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 fourth quarter, which ended
on December 30, 2022.
Financial Highlights
- Total revenue in the fourth quarter of 2022 was $70.1 million
and revenue before reimbursements was $68.8 million, which exceeded
the high end of our guidance. This compares to total revenue of
$70.2 million and revenue before reimbursements of $69.8 million in
the fourth quarter of the prior year.
- GAAP diluted earnings per share was $0.31 in the fourth quarter
of 2022, as compared to $0.50 in the fourth quarter of 2021. GAAP
results for the fourth quarter of 2021 included a $7.7 million, or
$0.23 per diluted share, tax benefit related to the exercise of 2.9
million outstanding share appreciation rights (SARs).
- Adjusted diluted earnings per share, a non-GAAP measure, was
$0.36, exceeding the high end of our guidance, as compared to $0.56
in the fourth quarter of 2021. Adjusted diluted earnings per share
in the fourth quarter of 2021 included a $7.7 million, or $0.23 per
diluted share, tax benefit related to the exercise of 2.9 million
outstanding SARs. Excluding this non-recurring tax benefit,
adjusted diluted earnings per share in the prior year was $0.33.
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.
- During the fourth quarter of 2022, the Company completed its
“Dutch auction” tender offer through which it repurchased 4.9
million shares for a total cost of $115 million, or $23.50 per
share, excluding transaction related fees. As of the end of the
fourth quarter, the Company’s remaining share repurchase program
authorization was $14.7 million.
- As of the end of the quarter, the Company had $60.0 million
outstanding on its credit facility.
- Subsequent to the end of the fourth quarter, the Company’s
Board of Directors declared its first quarter 2023 dividend of
$0.11 per share for its shareholders of record on March 24, 2023,
to be paid on April 7, 2023.
“In spite of the increasing macro-economic headwinds we
experienced during the second half of the year, we reported strong
annual operating results with operating income up 19% for the
year,” stated Ted A. Fernandez, Chairman & CEO of The Hackett
Group, Inc. “We achieved our results while continuing to increase
our investments in program development and sales resources for our
expanding IP as-a-Service, research advisory and market
intelligence offerings, which were up over 20% for the year.”
Business Outlook for the First Quarter of 2023
Based on the Company’s current outlook:
- The Company estimates total revenue before reimbursements for
the first quarter of 2023 will be in the range of $69.0 million to
$70.5 million.
- The Company estimates adjusted diluted earnings per share for
the first quarter of 2023 to be in the range of $0.35 and $0.38,
assuming a GAAP effective tax rate of 22%.
Conference Call and Webcast Details
- On Tuesday, February 21, 2023, senior management will discuss
fourth quarter results in a conference call at 5:00 P.M. ET. The
number for the conference call is (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
21, 2023 and will run through 5:00 P.M. ET on Tuesday, March 7,
2023. To access the rebroadcast, please dial (866) 510-4837. For
International callers, please dial (203) 369-1943.
- In addition, The Hackett Group will also be webcasting this
conference call live. To participate, simply visit
http://www.thehackettgroup.com/about/investor-relations/
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 21, 2023
and will run through 5:00 P.M. ET on Tuesday, March 7, 2023. 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 more
than 25,000 benchmark studies and our Hackett-Certified® best
practices repository from the world’s leading businesses –
including 97% of the Dow Jones Industrials, 93% of the Fortune 100,
73% of the DAX 30 and 52% 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, Hackett-Certified, quadrant logo, World Class
Defined and Enabled, Quantum Leap and Digital Excelleration 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, 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 The
Hackett Group and its services as well as other risk detailed in
The Hackett Group’s reports filed with the United States Securities
and Exchange Commission. The Hackett Group does not undertake any
duty to update this release or any forward-looking statements
contained herein.
