The Hackett Group, Inc. (NASDAQ: HCKT), a global strategic
advisory and business transformation consulting firm, today
announced its financial results for the second quarter of 2013,
which ended June 28, 2013.
Second quarter 2013 revenue was $59.0 million, up 8%
sequentially and 2% from the same period in 2012. Pro forma diluted
earnings per share were $0.13, up 18% when compared to $0.11 for
the same period in 2012. 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 $0.09 for the three months
ended June 28, 2013, as compared to $0.12 in the same period in
2012. Excluding the impact of the accounting for deferred taxes in
2012, GAAP diluted earnings per share would have been $0.08 for the
three months ended June 29, 2012.
The Company also announced that it intends to launch a modified
"Dutch auction" tender offer to purchase up to $5.5 million in
shares of its common stock, at a price ranging from $5.75 to $6.50.
The tender offer would allow the Company to repurchase
approximately 17% of its outstanding common shares at the high-end
of the pricing range. The Company intends to pay for the share
repurchase from the expansion of its credit facility.
"The strong US demand for our services allowed us to exceed both
revenue and pro forma EPS guidance," stated Ted A. Fernandez,
Chairman & CEO of The Hackett Group, Inc. "I am also pleased to
see that our operating execution and our sound balance sheet
provide us with the opportunity to launch a $35.75 million tender
offer that enables us to return capital to shareholders while
maintaining the flexibility to continue to pursue our growth
initiatives."
At the end of the second quarter of 2013, the Company's cash
balances were $11.3 million. During the quarter the Company paid
down $5.5 million of its credit facility, leaving a $15.0 million
balance at quarter end. Additionally, during the second quarter of
2013, cash was utilized to repurchase 124 thousand shares of its
common stock at an average cost of $4.80 per share, for a total of
$594 thousand. The Company's remaining repurchase authorization at
the end of the second quarter of 2013 was $5.0 million.
Based on the current economic outlook, the Company estimates
total revenue for the third quarter of 2013 to be in the range of
$57.0 million to $59.0 million, and estimates pro forma diluted
earnings per share to be in the range of $0.11 to $0.13.
Other Highlights
REL 1000 Working Capital Research - New research from REL
Consultancy, a division of The Hackett Group, and CFO Magazine
found that the ability of companies to generate cash from
operations deteriorated in 2012, as the opportunity for working
capital improvement at 1,000 of the largest U.S. public companies
rose dramatically, topping $1 trillion for the first time.
The research, which examines the ability of companies to collect
from customers, manage inventory, and pay suppliers, found that as
revenue grew by 5% in 2012, profitability -- as measured by EBIT
margin decreased. At the same time, working capital levels
increased by 6%, to levels 25% higher than three years ago. Actual
Days Working Capital remained flat, however cash conversion
efficiency deteriorated for the second year in a row, indicating
that companies are taking longer to convert sales into cash. In
addition, free cash flow, which is a key indicator of the health of
corporate cash flows and represents the cash companies are able to
generate after laying out money to maintain or expand their asset
base, fell by 14% year over year, indicating poor cash flow
management.
Finance Key Issues Research - New Finance Key Issues research
from The Hackett Group found that despite continued cuts in
staffing and budgets this year, finance organizations are compelled
to respond to the challenges and opportunities presented by the new
"borderless business environment". The new study details how
finance leaders are forging ahead with high-value analytics and
business partnering programs while continuing to work on reducing
operational costs.
HR Key Issues Research - New HR Key Issues research from The
Hackett Group found that in the face of significant staff and
budget reductions, HR executives face continuing pressure and new
challenges in 2013, driven in part by the new "borderless business
environment." According to The Hackett Group's research, leaders
are focusing on several HR strategy issues for 2013: process
improvement, including cost reduction and standardization of
processes, data, technology and organizational culture; improving
the effectiveness of talent management; obtaining more value from
data to enable better decisions; and expanding the use of
technology.
