- 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
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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191105006180/en/
Robert A. Ramirez, CFO, 305-375-8005 or
rramirez@thehackettgroup.com
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