Log in
E-mail
Password
Remember
Forgot password ?
Become a member for free
Sign up
Sign up
New member
Sign up for FREE
New customer
Discover our services
Settings
Settings
Dynamic quotes 
OFFON

MarketScreener Homepage  >  Equities  >  Nasdaq  >  The Hackett Group, Inc.    HCKT

THE HACKETT GROUP, INC.

(HCKT)
  Report
SummaryQuotesChartsNewsRatingsCalendarCompanyFinancialsConsensusRevisions 
SummaryMost relevantAll NewsPress ReleasesOfficial PublicationsSector newsMarketScreener StrategiesAnalyst Recommendations

HACKETT : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. (form 10-Q)

08/05/2020 | 01:56pm EST

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. We intend the
forward-looking statements to be covered by the safe harbor provisions for
forward-looking statements. 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 impact such
forward-looking statements include, among others, the impact of the coronavirus
(COVID-19) pandemic and changes in worldwide and U.S. economic conditions that
impact business confidence and the demand for our products and services, our
ability to mitigate or manage disruptions posed by 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 and changes in general
economic conditions, interest rates and our ability to obtain additional debt
financing if needed. For a discussion of risks and actions taken in response to
the coronavirus pandemic, see "Our results of operations have been adversely
affected and could in the future be materially adversely impacted by the
coronavirus pandemic (COVID-19)" under Item 1A, "Risk Factors."



An additional description of our risk factors is set forth in our Annual Report
on Form 10-K for the year ended December 27, 2019. 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. Many of
the risks, uncertainties and other factors identified in the Annual Report on
Form 10-K have been amplified by the COVID-19 pandemic.

OVERVIEW


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 more than 17,850 benchmark and performance studies over
26 years at over 6,420 of the world's leading companies.



In the following discussion, Strategy and Business Transformation Group includes
the results of our North America IP as-a-service offerings, which include our
Executive Advisory Programs and Benchmarking Services, and our Business
Transformation Practices (S&BT). ERP, EPM and Analytics Solutions includes the
results of our North America Oracle EEA and SAP Solutions Practices (EEA).
International includes results of our S&BT and EEA Practices primarily in
Europe.



COVID-19 Pandemic Impact 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. In spite
of some disruption in March 2020, the COVID-19 pandemic did not have a
significant impact on our consolidated results of operations during the first
quarter of 2020, however, net revenue and dilutive earnings per share were
negatively impacted in the second quarter of 2020, and we expect negative
impacts to continue until economic conditions improve. A substantial or
prolonged economic downturn as a result of the COVID-19 pandemic or otherwise,
weak or uncertain economic conditions or similar factors could adversely affect
our clients' financial condition which may further reduce our clients' demand
for our services.



We are actively managing our business to respond to the impact of the COVID-19.
We have reduced employee headcount and employee travel to only essential
business needs and our employees have been working remotely from home. We are
generally following the requirements and protocols published by the U.S. Centers
for Disease Control and the World Health Organization, and state and local
governments. We cannot predict when or how we will begin to lift the actions put
in place.



                                       17
--------------------------------------------------------------------------------


As a response to the ongoing COVID-19 pandemic, we have implemented plans to
manage our costs and preserve cash. We have significantly limited the addition
of new employees and third party contracted services, eliminated all travel
except where necessary to meet customer needs, and limited discretionary
spending. In addition, at the end of June 2020, we reduced our global workforce
by approximately 10% of our global workforce and recorded a $5.0 million
restructuring charge. All client concessions and accounts receivable allowances
have been appropriately reflected in our financial statements. To the extent the
business disruption continues for an extended period, additional cost management
actions will be considered. Any future asset impairment charges, increases in
allowance for doubtful accounts, or restructuring charges will be dependent on
the severity and duration of the pandemic.



In light of the evolving health, social, economic and business environment,
governmental regulations or mandates, and business disruptions that could occur,
the potential impact that COVID-19 could have on our financial condition and
operating results remains highly uncertain.



For more information, see "Our results of operations have been adversely affected and could in the future be materially adversely impacted by the coronavirus pandemic (COVID-19)." under Item 1A, "Risk Factors."

