The Hackett Group Announces Third Quarter 2021 Results

The Hackett Group Announces Third Quarter 2021 Results

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By: The Hackett Group, Inc. via Business Wire

November 09, 2021 at 16:05 PM EST

Q3 2021 net revenue of $71.4 million, exceeds high end of guidance
Q3 2021 GAAP EPS of $0.25
Q3 2021 pro forma EPS of $0.32, exceeds the high end of guidance
Board of Directors declares a $0.10 per share quarterly dividend

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 third quarter, which ended on October 1, 2021.

Third quarter 2021 net revenue (gross revenue less reimbursable expenses) from continuing operations was $71.4 million, up 24%, as compared to the same COVID impacted period in the prior year as client engagement and demand continued to improve throughout the quarter.

GAAP diluted earnings per share were $0.25 for the third quarter of 2021, as compared to $0.09 in the same period in the prior year.

Third quarter 2021 pro forma diluted earnings per share were $0.32, as compared to $0.17 in same period of the prior year. Pro forma information is a non-GAAP financial presentation provided to enhance the understanding of the Company’s financial performance and is reconciled to the Company’s GAAP information in the accompanying tables.

At the end of the third quarter of 2021, the Company's cash balances were $52.9 million with no outstanding debt. During the third quarter of 2021, the Company repurchased 121 thousand shares of its common stock at an average price of $18.74 per share for a total of $2.3 million. As of the end of the third quarter of 2021, the Company's remaining share repurchase program authorization was $11.5 million.

Subsequent to the end of the third quarter of 2021, the Company's Board of Directors declared a quarterly dividend of $0.10 per share for its shareholders of record on December 17, 2021, to be paid on December 30, 2021.

“The increasing client demand we have experienced since the end of the second quarter of last year has continued throughout 2021,” stated Ted A. Fernandez, Chairman & CEO of The Hackett Group, Inc. “More importantly, we believe this momentum should continue into fiscal 2022.”

Based on the current economic outlook, the Company's estimates total net revenue for the fourth quarter of 2021 to be in the range of $64.5 million to $66.5 million. The Company estimates pro forma diluted earnings per share for the fourth quarter of 2021 to be in the range of $0.28 and $0.30.

Other Highlights

Best Practices Conference – On October 20, 2021, The Hackett Group held its annual Best Practices Conference, “Re!magine Peak Performance,” a virtual event with more than 850 registered delegates. The event featured more than 60 speakers, including senior executives from ABB, Albemarle Corporation, Aon plc, Bayer, BHP, bp, Boston Scientific, Engie, HP, Johnson & Johnson, The Lubrizol Corporation, and Takeda Pharmaceuticals International GmbH.

Key Issues Study Launch – In September 2021, The Hackett Group launched its 2022 Key Issues campaigns covering six functional areas: Finance, Procurement, Supply Chain, Human Resources, Information Technology, and Global Business Services. Results from the studies will be released in January 2022.

Podcasts – The Hackett Group continued its weekly “Business Excelleration” podcast, which recently featured topics such as: Wipro’s HR transformation; sustainable procurement; supplier diversity; HR strategies for the hybrid workplace; working capital survey results; trends in corporate learning and development; and how IT can shift from a cost center to a value creator.

AWS SAP Competency – In August 2021, Answerthink, a division of The Hackett Group, announced that it had achieved Amazon Web Services (AWS) SAP Competency status. Achieving AWS SAP Competency status differentiates Answerthink as an AWS Partner Network (APN) member, demonstrating its technical experience and proven customer success with specific focus on migrating SAP workloads to AWS.

On Tuesday, November 9, 2021, 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 9, 2021 and will run through 5:00 P.M. ET on Tuesday, November 23, 2021. To access the rebroadcast, please dial (800) 873-2155. For International callers, please dial (203) 369-3993.

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, November 9, 2021 and will run through 5:00 P.M. ET on Tuesday, November 23, 2021. 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 cloud ERP, EPM and analytics 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 distinguished Oracle, SAP, Coupa and OneStream practices.

