HCKT Hackett Group Inc

• Q4 2019 net revenue of $63.7 million, at the high-end of guidance, and pro forma EPS of $0.24, at mid-point of guidance
• Q4 2019 GAAP EPS of $0.07 as compared to GAAP EPS of $0.00 in the same period in the prior year
• Company announces annual dividend increase of 6% from $0.36 to $0.38 per share
• Board of Directors approves $5.0 million increase in the Company’s share repurchase program

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 fourth quarter, which ended on December 27, 2019.

Q4 2019 net revenue (gross revenue less reimbursable expenses) from continuing operations was $63.7 million, up 3%, as compared to the same period in the prior year. Q4 2019 gross revenue from continuing operations was $69.1 million, up 4%, from the same period in the prior year.

Q4 2019 pro forma diluted earnings per share were $0.24, down 8% when compared to $0.26 for the same period in the prior year. Fiscal 2019 pro forma diluted earnings per share were $1.00, down 6% when compared to $1.06 for 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.

GAAP diluted earnings per share were $0.07 for the fourth quarter of 2019, compared to earnings per share of $0.00 in the fourth quarter of 2018. GAAP diluted earnings per share were $0.72 for fiscal year 2019 and $0.74 for fiscal year 2018. During the fourth quarter of 2019, the Company recorded a restructuring charge and the write-off of its investment in The Hackett Institute’s Enterprise Analytics program, both of which negatively impacted GAAP earnings per share by $0.12. The fourth quarter of 2018 included the impact for the discontinued operations of the Working Capital group and the write-off of the investment for the HPE software offering which amounted to $0.23 per share.

At the end of the fourth quarter of 2019, the Company’s cash balances were $26.0 million. During the quarter, the Company repurchased 145 thousand shares under its share repurchase program. As of the end of the fourth quarter of 2019, the Company’s remaining share repurchase program authorization was $1.7 million. In its recent meeting, the Company’s Board of Directors approved a $5.0 million increase in the Company’s share repurchase program and authorized a 6% increase of its annual dividend from $0.36 to $0.38 per share, to be paid semi-annually.

“We continue to see solid U.S. performance driven by digital transformation and implementation of cloud software initiatives tempered by weak European results,” stated Ted A. Fernandez, Chairman and CEO of The Hackett Group. “During the quarter we took the necessary actions to mitigate the impact of the volatility in Europe. More importantly, as we start the year with improving revenue growth in the U.S. and the geopolitical headwinds impacting Europe stabilizing, we are excited about our 2020 prospects.”

Based on the current economic outlook, the Company estimates total net revenue for the first quarter of 2020 to be in the range of $65.0 million and $66.5 million or gross revenue (inclusive of reimbursable expenses) to be in the range of $70.5 million and $72.0 million. The Company estimates pro forma diluted earnings per share for the first quarter of 2020 to be in the range of $0.23 and $0.25.

Other Highlights

World-Class IT Research – The Hackett Group issued world-class IT research which found that smart automation technologies such as robotic process automation, conversational interfaces, and cognitive automation can enable typical IT organizations to improve productivity by up to 23% while helping them reduce costs, improve effectiveness, and enhance customer experience. The research also found that smart automation serves as a valuable milestone for IT organizations as these organizations continue their digital transformations, enabling them to achieve staffing levels below those seen by world-class IT organizations as they continue to drive towards the broader benefits that come with total technology optimization.

OneStream Platinum Partnership - The Hackett Group announced that it has been named a Platinum level implementation partner by OneStream Software. As a Platinum partner, OneStream recognizes The Hackett Group’s commitment to align with OneStream’s strategic vision and commitment to bring value to shared clients.

