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): August 9, 2022
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>incorporation or organization) | (Commission File Number) | (I.R.S. Employer<br><br>Identification No.) |
| 1001 Brickell Bay Drive, Suite 3000<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)) |
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 |
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.
Item 2.02 Results of Operations and Financial Condition.
On August 9, 2022, The Hackett Group, Inc. (the “Company”) issued a press release setting forth its consolidated financial results for the second fiscal quarter ended July 1, 2022. 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 9.01 Financial Statements and Exhibits.
(d) Exhibits
| Exhibit<br><br>Number | Description |
|---|---|
| 99.1 | Press Release of The Hackett Group, Inc., dated August 9, 2022 |
| 104 | Cover Page Interactive Data File (the cover page XBRL tags are embedded in the Inline XBRL document) |
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: August 9, 2022 | By: | /s/ Robert A. Ramirez |
| Robert A. Ramirez | ||
| Executive Vice President, Finance and Chief Financial Officer |
EX-99.1
Exhibit 99.1
Contact:
Robert A. Ramirez, CFO, 305-375-8005 or rramirez@thehackettgroup.com
The Hackett Group Announces Second Quarter 2022 Results
MIAMI, FL (August 9, 2022) - 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 second quarter, which ended on July 1, 2022.
Financial Highlights
• Total revenue in the second quarter of 2022 increased 4% to $75.9 million and revenue before reimbursements increased 2% to $74.8 million, as compared to the second quarter of 2021, which exceeded the high end of guidance.
• Total revenue in the second quarter of 2022 excluding the non-recurring $5.3 million SAP software sale in the second quarter of 2021 increased 12%.
• GAAP diluted earnings per share was $0.32 in both the second quarter of 2022 and 2021.
• Adjusted diluted earnings per share, a non-GAAP measure, was $0.38 in the second quarter of 2022 as compared to $0.39 in the second quarter of 2021, or $0.30 excluding the software sale transaction, an increase of 27% and which exceeded the high end of guidance. 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.
• As of the end of the second quarter of 2022, the Company’s remaining share repurchase program authorization was $10.6 million. As of July 1, 2022, the Company's cash balances were $61.7 million, with no outstanding debt.
• Subsequent to the end of the second quarter, the Company's Board of Directors declared a quarterly dividend of $0.11 per share for its shareholders of record on September 23, 2022, to be paid on October 7, 2022.
“We reported better than expected results driven by the growth and margin expansion of our Strategy and Business Transformation group,” stated Ted A. Fernandez, Chairman & CEO of The Hackett Group, Inc. “Additionally, we also signed a significant multi-year IP as-a-Service contract which demonstrates that our investments in our Quantum Leap and Digital Transformation platforms are strategic and valuable to our clients and partners.”
Business Outlook for the Third Quarter of 2022
Based on the Company's current economic outlook:
• The Company estimates total revenue before reimbursements for the third quarter of 2022 will be in the range of $70.5 million to $72.5 million.
• The Company estimates adjusted diluted earnings per share for the third quarter of 2022 to be in the range of $0.34 and $0.36, assuming a GAAP effective tax rate of 28% instead of the 25% long term tax rate we have been previously utilizing for guidance.
Conference Call and Webcast Details
• On Tuesday, August 9, 2022, senior management will discuss second quarter results in a conference call at 5:00 P.M. ET. The number for the conference call is (800) 593-0486, [Passcode: Second 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, August 9, 2022, and will run through 5:00 P.M. ET on Tuesday, August 23, 2022. To access the rebroadcast, please dial (888) 296-6948. For International callers, please dial (203) 369-3028.
• 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, August 9, 2022, and will run through 5:00 P.M. ET on Tuesday, August 23, 2022. To access the replay, visit www.thehackettgroup.comor http://www.streetevents.com.
Use of Non-GAAP Financial Measures
The Company provides adjusted earnings results (which exclude the loss from discontinued operations, non-cash stock compensation expense, acquisition-related compensation expense, acquisition-related non-cash compensation expense, restructuring and asset impairment 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. 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 financial and business trends relating to the Company’s 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, share-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 (NASDAQ: HCKT) is an intellectual property-based strategic consultancy and leading enterprise benchmarking firm to global companies, offering digital transformation including implementation of leading enterprise cloud applications, workflow automation and analytics that enable Digital World Class performance.
