ANSR Hackett Grp., Inc.(The) (MM)

Answerthink, Inc. (Nasdaq:ANSR): -- Revenues grow 17%, with strong revenue growth in Membership Advisory Programs -- Revenues and Pro-forma EPS in line with guidance Answerthink, Inc. (Nasdaq:ANSR), a strategic business advisory and technology consulting firm, today announced its financial results for the second quarter, which ended June 30, 2006. Second quarter revenue was $49.0 million, a 17% increase from the same period in 2005. Diluted earnings per share were $0.05, compared to $0.03 per share in the second quarter of 2005. Pro forma diluted earnings per share were $0.06, compared to $0.03 in the second quarter of 2005. 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. For the first six months of 2006, revenues were $98.8 million, a 26% increase from the first six months of 2005. Diluted loss per share was $0.09, compared to $0.00 for the same period in the previous year. The 2006 and 2005 results include restructuring costs of $0.14 and $0.03 per diluted share, respectively, related to an increase in previously established restructuring reserves for the closure and consolidation of facilities. Pro forma diluted earnings per share were $0.09, compared to $0.04 for the same period in the previous year. The Company's cash balances, including restricted cash and marketable investments, were $17.1 million at the end of the second quarter of 2006. During the quarter, the Company did not repurchase any shares of the Company's common stock. As of the end of the second quarter of 2006, $7.9 million remained available under the Company's share repurchase program authorization. "Our initiatives to accelerate the growth of our membership advisory programs had a positive impact on our quarterly results," said Ted A. Fernandez, Chairman and CEO of Answerthink. "This is important to our long-term strategy because we believe that the clients who value continuous access to our benchmark data and related best practice insight will turn to us for our other Hackett and Best Practice Solution offerings as those needs arise." Based on the current economic outlook, the Company estimates total revenues for the third quarter of 2006 to be in the range of $43.0 million to $45.0 million. The Company also estimates pro forma diluted earnings per share to be in the range of $0.03 to $0.05. Other Highlights U.S. and European Best Practices Conferences - Hackett held its annual best practices conferences in the U.S. and Europe. The conferences, entitled "Leveraging G&A for Competitive Advantage: From Back Office to Front of the Line," brought together more than 500 executives to hear presentations by senior executives from nearly 30 of the world's largest and most successful companies, including Alcoa, Citigroup, Hewlett Packard, Rolls Royce, Barclays, and Lufthansa. HR Book of Numbers Research - Hackett Book of Numbers research found that with an intense focus on strategic workforce planning, world-class HR organizations drive down voluntary termination rates to 33% that of typical companies. In part, as a result of these lower termination rates, companies with world-class HR organizations require 46% fewer hires than typical companies, and fill open positions 11% faster. Total Working Capital Research - Hackett-REL released findings showing that the 2,000 largest companies in the U.S. and Europe have more than $1 trillion in cash unnecessarily tied up in working capital, in the form of invoices paid late by customers, suppliers paid too early, and inventory moving too slowly through the supply chain. By implementing best practices and achieving working capital levels seen by leaders in this study, companies could also reduce annual operating costs by up to $42 billion, and boost net profits by up to 11%. Representative Client Engagements Finance & IT Transformation for Financial Services Provider - This client engaged us to perform transformation work focusing on both planning & performance management and related IT architecture. The effort will help the company implement Hackett-certified practices and improve the performance of IT systems supporting finance, with the goal being improving finance's ability to perform activities tied to strategic decision-making, including reporting, analytics, forecasting, and planning and budgeting. Sales and Marketing Transformation Support for European Arm of U.S. Automaker - This client selected Hackett-REL to support its first combined multi-brand, multi-geography transformation effort in