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HACKETT GROUP, INC. (HCKT)·Q3 2025 Earnings Summary

Executive Summary

  • Revenue before reimbursements was $72.2M, down 7% YoY and below guidance low-end ($73.0M prior Q2 guide), while adjusted EPS was $0.37 at the midpoint; GAAP EPS was $0.09 due to $4.8M stock-price award expense and $3.1M restructuring, partly offset by $1.8M acquisition-related comp benefit .
  • Versus Wall Street: HCKT modestly beat EPS (consensus $0.37*) and missed revenue (consensus $74.8M*), reflecting protracted client decision cycles and an iPaaS non-renewal; SAP grew 4% YoY while Oracle declined 25% YoY .
  • Q4 2025 guidance: revenue before reimbursements $69.5–$71.0M and adjusted EPS $0.38–$0.40 (assumes 24.5% GAAP tax rate), factoring 8–10% fewer billing days seasonality .
  • Capital return: Board added $40M to repurchase authorization and announced a $40M modified Dutch auction at $18.30–$21.00; declared a $0.12 quarterly dividend .
  • Strategic catalysts: Release of AI XPLR V4 elicited “game changing” partner feedback; management expects alliances and AI Explorer licensing ramp to expand growth and ARR potential .

What Went Well and What Went Wrong

  • What Went Well

    • GenAI momentum: GS&BT (ex-OneStream and iPaaS) grew >4% with strong GenAI consulting and implementation; adjusted gross margin 42.6% and adjusted EBITDA margin 21.2% underscored profitability resilience .
    • SAP improvement: SAP Solutions revenue before reimbursements rose 4% YoY to $13.4M as implementations ramped from prior software sales activity .
    • Innovation and pipeline: AI XPLR V4 released; Celonis alliance integrates PI into XPLR/ZBrain, accelerating agentic workflows; “one potential partner” called V4 “game changing” .

  • What Went Wrong

    • Oracle softness: Oracle Solutions revenue fell 25% YoY to $16.4M due to prolonged client decision-making and post go-live revenue replacement timing .
    • Revenue below plan: Q3 revenue before reimbursements ($72.2M) came in below prior Q2 guidance low-end ($73.0M), and missed Street consensus ($74.8M*) .
    • GAAP EPS compression: $0.09 GAAP EPS reflects $4.8M stock price award program expense ($0.17/sh) and $3.1M restructuring ($0.08/sh) tied to pivot to GenAI productivity, partially offset by $1.8M acquisition-related comp benefit ($0.05/sh) .

Financial Results

MetricQ3 2024Q1 2025Q2 2025Q3 2025
Total Revenue ($USD Millions)$79.8 $77.9 $78.9 $73.1
Revenue Before Reimbursements ($USD Millions)$77.9 $76.2 $77.6 $72.2
GAAP Diluted EPS ($)$0.31 $0.11 $0.06 $0.09
Adjusted Diluted EPS ($)$0.43 $0.41 $0.38 $0.37
Revenue Consensus Mean ($USD Millions)*$76.6$77.3$77.9$74.8
Primary EPS Consensus Mean ($)*$0.397$0.400$0.377$0.367

Values retrieved from S&P Global.*

Profitability vs YoYQ3 2024Q3 2025
Adjusted Gross Margin %43.2% 42.6%
Adjusted EBITDA Margin %22.7% 21.2%
Segment Revenue Before Reimbursements ($USD Millions)Q3 2024Q2 2025Q3 2025
Global S&BT$43.252 $43.611 $42.398
Oracle Solutions$21.838 $20.494 $16.353
SAP Solutions$12.859 $13.524 $13.415
KPIsQ3 2024Q2 2025Q3 2025
Consultant Headcount1,262 1,382 1,317
Total Headcount1,546 1,685 1,599
DSO (Days)70 73 71
Cash from Operations ($USD Thousands)$10,578 $5,649 $11,395
Capital Expenditures ($USD Thousands)$1,229 $1,910 $2,405
Share Repurchase Cost ($USD Thousands)$1,737 $4,320 $17,405

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue Before Reimbursements ($USD Millions)Q4 2025N/A$69.5–$71.0 New
Adjusted Diluted EPS ($)Q4 2025N/A$0.38–$0.40 New
GAAP Effective Tax Rate (assumption)Q4 2025N/A24.5% New
Oracle Solutions Rev. vs PYQ4 2025N/ADown ~15% vs PY (qualitative) New
SAP Solutions Rev. vs PYQ4 2025N/ADown vs PY due to lower software sales (qualitative) New
DividendQ4 2025$0.12 (prior quarterly cadence) $0.12 declared for 1/9/2026 Maintained
Share Repurchase AuthorizationAs of Nov-2025~$12.6M remaining +$40M added; ~$52.6M available Raised
Dutch Tender OfferAnnounced Nov-2025N/AUp to $40M at $18.30–$21.00 New

