10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 29, 2017

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission File Number 333-48123

The Hackett Group, Inc.

(Exact name of registrant as specified in its charter)

FLORIDA	65-0750100
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
1001 Brickell Bay Drive, Suite 3000 Miami, Florida	33131
(Address of principal executive offices)	(Zip Code)

(305) 375-8005

(Registrant’s telephone number, including area code)

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.    YES  ☒    NO  ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    YES  ☒    NO  ☐

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.

Large Accelerated Filer	☐	Accelerated Filer	☒
Non-Accelerated Filer	☐ (Do not check if a smaller reporting company)	Smaller Reporting Company	☐
		Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    YES    NO  ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of November 1, 2017, there were 28,656,338 shares of common stock outstanding.

The Hackett Group, Inc.

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION		Page
Item 1.	Financial Statements
	Consolidated Balance Sheets as of September 29, 2017 and December 30, 2016 (unaudited)	3
	Consolidated Statements of Operations for the Quarters and Nine Months Ended September 29, 2017 and September 30, 2016 (unaudited)	4
	Consolidated Statements of Comprehensive Income for the Quarters and Nine Months Ended September 29, 2017 and September 30, 2016 (unaudited)	5
	Consolidated Statements of Cash Flows for the Nine Months Ended September 29, 2017 and September 30, 2016 (unaudited)	6
	Notes to Consolidated Financial Statements (unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	21
Item 4.	Controls and Procedures	21
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	22
Item 1A.	Risk Factors	22
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	22
Item 6.	Exhibits	23
SIGNATURES		24

2

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

The Hackett Group, Inc.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

(unaudited)

	September 29,			December 30,
	2017			2016
ASSETS
Current assets:
Cash	$	16,226		$	19,710
Accounts receivable and unbilled revenue, net of allowance of $2,686 and $2,574 at September 29, 2017 and December 30, 2016, respectively		55,552			47,399
Prepaid expenses and other current assets		2,897			1,704
Total current assets		74,675			68,813
Property and equipment, net		17,854			14,774
Other assets		4,679			3,336
Goodwill, net		84,966			72,376
Total assets	$	182,174		$	159,299
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	8,597		$	9,089
Accrued expenses and other liabilities		35,971			46,725
Total current liabilities		44,568			55,814
Non-current accrued expenses and other liabilities		6,936			—
Long-term deferred tax liability, net		10,591			10,216
Long-term debt		22,000			7,000
Total liabilities		84,095			73,030
Commitments and contingencies
Shareholders’ equity:
Preferred stock, $.001 par value, 1,250,000 shares authorized; none issued and outstanding		—			—
Common stock, $.001 par value, 125,000,000 shares authorized; 55,600,776 and 54,785,193 shares issued at September 29, 2017 and December 30, 2016, respectively		57			55
Additional paid-in capital		284,628			277,100
Treasury stock, at cost, 26,945,776 and 26,197,981 shares September 29, 2017 and December 30, 2016, respectively		(134,053	)		(122,756	)
Accumulated deficit		(43,301	)		(56,581	)
Accumulated comprehensive loss		(9,252	)		(11,549	)
Total shareholders' equity		98,079			86,269
Total liabilities and shareholders' equity	$	182,174		$	159,299

The accompanying notes are an integral part of the consolidated financial statements.

3

The Hackett Group, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

	Quarter Ended						Nine Months Ended
	September 29,			September 30,			September 29,			September 30,
	2017			2016			2017			2016
Revenue:
Revenue before reimbursements	$	65,947			66,810		$	198,742			196,961
Reimbursements		5,515			7,308			17,719			21,548
Total revenue		71,462			74,118			216,461			218,509
Costs and expenses:
Cost of service:
Personnel costs before reimbursable expenses (includes $1,876 and $1,450 and $5,160 and $4,216 of stock compensation expense in the quarters and nine months ended September 29, 2017 and September 30, 2016, respectively)		42,302			42,071			127,108			125,082
Reimbursable expenses		5,515			7,308			17,719			21,548
Total cost of service		47,817			49,379			144,827			146,630
Selling, general and administrative costs (includes $894 and $793 and $2,427 and $2,251 of stock compensation expense in the quarters and nine months ended September 29, 2017 and September 30, 2016, respectively)		15,771			15,732			48,039			46,994
Restructuring costs		—			—			1,293			—
Total costs and operating expenses		63,588			65,111			194,159			193,624
Income from operations		7,874			9,007			22,302			24,885
Other expense:
Interest expense		(184	)		(137	)		(401	)		(288	)
Income from operations before income taxes		7,690			8,870			21,901			24,597
Income tax expense		2,401			3,382			3,988			9,281
Net income	$	5,289		$	5,488		$	17,913		$	15,316
Basic net income per common share:
Income per common share from operations	$	0.18		$	0.19		$	0.62		$	0.52
Weighted average common shares outstanding		28,765			28,579			28,891			29,251
Diluted net income per common share:
Income per common share from operations	$	0.17		$	0.17		$	0.56		$	0.47
Weighted average common and common equivalent shares outstanding		31,958			32,375			32,254			32,870

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)

	Quarter Ended					Nine Months Ended
	September 29,		September 30,			September 29,		September 30,
	2017		2016			2017		2016
Net income	$	5,289	$	5,488		$	17,913	$	15,316
Foreign currency translation adjustment		829		(484	)		2,297		(2,721	)
Total comprehensive income	$	6,118	$	5,004		$	20,210	$	12,595

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)

	Nine Months Ended
	September 29,			September 30,
	2017			2016
Cash flows from operating activities:
Net income	$	17,913		$	15,316
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense		1,841			1,875
Amortization expense		1,475			825
Amortization of debt issuance costs		68			84
Non-cash stock compensation expense		7,588			6,467
Provision (reversal) for doubtful accounts		142			(11	)
Loss (gain) on foreign currency translation		530			(566	)
Release of valuation allowance		1,815			2,590
Changes in assets and liabilities:
Increase in accounts receivable and unbilled revenue		(4,935	)		(5,474	)
Increase in prepaid expenses and other assets		(1,172	)		(405	)
Decrease in accounts payable		(902	)		(2,090	)
Decrease in accrued expenses and other liabilities		(3,938	)		(10	)
(Decrease) increase in income tax payable		(1,474	)		2,211
Net cash provided by operating activities		18,951			20,812
Cash flows from investing activities:
Purchases of property and equipment		(4,919	)		(2,068	)
Cash consideration paid for acquisitions		(9,268	)		—
Cash acquired in acquisitions		261			—
Net cash used in investing activities		(13,926	)		(2,068	)
Cash flows from financing activities:
Proceeds from ESPP		562			519
Proceeds from borrowings		26,000			30,000
Repayment of borrowings		(11,000	)		(17,000	)
Debt issuance costs		—			(237	)
Dividends paid		(8,670	)		(7,163	)
Exercise of stock options		200			—
Repurchase of common stock		(15,598	)		(33,976	)
Net cash used in financing activities		(8,506	)		(27,857	)
Effect of exchange rate on cash		(3	)		(30	)
Net decrease in cash and cash equivalents		(3,484	)		(9,143	)
Cash at beginning of period		19,710			23,503
Cash at end of period	$	16,226		$	14,360
Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	3,696		$	4,473
Cash paid for interest	$	292		$	187
Supplemental disclosure of non-cash acquisition financing activities:
Shares issued to sellers of Jibe Consulting	$	3,600,000		$	—

The accompanying notes are an integral part of the consolidated financial statements.

6

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 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 30, 2016, included in the Annual Report on Form 10-K filed by the Company with the SEC on March 10, 2017. The consolidated results of operations for the quarter and nine months ended September 29, 2017, 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.

Fair Value

The Company’s financial instruments consist of cash and cash equivalents, accounts receivable and unbilled revenue, accounts payable, accrued expenses and other liabilities and debt. As of September 29, 2017 and December 30, 2016, the carrying amount of each financial instrument approximated the instrument’s respective fair value due to the short-term nature and maturity of these instruments.

The Company uses significant other observable market data or assumptions (Level 2 inputs as defined in accounting guidance) that it believes market participants would use in pricing debt. The fair value of the debt approximated the carrying amount, using Level 2 inputs, due to the short-term variable interest rates based on market rates.

Business Combinations

The Company applies the provisions of ASC 805, Business Combinations, in the accounting for its acquisitions, which requires recognition of the assets acquired and the liabilities assumed at their acquisition date fair values, separately from goodwill. Goodwill as of the acquisition date is measured as the excess of consideration transferred and the net of the acquisition date fair values of the tangible and identifiable intangible assets acquired and liabilities assumed. While the Company uses its best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date as well as contingent consideration, where applicable, its estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, that may be up to 12 months from the acquisition date, the Company records adjustments to the assets acquired and liabilities assumed with a corresponding adjustment to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, the impact of any subsequent adjustments is included in the consolidated statements of operations.

Recently Issued Accounting Standards

In May 2014, the Financial Accounting Standards Board (“FASB”) issued guidance on revenue recognition, which provides for a single, principles-based model for revenue recognition and replaces the existing revenue recognition guidance. The guidance is effective for annual and interim periods beginning on or after December 15, 2017 and will replace most existing revenue recognition guidance under U.S. GAAP when it becomes effective. It permits the use of either a retrospective or cumulative effect transition method and early adoption is permitted, however not before December 15, 2016.

7

The Hackett Group, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Basis of Presentation and General Information (continued)

The Company has completed an initial assessment of the impact of the new guidance on its existing revenue recognition policies and plans to adopt the rule on December 30, 2017, using the cumulative effect method of adoption. The guidance requires significantly expanded disclosures around the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers, which the Company is currently compiling. While the Company has not fully completed its assessment of the impact of the standard, based on the analysis completed to date, the Company does not currently anticipate that the new rule will have a material impact on its consolidated financial statements.

In February 2016, the FASB issued guidance on leases which supersedes the current lease guidance. The core principle requires lessees to recognize the assets and liabilities that arise from nearly all leases on the balance sheet. Accounting applied by lessors will remain largely consistent with previous guidance. The amendments are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company is assessing the impact of this standard on its consolidated financial statements and related disclosures.

In March 2016, the FASB issued guidance simplifying the accounting for share-based payment transactions including the income tax consequences, classification of awards as either equity or liabilities and classification on the statements of cash flows. Under the new standard, all excess tax benefits and tax deficiencies should be recognized as income tax expense or benefit on the statements of income.  An excess income tax benefit arises when the tax deduction of a share-based award for income tax purposes exceeds the compensation cost recognized for financial reporting purposes and, a tax deficiency arises when the compensation cost exceeds the tax deduction. Under current GAAP, excess tax benefits are recognized as additional paid-in capital while tax deficiencies are recognized either as an offset to accumulated excess tax benefits, if any, or on the statements of income.

Management adopted the guidance effective December 31, 2016. As a result of the adoption of this guidance, management made an accounting policy election to recognize the effect of forfeitures in compensation cost when they occur, which had an immaterial impact on results of operations and financial position and no impact on cash flows at adoption.  In the first quarter of 2017, the Company recorded no income tax expense as a result of the adoption of the new guidance relating to the accounting on the vesting of share-based awards. Excluding the effect of the new guidance, the effective tax rate would have been 34% for certain federal, foreign and state taxes during the nine months ended September 29, 2017.

In August 2016, the FASB issued guidance on the classification of certain cash receipts and cash payments. The guidance provides specific clarification on eight cash flow classification issues, including contingent consideration payments made after a business combination. The guidance is effective for interim and annual periods beginning after December 15, 2017. Early adoption is permitted and the guidance requires a retrospective transition. We do not expect the guidance to have a material impact on our consolidated financial statements.

Reclassifications

Certain prior period amounts in the consolidated financial statements, and notes thereto, have been reclassified to conform to current period presentation.

8

The Hackett Group, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

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.

Dilutive 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				Nine Months Ended
	September 29,		September 30,		September 29,		September 30,
	2017		2016		2017		2016
Basic weighted average common shares outstanding		28,764,661		28,579,237		28,891,301		29,251,459
Effect of dilutive securities:
Unvested restricted stock units and common stock subject to vesting requirements issued to employees and non-employees		928,103		1,472,927		1,008,159		1,327,491
Common stock issuable upon the exercise of stock options and SARs		2,264,901		2,323,333		2,354,767		2,291,271
Dilutive weighted average common shares outstanding		31,957,665		32,375,498		32,254,227		32,870,220

Approximately 0.9 million and 0.8 million shares of common stock equivalents were excluded from the computations of diluted net income per common share for the quarter and nine months ended September 29, 2017, respectively, as compared to 0.8 million and 0.9 million for the same periods in 2016, as their inclusion would have had an anti-dilutive effect on diluted net income per common share.   

3. Accounts Receivable and Unbilled Revenue, Net

Accounts receivable and unbilled revenue, net, consisted of the following (in thousands):

	September 29,			December 30,
	2017			2016
Accounts receivable	$	39,614		$	39,335
Unbilled revenue		18,624			10,638
Allowance for doubtful accounts		(2,686	)		(2,574	)
Accounts receivable and unbilled revenue, net	$	55,552		$	47,399

Accounts receivable is net of uncollected advanced billings. Unbilled revenue includes recognized recoverable costs and accrued profits on contracts for which billings had not been presented to clients.

9

The Hackett Group, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

4. Accrued Expenses and Other Liabilities

Accrued expenses and other liabilities consisted of the following (in thousands):

	September 29,		December 30,
	2017		2016
Accrued compensation and benefits	$	10,062	$	4,412
Accrued bonuses		3,318		13,038
Accrued dividend payable		—		4,023
Deferred revenue		11,959		10,975
Accrued sales, use, franchise and VAT tax		2,647		3,791
Non-cash stock compensation accrual		2,507		4,225
Income tax payable		2,953		4,437
Other accrued expenses		2,525		1,824
Total accrued expenses and other liabilities	$	35,971	$	46,725

5. Restructuring Costs

In the prior quarter ended June 30, 2017, the Company recorded restructuring costs of $1.3 million, which was primarily related to the transition of resources driven by our migration from on-premise software to cloud-based implementations, as well as the Jibe acquisition, and the rationalization of global resources as a result of the emergence of RPA (“Robotic Process Automation”) related engagements from the Aecus acquisition.As of September 29, 2017, the Company did not have any remaining commitments related to restructuring.     

