The Hackett Group Announces Third Quarter 2019 Results

  • Q3 2019 net revenue of $66.8 million and pro forma EPS of $0.27, both in line with guidance
  • Q3 2019 GAAP EPS of $0.21 as compared to GAAP EPS of $0.16 in the same period of the prior year
  • The Board of Directors declared $0.18 per share semi-annual dividend, to be paid on January 7, 2020

MIAMI--()--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 September 27, 2019.

Q3 2019 net revenue (gross revenue less reimbursable expenses) from continuing operations was $66.8 million, down 2%, as compared to the same period in the prior year. Q3 2019 gross revenue from continuing operations was $72.7 million, down 1% from the same period in the prior year.

Q3 2019 pro forma diluted earnings per share were $0.27 per share, as compared to $0.28 per share for the same period in 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.

Q3 2019 GAAP diluted earnings per share were $0.21 per share, as compared to $0.16 per share for the same period in the prior year. During the third quarter of 2018, the Company recorded a $0.8 million, or $0.02 per diluted share, expense due to the remeasurement of an acquisition-related earnout liability, and a $0.5 million, or $0.02 per diluted share, loss from discontinued operations.

In its recent meeting, the Company’s Board of Directors declared a semi-annual dividend of $0.18 per share for its shareholders of record on December 20, 2019, to be paid on January 7, 2020.

At the end of the third quarter of 2019, the Company’s cash balances were $16.4 million. During the quarter, the Company utilized cash to pay down outstanding debt of $2.0 million. During the third quarter of 2019, the Company did not repurchase shares under its stock repurchase program. At the end of the third quarter of 2019, the Company’s remaining stock repurchase program authorization was $3.9 million.

“Solid U.S. performance driven by digital transformation and implementation of cloud software initiatives was tempered by weaker than expected European results,” stated Ted A. Fernandez, Chairman and CEO of The Hackett Group. “We believe that we are taking the necessary actions to mitigate the impact of the volatility in Europe on our 2020 results.”

Based on the current economic outlook, the Company estimates total net revenue for the fourth quarter of 2019 to be in the range of $61.5 million and $63.5 million or gross revenue (inclusive of reimbursable expenses) to be in the range of $66.5 million and $68.5 million. The Company estimates pro forma diluted earnings per share for the fourth quarter of 2019 to be in the range of $0.23 and $0.25.

Other Highlights

World-Class Procurement Research – New world-class procurement research from The Hackett Group found that through full deployment of digital tools, typical procurement organizations can reduce operational costs by up to 45%, achieving efficiency levels below those of today’s world-class procurement organizations while at the same time enabling them to improve effectiveness and customer experience.

World-Class Finance Research – New world-class finance research from The Hackett Group found that by fully embracing digital transformation typical finance organizations can reduce costs by more than 40%, rapidly accelerating their progress towards previously unattainable world-class efficiency levels.

World-Class HR Research – New world-class HR research from The Hackett Group found that typical HR organizations can reduce costs by 17% and operate with 26% fewer staff hours – while also improving effectiveness and customer experience – by adopting smart automation approaches, including robotic process automation and smart data capture.

OpenWorld DTP Adoption – The Hackett Group announced that it has reached mainstream adoption of its Oracle Digital Transformation Platform (DTP), with more than 100 successful DTP solution applications deployed at clients since its formal release in October of 2018.

On Tuesday, November 5, 2019 senior management will discuss third quarter results in a conference call at 5:00 P.M. ET. (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 5, 2019 and will run through 5:00 P.M. ET on Tuesday, November 19, 2019. To access the rebroadcast, please dial (800) 839-0130. For International callers, please dial (402) 998-1223.

