- Q3 2013 revenue of $57.9 million up 4%
and pro forma EPS of $0.12 up 9% from prior year, both at mid point
of guidance
- Board increases remaining stock
repurchase authorization to $10.0 million
- Company declares annual dividend of
$0.10 for holders of record on December 10, 2013
The Hackett Group, Inc. (NASDAQ:HCKT), a global strategic
advisory and business transformation and technology consulting
firm, today announced its financial results for the third quarter
of 2013, which ended September 27, 2013.
Third quarter 2013 revenue was $57.9 million, up 4% from prior
year. Pro forma diluted earnings per share were $0.12, up 9% 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 $0.08 for both the third quarter of 2013 and
2012.
At the end of the third quarter of 2013, the Company's cash
balances were $15.4 million and the Company had $15.0 million
outstanding on its credit facility.
Subsequent to September 27, 2013, the Company completed its
tender offer through which it bought back approximately 1.0 million
shares at a purchase price of $7.00 per share for an aggregate cost
of approximately $6.9 million, excluding fees and expenses. The
tender offer was funded by drawing $7.0 million on the Company's
amended and restated credit agreement, which brings the current
outstanding balance on the credit facility to $22.0 million.
In its recent meeting, the Company's Board of Directors declared
the payment of a dividend of $0.10 for holders of record on
December 10, 2013. This dividend will be paid on December 20, 2013.
Additionally, the Board of Directors approved to increase the stock
repurchase program authorization by an additional $5.0 million.
This brings the Company's remaining stock repurchase authorization
to $10.0 million.
"We reported solid quarterly results driven by strong US demand
which was somewhat offset by weaker than expected results in Europe
and Australia," stated Ted A. Fernandez, Chairman & CEO of The
Hackett Group, Inc. "We now expect continuing deterioration in both
Europe and Australia to more than offset continued year on year US
improvements in the fourth quarter. However, as we enter the new
year, we expect our increased investment in EPM capabilities in
Europe to strengthen our overall market offering and performance in
2014."
Based on the current economic outlook, the Company estimates
total revenue for the fourth quarter of 2013 to be in the range of
$51.0 million to $53.0 million, and estimates pro forma diluted
earnings per share to be in the range of $0.07 to $0.09.
Other Highlights
Offshoring Research Update - New research from The Hackett Group
found that large companies in North America and Europe are now
losing over 250,000 jobs each year in IT, finance, and other key
business services areas, due to the combined impact of offshoring,
technology-driven productivity improvements, and the low-growth
business environment. While the number of jobs being lost annually
will decline over the next few years, The Hackett Group now
estimates that by 2017 nearly half of all back office jobs at these
companies that existed in North America and Europe in 2002 will
have disappeared -- a total loss of 3.7 million jobs.
Global Operating Model Research - New research from The Hackett
Group found that while many large companies are aggressively
pursuing globalization of their products and brands, the large
majority are flying blind, without the ability to truly see what is
happening globally or make adjustments. Hackett's new "Global
Operating Model" Book of Numbers research, which looks at the
performance of more than 100 companies, found a strong acceleration
of the trend towards globalization of business, with most companies
moving toward high levels of globalization for their products and
services lines and expanding the globalization of delivery of
business services over the next few years. In large part these
trends are being driven by high growth rates in China and other
emerging markets combined with stagnation in developed markets.
European Best Practices Conference - The Hackett Group held its
2013 European Best Practices Conference in Berlin October 30-31 for
over 200 attendees. The theme was "Borderless Business: Integrating
the Enterprise for Sustainable Success," and the conference
featured presentations by senior executives from more than 15
global companies, including: ABB Switzerland, Airbus/EADS, Amway,
Antalis, Atos, Bayer, Coca-Cola Enterprises, Deutsche Bank, Glaxo
SmithKline, National Grid, Nestlé, OC Oerlikon Management, Rio
Tinto, Tetra Pak International, and Unilever.
Category Insight Research - In early October, The Hackett Group
announced a significant new capability as part of its services for
Procurement leaders, a series of Category Insight Reports. Each
report offers empirical analysis to streamline the market research
and intelligence efforts of procurement professionals. Initial
reports will cover an array of indirect spend areas, including:
commercial printing, maintenance, repair, and operations suppliers,
temporary labor, and facilities management. The Category Insight
Reports are designed to complement the operational research,
advisory, procurement strategy and insights, benchmarks, consulting
expertise, and other research and transformation capabilities The
Hackett Group offers.
On Tuesday, November 5, 2013, 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) 779-3138, [Passcode:
Third 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, November 5,
2013 and will run through 5:00 P.M. ET on Tuesday, November 19,
2013. To access the rebroadcast, please dial (866) 411-8824. For
International callers, please dial (203) 369-0662.
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 5, 2013
and will run through 5:00 P.M. ET on Tuesday, November 19, 2013. To
access the replay, visit http://www.thehackettgroup.com or
http://www.streetevents.com.
About The Hackett Group
The Hackett Group, Inc.