The following table sets forth the activity in the restructuring expense accruals (in thousands):

	Severance and Other
	Employee Costs
Accrual balance at December 30, 2016	$	—
Expenses		1,293
Payments		1,293
Accrual balance at September 29, 2017	$	—

6. Credit Facility

In February 2012, the Company entered into a credit agreement with Bank of America, N.A. (“Bank of America”), pursuant to which Bank of America agreed to lend the Company up to $20.0 million pursuant to a revolving line of credit (the “Revolver”) and up to $47.0 million pursuant to a term loan (the “Term Loan”).  The Company has fully utilized and repaid its Term Loan.

On May 9, 2016, the Company amended and restated the credit agreement with Bank of America to:

• Provide for up to an additional $25.0 million of borrowing under the Revolver for a total borrowing capacity of $45.0 million; and

• Extend the maturity date on the Revolver to May 9, 2021, five years from the date of this amendment of the Credit Agreement.

The obligations of Hackett under the Revolver 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, a 100% pledge of the capital stock of the U.S. Subsidiaries, and a 66% pledge of the capital stock of Hackett’s direct foreign subsidiaries (subject to certain exceptions).

During the quarter and nine months ended September 29, 2017, the Company had net borrowings of $2.0 million and $15.0 million, respectively, under the Revolver and had a balance of $22.0 million outstanding as of September 29, 2017. The interest rates per annum applicable to borrowings under Revolver will be, at the Company’s option, equal to either a base rate or a LIBOR base rate, plus an applicable margin percentage. The applicable margin percentage is based on the consolidated leverage ratio, as defined in the

10

The Hackett Group, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

6. Credit Facility (continued)

Credit Agreement. As of September 29, 2017, the applicable margin percentage was 1.50% per annum based on the consolidated leverage ratio, in the case of LIBOR rate advances, and 0.75% per annum, in the case of base rate advances. The interest rate as of September 29, 2017, was 2.73%.

The Company is subject to certain covenants, including total consolidated leverage, fixed cost coverage, adjusted fixed cost coverage and liquidity requirements, each as set forth in the Credit Agreement, subject to certain exceptions.  As of September 29, 2017, the Company was in compliance with all covenants.

7. Stock Based Compensation

During the nine months ended September 29, 2017, the Company issued 672,592 restricted stock units at a weighted average grant-date fair value of $16.61 per share. As of September 29, 2017, the Company had 1,553,240 restricted stock units outstanding at a weighted average grant-date fair value of $12.81 per share. As of September 29, 2017, $11.2 million of total restricted stock unit compensation expense related to unvested awards had not been recognized and is expected to be recognized over a weighted average period of approximately 2.0 years.

During the nine months ended September 29, 2017, 182,279 shares of common stock subject to vesting requirements were issued. These shares were issued to settle the equity portion of the closing consideration to the sellers in the acquisition of Jibe Consulting in May 2017 and will vest over four years. See Note 12 “Acquisitions” for further details. As of September 29, 2017, the Company had 531,024 shares of common stock subject to vesting requirements outstanding at a weighted average grant-date fair value of $12.85 per share. As of September 29, 2017, $4.8 million of compensation expense related to common stock subject to vesting requirements had not been recognized and is expected to be recognized over a weighted average period of approximately 3.1 years.

11

The Hackett Group, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

8. Shareholders’ Equity

Stock Appreciation Rights (“SARs”)

In 2012, the Company’s Chief Executive Officer (“CEO”) and Chief Operating Officer (“COO”) agreed to give up 50% of their equity incentive compensation awards under the 1998 Stock Option and Incentive Plan for the years 2012 through 2015 in exchange for 2.9 million SARs with an exercise price of $4.00, only to be earned upon the achievement of 50% growth in pro forma earnings per share and 50% growth in pro forma EBITDA from a base year of 2011.  The grants would have expired if neither target were achieved during a six-year term.

In the first quarter of 2015, the outstanding SARs awards for the achievement of 50% growth in pro forma earnings per share vested with the Audit Committee’s approval of the Company’s 2014 financial statements. In the first quarter of 2016, the outstanding SARs awards for the Company’s achievement of over 50% growth of pro forma EBITDA vested with the Audit Committee’s approval of the Company’s 2015 financial statements.  As of September 29, 2017, no SARs had been exercised. By the end of 2015, all non-cash stock compensation expense relating to the outstanding SARs had been expensed.

Treasury Stock

Under the Company’s share 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. During the quarter ended September 29, 2017, the Company repurchased 182 thousand shares of its common stock at an average price of $13.73 per share for a total cost of $2.5 million. During the nine months ended September 29, 2017, the Company repurchased 748 thousand shares of its common stock at an average price of $15.11 per share for a total cost of $11.3 million. During the quarter ended September 29, 2017, the Company’s Board of Directors approved an additional $5.0 million authorization under the repurchase plan increasing the total authorization to $137.2 million.  As of September 29, 2017, the Company had $3.1 million available under its share repurchase plan authorization.

During the quarter ended September 30, 2016, the Company repurchased 30 thousand shares of its common stock at an average price of $14.84 per share for a total cost of $449 thousand. During the nine months ended September 30, 2016, the Company repurchased 2.1 million shares of its common stock at an average price of $14.60 per share for a total cost of $30.1 million.

The shares repurchased under the share repurchase plan during the quarter and nine months ended September 29, 2017, do not include 68 thousand and 262 thousand shares, respectively, which the Company bought back to satisfy employee net vesting obligations for a cost of $1.0 million and $4.3 million, respectively.  During the quarter and nine months ended September 30, 2016, the Company bought back 4 thousand and 288 thousand shares, respectively, at a cost of $50 thousand and $3.9 million, respectively, to satisfy employee net vesting obligations.

On May 6, 2016, the Company’s Board of Directors approved the repurchase of 697 thousand shares of its common stock from the Company’s CEO, 732 thousand shares of its common stock from the Company’s COO, and 73 thousand shares of its common stock from the Company’s Chief Financial Officer (“CFO”) for a total of approximately 1.5 million shares at a purchase price of $14.77 per share. The transaction was approved by the Audit Committee of the Board of Directors which is comprised solely of independent directors and was effected as part of the Company’s share repurchase program.  Following the transaction, Mr. Fernandez, Mr. Dungan and Mr. Ramirez remained the beneficial owners of 11.8%, 4.9% and 0.9% shares, respectively, of the outstanding common stock.  Following the transaction, approximately $3.1 million remained available under the Company’s share repurchase program. One of the primary reasons for this transaction was to lower the Company’s weighted average shares outstanding which had increased by 11% from the first quarter of 2016 as a result of the vesting of the SARs and appreciation in share price. The repurchase reduced weighted average shares outstanding by approximately 4% and is $0.03 to $0.04 accretive on an annualized basis. Based on the most recent SEC filings, including shares of Company common stock beneficially owned and shares that could be acquired upon the exercise of the SARs, Mr. Fernandez continues to be the single largest beneficial shareholder of the Company.

In reviewing and approving the transaction, the independent directors of the Board considered, among other factors, the benefits to the Company’s stockholders of this transaction such as the fact that (i) the share repurchase transaction is expected to be accretive to earnings per share, and (ii) the transaction was a unique opportunity to repurchase a large block of shares in an orderly manner. The transaction was funded from borrowings under the Company’s Revolver which was amended on May 9, 2016 in order to provide an additional $25.0 million in borrowing capacity for an aggregate amount of up to $45.0 million from time to time.    

12

The Hackett Group, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

8. Shareholders’ Equity (continued)

Dividend Program

In 2016, the Company increased the annual dividend from $0.20 per share to $0.26 per share to be paid on a semi-annual basis which resulted in aggregate dividends of $4.0 million paid to shareholders of record on July 11, 2016 and December 22, 2016, respectively. These dividends were paid from U.S. domestic sources and are accounted for as an increase to accumulated deficit. The dividend declared in December 2016 was paid in January 2017. During the quarter ended March 31, 2017, the Company increased its annual dividend to $0.30 per share to be paid on a semi-annual basis.  The first semi-annual dividend for 2017 was paid on July 10, 2017, for a total of $4.6 million. Subsequent to quarter end, the Company declared its semi-annual dividend of $0.15 per share for shareholders of record as of December 22, 2017, which is to be paid on January 5, 2018.

9. Transactions with Related Parties

During the nine months ended September 29, 2017, the Company bought back 59 thousand shares of its common stock from members of its Board of Directors for $1.2 million, or $20.13 per share.  

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.

11. Geographic and Group Information

Revenue, which is primarily based on the country of the contracting entity, was attributed to the following geographical areas (in thousands):

	Quarter Ended				Nine Months Ended
	September 29,		September 30,		September 29,		September 30,
	2017		2016		2017		2016
Revenue:
North America	$	60,148	$	64,136	$	174,015	$	188,666
International (primarily European countries)		11,314		9,982		42,446		29,843
Total revenue	$	71,462	$	74,118	$	216,461	$	218,509

Long-lived assets are attributable to the following geographic areas (in thousands):

	September 29,		December 30,
	2017		2016
Long-lived assets:
North America	$	90,218	$	78,200
International (primarily European countries)		17,281		12,286
Total long-lived assets	$	107,499	$	90,486

As of September 29, 2017 and December 30, 2016, foreign assets included $15.0 million and $11.9 million, respectively, of goodwill related to acquisitions.   

In the following table, the Hackett Group service group encompasses Benchmarking, Business Transformation, Executive Advisory, Oracle Cloud Applications, EPM and EPM Application Maintenance and Support groups.  The SAP Solutions service group encompasses SAP ERP Implementation and SAP Maintenance groups (in thousands):

	Quarter Ended				Nine Months Ended
	September 29,		September 30,		September 29,		September 30,
	2017		2016		2017		2016
The Hackett Group		60,789		62,610	$	183,510	$	186,302
SAP Solutions		10,673		11,508		32,951		32,207
Total revenue	$	71,462	$	74,118	$	216,461	$	218,509

13

The Hackett Group, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

12. Acquisitions

Jibe Consulting, Inc.

Effective May 1, 2017, the Company acquired certain assets and liabilities of Jibe Consulting, Inc. (“Jibe”), a U.S.- based Oracle E-Business Suite (“EBS”) and Oracle Cloud Business Application implementation firm. The acquisition of Jibe enhances the Company’s Cloud Application capabilities and strongly complements its market leading EPM transformation and technology implementation group.

The sellers’ purchase consideration was $5.4million in cash, not subject to vesting, and $3.6 million in shares of the Company’s common stock, subject to vesting. The equity that was issued has a four-year vesting term and will be recorded as compensation expense over the respective vesting period. In addition, the sellers have the opportunity to earn an additional $6.6 million in cash and $4.4 million in Company common stock based on the achievement of performance targets over the 18 months period following closing for a total of $11.0 million in contingent consideration; a portion of which will be allocated to key employees in both cash and Company stock.  The cash related to the contingent consideration which is to be paid to the sellers is not subject to service vesting and has been accounted for as part of the purchase consideration. The cash related to the contingent consideration, which is to be paid to the key employees, is subject to service vesting and is being accounted for as compensation expense. This contingent liability has been recorded in the consolidated balance sheet as non-current accrued expenses and other liabilities. The equity related to the contingent consideration will be subject to service vesting and will be recorded as compensation expense over the respective vesting period. As of September 29, 2017, the Company had recorded $1.0 million of acquisition-related compensation expense and non-cash stock compensation related to the equity portion of the closing consideration and the equity portion of the contingent consideration. The initial cash consideration was funded from borrowings under the Company’s Revolver.

The purchase price was allocated to tangible and intangible assets acquired and liabilities assumed based on their estimated fair values.  The fair value of identifiable intangible assets acquired was based on estimates and assumptions made by management at the time of the acquisition. Management is currently working to complete the valuation of identified intangible assets, goodwill and related deferred income taxes. As additional information, as of the acquisition date, becomes available and as management completes its evaluation, the preliminary purchase price allocation may be revised during the remainder of the measurement period (which will not exceed 12 months from the acquisition date). Any such revisions or changes may be material as the fair values of the tangible and intangible assets acquired and liabilities assumed are finalized. The following table presents the preliminary purchase price allocation of the assets acquired and liabilities assumed, based on the fair values (in thousands):

	Purchase Price
	Allocation
Total purchase consideration	$	11,293
Accounts receivable		1,932
Other current assets		59
Total current assets acquired		1,991
Intangible assets		931
Goodwill		9,538
Total assets		12,460
Other accrued expenses		1,167
Total liabilities acquired		1,167
Purchase consideration on acquisition	$	11,293

The recognized goodwill is primarily attributable to the benefits the Company expects to derive from enhanced market opportunities. The acquired intangible assets with definite lives are amortized over periods ranging from 2 to 5 years. The following table presents the preliminary intangible assets acquired from Jibe:

	Amount		Useful Life
Category	(in thousands)		(in years)
Customer Base	$	140	5
Customer Backlog		325	2
Non-Compete		466	5
	$	931

14

The Hackett Group, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

12. Acquisitions(continued)

The acquisition was not material to the Company's results of operations, financial position, or cash flows and therefore, the pro forma impact of these acquisitions is not presented. Since the acquisition date through September 29, 2017, Jibe contributed $7.6 million of revenue before reimbursable expenses and contribution before depreciation, amortization, interest, corporate overhead allocation and taxes of $0.7 million.  The acquisition related costs incurred in the second quarter of 2017 totaled $0.2 million and were all classified in selling, general and administrative costs in the Company’s consolidated statements of operations. All goodwill is expected to be deductible for tax purposes.

