The Hackett Group(HCKT) - 2023 Q4 - Annual Results

The Hackett Group Q4 2023 Earnings Release The Hackett Group's Q4 2023 earnings release details strong financial performance, positive AI platform adoption, and a strategic Q1 2024 outlook, supported by comprehensive financial statements Financial Highlights & Business Outlook The Hackett Group reported solid Q4 2023 results, exceeding revenue and adjusted EPS guidance, highlighted by positive reception for its new generative AI platform, AI XPLR, and provided its outlook for Q1 2024, projecting continued revenue growth and stable adjusted earnings, while announcing a quarterly dividend Q4 2023 Performance Summary The company exceeded Q4 2023 revenue and adjusted EPS guidance, driven by favorable feedback for its new AI XPLR platform and strong financial results - The company's new generative artificial intelligence platform, AI XPLR, is receiving favorable feedback and has led to a significant number of client meetings to establish Gen AI roadmaps[3] - GAAP net income for Q4 2023 includes a one-time legal settlement and related costs of $1.2 million, which negatively impacted GAAP diluted earnings per share by $0.03[4] Q4 2023 Key Financial Results | Metric | Q4 2023 | Q4 2022 | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $72.4M | $70.1M | +3.3% | | Revenue before reimbursements | $71.2M | $68.8M | +3.5% | | GAAP Diluted EPS | $0.28 | $0.31 | -9.7% | | Adjusted Diluted EPS | $0.39 | $0.36 | +8.3% | Q1 2024 Business Outlook The company provides Q1 2024 guidance projecting continued revenue growth and stable adjusted earnings per share Q1 2024 Guidance | Metric | Guidance Range | | :--- | :--- | | Total revenue before reimbursements | $72.5M - $74.0M | | Adjusted diluted earnings per share | $0.36 - $0.39 | Capital Allocation and Liquidity The company declared a quarterly dividend, significantly reduced debt, and maintained a solid cash flow from operations - The Board of Directors declared a Q1 2024 dividend of $0.11 per share[4] - During Q4 2023, the company paid down $11.0 million of its debt, leaving an outstanding balance of $33.0 million on its credit facility[4] Cash Position and Cash Flow | Metric | Q4 2023 | Q4 2022 | | :--- | :--- | :--- | | Cash Balances (End of Period) | $21.0M | $30.3M | | Cash Flow from Operations | $25.6M | $24.8M | Financial Statements Analysis The company's full-year 2023 revenue saw a slight increase, but operating and net income declined compared to 2022, primarily due to higher operating costs, including a legal settlement, and increased interest expense, while the balance sheet strengthened with a significant reduction in long-term debt, and segment performance was mixed, with Oracle Solutions showing growth in both revenue and profit, while Global S&BT and SAP Solutions experienced profit declines Consolidated Statements of Operations Full-year 2023 operations show a slight revenue increase but a decline in operating and net income, primarily due to higher costs and increased interest expense - Total costs and operating expenses for the full year 2023 increased to $247.3 million from $238.5 million in 2022, driven by higher personnel costs, SG&A, and a $1.2 million legal settlement[13] - Net interest expense significantly increased to $3.2 million for the full year 2023, compared to only $0.14 million in 2022[13] Full Year Performance (2023 vs 2022) | Metric (in thousands) | Twelve Months Ended Dec 29, 2023 | Twelve Months Ended Dec 30, 2022 | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $296,590 | $293,742 | +1.0% | | Operating Income | $49,262 | $55,248 | -10.8% | | Net Income | $34,151 | $40,802 | -16.3% | | Diluted EPS | $1.24 | $1.28 | -3.1% | Condensed Consolidated Balance Sheets The balance sheet reflects a substantial reduction in long-term debt and a significant increase in shareholders' equity - The company significantly reduced its long-term debt by 45.2% year-over-year, contributing to a substantial decrease in total liabilities[14] Balance Sheet Summary (as of year-end) | Metric (in thousands) | Dec 29, 2023 | Dec 30, 2022 | Change | | :--- | :--- | :--- | :--- | | Cash | $20,957 | $30,255 | -30.7% | | Total Assets | $181,428 | $184,993 | -1.9% | | Long-term Debt | $32,711 | $59,653 | -45.2% | | Total Liabilities | $91,348 | $126,715 | -27.9% | | Shareholders' Equity | $90,080 | $58,278 | +54.6% | Segment Performance Segment performance was mixed, with Oracle Solutions showing strong growth in revenue and profit, while other segments experienced profit declines - For the full year 2023, Oracle Solutions was the standout performer, with growth in both revenue (+1.9%) and segment profit (+17.8%), while Global S&BT and SAP Solutions saw their segment profits decline despite relatively stable revenues[15] Full Year Segment Revenue (in thousands) | Segment | 2023 Revenue | 2022 Revenue | Change | | :--- | :--- | :--- | :--- | | Global S&BT | $171,927 | $169,660 | +1.3% | | Oracle Solutions | $77,772 | $76,320 | +1.9% | | SAP Solutions | $46,891 | $47,762 | -1.8% | Full Year Segment Profit (in thousands) | Segment | 2023 Profit | 2022 Profit | Change | | :--- | :--- | :--- | :--- | | Global S&BT | $54,366 | $61,319 | -11.3% | | Oracle Solutions | $18,060 | $15,335 | +17.8% | | SAP Solutions | $11,925 | $12,827 | -7.0% | Supplemental Information This section provides a detailed reconciliation between GAAP and non-GAAP financial measures, explaining that adjustments are made for items like non-cash stock-based compensation and legal settlements to better reflect core operating performance, and also includes supplemental data on key operational metrics, showing a year-over-year increase in headcount and stable customer concentration Reconciliation of GAAP to Non-GAAP Measures This section reconciles GAAP and non-GAAP financial measures, highlighting adjustments for non-cash items and legal settlements to clarify core operating performance - The company provides non-GAAP results to enhance understanding of its core operating performance by excluding items such as non-cash stock-based compensation, legal settlements, and amortization of intangible assets[6][18] Q4 GAAP to Non-GAAP Net Income Reconciliation (in thousands) | Description | Q4 2023 | Q4 2022 | | :--- | :--- | :--- | | GAAP NET INCOME | $7,850 | $9,716 | | Non-cash stock based compensation | $2,794 | $2,439 | | Legal settlement and related costs | $1,178 | - | | Tax effect of adjustments | $996 | $687 | | ADJUSTED NET INCOME | $10,826 | $11,468 | Key Metrics and Other Data Supplemental data reveals an increase in total headcount, stable Days Sales Outstanding, and consistent customer revenue concentration Key Operational Metrics | Metric | Q4 2023 | Q3 2023 | Q4 2022 | | :--- | :--- | :--- | :--- | | Consultant Headcount | 1,168 | 1,177 | 1,128 | | Total Headcount | 1,416 | 1,430 | 1,353 | | Days Sales Outstanding (DSO) | 65 | 75 | 63 | Revenue Concentration (% of total revenue) | Customer Group | Q4 2023 | Q4 2022 | | :--- | :--- | :--- | | Top Customer | 7% | 5% | | Top 5 Customers | 18% | 16% | | Top 10 Customers | 27% | 26% |