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 5, 2019 and will run through 5:00 P.M. ET on Tuesday, November 19, 2019. 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 16,500 benchmarking studies with major corporations and government agencies, including 93% of the Dow Jones Industrials, 89% of the Fortune 100, 83% 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 Nine Months Ended
September 27, September 28, September 27, September 28,

2019

2018

2019

2018

Revenue:
Revenue before reimbursements ("net revenue")

$

66,755

 

$

68,183

 

$

197,101

 

$

202,928

 

Reimbursements

 

5,935

 

 

5,535

 

 

16,265

 

 

16,424

 

Total revenue from continuing operations

 

72,690

 

 

73,718

 

 

213,366

 

 

219,352

 

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

 

41,026

 

 

40,883

 

 

120,780

 

 

123,635

 

Non-cash stock compensation expense

 

833

 

 

915

 

 

2,775

 

 

2,915

 

Acquisition-related compensation expense (benefit)

 

157

 

 

240

 

 

(131

)

 

(549

)

Acquisition-related non-cash stock compensation expense

 

322

 

 

731

 

 

690

 

 

1,452

 

Reimbursable expenses

 

5,935

 

 

5,535

 

 

16,265

 

 

16,424

 

Total cost of service

 

48,273

 

 

48,304

 

 

140,379

 

 

143,877

 

 
Selling, general and administrative costs

 

14,117

 

 

14,922

 

 

43,318

 

 

44,164

 

Non-cash stock compensation expense

 

776

 

 

850

 

 

2,268

 

 

2,495

 

Amortization of intangible assets

 

236

 

 

585

 

 

789

 

 

1,789

 

Change in acquisition-related contingent consideration liability

 

(108

)

 

803

 

 

(1,133

)

 

(3,750

)

Total selling, general, and administrative expenses

 

15,021

 

 

17,160

 

 

45,242

 

 

44,698

 

 
Total costs and operating expenses

 

63,294

 

 

65,464

 

 

185,621

 

 

188,575

 

 
Income from operations

 

9,396

 

 

8,254

 

 

27,745

 

 

30,777

 

 
Other expense:
Interest expense

 

(62

)

 

(158

)

 

(268

)

 

(515

)

 
Income from continuing operations before income taxes

 

9,334

 

 

8,096

 

 

27,477

 

 

30,262

 

Income tax expense

 

2,427

 

 

2,425

 

 

6,481

 

 

5,618

 

Income from continuing operations

 

6,907

 

 

5,671

 

 

20,996

 

 

24,644

 

Income (loss) from discontinued operations (2)

 

2

 

 

(514

)

 

(4

)

 

(599

)

Net income

$

6,909

 

$

5,157

 

$

20,992

 

$

24,045

 

 
Weighted average common shares outstanding:
Basic

 

29,876

 

 

29,478

 

 

29,794

 

 

29,332

 

Diluted

 

32,571

 

 

32,593

 

 

32,413

 

 

32,214

 

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

$

0.23

 

$

0.19

 

$

0.70

 

$

0.84

 

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

 

0.00

 

 

(0.02

)

 

(0.00

)

 

(0.02

)

Basic net income per common share

$

0.23

 

$

0.17

 

$

0.70

 

$

0.82

 

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

$

0.21

 

$

0.18

 

$

0.65

 

$

0.77

 

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

 

0.00

 

 

(0.02

)

 

(0.00

)

 

(0.02

)

Diluted net income per common share

$

0.21

 

$

0.16

 

$

0.65

 

$

0.75

 

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

$

9,334

 

$

8,096

 

$

27,477

 

$

30,262

 

Non-cash stock compensation expense

 

1,609

 

 

1,765

 

 

5,043

 

 

5,410

 

Acquisition-related compensation expense (benefit)

 

157

 

 

240

 

 

(131

)

 

(549

)

Acquisition-related non-cash stock compensation expense

 

322

 

 

731

 

 

690

 

 

1,452

 

Change in acquisition-related contingent consideration liability

 

(108

)

 

803

 

 

(1,133

)

 

(3,750

)

Acquisition-related costs

 

32

 

 

32

 

Amortization of intangible assets

 

236

 

 

585

 

 

789

 

 

1,789

 

Pro forma income before income taxes

 

11,582

 

 

12,220

 

 

