Business Wire | Feb 23, 2021 04:06PM EST

The Hackett Group Announces Fourth Quarter 2020 Results

Feb. 23, 2021

MIAMI--(BUSINESS WIRE)--Feb. 23, 2021--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 fourth quarter, which ended on January 1, 2021.

Fourth quarter 2020 net revenue (gross revenue less reimbursable expenses) from continuing operations was $59.2 million, down 7%, as compared to the same period in the prior year, but up 2.5% sequentially from the third quarter as demand improved throughout the quarter.

GAAP diluted earnings per share were $0.03 for the fourth quarter of 2020, as compared to GAAP diluted earnings per share of $0.07 in the same period in the prior year due to the economic disruption resulting from the COVID-19 pandemic. GAAP results for the fourth quarter of 2020 included a $5.5 million, or $0.12 per diluted share, restructuring and asset impairment charge primarily related to the reduction in the Company's global office space requirements resulting from the emerging work from home delivery model. GAAP results for the fourth quarter of 2019 included a $4.5 million, or $0.12 per diluted share, restructuring and asset impairment charge primarily related to the reduction of international operations.

Fourth quarter 2020 pro forma diluted earnings per share were $0.23, as compared to $0.24 in the same period in the prior year, but up 35% sequentially from the third quarter as client engagements and utilization improved throughout the quarter. 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.

At its most recent meeting, the Company's Board of Directors authorized a 5% increase in its annual dividend from $0.38 to $0.40 per share, to be paid quarterly, and declared a quarterly dividend of $0.10 per share for its shareholders of record on March 26, 2021, to be paid on April 8, 2021.

At the end of the fourth quarter of 2020, the Company's cash balances were $49.5 million with no outstanding debt. During the quarter, the Company repurchased 40 thousand shares of its stock at an average price of $11.96 for a total of $483 thousand. As of the end of the fourth quarter of 2020, the Company's remaining share repurchase program authorization was $4.3 million.

"Although the pandemic continued to weigh on our results, our revenues grew sequentially and our pro forma EPS was up 35 percent, which demonstrated the demand improvement as well as the increase in utilization and client engagements throughout the quarter," stated Ted A. Fernandez, Chairman & CEO of The Hackett Group, Inc. "We expect this momentum to carry into the new year which should allow us to continue to improve our results and emerge financially and strategically stronger as and when the pandemic subsides."

Although economic uncertainty from the COVID-19 pandemic continues to be high, the Company's current estimates suggest that net revenue for the first quarter of 2021 will be in the range of $61.0 million to $63.0 million, down slightly from the pre-COVID-19 first quarter of 2020. The Company estimates pro forma diluted earnings per share for the first quarter of 2021 to be in the range of $0.24 and $0.26 which provides the opportunity to exceed prior year pre-COVID-19 pro forma EPS results.

Other Highlights

Global Virtual Best Practices Conference - In November, The Hackett Group held its global virtual best practices conference, "Digital Excelleration: Fast-Tracking Enterprise Performance." The event was attended by more than 450 senior executives from companies around the globe, making it larger than the 2019 North American and European Best Practices Conferences combined. The conference featured nearly 30 presentations by executives from more than 20 companies, including: 3M, ABB, Boston Scientific, Coca-Cola, Habitat for Humanities, HP, Jaguar Land Rover, Vodafone, Mastercard, Northwestern Mutual, Thomson Reuters, and United Parcel Services.

C-Suite Research Issued - The Hackett Group issued a new research piece "Business Excelleration: Fast-Tracking Digital World Class" which details the most important areas that CEOs, COOs, CFOs, CHROs, CIOs, CPOs, and other business services leaders can focus on in order to fast-track digital world-class performance and build a flexible and resilient operating model.

Sustainable Procurement Study Launched - The Hackett Group launched its 2020 Sustainable Procurement Study, designed to help participants understand the benefits that can be realized from sustainability activities, key metrics and KPIs to measure performance, and critical capabilities for sustainable procurement and their maturity across organizations.

