8-K
HACKETT GROUP, INC. (HCKT)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): May 1, 2020
The Hackett Group, Inc.
(Exact name of registrant as specified in its charter)
| FLORIDA | 333-48123 | 65-0750100 |
|---|---|---|
| (State or other jurisdiction of<br><br><br>incorporation or organization) | (Commission File Number) | (I.R.S. Employer<br><br><br>Identification No.) |
| 1001 Brickell Bay Drive, Suite 3000<br><br><br>Miami, Florida | 33131 | |
| --- | --- | |
| (Address of principal executive offices) | (Zip Code) |
(305) 375-8005
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| --- | --- |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR § 230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR § 240.12b-2).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, par value $.001 per share | HCKT | NASDAQ Stock Market |
Item 2.02 Results of Operations and Financial Condition.
On May 5, 2020, The Hackett Group, Inc. (the “Company”) issued a press release setting forth its consolidated financial results for the first fiscal quarter ended March 27, 2020. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein.
The information contained in Item 2.02 of this current report on Form 8-K, as well as Exhibit 99.1, is being furnished to the Securities and Exchange Commission and shall not be deemed “filed” with the Securities and Exchange Commission nor incorporated by reference in any registration statement filed by the Company under the Securities Act of 1933, as amended.
Item 5.07 Submission of Matters to a Vote of Security Holders.
The 2020 Annual Meeting of Shareholders of the Company was held on May 1, 2020. Matters submitted to shareholders at the meeting and the voting results thereof were as follows:
Proposal 1 – Election of Director. The shareholders of the Company elected the director nominee named below to serve until the 2023 Annual Meeting of Shareholders or until his successor is duly elected and qualified. The following is a breakdown of the voting results:
| BROKER | |||
|---|---|---|---|
| DIRECTOR | FOR | WITHHELD | NON-VOTES |
| John R. Harris | 16,943,287 | 133,410 | 3,206,793 |
Proposal 2 – Amendment to the Company’s 1998 Stock Option and Incentive Plan. The shareholders of the Company approved an amendment to the Company’s 1998 Stock Option and Incentive Plan (the “Plan”) to (i) increase the sublimit under the Plan for issuances of restricted stock and restricted stock units by 1,200,000 shares and (ii) increase the total number of shares authorized for issuance under the Plan by 1,200,000 shares. The following is a breakdown of the voting results:
| FOR | AGAINST | ABSTAIN | NON-VOTES |
|---|---|---|---|
| 20,922,045 | 2,415,500 | 22,274 | 3,206,793 |
Proposal 3 – Advisory Vote on Executive Officer Compensation. The shareholders of the Company approved an advisory vote on executive officer compensation. The following is a breakdown of the voting results:
| BROKER | |||
|---|---|---|---|
| FOR | AGAINST | ABSTAIN | NON-VOTES |
| 22,842,126 | 501,085 | 16,608 | 3,206,793 |
Proposal 4 – Appointment of RSM US LLP as Independent Auditor. The shareholders of the Company ratified the appointment of RSM US LLP as the Company’s independent registered public accounting firm for the fiscal year ending January 1, 2021. The following is a breakdown of the voting results:
| FOR | AGAINST | ABSTAIN | NON-VOTES |
|---|---|---|---|
| 26,516,582 | 40,186 | 9,844 | - |
Item 9.01 Financial Statements and Exhibits.
| (d) | Exhibits |
|---|---|
| Exhibit<br><br><br>Number | Description |
| --- | --- |
| 99.1 | Press Release of The Hackett Group, Inc., dated May 5, 2020 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| THE HACKETT GROUP, INC. | ||
|---|---|---|
| Date: May 5, 2020 | By: | /s/ Robert A. Ramirez |
| Robert A. Ramirez | ||
| Executive Vice President, Finance and Chief Financial Officer |
hckt-ex991_6.htm
Exhibit 99.1
Contact:
Robert A. Ramirez, CFO, 305-375-8005 or rramirez@thehackettgroup.com
The Hackett Group Announces First Quarter 2020 Results
| • | Q1 2020 net revenue of $65.2 million, up 5%, and pro forma EPS of $0.24, up 9%, both in line with guidance |
|---|---|
| • | Q1 2020 GAAP EPS of $0.17, as compared to GAAP EPS of $0.22 in the same period in the prior year |
| --- | --- |
| • | Q1 2020 ending cash balance of $23.3 million and no outstanding debt |
| --- | --- |
MIAMI, FL – May 5, 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 first quarter, which ended on March 27, 2020.
