- Q2 2018 net revenue of $69.6 million,
up 3% when compared to prior year and in line with guidance
- Q2 2018 pro forma diluted EPS of $0.27
per share, up 8% from prior year
- Declared semi-annual dividend of $0.17
per share, up 13% from prior year
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 29, 2018.
Q2 2018 net revenue (gross revenue less reimbursable expenses)
was $69.6 million, up 3% from the same period in the prior year. Q2
2018 gross revenue was $75.6 million, up 3% from the same period in
the prior year.
Q2 2018 pro forma diluted earnings per share were $0.27, up 8%
when compared to $0.25 for the same period in 2017. 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.
GAAP diluted earnings per share were $0.36 for the second
quarter of 2018, as compared to $0.15 in the second quarter of
2017. During the second quarter of 2018, the Company recorded a
$4.6 million, or $0.14 per diluted share, benefit due to the
remeasurement of an acquisition earnout liability. During the
second quarter of 2017, the Company recorded acquisition related
restructuring of approximately $0.04 per diluted share.
At the end of the second quarter of 2018, the Company’s cash
balances were $13.3 million. During the quarter, the Company
utilized cash to pay down outstanding debt of $5.5 million. During
the second quarter of 2018, the Company did not repurchase shares
under its stock repurchase program. As of the end of the second
quarter of 2018, the Company’s remaining stock repurchase program
authorization was $7.2 million.
“We continued to report solid operating results due to strong
digital transformation, cloud and analytics demand, while
continuing to transition our Oracle business from on-premise to
cloud implementations,” stated Ted A. Fernandez, Chairman and CEO
of The Hackett Group. “With Oracle Cloud revenue now exceeding our
on-premise revenue and with cloud growth outpacing the on-premise
decline, we are getting closer to seeing the revenue growth fully
reflected in our results.”
Based on the current economic outlook, the Company estimates
total net revenue for the third quarter of 2018 to be in the range
of $67.0 million and $69.0 million or gross revenue (inclusive of
reimbursable expenses) to be in the range of $73.0 million and
$75.0 million. The Company estimates pro forma diluted earnings per
share for the third quarter of 2018 to be in the range of $0.26 and
$0.28. At the high end of guidance, pro forma diluted earnings per
share for the third quarter of 2018 would increase 8%, when
compared to the same period in the prior year.
Other Highlights
Procurement Key Issues Research – The Hackett Group issued new
Key Issues Research showing that procurement organizations have
significantly shrunk the capability gap in digital transformation
over the past year, with two thirds now having a strategy in place
and nearly half having the resources and competencies needed to
execute. Procurement leaders expect to rely on digital
transformation to help them achieve an array of critical objectives
in 2018, including cost-cutting, improving agility, and improving
their ability to serve as a trusted advisor to the enterprise.
ADP Relationship Expansion - The Hackett Group and ADP announced
a further expansion to their strategic alliance that will offer
large companies (those with 1000+ employees) using ADP Enterprise
HR®, ADP Vantage HCM®, and ADP Workforce Now® access to The Hackett
Group’s advisors, best practices, metrics, research, and tools.
These offerings are aimed at helping large organizations improve
human capital management (HCM) performance, the efficiency and
effectiveness of their HR operations and strategic impact to help
drive enterprise results.
Oracle Cloud Excellence Implementer Program - The Hackett Group,
a Cloud Premier and Platinum level member of Oracle PartnerNetwork
(OPN), announced it has joined the Oracle Cloud Excellence
Implementer (CEI) program and has achieved CEI status for six
Oracle Cloud applications in North America, including Oracle
Enterprise Planning and Budgeting Cloud, Oracle Financial
Consolidation and Close Cloud, Oracle Financials Cloud, Oracle
Global Human Resources Cloud, Oracle Benefits Cloud, and Oracle
Talent Management Cloud.
2018 Digital Awards Launch – The Hackett Group began accepting
applications for its 2018 Digital Awards, which recognizes leaders
in RPA, intelligent data capture, cognitive automation, advanced
analytics, and other areas. Applications are being accepted until
August 15 at this link: http://go.poweredbyhackett.com/7bnm
On Tuesday, August 7, 2018 senior management will discuss second
quarter results in a conference call at 5:00 P.M. ET. The number
for the conference call is (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 7,
2018 and will run through 5:00 P.M. ET on Tuesday, August 21, 2018.
