UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30,September 29, 2023

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from to

Commission File Number 333-48123

 

The Hackett Group, Inc.

(Exact name of registrant as specified in its charter)

 

 

Florida

 

65-0750100

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

1001 Brickell Bay Drive, Suite 3000

Miami, Florida

 

33131

(Address of principal executive offices)

 

(Zip Code)

 

(305) 375-8005

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $.001 per share

HCKT

NASDAQ Stock Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirement for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large Accelerated Filer

 

Accelerated Filer

 

 

 

 

 

 

 

Non-Accelerated Filer

 

Smaller Reporting Company

 

 

 

 

 

 

 

 

 

 

Emerging Growth Company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of August 4,November3, 2023, there were27,216,659 27,237,502shares of common stock outstanding.

 

 

 


The Hackett Group, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

The Hackett Group, Inc.

TABLE OF CONTENTS

 

PART I - FINANCIAL INFORMATION

Page

 

 

 

Item 1.

Financial Statements

 

 

 

 

 

Consolidated Balance Sheets as of June 30,September 29, 2023 (unaudited) and December 30, 2022

3

 

 

 

 

Consolidated Statements of Operations for the Three and SixNine Months Ended June 30,September 29, 2023, and July 1,September 30, 2022, (unaudited)

4

 

 

 

 

Consolidated Statements of Comprehensive Income for the Three and SixNine Months Ended June 30,September 29, 2023, and July 1,September 30, 2022, (unaudited)

5

 

 

 

 

Consolidated Statements of Cash Flows for the SixNine Months Ended June 30,September 29, 2023, and July 1,September 30, 2022, (unaudited)

6

 

 

 

 

Consolidated Statements of Equity for the Three and SixNine Months Ended June 30,September 29, 2023, and July 1,September 30, 2022, (unaudited)

7

 

 

 

 

Notes to Consolidated Financial Statements (unaudited)

8

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

1918

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

2423

 

 

 

Item 4.

Controls and Procedures

2423

 

 

Item 5.

Other Information

2423

 

 

PART II - OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

2524

 

 

 

Item 1A.

Risk Factors

2524

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

2524

 

 

 

Item 6.

Exhibits

2625

 

 

SIGNATURES

2726

 

2


 

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

The Hackett Group, Inc.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

(unaudited)

 

 

June 30,

 

 

December 30,

 

 

September 29,

 

 

December 30,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

ASSETS

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

Cash

 

$

15,834

 

 

$

30,255

 

 

$

9,879

 

 

$

30,255

 

Accounts receivable and contract assets, net of allowance of $1,128 and $856 at June 30, 2023 and December 30, 2022, respectively

 

 

57,797

 

 

 

48,376

 

Accounts receivable and contract assets, net of allowance of $973 and $856 at September 29, 2023 and December 30, 2022, respectively

 

 

62,207

 

 

 

48,376

 

Prepaid expenses and other current assets

 

 

3,203

 

 

 

2,535

 

 

 

3,174

 

 

 

2,535

 

Total current assets

 

 

76,834

 

 

 

81,166

 

 

 

75,260

 

 

 

81,166

 

 

 

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

19,856

 

 

 

19,359

 

 

 

20,033

 

 

 

19,359

 

Other assets

 

 

285

 

 

 

268

 

 

 

282

 

 

 

268

 

Goodwill

 

 

84,148

 

 

 

83,502

 

 

 

83,663

 

 

 

83,502

 

Operating lease right-of-use assets

 

 

1,804

 

 

 

698

 

 

 

1,609

 

 

 

698

 

Total assets

 

$

182,927

 

 

$

184,993

 

 

$

180,847

 

 

$

184,993

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

5,475

 

 

$

8,741

 

 

$

5,039

 

 

$

8,741

 

Accrued expenses and other liabilities

 

 

22,342

 

 

 

30,953

 

 

 

23,726

 

 

 

30,953

 

Contract liabilities

 

 

14,452

 

 

 

13,278

 

 

 

12,869

 

 

 

13,278

 

Income tax payable

 

 

3,373

 

 

 

5,759

 

 

 

4,009

 

 

 

5,759

 

Operating lease liabilities

 

 

1,226

 

 

 

870

 

 

 

1,328

 

 

 

870

 

Total current liabilities

 

 

46,868

 

 

 

59,601

 

 

 

46,971

 

 

 

59,601

 

Non-current deferred tax liability, net

 

 

9,339

 

 

 

6,877

 

 

 

8,583

 

 

 

6,877

 

Long term debt, net

 

 

52,676

 

 

 

59,653

 

 

 

43,694

 

 

 

59,653

 

Operating lease liabilities

 

 

1,151

 

 

 

584

 

 

 

757

 

 

 

584

 

Total liabilities

 

 

110,034

 

 

 

126,715

 

 

 

100,005

 

 

 

126,715

 

 

 

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock, $0.001 par value, 1,250,000 shares authorized; none
issued and outstanding

 

 

 

 

 

 

 

 

 

 

 

 

Common stock, $0.001 par value, 125,000,000 shares authorized; 60,528,948 and
60,147,720 shares issued at June 30, 2023 and December 30, 2022, respectively

 

 

61

 

 

 

60

 

Common stock, $0.001 par value, 125,000,000 shares authorized; 60,537,559 and
60,147,720 shares issued at September 29, 2023 and December 30, 2022, respectively

 

 

61

 

 

 

60

 

Additional paid-in capital

 

 

311,505

 

 

 

308,325

 

 

 

314,046

 

 

 

308,325

 

Treasury stock, at cost, 33,314,926 and 33,277,459 shares June 30, 2023 and December 30, 2022, respectively

 

 

(274,600

)

 

 

(273,866

)

Treasury stock, at cost, 33,314,926 and 33,277,459 shares September 29, 2023 and December 30, 2022, respectively

 

 

(274,600

)

 

 

(273,866

)

Retained earnings

 

 

49,540

 

 

 

38,640

 

 

 

55,966

 

 

 

38,640

 

Accumulated other comprehensive loss

 

 

(13,613

)

 

 

(14,881

)

 

 

(14,631

)

 

 

(14,881

)

Total shareholders' equity

 

 

72,893

 

 

 

58,278

 

 

 

80,842

 

 

 

58,278

 

Total liabilities and shareholders' equity

 

$

182,927

 

 

$

184,993

 

 

$

180,847

 

 

$

184,993

 

 

The accompanying notes are an integral part of the consolidated financial statements.

3


 

The Hackett Group, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

 

 

Quarter Ended

 

 

Six Months Ended

 

 

Quarter Ended

 

 

Nine Months Ended

 

 

June 30,

 

July 1,

 

June 30,

 

July 1,

 

 

September 29,

 

September 30,

 

September 29,

 

September 30,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue before reimbursements

 

$

75,641

 

 

$

74,768

 

 

$

145,472

 

 

$

149,876

 

 

$

74,634

 

 

$

70,995

 

 

$

220,106

 

 

$

220,871

 

Reimbursements

 

 

1,461

 

 

 

1,160

 

 

 

2,859

 

 

 

1,716

 

 

 

1,222

 

 

 

1,038

 

 

 

4,081

 

 

 

2,754

 

Total revenue

 

 

77,102

 

 

 

75,928

 

 

 

148,331

 

 

 

151,592

 

 

 

75,856

 

 

 

72,033

 

 

 

224,187

 

 

 

223,625

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of service:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Personnel costs before reimbursable expenses (includes $1,643 and $3,169 and $1,483 and $3,149 of non-cash stock based compensation expense in the three and six months ended June 30, 2023 and July 1, 2022, respectively)

 

 

45,426

 

 

 

44,701

 

 

 

88,569

 

 

 

92,034

 

Personnel costs before reimbursable expenses (includes $1,518 and $4,687 and $1,652 and $4,801 of non-cash stock based compensation expense in the three and nine months ended September 29, 2023 and September 30, 2022, respectively)

 

 

44,421

 

 

 

42,870

 

 

 

132,990

 

 

 

134,904

 

Reimbursable expenses

 

 

1,461

 

 

 

1,160

 

 

 

2,859

 

 

 

1,716

 

 

 

1,222

 

 

 

1,038

 

 

 

4,081

 

 

 

2,754

 

Total cost of service

 

 

46,887

 

 

 

45,861

 

 

 

91,428

 

 

 

93,750

 

 

 

45,643

 

 

 

43,908

 

 

 

137,071

 

 

 

137,658

 

Selling, general and administrative costs (includes $1,129 and $2,050 and $1,235 and $2,168 of non-cash stock based compensation expense in the three and six months ended June 30, 2023 and July 1, 2022, respectively)

 

 

17,425

 

 

 

15,886

 

 

 

32,861

 

 

 

30,252

 

Selling, general and administrative costs (includes $1,193 and $3,243 and $859 and $3,027 of non-cash stock based compensation expense in the three and nine months ended September 29, 2023 and September 30, 2022, respectively)

 

 

16,470

 

 

 

14,616

 

 

 

49,331

 

 

 

44,993

 

Restructuring and asset impairment settlement

 

 

 

 

 

(526

)

 

 

 

 

 

(651

)

Total costs and operating expenses

 

 

64,312

 

 

 

61,747

 

 

 

124,289

 

 

 

124,002

 

 

 

62,113

 

 

 

57,998

 

 

 

186,402

 

 

 

182,000

 

Income from operations

 

 

12,790

 

 

 

14,181

 

 

 

24,042

 

 

 

27,590

 

 

 

13,743

 

 

 

14,035

 

 

 

37,785

 

 

 

41,625

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other expense, net:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

(921

)

 

 

(28

)

 

 

(1,780

)

 

 

(56

)

 

 

(814

)

 

 

(14

)

 

 

(2,594

)

 

 

(70

)

Income from operations before income taxes

 

 

11,869

 

 

 

14,153

 

 

 

22,262

 

 

 

27,534

 

 

 

12,929

 

 

 

14,021

 

 

 

35,191

 

 

 

41,555

 

Income tax expense

 

 

3,149

 

 

 

3,938

 

 

 

5,381

 

 

 

6,814

 

 

 

3,509

 

 

 

3,655

 

 

 

8,890

 

 

 

10,469

 

Net income

 

$

8,720

 

 

$

10,215

 

 

 

16,881

 

 

$

20,720

 

 

$

9,420

 

 

$

10,366

 

 

 

26,301

 

 

$

31,086

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic net income per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income per common share from operations

 

$

0.32

 

 

$

0.32

 

 

$

0.62

 

 

$

0.66

 

 

$

0.35

 

 

$

0.33

 

 

$

0.97

 

 

$

0.98

 

Weighted average common shares outstanding

 

 

27,192

 

 

 

31,652

 

 

 

27,109

 

 

 

31,551

 

 

 

27,220

 

 

 

31,686

 

 

 

27,146

 

 

 

31,596

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted net income per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income per common share from operations

 

$

0.32

 

 

$

0.32

 

 

$

0.62

 

 

$

0.65

 

 

$

0.34

 

 

$

0.32

 

 

$

0.95

 

 

$

0.97

 

Weighted average common and common equivalent shares outstanding

 

 

27,548

 

 

 

32,221

 

 

 

27,408

 

 

$

32,032

 

 

 

27,818

 

 

 

32,309

 

 

 

27,545

 

 

$

32,124

 

 

The accompanying notes are an integral part of the consolidated financial statements.