Aecus Limited

Effective April 6, 2017, the Company acquired 100% of the equity of the U.K.-based operations of Aecus Limited (“Aecus”), a European Outsourcing Advisory and Robotics Process Automation (“RPA”) consulting firm. This acquisition strongly complements the global strategy and business transformation offerings of the Hackett Group.

The sellers’ purchase consideration was £3.2 million in cash. In addition, the sellers have the opportunity to earn an additional £2.4 million in contingent consideration in cash based on the achievement of performance targets achieved over the next 12 months and key personnel have the opportunity to earn £0.3 million in cash and £0.3 million in the Company’s common stock. The contingent consideration for the selling shareholders and key personnel is subject to performance and service periods and will be accounted for as compensation expense and in non-current accrued expenses and other liabilities. As of September 29, 2017, the Company had recorded a total of $0.9 million of acquisition-related compensation expense and acquisition non-cash stock compensation expense for the cash and equity portion of the contingent consideration. The closing purchase consideration was funded with the Company’s available funds.

The purchase price was allocated to tangible and intangible assets acquired and liabilities assumed based on their estimated fair values.  The fair value of identifiable intangible assets acquired was based on estimates and assumptions made by management at the time of the acquisition. Management is currently working to complete the valuation of identified intangible assets, goodwill and related deferred income taxes. As additional information, as of the acquisition date, becomes available and as management completes its evaluation, the preliminary purchase price allocation may be revised during the remainder of the measurement period (which will not exceed 12 months from the acquisition date). Any such revisions or changes may be material as the fair values of the tangible and intangible assets acquired and liabilities assumed are finalized. The following table presents the preliminary purchase price allocation of the assets acquired and liabilities assumed, based on the fair values (in thousands):

	Purchase Price
	Allocation
Total purchase consideration	£	3,173
Cash		209
Accounts receivable		898
Other current assets		46
Total current assets acquired		1,153
Intangible assets		1,515
Goodwill		1,306
Total assets		3,974
Other accrued expenses		801
Total liabilities acquired		801
Purchase consideration on acquisition	£	3,173

15

The Hackett Group, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

12. Acquisitions(continued)

The recognized goodwill is primarily attributable to the benefits the Company expects to derive from enhanced market opportunities. The acquired intangible assets with definite lives are amortized over periods ranging from 2 to 5 years. The following table presents the preliminary intangible assets acquired from Aecus:

	Amount		Useful Life
Category	(in thousands)		(in years)
Customer Base	£	455	5
Customer Backlog		52	2
Non-Compete		1,008	5
	£	1,515

The acquisition was not material to the Company's results of operations, financial position, or cash flows and therefore, the pro forma impact of these acquisitions is not presented. From acquisition date through the month ended September 29, 2017, Aecus has contributed $2.6 million of revenue before reimbursable expenses and contribution before depreciation, amortization, interest, corporate overhead allocation and taxes of $0.5 million.  The acquisition related costs incurred during the first nine months of 2017 totaled $0.1 million and were all classified in selling, general and administrative costs in the Company’s consolidated statements of operations. The goodwill and intangibles resulting from this transaction are not expected to be deductible under UK tax regulations.

Chartered Institute of Management Accountants (Subsequent Event)

Subsequent to the quarter ended September 29, 2017, Hackett-REL, Ltd., a subsidiary of the Company located in the United Kingdom, acquired The Chartered Institute of Management Accountants' share of the Certified GBS Professionals program.   This acquisition allows those studying under the program and their employers to benefit further from the Company’s sector specific expertise and focus on the growing global business services market.  Purchase consideration was $2.0 million in cash and was funded with the Company’s available funds.  Also in connection with this transaction, the Alliance and Program Development Agreement between the Company, Hackett-REL, Ltd and The Chartered Institute of Management Accountants was terminated.

As a result of the short period between the acquisition date and the date of the issuance of the Company’s third quarter consolidated financial statements, all of the information required to be disclosed by ASC 805 has not yet been completed.

16

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. We intend the forward-looking statements to be covered by the safe harbor provisions for forward-looking statements. 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 impact such forward-looking statements include, among others, our ability to effectively integrate acquisitions into our operations, 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 and changes in general economic conditions, interest rates and our ability to obtain debt financing through additional borrowings under an amendment to our existing credit facility. An additional description of our risk factors is set forth in our Annual Report on Form 10-K for the year ended December 30, 2016. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

OVERVIEW

The Hackett Group, Inc. (“Hackett” or the “Company”) is a leading strategic advisory and technology consulting firm that enables companies to achieve world-class business performance. By leveraging the comprehensive Hackett database, the world’s leading repository of enterprise business process performance metrics and best practice intellectual capital, our business and technology solutions help clients improve performance and maximize returns on technology investments. Only Hackett empirically defines world-class performance in sales, general and administrative and certain supply chain activities with analysis gained through more than 13,000 benchmark studies over 23 years at over 5,100 of the world’s leading companies.

In the following discussion, “The Hackett Group” encompasses our Benchmarking, Business Transformation, Executive Advisory, Enterprise Performance Management (“EPM”), EPM Application Maintenance and Support (“AMS”) and Oracle Cloud Applications groups. “SAP Solutions” encompasses our SAP ERP Implementation and SAP Maintenance groups.

NON-GAAP FINANCIAL INFORMATION

Adjusted non-GAAP information is provided to enhance the understanding of the financial performance of our business compared to prior periods and is reconciled to our GAAP information in the tables below.  In our quarterly earnings announcements, we refer to adjusted non-GAAP information as “pro-forma”, which is unaudited.  We also present earnings before income taxes, interest, depreciation and amortization expense (EBITDA), and other one-time acquisition-related and restructuring charges (Adjusted EBITDA), both of which are non-GAAP measures. These measures are used by management to evaluate our financial performance.

References to adjusted non-GAAP results below specifically exclude non-cash stock compensation expense, intangible asset amortization expense, other one-time acquisition related income and expense, restructuring charges and assumes a normalized long-term cash tax rate.  

All non-GAAP information presented herein should be considered in addition to, and not as substitute for or superior to, any measure of performance, cash flows, or liquidity prepared in accordance with GAAP.

17

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, our results of operations and the percentage relationship to revenue before reimbursements of such results (in thousands and unaudited):

	Quarter Ended										Nine Months Ended
	September 29,					September 30,					September 29,					September 30,
	2017					2016					2017					2016
Revenue:
Revenue before reimbursements	$	65,947		100.0	%	$	66,810		100.0	%	$	198,742		100.0	%	$	196,961		100.0	%
Reimbursements		5,515					7,308					17,719					21,548
Total revenue		71,462					74,118					216,461					218,509
Costs and expenses:
Cost of service:
Personnel costs before reimbursable expenses		39,807		60.4	%		40,621		60.8	%		120,906		60.8	%		120,866		61.4	%
Acquisition-related compensation expense		619					—					1,042					—
Non-cash stock compensation expense		1,082					1,135					3,440					3,318
Acquisition-related non-cash stock compensation expense		794					315					1,720					898
Reimbursable expenses		5,515					7,308					17,719					21,548
Total cost of service		47,817					49,379					144,827					146,630
Selling, general and administrative costs		14,209		21.5	%		14,664		21.9	%		43,759		22.0	%		43,918		22.3	%
Non-cash stock compensation expense		894					793					2,427					2,251
Acquisition-related costs		111					—					378					—
Amortization of intangible assets		557					275					1,475					825
Restructuring costs		—					—					1,293					—
Total selling, general, and administrative expenses		15,771					15,732					49,332					46,994
Total costs and operating expenses		63,588					65,111					194,159					193,624
Income from operations		7,874		11.9	%		9,007		13.5	%		22,302		11.2	%		24,885		12.6	%
Other expense:
Interest expense		(184	)				(137	)				(401	)				(288	)
Income from operations before income taxes		7,690		11.7	%		8,870		13.3	%		21,901		11.0	%		24,597		12.5	%
Income tax expense		2,401		3.6	%		3,382		5.1	%		3,988		2.0	%		9,281		4.7	%
Net income	$	5,289		8.0	%	$	5,488		8.2	%	$	17,913		9.0	%	$	15,316		7.8	%
Diluted net income per common share	$	0.17				$	0.17				$	0.56				$	0.47
Adjusted non-GAAP data (unaudited):
Income from operations before income taxes	$	7,690				$	8,870				$	21,901				$	24,597
Acquisition-related compensation expense		619					—					1,042					—
Non-cash stock compensation expense		1,976					1,928					5,867					5,569
Acquisition-related non-cash stock compensation expense		794					315					1,720					898
Acquisition-related costs		111					—					378					—
Restructuring costs		—					—					1,293					—
Amortization of intangible assets		557					275					1,475					825
Adjusted non-GAAP income before income taxes		11,747					11,388					33,676					31,889
Adjusted non-GAAP income tax expense		3,524		30.0	%		3,416		30.0	%		10,103		30.0	%		9,567		30.0	%
Adjusted non-GAAP net income	$	8,223				$	7,972				$	23,573				$	22,322
Adjusted non-GAAP diluted net income per share	$	0.26				$	0.25				$	0.73				$	0.68
EBITDA: (non-GAAP)
Income from operations before income taxes		7,690					8,870					21,901					24,597
Interest expense		184					137					401					288
Depreciation expense		590					618					1,841					1,875
Amortization of intangible assets		557					275					1,475					825
EBITDA (non-GAAP)	$	9,021				$	9,900				$	25,618				$	27,585
Reconciliation to adjusted non-GAAP EBITDA:
EBITDA		9,021					9,900					25,618					27,585
Acquisition-related compensation expense		619					—					1,042					—
Non-cash stock compensation expense		1,976					1,928					5,867					5,569
Acquisition-related non-cash stock compensation expense		794					315					1,720					898
Acquisition-related costs		111					—					378					—
Restructuring costs		—					—					1,293					—
Adjusted non-GAAP EBITDA	$	12,521				$	12,143				$	35,918				$	34,052

18

Overview.References to adjusted non-GAAP results specifically exclude non-cash stock compensation expense, intangible asset amortization expense, acquisition-related cash and stock compensation expenses,acquisition and restructuring related charges and assumes a normalized long-term cash tax rate of 30%.

During the second quarter of 2017, we completed the acquisitions of Jibe Consulting, Inc. and Aecus Limited. See Note 12, “Acquisitions” to our consolidated financial statements included in this Quarterly Report on Form 10-Q.

Revenue. We are a global company with operations located primarily in the United States and Western Europe. Our revenue is denominated in multiple currencies, primarily the U.S. Dollar, British Pound, Euro and Australian Dollar 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 2017 and the comparable period of 2016. Revenue is analyzed based on geographical location of engagement team personnel.  

Our total Company net revenue, or revenue before reimbursements, decreased by 1%, to $65.9 million in the third quarter of 2017, as compared to $66.8 million in the third quarter of 2016. Our total Company net revenue increased 1%, to $198.7 million in the first nine months of 2017, as compared to $197.0 million during the same period in 2016. In both the third quarter and first nine months of 2017 and 2016, no one customer accounted for more than 5% of our total revenue.

The Hackett Group net revenue decreased less than a percent, to $56.1 million during the third quarter of 2017, as compared to $56.3 million in the third quarter of 2016. The Hackett Group net revenue increased less than a percent, to $168.8 million during the first nine months of 2017, as compared to $168.0 million during the same period in 2016.   Hackett domestic revenue was down 7% during both the third quarter and first nine months of 2017, as revenue was adversely impacted as a result of the transition from on- premise to cloud application migration activity and slightly lower than anticipated activity in some of our other Hackett domestic practices.  The decrease of the domestic Hackett revenue was offset by strong Hackett international growth of 36% and 39%, primarily in Europe, during the third quarter and first nine months of 2017, respectively, as compared to the same periods in the prior year.  

SAP Solutions net revenue decreased 6%, to $9.8 million, during the third quarter of 2017, as compared to $10.5 million in the third quarter of 2016. SAP Solutions net revenue increased 3%, to $30.0 million, during the first nine months of 2017, as compared $29.0 million during the same period of 2016.

Total Company international net revenue accounted for 19% of total Company net revenue during the third quarter and first nine months of 2017, as compared to 13% and 14% during the same periods in 2016, respectively.

Reimbursements as a percentage of total net revenue were 8% and 9% during the third quarter and first nine months of 2017, respectively, as compared to 11% during both of the same periods in 2016. This decrease primarily related to lower expense ratios resulting from the recent acquisitions and the increase in IP as a service which both historically drive lower levels of reimbursable expenses.  Reimbursements are engagement travel related expenses which are billed to clients and have no impact on profitability.  

Cost of Service. Cost of service primarily consists of salaries, benefits and incentive compensation for consultants and subcontractor fees; acquisition-related cash and stock compensation costs; non-cash stock compensation expense; and reimbursable expenses associated with projects.

Personnel costs decreased 2%, to $39.8 million, for the third quarter of 2017, from $40.6 million in the third quarter of 2016. The decrease in absolute dollar was primarily a result of lower incentive compensation accruals, partially offset by higher use of subcontractors during the quarter and higher fringe and payroll taxes.  Personnel costs were $120.9 million, in both the first nine months of 2017 and 2016. Personnel costs before reimbursable expenses, a non-GAAP metric, as a percentage of revenue before reimbursements, were 60% and 61% for the third quarter and first nine months of 2017, respectively, as compared to 61% for both of the same periods in 2016.

