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Form 10-Q HACKETT GROUP, INC. For: Jul 01

August 10, 2022 3:26 PM EDT

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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 July 1, 2022

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 5, 2022, there were 31,682,972 shares 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 July 1, 2022 (unaudited) and December 31, 2021

3

 

 

 

 

Consolidated Statements of Operations for the Three and Six Months Ended July 1, 2022 and July 2, 2021 (unaudited)

4

 

 

 

 

Consolidated Statements of Comprehensive Income for the Three and Six Months Ended July 1, 2022 and July 2, 2021 (unaudited)

5

 

 

 

 

Consolidated Statements of Cash Flows for the Six Months Ended July 1, 2022 and July 2, 2021 (unaudited)

6

 

 

 

 

Consolidated Statements of Equity for the Three and Six Months Ended July 1, 2022, and July 2, 2021 (unaudited)

7

 

 

 

 

Notes to Consolidated Financial Statements (unaudited)

8

 

 

 

Item 2.

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

16

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

20

 

 

 

Item 4.

Controls and Procedures

20

 

 

PART II - OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

21

 

 

 

Item 1A.

Risk Factors

21

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

21

 

 

 

Item 6.

Exhibits

22

 

 

SIGNATURES

23

 

2


 

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

The Hackett Group, Inc.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

(unaudited)

 

 

 

July 1,

 

 

December 31,

 

 

 

2022

 

 

2021

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash

 

$

61,680

 

 

$

45,794

 

Accounts receivable and contract assets, net of allowance of $1,469 and $2,702 at July 1, 2022 and December 31, 2021, respectively

 

 

49,485

 

 

 

50,616

 

Prepaid expenses and other current assets

 

 

3,033

 

 

 

5,766

 

Total current assets

 

 

114,198

 

 

 

102,176

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

18,638

 

 

 

18,026

 

Other assets

 

 

501

 

 

 

620

 

Goodwill

 

 

83,512

 

 

 

85,070

 

Operating lease right-of-use assets

 

 

1,040

 

 

 

1,649

 

Total assets

 

$

217,889

 

 

$

207,541

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

5,400

 

 

$

7,677

 

Accrued expenses and other liabilities

 

 

30,482

 

 

 

30,297

 

Contract liabilities (deferred revenue)

 

 

14,250

 

 

 

14,616

 

Operating lease liabilities

 

 

1,507

 

 

 

2,299

 

Total current liabilities

 

 

51,639

 

 

 

54,889

 

Non-current deferred tax liability, net

 

 

8,401

 

 

 

7,325

 

Operating lease liabilities

 

 

1,019

 

 

 

1,474

 

Total liabilities

 

 

61,059

 

 

 

63,688

 

 

 

 

 

 

 

 

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; 60,065,278 and
   
59,631,003 shares issued at July 1, 2022 and December 31, 2021, respectively

 

 

60

 

 

 

60

 

Additional paid-in capital

 

 

304,164

 

 

 

300,288

 

Treasury stock, at cost, 28,388,144 and 28,357,145 shares July 1, 2022
   and December 31, 2021, respectively

 

 

(157,929

)

 

 

(157,294

)

Retained earnings

 

 

25,038

 

 

 

11,272

 

Accumulated other comprehensive loss

 

 

(14,503

)

 

 

(10,473

)

Total shareholders' equity

 

 

156,830

 

 

 

143,853

 

Total liabilities and shareholders' equity

 

$

217,889

 

 

$

207,541

 

 

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

 

 

 

July 1,

 

 

July 2,

 

 

July 1,

 

 

July 2,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Revenue before reimbursements

 

$

74,768

 

 

$

72,997

 

 

$

149,876

 

 

$

136,407

 

Reimbursements

 

 

1,160

 

 

 

200

 

 

 

1,716

 

 

 

276

 

Total revenue

 

 

75,928

 

 

 

73,197

 

 

 

151,592

 

 

 

136,683

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Cost of service:

 

 

 

 

 

 

 

 

 

 

 

 

Personnel costs before reimbursable expenses (includes $1,483 and $3,149 and $1,779 and $3,626 of stock compensation expense in the three and six months ended July 1, 2022 and July 2, 2021, respectively)

 

 

44,701

 

 

 

43,227

 

 

 

92,034

 

 

 

84,397

 

Reimbursable expenses

 

 

1,160

 

 

 

200

 

 

 

1,716

 

 

 

276

 

Total cost of service

 

 

45,861

 

 

 

43,427

 

 

 

93,750

 

 

 

84,673

 

Selling, general and administrative costs (includes $1,235 and $2,168 and $874 and $1,614 of stock compensation expense in the three and six months ended July 1, 2022 and July 2, 2021, respectively)

 

 

15,886

 

 

 

15,553

 

 

 

30,252

 

 

 

28,940

 

Total costs and operating expenses

 

 

61,747

 

 

 

58,980

 

 

 

124,002

 

 

 

113,613

 

Income from operations

 

 

14,181

 

 

 

14,217

 

 

 

27,590

 

 

 

23,070

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other expense:

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(28

)

 

 

(25

)

 

 

(56

)

 

 

(50

)

Income from operations before income taxes

 

 

14,153

 

 

 

14,192

 

 

 

27,534

 

 

 

23,020

 

Income tax expense

 

 

3,938

 

 

 

3,660

 

 

 

6,814

 

 

 

6,120

 

Income from continuing operations

 

 

10,215

 

 

 

