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The Hackett Group Announces Fourth Quarter 2023 Results

The Hackett Group, Inc. (NASDAQ: HCKT), a leading benchmarking, executive 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 29, 2023.

Financial Highlights

  • Total revenue in the fourth quarter of 2023 was $72.4 million and revenue before reimbursements was $71.2 million, which exceeded the high end of our guidance. This compares to total revenue of $70.1 million and revenue before reimbursements of $68.8 million in the fourth quarter of the prior year.
  • GAAP diluted earnings per share was $0.28 in the fourth quarter of 2023, as compared to $0.31 in the fourth quarter of 2022. GAAP net income includes a one-time legal settlement and related costs of $1.2M, or $0.03 per diluted earnings per share.
  • Adjusted diluted earnings per share, a non-GAAP measure, was $0.39, exceeding the high end of our guidance, as compared to $0.36 in the fourth quarter of 2022. 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.
  • Cash flow from operations was $25.6 million for the fourth quarter of 2023, as compared to $24.8 million in the fourth quarter of 2022.
  • As of December 29, 2023, the Company's cash balances were $21.0 million, with $33.0 million outstanding on the Company's credit facility. During the fourth quarter of 2023, the Company paid down $11.0 million of its debt balance.
  • Subsequent to the end of the fourth quarter, the Company's Board of Directors declared its first quarter 2024 dividend of $0.11 per share for its shareholders of record on March 22, 2024, to be paid on April 5, 2024.

"We reported solid operating results which exceeded our previously provided guidance while continuing our investment in program development and sales resources in our recurring high margin IP and AI offerings," stated Ted A. Fernandez, Chairman & CEO of The Hackett Group, Inc. "More importantly, our recently launched generative artificial intelligence platform, AI XPLR, is receiving favorable feedback. It has led to a significant number of client meetings, enabling us to showcase our unique ability to assess organizational opportunities by leveraging our rapidly growing Use Case Repository to establish Gen AI roadmaps with related benefit case analyses IP."

Business Outlook for the First Quarter of 2024

Based on the Company’s current outlook:

  • The Company estimates total revenue before reimbursements for the first quarter of 2024 will be in the range of $72.5 million to $74.0 million.
  • The Company estimates adjusted diluted earnings per share for the first quarter of 2024 to be in the range of $0.36 and $0.39, assuming a GAAP effective tax rate of 22%.

Conference Call and Webcast Details

  • On Tuesday, February 20, 2024, 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 20, 2024 and will run through 5:00 P.M. ET on Tuesday, March 5, 2024. To access the rebroadcast, please dial (888) 566-0474. For International callers, please dial (203) 369-3610.
  • In addition, The Hackett Group® will also be webcasting this conference call live. To participate, simply visit https://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 20, 2024 and will run through 5:00 P.M. ET on Tuesday, March 5, 2024. To access the replay, visit www.thehackettgroup.com.

Use of Non-GAAP Financial Measures

The Company provides adjusted earnings results (which historically has excluded 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 (settlement), legal settlement and related costs, 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 26,000 benchmark studies and our Hackett-Certified® best practices repository from the world’s leading businesses – including 97% of the Dow Jones Industrials, 89% of the Fortune 100, 70% of the DAX 40 and 55% 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.

For more information on The Hackett Group, visit: https://www.thehackettgroup.com/; email info@thehackettgroup.com; or call (770) 225-3600.

The Hackett Group, Hackett-Certified, quadrant logo, World Class Defined and Enabled, Quantum Leap, Digital World Class and Hackett Value 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, the ability of The Hackett Group to effectively market its digital transformation, artificial intelligence 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 29,

 

December 30,

 

December 29,

 

December 30,

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Revenue:
Revenue before reimbursements

$

71,167

 

$

68,817

 

$

291,273

 

$

289,688

 

Reimbursements

 

1,236

 

 

1,300

 

 

5,317

 

 

4,054

 

Total revenue

 

72,403

 

 

70,117

 

 

296,590

 

 

293,742

 

 
Costs and expenses:
Cost of service:
Personnel costs before reimbursable expenses (includes $1,551 and $6,238 and $1,401 and $6,201 of non-cash stock based compensation expense in the three and twelve months ended December 29, 2023 and December 30, 2022, respectively)

 

41,901

 

 

39,208

 

 

174,891

 

 

174,112

 

Reimbursable expenses

 

1,236

 

 

1,300

 

 

5,317

 

 

4,054

 

Total cost of service

 

43,137

 

 

40,508

 

 

180,208

 

 

178,166

 

 
Selling, general and administrative costs (includes $1,243 and $4,486 and $1,038 and $4,066 of non-cash stock based compensation expense in the three and twelve months ended December 29, 2023 and December 30, 2022, respectively)

 

16,611

 

 

15,986

 

 

65,942

 

 

60,979

 

Restructuring and asset impairment settlement

 

