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 27, 2019

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)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $.001 per share	HCKT	NASDAQ Stock Market

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 every Interactive Data File required to be submitted 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 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	☐	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  ☒

As of October 31, 2019, there were 29,896,607 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 27, 2019 and December 28, 2018 (unaudited)	3
	Consolidated Statements of Operations for the Three and Nine Months Ended September 27, 2019 and September 28, 2018 (unaudited)	4
	Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 27, 2019 and September 28, 2018 (unaudited)	5
	Consolidated Statements of Cash Flows for the Nine Months Ended September 27, 2019 and September 28, 2018 (unaudited)	6
	Consolidated Statements of Equity for the Three and Nine Months Ended September 27, 2019 and September 28, 2018 (unaudited)	7
	Notes to Consolidated Financial Statements (unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24
Item 4.	Controls and Procedures	24
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	24
Item 1A.	Risk Factors	24
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	25
Item 6.	Exhibits	26
SIGNATURES		27

2

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

The Hackett Group, Inc.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

(unaudited)

	September 27,			December 28,
	2019			2018
ASSETS
Current assets:
Cash	$	16,423		$	13,808
Accounts receivable and contract assets, net of allowance of $710 and $1,441 at September 27, 2019 and December 28, 2018, respectively		57,890			54,807
Prepaid expenses and other current assets		3,664			4,339
Assets related to discontinued operations		—			137
Total current assets		77,977			73,091
Property and equipment, net		21,080			19,750
Other assets		2,801			3,704
Goodwill, net		83,782			84,207
Operating lease right-of-use assets		8,293			—
Total assets	$	193,933		$	180,752
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	5,217		$	7,429
Accrued expenses and other liabilities		31,450			34,498
Operating lease liabilities		2,678			—
Liabilities related to discontinued operations		22			2,300
Total current liabilities		39,367			44,227
Long-term deferred tax liability, net		7,704			6,435
Long-term debt		2,500			6,500
Operating lease liabilities		5,615			—
Total liabilities		55,186			57,162
Commitments and contingencies
Shareholders’ equity:
Preferred stock, $0.001 par value, 1,250,000 shares authorized; none issued and outstanding		—			—
Common stock, $0.001 par value, 125,000,000 shares authorized 57,137,480 and 56,607,622 shares issued at September 27, 2019 and December 28, 2018, respectively		58			57
Additional paid-in capital		301,035			296,955
Treasury stock, at cost, 27,280,200 and 27,086,782 shares September 27, 2019 and December 28, 2018, respectively		(139,660	)		(136,604	)
Accumulated deficit		(10,221	)		(25,424	)
Accumulated other comprehensive loss		(12,465	)		(11,394	)
Total shareholders' equity		138,747			123,590
Total liabilities and shareholders' equity	$	193,933		$	180,752

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 27,			September 28,			September 27,			September 28,
	2019			2018			2019			2018
Revenue:
Revenue before reimbursements	$	66,755		$	68,183		$	197,101			202,928
Reimbursements		5,935			5,535			16,265			16,424
Total revenue		72,690			73,718			213,366			219,352
Costs and expenses:
Cost of service:
Personnel costs before reimbursable expenses		41,183			41,123			120,649			123,086
Stock compensation expense		1,155			1,646			3,465			4,367
Reimbursable expenses		5,935			5,535			16,265			16,424
Total cost of service		48,273			48,304			140,379			143,877
Selling, general and administrative costs		14,353			15,507			44,107			45,953
Stock compensation expense		776			850			2,268			2,495
Change in acquisition-related contingent consideration liability		(108	)		803			(1,133	)		(3,750	)
Total costs and operating expenses		63,294			65,464			185,621			188,575
Income from operations		9,396			8,254			27,745			30,777
Other expense:
Interest expense		(62	)		(158	)		(268	)		(515	)
Income from operations before income taxes		9,334			8,096			27,477			30,262
Income tax expense		2,427			2,425			6,481			5,618
Income from continuing operations		6,907			5,671			20,996			24,644
Income (loss) from discontinued operations		2			(514	)		(4	)		(599	)
Net income	$	6,909		$	5,157		$	20,992		$	24,045
Basic net income per common share:
Income per common share from continuing operations	$	0.23		$	0.19		$	0.70		$	0.84
Income (loss) per common share from discontinued operations		0.00			(0.02	)		(0.00	)		(0.02	)
Basic net income per common share	$	0.23		$	0.17		$	0.70		$	0.82
Diluted net income per common share:
Income per common share from continuing operations	$	0.21		$	0.18		$	0.65		$	0.77
Income (loss) per common share from discontinued operations		0.00			(0.02	)		(0.00	)		(0.02	)
Diluted net income per common share	$	0.21		$	0.16		$	0.65		$	0.75
Weighted average common shares outstanding:
Basic		29,876			29,478			29,794			29,332
Diluted		32,571			32,593			32,413			32,214

