10-Q 1 hckt-20230929.htm 10-Q 10-Q
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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 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 November 3, 2023, there were 27,237,502 shares of common stock outstanding.

 

 

 


 

 

TABLE OF CONTENTS

 

PART I - FINANCIAL INFORMATION

Page

 

 

 

Item 1.

Financial Statements

 

 

 

 

 

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

3

 

 

 

 

Consolidated Statements of Operations for the Three and Nine Months Ended September 29, 2023, and September 30, 2022, (unaudited)

4

 

 

 

 

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

5

 

 

 

 

Consolidated Statements of Cash Flows for the Nine Months Ended September 29, 2023, and September 30, 2022, (unaudited)

6

 

 

 

 

Consolidated Statements of Equity for the Three and Nine Months Ended September 29, 2023, and 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

18

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

23

 

 

 

Item 4.

Controls and Procedures

23

 

 

Item 5.

Other Information

23

 

 

PART II - OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

24

 

 

 

Item 1A.

Risk Factors

24

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

24

 

 

 

Item 6.

Exhibits

25

 

 

SIGNATURES

26

 

2


 

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

The Hackett Group, Inc.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

(unaudited)

 

 

 

September 29,

 

 

December 30,

 

 

 

2023

 

 

2022

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash

 

$

9,879

 

 

$

30,255

 

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

 

 

3,174

 

 

 

2,535

 

Total current assets

 

 

75,260

 

 

 

81,166

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

20,033

 

 

 

19,359

 

Other assets

 

 

282

 

 

 

268

 

Goodwill

 

 

83,663

 

 

 

83,502

 

Operating lease right-of-use assets

 

 

1,609

 

 

 

698

 

Total assets

 

$

180,847

 

 

$

184,993

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

5,039

 

 

$

8,741

 

Accrued expenses and other liabilities

 

 

23,726

 

 

 

30,953

 

Contract liabilities

 

 

12,869

 

 

 

13,278

 

Income tax payable

 

 

4,009

 

 

 

5,759

 

Operating lease liabilities

 

 

1,328

 

 

 

870

 

Total current liabilities

 

 

46,971

 

 

 

59,601

 

Non-current deferred tax liability, net

 

 

8,583

 

 

 

6,877

 

Long term debt, net

 

 

43,694

 

 

 

59,653

 

Operating lease liabilities

 

 

757

 

 

 

584

 

Total liabilities

 

 

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; 60,537,559 and
   
60,147,720 shares issued at September 29, 2023 and December 30, 2022, respectively

 

 

61

 

 

 

60

 

Additional paid-in capital

 

 

314,046

 

 

 

308,325

 

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

 

 

55,966

 

 

 

38,640

 

Accumulated other comprehensive loss

 

 

(14,631

)

 

 

(14,881

)

Total shareholders' equity

 

 

80,842

 

 

 

58,278

 

Total liabilities and shareholders' equity

 

$

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

 

 

Nine Months Ended

 

 

 

September 29,

 

 

September 30,

 

 

September 29,

 

 

September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Revenue before reimbursements

 

$

74,634

 

 

$

70,995

 

 

$

220,106

 

 

$

220,871

 

Reimbursements

 

 

1,222

 

 

 

1,038

 

 

 

4,081

 

 

 

2,754

 

Total revenue

 

 

75,856

 

 

 

72,033

 

 

 

224,187

 

 

 

223,625

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Cost of service:

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

1,222

 

 

 

1,038

 

 

 

4,081

 

 

 

2,754

 

Total cost of service

 

 

45,643

 

 

 

43,908

 

 

 

137,071

 

 

 

137,658

 

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

 

 

62,113

 

 

 

57,998

 

 

 

186,402

 

 

 

182,000

 

Income from operations

 

 

13,743

 

 

 

14,035

 

 

 

37,785

 

 

 

41,625

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other expense, net:

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

(814

)

 

 

(14

)

 

 

(2,594

)

 

 

(70

)

Income from operations before income taxes

 

 

12,929

 

 

 

14,021

 

 

 

35,191

 

 

 

41,555

 

Income tax expense

 

 

3,509

 

 

 

3,655

 

 

 

8,890

 

 

 

10,469

 

Net income

 

$

9,420

 

 

$

10,366

 

 

 

26,301

 

 

$

31,086

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic net income per common share:

 

 

 

 

 

 

 

 

 

 

 

 

Income per common share from operations

 

$

0.35

 

 

$

0.33

 

 

$

0.97

 

 

$

0.98

 

Weighted average common shares outstanding

 

 

27,220

 

 

 

31,686

 

 

 

27,146

 

 

 

31,596

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted net income per common share:

 

 

 

 

 

 

 

 

 

 

 

 

Income per common share from operations

 

$

0.34

 

 

