The Hackett Group, Inc. (NASDAQ: HCKT), a global strategic
advisory and operations improvement consulting firm, today
announced its financial results for the third quarter of 2012,
which ended September 28, 2012.
Third quarter 2012 revenue was $58.6 million, a 1% increase (3%
on a constant currency basis) from the same period in 2011. Pro
forma diluted earnings per share were $0.11 for the third quarter
of 2012, as compared to $0.09 for the same period in 2011. 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.
GAAP diluted earnings per share were $0.08 for the third quarter
of 2012, as compared to $0.10 from the same period in 2011. For
comparison purposes, GAAP earnings per share for the third quarter
of 2012 were unfavorably impacted by U.S. federal income tax
expense of approximately $0.05 per diluted share, resulting from
the release of tax valuation reserves and recognition of the
corresponding deferred tax assets at the end of 2011.
“We reported solid operating results in spite of the volatility
we experienced in Europe as we entered the quarter,” stated Ted A.
Fernandez, Chairman and CEO of The Hackett Group. “We continue to
believe our offerings are well aligned with the complexities of the
global economy and provide us with opportunities to continue to
improve our financial performance.”
At the end of the third quarter of 2012, the Company’s cash
balances were $15.2 million. During the third quarter of 2012, the
Company repaid $4.0 million of its new credit facility, leaving a
$28.0 million balance at quarter end. Subsequent to quarter end,
the Company repaid an additional $3.0 million.
Based on the current economic outlook, the Company estimates
total revenue for the fourth quarter of 2012 to be in the range of
$54.0 million to $56.0 million, and estimates pro forma diluted
earnings per share to be in the range of $0.09 to $0.11.
Other Highlights
European Best Practices Conference - Over 125 executives from
Europe's largest companies attended The Hackett Group's 2012
European Best Practices Conference in London in early October.
Attendees heard presentations by executives from more than a dozen
of the world's most successful companies, including Bayer, BSkyB,
First Data, Henkel, Lafarge, Nedbank, Rio Tinto, Royal
FrieslandCampina, and Vodafone.
REL 1000 Working Capital Research Results - The ability of the
largest U.S. companies to collect from customers and manage
inventory improved just slightly in 2011, while payables
performance worsened, according to the 14th annual working capital
survey from REL, a division of The Hackett Group, and CFO Magazine.
Overall, working capital performance improved slightly for 1000 of
the largest U.S. public companies in the REL/CFO analysis. The
study found a tremendous improvement opportunity in working capital
management. Companies in the study now have over $900 billion in
excess working capital, a figure that represents nearly 7% of the
U.S. Gross Domestic Product and is the largest opportunity in this
area in the past five years.
Economic Uncertainty Research - In the face of increasing
business volatility and shrinking GDP growth projections, The
Hackett Group issued research detailing six operational imperatives
designed to help companies combat economic uncertainty by enhancing
the efficiency and effectiveness of their operations, including the
finance, human resource, information technology, procurement, and
supply chain areas. According to The Hackett Group's research, by
focusing on six imperatives and making significant process
improvements and other changes to various elements of their Service
Delivery Model for back-office services, a typical global company
(with $33.4 billion in revenue) could cut the cost of these
services by up to $302 million, or more than 25%. At the same time,
companies can improve the quality and timeliness of performance
information and decision-making processes, and also enhance
business agility and responsiveness.
Talent Management Book of Numbers™ Findings - New Book of
Numbers research from The Hackett Group found that finance,
information technology, procurement, and other business service
areas are in the midst of a growing talent crisis, and the failure
of human resource and business service leaders to effectively
collaborate is in large part to blame. According to the research,
business service organizations are seeing dangerous deficits in
talent and skills, and are highly dissatisfied with the level of
support they receive from human resources on talent issues. This
dissatisfaction is primarily being driven by the extremely low
levels of service that human resources is providing, and lack of
effective communication and collaboration between business service
leaders and human resources.
