Hackett : Supplemental Data discussed during earnings call – Q3 2022

The Hackett Group, Inc.

Supplemental Data Discussed During Q3 2022 Earnings Conference Call

Q3 2022 Global S&BT segment revenue before reimbursements growth year over year

Q3 2022 Global S&BT revenue before reimbursements

Q3 2022 US S&BT growth rate as compared to prior year

Q3 2022 international S&BT growth rate as compared to prior year

Q3 2022 international S&BT growth rate as compared to prior year utilizing prior year foreign exchange rates Q3 2022 Global S&BT segment profit growth year over year

Q3 2022 Oracle Solutions segment revenue before reimbursements

Q3 2022 Oracle Solutions segment revenue before reimbursements % decrease from Q3 2021 Q3 2022 SAP Solutions segment revenue before reimbursements

Q3 2022 SAP Solutions segment revenue before reimbursements % decrease from Q3 2021

Over past 2 years % of our consulting services have come from the advisory and benchmarking client base Q3 2022 % of recurring revenue before reimbursements to total Company revenue before reimbursements Q3 2022 total Company adjusted cost of sales

Q3 2022 total Company adjusted cost of sales as % of revenue before reimbursements

Q3 2021 total Company adjusted cost of sales

Q3 2021 total Company adjusted cost of sales as % of revenue before reimbursements

Q3 2022 total Company adjusted gross margin as % of revenue before reimbursements

Q3 2021 total Company adjusted gross margin as % of revenue before reimbursements

Q3 2022 total Company adjusted SGA

Q3 2022 total Company adjusted SGA as % of revenue before reimbursements

Q3 2021 total Company adjusted SGA

Q3 2021 total Company adjusted SGA as % of total revenue

Q3 2022 adjusted EBITDA

Q3 2022 adjusted EBITDA as a % of revenue before reimbursements

Q3 2021 adjusted EBITDA

Q3 2021 adjusted EBITDA as a % of revenue before reimbursements

Q3 2022 favorable impact on adjusted diluted net income per common share from decrease in tax rate from 28% to 26% Q3 2022 % of offshore resources of total resources for Oracle Solutions and SAP Solutions segments

11% $41.1M 13.2% 1.6% 16.0% 18% $17.4M 16% $12.5M 10.0% over 40% approx. 21% $41.2M 58.1% $43.6M 61.0% 41.9% 39.0% $13.8M 19.4% $13.6M 19.1% $16.9M 23.7% $15.1M 21.1% $0.01 cent approx. 50%

The Hackett Group, Inc.

RECONCILIATION OF TOTAL REVENUE TO REVENUE BEFORE REIMBURSEMENTS BY SEGMENT (in thousands)

(unaudited)

									Three Months Ended
		September 30,			July 1,			April, 1		December 31,			October 1,			July 2,			April 2,
		2022			2022			2022			2021			2021			2021			2021
Global S&BT:
Total revenue	$	41,593	$	44,530	$	42,637	$	39,268	$	37,085	$	35,804	$	34,067
Reimbursements		484			508			237			221			196			56			22
Revenue before reimbursements	$	41,109		$	44,022		$	42,400		$	39,047		$	36,889		$	35,748		$	34,045
Oracle Solutions:
Total revenue	$	17,682	$	19,972	$	21,512	$	19,123	$	20,762	$	18,578	$	16,423
Reimbursements		253			398			119			85			63			39			11
Revenue before reimbursements	$	17,429		$	19,574		$	21,393		$	19,038		$	20,699		$	18,539		$	16,412
SAP Solutions:
Total revenue	$	12,758	$	11,426	$	11,515	$	11,841	$	14,047	$	18,815	$	12,996
Reimbursements		301			254			200			150			235			105			43
Revenue before reimbursements	$	12,457		$	11,172		$	11,315		$	11,691		$	13,812		$	18,710		$	12,953
Total segment revenue:
Total revenue	$	72,033	$	75,928	$	75,664	$	70,232	$	71,894	$	73,197	$	63,486
Reimbursements		1,038			1,160			556			456			494			200			76
Revenue before reimbursements	$	70,995		$	74,768		$	75,108		$	69,776		$	71,400		$	72,997		$	63,410

The Hackett Group, Inc.