To access the rebroadcast, please dial (866) 424-7877. For
International callers, please dial (203) 369-0866.
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 7, 2018 and
will run through 5:00 P.M. ET on Tuesday, August 21, 2018. 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, offering digital transformation including robotic
process automation and enterprise cloud application implementation.
Services include business transformation, enterprise
analytics, working capital management 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 more than 15,200 benchmarking
and performance studies with major corporations and government
agencies, including 97% of the Dow Jones Industrials, 89% of the
Fortune 100, 87% of the DAX 30 and 59% of the FTSE 100. These
studies drive its Best Practice Intelligence Center™ 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 ability of
our products, services, or offerings mentioned in this release to
deliver the desired effect, our ability to effectively integrate
acquisitions into our operations, 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 these referenced above, the timing of projects
and the potential for contract cancellations by our customers,
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, changes in general economic
conditions and interest rates, our ability to obtain debt financing
through additional borrowings under an amendment to our existing
credit facility as well as other risks detailed in our Company's
Annual Report on Form 10-K for the most recent fiscal year 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 29, June 30, June
29, June 30, 2018 2017 2018
2017 Revenue: Revenue before reimbursements ("net revenue")
$ 69,614 $ 67,726 $ 137,089 $ $ 132,795 Reimbursements 6,035
5,844 11,293 12,204
Total revenue 75,649 73,570 148,382 144,999 Costs and
expenses: Cost of service: Personnel costs before reimbursable
expenses 42,993 40,947 84,614 81,099 Acquisition-related
compensation (benefit) expense (204 ) 423 (789 ) 423 Non-cash stock
compensation expense 1,002 1,226 2,045 2,358 Acquisition-related
non-cash stock compensation (benefit) expense (79 ) 616 721 926
Reimbursable expenses 6,035 5,844
11,293 12,204 Total cost of service
49,747 49,056 97,884 97,010 Selling, general and
administrative costs 15,022 15,190 29,843 29,550 Non-cash stock
compensation expense 804 874 1,646 1,533 Acquisition-related costs
— 161 — 267 Amortization of intangible assets 591 532 1,204 918
Acquisition-related contingent consideration liability (4,553 ) —
(4,553 ) — Restructuring costs — 1,293
— 1,293 Total selling, general, and
administrative expenses 11,864 18,050 28,140 33,561
Total costs and operating expenses 61,611
67,106 126,024 130,571
Income from operations 14,038 6,464 22,358 14,428
Other expense: Interest expense (178 ) (127 )
(357 ) (217 ) Income from operations before
income taxes 13,860 6,337 22,001 14,211 Income tax expense
2,339 1,587 3,113 1,587
Net income $ 11,521 $ 4,750 $ 18,888 $
12,624 Basic net income per common share: Income per
common share from operations $ 0.39 $ 0.16 $ 0.65 $ 0.44 Weighted
average common shares outstanding 29,430 29,041 29,260 28,955
Diluted net income per common share: Income per common share
from operations $ 0.36 $ 0.15 $ 0.59 $ 0.39 Weighted average common
and common equivalent shares outstanding 32,235 32,513 32,025
32,403 Pro forma data (1): Income from operations before
income taxes $ 13,860 $ 6,337 $ 22,001 $ 14,211 Acquisition-related
compensation (benefit) expense (204 ) 423 (789 ) 423 Non-cash stock
compensation expense 1,806 2,100 3,691 3,891 Acquisition-related
non-cash stock compensation (benefit) expense (79 ) 616 721 926
Acquisition-related costs — 161 — 267 Acquisition-related
contingent consideration liability (4,553 ) — (4,553 ) —
Restructuring costs — 1,293 — 1,293 Amortization of intangible
assets 591 532 1,204
918 Pro forma income before income taxes 11,421
11,462 22,275 21,929 Pro forma income tax expense 2,855
3,439 5,569 6,579
Pro forma net income $ 8,566 $ 8,023 $ 16,706
$ 15,350 Pro forma basic net income per common share
$ 0.29 $ 0.28 $ 0.57 $ 0.53 Weighted average common shares
outstanding 29,430 29,041 29,260 28,955 Pro forma diluted
net income per common share $ 0.27 $ 0.25 $ 0.52 $ 0.47 Weighted
average common and common equivalent shares outstanding 32,235
32,513 32,025 32,403
(1) The Company provides pro forma
earnings results (which exclude the amortization of intangible
assets, stock compensation expense, acquisition-related one time
benefit, cash and stock compensation expense (benefit),
restructuring expenses 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.