The Hackett Group has completed nearly 20,000 benchmarking studies with major corporations and government agencies, including 93% of the Dow Jones Industrials, 91% of the Fortune 100, 80% of the DAX 30 and 55% of the FTSE 100. These studies drive The Hackett’s Group’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 digital 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 impact of the coronavirus pandemic, including the duration and severity of the pandemic, the economic impact of the pandemic and the timing of an economic recovery, demand for our services, our ability to manage our business and capital resources through the pandemic, the ability of our products, services, or offerings mentioned in this release to deliver the desired effect, our ability to retain existing business, our ability to attract additional business through strategic initiatives or otherwise, 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, especially given that our clients are also impacted by the pandemic, changes in expectations regarding the business consulting and information technology industries, our ability to attract and retain skilled employees, the impact of any federally-mandated vaccine, testing or other COVID-19 related requirements on employee retention and our results of operations, 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, as well as other risks detailed in our Annual Report on Form 10-K for the most recent fiscal year as 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						Nine Months Ended
	October 1,			September 25,			October 1,			September 25,
		2021			2020			2021			2020
Revenue:
Revenue before reimbursements ("net revenue")	$	71,400		$	57,769		$	207,807		$	175,587
Reimbursements		494			148			770			4,614
TOTAL REVENUE FROM CONTINUING OPERATIONS		71,894			57,917			208,577			180,201

Costs and expenses:
Cost of service:
Personnel costs before reimbursable expenses		43,552			37,791			124,312			117,558
Non-cash stock compensation expense		1,651			1,508			4,918			4,449
Acquisition-related compensation expense		-			10			11			39
Acquisition-related non-cash stock compensation expense		19			243			378			755
Reimbursable expenses		494			148			770			4,614
TOTAL COST OF SERVICE		45,716			39,700			130,389			127,415

Selling, general and administrative costs		13,613			12,732			40,415			38,042
Non-cash stock compensation expense		901			711			2,515			1,830
Amortization of intangible assets		259			247			783			723
Restructuring costs		—			—			—			5,034
TOTAL SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		14,773			13,690			43,713			45,629

TOTAL COSTS AND OPERATING EXPENSES		60,489			53,390			174,102			173,044

INCOME FROM OPERATIONS		11,405			4,527			34,475			7,157

Other expense:
Interest expense		(26	)		(22	)		(76	)		(100	)

INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		11,379			4,505			34,399			7,057
Income tax expense		3,248			1,362			9,368			2,312
INCOME FROM CONTINUING OPERATIONS		8,131			3,143			25,031			4,745
Loss from discontinued operations (2)		-			(157	)		(7	)		(165	)
NET INCOME	$	8,131		$	2,986		$	25,024		$	4,580

Weighted average common shares outstanding:
Basic		29,814			30,053			30,038			29,986
Diluted		32,876			32,403			32,871			32,335

Basic net income per common share:
Income per common share from continuing operations	$	0.27		$	0.11		$	0.83		$	0.16
Loss per common share from discontinued operations (2)		(0.00	)		(0.01	)		(0.00	)		(0.01	)
Basic net income per common share	$	0.27		$	0.10		$	0.83		$	0.15

Diluted net income per common share:
Income per common share from continuing operations	$	0.25		$	0.10		$	0.76		$	0.15
Loss per common share from discontinued operations (2)		(0.00	)		(0.01	)		0.00			(0.01	)
Diluted net income per common share	$	0.25		$	0.09		$	0.76		$	0.14

PRO FORMA DATA (1):
Income from continuing operations before income taxes	$	11,379		$	4,505		$	34,399		$	7,057
Non-cash stock compensation expense		2,552			2,219			7,433			6,279
Acquisition-related compensation expense		-			10			11			39
Acquisition-related non-cash stock compensation expense		19			243			378			755
Restructuring costs		-			-			-			5,034
Amortization of intangible assets		259			247			783			723
PRO FORMA INCOME BEFORE INCOME TAXES		14,209			7,224			43,004			19,887
Pro forma income tax expense		3,552			1,806			10,751			4,972
PRO FORMA NET INCOME	$	10,657		$	5,418		$	32,253		$	14,915