On Tuesday, February 18, 2020 senior management will discuss fourth quarter results in a conference call at 5:00 P.M. ET. (800) 593-0486, [Passcode: Fourth 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, February 18, 2020 and will run through 5:00 P.M. ET on Tuesday, March 3, 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 Tuesday, February 18, 2020 and will run through 5:00 P.M. ET on Tuesday, March 3, 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 more than 17,850 benchmarking studies with major corporations and government agencies, including 93% of the Dow Jones Industrials, 90% of the Fortune 100, 80% 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 mitigate the impact of the recent decline in our European operations, 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

 

Twelve Months Ended

December 27,

 

December 28,

 

 

December 27,

 

December 28,

2019

 

2018

 

 

2019

 

2018

Revenue: Revenue before reimbursements ("net revenue")

$

63,736

$

61,595

$

260,837

$

264,523

Reimbursements

 

5,370

 

4,940

 

21,635

 

21,364

Total revenue from continuing operations

 

69,106

 

66,535

 

282,472

 

285,887

  Costs and expenses: Cost of service: Personnel costs before reimbursable expenses

 

38,610

 

35,979

 

159,390

 

159,614

Non-cash stock compensation expense

 

1,056

 

900

 

3,831

 

3,815

Acquisition-related compensation expense (benefit)

 

-

 

14

 

(131)

 

(535)

Acquisition-related non-cash stock compensation expense

 

264

 

575

 

954

 

2,027

Reimbursable expenses

 

5,370

 

4,940

 

21,635

 

21,364

Total cost of service

 

45,300

 

42,408

 

185,679

 

186,285

  Selling, general and administrative costs

 

14,789

 

14,352

 

58,107

 

58,516

Non-cash stock compensation expense

 

663

 

743

 

2,931

 

3,238

Amortization of intangible assets

 

247

 

580

 

1,036

 

2,369

Change in acquisition-related contingent consideration liability

 

-

 

(614)

 

(1,133)

 

(4,364)

Asset impairment

 

1,180

 

6,269

 

1,180

 

6,269

Restructuring costs

 

3,334

—

 

3,334

— Total selling, general, and administrative expenses

 

20,213

 

21,330

 

65,455

 

66,028

  Total costs and operating expenses

 

65,513

 

63,738

 

251,134

 

252,313

  Income from operations

 

3,593

 

2,797

 

31,338

 

33,574

  Other expense: Interest expense

 

(43)

 

(123)

 

(311)

 

(638)

  Income from continuing operations before income taxes

 

3,550

 

2,674

 

31,027

 

32,936

Income tax expense (benefit)

 

1,263

 

(41)

 

7,744

 

5,577

Income from continuing operations

 

2,287

 

2,715

 

23,283

 

27,359

Income (loss) from discontinued operations (2)

 

(2)

 

(2,851)

 

(6)

 

(3,450)

Net income (loss)

$

2,285

$

(136)

$

23,277

$

23,909

  Weighted average common shares outstanding: Basic

 

29,837

 

29,517

 

29,805

 

29,379

Diluted

 

32,573

 

32,677

 

32,453

 

32,330

  Basic net income per common share: Income per common share from continuing operations

$

0.08

$

0.09

$

0.78

$

0.93

Income (loss) per common share from discontinued operations (2)

 

(0.00)

 

(0.09)

 

(0.00)

 

(0.12)

Basic net income per common share

$

0.08

$

(0.00)

$

0.78

$

0.81

  Diluted net income per common share: Income per common share from continuing operations

$

0.07

$

0.08

$

0.72

$

0.85

Income (loss) per common share from discontinued operations (2)

 

(0.00)

 

(0.08)

 

(0.00)

 

(0.11)

Diluted net income per common share

$

0.07

$

(0.00)

$

0.72

$

0.74

    Pro forma data (1): Income from continuing operations before income taxes

$

3,550

$

2,674

$

31,027

$

32,936

Non-cash stock compensation expense

 

1,719

 

1,643

 

6,762

 

7,053

Acquisition-related compensation expense (benefit) —

 

14

 

(131)

 

(535)

Acquisition-related non-cash stock compensation expense

 

264

 

575

 

954

 

2,027

Change in acquisition-related contingent consideration liability —

 

(614)

 

(1,133)

 

(4,364)

Asset impairment

 

1,180

 

6,269

 

1,180

 

6,269

Restructuring costs

 

3,334

—

 

3,334

— Acquisition-related costs — —

 

32

— Amortization of intangible assets

 

247

 

580

 

1,036

 

2,369

Pro forma income before income taxes

 

