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 first quarter, which ended
on March 29, 2019.
Q1 2019 net revenue (gross revenue less reimbursable expenses) from
continuing operations was $62.4 million, down 6%, as compared to the
same period in the prior year. Q1 2019 gross revenue from continuing
operations was $67.2 million, down 6% from the same period in the prior
year.
Q1 2019 GAAP diluted earnings per share were $0.22 per share, as
compared to $0.23 per share for the same period in the prior year.
Q1 2019 pro forma diluted earnings per share were $0.22 per share, as
compared to $0.25 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.
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 June 28, 2019, to be paid on July 10, 2019. This represents an
increase of 6% from the prior year.
At the end of the first quarter of 2019, the Company’s cash balances
were $10.7 million. During the first quarter of 2019, the Company
repurchased 224 thousand shares of the Company’s common stock at an
average price per share of $17.77 for a total of $4.0 million. At the
end of the first quarter of 2019, the Company’s remaining stock purchase
program authorization was $5.3 million.
“Although the first quarter started out slowly, as the quarter
progressed, we experienced the increase in demand and revenues that was
more representative with our original plans,” stated Ted A. Fernandez,
Chairman and CEO of The Hackett Group. “Given this momentum, we expect a
significant improvement in our sequential revenue growth in the second
quarter, which bodes well for our prospects for the remainder of the
year.”
Based on the current economic outlook, the Company estimates total net
revenue for the second quarter of 2019 to be in the range of $67.0
million and $69.0 million or gross revenue (inclusive of reimbursable
expenses) to be in the range of $72.5 million and $74.5 million. The
Company estimates pro forma diluted earnings per share for the second
quarter of 2019 to be in the range of $0.26 and $0.28.
Other Highlights
Awards from Forbes & Statista, IAOP, Spend Matters – The
Hackett Group received three awards in Q1 2019. Forbes & Statista named
The Hackett Group to its list of America’s Best Management Consulting
Firms for 2019. The International Association of Outsourcing
Professionals (IAOP) included the Company on its 2019 list of the Best
of the World’s Best Outsourcing Advisors in both the “Multiple
Appearances” and “Fresh Faces” categories. Finally, Spend Matters named
The Hackett Group as one of its “50 Providers to Know.”
Finance Key Issues Research – The Hackett Group issued its 2019
Finance Key Issues research, which found that corporate finance
organizations are counting on digital transformation to enable them to
improve customer focus and enhance strategic value while continuing to
reduce costs over the next few years. But significant obstacles must be
overcome, the research found, as digital transformation has only just
begun to have an impact on finance performance.
Procurement Key Issues – The Hackett Group issued its 2019
Procurement Key Issues research, which found that digital transformation
is making it easier for procurement organizations to “do more with
less.” But there is still significant need for procurement to address
its critical development priorities for 2019, including: improving
analytical capabilities, aligning skills and talent with business needs,
leveraging supplier relationships, enhancing agility, and achieving true
customer-centricity. The Hackett Group also found that procurement
organizations are showing a renewed and expanded focus on strategic
sourcing and spend management in response to concerns over economic
uncertainty, increased competition, and global trade issues.