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, our results of operations and the percentage relationship to revenue before reimbursements of such results (in thousands and unaudited):



                                                  Quarter Ended                                    Six Months Ended
                                        June 26,                 June 28,                 June 26,                  June 28,
                                          2020                     2019                     2020                      2019
REVENUE:
Revenue before reimbursements     $ 52,632       100.0 %   $ 67,976       100.0 %   $ 117,818       100.0 %   $ 130,346       100.0 %
Reimbursements                         119                    5,545                     4,466                    10,330
TOTAL REVENUE                       52,751                   73,521                   122,284                   140,676
COST AND EXPENSES:
Cost of service:
Personnel costs before
reimbursable expenses               38,654        73.4 %     40,820       

60.1 % 79,767 67.7 % 79,754 61.2 % Stock compensation expense

           1,600                    1,022                     2,941                     1,942

Acquisition-related

compensation expense (benefit)          29                     (159 )                      29                      (288 )
Acquisition-related non-cash
stock compensation
  expense                              259                      289                       512                       368
Reimbursable expenses                  119                    5,545                     4,466                    10,330
TOTAL COST OF SERVICE               40,661                   47,517                    87,715                    92,106
Selling, general and
administrative costs                11,413        21.7 %     15,159        22.3 %      25,310        21.5 %      29,201        22.4 %
Non-cash stock compensation
expense                                483                      787                     1,119                     1,492
Amortization of intangible
assets                                 238                      254                       476                       553
Acquisition-related contingent
consideration liability                  -                       45                         -                    (1,025 )
Restructuring costs                  5,034                        -                     5,034                         -
TOTAL SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES             17,168                   16,245                    31,939                    30,221
TOTAL COSTS AND OPERATING
EXPENSES                            57,829                   63,762                   119,654                   122,327

INCOME (LOSS) FROM OPERATIONS (5,078 ) -9.6 % 9,759 14.4 % 2,630 2.2 % 18,349 14.1 % Other expense: Interest expense

                       (41 )                   (105 )                     (78 )                    (206 )
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES      (5,119 )      -9.7 %      9,654        14.2 %       2,552         2.2 %      18,143        13.9 %
Income tax (benefit) expense        (1,186 )      -2.3 %      2,614         3.8 %         950         0.8 %       4,054         3.1 %
INCOME (LOSS) FROM CONTINUING
OPERATIONS (NET OF TAXES)           (3,933 )                  7,040                     1,602                    14,089
Loss from discontinued
operations                               -                      (51 )                      (8 )                      (6 )
NET INCOME (LOSS)                 $ (3,933 )      -7.5 %   $  6,989        10.3 %   $   1,594         1.4 %   $  14,083        10.8 %
Diluted net (loss) income per
common share                      $  (0.13 )$   0.22$    0.05$    0.44




Revenue. We are a global company with operations 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 quarter and six months ended June
26, 2020 and the comparable periods of 2019. Revenue is analyzed based on
geographical location of engagement team personnel.



                                       18

--------------------------------------------------------------------------------


The following table sets forth revenue by group for the periods indicated (in
thousands):



                                                  Quarter Ended              Six Months Ended
                                             June 26,       June 28,      June 26,      June 28,
                                               2020           2019          2020          2019
S&BT                                        $   16,798$   26,261$  41,260$  50,582
EEA                                             31,399         31,005        64,622        58,744
International                                    4,435         10,710        11,936        21,020
Revenue from continuing operations before
  reimbursements                            $   52,632$   67,976$ 117,818$ 130,346




Our total Company net revenue from continuing operations, or revenue before
reimbursements, decreased 23% to $52.6 million, and 10% to $117.8 million in the
second quarter and first six months of 2020, respectively, as compared to $68.0
million and $130.3 million, in the same periods of 2019. Net revenues and
reimbursable expenses were both affected as the economic disruption from the
COVID-19 pandemic interrupted travel and as we transitioned to a remote service
delivery model throughout the US and Europe. In the second quarter and first six
months of 2020, one customer accounted for 6% and 5%, respectively, of our total
revenue. In both periods in 2019, no customer accounted for more than 5% of our
total revenue.

S&BT net revenue was $16.8 million and $41.3 million during the second quarter
and first six months of 2020, respectively, as compared to $26.3 million and
$50.6 million in the same periods of 2019. This group's business transformation
practice was disrupted by the impact of the COVID-19 pandemic.

EEA net revenue increased to $31.4 million and to $64.6 million during the
second quarter and first six months of 2020, respectively, as compared to $31.0
million and $58.7 million in the same periods of 2019, respectively. This
increase was driven by strong growth from our SAP S4 HANA implementation and
Reseller practices, and growth from our Oracle Cloud ERP and OneStream
Practices.

