Hackett Group (NASDAQ: HCKT) Q1 2026 revenue slips but margins and EPS improve
The Hackett Group, Inc. reported lower revenue but higher profit for the quarter ended March 27, 2026. Total revenue was $68.8 million, down from $77.9 million a year earlier, as Global S&BT and Oracle Solutions declined while SAP Solutions grew.
Global S&BT revenue fell to $36.8 million and Oracle Solutions to $15.7 million, while SAP Solutions increased to $16.3 million, helped by implementation work tied to prior SAP software sales. Despite lower revenue, income from operations more than doubled to $8.9 million, and net income rose to $4.3 million, or $0.17 per diluted share, from $3.1 million, or $0.11.
Improved profitability was driven by significantly lower personnel and stock-based compensation costs, partially offset by $2.0 million of restructuring costs related to a pivot toward Gen AI offerings. Operating cash flow turned negative at $(5.1) million due to higher receivables and lower accrued liabilities. The company ended the quarter with $6.1 million of cash and $79.0 million of revolving debt, continued share repurchases of $3.0 million, and paid a quarterly dividend of about $3.0 million.
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Insights
Hackett traded lower revenue for higher margins, while levering up and investing in Gen AI.
The Hackett Group saw revenue slip to $68.8 million as Global S&BT and Oracle Solutions softened, partly from elongated Gen AI decision cycles and the completion of a large Oracle engagement. SAP Solutions grew to $16.3 million, reflecting past SAP software wins and implementation work.
Despite the top-line decline, income from operations rose to $8.9 million as personnel and stock-based compensation costs fell and segment cost structures improved. However, this included $1.9 million of restructuring costs tied to staff reductions supporting a pivot toward Gen AI delivery platforms, indicating ongoing business realignment.
Cash dynamics were less favorable: operating cash flow swung to $(5.1 million), mainly from higher accounts receivable and lower accrued bonuses and vendor accruals. Net debt increased with $79.0 million drawn on the Credit Facility at a 5.3% SOFR-based rate, while the company still returned cash via a $3.0 million dividend and $3.0 million of buybacks in the quarter.
Key Figures
Key Terms
Global S&BT financial
segment contribution financial
restructuring costs financial
Credit Facility financial
Gen AI technical
Rule 10b5-1 trading arrangement regulatory
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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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.
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).
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.
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TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION |
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Item 1. |
Financial Statements |
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Consolidated Balance Sheets as of March 27, 2026 (unaudited) and December 26, 2025 |
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Consolidated Statements of Operations for the Three Months Ended March 27, 2026, and March 28, 2025, (unaudited) |
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Consolidated Statements of Comprehensive Income for the Three Months Ended March 27, 2026, and March 28, 2025, (unaudited) |
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Consolidated Statements of Cash Flows for the Three Months Ended March 27, 2026, and March 28, 2025, (unaudited) |
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Consolidated Statements of Shareholders' Equity for the Three Months Ended March 27, 2026, and March 28, 2025, (unaudited) |
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Notes to Consolidated Financial Statements (unaudited) |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
Quantitative and Qualitative Disclosures About Market Risk |
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Item 4. |
Controls and Procedures |
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Other Information |
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PART II - OTHER INFORMATION |
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Item 1. |
Legal Proceedings |
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Item 1A. |
Risk Factors |
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Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
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Item 6. |
Exhibits |
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SIGNATURES |
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PART I — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The Hackett Group, Inc.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)
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March 27, |
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December 26, |
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ASSETS |
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Cash |
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Accounts receivable and contract assets, net of allowance of $ |
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Property, software and equipment, net |
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Other assets |
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Intangible assets, net |
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Goodwill |
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Total assets |
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LIABILITIES AND SHAREHOLDERS’ EQUITY |
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Current liabilities: |
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Accounts payable |
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Accrued expenses and other liabilities |
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Contract liabilities |
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Income tax payable |
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Operating lease liabilities |
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Total current liabilities |
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Deferred tax liability, net |
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Long term debt, net |
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Operating lease liabilities |
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Total liabilities |
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Commitments and contingencies |
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Shareholders’ equity: |
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Preferred stock, $ |
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Common stock, $ |
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Treasury stock, at cost, |
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Retained earnings |
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Accumulated other comprehensive loss |
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Total shareholders' equity |
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Total liabilities and shareholders' equity |
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$ |
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The accompanying notes are an integral part of the consolidated financial statements.
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The Hackett Group, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
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Quarter Ended |
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March 28, |
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Revenue: |
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Revenue before reimbursements |
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Reimbursements |
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Total revenue |
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Costs and expenses: |
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Cost of service: |
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Personnel costs before reimbursable expenses (includes $ |
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Reimbursable expenses |
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Total cost of service |
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Selling, general and administrative costs (includes $ |
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Restructuring costs |
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Total costs and operating expenses |
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Income from operations |
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Other expense, net: |
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Interest expense, net |
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Income before income taxes |
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Income tax expense |
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Net income |
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$ |
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Basic net income per common share: |
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Income per common share |
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Weighted average common shares outstanding |
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Diluted net income per common share: |
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Income per common share |
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Weighted average common and common equivalent shares outstanding |
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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)
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Quarter Ended |
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March 27, |
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March 28, |
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2026 |
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2025 |
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Net income |
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$ |
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$ |
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Foreign currency translation adjustment, net |
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Total comprehensive income |
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$ |
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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)
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Quarter Ended |
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March 27, |
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March 28, |
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2026 |
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2025 |
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Cash flows from operating activities: |
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Net income |
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$ |
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$ |
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Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation expense |
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Amortization expense |
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Amortization of debt issuance costs |
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Non-cash stock based compensation expense |
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Provision for doubtful accounts |
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(Gain) loss on foreign currency translation |
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Deferred income tax expense |
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Changes in assets and liabilities, net of acquisition: |
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Increase in accounts receivable and contract assets |
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Decrease (increase) in prepaid expenses and other assets |
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Decrease in accounts payable |
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Decrease in accrued expenses and other liabilities |
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Increase in contract liabilities |
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Decrease in income tax payable |
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Net cash (used in) provided by operating activities |
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Cash flows from investing activities: |
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Purchases of property, software and equipment |
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Net cash used in investing activities |
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Cash flows from financing activities: |
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Debt proceeds |
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Repayment of debt |
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Debt issuance costs |
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Taxes paid to satisfy employee withholding tax obligations |
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Dividends paid |
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Repurchase of common stock |
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Net cash used in financing activities |
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Effect of exchange rate on cash |
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Net decrease in cash |
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Cash at beginning of period |
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Cash at end of period |
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$ |
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$ |
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Supplemental disclosure of cash flow information: |
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Cash paid for income taxes |
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$ |
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$ |
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Cash paid for interest |
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$ |
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$ |
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Supplemental disclosure of non-cash flow financing activities: |
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Dividend declared during the quarter and paid the following quarter |
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$ |
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$ |
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The accompanying notes are an integral part of the consolidated financial statements.