On Tuesday, May 7, 2019 senior management will discuss first quarter
results in a conference call at 5:00 P.M. ET. The number for the
conference call is (800) 593-0486, [Passcode: First 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, May 7, 2019 and will run
through 5:00 P.M. ET on Tuesday, May 21, 2019. To access the
rebroadcast, please dial (800) 879-1876. For International callers,
please dial (203) 369-3560. 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, May 7, 2019 and will run
through 5:00 P.M. ET on Tuesday, May 21, 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,
changes in general economic conditions and interest rates, 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 | ||||||
| March 29, | March 30, | |||||
| 2019 | 2018 | |||||
| Revenue: | ||||||
| Revenue before reimbursements (“net revenue”) | $ | 62,370 | $ | 66,039 | ||
| Reimbursements | 4,785 | 5,068 | ||||
| Total revenue from continuing operations | 67,155 | 71,107 | ||||
| Costs and expenses: | ||||||
| Cost of service: | ||||||
| Personnel costs before reimbursable expenses | 38,934 | 40,604 | ||||
| Non-cash stock compensation expense | 920 | 1,023 | ||||
| Acquisition-related compensation benefit | (129) | (585) | ||||
| Acquisition-related non-cash stock compensation expense | 79 | 800 | ||||
| Reimbursable expenses | 4,785 | 5,068 | ||||
| Total cost of service | 44,589 | 46,910 | ||||
| Selling, general and administrative costs | 14,042 | 14,463 | ||||
| Non-cash stock compensation expense | 705 | 841 | ||||
| Amortization of intangible assets | 299 | 613 | ||||
| Acquisition-related contingent consideration liability | (1,070) | — | ||||
| Total selling, general, and administrative expenses | 13,976 | 15,917 | ||||
| Total costs and operating expenses | 58,565 | 62,827 | ||||
| Income from operations | 8,590 | 8,280 | ||||
| Other expense: | ||||||
| Interest expense | (101) | (179) | ||||
| Income from continuing operations before income taxes | 8,489 | 8,101 | ||||
| Income tax expense | 1,440 | 800 | ||||
| Income from continuing operations | 7,049 | 7,301 | ||||
|
Gain from discontinued operations (2) |
45 | 66 | ||||
| Net income | $ | 7,094 | $ | 7,367 | ||
| Weighted average common shares outstanding: | ||||||
| Basic | 29,683 | 29,089 | ||||
| Diluted | 32,294 | 31,815 | ||||
| Basic net income per common share: | ||||||
| Income per common share from continuing operations | $ | 0.24 | $ | 0.25 | ||
| Income per common share from discontinued operations (2) | 0.00 | 0.00 | ||||
| Net income per common share | $ | 0.24 | $ | 0.25 | ||
| Diluted net income per common share: | ||||||
| Income per common share from continuing operations | $ | 0.22 | $ | 0.23 | ||
|
Income per common share from discontinued operations (2) |
0.00 | 0.00 | ||||
| Net income per common share | $ | 0.22 | $ | 0.23 | ||
| Pro forma data (1): | ||||||
| Income from continuing operations before income taxes | $ | 8,489 | $ | 8,101 | ||
| Non-cash stock compensation expense | 1,625 | 1,864 | ||||
| Acquisition-related compensation benefit | (129) | (585) | ||||
| Acquisition-related non-cash stock compensation expense | 79 | 800 | ||||
| Acquisition-related contingent consideration liability | (1,070) | — | ||||
| Amortization of intangible assets | 299 | 613 | ||||
| Pro forma income before income taxes | 9,293 | 10,793 | ||||
| Pro forma income tax expense | 2,323 | 2,698 | ||||
| Pro forma net income | $ | 6,970 | $ | 8,095 | ||
| Pro forma basic net income per common share | $ | 0.23 | $ | 0.28 | ||
| Weighted average common shares outstanding | 29,683 | 29,089 | ||||
| Pro forma diluted net income per common share | $ | 0.22 | $ | 0.25 | ||
| Weighted average common and common equivalent shares outstanding | 32,294 | 31,815 | ||||
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(1) The Company provides pro forma earnings results (which exclude |
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(2) Discontinued operations relate to the discontinuance of the Company’s European Working Capital group. |
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(3) Not applicable. |
| The Hackett Group, Inc. | |||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||
| (in thousands) | |||||||
| (unaudited) | |||||||
| March 29, | December 28, | ||||||
| 2019 | 2018 | ||||||
| ASSETS | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 10,659 | $ | 13,808 | |||
