The Hackett Group(HCKT) - 2024 Q2 - Quarterly Results

Q2 2024 Performance Overview The Hackett Group reported strong Q2 2024 results, exceeding revenue guidance and nearly doubling cash flow from operations, while strategically pivoting towards Gen AI consulting and maintaining shareholder returns Financial Highlights The Hackett Group reported solid Q2 2024 results, exceeding the high end of revenue guidance and meeting the high end for adjusted EPS. Total revenue saw a slight year-over-year increase, while GAAP diluted EPS decreased marginally. Notably, cash flow from operations nearly doubled compared to the same period last year | Metric | Q2 2024 ($ millions) | Q2 2023 ($ millions) | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $77.7 | $77.1 | +0.8% | | Revenue before Reimbursements | $75.9 | $75.6 | +0.4% | | GAAP Diluted EPS | $0.31 | $0.32 | -3.1% | | Adjusted Diluted EPS | $0.39 | $0.39 | Flat | | Cash Flow from Operations | $13.7 | $7.7 | +77.9% | - As of June 28, 2024, the company had cash balances of $19.1 million, with $27.0 million outstanding on its credit facility[3] Management Commentary and Strategy Management emphasized the company's aggressive pivot towards Gen AI consulting, leveraging its new ideation and design platform, AI XPLR. The focus has been on enhancing the platform based on client feedback, with an upgraded Version 2 set for release in August 2024, which will include use case simulations and design functionality - The company is actively shifting its capabilities and go-to-market strategy to meet the growing demand for Gen AI consulting[4] - The AI XPLR platform is central to this strategy, with Version 2 launching in August 2024 to include significant upgrades like use case simulations and design functionality[4] Business Outlook (Q3 2024) For the third quarter of 2024, The Hackett Group anticipates revenue before reimbursements to be in the range of $74.5 million to $76.0 million. Adjusted diluted earnings per share are projected to be between $0.39 and $0.41 | Guidance Metric | Q3 2024 Range | | :--- | :--- | | Revenue before Reimbursements ($ millions) | $74.5 - $76.0 | | Adjusted Diluted EPS | $0.39 - $0.41 | Shareholder Returns The company continues to return capital to shareholders, with the Board of Directors declaring a third-quarter dividend of $0.11 per share. The existing share repurchase program has an authorization of $12.9 million remaining - The Board of Directors declared a Q3 2024 dividend of $0.11 per share, payable on October 4, 2024, to shareholders of record on September 20, 2024[3] - As of the end of the quarter, $12.9 million remained under the company's share repurchase program authorization[3] Financial Statements The financial statements detail a slight revenue increase, stable net income, a stronger balance sheet with reduced long-term debt, varied segment performance, and key non-GAAP adjustments Consolidated Statements of Operations For the second quarter of 2024, total revenue increased slightly to $77.7 million from $77.1 million in the prior-year quarter. Operating income was nearly flat at $12.5 million, and net income remained stable at $8.7 million. Diluted EPS saw a minor decrease from $0.32 to $0.31 | (in thousands) | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Total Revenue | $77,656 | $77,102 | | Operating Income | $12,516 | $12,790 | | Net Income | $8,748 | $8,720 | | Diluted EPS | $0.31 | $0.32 | | Six Months Ended (in thousands) | June 28, 2024 | June 30, 2023 | | :--- | :--- | :--- | | Total Revenue | $154,843 | $148,331 | | Net Income | $17,479 | $16,881 | Consolidated Balance Sheets As of June 28, 2024, the company's balance sheet showed total assets of $187.5 million and shareholders' equity of $102.2 million. Cash stood at $19.1 million, while long-term debt decreased to $26.7 million from $32.7 million at the end of 2023 | (in thousands) | June 28, 2024 | Dec 29, 2023 | | :--- | :--- | :--- | | Cash | $19,145 | $20,957 | | Total Current Assets | $80,259 | $75,438 | | Total Assets | $187,524 | $181,428 | | Long-term Debt | $26,747 | $32,711 | | Total Liabilities | $85,301 | $91,348 | | Shareholders' Equity | $102,223 | $90,080 | Segment Performance In Q2 2024, the Oracle Solutions segment was the standout performer, with revenue growing 11% year-over-year to $23.0 million. The Global S&BT segment's revenue declined slightly to $42.3 million, while SAP Solutions revenue also saw a small decrease to $12.3 million. For the first six months, both Oracle and SAP segments demonstrated strong revenue growth | Q2 Revenue (in thousands) | Q2 2024 | Q2 2023 | % Change | | :--- | :--- | :--- | :--- | | Global S&BT | $42,262 | $43,632 | -3.1% | | Oracle Solutions | $23,045 | $20,775 | +10.9% | | SAP Solutions | $12,349 | $12,695 | -2.7% | | Q2 Segment Profit (in thousands) | Q2 2024 | Q2 2023 | % Change | | :--- | :--- | :--- | :--- | | Global S&BT | $12,748 | $13,102 | -2.7% | | Oracle Solutions | $5,369 | $5,886 | -8.8% | | SAP Solutions | $3,253 | $2,990 | +8.8% | Reconciliation of GAAP to Non-GAAP Measures The company reconciled its Q2 2024 GAAP net income of $8.7 million to an adjusted net income of $10.9 million. The primary adjustment was the exclusion of $2.9 million in non-cash stock-based compensation expense. This resulted in an adjusted diluted EPS of $0.39, which was flat compared to the prior-year quarter | Reconciliation (in thousands) | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | GAAP Net Income | $8,748 | $8,720 | | Non-cash stock based compensation | $2,850 | $2,769 | | Other adjustments | $0 | $3 | | Adjusted Net Income | $10,850 | $10,761 | | GAAP Diluted EPS | $0.31 | $0.32 | | Adjusted Diluted EPS | $0.39 | $0.39 | Supplemental Financial Data Supplemental data for Q2 2024 shows a significant increase in customer concentration, with the top customer accounting for 13% of revenue, up from 5% in Q2 2023. Total headcount remained stable year-over-year at 1,409 employees. Days Sales Outstanding (DSO) was unchanged at 68 days | Revenue Concentration | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Top customer | 13% | 5% | | Top 5 customers | 25% | 16% | | Top 10 customers | 33% | 24% | | Key Metrics | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Consultant headcount | 1,145 | 1,148 | | Total headcount | 1,409 | 1,401 | | Days sales outstanding (DSO) | 68 | 68 | Other Information This section provides details on the Q2 2024 earnings conference call and an overview of The Hackett Group's strategic positioning as a Gen AI consultancy Conference Call Information The company scheduled a conference call and live webcast for 5:00 P.M. ET on August 6, 2024, to discuss its second-quarter results. Details for participation and for accessing a replay were provided - A conference call to discuss Q2 results was held on Tuesday, August 6, 2024, at 5:00 P.M. ET[6] - A live webcast and an online replay of the call are available on the company's website, www.thehackettgroup.com[7](index=7&type=chunk) About The Hackett Group The Hackett Group positions itself as a premier Gen AI strategic consultancy and executive advisory firm. It utilizes its proprietary AI XPLR™ assessment platform and extensive best-practice insights from benchmarking leading global companies to help organizations achieve top-tier digital performance - The company is a leading Gen AI strategic consultancy and executive advisory firm focused on enabling Digital World Class® performance[10] - It leverages its AI XPLR™ Gen AI assessment platform and insights from benchmarking top global companies, including 97% of the Dow Jones Industrials and 89% of the Fortune 100[10]