Attached files
| file | filename |
|---|---|
| 8-K - 8-K - HACKETT GROUP, INC. | hckt-8k_20180502.htm |
Exhibit 99.1
Contact:
Robert A. Ramirez, CFO, 305-375-8005 or rramirez@thehackettgroup.com
The Hackett Group Announces First Quarter 2018 Results
|
• |
Q1 2018 total net revenue of $67.5 million, up 4% from prior year, and pro forma EPS of $0.26, up 13% from prior year and both in line with guidance |
|
• |
Board of Directors declares $0.17 semi-annual dividend and approves a $5.0 million increase in the Company’s share repurchase program |
MIAMI, FL – May 8, 2018 - 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 first quarter, which ended on March 30, 2018.
Q1 2018 net revenue was $67.5 million, up 4% from prior year. Q1 2018 gross revenue was $72.7 million, up 2% from prior year. The actual Q1 2018 reimbursable expense ratio on net revenue was 7.8% versus 9.8% from the prior year. Reimbursable expenses are project travel-related expenses passed through to a client with no associated margin.
Q1 2018 pro forma diluted earnings per share were $0.26, up 13%, when compared to $0.23 for the same period in the prior year. 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 $0.23 for the first quarter of 2018, as compared to $0.24 for the same period in the prior year. Income tax expense in Q1 2018 had a $0.02 unfavorable impact in GAAP diluted earnings per share.
In its recent meeting, the Company’s Board of Directors declared a semi-annual dividend of $0.17 per share for its shareholders of record on June 29, 2018, to be paid on July 11, 2018.
At the end of the first quarter of 2018, the Company’s cash balances were $23.7 million. During the first quarter the Company utilized cash to repurchase 228 thousand shares of the Company’s common stock at an average price per share of $17.42 for a total of $4.0 million. At the end of the first quarter of 2018, the Company’s remaining stock purchase program authorization was $2.2 million. Subsequent to the end of the first quarter, the Company’s Board of Directors approved a $5.0 million increase in the Company’s share repurchase program.
“We reported solid quarterly results as we started to see the initial benefits of our cloud and digital transformation focus,” stated Ted A. Fernandez, Chairman & CEO of the Hackett Group. “Additionally, we are seeing favorable reaction to our recently introduced Quantum Leap, Digital Transformation Platform and RPA offerings which digitize and leverage our unique Hackett Intellectual Property and highly differentiate our capabilities.”
Based on the current economic outlook, the Company estimates total net revenue for the second quarter of 2018 to be in the range of $69.0 million and $71.0 million or gross revenue (inclusive of reimbursable expenses) to be in the range of $74.0 million and $76.0 million. The Company estimates pro forma diluted earnings per share for the second quarter of 2018 to be in the range of $0.26 and $0.28. At the high end of guidance, pro forma diluted earnings per share for the second quarter of 2018 would increase 12%, when compared to the same period in the prior year.
Other Highlights
Best Practices Conference – More than 300 attendees joined The Hackett Group for its 2018 North American Best Practices Conference, “Unlocking Digital Value,” in Atlanta, from April 30 to May 2. Highlights of the conference included presentations by senior leadership from more than a dozen of the largest and most successful U.S. companies, each spotlighting their digital transformation efforts in finance, procurement, HR, IT, and other business services areas. Presenters included executives from: Becton, Dickinson and Company; Cargill; General Motors; Halyard Health; IBM; Mary Kay; MGM Resorts International; NCR; Pfizer; Rogers Communications Canada; Thermo Fisher Scientific; Verizon Communications; and WestRock. More than 20 executives from The Hackett Group also presented on the company’s latest research, analysis, and insights.
IT Key Issues Research – New research from The Hackett Group found that support for enterprise analytics and development of IT talent are two top priority areas for CIOs in 2018, as companies seek to unlock the value of digital business. However, companies’ efforts to deploy and derive value from digital tools are likely to be handicapped by low capability maturity in these two key areas and a lack of initiative to improve over the coming year. The research also found that IT budgets are expected to rise by 1.8% in 2018. The research is available for complimentary download here: http://go.poweredbyhackett.com/keyit1801sm.
