- Q2 2019 net revenue of $68.0 million at the mid-point of
guidance and pro forma EPS of $0.28, at high-end of guidance
- Q2 2019 GAAP EPS of $0.22 as compared to GAAP EPS of $0.36 in
the same period of the prior year, which included a favorable $0.14
per share acquisition liability adjustment
- Board of Directors declared $0.18 semi-annual dividend, an
increase of 6% from prior year, paid in July 2019
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 28, 2019.
Q2 2019 net revenue (gross revenue less reimbursable expenses)
from continuing operations was $68.0 million, down 1%, as compared
to the same period in the prior year. Q2 2019 gross revenue from
continuing operations was $73.5 million, down 1% from the same
period in the prior year.
Q2 2019 pro forma diluted earnings per share were $0.28 per
share, as compared to $0.27 per share for 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.
Q2 2019 GAAP diluted earnings per share were $0.22 per share, as
compared to $0.36 per share for the same period in the prior year.
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.
At the end of the second quarter of 2019, the Company’s cash
balances were $16.7 million. During the quarter, the Company
utilized cash to pay down outstanding debt of $3.0 million. In
addition, during the second quarter of 2019, the Company
repurchased 93 thousand shares of the Company’s common stock at an
average price per share of $15.60 for a total of $1.5 million. At
the end of the second quarter of 2019, the Company’s remaining
stock repurchase program authorization was $3.9 million.
“As expected, we experienced strong sequential growth in nearly
all of our US groups as we saw increased momentum across client
cloud and digital transformation initiatives,” stated Ted A.
Fernandez, Chairman and CEO of The Hackett Group. “We expect our US
momentum to continue into the third quarter, which bodes well for
our prospects for the remainder of the year.”
Based on the current economic outlook, the Company estimates
total net revenue for the third quarter of 2019 to be in the range
of $66.5 million and $68.5 million or gross revenue (inclusive of
reimbursable expenses) to be in the range of $72.0 million and
$74.0 million. The Company estimates pro forma diluted earnings per
share for the third quarter of 2019 to be in the range of $0.27 and
$0.29.
Other Highlights
Digital Awards - The Hackett Group announced that Bayer and IBM
were the winners of its 2019 Digital Awards, which spotlight
companies that are on the cutting edge of digital transformation,
including smart automation, robotic process automation (RPA),
cognitive computing and advanced analytics. Bayer won the award in
the advanced analytics category for its Statistical Demand
Forecasting System, while IBM won in the smart automation category
for its Cognitive Support Platform. Four other companies were also
recognized as finalists: HCL/Manchester United Football Club, HP,
IBM and Indecomm. The Hackett Group’s Digital Awards spotlight and
celebrate companies on the cutting edge of using smart automation
and advanced analytics to solve business problems.
HR Key Issues Research – The Hackett Group issued its 2019 HR
Key Issues research, which found that HR organizations are making
progress on improving key capabilities. The research found that
improvements have been slow and gaps remain and HR organizations
find themselves challenged to address an array of areas that are
critical to helping the enterprise achieve its objectives. The
research found that most HR organizations remain behind the curve
in addressing areas that are central to achieving enterprise goals:
developing executives who can lead in volatile environments,
supporting enterprise digital transformation, and dealing with
critical talent/skill shortages.
IT Key Issues Research – The Hackett Group issued its 2019 IT
Key Issues research, which found that while IT organizations are
making progress with their own internal digital transformation,
they are still struggling to support the broader enterprise,
reallocate the technology portfolio, implement a more agile
technology infrastructure, drive innovation, and improve
customer-centricity. The research found that IT has limited
capability to address many of their highest priority objectives. In
addition, plans to address these deficiencies fall woefully short,
calling into question IT’s ability to live up to the business
expectation to serve as a true strategic business partner.
On Tuesday, August 6, 2019 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 6,
2019 and will run through 5:00 P.M. ET on Tuesday, August 20, 2019.
To access the rebroadcast, please dial (888) 397-5659. For
International callers, please dial (203) 369-3145.