-

 

 

-

 

 

-

 

 

(651

)

Legal settlement and related costs

 

1,178

 

 

-

 

 

1,178

 

 

-

 

Total costs and operating expenses

 

60,926

 

 

56,494

 

 

247,328

 

 

238,494

 

 
Operating income

 

11,477

 

 

13,623

 

 

49,262

 

 

55,248

 

 
Other expense, net:
Interest expense, net

 

(641

)

 

(74

)

 

(3,235

)

 

(144

)

 
Income from operations before income taxes

 

10,836

 

 

13,549

 

 

46,027

 

 

55,104

 

Income tax expense

 

2,986

 

 

3,833

 

 

11,876

 

 

14,302

 

Net income

$

7,850

 

$

9,716

 

$

34,151

 

$

40,802

 

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

$

0.29

 

$

0.32

 

$

1.26

 

$

1.30

 

Weighted average common shares outstanding

 

27,242

 

 

30,812

 

 

27,170

 

 

31,400

 

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

$

0.28

 

$

0.31

 

$

1.24

 

$

1.28

 

Weighted average common and common equivalent shares outstanding

 

27,912

 

 

31,474

 

 

27,637

 

 

31,962

 

 
 
The Hackett Group, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)

December 29,

 

December 30,

 

2023

 

 

 

2022

 

ASSETS
Current assets:
Cash

$

20,957

$

30,255

Accounts receivable and contract assets, net

 

52,113

 

 

48,376

 

Prepaid expenses and other current assets

 

2,368

 

 

2,535

 

Total current assets

 

75,438

 

 

81,166

 

Property and equipment, net

 

20,044

 

 

19,359

 

Other assets

 

285

 

 

268

 

Goodwill

 

84,242

 

 

83,502

 

Operating lease right-of-use assets

 

1,419

 

 

698

 

Total assets

$

181,428

 

$

184,993

 

 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable

$

7,557

 

$

8,741

 

Accrued expenses and other liabilities

 

26,801

 

 

30,953

 

Contract liabilities

 

12,087

 

 

13,278

 

Income tax payable

 

2,360

 

 

5,759

 

Operating lease liabilities

 

1,083

 

 

870

 

Total current liabilities

 

49,888

 

 

59,601

 

Long-term deferred tax liability, net

 

8,118

 

 

6,877

 

Long-term debt

 

32,711

 

 

59,653

 

Operating lease liabilities

 

631

 

 

584

 

Total liabilities

 

91,348

 

 

126,715

 

 
Shareholders' equity

 

90,080

 

 

58,278

 

Total liabilities and shareholders' equity

$

181,428

 

$

184,993

 

 
 
The Hackett Group, Inc.
SEGMENT PROFIT
(in thousands)
(unaudited)
 

Quarter Ended

 

Twelve Months Ended

December 29,

 

December 30,

 

December 29,

 

December 30,

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Global S&BT (1):
Total revenue (4)

$

42,162

$

40,901

$

171,927

$

169,660

 

Segment profit (5)

 

13,506

 

 

15,380

 

 

54,366

 

 

61,319

 

Oracle Solutions (2):
Total revenue (4)

$

18,998

 

$

17,155

 

$

77,772

 

$

76,320

 

Segment profit (5)

 

4,094

 

 

3,188

 

 

18,060

 

 

15,335

 

SAP Solutions (3):
Total revenue (4)

$

11,243

 

$

12,061

 

$

46,891

 

$

47,762

 

Segment profit (5)

 

3,439

 

 

3,589

 

 

11,925

 

 

12,827

 

Total Company:
Total revenue (4)

$

72,403

 

$

70,117

 

$

296,590

 

$

293,742

 

 
Total segment profit

$

21,039

 

$

22,157

 

$

84,351

 

$

89,481

 

Items not allocated to segment level (5):
Corporate general and administrative expenses

 

4,696

 

 

5,281

 

 

19,766

 

 

21,180

 

Non-cash stock based compensation expense

 

2,794

 

 

2,439

 

 

10,724

 

 

10,267

 

Restructuring and asset impairment settlement

 

-

 

 

-

 

 

-

 

 

(651

)

Legal settlement and related costs

 

1,178

 

 

-

 

 

1,178

 

 

-

 

Depreciation and amortization

 

894

 

 

814

 

 

3,421

 

 

3,437

 

Interest expense, net

 

641

 

 

74

 

 

3,235

 

 

144

 

Income from continuing operations before taxes

$

10,836

 

$

13,549

 

$

46,027

 

$

55,104

 

(1) Global S&BT includes the results of our strategic businesses consulting practices, including Strategy and Business Transformation 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. Items not allocated to the segment level include corporate general and administrative expenses, non-cash stock based compensation expense, depreciation and amortization expense, restructuring and asset impairment charge (settlement), legal settlement and related costs, and interest expense and foreign currency gains and losses. 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 29,