HR Key Issues Research – New research from The Hackett Group found that despite another year of flat to decreasing budgets and headcounts, HR organizations are focused on helping their companies unlock the value of digital transformation this year. But while most HR executives recognize the future potential of digital technology to transform the enterprise as well as HR roles and operating models, less than half feel their organizations have the resources and capabilities in place to execute and support their company’s digital transformation strategy. The research also found that urgent shortfalls exist in HR’s ability to support critical goals, including developing executives who can lead in volatile environments and enabling business strategy execution. In addition, there are significant internal gaps, with limited ability to address some of the most critical development areas. On the upside, HR organizations are now targeting many of these same areas for improvement initiatives in 2018. The research is available for complimentary download here: http://go.poweredbyhackett.com/keyhr1801sm.
Finance Key Issues Research – New research from The Hackett Group found that faster adoption of digital tools is critical if finance is to deliver on its key mandates in 2018 -- to help companies drive growth while holding down cost. Finance also faces significant budget constraints of its own in 2018, which can also be addressed in part through digital transformation, the research found. Unlocking the value of digital transformation is emerging as a strategic imperative for the enterprise in 2018, and The Hackett Group’s research identified four “must dos” for finance: balance investments to improve performance; improve analytics to better support the enterprise; leverage digital strategy to improve efficiency, effectiveness, and agility; and reshape the service delivery model to improve customer service and reduce cost. The research is available for complimentary download here: http://go.poweredbyhackett.com/keyfin1801sm.
On Tuesday, May 8, 2018 senior management will discuss first quarter results in a conference call at 5:00 P.M. ET. The number for the conference call is (800) 369-2134, [Passcode: First Quarter]. For International callers, please dial (212) 547-0413.
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, May 8, 2018 and will run through 5:00 P.M. ET on Tuesday, May 22, 2018. To access the rebroadcast, please dial (866) 453-1997. For International callers, please dial (203) 369-1223.
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, May 8, 2018 and will run through 5:00 P.M. ET on Tuesday, May 22, 2018. 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, offering digital transformation including robotic process automation and enterprise cloud application implementation. Services include business transformation, enterprise analytics, working 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 and SAP practices.
The Hackett Group has completed more than 15,200 benchmarking and performance studies with major corporations and government agencies, including 97% of the Dow Jones Industrials, 89% of the Fortune 100, 87% of the DAX 30 and 59% 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, 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 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, including these referenced above, 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.
Page 4 of 6 - The Hackett Group, Inc. Announces First Quarter Results
The Hackett Group, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
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Quarter Ended |
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March 30, |
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March 31, |
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2018 |
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2017 |
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||
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Revenue: |
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|
|
|
|
|
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Revenue before reimbursements ("net revenue") |
|
$ |
67,475 |
|
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$ |
65,069 |
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Reimbursements |
|
|
5,258 |
|
|
|
6,360 |
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Total revenue |
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|
72,733 |
|
|
|
71,429 |
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|
|
|
|
|
|
|
|
|
|
|
Costs and expenses: |
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|
|
|
|
|
|
|
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Cost of service: |
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|
|
|
|
|
|
|
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Personnel costs before reimbursable expenses |
|
|
41,621 |
|
|
|
40,152 |
|
|
Acquisition-related compensation expense |
|
|
(585 |
) |
|
|
— |
|
|
Non-cash stock compensation expense |
|
|
1,043 |
|
|
|
1,132 |
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|
Acquisition-related non-cash stock compensation expense |
|
|
800 |
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|
|
310 |
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Reimbursable expenses |
|
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5,258 |
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|
|
6,360 |
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Total cost of service |
|
|
48,137 |
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|
|
47,954 |
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative costs |
