The Hackett Group Announces Second Quarter 2013 Results *Q2 2013 revenue of $59.0 million and pro forma EPS of $0.13 cents, exceed guidance *Hackett Group announces it intends to repurchase $35.75 million of stock through tender offer Business Wire MIAMI -- August 6, 2013 The Hackett Group, Inc. (NASDAQ: HCKT), a global strategic advisory and business transformation consulting firm, today announced its financial results for the second quarter of 2013, which ended June 28, 2013. Second quarter 2013 revenue was $59.0 million, up 8% sequentially and 2% from the same period in 2012. Pro forma diluted earnings per share were $0.13, up 18% when compared to $0.11 for the same period in 2012. Pro forma information is provided to enhance the understanding of the Company's financial performance and is reconciled to the Company's GAAP information in the accompanying tables. GAAP diluted earnings per share were $0.09 for the three months ended June 28, 2013, as compared to $0.12 in the same period in 2012. Excluding the impact of the accounting for deferred taxes in 2012, GAAP diluted earnings per share would have been $0.08 for the three months ended June 29, 2012. The Company also announced that it intends to launch a modified "Dutch auction" tender offer to purchase up to $5.5 million in shares of its common stock, at a price ranging from $5.75 to $6.50. The tender offer would allow the Company to repurchase approximately 17% of its outstanding common shares at the high-end of the pricing range. The Company intends to pay for the share repurchase from the expansion of its credit facility. "The strong US demand for our services allowed us to exceed both revenue and pro forma EPS guidance," stated Ted A. Fernandez, Chairman & CEO of The Hackett Group, Inc. "I am also pleased to see that our operating execution and our sound balance sheet provide us with the opportunity to launch a $35.75 million tender offer that enables us to return capital to shareholders while maintaining the flexibility to continue to pursue our growth initiatives." At the end of the second quarter of 2013, the Company's cash balances were $11.3 million. During the quarter the Company paid down $5.5 million of its credit facility, leaving a $15.0 million balance at quarter end. Additionally, during the second quarter of 2013, cash was utilized to repurchase 124 thousand shares of its common stock at an average cost of $4.80 per share, for a total of $594 thousand. The Company's remaining repurchase authorization at the end of the second quarter of 2013 was $5.0 million. Based on the current economic outlook, the Company estimates total revenue for the third quarter of 2013 to be in the range of $57.0 million to $59.0 million, and estimates pro forma diluted earnings per share to be in the range of $0.11 to $0.13. Other Highlights REL 1000 Working Capital Research - New research from REL Consultancy, a division of The Hackett Group, and CFO Magazine found that the ability of companies to generate cash from operations deteriorated in 2012, as the opportunity for working capital improvement at 1,000 of the largest U.S. public companies rose dramatically, topping $1 trillion for the first time. The research, which examines the ability of companies to collect from customers, manage inventory, and pay suppliers, found that as revenue grew by 5% in 2012, profitability -- as measured by EBIT margin decreased. At the same time, working capital levels increased by 6%, to levels 25% higher than three years ago. Actual Days Working Capital remained flat, however cash conversion efficiency deteriorated for the second year in a row, indicating that companies are taking longer to convert sales into cash. In addition, free cash flow, which is a key indicator of the health of corporate cash flows and represents the cash companies are able to generate after laying out money to maintain or expand their asset base, fell by 14% year over year, indicating poor cash flow management. Finance Key Issues Research - New Finance Key Issues research from The Hackett Group found that despite continued cuts in staffing and budgets this year, finance organizations are compelled to respond to the challenges and opportunities presented by the new "borderless business environment". The new study details how finance leaders are forging ahead with high-value analytics and business partnering programs while continuing to work on reducing operational costs. HR Key Issues Research - New HR Key Issues research from The Hackett Group found that in the face of significant staff and budget reductions, HR executives face continuing pressure and new challenges in 2013, driven in part by the new "borderless business environment." According to The Hackett Group's research, leaders are focusing on several HR strategy issues for 2013: process improvement, including cost reduction and standardization of processes, data, technology and organizational culture; improving the effectiveness of talent management; obtaining more value from data to enable better decisions; and expanding the use of technology. Best Practices Conference - Over 225 senior-level executives from the