PART I - FINANCIAL INFORMATION Financial Statements This section presents the unaudited consolidated financial statements for the three and six months ended June 27, 2025, including Balance Sheets, Statements of Operations, Comprehensive Income, Cash Flows, and Shareholders' Equity, along with detailed Notes to the Financial Statements Consolidated Balance Sheet Highlights (Unaudited) | Account | June 27, 2025 ($ millions) | December 27, 2024 ($ millions) | | :--- | :--- | :--- | | Total Assets | 200.516 | 191.877 | | Total Current Assets | 80.207 | 76.346 | | Goodwill | 91.135 | 89.782 | | Total Liabilities | 80.714 | 76.303 | | Total Current Liabilities | 46.996 | 53.128 | | Long term debt, net | 22.774 | 12.734 | | Total Shareholders' Equity | 119.802 | 115.574 | Consolidated Statements of Operations Highlights (Unaudited) | Metric | Q2 2025 ($ millions) | Q2 2024 ($ millions) | Six Months 2025 ($ millions) | Six Months 2024 ($ millions) | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | 78.899 | 77.656 | 156.764 | 154.843 | | Income from Operations | 4.595 | 12.516 | 8.998 | 24.041 | | Net Income | 1.661 | 8.748 | 4.804 | 17.479 | | Diluted EPS | $0.06 | $0.31 | $0.17 | $0.63 | Consolidated Statements of Cash Flows Highlights (Unaudited) | Cash Flow Activity | Six Months Ended June 27, 2025 ($ millions) | Six Months Ended June 28, 2024 ($ millions) | | :--- | :--- | :--- | | Net cash provided by operating activities | 9.843 | 16.511 | | Net cash used in investing activities | (4.221) | (1.832) | | Net cash used in financing activities | (11.801) | (16.477) | | Net decrease in cash | (6.224) | (1.811) | Notes to Consolidated Financial Statements The notes detail the basis of financial statement presentation, significant accounting policies, and key events, including acquisitions, segment structure, a new stock compensation program, and upcoming restructuring charges - The company acquired LeewayHertz, an AI technology consulting firm, for $7.8 million, resulting in $5.9 million of goodwill and $2.5 million in intangible assets. This is part of a strategy to lead in Gen AI solutions2627 - In May 2025, the company acquired assets from Spend Matters, a procurement and supply chain intelligence provider, for $0.766 million in cash, recognizing $2.0 million in provisional intangible assets30 Disaggregated Revenue by Segment (Six Months Ended) | Segment | June 27, 2025 ($ millions) | June 28, 2024 ($ millions) | YoY Change | | :--- | :--- | :--- | :--- | | Global S&BT | 87.562 | 83.154 | +5.3% | | Oracle Solutions | 41.887 | 44.774 | -6.4% | | SAP Solutions | 27.315 | 26.915 | +1.5% | | Total Segment Revenue | 156.764 | 154.843 | +1.2% | - A new stock price award program was introduced for executives with performance-based RSUs tied to stock price hurdles of $30, $40, and $50. This program resulted in significant non-cash stock compensation expense of $10.3 million for the first six months of 20257174 - The company anticipates restructuring charges of approximately $1.5 million to $2.0 million in Q3 2025, primarily for severance costs, as it pivots its business towards Gen AI and adjusts staffing levels95 Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses the company's strategic pivot to a Gen AI-focused consulting firm, leveraging recent acquisitions and proprietary platforms, detailing financial results, revenue growth, increased operating costs, and liquidity strategy - The company is aggressively repositioning as a global IP platform-based Generative AI (Gen AI) strategic consulting firm, leveraging its AI XPLR platform and the newly acquired ZBrain platform from LeewayHertz101103 - The effective tax rate for Q2 2025 was 60.7%, a sharp increase from 27.1% in Q2 2024. This was primarily due to the limitation of executive compensation deductions related to the new stock price award program128 Results of Operations Total revenue for Q2 2025 increased slightly to $78.9 million, with growth in Global S&BT and SAP Solutions offset by Oracle Solutions decline, while operating costs rose significantly due to stock compensation, leading to lower net income Segment Revenue Performance (Q2 2025 vs