6
The Hackett Group, Inc.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(in thousands)
(unaudited)
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Accumulated |
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Additional |
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Other |
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Total |
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Common Stock |
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Paid in |
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Treasury Stock |
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Retained |
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Comprehensive |
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Shareholders' |
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Shares |
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Amount |
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Capital |
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Shares |
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Amount |
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Earnings |
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Loss |
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Equity |
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Balance at December 26, 2025 |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Issuance of common stock |
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— |
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( |
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— |
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— |
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— |
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— |
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( |
) |
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Treasury stock purchased |
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— |
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— |
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— |
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( |
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( |
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— |
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— |
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( |
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Amortization of restricted stock |
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— |
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— |
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— |
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— |
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— |
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— |
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Dividends declared |
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— |
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— |
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— |
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— |
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— |
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( |
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— |
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Net income |
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— |
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— |
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— |
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— |
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— |
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— |
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Foreign currency translation |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Balance at March 27, 2026 |
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$ |
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$ |
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( |
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$ |
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$ |
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$ |
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$ |
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Accumulated |
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Additional |
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Other |
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Total |
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Common Stock |
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Paid in |
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Treasury Stock |
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Retained |
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Comprehensive |
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Shareholders' |
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Shares |
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Amount |
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Capital |
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Shares |
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Amount |
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Earnings |
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Loss |
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Equity |
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Balance at December 27, 2024 |
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$ |
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$ |
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( |
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$ |
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$ |
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$ |
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$ |
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Issuance of common stock |
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— |
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( |
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— |
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— |
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— |
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— |
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( |
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Treasury stock purchased |
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— |
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— |
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— |
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( |
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( |
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— |
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— |
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( |
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Amortization of restricted stock |
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— |
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— |
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— |
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— |
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— |
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Dividends declared |
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— |
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— |
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— |
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— |
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( |
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— |
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( |
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Net income |
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— |
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— |
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— |
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— |
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— |
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Foreign currency translation |
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|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Balance at March 28, 2025 |
|
|
|
|
$ |
|
|
$ |
|
|
|
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||||
The accompanying notes are an integral part of the consolidated financial statements.
7
The Hackett Group, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Basis of Presentation and General Information
Basis of Presentation
The accompanying consolidated financial statements of The Hackett Group, Inc. (“Hackett” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include the Company’s accounts and those of its wholly-owned subsidiaries which the Company is required to consolidate. All intercompany transactions and balances have been eliminated in the consolidation.
In the opinion of management, the accompanying consolidated financial statements reflect all normal and recurring adjustments which are necessary for a fair presentation of the Company’s financial position, results of operations, and cash flows as of the dates and for the periods presented. The consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, these statements do not include all the disclosures normally required by U.S. GAAP for annual financial statements and should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 26, 2025, included in the Annual Report on Form 10-K filed by the Company with the SEC on February 28, 2026. The consolidated results of operations for the quarter ended March 27, 2026, are not necessarily indicative of the results to be expected for any future period or for the full fiscal year.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.
Business Combination
Spend Matters
On May 15, 2025, Hackett acquired certain assets and liabilities of Spend Matters LLC (“Spend Matters”), a leading provider of data-backed technology and solutions intelligence in the procurement and supply chain sectors. At closing, Hackett paid cash consideration of $
As a result of the acquisition, the Company recognized provisional intangible assets of $
Segment Reporting
Segments are defined as components of a company that engage in business activities from which they earn revenue and incur expenses, and for which separate financial information is available and is evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company assessed its operating segments under the management approach in accordance with ASC 280, Segment Reporting (ASC 280), and has determined that it has three operating segments: Global S&BT, Oracle Solutions and SAP Solutions which are also its reportable segments. See Note 11 “Segment Information and Geographical Data” for detailed segment information.
Goodwill
For acquisitions accounted for as a business combination, goodwill represents the excess of the cost over the fair value of the net assets acquired. The Company has organized its operating and internal reporting structure to align with its primary market solutions. In accordance with ASC 280, management made the determination to present
8
The Hackett Group, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Basis of Presentation and General Information (continued)
|
|
|
|
|
Foreign |
|
|
|
|
|||||||
|
|
December 26, |
|
|
Additions/ |
|
|
Currency |
|
|
March 27, |
|
||||
|
|
2025 |
|
|
Adjustments |
|
|
Translation |
|
|
2026 |
|
||||
Global S&BT |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Oracle Solutions |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
SAP Solutions |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Goodwill |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Revenue Recognition
The Company primarily generates its revenue from providing professional services to its clients. The Company also generates revenue from software-related sales, software maintenance and support and subscriptions to its executive and best practices advisory programs. A single contract could include one or multiple performance obligations. For those contracts that have multiple performance obligations, the Company allocates the total transaction price to each performance obligation based on its relative standalone selling price. The Company determines the standalone selling price based on the respective selling price of the individual elements when sold separately.
Revenue is recognized when control of the goods and services provided are transferred to the Company’s customers, in an amount that reflects the consideration it expects to be entitled to in exchange for those goods and services using the following steps: 1) identify the contract, 2) identify the performance obligations, 3) determine the transaction price, 4) allocate the transaction price to the performance obligations in the contract, and 5) recognize revenue as or when the Company satisfies the performance obligations.
The Company typically satisfies its performance obligations for professional services over time as the related services are provided. The performance obligations related to software maintenance and support and subscriptions to its executive and best practice advisory programs are typically satisfied evenly over the course of the service period. Other performance obligations, such as software-related sales, are satisfied at a point in time.
The Company generates revenue under four types of billing arrangements: fixed-fee; time-and-materials; executive and best practice advisory services; and software-related sales and software maintenance and support.
In fixed-fee billing arrangements, which would also include contracts with capped fees, the Company agrees to a pre-established fee or fee cap in exchange for a predetermined set of professional services. The Company sets the fees based on its estimates of the costs and timing for completing the engagements. The Company generally recognizes revenue under fixed-fee or capped fee arrangements using a proportionate performance approach, which is based on work completed to-date as compared to estimates of the total services to be provided under the engagement. Estimates of total engagement revenue and cost of services are monitored regularly during the term of the engagement. If the Company’s estimates indicate a potential loss, such a loss is recognized in the period in which the loss first becomes probable and reasonably estimable. The customer is invoiced based on the contractual agreement between the parties, typically bi-weekly, monthly or milestone driven, with net thirty or sixty-day terms, however client terms are subject to change.
Time-and-material billing arrangements require the client to pay based on the number of hours worked by the Company’s consultants at agreed hourly rates. The Company recognizes revenue under time-and-material arrangements as the related services or goods are provided, using the right to invoice practical expedient which allows it to recognize revenue in the amount based on the number of hours worked and the agreed upon hourly rates. The customer is invoiced based on the contractual agreement between the parties, typically bi-weekly, monthly or milestone driven, with net thirty or sixty-day terms, however client terms are subject to change.
Advisory services contracts are typically in the form of a subscription agreement which allows the customer access to the Company’s executive and best practice advisory programs. There is typically a single performance obligation and the transaction price is the contractual amount of the subscription agreement. Revenue from advisory services contracts is recognized ratably over the life of the agreements. Customers are typically invoiced at the inception of the contract, with net thirty or sixty-day terms, however client terms are subject to change.