4


 

The Hackett Group, Inc.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)

 

 

Quarter Ended

 

 

Six Months Ended

 

 

Quarter Ended

 

 

Nine Months Ended

 

 

June 30,

 

July 1,

 

June 30,

 

July 1,

 

 

September 29,

 

September 30,

 

September 29,

 

September 30,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net income

 

$

8,720

 

 

$

10,215

 

 

$

16,881

 

 

$

20,720

 

 

$

9,420

 

 

$

10,366

 

 

$

26,301

 

 

$

31,086

 

Foreign currency translation adjustment

 

 

698

 

 

 

(2,896

)

 

 

1,268

 

 

 

(4,030

)

 

 

(1,018

)

 

 

(1,966

)

 

 

250

 

 

 

(5,996

)

Total comprehensive income

 

$

9,418

 

 

$

7,319

 

 

$

18,149

 

 

$

16,690

 

 

$

8,402

 

 

$

8,400

 

 

$

26,551

 

 

$

25,090

 

 

The accompanying notes are an integral part of the consolidated financial statements.

5


 

The Hackett Group, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 

Six Months Ended

 

 

Nine Months Ended

 

 

June 30,

 

July 1,

 

 

September 29,

 

September 30,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

16,881

 

 

$

20,720

 

 

$

26,301

 

 

$

31,086

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation expense

 

 

1,636

 

 

 

1,630

 

 

 

2,528

 

 

 

2,468

 

Amortization expense

 

 

 

 

 

154

 

 

 

 

 

 

154

 

Amortization of debt issuance costs

 

 

36

 

 

 

28

 

 

 

54

 

 

 

43

 

Non-cash stock based compensation expense

 

 

5,219

 

 

 

5,317

 

 

 

7,930

 

 

 

7,828

 

Provision for doubtful accounts

 

 

303

 

 

 

204

 

 

 

219

 

 

 

295

 

Loss (gain) on foreign currency translation

 

 

605

 

 

 

(968

)

 

 

263

 

 

 

(1,383

)

Deferred income tax expense

 

 

2,390

 

 

 

1,064

 

 

 

1,617

 

 

 

360

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

(Increase) decrease in accounts receivable and contract assets

 

 

(9,772

)

 

 

1,079

 

Increase in accounts receivable and contract assets

 

 

(14,134

)

 

 

(1,446

)

(Increase) decrease in prepaid expenses and other assets

 

 

(1,710

)

 

 

3,369

 

 

 

(1,482

)

 

 

3,566

 

Decrease in accounts payable

 

 

(3,266

)

 

 

(2,277

)

 

 

(3,701

)

 

 

(2,992

)

Decrease in accrued expenses and other liabilities

 

 

(6,459

)

 

 

(7,613

)

 

 

(5,619

)

 

 

(9,783

)

Increase (decrease) in contract liabilities

 

 

1,174

 

 

 

(366

)

Decrease in contract liabilities

 

 

(409

)

 

 

(2,201

)

(Decrease) increase in income tax payable

 

 

(2,387

)

 

 

1,948

 

 

 

(1,750

)

 

 

6,083

 

Net cash provided by operating activities

 

 

4,650

 

 

 

24,289

 

 

 

11,817

 

 

 

34,078

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(2,125

)

 

 

(2,267

)

 

 

(3,203

)

 

 

(3,163

)

Net cash used in investing activities

 

 

(2,125

)

 

 

(2,267

)

 

 

(3,203

)

 

 

(3,163

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

Debt issuance costs

 

 

(13

)

 

 

(10

)

 

 

(14

)

 

 

(10

)

Proceeds from borrowings

 

 

5,000

 

 

 

 

 

 

5,000

 

 

 

 

Repayment of borrowings

 

 

(12,000

)

 

 

 

 

 

(21,000

)

 

 

 

Proceeds from ESPP

 

 

481

 

 

 

407

 

 

 

481

 

 

 

407

 

Proceeds from the exercise of stock options

 

 

 

 

 

120

 

 

 

 

 

 

120

 

Dividends paid

 

 

(5,987

)

 

 

(3,475

)

 

 

(8,978

)

 

 

(6,954

)

Repurchase of common stock

 

 

(4,379

)

 

 

(3,142

)

 

 

(4,446

)

 

 

(3,211

)

Net cash used in financing activities

 

 

(16,898

)

 

 

(6,100

)

 

 

(28,957

)

 

 

(9,648

)

Effect of exchange rate on cash

 

 

(48

)

 

 

(36

)

 

 

(33

)

 

 

(16

)

Net (decrease) increase in cash and cash equivalents

 

 

(14,421

)

 

 

15,886

 

Net (decrease) increase in cash

 

 

(20,376

)

 

 

21,251

 

Cash at beginning of period

 

 

30,255

 

 

 

45,794

 

 

 

30,255

 

 

 

45,794

 

Cash at end of period

 

$

15,834

 

 

$

61,680

 

 

$

9,879

 

 

$

67,045

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

 

 

 

 

Cash paid (refunded) for income taxes

 

$

5,192

 

 

$

(34

)

 

$

8,719

 

 

$

(34

)

Cash paid for interest

 

$

1,819

 

 

$

28

 

 

$

2,690

 

 

$

43

 

Supplemental disclosure of non-cash flow investing and financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

Dividend declared during the quarter and paid the following quarter

 

$

2,991

 

 

$

3,480

 

 

$

2,994

 

 

$

3,483

 

 

The accompanying notes are an integral part of the consolidated financial statements.

6


 

The Hackett Group, Inc.

CONSOLIDATED STATEMENTS OF EQUITY

(in thousands)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

Other

 

Total

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

Other

 

Total

 

 

Common Stock

 

 

Paid in

 

Treasury Stock

 

 

Retained

 

Comprehensive

 

Shareholders'

 

 

Common Stock

 

 

Paid in

 

Treasury Stock

 

 

Retained

 

Comprehensive

 

Shareholders'

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Shares

 

 

Amount

 

 

Earnings

 

 

Loss

 

 

Equity

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Shares

 

 

Amount

 

 

Earnings

 

 

Loss

 

 

Equity

 

Balance at December 30, 2022

 

 

60,148

 

 

$

60

 

 

$

308,325

 

 

 

(33,277

)

 

$

(273,866

)

 

$

38,640

 

 

$

(14,881

)

 

$

58,278

 

 

 

60,148

 

 

$

60

 

 

$

308,325

 

 

 

(33,277

)

 

$

(273,866

)

 

$

38,640

 

 

$

(14,881

)

 

$

58,278

 

Issuance of common stock

 

 

343

 

 

 

 

 

 

(3,529

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,529

)

 

 

343

 

 

 

 

 

 

(3,529

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,529

)

Treasury stock purchased, net of costs

 

 

 

 

 

 

 

 

 

 

 

(37

)

 

 

(711

)

 

 

 

 

 

 

 

 

(711

)

 

 

 

 

 

 

 

 

 

 

 

(37

)

 

 

(711

)

 

 

 

 

 

 

 

 

(711

)

Amortization of restricted stock
units and common stock subject to
vesting requirements

 

 

 

 

 

 

 

 

3,662

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,662

 

 

 

 

 

 

 

 

 

3,662

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,662

 

Dividends declared

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,990

)

 

 

 

 

 

(2,990

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,990

)

 

 

 

 

 

(2,990

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8,161

 

 

 

 

 

 

8,161

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8,161

 

 

 

 

 

 

8,161

 

Foreign currency translation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

570

 

 

 

570

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

570

 

 

 

570

 

Balance at March 31, 2023

 

 

60,491

 

 

$

60

 

 

$

308,458

 

 

 

(33,314

)

 

$

(274,577

)

 

$

43,811

 

 

$

(14,311

)

 

$

63,441

 

 

 

60,491

 

 

$

60

 

 

$

308,458

 

 

 

(33,314

)

 

$

(274,577

)

 

$

43,811

 

 

$

(14,311

)

 

$

63,441

 

Issuance of common stock

 

 

38

 

 

 

1

 

 

 

362

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

363

 

 

 

38

 

 

 

1

 

 

 

362

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

363

 

Treasury stock purchased, net of costs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(23

)

 

 

 

 

 

 

 

 

(23

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(23

)

 

 

 

 

 

 

 

 

(23

)

Amortization of restricted stock
units and common stock subject to
vesting requirements

 

 

 

 

 

 

 

 

2,685

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,685

 

 

 

 

 

 

 

 

 

2,685

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,685

 

Dividends declared

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,991

)

 

 

 

 

 

(2,991

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,991

)

 

 

 

 

 

(2,991

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8,720

 

 

 

 

 

 

8,720

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8,720

 

 

 

 

 

 

8,720

 

Foreign currency translation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

698

 

 

 

698

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

698

 

 

 

698

 

Balance at June 30, 2023

 

 

60,529

 

 

$

61

 

 

$

311,505

 

 

 

(33,314

)

 

$

(274,600

)

 

$

49,540

 

 

$

(13,613

)

 

$

72,893

 

 

 

60,529

 

 

$

61

 

 

$

311,505

 

 

 

(33,314

)

 

$

(274,600

)

 

$

49,540

 

 

$

(13,613

)

 

$

72,893

 

Issuance of common stock

 

 

9

 

 

 

 

 

 

(67

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(67

)

Amortization of restricted stock
units and common stock subject to
vesting requirements

 

 

 

 

 

 

 

 

2,608

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,608

 

Dividends declared

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,994

)

 

 

 

 

 

(2,994

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9,420

 

 

 

 

 

 

9,420

 

Foreign currency translation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,018

)

 

 

(1,018

)

Balance at September 29, 2023

 

 

60,538

 

 

$

61

 

 

$

314,046

 

 

 

(33,314

)

 

$

(274,600

)

 

$

55,966

 

 

$

(14,631

)

 

$

80,842

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

Other

 

Total

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

Other

 

Total

 

 

Common Stock

 

 

Paid in

 

Treasury Stock

 

 

Retained

 

Comprehensive

 

Shareholders'

 

 

Common Stock

 

 

Paid in

 

Treasury Stock

 

 

Retained

 

Comprehensive

 

Shareholders'

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Shares

 

 

Amount

 

 

Earnings

 

 

Loss

 

 

Equity

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Shares

 

 

Amount

 

 

Earnings

 

 

Loss

 

 

Equity

 

Balance at December 31, 2021

 

 

59,631

 

 

$

60

 

 

$

300,288

 

 

 

(28,358

)

 

$

(157,294

)

 

$

11,272

 

 

$

(10,473

)

 

$

143,853

 

 

 

59,631

 

 

$

60

 

 

$

300,288

 

 

 

(28,358

)

 

$

(157,294

)

 

$

11,272

 

 

$

(10,473

)

 

$

143,853

 

Issuance of common stock

 

 

373

 

 

 

 

 

 

(2,432

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,432

)

 

 

373

 

 

 

 

 

 

(2,432

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,432

)

Treasury stock purchased, net of costs

 

 