 

December 30,

 

December 29,

 

December 30,

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

GAAP NET INCOME

$

7,850

$

9,716

$

34,151

$

40,802

Adjustments (1):
Non-cash stock based compensation expense (2)

 

2,794

 

 

2,436

 

 

10,714

 

 

10,252

 

Acquisition-related non-cash stock based compensation expense (3)

 

-

 

 

3

 

 

10

 

 

15

 

Restructuring and asset impairment settlement

 

-

 

 

-

 

 

-

 

 

(651

)

Legal settlement and related costs

 

1,178

 

 

-

 

 

1,178

 

 

-

 

Amortization of intangible assets (4)

 

-

 

 

-

 

 

-

 

 

154

 

ADJUSTED NET INCOME BEFORE INCOME TAXES ON ADJUSTMENTS (1)

 

11,822

 

 

12,155

 

 

46,053

 

 

50,572

 

Tax effect of adjustments above (5)

 

996

 

 

687

 

 

3,089

 

 

2,562

 

ADJUSTED NET INCOME (1)

$

10,826

 

$

11,468

 

$

42,964

 

$

48,010

 

 
GAAP diluted net income per common share

$

0.28

 

$

0.31

 

$

1.24

 

$

1.28

 

Adjusted diluted net income per common share (1)

$

0.39

 

$

0.36

 

$

1.55

 

$

1.50

 

Weighted average common and common equivalent shares outstanding

 

27,912

 

 

31,474

 

 

27,637

 

 

31,962

 

(1) The Company provides adjusted earnings results (which historically has excluded 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 (settlement), legal settlement and related costs, 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.
(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 in 2023 and 2022, and the impact of the legal settlement and related costs were $0.3 million in 2023. For the twelve month periods the impact of non-cash stock compensation was $2.8 million and $2.7 million in 2023 and 2022, respectively; the impact of intangible amortization was $32 thousand in 2022; the impact on the restructuring and asset impairment reversal was $0.2 million benefit in 2022 and the impact of the legal settlement and related costs were $0.3 million in 2023.
 
 
The Hackett Group, Inc.
SUPPLEMENTAL FINANCIAL DATA
(unaudited)
 

Quarter Ended

December 29,

 

September 29,

 

December 30,

 

2023

 

 

 

2023

 

 

 

2022

 

Segment Total Revenue and Revenue Before Reimbursements (in thousands):
Global S&BT:
Total revenue

$

42,162

 

$

43,798

 

$

40,901

 

Reimbursements

 

566

 

 

498

 

 

482

 

Revenue before reimbursements

$

41,596

 

$

43,300

 

$

40,419

 

 
Oracle Solutions:
Total revenue

$

18,998

 

$

20,831

 

$

17,155

 

Reimbursements

 

556

 

 

457

 

 

483

 

Revenue before reimbursements

$

18,442

 

$

20,374

 

$

16,672

 

 
SAP Solutions:
Total revenue

$

11,243

 

$

11,227

 

$

12,061

 

Reimbursements

 

114

 

 

267

 

 

335

 

Revenue before reimbursements

$

11,129

 

$

10,960

 

$

11,726

 

 
Total segment revenue:
Total revenue

$

72,403

 

$

75,856

 

$

70,117

 

Reimbursements

 

1,236

 

 

1,222

 

 

1,300

 

Revenue before reimbursements

$

71,167

 

$

74,634

 

$

68,817

 

 
Revenue Concentration:
(% of total revenue)
Top customer

 

7

%

 

6

%

 

5

%

Top 5 customers

 

18

%

 

16

%

 

16

%

Top 10 customers

 

27

%

 

24

%

 

26

%

 
Key Metrics and Other Financial Data:
 
Total Company:
Consultant headcount

 

1,168

 

 

1,177

 

 

1,128

 

Total headcount

 

1,416

 

 

1,430

 

 

1,353

 

Days sales outstanding (DSO)

 

65

 

 

75

 

 

63

 

Cash provided by operating activities (in thousands)

$

25,587

 

$

7,167

 

$

24,827

 

Depreciation (in thousands)

$

894

 

$

892

 

$

814

 

Capital expenditures (in thousands)

$

898

 

$

1,078

 

$

1,494

 

 
Remaining Plan authorization:
Shares purchased (in thousands)

 

-

 

 

-

 

 

4,889

 

Cost of shares repurchased (in thousands)

$

 

$

 

$

115,937

 

Average price per share of shares purchased

$

 

$

 

$

23.71

 

Remaining Plan authorization (in thousands)

$

13,938

 

$

13,938

 

$

14,672

 

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

 

3

 

 

3

 

 

31

 

Cost of shares purchased (in thousands)

$

71

 

$

66

 

$

646

 

Average price per share of shares purchased

$

23.08

 

$

23.55

 

$

20.93

 

 

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