Acquisition related compensation costs of $0.6 million and $1.0 million for the third quarter and first nine months of 2017, respectively, relate to the accrual for the cash portion of the Aecus contingent consideration to be paid to the selling shareholders and key personnel, and the cash portion of the Jibe contingent consideration that is to be paid to key employees, all of which are subject to service vesting and as a result is recorded as compensation expense. See Note 12, “Acquisitions” to our consolidated financial statements included in this Quarterly Report on Form 10-Q.

Non-cash stock compensation expense was $1.1 million and $3.4 million in the third quarter and first nine months of 2017, respectively, as compared to $1.1 million and $3.3 million during the same period in 2016.

19

Acquisition related non-cash stock compensation expense in 2017 primarily relates to our EPM AMS acquisition of Technolab in fiscal 2014 and the Jibe and Aecus acquisitions in 2017. See Note 12, “Acquisitions” to our consolidated financial statements included in this Quarterly Report on Form 10-Q.

Total company adjusted non-GAAP gross margin was 40% and 39% of net revenue in the third quarter and first nine months of 2017, respectively, and 39% for both of the same periods in 2016.

Selling, General and Administrative Costs (SG&A). SG&A excluding non-cash compensation expense, the amortization of intangible assets and acquisition related costs was $14.2 million and $43.8 million for the third quarter and first nine months of 2017, as compared to $14.7 million and $43.9 million for the same periods in 2016, respectively. SG&A as a percentage of revenue before reimbursements was 22% for both the third quarter and first nine months of 2017 and 2016.

Amortization expense was $0.6 million and $1.5 million in the third quarter and first nine months 2017, respectively, as compared to $0.3 million and $0.8 million in the same periods in 2016. The amortization expense in 2017 relates to the amortization of the intangible assets acquired in our 2014 EPM AMS acquisition of Technolab and our acquisitions of Jibe and Aecus in the second quarter of 2017. The intangible assets relate to the customer relationship, customer backlog and non-compete agreements. The Technolab intangible assets will continue to amortize through 2018 and the Jibe and Aecus intangible assets will continue to amortize until 2022.

Restructuring Costs. In the second quarter of 2017, we recorded restructuring costs primarily related to the transition of resources driven by our migration from on premise software to cloud-based implementations as well as the Jibe acquisition, and the rationalization of global resources as a result of the emergence of RPA related engagements from our Aecus acquisition.  There were no restructuring costs related to employee severance costs recorded in the third quarter of 2017.

Income Taxes. During the third quarter and first nine months of 2017, we recorded $2.4 million and $4.0 million, respectively,  of income tax expense related to for certain federal, foreign and state taxes which reflected an effective tax rate of 31% and 18%, respectively. During the first quarter of 2017, we recorded no income tax expense as a result of the adoption of a new pronouncement relating to the accounting on the vesting of share-based awards. Excluding the effect of the new pronouncement, the effective tax rate would have been 34% for certain federal, foreign and state taxes for the nine months ended September 29, 2017. In the third quarter and first nine months of 2016, we recorded income tax expense of $3.4 million and $9.3 million, which reflected an effective tax rate of 38% in both periods for certain federal, foreign and state taxes.

Liquidity and Capital Resources

As of September 29, 2017 and December 30, 2016, we had $16.2 million and $19.7 million, respectively, classified in cash on the consolidated balance sheets.  We currently believe that available funds (including the cash on hand and funds available for borrowing capacity under the Revolver), and cash flows generated by operations will be sufficient to fund our working capital and capital expenditure requirements for at least the next twelve months. 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, however, that additional financing will be available when needed or desired.

The following table summarizes our cash flow activity (in thousands):

	Nine Months Ended
	September 29,			September 30,
	2017			2016
Cash flows provided by operating activities	$	18,952		$	20,812
Cash flows used in investing activities	$	(13,926	)	$	(2,068	)
Cash flows used in financing activities	$	(8,507	)	$	(27,857	)

Cash Flows from Operating Activities

Net cash provided by operating activities was $19.0 million during the first nine months of 2017, as compared to $20.8 million during the same period in 2016.  In 2017 the net cash provided by operating activities was primarily due to net income adjusted for non-cash items, offset by a decrease in accrued expenses and other liabilities due to the payout of the 2016 incentive compensation and a decrease in income tax payable and an increase in accounts receivable and unbilled revenue. In 2016, the net cash provided by operating activities was primarily due to net income adjusted for non-cash items and an increase in income taxes payable, partially offset by increased accounts receivable and unbilled revenue, decreases in accounts payable related to the timing of vendor payments and decreases in accrued income taxes resulting from the 2016 income tax payment.

20

Cash Flows from Investing Activities

Net cash used in investing activities was $13.9 million and $2.1 million during the first nine months of 2017 and 2016, respectively. Net cash used in investing activities during the first nine months of 2017 primarily related to the cash paid for the Jibe and Aecus acquisitions. Additionally, during 2017, cash flows used in investing activities also included investments relating to the development of the Hackett Academy and our benchmark technology, as well as further investments in internal corporate systems.  During 2016, investing activities related to capital expenditures on the continued development of our benchmark technology.  

Cash Flows from Financing Activities

Net cash used in financing activities was $8.5 million and $27.9 million during 2017 and 2016, respectively. The usage of cash in 2017 was primarily related to the repurchase of $11.3 million of Company common stock, the cost of share purchases to satisfy employee net vesting requirements of $4.3 million, the payment of the second 2016 semi-annual dividend, and first 2017 semi-annual dividend totaling $8.7 million. These uses of cash were partially offset by the net drawdown on the Revolver of $15.0 million (as defined below). The usage of cash in 2016 was primarily related to the cost of the repurchase of $30.1 million of Company common stock under the Company’s share repurchase program, $3.9 million to satisfy employee net vesting-related tax requirements, and $7.2 million was utilized to payout dividends.  These uses of cash were partially offset by the net borrowings of $13.0 million.

The Company is party to a credit agreement with Bank of America, N.A, dated as of May 9, 2016, (the “Credit Agreement”). The Credit Agreement provides for a revolving line of credit (the “Revolver”) with a total borrowing capacity of $45.0 million. As of September 29, 2017, we had a remaining capacity under our Revolver of $23.0 million. See Note 6, “Credit Facility,” to our consolidated financial statements included in this Quarterly Report on Form 10-Q for more information.

Recently Issued Accounting Standards

For a discussion of recently issued accounting standards, see Note 1, “Basis of Presentation and General Information,” to our consolidated financial statements included in this Quarterly Report on Form 10-Q and Note 1, “Basis of Presentation and General Information,” to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 30, 2016.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

As of September 29, 2017, 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 Revolver, which is subject to variable interest rates. The interest rates per annum applicable to loans under the Revolver will be, at our option, equal to either a base rate or a LIBOR 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 Revolver would not have had a material impact on our results of operations for the quarter and nine months ended September 29, 2017.

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 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 Principal Executive Officer and Principal 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 Principal Executive Officer and Principal 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.

21

Changes in Internal Control Over Financial Markets

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.

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.

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 30, 2016.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Issuer Purchases of Equity Securities

During the quarter ended September 29, 2017, the Company repurchased 182 thousand shares of its common stock at an average price of $13.73 per share, for a total cost of $2.5 million, under the repurchase plan approved by the Company's Board of Directors. As of September 29, 2017, the Company had $3.1 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	of Shares		Paid per Share		Program		Program
Balance as of June 30, 2017		—	$	—		—	$	630,006
July 1, 2017 to July 28, 2017		—	$	—		—	$	630,006
July 29, 2017 to August 25, 2017		166,516	$	13.73		166,516	$	3,343,305	*
August 26, 2017 to September 29, 2017		15,000	$	13.70		15,000	$	3,137,863
		181,516	$	13.73		181,516

*During the third quarter of 2017, the Company’s Board of Directors approved an additional $5.0 million increase to the repurchase plan.

Shares repurchased during the quarter ended September 29, 2017 under the repurchase plan approved by the Company's Board of Directors do not include 68 thousand shares for a cost of $1.0 million that the Company bought back to satisfy employee net vesting obligations.  

22

Item 6. Exhibits

Exhibit No.	Exhibit Description
3.1	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).
3.2	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).
3.3	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).
3.4	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).
3.5	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).
31.1*	Certification by CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification by CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32*	Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema
101.CAL	XBRL Taxonomy Extension Calculation Linkbase
101.DEF	XBRL Taxonomy Extension Definition Linkbase
101.LAB	XBRL Taxonomy Extension Label Linkbase
101.PRE	XBRL Taxonomy Extension Presentation Linkbase

* Filed herewith

23

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.

	The Hackett Group, Inc.
Date: November 8, 2017	/s/ Robert A. Ramirez
	Robert A. Ramirez
	Executive Vice President, Finance and Chief Financial Officer

24

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Ted A. Fernandez, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of The Hackett Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  November 8, 2017	By:	/s/ Ted A. Fernandez
		Ted A. Fernandez
		Chairman of the Board and Chief Executive Officer
		The Hackett Group, Inc.

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO

RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Robert A. Ramirez, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of The Hackett Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  November 8, 2017	By:	/s/ Robert A. Ramirez
		Robert A. Ramirez
		Executive Vice President, Finance and Chief Financial Officer
		The Hackett Group, Inc.

EX-32

Exhibit 32

THE HACKETT GROUP, INC

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of The Hackett Group, Inc. (the “Company”) on Form 10- Q for the period ended September 29, 2017, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, Ted A. Fernandez, Chairman of the Board and Chief Executive Officer, and Robert A. Ramirez, Executive Vice President, Finance and Chief Financial Officer, of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that:

(1) The Report fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

By:	/s/ Ted A. Fernandez
	Ted A. Fernandez
	Chairman of the Board and Chief Executive Officer
	November 8, 2017
By:	/s/ Robert A. Ramirez
	Robert A. Ramirez
	Executive Vice President, Finance and Chief Financial Officer
	November 8, 2017

A signed original of this statement required by Section 906 has been provided to The Hackett Group, Inc. and will be retained by The Hackett Group, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 29, 2017	Nov. 01, 2017
Document And Entity Information [Abstract]
Trading Symbol	HCKT
Entity Registrant Name	HACKETT GROUP, INC.
Entity Central Index Key	0001057379
Document Type	10-Q
Document Period End Date	Sep. 29, 2017
Amendment Flag	false
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q3
Current Fiscal Year End Date	--12-29
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		28,656,338

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 29, 2017	Dec. 30, 2016
Current assets:
Cash	$ 16,226	$ 19,710
Accounts receivable and unbilled revenue, net of allowance of $2,686 and $2,574 at September 29, 2017 and December 30, 2016, respectively	55,552	47,399
Prepaid expenses and other current assets	2,897	1,704
Total current assets	74,675	68,813
Property and equipment, net	17,854	14,774
Other assets	4,679	3,336
Goodwill, net	84,966	72,376
Total assets	182,174	159,299
Current liabilities:
Accounts payable	8,597	9,089
Accrued expenses and other liabilities	35,971	46,725
Total current liabilities	44,568	55,814
Non-current accrued expenses and other liabilities	6,936
Long-term deferred tax liability, net	10,591	10,216
Long-term debt	22,000	7,000
Total liabilities	84,095	73,030
Commitments and contingencies
Shareholders’ equity:
Preferred stock, $.001 par value, 1,250,000 shares authorized; none issued and outstanding
Common stock, $.001 par value, 125,000,000 shares authorized; 55,600,776 and 54,785,193 shares issued at September 29, 2017 and December 30, 2016, respectively	57	55
Additional paid-in capital	284,628	277,100
Treasury stock, at cost, 26,945,776 and 26,197,981 shares September 29, 2017 and December 30, 2016, respectively	(134,053)	(122,756)
Accumulated deficit	(43,301)	(56,581)
Accumulated comprehensive loss	(9,252)	(11,549)
Total shareholders' equity	98,079	86,269
Total liabilities and shareholders' equity	$ 182,174	$ 159,299

XML

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Sep. 29, 2017	Dec. 30, 2016
Statement Of Financial Position [Abstract]
Accounts receivable and unbilled revenue, allowance	$ 2,686	$ 2,574
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	1,250,000	1,250,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	125,000,000	125,000,000
Common stock, shares issued	55,600,776	54,785,193
Treasury stock, at cost, shares	26,945,776	26,197,981

XML

Consolidated Statements of Operations - USD ($)	3 Months Ended		9 Months Ended
	Sep. 29, 2017	Sep. 30, 2016	Sep. 29, 2017	Sep. 30, 2016
Revenue:
Revenue before reimbursements	$ 65,947,000	$ 66,810,000	$ 198,742,000	$ 196,961,000
Reimbursements	5,515,000	7,308,000	17,719,000	21,548,000
Total revenue	71,462,000	74,118,000	216,461,000	218,509,000
Cost of service:
Personnel costs before reimbursable expenses (includes $1,876 and $1,450 and $5,160 and $4,216 of stock compensation expense in the quarters and nine months ended September 29, 2017 and September 30, 2016, respectively)	42,302,000	42,071,000	127,108,000	125,082,000
Reimbursable expenses	5,515,000	7,308,000	17,719,000	21,548,000
Total cost of service	47,817,000	49,379,000	144,827,000	146,630,000
Selling, general and administrative costs (includes $894 and $793 and $2,427 and $2,251 of stock compensation expense in the quarters and nine months ended September 29, 2017 and September 30, 2016, respectively)	15,771,000	15,732,000	48,039,000	46,994,000
Restructuring costs			1,293,000
Total costs and operating expenses	63,588,000	65,111,000	194,159,000	193,624,000
Income from operations	7,874,000	9,007,000	22,302,000	24,885,000
Other expense:
Interest expense	(184,000)	(137,000)	(401,000)	(288,000)
Income from operations before income taxes	7,690,000	8,870,000	21,901,000	24,597,000
Income tax expense	2,401,000	3,382,000	3,988,000	9,281,000
Net income	$ 5,289,000	$ 5,488,000	$ 17,913,000	$ 15,316,000
Basic net income per common share:
Income per common share from operations	$ 0.18	$ 0.19	$ 0.62	$ 0.52
Weighted average common shares outstanding	28,764,661	28,579,237	28,891,301	29,251,459
Diluted net income per common share:
Income per common share from operations	$ 0.17	$ 0.17	$ 0.56	$ 0.47
Weighted average common and common equivalent shares outstanding	31,957,665	32,375,498	32,254,227	32,870,220