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 27,			September 28,			September 27,			September 28,
	2019			2018			2019			2018
Net income	$	6,909		$	5,157		$	20,992		$	24,045
Foreign currency translation adjustment		(1,056	)		(432	)		(1,071	)		(1,626	)
Total comprehensive income	$	5,853		$	4,725		$	19,921		$	22,419

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 27,			September 28,
	2019			2018
Cash flows from operating activities:
Net income	$	20,992		$	24,045
Less loss from discontinued operations		(4	)		(599	)
Net income from continuing operations		20,996			24,644
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense		2,320			1,857
Amortization expense		789			1,789
Amortization of debt issuance costs		68			68
Non-cash stock compensation expense		5,733			6,932
Provision for doubtful accounts		719			313
Gain on foreign currency translation		(384	)		(425	)
Release of valuation allowance		1,277			1,565
Changes in assets and liabilities:
Increase in accounts receivable and contract assets		(3,904	)		(1,612	)
(Increase) decrease in prepaid expenses and other assets		803			(1,352	)
Decrease in accounts payable		(2,213	)		(3,317	)
Decrease in accrued expenses and other liabilities		(1,463	)		(3,033	)
Increase (decrease) in income tax payable		1,803			(2,476	)
Net cash provided by operating activities		26,540			24,354
Cash flows from investing activities:
Purchases of property and equipment		(3,719	)		(7,273	)
Net cash used in investing activities		(3,719	)		(7,273	)
Cash flows from financing activities:
Proceeds from issuance of common stock		418			387
Proceeds from borrowings		1,000			5,000
Repayment of borrowings		(5,000	)		(12,500	)
Dividends paid		(11,196	)		(10,048	)
Repurchase of common stock		(5,531	)		(4,272	)
Net cash used in financing activities		(20,309	)		(21,433	)
Effect of exchange rate on cash		103			17
Net increase (decrease) in cash and cash equivalents		2,615			(4,335	)
Cash at beginning of period		13,808			17,512
Cash at end of period	$	16,423		$	13,177
Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	3,410		$	5,406
Cash paid for interest	$	227		$	450

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

6

The Hackett Group, Inc.

CONSOLIDATED STATEMENTS OF EQUITY

(in thousands)

(unaudited)