Podcast Launch - In December, The Hackett Group launched a weekly "Business Excelleration" podcast, featuring insights and research data to help business leaders improve efficiency and effectiveness in finance, human capital management, strategic sourcing, procurement, and information technology.

SAP North American Partner Excellence Award - In February, Answerthink, a division of The Hackett Group, received the 2021 SAP North America Award for Partner Excellence for Marketing.

On Tuesday, February 23, 2021, senior management will discuss fourth quarter results in a conference call at 5:00 P.M. ET. The number for the conference call is (800) 593-0486, [Passcode: Fourth 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, February 23, 2021 and will run through 5:00 P.M. ET on Tuesday, March 9, 2021. To access the rebroadcast, please dial (800) 759-4056. For international callers, please dial (402) 998-0478.

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, February 23, 2021 and will run through 5:00 P.M. ET on Tuesday, March 9, 2021. 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 cloud ERP, EPM and analytics 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 distinguished Oracle, SAP, Coupa and OneStream practices.

The Hackett Group has completed nearly 20,000 benchmarking studies with major corporations and government agencies, including 93% of the Dow Jones Industrials, 91% of the Fortune 100, 80% of the DAX 30 and 55% of the FTSE 100. These studies drive The Hackett's Group'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 digital 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 duration and severity of the pandemic, the economic impact of the pandemic 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 third 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.

The Hackett Group, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS(in thousands, except per share data)(unaudited) Quarter Ended Twelve Months Ended

January December January December 1, 27 1, 27,

2021 2019 2021 2019

Revenue:Revenue before reimbursements ("net $ 59,223 $ 63,736 $ 234,810 $ 260,837revenue")Reimbursements 58 5,370 4,672 21,635

TOTAL REVENUE FROM CONTINUING 59,281 69,106 239,482 282,472OPERATIONS Costs and expenses:Cost of service:Personnel costs before reimbursable 36,769 38,610 154,327 159,390expensesNon-cash stock compensation expense 1,806 1,056 6,255 3,831

Acquisition-related compensation 11 - 50 (131)expense (benefit)Acquisition-related non-cash stock 309 264 1,064 954compensation expenseReimbursable expenses 58 5,370 4,672 21,635

TOTAL COST OF SERVICE 38,953 45,300 166,368 185,679

Selling, general and administrative 12,544 14,789 50,586 58,107costsNon-cash stock compensation expense 591 663 2,421 2,931

Amortization of intangible assets 254 247 977 1,036

Acquisition-related contingent - - - (1,133)consideration liabilityRestructuring charges and asset 5,454 4,514 10,488 4,514impairmentsTOTAL SELLING, GENERAL AND 18,843 20,213 64,472 65,455ADMINISTRATIVE EXPENSES TOTAL COSTS AND OPERATING EXPENSES 57,796 65,513 230,840 251,134

INCOME FROM OPERATIONS 1,485 3,593 8,642 31,338

Other expense:Interest expense (26) (43) (126) (311)

INCOME FROM CONTINUING OPERATIONS 1,459 3,550 8,516 31,027BEFORE INCOME TAXESIncome tax expense 559 1,263 2,871 7,744

INCOME FROM CONTINUING OPERATIONS 900 2,287 5,645 23,283

Loss from discontinued operations (7) (2) (172) (6)(2)NET INCOME $ 893 $ 2,285 $ 5,473 $ 23,277

Weighted average common sharesoutstanding:Basic 29,995 29,837 29,988 29,805

Diluted 32,614 32,573 32,405 32,453

Basic net income per common share:Income per common share from $ 0.03 $ 0.08 $ 0.19 $ 0.78continuing operationsLoss per common share from (0.00) (0.00) (0.01) (0.00)discontinued operations (2)Basic net income per common share $ 0.03 $ 0.08 $ 0.18 $ 0.78

Diluted net income per commonshare:Income per common share from $ 0.03 $ 0.07 $ 0.17 $ 0.72continuing operationsLoss per common share from (0.00) (0.00) (0.00) (0.00)discontinued operations (2)Diluted net income per common share $ 0.03 $ 0.07 $ 0.17 $ 0.72