XML

Consolidated Statements of Operations (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 29, 2017	Sep. 30, 2016	Sep. 29, 2017	Sep. 30, 2016
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total share based compensation			$ 7,588	$ 6,467
Cost of Sales [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total share based compensation	$ 1,876	$ 1,450	5,160	4,216
Selling General and Administrative [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total share based compensation	$ 894	$ 793	$ 2,427	$ 2,251

XML

Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 29, 2017	Sep. 30, 2016	Sep. 29, 2017	Sep. 30, 2016
Statement Of Income And Comprehensive Income [Abstract]
Net income	$ 5,289	$ 5,488	$ 17,913	$ 15,316
Foreign currency translation adjustment	829	(484)	2,297	(2,721)
Total comprehensive income	$ 6,118	$ 5,004	$ 20,210	$ 12,595

XML

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Sep. 29, 2017	Sep. 30, 2016
Cash flows from operating activities:
Net income	$ 17,913	$ 15,316
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense	1,841	1,875
Amortization expense	1,475	825
Amortization of debt issuance costs	68	84
Non-cash stock compensation expense	7,588	6,467
Provision (reversal) for doubtful accounts	142	(11)
Loss (gain) on foreign currency translation	530	(566)
Release of valuation allowance	1,815	2,590
Changes in assets and liabilities:
Increase in accounts receivable and unbilled revenue	(4,935)	(5,474)
Increase in prepaid expenses and other assets	(1,172)	(405)
Decrease in accounts payable	(902)	(2,090)
Decrease in accrued expenses and other liabilities	(3,938)	(10)
(Decrease) increase in income tax payable	(1,474)	2,211
Net cash provided by operating activities	18,951	20,812
Cash flows from investing activities:
Purchases of property and equipment	(4,919)	(2,068)
Cash consideration paid for acquisitions	(9,268)
Cash acquired in acquisitions	261
Net cash used in investing activities	(13,926)	(2,068)
Cash flows from financing activities:
Proceeds from ESPP	562	519
Proceeds from borrowings	26,000	30,000
Repayment of borrowings	(11,000)	(17,000)
Debt issuance costs		(237)
Dividends paid	(8,670)	(7,163)
Exercise of stock options	200
Repurchase of common stock	(15,598)	(33,976)
Net cash used in financing activities	(8,506)	(27,857)
Effect of exchange rate on cash	(3)	(30)
Net decrease in cash and cash equivalents	(3,484)	(9,143)
Cash at beginning of period	19,710	23,503
Cash at end of period	16,226	14,360
Supplemental disclosure of cash flow information:
Cash paid for income taxes	3,696	4,473
Cash paid for interest	292	$ 187
Supplemental disclosure of non-cash acquisition financing activities:
Shares issued to sellers of Jibe Consulting	$ 3,600,000

XML

Basis of Presentation and General Information

9 Months Ended

Sep. 29, 2017

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Basis of Presentation and General Information

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 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 30, 2016, included in the Annual Report on Form 10-K filed by the Company with the SEC on March 10, 2017. The consolidated results of operations for the quarter and nine months ended September 29, 2017, 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.

Fair Value

The Company’s financial instruments consist of cash and cash equivalents, accounts receivable and unbilled revenue, accounts payable, accrued expenses and other liabilities and debt. As of September 29, 2017 and December 30, 2016, the carrying amount of each financial instrument approximated the instrument’s respective fair value due to the short-term nature and maturity of these instruments.

The Company uses significant other observable market data or assumptions (Level 2 inputs as defined in accounting guidance) that it believes market participants would use in pricing debt. The fair value of the debt approximated the carrying amount, using Level 2 inputs, due to the short-term variable interest rates based on market rates.

Business Combinations

The Company applies the provisions of ASC 805, Business Combinations, in the accounting for its acquisitions, which requires recognition of the assets acquired and the liabilities assumed at their acquisition date fair values, separately from goodwill. Goodwill as of the acquisition date is measured as the excess of consideration transferred and the net of the acquisition date fair values of the tangible and identifiable intangible assets acquired and liabilities assumed. While the Company uses its best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date as well as contingent consideration, where applicable, its estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, that may be up to 12 months from the acquisition date, the Company records adjustments to the assets acquired and liabilities assumed with a corresponding adjustment to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, the impact of any subsequent adjustments is included in the consolidated statements of operations.

Recently Issued Accounting Standards

In May 2014, the Financial Accounting Standards Board (“FASB”) issued guidance on revenue recognition, which provides for a single, principles-based model for revenue recognition and replaces the existing revenue recognition guidance. The guidance is effective for annual and interim periods beginning on or after December 15, 2017 and will replace most existing revenue recognition guidance under U.S. GAAP when it becomes effective. It permits the use of either a retrospective or cumulative effect transition method and early adoption is permitted, however not before December 15, 2016.

1. Basis of Presentation and General Information (continued)

The Company has completed an initial assessment of the impact of the new guidance on its existing revenue recognition policies and plans to adopt the rule on December 30, 2017, using the cumulative effect method of adoption. The guidance requires significantly expanded disclosures around the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers, which the Company is currently compiling. While the Company has not fully completed its assessment of the impact of the standard, based on the analysis completed to date, the Company does not currently anticipate that the new rule will have a material impact on its consolidated financial statements.

In February 2016, the FASB issued guidance on leases which supersedes the current lease guidance. The core principle requires lessees to recognize the assets and liabilities that arise from nearly all leases on the balance sheet. Accounting applied by lessors will remain largely consistent with previous guidance. The amendments are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company is assessing the impact of this standard on its consolidated financial statements and related disclosures.

In March 2016, the FASB issued guidance simplifying the accounting for share-based payment transactions including the income tax consequences, classification of awards as either equity or liabilities and classification on the statements of cash flows. Under the new standard, all excess tax benefits and tax deficiencies should be recognized as income tax expense or benefit on the statements of income.  An excess income tax benefit arises when the tax deduction of a share-based award for income tax purposes exceeds the compensation cost recognized for financial reporting purposes and, a tax deficiency arises when the compensation cost exceeds the tax deduction. Under current GAAP, excess tax benefits are recognized as additional paid-in capital while tax deficiencies are recognized either as an offset to accumulated excess tax benefits, if any, or on the statements of income.

Management adopted the guidance effective December 31, 2016. As a result of the adoption of this guidance, management made an accounting policy election to recognize the effect of forfeitures in compensation cost when they occur, which had an immaterial impact on results of operations and financial position and no impact on cash flows at adoption.  In the first quarter of 2017, the Company recorded no income tax expense as a result of the adoption of the new guidance relating to the accounting on the vesting of share-based awards. Excluding the effect of the new guidance, the effective tax rate would have been 34% for certain federal, foreign and state taxes during the nine months ended September 29, 2017.

In August 2016, the FASB issued guidance on the classification of certain cash receipts and cash payments. The guidance provides specific clarification on eight cash flow classification issues, including contingent consideration payments made after a business combination. The guidance is effective for interim and annual periods beginning after December 15, 2017. Early adoption is permitted and the guidance requires a retrospective transition. We do not expect the guidance to have a material impact on our consolidated financial statements.

Reclassifications

Certain prior period amounts in the consolidated financial statements, and notes thereto, have been reclassified to conform to current period presentation.

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Net Income Per Common Share

9 Months Ended

Sep. 29, 2017

Earnings Per Share [Abstract]

Net Income Per Common Share

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.

Dilutive 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				Nine Months Ended
	September 29,		September 30,		September 29,		September 30,
	2017		2016		2017		2016
Basic weighted average common shares outstanding		28,764,661		28,579,237		28,891,301		29,251,459
Effect of dilutive securities:
Unvested restricted stock units and common stock subject to vesting requirements issued to employees and non-employees		928,103		1,472,927		1,008,159		1,327,491
Common stock issuable upon the exercise of stock options and SARs		2,264,901		2,323,333		2,354,767		2,291,271
Dilutive weighted average common shares outstanding		31,957,665		32,375,498		32,254,227		32,870,220

Approximately 0.9 million and 0.8 million shares of common stock equivalents were excluded from the computations of diluted net income per common share for the quarter and nine months ended September 29, 2017, respectively, as compared to 0.8 million and 0.9 million for the same periods in 2016, as their inclusion would have had an anti-dilutive effect on diluted net income per common share.   

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Accounts Receivable and Unbilled Revenue, Net

9 Months Ended

Sep. 29, 2017

Accounts Receivable And Unbilled Revenue Net [Abstract]

Accounts Receivable and Unbilled Revenue, Net

3. Accounts Receivable and Unbilled Revenue, Net

Accounts receivable and unbilled revenue, net, consisted of the following (in thousands):

	September 29,			December 30,
	2017			2016
Accounts receivable	$	39,614		$	39,335
Unbilled revenue		18,624			10,638
Allowance for doubtful accounts		(2,686	)		(2,574	)
Accounts receivable and unbilled revenue, net	$	55,552		$	47,399

Accounts receivable is net of uncollected advanced billings. Unbilled revenue includes recognized recoverable costs and accrued profits on contracts for which billings had not been presented to clients.

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Accrued Expenses and Other Liabilities

9 Months Ended

Sep. 29, 2017

Accounts Payable And Accrued Liabilities Current And Noncurrent [Abstract]

Accrued Expenses and Other Liabilities

4. Accrued Expenses and Other Liabilities

Accrued expenses and other liabilities consisted of the following (in thousands):

	September 29,		December 30,
	2017		2016
Accrued compensation and benefits	$	10,062	$	4,412
Accrued bonuses		3,318		13,038
Accrued dividend payable		—		4,023
Deferred revenue		11,959		10,975
Accrued sales, use, franchise and VAT tax		2,647		3,791
Non-cash stock compensation accrual		2,507		4,225
Income tax payable		2,953		4,437
Other accrued expenses		2,525		1,824
Total accrued expenses and other liabilities	$	35,971	$	46,725

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Restructuring Costs

9 Months Ended

Sep. 29, 2017

Restructuring And Related Activities [Abstract]

Restructuring Costs

5. Restructuring Costs

In the prior quarter ended June 30, 2017, the Company recorded restructuring costs of $1.3 million, which was primarily related to the transition of resources driven by our migration from on-premise software to cloud-based implementations, as well as the Jibe acquisition, and the rationalization of global resources as a result of the emergence of RPA (“Robotic Process Automation”) related engagements from the Aecus acquisition.As of September 29, 2017, the Company did not have any remaining commitments related to restructuring.     

The following table sets forth the activity in the restructuring expense accruals (in thousands):

	Severance and Other
	Employee Costs
Accrual balance at December 30, 2016	$	—
Expenses		1,293
Payments		1,293
Accrual balance at September 29, 2017	$	—

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Credit Facility

9 Months Ended

Sep. 29, 2017

Debt Disclosure [Abstract]

Credit Facility

6. Credit Facility

In February 2012, the Company entered into a credit agreement with Bank of America, N.A. (“Bank of America”), pursuant to which Bank of America agreed to lend the Company up to $20.0 million pursuant to a revolving line of credit (the “Revolver”) and up to $47.0 million pursuant to a term loan (the “Term Loan”).  The Company has fully utilized and repaid its Term Loan.

On May 9, 2016, the Company amended and restated the credit agreement with Bank of America to:

• Provide for up to an additional $25.0 million of borrowing under the Revolver for a total borrowing capacity of $45.0 million; and

• Extend the maturity date on the Revolver to May 9, 2021, five years from the date of this amendment of the Credit Agreement.

The obligations of Hackett under the Revolver 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, a 100% pledge of the capital stock of the U.S. Subsidiaries, and a 66% pledge of the capital stock of Hackett’s direct foreign subsidiaries (subject to certain exceptions).

During the quarter and nine months ended September 29, 2017, the Company had net borrowings of $2.0 million and $15.0 million, respectively, under the Revolver and had a balance of $22.0 million outstanding as of September 29, 2017. The interest rates per annum applicable to borrowings under Revolver will be, at the Company’s option, equal to either a base rate or a LIBOR base rate, plus an applicable margin percentage. The applicable margin percentage is based on the consolidated leverage ratio, as defined in the

6. Credit Facility (continued)

Credit Agreement. As of September 29, 2017, the applicable margin percentage was 1.50% per annum based on the consolidated leverage ratio, in the case of LIBOR rate advances, and 0.75% per annum, in the case of base rate advances. The interest rate as of September 29, 2017, was 2.73%.

The Company is subject to certain covenants, including total consolidated leverage, fixed cost coverage, adjusted fixed cost coverage and liquidity requirements, each as set forth in the Credit Agreement, subject to certain exceptions.  As of September 29, 2017, the Company was in compliance with all covenants.

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Stock Based Compensation

9 Months Ended

Sep. 29, 2017

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock Based Compensation

7. Stock Based Compensation

During the nine months ended September 29, 2017, the Company issued 672,592 restricted stock units at a weighted average grant-date fair value of $16.61 per share. As of September 29, 2017, the Company had 1,553,240 restricted stock units outstanding at a weighted average grant-date fair value of $12.81 per share. As of September 29, 2017, $11.2 million of total restricted stock unit compensation expense related to unvested awards had not been recognized and is expected to be recognized over a weighted average period of approximately 2.0 years.

