Business Wire | Nov 9, 2021 04:06PM EST

The Hackett Group Announces Third Quarter 2021 Results

Nov. 09, 2021

MIAMI--(BUSINESS WIRE)--Nov. 09, 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 third quarter, which ended on October 1, 2021.

Third quarter 2021 net revenue (gross revenue less reimbursable expenses) from continuing operations was $71.4 million, up 24%, as compared to the same COVID impacted period in the prior year as client engagement and demand continued to improve throughout the quarter.

GAAP diluted earnings per share were $0.25 for the third quarter of 2021, as compared to $0.09 in the same period in the prior year.

Third quarter 2021 pro forma diluted earnings per share were $0.32, as compared to $0.17 in same period of 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 third quarter of 2021, the Company's cash balances were $52.9 million with no outstanding debt. During the third quarter of 2021, the Company repurchased 121 thousand shares of its common stock at an average price of $18.74 per share for a total of $2.3 million. As of the end of the third quarter of 2021, the Company's remaining share repurchase program authorization was $11.5 million.

Subsequent to the end of the third quarter of 2021, the Company's Board of Directors declared a quarterly dividend of $0.10 per share for its shareholders of record on December 17, 2021, to be paid on December 30, 2021.

"The increasing client demand we have experienced since the end of the second quarter of last year has continued throughout 2021," stated Ted A. Fernandez, Chairman & CEO of The Hackett Group, Inc. "More importantly, we believe this momentum should continue into fiscal 2022."

Based on the current economic outlook, the Company's estimates total net revenue for the fourth quarter of 2021 to be in the range of $64.5 million to $66.5 million. The Company estimates pro forma diluted earnings per share for the fourth quarter of 2021 to be in the range of $0.28 and $0.30.

Other Highlights

Best Practices Conference - On October 20, 2021, The Hackett Group held its annual Best Practices Conference, "Re!magine Peak Performance," a virtual event with more than 850 registered delegates. The event featured more than 60 speakers, including senior executives from ABB, Albemarle Corporation, Aon plc, Bayer, BHP, bp, Boston Scientific, Engie, HP, Johnson & Johnson, The Lubrizol Corporation, and Takeda Pharmaceuticals International GmbH.

Key Issues Study Launch - In September 2021, The Hackett Group launched its 2022 Key Issues campaigns covering six functional areas: Finance, Procurement, Supply Chain, Human Resources, Information Technology, and Global Business Services. Results from the studies will be released in January 2022.

Podcasts - The Hackett Group continued its weekly "Business Excelleration" podcast, which recently featured topics such as: Wipro's HR transformation; sustainable procurement; supplier diversity; HR strategies for the hybrid workplace; working capital survey results; trends in corporate learning and development; and how IT can shift from a cost center to a value creator.

AWS SAP Competency - In August 2021, Answerthink, a division of The Hackett Group, announced that it had achieved Amazon Web Services (AWS) SAP Competency status. Achieving AWS SAP Competency status differentiates Answerthink as an AWS Partner Network (APN) member, demonstrating its technical experience and proven customer success with specific focus on migrating SAP workloads to AWS.

On Tuesday, November 9, 2021, 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 9, 2021 and will run through 5:00 P.M. ET on Tuesday, November 23, 2021. To access the rebroadcast, please dial (800) 873-2155. For International callers, please dial (203) 369-3993.

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 9, 2021 and will run through 5:00 P.M. ET on Tuesday, November 23, 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, 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 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 Nine Months Ended

October 1, September October 1, September 25, 25,

2021 2020 2021 2020

Revenue:Revenue before $ 71,400 $ 57,769 $ 207,807 $ 175,587 reimbursements ("netrevenue")Reimbursements 494 148 770 4,614

TOTAL REVENUE FROM 71,894 57,917 208,577 180,201 CONTINUING OPERATIONS Costs and expenses:Cost of service:Personnel costs before 43,552 37,791 124,312 117,558 reimbursable expensesNon-cash stock 1,651 1,508 4,918 4,449 compensation expenseAcquisition-related - 10 11 39 compensation expenseAcquisition-related 19 243 378 755 non-cash stockcompensation expenseReimbursable expenses 494 148 770 4,614

