- Q2 2020 net revenue of $52.6 million and pro forma EPS of
$0.06
- Q2 2020 GAAP loss per share of $0.13, compared to EPS of $0.22
in the prior year due to a $5.0 million COVID-19 restructuring
charge to reduce global workforce
- Q2 2020 ending cash balance of $37.4 million and no outstanding
debt
- Board of Directors declared a 9.5 cent quarterly dividend
The Hackett Group, Inc. (NASDAQ: HCKT), a global intellectual
property-based strategic consultancy and leading enterprise
benchmarking and best practices digital transformation firm, today
announced its financial results for the second quarter, which ended
on June 26, 2020.
Q2 2020 net revenue (gross revenue less reimbursable expenses)
was $52.6 million, down 23%, as compared to the same period in the
prior year.
GAAP diluted loss per share were $0.13 for the second quarter of
2020, as compared to GAAP diluted earnings per share of $0.22 in
the same period in the prior year. GAAP results for the second
quarter of 2020 included a $5.0 million, or $0.13 per diluted
share, restructuring charge related to the reduction of the
Company’s global workforce due to the economic disruption from the
coronavirus pandemic.
Q2 2020 pro forma diluted earnings per share were $0.06, as
compared to $0.28 in the same period in the prior year, due to the
economic disruption resulting from the coronavirus pandemic and the
Company’s decision to forgo a significant level of profitability to
maintain staffing levels throughout the second quarter. Pro forma
information is provided to enhance the understanding of the
Company’s financial performance and is reconciled to the Company’s
GAAP information in the accompanying tables.
At its most recent meeting, the Company’s Board of Directors
declared a quarterly dividend of 9.5 cents per share for its
shareholders of record on September 25, 2020, to be paid on October
9, 2020.
At the end of the second quarter of 2020, the Company’s cash
balances were $37.4 million. During the quarter, the Company did
not draw down on its credit facility. As of the end of the second
quarter of 2020, the Company’s remaining share repurchase program
authorization was $5.6 million.
“Our operating results reflect the expected revenue declines
from the coronavirus economic disruption and our decision to forgo
profitability during the quarter in order to protect our associates
until we had a much better assessment of the impact of the
pandemic,” stated Ted A. Fernandez, Chairman & CEO of the
Hackett Group, Inc. “I am very proud of our associates’ ability to
quickly take the necessary safety precautions while also
successfully adapting to our clients’ virtual service delivery
requirements. We are also pleased to finish the quarter with such a
strong cash position without any debt which allowed us to take the
necessary actions while continuing our dividend and remain strongly
poised for the expected economic recovery.”
Although economic uncertainty from the COVID-19 pandemic
continues to be high, the Company’s current estimates suggest that
net revenue for the third quarter of 2020 will be in the range of
$52.0 million to $54.0 million. The Company estimates pro forma
diluted earnings per share for the third quarter of 2020 to be in
the range of $0.13 and $0.15.
Other Highlights
Digital Awards Winners - The
Hackett Group announced the winners of its 2020 Digital Awards,
which spotlighted companies that are on the cutting edge of digital
business practice. This year’s winners are IBM (artificial
intelligence), Deutsche Telekom Services Europe (DTSE)
(automation), DBS Bank (digital transformation), and Genpact, in
collaboration with the Envision Virgin Racing Formula E Team
(analytics). In addition, three companies were named as finalists
in the competition: Nationwide Insurance, ABB, and Infosys BPM.
Working Capital Survey - The 1000
largest non-financial companies in the U.S. slowed payments to
suppliers slightly in 2019 as they collected cash from customers
more slowly and held slightly more inventory, causing overall
working capital performance to decline after several years of
improvement, according to the annual survey of The Hackett Group.
At the same time, cash on hand and debt grew dramatically, reaching
record levels. But according to The Hackett Group’s research team,
the global pandemic has sparked a dramatic increase in focus on
working capital and overall liquidity in 2020, driving many
companies to launch comprehensive transformation efforts for the
first time as they try to determine what their business will look
like as the world economy emerges from the crisis.
Coronavirus Response Center - The
Hackett Group continued to expand its Coronavirus Response Center,
which was launched in March as part of its Web site. The center
currently features nearly 30 pieces of research that offers
guidance and insights for leaders in corporate finance, procurement
and supply chain, human resources, information technology, and
more. In addition, The Hackett Group’s Blog now includes nearly 20
posts that address pandemic response issues.
