The Hackett Group, Inc. (NASDAQ: HCKT), a leading benchmarking,
research advisory and strategic consultancy firm that enables
organizations to achieve Digital World Class™ performance, today
announced its financial results for the third quarter, which ended
on September 30, 2022.
Financial Highlights
- Total revenue in the third quarter of 2022 was $72.0 million
and revenue before reimbursements was $71.0 million, which was in
line with our guidance. This compares to total revenue of $71.9
million and revenue before reimbursements of $71.4 in the third
quarter of the prior year.
- GAAP diluted earnings per share was $0.32 in the third quarter
of 2022, as compared to $0.25 in the third quarter of 2021.
- Adjusted diluted earnings per share, a non-GAAP measure, was
$0.37, exceeding the high end of our guidance as compared to $0.31
in the third quarter of 2021, an increase of 19% using a GAAP
effective tax rate in both periods. Adjusted financial 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.
- Subsequent to the end of the third quarter, the Company’s Board
of Directors approved an additional $120.0 million to its share
repurchase plan from the remaining $10.6 million. The Company also
announced its plan to launch a modified “Dutch auction” tender
offer tomorrow to purchase up to $120.0 million in value of its
common stock, at a price ranging from $20.50 to $23.50.
- The Company also amended and restated its credit facility to
extend the maturity date and increase the borrowing capacity to
$100 million. As of September 30, 2022, the Company’s cash balances
were $67 million, with no outstanding balance of the credit
facility.
- Subsequent to the end of the third quarter, the Company’s Board
of Directors also declared its fourth quarter dividend of $0.11 per
share for its shareholders of record on December 23, 2022, to be
paid on January 6, 2023.
- Effective in the third quarter of 2022, the Company has
reorganized its operating and internal reporting structure to
better align with its primary market solutions. As a result of this
reorganization, the Company will be reporting on three reportable
segments: (1) Global Strategy and Business Transformation, (2)
Oracle Solutions and (3) SAP Solutions. Segment related revenue and
profit are provided in the accompanying tables.
“We reported strong financial results driven by the growth and
contribution of our Global Strategy and Business Transformation
group,” stated Ted A. Fernandez, Chairman & CEO of The Hackett
Group, Inc. “Our results were achieved while we continued to
increase our investments in the content development and sales
resources for our expanding research advisory and market
intelligence offerings.”
Business Outlook for the Fourth Quarter of 2022
Based on the Company's current outlook:
- The Company estimates total revenue before reimbursements for
the fourth quarter of 2022 will be in the range of $66.0 million to
$68.0 million.
- The Company estimates adjusted diluted earnings per share for
the fourth quarter of 2022 to be in the range of $0.33 and $0.35,
assuming a GAAP effective tax rate of 28%.
Conference Call and Webcast Details
- On Tuesday, November 8, 2022, 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 Tuesday, November 8,
2022 and will run through 5:00 P.M. ET on Tuesday, November 22,
2022. To access the rebroadcast, please dial (888) 566-0478. For
International callers, please dial (203) 369-3051.
- In addition, The Hackett Group will also be webcasting this
conference call live. 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, November 8, 2022 and will run through 5:00 P.M.
ET on Tuesday, November 22, 2022. To access the replay, visit
www.thehackettgroup.com.
Use of Non-GAAP Financial Measures
The Company provides adjusted earnings results (which exclude
the loss from discontinued operations, non-cash stock based
compensation expense, acquisition-related compensation expense,
acquisition-related non-cash stock based compensation expense,
restructuring charges and reversals, amortization of intangible
assets and includes a GAAP 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 users' 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 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 its ongoing primary operations and
to provide a consistent basis for comparison between quarters.
Further, these non-GAAP results are one of the primary indicators
management uses for planning and forecasting. The presentation of
this additional non-GAAP information should be considered in
addition to, and not as a substitute for or superior to, any
results prepared in accordance with GAAP. See the reconciliation of
actual results titled “Reconciliation of GAAP to Non-GAAP Measures”
in the accompanying tables.
The Company believes that the presentation of non-GAAP financial
information on a forward-looking basis, including the guidance
contained in this release, provides important supplemental
information to management and investors regarding its anticipated
results of operations. The Company is unable to provide a
reconciliation of GAAP measures to corresponding forward-looking
non-GAAP measures without unreasonable effort due to the high
variability and low visibility of most of the items that have been
excluded from these non-GAAP measures. For example, non-cash stock
based compensation expense is impacted by the Company’s future
hiring needs, the type and volume of equity awards necessary for
such future hiring, and the price at which the Company’s stock will
trade in those future periods. In addition, the provision or
benefit for income taxes is impacted by non-recurring income tax
adjustments, valuation allowance on deferred tax assets, and the
income tax effect of non-GAAP exclusions. The effects of these
reconciling items may be significant, as the items that are being
excluded are difficult to predict.