TOTAL COST OF SERVICE 45,716 39,700 130,389 127,415

Selling, general and 13,613 12,732 40,415 38,042 administrative costsNon-cash stock 901 711 2,515 1,830 compensation expenseAmortization of intangible 259 247 783 723 assetsRestructuring costs - - - 5,034

TOTAL SELLING, GENERAL AND 14,773 13,690 43,713 45,629 ADMINISTRATIVE EXPENSES TOTAL COSTS AND OPERATING 60,489 53,390 174,102 173,044 EXPENSES INCOME FROM OPERATIONS 11,405 4,527 34,475 7,157

Other expense:Interest expense (26 ) (22 ) (76 ) (100 )

INCOME FROM CONTINUING 11,379 4,505 34,399 7,057 OPERATIONS BEFORE INCOMETAXESIncome tax expense 3,248 1,362 9,368 2,312

INCOME FROM CONTINUING 8,131 3,143 25,031 4,745 OPERATIONSLoss from discontinued - (157 ) (7 ) (165 )operations (2)NET INCOME $ 8,131 $ 2,986 $ 25,024 $ 4,580

Weighted average commonshares outstanding:Basic 29,814 30,053 30,038 29,986

Diluted 32,876 32,403 32,871 32,335

Basic net income percommon share:Income per common share $ 0.27 $ 0.11 $ 0.83 $ 0.16 from continuing operationsLoss per common share from (0.00 ) (0.01 ) (0.00 ) (0.01 )discontinued operations(2)Basic net income per $ 0.27 $ 0.10 $ 0.83 $ 0.15 common share Diluted net income percommon share:Income per common share $ 0.25 $ 0.10 $ 0.76 $ 0.15 from continuing operationsLoss per common share from (0.00 ) (0.01 ) 0.00 (0.01 )discontinued operations(2)Diluted net income per $ 0.25 $ 0.09 $ 0.76 $ 0.14 common share PRO FORMA DATA (1):Income from continuing $ 11,379 $ 4,505 $ 34,399 $ 7,057 operations before incometaxesNon-cash stock 2,552 2,219 7,433 6,279 compensation expenseAcquisition-related - 10 11 39 compensation expenseAcquisition-related 19 243 378 755 non-cash stockcompensation expenseRestructuring costs - - - 5,034

Amortization of intangible 259 247 783 723 assetsPRO FORMA INCOME BEFORE 14,209 7,224 43,004 19,887 INCOME TAXESPro forma income tax 3,552 1,806 10,751 4,972 expensePRO FORMA NET INCOME $ 10,657 $ 5,418 $ 32,253 $ 14,915

Pro forma basic net income $ 0.36 $ 0.18 $ 1.07 $ 0.50 per common shareWeighted average common 29,814 30,053 30,038 29,986 shares outstanding Pro forma diluted net $ 0.32 $ 0.17 $ 0.98 $ 0.46 income per common shareWeighted average common 32,876 32,403 32,871 32,335 and common equivalentshares outstanding(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)October 1,

January 1,

2021

2021

ASSETSCurrent assets:Cash and cash equivalents$

52,939

$

49,455

Accounts receivable and contract assets, net49,609

32,778

Prepaid expenses and other current assets3,168

2,599

Total current assets105,716

84,832

Property and equipment, net17,853

18,158

Other assets840

1,680

Goodwill85,089

85,297

Operating lease right-of-use assets1,862

2,578

Total assets$

211,360

$

192,545

LIABILITIES AND SHAREHOLDERS' EQUITYCurrent liabilities:Accounts payable$

5,027

$

6,098

Accrued expenses and other liabilities35,615

25,084

Contract liabilities (deferred revenue)11,959

8,765

Operating lease liabilities2,338

2,620

Total current liabilities54,939

42,567

Long-term deferred tax liability, net5,950

5,588

Operating lease liabilities1,962

3,503

Total liabilities62,851

51,658

Shareholders' equity148,509

140,887

Total liabilities and shareholders' equity$

211,360

$

192,545

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

2021 2021

ASSETSCurrent assets:Cash and cash equivalents $ 52,939 $ 49,455

Accounts receivable and contract assets, net 49,609 32,778

Prepaid expenses and other current assets 3,168 2,599

Total current assets 105,716 84,832

Property and equipment, net 17,853 18,158

Other assets 840 1,680

Goodwill 85,089 85,297

Operating lease right-of-use assets 1,862 2,578

Total assets $ 211,360 $ 192,545

LIABILITIES AND SHAREHOLDERS' EQUITYCurrent liabilities:Accounts payable $ 5,027 $ 6,098