Q1 2020 net revenue (gross revenue less reimbursable expenses) was $65.2 million, up 5%, as compared to the same period in the prior year. Q1 2020 gross revenue was $69.5 million, up 4%, from the same period in the prior year.
Q1 2020 pro forma diluted earnings per share were $0.24, up 9%, when compared to 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.
GAAP diluted earnings per share were $0.17 for the first quarter of 2020, as compared to earnings per share of $0.22 in the first quarter of 2019. GAAP results for the first quarter of 2019 included a $1.1 million benefit due to adjustments to contingent earnout liabilities relating to acquisitions and favorable GAAP income tax expenses, both of which benefited GAAP earnings by $0.05 when compared to the first quarter of 2020.
At the end of the first quarter of 2020, the Company’s cash balances were $23.3 million. During the quarter, the Company repurchased 198 thousand shares under its share repurchase program at an average price of $15.00 for a total of $3.0 million. As of the end of the first quarter of 2020, the Company’s remaining share repurchase program authorization was $5.6 million.
“We reported solid operating results even though we started to experience the economic disruption from the coronavirus in the latter part of the quarter,” stated Ted A. Fernandez, Chairman & CEO of The Hackett Group. “I am very proud of our associates as they quickly took the appropriate precautions to ensure their safety while also successfully adapting to our client’s virtual service delivery requirements. Given the significant economic uncertainty, we are very pleased to be in such a strong cash position and without any debt to navigate the volatility ahead and to be strongly positioned once the economic demand recovers.”
Due to the economic uncertainty, we are limiting our comments on outlook. Current estimates suggest sequential revenue declines of 15% to 20% from the first quarter of 2020 to the second quarter of 2020 and, given our decision to maintain current staffing levels through the balance of the second quarter, we expect to forego a significant level of profitability. However, we do not expect our cash balances net of any outstanding debt to decrease during the second quarter of 2020. As prudent measures, we intend to draw down a portion of our credit facility during the second quarter and the Company’s Board of Directors also deferred our dividend declaration decision until closer to quarter end.
Other Highlights
Performance Diagnostic Tool - The Hackett Group’s research finds that most companies will need to reduce SG&A costs by 15% to 30% to align costs with significant revenue declines due to the global pandemic. In late April, The Hackett Group responded by launching a new Performance Diagnostic offering which enables companies to move from data capture to performance results in less than one week. The diagnostic is designed as a rapid assessment tool to help companies make informed decisions on current and post-pandemic plans across corporate finance, procurement/supply chain, human resources, and information technology.
Coronavirus Response Center – The Hackett Group has established a Coronavirus Response Center as part of its Website. The center currently features more than 20 pieces of research that offers guidance and insights for leaders in corporate finance, procurement and supply chain, human resources, information technology, and more. These include individual response guides by function and other pieces in our new “2020 Disrupted” research series.
Answerthink Receives SAP Award – Answerthink, a division of The Hackett Group, announced that it received a 2020 SAP® North America Award for Partner Excellence for Emerging Markets and Net-New Growth. Awards were presented by SAP to the top-performing partners in North America that have made outstanding contributions to driving customers’ digital transformation programs.
Procurement Key Issues Research – The Hackett Group issued new Procurement Key Issues research detailing the dual challenge for procurement in 2020 – reducing both external and internal operating costs while at the same time adding value and becoming a better strategic advisor to the business. Modernizing procurement application platforms and driving better analytics to improve spend influence and enhance value are key focuses for procurement in 2020, the research found.
On Tuesday May 5, 2020, senior management will discuss first quarter results in a conference call at 5:00 P.M. ET. (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 5, 2020 and will run through 5:00 P.M. ET on Tuesday, May 19, 2020. To access the rebroadcast, please dial (888) 566-0512. For International callers, please dial (203) 369-3061.
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 5, 2020 and will run through 5:00 P.M. ET on Tuesday, May 19, 2020. 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 nearly 18,000 benchmarking studies with major corporations and government agencies, including 93% of the Dow Jones Industrials, 90% 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 impact of the coronavirus pandemic, including the economic impact and the timing of an economic recovery, our ability to manage our business and capital resources through the pandemic, the ability of our products, services, or offerings mentioned in this release to deliver the desired effect, 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, especially given that our clients are also impacted by the coronavirus pandemic, 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 our existing credit facility as well as other risks detailed in our Annual Report on Form 10-K for the most recent fiscal year and our Quarterly Report on Form 10-Q for the first fiscal quarter of fiscal 2020, each as 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.