On Monday, November 5, 2012,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) 779-3138, [Passcode:
Third Quarter, Leader: Ted A. Fernandez]. For International
callers, please dial (517) 308-9381.
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 Monday, November 5,
2012 and will run through 5:00 P.M. ET on Monday, November 19,
2012. To access the rebroadcast, please dial (800) 551-8152. For
International callers, please dial (203) 369-3810.
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 Monday, November 5, 2012
and will run through 5:00 P.M. ET on Monday, November 19, 2012. To
access the replay, visit http://www.thehackettgroup.com or
http://www.streetevents.com.
About The Hackett Group
The Hackett Group, Inc. (NASDAQ:
HCKT), a global strategic business advisory and operations
improvement consulting firm, is a leader in best practice advisory,
benchmarking, and transformation consulting services including
strategy and operations, working capital management, shared
services and globalization advice. Utilizing best practices and
implementation insights from more than 7,000 benchmarking
engagements, executives use The Hackett Group's empirically-based
approach to quickly define and implement initiatives to enable
world-class performance. Through its REL group, The Hackett Group
offers working capital solutions focused on delivering significant
cash flow improvements. Through its Archstone Consulting group, The
Hackett Group offers Strategy & Operations consulting services
in the Consumer and Industrial Products, Pharmaceutical,
Manufacturing and Financial Services industry sectors. Through its
Hackett Technology Solutions group, The Hackett Group offers
business application consulting services that help maximize returns
on IT investments. The Hackett Group has completed benchmark
studies with over 3,000 major corporations and government agencies,
including 97% of the Dow Jones Industrials, 86% of the Fortune 100,
90% of the DAX 30 and 48% of the FTSE 100.
More information on The Hackett Group is available: by phone at
(770) 225-7300; by e-mail at info@thehackettgroup.com.
SAP and all SAP logos are trademarks or registered trademarks of
SAP AG in Germany and in several other countries.
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, 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, changes in
general economic conditions and interest rates 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 28,
September 30,
September 28,
September 30,
2012
2011
2012
2011
Revenue: Revenue before reimbursements $ 52,299 $ 51,574 $ 158,131
$ 150,913 Reimbursements 6,322 6,361 18,792 18,693 Total revenue
58,621 57,935 176,923 169,606 Costs and expenses: Cost of
service: Personnel costs before reimbursable expenses (includes
$687 and $765 and $2,209 and $2,329 of stock compensation expense
in the quarters and nine months ended September 28, 2012 and
September 30, 2011, respectively) 33,414 32,739 101,192 95,814
Reimbursable expenses 6,322 6,361 18,792 18,693 Total cost of
service 39,736 39,100 119,984 114,507 Selling, general and
administrative costs (includes $674 and $509 and $1,860 and $1,172
of stock compensation expense in the quarters and nine months ended
September 28, 2012 and September 30, 2011, respectively) 14,623
14,324 44,528 42,599 Restructuring benefit (319) - (319) - Total
costs and operating expenses 54,040 53,424 164,193 157,106 Income
from operations 4,581 4,511 12,730 12,500 Other income (expense),
net: Interest income 2 11 19 24 Interest expense (196) - (470) -
Income before income taxes 4,387 4,522 12,279 12,524 Income taxes
1,751 176 2,265 448 Net income $ 2,636 $ 4,346 $ 10,014 $ 12,076
Basic net income per common share: Net income per common
share $ 0.09 $ 0.11 $ 0.31 $ 0.30 Weighted average common shares
outstanding 29,401 39,683 32,405 40,035 Diluted net income
per common share: Net income per common share $ 0.08 $ 0.10 $ 0.29
$ 0.29 Weighted average common and common equivalent shares
outstanding 31,489 41,873 34,312 41,969 Pro forma data (1):
Income before income taxes $ 4,387 $ 4,522 $ 12,279 $ 12,524 Stock
compensation expense 1,361 1,274 4,069 3,501 Restructuring benefit
(319) - (319) - Amortization of intangible assets 137 204 410 608
Pro forma income before income taxes 5,566 6,000 16,439 16,633 Pro
forma income tax expense 2,226 2,400 6,576 6,653 Pro forma net
income $ 3,340 $ 3,600 $ 9,863 $ 9,980 Pro forma basic net
income per common share $ 0.11 $ 0.09 $ 0.30 $ 0.25 Weighted
average common shares outstanding 29,401 39,683 32,405 40,035
Pro forma diluted net income per common share $ 0.11 $ 0.09
$ 0.29 $ 0.24 Weighted average common and common equivalent shares
outstanding 31,489 41,873 34,312 41,969 (1)
The Company provides pro forma earnings
results (which exclude the amortization of intangible assets, stock
compensation expense and restructuring benefit, and include a
normalized 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.
