The following excerpt is from the company's SEC filing.
305-375-8005
or rramirez@thehackettgroup.com
The
Hackett Group Announces Third Quarter 2022 Results
MIAMI, FL (November 8, 2022) - The Hackett Group, Inc. (NASDAQ: HCKT), a leading benchmarking,
research advisory and strategic consultancy firm that enables organizations to achieve Digital World Class
performance, today announced its financial results for the third quarter,
which ended on September 30, 2022
Financial Highlights
Total revenue in the third quarter of 2022 was $72.0 million and revenue before reimbursements was
$71.0 million, which was in line with our guidance. This com
pares to total revenue of $71.9 million and revenue before reimbursements of $71.4 in the third quarter of the prior year.
GAAP diluted earnings per share was $0.32 in the third quarter of 2022, as compared to $0.25 in the third quarter
of 2021.
Adjusted diluted earnings per share, a
non-GAAP
measure, was $0.37,
exceeding the high end of our guidance as compared to $0.31 in the third quarter of 2021, an increase of 19% using a GAAP effective tax rate in both periods. Adjusted financial information is provided to enhance the understanding of the
Companys financial performance and is reconciled to the Companys GAAP information in the accompanying tables.
Subsequent to the end of the third quarter, the Companys Board of Directors approved an additional
$120.0 million to its share repurchase plan from the remaining $10.6 million. The Company also announced its plan to launch a modified Dutch auction tender offer tomorrow to purchase up to $120.0 million in value of its
common stock, at a price ranging from $20.50 to $23.50.
The Company also amended and restated its credit facility to extend the maturity date and increase the borrowing
capacity to $100 million. As of September 30, 2022, the Companys cash balances were $67 million, with no outstanding balance of the credit facility.
Subsequent to the end of the third quarter, the Companys Board of Directors also declared its fourth
quarter dividend of $0.11 per share for its shareholders of record on December 23, 2022, to be paid on January 6, 2023.
Effective in the third quarter of 2022, the Company has reorganized its operating and internal reporting
structure to better align with its primary market solutions. As a result of this reorganization, the Company will be reporting on three reportable segments: (1) Global Strategy and Business Transformation, (2) Oracle Solutions and
(3) SAP Solutions. Segment related revenue and profit are provided in the accompanying tables.
We reported strong financial
results driven by the growth and contribution of our Global Strategy and Business Transformation group, stated Ted A. Fernandez, Chairman & CEO of The Hackett Group, Inc. Our results were achieved while we continued to increase
our investments in the content development and sales resources for our expanding research advisory and market intelligence offerings.
Business Outlook for the Fourth Quarter of 2022
Based on the Companys current outlook:
The Company estimates total revenue before reimbursements for the fourth quarter of 2022 will be in the range of
$66.0 million to $68.0 million.
The Company estimates adjusted diluted earnings per share for the fourth quarter of 2022 to be in the range of
$0.33 and $0.35, assuming a GAAP effective tax rate of 28%.
Conference Call and Webcast Details
On Tuesday, November 8, 2022, 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
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 8, 2022 and will run through
5:00 P.M. ET on Tuesday, November 22, 2022. To access the rebroadcast, please dial (888)
566-0478.
For International callers, please dial (203)
369-3051.
In addition, The Hackett Group will also be webcasting this conference call live. 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 8, 2022 and will run
through 5:00 P.M. ET on Tuesday, November 22, 2022. To access the replay, visit www.thehackettgroup.com.
Use of
Non-GAAP
Financial Measures
The Company provides adjusted earnings results (which exclude the loss from discontinued
operations,
non-cash
stock based compensation expense, acquisition-related compensation expense, acquisition-related
stock based compensation expense,
restructuring charges and reversals, 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
results are provided to enhance the users overall understanding of the Companys current financial performance and its prospects for the future. The Company believes the
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
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
results are one of the primary indicators management uses for planning and forecasting. The presentation of this
additional
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
Measures in the accompanying tables.
The Company believes that the
presentation of
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
measures without unreasonable effort due to the high
variability and low visibility of most of the items that have been excluded from these
measures. For example,
stock based compensation expense is
impacted by the Companys future hiring needs, the type and volume of equity awards necessary for such future hiring, and the price at which the Companys 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
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
) is a leading
, research advisory and strategic consultancy firm that enables organizations to
achieve Digital World Class
performance.