During the nine months ended September 29, 2017, 182,279 shares of common stock subject to vesting requirements were issued. These shares were issued to settle the equity portion of the closing consideration to the sellers in the acquisition of Jibe Consulting in May 2017 and will vest over four years. See Note 12 “Acquisitions” for further details. As of September 29, 2017, the Company had 531,024 shares of common stock subject to vesting requirements outstanding at a weighted average grant-date fair value of $12.85 per share. As of September 29, 2017, $4.8 million of compensation expense related to common stock subject to vesting requirements had not been recognized and is expected to be recognized over a weighted average period of approximately 3.1 years.

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Shareholders' Equity

9 Months Ended

Sep. 29, 2017

Stockholders Equity Note [Abstract]

Shareholders' Equity

8. Shareholders’ Equity

Stock Appreciation Rights (“SARs”)

In 2012, the Company’s Chief Executive Officer (“CEO”) and Chief Operating Officer (“COO”) agreed to give up 50% of their equity incentive compensation awards under the 1998 Stock Option and Incentive Plan for the years 2012 through 2015 in exchange for 2.9 million SARs with an exercise price of $4.00, only to be earned upon the achievement of 50% growth in pro forma earnings per share and 50% growth in pro forma EBITDA from a base year of 2011.  The grants would have expired if neither target were achieved during a six-year term.

In the first quarter of 2015, the outstanding SARs awards for the achievement of 50% growth in pro forma earnings per share vested with the Audit Committee’s approval of the Company’s 2014 financial statements. In the first quarter of 2016, the outstanding SARs awards for the Company’s achievement of over 50% growth of pro forma EBITDA vested with the Audit Committee’s approval of the Company’s 2015 financial statements.  As of September 29, 2017, no SARs had been exercised. By the end of 2015, all non-cash stock compensation expense relating to the outstanding SARs had been expensed.

Treasury Stock

Under the Company’s share 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. During the quarter ended September 29, 2017, the Company repurchased 182 thousand shares of its common stock at an average price of $13.73 per share for a total cost of $2.5 million. During the nine months ended September 29, 2017, the Company repurchased 748 thousand shares of its common stock at an average price of $15.11 per share for a total cost of $11.3 million. During the quarter ended September 29, 2017, the Company’s Board of Directors approved an additional $5.0 million authorization under the repurchase plan increasing the total authorization to $137.2 million.  As of September 29, 2017, the Company had $3.1 million available under its share repurchase plan authorization.

During the quarter ended September 30, 2016, the Company repurchased 30 thousand shares of its common stock at an average price of $14.84 per share for a total cost of $449 thousand. During the nine months ended September 30, 2016, the Company repurchased 2.1 million shares of its common stock at an average price of $14.60 per share for a total cost of $30.1 million.

The shares repurchased under the share repurchase plan during the quarter and nine months ended September 29, 2017, do not include 68 thousand and 262 thousand shares, respectively, which the Company bought back to satisfy employee net vesting obligations for a cost of $1.0 million and $4.3 million, respectively.  During the quarter and nine months ended September 30, 2016, the Company bought back 4 thousand and 288 thousand shares, respectively, at a cost of $50 thousand and $3.9 million, respectively, to satisfy employee net vesting obligations.

On May 6, 2016, the Company’s Board of Directors approved the repurchase of 697 thousand shares of its common stock from the Company’s CEO, 732 thousand shares of its common stock from the Company’s COO, and 73 thousand shares of its common stock from the Company’s Chief Financial Officer (“CFO”) for a total of approximately 1.5 million shares at a purchase price of $14.77 per share. The transaction was approved by the Audit Committee of the Board of Directors which is comprised solely of independent directors and was effected as part of the Company’s share repurchase program.  Following the transaction, Mr. Fernandez, Mr. Dungan and Mr. Ramirez remained the beneficial owners of 11.8%, 4.9% and 0.9% shares, respectively, of the outstanding common stock.  Following the transaction, approximately $3.1 million remained available under the Company’s share repurchase program. One of the primary reasons for this transaction was to lower the Company’s weighted average shares outstanding which had increased by 11% from the first quarter of 2016 as a result of the vesting of the SARs and appreciation in share price. The repurchase reduced weighted average shares outstanding by approximately 4% and is $0.03 to $0.04 accretive on an annualized basis. Based on the most recent SEC filings, including shares of Company common stock beneficially owned and shares that could be acquired upon the exercise of the SARs, Mr. Fernandez continues to be the single largest beneficial shareholder of the Company.

In reviewing and approving the transaction, the independent directors of the Board considered, among other factors, the benefits to the Company’s stockholders of this transaction such as the fact that (i) the share repurchase transaction is expected to be accretive to earnings per share, and (ii) the transaction was a unique opportunity to repurchase a large block of shares in an orderly manner. The transaction was funded from borrowings under the Company’s Revolver which was amended on May 9, 2016 in order to provide an additional $25.0 million in borrowing capacity for an aggregate amount of up to $45.0 million from time to time.   

8. Shareholders’ Equity (continued)

Dividend Program

In 2016, the Company increased the annual dividend from $0.20 per share to $0.26 per share to be paid on a semi-annual basis which resulted in aggregate dividends of $4.0 million paid to shareholders of record on July 11, 2016 and December 22, 2016, respectively. These dividends were paid from U.S. domestic sources and are accounted for as an increase to accumulated deficit. The dividend declared in December 2016 was paid in January 2017. During the quarter ended March 31, 2017, the Company increased its annual dividend to $0.30 per share to be paid on a semi-annual basis.  The first semi-annual dividend for 2017 was paid on July 10, 2017, for a total of $4.6 million. Subsequent to quarter end, the Company declared its semi-annual dividend of $0.15 per share for shareholders of record as of December 22, 2017, which is to be paid on January 5, 2018.

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Transactions with Related Parties

9 Months Ended

Sep. 29, 2017

Related Party Transactions [Abstract]

Transactions with Related Parties

9. Transactions with Related Parties

During the nine months ended September 29, 2017, the Company bought back 59 thousand shares of its common stock from members of its Board of Directors for $1.2 million, or $20.13 per share.  

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Litigation

9 Months Ended

Sep. 29, 2017

Commitments And Contingencies Disclosure [Abstract]

Litigation

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.

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Geographic and Group Information

9 Months Ended

Sep. 29, 2017

Segment Reporting [Abstract]

Geographic and Group Information

11. Geographic and Group Information

Revenue, which is primarily based on the country of the contracting entity, was attributed to the following geographical areas (in thousands):

	Quarter Ended				Nine Months Ended
	September 29,		September 30,		September 29,		September 30,
	2017		2016		2017		2016
Revenue:
North America	$	60,148	$	64,136	$	174,015	$	188,666
International (primarily European countries)		11,314		9,982		42,446		29,843
Total revenue	$	71,462	$	74,118	$	216,461	$	218,509

Long-lived assets are attributable to the following geographic areas (in thousands):

	September 29,		December 30,
	2017		2016
Long-lived assets:
North America	$	90,218	$	78,200
International (primarily European countries)		17,281		12,286
Total long-lived assets	$	107,499	$	90,486

As of September 29, 2017 and December 30, 2016, foreign assets included $15.0 million and $11.9 million, respectively, of goodwill related to acquisitions.   

In the following table, the Hackett Group service group encompasses Benchmarking, Business Transformation, Executive Advisory, Oracle Cloud Applications, EPM and EPM Application Maintenance and Support groups.  The SAP Solutions service group encompasses SAP ERP Implementation and SAP Maintenance groups (in thousands):

	Quarter Ended				Nine Months Ended
	September 29,		September 30,		September 29,		September 30,
	2017		2016		2017		2016
The Hackett Group		60,789		62,610	$	183,510	$	186,302
SAP Solutions		10,673		11,508		32,951		32,207
Total revenue	$	71,462	$	74,118	$	216,461	$	218,509

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Acquisitions

9 Months Ended

Sep. 29, 2017

Business Combinations [Abstract]

Acquisitions

12. Acquisitions

Jibe Consulting, Inc.

Effective May 1, 2017, the Company acquired certain assets and liabilities of Jibe Consulting, Inc. (“Jibe”), a U.S.- based Oracle E-Business Suite (“EBS”) and Oracle Cloud Business Application implementation firm. The acquisition of Jibe enhances the Company’s Cloud Application capabilities and strongly complements its market leading EPM transformation and technology implementation group.

The sellers’ purchase consideration was $5.4million in cash, not subject to vesting, and $3.6 million in shares of the Company’s common stock, subject to vesting. The equity that was issued has a four-year vesting term and will be recorded as compensation expense over the respective vesting period. In addition, the sellers have the opportunity to earn an additional $6.6 million in cash and $4.4 million in Company common stock based on the achievement of performance targets over the 18 months period following closing for a total of $11.0 million in contingent consideration; a portion of which will be allocated to key employees in both cash and Company stock.  The cash related to the contingent consideration which is to be paid to the sellers is not subject to service vesting and has been accounted for as part of the purchase consideration. The cash related to the contingent consideration, which is to be paid to the key employees, is subject to service vesting and is being accounted for as compensation expense. This contingent liability has been recorded in the consolidated balance sheet as non-current accrued expenses and other liabilities. The equity related to the contingent consideration will be subject to service vesting and will be recorded as compensation expense over the respective vesting period. As of September 29, 2017, the Company had recorded $1.0 million of acquisition-related compensation expense and non-cash stock compensation related to the equity portion of the closing consideration and the equity portion of the contingent consideration. The initial cash consideration was funded from borrowings under the Company’s Revolver.

The purchase price was allocated to tangible and intangible assets acquired and liabilities assumed based on their estimated fair values.  The fair value of identifiable intangible assets acquired was based on estimates and assumptions made by management at the time of the acquisition. Management is currently working to complete the valuation of identified intangible assets, goodwill and related deferred income taxes. As additional information, as of the acquisition date, becomes available and as management completes its evaluation, the preliminary purchase price allocation may be revised during the remainder of the measurement period (which will not exceed 12 months from the acquisition date). Any such revisions or changes may be material as the fair values of the tangible and intangible assets acquired and liabilities assumed are finalized. The following table presents the preliminary purchase price allocation of the assets acquired and liabilities assumed, based on the fair values (in thousands):

	Purchase Price
	Allocation
Total purchase consideration	$	11,293
Accounts receivable		1,932
Other current assets		59
Total current assets acquired		1,991
Intangible assets		931
Goodwill		9,538
Total assets		12,460
Other accrued expenses		1,167
Total liabilities acquired		1,167
Purchase consideration on acquisition	$	11,293

The recognized goodwill is primarily attributable to the benefits the Company expects to derive from enhanced market opportunities. The acquired intangible assets with definite lives are amortized over periods ranging from 2 to 5 years. The following table presents the preliminary intangible assets acquired from Jibe:

	Amount		Useful Life
Category	(in thousands)		(in years)
Customer Base	$	140	5
Customer Backlog		325	2
Non-Compete		466	5
	$	931

12. Acquisitions (continued)

The acquisition was not material to the Company's results of operations, financial position, or cash flows and therefore, the pro forma impact of these acquisitions is not presented. Since the acquisition date through September 29, 2017, Jibe contributed $7.6 million of revenue before reimbursable expenses and contribution before depreciation, amortization, interest, corporate overhead allocation and taxes of $0.7 million.  The acquisition related costs incurred in the second quarter of 2017 totaled $0.2 million and were all classified in selling, general and administrative costs in the Company’s consolidated statements of operations. All goodwill is expected to be deductible for tax purposes.

Aecus Limited

Effective April 6, 2017, the Company acquired 100% of the equity of the U.K.-based operations of Aecus Limited (“Aecus”), a European Outsourcing Advisory and Robotics Process Automation (“RPA”) consulting firm. This acquisition strongly complements the global strategy and business transformation offerings of the Hackett Group.

The sellers’ purchase consideration was £3.2 million in cash. In addition, the sellers have the opportunity to earn an additional £2.4 million in contingent consideration in cash based on the achievement of performance targets achieved over the next 12 months and key personnel have the opportunity to earn £0.3 million in cash and £0.3 million in the Company’s common stock. The contingent consideration for the selling shareholders and key personnel is subject to performance and service periods and will be accounted for as compensation expense and in non-current accrued expenses and other liabilities. As of September 29, 2017, the Company had recorded a total of $0.9 million of acquisition-related compensation expense and acquisition non-cash stock compensation expense for the cash and equity portion of the contingent consideration. The closing purchase consideration was funded with the Company’s available funds.

The purchase price was allocated to tangible and intangible assets acquired and liabilities assumed based on their estimated fair values.  The fair value of identifiable intangible assets acquired was based on estimates and assumptions made by management at the time of the acquisition. Management is currently working to complete the valuation of identified intangible assets, goodwill and related deferred income taxes. As additional information, as of the acquisition date, becomes available and as management completes its evaluation, the preliminary purchase price allocation may be revised during the remainder of the measurement period (which will not exceed 12 months from the acquisition date). Any such revisions or changes may be material as the fair values of the tangible and intangible assets acquired and liabilities assumed are finalized. The following table presents the preliminary purchase price allocation of the assets acquired and liabilities assumed, based on the fair values (in thousands):

	Purchase Price
	Allocation
Total purchase consideration	£	3,173
Cash		209
Accounts receivable		898
Other current assets		46
Total current assets acquired		1,153
Intangible assets		1,515
Goodwill		1,306
Total assets		3,974
Other accrued expenses		801
Total liabilities acquired		801
Purchase consideration on acquisition	£	3,173

12. Acquisitions (continued)

The recognized goodwill is primarily attributable to the benefits the Company expects to derive from enhanced market opportunities. The acquired intangible assets with definite lives are amortized over periods ranging from 2 to 5 years. The following table presents the preliminary intangible assets acquired from Aecus:

	Amount		Useful Life
Category	(in thousands)		(in years)
Customer Base	£	455	5
Customer Backlog		52	2
Non-Compete		1,008	5
	£	1,515

The acquisition was not material to the Company's results of operations, financial position, or cash flows and therefore, the pro forma impact of these acquisitions is not presented. From acquisition date through the month ended September 29, 2017, Aecus has contributed $2.6 million of revenue before reimbursable expenses and contribution before depreciation, amortization, interest, corporate overhead allocation and taxes of $0.5 million.  The acquisition related costs incurred during the first nine months of 2017 totaled $0.1 million and were all classified in selling, general and administrative costs in the Company’s consolidated statements of operations. The goodwill and intangibles resulting from this transaction are not expected to be deductible under UK tax regulations.

