Business Wire | Aug 10, 2021 04:06PM EDT

The Hackett Group Announces Second Quarter 2021 Results

Aug. 10, 2021

MIAMI--(BUSINESS WIRE)--Aug. 10, 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 second quarter, which ended on July 2, 2021.

Second quarter 2021 net revenue (gross revenue less reimbursable expenses) from continuing operations was $73.0 million, up 39%, as compared to the same COVID impacted period in the prior year, and up 15% sequentially from the first quarter of 2021 as client engagement and demand improved throughout the quarter. Excluding the SAP software sale, revenue totaled $67.7 million, a sequential increase of 7% and 29% when compared to the same period in the prior year.

GAAP diluted earnings per share were $0.32 for the second quarter of 2021, as compared to GAAP diluted loss per share of $0.13 when compared to the same COVID impacted period in the prior year, which included a restructuring charge related to staff reductions.

Second quarter 2021 pro forma diluted earnings per share were $0.39, or $0.30 excluding the software sale transaction, as compared to $0.06 in the same period in the prior year. Pro forma information is a non-GAAP financial presentation 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 the end of the second quarter of 2021, the Company's cash balances were $52.5 million with no outstanding debt. During the quarter, the Company repurchased 491 thousand shares of its stock at an average price of $17.58 for a total of $8.6 million. As of the end of the second quarter of 2021, the Company's remaining share repurchase program authorization was $13.6 million.

Subsequent to the end of the second quarter, the Company's Board of Directors declared a quarterly dividend of $0.10 per share for its shareholders of record on September 24, 2021, to be paid on October 8, 2021.

"Our revenues and pro forma EPS continued to improve as the demand for digital transformation solutions is clearly evident," stated Ted A. Fernandez, Chairman & CEO of The Hackett Group, Inc. "We expect the momentum for IP centric digital transformation and cloud enterprise software solutions to continue for the balance of the year."

Based on the current economic outlook, the Company's estimates total net revenue for the third quarter of 2021 to be in the range of $66.0 million to $68.0 million. The Company estimates pro forma diluted earnings per share for the third quarter of 2021 to be in the range of $0.28 and $0.30.

Other Highlights

Digital World-Class Research - The Hackett Group launched its 2021 Digital World-Class campaign, spotlighting the true performance potential in a technology-enabled operation and our new digital world-class benchmark results in Finance, Procurement, HR, and IT. Podcasts were released for each research piece, and virtual round table events were also held.

Digital Awards - In early July, The Hackett Group announced the winners of its 2021 Digital Awards, which spotlight companies that are on the cutting edge of using digital transformation solutions, including automation, advanced analytics, and AI to hyper-automate end-to-end business operations. This year's winners were: Alcon for Plan-to-Results (Data Analytics); Bosch for Purchase-to-Pay; Citibank for Account-to-Report; Mondelez International for Order-to-Cash; Reckitt for IT Opportunity-to-Deployment; Vodafone Procurement Company for Source-to-Purchase; and Wipro Limited for Hire-to-Retire.

Working Capital Research - In early July, The Hackett Group released research results showing that the pandemic drove significant changes in working capital performance among the 1000 largest non-financial U.S. companies in 2020. Drops in revenue and cost of goods sold were seen in many industries, and this was a major factor affecting overall working capital performance, the survey found. But companies also dramatically slowed payments to suppliers, and disrupted demand and unsold products drove inventory to higher levels. In addition, companies increased their cash on hand by 40% to protect themselves from the impact of the pandemic, and continued to accrue debt at record levels, with debt rising by 10% year-over-year. Capital expenditures also fell to record low levels, as companies cut spending and conserved cash in anticipation of further market uncertainty.

Supplier Diversity Research - The Hackett Group released new research and also held an executive Webinar showing that companies are making plans to dramatically expand their supplier diversity programs over the next few years in response to the worldwide calls for social reform and racial equality. According to The Hackett Group's study, companies globally dedicate 7.2% of their spend to diverse-owned business currently, which is equal to $72 million per billion of total spend. But by 2025, companies expect a more than 50% increase in their diversity spend goals, with an average target of 13% of their spend dedicated to companies across a wide range of under-represented diversity groups, including: minority-owned, women-owned, veteran-owned, service-disabled veteran-owned, historically underutilized business-zone located businesses, LGBTQ-owned businesses, and indigenous businesses.

On Tuesday, August 10, 2021, 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 10, 2021 and will run through 5:00 P.M. ET on Tuesday, August 24, 2021. To access the rebroadcast, please dial (800) 395-6236. For International callers, please dial (203) 369-3270.

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 10, 2021 and will run through 5:00 P.M. ET on Tuesday, August 24, 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, 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 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, 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, 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 by law.

