The following excerpt is from the company's SEC filing.
MIAMI, FL (February 21, 2023) – 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 fourth quarter, which ended on December 30, 2022.
Financial Highlights
Total revenue in the fourth quarter of 2022 was $70.1 million and revenue before reimbursements was $68.8 million, which exceeded the high end of our guidance. This compares to total revenue of $70.2 million and revenue before reimbursements of $69.8 million in the fourth qu
arter of the prior year.
GAAP diluted earnings per share was $0.31 in the fourth quarter of 2022, as compared to $0.50 in the fourth quarter of 2021. GAAP results for the fourth quarter of 2021 included a $7.7 million, or $0.23 per diluted share, tax benefit related to the exercise of 2.9 million outstanding share appreciation rights (SARs).
Adjusted diluted earnings per share, a non-GAAP measure, was $0.36, exceeding the high end of our guidance, as compared to $0.56 in the fourth quarter of 2021. Adjusted diluted earnings per share in the fourth quarter of 2021 included a $7.7 million, or $0.23 per diluted share, tax benefit related to the exercise of 2.9 million outstanding SARs. Excluding this non-recurring tax benefit, adjusted diluted earnings per share in the prior year was $0.33. 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.
During the fourth quarter of 2022, the Company completed its “Dutch auction” tender offer through which it repurchased 4.9 million shares for a total cost of $115 million, or $23.50 per share, excluding transaction related fees. As of the end of the fourth quarter, the Company’s remaining share repurchase program authorization was $14.7 million.
As of the end of the quarter, the Company had $60.0 million outstanding on its credit facility.
Subsequent to the end of the fourth quarter, the Company’s Board of Directors declared its first quarter 2023 dividend of $0.11 per share for its shareholders of record on March 24, 2023, to be paid on April 7, 2023.
“In spite of the increasing macro-economic headwinds we experienced during the second half of the year, we reported strong annual operating results with operating income up 19% for the year,” stated Ted A. Fernandez, Chairman & CEO of The Hackett Group, Inc. “We achieved our results while continuing to increase our investments in program development and sales resources for our expanding IP as-a-Service, research advisory and market intelligence offerings, which were up over 20% for the year.”
Business Outlook for the First Quarter of 2023
Based on the Company’s current outlook:
The Company estimates total revenue before reimbursements for the first quarter of 2023 will be in the range of $69.0 million to $70.5 million.
The Company estimates adjusted diluted earnings per share for the first quarter of 2023 to be in the range of $0.35 and $0.38, assuming a GAAP effective tax rate of 22%.
Conference Call and Webcast Details
On Tuesday, February 21, 2023, 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 21, 2023 and will run through 5:00 P.M. ET on Tuesday, March 7, 2023. To access the rebroadcast, please dial (866) 510-4837. For International callers, please dial (203) 369-1943.
In addition, The Hackett Group will also be webcasting this conference call live. To participate, simply visit http://www.thehackettgroup.com/about/investor-relations/ 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 21, 2023 and will run through 5:00 P.M. ET on Tuesday, March 7, 2023. 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 non-cash 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 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
, research advisory and strategic consultancy firm that enables organizations to achieve Digital World Class
performance.
Drawing upon our unparalleled intellectual property from more than 25,000 benchmark studies and our Hackett-Certified
best practices repository from the world’s leading businesses – including 97% of the Dow Jones Industrials, 93% of the Fortune 100, 73% of the DAX 30 and 52% 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: www.thehackettgroup.com, info@thehackettgroup.com, or by calling (770) 225-3600.
The Hackett Group, Hackett-Certified, quadrant logo, World Class Defined and Enabled, Quantum Leap and Digital Excelleration 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 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.