																	Accumulated
					Additional												Other			Total
	Common Stock				Paid in			Treasury Stock						Accumulated			Comprehensive			Shareholders'
	Shares		Amount		Capital			Shares			Amount			Deficit			Loss			Equity
Balance at December 28, 2018		56,615	$	57	$	296,955			(27,086	)	$	(136,604	)	$	(25,424	)	$	(11,394	)	$	123,590
Issuance of common stock		394		1		(2,373	)		—			—			—			—			(2,372	)
Treasury stock purchased		—		—		—			(102	)		(1,616	)		—			—			(1,616	)
Amortization of restricted stock units and common stock subject to vesting requirements		—		—		2,394			—			—			—			—			2,394
Net income		—		—		—			—			—			7,094			—			7,094
Foreign currency translation		—		—		—			—			—			—			657			657
Balance at March 29, 2019		57,009	$	58	$	296,976			(27,188	)	$	(138,220	)	$	(18,330	)	$	(10,737	)	$	129,747
Issuance of common stock		121		—		405			—			—			—			—			405
Treasury stock purchased		—		—		—			(92	)		(1,440	)		—			—			(1,440	)
Amortization of restricted stock units and common stock subject to vesting requirements		—		—		1,961			—			—			—			—			1,961
Dividends declared		—		—		—			—			—			(5,789	)		—			(5,789	)
Net income		—		—		—			—			—			6,989			—			6,989
Foreign currency translation		—		—		—			—			—			—			(672	)		(672	)
Balance at June 28, 2019		57,130	$	58	$	299,342			(27,280	)	$	(139,660	)	$	(17,130	)	$	(11,409	)	$	131,201
Issuance of common stock		7		—		(88	)		—			—			—			—			(88	)
Amortization of restricted stock units and common stock subject to vesting requirements		—		—		1,781			—			—			—			—			1,781
Net income		—		—		—			—			—			6,909			—			6,909
Foreign currency translation		—		—		—			—			—			—			(1,056	)		(1,056	)
Balance at September 27, 2019		57,137	$	58	$	301,035			(27,280	)	$	(139,660	)	$	(10,221	)	$	(12,465	)	$	138,747
					Additional												Other			Total
	Common Stock				Paid in			Treasury Stock						Accumulated			Comprehensive			Shareholders'
	Shares		Amount		Capital			Shares			Amount			Deficit			Loss			Equity
Balance at December 29, 2017		55,745	$	56	$	288,297			(26,945	)	$	(134,054	)	$	(38,515	)	$	(8,509	)	$	107,275
Issuance of common stock		721		1		(3,004	)		—			—			—			—			(3,003	)
Treasury stock purchased		—		—		1,346			(126	)		(2,310	)		—			—			(964	)
Amortization of restricted stock units and common stock subject to vesting requirements		—		—		3,557			—			—			—			—			3,557
Net income		—		—		—			—			—			7,367			—			7,367
Foreign currency translation		—		—		—			—			—			—			1,152			1,152
Balance at March 30, 2018		56,466	$	57	$	290,196			(27,071	)	$	(136,364	)	$	(31,148	)	$	(7,357	)	$	115,384
Issuance of common stock		56		—		205			—			—			—			—			205
Amortization of restricted stock units and common stock subject to vesting requirements		—		—		2,264			—			—			—			—			2,264
Dividends declared		—		—		—			—			—			(5,396	)		—			(5,396	)
Net income		—		—		—			—			—			11,521			—			11,521
Foreign currency translation		—		—		—			—			—			—			(2,346	)		(2,346	)
Balance at June 29, 2018		56,522	$	57	$	292,665			(27,071	)	$	(136,364	)	$	(25,023	)	$	(9,703	)	$	121,632
Issuance of common stock		12		—		(123	)		—			—			—			—			(123	)
Amortization of restricted stock units and common stock subject to vesting requirements		—		—		2,138			—			—			—			—			2,138
Net income		—		—		—			—			—			5,157			—			5,157
Foreign currency translation		—		—		—			—			—			—			(432	)		(432	)
Balance at September 28, 2018		56,534	$	57	$	294,680			(27,071	)	$	(136,364	)	$	(19,866	)	$	(10,135	)	$	128,372

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

7

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 28, 2018, included in the Annual Report on Form 10-K filed by the Company with the SEC on March 8, 2019. The consolidated results of operations for the quarter and nine months ended September 27, 2019, 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.