Pro forma basic net income per common share	$	0.36		$	0.18		$	1.07		$	0.50
Weighted average common shares outstanding		29,814			30,053			30,038			29,986

Pro forma diluted net income per common share	$	0.32		$	0.17		$	0.98		$	0.46
Weighted average common and common equivalent shares outstanding		32,876			32,403			32,871			32,335

(1) The Company provides pro forma earnings results (which exclude the amortization of intangible assets, non-cash stock compensation expense, acquisition-related one-time expense, 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.
(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)
	October 1,		January 1,
	2021		2021
ASSETS
Current assets:
Cash and cash equivalents	$	52,939	$	49,455
Accounts receivable and contract assets, net		49,609		32,778
Prepaid expenses and other current assets		3,168		2,599
Total current assets		105,716		84,832
Property and equipment, net		17,853		18,158
Other assets		840		1,680
Goodwill		85,089		85,297
Operating lease right-of-use assets		1,862		2,578
Total assets	$	211,360	$	192,545

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	5,027	$	6,098
Accrued expenses and other liabilities		35,615		25,084
Contract liabilities (deferred revenue)		11,959		8,765
Operating lease liabilities		2,338		2,620
Total current liabilities		54,939		42,567
Long-term deferred tax liability, net		5,950		5,588
Operating lease liabilities		1,962		3,503
Total liabilities		62,851		51,658

Shareholders' equity		148,509		140,887

Total liabilities and shareholders' equity	$	211,360	$	192,545

The Hackett Group, Inc.
SUPPLEMENTAL FINANCIAL DATA
(unaudited)

	Quarter Ended
	October 1,			July 2,			September 25,
		2021			2021			2020
Revenue Breakdown by Group:
(in thousands)
S&BT (3)	$	27,623		$	26,447		$	22,217
EEA (4)		38,201			40,521			29,710
International (5)		5,576			6,029			5,842
Net revenue from continuing operations (6)	$	71,400		$	72,997		$	57,769

Revenue Concentration:
(% of total revenue)
Top customer		5	%		7	%		6	%
Top 5 customers		14	%		19	%		16	%
Top 10 customers		24	%		30	%		26	%

Key Metrics and Other Financial Data:

Total Company:
Consultant headcount		1,049			1,001			923
Total headcount		1,257			1,210			1,124
Days sales outstanding (DSO)		63			59			57
Cash provided by operating activities (in thousands)	$	6,818		$	13,756		$	10,088
Depreciation (in thousands)	$	829		$	849		$	916
Amortization (in thousands)	$	259		$	263		$	247

Remaining Plan authorization:
Shares purchased (in thousands)		113			489			75
Cost of shares repurchased (in thousands)	$	2,103		$	8,603			932
Average price per share of shares purchased	$	18.68		$	17.58			12.41
Remaining Plan authorization (in thousands)	$	11,472		$	13,575		$	4,713

Shares Purchased to Satisfy Employee Net Vesting Obligations:
Shares purchased (in thousands)		8			2			8
Cost of shares purchased (in thousands)	$	155		$	38		$	111
Average price per share of shares purchased	$	19.49		$	17.63		$	14.26

View source version on businesswire.com: https://www.businesswire.com/news/home/20211109006527/en/

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

(3) 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.

(4) ERP, EPM and Analytics Solutions (EEA) includes the results of our North America Oracle EEA, SAP Solutions Practices and One Stream.

(5) International Groups include the results of our S&BT and EEA Practices, primarily in Europe.

(6) Net revenue excludes reimbursable expenses which are primarily travel-related expenses passed through to a client with no associated margin.