Drawing from our unparalleled IP from nearly 20,000 benchmark studies with the world’s 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 best practices 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, quadrant logo, World Class Defined and Enabled and Quantum Leap are the registered marks of The Hackett Group, Inc.
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 duration and severity of the pandemic, the economic impact of the pandemic and the timing of an economic recovery, demand for our services, 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 effectively integrate acquisitions into our operations, our ability to retain existing business, our ability to attract additional business through strategic initiatives or otherwise, 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 pandemic, changes in expectations regarding the business consulting and information technology industries, our ability to attract and retain skilled employees, the impact of any federally-mandated vaccine, testing or other COVID-19 related requirements on employee retention and our results of operations, 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 the geopolitical conflict involving Russian and Ukraine on our business, changes in general economic conditions, inflation and interest rates, our ability to obtain additional debt financing if needed, as well as other risks detailed in our Annual Report on Form 10-K for the most recent fiscal year 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.
Page 4 of 7 - The Hackett Group, Inc. Announces Second Quarter Results
The Hackett Group, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
| Six Months Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| July 2, | July 1, | July 2, | |||||||||
| 2021 | 2022 | 2021 | |||||||||
| Revenue: | |||||||||||
| Revenue before reimbursements | 74,768 | $ | 72,997 | $ | 149,876 | $ | 136,407 | ||||
| Reimbursements | 1,160 | 200 | 1,716 | 276 | |||||||
| Total revenue | 75,928 | 73,197 | 151,592 | 136,683 | |||||||
| Costs and expenses: | |||||||||||
| Cost of service: | |||||||||||
| Personnel costs before reimbursable expenses (includes 1,483, 3,149, 1,779 and 3,626 of stock compensation expense in the quarters and six months ended July 1, 2022 and July 2, 2021, respectively) | 44,701 | 43,227 | 92,034 | 84,397 | |||||||
| Reimbursable expenses | 1,160 | 200 | 1,716 | 276 | |||||||
| Total cost of service | 45,861 | 43,427 | 93,750 | 84,673 | |||||||
| Selling, general and administrative costs (includes 1,235, 2,168, 874 and 1,614 of stock compensation expense in the quarters and six months ended July 1, 2022 and July 2, 2021, respectively) | 15,886 | 15,553 | 30,252 | 28,940 | |||||||
| Total costs and operating expenses | 61,747 | 58,980 | 124,002 | 113,613 | |||||||
| Operating income | 14,181 | 14,217 | 27,590 | 23,070 | |||||||
| Other expense: | |||||||||||
| Interest expense | (28 | ) | (25 | ) | (56 | ) | (50 | ) | |||
| Income from continuing operations before income taxes | 14,153 | 14,192 | 27,534 | 23,020 | |||||||
| Income tax expense | 3,938 | 3,660 | 6,814 | 6,120 | |||||||
| Income from continuing operations | 10,215 | 10,532 | 20,720 | 16,900 | |||||||
| Loss from discontinued operations (net of taxes) | - | - | - | (7 | ) | ||||||
| Net income | 10,215 | $ | 10,532 | $ | 20,720 | $ | 16,893 | ||||
| Weighted average common shares outstanding: | |||||||||||
| Basic | 31,652 | 30,094 | 31,551 | 30,151 | |||||||
| Diluted | 32,221 | 32,970 | 32,032 | 32,870 | |||||||
| GAAP basic net income per common share: | |||||||||||
| Income per common share from continuing operations | 0.32 | $ | 0.35 | $ | 0.66 | $ | 0.56 | ||||
| Loss per common share from discontinued operations | - | - | - | (0.00 | ) | ||||||
| GAAP basic net income per common share | 0.32 | $ | 0.35 | $ | 0.66 | $ | 0.56 | ||||
| GAAP diluted net income per common share: | |||||||||||
| Income per common share from continuing operations | 0.32 | $ | 0.32 | $ | 0.65 | $ | 0.51 | ||||
| Loss per common share from discontinued operations | - | - | - | (0.00 | ) | ||||||
| GAAP diluted net income per common share | 0.32 | $ | 0.32 | $ | 0.65 | $ | 0.51 |
All values are in US Dollars.
