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 ("Gen 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.

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 ("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.

Previous wording

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 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.

Current wording

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 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.

Previous wording

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, 70% of the DAX 40 and 51% of the FTSE 100, which inform and are delivered by our platforms.

Current wording

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.

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 third quarter and first nine 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.

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 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.

Previous wording

Our Company total revenue was $73.1 million and $230.0 million during the third quarter and first nine months of 2025, respectively, as compared to $79.8 million and $234.6 million in the same periods in 2024, respectively. In the third quarter and first nine months of 2025, one customer accounted for 5% and 7%, respectively, of our Company total revenue. In the third quarter and first nine months of 2024, one customer accounted for 13% and 12%, respectively, of our Company total revenue.

Current wording

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.

Previous wording

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 A.I. 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.

Current wording

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.

Previous wording

Reimbursements as a percentage of Company total revenue were 1% and 2% during the third quarter and first nine months of 2025 and 2024, respectively. 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 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.

Previous wording

Personnel costs before reimbursable expenses were $42.4 million and $140.5 million for the third quarter and first nine months of 2025, respectively, as compared to $46.4 million and $137.6 million in the same periods of 2024, respectively. The decrease in the third quarter of 2025 was primarily related to the decrease of acquisition related non-cash stock based compensation expense relating to the LeewayHertz acquisition and lower bonus accruals, partially offset by the increase in non-cash stock compensation expense related to the stock price award program. The increase in the first nine months of 2025 was primarily related to the increase in non-cash stock compensation expense related to the stock price award program and the acquisition related non-cash stock compensation expense relating to the LeewayHertz acquisition, partially offset by lower bonus accruals. Personnel costs as a percentage of total Company total revenue were 58% and 61% during the quarter and first nine months of 2025, respectively, and 58% and 59% for the same periods in 2024, respectively.

Current wording

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.

Previous wording

Non-cash stock based compensation expense, included in personnel costs before reimbursable expenses was $1.6 million and $11.5 million during the quarter and first nine months of 2025, respectively, as compared to $2.1 million and $5.2 million in the same periods, respectively. The increase in the first nine months of 2025 was primarily related to increased non-cash stock compensation from the stock price award program issuances (Note 7), partially offset by lower acquisition related non-cash stock compensation expense (Note 1 and Note 7).

Current wording

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).

Previous wording

SG&A costs were $21.2 million and $68.0 million, for the third quarter and first nine months of 2025, respectively, as compared to $18.7 million and $55.0 million for the same periods in 2024, respectively. This increase in the costs during the third quarter and first nine 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 29% and 30% during the third quarter and first nine months of 2025, respectively, as compared to 23% during each of the same periods in 2024, respectively.

Current wording

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 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.

Previous wording

Non-cash stock based compensation expense, included in SG&A, was $4.3 million and $13.8 million during the third quarter and first nine months of 2025, respectively, as compared to $1.7 million and $4.1 million for the same periods in 2024, respectively. The increase in the third quarter and first nine months of 2025 primarily relates to the non-cash stock compensation expense from the stock price award program issuances (Note 7).

Current wording

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).

Previous wording

Amortization expense was $0.3 thousand and $0.7 thousand for the third quarter and first nine 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.

Current wording

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.

Previous wording

Restructuring Costs. During the third quarter of 2025, we incurred restructuring costs of $3.1 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.

Current wording

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.

Previous wording

Oracle Solutions segment contribution was $2.7 million and $11.5 million during the third quarter and first nine months of 2025, respectively, as compared to $5.5 million and $16.2 million for the same periods in 2024, respectively. The decrease during the third quarter and first nine months of 2025 was primarily due to decreased revenue, as discussed above, partially offset by decreased incentive compensation accruals related to performance.

Current wording

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.

Previous wording

SAP Solutions total revenue was $13.7 million and $41.0 million during the third quarter and first nine months of 2025, respectively, as compared to $13.0 million and $39.9 million in the same periods of 2024, respectively. The increase in revenue during the third quarter and first nine months of 2025, as compared to the same periods in 2024, was primarily due to increased implementation services, partially offset by lower software sales in the third quarter and first nine months of 2025.

Current wording

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.

Previous wording

Interest Expense, Net. Interest expense, net was $0.4 million and $1.0 million during the third quarter and first nine months of 2025, respectively, as compared to $0.4 million and $1.4 million in the same periods in 2024, respectively. As of September 26, 2025, we had outstanding debt of $44.0 million, excluding debt issue costs. As of September 27, 2024, we had outstanding debt of $20.0 million, excluding debt issue costs.

Current wording

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.

Previous wording

Income Taxes. During the third quarter and first nine months of 2025, we recorded $2.5 million and $6.1 million of income tax expense, respectively, related to certain federal, foreign and state taxes which reflected an effective tax rate of 49.3% and 45.3%, 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 third quarter and first nine months of 2024, we recorded $3.8 million and $9.4 million of income tax expense, respectively, related to certain federal, foreign and state taxes which reflected an effective tax rate of 30.9% and 26.6%, respectively.

Current wording

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%.

Previous wording

As of September 26, 2025 and December 27, 2024, we had $13.9 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 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.

Previous wording

Net cash provided by operating activities was $21.2 million during the first nine months of 2025, as compared to $27.1 million during the same period in 2024. In 2025, the net cash provided by operating activities was primarily due to net income adjusted for non-cash items. The cash inflows were partially offset by decreases in accrued liabilities and other accruals primarily due to payments of incentive compensation liabilities and vendors and increases in prepaid expenses primarily due to the timing of payments for income taxes. In 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 earned incentive compensation liabilities and the timing of payments for income taxes and to vendors.

Current wording

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.

Previous wording

Net cash used in investing activities was $6.6 million during the first nine months of 2025, as compared to $9.6 million during the same period in 2024. During both the third quarter and first nine 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 third quarter of 2025 included $0.8 million of cash consideration paid for the Company's acquisition of Spend Matters.

Current wording

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.

Previous wording

Net cash used in financing activities was $17.0 million and $28.4 million during the first nine months of 2025 and 2024, respectively. The usage of cash in 2025 primarily related to the repurchase of $39.0 million of the Company's common stock and dividend payments of $9.6 million, partially offset by a net $31.0 million drawdown on our Credit Facility. The usage of cash in 2024 primarily related to the repayment of borrowings of $13.0 million related to our Credit Facility, dividend payments of $9.1 million and the repurchase of $6.9 million of the Company's common stock.

Current wording

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.

Previous wording

As of September 26, 2025, we had $44.0 million of outstanding borrowings under our Credit Facility, excluding deferred debt costs, leaving us with a capacity of approximately $56.0 million.

Current wording

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.