Category: Business Services

The Hackett Group Announces Third Quarter 2015 Results

Q3 2015 revenue of $67.2 million, up 11% or 13% in constant currency from prior year, exceeds high-end of guidance, led by U.S. growth of 20%.
Q3 2015 pro forma EPS of $0.20 cents, up 25% from prior year, also exceeds high-end of guidance
Company declares semi-annual dividend of $0.10 per share for holders of record on December 28, 2015

MIAMI-- The Hackett Group, Inc. (HCKT), a global intellectual property-based strategic consultancy and leading enterprise benchmarking and best practices implementation firm, today announced its financial results for the third quarter, which ended on October 2, 2015.

Third quarter 2015 revenue increased 11%, or 13% in constant currency, to $67.2 million, as compared to $60.4 million for the same period in 2014. Pro forma diluted earnings per share were $0.20 for the third quarter of 2015, an increase of 25%, as compared to $0.16 for the same period in 2014. 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 $0.10 cents for both the third quarter of 2015 and 2014. GAAP results for the third quarter were unfavorably impacted by $1.3 million accrual for performance based stock appreciation rights issued in fiscal 2012, which are now expected to be earned, as well as a higher effective tax rate when compared to the prior year.

In its recent meeting, the Company's Board of Directors declared the payment of its second semi-annual dividend of $0.10 per share for holders of record on December 28, 2015. This dividend will be paid on January 8, 2016.

“This was another strong quarter driven by solid U.S. demand across nearly all of our practices,” stated Ted A. Fernandez, Chairman & CEO of The Hackett Group, Inc. “More importantly, the demand continues into the fourth quarter and, when coupled with the new strategic alliances that we recently launched, bodes well for our prospects.”

Based on current economic outlook, the Company estimates total revenue for the fourth quarter of 2015 to be in the range of $63.0 million to $65.0 million, and estimates pro forma diluted earnings per share to be in the range of $0.19 to $0.21.

Other Highlights

European Best Practices Conference – The Hackett Group held its annual European Best Practices Conference in London on October 7th and 8th. The event, “Creating World-Class Advantage Through Digital, Analytical and Operational Agility,” was attended by more than 150 executives. It featured presentations by senior leaders from more than 16 companies, including: Altana AG, Becton, Dickinson and Co., BP Group, The Coca-Cola Company, Cofely UK, General Electric Co, GlaxoSmithKline plc, Henkel, Lexmark International, Linde AG, Michelin, Novo Nordisk, Sanofi, SAP AG, Tetra Pak Group, and WNS Global Services.

World-Class Procurement Research – New research from The Hackett Group found that world-class procurement organizations now deliver services at 17% less cost than typical companies while offering improved effectiveness, largely by becoming more customer-centric. A key differentiator is the superior ability of world-class procurement organizations to gain a deep understanding of the needs of their business, react more quickly to changing requirements, and drive higher overall value and greater stakeholder satisfaction, the research found.

World-Class Finance – New research from The Hackett Group found that world-class finance organizations are far more responsive to business needs than their peers, driving greater value and agility while also spending more than 40% less and running with about half the staff. Overall, finance organizations continue to focus on redeploying resources away from transactional work towards higher-value activities to support innovation, growth, and greater agility, the research found. According to The Hackett Group’s research, world-class finance organizations are relying on three strategies to achieve operational excellence, drive higher value and improve agility: strengthening the foundations to enable agile service delivery; unleashing enterprise performance management (EPM) decision-making excellence; and building an adaptive finance organization.

World-Class HR – New research from The Hackett Group found that world-class HR organizations now spend 37% less than their peers and operate with 31% fewer staff, while delivering improved effectiveness and greater agility. The research also identified an array of HR capabilities that drive performance leadership, including: strategic workforce planning; technology/automation strategy; unified streamlined processes and systems; and performance measurement and analysis.

On Tuesday, November 10, 2015, 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 10, 2015 and will run through 5:00 P.M. ET on Tuesday, November 24, 2015. To access the rebroadcast, please dial (888) 566-0509. For International callers, please dial (203) 369-3613.