 

 

 

 

 

 

 

 

 

(31

)

 

 

(635

)

 

 

 

 

 

 

 

 

(635

)

 

 

 

 

 

 

 

 

 

 

 

(31

)

 

 

(635

)

 

 

 

 

 

 

 

 

(635

)

Amortization of restricted stock
units and common stock subject to
vesting requirements

 

 

 

 

 

 

 

 

3,632

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,632

 

 

 

 

 

 

 

 

 

3,632

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,632

 

Dividends declared

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,474

)

 

 

 

 

 

(3,474

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,474

)

 

 

 

 

 

(3,474

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10,505

 

 

 

 

 

 

10,505

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10,505

 

 

 

 

 

 

10,505

 

Foreign currency translation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,134

)

 

 

(1,134

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,134

)

 

 

(1,134

)

Balance at April 1, 2022

 

 

60,004

 

 

$

60

 

 

$

301,488

 

 

 

(28,389

)

 

$

(157,929

)

 

$

18,303

 

 

$

(11,607

)

 

$

150,315

 

 

 

60,004

 

 

$

60

 

 

$

301,488

 

 

 

(28,389

)

 

$

(157,929

)

 

$

18,303

 

 

$

(11,607

)

 

$

150,315

 

Issuance of common stock

 

 

61

 

 

 

 

 

 

452

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

452

 

 

 

61

 

 

 

 

 

 

452

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

452

 

Amortization of restricted stock
units and common stock subject to
vesting requirements

 

 

 

 

 

 

 

 

2,224

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,224

 

 

 

 

 

 

 

 

 

2,224

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,224

 

Dividends declared

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,480

)

 

 

 

 

 

(3,480

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,480

)

 

 

 

 

 

(3,480

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10,215

 

 

 

 

 

 

10,215

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10,215

 

 

 

 

 

 

10,215

 

Foreign currency translation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,896

)

 

 

(2,896

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,896

)

 

 

(2,896

)

Balance at July 1, 2022

 

 

60,065

 

 

$

60

 

 

$

304,164

 

 

 

(28,389

)

 

$

(157,929

)

 

$

25,038

 

 

$

(14,503

)

 

$

156,830

 

 

 

60,065

 

 

$

60

 

 

$

304,164

 

 

 

(28,389

)

 

$

(157,929

)

 

$

25,038

 

 

$

(14,503

)

 

$

156,830

 

Issuance of common stock

 

 

8

 

 

 

 

 

 

(69

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(69

)

Amortization of restricted stock
units and common stock subject to
vesting requirements

 

 

 

 

 

 

 

 

2,393

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,393

 

Dividends declared

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,483

)

 

 

 

 

 

(3,483

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10,366

 

 

 

 

 

 

10,366

 

Foreign currency translation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,966

)

 

 

(1,966

)

Balance at September 30, 2022

 

 

60,073

 

 

$

60

 

 

$

306,488

 

 

 

(28,389

)

 

$

(157,929

)

 

$

31,921

 

 

$

(16,469

)

 

$

164,071

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of the consolidated financial statements.

7


The Hackett Group, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

1. Basis of Presentation and General Information

Basis of Presentation

The accompanying consolidated financial statements of The Hackett Group, Inc. (“Hackett” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include the Company’s accounts and those of its wholly-owned subsidiaries which the Company is required to consolidate. All intercompany transactions and balances have been eliminated in the consolidation.

In the opinion of management, the accompanying consolidated financial statements reflect all normal and recurring adjustments which are necessary for a fair presentation of the Company’s financial position, results of operations, and cash flows as of the dates and for the periods presented. The consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, these statements do not include all the disclosures normally required by U.S. GAAP for annual financial statements and should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 30, 2022, included in the Annual Report on Form 10-K filed by the Company with the SEC on March 3, 2023. The consolidated results of operations for the quarter and sixnine months ended June 30,September 29, 2023, are not necessarily indicative of the results to be expected for any future period or for the full fiscal year.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Segment Reporting

Segments are defined as components of a company that engage in business activities from which they earn revenuesrevenue and incur expenses, and for which separate financial information is available and is evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company assesses its operating segments under the management approach in accordance with ASC 280, Segment Reporting"Segment Reporting" (ASC 280), and has determined that it has three operating segments: Global S&BT, Oracle Solutions and SAP Solutions which are also its reportable segments. See Note 1112 “Segment Information and GeographicGeographical Data” for detailed segment information.

Goodwill and Other Intangible Assets

For acquisitions accounted for as a business combination, goodwill represents the excess of the cost over the fair value of the net assets acquired. The Company has organized its operating and internal reporting structure to align with its primary market solutions. In accordance with ASC 280, management made the determination to present three operating segments, three reportable segments and three reporting units as follows: (1) Global S&BT, (2) Oracle Solutions, and (3) SAP Solutions. Global S&BT includes the results of the Company’s strategic business consulting practices; Oracle Solutions includes the results of the Company’s Oracle EPM/ERP and Digital AMS practices; SAP Solutions includes the Company’s SAP applications and related SAP service offerings. A reporting unit is an operating segment or one level below an operating segment to which goodwill is assigned. The goodwill has been allocated to the reporting unit based on the reporting unit's relative fair value. The carrying amount of goodwill by reporting unit is as follows (in thousands):

 

 

 

 

 

Foreign

 

 

 

 

 

 

 

 

Foreign

 

 

 

 

 

December 30,

 

Additions/

 

 

Currency

 

June 30,

 

 

December 30,

 

Additions/

 

 

Currency

 

September 29,

 

 

2022

 

 

Adjustments

 

 

Translation

 

 

2023

 

 

2022

 

 

Adjustments

 

 

Translation

 

 

2023

 

Global S&BT

 

$

56,810

 

 

$

-

 

 

$

646

 

 

$

57,456

 

 

$

56,810

 

 

$

-

 

 

$

161

 

 

$

56,971

 

Oracle Solutions

 

 

16,699

 

 

 

 

 

 

 

 

 

16,699

 

 

 

16,699

 

 

 

 

 

 

 

 

 

16,699

 

SAP Solutions

 

 

9,993

 

 

 

 

 

 

 

 

 

9,993

 

 

 

9,993

 

 

 

 

 

 

 

 

 

9,993

 

Goodwill

 

$

83,502

 

 

$

-

 

 

$

646

 

 

$

84,148

 

 

$

83,502

 

 

$

-

 

 

$

161

 

 

$

83,663

 

 

8


The Hackett Group, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

1. Basis of Presentation and General Information (continued)

Revenue Recognition

The Company generates substantially all of its revenue from providing professional services to its clients. The Company also generates revenue from software licenses,sales, software supportmaintenance and maintenancesupport and subscriptions to its executive and best practices advisory programs. A single contract could include one or multiple performance obligations. For those contracts that have multiple performance obligations, the Company allocates the total transaction price to each performance obligation based on its relative standalone selling price. The Company determines the standalone selling price based on the respective selling price of the individual elements when sold separately.

Revenue is recognized when control of the goods and services provided are transferred to the Company’s customers, in an amount that reflects the consideration it expects to be entitled to in exchange for those goods and services using the following steps: 1) identify the contract, 2) identify the performance obligations, 3) determine the transaction price, 4) allocate the transaction price to the performance obligations in the contract, and 5) recognize revenue as or when the Company satisfies the performance obligations.

The Company typically satisfies its performance obligations for professional services over time as the related services are provided. The performance obligations related to software maintenance and support maintenance and subscriptions to its executive and best practice advisory programs are typically satisfied evenly over the course of the service period. Other performance obligations, such as software licenses,sales, are satisfied at a point in time.

The Company generates revenue under four types of billing arrangements: fixed-fee (including software license revenue);fixed-fee; time-and-materials; executive and best practice advisory services; and software sales and software maintenance and support.

In fixed-fee billing arrangements, which would also include contracts with capped fees, the Company agrees to a pre-established fee or fee cap in exchange for a predetermined set of professional services. The Company sets the fees based on its estimates of the costs and timing for completing the engagements. The Company generally recognizes revenue under fixed-fee or capped fee arrangements using a proportionate performance approach, which is based on work completed to-date as compared to estimates of the total services to be provided under the engagement. Estimates of total engagement revenue and cost of services are monitored regularly during the term of the engagement. If the Company’s estimates indicate a potential loss, such a loss is recognized in the period in which the loss first becomes probable and reasonably estimable. The customer is invoiced based on the contractual agreement between the parties, typically bi-weekly, monthly or milestone driven, with net thirty-day terms, however client terms are subject to change.

Time-and-material billing arrangements require the client to pay based on the number of hours worked by the Company’s consultants at agreed upon hourly rates. The Company recognizes revenue under time-and-material arrangements as the related services or goods are provided, using the right to invoice practical expedient which allows it to recognize revenue in the amount based on the number of hours worked and the agreed upon hourly rates. The customer is invoiced based on the contractual agreement between the parties, typically bi-weekly, monthly or milestone driven, with net thirty-day terms, however client terms are subject to change.

Advisory services contracts are typically in the form of a subscription agreement which allows the customer access to the Company’s executive and best practice advisory programs. There is typically a single performance obligation and the transaction price is the contractual amount of the subscription agreement. Revenue from advisory services contracts is recognized ratably over the life of the agreements. Customers are typically invoiced at the inception of the contract, with net thirty-day terms, however client terms are subject to change.

The resale of on-premise software, cloud software and maintenance contracts are in the form of SAP America ("SAP") software license or maintenance agreements provided by SAP. SAP is the principal and the Company is the agent in these transactions as the Company does not obtain title to the software and maintenance which is sold simultaneously. The transaction price is the Company’s agreed-upon percentage of the software licensesale for either on-premise software or cloud software or maintenance amount in the contract with the vendor. Revenue for the resale of software licenses is recognized upon contract execution and customer’s receipt of the software. The Company also provides software maintenance on other ERP systems, primarily Oracle. Revenue from maintenance contracts is recognized ratably over the life of the agreements. The customer is typically invoiced at contract inception, with net thirty-day terms, however client terms are subject to change.

Revenue before reimbursements excludes reimbursable expenses charged to clients. Reimbursements, which include travel and out-of-pocket expenses, are included in revenue, and an equivalent amount of reimbursable expenses is included in the cost of service.

Expense reimbursements that are billable to clients are included in total revenue and are substantially all billed as time-and-material billing arrangements. Therefore, the Company recognizes all reimbursable expenses as revenue as the related services are provided, using the right to invoice practical expedient. Reimbursable expenses are recognized as expenses in the period in which the expense is incurred. Any expense reimbursements that are billable to clients under fixed-fee billing arrangements are recognized in line with the proportionate performance approach.

 

9


The Hackett Group, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

1. Basis of Presentation and General Information (continued)

The payment terms and conditions in the Company’s customer contracts vary. The agreements entered into in connection with a project, whether time and materials-based or fixed-fee or capped-fee based, typically allow clients to terminate early due to breach or for convenience with 30 days’ notice. In the event of termination, the client is contractually required to pay for all time, materials and expenses incurred by the Company through the effective date of the termination. In addition, from time to time the Company enters into agreements with its clients that limit its right to enter into business relationships with specific competitors of that client for a specific time period. These provisions typically prohibit the Company from performing a defined range of services which it might otherwise be willing to perform for potential clients. These provisions are generally limited to six to twelve months and usually apply only to specific employees or the specific project team.

