- Q2 2021 net revenue of $73.0 million exceeds high end of
guidance, which includes a $5.3 million SAP software sale
transaction
- Q2 2021 GAAP EPS of $0.32
- Q2 2021 pro forma EPS of $0.39, which exceeds the high end of
guidance or $0.30, excluding the SAP software sale transaction,
which is at the high end of guidance
- Board of Directors declares a $0.10 per share quarterly
dividend
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; Mondelēz 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 OF
OPERATIONS (in thousands, except per share data)
(unaudited)
Quarter Ended
Six Months Ended
July 2,
June 26,
July 2,
June 26,
2021
2020
2021
2020
Revenue: Revenue before reimbursements ("net revenue")
$
72,997
$
52,632
$
136,407
$
117,818
Reimbursements
200
119
276
4,466
TOTAL REVENUE FROM CONTINUING OPERATIONS
73,197
52,751
136,683
122,284
Costs and expenses: Cost of service: Personnel costs before
reimbursable expenses
41,448
38,654
80,760
79,767
Non-cash stock compensation expense
1,668
1,600
3,267
2,941
Acquisition-related compensation expense
-
29
11
29
Acquisition-related non-cash stock compensation expense
111
259
359
512
Reimbursable expenses
200
119
276
4,466
TOTAL COST OF SERVICE
43,427
40,661
84,673
87,715
Selling, general and administrative costs
14,416
11,413
26,802
25,310
Non-cash stock compensation expense
874
483
1,614
1,119
Amortization of intangible assets
263
238
524
476
Restructuring costs
-
5,034
-
5,034
TOTAL SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
15,553
17,168
28,940
31,939
TOTAL COSTS AND OPERATING EXPENSES
58,980
57,829
113,613
119,654
INCOME (LOSS) FROM OPERATIONS
14,217
(5,078
)
23,070
2,630
Other expense: Interest expense
(25
)
(41
)
(50
)
(78
)
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
14,192
(5,119
)
23,020
2,552
Income tax expense (benefit)
3,660
(1,186
)
6,120
950
INCOME (LOSS) FROM CONTINUING OPERATIONS
10,532
(3,933
)
16,900
1,602
Loss from discontinued operations (2)
-
-
(7
)
(8
)
NET INCOME (LOSS)
$
10,532
$
(3,933
)
$
16,893
$
1,594
Weighted average common shares outstanding: Basic
30,094
30,015
30,151
29,952
Diluted
32,970
30,015
32,870
32,301
Basic net income (loss) per common share: Income (loss) per
common share from continuing operations
$
0.35
$
(0.13
)
$
0.56
$
0.05
Loss per common share from discontinued operations (2)
-
-
(0.00
)
(0.00
)
Basic net income (loss) per common share
$
0.35
$
(0.13
)
$
0.56
$
0.05
Diluted net income (loss) per common share: Income (loss)
per common share from continuing operations
$
0.32
$
(0.13
)
$
0.51
$
0.05
Loss per common share from discontinued operations (2)
-
-
0.00
(0.00
)
Diluted net income (loss) per common share
$
0.32
$
(0.13
)
$
0.51
$
0.05
PRO FORMA DATA (1): Income (loss) from continuing operations
before income taxes
$
14,192
$
(5,119
)
$
23,020
$
2,552
Non-cash stock compensation expense
2,542
2,083
4,881
4,060
Acquisition-related compensation expense
-
29
11
29
Acquisition-related non-cash stock compensation expense
111
259
359
512
Restructuring costs
-
5,034
-
5,034
Amortization of intangible assets
263
238
524
476
PRO FORMA INCOME BEFORE INCOME TAXES
17,108
2,524
28,795
12,663
Pro 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 per common share
$
0.43
$
0.06
$
0.72
$
0.32
Weighted average common shares outstanding
30,094
30,015
30,151
29,952
Pro forma diluted net income per common share
$
0.39
$
0.06
$
0.66
$
0.29
Weighted average common and common equivalent shares outstanding
32,970
32,338
32,870
32,301
(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.
The Hackett Group, Inc. CONDENSED CONSOLIDATED BALANCE
SHEETS (in thousands) (unaudited)
July 2,
January 1,
2021
2021
ASSETS Current 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' EQUITY Current
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
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 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
(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/
Robert A. Ramirez, CFO, 305-375-8005 or
rramirez@thehackettgroup.com
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