Revenue Recognition

We generate substantially all of our revenue from providing professional services to our clients. We also generate revenue from software licenses, software support, maintenance and subscriptions to our executive and best practices advisory programs. A single contract could include one or multiple performance obligations. For those contracts that have multiple performance obligations, we allocate the total transaction price to each performance obligation based on its relative standalone selling price.  We determine the standalone selling price based on the respective selling price of the individual elements when they are sold separately.  

Revenue is recognized when control of the goods and services provided are transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods and services using the following steps: 1) identify the contract, 2) identify the performance obligations, 3) determine the transaction price, 4) allocate the transaction price to the performance obligations in the contract, and 5) recognize revenue as or when we satisfy the performance obligations.  

We typically satisfy our performance obligations for professional services over time as the related services are provided. The performance obligations related to software support, maintenance and subscriptions to our executive and best practice advisory programs are typically satisfied evenly over the course of the service period. Other performance obligations, such as software licenses, are satisfied at a point in time.

We generate our revenue under four types of billing arrangements: fixed-fee (including software license revenue); time-and-materials; executive and best practice advisory services; and software sales, maintenance and support.

In fixed-fee billing arrangements, which would also include contracts with capped fees, we agree to a pre-established fee or fee cap in exchange for a predetermined set of professional services. We set the fees based on our estimates of the costs and timing for completing the engagements. We generally recognize revenue under fixed-fee or capped fee arrangements using a proportionate performance approach, which is based on work completed to-date as compared to estimates of the total services to be provided under the engagement. Estimates of total engagement revenue and cost of services are monitored regularly during the term of the engagement. If our estimates indicate a potential loss, such loss is recognized in the period in which the loss first becomes probable and reasonably estimable. The customer is invoiced based on the contractual agreement between the parties, typically bi-weekly, monthly or mile-stone driven, with net thirty-day terms.

Time-and-material billing arrangements require the client to pay based on the number of hours worked by our consultants at agreed upon hourly rates. We recognize revenue under time-and-material arrangements as the related services or goods are provided, using the right to invoice practical expedient which allows us to recognize revenue in the amount based on the number of hours worked and the agreed upon hourly rates.  The customer is invoiced based on the contractual agreement between the parties, typically bi-weekly, monthly or milestone driven, with net thirty-day terms.

8

The Hackett Group, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Basis of Presentation and General Information (continued)

Advisory services contracts are typically in the form of a subscription agreement which allows the customer access to the Company’s executive and best practice advisory programs.  There is typically a single performance obligation and the transaction price is the contractual amount of the subscription agreement.  Revenue from advisory service contracts is recognized ratably over the life of the agreements.  Customers are typically invoiced at the inception of the contract, with net thirty-day terms.

The resale of software and maintenance contracts are in the form of SAP America software license or maintenance agreements provided by SAP America.  SAP is the principal and the Company is the agent in these transactions as the Company does not obtain title to the software and the maintenance is sold simultaneously.  The transaction price is the Company’s agreed-upon percentage of the software license or maintenance amount in the contract with the vendor.  Revenue for the resale of software licenses is recognized upon contract execution and customer’s receipt of the software. Revenue from maintenance contracts is recognized ratably over the life of the agreements.  The customer is typically invoiced at contract inception, with net thirty-day terms.

Expense reimbursements that are billable to clients are included in total revenue, and are substantially all billed as time-and-material billing arrangements.  Therefore, the Company recognizes all reimbursable expenses as revenue as the related services are provided, using the right to invoice practical expedient. Reimbursable expenses are recognized as expenses in the period in which the expense is incurred.  Any expense reimbursements that are billable to clients under fixed-fee billing arrangements are recognized in line with the proportionate performance approach.  

The payment terms and conditions in our customer contracts vary. The agreements entered into in connection with a project, whether time-and-materials-based or fixed-fee or capped-fee based, typically allow clients to terminate early due to breach or for convenience with 30 days’ notice. In the event of termination, the client is typically contractually required to pay for all time, materials and expenses incurred by the Company through the effective date of the termination. In addition, from time to time the Company enters into agreements with its clients that limit its ability to enter into business relationships with specific competitors of that client for a specific time period. These provisions typically prohibit the Company from performing a defined range of services which it might otherwise be willing to perform for potential clients. These provisions are generally limited to six to twelve months and usually apply only to specific employees or the specific project team.

