- Q3 2018 net revenue of $68.2 million,
up 3.5% when compared to prior year and in line with guidance
- Q3 2018 pro forma diluted EPS of $0.27
per share, up 4% from prior year and in line with guidance
- Board of Directors declares $0.17
dividend to be paid in January 2019
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
third quarter, which ended on September 28, 2018.
Q3 2018 net revenue (gross revenue less reimbursable expenses)
was $68.2 million, up 3.5% from the same period in the prior year.
Q3 2018 gross revenue was $73.8 million, up 3.3% from the same
period in the prior year.
Q3 2018 pro forma diluted earnings per share were $0.27, up 4%
when compared to $0.26 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.
GAAP diluted earnings per share were $0.16 for the third quarter
of 2018, as compared to $0.17 in the third quarter of 2017. During
the third quarter of 2018, the Company recorded a $0.8 million, or
$0.02 per diluted share, expense due to the remeasurement of an
acquisition-related earnout liability.
In its recent meeting, the Company’s Board of Directors declared
a semi-annual dividend of $0.17 per share for its shareholders of
record on December 21, 2018, to be paid on January 4, 2019.
At the end of the third quarter of 2018, the Company’s cash
balances were $13.2 million. During the quarter, the Company
utilized cash to pay down a net $2.0 million on its outstanding
debt. During the third quarter of 2018, the Company did not
repurchase shares under its stock repurchase program. As of the end
of the third quarter of 2018, the Company’s remaining stock
repurchase program authorization was $7.2 million.
“We continued to report solid operating results due to strong
digital transformation, cloud and analytics demand, while
continuing to transition our Oracle business from on-premise to
cloud implementations,” stated Ted A. Fernandez, Chairman and CEO
of The Hackett Group. “With Oracle cloud growth outpacing the
on-premise decline, we continue to get closer to realizing the
revenue growth fully reflected in our results.”
Based on the current economic outlook, the Company estimates
total net revenue for the fourth quarter of 2018 to be in the range
of $61.5 million and $63.5 million or gross revenue (inclusive of
reimbursable expenses) to be in the range of $66.5 million and
$68.5 million. The Company estimates pro forma diluted earnings per
share for the fourth quarter of 2018 to be in the range of $0.25
and $0.27.
Other Highlights
2018 Digital Awards – The Hackett Group announced HP and Shell
as the winners of its 2018 Digital Awards, which spotlight
companies that are on the cutting edge of digital transformation,
including smart automation, robotic process automation, cognitive
computing and advanced analytics. HP won the award in the
automation category for its Finance Digital Transformation
implementation, while Shell won in the advanced analytics category
for its Data Science Center of Excellence project. Four other
companies were also recognized as finalists. In the automation
category, the finalists were HCR ManorCare and The Adecco Group.
For advanced analytics, the finalists were Pfizer and Vodafone.
World-Class Finance Research – The Hackett Group issued a new
research finding that finance must rise to the challenge of today’s
volatile global markets and become a more effective strategic
partner to senior management. The research found that finance is
using digital transformation to help it excel in three key areas:
running an efficient operation, delivering effective services and
improving its customers’ experience. Broader adoption of digital
technologies is already helping some finance organizations achieve
all three objectives, the research found. Digital leaders, or
finance functions that ranked “high” on a scorecard of technology
metrics, operate at 44% lower cost than their peers and employ 45%
fewer staff. They experience error rates that are 37% lower and
spend 19% less time collecting and compiling data.
World-Class HR Research – The Hackett Group issued new research
showing that world-class HR organizations now spend 26 percent less
than peers on HR and operate with 32 percent fewer staff while
driving dramatically higher levels of effectiveness, according to
the latest analysis of benchmark data from The Hackett Group.
Digital transformation is one key strategy that world-class HR
organizations deploy to raise the performance bar, investing in
cloud-based HR applications and services.