32,767

 

 

34,614

 

Pro forma income tax expense

 

2,896

 

 

3,055

 

 

8,192

 

 

8,654

 

Pro forma net income

$

8,687

 

$

9,165

 

$

24,575

 

$

25,961

 

 
Pro forma basic net income per common share

$

0.29

 

$

0.31

 

$

0.82

 

$

0.89

 

Weighted average common shares outstanding

 

29,876

 

 

29,478

 

 

29,794

 

 

29,332

 

 
Pro forma diluted net income per common share

$

0.27

 

$

0.28

 

$

0.76

 

$

0.81

 

Weighted average common and common equivalent shares outstanding

 

32,571

 

 

32,593

 

 

32,413

 

 

32,214

 

 
(1) The Company provides pro forma earnings results (which exclude the amortization of intangible assets, stock compensation expense, acquisition-related 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)
September 27, December 28,

2019

2018

ASSETS
Current assets:
Cash and cash equivalents

$

16,423

$

13,808

Accounts receivable and contract assets, net

 

57,890

 

54,807

Prepaid expenses and other current assets

 

3,664

 

4,339

Assets related to discontinued operations (3)

 

-

 

137

Total current assets

 

77,977

 

73,091

 
Property and equipment, net

 

21,080

 

19,750

Other assets

 

2,801

 

3,704

Goodwill, net

 

83,782

 

84,207

Operating lease right-of-use assets

 

8,293

 

-

Total assets

$

193,933

$

180,752

 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable

$

5,217

$

7,429

Accrued expenses and other liabilities

 

31,450

 

34,498

Operating lease liabilities

 

2,678

 

-

Liabilities related to discontinued operations (3)

 

22

 

2,300

Total current liabilities

 

39,367

 

44,227

Long-term deferred tax liability, net

 

7,704

 

6,435

Long-term debt

 

2,500

 

6,500

Operating lease liabilities

 

5,615

 

-

Total liabilities

 

55,186

 

57,162

 
Shareholders' equity

 

138,747

 

123,590

Total liabilities and shareholders' equity

$

193,933

$

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

September 27,

September 28,

June 28,

2019

2018

2019

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

$

27,435

 

$

26,014

 

$

26,549

 

EEA (5)

 

30,920

 

 

29,971

 

 

30,717

 

International (6)

 

8,400

 

 

12,198

 

 

10,710

 

Net revenue from continuing operations (7)

$

66,755

 

$

68,183

 

$

67,976

 

 
Revenue Concentration:
(% of total revenue)
Top customer

 

6

%

 

7

%

 

4

%

Top 5 customers

 

19

%

 

19

%

 

16

%

Top 10 customers

 

27

%

 

26

%

 

25

%

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

 

1,029

 

 

1,027

 

 

999

 

Total headcount (8)

 

1,268

 

 

1,271

 

 

1,240

 

Days sales outstanding (DSO) (8)

 

72

 

 

70

 

 

68

 

Cash provided by operating activities (in thousands)

$

8,506

 

$

9,521

 

$

11,273

 

Pro forma return on equity (9)

 

25

%

 

30

%

 

26

%

Depreciation (in thousands)

$

884

 

$

652

 

$

830

 

Amortization (in thousands)

$

236

 

$

585

 

$

255

 

 
 
Remaining Plan authorization:
Shares purchased (in thousands)

 

-

 

 

-

 

 

92

 

Cost of shares repurchased (in thousands)

$

$

$

1,440

Average price per share of shares purchased

$

 

 

$

 

 

$

15.59

 

Remaining Plan authorization (in thousands)

$

3,878

 

$

7,174

 

$

3,878

 

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

 

5

 

 

8

 

 

1

 

Cost of shares purchased (in thousands)

$

88

 

$

118

 

$

14

 

Average price per share of shares purchased

$

16.29

 

$

15.77

 

$

16.39

 

(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.

 

Contacts

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

Release Summary

The Hackett Group Announces Third Quarter 2019 Results

Contacts

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