HACKETT GROUP, INC.

Previous wording

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 ("A.I.")-related consulting services and solutions, our ability to effectively integrate acquisitions, including the LeewayHertz acquisition, 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 27, 2024.

Current wording

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 ("A.I.")-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.

Previous wording

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 28, 2025 and the three months ended March 29, 2024. In this MD&A, we discuss revenue based on geographical location of engagement team personnel.

Current wording

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 second quarter and first six months of 2025 and the same comparable periods of 2024. In this MD&A, we discuss revenue based on geographical location of engagement team personnel.

Previous wording

Our Company total revenue was $77.9 million during the first three months of 2025, as compared to $77.2 million in the same period in 2024. In the first three months of 2025 and 2024, one customer accounted for 9% of our Company total revenue in both periods.

Current wording

Our Company total revenue was $78.9 million and 156.8 million during the second quarter and first six months of 2025, respectively, as compared to $77.7 million and $154.8 million in the same periods in 2024, respectively. In the second quarter and first six months of 2025, one customer accounted for 7% and 8%, respectively, of our Company total revenue. In both the second quarter and first six months of 2024, one customer accounted for 13% and 11%, respectively, of our Company total revenue.

Previous wording

Global S&BT total revenue was $43.4 million and $40.9 million during the first three months of 2025 and 2024, respectively. This increase was related to growth in our Gen AI consulting and implementation offerings, partially offset by weakness in our OneStream and eProcurement implementation offerings.

Current wording

Global S&BT total revenue was $44.2 million and $87.6 million during the second quarter and first six months of 2025, respectively, as compared to $42.3 million and $83.2 million in the same periods of 2024, respectively. This strong growth from our Gen AI consulting and implementation offerings was partially offset by weakness in our OneStream implementation offerings in 2025.

Previous wording

SAP Solutions total revenue was $13.4 million and $14.6 million during the first three months of 2025 and 2024, respectively. The decrease in revenue during the first three months of 2025, as compared to the same period in 2024, was primarily due to the over performance in the fourth quarter of 2024, which tempered our first quarter results.

Current wording

SAP Solutions total revenue was $13.9 million and $27.3 million during the second quarter and first six months of 2025, respectively, as compared to $12.3 million and $26.9 million in the same periods of 2024, respectively. The increase in revenue during the second quarter and first six months of 2025, as compared to the same periods in 2024, was primarily due to increased implementation revenue in 2025 that corresponds with the volume of software sales from the last several quarters.

Previous wording

Reimbursements as a percentage of Company total revenue were 2% during both the first three months of 2025 and 2024. Reimbursements are project travel-related expenses passed through to a client with no associated operating margin.

Current wording

Reimbursements as a percentage of Company total revenue were 2% during both the second quarter and first six months of 2025 and 2024. Reimbursements are project travel-related expenses passed through to a client with no associated operating margin.

Previous wording

Personnel costs before reimbursable expenses increased 6%, to $48.4 million for the first three months of 2025, as compared to $45.8 million in the same period of 2024. The increase was primarily related to the stock price award program and the acquisition related non-cash stock compensation expense relating to the LeewayHertz acquisition. Personnel costs as a percentage of total Company total revenue were 62% and 59% during the first three months of 2025 and 2024, respectively.

Current wording

Personnel costs before reimbursable expenses were $49.7 million and $98.1 million for the second quarter and first six months of 2025, respectively, as compared to $45.4 million and $91.2 million in the same periods of 2024, respectively. The increase was primarily related to the stock price award program and the acquisition related non-cash stock compensation expense relating to the LeewayHertz acquisition. Personnel costs as a percentage of total Company total revenue were 63% during both the quarter and first six months of 2025, respectively and 58% and 59% for the same periods in 2024, respectively.

Previous wording

Non-cash stock based compensation expense, included in personnel costs before reimbursable expenses was $4.9 million and $1.4 million during the first three months of 2025 and 2024, respectively. This increase was primarily related to increased non-cash stock compensation from the stock price appreciation equity program issuances (Note 7) and to the acquisition related non-cash stock compensation expense (Note 1 and Note 7).

