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HACKETT GROUP, INC. (HCKT)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 revenue before reimbursements was $76.2M, near the high end of guidance, and adjusted diluted EPS was $0.41 at the high end; GAAP EPS fell to $0.11 due to $5.1M stock price award expense ($0.16/sh) and $2.4M acquisition-related costs ($0.07/sh) .
  • Versus consensus, HCKT delivered a modest EPS beat and slight revenue miss: EPS $0.41 vs $0.40*, revenue before reimbursements $76.2M vs $77.3M*; total revenue was $77.9M .
  • Mix and margin: Global S&BT grew 6% YoY (13% ex-OneStream/eProcurement) as GenAI work expanded and lifted gross margin; Oracle was down on a large post go‑live wind-down, SAP down YoY against a strong prior-year comp but with improving implementation outlook .
  • Q2 2025 guidance: revenue before reimbursements $76.0–$77.5M and adjusted EPS $0.37–$0.39 (assumes 27% tax); CFO also guided adj. gross margin ~43–44%, adj. SG&A+interest ~$18.6M, adj. EBITDA margin ~21–22%—implying revenue guide slightly below consensus midpoint while EPS is in line* .
  • Strategic catalysts: AI XPLR v3 launched ahead of growing GenAI demand; ZBrain JV expected to execute within 30–45 days with ARR licensing to begin (AI XPLR licensing targeted to start in July), plus rising channel partner interest that could expand distribution .

What Went Well and What Went Wrong

What Went Well

  • GenAI driving growth and margins: “GenAI engagements…favorably impacted our gross margin,” with Global S&BT revenue up 6% YoY and 13% ex‑OneStream/e‑procurement .
  • Delivered to guidance: Q1 revenue before reimbursements near the high end of guide ($76.2M) and adjusted EPS at the high end ($0.41) .
  • Platform velocity: AI XPLR v3 released, enabling thousands of industry-specific GenAI solutions with multi‑agent workflows; management emphasized uniqueness and speed as competitive advantages .

What Went Wrong

  • GAAP EPS compression: GAAP diluted EPS fell to $0.11 from $0.32 YoY due to $5.1M stock price award expense and $2.4M acquisition-related costs in the quarter .
  • Segment softness outside GenAI: Oracle down (post go‑live wind‑down) and SAP down YoY against a strong prior-year comp; OneStream and e‑procurement also weaker .
  • Working capital pressure: DSO increased to 73 days (vs 66 in Q4 and 68 YoY) on extended terms/milestones; management expects improvement in Q2 .

Financial Results

Consolidated P&L and Cash Flow

MetricQ1 2024Q4 2024Q1 2025
Total Revenue ($M)$77.2 $79.2 $77.9
Revenue before Reimbursements ($M)$75.7 $77.5 $76.2
Operating Income ($M)$11.5 $7.7 $4.4
Net Income ($M)$8.7 $3.6 $3.1
GAAP Diluted EPS ($)$0.32 $0.12 $0.11
Adjusted Diluted EPS ($)$0.39 $0.47 $0.41
Cash from Operations ($M)$2.8 $20.6 $4.2

Notes: Q1 2025 GAAP EPS impacted by $5.1M stock price award expense ($0.16/sh) and $2.4M acquisition-related expenses ($0.07/sh) .

Profitability and Operating Metrics

MetricQ1 2024Q1 2025
Adjusted Gross Margin %41.4% 43.4%
Adjusted EBITDA ($M)$15.2 $15.7
Adjusted EBITDA Margin %20.0% 20.7%

Segment Revenue Before Reimbursements

Segment ($M)Q1 2024Q4 2024Q1 2025
Global S&BT$40.25 $43.21 $42.64
Oracle Solutions$21.07 $17.41 $20.40
SAP Solutions$14.41 $16.84 $13.19
Total (pre‑reimb.)$75.73 $77.46 $76.23