10,294

 

11,141

 

43,061

 

45,755

Pro forma income tax expense

 

2,574

 

2,785

 

10,765

 

11,439

Pro forma net income

$

7,721

$

8,356

$

32,296

$

34,316

  Pro forma basic net income per common share

$

0.26

$

0.28

$

1.08

$

1.17

Weighted average common shares outstanding

 

29,837

 

29,517

 

29,805

 

29,379

  Pro forma diluted net income per common share

$

0.24

$

0.26

$

1.00

$

1.06

Weighted average common and common equivalent shares outstanding

 

32,573

 

32,677

 

32,453

 

32,330

  (1) The Company provides pro forma earnings results (which exclude the amortization of intangible assets, stock compensation expense, acquisition-related and other 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 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)

December 27,

 

December 28,

2019

 

2018

ASSETS

Current assets: Cash and cash equivalents

$

25,954

$

13,808

Accounts receivable and contract assets, net

 

49,778

 

54,807

Prepaid expenses and other current assets

 

2,895

 

4,339

Assets related to discontinued operations (3)

 

-

 

137

Total current assets

 

78,627

 

73,091

  Property and equipment, net

 

19,916

 

19,750

Other assets

 

2,652

 

3,704

Goodwill, net

 

84,578

 

84,207

Operating lease right-of-use assets

 

7,962

 

-

Total assets

$

193,735

$

180,752

 

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities: Accounts payable

$

8,494

$

7,429

Accrued expenses and other liabilities

 

32,482

 

34,498

Operating lease liabilities

 

2,707

 

-

Liabilities related to discontinued operations (3)

 

-

 

2,300

Total current liabilities

 

43,683

 

44,227

Long-term deferred tax liability, net

 

7,183

 

6,435

Long-term debt

 

-

 

6,500

Operating lease liabilities

 

5,255

 

-

Total liabilities

 

56,121

 

57,162

  Shareholders' equity

 

137,614

 

123,590

Total liabilities and shareholders' equity

$

193,735

$

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 December 27, December 28, September 27,

2019

2018

2019

Revenue Breakdown by Group: (in thousands) S&BT (4)

$

25,875

$

24,690

$

27,435

EEA (5)

 

30,454

 

27,350

 

30,920

International (6)

 

7,407

 

9,555

 

8,400

Net revenue from continuing operations (7)

$

63,736

$

61,595

$

66,755

  Revenue Concentration: (% of total revenue) Top customer

 

5%

 

4%

 

6%

Top 5 customers

 

14%

 

16%

 

19%

Top 10 customers

 

22%

 

24%

 

27%

  Key Metrics and Other Financial Data:   Total Company: Consultant headcount (8)

 

990

 

984

 

1,036

Total headcount (8)

 

1,209

 

1,226

 

1,271

Days sales outstanding (DSO) (8)

 

66

 

75

 

72

Cash provided by operating activities (in thousands)

$

15,821

$

8,056

$

8,506

Pro forma return on equity (9)

 

25%

 

30%

 

25%

Depreciation (in thousands)

$

887

$

609

$

884

Amortization (in thousands)

$

247

$

580

$

236

    Remaining Plan authorization: Shares purchased (in thousands)

 

145

 

15

 

-

Cost of shares repurchased (in thousands)

$

2,227

$

240

$ — Average price per share of shares purchased

$

15.33

$

16.01

$ — Remaining Plan authorization (in thousands)

$

1,651

$

6,934

$

3,878

  Shares Purchased to Satisfy Employee Net Vesting Obligations: Shares purchased (in thousands)

 

3

 

14

 

5

Cost of shares purchased (in thousands)

$

49

$

274

$

88

Average price per share of shares purchased

$

16.20

$

19.74

$

16.29

(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 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)

Prior periods have been restated to exclude the discontinuance of the Company's European Working Capital Group.

(9)

Twelve months of pro forma net income divided by average shareholder's equity.

(10)

Certain reclassifications have been made to conform with current reporting requirements.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20200218006069/en/

Robert A. Ramirez, CFO, 305-375-8005 or rramirez@thehackettgroup.com