sales and marketing. The program's goal is to identify and implement changes that can improve margin performance, in response to downward pricing pressure and static market share. Hackett-REL will assist in the consolidation and integration of a large number of individual projects currently underway across Europe. The client selected Hackett-REL based on its deep experience in the automotive sector, its project management skills, and its extensive background in automotive sales and marketing, supply chain, and process reengineering. Hyperion Implementation for Technical Services Company - On the heels of a successful Hackett transformation engagement in planning and financial management, this client selected Answerthink to implement an enterprise license for Hyperion. The implementation will enable the company to move from spreadsheets to a centralized budgeting and planning system integrating expense, revenue, and headcount planning across multiple business units. Oracle Implementation for Mortgage and Retail Bank - This company selected Answerthink to implement Oracle's Enterprise ERP application suite, and, using Answerthink's Best Practices Implementation approach and tools, simultaneously redesign its general ledger, asset management systems, and chart of accounts. The new thin ledger will enable the company to do its reporting out of a centralized financial data repository, and will integrate executive dashboards tracking key performance indicators in fourteen functional areas. Multiple Process-Level Benchmarks for Global Energy and Petrochemicals Group - This client has selected Hackett to benchmark all 15 major HR process areas individually over the next four years. The work is part of an overall process reengineering effort being executed to bring together HR operations from multiple global business units. The company's goal is to attain first-quartile status in HR. Finance and IT Benchmarks for U.S. Tire Manufacturer - This client contracted with us to perform functional benchmarks in finance, IT, and HR as well as process-level benchmarks in application ROI and time & attendance. The effort is part of an ongoing Six Sigma initiative, and the company is hoping to use the benchmark results as a foundation for transformation work that will standardize and simplify its back-office infrastructure globally, targeting world-class performance levels as its goal. The effort will include capturing data from over 220 locations worldwide. At 5:00 P.M. ET on Tuesday, August 1, 2006, the senior management of Answerthink will host a conference call to discuss second quarter earnings results for the period ending June 30, 2006. The number for the conference call is 800-857-4830, (Passcode: Second Quarter, Leader: Ted A. Fernandez). For International callers, please dial 210-839-8500. 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 1, 2006 and will run through 5:00 P.M. ET on Tuesday, August 15, 2006. To access the rebroadcast, please dial 866-419-2884. For International callers, please dial 203-369-0764. In addition, Answerthink will also be webcasting this conference call live through the StreetEvents.com service. To participate, simply visit http://www.answerthink.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 1, 2006 and will run through 5:00 P.M. ET on Tuesday, August 15, 2006. To access the call, visit http://www.answerthink.com or http://www.streetevents.com. About Answerthink Answerthink, Inc. (http://www.answerthink.com) is a leading business and technology consulting firm that enables companies to achieve world-class business performance. By leveraging the comprehensive database of The Hackett Group, Answerthink's business and technology solutions help clients significantly improve performance and maximize returns on technology investments. Answerthink's capabilities include benchmarking, business transformation, business applications, business intelligence, and offshore application development and support. Founded in 1997, Answerthink has offices throughout the United States and in Europe and India. About The Hackett Group The Hackett Group (http://www.TheHackettGroup.com), a strategic advisory firm and an Answerthink company, is a world leader in best practice research, benchmarking and business transformation services that empirically define and enable world-class enterprise performance. Through the acquisition of REL Consultancy Group, a global leader in generating cash improvement from working capital, we offer Hackett-REL Total