Chartered Institute of Management Accountants (Subsequent Event)

Subsequent to the quarter ended September 29, 2017, Hackett-REL, Ltd., a subsidiary of the Company located in the United Kingdom, acquired The Chartered Institute of Management Accountants' share of the Certified GBS Professionals program.   This acquisition allows those studying under the program and their employers to benefit further from the Company’s sector specific expertise and focus on the growing global business services market.  Purchase consideration was $2.0 million in cash and was funded with the Company’s available funds.  Also in connection with this transaction, the Alliance and Program Development Agreement between the Company, Hackett-REL, Ltd and The Chartered Institute of Management Accountants was terminated.

As a result of the short period between the acquisition date and the date of the issuance of the Company’s third quarter consolidated financial statements, all of the information required to be disclosed by ASC 805 has not yet been completed.

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Basis of Presentation and General Information (Policies)

9 Months Ended

Sep. 29, 2017

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Basis of Presentation

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 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 30, 2016, included in the Annual Report on Form 10-K filed by the Company with the SEC on March 10, 2017. The consolidated results of operations for the quarter and nine months ended September 29, 2017, are not necessarily indicative of the results to be expected for any future period or for the full fiscal year.

Use of Estimates

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.

Fair Value

Fair Value

The Company’s financial instruments consist of cash and cash equivalents, accounts receivable and unbilled revenue, accounts payable, accrued expenses and other liabilities and debt. As of September 29, 2017 and December 30, 2016, the carrying amount of each financial instrument approximated the instrument’s respective fair value due to the short-term nature and maturity of these instruments.

The Company uses significant other observable market data or assumptions (Level 2 inputs as defined in accounting guidance) that it believes market participants would use in pricing debt. The fair value of the debt approximated the carrying amount, using Level 2 inputs, due to the short-term variable interest rates based on market rates.

Business Combinations

Business Combinations

The Company applies the provisions of ASC 805, Business Combinations, in the accounting for its acquisitions, which requires recognition of the assets acquired and the liabilities assumed at their acquisition date fair values, separately from goodwill. Goodwill as of the acquisition date is measured as the excess of consideration transferred and the net of the acquisition date fair values of the tangible and identifiable intangible assets acquired and liabilities assumed. While the Company uses its best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date as well as contingent consideration, where applicable, its estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, that may be up to 12 months from the acquisition date, the Company records adjustments to the assets acquired and liabilities assumed with a corresponding adjustment to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, the impact of any subsequent adjustments is included in the consolidated statements of operations.

Recently Issued Accounting Standards

Recently Issued Accounting Standards

In May 2014, the Financial Accounting Standards Board (“FASB”) issued guidance on revenue recognition, which provides for a single, principles-based model for revenue recognition and replaces the existing revenue recognition guidance. The guidance is effective for annual and interim periods beginning on or after December 15, 2017 and will replace most existing revenue recognition guidance under U.S. GAAP when it becomes effective. It permits the use of either a retrospective or cumulative effect transition method and early adoption is permitted, however not before December 15, 2016.

1. Basis of Presentation and General Information (continued)

The Company has completed an initial assessment of the impact of the new guidance on its existing revenue recognition policies and plans to adopt the rule on December 30, 2017, using the cumulative effect method of adoption. The guidance requires significantly expanded disclosures around the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers, which the Company is currently compiling. While the Company has not fully completed its assessment of the impact of the standard, based on the analysis completed to date, the Company does not currently anticipate that the new rule will have a material impact on its consolidated financial statements.

In February 2016, the FASB issued guidance on leases which supersedes the current lease guidance. The core principle requires lessees to recognize the assets and liabilities that arise from nearly all leases on the balance sheet. Accounting applied by lessors will remain largely consistent with previous guidance. The amendments are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company is assessing the impact of this standard on its consolidated financial statements and related disclosures.

In March 2016, the FASB issued guidance simplifying the accounting for share-based payment transactions including the income tax consequences, classification of awards as either equity or liabilities and classification on the statements of cash flows. Under the new standard, all excess tax benefits and tax deficiencies should be recognized as income tax expense or benefit on the statements of income.  An excess income tax benefit arises when the tax deduction of a share-based award for income tax purposes exceeds the compensation cost recognized for financial reporting purposes and, a tax deficiency arises when the compensation cost exceeds the tax deduction. Under current GAAP, excess tax benefits are recognized as additional paid-in capital while tax deficiencies are recognized either as an offset to accumulated excess tax benefits, if any, or on the statements of income.

Management adopted the guidance effective December 31, 2016. As a result of the adoption of this guidance, management made an accounting policy election to recognize the effect of forfeitures in compensation cost when they occur, which had an immaterial impact on results of operations and financial position and no impact on cash flows at adoption.  In the first quarter of 2017, the Company recorded no income tax expense as a result of the adoption of the new guidance relating to the accounting on the vesting of share-based awards. Excluding the effect of the new guidance, the effective tax rate would have been 34% for certain federal, foreign and state taxes during the nine months ended September 29, 2017.

In August 2016, the FASB issued guidance on the classification of certain cash receipts and cash payments. The guidance provides specific clarification on eight cash flow classification issues, including contingent consideration payments made after a business combination. The guidance is effective for interim and annual periods beginning after December 15, 2017. Early adoption is permitted and the guidance requires a retrospective transition. We do not expect the guidance to have a material impact on our consolidated financial statements.

Reclassifications

Reclassifications

Certain prior period amounts in the consolidated financial statements, and notes thereto, have been reclassified to conform to current period presentation.

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Net Income Per Common Share (Tables)

9 Months Ended

Sep. 29, 2017

Earnings Per Share [Abstract]

Basic And Diluted Weighted Average Shares

The following table reconciles basic and dilutive weighted average common shares:

	Quarter Ended				Nine Months Ended
	September 29,		September 30,		September 29,		September 30,
	2017		2016		2017		2016
Basic weighted average common shares outstanding		28,764,661		28,579,237		28,891,301		29,251,459
Effect of dilutive securities:
Unvested restricted stock units and common stock subject to vesting requirements issued to employees and non-employees		928,103		1,472,927		1,008,159		1,327,491
Common stock issuable upon the exercise of stock options and SARs		2,264,901		2,323,333		2,354,767		2,291,271
Dilutive weighted average common shares outstanding		31,957,665		32,375,498		32,254,227		32,870,220

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Accounts Receivable and Unbilled Revenue, Net (Tables)

9 Months Ended

Sep. 29, 2017

Accounts Receivable And Unbilled Revenue Net [Abstract]

Accounts Receivable and Unbilled Revenue, Net

Accounts receivable and unbilled revenue, net, consisted of the following (in thousands):

	September 29,			December 30,
	2017			2016
Accounts receivable	$	39,614		$	39,335
Unbilled revenue		18,624			10,638
Allowance for doubtful accounts		(2,686	)		(2,574	)
Accounts receivable and unbilled revenue, net	$	55,552		$	47,399

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Accrued Expenses and Other Liabilities (Tables)

9 Months Ended

Sep. 29, 2017

Accounts Payable And Accrued Liabilities Current And Noncurrent [Abstract]

Components Of Accrued Expenses And Other Liabilities

Accrued expenses and other liabilities consisted of the following (in thousands):

	September 29,		December 30,
	2017		2016
Accrued compensation and benefits	$	10,062	$	4,412
Accrued bonuses		3,318		13,038
Accrued dividend payable		—		4,023
Deferred revenue		11,959		10,975
Accrued sales, use, franchise and VAT tax		2,647		3,791
Non-cash stock compensation accrual		2,507		4,225
Income tax payable		2,953		4,437
Other accrued expenses		2,525		1,824
Total accrued expenses and other liabilities	$	35,971	$	46,725

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Restructuring Costs (Tables)

9 Months Ended

Sep. 29, 2017

Restructuring And Related Activities [Abstract]

Schedule of Activity in Restructuring Expense Accruals

The following table sets forth the activity in the restructuring expense accruals (in thousands):

	Severance and Other
	Employee Costs
Accrual balance at December 30, 2016	$	—
Expenses		1,293
Payments		1,293
Accrual balance at September 29, 2017	$	—

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Geographic and Group Information (Tables)

9 Months Ended

Sep. 29, 2017

Segment Reporting [Abstract]

Geographic Revenue

Revenue, which is primarily based on the country of the contracting entity, was attributed to the following geographical areas (in thousands):

	Quarter Ended				Nine Months Ended
	September 29,		September 30,		September 29,		September 30,
	2017		2016		2017		2016
Revenue:
North America	$	60,148	$	64,136	$	174,015	$	188,666
International (primarily European countries)		11,314		9,982		42,446		29,843
Total revenue	$	71,462	$	74,118	$	216,461	$	218,509

Long-Lived Assets Attributable To Geographic Area

Long-lived assets are attributable to the following geographic areas (in thousands):

	September 29,		December 30,
	2017		2016
Long-lived assets:
North America	$	90,218	$	78,200
International (primarily European countries)		17,281		12,286
Total long-lived assets	$	107,499	$	90,486

Revenue By Service Group

In the following table, the Hackett Group service group encompasses Benchmarking, Business Transformation, Executive Advisory, Oracle Cloud Applications, EPM and EPM Application Maintenance and Support groups.  The SAP Solutions service group encompasses SAP ERP Implementation and SAP Maintenance groups (in thousands):

	Quarter Ended				Nine Months Ended
	September 29,		September 30,		September 29,		September 30,
	2017		2016		2017		2016
The Hackett Group		60,789		62,610	$	183,510	$	186,302
SAP Solutions		10,673		11,508		32,951		32,207
Total revenue	$	71,462	$	74,118	$	216,461	$	218,509

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Acquisitions (Tables)

9 Months Ended

Sep. 29, 2017

Jibe Consulting, Inc [Member]

Business Acquisition [Line Items]

Purchase Price Allocation

The following table presents the preliminary purchase price allocation of the assets acquired and liabilities assumed, based on the fair values (in thousands):

	Purchase Price
	Allocation
Total purchase consideration	$	11,293
Accounts receivable		1,932
Other current assets		59
Total current assets acquired		1,991
Intangible assets		931
Goodwill		9,538
Total assets		12,460
Other accrued expenses		1,167
Total liabilities acquired		1,167
Purchase consideration on acquisition	$	11,293

Acquired Intangible Assets

The following table presents the preliminary intangible assets acquired from Jibe:

	Amount		Useful Life
Category	(in thousands)		(in years)
Customer Base	$	140	5
Customer Backlog		325	2
Non-Compete		466	5
	$	931

Aecus Limited [Member]

Business Acquisition [Line Items]

Purchase Price Allocation

The following table presents the preliminary purchase price allocation of the assets acquired and liabilities assumed, based on the fair values (in thousands):

	Purchase Price
	Allocation
Total purchase consideration	£	3,173
Cash		209
Accounts receivable		898
Other current assets		46
Total current assets acquired		1,153
Intangible assets		1,515
Goodwill		1,306
Total assets		3,974
Other accrued expenses		801
Total liabilities acquired		801
Purchase consideration on acquisition	£	3,173

Acquired Intangible Assets

The following table presents the preliminary intangible assets acquired from Aecus:

	Amount		Useful Life
Category	(in thousands)		(in years)
Customer Base	£	455	5
Customer Backlog		52	2
Non-Compete		1,008	5
	£	1,515

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Basis of Presentation and General Information (Details) - USD ($)	3 Months Ended			9 Months Ended
	Sep. 29, 2017	Mar. 31, 2017	Sep. 30, 2016	Sep. 29, 2017	Sep. 30, 2016
Organization Consolidation And Presentation Of Financial Statements [Abstract]
Income tax expense	$ 2,401,000	$ 0	$ 3,382,000	$ 3,988,000	$ 9,281,000
Effective tax rate				34.00%

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Net Income Per Common Share (Basic And Diluted Weighted Average Shares) (Details) - shares	3 Months Ended		9 Months Ended
	Sep. 29, 2017	Sep. 30, 2016	Sep. 29, 2017	Sep. 30, 2016
Earnings Per Share [Abstract]
Basic weighted average common shares outstanding	28,764,661	28,579,237	28,891,301	29,251,459
Unvested restricted stock units and common stock subject to vesting requirements issued to employees and non-employees	928,103	1,472,927	1,008,159	1,327,491
Common stock issuable upon the exercise of stock options and SARs	2,264,901	2,323,333	2,354,767	2,291,271
Dilutive weighted average common shares outstanding	31,957,665	32,375,498	32,254,227	32,870,220

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Net Income Per Common Share (Narrative) (Details) - shares shares in Millions	3 Months Ended		9 Months Ended
	Sep. 29, 2017	Sep. 30, 2016	Sep. 29, 2017	Sep. 30, 2016
Earnings Per Share [Abstract]
Antidilutive common share equivalents	0.9	0.8	0.8	0.9

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Accounts Receivable and Unbilled Revenue, Net (Details) - USD ($) $ in Thousands	Sep. 29, 2017	Dec. 30, 2016
Accounts Receivable And Unbilled Revenue Net [Abstract]
Accounts receivable	$ 39,614	$ 39,335
Unbilled revenue	18,624	10,638
Allowance for doubtful accounts	(2,686)	(2,574)
Accounts receivable and unbilled revenue, net	$ 55,552	$ 47,399