Current wording

Non-cash stock based compensation expense, included in personnel costs before reimbursable expenses was $5.0 million and $9.9 million during the quarter and first six months of 2025, respectively, as compared to $1.6 million and $3.0 million in the same periods, respectively. This increase was primarily related to increased non-cash stock compensation from the stock price award program issuances (Note 7) and to the acquisition related non-cash stock compensation expense (Note 1 and Note 7).

Previous wording

SG&A costs increased 28%, to $23.4 million, as compared to $18.3 million for the same period in 2024, respectively. This increase in the costs during the first three months of 2025 was primarily due to increased non-cash stock based compensation from the stock price appreciation equity program issuances (Note 7). SG&A costs as a percentage of total Company revenue were 30% during the first three months of 2025, respectively, as compared to 24% during the same period in 2024.

Current wording

SG&A costs were $23.4 million and $46.8 million, for the second quarter and first six months of 2025, respectively, as compared to $18.0 million and $36.3 million for the same periods in 2024, respectively. This increase in the costs during the second quarter and first six months of 2025 was primarily due to increased non-cash stock based compensation from the stock price award program issuances (Note 7). SG&A costs as a percentage of total Company revenue were 30% during both the second quarter and first six months of 2025, respectively, as compared to 23% during the same periods in 2024, respectively.

Previous wording

Non-cash stock based compensation expense, included in SG&A, was $4.7 million and $1.2 million during the first three months of 2025 and 2024, respectively. The increase in the first three months of 2025 primarily relates to the non-cash stock compensation expense from the stock price appreciation equity program issuances (Note 7).

Current wording

Non-cash stock based compensation expense, included in SG&A, was $4.7 million and $9.5 million during the second quarter and first six months of 2025, respectively, as compared to $1.2 million and $2.4 million for the same periods in 2024, respectively. The increase in the second quarter and first six months of 2025 primarily relates to the non-cash stock compensation expense from the stock price award program issuances (Note 7).

Previous wording

Amortization expense was $145 thousand for the first three months of 2025 which was related to the intangible assets acquired in our September 2024 acquisition of LeewayHertz. There was no intangible amortization in the first three months of 2024.

Current wording

Amortization expense was $231 thousand and $376 thousand for the second quarter and first six months of 2025, respectively, which was related to the intangible assets acquired in our September 2024 acquisition of LeewayHertz and May 2025 acquisition of Spend Matters. There was no intangible amortization for the same periods in 2024.

Previous wording

Segment Profit. Segment profit 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.

Current wording

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.

Previous wording

Global S&BT segment profit was $12.8 million during the first three months of 2025, respectively, as compared to $10.1 million for the same period in 2024. This increase in the first three months of 2025 was primarily due to the revenue growth in our Gen A.I. consulting and implementation offerings, partially offset by weakness in our OneStream and eProcurement implementation offerings as mentioned above.

Current wording

Global S&BT segment contribution was $13.0 million and $25.8 million during the second quarter and first six months of 2025, respectively, as compared to $12.8 million and $22.8 million for the same periods in 2024, respectively. This increase during the second quarter and first six months of 2025 was primarily due to the revenue growth in our Gen AI consulting and implementation offerings, which were partially offset by weakness in our OneStream implementation offerings in 2025, as mentioned above.

Previous wording

Oracle Solutions segment profit was $4.4 million during the first three months of 2025, as compared to $5.3 million for the same period in 2024, respectively. The decrease during the first three months of 2025 was primarily due to decreased revenues and increased headcount related costs, partially offset by decreased incentive compensation accruals related to performance.

Current wording

Oracle Solutions segment contribution was $4.5 million and $8.8 million during the second quarter and first six months of 2025, respectively, as compared to $5.4 million and $10.6 million for the same periods in 2024, respectively. The decrease during the second quarter and first six months of 2025 was primarily due to decreased revenue, as discussed above, partially offset by decreased incentive compensation accruals related to performance.

Previous wording

Interest Expense, Net. Interest expense, net was $0.2 million and $0.5 million during the first three months of 2025 and 2024, respectively. As of March 28, 2025, we had outstanding debt of $18 million, excluding debt issue costs. As of March 29, 2024, we had outstanding debt of $31.0 million, excluding debt issue costs.