The resale of on-premise software, cloud software and maintenance contracts are in the form of SAP America ("SAP") software or maintenance agreements provided by SAP. SAP is the principal and the Company is the agent in these transactions as the Company does not obtain title to the software and maintenance which is sold simultaneously. The transaction price is the Company’s agreed-upon percentage of the software-related sale for either on-premise software or cloud software or maintenance amount in the contract with the vendor. Revenue for the resale of software is recognized upon contract execution and customer’s receipt of the software. The Company also provides software maintenance on other ERP systems, primarily Oracle. Revenue from maintenance contracts is recognized ratably over the life of the agreements. The customer is typically invoiced at contract inception, with net thirty or sixty-day terms, however client terms are subject to change.
9
The Hackett Group, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Basis of Presentation and General Information (continued)
Revenue before reimbursements excludes reimbursable expenses charged to clients. Reimbursements, which include travel and out-of-pocket expenses, are included in revenue, and an equivalent amount of reimbursable expenses is included in the cost of service.
Expense reimbursements that are billable to clients are included in total revenue and are substantially all billed as time-and-material billing arrangements. Therefore, the Company recognizes all reimbursable expenses as revenue as the related services are provided, using the right to invoice practical expedient. Reimbursable expenses are recognized as expenses in the period in which the expense is incurred. Any expense reimbursements that are billable to clients under fixed-fee billing arrangements are recognized in line with the proportionate performance approach.
The payment terms and conditions in the Company’s customer contracts vary. The agreements entered into in connection with a project, whether time and materials-based or fixed-fee or capped-fee based, typically allow clients to terminate early due to breach or for convenience with 30 days’ notice. In the event of termination, the client is contractually required to pay for all time, materials and expenses incurred by the Company through the effective date of the termination. In addition, from time to time the Company enters into agreements with its clients that limit its right to enter into business relationships with specific competitors of that client for a specific time period. These provisions typically prohibit the Company from performing a defined range of services which it might otherwise be willing to perform for potential clients. These provisions are generally limited to
Differences between the timing of billings and the recognition of revenue are recognized as either contract assets or contract liabilities in the accompanying consolidated balance sheets. Revenue recognized for services performed but not yet billed to clients is recorded as contract assets and is included within accounts receivable and contract assets. Services not yet performed, however billed to the client and uncollected at period end, are recorded as contract assets and are included within accounts receivable and contract assets. Client prepayments are classified as contract liabilities and recognized over future periods as earned in accordance with the applicable engagement agreement. See Note 3 for the accounts receivable and contract asset balances. During the three months ended March 27, 2026, the Company recognized $
Based on the information that management reviews internally for evaluating operating segment performance and nature, amount, timing, and uncertainty of revenue and cash flows affected by economic factors, the Company disaggregates revenue as follows for the three months ended March 27, 2026 and March 28, 2025 (in thousands):
|
|
Quarter Ended |
|
|||||
|
|
March 27, |
|
|
March 28, |
|
||
|
|
2026 |
|
|
2025 |
|
||
Global S&BT: |
|
|
|
|
|
|
||
North America Consulting |
|
$ |
|
|
$ |
|
||
International Consulting |
|
|
|
|
|
|
||
Total Global S&BT |
|
$ |
|
|
$ |
|
||
Oracle Solutions: |
|
|
|
|
|
|
||
Consulting and software support and maintenance |
|
$ |
|
|
$ |
|
||
Total Oracle Solutions |
|
$ |
|
|
$ |
|
||
SAP Solutions: |
|
|
|
|
|
|
||
Consulting and software support and maintenance |
|
$ |
|
|
$ |
|
||
Software-related sales |
|
|
|
|
|
|
||
Total SAP Solutions |
|
$ |
|
|
$ |
|
||
Total segment revenue |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
10
The Hackett Group, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Basis of Presentation and General Information (continued)
The total revenue (excluding reimbursable expenses) from the Global S&BT segment, the Oracle Solutions segment and the SAP Solutions segment's consulting and software support and maintenance services is all recognized over time. The software-related sales revenue included in the SAP Solutions segment is recognized at a point in time.
Capitalized Sales Commissions
Sales commissions earned by the Company’s sales force are considered incremental and recoverable costs of obtaining a contract with a customer. These costs are deferred and then amortized as project revenue is recognized. The Company determined the period of amortization by taking into consideration the customer contract period, which is generally less than
Stock Based Compensation
We recognize compensation expense for awards of equity and liability instruments, which have only a service condition, to employees based on the grant-date fair value of those awards, over the requisite service period, with limited exceptions.
In September 2024, a stock price award program was offered to certain leaders. These equity awards were granted with both a
market condition (three tranches, each with varying market share price thresholds) and service conditions. The Company measured these equity awards using the Monte Carlo valuation model to determine the fair value as of the grant date. The Monte Carlo valuation model, using different share price paths, calculated a derived service period which is the median share price path on which the market condition is satisfied for each tranche. The assumptions utilized in the model are as of a point in time and may differ from the actual value of the equity awards. The requisite service period was determined to be a service condition as the service conditions are greater than the derived service period. For each of the three tranches, stock compensation expense is recognized on a straight-line basis over the requisite service period. The Company has elected to account for forfeitures as incurred. If an employee forfeits nonvested shares subsequent to meeting a service condition, the previously recognized expense is not reversed. If an employee forfeits nonvested shares prior to meeting a service condition, the previously recognized expense is reversed. See Note 7 for additional information.
Practical Expedients
The Company does not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less. The Company does not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the customer and the transfer of the promised goods or services to the customer will be less than one year.
Sales tax collected from customers and remitted to the applicable taxing authorities is accounted for on a net basis, with no impact on revenue.
Expense reimbursements that are billable to clients are included in total revenue and are substantially all billed as time-and-material billing arrangements. Therefore, the Company recognizes all reimbursable expenses as revenue as the related services are provided, using the right to invoice practical expedient. Reimbursable expenses are recognized as expenses in the period in which the expense is incurred. Any expense reimbursements that are billable to clients under fixed-fee billing arrangements are recognized in line with the proportionate performance approach.
Fair Value
The Company’s financial instruments consist of cash, accounts receivable and contract assets, accounts payable, accrued expenses and other liabilities, contract liabilities and long-term debt. As of March 27, 2026 and December 26, 2025, the carrying amount of each financial instrument approximated the instrument’s respective fair value due to either the short-term nature or the maturity of these instruments.
11
The Hackett Group, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Basis of Presentation and General Information (continued)
Recent Accounting Pronouncements
In November 2024, the FASB issued ASU No. 2024-03 Expense Disaggregation Disclosures (Subtopic 220-40) to require public business entities to disclose disaggregated information about expenses to help investors better understand an entity's performance, better assess the entity's prospects for future cash flows, and compare an entity's performance over time and with that of other entities. The amendments in this ASU are effective for fiscal years beginning after December 15, 2026, and interim periods with annual reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements.