UVARS Award - Answerthink, a
division of The Hackett Group and member of United VARs, announced
that United VARs has received a 2020 SAP® Pinnacle Award as the
Global Platinum Reseller of the Year, recognizing its outstanding
contributions as an SAP partner. SAP presents these awards annually
to the top partners that have excelled in developing and growing
their partnership with SAP and helping customers run better.
Winners and finalists in 34 categories were chosen based on
recommendations from the SAP field, customer feedback, and
performance indicators.
On Tuesday August 4, 2020, senior management will discuss second
quarter results in a conference call at 5:00 P.M. ET. (800)
593-0486, [Passcode: Second Quarter]. For International callers,
please dial (517) 308-9371. Please dial in at least 5-10 minutes
prior to start time. If you are unable to participate on the
conference call, a rebroadcast will be available beginning at 8:00
P.M. ET on Tuesday, August 4, 2020 and will run through 5:00 P.M.
ET on Tuesday, August 18, 2020. To access the rebroadcast, please
dial (800) 856-2259. For International callers, please dial (402)
280-9962. In addition, The Hackett Group will also be webcasting
this conference call live through the StreetEvents.com service. To
participate, simply visit http://www.thehackettgroup.com
approximately 10 minutes prior to the start of the call and click
on the conference call link provided. An online replay of the call
will be available after 8:00 P.M. ET on Tuesday, August 4, 2020 and
will run through 5:00 P.M. ET on Tuesday, August 18, 2020. To
access the replay, visit www.thehackettgroup.com or
http://www.streetevents.com.
About The Hackett Group
The Hackett Group (NASDAQ: HCKT) is an intellectual
property-based strategic consultancy and leading enterprise
benchmarking and best practices digital transformation firm to
global companies, with offerings that include robotic process
automation and enterprise cloud application implementation.
Services include business transformation, enterprise analytics and
global business services. The Hackett Group also provides dedicated
expertise in business strategy, operations, finance, human capital
management, strategic sourcing, procurement and information
technology, including its award-winning Oracle and SAP
practices.
The Hackett Group has completed nearly 18,000 benchmarking
studies with major corporations and government agencies, including
93% of the Dow Jones Industrials, 90% of the Fortune 100, 83% of
the DAX 30 and 57% of the FTSE 100. These studies drive Hackett’s
Digital Transformation Platform which includes the firm's
benchmarking metrics, best practices repository and best practice
configuration guides and process flows, which enable The Hackett
Group’s clients and partners to achieve world-class
performance.
More information on The Hackett Group is available at:
www.thehackettgroup.com, info@thehackettgroup.com, or by calling
(770) 225-3600.
This press release contains "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995
and involve known and unknown risks, uncertainties and other
factors that may cause The Hackett Group's actual results,
performance or achievements to be materially different from the
results, performance or achievements expressed or implied by the
forward-looking statements. Factors that impact such
forward-looking statements include, among others, the impact of the
coronavirus pandemic, including the duration and severity of the
pandemic, the economic impact of the pandemic and the timing of an
economic recovery, our ability to manage our business and capital
resources through the pandemic, the ability of our products,
services, or offerings mentioned in this release to deliver the
desired effect, our ability to retain existing business, our
ability to attract additional business, our ability to effectively
market and sell our product offerings and other services, including
those referenced above, the timing of projects and the potential
for contract cancellations by our customers, especially given that
our clients are also impacted by the coronavirus pandemic, changes
in expectations regarding the business consulting and information
technology industries, our ability to attract and retain skilled
employees, possible changes in collections of accounts receivable
due to the bankruptcy or financial difficulties of our customers,
risks of competition, price and margin trends, foreign currency
fluctuations, the impact of Brexit on our business, changes in
general economic conditions and interest rates, our ability to
mitigate the impact of the recent decline in our European
operations, our ability to obtain debt financing through additional
borrowings under our existing credit facility as well as other
risks detailed in our Annual Report on Form 10-K for the most
recent fiscal year and our Quarterly Report on Form 10-Q for the
first fiscal quarter of fiscal 2020, each as filed with the
Securities and Exchange Commission. We undertake no obligation to
update or revise publicly any forward-looking statements, whether
as a result of new information, future events or otherwise, except
as required by law.