The Hackett Group, Inc. CONSOLIDATED STATEMENTS OF
OPERATIONS (in thousands, except per share data)
(unaudited) Quarter Ended Twelve Months Ended
December 30,
December 31,
December 30,
December 31,
2022
2021
2022
2021
Revenue: Revenue before reimbursements
$
68,817
$
69,776
$
289,688
$
277,583
Reimbursements
1,300
456
4,054
1,226
Total revenue
70,117
70,232
293,742
278,809
Costs and expenses: Cost of service: Personnel costs before
reimbursable expenses (includes $1,401, $6,201, $1,470 and $6,766
of non-cash stock based compensation expense in the quarters and
twelve months ended December 30, 2022 and December 31, 2021,
respectively)
39,208
42,301
174,112
171,920
Reimbursable expenses
1,300
456
4,054
1,226
Total cost of service
40,508
42,757
178,166
173,146
Selling, general and administrative costs (includes $1,038,
$4,066, $841 and $3,356 of non-cash stock based compensation
expense in the quarters and twelve months ended December 30, 2022
and December 31, 2021, respectively)
15,986
15,474
60,979
59,187
Restructuring charge and asset impairment
-
-
(651
)
-
Total costs and operating expenses
56,494
58,231
238,494
232,333
Operating income
13,623
12,001
55,248
46,476
Other expense, net: Interest expense, net
(74
)
(19
)
(144
)
(95
)
Income from continuing operations before income taxes
13,549
11,982
55,104
46,381
Income tax expense (benefit) (1)
3,833
(4,539
)
14,302
4,829
Income from continuing operations
9,716
16,521
40,802
41,552
Loss from discontinued operations (net of taxes)
-
-
-
(7
)
Net income
$
9,716
$
16,521
$
40,802
$
41,545
Weighted average common shares outstanding: Basic
30,812
29,970
31,400
30,021
Diluted
31,474
32,916
31,962
32,883
GAAP basic net income per common share: Income per common
share from continuing operations
$
0.32
$
0.55
$
1.30
$
1.38
Loss per common share from discontinued operations
-
-
-
(0.00
)
GAAP basic net income per common share
$
0.32
$
0.55
$
1.30
$
1.38
GAAP diluted net income per common share: Income per common
share from continuing operations
$
0.31
$
0.50
$
1.28
$
1.26
Loss per common share from discontinued operations
-
-
-
(0.00
)
GAAP diluted net income per common share
$
0.31
$
0.50
$
1.28
$
1.26
(1) The fourth quarter and full year of 2021 included a tax
benefit of $7.7 million related to the exercise of 2.9 million
SARs.
The Hackett Group, Inc. CONDENSED CONSOLIDATED
BALANCE SHEETS (in thousands) (unaudited)
December 30, December 31,
2022
2021
ASSETS Current assets: Cash
$
30,255
$
45,794
Accounts receivable and contract assets, net
48,376
50,616
Prepaid expenses and other current assets
2,535
5,766
Total current assets
81,166
102,176
Property and equipment, net
19,359
18,026
Other assets
268
620
Goodwill
83,502
85,070
Operating lease right-of-use assets
698
1,649
Total assets
$
184,993
$
207,541
LIABILITIES AND SHAREHOLDERS' EQUITY Current
liabilities: Accounts payable
$
8,741
$
7,677
Accrued expenses and other liabilities
36,712
30,297
Contract liabilities (deferred revenue)
13,278
14,616
Operating lease liabilities
870
2,299
Total current liabilities
59,601
54,889
Long-term deferred tax liability, net
6,877
7,325
Long-term debt
59,653
-
Operating lease liabilities
584
1,474
Total liabilities
126,715
63,688
Shareholders' equity
58,278
143,853
Total liabilities and shareholders' equity
$
184,993
$
207,541
The Hackett Group, Inc. SEGMENT PROFIT (in
thousands) (unaudited)
Quarter Ended
Twelve Months Ended
December 30,
December 31,
December 30,
December 31,
2022
2021
2022
2021
Global S&BT (1): Total revenue (4)
$
40,901
$
39,268
$
169,660
$
146,224
Segment profit (5)
15,380
14,805
61,319
49,321
Oracle Solutions (2): Total revenue (4)
$
17,155
$
19,123
$
76,320
$
74,886
Segment profit (5)
3,188
3,554
15,335
15,662
SAP Solutions (3): Total revenue (4)
$
12,061
$
11,841
$
47,762
$
57,699
Segment profit (5)
3,589
3,352
12,827
18,843
Total Company: Total revenue (4)
$
70,117
$
70,232
$
293,742
$
278,809
Total segment profit