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 6, 2019 and
will run through 5:00 P.M. ET on Tuesday, August 20, 2019. 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 more than 16,500 benchmarking
studies with major corporations and government agencies, including
93% of the Dow Jones Industrials, 89% 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 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 those 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, the impact of Brexit on our
business, 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 28, June 29, June 28, June 29,
2019
2018
2019
2018
Revenue: Revenue before reimbursements ("net revenue")
$
67,976
$
68,706
$
130,346
$
134,745
Reimbursements
5,545
5,821
10,330
10,889
Total revenue from continuing operations
73,521
74,527
140,676
145,634
Costs and expenses: Cost of service: Personnel costs before
reimbursable expenses
40,820
42,148
79,754
82,752
Non-cash stock compensation expense
1,022
977
1,942
2,000
Acquisition-related compensation benefit
(159
)
(204
)
(288
)
(789
)
Acquisition-related non-cash stock compensation expense
289
(79
)
368
721
Reimbursable expenses
5,545
5,821
10,330
10,889
Total cost of service
47,517
48,663
92,106
95,573
Selling, general and administrative costs
15,159
14,779
29,201
29,242
Non-cash stock compensation expense
787
804
1,492
1,645
Amortization of intangible assets
254
591
553
1,204
Acquisition-related contingent consideration liability
45
(4,553
)
(1,025
)
(4,553
)
Total selling, general, and administrative expenses
16,245
11,621
30,221
27,538
Total costs and operating expenses
63,762
60,284
122,327
123,111
Income from operations
9,759
14,243
18,349
22,523
Other expense: Interest expense
(105
)
(178
)
(206
)
(357
)
Income from continuing operations before income taxes
9,654
14,065
18,143
22,166
Income tax expense
2,614
2,393
4,054
3,193
Income from continuing operations
7,040
11,672
14,089
18,973
Loss from discontinued operations (2)
(51
)
(151
)
(6
)
(85
)
Net income
$
6,989
$
11,521
$
14,083
$
18,888
Weighted average common shares outstanding: Basic
29,823
29,430
29,753
29,260
Diluted
32,374
32,235
32,334
32,025
Basic net income per common share: Income per common share
from continuing operations
$
0.23
$
0.40
$
0.47
$
0.65
Loss per common share from discontinued operations (2)
(0.00
)
(0.01
)
(0.00
)
(0.00
)
Net income per common share
$
0.23
$
0.39
$
0.47
$
0.65
Diluted net income per common share: Income per common share
from continuing operations
$
0.22
$
0.36
$
0.44
$
0.59
Loss per common share from discontinued operations (2)
(0.00
)
(0.00
)
(0.00
)
(0.00
)
Net income per common share
$
0.22
$
0.36
$
0.44
$
0.59
Pro forma data (1): Income from continuing operations
before income taxes
$
9,654
$
14,065
$
18,143
$
22,166
Non-cash stock compensation expense
1,809
1,781
3,434
3,645
Acquisition-related compensation benefit
(159
)
(204
)
(288
)
(789
)
Acquisition-related non-cash stock compensation expense
289
(79
)
368
721
Acquisition-related contingent consideration liability
45
(4,553
)
(1,025
)
(4,553
)
Amortization of intangible assets
254
591
553
1,204
Pro forma income before income taxes
11,892
11,601
21,185
22,394
Pro forma income tax expense
2,973
2,900
5,296
5,599
Pro forma net income
$
8,919
$
8,701
$
15,889
$
16,795
Pro forma basic net income per common share
$
0.30
$
0.30
$
0.53
$
0.57
Weighted average common shares outstanding
29,823
29,430
29,753
29,260
Pro forma diluted net income per common share
$
0.28
$
0.27
$
0.49
$
0.52
Weighted average common and common equivalent shares outstanding
32,374
32,235
32,334
32,025
(1) The Company provides pro forma earnings results (which
exclude the amortization of intangible assets, stock compensation
expense, acquisition-related one-time expense (benefit), and