|
|
14,822 |
|
|
|
14,360 |
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|
Non-cash stock compensation expense |
|
|
841 |
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|
|
659 |
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|
Acquisition-related costs |
|
|
— |
|
|
|
106 |
|
|
Amortization of intangible assets |
|
|
613 |
|
|
|
386 |
|
|
Total selling, general, and administrative expenses |
|
|
16,276 |
|
|
|
15,511 |
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and operating expenses |
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64,413 |
|
|
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63,465 |
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|
|
|
|
|
|
|
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Income from operations |
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8,320 |
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7,964 |
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|
|
|
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|
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Other expense: |
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Interest expense |
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(179 |
) |
|
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(90 |
) |
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|
|
|
|
|
|
|
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Income from operations before income taxes |
|
|
8,141 |
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|
|
7,874 |
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Income tax expense |
|
|
774 |
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|
|
— |
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Net income |
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$ |
7,367 |
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$ |
7,874 |
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Basic net income per common share: |
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Income per common share from operations |
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$ |
0.25 |
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$ |
0.27 |
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Weighted average common shares outstanding |
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29,089 |
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28,868 |
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Diluted net income per common share: |
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Income per common share from operations |
|
$ |
0.23 |
|
|
$ |
0.24 |
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Weighted average common and common equivalent shares outstanding |
|
|
31,815 |
|
|
|
32,292 |
|
|
|
|
|
|
|
|
|
|
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Pro forma data (1): |
|
|
|
|
|
|
|
|
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Income from operations before income taxes |
|
$ |
8,141 |
|
|
$ |
7,874 |
|
|
Acquisition-related compensation expense |
|
|
(585 |
) |
|
|
— |
|
|
Non-cash stock compensation expense |
|
|
1,884 |
|
|
|
1,791 |
|
|
Acquisition-related non-cash stock compensation expense |
|
|
800 |
|
|
|
310 |
|
|
Acquisition-related costs |
|
|
— |
|
|
|
106 |
|
|
Amortization of intangible assets |
|
|
613 |
|
|
|
386 |
|
|
Pro forma income before income taxes |
|
|
10,853 |
|
|
|
10,467 |
|
|
Pro forma income tax expense |
|
|
2,713 |
|
|
|
3,140 |
|
|
Pro forma net income |
|
$ |
8,140 |
|
|
$ |
7,327 |
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma basic net income per common share |
|
$ |
0.28 |
|
|
$ |
0.25 |
|
|
Weighted average common shares outstanding |
|
|
29,089 |
|
|
|
28,868 |
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma diluted net income per common share |
|
$ |
0.26 |
|
|
$ |
0.23 |
|
|
Weighted average common and common equivalent shares outstanding |
|
|
31,815 |
|
|
|
32,292 |
|
Page 5 of 6 - The Hackett Group, Inc. Announces First Quarter Results
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
|
|
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March 30, |
|
|
December 29, |
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||
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2018 |
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2017 |
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||
|
ASSETS |
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Current assets: |
|
|
|
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|
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|
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Cash and cash equivalents |
|
$ |
23,666 |
|
|
$ |
17,512 |
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|
Accounts receivable and unbilled revenue, net |
|
|
51,943 |
|
|
|
55,262 |
|
|
Prepaid expenses and other current assets |
|
|
3,456 |
|
|
|
2,511 |
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Total current assets |
|
|
79,065 |
|
|
|
75,285 |
|
|
|
|
|
|
|
|
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Property and equipment, net |
|
|
20,652 |
|
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|
18,851 |
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Other assets |
|
|
5,641 |
|
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|
6,021 |
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Goodwill, net |
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85,691 |
|
|
|
85,074 |
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Total assets |
|
$ |
191,049 |
|
|
$ |
185,231 |
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LIABILITIES AND SHAREHOLDERS' EQUITY |