Best Practices Conference - Over 225 senior-level executives
from the world's most respected brands attended The Hackett Group's
2013 North American Best Practices Conference, "Borderless
Business: Integrating the Enterprise for Sustainable Success," in
Miami on May 20-22. The conference focused on how companies are
addressing the opportunities and challenges of today's global
economy. This year's best practices conference brought together
speakers from 17 of the world’s most successful companies,
including CEOs, CFOs, CIOs, and leaders in procurement, human
resources, and global business services from: Becton, Dickinson and
Company; Citigroup; Coca Cola Refreshments USA; Cytec Industries;
FedEx; Fidelity Investments; General Electric; General Mills;
Hertz; Kimberly-Clark; Kronos; Lennox International; Meritor;
MetLife; Office Depot; SAP AG; and TE Connectivity.
On Tuesday, August 6, 2013, 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) 779-3138, [Passcode:
Second Quarter, Leader: Ted A. Fernandez]. For International
callers, please dial (517) 308-9381.
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 6,
2013 and will run through 5:00 P.M. ET on Tuesday, August 20, 2013.
To access the rebroadcast, please dial (800) 925-0562. For
International callers, please dial (203) 369-3629.
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 6, 2013 and
will run through 5:00 P.M. ET on Tuesday, August 20, 2013. To
access the replay, visit http://www.thehackettgroup.com or
http://www.streetevents.com.
For additional information on The Hackett Group, please visit
our website at www.thehackettgroup.com.
About The Hackett Group
The Hackett Group, Inc. (NASDAQ:
HCKT), a global strategic business advisory and business
transformation consulting firm, is a leader in best practice
advisory, benchmarking, and transformation consulting services
including strategy and operations, working capital management,
shared services and globalization advice. Utilizing best practices
and implementation insights from more than 8,500 benchmarking
engagements, executives use The Hackett Group's empirically-based
approach to quickly define and implement initiatives to enable
world-class performance. Through its REL group, The Hackett Group
offers working capital solutions focused on delivering significant
cash flow improvements. Through its Archstone Consulting group, The
Hackett Group offers Strategy & Operations consulting services
in the Consumer and Industrial Products, Pharmaceutical,
Manufacturing and Financial Services industry sectors. Through its
Hackett ERP Solutions group, The Hackett Group offers business
application consulting services that help maximize returns on IT
investments. The Hackett Group has completed benchmark studies with
over 3,500 major corporations and government agencies, including
97% of the Dow Jones Industrials, 84% of the Fortune 100, 87% of
the DAX 30 and 48% of the FTSE 100.
More information on The Hackett Group is available: by phone at
(770) 225-7300; by e-mail at info@thehackettgroup.com.
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, 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
Six Months Ended June 28, 2013 June 29, 2012
June 28, 2013 June 29, 2012 Revenue: Revenue before
reimbursements $ 52,341 $ 51,469 $ 101,212 $ 100,513 Reimbursements
6,620 6,495 12,098 11,534 Total revenue
58,961 57,964 113,310 112,047 Costs and expenses: Cost of
service: Personnel costs before reimbursable expenses (includes
$863 and $759 and $1,686 and $1,517 of stock compensation expense
in the quarters and six months ended June 28, 2013 and June 29,
2012, respectively) 33,363 32,167 65,405 62,727 Reimbursable
expenses 6,620 6,495 12,098 11,534
Total cost of service 39,983 38,662 77,503 74,261 Selling,
general and administrative costs (includes $782 and $679 and $1,481
and $1,186 of stock compensation expense in the quarters and six
months ended June 28, 2013 and June 29, 2012, respectively) 13,893
14,819 27,193 29,326 Total costs and
operating expenses 53,876 53,481 104,696
103,587 Income from operations 5,085 4,483 8,614 8,460 Other
income (expense): Interest income 3 8 4 17 Interest expense (125 )
(247 ) (267 ) (274 ) Income from continuing operations before
income taxes 4,963 4,244 8,351 8,203 Income tax expense 2,033
406 3,392 514 Income from continuing