In September 2025, the FASB issued ASU 2025‑06, Intangibles—Goodwill and Other—Internal‑Use Software (Subtopic 350‑40): Targeted Improvements to the Accounting for Internal‑Use Software. The ASU modernizes the accounting model for internal‑use software by removing references to software development project stages and replacing them with a principles‑based capitalization threshold that is intended to better align with current, including iterative and agile, software development practices. Under the updated guidance, internal‑use software development costs are capitalized when management has authorized and committed funding for the project and it is probable that the project will be completed and the software will be used to perform its intended function. The ASU also supersedes existing guidance on website development costs and incorporates that guidance into Subtopic 350‑40. The amendments do not change the accounting for software to be sold, leased, or marketed, nor do they change which costs are eligible for capitalization or when capitalization ceases. The guidance is effective for fiscal years beginning after December 15, 2027, including interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact of adoption of this standard on its consolidated financial statements
2. Net Income per Common Share
Basic net income per common share is computed by dividing net income by the weighted average number of common shares outstanding during the period. With regard to common stock subject to vesting requirements and restricted stock units issued to the Company’s employees and non-employee members of its Board of Directors, the calculation includes only the vested portion of such stock and units.
Diluted net income per common share is computed by dividing net income by the weighted average number of common shares outstanding, increased by the assumed conversion of other potentially dilutive securities during the period.
The following table reconciles basic and dilutive weighted average common shares:
|
|
Quarter Ended |
|
|||||
|
|
March 27, |
|
|
March 28, |
|
||
|
|
2026 |
|
|
2025 |
|
||
|
|
|
|
|
|
|
||
Basic weighted average common shares outstanding |
|
|
|
|
|
|
||
Effect of dilutive securities: |
|
|
|
|
|
|
||
Unvested restricted stock units and common stock subject |
|
|
|
|
|
|
||
Dilutive weighted average common shares outstanding |
|
|
|
|
|
|
||
12
The Hackett Group, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
3. Accounts Receivable and Contract Assets, Net
Accounts receivable and contract assets, net, consisted of the following (in thousands):
|
|
March 27, |
|
|
December 26, |
|
||
|
|
2026 |
|
|
2025 |
|
||
Accounts receivable |
|
$ |
|
|
$ |
|
||
Contract assets (unbilled revenue) |
|
|
|
|
|
|
||
Allowance for doubtful accounts |
|
|
( |
) |
|
|
( |
) |
Accounts receivable and contract assets, net |
|
$ |
|
|
$ |
|
||
Accounts receivable as of March 27, 2026 and December 26, 2025, is net of uncollected advanced billings. Contract assets as of March 27, 2026 and December 26, 2025, includes recognized recoverable costs and accrued profits on contracts for which billings had not been presented to clients. As of December 27, 2024, the Company had accounts receivable and contract assets of $
4. Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities consisted of the following (in thousands):
|
|
March 27, |
|
|
December 26, |
|
||
|
|
2026 |
|
|
2025 |
|
||
Accrued compensation and benefits |
|
$ |
|
|
$ |
|
||
Accrued bonuses |
|
|
|
|
|
|
||
Dividend payable |
|
|
|
|
|
|
||
Accrued sales, use, franchise and VAT tax |
|
|
|
|
|
|
||
Restructuring reserves |
|
|
|
|
|
|
||
Non-cash stock based compensation accrual |
|
|
|
|
|
|
||
Acquisition-related liabilities |
|
|
|
|
|
|
||
Other accrued expenses |
|
|
|
|
|
|
||
Total accrued expenses and other liabilities |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
5. Lease Commitments
The Company has operating leases for office space and, to a much lesser extent, operating leases for equipment. The Company’s office leases are between terms of
The components of lease expense were as follows for the three months ended March 27, 2026 (in thousands):
Operating lease cost |
|
$ |
|
|
|
|
|
|
|
Total net lease costs |
|
$ |
|
|
13
The Hackett Group, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
5. Lease Commitments (continued)
The weighted average remaining lease term is
Future minimum lease commitments under non-cancellable operating leases as of March 27, 2026, were as follows (in thousands):
2026 (excluding the three months ended March 27, 2026) |
|
$ |
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 |
|
|
|
|
2030 and thereafter |
|
|
|
|
Total lease payments |
|
|
|
|
Less imputed interest |
|
|
( |
) |
Total |
|
$ |
|
6. Credit Facility
On November 7, 2022, the Company entered into a third amended and restated credit agreement (the “Credit Agreement”) with Bank of America, N.A., as administrative agent, and the lenders party thereto, pursuant to which the lenders agreed to amend and restate its existing credit agreement, in order to extend the maturity date of the revolving line of credit and provide the Company with an additional $
The obligations of Hackett under the Credit Facility are guaranteed by active existing and future material U.S. subsidiaries of Hackett (the “U.S. Subsidiaries”) and are secured by substantially all of the existing and future property and assets of Hackett and the U.S. Subsidiaries.
The interest rates per annum applicable to loans under the Credit Facility will be, at the Company’s option, equal to either a base rate or a Secured Overnight Financing Rate ("SOFR") rate. The applicable margin percentage is based on the consolidated leverage ratio, as defined in the Credit Agreement. As of March 27, 2026, the applicable margin percentage was
The Company is subject to certain covenants, including total consolidated leverage, fixed cost coverage and liquidity requirements, each as set forth in the Credit Agreement, subject to certain exceptions. As of March 27, 2026, the Company was in compliance with all covenants.
As of March 27, 2026, the Company had $
7. Stock Based Compensation
Restricted Stock Units
On September 16 and September 17, 2024, the Company granted its Chief Executive Officer, Chief Operating Officer, Chief Financial Officer and certain other Company leaders performance-based restricted stock units, in the amounts of
14
The Hackett Group, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
7. Stock Based Compensation (continued)
own market condition and service condition. The market condition is met when the Company’s stock price reaches a certain share price hurdle for
Furthermore, if the second or third tranches are not met during the performance period, and the volume weighted average of the Company’s stock price falls between two share price hurdles for over
The Company used a Monte Carlo valuation model to determine the fair value of the three tranches as of the grant date. The Monte Carlo valuation model, using different share price paths, calculates a derived service period which is the median share price path on which the market condition is satisfied for each tranche. The requisite service period was determined to be service conditions as the service conditions are greater than the derived service period. For each of the three tranches, stock compensation expense is recognized on a straight-line basis over the requisite service period. The Company has elected to account for forfeitures as incurred. If an employee forfeits nonvested shares subsequent to meeting a service condition, the previously recognized expense is not reversed. If an employee forfeits nonvested shares prior to meeting the service condition, the previously recognized expense is reversed.
As of March 27, 2026 and March 28, 2025, the market and service conditions for the first tranche had been met and the service conditions were met and as such, the shares were vested and were included in the Company's basic shares outstanding for the period. The first tranche vested
Award Summary |
||||||||||||||||||||||||
|
||||||||||||||||||||||||
Tranche |
|
Grant Date Fair Value |
|
|
Share Price Vesting Conditions |
|
Underlying Share # |
|
|
Contractual Service Period |
|
Derived Service Period |
||||||||||||
|
|
September 16, 2024 |
|
|
September 17, 2024 |
|
|
Both Grant Dates |
|
September 16, 2024 |
|
|
September 17, 2024 |
|
|
Both Grant Dates |
|
September 16, 2024 |
|
September 17, 2024 |
||||
1 |
|
$ |
|
|
$ |
|
|
>$ |
|
|
|
|
|
|
|
|
|
|||||||
2 |
|
$ |
|
|
$ |
|
|
>$ |
|
|
|
|
|
|
|
|
|
|||||||
3 |
|
$ |
|
|
$ |
|
|
>$ |
|
|
|
|
|
|
|
|
|
|||||||
The following table summarizes the fair value assumption utilized in the Monte Carlo valuation model to calculate fair value:
|
|
|
|
|
|
|
|
|
|
|||
Grant Date |
|
Volatility |
|
|
Risk Free Interest Rate |
|
|
Dividend Yield |
|
|||
September 16, 2024 |
|
|
% |
|
|
% |
|
|
% |
|||
September 17, 2024 |
|
|
% |
|
|
% |
|
|
% |
|||
15
The Hackett Group, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
7. Stock Based Compensation (continued)
During the three months ended March 27, 2026, the Company issued
Forfeitures for all of the Company’s outstanding equity awards are recognized as incurred.