Hackett US net revenue from continuing operations represented 92% and 90% of our
total Company net revenue during the second quarter and first six months of
2020, respectively, and decreased 16% and 3%, respectively, when compared to the
same periods in 2019.

Hackett international net revenue from continuing operations was $4.4 million
and $11.9 million in the second quarter and first six months of 2020,
respectively, as compared to $10.7 million and $21.0 million during the same
periods in 2019, respectively. Europe continues to be impacted by lengthened
client decision-making from economic uncertainty, which has been further
impacted by the COVID-19 pandemic. Total Company international net revenue
accounted for 8% and 10% of total Company net revenue during both the second
quarter and first six months of 2020, respectively, as compared to 16% for the
same periods in 2019.

Reimbursements as a percentage of total net revenue were 0% and 4% during the
second quarter and first six months of 2020, respectively, as compared to 8.0%
for both of the same periods in 2019. Reimbursements are project travel-related
expenses passed through to a client with no associated margin. As a result of
COVID-19, most travel was eliminated except where necessary to meet customer
needs.

Cost of Service. Cost of service primarily consists of salaries, benefits and incentive compensation for consultants and subcontractor fees; acquisition-related cash and stock compensation costs; non-cash stock compensation expense; and reimbursable expenses associated with projects.


Personnel costs decreased 5%, to $38.7 million from $40.8 million for the second
quarter of 2020, as compared to the same period in 2019. Personnel costs were
comparable between the first six months of 2020 and 2019. The decrease in
personnel costs in the second quarter of 2020 was primarily due to the
restructuring actions that were implemented at the end of the second quarter of
2020 which included a reduction of approximately 10% of the global workforce.
Personnel costs before reimbursable expenses, as a percentage of revenue before
reimbursements, were 73% and 68% for the second quarter and first six months of
2020, respectively, as compared to 60% and 61% for the same periods of 2019,
respectively.

Non-cash stock compensation expense was $1.6 million and $2.9 million for the
second quarter and first six months of 2020, respectively, as compared to $1.0
million and $1.9 million for the same periods of 2019, respectively.

The acquisition-related compensation expense and benefit in 2020 and 2019
related to the accrual for the cash portion of contingent consideration related
to two acquisitions, all of which is subject to service vesting and as a result
has been recorded as compensation expense. The majority of the liabilities were
settled during the fourth quarter of 2019.

Acquisition related non-cash stock compensation expense in 2020 and 2019 related to equity awards issued in relation to acquisitions between 2014 and 2017.

                                       19

--------------------------------------------------------------------------------


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 compensation expense,
amortization of intangible assets, acquisition related costs and various other
overhead expenses.

SG&A costs were $11.4 million and $25.3 million for the second quarter and first
six months of 2020, respectively, as compared to $15.2 million and $29.2 million
for the same periods in 2019, respectively. The decrease in SG&A was primarily
due to the reduction in travel related selling and marketing activities as a
result of the COVID-19 pandemic. These SG&A costs as a percentage of revenue
before reimbursements were 22% for all periods presented.

Non-cash stock compensation expense was $0.5 million and $1.1 million for the
second quarter and first six months of 2020, respectively, as compared to $0.8
million and $1.5 million for the same periods in 2019, respectively.

Amortization expense was $0.2 million and $0.5 million in the second quarter and
first six months of 2020, respectively, as compared to $0.3 million and $0.6
million in the same periods in 2019, respectively. The amortization expense in
2020 and 2019 related to the amortization of the intangible asset 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 will continue to amortize until 2022 and the intangible
assets related to the joint venture will continue to amortize until 2021.

Acquisition-related Contingent Consideration Liability. During the first quarter
of 2019, the liability related to the cash portion of the Jibe acquisition
contingent consideration due to the selling shareholders, which was not subject
to vesting, resulted in a benefit due to the reduction of the contingent earnout
liability. This liability was settled in the fourth quarter of 2019.

Restructuring Costs. During the second quarter of 2020, we recorded restructuring costs of $5.0 million, which was primarily related to the reduction of staff in the United States and Europe as a result of the impact of the COVID-19 pandemic.

During 2019, we recorded restructuring costs of $3.3 million, which was primarily related to the reduction of staff in Europe and Australia.