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Current liabilities: |
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Accounts payable |
|
$ |
8,621 |
|
|
$ |
8,434 |
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|
Accrued expenses and other liabilities |
|
|
39,802 |
|
|
|
43,014 |
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Total current liabilities |
|
|
48,423 |
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|
|
51,448 |
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|
Non-current accrued expenses and other liabilities |
|
|
613 |
|
|
|
1,268 |
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Long-term deferred tax liability, net |
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|
7,629 |
|
|
|
6,240 |
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Long-term debt |
|
|
19,000 |
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|
19,000 |
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Total liabilities |
|
|
75,665 |
|
|
|
77,956 |
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|
|
|
|
|
|
|
|
|
|
|
Shareholders' equity |
|
|
115,384 |
|
|
|
107,275 |
|
|
Total liabilities and shareholders' equity |
|
$ |
191,049 |
|
|
$ |
185,231 |
|
Page 6 of 6 - The Hackett Group, Inc. Announces First Quarter Results
SUPPLEMENTAL FINANCIAL DATA
(unaudited)
|
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Quarter Ended |
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|||||||||
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|
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March 30, |
|
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March 31, |
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December 29, |
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2018 |
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2017 |
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2017 |
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|||
|
Revenue Breakdown by Group: |
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(in thousands) |
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The Hackett Group (2) |
|
$ |
58,898 |
|
|
$ |
54,991 |
|
|
$ |
54,639 |
|
|
SAP Solutions (3) |
|
|
8,577 |
|
|
|
10,078 |
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|
|
9,871 |
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Net revenue (4) |
|
$ |
67,475 |
|
|
$ |
65,069 |
|
|
$ |
64,510 |
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Revenue Concentration: |
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(% of total revenue) |
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Top customer |
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3 |
% |
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4 |
% |
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4 |
% |
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Top 5 customers |
|
|
12 |
% |
|
|
18 |
% |
|
|
13 |
% |
|
Top 10 customers |
|
|
19 |
% |
|
|
30 |
% |
|
|
20 |
% |
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Key Metrics and Other Financial Data: |
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Total Company: |
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Consultant headcount |
|
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1,016 |
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|
|
922 |
|
|
|
1,011 |
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Total headcount |
|
|
1,257 |
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|
|
1,142 |
|
|
|
1,243 |
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|
Days sales outstanding (DSO) |
|
|
65 |
|
|
|
64 |
|
|
|
72 |
|
|
Cash provided by operating activities (in thousands) |
|
$ |
17,203 |
|
|
$ |
4,876 |
|
|
$ |
7,559 |
|
|
Pro forma return on equity (5) |
|
|
31 |
% |
|
|
32 |
% |
|
|
33 |
% |
|
Depreciation (in thousands) |
|
$ |
580 |
|
|
$ |
639 |
|
|
$ |
601 |
|
|
Amortization (in thousands) |
|
$ |
613 |
|
|
$ |
386 |
|
|
$ |
615 |
|
|
|
|
|
|
|
|
|
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Remaining Plan authorization: |
|
|
|
|
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|
|
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|
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Shares purchased (in thousands) |
|
|
53 |
|
|
|
59 |
|
|
|
— |
|
|
Cost of shares repurchased (in thousands) |
|
$ |
963 |
|
|
$ |
1,186 |
|
|
$ |
— |
|
|
Average price per share of shares purchased |
|
$ |
18.33 |
|
|
$ |
20.13 |
|
|
$ |
— |
|
|
Remaining Plan authorization (in thousands) |
|
$ |
2,174 |
|
|
$ |
3,247 |
|
|
$ |
3,138 |
|
|
|
|
|
|
|
|
|
|
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|
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Shares Purchased to Satisfy Employee Net Vesting Obligations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares purchased (in thousands) |
|
|
175 |
|
|
|
174 |
|
|
|
6 |
|
|
Cost of shares purchased (in thousands) |
|
$ |
3,004 |
|
|
$ |
2,906 |
|
|
$ |
89 |
|
|
Average price per share of shares purchased |
|
$ |
17.15 |
|
|
$ |
16.72 |
|
|
$ |
15.37 |
|
|
(2) |
The Hackett Group encompasses the Benchmarking, Business Transformation and Executive Advisory groups, and EPM Groups |
and excludes AMS.
|
(3) |
SAP Solutions encompasses Best Practice Implementation of ERP Software, the SAP group, approximately 40% of which are offshore resources. |
|
(4) |
Net revenue excludes reimbursable expenses which are travel related expenses passed through to a client with no associated margin. |
|
(5) |
Twelve months of pro forma net income divided by average shareholder's equity. |
|
(6) |
Certain reclassifications have been made to conform with current reporting requirements. |