RECONCILIATION OF GAAP TO NON-GAAPMEASURES (in thousands, except per share data)

(unaudited)

RECONCILIATION OF GAAP TO NON-GAAP MEASURES (ADJUSTED NET INCOME)

		Quarter Ended			Nine Months Ended
		September 30,			October 1,		September 30,			October 1,
		2022			2021			2022			2021
GAAP NET INCOME	$	10,366		$	8,131		$	31,086		$	25,024
Adjustments (1):
Non-cash stock based compensation expense (2)		2,507			2,552			7,816			7,433
Acquisition-related compensation expense (3)		-			-			-			11
Acquisition-relatednon-cash stock based compensation expense (3)		4			19			12			378
Restructuring charge reversal		(526)			-			(651)			-
Amortization of intangible assets (4)		-			259			154			783
ADJUSTED NET INCOME BEFORE INCOME TAXES ON ADJUSTMENTS (1)		12,351			10,961			38,417			33,629
Tax effect of adjustments above (5)		511			709			1,875			2,150
ADJUSTED NET INCOME (1)	$	11,840		$	10,252		$	36,542		$	31,479
GAAP diluted net income per common share	$	0.32	$	0.25	$	0.97	$	0.76
Adjusted diluted net income per common share (1)	$	0.37	$	0.31	$	1.14	$	0.96
Weighted average common and common equivalent shares outstanding		32,309			32,876			32,124			32,871

RECONCILIATION OF GAAP TO NON-GAAP MEASURES (ADJUSTED EBITDA)
		Quarter Ended			Nine Months Ended
		September 30,			October 1,		September 30,			October 1,
		2022			2021			2022			2021
GAAP NET INCOME	$	10,366		$	8,131		$	31,086		$	25,024
Add back:
Income tax expense		3,655			3,248			10,469			9,368
Interest expense		14			26			70			76
Depreciation		838			829			2,468			2,552
Amortization		-			259			154			783
EBITDA		14,873			12,493			44,247			37,803
Adjustments:
Non-cash stock based compensation expense (2)		2,507			2,552			7,816			7,433
Acquisition-related compensation expense (3)		-			-			-			11
Acquisition-relatednon-cash stock based compensation expense (3)		4			19			12			378
Restructuring charge reversal		(526)			-			(651)			-
ADJUSTED EBITDA	$	16,858		$	15,064		$	51,424		$	45,625
RECONCILIATION OF GAAP TO NON-GAAP MEASURES (ADJUSTED GROSS MARGIN)
		Quarter Ended			Nine Months Ended
		September 30,			October 1,		September 30,			October 1,
		2022			2021			2022			2021
Revenue:
Revenue before reimbursements	$	70,995	$	71,400	$	220,871	$	207,807
Reimbursements		1,038			494			2,754			770
Total revenue		72,033			71,894			223,625			208,577
Costs and expenses:
Cost of service:
Personnel costs before reimbursable expenses (includes $1,652, $4,801, $1,670 and $5,296 of		42,870			45,222			134,904			129,619
non-cash stock based compensation expense in the quarters and nine months ended September
30, 2022 and October 1, 2021, respectively)
Reimbursable expenses		1,038			494			2,754			770
Total cost of service		43,908			45,716			137,658			130,389
GAAP GROSS MARGIN		28,125			26,178			85,967			78,188
Adjustments:
Non-cash stock based compensation expense (2)		1,648			1,651			4,789			4,918
Acquisition related compensation expense (3)		-			-			-			11
Acquisition-relatednon-cash stock based compensation expense (3)		4			19			12			378
ADJUSTED GROSS MARGIN	$	29,777		$	27,848		$	90,768		$	83,495