The Hackett Group, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS (in
thousands, except per share data) (unaudited)
Quarter Ended Six Months Ended June
26, June 28, June 26, June 28,
2020
2019
2020
2019
REVENUE: Revenue before reimbursements ("net revenue")
$ 52,632
$ 67,976
$ 117,818
$ 130,346
Reimbursements
119
5,545
4,466
10,330
TOTAL REVENUE FROM CONTINUING OPERATIONS
52,751
73,521
122,284
140,676
COSTS AND EXPENSES: Cost of service:
Personnel costs before reimbursable expenses
38,654
40,820
79,767
79,754
Non-cash stock compensation expense
1,600
1,022
2,941
1,942
Acquisition-related compensation expense (benefit)
29
(159)
29
(288)
Acquisition-related non-cash stock compensation expense
259
289
512
368
Reimbursable expenses
119
5,545
4,466
10,330
TOTAL COST OF SERVICE
40,661
47,517
87,715
92,106
Selling, general and administrative costs
11,413
15,159
25,310
29,201
Non-cash stock compensation expense
483
787
1,119
1,492
Amortization of intangible assets
238
254
476
553
Acquisition-related contingent consideration liability
-
45
-
(1,025)
Restructuring costs
5,034
-
5,034
-
TOTAL SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
17,168
16,245
31,939
30,221
TOTAL COSTS AND OPERATING EXPENSES
57,829
63,762
119,654
122,327
INCOME (LOSS) FROM OPERATIONS
(5,078)
9,759
2,630
18,349
Other expense: Interest expense
(41)
(105)
(78)
(206)
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE
INCOME TAXES
(5,119)
9,654
2,552
18,143
Income tax (benefit) expense
(1,186)
2,614
950
4,054
INCOME (LOSS) FROM CONTINUING OPERATIONS
(3,933)
7,040
1,602
14,089
Loss from discontinued operations (2)
-
(51)
(8)
(6)
NET INCOME (LOSS)
$ (3,933)
$ 6,989
$ 1,594
$ 14,083
Basic net income (loss) per common share:
Income (loss) per common share from continuing operations
$ (0.13)
$ 0.23
$ 0.05
$ 0.47
Weighted average common shares outstanding
30,015
29,823
29,952
29,753
Diluted net income (loss) per common share:
Income (loss) per common share from continuing operations
$ (0.13)
$ 0.22
$ 0.05
$ 0.44
Weighted average common and common equivalent shareoutstanding (3)
30,015
32,374
32,301
32,334
PRO FORMA DATA (1): Income (loss) from
continuing operations before income taxes
$ (5,119)
$ 9,654
$ 2,552
$ 18,143
Non-cash stock compensation expense
2,083
1,809
4,060
3,434
Acquisition-related compensation expense (benefit)
29
(159)
29
(288)
Acquisition-related non-cash stock compensation expense
259
289
512
368
Acquisition-related contingent consideration liability
-
45
-
(1,025)
Restructuring costs
5,034
-
5,034
-
Amortization of intangible assets
238
254
476
553
PRO FORMA INCOME BEFORE INCOME TAXES
2,524
11,892
12,663
21,185
Pro forma income tax expense
631
2,973
3,166
5,296
PRO FORMA NET INCOME
$ 1,893
$ 8,919
$ 9,497
$ 15,889
Pro forma basic net income per common share
$ 0.06
$ 0.30
$ 0.32
$ 0.53
Weighted average common shares outstanding
30,015
29,823
29,952
29,753
Pro forma diluted net income per common share
$ 0.06
$ 0.28
$ 0.29
$ 0.49
Weighted average common and common equivalent sharesoutstanding (3)
30,015
32,374
32,301
32,334
(1) The Company provides pro forma
earnings results (which exclude the amortization of intangible
assets, non-cash stock compensation expense, acquisition-related
expense
(benefit) and other one-time expense
(benefit), and includes a normalized tax rate, which is our
long-term projected cash tax rate) as a complement to results
provided in
accordance with Generally Accepted
Accounting Principles (GAAP). These non-GAAP results are provided
to enhance the overall users' understanding of the Company's
current financial performance and its
prospects for the future. The Company believes the non-GAAP results
provide useful information to both management and investors and
by excluding certain expenses that it
believes are not indicative of its core operating results. The
non-GAAP measures are included to provide investors and management
with
an alternative method for assessing
operating results in a manner that is focused on the performance of
ongoing operations and to provide a more consistent basis for
comparison
between quarters. Further, these non-GAAP
results are one of the primary indicators management uses for
planning and forecasting in future periods. In addition, since
the
Company has historically reported non-GAAP
results to the investment community, it believes the continued
inclusion of non-GAAP results provides consistency in its financial
reporting.