Differences between the timing of billings and the recognition of revenue are recognized as either contract assets or contract liabilities in the accompanying consolidated balance sheets. Revenue recognized for services performed but not yet billed to clients is recorded as contract assets and is included within accounts receivable and contract assets. Services not yet performed, however billed to the client and uncollected at period end, are recorded as contract assets and are included within accounts receivable and contract assets. Client prepayments are classified as contract liabilities and recognized over future periods as earned in accordance with the applicable engagement agreement. See Note 3 for the accounts receivable and contract asset balances. During the quarter and sixnine months ended June 30,September 29, 2023, the Company recognized $2.81.5 million and $10.612.1 million, respectively, of revenue as a result of changes in the contract liability balance, as compared to $3.42.0 million and $10.312.3 million, respectively, for the quarter and sixnine months ended July 1,September 30, 2022.

Based on the information that management reviews internally for evaluating operating segment performance and nature, amount, timing, and uncertainty of revenue and cash flows affected by economic factors, the Company disaggregates revenue as follows for the quarters and sixnine months ended June 30,September 29, 2023 and July 1,September 30, 2022 (in thousands):

 

 

Quarter Ended

 

 

Six Months Ended

 

 

Quarter Ended

 

 

Nine Months Ended

 

 

June 30,

 

July 1,

 

 

June 30,

 

July 1,

 

 

September 29,

 

September 30,

 

 

September 29,

 

September 30,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Global S&BT:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North America Consulting

 

$

36,444

 

 

$

38,698

 

 

$

72,611

 

 

$

73,783

 

 

$

37,032

 

 

$

35,804

 

 

$

109,642

 

 

$

109,587

 

International Consulting

 

 

7,188

 

 

 

5,832

 

 

 

13,356

 

 

 

13,384

 

 

 

6,766

 

 

 

5,789

 

 

 

20,123

 

 

 

19,173

 

Total Global S&BT

 

$

43,632

 

 

$

44,530

 

 

$

85,967

 

 

$

87,167

 

 

$

43,798

 

 

$

41,593

 

 

$

129,765

 

 

$

128,760

 

Oracle Solutions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consulting and software support and maintenance

 

$

20,775

 

 

$

19,971

 

 

$

37,943

 

 

$

41,483

 

 

$

20,831

 

 

$

17,682

 

 

$

58,774

 

 

$

59,165

 

Total Oracle Solutions

 

$

20,775

 

 

$

19,971

 

 

$

37,943

 

 

$

41,483

 

 

$

20,831

 

 

$

17,682

 

 

$

58,774

 

 

$

59,165

 

SAP Solutions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consulting and software support and maintenance

 

$

11,054

 

 

$

10,413

 

 

$

21,767

 

 

$

20,762

 

 

$

10,605

 

 

$

10,118

 

 

$

32,372

 

 

$

30,880

 

Software license sales

 

 

1,641

 

 

 

1,014

 

 

 

2,654

 

 

 

2,180

 

Software sales

 

 

622

 

 

 

2,640

 

 

 

3,276

 

 

 

4,820

 

Total SAP Solutions

 

$

12,695

 

 

$

11,427

 

 

$

24,421

 

 

$

22,942

 

 

$

11,227

 

 

$

12,758

 

 

$

35,648

 

 

$

35,700

 

Total segment revenue

 

$

77,102

 

 

$

75,928

 

 

$

148,331

 

 

$

151,592

 

 

$

75,856

 

 

$

72,033

 

 

$

224,187

 

 

$

223,625

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The total revenue from the Global S&BT segment, the Oracle Solutions segment and the SAP Solutions segment's consulting and software support and maintenance services is all recognized over time. The software license sales total revenue included in the SAP Solutions segment is recognized at a point in time.

Capitalized Sales Commissions

Sales commissions earned by the Company’s sales force are considered the incremental and recoverable costs of obtaining a contract with a customer. These costs are deferred and then amortized as project revenue is recognized. The Company determined the period of amortization by taking into consideration the customer contract period, which areis generally less than 12 months. Commission expense isexpenses are included the in Selling, Generalgeneral and Administrative Costsadministrative costs in the accompanying consolidated statements of operations. As of December 30, 2022 and December 31, 2021, the Company had $1.5 million and $1.6 million, respectively, of deferred commissions, of which $0.40.3 million and $0.60.9 million was amortized during the quarter and sixnine months ended June 30,September 29, 2023, respectively, and $0.40.2 million and $0.70.9 million for the same periods in 2022, respectively. No impairment loss was recognized relating to the capitalization of deferred commission.

10


The Hackett Group, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

1. Basis of Presentation and General Information (continued)

Practical Expedients

The Company does not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less. The Company does not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the customer and the transfer of the promised goods or services to the customer will be less than one year.

Sales tax collected from customers and remitted to the applicable taxing authorities is accounted for on a net basis, with no impact on revenue.

Expense reimbursements that are billable to clients are included in total revenue and are substantially all billed as time-and-material billing arrangements. Therefore, the Company recognizes all reimbursable expenses as revenue as the related services are provided, using the right to invoice practical expedient. Reimbursable expenses are recognized as expenses in the period in which the expense is incurred. Any expense reimbursements that are billable to clients under fixed-fee billing arrangements are recognized in line with the proportionate performance approach.

Fair Value

The Company’s financial instruments consist of cash, accounts receivable and contract assets, accounts payable, accrued expenses and other liabilities and contract liabilities. As of June 30,September 29, 2023 and December 30, 2022, the carrying amount of each financial instrument approximated the instrument’s respective fair value due to the short-term nature and maturity of these instruments.

The Company uses significant other observable market data or assumptions (Level 2 inputs as defined in accounting guidance) that it believes market participants would use in pricing debt. The fair value of the debt approximated the carrying amount, using Level 2 inputs, due to the short-term variable interest rates based on market rates.

Impact of Macroeconomic Conditions on the Business

 

The level of revenue the Company achieves is based on its ability to deliver market leading services and solutions and to deploy skilled teams of professionals quickly. The Company’s results of operations are affected by economic conditions, including macroeconomic conditions and levels of business confidence. Any deterioration in the current macroeconomic environment or economic downturn as a result of weak or uncertain economic conditions due to inflation, high interest rates, national or geopolitical events or other factors impacting economic activity or business confidence could adversely affect the Company's clients' financial condition or outlook which may reduce clients' demand for the Company's services.

 

2. Net Income per Common Share

Basic net income per common share is computed by dividing net income by the weighted average number of common shares outstanding during the period. With regard to common stock subject to vesting requirements and restricted stock units issued to the Company’s employees and non-employee members of its Board of Directors, the calculation includes only the vested portion of such stock and units.

Diluted net income per common share is computed by dividing net income by the weighted average number of common shares outstanding, increased by the assumed conversion of other potentially dilutive securities during the period.

 

11


The Hackett Group, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

2. Net Income per Common Share (continued)

The following table reconciles basic and dilutive weighted average common shares:

 

Quarter Ended

 

 

Six Months Ended

 

 

Quarter Ended

 

 

Nine Months Ended

 

 

June 30,

 

July 1,

 

June 30,

 

July 1,

 

 

September 29,

 

September 30,

 

September 29,

 

September 30,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted average common shares outstanding

 

 

27,191,648

 

 

 

31,652,413

 

 

 

27,109,054

 

 

 

31,550,911

 

 

 

27,220,176

 

 

 

31,685,621

 

 

 

27,146,095

 

 

 

31,595,814

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unvested restricted stock units and common stock subject
to vesting requirements issued to employees and
non-employees

 

 

355,999

 

 

 

566,969

 

 

 

299,078

 

 

 

468,500

 

 

 

597,773

 

 

 

622,893

 

 

 

398,643

 

 

 

519,964

 

Common stock issuable upon the exercise of stock options
and SARs

 

 

 

 

 

1,656

 

 

 

 

 

 

12,889

 

 

 

 

 

 

 

 

 

 

 

 

8,593

 

Dilutive weighted average common shares outstanding

 

 

27,547,647

 

 

 

32,221,038

 

 

 

27,408,132

 

 

 

32,032,300

 

 

 

27,817,949

 

 

 

32,308,514

 

 

 

27,544,738

 

 

 

32,124,371

 

 

Approximately 5102 thousand shares and 32 thousand shares of common stock equivalents were excluded from the computations of diluted net income per common share for the quarter and sixnine months ended June 30,September 29, 2023, respectively, as compared to 3 thousand shares and 2 thousand shares for the quarter and sixnine months ended July 1,September 30, 2022, respectively, as inclusion would have had an anti-dilutive effect on diluted net income per common share.

3. Accounts Receivable and Contract Assets, Net

Accounts receivable and contract assets, net, consisted of the following (in thousands):

 

June 30,

 

 

December 30,

 

 

September 29,

 

 

December 30,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Accounts receivable

 

$

37,934

 

 

$

28,913

 

 

$

45,443

 

 

$

28,913

 

Contract assets

 

 

20,991

 

 

 

20,319

 

 

 

17,737

 

 

 

20,319

 

Allowance for doubtful accounts

 

 

(1,128

)

 

 

(856

)

 

 

(973

)

 

 

(856

)

Accounts receivable and contract assets, net

 

$

57,797

 

 

$

48,376

 

 

$

62,207

 

 

$

48,376

 

 

Accounts receivable is net of uncollected advanced billings. Contract assets representsrepresent revenue for services performed that have not been invoiced.

4. Accrued Expenses and Other Liabilities

Accrued expenses and other liabilities consisted of the following (in thousands):

 

 

June 30,

 

December 30,

 

 

September 29,

 

December 30,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Accrued compensation and benefits

 

$

11,530

 

 

$

9,320

 

 

$

9,453

 

 

$

9,320

 

Accrued bonuses

 

 

2,658

 

 

 

12,171

 

 

 

5,406

 

 

 

12,171

 

Accrued dividend payable

 

 

2,991

 

 

 

2,997

 

 

 

2,994

 

 

 

2,997

 

Restructuring liability

 

 

167

 

 

 

106

 

Accrued sales, use, franchise and VAT tax

 

 

2,065

 

 

 

2,572

 

 

 

2,578

 

 

 

2,572

 

Non-cash stock based compensation accrual

 

 

114

 

 

 

1,241

 

 

 

215

 

 

 

1,241

 

Other accrued expenses

 

 

2,817

 

 

 

2,546

 

 

 

3,080

 

 

 

2,652

 

Total accrued expenses and other liabilities

 

$

22,342

 

 

$

30,953

 

 

$

23,726

 

 

$

30,953

 

 

12


The Hackett Group, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

5. Leases

 

The Company has operating leases for office space and, to a much lesser extent, operating leases for equipment. The Company’s office leases are between terms of 1 year and 45 years. Rents usually increase annually in accordance with defined rent steps or are based on current year consumer price index adjustments. Some of the lease agreements contain one or more of the following provisions: tenant allowances, rent holidays, lease premiums, and rent escalation clauses. There are typically no purchase options, residual value guarantees or restrictive covenants. When renewal options exist, the Company generally does not deem them to be reasonably certain to be exercised, and therefore the amounts are not recognized as part of the lease liability nor the right of use asset.