PRO FORMA DATA (1):Income from continuing operations $ 1,459 $ 3,550 $ 8,516 $ 31,027before income taxesNon-cash stock compensation expense 2,397 1,719 8,676 6,762

Acquisition-related compensation 11 - 50 (131)expense (benefit)Acquisition-related non-cash stock 309 264 1,064 954compensation expenseAcquisition-related contingent - - - (1,133)consideration liabilityAcquisition-related costs - - - 32

Restructuring charges and asset 5,454 4,514 10,488 4,514impairmentsAmortization of intangible assets 254 247 977 1,036

PRO FORMA INCOME BEFORE INCOME 9,884 10,294 29,771 43,061TAXESPro forma income tax expense 2,471 2,574 7,443 10,765

PRO FORMA NET INCOME $ 7,413 $ 7,721 $ 22,328 $ 32,296

Pro forma basic net income per $ 0.25 $ 0.26 $ 0.74 $ 1.08common shareWeighted average common shares 29,995 29,837 29,988 29,805outstanding Pro forma diluted net income per $ 0.23 $ 0.24 $ 0.69 $ 1.00common shareWeighted average common and common 32,614 32,573 32,405 32,453equivalent shares outstanding(1) The Company provides pro forma earnings results (which exclude the amortization of intangible assets, non-cash stock compensation expense, restructuring charges, asset impairments, 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.

(1) The Company provides pro forma earnings results (which exclude theamortization of intangible assets, non-cash stock compensation expense,restructuring charges, asset impairments, acquisition-related one-time expense(benefit), and include a normalized tax rate, which is our long-term projectedcash tax rate) as a complement to results provided in accordance with GenerallyAccepted Accounting Principles (GAAP). These non-GAAP results are provided toenhance the overall users' understanding of the Company's current financialperformance and its prospects for the future. The Company believes the non-GAAPresults provide useful information to both management and investors and byexcluding certain expenses that it believes are not indicative of its coreoperating results. The non-GAAP measures are included to provide investors andmanagement with an alternative method for assessing operating results in amanner that is focused on the performance of ongoing operations and to providea more consistent basis for comparison between quarters. Further, thesenon-GAAP results are one of the primary indicators management uses for planningand forecasting in future periods. In addition, since the Company hashistorically reported non-GAAP results to the investment community, it believesthe continued inclusion of non-GAAP results provides consistency in itsfinancial reporting. The presentation of this additional information should notbe considered in isolation or as a substitute for results prepared inaccordance with GAAP.



(2) Discontinued operations relate to the discontinuance of the Company'sEuropean Working Capital group.

The Hackett Group, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS(in thousands)(unaudited)January 1,

December 27,

2021

2019

ASSETSCurrent assets:Cash and cash equivalents$

49,455

$

25,954

Accounts receivable and contract assets, net32,778

49,778

Prepaid expenses and other current assets2,599

2,895

Total current assets84,832

78,627

Property and equipment, net18,158

19,916

Other assets1,680

2,652

Goodwill85,297

84,578

Operating lease right-of-use assets2,578

7,962

Total assets$

192,545

$

193,735

LIABILITIES AND SHAREHOLDERS' EQUITYCurrent liabilities:Accounts payable$

6,098

$

8,494

Accrued expenses and other liabilities33,849

32,482

Operating lease liabilities2,620

2,707

Total current liabilities42,567

43,683

Long-term deferred tax liability, net5,588

7,183

Operating lease liabilities3,503

5,255

Total liabilities51,658

56,121

Shareholders' equity140,887

137,614

Total liabilities and shareholders' equity$

192,545

$

193,735

The Hackett Group, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS(in thousands)(unaudited) January 1, December 27,