of 8 - The Hackett Group, Inc. Announces Fourth Quarter Results
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Quarter Ended
Twelve Months Ended
December 31,
Revenue:
Revenue before reimbursements
68,817
69,776
289,688
277,583
Reimbursements
70,117
70,232
293,742
278,809
Costs and expenses:
Cost of service:
Personnel costs before reimbursable expenses (includes $1,401, $6,201, $1,470 and $6,766 of non-cash stock based compensation expense in the quarters and twelve months ended December 30, 2022 and December 31, 2021, respectively)
39,208
42,301
174,112
171,920
Reimbursable expenses
Total cost of service
40,508
42,757
178,166
173,146
Selling, general and administrative costs (includes $1,038, $4,066, $841 and $3,356 of non-cash stock based compensation expense in the quarters and twelve months ended December 30, 2022 and December 31, 2021, respectively)
15,986
15,474
60,979
59,187
Restructuring charge and asset impairment
Total costs and operating expenses
56,494
58,231
238,494
232,333
Operating income
13,623
12,001
55,248
46,476
Other expense, net:
Interest expense, net
Income from continuing operations before income taxes
13,549
11,982
55,104
46,381
Income tax expense (benefit) (1)
(4,539
14,302
16,521
40,802
41,552
Loss from discontinued operations (net of taxes)
Net income
41,545
Weighted average common shares outstanding:
30,812
29,970
31,400
30,021
Diluted
31,474
32,916
31,962
32,883
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:
(1) The fourth quarter and full year of 2021 included a tax benefit of $7.7 million related to the exercise of 2.9 million SARs.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
ASSETS
Current assets:
30,255
45,794
Accounts receivable and contract assets, net
48,376
50,616
Prepaid expenses and other current assets
Total current assets
81,166
102,176
Property and equipment, net
19,359
18,026
Other assets
Goodwill
83,502
85,070
Operating lease right-of-use assets
Total assets
184,993
207,541
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable
Accrued expenses and other liabilities
36,712
30,297
Contract liabilities (deferred revenue)
13,278
14,616
Operating lease liabilities
Total current liabilities
59,601
54,889
Long-term deferred tax liability, net
Long-term debt
59,653
Total liabilities
126,715
63,688
Shareholders' equity
58,278
143,853
Total liabilities and shareholders' equity
SEGMENT PROFIT
Global S&BT (1):
Total revenue (4)
40,901
39,268
169,660
146,224
Segment profit (5)
15,380
14,805
61,319
49,321
Oracle Solutions (2):
17,155
19,123
76,320
74,886
15,335
15,662
SAP Solutions (3):
12,061
11,841
47,762
57,699
12,827
18,843
Total Company:
Total segment profit
22,157
21,711
89,481
83,826
Items not allocated to segment level (5):
Corporate general and administrative expenses
21,180
22,840
Non-cash stock based compensation expense
10,267
10,122
Acquisition-related compensation expense
Depreciation and amortization
Income from continuing operations before taxes
(1) 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.
(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. These administrative function costs include corporate general and administrative expenses, non-cash 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, non-recurring expenses and benefits.
RECONCILIATION OF GAAP TO NON-GAAP MEASURES
GAAP NET INCOME
Adjustments (1):
Non-cash stock based compensation expense (2)
10,252
Acquisition-related compensation expense (3)
Acquisition-related non-cash stock based compensation expense (3)
Amortization of intangible assets (4)
ADJUSTED NET INCOME BEFORE INCOME TAXES ON ADJUSTMENTS (1)
12,155
19,065
50,572
52,701
Tax effect of adjustments above (5)
ADJUSTED NET INCOME (1)
11,468
18,419
48,010
49,905
Adjusted diluted net income per common share (1)
Weighted average common and common equivalent shares outstanding
(1) 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 non-cash 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 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 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) 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, 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 and $0.6 million in 2022 and 2021, respectively and the impact of intangible amortization was $46 thousand in 2021. For the nine month periods the impact of non-cash stock based compensation expense was $2.7 million and $2.5 million in 2022 and 2021, respectively; the impact of intangible amortization was $32 thousand and $201 thousand in 2022 and 2021, respectively and the impact on the restructuring charge reversal was $172 thousand in 2022.
SUPPLEMENTAL FINANCIAL DATA
September 30,
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)
24,827
19,885
Depreciation (in thousands)
Amortization (in thousands)
Capital expenditures (in thousands)
Remaining Plan authorization:
Shares purchased (in thousands) (1)
Cost of shares repurchased (in thousands) (1)
115,937
Average price per share of shares purchased
Remaining Plan authorization (in thousands) (2)
14,672
10,609
11,244
Shares Purchased to Satisfy Employee Net Vesting Obligations:
Cost of shares purchased (in thousands)
19,767
(1) Includes the shares repurchased through the Tender Offer transaction in December from which the Company acquired 4.9 million shares at $23.71 per share, or $115.9 million, inclusive of transaction related fees.
(2) The Company's Board of Directors approved an additional $120.0 million to its share repurchase plan in November 2022.
The above information was disclosed in a filing to the SEC. To see the filing, click here.
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