 

The components of lease expense were as follows for the sixnine months ended June 30,September 29, 2023 (in thousands):

 

Operating lease cost

 

$

560

 

 

$

841

 

 

 

 

 

 

 

Total net lease costs

 

$

560

 

 

$

841

 

 

The weighted average remaining lease term is 2.92.8 years. The weighted average discount rate utilized is 4%. For the quarter and sixnine months ended June 30,September 29, 2023, the Company paid $0.30.4 million and $0.61.0 million, respectively, from operating cash flows for its operating leases.

Future minimum lease payments under non-cancellable operating leases as of June 30,September 29, 2023, were as follows (in thousands):

2023 (excluding the six months ended June 30, 2023)

 

$

722

 

2023 (excluding the nine months ended September 29, 2023)

 

$

393

 

2024

 

 

985

 

 

 

1,068

 

2025

 

 

260

 

 

 

259

 

2026

 

 

222

 

 

 

222

 

Thereafter

 

 

365

 

 

 

365

 

Total lease payments

 

 

2,554

 

 

 

2,307

 

Less imputed interest

 

 

(177

)

 

 

(126

)

Total

 

$

2,377

 

 

$

2,181

 

As of June 30,September 29, 2023, the Company does not have any additional operating leases that have not yet commenced.

6. Credit Facility

On November 7, 2022, the Company entered into a third amended and restated credit agreement (the “Credit Agreement”) with Bank of America, N.A., as administrative agent, and the lenders party thereto, pursuant to which the lenders agreed to amend and restate its existing credit agreement, in order to extend the maturity date of the revolving line of credit and provide the Company with an additional $55.0 million in borrowing capacity, for an aggregate amount of up to $100.0 million from time to time pursuant to a revolving line of credit (the “Credit Facility”). The Credit Facility matures on November 7, 2027.

The obligations of Hackett under the Credit Facility are guaranteed by active existing and future material U.S. subsidiaries of Hackett (the “U.S. Subsidiaries”) and are secured by substantially all of the existing and future property and assets of Hackett and the U.S. Subsidiaries.

The interest rates per annum applicable to loans under the Credit Facility will be, at the Company’s option, equal to either a base rate or a Bloomberg Short-Term Bank Yield Index ("BSBY") rate, plus an applicable margin percentage. The applicable margin percentage is based on the consolidated leverage ratio, as defined in the Credit Agreement. As of June 30,September 29, 2023, the applicable margin percentage was 1.50% per annum for the BSBY rate, and 0.75% per annum, for the base rate. As of September 29, 2023, the interest rate on the Company's outstanding debt was 6.9%, utilizing the BSBY margin percentage. The interest rate of the commitment fee as of June 30,September 29, 2023 was 0.125%. Interest payments are made monthly.

The Company is subject to certain covenants, including total consolidated leverage, fixed cost coverage and liquidity requirements, each as set forth in the Credit Agreement, subject to certain exceptions. As of June 30,September 29, 2023, the Company was in compliance with all covenants.

 

13


The Hackett Group, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

6. Credit Facility (continued)

As of June 30,September 29, 2023, the Company had $53.044.0 million of outstanding debt, excluding $0.3 million of deferred debt costs. As of December 30, 2022, the Company had $60.0 million of outstanding debt, excluding $0.3 million of deferred debt costs. During the second quarter and first sixnine months ended June 30,September 29, 2023, the Company paid down $5.09.0 million and a net of $7.016.0 million, respectively, on the principal balance.

As of June 30,September 29, 2023, the Company had $0.3 million of debt issuance costs remaining which will be amortized over the remaining life of the Credit Facility.

7. Stock Based Compensation

During the quarter and sixnine months ended June 30,September 29, 2023, the Company issued7,886 422and 589,443589,865 restricted stock units, respectively, at a weighted average grant-date fair value of $18.9823.68 and $21.40 per share, respectively. As of June 30,September 29, 2023, the Company had 1,254,3011,228,946 restricted stock units outstanding at a weighted average grant-date fair value of $19.7419.76 per share. As of June 30,September 29, 2023, $17.614.7 million of total restricted stock unit non-cash compensation expense related to unvested awards had not been recognized and is expected to be recognized over a weighted average period of approximately 2.42.3 years. In addition, as of June 30,September 29, 2023, the Company had 1,318 shares of common stock subject to vesting requirements outstanding at a weighted average grant-date fair value of $16.17 per share.

Forfeitures for all of the Company’s outstanding equity awards are recognized as incurred.

8. Shareholders’ Equity

Treasury Stock and Tender Offer

On July 30, 2002, the Company announced that its Board of Directors approved the repurchase of up to $5.0 million of the Company’s common stock through its share repurchase program. Since the inception of the repurchase plan, the Board of Directors has approved the repurchase of $287.2 million of the Company’s common stock, $120.0 million of which was approved in 2022. As of June 30,September 29, 2023, the Company had affected cumulative purchases under the plan of $273.2 million, leaving $14.013.9 million available for future purchases.

 

In December 2022, the Company completed a tender offer through which 4.9 million shares of the Company's common stock were purchased for a total cost, inclusive of transaction related fees, of $116.0 million, or $23.72 per share, which represented 15% of the Company's issued and outstanding stock at the time. The Company used $60.0 million in borrowings from its Credit Facility and cash on hand to fund the tender offer.

 

During the quarter ended June 30,September 29, 2023 and July 1,September 30, 2022, the Company did not repurchase any outstanding stock in the open market. During the sixnine months ended June 30,September 29, 2023 and July 1,September 30, 2022, the Company repurchased 37 thousand shares and 31 thousand shares, respectively, from members of its Board of Directors at an average price per share of $18.96 and $20.50, respectively, for a total cost of $0.7 million and $0.6 million, respectively.

 

There is no expiration of the Company's repurchase authorization. Under the repurchase plan, the Company may buy back shares of its outstanding stock from time to time either on the open market or through privately negotiated transactions, subject to market conditions and trading restrictions. The Company holds repurchased shares of its common stock as treasury stock and accounts for treasury stock under the cost method.

 

Shares purchased under the repurchase plan do not include shares withheld to satisfy withholding tax obligations. These withheld shares are never issued and in lieu of issuing the shares, taxes were paid on the employee’s behalf. During the quarter and sixnine months ended June 30,September 29, 2023, 63 thousand shares and 168171 thousand shares were withheld and not issued, respectively, for a cost of $0.166 millionthousand and $3.63.7 million, respectively. During the quarter and sixnine months ended July 1,September 30, 2022, 43 thousand shares and 130134 thousand shares were withheld and not issued, respectively, for a cost of $7669 thousand and $2.52.6 million, respectively. The shares withheld for taxes are included under issuance of common stock in the accompanying consolidated statements of shareholders’ equity.

 

14


The Hackett Group, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

8. Shareholders’ Equity (continued)

Dividend Program

In 2022, the Company increased the annual dividend from $0.40 per share to $0.44 per share to be paid on a quarterly basis. During the first halfnine months of 2023, the Company declared twothree quarterly dividends to its shareholders for an aggregate of $6.09.0 million, which were paid in April 2023, July 2023 and JulyOctober 2023. These dividends were paid from U.S. domestic sources and are accounted for as a decrease to retained earnings. Subsequent to June 30,September 29, 2023, the Company declared its thirdfourth quarter dividend in 2023 to be paid in OctoberJanuary of 20232024.

15


The Hackett Group, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

9. Transactions with Related Parties

During the sixnine months ended June 30,September 29, 2023, the Company bought back 37 thousand shares of its common stock from members of its Board of Directors for $0.7 million, or $18.96 per share.

10. Contingency

In May 2023, Gartner, Inc. filed a lawsuit seeking a preliminary injunction and damages against the Company and two ex-Gartner employees that were hired by the Company. On November 7, 2023, the Court issued a preliminary injunction preventing the Company from employing the individuals in their current roles. No trial date has been scheduled. Based on the early stage of the litigation, we are unable to reasonably estimate the loss, or range of loss, if any, that may result. Accordingly, the Company has not recorded a loss contingency related to this matter.

11. Litigation

The Company is involved in legal proceedings, claims, and litigation arising in the ordinary course of business not specifically discussed herein. In the opinion of management, the final disposition of such matters will not have a material adverse effect on the Company’s financial position, cash flows or results of operations.

11.12. Segment Information and Geographical Data

The Company has organized its operating and internal reporting structure to align with its primary market solutions. In accordance with ASC 280, the Company determined it has three operating segments and three reportable segments: (1) Global S&BT, (2) Oracle Solutions, and (3) SAP Solutions. Global S&BT includes the results of the Company’s strategic business consulting practices; Oracle Solutions includes the results of the Company’s Oracle EPM/ERP and Digital AMS practices; SAP Solutions includes the Company’s SAP applications and related SAP service offerings. The SAP Solutions reportable segment is the only segment that contains software license sales.sales revenue.

The measurement criteria for segment profit or loss are substantially the same for each reportable segment, excluding any unusual or infrequent items, if any. Segment profit consists of the revenuesrevenue generated by a segment, less operating expenses that are incurred directly by the segment. Unallocated costs include corporate costs related to the administrative functions that are performed in a centralized manner and that are not attributable to a particular segment, depreciation and amortization expense, interest expense, non cashnon-cash compensation expense and any non recurringnon-recurring transactions. Segment information related to assets has been omitted as the Chief Operating Decision Makerchief operating decision maker does not receive discrete financial information regarding assets at the segment level.