(NASDAQ:HCKT), a global strategic business advisory and business
transformation and technology consulting firm, is a leader in best
practice advisory, benchmarking, and transformation consulting
services including enterprise performance management and business
intelligence, 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 and application management 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
Nine Months Ended September 27, September 28,
September 27, September 28, 2013 2012
2013 2012 Revenue:
Revenue before reimbursements
$ 51,976 $ 49,806 $ 153,188 $ 150,319
Reimbursements
5,940 5,841 18,038 17,375 Total revenue 57,916 55,647 171,226
167,694 Costs and expenses: Cost of service: Personnel costs
before reimbursable expenses (includes $854 and $685 and $2,540 and
$2,202 of stock compensation expense in the quarters and nine
months ended September 27, 2013 and September 28, 2012,
respectively) 33,970 31,665 99,375 94,392 Reimbursable expenses
5,940 5,841 18,038 17,375 Total cost of service 39,910 37,506
117,413 111,767 Selling, general and administrative costs
(includes $681 and $674 and $2,162 and $1,860 of stock compensation
expense in the quarters and nine months ended September 27, 2013
and September 28, 2012, respectively) 13,289 13,922 40,482 43,248
Restructuring benefit - (319) - (319) Total costs and operating
expenses 53,199 51,109 157,895 154,696 Income from operations 4,717
4,538 13,331 12,998 Other income (expense): Interest income 2 2 6
19 Interest expense (94) (196) (361) (470) Income from continuing
operations before income taxes 4,625 4,344 12,976 12,547 Income tax
expense 1,926 1,751 5,318 2,265 Income from continuing operations
2,699 2,593 7,658 10,282 (Loss) income from discontinued operations
(64) 43 (135) (268) Net income $ 2,635 $ 2,636 $ 7,523 $ 10,014
Basic net income per common share: Income per common share
from continuing operations $ 0.09 $ 0.09 $ 0.25 $ 0.32 (Loss)
income per common share from discontinued operations (0.00) 0.00
(0.00) (0.01) Net income per common share $ 0.09 $ 0.09 $ 0.25 $
0.31 Diluted net income per common share: Income per common
share from continuing operations $ 0.08 $ 0.08 $ 0.24 $ 0.30 (Loss)
income per common share from discontinued operations (0.00) 0.00
(0.00) (0.01) Net income per common share $ 0.08 $ 0.08 $ 0.23 $
0.29 Weighted average common shares outstanding: Basic
30,627 29,401 30,484 32,405 Diluted 32,797 31,489 32,174 34,312
Pro forma data (1): Income from continuing operations before
income taxes $ 4,625 $ 4,344 $ 12,976 $ 12,547 Stock compensation
expense 1,535 1,359 4,702 4,062 Restructuring benefit - (319) -
(319) Amortization of intangible assets 150 137 451 410 Pro forma
income before income taxes 6,310 5,521 18,129 16,700 Pro forma
income tax expense 2,524 2,208 7,252 6,680 Pro forma net income $
3,786 $ 3,313 $ 10,877 $ 10,020 Pro forma basic net income
per common share $ 0.12 $ 0.11 $ 0.36 $ 0.31 Weighted average
common shares outstanding 30,627 29,401 30,484 32,405 Pro
forma diluted net income per common share $ 0.12 $ 0.11 $ 0.34 $
0.29 Weighted average common and common equivalent shares
outstanding 32,797 31,489 32,174 34,312 (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)
September 27, December 28, 2013
2012 ASSETS Current assets: Cash and cash
equivalents $ 14,851 $ 16,906 Accounts receivable and unbilled
revenue, net 37,367 36,869 Deferred tax asset, net 4,194 4,741
Prepaid expenses and other current assets 3,116 2,335 Total current
assets 59,528 60,851 Restricted cash 522 683 Property and
equipment, net 13,032 12,859 Other assets 1,093 1,598 Goodwill, net
75,967 76,220 Non-current deferred tax asset, net - 1,710 Total
assets $ 150,142 $ 153,921
LIABILITIES AND SHAREHOLDERS'
EQUITY Current liabilities: Accounts payable $ 4,852 $ 7,711
Accrued expenses and other liabilities 21,831 26,484 Current
portion of long-term debt - 2,895 Total current liabilities 26,683
37,090 Long-term deferred tax liability, net 2,677 - Long-term debt
15,026 22,105 Total liabilities 44,386 59,195 Shareholders'
equity 105,756 94,726 Total liabilities and shareholders' equity $
150,142 $ 153,921
The Hackett Group, Inc.
SUPPLEMENTAL FINANCIAL DATA (unaudited)
Quarter Ended September 27, June 28,
September 28, 2013 2013 2012 Revenue
Breakdown by Group: (in thousands) The Hackett Group (2) $
48,689 $ 47,659 $ 45,429 ERP Solutions (3) 9,227 11,302 10,218 $
57,916 $ 58,961 $ 55,647
Revenue Concentration: (% of
total revenue) Top customer 3% 3% 3% Top 5 customers 12% 16% 11%
Top 10 customers 22% 24% 20%
Key Metrics and Other
Financial Data: Total Company: Consultant
headcount 718 735 726 Total headcount 912 926 932 Days sales
outstanding (DSO) 59 55 57 Cash provided by operating activities
(in thousands) $ 3,858 $ 5,720 $ 4,857 Depreciation (in thousands)
$ 456 $ 461 $ 492 Amortization (in thousands) $ 150 $ 151 $ 136
The Hackett Group (in thousands)
: The Hackett
Group annualized revenue per professional (2) $ 358 $ 358 $ 338
ERP Solutions: ERP Solutions consultant utilization
rate (3) 72% 83% 74% ERP Solutions gross billing rate per hour (3)
$ 132 $ 130 $ 130
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 $ 4,963 $ 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, the SAP group, approximately 45% of which are offshore
resources.
The Hackett Group, Inc.Robert A. Ramirez, CFO,
305-375-8005rramirez@thehackettgroup.com
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