Sales tax collected from customers and remitted to the applicable taxing authorities is accounted for on a net basis, with no impact to revenue.

Differences between the timing of billings and the recognition of revenue are recognized as either unbilled services or contract liabilities in the accompanying consolidated balance sheets. Revenue recognized for services performed but not yet billed to clients are recorded as unbilled services. Revenue recognized, but for which the Company is not yet entitled to bill because certain events, such as the completion of the measurement period, are recorded as contract assets and included within unbilled services. Client prepayments are classified as contract liabilities and recognized over future periods as earned in accordance with the applicable engagement agreement. See Note 3 for the accounts receivable and contract asset balances and see Note 4 for the contract liabilities balances. During the quarter and nine months ended September 27, 2019, the Company recognized $3.8 million and $12.0 million, respectively, of revenue as a result of changes in contract liabilities liability balance, as compared to $4.2 million and $14.0 million for the quarter and nine months ended September 28, 2018, respectively. 

The following table reflects the Company’s disaggregation of total revenue including reimbursable expenses for the quarters and nine months ended September 27, 2019 and September 28, 2018:

	Quarter Ended				Nine Months Ended
	September 27,		September 28,		September 27,		September 28,
	2019		2018		2019		2018
Consulting	$	65,971	$	67,614	$	194,710	$	200,903
Software License Sales		784		569		2,391		2,025
Revenue before reimbursements from continuing operations	$	66,755	$	68,183	$	197,101	$	202,928

9

The Hackett Group, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Basis of Presentation and General Information (continued)

Capitalized Sales Commissions

Sales commissions earned by our sales force are considered incremental and recoverable costs of obtaining a contract with a customer. These costs are deferred and then amortized as project revenue is recognized.  We determined the period of amortization by taking into consideration the customer contract period, which are generally less than 12 months. Commission expense is included in Selling, General and Administrative Costs in the accompanying condensed consolidated statements of operations. As of December 28, 2018, and December 29, 2017, the Company had $1.2 million and $1.4 million, respectively, of deferred commissions, of which $0.4 million and $0.9 million was amortized during the quarter and nine months of 2019 and $0.1 million and $0.7 million for the same periods in 2018. No impairment loss was recognized relating to the capitalization of deferred commission during either years.

Practical Expedients

The Company does not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less.  The Company does not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the customer and the transfer of the promised goods or services to the customer will be less than one year.

Discontinued Operations

The Company’s European REL Working Capital group’s sales had declined over the past several years as European countries have experienced continued economic recoveries and improved cash balances.  Companies are holding high cash reserves which drove working capital project sales of this group down across all of Europe. The REL practice had a limited pipeline of potential client engagements; therefore, the Company made the strategic decision to exit the business at the end of fiscal year 2018.

The following table includes the carrying amounts of the major classes of assets and liabilities presented in discontinued operations in our consolidated balance sheet:

	September 27,		December 28,
	2019		2018
ASSETS
Accounts receivable and contract assets (no allowance as of September 27, 2019 and December 28, 2018)	$	—	$	137
Assets related to discontinued operations	$	—	$	137
LIABILITIES
Accrued expenses and other liabilities (1)	$	22	$	2,300
Liabilities related to discontinued operations	$	22	$	2,300
(1) The balance at December 28, 2018, primarily represents the accrued severance related to terminated employees.