Drawing upon our unparalleled intellectual
property from nearly 20,000 benchmark studies and our Hackett-Certified
best practices repository from the worlds leading businesses including 97% of the Dow Jones Industrials,
94% of the Fortune 100, 70% of the DAX 30 and 51% 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.
More information on The Hackett Group is available at:
info@thehackettgroup.com
, or by calling (770)
225-3600.
The Hackett Group, quadrant logo, World Class Defined and Enabled, Quantum Leap, Digital World Class and Hackett Excelleration 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 Companys 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, macroeconomic conditions, the ability of The Hackett
Group to effectively market its digital transformation 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 its services as
well as other risks detailed in The Hackett Groups reports filed with the United States Securities and Exchange Commission (the SEC). The Hackett Group does not undertake any duty to update this release or any forward-looking
statements contained herein, except as may be required by law.
Additional Information Regarding the Tender Offer
This press release is for informational purposes only and is not an offer to buy or the solicitation of an offer to sell any security. The tender offer
described above has not yet commenced, and there can be no assurances that the Company will commence the tender offer on the terms described in this press release or at all. On the commencement date of the tender offer, the Company will file a
tender offer statement on Schedule TO, including an offer to purchase, letter of transmittal and other tender offer materials, with the SEC. The tender offer will only be made pursuant to the offer to purchase, the related letter of transmittal and
the other tender offer materials filed as part of the Schedule TO. When available, shareholders should read carefully the offer to purchase, the related letter of transmittal and other tender offer materials because they will contain important
information, including the terms and conditions of the tender offer. Once the tender offer commences, shareholders will be able to obtain a free copy of the tender offer statement on Schedule TO, the offer to purchase, letter of transmittal and
other documents that the Company will be filing with the SEC at the SECs website at www.sec.gov or from the Companys information agent for the tender offer.
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of 8 - The Hackett Group, Inc. Announces Third Quarter Results
CONSOLIDATED STATEMENTS OF OPERATIONS
(in
thousands, except per share data)
(unaudited)
Quarter Ended
Nine Months Ended
October 1,
Revenue:
Revenue before reimbursements
70,995
71,400
220,871
207,807
Reimbursements
72,033
71,894
223,625
208,577
Costs and expenses:
Cost of service:
Personnel costs before reimbursable expenses (includes $1,652, $4,801, $1,670 and $5,296 of
stock based compensation expense in the quarters and nine months ended September 30, 2022 and October 1, 2021, respectively)
42,870
45,222
134,904
129,619
Reimbursable expenses
Total cost of service
43,908
45,716
137,658
130,389
Selling, general and administrative costs (includes $859, $3,027, $901 and $2,515 of
14,616
14,773
44,993
43,713
Restructuring charge reversal
Total costs and operating expenses
57,998
60,489
182,000
174,102
Operating income
14,035
11,405
41,625
34,475
Other expense, net:
Interest expense, net
Income from continuing operations before income taxes
14,021
11,379
41,555
34,399
Income tax expense
10,469
10,366
31,086
25,031
Loss from discontinued operations (net of taxes)
Net income
25,024
Weighted average common shares outstanding:
31,686
29,814
31,596
30,038
Diluted
32,309
32,876
32,124
32,871
GAAP basic net income per common share:
Income per common share from continuing operations
Loss per common share from discontinued operations
GAAP diluted net income per common share:
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of 8 - The Hackett Group, Inc. Announces Third Quarter Results
CONDENSED CONSOLIDATED BALANCE SHEETS
(in
thousands)
December 31,
ASSETS
Current assets:
Cash and cash equivalents
67,045
45,794
Accounts receivable and contract assets, net
52,105
50,616
Prepaid expenses and other current assets
Total current assets
122,387
102,176
Property and equipment, net
18,676
18,026
Other assets
Goodwill
82,468
85,070
Operating lease
right-of-use
Total assets
224,657
207,541
LIABILITIES AND SHAREHOLDERS EQUITY
Current liabilities:
Accounts payable
Accrued expenses and other liabilities
33,898
30,297
Contract liabilities (deferred revenue)
12,415
Operating lease liabilities
Total current liabilities
51,941
54,889
Long-term deferred tax liability, net
Total liabilities
60,586
63,688
Shareholders equity
164,071
143,853
Total liabilities and shareholders equity
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of 8 - The Hackett Group, Inc. Announces Third Quarter Results
SEGMENT INFORMATION
(in thousands)
Global S&BT (1):
Total revenue (4)
41,593
37,085
128,760
106,956
Segment profit (5)
14,030
11,847
45,939
34,517
Oracle Solutions (2):
17,682
20,762
59,165
55,763
12,147
12,062
SAP Solutions (3):
12,758
14,047
35,700
45,858
15,571
Total Company:
Total segment profit
21,190
20,980
67,324
62,150
Items not allocated to segment level (5):
Corporate general and administrative expenses
15,899
16,528
Non-cash
Depreciation and amortization
Income from continuing operations before taxes
Global S&BT includes the results of our strategic businesses consulting practices, including S&BT
Consulting, Benchmarking, Business Advisory Services, IP
as-a-Service
and OneStream.