world's most respected brands attended The Hackett Group's 2013 North American Best Practices Conference, "Borderless Business: Integrating the Enterprise for Sustainable Success," in Miami on May 20-22. The conference focused on how companies are addressing the opportunities and challenges of today's global economy. This year's best practices conference brought together speakers from 17 of the world’s most successful companies, including CEOs, CFOs, CIOs, and leaders in procurement, human resources, and global business services from: Becton, Dickinson and Company; Citigroup; Coca Cola Refreshments USA; Cytec Industries; FedEx; Fidelity Investments; General Electric; General Mills; Hertz; Kimberly-Clark; Kronos; Lennox International; Meritor; MetLife; Office Depot; SAP AG; and TE Connectivity. On Tuesday, August 6, 2013, senior management will discuss second quarter results in a conference call at 5:00 P.M. ET. The number for the conference call is (800) 779-3138, [Passcode: Second Quarter, Leader: Ted A. Fernandez]. For International callers, please dial (517) 308-9381. Please dial in at least 5-10 minutes prior to start time. If you are unable to participate on the conference call, a rebroadcast will be available beginning at 8:00 P.M. ET on Tuesday, August 6, 2013 and will run through 5:00 P.M. ET on Tuesday, August 20, 2013. To access the rebroadcast, please dial (800) 925-0562. For International callers, please dial (203) 369-3629. In addition, The Hackett Group will also be webcasting this conference call live through the StreetEvents.com service. To participate, simply visit http://www.thehackettgroup.com approximately 10 minutes prior to the start of the call and click on the conference call link provided. An online replay of the call will be available after 8:00 P.M. ET on Tuesday, August 6, 2013 and will run through 5:00 P.M. ET on Tuesday, August 20, 2013. To access the replay, visit http://www.thehackettgroup.com or http://www.streetevents.com. For additional information on The Hackett Group, please visit our website at www.thehackettgroup.com. About The Hackett Group The Hackett Group, Inc. (NASDAQ: HCKT), a global strategic business advisory and business transformation consulting firm, is a leader in best practice advisory, benchmarking, and transformation consulting services including strategy and operations, working capital management, shared services and globalization advice. Utilizing best practices and implementation insights from more than 8,500 benchmarking engagements, executives use The Hackett Group's empirically-based approach to quickly define and implement initiatives to enable world-class performance. Through its REL group, The Hackett Group offers working capital solutions focused on delivering significant cash flow improvements. Through its Archstone Consulting group, The Hackett Group offers Strategy & Operations consulting services in the Consumer and Industrial Products, Pharmaceutical, Manufacturing and Financial Services industry sectors. Through its Hackett ERP Solutions group, The Hackett Group offers business application consulting services that help maximize returns on IT investments. The Hackett Group has completed benchmark studies with over 3,500 major corporations and government agencies, including 97% of the Dow Jones Industrials, 84% of the Fortune 100, 87% of the DAX 30 and 48% of the FTSE 100. More information on The Hackett Group is available: by phone at (770) 225-7300; by e-mail at email@example.com. This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and involve known and unknown risks, uncertainties and other factors that may cause The Hackett Group's actual results, performance or achievements to be materially different from the results, performance or achievements expressed or implied by the forward-looking statements. Factors that impact such forward-looking statements include, among others, the ability of our products, services, or offerings mentioned in this release to deliver the desired effect, 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 cancellations 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, changes in general economic conditions and interest rates, our ability to obtain debt financing through additional borrowings under an amendment to our existing credit facility as well as other risks detailed in our Company's Annual Report on Form 10-K for the most recent fiscal year filed with the Securities and Exchange Commission. 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. The Hackett Group, Inc. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) (unaudited) Quarter Ended Six Months Ended June 28, June 29, June 28, June 29, 2013 2012 2013 2012 Revenue: Revenue before $ 52,341 $ 51,469 $ 101,212 $ 100,513 reimbursements Reimbursements 6,620 6,495 12,098 11,534 Total revenue 58,961 57,964 113,310 112,047 Costs and expenses: Cost of service: Personnel costs before reimbursable expenses (includes $863 and $759 and $1,686 and $1,517 of stock compensation expense in the quarters and six months ended June 28, 2013 and June 33,363 32,167 65,405 62,727 29, 2012, respectively) Reimbursable 6,620 6,495 12,098 11,534 expenses Total cost of 39,983 38,662 77,503 74,261 service Selling, general and administrative costs (includes $782 and $679 and $1,481 and $1,186 of stock compensation expense in the quarters and six months ended June 28, 2013 and June 13,893 14,819 27,193 29,326 29, 2012, respectively) Total costs and operating 53,876 53,481 104,696 103,587 expenses Income from 5,085 4,483 8,614 8,460 operations Other income (expense): Interest income 3 8 4 17 Interest (125 ) (247 ) (267 ) (274 ) expense Income from continuing operations 4,963 4,244 8,351 8,203 before income taxes Income tax 2,033 406 3,392 514 expense Income from continuing 2,930 3,838 4,959 7,689 operations Income (loss) from - 7 (71 ) (311 ) discontinued operations Net income $ 2,930 $ 3,845 $ 4,888 $ 7,378 Basic net income per common share: Income per common share $ 0.10 $ 0.13 $ 0.16 $ 0.23 from continuing operations Income (loss) per common share from - - - (0.01 ) discontinued operations Net income per $ 0.10 $ 0.13 $ 0.16 $ 0.22 common share Diluted net income per common share: Income per common share $ 0.09 $ 0.12 $ 0.16 $ 0.22 from continuing operations Income (loss) per common share from - - (0.00 ) (0.01 ) discontinued operations Net income per $ 0.09 $ 0.12 $ 0.15 $ 0.21 common share Weighted average common shares outstanding: Basic 30,532 29,290 30,412 33,907 Diluted 32,251 31,509 31,862 35,724 Pro forma data (1): Income from continuing operations $ 4,963 $ 4,244 $ 8,351 $ 8,203 before income taxes Stock compensation 1,645 1,438 3,167 2,703 expense Amortization of intangible 151 137 301 274 assets Pro forma income before 6,759 5,819 11,819 11,180 income taxes Pro forma income tax 2,704 2,328 4,728 4,472 expense Pro forma net $ 4,055 $ 3,491 $ 7,091 $ 6,708 income Pro forma basic net income per $ 0.13 $ 0.12 $ 0.23 $ 0.20 common share Weighted average common 30,532 29,290 30,412 33,907 shares outstanding Pro forma diluted net $ 0.13 $ 0.11 $ 0.22 $ 0.19 income per common share Weighted average common and common 32,251 31,509 31,862 35,724 equivalent shares outstanding (1) The Company provides pro forma earnings results (which exclude the amortization of intangible assets and stock compensation expense, and results from discontinued operations and include a normalized 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 overall users' 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 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. The Hackett Group, Inc. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) (unaudited) June 28, December 28, 2013 2012 ASSETS Current assets: Cash and cash equivalents $ 10,811 $ 16,906 Accounts receivable and unbilled revenue, net 35,601 36,869 Deferred tax asset, net 3,858 4,741 Prepaid expenses and other current assets 3,357 2,335 Total current assets 53,627 60,851 Restricted cash 522 683 Property and equipment, net 13,082 12,859 Other assets 1,232 1,598 Goodwill, net 75,247 76,220 Non-current deferred tax asset, net - 1,710 Total assets $ 143,710 $ 153,921 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 5,076 $ 7,711 Accrued expenses and other liabilities 22,825 26,484 Current portion of long-term debt - 2,895 Total current liabilities 27,901 37,090 Long-term deferred tax liability, net 666 - Long-term debt 15,026 22,105 Total liabilities 43,593 59,195 Shareholders' equity 100,117 94,726 Total liabilities and shareholders' equity $ 143,710 $ 153,921 The Hackett Group, Inc. SUPPLEMENTAL FINANCIAL DATA (unaudited) Quarter Ended June 28, March 29, June 29, 2013 2013 2012 Revenue Breakdown by Group: (in thousands) The Hackett Group (2) $ 47,659 $ 43,612 $ 50,104 ERP Solutions (3) 11,302 10,737 7,860 Total revenue $ 58,961 $ 54,349 $ 57,964 Revenue Concentration: (% of total revenue) Top customer 3 % 4 % 5 % Top 5 customers 16 % 14 % 14 % Top 10 customers 24 % 23 % 23 % Key Metrics and Other Financial Data: Total Company: Consultant headcount 735 719 749 Total headcount 926 906 956 Days sales outstanding 55 56 55 (DSO) Cash provided by (used in) operating activities $ 5,720 $ (547 ) $ 10,109 (in thousands) Depreciation (in $ 461 $ 499 $ 491 thousands) Amortization (in $ 151 $ 150 $ 137 thousands) The Hackett Group (in thousands): The Hackett Group annualized revenue per $ 358 $ 329 $ 379 professional (2) ERP Solutions: ERP Solutions consultant 83 % 75 % 71 % utilization rate (3) ERP Solutions gross billing rate per hour $ 130 $ 137 $ 122 (3) Share Repurchase Plan: Shares purchased in the 124 - - quarter (in thousands) Cost of shares repurchased in the $ 594 $ - $ - quarter (in thousands) Average price per share of shares purchased in $ 4.80 $ - $ - the quarter Remaining authorization $ 4,963 $ 556 $ 556 (in thousands) (2) The Hackett Group encompasses the Benchmarking, Business Transformation and Executive Advisory groups, and EPM Technologies. (3) ERP Solutions encompasses Best Practice Implementation of ERP Software, which is currently SAP. Contact: The Hackett Group, Inc. Robert A. Ramirez, CFO, 305-375-8005 firstname.lastname@example.org
The Hackett Group Announces Second Quarter 2013 Results
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