Earnings Call Themes & Trends

TopicQ1 2025 (5/6)Q2 2025 (8/5)Q3 2025 (11/4)Trend
AI platform innovationReleased AI XPLR v3; ZBrain orchestration JV; GenAI viewed as generational opportunity Accelerated path to v4; set to ingest client tech footprint; Celonis PI partnership announced AI XPLR V4 released; partner called it “game changing”; licensing targeted late Q4/Q1 Strengthening platform capability and partner interest
Macro/tariffs/decision-makingCautious IT budgets amid GenAI prioritization; tariff negotiation uncertainty Tariffs had little Q2 impact; expect Q3 impact; broader services ecosystem adjusting Clients protecting ’25 spend; stronger ’26 commitments as volatility recedes Near-term caution; improving into 2026
Oracle SolutionsPost go-live wind-down weighing; activity solid Continued softness; decision-making protracted Down 25% YoY; restructuring to align with GenAI productivity Down; actions taken
SAP SolutionsDown vs strong prior-year comp; outlook improving on software-driven implementations Stable; implementations tied to recent software sales Up 4% YoY; expect higher Q4 activity Improving
Recurring revenue/ARR~23% recurring multi-year/subscription base —~23% recurring; iPaaS shifting to XPLR/ZBrain opportunities Stable; pivot to AI platform ARR
Alliances—Celonis alliance announced Multiple channel partnerships under discussion; expect announcements Building pipeline

Management Commentary

  • “What distinguished this quarter was the release of our AI XPLR V4 … [a partner] described [it] as game changing” .
  • “Our ability to identify, design and build GenAI solutions based on client-specific processes and enterprise application automation footprints in accelerated time is powerful” .
  • “GS&BT segment was up over 4% excluding OneStream and iPaaS” .
  • “We are announcing a $40M Dutch tender offer ... expected to be strongly accretive” .
  • “Adjusted diluted earnings per share … $0.37 … at the midpoint of our earnings guidance range” .

Q&A Highlights

  • Alliances: Management expects one or two major alliance partners in the near future, citing heightened visibility post-V4 and active proof points with large partners .
  • Licensing timeline: AI Explorer licensing targeted late Q4 or early Q1; portion of licenses expected to include ZBrain .
  • Dutch auction rationale: Desire to be more aggressive buying during Q3 volatility; post-offer leverage targeted around ~1x EBITDA, viewed as “virtually no leverage” .
  • Capacity and productivity: No resource constraints; restructuring aligns with productivity gains from Accelerator and Transformation Explorer; growth to be less headcount-dependent .

Estimates Context

Q3 2025 Consensus vs ActualConsensusActual
Revenue Before Reimbursements ($USD Millions)74.8*72.2
Primary EPS ($)0.367*0.37

Values retrieved from S&P Global.*

  • EPS modest beat; revenue miss. Q4 guide implies seasonally lower revenue but higher adjusted margins (46–47%), suggesting estimate revisions may cut near-term revenue while keeping EPS near current ranges given margin mix shift and lower billing days .

Key Takeaways for Investors

  • Near-term: Revenue softness concentrated in Oracle and an iPaaS non-renewal; expect seasonality and continued decision delays in Q4, but margin profile guided higher; watch tender participation and leverage trajectory (~1x EBITDA post-offer) .
  • Medium-term: AI XPLR V4 plus Celonis PI alliance and anticipated partnerships/licensing represent catalysts for ARR growth and sales reach expansion; management cites strong pipeline and proof points with major partners .
  • Capital return: $52.6M repurchase capacity with $40M Dutch auction underway and $0.12 dividend provides downside support; insiders not participating, raising relative ownership of non-tendering holders .
  • Financial posture: Strong Q3 operating cash flow ($11.4M) and disciplined capex ($2.4M) amid heavy repurchases; debt increased to $44.0M to fund buybacks but remains conservatively positioned .
  • Narrative shift: Continued pivot to higher-margin GenAI services and platform ARR could structurally improve profitability; watch execution on licensing start (late Q4/Q1) and alliance announcements as stock catalysts .
  • Risk checks: Protracted client decision-making, tariff/macro noise, and Oracle replacement timing remain key swing factors into early 2026; restructuring mitigates utilization headwinds .