Oracle Solutions includes the results of our EPM/ERP and Digital AMS practices.
SAP Solutions includes the results of our SAP applications and related SAP service offerings.
Total revenue includes reimbursable expenses, which are project travel-related expenses passed through to a
client with no associated operating margin.
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. These administrative function costs include corporate general and administrative expenses,
stock based compensation, depreciation and amortization expense, restructuring
charges and reversals and interest expense. 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,
expenses and benefits.
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of 8 - The Hackett Group, Inc. Announces Third Quarter Results
RECONCILIATION OF GAAP TO
NON-GAAP
MEASURES
(in thousands, except per share data)
GAAP NET INCOME
Adjustments (1):
stock based compensation expense (2)
Acquisition-related compensation expense (3)
stock based compensation
expense (3)
Amortization of intangible assets (4)
ADJUSTED NET INCOME BEFORE INCOME TAXES ON ADJUSTMENTS (1)
12,351
10,961
38,417
33,629
Tax effect of adjustments above (5)
ADJUSTED NET INCOME (1)
11,840
10,252
36,542
31,479
Adjusted diluted net income per common share (1)
Weighted average common and common equivalent shares outstanding
The Company provides adjusted earnings results (which exclude the loss from discontinued operations,
stock based compensation expense, restructuring charges and
reversals, amortization of intangible assets and include a GAAP tax rate) as a complement to results provided in accordance with Generally Accepted Accounting Principles (GAAP). These
results are
provided to enhance the users overall understanding of the Companys current financial performance and its prospects for the future. The Company believes the
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
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
results are one of the primary indicators management uses for planning and forecasting in future periods. In addition, since the Company has historically reported
results to the investment community, it believes the continued inclusion of
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.
stock based compensation expense is accounted for under
Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation-Stock Compensation. The Company excludes
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
measures of profitability, which exclude
stock
based compensation, are widely used by investors.
The Company incurs cash and
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
stock based compensation expense is also accounted for under Financial Accounting Standards Board Accounting Standards Codification Topic 718,
Compensation-Stock Compensation.
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.
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
stock compensation was $0.6 million and $0.7 million in 2022 and 2021, respectively; the impact of intangible
amortization was $51 thousand in 2021; and the impact on the restructuring charge reversal was $136 thousand in 2022. For the nine month periods the impact of
stock compensation was
$2.0 million and $1.9 million in 2022 and 2021, respectively; the impact of intangible amortization was $32 thousand and $155 thousand in 2022 and 2021, respectively and the impact on the restructuring charge reversal was
$168 thousand in 2022.
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of 8 - The Hackett Group, Inc. Announces Third Quarter Results
SUPPLEMENTAL FINANCIAL DATA
(unaudited)
July 1,
Revenue Concentration:
(% of total revenue)
Top customer
Top 5 customers
Top 10 customers
Key Metrics and Other Financial Data:
Consultant headcount
Total headcount
Days sales outstanding (DSO)
Cash provided by operating activities (in thousands)
18,235
Depreciation (in thousands)
Amortization (in thousands)
Capital expenditures (in thousands)
Remaining Plan authorization:
Shares purchased (in thousands)
Cost of shares repurchased (in thousands)
Average price per share of shares purchased
Remaining Plan authorization (in thousands)
10,609
11,472
Shares Purchased to Satisfy Employee Net Vesting Obligations:
Cost of shares purchased (in thousands)
The above information was disclosed in a filing to the SEC. To see the filing, click here.
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