Page 4 of 7 - The Hackett Group, Inc. Announces First Quarter Results
The Hackett Group, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
| Quarter Ended | ||||||
|---|---|---|---|---|---|---|
| March 27, | March 29, | |||||
| 2020 | 2019 | |||||
| Revenue: | ||||||
| Revenue before reimbursements ("net revenue") | $ | 65,186 | $ | 62,370 | ||
| Reimbursements | 4,347 | 4,785 | ||||
| Total revenue from continuing operations | 69,533 | 67,155 | ||||
| Costs and expenses: | ||||||
| Cost of service: | ||||||
| Personnel costs before reimbursable expenses | 41,113 | 38,934 | ||||
| Non-cash stock compensation expense | 1,341 | 920 | ||||
| Acquisition-related compensation benefit | - | (129 | ) | |||
| Acquisition-related non-cash stock compensation expense | 253 | 79 | ||||
| Reimbursable expenses | 4,347 | 4,785 | ||||
| Total cost of service | 47,054 | 44,589 | ||||
| Selling, general and administrative costs | 13,897 | 14,042 | ||||
| Non-cash stock compensation expense | 636 | 705 | ||||
| Amortization of intangible assets | 238 | 299 | ||||
| Acquisition-related contingent consideration liability | - | (1,070 | ) | |||
| Total selling, general, and administrative expenses | 14,771 | 13,976 | ||||
| Total costs and operating expenses | 61,825 | 58,565 | ||||
| Income from operations | 7,708 | 8,590 | ||||
| Other expense: | ||||||
| Interest expense | (37 | ) | (101 | ) | ||
| Income from continuing operations before income taxes | 7,671 | 8,489 | ||||
| Income tax expense | 2,136 | 1,440 | ||||
| Income from continuing operations | 5,535 | 7,049 | ||||
| Gain (loss) from discontinued operations (2) | (8 | ) | 45 | |||
| Net income | $ | 5,527 | $ | 7,094 | ||
| Weighted average common shares outstanding: | ||||||
| Basic | 29,889 | 29,683 | ||||
| Diluted | 32,264 | 32,294 | ||||
| Basic net income per common share: | ||||||
| Income per common share from continuing operations | $ | 0.19 | $ | 0.24 | ||
| Income (loss) per common share from discontinued operations (2) | (0.00 | ) | 0.00 | |||
| Net income per common share | $ | 0.19 | $ | 0.24 | ||
| Diluted net income per common share: | ||||||
| Income per common share from continuing operations | $ | 0.17 | $ | 0.22 | ||
| Income (loss) per common share from discontinued operations (2) | (0.00 | ) | 0.00 | |||
| Net income per common share | $ | 0.17 | $ | 0.22 |
Page 5 of 7 - The Hackett Group, Inc. Announces First Quarter Results
| Pro forma data (1): | |||||
|---|---|---|---|---|---|
| Income from continuing operations before income taxes | $ | 7,671 | $ | 8,489 | |
| Non-cash stock compensation expense | 1,977 | 1,625 | |||
| Acquisition-related compensation benefit | - | (129 | ) | ||
| Acquisition-related non-cash stock compensation expense | 253 | 79 | |||
| Acquisition-related contingent consideration liability | - | (1,070 | ) | ||
| Amortization of intangible assets | 238 | 299 | |||
| Pro forma income before income taxes | 10,139 | 9,293 | |||
| Pro forma income tax expense | 2,535 | 2,323 | |||
| Pro forma net income | $ | 7,604 | $ | 6,970 | |
| Pro forma basic net income per common share | $ | 0.25 | $ | 0.23 | |
| Weighted average common shares outstanding | 29,889 | 29,683 | |||
| Pro forma diluted net income per common share | $ | 0.24 | $ | 0.22 | |
| Weighted average common and common equivalent shares outstanding | 32,264 | 32,294 |
(1) The Company provides pro forma earnings results (which exclude the amortization of intangible assets, non-cash 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 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) Discontinued operations relate to the discontinuance of the Company’s European Working Capital group.