includea 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-GAAPresults 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 provideuseful 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 provideinvestors 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 forcomparison 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 hashistorically reported non-GAAP results to the investment
community, it believes the continued inclusion of non-GAAP results
provides consistency in its financial reporting. The presentationof
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) June 28,
December 28,
2019
2018
ASSETS Current assets: Cash and cash equivalents
$
16,682
$
13,808
Accounts receivable and unbilled revenue, net
54,547
54,807
Prepaid expenses and other current assets
4,086
4,339
Assets related to discontinued operations (3)
-
137
Total current assets
75,315
73,091
Restricted cash Property and equipment, net
21,112
19,750
Other assets
3,116
3,704
Goodwill, net
84,213
84,207
Operating lease right-of-use assets
7,613
-
Total assets
$
191,369
$
180,752
LIABILITIES AND SHAREHOLDERS' EQUITY Current
liabilities: Accounts payable
$
6,767
$
7,429
Accrued expenses and other liabilities
33,114
34,498
Operating lease liabilities
2,376
-
Liabilities related to discontinued operations (3)
31
2,300
Total current liabilities
42,288
44,227
Long-term deferred tax liability, net
8,143
6,435
Long-term debt
4,500
6,500
Operating lease liabilities
5,237
-
Total liabilities
60,168
57,162
Shareholders' equity
131,201
123,590
Total liabilities and shareholders' equity
$
191,369
$
180,752
(3) The assets and liabilities related to discontinued operations
relate to the discontinuance of the Company's European Working
Capital Group.
The Hackett Group, Inc. SUPPLEMENTAL
FINANCIAL DATA (unaudited) Quarter Ended
June 28, June 29, March 29,
2019
2018
2019
Revenue Breakdown by Group: (in thousands) Global S&BT
(4)
$
35,718
$
37,816
$
33,270
EEA (5)
32,258
30,890
29,100
Net revenue from continuing operations (6)
$
67,976
$
68,706
$
62,370
Revenue Concentration: (% of total revenue) Top
customer
4
%
6
%
5
%
Top 5 customers
16
%
18
%
18
%
Top 10 customers
25
%
25
%
26
%
Key Metrics and Other Financial Data: Total
Company: Consultant headcount (7)
999
1,020
979
Total headcount (7)
1,240
1,268
1,222
Days sales outstanding (DSO) (7)
68
69
76
Cash provided by (used in) operating activities (in thousands)
$
11,273
$
(2,368
)
$
6,759
Pro forma return on equity (8)
26
%
31
%
27
%
Depreciation (in thousands)
$
830
$
624
$
606
Amortization (in thousands)
$
255
$
591
$
299
Remaining Plan authorization: Shares purchased (in
thousands)
92
-
101
Cost of shares repurchased (in thousands)
$
1,440
$ —
$
1,616
Average price per share of shares purchased
$
15.59
$ —
$
15.99
Remaining Plan authorization (in thousands)
$
3,878
$
7,174
$
5,318
Shares Purchased to Satisfy Employee Net Vesting
Obligations: Shares purchased (in thousands)
1
11
123
Cost of shares purchased (in thousands)
$
14
$
182
$
2,370
Average price per share of shares purchased
$
16.39
$
16.22
$
19.24
(4) Strategy and Business Transformation
Group (S&BT) includes the results of our IP as-a-service
offerings, which includes our Executive Advisory Programs and our
Benchmarking Services, our Business Transformation Practices and
the international portion of our EPM revenue.
(5) ERP, EPM and Analytics Solutions (EEA)
includes the results of our Oracle EEA and SAP Solutions
Practices.
(6) Net revenue excludes reimbursable
expenses which are primarily travel-related expenses passed through
to a client with no associated margin.
(7) Prior periods have been restated to
exclude the discontinuance of the Company's European Working
Capital Group.
(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/20190806005903/en/
Robert A. Ramirez, CFO, 305-375-8005 or
rramirez@thehackettgroup.com
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