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Accrued Expenses and Other Liabilities (Details) - USD ($) $ in Thousands	Sep. 29, 2017	Dec. 30, 2016
Accounts Payable And Accrued Liabilities Current And Noncurrent [Abstract]
Accrued compensation and benefits	$ 10,062	$ 4,412
Accrued bonuses	3,318	13,038
Accrued dividend payable		4,023
Deferred revenue	11,959	10,975
Accrued sales, use, franchise and VAT tax	2,647	3,791
Non-cash stock compensation accrual	2,507	4,225
Income tax payable	2,953	4,437
Other accrued expenses	2,525	1,824
Total accrued expenses and other liabilities	$ 35,971	$ 46,725

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Restructuring Costs (Narrative) (Details) - USD ($)	3 Months Ended	9 Months Ended
	Jun. 30, 2017	Sep. 29, 2017
Restructuring And Related Activities [Abstract]
Restructuring costs	$ 1,300,000	$ 1,293,000
Remaining restructuring commitments		$ 0

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Restructuring Costs (Schedule of Activity in Restructuring Expense Accruals) (Details) - USD ($)	3 Months Ended	9 Months Ended
	Jun. 30, 2017	Sep. 29, 2017
Restructuring And Related Activities [Abstract]
Restructuring costs	$ 1,300,000	$ 1,293,000
Payments		1,293,000
Accrual balance at September 29, 2017		$ 0

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Credit Facility (Details) - USD ($)	3 Months Ended	9 Months Ended
	Sep. 29, 2017	Sep. 29, 2017	May 09, 2016
Revolving line of credit facility [Member]
Line of Credit Facility [Line Items]
Borrowing capacity under credit facility	$ 20,000,000	$ 20,000,000	$ 45,000,000
Additional borrowing capacity			$ 25,000,000
Maturity date		May 09, 2021
Pledge of capital stock to U.S. subsidiaries		100.00%
Pledge of capital stock to direct foreign subsidiaries		66.00%
Additional amount drawn on loan	2,000,000	$ 15,000,000
Credit facility amount outstanding	$ 22,000,000	$ 22,000,000
Interest rate	2.73%	2.73%
Revolving line of credit facility [Member] | London Interbank Offered Rate (LIBOR) [Member]
Line of Credit Facility [Line Items]
Margin percentage base rate		1.50%
Revolving line of credit facility [Member] | Base Rate [Member]
Line of Credit Facility [Line Items]
Margin percentage base rate		0.75%
Term Loan [Member]
Line of Credit Facility [Line Items]
Borrowing capacity under credit facility	$ 47,000,000	$ 47,000,000
Term of debt		5 years

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Stock Based Compensation (Details) - USD ($) $ / shares in Units, $ in Millions		9 Months Ended
	May 01, 2017	Sep. 29, 2017
Jibe Consulting [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period	4 years
Restricted Stock Units (RSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares granted		672,592
Weighted average grant-date fair value		$ 16.61
Shares outstanding		1,553,240
Nonvested weighted average grant-date fair value		$ 12.81
Compensation expense		$ 11.2
Weighted average period		2 years
Common Stock Subject to Vesting Requirements [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares granted		182,279
Shares outstanding		531,024
Nonvested weighted average grant-date fair value		$ 12.85
Compensation expense		$ 4.8
Weighted average period		3 years 1 month 7 days
Common Stock Subject to Vesting Requirements [Member] | Jibe Consulting [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period		4 years

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Shareholders' Equity (Details) - USD ($)						3 Months Ended			9 Months Ended		12 Months Ended
	Nov. 08, 2017	Jul. 10, 2017	Dec. 22, 2016	Jul. 11, 2016	May 06, 2016	Sep. 29, 2017	Sep. 30, 2016	Apr. 01, 2016	Sep. 29, 2017	Sep. 30, 2016	Dec. 28, 2012	Mar. 31, 2017	May 09, 2016
Equity, Class of Treasury Stock [Line Items]
Equity incentive compensation awards given up											50.00%
Repurchase of common stock					1,500,000
Purchase price per share					$ 14.77
Amount available under repurchase plan					$ 3,100,000	$ 3,100,000			$ 3,100,000
Additional stock repurchase authorized						5,000,000
Stock repurchase authorized						$ 137,200,000			$ 137,200,000
Shares repurchased for employee net vesting obligations, shares						68,000	4,000		262,000	288,000
Shares repurchased for employee net vesting obligations, value						$ 1,000,000	$ 50,000		$ 4,300,000	$ 3,900,000
Weighted average shares outstanding					4.00%			11.00%
Weighted average shares outstanding accretive on an annualized basis					$ 0.04			$ 0.03
Dividend paid, per share			$ 0.26	$ 0.20
Dividend paid, cash value		$ 4,600,000	$ 4,000,000	$ 4,000,000
Dividend declared												$ 0.30
Subsequent Event [Member]
Equity, Class of Treasury Stock [Line Items]
Dividend declared	$ 0.15
Dividend declared, date of record	Dec. 22, 2017
Dividend declared, date of payment	Jan. 05, 2018
Revolving line of credit facility [Member]
Equity, Class of Treasury Stock [Line Items]
Additional borrowing capacity													$ 25,000,000
Borrowing capacity under credit facility						$ 20,000,000			$ 20,000,000				$ 45,000,000
Chief Executive Officer [Member]
Equity, Class of Treasury Stock [Line Items]
Repurchase of common stock					697,000
Beneficial owners					11.80%
Chief Operating Officer [Member]
Equity, Class of Treasury Stock [Line Items]
Repurchase of common stock					732,000
Beneficial owners					4.90%
Chief Financial Officer [Member]
Equity, Class of Treasury Stock [Line Items]
Repurchase of common stock					73,000
Beneficial owners					0.90%
Share Repurchase Plan [Member]
Equity, Class of Treasury Stock [Line Items]
Repurchase of common stock						182,000	30,000		748,000	2,100,000
Purchase price per share						$ 13.73	$ 14.84		$ 15.11	$ 14.60
Total cost						$ 2,500,000	$ 449,000		$ 11,300,000	$ 30,100,000
Stock Appreciation Rights (SARs) [Member]
Equity, Class of Treasury Stock [Line Items]
SARs exchanged											2,900,000
Exercise price											$ 4.00
Target achievement, pro forma Earnings per share											50.00%
Target achievement, pro forma EBITDA											50.00%
Target achievement, Term									6 years
SARs exercised									0

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Transactions with Related Parties (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Millions		9 Months Ended
	May 06, 2016	Sep. 29, 2017
Related Party Transaction [Line Items]
Repurchase of common stock	1,500
Purchase price per share	$ 14.77
Director [Member]
Related Party Transaction [Line Items]
Repurchase of common stock		59
Total cost		$ 1.2
Purchase price per share		$ 20.13

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Geographic and Group Information (Geographic Revenue) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 29, 2017	Sep. 30, 2016	Sep. 29, 2017	Sep. 30, 2016
Revenues from External Customers and Long-Lived Assets [Line Items]
Total revenue	$ 71,462	$ 74,118	$ 216,461	$ 218,509
North America [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total revenue	60,148	64,136	174,015	188,666
International (Primarily European Countries) [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total revenue	$ 11,314	$ 9,982	$ 42,446	$ 29,843

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Geographic and Group Information (Long-Lived Assets Attributable To Geographic Area) (Details) - USD ($) $ in Thousands	Sep. 29, 2017	Dec. 30, 2016
Revenues from External Customers and Long-Lived Assets [Line Items]
Total long-lived assets	$ 107,499	$ 90,486
North America [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total long-lived assets	90,218	78,200
International (Primarily European Countries) [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total long-lived assets	$ 17,281	$ 12,286

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Geographic and Group Information (Narrative) (Details) - USD ($) $ in Millions	Sep. 29, 2017	Dec. 30, 2016
Segment Reporting [Abstract]
Goodwill included in foreign assets	$ 15.0	$ 11.9

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Geographic and Group Information (Revenue By Service Group) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 29, 2017	Sep. 30, 2016	Sep. 29, 2017	Sep. 30, 2016
Segment Reporting Information [Line Items]
Total revenue	$ 71,462	$ 74,118	$ 216,461	$ 218,509
The Hackett Group [Member]
Segment Reporting Information [Line Items]
Total revenue	60,789	62,610	183,510	186,302
SAP Solutions [Member]
Segment Reporting Information [Line Items]
Total revenue	$ 10,673	$ 11,508	$ 32,951	$ 32,207

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Acquisitions (Narrative) (Details) $ in Thousands, £ in Millions			3 Months Ended	5 Months Ended	9 Months Ended
	May 01, 2017 USD ($)	Apr. 06, 2017 GBP (£)	Sep. 30, 2017 USD ($)	Sep. 29, 2017 USD ($)	Sep. 29, 2017 USD ($)	Sep. 30, 2016 USD ($)
Business Acquisition [Line Items]
Purchase consideration					$ 9,268
Non-cash stock compensation expense					7,588	$ 6,467
Jibe Consulting, Inc [Member]
Business Acquisition [Line Items]
Effective date of acquisition	May 01, 2017
Purchase consideration	$ 5,400
Purchase consideration, common stock	$ 3,600
Vesting period	4 years
Contingent consideration	$ 11,000
Contingent consideration performance period	18 months
Non-cash stock compensation expense					1,000
Preliminary purchase price allocation evaluation period from acquisition date	12 months
Contributed total revenue				$ 7,600
Contribution before depreciation, amortization, interest, corporate overhead allocation and taxes				700
Acquisition related costs				200
Jibe Consulting, Inc [Member] | Minimum
Business Acquisition [Line Items]
Amortization period	2 years
Jibe Consulting, Inc [Member] | Maximum
Business Acquisition [Line Items]
Amortization period	5 years
Jibe Consulting, Inc [Member] | Cash Contingent Consideration [Member]
Business Acquisition [Line Items]
Contingent consideration	$ 6,600
Jibe Consulting, Inc [Member] | Stock Based Contingent Consideration [Member]
Business Acquisition [Line Items]
Contingent consideration	$ 4,400
Aecus Limited [Member]
Business Acquisition [Line Items]
Effective date of acquisition		Apr. 06, 2017
Purchase consideration | £		£ 3.2
Contingent consideration performance period		12 months
Non-cash stock compensation expense					900
Preliminary purchase price allocation evaluation period from acquisition date		12 months
Contributed total revenue				2,600
Contribution before depreciation, amortization, interest, corporate overhead allocation and taxes				$ 500
Acquisition related costs					$ 100
Acquired percentage		100.00%
Aecus Limited [Member] | Minimum
Business Acquisition [Line Items]
Amortization period		2 years
Aecus Limited [Member] | Maximum
Business Acquisition [Line Items]
Amortization period		5 years
Aecus Limited [Member] | Cash Contingent Consideration [Member] | Sellers [Member]
Business Acquisition [Line Items]
Contingent consideration | £		£ 2.4
Aecus Limited [Member] | Cash Contingent Consideration [Member] | Key Personnel [Member]
Business Acquisition [Line Items]
Contingent consideration | £		0.3
Aecus Limited [Member] | Stock Based Contingent Consideration [Member] | Key Personnel [Member]
Business Acquisition [Line Items]
Contingent consideration | £		£ 0.3
The Chartered Institute of Management Accountants [Member] | Subsequent Event [Member]
Business Acquisition [Line Items]
Purchase consideration			$ 2,000

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Acquisition (Purchase Price Allocation) (Details) £ in Thousands, $ in Thousands	May 01, 2017 USD ($)	Apr. 06, 2017 GBP (£)	Sep. 29, 2017 USD ($)	Dec. 30, 2016 USD ($)
Business Acquisition [Line Items]
Goodwill, net | $			$ 84,966	$ 72,376
Jibe Consulting, Inc [Member]
Business Acquisition [Line Items]
Total purchase consideration | $	$ 11,293
Accounts receivable | $	1,932
Other current assets | $	59
Total current assets acquired | $	1,991
Intangible assets | $	931
Goodwill, net | $	9,538
Total assets | $	12,460
Other accrued expenses | $	1,167
Total liabilities acquired | $	1,167
Purchase consideration on acquisition | $	$ 11,293
Aecus Limited [Member]
Business Acquisition [Line Items]
Total purchase consideration | £		£ 3,173
Cash | £		209
Accounts receivable | £		898
Other current assets | £		46
Total current assets acquired | £		1,153
Intangible assets | £		1,515
Goodwill, net | £		1,306
Total assets | £		3,974
Other accrued expenses | £		801
Total liabilities acquired | £		801
Purchase consideration on acquisition | £		£ 3,173

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Acquisition (Intangible Assets Acquired) (Details) £ in Thousands, $ in Thousands	May 01, 2017 USD ($)	Apr. 06, 2017 GBP (£)
Jibe Consulting, Inc [Member]
Business Acquisition [Line Items]
Amount | $	$ 931
Jibe Consulting, Inc [Member] | Customer Base [Member]
Business Acquisition [Line Items]
Amount | $	$ 140
Useful Life (in years)	5 years
Jibe Consulting, Inc [Member] | Customer Backlog [Member]
Business Acquisition [Line Items]
Amount | $	$ 325
Useful Life (in years)	2 years
Jibe Consulting, Inc [Member] | Non-Compete [Member]
Business Acquisition [Line Items]
Amount | $	$ 466
Useful Life (in years)	5 years
Aecus Limited [Member]
Business Acquisition [Line Items]
Amount | £		£ 1,515
Aecus Limited [Member] | Customer Base [Member]
Business Acquisition [Line Items]
Amount | £		£ 455
Useful Life (in years)		5 years
Aecus Limited [Member] | Customer Backlog [Member]
Business Acquisition [Line Items]
Amount | £		£ 52
Useful Life (in years)		2 years
Aecus Limited [Member] | Non-Compete [Member]
Business Acquisition [Line Items]
Amount | £		£ 1,008
Useful Life (in years)		5 years