8. Shareholders’ Equity
Treasury Stock and Tender Offer
On July 30, 2002, the Company announced that its Board of Directors approved the repurchase of the Company’s common stock through its share repurchase program. Since the inception of the repurchase plan, the Board of Directors has approved the repurchase of $
In December 2025, the Company completed a tender offer through which
During the three months ended March 27, 2026, the Company repurchased
There is no expiration of the Company's repurchase authorization. Under the repurchase plan, the Company may buy back shares of its outstanding stock either on the open market or through privately negotiated transactions, subject to market conditions and trading restrictions. The Company holds repurchased shares of its common stock as treasury stock and accounts for treasury stock under the cost method.
Shares purchased under the repurchase plan do not include shares withheld to satisfy withholding tax obligations. These withheld shares are never issued and in lieu of issuing the shares, taxes were paid on the employee’s behalf. During the three months ended March 27, 2026, the Company withheld and did not issue
Dividend Program
During the three months ended March 27, 2026, the Company declared its first quarterly dividend to its shareholders for an aggregate of $
9. Transactions with Related Parties
During the three months ended March 27, 2026, the Company repurchased
10. Litigation
The Company is involved in legal proceedings, claims, and litigation arising in the ordinary course of business not specifically discussed herein. In the opinion of management, the final disposition of such matters will not have a material adverse effect on the Company’s financial position, cash flows or results of operations.
16
The Hackett Group, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
11. Segment Information and Geographical Data
The Company has organized its operating and internal reporting structure to align with its primary market solutions. In accordance with ASC 280, the Company determined it has
The Company’s chief operating decision maker (“CODM”), its Chief Executive Officer ("CEO"), reviews the financial information presented for purposes of allocating resources and evaluating segment financial performance.
17
The Hackett Group, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
11. Segment Information and Geographical Data (continued)
The tables below set forth information about the Company’s operating segments for the three months ended March 27, 2026 and March 28, 2025, along with the items necessary to reconcile the segment information to the totals reported in the accompanying consolidated financial statements (in thousands):
|
|
Quarter Ended |
|
|||||
|
|
March 27, |
|
|
March 28, |
|
||
|
|
2026 |
|
|
2025 |
|
||
Global S&BT: |
|
|
|
|
|
|
||
Revenue before reimbursements* |
|
$ |
|
|
$ |
|
||
Cost of sales |
|
|
|
|
|
|
||
Gross margin |
|
|
|
|
|
|
||
Selling, general and administrative costs |
|
|
|
|
|
|
||
Segment contribution |
|
|
|
|
|
|
||
Oracle Solutions: |
|
|
|
|
|
|
||
Revenue before reimbursements* |
|
$ |
|
|
$ |
|
||
Cost of sales |
|
|
|
|
|
|
||
Gross margin |
|
|
|
|
|
|
||
Selling, general and administrative costs |
|
|
|
|
|
|
||
Segment contribution |
|
|
|
|
|
|
||
SAP Solutions: |
|
|
|
|
|
|
||
Revenue before reimbursements* |
|
$ |
|
|
$ |
|
||
Cost of sales |
|
|
|
|
|
|
||
Gross margin |
|
|
|
|
|
|
||
Selling, general and administrative costs |
|
|
|
|
|
|
||
Segment contribution |
|
|
|
|
|
|
||
Total Company: |
|
|
|
|
|
|
||
Total segment contribution margin |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Items not allocated to segment level: |
|
|
|
|
|
|
||
Corporate general and administrative expenses** |
|
|
|
|
|
|
||
Non-cash stock based compensation expense*** |
|
|
|
|
|
|
||
Stock price award program compensation expense*** |
|
|
|
|
|
|
||
Acquisition-related cash compensation (reversal) expense**** |
|
|
( |
) |
|
|
|
|
Acquisition-related non-cash stock based compensation (reversal) expense**** |
|
|
( |
) |
|
|
|
|
Acquisition-related costs |
|
|
- |
|
|
|
|
|
Restructuring costs**** |
|
|
|
|
|
- |
|
|
Depreciation expense |
|
|
|
|
|
|
||
Amortization expense |
|
|
|
|
|
|
||
Interest expense, net |
|
|
|
|
|
|
||
Income before taxes |
|
$ |
|
|
$ |
|
||
*Revenue before reimbursements excludes reimbursable expenses, which are project travel-related expenses passed through to a client with no associated operating margin.
**Corporate general and administrative expenses primarily include costs related to business support functions including accounting and finance, human resources, legal, information technology and office administration, as well as any foreign currency gains and losses. Corporate general and administrative expenses exclude one-time, non-recurring expenses and benefits, which are disaggregated in the above table.
***See Note 7.
****Reversal of performance-based accruals related to the LeewayHertz acquisition.
*****Restructuring costs are not allocated to the segments.
18
The Hackett Group, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
11. Segment Information and Geographical Data (continued)
The tables below set forth information on the Company's geographical data. Total revenue, which is primarily based on the country of the contracting entity, was attributed to the following geographical areas (in thousands):
|
|
Quarter Ended |
|
|||||
|
|
March 27, |
|
|
March 28, |
|
||
|
|
2026 |
|
|
2025 |
|
||
|
|
|
|
|
|
|
||
United States |
|
$ |
|
|
$ |
|
||
Europe (U.K., Germany, France, Switzerland and Spain) |
|
|
|
|
|
|
||
Other (Australia, Canada, India and Uruguay) |
|
|
|
|
|
|
||
Total revenue |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Long-lived assets are attributable to the following geographic areas (in thousands):
|
|
March 27, |
|
|
December 26, |
|
||
|
|
2026 |
|
|
2025 |
|
||
Long-lived assets: |
|
|
|
|
|
|
||
United States |
|
$ |
|
|
$ |
|
||
Europe (U.K., Germany, Spain and Netherlands) |
|
|
|
|
|
|
||
Other (Australia, Canada, India and Uruguay) |
|
|
|
|
|
|
||
Total long-lived assets |
|
$ |
|
|
$ |
|
||
The domestic long-lived assets above include the Spend Matters intangible assets of $
12. Restructuring Costs
During the first quarter of 2026 and the third quarter of 2025, the Company incurred restructuring costs of $
The following table sets forth the activity in the restructuring expense accrual (in thousands):
|
|
Employee- Related |
|
|
|
|
Costs |
|
|
Accrual balance at December 27, 2024 |
$ |
|
|
|
Restructuring costs |
|
|
|
|
Cash paid |
|
|
( |
) |
Accrual balance at December 26, 2025 |
$ |
|
|
|
Restructuring costs |
|
|
|
|
Cash paid |
|
|
( |
) |
Accrual balance at March 27, 2026 |
$ |
|
|
|
19
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). We intend the forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in these sections. All statements regarding our expected financial position and operating results, our business strategy, our financing plans and forecasted demographic and economic trends relating to our industry are forward-looking statements. These statements can sometimes be identified by our use of forward-looking words such as “may,” “will,” “anticipate,” “estimate,” “expect,” or “intend” and similar expressions. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from the results, performance or achievements expressed or implied by the forward-looking statements. We cannot promise you that our expectations reflected in such forward-looking statements will turn out to be correct. Factors that could impact such forward-looking statements include, among others, changes in worldwide and U.S. economic conditions that impact business confidence and the demand for our products and services, our ability to transition our capabilities to support generative artificial intelligence ("Gen AI")-related consulting services and solutions, our ability to effectively integrate acquisitions, including the LeewayHertz and Spend Matters acquisitions, into our operations, our ability to manage joint ventures and successfully cooperate with our joint venture partners, 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 cancellation 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, the impact of the geopolitical conflict involving Russia and Ukraine and in the Middle East on our business and changes in general economic conditions, interest rates, tariffs and trade barriers and our ability to obtain additional debt financing if needed.