15


The Hackett Group, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

12. Segment Information and Geographical Data (continued)

The tables below set forth information about the Company’s operating segments for the second quarter and sixnine months ended June 30,September 29, 2023, and July 1,September 30, 2022, along with the items necessary to reconcile the segment information to the totals reported in the accompanying consolidated financial statements (in thousands):

 

 

Quarter Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

July 1,

 

 

June 30,

 

 

July 1,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Global S&BT:

 

 

 

 

 

 

 

 

 

 

 

 

Total revenue*

 

$

43,632

 

 

$

44,530

 

 

$

85,967

 

 

$

87,167

 

Segment profit

 

 

13,102

 

 

 

16,269

 

 

 

26,909

 

 

 

31,910

 

Oracle Solutions:

 

 

 

 

 

 

 

 

 

 

 

 

Total revenue*

 

$

20,775

 

 

$

19,971

 

 

$

37,943

 

 

$

41,483

 

Segment profit

 

 

5,886

 

 

 

4,301

 

 

 

8,935

 

 

 

8,834

 

SAP Solutions:

 

 

 

 

 

 

 

 

 

 

 

 

Total revenue*

 

$

12,695

 

 

$

11,427

 

 

$

24,421

 

 

$

22,942

 

Segment profit

 

 

2,990

 

 

 

2,977

 

 

 

5,624

 

 

 

5,391

 

Total Company:

 

 

 

 

 

 

 

 

 

 

 

 

Total revenue*

 

$

77,102

 

 

$

75,928

 

 

$

148,331

 

 

$

151,592

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total segment profit

 

$

21,978

 

 

$

23,547

 

 

$

41,468

 

 

$

46,135

 

Items not allocated to segment level:

 

 

 

 

 

 

 

 

 

 

 

 

Corporate general and administrative expenses**

 

 

5,610

 

 

 

5,935

 

 

 

10,571

 

 

 

11,569

 

Non-cash stock based compensation expense

 

 

2,772

 

 

 

2,718

 

 

 

5,219

 

 

 

5,317

 

Depreciation and amortization

 

 

806

 

 

 

838

 

 

 

1,636

 

 

 

1,784

 

Restructuring and asset impairment settlement

 

 

-

 

 

 

(125

)

 

 

-

 

 

 

(125

)

Interest expense, net

 

 

921

 

 

 

28

 

 

 

1,780

 

 

 

56

 

Income from continuing operations before taxes

 

$

11,869

 

 

$

14,153

 

 

$

22,262

 

 

$

27,534

 

16


The Hackett Group, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

 

Quarter Ended

 

 

Nine Months Ended

 

 

 

September 29,

 

 

September 30,

 

 

September 29,

 

 

September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Global S&BT:

 

 

 

 

 

 

 

 

 

 

 

 

Total revenue*

 

$

43,798

 

 

$

41,593

 

 

$

129,765

 

 

$

128,760

 

Segment profit

 

 

13,951

 

 

 

14,030

 

 

 

40,860

 

 

 

45,939

 

Oracle Solutions:

 

 

 

 

 

 

 

 

 

 

 

 

Total revenue*

 

$

20,831

 

 

$

17,682

 

 

$

58,774

 

 

$

59,165

 

Segment profit

 

 

5,031

 

 

 

3,313

 

 

 

13,966

 

 

 

12,147

 

SAP Solutions:

 

 

 

 

 

 

 

 

 

 

 

 

Total revenue*

 

$

11,227

 

 

$

12,758

 

 

$

35,648

 

 

$

35,700

 

Segment profit

 

 

2,861

 

 

 

3,847

 

 

 

8,486

 

 

 

9,238

 

Total Company:

 

 

 

 

 

 

 

 

 

 

 

 

Total revenue*

 

$

75,856

 

 

$

72,033

 

 

$

224,187

 

 

$

223,625

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total segment profit

 

$

21,843

 

 

$

21,190

 

 

$

63,312

 

 

$

67,324

 

Items not allocated to segment level:

 

 

 

 

 

 

 

 

 

 

 

 

Corporate general and administrative expenses**

 

 

4,497

 

 

 

4,332

 

 

 

15,069

 

 

 

15,899

 

Non-cash stock based compensation expense

 

 

2,711

 

 

 

2,511

 

 

 

7,930

 

 

 

7,828

 

Depreciation and amortization

 

 

892

 

 

 

838

 

 

 

2,528

 

 

 

2,623

 

Restructuring and asset impairment settlement

 

 

-

 

 

 

(526

)

 

 

-

 

 

 

(651

)

Interest expense, net

 

 

814

 

 

 

14

 

 

 

2,594

 

 

 

70

 

Income from continuing operations before taxes

 

$

12,929

 

 

$

14,021

 

 

$

35,191

 

 

$

41,555

 

*Total revenue includes reimbursable expenses, which are project travel-related expenses passed through to a client with no associated operating margin.

**Corporate general and administrative expenses primarily include costs related to business support functions including accounting and finance, human resources, legal, information technology and office administration, as well as any foreign currency gains and losses. Corporate general and administrative expenses exclude non cash compensation expense and one-time, non-recurring expenses and benefits.

17


The Hackett Group, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

11. Segment Information and Geographical Data (continued)

The tables below set forth information on the Company's geographical data. Total revenue, which is primarily based on the country of the contracting entity, was attributed to the following geographical areas (in thousands):

 

 

Quarter Ended

 

 

Six Months Ended

 

 

Quarter Ended

 

 

Nine Months Ended

 

 

June 30,

 

July 1,

 

June 30,

 

July 1,

 

 

September 29,

 

September 30,

 

September 29,

 

September 30,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

$

65,272

 

 

$

66,717

 

 

$

126,622

 

 

$

131,110

 

 

$

63,955

 

 

$

62,505

 

 

$

190,578

 

 

$

193,614

 

Europe

 

 

7,673

 

 

 

5,103

 

 

 

13,734

 

 

 

12,640

 

 

 

7,399

 

 

 

5,311

 

 

 

21,132

 

 

 

17,952

 

Other (Australia, Canada, India and Uruguay)

 

 

4,157

 

 

 

4,108

 

 

 

7,975

 

 

 

7,842

 

 

 

4,502

 

 

 

4,217

 

 

 

12,477

 

 

 

12,059

 

Total revenue

 

$

77,102

 

 

$

75,928

 

 

$

148,331

 

 

$

151,592

 

 

$

75,856

 

 

$

72,033

 

 

$

224,187

 

 

$

223,625

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

16


The Hackett Group, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

12. Segment Information and Geographical Data (continued)

Long-lived assets are attributable to the following geographic areas (in thousands):

 

 

June 30,

 

 

December 30,

 

 

September 29,

 

 

December 30,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Long-lived assets:

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

$

91,327

 

 

$

89,705

 

 

$

91,228

 

 

$

89,705

 

Europe

 

 

14,349

 

 

 

13,640

 

 

 

13,920

 

 

 

13,640

 

Other (Australia, Canada, India and Uruguay)

 

 

417

 

 

 

482

 

 

 

439

 

 

 

482

 

Total long-lived assets

 

$

106,093

 

 

$

103,827

 

 

$

105,587

 

 

$

103,827

 

 

As of June 30,September 29, 2023 and December 30, 2022, foreign assets included $14.213.7 million and $13.5 million, respectively, of goodwill related to prior acquisitions.

 

 

 

 

1817


 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). We intend the forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in these sections. All statements regarding our expected financial position and operating results, our business strategy, our financing plans and forecasted demographic and economic trends relating to our industry are forward-looking statements. These statements can sometimes be identified by our use of forward-looking words such as “may,” “will,” “anticipate,” “estimate,” “expect,” or “intend” and similar expressions. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from the results, performance or achievements expressed or implied by the forward-looking statements. We cannot promise you that our expectations reflected in such forward-looking statements will turn out to be correct. Factors that could impact such forward-looking statements include, among others, changes in worldwide and U.S. economic conditions that impact business confidence and the demand for our products and services, the impact of the coronavirus (COVID-19) pandemic, 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 cancellation 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, the impact of national or geopolitical conflict, such as the war involving Russia and Ukraine on our business and changes in general economic conditions, inflation, interest rates and our ability to obtain additional debt financing if needed. 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.

 

OVERVIEW

The following Management's Discussion and Analysis ("MD&A") is intended to help the reader understand the results of operations and financial condition of Hackett. MD&A is provided as a supplement to, and should be read in conjunction with, our consolidated financial statements and the accompanying notes to our consolidated financial statements included in this Quarterly Report on Form 10-Q.

The Hackett Group, Inc. (“Hackett” or the “Company”) is a leading IP-based strategic advisory and technology consulting firm that enables companies to achieve world-class business performance. By leveraging the comprehensive Hackett database, the world’s leading repository of enterprise business process performance metrics and best practice intellectual capital, our business and technology solutions help clients improve performance and maximize returns on technology investments. Only Hackett empirically defines world-class performance in sales, general and administrative and certain supply chain activities with analysis gained through over 25,000 benchmark and performance studies over 29 years at over 8,800 of the world’s leading companies.

 

Impact of Macroeconomic Conditions on Our Business

 

The level of revenue we achieve is based on our ability to deliver market leading services and solutions and to deploy skilled teams of professionals quickly. Our results of operations are affected by economic conditions, including macroeconomic conditions and levels of business confidence. Any deterioration in the current macroeconomic environment or economic downturn as a result of weak or uncertain economic conditions due to inflation, high interest rates, national or geopolitical events or other factors impacting economic activity or business confidence could adversely affect our clients' financial condition or outlook which may reduce the clients' demand for our services.

1918


 

 

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, our results of operations (in thousands and unaudited):

 

 

Quarter Ended

 

 

Six Months Ended

 

 

Quarter Ended

 

 

Nine Months Ended

 

 

June 30,

July 1,

 

June 30,

July 1,

 

 

September 29,

September 30,

 

September 29,

September 30,

 

 

2023

2022

 

 

2023

2022

 

 

2023

2022

 

 

2023

2022

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue before reimbursements

 

$

75,641

 

 

$

74,768

 

 

$

145,472

 

 

$

149,876

 

 

$

74,634

 

 

$

70,995

 

 

$

220,106

 

 

$

220,871

 

Reimbursements

 

 

1,461

 

 

 

1,160

 

 

 

2,859

 

 

 

1,716

 

 

 

1,222

 

 

 

1,038

 

 

 

4,081

 

 

 

2,754

 

Total revenue

 

 

77,102

 

 

 

75,928

 

 

 

148,331

 

 

 

151,592

 

 

 

75,856

 

 

 

72,033

 

 

 

224,187

 

 

 

223,625

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of service:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Personnel costs before reimbursable expenses (includes $1,643 and $3,169 and $1,483 and $3,149 of non-cash stock based compensation expense in the three and six months ended June 30, 2023 and July 1, 2022, respectively)

 

 

45,426

 

 

 

44,701

 

 

 

88,569

 

 

 

92,034

 

Personnel costs before reimbursable expenses (includes $1,518 and $4,687 and $1,652 and $4,801 of non-cash stock based compensation expense in the three and nine months ended September 29, 2023 and September 30, 2022, respectively)

 

 

44,421

 

 

 

42,870

 

 

 

132,990

 

 

 

134,904

 

Reimbursable expenses

 

 

1,461

 

 

 

1,160

 

 

 

2,859

 

 

 

1,716

 

 

 

1,222

 

 

 

1,038

 

 

 

4,081

 

 

 

2,754

 

Total cost of service

 

 

46,887

 

 

 

45,861

 

 

 

91,428

 

 

 

93,750

 

 

 

45,643

 

 

 

43,908

 

 

 

137,071

 

 

 

137,658

 

Selling, general and administrative costs (includes $1,129 and $2,050 and $1,235 and $2,168 of non-cash stock based compensation expense in the three and six months ended June 30, 2023 and July 1, 2022, respectively)

 

 

17,425

 

 

 

15,886

 

 

 

32,861

 

 

 

30,252

 

Selling, general and administrative costs (includes $1,193 and $3,243 and $859 and $3,027 of non-cash stock based compensation expense in the three and nine months ended September 29, 2023 and September 30, 2022, respectively)

 

 

16,470

 

 

 

14,616

 

 

 

49,331

 

 

 

44,993

 

Restructuring charge reversal

 

 

 

 

 

(526

)

 

 

 

 

 

(651

)

Total costs and operating expenses

 

 

64,312

 

 

 

61,747

 

 

 

124,289

 

 

 

124,002

 

 

 

62,113

 

 

 

57,998

 

 

 

186,402

 

 

 

182,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from operations

 

 

12,790

 

 

 

14,181

 

 

 

24,042

 

 

 

27,590

 

 

 

13,743

 

 

 

14,035

 

 

 

37,785

 

 

 

41,625

 

Other expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(921

)

 

 

(28

)

 

 

(1,780

)

 

 

(56

)

 

 

(814

)

 

 

(14

)

 

 

(2,594

)

 

 

(70

)

Income from continuing operations before income taxes

 

 

11,869

 

 

 

14,153

 

 

 

22,262

 

 

 

27,534

 

 

 

12,929

 

 

 

14,021

 

 

 

35,191

 

 

 

41,555

 

Income tax expense

 

 

3,149

 

 

 

3,938

 

 

 

5,381

 

 

 

6,814

 

 

 

3,509

 

 

 

3,655

 

 

 

8,890

 

 

 

10,469

 

Net income

 

$

8,720

 

 

$

10,215

 

 

$

16,881

 

 

$

20,720

 

 

$

9,420

 

 

$

10,366

 

 

$

26,301

 

 

$

31,086

 

Diluted net income per common share

 

$

0.32

 

 

$

0.32

 

 

$

0.62

 

 

$

0.65

 

 

$

0.34

 

 

$

0.32

 

 

$

0.95

 

 

$

0.97

 

 

Revenue. We are a global company with operations in our primary markets located in the United States and Western Europe. Our revenue is denominated in multiple currencies, primarily the U.S. Dollar, British Pound and Euro, and as a result is affected by currency exchange rate fluctuations. The impact of currency fluctuations did not have a significant impact on comparisons between the second quarter and first sixnine months of 2023 and the comparable periods of 2022. In this MD&A, we discuss revenue based on geographical location of engagement team personnel.