The Hackett Group, Inc. CONDENSED
CONSOLIDATED BALANCE SHEETS (in thousands)
(unaudited) September 28, 2012
December 30, 2011 ASSETS Current assets: Cash
and cash equivalents $ 14,534 $ 32,936 Accounts receivable and
unbilled revenue, net 36,482 35,209 Deferred tax asset, net 5,026
6,975 Prepaid expenses and other current assets 2,426 2,344 Total
current assets 58,468 77,464 Restricted cash 683 885
Property and equipment, net 12,666 11,696 Other assets 1,759 1,823
Goodwill, net 76,248 75,558 Total assets $ 149,824 $ 167,426
LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities:
Accounts payable $ 5,154 $ 7,433 Accrued expenses and other
liabilities 25,359 28,018 Current portion of long-term debt 4,316 -
Total current liabilities 34,829 35,451 Long-term deferred tax
liability, net 1,432 1,727 Long-term debt 23,684 - Total
liabilities 59,945 37,178 Shareholders' equity 89,879
130,248 Total liabilities and shareholders' equity $ 149,824 $
167,426
The Hackett Group, Inc.
SUPPLEMENTAL FINANCIAL DATA (unaudited)
Quarter Ended September 28, 2012 June 29, 2012
September 30, 2011 Revenue Breakdown by Group: (in
thousands) The Hackett Group (2) $ 45,429 $ 50,104 $ 46,972 ERP
Solutions (3) 13,192 11,180
10,963 Total revenue $ 58,621 $ 61,284 $
57,935
Revenue Concentration: (% of total
revenue) Top customer 3 % 5 % 3 % Top 5 customers 11 % 14 % 14 %
Top 10 customers 20 % 23 % 24 %
Key Metrics and
Other Financial Data: Total Company: Consultant
headcount 756 749 746 Total headcount 962 956 951 Days sales
outstanding (DSO) 57 55 60 Cash provided by operating activities
(in thousands) $ 4,857 $ 10,109 $ 1,734 Depreciation (in thousands)
$ 492 $ 491 $ 497 Amortization (in thousands) $ 136 $ 137 $ 204
The Hackett Group (in thousands)
: The Hackett
Group annualized revenue per professional (2) $ 338 $ 379 $ 366
ERP Solutions: ERP Solutions consultant utilization
rate (3) 76 % 73 % 74 % ERP Solutions gross billing rate per hour
(3) $ 146 $ 140 $ 134
Share Repurchase Plan
(4)
: Shares purchased in the quarter (in thousands) - - 269
Cost of shares repurchased in the quarter (in thousands) $ - $ - $
967 Average price per share of shares purchased in the quarter $ -
$ - $ 3.59 Remaining authorization (in thousands) $ 556 $ 556 $
2,503
(2)
The Hackett Group encompasses
Benchmarking, Business Transformation and Executive Advisory
groups, and includes EPM Technologies.
(3)
ERP Solutions encompasses Best Practice Implementation of ERP
Software, which includes Oracle and SAP.
(4)
The Share Repurchase Plan information does
not include 11.0 million shares purchased pursuant to the Dutch
Tender Offer at $5.00 per share for a total of $55.0 million,
excluding fees, during Q1 2012.
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