Current wording

Interest Expense, Net. Interest expense, net was $0.4 million and $0.6 million during the second quarter and first six months of 2025, respectively, as compared to $0.5 million and $1.0 million in the same periods in 2024, respectively. As of June 27, 2025, we had outstanding debt of $23.0 million, excluding debt issue costs. As of June 28, 2024, we had outstanding debt of $27.0 million, excluding debt issue costs.

Previous wording

Income Taxes. 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%, respectively. During the first three months of 2024, we recorded $2.3 million of income tax expense related to certain federal, foreign and state taxes which reflected an effective tax rate of 21.0%.

Current wording

Income Taxes. During the second quarter and first six months of 2025, we recorded $2.6 million and $3.6 million of income tax expense, respectively, related to certain federal, foreign and state taxes which reflected an effective tax rate of 60.7% and 43.0%, respectively. The increase in the effective tax rate is primarily due to the limitation of executive compensation deductions related to executive compensation, primarily driven by the stock price award program (Note 7). During the second quarter and first six months of 2024, we recorded $3.3 million and $5.6 million of income tax expense, respectively, related to certain federal, foreign and state taxes which reflected an effective tax rate of 27.1% and 24.2%, respectively.

Previous wording

As of March 28, 2025 and December 27, 2024, we had $9.2 million and $16.4 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 27, 2024.

Current wording

As of June 27, 2025 and December 27, 2024, we had $10.1 million and $16.4 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 27, 2024.

Previous wording

Net cash provided by operating activities was $4.2 million during the first three months of 2025, as compared to $2.8 million during the same period in 2024. In 2025 and 2024, 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 and contract assets, decreases in accrued liabilities and other accruals primarily due to payments of the prior year earned incentive compensation liabilities and payments to vendors.

Current wording

Net cash provided by operating activities was $9.8 million during the first six months of 2025, as compared to $16.5 million during the same period in 2024. In 2025 and 2024, 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 and contract assets, decreases in accrued liabilities and other accruals primarily due to payments in the prior year of earned incentive compensation liabilities and the timing of paymentsfor income taxes and to vendors.

Previous wording

Net cash used in investing activities was $1.5 million during the first three months of 2025, as compared to $0.9 million during the same period in 2024. During both the first three months periods of 2025 and 2024, cash flows used in investing activities also included investments made to the continued development of our Hackett Connect Executive Advisory member platform and continued development of our QL benchmark, DTP technologies and our Gen A.I. platforms, AI XPLR and ZBrain.

Current wording

Net cash used in investing activities was $4.2 million during the first six months of 2025, as compared to $1.8 million during the same period in 2024. During both the second quarter and first six months periods of 2025 and 2024, cash flows used in investing activities included investments made to the continued development of our Hackett Connect Executive Advisory member platform and continued development of our QL benchmark, DTP technologies and our Gen A.I. platforms, AI XPLR and ZBrain. In addition, cash flows used in investing activities during the second quarter of 2025 included $0.8 million of cash consideration paid for the Company's acquisition of Spend Matters.

Previous wording

Net cash used in financing activities was $9.7 million and $9.8 million during the first three months of 2025 and 2024, respectively. 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. The usage of cash in 2024 primarily related to the repurchase of $4.8 million of the Company's common stock, dividend payments of $3.0 million and the repayment of borrowings of $2.0 million related to our Credit Facility.

Current wording

Net cash used in financing activities was $11.8 million and $16.5 million during the first six months of 2025 and 2024, respectively. The usage of cash in 2025 primarily related to the repurchase of $16.1 million of the Company's common stock and dividend payments of $6.3 million, partially offset by the $10.0 million drawdown on our Credit Facility. The usage of cash in 2024 primarily related to the repurchase of $5.0 million of the Company's common stock, dividend payments of $6.0 million and the repayment of borrowings of $6.0 million related to our Credit Facility.

Previous wording

As of March 28, 2025, we had $18.0 million of outstanding borrowings under our Credit Facility, excluding deferred debt costs, leaving us with a capacity of approximately $82.0 million.

Current wording

As of June 27, 2025, we had $23.0 million of outstanding borrowings under our Credit Facility, excluding deferred debt costs, leaving us with a capacity of approximately $77.0 million.