Page 5 of 7 - The Hackett Group, Inc. Announces Second Quarter Results
The Hackett Group, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
| July 1, | December 31, | |||
|---|---|---|---|---|
| 2022 | 2021 | |||
| ASSETS | ||||
| Current assets: | ||||
| Cash and cash equivalents | $ | 61,680 | $ | 45,794 |
| Accounts receivable and contract assets, net | 49,485 | 50,616 | ||
| Prepaid expenses and other current assets | 3,033 | 5,766 | ||
| Total current assets | 114,198 | 102,176 | ||
| Property and equipment, net | 18,638 | 18,026 | ||
| Other assets | 501 | 620 | ||
| Goodwill | 83,512 | 85,070 | ||
| Operating lease right-of-use assets | 1,040 | 1,649 | ||
| Total assets | $ | 217,889 | $ | 207,541 |
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||
| Current liabilities: | ||||
| Accounts payable | $ | 5,400 | $ | 7,677 |
| Accrued expenses and other liabilities | 30,482 | 30,297 | ||
| Contract liabilities (deferred revenue) | 14,250 | 14,616 | ||
| Operating lease liabilities | 1,507 | 2,299 | ||
| Total current liabilities | 51,639 | 54,889 | ||
| Long-term deferred tax liability, net | 8,401 | 7,325 | ||
| Operating lease liabilities | 1,019 | 1,474 | ||
| Total liabilities | 61,059 | 63,688 | ||
| Shareholders' equity | 156,830 | 143,853 | ||
| Total liabilities and shareholders' equity | $ | 217,889 | $ | 207,541 |
Page 6 of 7 - The Hackett Group, Inc. Announces Second Quarter Results
The Hackett Group, Inc.
SUPPLEMENTAL FINANCIAL DATA
(unaudited)
| Quarter Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| July 1, | April 1, | July 2, | |||||||
| 2022 | 2022 | 2021 | |||||||
| Revenue Breakdown by Group: | |||||||||
| (in thousands) | |||||||||
| S&BT (1) | $ | 33,390 | $ | 29,980 | $ | 26,496 | |||
| EEA (2) | 36,775 | 37,965 | 40,673 | ||||||
| International (3) | 5,764 | 7,719 | 6,028 | ||||||
| Total revenue | $ | 75,929 | $ | 75,664 | $ | 73,197 | |||
| Revenue Concentration: | |||||||||
| (% of total revenue) | |||||||||
| Top customer | 7 | % | 7 | % | 7 | % | |||
| Top 5 customers | 18 | % | 16 | % | 19 | % | |||
| Top 10 customers | 26 | % | 24 | % | 30 | % | |||
| Key Metrics and Other Financial Data: | |||||||||
| Total Company: | |||||||||
| Consultant headcount | 1,131 | 1,141 | 1,037 | ||||||
| Total headcount | 1,345 | 1,351 | 1,246 | ||||||
| Days sales outstanding (DSO) | 59 | 61 | 59 | ||||||
| Cash provided by operating activities (in thousands) | $ | 18,235 | $ | 6,054 | $ | 13,756 | |||
| Depreciation (in thousands) | $ | 828 | $ | 802 | $ | 849 | |||
| Amortization (in thousands) | $ | 10 | $ | 144 | $ | 263 | |||
| Capital expeditures (in thousands) | $ | 1,274 | $ | 993 | $ | 891 | |||
| Remaining Plan authorization: | |||||||||
| Shares purchased (in thousands) | - | 31 | 489 | ||||||
| Cost of shares repurchased (in thousands) | $ | — | $ | 635 | $ | 8,603 | |||
| Average price per share of shares purchased | $ | — | $ | 20.50 | $ | 17.58 | |||
| Remaining Plan authorization (in thousands) | $ | 10,609 | $ | 10,609 | $ | 13,575 | |||
| Shares Purchased to Satisfy Employee Net Vesting Obligations: | |||||||||
| Shares purchased (in thousands) | 4 | 126 | 2 | ||||||
| Cost of shares purchased (in thousands) | $ | 76 | $ | 2,433 | $ | 38 | |||
| Average price per share of shares purchased | $ | 21 | $ | 19 | $ | 18 |
(1) 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.