World-Class IT Research – The Hackett Group issued world-class
IT performance research showing that IT organizations are currently
struggling with the challenge of enabling their company’s digital
transformation while at the same time transforming the IT function
itself into a more customer-centric, innovative and agile
operation. While these two missions are interdependent, given the
finite resources of time, talent and capital, most IT organizations
are finding it difficult to strike a balance, the research
found.
On Tuesday, November 6, 2018 senior management will discuss
third quarter results in a conference call at 5:00 P.M. ET. The
number for the conference call is (800) 593-0486, [Passcode: Third
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, November 6,
2018 and will run through 5:00 P.M. ET on Tuesday, November 20,
2018. To access the rebroadcast, please dial (866) 373-9220. For
International callers, please dial (203) 369-0279.
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, November 6, 2018
and will run through 5:00 P.M. ET on Tuesday, November 20, 2018. 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, offering digital transformation including robotic
process automation and enterprise cloud application implementation.
Services include business transformation, enterprise
analytics, working capital management 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 15,200 benchmarking
and performance studies with major corporations and government
agencies, including 97% of the Dow Jones Industrials, 89% of the
Fortune 100, 87% of the DAX 30 and 59% of the FTSE 100. These
studies drive its Best Practice Intelligence Center™ 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 these 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
Nine Months Ended September 28, September 29,
September 28, September 29, 2018 2017
2018 2017 Revenue: Revenue before reimbursements
("net revenue") $ 68,243 $ 65,947 $ 205,332 $ $ 198,742
Reimbursements 5,597 5,515
16,890 17,719 Total revenue 73,840 71,462
222,222 216,461 Costs and expenses: Cost of service:
Personnel costs before reimbursable expenses 41,361 39,807 125,975
120,906 Non-cash stock compensation expense 940 1,082 2,985 3,440
Acquisition-related compensation expense (benefit) 240 619 (549 )
1,042 Acquisition-related non-cash stock compensation expense 731
794 1,452 1,720 Reimbursable expenses 5,597
5,515 16,890 17,719 Total cost
of service 48,869 47,817 146,753 144,827 Selling, general
and administrative costs 15,105 14,209 44,949 43,759 Non-cash stock
compensation expense 850 894 2,495 2,427 Amortization of intangible
assets 585 557 1,789 1,475 Acquisition-related costs — 111 — 378
Acquisition-related contingent consideration liability 803 — (3,750
) — Restructuring costs — — —
1,293 Total selling, general, and
administrative expenses 17,343 15,771 45,483 49,332
Total costs and operating expenses 66,212
63,588 192,236 194,159
Income from operations 7,628 7,874 29,986 22,302
Other expense: Interest expense (158 ) (184 )
(515 ) (401 ) Income from operations before
income taxes 7,470 7,690 29,471 21,901 Income tax expense
2,313 2,401 5,426 3,988
Net income $ 5,157 $ 5,289 $ 24,045 $
17,913 Basic net income per common share: Income per
common share from operations $ 0.17 $ 0.18 $ 0.82 $ 0.62 Weighted
average common shares outstanding 29,478 28,765 29,333 28,891
Diluted net income per common share: Income per common share
from operations $ 0.16 $ 0.17 $ 0.75 $ 0.56 Weighted average common
and common equivalent shares outstanding 32,593 31,958 32,214
32,254 Pro forma data (1): Income from operations before
income taxes $ 7,470 $ 7,690 $ 29,471 $ 21,901 Non-cash stock
compensation expense 1,790 1,976 5,480 5,867 Acquisition-related
compensation expense (benefit) 240 619 (549 ) 1,042
Acquisition-related non-cash stock compensation expense 731 794
1,452 1,720 Acquisition-related costs — 111 — 378
Acquisition-related contingent consideration liability 803 — (3,750
) — Restructuring costs — — — 1,293 Amortization of intangible
assets 585 557 1,789
1,475 Pro forma income before income taxes 11,619
11,747 33,893 33,676 Pro forma income tax expense 2,905
3,524 8,473 10,103
Pro forma net income $ 8,714 $ 8,223 $ 25,420
$ 23,573 Pro forma basic net income per common share
$ 0.30 $ 0.29 $ 0.87 $ 0.82 Weighted average common shares
outstanding 29,478 28,765 29,333 28,891 Pro forma diluted
net income per common share $ 0.27 $ 0.26 $ 0.79 $ 0.73 Weighted
average common and common equivalent shares outstanding 32,593
31,958 32,214 32,254
(1) The Company provides pro forma
earnings results (which exclude the amortization of intangible
assets, stock compensation expense, acquisition-related one-time
expense, cash and stock compensation expense (benefit),
restructuring expenses 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.