2021 2019

ASSETS Current assets: Cash and cash equivalents $ 49,455 $ 25,954

Accounts receivable and contract assets, net 32,778 49,778

Prepaid expenses and other current assets 2,599 2,895

Total current assets 84,832 78,627

Property and equipment, net 18,158 19,916

Other assets 1,680 2,652

Goodwill 85,297 84,578

Operating lease right-of-use assets 2,578 7,962

Total assets $ 192,545 $ 193,735

LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 6,098 $ 8,494

Accrued expenses and other liabilities 33,849 32,482

Operating lease liabilities 2,620 2,707

Total current liabilities 42,567 43,683

Long-term deferred tax liability, net 5,588 7,183

Operating lease liabilities 3,503 5,255

Total liabilities 51,658 56,121

Shareholders' equity 140,887 137,614

Total liabilities and shareholders' equity $ 192,545 $ 193,735

The Hackett Group, Inc.SUPPLEMENTAL FINANCIAL DATA(unaudited)Quarter Ended

January 1,

September 25,

December 27,

2021

2020

2019

Revenue Breakdown by Group:(in thousands)S&BT (3)$

23,362

$

22,217

$

26,645

EEA (4)30,102

29,710

29,684

International (5)5,759

5,842

7,407

Net revenue from continuing operations (6)$

59,223

$

57,769

$

63,736

Revenue Concentration:(% of total revenue)Top customer3%

6%

5%

Top 5 customers13%

16%

14%

Top 10 customers23%

26%

22%

Key Metrics and Other Financial Data:Total Company:Consultant headcount928

923

982

Total headcount1,133

1,124

1,201

Days sales outstanding (DSO)54

57

66

Cash provided by operating activities (in thousands)$

12,906

$

10,088

$

15,821

Depreciation (in thousands)$

902

$

916

$

887

Amortization (in thousands)$

254

$

247

$

247

Remaining Plan authorization:Shares purchased (in thousands)36

75

145

Cost of shares repurchased (in thousands)$

429

$

932

$

2,227

Average price per share of shares purchased$

11.84

$

12.41

$

15.33

Remaining Plan authorization (in thousands)$

4,284

$

4,713

$

1,651

Shares Purchased to Satisfy Employee Net Vesting Obligations:Shares purchased (in thousands)4

8

3

Cost of shares purchased (in thousands)$

54

$

111

$

49

Average price per share of shares purchased$

13.00

$

14.26

$

16.20

The Hackett Group, Inc.SUPPLEMENTAL FINANCIAL DATA(unaudited) Quarter Ended

January September December 1, 25, 27,

2021 2020 2019

Revenue Breakdown by Group:(in thousands)S&BT (3) $ 23,362 $ 22,217 $ 26,645

EEA (4) 30,102 29,710 29,684

International (5) 5,759 5,842 7,407

Net revenue from continuing operations (6) $ 59,223 $ 57,769 $ 63,736

Revenue Concentration:(% of total revenue)Top customer 3% 6% 5%

Top 5 customers 13% 16% 14%

Top 10 customers 23% 26% 22%

Key Metrics and Other Financial Data: Total Company:Consultant headcount 928 923 982

Total headcount 1,133 1,124 1,201

Days sales outstanding (DSO) 54 57 66

Cash provided by operating activities (in $ 12,906 $ 10,088 $ 15,821thousands)Depreciation (in thousands) $ 902 $ 916 $ 887

Amortization (in thousands) $ 254 $ 247 $ 247

Remaining Plan authorization:Shares purchased (in thousands) 36 75 145

Cost of shares repurchased (in thousands) $ 429 $ 932 $ 2,227

Average price per share of shares purchased $ 11.84 $ 12.41 $ 15.33

Remaining Plan authorization (in thousands) $ 4,284 $ 4,713 $ 1,651

Shares Purchased to Satisfy Employee NetVesting Obligations:Shares purchased (in thousands) 4 8 3

Cost of shares purchased (in thousands) $ 54 $ 111 $ 49

Average price per share of shares purchased $ 13.00 $ 14.26 $ 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 North America Oracle EEA, SAP Solutions Practices and One Stream.

(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) Certain reclassifications have been made to conform with current reporting requirements.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210223006099/en/

CONTACT: Robert A. Ramirez, CFO, 305-375-8005 or rramirez@thehackettgroup.com