About The Hackett Group
The Hackett Group, Inc. (NASDAQ: HCKT) is a leading
benchmarking, research advisory and strategic consultancy firm that
enables organizations to achieve Digital World Class™
performance.
Drawing upon our unparalleled intellectual property from nearly
20,000 benchmark studies and our Hackett-Certified® best practices
repository from the world’s leading businesses – including 97% of
the Dow Jones Industrials, 94% of the Fortune 100, 70% of the DAX
30 and 51% of the FTSE 100 – captured through our leading
benchmarking platform, Quantum Leap® and our Digital Transformation
Platform, we accelerate digital transformations, including
enterprise cloud implementations.
More information on The Hackett Group is available at:
www.thehackettgroup.com, info@thehackettgroup.com, or by calling
(770) 225-3600.
The Hackett Group, quadrant logo, World Class Defined and
Enabled, Quantum Leap, Digital World Class and Hackett
Excelleration Matrix are the registered marks of The Hackett
Group.
Cautionary Statement Regarding “Forward-Looking”
Statements
This release contains “forward-looking” statements within the
meaning of Section 27A of the Securities Act of 1933 as amended and
Section 21E of the Securities Exchange Act of 1934, as amended.
Statements including without limitation, words such as “expects,”
“anticipates,” “intends,” “plans,” “believes,” “seeks,”
“estimates,” or other similar phrases or variations of such words
or similar expressions indicating, present or future anticipated or
expected occurrences or outcomes are intended to identify such
forward-looking statements. Forward-looking statements are not
statements of historical fact and involve known and unknown risks,
uncertainties and other factors that may cause the Company’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 may impact such
forward-looking statements include without limitation,
macroeconomic conditions, the ability of The Hackett Group to
effectively market its digital transformation and other consulting
services, competition from other consulting and technology
companies that may have or develop in the future, similar
offerings, the commercial viability of its services as well as
other risks detailed in The Hackett Group’s reports filed with the
United States Securities and Exchange Commission (the “SEC”). The
Hackett Group does not undertake any duty to update this release or
any forward-looking statements contained herein, except as may be
required by law.
Additional Information Regarding the Tender Offer
This press release is for informational purposes only and is not
an offer to buy or the solicitation of an offer to sell any
security. The tender offer described above has not yet commenced,
and there can be no assurances that the Company will commence the
tender offer on the terms described in this press release or at
all. On the commencement date of the tender offer, the Company will
file a tender offer statement on Schedule TO, including an offer to
purchase, letter of transmittal and other tender offer materials,
with the SEC. The tender offer will only be made pursuant to the
offer to purchase, the related letter of transmittal and the other
tender offer materials filed as part of the Schedule TO. When
available, shareholders should read carefully the offer to
purchase, the related letter of transmittal and other tender offer
materials because they will contain important information,
including the terms and conditions of the tender offer. Once the
tender offer commences, shareholders will be able to obtain a free
copy of the tender offer statement on Schedule TO, the offer to
purchase, letter of transmittal and other documents that the
Company will be filing with the SEC at the SEC’s website at
www.sec.gov or from the Company’s information agent for the tender
offer.
The Hackett Group, Inc. CONSOLIDATED
STATEMENTS OF OPERATIONS (in thousands, except per share
data) (unaudited)
Quarter Ended
Nine Months Ended
September 30,
October 1,
September 30,
October 1,
2022
2021
2022
2021
Revenue: Revenue before reimbursements
$
70,995
$
71,400
$
220,871
$
207,807
Reimbursements
1,038
494
2,754
770
Total revenue
72,033
71,894
223,625
208,577
Costs and expenses: Cost of service: Personnel costs before
reimbursable expenses (includes $1,652, $4,801, $1,670 and $5,296
of non-cash stock based compensation expense in the quarters and
nine months ended September 30, 2022 and October 1, 2021,
respectively)
42,870
45,222
134,904
129,619
Reimbursable expenses
1,038
494
2,754
770
Total cost of service
43,908
45,716
137,658
130,389
Selling, general and administrative costs (includes $859,
$3,027, $901 and $2,515 of non-cash stock based compensation
expense in the quarters and nine months ended September 30, 2022