The Hackett Group, Inc. CONDENSED
CONSOLIDATED BALANCE SHEETS (in thousands)
(unaudited) September 28, December 29,
2018 2017 ASSETS Current assets: Cash and cash
equivalents $ 13,177 $ 17,512 Accounts receivable and unbilled
revenue, net 56,875 55,262 Prepaid expenses and other current
assets 3,742 2,511 Total current assets 73,794 75,285
Property and equipment, net 24,313 18,851 Other assets 4,386
6,021 Goodwill, net 84,612 85,074 Total assets $
187,105 $ 185,231
LIABILITIES AND SHAREHOLDERS'
EQUITY Current liabilities: Accounts payable $ 5,119 $ 8,434
Accrued expenses and other liabilities 34,065 43,014
Total current liabilities
39,184 51,448 Non-current accrued expenses and other liabilities
244 1,268 Long-term deferred tax liability, net 7,805 6,240
Long-term debt 11,500 19,000 Total liabilities 58,733
77,956 Shareholders' equity 128,372 107,275
Total liabilities and shareholders' equity $ 187,105 $ 185,231
The Hackett Group, Inc.
SUPPLEMENTAL FINANCIAL DATA (unaudited)
Quarter Ended September 28, September 29,
June 29, 2018 2017 2018 Revenue
Breakdown by Group: (in thousands) The Hackett Group (2) $
60,285 $ 56,107 $ 61,287 SAP Solutions (3) 7,958
9,840 8,327 Net revenue (4) $ 68,243
$ 65,947 $ 69,614
Revenue
Concentration: (% of total revenue) Top customer 7 % 4 % 6 %
Top 5 customers 19 % 12 % 18 % Top 10 customers 26 % 20 % 25 %
Key Metrics and Other Financial Data: Total
Company: Consultant headcount 1,046 1,022 1,043 Total headcount
1,290 1,259 1,291 Days sales outstanding (DSO) 70 71 68 Cash
provided by (used in) operating activities (in thousands) $ 9,521 $
9,966 $ (2,368 ) Pro forma return on equity (5) 30 % 35 % 31 %
Depreciation (in thousands) $ 652 $ 590 $ 624 Amortization (in
thousands) $ 585 $ 557 $ 591
Remaining Plan
authorization: Shares purchased (in thousands) - 182 - Cost of
shares repurchased (in thousands) $ — $ 2,492 $ — Average price per
share of shares purchased $ — $ 13.73 $ — Remaining Plan
authorization (in thousands) $ 7,174 $ 3,138 $ 7,174
Shares Purchased to Satisfy Employee Net Vesting
Obligations: Shares purchased (in thousands) 8 68 11 Cost of
shares purchased (in thousands) $ 118 $ 1,050 $ 182 Average price
per share of shares purchased $ 15.77 $ 15.50 $ 16.22 (2)
The Hackett Group encompasses the Benchmarking, Business
Transformation and Executive Advisory groups, and EPM Groups and
excludes AMS. (3) SAP Solutions encompasses Best Practice
Implementation of ERP Software, the SAP group, approximately 50% of
which are offshore resources. (4) Net revenue excludes reimbursable
expenses which are primarily travel-related expenses passed through
to a client with no associated margin. (5) Twelve months of pro
forma net income divided by average shareholder's equity (6)
Certain reclassifications have been made to conform with current
reporting requirements.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20181106005950/en/
The Hackett Group, Inc.Robert A. Ramirez, CFO,
305-375-8005rramirez@thehackettgroup.com
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