 

Our Company total revenue was $77.1$75.9 million and $148.3$224.2 million during the second quarter and first sixnine months of 2023, respectively, as compared to $75.9$72.0 million and $151.6$223.6 million in the same periods in 2022, respectively. During the first sixnine months of 2022, we experienced stronger than expected post-Covid pent-up demand that drove strong results. By the middle of 2022, the impact of the increase in interest rates started to disrupt economic growth and resulted in extended client decision making. In both the second quarter and first sixnine months of 2023, one customer accounted for 6% and 5%, respectively, of our total Company revenue and in both the second quarter and first sixnine months of 2022, one customer accounted for 7% of our total Company revenue.

 

Segment revenue. The Company has three reportable segments: Global Strategy & Business Transformation (Global S&BT), Oracle Solutions and SAP Solutions. Global S&BT includes S&BT Consulting, Benchmarking, Business Advisory Services, Intellectual Property as-a-Service (IPASS) and OneStream offerings. Oracle Solutions and SAP Solutions support the two fundamentally distinct ERP systems: Oracle and SAP.

 

20


The following table sets forth total revenue by operating segment, which includes reimbursable expenses related to project travel-related expenses passed through to a client with no associated operating margin (in thousands):

 

 

 

Quarter Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

July 1,

 

 

June 30,

 

 

July 1,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Global S&BT

 

$

43,632

 

 

$

44,530

 

 

$

85,967

 

 

$

87,167

 

Oracle Solutions

 

 

20,775

 

 

 

19,971

 

 

 

37,943

 

 

 

41,483

 

SAP Solutions

 

 

12,695

 

 

 

11,427

 

 

 

24,421

 

 

 

22,942

 

Total revenue

 

$

77,102

 

 

$

75,928

 

 

$

148,331

 

 

$

151,592

 

19


 

 

Quarter Ended

 

 

Nine Months Ended

 

 

 

September 29,

 

 

September 30,

 

 

September 29,

 

 

September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Global S&BT

 

$

43,798

 

 

$

41,593

 

 

$

129,765

 

 

$

128,760

 

Oracle Solutions

 

 

20,831

 

 

 

17,682

 

 

 

58,774

 

 

 

59,165

 

SAP Solutions

 

 

11,227

 

 

 

12,758

 

 

 

35,648

 

 

 

35,700

 

Total revenue

 

$

75,856

 

 

$

72,033

 

 

$

224,187

 

 

$

223,625

 

 

Global S&BT total revenue was $43.6$43.8 million and $86.0$129.8 million during the second quarter and first sixnine months of 2023, respectively, as compared to $44.5$41.6 million and $87.2$128.8 million in the same periods of 2022, respectively. This segment has been impacted by slowing economic growth resulting in extended client decision making in our business transformation engagements. Additionally, the 2022 periods experiencedprior period comparisons were against the accelerated post pandemic demand that we experienced throughout the first half of 2022.

Oracle Solutions total revenue was $20.8 million and $37.9 $58.8million during the second quarter and first sixnine months of 2023, respectively, as compared to $20.0$17.7 million and $41.5$59.2 million in the same periods of 2022, respectively. The decreaseincrease in revenue overduring the six monthsquarter ended June 30,September 29, 2023, as compared to the same period in 2022, was primarily due to the segment coming offsegment's continued momentum that began in the second quarter of solid 2022 results and rebuilding the pipeline in light of unfavorable macroeconomic conditions as we entered 2023.

SAP Solutions total revenue was $12.7$11.2 million and $24.4 $35.6million during the second quarter and first sixnine months of 2023, respectively, as compared to $11.4$12.8 million and $22.9$35.7 million in the same periods of 2022, respectively. The increasedecrease in revenue overduring the three month and six month periods inquarter ended September 29, 2023, as compared to the same period in 2022, werewas due to higherlower sales of SAP cloud license deals.software.

Reimbursements as a percentage of Company total revenue were 2%1.6% and 1.8% during both the second quarter and first sixnine months of 2023, respectively, as compared to 2%1.4% and 1%1.2%, in the same periods in 2022, respectively. Reimbursements are project travel-related expenses passed through to a client with no associated operating margin. We have experienced increased client-related travel since the transition to a remote delivery model, however we do not expect reimbursements to return to pre-pandemic levels.

Cost of Service. Cost of service consists of personnel costs before reimbursable expenses, which includes salaries, benefits and incentive compensation for consultants and subcontractor fees, acquisition-related cash, acquisition-related non-cash stock based compensation expense and non-cash stock based compensation expense, and reimbursable expenses which are travel and other expenses passed through to a client and are associated with projects.

Personnel costs before reimbursable expenses increased 2%4%, to $45.4$44.4 million, and decreased 4%1%, to $88.6 $133.0million, for the second quarter and first sixnine months of 2023, respectively, as compared to $44.7$42.9 million and $92.0$134.9 million in the same periods of 2022, respectively. The higher costs in the third quarter of 2023 were primarily due to the increased incentive compensation accruals commensurate with Company performance and increased utilization of subcontractors. The lower costs in the six-monthnine-month period of 2023 were primarily a result of lower incentive compensation accruals commensurate with Company performance.performance and lower salaries resulting from headcount adjustments made earlier this year, partially offset by the increased use of subcontractors in 2023. Personnel costs as a percentage of total Company revenue were 59% and 60% during both the second quarter and first sixnine months of 2023, respectively, as compared to 59% and 61%60% for both of the same periods of 2022, respectively.2022.

Non-cash stock based compensation expense, included in personnel costs before reimbursable expenses was $1.6$1.5 million and $3.2$4.7 million during the second quarter and first sixnine months of 2023, respectively, as compared to $1.5$1.7 million and $3.1$4.8 million for the same periods of 2022, respectively.

Selling, General and Administrative Costs (“SG&A”). SG&A primarily consists of salaries, benefits and incentive compensation for the selling, marketing, administrative and executive employees, non-cash stock based compensation expense, amortization of intangible assets, acquisition related costs and various other overhead expenses.

SG&A costs increased 13%, to $16.5 million, and 10%, to $17.4 million, and 9%, to $32.9$49.3 million, during the second quarter and first sixnine months of 2023, respectively, as compared to $15.9$14.6 million and $30.3$45.0 million for the same periods of 2022, respectively. This increase in the costs during the second quarter and first sixnine months of 2023 was primarily due to the increased investments in dedicated sales resources for our IP-based offerings in our Global S&BT segment, partially offset by lower incentive compensation commensurate with Company performance. SG&A costs as a percentage of total Company revenue were 23% and 22% during both the second quarter and first sixnine months of 2023, respectively, as compared to 21% and 20% during the same periods in 2022, respectively.2022.

Non-cash stock based compensation expense, included in SG&A, was $1.1$1.2 million and $2.1 $3.2million during the second quarter and first sixnine months of 2023, respectively, as compared to $1.2$0.9 million and $2.2$3.0 million for the same periods, respectively.

AmortizationThere was no amortization expense included in SG&A in the first nine months of 2023, however, there was $10thousand and $154 thousandin the second quarter and first six months of 2022, respectively. There was no amortization expense in the first sixnine months of 2023.2022. The amortization expense in 2022 was related to the

21


intangible assets acquired in our acquisitions and the buyout of our partner’s joint venture interest in the CGBS Training and Certification Programs in 2017. The intangible assets related to the acquisitions were fully amortized as of the second quarter of 2022.

20


Segment Profit. Segment profit consists of the revenue generated by the segment, less the direct costs of revenue and selling, general and administrative expenses that are incurred directly by the segment. Items not allocated to the segment level include corporate costs related to the administrative functions that are performed in a centralized manner and that are not attributable to a particular segment, depreciation and amortization expense, interest expense, non cashnon-cash compensation expense and any non recurringnon-recurring transactions.

Global S&BT segment profit was $13.1$14.0 million and $26.9$40.9 million during the second quarter and first sixnine months of 2023, respectively, as compared to $16.3$14.0 million and $31.9$45.9 million for the same periods in 2022, respectively. This decrease in the nine month comparison was primarily due to the incremental investments we are making in program development and additional dedicated sales resources for Benchmark, Executive Advisory Market Intelligence and our other IP as-a-service offerings.

Oracle Solutions segment profit was $5.9$5.0 million and $8.9$14.0 million during the second quarter and first sixnine months of 2023, respectively, as compared to $4.3$3.3 million and $8.8$12.1 million for the same periods in 2022, respectively. The increase in the secondthird quarter of 2023 segment profit, as compared to the same period in the prior year, was primarily due to the increase in year over year revenue, partially offset by the increase in new hires and higher use of subcontractors. The increase in the nine month comparison was primarily due to the lower salary and benefits costs in 2023, partially offset by higher use of subcontractors and lower revenue.

SAP Solutions segment profit was $3.0$2.9 million and $5.6$8.5 million during the second quarter and first sixnine months of 2023, respectively, as compared to $3.0$3.8 million and $5.4$9.2 million in the same periods in 2022, respectively. The decrease in segment profit in both the quarter and nine month periods in 2023, as compared to the same periods in 2022, was primarily due to lower sales of SAP cloud software.

Interest Expense. Interest expense was $0.9$0.8 million and $1.8 $2.6million during the second quarter and first sixnine months of 2023, respectively, as compared to $28$14 thousand and $56$70 thousand in 2022, respectively. In the fourth quarter of 2022, we drew down $60.0 million on our Credit Facility (as defined below) to fund the tender offer transaction. As of June 30,September 29, 2023, we had an outstanding balance of $53.0 $44.0million. As of July 1,September 30, 2022, we did not have any outstanding debt.