and October 1, 2021, respectively)
14,616
14,773
44,993
43,713
Restructuring charge reversal
(526
)
-
(651
)
-
Total costs and operating expenses
57,998
60,489
182,000
174,102
Operating income
14,035
11,405
41,625
34,475
Other expense, net: Interest expense, net
(14
)
(26
)
(70
)
(76
)
Income from continuing operations before income taxes
14,021
11,379
41,555
34,399
Income tax expense
3,655
3,248
10,469
9,368
Income from continuing operations
10,366
8,131
31,086
25,031
Loss from discontinued operations (net of taxes)
-
-
-
(7
)
Net income
$
10,366
$
8,131
$
31,086
$
25,024
Weighted average common shares outstanding: Basic
31,686
29,814
31,596
30,038
Diluted
32,309
32,876
32,124
32,871
GAAP basic net income per common share: Income per common
share from continuing operations
$
0.33
$
0.27
$
0.98
$
0.83
Loss per common share from discontinued operations
-
-
-
(0.00
)
GAAP basic net income per common share
$
0.33
$
0.27
$
0.98
$
0.83
GAAP diluted net income per common share: Income per common
share from continuing operations
$
0.32
$
0.25
$
0.97
$
0.76
Loss per common share from discontinued operations
-
-
-
(0.00
)
GAAP diluted net income per common share
$
0.32
$
0.25
$
0.97
$
0.76
The Hackett Group, Inc. CONDENSED
CONSOLIDATED BALANCE SHEETS (in thousands)
(unaudited)
September 30,
December 31,
2022
2021
ASSETS
Current assets: Cash and cash equivalents
$
67,045
$
45,794
Accounts receivable and contract assets, net
52,105
50,616
Prepaid expenses and other current assets
3,237
5,766
Total current assets
122,387
102,176
Property and equipment, net
18,676
18,026
Other assets
263
620
Goodwill
82,468
85,070
Operating lease right-of-use assets
863
1,649
Total assets
$
224,657
$
207,541
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities: Accounts payable
$
4,686
$
7,677
Accrued expenses and other liabilities
33,898
30,297
Contract liabilities (deferred revenue)
12,415
14,616
Operating lease liabilities
942
2,299
Total current liabilities
51,941
54,889
Long-term deferred tax liability, net
7,684
7,325
Operating lease liabilities
961
1,474
Total liabilities
60,586
63,688
Shareholders' equity
164,071
143,853
Total liabilities and shareholders' equity
$
224,657
$
207,541
The Hackett Group, Inc. SEGMENT
INFORMATION (in thousands) (unaudited)
Quarter Ended
Nine Months Ended
September 30,
October 1,
September 30,
October 1,
2022
2021
2022
2021
Global S&BT (1): Total revenue (4)
$
41,593
$
37,085
$
128,760
$
106,956
Segment profit (5)
14,030
11,847
45,939
34,517
Oracle Solutions (2): Total revenue (4)
$
17,682
$
20,762
$
59,165
$
55,763
Segment profit (5)
3,313
5,417
12,147
12,062
SAP Solutions (3): Total revenue (4)
$
12,758
$
14,047
$
35,700
$
45,858
Segment profit (5)
3,847
3,716
9,238
15,571
Total Company: Total revenue (4)
$
72,033
$
71,894
$
223,625
$
208,577
Total segment profit
$
21,190
$
20,980
$
67,324
$
62,150
Items not allocated to segment level (5): Corporate general and
administrative expenses
4,332
5,916
15,899
16,528
Non-cash stock based compensation expense
2,511
2,571
7,828
7,811
Depreciation and amortization
838
1,088
2,623
3,336
Restructuring charge reversal
(526
)
-
(651
)
-
Interest expense, net
14
26
70
76
Income from continuing operations before taxes
$
14,021
$
11,379
$
41,555
$
34,399
(1) Global S&BT includes the results of our strategic
businesses consulting practices, including S&BT Consulting,
Benchmarking, Business Advisory Services, IP as-a-Service and
OneStream. (2) Oracle Solutions includes the results of our EPM/ERP
and Digital AMS practices. (3) SAP Solutions includes the results
of our SAP applications and related SAP service offerings. (4)
Total revenue includes reimbursable expenses, which are project
travel-related expenses passed through to a client with no
associated operating margin. (5) Segment profits consist of the
revenue generated by the segment, less the direct costs of revenue
and selling, general and administrative expenses that are incurred
directly by the segment. Items not allocated to the segment level
include corporate costs related to administrative functions that
are performed in a centralized manner that are not attributable to
a particular segment. These administrative function costs include
corporate general and administrative expenses, non-cash stock based
compensation, depreciation and amortization expense, restructuring
charges and reversals and interest expense. Corporate general and
administrative expenses primarily include costs related to business
support functions including accounting and finance, human
resources, legal, information technology and office administration.
Corporate general and administrative expenses exclude one-time,
non-recurring expenses and benefits.