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 10, 2015 and will run through 5:00 P.M. ET on Tuesday, November 24, 2015. To access the replay, visit http://www.thehackettgroup.com or http://www.streetevents.com.

About The Hackett Group

The Hackett Group (HCKT) is an intellectual property-based strategic consultancy and leading enterprise benchmarking and best practices implementation firm to global companies. Services include business transformation, enterprise performance managementworking capital management, 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 award-winning Oracle EPM and SAP practices.

The Hackett Group has completed more than 11,000 benchmarking studies with major corporations and government agencies, including 93% of the Dow Jones Industrials, 86% of the Fortune 100, 87% of the DAX 30 and 51% of the FTSE 100. These studies drive its Best Practice Intelligence Center™ 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 world-class performance.

More information on The Hackett Group is available at: www.thehackettgroup.com, This email address is being protected from spambots. You need JavaScript enabled to view it., 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 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
      October 2,     September 26,     October 2,     September 26,
      2015     2014     2015     2014
Revenue:                        
Revenue before reimbursements ("net revenue")   $ 59,992     $ 54,550  

 

$ 174,320     $ 158,968  
Reimbursements     7,225       5,887       20,266       17,426  
Total revenue     67,217       60,437       194,586       176,394  
                         
Costs and expenses:                        
Cost of service:                        
Personnel costs before reimbursable expenses     36,231       33,440       106,272       99,646  
Non-cash stock compensation expense     1,372       566       3,463       1,904  
Acquisition-related non-cash stock compensation expense     251       276       677       623  
Acquisition consideration reflected as compensation expense     -       860       -       2,580  
Reimbursable expenses     7,225       5,887       20,266       17,426  
Total cost of service     45,079       41,029       130,678       122,179  
                         
Selling, general and administrative costs     14,579       14,055       43,516       41,307  
Non-cash stock compensation expense     2,068       814       3,123       2,158  
Amortization of intangible assets     548       553       1,642       1,679  
Acquisition related costs     -       -       -       120  
Total selling, general, and administrative expenses     17,195       15,422       48,281       45,264  
                         
Bargain purchase gain from acquisition     -       -       -       (3,015 )
Restructuring costs     -       -       -       3,604  
Total costs and operating expenses     62,274       56,451       178,959       168,032  
                         
Income from operations     4,943       3,986       15,627       8,362  
                         
Other income (expense):                        
Interest income     1       2       3       4  
Interest expense     (102 )     (173 )     (351 )     (463 )
                         
Income from operations before income taxes     4,842       3,815       15,279       7,903  
Income tax expense     1,784       879       5,525       1,734  
Net income   $ 3,058     $ 2,936  

 

$ 9,754     $ 6,169  
                         
Basic net income per common share:                        
Income per common share from operations   $ 0.11     $ 0.10  

 

$ 0.34     $ 0.21  
Weighted average common shares outstanding     28,755       28,558       28,675       28,872  
                         
Diluted net income per common share:                        
Income per common share from operations   $ 0.10     $ 0.10  

 

$ 0.32     $ 0.21  
Weighted average common and common equivalent shares outstanding     31,488       29,800       30,765       29,884  
                         
Pro forma data (1):                        
Income from operations before income taxes   $ 4,842     $ 3,815  

 

$ 15,279     $ 7,903  
Bargain purchase gain from acquisition     -       -       -       (3,015 )
Non-cash stock compensation expense     3,440       1,380       6,586       4,062  
Acquisition-related non-cash stock compensation expense     251       276       677       623  
Acquisition-related cash compensation expense     -       860       -       2,580  
Acquisition-related costs     -       -       -       120  
Restructuring costs     -       -       -       3,604  
Amortization of intangible assets     548       553       1,642       1,679  
Pro forma income before income taxes     9,081       6,884       24,184       17,556  
Pro forma income tax expense     2,724       2,067       7,255       5,705  
Pro forma net income   $ 6,357     $ 4,817  

 

$ 16,929     $ 11,851  
                         
Pro forma basic net income per common share   $ 0.22     $ 0.17  

 