Income Taxes. During the second quarter and first sixnine months of 2023, we recorded $3.1$3.5 million and $5.4$8.9 million of income tax expense, respectively, related to certain federal, foreign and state taxes which reflected an effective tax rate of 26.5%27.1% and 24.2%25.3%, respectively. During the secondthird quarter and first sixnine months of 2022, we recorded $3.9$3.7 million and $6.8$10.5 million of income tax expense, respectively, related to certain federal, foreign and state taxes which reflected an effective tax rate of 27.8%26.1% and 24.8%25.2%, respectively.

Liquidity and Capital Resources

As of June 30,September 29, 2023 and December 30, 2022, we had $15.8$9.9 million and $30.3 million, respectively, classified as cash on the consolidated balance sheets. We currently believe that available funds (including the cash on hand and funds available for borrowing under our revolving line of credit the "Credit Facility") and cash flows generated by operations will be sufficient to fund our working capital and capital expenditure requirements, including working capital, debt payments, lease obligations and capital expenditures for at least the next twelve months and beyond. We may decide to raise additional funds in order to fund expansion, to develop new or further enhance products and services, to respond to competitive pressures, or to acquire complementary businesses or technologies. There is no assurance that additional financing would be available when needed or desired. Our cash requirements have not changed materially from those disclosed in Item 7 included in Part II of our Annual Report on Form 10-K for the year ended December 30, 2022.

The following table summarizes our cash flow activity (in thousands):

 

 

Six Months Ended

 

 

Nine Months Ended

 

 

June 30,

 

July 1,

 

 

September 29,

 

September 30,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Cash flows provided by operating activities

 

$

4,650

 

 

$

24,289

 

 

$

11,817

 

 

$

34,078

 

Cash flows used in investing activities

 

$

(2,125

)

 

$

(2,267

)

 

$

(3,203

)

 

$

(3,163

)

Cash flows used in financing activities

 

$

(16,898

)

 

$

(6,100

)

 

$

(28,957

)

 

$

(9,648

)

Cash Flows from Operating Activities

Net cash provided by operating activities was $4.7$11.8 million during the first sixnine months of 2023, as compared to $24.3$34.1 million during the same period in 2022. In 2023, the net cash provided by operating activities was primarily due to net income adjusted for non-cash items, and an increase in contract liabilities, partially offset by an increase in accounts receivable and contract assets, a decrease in accrued liabilities and other accruals primarily due to payments of the 2022 incentive compensation andliabilities, payments to vendors and payments related to income tax liabilities. In 2022, the net cash provided by operating activities was primarily due to net income adjusted for non-cash items and an increase in income tax liabilities, partially offset by a decrease in accounts payable and accrued liabilities and other accruals primarily due to payments to vendors, payments of the 2021 incentive compensation liabilities and payments to vendors.lower contract liabilities.

21


Cash Flows from Investing Activities

22


Net cash used in investing activities was $2.1$3.2 million during both the first sixnine months of 2023 as compared to $2.3 million during the same period inand 2022. During both periods, cash flows used in investing activities primarily related to investments for the development of our Hackett Connect Executive Advisory member platform and continued development of our Quantum Leap benchmark and Digital Transformation technologies.

Cash Flows from Financing Activities

Net cash used in financing activities was $16.9 $29.0million and $6.1$9.6 million during the first sixnine months of 2023 and 2022, respectively. The usage of cash in 2023 primarily related to the net repayment of borrowings of $7.0$16.0 million related to our Credit Facility, dividend payments of $6.0$9.0 million and the repurchase of $4.4 million of the Company's common stock. The usage of cash in 2022 primarily related to the repurchase of $3.1$3.2 million of the Company’s common stock and dividend payments of $3.5$7.0 million.

On November 7, 2022, we amended and restated our credit agreement in order to extend the maturity date of the Credit Facility and provide the Company with an additional $55 million in borrowing capacity, for an aggregate amount of up to $100 million. See Note 6, “Credit Facility,” to our consolidated financial statements included in this Quarterly Report on Form 10-Q for more information. As of June 30,September 29, 2023, we had $53.0$44.0 million of outstanding borrowings under our Credit Facility, excluding deferred debt costs, leaving us with a capacity of approximately $47.0$56.0 million.

2322


 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

As of June 30,September 29, 2023, our exposure to market risk related primarily to changes in interest rates and foreign currency exchange rate risks.

Interest Rate Risk

Our exposure to market risk for changes in interest rates relates primarily to the Credit Facility, which is subject to variable interest rates. Under our prior credit agreement, which was amended and restated in November 2022, the interest rates per annum applicable to loans under the Credit Facility was, at our option, equal to a base rate for one-, two-, three- or nine-month interest periods chosen by us in each case, plus an applicable margin percentage. A 100-basis point increase in our interest rate under our Credit Facility (Bloomberg Short-Term Bank Yield Index) would not have had a material impact on our results of operations for the quarter and sixnine months ended June 30,September 29, 2023.

Exchange Rate Sensitivity

We face exposure to adverse movements in foreign currency exchange rates as a portion of our revenue, expenses, assets and liabilities are denominated in currencies other than the U.S. Dollar, primarily the British Pound, the Euro and the Australian Dollar. These exposures may change over time as business practices evolve.

 

Item 4. Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report on Form 10-Q.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 5. Other Information.

Rule 10b5-1 Trading Arrangements

During the three months ended June 30,September 29, 2023, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

Frequency of Say on Pay

As previously reported in our Form 8-K filed on May 9, 2023, the 2023 Annual Meeting of Shareholders was held on May 4, 2023 (the “2023 Annual Meeting”). The shareholders voted on the matters set forth in such Form 8-K, including Proposal 3 related to the say-on-frequency advisory vote. Based on consideration of the voting results set forth in Proposal 3 in the Form 8-K, and as was recommended with respect to this proposal by our Board of Directors in the proxy statement for the 2023 Annual Meeting, the Company’s Board of Directors has determined that an advisory vote by the shareholders regarding named executive officer compensation as set forth in the proxy statement will be conducted on an annual basis. This disclosure is intended to satisfy the requirements of Item 5.07(d) of Form 8-K.

2423


 

PART II — OTHER INFORMATION

The Company is involved in legal proceedings, claims, and litigation arising in the ordinary course of business not specifically discussed herein. In the opinion of management, the final disposition of such matters will not have a material adverse effect on the Company’s financial position, cash flows or results of operations.

Item 1A. Risk Factors.

 

For a discussion of our potential risks and uncertainties, see the risk factor below and the information under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 30, 2022 (the “Annual Report”).

 

There have been no material changes to any of the risk factors disclosed in the Company’s Annual Report on Form 10-K for the year ended December 30, 2022.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Issuer Purchases of Equity Securities

During the quarter ended June 30,September 29, 2023 the Company did not repurchase any common stock under the repurchase plan and during the sixnine months ended June 30,September 29, 2023, the Company repurchased 37 thousand shares of its common stock under the repurchase plan. As of June 30,September 29, 2023, the Company had $13.9 million of authorization remaining under the repurchase plan.

 

 

 

 

 

 

 

 

 

Total Number

 

 

Maximum Dollar

 

 

 

 

 

 

 

 

 

 

of Shares as Part

 

 

Value That May

 

 

 

 

 

 

 

 

 

 

of Publicly

 

 

Yet be Purchased

 

 

 

 

Total Number

 

 

Average Price

 

 

Announced

 

 

Under the

 

 

Period

 

of Shares

 

 

Paid per Share

 

 

Program

 

 

Program

 

 

Balance as of March 31, 2023

 

 

 

 

 

 

 

 

 

 

$

13,961,293

 

 

April 1, 2023 to April 28, 2023

 

 

 

 

$

 

 

 

 

 

$

13,961,293

 

 

April 29, 2023 to May 26, 2023

 

 

 

 

$

 

 

 

 

 

$

13,961,293

 

 

May 27, 2023 to June 30, 2023

 

 

 

 

$

 

 

 

 

 

$

13,937,978

 

*

 

 

 

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Number

 

 

Maximum Dollar

 

 

 

 

 

 

 

 

 

 

of Shares as Part

 

 

Value That May

 

 

 

 

 

 

 

 

 

 

of Publicly

 

 

Yet be Purchased

 

 

 

 

Total Number

 

 

Average Price

 

 

Announced

 

 

Under the

 

 

Period

 

of Shares

 

 

Paid per Share

 

 

Program

 

 

Program

 

 

Balance as of June 30, 2023

 

 

 

 

 

 

 

 

 

 

$

13,937,978

 

 

July 1, 2023 to July 28, 2023

 

 

 

 

$

 

 

 

 

 

$

13,937,978

 

 

July 29, 2023 to August 25, 2023

 

 

 

 

$

 

 

 

 

 

$

13,937,978

 

 

August 26, 2023 to September 29, 2023

 

 

 

 

$

 

 

 

 

 

$

13,937,978

 

 

 

 

 

 

 

$

 

 

 

 

 

 

 

 

 

*The decrease in the repurchase plan authorization related to additional transaction related fees for the tender offer which occurred in December 2022.

 

Shares repurchased during the quarter and sixnine months ended June 30,September 29, 2023 under the repurchase plan do not include 63 thousand shares and 168 171thousand shares, respectively, for a cost of $0.1 million$66 thousand and $3.6$3.7 million, respectively, that the Company bought back to satisfy employee net vesting obligations.

2524


 

Item 6. Exhibits

 

Exhibit No.

Exhibit Description

    3.1

Second Amended and Restated Articles of Incorporation of the Registrant, as amended (incorporated herein by reference to the Registrant's Form 10-K for the year ended December 29, 2000).

    3.2

Articles of Amendment of the Articles of Incorporation of the Registrant (incorporated herein by reference to the Registrant's Form 10-K for the year ended December 28, 2007).

    3.3

Amended and Restated Bylaws of the Registrant, as amended (incorporated herein by reference to the Registrant's Form 10-K for the year ended December 29, 2000).

    3.4

Amendment to Amended and Restated Bylaws of the Registrant (incorporated herein by reference to the Registrant's Form 8-K filed on March 31, 2008).

    3.5

Amendment to Amended and Restated Bylaws of the Registrant (incorporated herein by reference to the Registrant's Form 8-K filed on January 21, 2015).

 

 

 

  31.1*

Certification by CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

  31.2*

Certification by CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

  32*

Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS**

Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the inline XBRL document.

101.SCH**

Inline XBRL Taxonomy Extension Schema

101.CAL**

Inline XBRL Taxonomy Extension Calculation Linkbase

101.DEF**

Inline XBRL Taxonomy Extension Definition Linkbase

101.LAB**

Inline XBRL Taxonomy Extension Label Linkbase

101.PRE**

Inline XBRL Taxonomy Extension Presentation Linkbase

 

104**

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

 

 

 

* Filed herewith

** Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability.

 

2625


 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

 

The Hackett Group, Inc.

 

 

 

Date: August 9,November 8, 2023

 

/s/ Robert A. Ramirez

 

 

Robert A. Ramirez

 

 

Executive Vice President, Finance and Chief Financial Officer

 

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