An additional description of our risk factors is described in Part I – Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the year ended December 26, 2025.
OVERVIEW
The following Management's Discussion and Analysis ("MD&A") is intended to help the reader understand the results of operations and financial condition of Hackett. MD&A is provided as a supplement to, and should be read in conjunction with, our consolidated financial statements and the accompanying notes to our consolidated financial statements included in this Quarterly Report on Form 10-Q.
Hackett is a global IP platform-based Gen AI strategic consulting and executive advisory digital transformation firm. The Hackett Group provides dedicated expertise in Gen AI enabled enterprise transformation services across front, mid and back office areas, including its highly recognized Oracle, SAP, OneStream and Coupa implementation offerings.
In early 2024, we launched our AI assessment platform, AI XPLR which helps clients identify, evaluate and design Gen AI enablement opportunities. Using AI XPLR, our experienced professionals guide organizations to harness the power of Gen AI solutions designed to digitally transform their operations to achieve quantifiable, breakthrough results, allowing us to be key architects of our clients' Gen AI journey.
We believe Gen AI will fundamentally change the way companies operate as well as the way consulting services are sold and delivered. We believe the Gen AI platform capabilities we have developed in AI XPLR which were expanded with ZBrain, which we acquired as part of the LeewayHertz acquisition, is highly differentiating and we expect will enable us to effectively compete in this emerging and important space.
The Hackett Group has completed over 28,400 benchmarking and performance studies with major organizations. These studies are executed utilizing our Quantum Leap platform which drives our Digital Transformation Platform (“DTP” or “Hackett DTP”). This includes the firm's benchmarking metrics, best practices repository, and best practice configuration and process flow accelerators, which enables our clients and partners to achieve digital world-class performance. We consider this, along with our
20
recent innovations, our core Hackett Intellectual Property ("IP") which allows us to identify, design and evaluate transformation opportunities to be proprietary and key components of our Hackett Solutioning IP.
Our transformation expertise is grounded in best practices insights from benchmarking the world’s leading businesses – including 97% of the Dow Jones Industrials, 90% of the Fortune 100, 68% of the DAX 40 and 53% of the FTSE 100, which inform and are delivered by our platforms.
Impact of Macroeconomic Conditions on Our Business
The level of revenue we achieve is based on our ability to deliver market leading services and solutions and to deploy skilled teams of professionals quickly. Our results of operations are affected by economic conditions, including macroeconomic conditions and levels of business confidence. Any deterioration in the current macroeconomic environment or economic downturn as a result of weak or uncertain economic conditions due to inflation, high interest rates, tariffs, national or geopolitical events or other factors impacting economic activity or business confidence could adversely affect our clients' financial condition or outlook which may reduce the clients' demand for our services.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, our results of operations (in thousands and unaudited):
|
|
Quarter Ended |
|
|||||
|
|
March 27, |
March 28, |
|
||||
|
|
2026 |
2025 |
|
||||
Revenue: |
|
|
|
|
|
|
||
Revenue before reimbursements |
|
$ |
67,843 |
|
|
$ |
76,231 |
|
Reimbursements |
|
|
954 |
|
|
|
1,634 |
|
Total revenue |
|
|
68,797 |
|
|
|
77,865 |
|
Costs and expenses: |
|
|
|
|
|
|
||
Cost of service: |
|
|
|
|
|
|
||
Personnel costs before reimbursable expenses (includes $589 and $4,928 of non-cash stock based compensation reversal and expense in the three months ended March 27, 2026 and March 28, 2025, respectively) |
|
|
38,505 |
|
|
|
48,380 |
|
Reimbursable expenses |
|
|
954 |
|
|
|
1,634 |
|
Total cost of service |
|
|
39,459 |
|
|
|
50,014 |
|
Selling, general and administrative costs (includes $2,068 and $4,744 of non-cash stock based compensation expense in the three months ended March 27, 2026 and March 28, 2025, respectively) |
|
|
18,446 |
|
|
|
23,448 |
|
Restructuring costs |
|
|
1,956 |
|
|
|
— |
|
Total costs and operating expenses |
|
|
59,861 |
|
|
|
73,462 |
|
|
|
|
|
|
|
|
||
Income from operations |
|
|
8,936 |
|
|
|
4,403 |
|
Other expense, net: |
|
|
|
|
|
|
||
Interest expense, net |
|
|
(1,008 |
) |
|
|
(202 |
) |
Income before income taxes |
|
|
7,928 |
|
|
|
4,201 |
|
Income tax expense |
|
|
3,647 |
|
|
|
1,058 |
|
Net income |
|
$ |
4,281 |
|
|
$ |
3,143 |
|
Diluted net income per common share |
|
$ |
0.17 |
|
|
$ |
0.11 |
|
Revenue. We are a global Company with operations in our primary markets located in the United States and Western Europe. Our revenue is denominated in multiple currencies, primarily the U.S. Dollar, British Pound and Euro, and as a result is affected by currency exchange rate fluctuations. The impact of currency fluctuations did not have a significant impact on comparisons between the three months ended March 27, 2026 and the three months ended March 28, 2025. In this MD&A, we discuss revenue based on geographical location of engagement team personnel.
Our Company total revenue was $68.8 million during the first three months of 2026 as compared to $77.9 million in the same period in 2025. In the first three months of 2026, one customer accounted for 4% of our Company total revenue. In the first three months of 2025, one customer accounted for 9% of our Company total revenue.
21
Segment revenue. The Company has three reportable segments: Global Strategy & Business Transformation (Global S&BT), Oracle Solutions and SAP Solutions. Global S&BT includes S&BT Gen AI and Business Transformation Consulting, Benchmarking, Business Advisory Services, Intellectual Property as-a-Service (IPASS) and OneStream offerings. Oracle Solutions and SAP Solutions support the two fundamentally distinct ERP systems: Oracle and SAP.