10,532

 

 

 

20,720

 

 

 

16,900

 

Loss from discontinued operations

 

 

 

 

 

 

 

 

 

 

 

(7

)

Net income

 

$

10,215

 

 

$

10,532

 

 

$

20,720

 

 

$

16,893

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic net income per common share:

 

 

 

 

 

 

 

 

 

 

 

 

Income per common share from continuing operations

 

$

0.32

 

 

$

0.35

 

 

$

0.66

 

 

$

0.56

 

Loss per common share from discontinued operations

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(0.00

)

Net income per common share

 

$

0.32

 

 

$

0.35

 

 

$

0.66

 

 

$

0.56

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted net income per common share:

 

 

 

 

 

 

 

 

 

 

 

 

Income per common share from continuing operations

 

$

0.32

 

 

$

0.32

 

 

$

0.65

 

 

$

0.51

 

Loss per common share from discontinued operations

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(0.00

)

Net income per common share

 

$

0.32

 

 

$

0.32

 

 

$

0.65

 

 

$

0.51

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

31,652

 

 

 

30,094

 

 

 

31,551

 

 

 

30,151

 

Diluted

 

 

32,221

 

 

 

32,970

 

 

 

32,032

 

 

 

32,870

 

 

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

 

 

 

July 1,

 

 

July 2,

 

 

July 1,

 

 

July 2,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net income

 

$

10,215

 

 

$

10,532

 

 

$

20,720

 

 

$

16,893

 

Foreign currency translation adjustment

 

 

(2,896

)

 

 

(132

)

 

 

(4,030

)

 

 

137

 

Total comprehensive income

 

$

7,319

 

 

$

10,400

 

 

$

16,690

 

 

$

17,030

 

 

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

 

 

 

July 1,

 

 

July 2,

 

 

 

2022

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income

 

$

20,720

 

 

$

16,893

 

Plus loss from discontinued operations

 

 

 

 

 

(7

)

Net income from continuing operations

 

 

20,720

 

 

 

16,900

 

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

 

 

 

 

 

 

Depreciation expense

 

 

1,630

 

 

 

1,723

 

Amortization expense

 

 

154

 

 

 

524

 

Amortization of debt issuance costs

 

 

28

 

 

 

22

 

Non-cash stock compensation expense

 

 

5,317

 

 

 

5,240

 

Provision for doubtful accounts

 

 

204

 

 

 

38

 

(Gain) loss on foreign currency translation

 

 

(968

)

 

 

88

 

Deferred income tax expense

 

 

1,064

 

 

 

690

 

Changes in assets and liabilities:

 

 

 

 

 

 

Decrease (increase) in accounts receivable and contract assets

 

 

1,079

 

 

 

(14,554

)

Decrease in prepaid expenses and other assets

 

 

3,369

 

 

 

528

 

Decrease in accounts payable

 

 

(2,277

)

 

 

(1,383

)

(Decrease) increase in accrued expenses and other liabilities

 

 

(7,613

)

 

 

2,146

 

(Decrease) increase in contract liabilities

 

 

(366

)

 

 

5,119

 

Increase in income tax payable

 

 

1,948

 

 

 

2,577

 

Net cash provided by operating activities

 

 

24,289

 

 

 

19,651

 

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of property and equipment

 

 

(2,267

)

 

 

(1,417

)

Net cash used in investing activities

 

 

(2,267

)

 

 

(1,417

)

Cash flows from financing activities:

 

 

 

 

 

 

Debt issuance costs

 

 

(10

)

 

 

 

Proceeds from ESPP

 

 

407

 

 

 

391

 

Proceeds from exercise of stock options

 

 

120

 

 

 

 

Dividends paid

 

 

(3,475

)

 

 

(3,253

)

Repurchase of common stock

 

 

(3,142

)

 

 

(12,357

)

Net cash used in financing activities

 

 

(6,100

)

 

 

(15,219

)

Effect of exchange rate on cash

 

 

(36

)

 

 

(17

)

Net increase in cash and cash equivalents

 

 

15,886

 

 

 

2,998

 

Cash at beginning of period

 

 

45,794

 

 

 

49,455

 

Cash at end of period

 

$

61,680

 

 

$

52,453

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

Cash (refunded) paid for income taxes

 

$

(34

)

 

$

2,710

 

Cash paid for interest

 

$

28

 

 

$

14

 

 

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 31, 2021

 

 

59,631

 

 

$

60

 

 

$

300,288

 

 

 

(28,358

)

 

$

(157,294

)

 

$

11,272

 

 

$

(10,473

)

 

$

143,853

 

Issuance of common stock

 

 

373

 

 

 

 

 

 

(2,432

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,432

)

Treasury stock purchased

 

 

 

 

 

 

 

 

 

 

 

(31

)

 

 

(635

)

 

 

 

 

 

 

 

 

(635

)

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

 

 

 

 

 

 

 

 

3,632

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,632

 

Dividends declared

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,474

)

 

 

 

 

 

(3,474

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10,505

 

 

 

 

 

 

10,505

 

Foreign currency translation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,134

)

 

 

(1,134

)

Balance at April 1, 2022

 

 

60,004

 

 

$

60

 

 

$

301,488

 

 

 

(28,389

)

 

$

(157,929

)

 

$

18,303

 

 

$

(11,607

)

 

$

150,315

 

Issuance of common stock

 

 

61

 

 

 

 

 

 

452

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

452

 

Treasury stock purchased

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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