- Q3 2020 net revenue of $57.8 million exceeds high end of
guidance
- Q3 2020 GAAP EPS of $0.09
- Q3 2020 Pro forma EPS of $0.17, which exceeds high end of
guidance
- 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 third quarter, which ended
on September 25, 2020.
Third quarter 2020 net revenue (gross revenue less reimbursable
expenses) was $57.8 million, down 13%, as compared to the same
period in the prior year, but up 10% sequentially as demand
improved throughout the quarter.
GAAP diluted earnings per share were $0.09 for the third quarter
of 2020, as compared to GAAP diluted earnings per share of $0.21 in
the same period in the prior year due to the economic disruption
resulting from the COVID-19 pandemic.
Third quarter 2020 pro forma diluted earnings per share were
$0.17, as compared to $0.27 in the same period in the prior year.
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 December 18, 2020, to be paid on January
9, 2021.
At the end of the third quarter of 2020, the Company’s cash
balances were $43.2 million with no outstanding debt. During the
quarter, the Company repurchased 83 thousand shares under its share
repurchase program at an average price of $12.57 for a total of
$1.0 million. As of the end of the third quarter of 2020, the
Company’s remaining share repurchase program authorization was $4.7
million.
“Although our results continued to be impacted by the pandemic,
our revenues grew 10 percent on a quarterly sequential basis, as
client demand and engagement improved throughout the quarter,”
stated Ted A. Fernandez, Chairman & CEO of The Hackett Group,
Inc. “We expect this momentum to continue into the fourth quarter
which should allow us to continue to improve our results in the
near term and emerge financially and strategically stronger as and
when the pandemic subsides.”
Although economic uncertainty from the COVID-19 pandemic
continues to be high, the Company’s current estimates suggest that
net revenue for the fourth quarter of 2020 will be in the range of
$55.0 million to $58.0 million. The Company estimates pro forma
diluted earnings per share for the fourth quarter of 2020 to be in
the range of $0.20 and $0.22.
Other Highlights
2020 Disrupted Marketing Campaign – In second quarter and early
third quarter, The Hackett Group executed its most extensive
integrated marketing effort ever. At the core of the effort was the
"2020 Disrupted" campaign, with research that focused on five
essential digital transformation action areas: cash, cost, people,
technology and supply chain. In early third quarter, the focus of
the marketing offers focused on planning for the "next normal," as
most companies quickly discovered that their forecasts and plans
for the coming quarters were completely outdated and faced the
challenge of developing multiple possible scenarios for what the
recovery might look like for their company and industry.
Digital World-Class Research – The Hackett Group issued
world-class research for finance, procurement, human resources, and
information technology Each research piece contains more than 50
metrics detailing how executives are shattering outdated operating
models to usher in innovative ways to deliver new levels of agile
business services, including The Hackett Group’s new projections of
how companies can achieve digital world-class performance levels,
further enhancing efficiency, effectiveness, and customer
experience.
2021 Key Issues Study Launch – The Hackett Group launched its
2021 CXO Agenda studies for finance, procurement, supply chain,
human resources, information technology. The studies, which will
result in research that will be issued in early 2021, will enable
participants to gain insights into: key challenges and
opportunities in 2021; how prepared a company’s function is to meet
these unique challenges; what initiatives are on the 2021
transformation agenda, and how they compare to other organizations;
projected changes in staffing levels and operating budgets by
function; and broader business trends and strategic enterprise
priorities.
Working Capital Update – The Hackett Group released a first-ever
mid-year update to its annual Working Capital Survey. The results,
which look at working capital performance at 849 of the largest
non-financial U.S. companies, detailed the reduction in revenue and
increase in both debt and cash-on-hand for companies, as well as
the deterioration of working capital performance, including a 7%
increase in Days Sales Outstanding, a 15% increase in Days
Inventory Outstanding and a 10% increase in Days Payables
Outstanding.
On Monday, November 2, 2020, senior management will discuss
third quarter results in a conference call at 5:00 P.M. ET. The
number for the conference call is (800) 593-0486, [Passcode: Third
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 Monday, November 2,
2020 and will run through 5:00 P.M. ET on Monday, November 16,
2020. To access the rebroadcast, please dial (800) 925-1779. For
International callers, please dial (402) 220-3079.