$ 0.59     $ 0.41  
Weighted average common shares outstanding     28,755       28,558       28,675       28,872  
                         
Pro forma diluted net income per common share   $ 0.20     $ 0.16  

 

$ 0.55     $ 0.40  
Weighted average common and common equivalent shares outstanding     31,488       29,800       30,765       29,884  

 

(1) The Company provides pro forma earnings results (which exclude the amortization of intangible assets, stock compensation expense, restructuring expense, acquisition-related costs 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 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)
             
      October 2,     January 2,
      2015     2015
     

(unaudited)

     
ASSETS            
Current assets:            
Cash and cash equivalents   $ 16,338   $ 14,608
Accounts receivable and unbilled revenue, net     43,993     37,421
Deferred tax asset, net     486     2,828
Prepaid expenses and other current assets     2,131     2,199
Total current assets     62,948     57,056
             
Property and equipment, net     14,189     13,753
Other assets     4,796     6,548
Goodwill, net     74,961     75,429
Total assets   $ 156,894   $ 152,786
             
LIABILITIES AND SHAREHOLDERS' EQUITY            
Current liabilities:            
Accounts payable   $ 5,950   $ 7,909
Accrued expenses and other liabilities     34,230     30,901
Current portion of long-term debt     -     -
Total current liabilities     40,180     38,810
Long-term deferred tax liability, net     8,276     5,925
Long-term debt     9,263     18,263
Total liabilities     57,719     62,998
             
Shareholders' equity     99,175     89,788
Total liabilities and shareholders' equity   $ 156,894   $ 152,786
             
                   
The Hackett Group, Inc.
SUPPLEMENTAL FINANCIAL DATA
(unaudited)
                   
      Quarter Ended
      October 2,     July 3,     September 26,
      2015     2015     2014
Revenue Breakdown by Group:                  
(in thousands)                  
The Hackett Group (2)   $ 58,174     $ 55,991     $ 51,370  
ERP Solutions (3)     9,043       10,404       9,067  
Total revenue   $ 67,217     $ 66,395     $ 60,437  
                   
Revenue Concentration:                  
(% of total revenue)                  
Top customer     4 %     3 %     4 %
Top 5 customers     16 %     14 %     15 %
Top 10 customers     27 %     25 %     25 %
                   
Key Metrics and Other Financial Data:                  
                   
Total Company:                  
Consultant headcount     827       810       775  
Total headcount     1,027       1,012       973  
Days sales outstanding (DSO)     60       61       67  
Cash provided by operating activities (in thousands)   $ 12,546     $ 7,015     $ 5,888  
Depreciation (in thousands)   $ 651     $ 663     $ 512  
Amortization (in thousands)   $ 548     $ 547     $ 553  
                   
The Hackett Group (in thousands):                  
The Hackett Group annualized revenue per professional (2)   $ 396     $ 397     $ 368  
                   
ERP Solutions:                  
ERP Solutions consultant utilization rate (3)     75 %     77 %     72 %
ERP Solutions gross billing rate per hour (3)   $ 132     $ 136     $ 128  
                   
Shares Repurchased:                  
Shares purchased (in thousands) (5)     -       83       485  
Cost of shares repurchased (in thousands) (5)   $ -     $ 816     $ 2,974  
Average price per share of shares purchased (5)   $ -     $ 9.83     $ 6.13  
Remaining Plan authorization (in thousands)   $ 2,309     $ 2,309     $ 4,322  
                   

 

(2) The Hackett Group encompasses the Benchmarking, Business Transformation and Executive Advisory groups, and EPM Groups.

(3) ERP Solutions encompasses Best Practice Implementation of ERP Software, the SAP group, approximately 40% of which are offshore resources.

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

(5) Shares repurchased include shares bought back to satisfy employee net vesting obligations of 5 thousand shares for $65 thousand; 9 thousand shares for $113 thousand; and 2 thousand shares for $12 thousand, for the quarters ended October 2, 2015, July 3, 2015 and September 26, 2014, respectively.

 

Contact:

The Hackett Group
Robert A. Ramirez, CFO, 305-375-8005
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