Accrued expenses and other liabilities 35,615 25,084

Contract liabilities (deferred revenue) 11,959 8,765

Operating lease liabilities 2,338 2,620

Total current liabilities 54,939 42,567

Long-term deferred tax liability, net 5,950 5,588

Operating lease liabilities 1,962 3,503

Total liabilities 62,851 51,658

Shareholders' equity 148,509 140,887

Total liabilities and shareholders' equity $ 211,360 $ 192,545

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

October 1,

July 2,

September 25,

2021

2021

2020

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

27,623

$

26,447

$

22,217

EEA (4)38,201

40,521

29,710

International (5)5,576

6,029

5,842

Net revenue from continuing operations (6)$

71,400

$

72,997

$

57,769

Revenue Concentration:(% of total revenue)Top customer5

%

7

%

6

%

Top 5 customers14

%

19

%

16

%

Top 10 customers24

%

30

%

26

%

Key Metrics and Other Financial Data:Total Company:Consultant headcount1,049

1,001

923

Total headcount1,257

1,210

1,124

Days sales outstanding (DSO)63

59

57

Cash provided by operating activities (in thousands)$

6,818

$

13,756

$

10,088

Depreciation (in thousands)$

829

$

849

$

916

Amortization (in thousands)$

259

$

263

$

247

Remaining Plan authorization:Shares purchased (in thousands)113

489

75

Cost of shares repurchased (in thousands)$

2,103

$

8,603

932

Average price per share of shares purchased$

18.68

$

17.58

12.41

Remaining Plan authorization (in thousands)$

11,472

$

13,575

$

4,713

Shares Purchased to Satisfy Employee Net Vesting Obligations:Shares purchased (in thousands)8

2

8

Cost of shares purchased (in thousands)$

155

$

38

$

111

Average price per share of shares purchased$

19.49

$

17.63

$

14.26

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

October 1, July 2, September 25,

2021 2021 2020

Revenue Breakdown by Group:(in thousands)S&BT (3) $ 27,623 $ 26,447 $ 22,217

EEA (4) 38,201 40,521 29,710

International (5) 5,576 6,029 5,842

Net revenue from continuing operations (6) $ 71,400 $ 72,997 $ 57,769

Revenue Concentration:(% of total revenue)Top customer 5 % 7 % 6 %

Top 5 customers 14 % 19 % 16 %

Top 10 customers 24 % 30 % 26 %

Key Metrics and Other Financial Data: Total Company:Consultant headcount 1,049 1,001 923

Total headcount 1,257 1,210 1,124

Days sales outstanding (DSO) 63 59 57

Cash provided by operating activities (in $ 6,818 $ 13,756 $ 10,088 thousands)Depreciation (in thousands) $ 829 $ 849 $ 916

Amortization (in thousands) $ 259 $ 263 $ 247

Remaining Plan authorization:Shares purchased (in thousands) 113 489 75

Cost of shares repurchased (in thousands) $ 2,103 $ 8,603 932

Average price per share of shares purchased $ 18.68 $ 17.58 12.41

Remaining Plan authorization (in thousands) $ 11,472 $ 13,575 $ 4,713

Shares Purchased to Satisfy Employee NetVesting Obligations:Shares purchased (in thousands) 8 2 8

Cost of shares purchased (in thousands) $ 155 $ 38 $ 111

Average price per share of shares purchased $ 19.49 $ 17.63 $ 14.26

(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. View source version on businesswire.com: https://www.businesswire.com/news/home/20211109006527/en/

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