The Hackett
Group, Inc. RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(in thousands, except per share data) (unaudited)
Quarter Ended
Nine Months Ended
September 30,
October 1,
September 30,
October 1,
2022
2021
2022
2021
GAAP NET INCOME
$
10,366
$
8,131
$
31,086
$
25,024
Adjustments (1): Non-cash stock based compensation expense (2)
2,507
2,552
7,816
7,433
Acquisition-related compensation expense (3)
-
-
-
11
Acquisition-related non-cash stock based compensation expense (3)
4
19
12
378
Restructuring charge reversal
(526
)
-
(651
)
-
Amortization of intangible assets (4)
-
259
154
783
ADJUSTED NET INCOME BEFORE INCOME TAXES ON ADJUSTMENTS (1)
12,351
10,961
38,417
33,629
Tax effect of adjustments above (5)
511
709
1,875
2,150
ADJUSTED NET INCOME (1)
$
11,840
$
10,252
$
36,542
$
31,479
GAAP diluted net income per common share
$
0.32
$
0.25
$
0.97
$
0.76
Adjusted diluted net income per common share (1)
$
0.37
$
0.31
$
1.14
$
0.96
Weighted average common and common equivalent shares outstanding
32,309
32,876
32,124
32,871
(1) The Company provides adjusted earnings results (which
exclude the loss from discontinued operations, non-cash stock based
compensation expense, acquisition-related compensation expense,
acquisition-related non-cash stock based compensation expense,
restructuring charges and reversals, amortization of intangible
assets and include a GAAP 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 users' 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 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) Non-cash stock based compensation expense
is accounted for under Financial Accounting Standards Board
Accounting Standards Codification Topic 718, Compensation-Stock
Compensation. The Company excludes non-cash stock based
compensation expense and the related tax effects for the purposes
of adjusted net income and adjusted diluted earnings per share. The
Company believes that non-GAAP measures of profitability, which
exclude non-cash stock based compensation expense, are widely used
by investors. (3) The Company incurs cash and non-cash stock based
compensation expense for acquisition related consideration that is
recognized over time under GAAP. The Company believes excluding
these amounts more consistently presents its ongoing results of
operations because they are related to acquisitions and not due to
normal operating activities. The acquisition-related non-cash stock
based compensation expense is also accounted for under Financial
Accounting Standards Board Accounting Standards Codification Topic
718, Compensation-Stock Compensation. (4) The Company has incurred
expense on amortization of intangible assets related to various
acquisitions. The Company excludes the effect of the amortization
of intangibles from our adjusted results in order to more
consistently present its ongoing results of operations. (5) The
adjustment for the income tax expense is based on the accounting
treatment and income tax rate for the jurisdiction of each item.
For the quarter end periods the impact of non-cash stock based
compensation expense was $0.6 million and $0.7 million in 2022 and
2021, respectively; the impact of intangible amortization was $51
thousand in 2021; and the impact on the restructuring charge
reversal was $136 thousand in 2022. For the nine month periods the
impact of non-cash stock based compensation expense was $2.0
million and $1.9 million in 2022 and 2021, respectively; the impact
of intangible amortization was $32 thousand and $155 thousand in
2022 and 2021, respectively and the impact on the restructuring
charge reversal was $168 thousand in 2022.
The
Hackett Group, Inc. SUPPLEMENTAL FINANCIAL DATA
(unaudited)
Quarter Ended
September 30,
July 1,
October 1,
2022
2022
2021
Revenue Concentration: (% of total revenue) Top customer
7
%
7
%
5
%
Top 5 customers
18
%
18
%
14
%
Top 10 customers
26
%
26
%
24
%
Key Metrics and Other Financial Data: Total
Company: Consultant headcount
1,121
1,122
1,075
Total headcount
1,342
1,336
1,283
Days sales outstanding (DSO)
66
59
63
Cash provided by operating activities (in thousands)
$
9,789
$
18,235
$
6,818
Depreciation (in thousands)
$
838
$
828
$
829
Amortization (in thousands)
$
-
$
10
$
259
Capital expenditures (in thousands)
$
893
$
845
$
649
Remaining Plan authorization: Shares purchased (in
thousands)
—
—
113
Cost of shares repurchased (in thousands)
$
—
$
—
$
2,103
Average price per share of shares purchased
$
—
$
—
$
18.68
Remaining Plan authorization (in thousands)
$
10,609
$
10,609
$
11,472
Shares Purchased to Satisfy Employee Net Vesting
Obligations: Shares purchased (in thousands)
3
4
8
Cost of shares purchased (in thousands)
$
69
$
76
$
155
Average price per share of shares purchased
$
21.05
$
21.24
$
19.49
View source
version on businesswire.com: https://www.businesswire.com/news/home/20221108006000/en/
Robert A. Ramirez, CFO, 305-375-8005 or
rramirez@thehackettgroup.com
Hackett (NASDAQ:HCKT)
Historical Stock Chart
From Jun 2024 to Jul 2024
Hackett (NASDAQ:HCKT)
Historical Stock Chart
From Jul 2023 to Jul 2024