10

The Hackett Group, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Basis of Presentation and General Information (continued)

The following table presents the gain and loss results for the Company’s discontinued operations:

	Quarter Ended						Nine Months Ended
	September 27,			September 28,			September 27,			September 28,
	2019			2018			2019			2018
Revenue:
Revenue before reimbursements	$	—		$	60		$	75		$	2,404
Reimbursements		—			62			17			466
Total revenue		—			122			92			2,870
Costs and expenses:
Cost of service:
Personnel costs before reimbursable expenses		2			503			26			2,410
Reimbursable expenses		—			62			17			466
Total cost of service		2			565			43			2,876
Selling, general and administrative costs		(4	)		183			52			785
Total costs and operating expenses		(2	)		748			95			3,661
Income (loss) from discontinued operations before income taxes		2			(626	)		(3	)		(791	)
Income tax expense (benefit)		—			(112	)		1			(192	)
Income (loss) from discontinued operations	$	2		$	(514	)	$	(4	)	$	(599	)

Fair Value

The Company’s financial instruments consist of cash and cash equivalents, accounts receivable and contract assets, accounts payable, accrued expenses and other liabilities and debt. As of September 27, 2019 and December 28, 2018, 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 February 2016, the FASB issued guidance on leases which supersedes the current lease guidance. The core principle establishes a right-of-use (ROU) model that requires lessees to recognize the assets and liabilities that arise from nearly all leases on the balance sheet. Accounting applied by lessees has remain largely consistent with previous guidance. The Company adopted the amended guidance effective December 29, 2018, including interim periods within this fiscal year, using the effective date as the date of initial application. Consequently, on adoption, the Company recognized additional operating liabilities of approximately $9.0 million, with corresponding ROU assets of approximately the same amount based on the present value of the remaining minimum rental payments under current leasing standards for existing operating leases. The amended guidance did not have a material impact on the Company’s consolidated statements of comprehensive income or its consolidated statements of cash flows. See Note 5 for additional information.

11

The Hackett Group, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Basis of Presentation and General Information (continued)

In July 2018, the FASB issued ASU 2018-09, which affects a wide variety of topics in the Codification and applies to all reporting entities within the scope of the affected accounting guidance.  The amendments in the ASU represent changes that clarify, correct errors in, or make minor improvements to the Codification.  Ultimately, the amendments make the Codification easier to understand and apply by eliminating inconsistencies and providing clarifications.  Some of the amendments in this ASU do not require transition guidance and are effective upon issuance of the ASU, while many of the amendments have transition guidance with effective dates for annual periods beginning after December 15, 2018.  The adoption of the amendments in this ASU did not have a material impact on the Company’s consolidated financial statements and related disclosures.

In January 2017, the FASB issued ASU 2017-04, which eliminates Step 2 from the goodwill impairment test. For public companies, this update will be effective for interim and annual periods beginning after December 15, 2019, with early adoption permitted for interim and annual goodwill impairment test with a measurement date after January 1, 2017. The Company does not expect the guidance to have a material impact on the Company’s 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.

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.

Diluted 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 27,		September 28,		September 27,		September 28,
	2019		2018		2019		2018
Basic weighted average common shares outstanding		29,876,468		29,478,243		29,794,091		29,332,508
Effect of dilutive securities:
Unvested restricted stock units and common stock subject to vesting requirements issued to employees and non-employees		350,842		684,045		270,776		507,508
Common stock issuable upon the exercise of stock options and share appreciation rights (SARs)		2,343,432		2,431,071		2,348,248		2,374,403
Dilutive weighted average common shares outstanding		32,570,742		32,593,359		32,413,115		32,214,419

Approximately 26 thousand shares and 39 thousand 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 27, 2019, respectively, as compared to 1 thousand shares and 2 thousand shares for the quarter and nine months ended September 28, 2018, respectively, as their inclusion would have had an anti-dilutive effect on diluted net income per common share.   

12

The Hackett Group, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

3. Accounts Receivable and Contract Assets, Net

Accounts receivable and contract assets, net, consisted of the following (in thousands):

	September 27,			December 28,
	2019			2018
Accounts receivable	$	41,208		$	35,794
Contract assets		17,392			20,454
Allowance for doubtful accounts		(710	)		(1,441	)
Accounts receivable and contract assets, net	$	57,890		$	54,807

Accounts receivable is net of uncollected advanced billings. Contract assets represent revenue for services performed that have not been invoiced.