(2) ERP, EPM and Analytics Solutions (EEA) includes the results of our North America Oracle EEA and SAP Solutions Practices and One Stream.
(3) International Groups include the results of our S&BT and EEA Practices, primarily in Europe.
Page 7 of 7 - The Hackett Group, Inc. Announces Second Quarter Results
| The Hackett Group, Inc. | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| RECONCILIATION OF GAAP TO NON-GAAP MEASURES | ||||||||||
| (in thousands, except per share data) | ||||||||||
| (unaudited) | ||||||||||
| Quarter Ended | Six Months Ended | |||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| July 1, | July 2, | July 1, | July 2, | |||||||
| 2022 | 2021 | 2022 | 2021 | |||||||
| GAAP NET INCOME | $ | 10,215 | $ | 10,532 | $ | 20,720 | $ | 16,893 | ||
| Adjustments (1): | ||||||||||
| Loss from discontinued operations (net of taxes) (2) | - | - | - | 7 | ||||||
| Non-cash stock compensation expense (3) | 2,714 | 2,542 | 5,309 | 4,881 | ||||||
| Acquisition-related compensation expense (4) | - | - | - | 11 | ||||||
| Acquisition-related non-cash stock compensation expense (4) | 4 | 111 | 8 | 359 | ||||||
| Restructuring and asset impairment reversal | (125 | ) | - | (125 | ) | - | ||||
| Amortization of intangible assets (5) | 10 | 263 | 154 | 524 | ||||||
| ADJUSTED NET INCOME BEFORE INCOME TAXES ON ADJUSTMENTS (1) | 12,818 | 13,448 | 26,066 | 22,675 | ||||||
| Tax effect of adjustments above (6) | 669 | 731 | 1,364 | 1,441 | ||||||
| ADJUSTED NET INCOME (1) | $ | 12,149 | $ | 12,717 | $ | 24,702 | $ | 21,234 | ||
| GAAP diluted net income per common share | $ | 0.32 | $ | 0.32 | $ | 0.65 | $ | 0.51 | ||
| Adjusted diluted net income per common share (1) | $ | 0.38 | $ | 0.39 | $ | 0.77 | $ | 0.65 | ||
| Weighted average common and common equivalent shares outstanding | 32,221 | 32,970 | 32,032 | 32,870 |
____________________________________________________________________________________________________________
(1) The Company provides adjusted earnings results (which exclude the loss from discontinued operations, non-cash stock compensation expense, acquisition-related compensation expense, acquisition-related non-cash compensation expense, restructuring and asset impairment 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) Discontinued operations relate to the discontinuance of the Company's European Working Capital group, which is adjusted from the GAAP net income as it is not part of the Company's ongoing results of operations.
(3) Non-cash stock 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 non-GAAP measures of profitability, which exclude stock-based compensation, are widely used by investors.
(4) The Company incurs cash and stock compensation expense for acquisition related consideration that is recognized over time under GAAP. The Company believes excluding these amounts more consistently present its ongoing results of operations because they are related to acquisitions and not due to normal operating activities. The acquisition-related non-cash stock compensation expense is also accounted for under Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation-Stock Compensation.
(5) 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.
(6) 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 compensation was $0.7 million and $0.7 million in 2022 and 2021, respectively; the impact of intangible amortization was $3 thousand and $52 thousand in 2022 and 2021, respectively; and the impact on the restructuring and asset impairment reversal was $32 thousand in 2022. For the six month periods the impact of non-cash stock compensation was $1.4 million and $1.2 million in 2022 and 2021, respectively; the impact of intangible amortization was $32 thousand and $104 thousand in 2022 and 2021, respectively and the impact on the restructuring and asset impairment reversal was $32 thousand in 2022.