Balance Sheet and KPIs

KPIQ1 2024Q4 2024Q1 2025
Cash ($M)$16.37 $16.37 $9.18
Long‑term Debt ($M)$— (not shown)$12.73 $17.76
DSO (days)68 66 73
Consultant Headcount1,154 1,284 1,332
Total Headcount1,414 1,553 1,618
Shares Repurchased (k)43 117 379 (206 under program; 173 for vesting)
Average Buyback Price ($/sh)$24.34 $30.95 $30.93
Dividend Declared ($/sh)$—$0.12 (Q1 2025) $0.12 (pay 7/7/25)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue before Reimbursements ($M)Q2 2025N/A$76.0–$77.5 New
Adjusted Diluted EPS ($)Q2 2025N/A$0.37–$0.39 (tax 27%) New
Adjusted Gross Margin %Q2 2025N/A~43–44% New
Adjusted SG&A + Interest ($M)Q2 2025N/A~$18.6 New
Adjusted EBITDA Margin %Q2 2025N/A~21–22% New
Segment OutlookQ2 2025N/AGSBT +~5% YoY; Oracle+SAP (combined) down YoY New
Cash From OperationsQ2 2025N/AUp sequentially New
DividendQ2 2025$0.12 (Q1) $0.12 declared for Q2 (record 6/20, pay 7/7) Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3’24, Q4’24)Current Period (Q1’25)Trend
GenAI platforms and capabilitiesQ3: AI XPLR v2; LeewayHertz acquisition closes . Q4: v3 “soon” to release .AI XPLR v3 released; multi‑agent design via ZBrain, strong differentiation; GenAI boosting gross margins .Accelerating adoption and product velocity
ARR/licensing and JVEarly ARR not highlighted . Q4: platform roadmap .ZBrain licensed clients added; JV execution expected in 30–45 days; AI XPLR licensing to begin around July .Building ARR optionality
Channel partnersNot emphasized .Inbound interest from large SIs and enterprise software vendors to distribute platforms/services .Expanding routes to market
Macro/tariffsNot noted .Heightened uncertainty from tariff negotiations may pause decisions; pivoting to strategic cost reduction messaging where needed .Emerging headwind
Segment dynamicsQ3: Growth across segments; Oracle/SAP solid . Q4: SAP strong, Oracle normalizing .GSBT +6% YoY (13% ex‑OneStream/e‑proc); Oracle down on post go‑live wind‑down; SAP down YoY vs tough comp but improving implementation outlook .Mixed: GenAI-led strength, applications softer
Working capitalQ3 DSO 70 days . Q4 DSO 66 .DSO 73 days; expected improvement in Q2 .Temporary pressure

Management Commentary

  • “We reported operating results that were near and at the high end of our revenue and adjusted earnings per share guidance, respectively… More importantly, we released AI XPLR version 3…” — Ted A. Fernandez, CEO .
  • “GenAI engagements…demand a higher margin than our traditional consulting and implementation revenues and are driven by…AI XPLR and ZBrain platforms…” .
  • “Excluding [OneStream and e‑procurement], our GSBT segment was up 13%.” .
  • “We are continuing to add licensed clients to the ZBrain platform, and we are close to completing and executing the JV agreement.” .
  • “We now believe that GenAI‑enabled transformation augmented by AI XPLR will be our primary strategic entry point to clients…” .

Q&A Highlights

  • Pipeline and conversion: Client reactions to AI XPLR are “very favorable,” leading to proposal activity and wins; channel partners (SIs, enterprise software vendors) showing strong interest to broaden distribution .
  • Capacity build: Implementation capacity up ~60–70% since acquisition; hiring both offshore (ZBrain/LeewayHertz) and market‑facing U.S. resources .
  • JV and ARR: ZBrain licensing underway; JV expected to execute in 30–45 days; AI XPLR licensing planned to begin around July; potential for external capital to accelerate ARR growth .
  • GenAI revenue mix: Roughly 50/50 between implementation and ideation/evaluation currently, with implementation expected to become multiples larger over time .
  • Oracle/SAP outlook: Oracle activity “solid” but still refilling a large post go‑live gap; SAP momentum “clearly up” with implementations tied to recent software sales .

Estimates Context

  • Q1 2025 vs Street: Adjusted EPS $0.41 vs $0.40* (beat); revenue before reimbursements $76.2M vs $77.3M* (miss). Total revenue reported at $77.9M .
  • Q2 2025 guide vs Street: Revenue guide $76.0–$77.5M (midpoint $76.75M) vs $77.93M* consensus; adjusted EPS guide $0.37–$0.39 (midpoint $0.38) vs $0.377*—implying revenue guide slightly below consensus and EPS roughly in line* .
    Values marked with * retrieved from S&P Global.

Actual vs Consensus – Q1 2025

MetricConsensusActual
Adjusted EPS ($)0.40*0.41
Revenue before Reimbursements ($M)77.30*76.23

Consensus and Company Outlook – Q2 2025

MetricStreet ConsensusCompany Guidance
Adjusted EPS ($)0.377*0.37–0.39
Revenue before Reimbursements ($M)77.93*76.0–77.5

Key Takeaways for Investors

  • Mix improving via GenAI: GSBT growth and higher‑margin GenAI engagements are lifting adjusted gross margin (43.4% vs 41.4% YoY), supporting resilient profitability despite softness in applications .
  • Estimate lens: Q1 printed an EPS beat but a modest revenue shortfall; Q2 revenue guide sits slightly below consensus while EPS guide aligns—watch order conversion and partner‑led pipeline to close the gap .
  • ARR optionality: Near‑term JV formation and the start of AI XPLR licensing introduce an incremental ARR leg that can compound services revenue and potentially attract external capital/partners .
  • Execution watch‑items: Normalize DSO from 73 days, fill Oracle’s post go‑live gap, and convert SAP software strength into services throughput in 2H .
  • Capital returns intact: Continued $0.12 quarterly dividend and active buybacks ($11.7M in Q1) underscore commitment to shareholder returns while funding GenAI investments .
  • Macro swing factor: Management flagged tariff‑related uncertainty as a potential near‑term decision‑making headwind; messaging pivot to strategic cost reduction can cushion demand if needed .
  • Stock catalysts: Evidence of accelerating partner wins, JV execution with first ARR ramps, and sequential DSO improvement would be positive signals for revenue durability and cash conversion .