$

0.32

 

 

$

0.95

 

 

$

0.97

 

Weighted average common and common equivalent shares outstanding

 

 

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

 

 

Nine Months Ended

 

 

 

September 29,

 

 

September 30,

 

 

September 29,

 

 

September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net income

 

$

9,420

 

 

$

10,366

 

 

$

26,301

 

 

$

31,086

 

Foreign currency translation adjustment

 

 

(1,018

)

 

 

(1,966

)

 

 

250

 

 

 

(5,996

)

Total comprehensive income

 

$

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)

 

 

Nine Months Ended

 

 

 

September 29,

 

 

September 30,

 

 

 

2023

 

 

2022

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income

 

$

26,301

 

 

$

31,086

 

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

 

 

 

 

 

 

Depreciation expense

 

 

2,528

 

 

 

2,468

 

Amortization expense

 

 

 

 

 

154

 

Amortization of debt issuance costs

 

 

54

 

 

 

43

 

Non-cash stock based compensation expense

 

 

7,930

 

 

 

7,828

 

Provision for doubtful accounts

 

 

219

 

 

 

295

 

Loss (gain) on foreign currency translation

 

 

263

 

 

 

(1,383

)

Deferred income tax expense

 

 

1,617

 

 

 

360

 

Changes in assets and liabilities:

 

 

 

 

 

 

Increase in accounts receivable and contract assets

 

 

(14,134

)

 

 

(1,446

)

(Increase) decrease in prepaid expenses and other assets

 

 

(1,482

)

 

 

3,566

 

Decrease in accounts payable

 

 

(3,701

)

 

 

(2,992

)

Decrease in accrued expenses and other liabilities

 

 

(5,619

)

 

 

(9,783

)

Decrease in contract liabilities

 

 

(409

)

 

 

(2,201

)

(Decrease) increase in income tax payable

 

 

(1,750

)

 

 

6,083

 

Net cash provided by operating activities

 

 

11,817

 

 

 

34,078

 

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of property and equipment

 

 

(3,203

)

 

 

(3,163

)

Net cash used in investing activities

 

 

(3,203

)

 

 

(3,163

)

Cash flows from financing activities:

 

 

 

 

 

 

Debt issuance costs

 

 

(14

)

 

 

(10

)

Proceeds from borrowings

 

 

5,000

 

 

 

 

Repayment of borrowings

 

 

(21,000

)

 

 

 

Proceeds from ESPP

 

 

481

 

 

 

407

 

Proceeds from the exercise of stock options

 

 

 

 

 

120

 

Dividends paid

 

 

(8,978

)

 

 

(6,954

)

Repurchase of common stock

 

 

(4,446

)

 

 

(3,211

)

Net cash used in financing activities

 

 

(28,957

)

 

 

(9,648

)

Effect of exchange rate on cash

 

 

(33

)

 

 

(16

)

Net (decrease) increase in cash

 

 

(20,376

)

 

 

21,251

 

Cash at beginning of period

 

 

30,255

 

 

 

45,794

 

Cash at end of period

 

$

9,879

 

 

$

67,045

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

Cash paid (refunded) for income taxes

 

$

8,719

 

 

$

(34

)

Cash paid for interest

 

$

2,690

 

 

$

43

 

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

 

 

 

 

 

 

Dividend declared during the quarter and paid the following quarter

 

$

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

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

Total

 

 

 

Common Stock

 

 

Paid in

 

 

Treasury Stock

 

 

Retained

 

 

Comprehensive

 

 

Shareholders'

 

 

 

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

 

Issuance of common stock

 

 

343

 

 

 

 

 

 

(3,529

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,529

)

Treasury stock purchased, net of costs

 

 

 

 

 

 

 

 

 

 

 

(37

)

 

 

(711

)

 

 

 

 

 

 

 

 

(711

)

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

 

 

 

 

 

 

 

 

3,662

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,662

 

Dividends declared

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,990

)

 

 

 

 

 

(2,990

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8,161

 

 

 

 

 

 

8,161

 

Foreign currency translation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

570

 

 

 

570

 

Balance at March 31, 2023

 

 

60,491

 

 

$

60

 

 

$

308,458

 

 

 

(33,314

)

 

$

(274,577

)

 

$

43,811

 

 

$

(14,311

)

 

$

63,441

 

Issuance of common stock

 

 

38

 

 

 

1

 

 

 

362

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

363

 

Treasury stock purchased, net of costs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(23

)

 

 

 

 

 

 

 

 

(23

)

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

 

 

 

 

 

 

 

 

2,685

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,685

 

Dividends declared

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,991

)

 

 

 

 

 

(2,991

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8,720

 

 

 

 

 

 

8,720

 

Foreign currency translation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

698

 

 

 

698

 

Balance at June 30, 2023

 

 

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