Page 6 of 7 - The Hackett Group, Inc. Announces First Quarter Results
The Hackett Group, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
| March 27, | December 27, | |||
|---|---|---|---|---|
| 2020 | 2019 | |||
| ASSETS | ||||
| Current assets: | ||||
| Cash and cash equivalents | $ | 23,280 | $ | 25,954 |
| Accounts receivable and unbilled revenue, net | 53,397 | 49,778 | ||
| Prepaid expenses and other current assets | 3,316 | 2,895 | ||
| Total current assets | 79,993 | 78,627 | ||
| Property and equipment, net | 19,774 | 19,916 | ||
| Other assets | 2,238 | 2,652 | ||
| Goodwill | 83,786 | 84,578 | ||
| Operating lease right-of-use assets | 9,318 | 7,962 | ||
| Total assets | $ | 195,109 | $ | 193,735 |
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||
| Current liabilities: | ||||
| Accounts payable | $ | 8,347 | $ | 8,494 |
| Accrued expenses and other liabilities | 27,848 | 32,482 | ||
| Operating lease liabilities | 2,686 | 2,707 | ||
| Total current liabilities | 38,881 | 43,683 | ||
| Long-term deferred tax liability, net | 8,797 | 7,183 | ||
| Operating lease liabilities | 6,632 | 5,255 | ||
| Total liabilities | 54,310 | 56,121 | ||
| Shareholders' equity | 140,799 | 137,614 | ||
| Total liabilities and shareholders' equity | $ | 195,109 | $ | 193,735 |
Page 7 of 7 - The Hackett Group, Inc. Announces First Quarter Results
The Hackett Group, Inc.
SUPPLEMENTAL FINANCIAL DATA
(unaudited)
| Quarter Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| March 27, | March 29, | December 27, | |||||||
| 2020 | 2019 | 2019 | |||||||
| Revenue Breakdown by Group: | |||||||||
| (in thousands) | |||||||||
| S&BT (3) | $ | 24,684 | $ | 24,647 | $ | 25,875 | |||
| EEA (4) | 33,002 | 27,413 | 30,454 | ||||||
| International (5) | 7,500 | 10,310 | 7,407 | ||||||
| Net revenue from continuing operations (6) | $ | 65,186 | $ | 62,370 | $ | 63,736 | |||
| Revenue Concentration: | |||||||||
| (% of total revenue) | |||||||||
| Top customer | 4 | % | 5 | % | 5 | % | |||
| Top 5 customers | 15 | % | 18 | % | 14 | % | |||
| Top 10 customers | 25 | % | 26 | % | 22 | % | |||
| Key Metrics and Other Financial Data: | |||||||||
| Total Company: | |||||||||
| Consultant headcount | 1,026 | 979 | 982 | ||||||
| Total headcount | 1,243 | 1,222 | 1,201 | ||||||
| Days sales outstanding (DSO) | 70 | 76 | 66 | ||||||
| Cash provided by operating activities (in thousands) | $ | 6,521 | $ | 6,759 | $ | 15,821 | |||
| Pro forma return on equity (7) | 24 | % | 27 | % | 25 | % | |||
| Depreciation (in thousands) | $ | 800 | $ | 606 | $ | 887 | |||
| Amortization (in thousands) | $ | 238 | $ | 299 | $ | 247 | |||
| Remaining Plan authorization: | |||||||||
| Shares purchased (in thousands) | 73 | 101 | 145 | ||||||
| Cost of shares repurchased (in thousands) | $ | 1,006 | $ | 1,616 | $ | 2,227 | |||
| Average price per share of shares purchased | $ | 13.79 | $ | 15.99 | $ | 15.33 | |||
| Remaining Plan authorization (in thousands) | $ | 5,645 | $ | 5,318 | $ | 1,651 | |||
| Shares Purchased to Satisfy Employee Net Vesting Obligations: | |||||||||
| Shares purchased (in thousands) | 125 | 123 | 3 | ||||||
| Cost of shares purchased (in thousands) | $ | 1,962 | $ | 2,370 | $ | 49 | |||
| Average price per share of shares purchased | $ | 15.70 | $ | 19.24 | $ | 16.20 |
(3) 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.
(4) ERP, EPM and Analytics Solutions (EEA) includes the results of our Oracle EEA and SAP Solutions Practices.
(5) International Groups include the results of our S&BT and EEA Practices, primarily in Europe.
(6) Net revenue excludes reimbursable expenses which are primarily travel-related expenses passed through to a client with no associated margin.
(7) Twelve months of pro forma net income divided by average shareholder's equity.
(8) Certain reclassifications have been made to conform with current reporting requirements.