RECONCILIATION OF GAAP TO NON-GAAP MEASURES (ADJUSTED COS)
		Quarter Ended			Nine Months Ended
		September 30,			October 1,		September 30,			October 1,
		2022			2021			2022			2021
GAAP TOTAL COST OF SERVICE	$	43,908	$	45,716	$	137,658	$	130,389
Adjustments:
Non-cash stock based compensation expense (2)		(1,648)			(1,651)			(4,789)			(4,918)
Acquisition related compensation expense (benefit) (3)		-			-			-			(11)
Acquisition-relatednon-cash stock based compensation expense (3)		(4)			(19)			(12)			(378)
Reimbursable expenses		(1,038)			(494)			(2,754)			(770)
ADJUSTED COS	$	41,218		$	43,552		$	130,103		$	124,312
RECONCILIATION OF GAAP TO NON-GAAP MEASURES (ADJUSTED SGA)
		Quarter Ended			Nine Months Ended
		September 30,			October 1,		September 30,			October 1,
		2022			2021			2022			2021
GAAP SELLING, GENERAL AND ADMINISTRATIVE COSTS	$	14,616	$	14,773	$	44,993	$	43,713
RESTRUCTURING CHARGE REVERSAL		(526)			-			(651)			-
Adjustments:
Non-cash stock based compensation expense (2)		(859)			(901)			(3,027)			(2,515)
Amortization expense (4)		-			(259)			(154)			(783)
Restructuring charge reversal		526			-			651			-
ADJUSTED SGA	$	13,757		$	13,613		$	41,812		$	40,415

1. The Company provides adjusted earnings results (which exclude the loss from discontinued operations, non-cash stock based compensation expense, acquisition-related compensation expense, acquisition-relatednon-cash stock based compensation expense, restructuring charges and reversals, amortization of intangible assets and include a GAAP tax rate) as a complement to results provided in accordance with Generally Accepted Accounting Principles (GAAP). These non-GAAP results are provided to enhance the users' overall understanding of the Company's current financial performance and its prospects for the future. The Company believes the non-GAAP results provide useful information to both management and investors and by excluding certain expenses that it believes are not indicative of its core operating results. The non-GAAP measures are included to provide investors and management with an alternative method for assessing operating results in a manner that is focused on the performance of ongoing operations and to provide a more consistent basis for comparison between quarters. Further, these non-GAAP results are one of the primary indicators management uses for planning and forecasting in future periods. In addition, since the Company has historically reported non-GAAP results to the investment community, it believes the continued inclusion of non-GAAP results provides consistency in its financial reporting. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP.
2. Non-cashstock based compensation expense is accounted for under Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation-Stock Compensation. The Company excludes non-cash stock based compensation expense and the related tax effects for the purposes of adjusted net income and adjusted diluted earnings per share. The Company believes that non-GAAP measures of profitability, which exclude non-cash stock based compensation expense, are widely used by investors.
3. The Company incurs cash and non-cash stock based compensation expense for acquisition related consideration that is recognized over time under GAAP. The Company believes excluding these amounts more consistently presents its ongoing results of operations because they are related to acquisitions and not due to normal operating activities. The acquisition- related non-cash stock based compensation expense is also accounted for under Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation- Stock Compensation.
4. The Company has incurred expense on amortization of intangible assets related to various acquisitions. The Company excludes the effect of the amortization of intangibles from our adjusted results in order to more consistently present its ongoing results of operations.
5. The adjustment for the income tax expense is based on the accounting treatment and income tax rate for the jurisdiction of each item. For the quarter end periods the impact of non- cash stock based compensation expense was $0.6 million and $0.7 million in 2022 and 2021, respectively; the impact of intangible amortization was $51 thousand in 2021; and the impact on the restructuring charge reversal was $136 thousand in 2022. For the nine month periods the impact of non-cash stock based compensation expense was $2.0 million and $1.9 million in 2022 and 2021, respectively; the impact of intangible amortization was $32 thousand and $155 thousand in 2022 and 2021, respectively and the impact on the restructuring charge reversal was $168 thousand in 2022.
6. The adjustment for the income tax expense is based on the accounting treatment and income tax rate for the jurisdiction of each item. For the quarter end periods the impact of non- cash stock compensation was $0.7 million and $0.7 million in 2022 and 2021, respectively; the impact of intangible amortization was $3 thousand and $52 thousand in 2022 and 2021, respectively; and the impact on the restructuring and asset impairment reversal was $32 thousand in 2022. For the six month periods the impact of non-cash stock compensation was $1.4 million and $1.2 million in 2022 and 2021, respectively; the impact of intangible amortization was $32 thousand and $104 thousand in 2022 and 2021, respectively and the impact on the restructuring and asset impairment reversal was $32 thousand in 2022.