The following table sets forth total revenue by operating segment, which includes reimbursable expenses related to project travel-related expenses passed through to a client with no associated operating margin (in thousands):
|
|
Quarter Ended |
|
|||||
|
|
March 27, |
|
|
March 28, |
|
||
|
|
2026 |
|
|
2025 |
|
||
Global S&BT |
|
$ |
36,775 |
|
|
$ |
43,357 |
|
Oracle Solutions |
|
|
15,685 |
|
|
|
21,085 |
|
SAP Solutions |
|
|
16,337 |
|
|
|
13,423 |
|
Total revenue |
|
$ |
68,797 |
|
|
$ |
77,865 |
|
Global S&BT total revenue was $36.8 million and $43.4 million during the first three months of 2026 and 2025, respectively. Although we continued to see an increasing number of clients utilizing our Gen AI delivery platforms, that was more than offset by elongated client decision cycles that persisted throughout the quarter as clients are evaluating their Gen AI return on investments.
Oracle Solutions total revenue was $15.7 million and $21.1 million during the first three months of 2026 and 2025, respectively. Oracle Solutions has stabilized from the completion of a large client engagement which primarily explains the decreases on a year over year comparison.
SAP Solutions total revenue was $16.3 million and $13.4 million during the first three months of 2026 and 2025, respectively. The increase in revenue during the first three months of 2026, as compared to the same periods in 2025, was primarily driven by implementation services that correspond to the volume of software sales from the last several quarters that were coupled with significant implementation fees. This was primarily due to the increased sales investments we have made with SAP and SAP’s success driving S4 HANA Cloud migrations.
Reimbursements as a percentage of Company total revenue were 1% and 2% during the first three months of 2026 and 2025, respectively. Reimbursements are project travel-related expenses passed through to a client with no associated operating margin.
Cost of Service. Cost of service consists of personnel costs before reimbursable expenses, which includes salaries, benefits and incentive compensation for consultants and subcontractor fees, acquisition-related non-cash stock based compensation expense and non-cash stock based compensation expense, and reimbursable expenses which are travel and other expenses passed through to a client and are associated with projects.
Personnel costs before reimbursable expenses decreased 20%, to $38.5 million for the first three months of 2026, as compared to $48.4 million in the same period of 2025. The decrease in the first quarter of 2026 was primarily related to the decrease of acquisition related non-cash stock based compensation expense relating to the LeewayHertz acquisition and to the non-cash stock based compensation expense relating to the stock price award program, headcount reductions from the leverage of our Gen AI delivery platforms and lower bonus accruals commensurate with performance. Personnel costs as a percentage of total Company total revenue were 56% and 62% during the first three months of 2026 and 2025, respectively.
Non-cash stock based compensation reversal of expense, included in personnel costs before reimbursable expenses, was $0.6 million in the first three months of 2026 and non-cash stock based compensation expense was $4.9 million during the first three months 2025. The decrease in the first three months of 2026 was primarily related to a decrease in non-cash stock compensation from the stock price award program issuances (Note 7) and reversals of acquisition related non-cash stock compensation expense that were performance-related (Note 1 and Note 7).
Selling, General and Administrative Costs (“SG&A”). SG&A primarily consists of salaries, benefits and incentive compensation for the selling, marketing, administrative and executive employees, non-cash stock based compensation expense and various other overhead expenses.
SG&A costs decreased 21%, to $18.4 million for the first three months of 2026, as compared to $23.4 million for the same period in 2025. The decrease in the costs during the first three months of 2026 was primarily due to decreased non-cash stock based compensation from the stock price award program issuances and lower bonus accruals (Note 7). SG&A costs as a
22
percentage of total Company revenue were 27% during the first three months of 2026, as compared to 30% during the same period in 2025, respectively.
Non-cash stock based compensation expense, included in SG&A, was $2.1 million and $4.7 million during the first three months of 2026 and 2025, respectively. The decrease in the first three months of 2026 primarily relates to the non-cash stock compensation expense from the stock price award program issuances (Note 7).
Amortization expense was $315 thousand and $145 thousand for the first three months of 2026 and 2025, respectively, which was related to the intangible assets acquired in our September 2024 acquisition of LeewayHertz and May 2025 acquisition of Spend Matters.
Restructuring Costs. During the first quarter of 2026, we incurred restructuring costs of $1.9 million as a result of the continued pivot of our business to Gen AI. These costs were primarily employee-related costs, as the Company reduced staff to be commensurate with current market demand and the leverage of our Gen AI delivery platforms are expected to have on our service offerings.
Segment Contribution. Segment contribution consists of the revenue generated by the segment, less the direct costs of revenue and selling, general and administrative expenses that are incurred directly by the segment. Items not allocated to the segment level include corporate costs related to the administrative functions that are performed in a centralized manner and that are not attributable to a particular segment. These administrative function costs include corporate general and administrative expenses, non-cash compensation, depreciation expense, interest expense and legal settlement and related costs.
Global S&BT segment contribution was $9.1 million during the first three months of 2026, as compared to $12.8 million for the same period in 2025, respectively, primarily due to elongated client decision making that persisted throughout the quarter as mentioned above.
Oracle Solutions segment contribution was $3.6 million during the first three months of 2026, as compared to $4.4 million for the same period in 2025, respectively. The decrease during the first three months of 2026 was primarily due to decreased revenue, as discussed above, partially offset by decreased incentive compensation accruals related to performance.
SAP Solutions segment contribution was $5.0 million and $4.3 million during the first three months of 2026 and 2025, respectively. The increase in segment profit in the first three months of 2026, as compared to the same period in 2025, was primarily due to increased implementation services from software sales over the past several quarters as mentioned above.
Interest Expense, Net. Interest expense, net was $1.0 million and $0.2 million during the first three months of 2026 and 2025, respectively. As of March 27, 2026, we had outstanding debt of $79.0 million, excluding debt issue costs. As of March 28, 2025, we had outstanding debt of $18.0 million, excluding debt issue costs.
Income Taxes. During the first three months of 2026, we recorded $3.6 million of income tax expense, related to certain federal, foreign and state taxes which reflected an effective tax rate of 46.0%. The increase in the effective tax rate is primarily due to the vesting fair value for restricted stock unit awards being lower than the grant date fair value for such awards. During the first three months of 2025, we recorded $1.1 million of income tax expense related to certain federal, foreign and state taxes which reflected an effective tax rate of 25.2%.
Liquidity and Capital Resources
As of March 27, 2026 and December 26, 2025, we had $6.1 million and $18.2 million, respectively, classified as cash on the consolidated balance sheets. We currently believe that available funds (including the cash on hand and funds available for borrowing under our revolving line of credit the "Credit Facility") and cash flows generated by operations will be sufficient to fund our working capital requirements, including debt payments, lease obligations and capital expenditures for at least the next twelve months and beyond. We may decide to raise additional funds in order to fund expansion, to develop new or further enhance products and services, to respond to competitive pressures, or to acquire complementary businesses or technologies. There is no assurance that additional financing would be available when needed or desired. Our cash requirements have not changed materially from those disclosed in Item 7 included in Part II of our Annual Report on Form 10-K for the year ended December 26, 2025.