operations 2,930 3,838 4,959 7,689 Income (loss) from discontinued
operations - 7 (71 ) (311 ) Net income $ 2,930
$ 3,845 $ 4,888 $ 7,378 Basic net
income per common share: Income per common share from continuing
operations $ 0.10 $ 0.13 $ 0.16 $ 0.23 Income (loss) per common
share from discontinued operations - - - (0.01
) Net income per common share $ 0.10 $ 0.13 $ 0.16
$ 0.22 Diluted net income per common share:
Income per common share from continuing operations $ 0.09 $ 0.12 $
0.16 $ 0.22 Income (loss) per common share from discontinued
operations - - (0.00 ) (0.01 ) Net income per common
share $ 0.09 $ 0.12 $ 0.15 $ 0.21
Weighted average common shares outstanding: Basic 30,532
29,290 30,412 33,907 Diluted 32,251 31,509 31,862 35,724 Pro
forma data (1): Income from continuing operations before income
taxes $ 4,963 $ 4,244 $ 8,351 $ 8,203 Stock compensation expense
1,645 1,438 3,167 2,703 Amortization of intangible assets 151
137 301 274 Pro forma income before
income taxes 6,759 5,819 11,819 11,180 Pro forma income tax expense
2,704 2,328 4,728 4,472 Pro forma net
income $ 4,055 $ 3,491 $ 7,091 $ 6,708
Pro forma basic net income per common share $ 0.13 $ 0.12 $
0.23 $ 0.20 Weighted average common shares outstanding 30,532
29,290 30,412 33,907 Pro forma diluted net income per common
share $ 0.13 $ 0.11 $ 0.22 $ 0.19 Weighted average common and
common equivalent shares outstanding 32,251 31,509 31,862 35,724
(1) The Company provides pro forma earnings
results (which exclude the amortization of intangible assets and
stock compensation expense, and results from discontinued
operations and include a normalized 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 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.
The Hackett Group,
Inc. CONDENSED CONSOLIDATED BALANCE SHEETS (in
thousands) (unaudited) June 28,
2013
December 28,
2012
ASSETS Current assets: Cash and cash equivalents $
10,811 $ 16,906 Accounts receivable and unbilled revenue, net
35,601 36,869 Deferred tax asset, net
3,858
4,741 Prepaid expenses and other current assets 3,357 2,335 Total
current assets
53,627
60,851 Restricted cash 522 683 Property and equipment, net
13,082 12,859 Other assets 1,232 1,598 Goodwill, net 75,247 76,220
Non-current deferred tax asset, net - 1,710 Total assets $
143,710
$ 153,921
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities: Accounts payable $ 5,076 $ 7,711 Accrued
expenses and other liabilities 22,825 26,484 Current portion of
long-term debt - 2,895 Total current liabilities 27,901 37,090
Long-term deferred tax liability, net
666
- Long-term debt 15,026 22,105 Total liabilities
43,593
59,195 Shareholders' equity 100,117 94,726 Total liabilities
and shareholders' equity $
143,710
$ 153,921
The Hackett Group, Inc.
SUPPLEMENTAL FINANCIAL DATA (unaudited)
Quarter Ended June 28,
2013
March 29,
2013
June 29,
2012
Revenue Breakdown by Group: (in thousands) The Hackett Group
(2) $ 47,659 $ 43,612 $ 50,104 ERP Solutions (3) 11,302
10,737 7,860 Total revenue $ 58,961 $ 54,349 $ 57,964
Revenue Concentration: (% of total revenue) Top
customer 3 % 4 % 5 % Top 5 customers 16 % 14 % 14 % Top 10
customers 24 % 23 % 23 %
Key Metrics and Other Financial
Data: Total Company: Consultant headcount 735 719
749 Total headcount 926 906 956 Days sales outstanding (DSO) 55 56
55 Cash provided by (used in) operating activities (in thousands) $
5,720 $ (547 ) $ 10,109 Depreciation (in thousands) $ 461 $ 499 $
491 Amortization (in thousands) $ 151 $ 150 $ 137
The
Hackett Group (in thousands)
: The Hackett Group
annualized revenue per professional (2) $ 358 $ 329 $ 379
ERP Solutions: ERP Solutions consultant utilization rate (3)
83 % 75 % 71 % ERP Solutions gross billing rate per hour (3) $ 130
$ 137 $ 122
Share Repurchase Plan: Shares purchased
in the quarter (in thousands) 124 - - Cost of shares repurchased in
the quarter (in thousands) $ 594 $ - $ - Average price per share of
shares purchased in the quarter $
4.80
$ - $ - Remaining authorization (in thousands) $ 4,963 $ 556 $ 556
(2) The Hackett Group encompasses the Benchmarking, Business
Transformation and Executive Advisory groups, and EPM Technologies.
(3) ERP Solutions encompasses Best Practice Implementation of ERP
Software, which is currently SAP.
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