The presentation of this additional
information should not be considered in isolation or as a
substitute for results prepared in accordance with GAAP.
(2)
Discontinued operations relate to the discontinuance of the
Company's European Working Capital group. (3) For the period
in which the Company has reported a net loss, diluted net loss per
share attributable to common stockholders is the same as basic net
loss per share attributable to common stockholders, because
dilutive common shares are not assumed to have been issued if their
effect is anti-dilutive.
The Hackett Group, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands)
(unaudited) June 26, December 27,
2020
2019
ASSETS Current assets: Cash and cash equivalents
$ 37,370
$ 25,954
Accounts receivable and unbilled revenue, net
36,962
49,778
Prepaid expenses and other current assets
3,719
2,895
Total current assets
78,051
78,627
Property and equipment, net
19,724
19,916
Other assets
2,052
2,652
Goodwill
83,880
84,578
Operating lease right-of-use assets
8,753
7,962
Total assets
$ 192,460
$ 193,735
LIABILITIES AND SHAREHOLDERS' EQUITY Current
liabilities: Accounts payable
$ 4,739
$ 8,494
Accrued expenses and other liabilities
34,810
32,482
Operating lease liabilities
2,701
2,707
Total current liabilities
42,250
43,683
Long-term deferred tax liability, net
7,577
7,183
Operating lease liabilities
6,052
5,255
Total liabilities
55,879
56,121
Shareholders' equity
136,581
137,614
Total liabilities and shareholders' equity
$ 192,460
$ 193,735
The Hackett Group, Inc. SUPPLEMENTAL FINANCIAL
DATA (unaudited) Quarter Ended June
26, June 28, March 27,
2020
2019
2020
Revenue Breakdown by Group:
-
(in thousands) S&BT (4)
$ 16,798
$ 26,261
$ 24,462
EEA (5)
31,399
31,005
33,223
International (6)
4,435
10,710
7,500
Net revenue from continuing operations (7)
$ 52,632
$ 67,976
$ 65,186
Revenue Concentration: (% of total revenue) Top
customer
6%
4%
4%
Top 5 customers
17%
16%
15%
Top 10 customers
27%
25%
25%
Key Metrics and Other Financial Data: Total
Company: Consultant headcount
908
999
1,026
Total headcount
1,110
1,240
1,243
Days sales outstanding (DSO)
64
68
70
Cash provided by operating activities (in thousands)
$ 14,547
$ 11,273
$ 6,521
Pro forma return on equity (8)
20%
26%
24%
Depreciation (in thousands)
$ 883
$ 830
$ 800
Amortization (in thousands)
$ 238
$ 254
$ 238
Remaining Plan authorization: Shares purchased (in
thousands)
-
92
73
Cost of shares repurchased (in thousands)
$ —
$ 1,440
$ 1,006
Average price per share of shares purchased
$ —
$ 15.59
$ 13.79
Remaining Plan authorization (in thousands)
$ 5,645
$ 3,878
$ 5,645
Shares Purchased to Satisfy Employee Net Vesting
Obligations: Shares purchased (in thousands)
2
1
125
Cost of shares purchased (in thousands)
$ 25
$ 14
$ 1,962
Average price per share of shares purchased
$ 13.29
$ 16.39
$ 15.70
(4) Strategy and Business Transformation
Group (S&BT) includes the results of our IP as-a-service
offerings,
which includes our North America Executive
Advisory Programs, our Benchmarking Services and our Business
Transformation Practices.
(5) ERP, EPM and Analytics Solutions (EEA)
includes the results of our North America Oracle EEA and SAP
Solutions Practices.
(6) International Groups include the
results of our S&BT and EEA Practices, primarily in Europe.
(7) Net revenue excludes reimbursable
expenses which are primarily travel-related expenses passed through
to a client with no associated margin.
(8) Twelve months of pro forma net income
divided by average shareholder's equity.
(9) Certain reclassifications have been
made to conform with current reporting requirements.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200804005997/en/
Robert A. Ramirez, CFO, 305-375-8005 or
rramirez@thehackettgroup.com
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