The following table summarizes our cash flow activity (in thousands):
|
|
Quarter Ended |
|
|||||
|
|
March 27, |
|
|
March 28, |
|
||
|
|
2026 |
|
|
2025 |
|
||
Cash flows (used in) provided by operating activities |
|
$ |
(5,066 |
) |
|
$ |
4,194 |
|
Cash flows used in investing activities |
|
$ |
(2,414 |
) |
|
$ |
(1,544 |
) |
Cash flows used in financing activities |
|
$ |
(4,649 |
) |
|
$ |
(9,745 |
) |
23
Cash Flows from Operating Activities
Net cash used in operating activities was $5.1 million during the first three months of 2026, as compared to net cash provided by $4.2 million during the same period in 2025. In 2026, the net cash used in operating activities was primarily due to increases in accounts receivable and decreases in accrued liabilities primarily due to payments of the prior year earned incentive compensation liabilities and payments to vendors, partially offset by net income adjusted for non-cash items. In 2025, the net cash provided by operating activities was primarily due to net income adjusted for non-cash items and increases in contract liabilities, partially offset by increases in accounts receivable, decreases in accrued liabilities and other accruals primarily due to payments of the prior year earned incentive compensation liabilities and payments to vendors.
Cash Flows from Investing Activities
Net cash used in investing activities was $2.4 million during the first three months of 2026, as compared to $1.5 million during the same period in 2025. During both the first three months periods of 2026 and 2025, cash flows used in investing activities primarily included investments made to the continued development of our Gen AI delivery platforms.
Cash Flows from Financing Activities
Net cash used in financing activities was $4.6 million during the first three months of 2026, as compared to $9.7 million during the same period in 2025. The usage of cash in 2026 primarily related to the repurchase of $4.6 million of the Company's common stock and dividend payments of $3.0 million, partially offset by a net $3.0 million drawdown on our Credit Facility. The usage of cash in 2025 primarily related to the repurchase of $11.7 million of the Company's common stock and dividend payments of $3.0 million, partially offset by the $5.0 million drawdown on our Credit Facility.
As of March 27, 2026, we had $79.0 million of outstanding borrowings under our Credit Facility, excluding deferred debt costs, leaving us with a capacity of approximately $21.0 million.
24
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
As of March 27, 2026, our exposure to market risk related primarily to changes in interest rates and foreign currency exchange rate risks.
Interest Rate Risk
Our exposure to market risk for changes in interest rates relates primarily to the Credit Facility, which is subject to variable interest rates. Under our credit agreement, the interest rates per annum applicable to loans under the Credit Facility was, at our option, equal to a base rate for one-, two-, three- or nine-month interest periods chosen by us in each case, plus an applicable margin percentage. A 100-basis point increase in our interest rate under our Credit Facility would not have had a material impact on our results of operations for the quarter ended March 27, 2026.
Exchange Rate Sensitivity
We face exposure to adverse movements in foreign currency exchange rates as a portion of our revenue, expenses, assets and liabilities are denominated in currencies other than the U.S. Dollar, primarily the British Pound, the Euro, the Indian Rupee and the Australian Dollar. These exposures may change over time as business practices evolve.
Item 4. Controls and Procedures
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report on Form 10-Q.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 5. Other Information.
Rule 10b5-1 Trading Arrangements
During the three months ended March 27, 2026, no director or officer of the Company
25
PART II — OTHER INFORMATION
Item 1. Legal Proceedings.
The Company is involved in legal proceedings, claims, and litigation arising in the ordinary course of business not specifically discussed herein. In the opinion of management, the final disposition of such matters will not have a material adverse effect on the Company’s financial position, cash flows or results of operations.
Item 1A. Risk Factors.
For a discussion of our potential risks and uncertainties, see the risk factor below and the information under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 26, 2025.
There have been no material changes to any of the risk factors disclosed in the Company’s Annual Report on Form 10-K for the year ended December 26, 2025.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Issuer Purchases of Equity Securities
During the quarter ended March 27, 2026, the Company repurchased 211 thousand shares at an average price of $14.00 per share for a total cost of $3.0 million. As of March 27, 2026, the Company had $22.0 million of authorization remaining under the repurchase plan.
|
|
|
|
|
|
|
|
Total Number |
|
|
Maximum Dollar |
|
|
||||
|
|
|
|
|
|
|
|
of Shares as Part |
|
|
Value That May |
|
|
||||
|
|
|
|
|
|
|
|
of Publicly |
|
|
Yet be Purchased |
|
|
||||
|
|
Total Number |
|
|
Average Price |
|
|
Announced |
|
|
Under the |
|
|
||||
Period(1) |
|
of Shares |
|
|
Paid per Share |
|
|
Program |
|
|
Program |
|
|
||||
Balance as of December 26, 2025 |
|
|
|
|
|
|
|
|
|
|
$ |
11,367,753 |
|
|
|||
December 27, 2026 to January 23, 2026 |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
24,999,999 |
|
* |
January 24, 2026 to February 20, 2026 |
|
|
62,031 |
|
|
$ |
15.12 |
|
|
|
62,031 |
|
|
$ |
24,062,028 |
|
|
February 21, 2026 to March 27, 2026 |
|
|
149,776 |
|
|
$ |
13.54 |
|
|
|
149,776 |
|
|
$ |
22,033,756 |
|
|
|
|
|
211,807 |
|
|
$ |
14.00 |
|
|
|
211,807 |
|
|
|
|
|
|
(1) On July 30, 2002, the Board of Directors approved and announced the repurchase program. As of March 27, 2026, the Board of Directors had approved a cumulative authorization of $373.8 million with cumulative purchases under the plan of $351.8 million, leaving $22.0 million available for future purchases. There is no expiration date on the current authorization.
*The Company’s Board of Directors approved an additional share repurchase authorization of $13.6 million on February 12, 2026.
Shares repurchased during the three months ended March 27, 2026 under the repurchase plan do not include 121 thousand shares for a cost of $1.7 million that the Company bought back to satisfy employee net vesting obligations.
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Item 6. Exhibits
Exhibit No. |
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Exhibit Description |
3.1 |
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Second Amended and Restated Articles of Incorporation of the Registrant, as amended (incorporated herein by reference to the Registrant's Form 10-K for the year ended December 29, 2000). |
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3.2 |
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Articles of Amendment of the Articles of Incorporation of the Registrant (incorporated herein by reference to the Registrant's Form 10-K for the year ended December 28, 2007). |
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3.3 |
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Amended and Restated Bylaws of the Registrant, as amended (incorporated herein by reference to the Registrant's Form 10-K for the year ended December 29, 2000). |
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3.4 |
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Amendment to Amended and Restated Bylaws of the Registrant (incorporated herein by reference to the Registrant's Form 8-K filed on March 31, 2008). |
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3.5 |
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Amendment to Amended and Restated Bylaws of the Registrant (incorporated herein by reference to the Registrant's Form 8-K filed on January 21, 2015). |
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31.1* |
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Certification by CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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31.2* |
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Certification by CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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32* |
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Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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101.INS** |
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Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the inline XBRL document. |
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101.SCH** |
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Inline XBRL Taxonomy Extension Schema with embedded Linkbases Document. |
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104** |
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Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
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* Filed herewith
** Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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The Hackett Group, Inc. |
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Date: May 6, 2026 |
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/s/ Robert A. Ramirez |
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Robert A. Ramirez |
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Executive Vice President, Finance and Chief Financial Officer |
28