Working Capital services to liberate cash flow from operations through improved working capital, reduced costs and increased service quality. Hackett-REL has helped clients in more than 60 countries free up over $25 billion through working capital improvements in the last 10 years alone. Only The Hackett Group empirically defines world-class performance in sales, general and administrative (SG&A) and supply chain activities with analysis gained through 3,500 benchmark studies over 14 years at 2,100 of the world's leading companies. Our clients comprise 97 percent of the Dow Jones Industrials, 77 percent of the Fortune 100 and 90 percent of the Dow Jones Global Titans Index. 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 Answerthink'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 ability of the products, services, or practices mentioned in this release to deliver the desired effect, our ability to effectively integrate acquisitions into our operations, our ability to attract additional business, our ability to effectively market and sell our product offerings and other services, the timing of projects and the potential for contract cancellations by our customers, changes in expectations regarding the information technology industry, our ability to attract and retain skilled employees, possible changes in collections of accounts receivable, risks of competition, price and margin trends, foreign currency fluctuations, changes in general economic conditions and interest rates as well as other risks detailed in the Company's Annual Report on Form 10-K for the fiscal year ended December 30, 2005 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. -0- *T Answerthink, Inc. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) (unaudited) Quarter Ended Six Months Ended ------------------- ------------------- June 30, July 1, June 30, July 1, 2006 2005 2006 2005 --------- --------- --------- --------- Revenues: Revenues before reimbursements $ 43,950 $ 37,440 $ 88,846 $ 70,618 Reimbursements 5,046 4,260 9,981 7,954 -------- -------- -------- -------- Total revenues 48,996 41,700 98,827 78,572 Costs and expenses: Cost of service: Personnel costs before reimbursable expenses 24,527 20,298 50,991 40,806 (includes $247 and $122, and $467 and $267 of stock compensation expense in the quarters and six months ended June 30, 2006 and July 1, 2005, respectively) Reimbursable expenses 5,046 4,260 9,981 7,954 -------- -------- -------- -------- Total cost of service 29,573 24,558 60,972 48,760 Selling, general and administrative expenses 17,072 16,118 34,865 29,437 (includes $898 and $435, and $1,754 and $1,018 of stock compensation expense in the quarters and six months ended June 30, 2006 and July 1, 2005, respectively) Restructuring costs - - 6,313 1,134 -------- -------- -------- -------- Total costs and operating expenses 46,645 40,676 102,150 79,331 -------- -------- -------- -------- Income (loss) from operations 2,351 1,024 (3,323) (759) Other income (expense): Interest income 163 321 353 584 Interest expense (38) (16) (143) (40) -------- -------- -------- -------- Income (loss) before income taxes 2,476 1,329 (3,113) (215) Income taxes 332 95 697 (19) -------- -------- -------- -------- Net income (loss) $ 2,144 $ 1,234 $ (3,810) $ (196) -------- -------- -------- -------- Basic net income (loss) per common share: Net income (loss) per common share $ 0.05 $ 0.03 $ (0.09) $ (0.00) Weighted average common shares outstanding 44,626 42,786 44,572 43,112 Diluted net income (loss) per common share (1): Net income (loss) per common share $ 0.05 $ 0.03 $ (0.09) $ (0.00) Weighted average common and common equivalent shares outstanding 46,594 47,137 44,572 43,112 Pro forma data: (2) Income (loss) before income taxes $ 2,476 $ 1,329 $ (3,113) $ (215) Restructuring costs - - 6,313 1,134 Stock compensation expense 1,145 728 2,221 1,285 Amortization of intangible assets 834 420 1,804 864 -------- -------- -------- -------- Pro forma income before income taxes 4,455 2,477 7,225 3,068 Pro forma income taxes 1,782 991 2,890 1,227 -------- -------- -------- -------- Pro forma net income $ 2,673 $ 1,486 $ 4,335 $ 1,841 -------- -------- -------- -------- Pro forma basic net income per common share $ 0.06 $ 0.03 $ 0.10 $ 0.04 Weighted average common shares outstanding 44,626 42,786 44,572 43,112 Pro forma diluted net income per common share $ 0.06 $ 0.03 $ 0.09 $ 0.04 Weighted average common and common equivalent shares outstanding 46,594 45,106 46,573 45,510 (1) Potentially dilutive shares were excluded from the diluted loss per share calculation for the six months ended June 30, 2006 and July 1, 2005 as their effects would have been anti-dilutive to the loss incurred by the Company. The total number of weighted average common and common equivalent shares outstanding, including any anti-dilutive shares, for the six months ended June 30, 2006 and July 1, 2005 were 46,573 and 45,510 shares, respectively. (2) The Company provides pro forma earnings results (which exclude amortization of intangible assets, non-cash compensation and restructuring charges, and include a normalized tax rate) as a complement to results provided in accordance with Generally Accepted Accounting Principles. These non-GAAP results are provided to enhance the users's overall 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 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 inclusion of non-GAAP numbers 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 accounting principles generally accepted in the United States of America. Answerthink, Inc. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) June 30, December 30, 2006 2005 ---------------------------------------------------------------------- ASSETS (unaudited) Current assets: Cash and cash equivalents $ 11,529 $ 18,103 Marketable investments 4,950 9,902 Restricted cash - 3,657 Accounts receivable and unbilled revenue, net 43,421 41,928 Prepaid expenses and other current assets 2,911 3,273 ----------- ----------- Total current assets 62,811 76,863 Restricted cash 600 600 Property and equipment, net 5,634 6,304 Other assets 4,756 6,422 Goodwill, net 63,676 61,692 ----------- ----------- Total assets $ 137,477 $ 151,881 ----------- ----------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 5,632 $ 6,319 Accrued expenses and other liabilities 26,119 37,751 Loan payable - 3,657 ----------- ----------- Total current liabilities 31,751 47,727 Accrued expenses and other liabilities, non-current 5,275 3,272 ----------- ----------- 37,026 50,999 Shareholders' equity 100,451 100,882 ----------- ----------- Total liabilities and shareholders' equity $ 137,477 $ 151,881 ----------- ----------- *T -0- *T Answerthink, Inc. Supplemental Financial Data (unaudited) Yr. on Yr. Quarter Ended Quarter Ended Change ---------------------- ------------------------ June 30, March 31, July 1, 2006 2006 2005 % ---------- ---------- ----------- ---------- Revenue Breakdown by Group: (in thousands) The Hackett Group Benchmarking $ 5,127 $ 4,623 $ 5,366 -4.5% Membership Advisory Programs 3,194 2,236 1,948 64.0% Transformation Advisory (4) 17,245 18,354 10,449 65.0% ---------- ---------- ----------- ---------- Total The Hackett Group 25,566 25,213 17,763 43.9% Best Practice Solutions Business Applications 12,780 14,124 14,398 -11.2% Business Intelligence 10,650 10,494 9,539 11.6% ---------- ---------- ----------- ---------- Total Best Practice Solutions 23,430 24,618 23,937 -2.1% ---------- ---------- ----------- ---------- Total revenues $ 48,996 $ 49,831 $ 41,700 17.5% ========== ========== =========== ========== Revenue Concentration: (% of total revenues) Top customer 4% 6% 5% Top 5 customers 16% 21% 19% Top 10 customers 27% 32% 30% Key Metrics and Other Financial Data: The Hackett Group revenue per professional (in thousands) $ 387 $ 350 $ 403 Membership Advisory - Annualized Contract Value (3) $ 11,359 $ 9,911 $ 8,078 Best Practice Solutions consultant utilization rate 76% 76% 73% Best Practice Solutions gross billing rate per hour $ 156 $ 155 $ 155 Consultant headcount 642 670 596 Total headcount 838 856 782 Days sales outstanding (DSO) 80 76 75 Cash provided by (used in) operating activities (in thousands) $ 1,433 $ (3,633) (1,787) Depreciation and amortization (in thousands) $ 1,458 $ 1,640 $ 1,190 Share Repurchase Program: Shares purchased since inception (in thousands) 6,534 6,534 6,534 Cost of shares repurchased since inception (in thousands) $ 22,119 $ 22,119 $ 22,119 Average per share cost of shares purchased since inception $ 3.39 $ 3.39 $ 3.39 Remaining authorization (in thousands) $ 7,881 $ 7,881 $ 7,881 (3) We define "Annualized Contract Value" as of the quarter-end as the aggregate annualized revenue attributed to all agreements in effect on such date, without regard to the remaining duration of any such agreement. (4) Transformation Advisory includes revenues for REL of $6.3 million and $6.2 million for the quarters ended June 30, 2006 and March 31, 2006, respectively. *T