Income Taxes. During the second quarter and six months of 2020, we recorded an
income tax benefit of $1.2 million and income tax expense of $950 thousand,
respectively, related to certain federal, foreign and state taxes which
reflected an effective tax rate benefit of 23% and expense of 37%, respectively.
In the second quarter of and six months of 2019, we recorded income tax expense
of $2.6 million and $4.1 million, respectively, related to certain federal,
foreign and state taxes which reflected an effective tax rate of 27% and 22%,
respectively. The increase in the six months ending June 26, 2020 GAAP income
tax rate is primarily due to a lower tax benefit related to share based
compensation when compared to the same period in the prior year, restructuring
charges in the quarter ended June 26, 2020 in countries with lower statutory
income tax rates and changes in the Company's overall profitability due to the
impact of the COVID-19 pandemic.

Liquidity and Capital Resources


As of June 26, 2020, and December 27, 2019, we had $37.4 million and $26.0
million, respectively, classified in cash on the consolidated balance sheets. We
currently believe that available funds (including the cash on hand and funds
available for borrowing capacity under our revolving line of credit (the
"Revolver")) and cash flows generated by operations will be sufficient to fund
our working capital and capital expenditure requirements for at least the next
twelve months. 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.

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



                                                 Six Months Ended
                                              June 26,      June 28,
                                                2020          2019

Cash flows provided by operating activities $ 21,068$ 18,032 Cash flows used in investing activities $ (1,349 )$ (2,819 ) Cash flows used in financing activities $ (8,400 )$ (12,432 )

Cash Flows from Operating Activities


Net cash provided by operating activities was $21.1 million during the first six
months of 2020, as compared to $18.0 million during the same period in 2019. In
2020, the net cash provided by operating activities was primarily due to net
income adjusted for non-cash items, decreases in accounts receivable and
unbilled revenue and increases in accrued expenses and other liabilities,
partially offset by decreases in accounts payable due to the timing of vendor
payments and decreases in employee reimbursable expenses resulting from
decreased travel. In 2019, the net cash provided by operating activities was
primarily due to total net income adjusted

                                       20

--------------------------------------------------------------------------------

for non-cash items, partially offset by a decrease in accounts payable and accrued expenses and liabilities after the payout of incentive compensation.

Cash Flows from Investing Activities


Net cash used in investing activities was $1.3 million and $2.8 million during
the first six months of 2020 and 2019, respectively. During 2020, cash flows
used in investing activities included investments related to the development of
our Quantum Leap benchmark technology. In 2019, cash flows used in investing
activities included investments related to our internal corporate systems, the
global rollout of new laptops which occurs every three to four years, and the
development of our Quantum Leap benchmark technology.



Cash Flows from Financing Activities


Net cash used in financing activities was $8.4 million and $12.4 million during
the first six months 2020 and 2019, respectively. The usage of cash in 2020
primarily related to the dividend payment of $5.8 million and the repurchase of
$3.0 million of our Company common stock. The usage of cash in 2019 was
primarily related to the dividend payment of $5.4 million, the repurchase of
$5.4 million of our Company common stock and the net payments made under the
Revolver of $2.0 million.

As of June 26, 2020, we did not have any outstanding borrowings under the
Revolver, leaving us with a capacity of approximately $45.0 million. See Note 7,
"Credit Facility," to our consolidated financial statements included in this
Quarterly Report on Form 10-Q for more information.

Recently Issued Accounting Standards


For a discussion of recently issued accounting standards, see Note 1, "Basis of
Presentation and General Information," to our consolidated financial statements
included in this Quarterly Report on Form 10-Q and Note 1, "Basis of
Presentation and General Information," to our consolidated financial statements
included in our Annual Report on Form 10-K for the year ended December 27, 2019.



                                       21

--------------------------------------------------------------------------------

© Edgar Online, source Glimpses

All news about THE HACKETT GROUP, INC.
11/13Ford CEO says carmaker now eyes making own EV batteries
RE
11/05HACKETT : Supplemental Data discussed during earnings call – Q3 2020
PU
11/04HACKETT : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT..
AQ
11/03HACKETT : Announces Third Quarter 2020 Results
PU
11/03HACKETT : Consolidated Statements of Operations – Q3 2020
PU
11/02HACKETT GROUP : 3Q Earnings Snapshot
AQ
11/02HACKETT GROUP, INC. : Results of Operations and Financial Condition, Financial S..
AQ
11/02HACKETT :  The Hackett Group Announces Third Quarter 2020 Results
BU
10/28Ford sees full-year pretax profit, posts stronger than expected quarterly ear..
RE
10/12THE HACKETT GROUP, INC. : Invites You to Participate in the 2020 Third Quarter E..
BU
More news