The Hackett Group, Inc.CONSOLIDATED STATEMENTS OFOPERATIONS(in thousands, except pershare data)(unaudited) Quarter Ended Six Months Ended

July 2, June 26, July 2, June 26,

2021 2020 2021 2020

Revenue:Revenue before reimbursements $ 72,997 $ 52,632 $ 136,407 $ 117,818 ("net revenue")Reimbursements 200 119 276 4,466

TOTAL REVENUE FROM CONTINUING 73,197 52,751 136,683 122,284 OPERATIONS Costs and expenses:Cost of service:Personnel costs before 41,448 38,654 80,760 79,767 reimbursable expensesNon-cash stock compensation 1,668 1,600 3,267 2,941 expenseAcquisition-related - 29 11 29 compensation expenseAcquisition-related non-cash 111 259 359 512 stock compensation expenseReimbursable expenses 200 119 276 4,466

TOTAL COST OF SERVICE 43,427 40,661 84,673 87,715

Selling, general and 14,416 11,413 26,802 25,310 administrative costsNon-cash stock compensation 874 483 1,614 1,119 expenseAmortization of intangible 263 238 524 476 assetsRestructuring costs - 5,034 - 5,034

TOTAL SELLING, GENERAL AND 15,553 17,168 28,940 31,939 ADMINISTRATIVE EXPENSES TOTAL COSTS AND OPERATING 58,980 57,829 113,613 119,654 EXPENSES INCOME (LOSS) FROM OPERATIONS 14,217 (5,078 ) 23,070 2,630

Other expense:Interest expense (25 ) (41 ) (50 ) (78 )

INCOME (LOSS) FROM CONTINUING 14,192 (5,119 ) 23,020 2,552 OPERATIONS BEFORE INCOMETAXESIncome tax expense (benefit) 3,660 (1,186 ) 6,120 950

INCOME (LOSS) FROM CONTINUING 10,532 (3,933 ) 16,900 1,602 OPERATIONSLoss from discontinued - - (7 ) (8 )operations (2)NET INCOME (LOSS) $ 10,532 $ (3,933 ) $ 16,893 $ 1,594

Weighted average commonshares outstanding:Basic 30,094 30,015 30,151 29,952

Diluted 32,970 30,015 32,870 32,301

Basic net income (loss) percommon share:Income (loss) per common $ 0.35 $ (0.13 ) $ 0.56 $ 0.05 share from continuingoperationsLoss per common share from - - (0.00 ) (0.00 )discontinued operations (2)Basic net income (loss) per $ 0.35 $ (0.13 ) $ 0.56 $ 0.05 common share Diluted net income (loss) percommon share:Income (loss) per common $ 0.32 $ (0.13 ) $ 0.51 $ 0.05 share from continuingoperationsLoss per common share from - - 0.00 (0.00 )discontinued operations (2)Diluted net income (loss) per $ 0.32 $ (0.13 ) $ 0.51 $ 0.05 common share PRO FORMA DATA (1):Income (loss) from continuing $ 14,192 $ (5,119 ) $ 23,020 $ 2,552 operations before incometaxesNon-cash stock compensation 2,542 2,083 4,881 4,060 expenseAcquisition-related - 29 11 29 compensation expenseAcquisition-related non-cash 111 259 359 512 stock compensation expenseRestructuring costs - 5,034 - 5,034

Amortization of intangible 263 238 524 476 assetsPRO FORMA INCOME BEFORE 17,108 2,524 28,795 12,663 INCOME TAXESPro forma income tax expense 4,277 631 7,199 3,166

PRO FORMA NET INCOME $ 12,831 $ 1,893 $ 21,596 $ 9,497

Pro forma basic net income $ 0.43 $ 0.06 $ 0.72 $ 0.32 per common shareWeighted average common 30,094 30,015 30,151 29,952 shares outstanding Pro forma diluted net income $ 0.39 $ 0.06 $ 0.66 $ 0.29 per common shareWeighted average common and 32,970 32,338 32,870 32,301 common equivalent sharesoutstanding(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, 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,acquisition-related one-time expense, and include a normalized tax rate, whichis our long-term projected cash tax rate) as a complement to results providedin accordance with Generally Accepted Accounting Principles (GAAP). Thesenon-GAAP results are provided to enhance the overall users' understanding ofthe Company's current financial performance and its prospects for the future.The Company believes the non-GAAP results provide useful information to bothmanagement and investors and by excluding certain expenses that it believes arenot indicative of its core operating results. The non-GAAP measures areincluded to provide investors and management with an alternative method forassessing operating results in a manner that is focused on the performance ofongoing operations and to provide a more consistent basis for comparisonbetween quarters. Further, these non-GAAP results are one of the primaryindicators management uses for planning and forecasting in future periods. Inaddition, since the Company has historically reported non-GAAP results to theinvestment community, it believes the continued inclusion of non-GAAP resultsprovides consistency in its financial reporting. The presentation of thisadditional information should not be considered in isolation or as a substitutefor results prepared in accordance 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)July 2,