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 Monday, November 2, 2020
and will run through 5:00 P.M. ET on Monday, November 16, 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 cloud ERP, EPM and
analytics 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 distinguished
Oracle, SAP, Coupa and OneStream 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 digital 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
second 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
Nine Months Ended
September 25,
September 27,
September 25,
September 27,
2020
2019
2020
2019
Revenue: Revenue before reimbursements ("net revenue")
$
57,769
$
66,755
$
175,587
$
197,101
Reimbursements
148
5,935
4,614
16,265
TOTAL REVENUE FROM CONTINUING OPERATIONS
57,917
72,690
180,201
213,366
Costs and expenses: Cost of service: Personnel costs before
reimbursable expenses
37,791
41,026
117,558
120,780
Non-cash stock compensation expense
1,508
833
4,449
2,775
Acquisition-related compensation expense (benefit)
10
157
39
(131)
Acquisition-related non-cash stock compensation expense
243
322
755
690
Reimbursable expenses
148
5,935
4,614
16,265
TOTAL COST OF SERVICE
39,700
48,273
127,415
140,379
Selling, general and administrative costs
12,732
14,117
38,042
43,318
Non-cash stock compensation expense
711
776
1,830
2,268
Amortization of intangible assets
247
236
723
789
Acquisition-related contingent consideration liability
-
(108)
-
(1,133)
Restructuring costs
-
-
5,034
-
TOTAL SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
13,690
15,021
45,629
45,242
TOTAL COSTS AND OPERATING EXPENSES
53,390
63,294
173,044
185,621
INCOME FROM OPERATIONS
4,527
9,396
7,157
27,745
Other expense: Interest expense
(22)
(62)
(100)
(268)
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
4,505
9,334
7,057
27,477
Income tax expense
1,362
2,427
2,312
6,481
INCOME FROM CONTINUING OPERATIONS
3,143
6,907
4,745
20,996
(Loss) income from discontinued operations (2)
(157)
2
(165)
(4)
NET INCOME
$
2,986
$
6,909
$
4,580
$
20,992
Weighted average common shares outstanding: Basic
30,053
29,876
29,986
29,794
Diluted
32,403
32,571
32,335
32,413
Basic net income per common share: Income per common share
from continuing operations
$
0.11
$
0.23
$
0.16
$
0.70
(Loss) income per common share from discontinued operations (2)
(0.01)
0.00
(0.01)
(0.00)
Net income per common share
$
0.10
$
0.23
$
0.15
$
0.70
Diluted net income per common share: Income per common share
from continuing operations
$
0.10
$
0.21
$
0.15
$
0.65
(Loss) income per common share from discontinued operations (2)
(0.01)
0.00
(0.01)
(0.00)
Net income per common share
$
0.09
$
0.21
$
0.14
$
0.65
PRO FORMA DATA (1): Income from continuing operations before
income taxes
$
4,505
$
9,334
$
7,057
$
27,477
Non-cash stock compensation expense
2,219
1,609
6,279
5,043
Acquisition-related compensation expense (benefit)
10
157
39
(131)
Acquisition-related non-cash stock compensation expense
243
322
755
690
Acquisition-related contingent consideration liability
-
(108)
-
(1,133)
Acquisition-related costs
-
32
-
32
Restructuring costs
-
-
5,034
-
Amortization of intangible assets
247
236
723
789
PRO FORMA INCOME BEFORE INCOME TAXES
7,224
11,582
19,887
32,767
Pro forma income tax expense
1,806
2,896
4,972
8,192
PRO FORMA NET INCOME
$
5,418
$
8,687
$
14,915
$
24,575
Pro forma basic net income per common share
$
0.18
$
0.29
$
0.50
$
0.82
Weighted average common shares outstanding
30,053
29,876
29,986
29,794
Pro forma diluted net income per common share
$
0.17
$
0.27
$
0.46
$
0.76
Weighted average common and common equivalent shares outstanding
32,403
32,571
32,335
32,413
(1) The Company provides pro forma earnings results (which
exclude the amortization of intangible assets, non-cash stock
compensation expense, acquisition-related one-time expense
(benefit), and include 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.
The Hackett Group, Inc. CONDENSED CONSOLIDATED BALANCE
SHEETS (in thousands) (unaudited) September
25, December 27,
2020
2019
ASSETS Current assets: Cash and cash equivalents
$
43,167
$
25,954
Accounts receivable and contract assets, net
36,221
49,778
Prepaid expenses and other current assets
3,350
2,895
Total current assets
82,738
78,627
Property and equipment, net
18,981
19,916
Other assets
1,847
2,652
Goodwill
84,288
84,578
Operating lease right-of-use assets
8,273
7,962
Total assets
$
196,127
$
193,735
LIABILITIES AND SHAREHOLDERS' EQUITY Current
liabilities: Accounts payable
$
5,045
$
8,494
Accrued expenses and other liabilities
37,238
32,482
Operating lease liabilities
2,678
2,707
Liabilities related to discontinued operations (3)
157
-
Total current liabilities
45,118
43,683
Long-term deferred tax liability, net
6,767
7,183
Operating lease liabilities
5,595
5,255
Total liabilities
57,480
56,121
Shareholders' equity
138,647
137,614
Total liabilities and shareholders' equity
$
196,127
$
193,735
(3) Discontinued operations relate to the
discontinuance of the Company's European Working Capital group.
The Hackett Group, Inc. SUPPLEMENTAL FINANCIAL DATA
(unaudited) Quarter Ended
September 25,
September 27,
June 26,
2020
2019
2020
Revenue Breakdown by Group: (in thousands) S&BT (4)
$
22,217
$
28,221
$
17,752
EEA (5)
29,710
30,134
30,445
International (6)
5,842
8,400
4,435
Net revenue from continuing operations (7)
$
57,769
$
66,755
$
52,632
Revenue Concentration: (% of total revenue) Top
customer
6%
6%
6%
Top 5 customers
16%
19%
17%
Top 10 customers
26%
27%
27%
Key Metrics and Other Financial Data: Total
Company: Consultant headcount
923
1,036
908
Total headcount
1,124
1,271
1,110
Days sales outstanding (DSO)
57
72
64
Cash provided by operating activities (in thousands)
$
10,088
$
8,506
$
14,547
Depreciation (in thousands)
$
916
$
884
$
883
Amortization (in thousands)
$
247
$
236
$
238
Remaining Plan authorization: Shares purchased (in
thousands)
75
-
-
Cost of shares repurchased (in thousands)
$
932
$
—
$
—
Average price per share of shares purchased
$
12.41
$
—
$
—
Remaining Plan authorization (in thousands)
$
4,713
$
3,878
$
5,645
Shares Purchased to Satisfy Employee Net Vesting
Obligations: Shares purchased (in thousands)
8
5
2
Cost of shares purchased (in thousands)
$
111
$
88
$
25
Average price per share of shares purchased
$
14.26
$
16.29
$
13.29
(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, SAP Solutions Practices and One
Stream. (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)
Certain reclassifications have been made to conform with current
reporting requirements.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201102005974/en/
Robert A. Ramirez, CFO, 305-375-8005 or
rramirez@thehackettgroup.com
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