$
22,157
$
21,711
$
89,481
$
83,826
Items not allocated to segment level (5): Corporate general and
administrative expenses
5,281
6,357
21,180
22,840
Non-cash stock based compensation expense
2,439
2,311
10,267
10,122
Acquisition-related compensation expense
-
-
-
11
Depreciation and amortization
814
1,042
3,437
4,377
Restructuring charge and asset impairment
-
-
(651
)
-
Interest expense, net
74
19
144
95
Income from continuing operations before taxes
$
13,549
$
11,982
$
55,104
$
46,381
(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 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
charge and asset impairment 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 Twelve Months Ended
December 30,
December 31,
December 30,
December 31,
2022
2021
2022
2021
GAAP NET INCOME
$
9,716
$
16,521
$
40,802
$
41,545
Adjustments (1): Loss from discontinued operations
-
-
-
7
Non-cash stock based compensation expense (2)
2,436
2,283
10,252
9,716
Acquisition-related compensation expense (3)
-
-
-
11
Acquisition-related non-cash stock based compensation expense (3)
3
28
15
406
Restructuring charge and asset impairment
-
-
(651
)
-
Amortization of intangible assets (4)
-
233
154
1,016
ADJUSTED NET INCOME BEFORE INCOME TAXES ON ADJUSTMENTS (1)
12,155
19,065
50,572
52,701
Tax effect of adjustments above (5)
687
646
2,562
2,796
ADJUSTED NET INCOME (1)
$
11,468
$
18,419
$
48,010
$
49,905
GAAP diluted net income per common share
$
0.31
$
0.50
$
1.28
$
1.26
Adjusted diluted net income per common share (1)
$
0.36
$
0.56
$
1.50
$
1.52
Weighted average common and common equivalent shares outstanding
31,474
32,916
31,962
32,883
(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 charge and asset impairment, 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 $0.7 million and $0.6 million in 2022 and
2021, respectively and the impact of intangible amortization was
$46 thousand in 2021. For the twelve month periods the impact of
non-cash stock based compensation expense was $2.7 million and $2.5
million in 2022 and 2021, respectively; the impact of intangible
amortization was $32 thousand and $201 thousand in 2022 and 2021,
respectively and the impact on the restructuring charge was $172
thousand in 2022.
The Hackett Group, Inc. SUPPLEMENTAL
FINANCIAL DATA (unaudited) Quarter Ended
December 30,
September 30,
December 31,
2022
2022
2021
Revenue Concentration: (% of total revenue) Top customer
5
%
7
%
6
%
Top 5 customers
16
%
18
%
15
%
Top 10 customers
26
%
26
%
22
%
Key Metrics and Other Financial Data: Total
Company: Consultant headcount
1,120
1,121
1,106
Total headcount
1,345
1,342
1,308
Days sales outstanding (DSO)
63
66
66
Cash provided by operating activities (in thousands)
$
24,827
$
9,789
$
19,885
Depreciation (in thousands)
$
814
$
838
$
809
Amortization (in thousands)
$
-
$
-
$
233
Capital expenditures (in thousands)
$
1,494
$
896
$
986
Remaining Plan authorization: Shares purchased (in
thousands) (1)
4,889
-
10
Cost of shares repurchased (in thousands) (1)
$
115,937
$
—
$
224
Average price per share of shares purchased
$
23.71
$
—
$
21.64
Remaining Plan authorization (in thousands) (2)
$
14,672
$
10,609
$
11,244
Shares Purchased to Satisfy Employee Net Vesting
Obligations: Shares purchased (in thousands)
31
3
998
Cost of shares purchased (in thousands)
$
646
$
69
$
19,767
Average price per share of shares purchased
$
20.93
$
21.05
$
19.81
(1) Includes the shares repurchased through the Tender Offer
transaction in December from which the Company acquired 4.9 million
shares at $23.71 per share, or $115.9 million, inclusive of
transaction related fees. (2) The Company's Board of Directors
approved an additional $120.0 million to its share repurchase plan
in November 2022.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230221005740/en/
Robert A. Ramirez, CFO, 305-375-8005 or
rramirez@thehackettgroup.com
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