Q2 2024) | Segment | Q2 2025 ($ millions) | Q2 2024 ($ millions) | YoY Change | | :--- | :--- | :--- | :--- | | Global S&BT | 44.2 | 42.3 | +4.6% | | Oracle Solutions | 20.8 | 23.0 | -9.7% | | SAP Solutions | 13.9 | 12.3 | +12.5% | - Personnel costs increased to 63% of total revenue in Q2 2025 from 58% in Q2 2024, primarily due to the stock price award program and acquisition-related non-cash stock compensation116 - SG&A costs rose to $23.4 million in Q2 2025 from $18.0 million in Q2 2024, also driven by increased non-cash stock compensation from the new award program119 Liquidity and Capital Resources As of June 27, 2025, the company had $10.1 million in cash, with net cash from operations decreasing to $9.8 million, primarily used for share repurchases and dividends, partially funded by a credit facility drawdown Cash Flow Summary (Six Months Ended) | Activity | June 27, 2025 ($ millions) | June 28, 2024 ($ millions) | | :--- | :--- | :--- | | Cash from Operating Activities | 9.843 | 16.511 | | Cash used in Investing Activities | (4.221) | (1.832) | | Cash used in Financing Activities | (11.801) | (16.477) | - Major uses of cash in the first six months of 2025 included $10.5 million for common stock repurchases and $6.3 million for dividend payments8386133 - The company drew down $10.0 million from its credit facility, ending the period with $23.0 million in outstanding debt and approximately $77.0 million in remaining borrowing capacity133134 Quantitative and Qualitative Disclosures About Market Risk The company identifies interest rate risk from its variable-rate credit facility and foreign currency exchange rate risk from international operations as primary market exposures, noting minimal material impact from interest rate changes - The primary market risk exposure relates to variable interest rates on the company's Credit Facility137 - The company is exposed to foreign currency fluctuations as a portion of its revenue and expenses are denominated in British Pounds, Euros, and Australian Dollars138 Controls and Procedures Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of June 27, 2025, with no material changes to internal control over financial reporting during the quarter - Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of June 27, 2025139 - There were no changes in internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, internal controls140 PART II - OTHER INFORMATION Legal Proceedings The company is involved in various legal proceedings arising in the ordinary course of business, with management expecting no material adverse effect on financial position, cash flows, or results of operations - The company states that ongoing legal proceedings arising from the ordinary course of business are not expected to have a material adverse effect on its financial results142 Risk Factors The report indicates that there have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended December 27, 2024 - There have been no material changes to the risk factors disclosed in the Company's Annual Report on Form 10-K for the year ended December 27, 2024143 Unregistered Sales of Equity Securities and Use of Proceeds During Q2 2025, the company repurchased 177,000 shares for $4.3 million, with $17.0 million remaining under authorization, and an additional $13.0 million approved by the Board post-quarter Issuer Purchases of Equity Securities (Q2 2025) | Period | Total Shares Purchased | Average Price Paid per Share | Total Cost ($ millions) | | :--- | :--- | :--- | :--- | | Q2 2025 | 177,000 | $24.47 | 4.3 | - As of June 27, 2025, $17.0 million remained available for future purchases under the repurchase plan144 - Subsequent to the quarter's end, the Board of Directors increased the share repurchase authorization by an additional $13.0 million144 Exhibits This section lists the exhibits filed with the Form 10-Q report, including CEO and CFO certifications required by Sarbanes-Oxley Act and interactive data files - The filing includes required certifications by the CEO (Exhibit 31.1) and CFO (Exhibit 31.2) pursuant to the Sarbanes-Oxley Act of 2002147
The Hackett Group(HCKT) - 2025 Q2 - Quarterly Report