| Accounts receivable and unbilled revenue, net | 56,012 | 54,807 | |||||
| Prepaid expenses and other current assets | 4,034 | 4,339 | |||||
| Assets related to discontinued operations (4) | – | 137 | |||||
| Total current assets | 70,705 | 73,091 | |||||
| Restricted cash | |||||||
| Property and equipment, net | 20,643 | 19,750 | |||||
| Other assets | 3,469 | 3,704 | |||||
| Goodwill, net | 84,575 | 84,207 | |||||
| Operating lease right-of-use assets | 8,301 | – | |||||
| Total assets | $ | 187,693 | $ | 180,752 | |||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||
| Current liabilities: | |||||||
| Accounts payable | $ | 6,375 | $ | 7,429 | |||
| Accrued expenses and other liabilities | 26,939 | 34,498 | |||||
| Operating lease liabilities | 2,604 | – | |||||
| Liabilities related to discontinued operations (4) | 669 | 2,300 | |||||
| Total current liabilities | 36,587 | 44,227 | |||||
| Non-current accrued expenses and other liabilities | – | – | |||||
| Long-term deferred tax liability, net | 8,162 | 6,435 | |||||
| Long-term debt | 7,500 | 6,500 | |||||
| Operating lease liabilities | 5,697 | – | |||||
| Total liabilities | 57,946 | 57,162 | |||||
| Shareholders’ equity | 129,747 | 123,590 | |||||
| Total liabilities and shareholders’ equity | $ | 187,693 | $ | 180,752 | |||
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(4) The assets and liabilities related to discontinued operations relate to the discontinuance of the Company’s European Working Capital Group. |
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The Hackett Group, Inc. |
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| SUPPLEMENTAL FINANCIAL DATA | |||||||||
| (unaudited) | |||||||||
| Quarter Ended | |||||||||
| March 29, | March 30, | December 28, | |||||||
| 2019 | 2018 | 2018 | |||||||
| Revenue Breakdown by Group: | |||||||||
| (in thousands) | |||||||||
| Global S&BT (5) | $ | 33,270 | $ | 35,139 | $ | 32,908 | |||
| EEA (6) | 29,100 | 30,900 | 28,687 | ||||||
| Net revenue from continuing operations (7) | $ | 62,370 | $ | 66,039 | $ | 61,595 | |||
| Revenue Concentration: | |||||||||
| (% of total revenue) | |||||||||
| Top customer | 5% | 3% | 4% | ||||||
| Top 5 customers | 18% | 12% | 16% | ||||||
| Top 10 customers | 26% | 19% | 24% | ||||||
| Key Metrics and Other Financial Data: | |||||||||
| Total Company: | |||||||||
| Consultant headcount | 979 | 1,016 | 1,003 | ||||||
| Total headcount | 1,222 | 1,257 | 1,246 | ||||||
| Days sales outstanding (DSO) | 76 | 65 | 75 | ||||||
| Cash provided by operating activities (in thousands) | $ | 6,759 | $ | 17,203 | $ | 8,056 | |||
| Pro forma return on equity (8) | 27% | 30% | 30% | ||||||
| Depreciation (in thousands) | $ | 606 | $ | 580 | $ | 609 | |||
| Amortization (in thousands) | $ | 299 | $ | 613 | $ | 580 | |||
| Remaining Plan authorization: | |||||||||
| Shares purchased (in thousands) | 101 | 53 | 15 | ||||||
| Cost of shares repurchased (in thousands) | $ | 1,616 | $ | 963 | $ | 240 | |||
| Average price per share of shares purchased | $ | 15.99 | $ | 18.33 | $ | 16.01 | |||
| Remaining Plan authorization (in thousands) | $ | 5,318 | $ | 2,174 | $ | 6,934 | |||
| Shares Purchased to Satisfy Employee Net Vesting Obligations: | |||||||||
| Shares purchased (in thousands) | 123 | 175 | 14 | ||||||
| Cost of shares purchased (in thousands) | $ | 2,370 | $ | 3,004 | $ | 274 | |||
| Average price per share of shares purchased | $ | 19.24 | $ | 17.15 | $ | 19.74 | |||
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(5) Strategy and Business Transformation Group (S&BT) includes the results of our Executive Advisory Programs, Benchmarking Services, and Business Transformation Practices. |
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(6) ERP, EPM and Analytics Solutions (EEA) includes the results of our Oracle EEA and SAP Solutions Practices. |
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(7) Net revenue excludes reimbursable expenses which are primarily travel-related expenses passed through to a client with no associated margin. |
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(8) Twelve months of pro forma net income divided by average |
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(9) Certain reclassifications have been made to conform with current reporting requirements. |
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