January 1,

2021

2021

ASSETSCurrent assets:Cash and cash equivalents$

52,453

$

49,455

Accounts receivable and contract assets, net47,202

32,778

Prepaid expenses and other current assets2,623

2,599

Total current assets102,278

84,832

Property and equipment, net17,844

18,158

Other assets1,142

1,680

Goodwill85,394

85,297

Operating lease right-of-use assets2,100

2,578

Total assets$

208,758

$

192,545

LIABILITIES AND SHAREHOLDERS' EQUITYCurrent liabilities:Accounts payable$

4,715

$

6,098

Accrued expenses and other liabilities34,609

25,084

Contract liabilities (deferred revenue)13,884

8,765

Operating lease liabilities2,382

2,620

Total current liabilities55,590

42,567

Long-term deferred tax liability, net6,325

5,588

Operating lease liabilities2,480

3,503

Total liabilities64,395

51,658

Shareholders' equity144,363

140,887

Total liabilities and shareholders' equity$

208,758

$

192,545

The Hackett Group, Inc.CONDENSED CONSOLIDATED BALANCE SHEETS(in thousands)(unaudited) July 2, January 1,

2021 2021

ASSETSCurrent assets:Cash and cash equivalents $ 52,453 $ 49,455

Accounts receivable and contract assets, net 47,202 32,778

Prepaid expenses and other current assets 2,623 2,599

Total current assets 102,278 84,832

Property and equipment, net 17,844 18,158

Other assets 1,142 1,680

Goodwill 85,394 85,297

Operating lease right-of-use assets 2,100 2,578

Total assets $ 208,758 $ 192,545

LIABILITIES AND SHAREHOLDERS' EQUITYCurrent liabilities:Accounts payable $ 4,715 $ 6,098

Accrued expenses and other liabilities 34,609 25,084

Contract liabilities (deferred revenue) 13,884 8,765

Operating lease liabilities 2,382 2,620

Total current liabilities 55,590 42,567

Long-term deferred tax liability, net 6,325 5,588

Operating lease liabilities 2,480 3,503

Total liabilities 64,395 51,658

Shareholders' equity 144,363 140,887

Total liabilities and shareholders' equity $ 208,758 $ 192,545

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

July 2,

April 2,

June 26,

2021

2021

2020

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

26,447

$

25,738

$

17,484

EEA (4)40,521

32,138

30,713

International (5)6,029

5,534

4,435

Net revenue from continuing operations (6)$

72,997

$

63,410

$

52,632

Revenue Concentration:(% of total revenue)Top customer7

%

3

%

6

%

Top 5 customers19

%

13

%

17

%

Top 10 customers30

%

22

%

27

%

Key Metrics and Other Financial Data:Total Company:Consultant headcount1,001

943

908

Total headcount1,210

1,149

1,110

Days sales outstanding (DSO)59

55

64

Cash provided by operating activities (in thousands)$

13,756

$

5,895

$

14,547

Depreciation (in thousands)$

849

$

874

$

883

Amortization (in thousands)$

263

$

261

$

238

Remaining Plan authorization:Shares purchased (in thousands)489

136

-

Cost of shares repurchased (in thousands)$

8,603

$

2,106

$

-Average price per share of shares purchased$

17.58

$

15.45

$

-Remaining Plan authorization (in thousands)$

13,575

$

2,178

$

5,645

Shares Purchased to Satisfy Employee Net Vesting Obligations:Shares purchased (in thousands)2

108

2

Cost of shares purchased (in thousands)$

38

$

1,606

$

25

Average price per share of shares purchased$

17.63

$

14.85

$

13.29

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

July 2, April 2, June 26,

2021 2021 2020

Revenue Breakdown by Group:(in thousands)S&BT (3) $ 26,447 $ 25,738 $ 17,484

EEA (4) 40,521 32,138 30,713

International (5) 6,029 5,534 4,435

Net revenue from continuing operations (6) $ 72,997 $ 63,410 $ 52,632

Revenue Concentration:(% of total revenue)Top customer 7 % 3 % 6 %

Top 5 customers 19 % 13 % 17 %

Top 10 customers 30 % 22 % 27 %

Key Metrics and Other Financial Data: Total Company:Consultant headcount 1,001 943 908

Total headcount 1,210 1,149 1,110

Days sales outstanding (DSO) 59 55 64

Cash provided by operating activities (in $ 13,756 $ 5,895 $ 14,547 thousands)Depreciation (in thousands) $ 849 $ 874 $ 883

Amortization (in thousands) $ 263 $ 261 $ 238

Remaining Plan authorization:Shares purchased (in thousands) 489 136 -

Cost of shares repurchased (in thousands) $ 8,603 $ 2,106 $ -

Average price per share of shares purchased $ 17.58 $ 15.45 $ -

Remaining Plan authorization (in thousands) $ 13,575 $ 2,178 $ 5,645

Shares Purchased to Satisfy Employee NetVesting Obligations:Shares purchased (in thousands) 2 108 2

Cost of shares purchased (in thousands) $ 38 $ 1,606 $ 25

Average price per share of shares purchased $ 17.63 $ 14.85 $ 13.29

(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/20210810005973/en/

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