The Hackett Group, Inc. CONDENSED
CONSOLIDATED BALANCE SHEETS (in thousands)
(unaudited) June 29, December 29, 2018
2017 ASSETS Current assets: Cash and cash equivalents
$ 13,270 $ 17,512 Accounts receivable and unbilled revenue, net
56,773 55,262 Prepaid expenses and other current assets
3,282 2,511
Total current assets
73,325 75,285 Property and equipment, net 22,846 18,851
Other assets 5,025 6,021 Goodwill, net 84,720 85,074
Total assets $ 185,916 $ 185,231
LIABILITIES AND
SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $
8,400 $ 8,434 Accrued expenses and other liabilities 34,072
43,014 Total current liabilities 42,472 51,448 Non-current
accrued expenses and other liabilities 213 1,268 Long-term deferred
tax liability, net 8,099 6,240 Long-term debt 13,500
19,000 Total liabilities 64,284 77,956 Shareholders' equity
121,632 107,275 Total liabilities and shareholders'
equity $ 185,916 $ 185,231
The
Hackett Group, Inc. SUPPLEMENTAL FINANCIAL DATA
(unaudited) Quarter Ended June 29,
June 30, March 30, 2018 2017
2018 Revenue Breakdown by Group: (in thousands) The
Hackett Group (2) $ 61,287 $ 57,658 $ 58,898 SAP Solutions (3)
8,327 10,068 8,577 Net
revenue (4) $ 69,614 $ 67,726 $ 67,475
Revenue Concentration: (% of total revenue) Top customer 6 %
4 % 3 % Top 5 customers 18 % 15 % 12 % Top 10 customers 25 % 25 %
19 %
Key Metrics and Other Financial Data:
Total Company: Consultant headcount 1,043 1,002 1,016 Total
headcount 1,291 1,236 1,257 Days sales outstanding (DSO) 68 61 65
Cash (used in) provided by operating activities (in thousands) $
(2,368 ) $ 4,111 $ 17,203 Pro forma return on equity (5) 31 % 38 %
31 % Depreciation (in thousands) $ 624 $ 612 $ 580 Amortization (in
thousands) $ 591 $ 532 $ 613
Remaining Plan
authorization: Shares purchased (in thousands) - 507 53 Cost of
shares repurchased (in thousands) $
—
$ 7,617 $ 963 Average price per share of shares purchased $ — $
15.01 $ 18.33 Remaining Plan authorization (in thousands) $ 7,174 $
630 $ 2,174
Shares Purchased to Satisfy Employee Net
Vesting Obligations: Shares purchased (in thousands) 11 21 175
Cost of shares purchased (in thousands) $ 182 $ 370 $ 3,004 Average
price per share of shares purchased $ 16.22 $ 17.90 $ 17.15
(2) The Hackett Group encompasses the Benchmarking, Business
Transformation and Executive Advisory groups, and EPM Groups and
excludes AMS.
(3) SAP Solutions encompasses Best
Practice Implementation of ERP Software, the SAP group,
approximately 50% of which are offshore resources.
(4) Net revenue excludes reimbursable expenses which are primarily
travel-related expenses passed through to a client with no
associated margin. (5) Twelve months of pro forma net income
divided by average shareholder's equity (6) Certain
reclassifications have been made to conform with current reporting
requirements.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180807005892/en/
The Hackett GroupRobert A. Ramirez, CFO,
305-375-8005rramirez@thehackettgroup.com
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