4. Accrued Expenses and Other Liabilities

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

	September 27,		December 28,
	2019		2018
Accrued compensation and benefits	$	9,392	$	5,012
Accrued bonuses		2,063		5,064
Accrued dividend payable		—		5,407
Acquisition earnout accruals		1,112		2,559
Contract liabilities		9,827		8,259
Accrued sales, use, franchise and VAT tax		2,956		3,077
Non-cash stock compensation accrual		689		872
Income tax payable		3,591		1,769
Other accrued expenses		1,820		2,479
Total accrued expenses and other liabilities	$	31,450	$	34,498

5. Leases

As described in Note 1 “Recently Issued Accounting Standards”, effective December 29, 2018, the Company adopted the new lease accounting standard. The Company has operating leases for office space and, to a much lesser extent, operating leases for equipment. The Company’s office leases are between terms of 1 and 10 years. Rents usually increase annually in accordance with defined rent steps or are based on current year consumer price index adjustments. Some of the lease agreements contain one or more of the following provisions or clauses: tenant allowances, rent holidays, lease premiums, and rent escalation clauses. There are typically no purchase options, residual value guarantees or restrictive covenants. When renewal options exist, the Company generally does not deem them to be reasonably certain to be exercised, and therefore the amounts are not recognized as part of our lease liability nor our right of use asset.

The components of lease expense during the three and nine months ended September 27, 2019, were as follows (in thousands):

	Three Months		Nine Months
Operating lease cost	$	692	$	2,091
Total net lease costs	$	692	$	2,091

The weighted average remaining lease term is 5.1 years.  Assuming the Company exercises its opt-out option in year 5 for its London office lease, the weighted average remaining lease term would be 3.3 years. The weighted average discount rate utilized is 4%. The discount rates applied to each lease, reflects the Company’s estimated incremental borrowing rate. This includes an assessment of the Company’s credit rating to determine the rate that the Company would have to pay to borrow, on a collateralized basis for a similar term, an amount equal to our lease payments in a similar economic environment. For the quarter and nine months ended September 27, 2019, the Company paid $0.7 million and $2.0 million, respectively, from operating cash flows for operating leases.

13

The Hackett Group, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

5. Leases (continued)

Future minimum lease payments under non-cancellable operating leases as of September 27, 2019, were as follows (in thousands):

2019 (excluding the nine months ended September 27, 2019)	$	688
2020		2,362
2021		1,931
2022		1,676
2023		733
2024 and thereafter		1,831
Total lease payments		9,221
Less imputed interest		(928	)
Total	$	8,293

As of September 27, 2019, the Company does not have any additional operating leases that have not yet commenced that create significant rights and obligations for the Company.

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”, and together with the Revolver, the “Credit Facility”).  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 (the “Credit Agreement”) 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.

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 28, 2019, the Company paid down $2.0 million and a net $4.0 million under the Revolver, respectively,which had a balance of $2.5 million outstanding as of September 27, 2019. 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 Credit Agreement. As of September 27, 2019, the applicable margin percentage was 1.25% 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 27, 2019, was 3.3%. Subsequent to September 27, 2019, the Company paid off the remaining $2.5 million balance outstanding under the Revolver.

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.  As of September 27, 2019, the Company was in compliance with all covenants.

14

The Hackett Group, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

7. Stock Based Compensation

During the nine months ended September 27, 2019, the Company issued 430,412 restricted stock units at a weighted average grant-date fair value of $18.45 per share. As of September 27, 2019, the Company had 948,144 restricted stock units outstanding at a weighted average grant-date fair value of $17.44 per share. As of September 27, 2019, $10.5 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 2.3 years.

During the nine months ended September 27, 2019, 30,773 shares of common stock subject to vesting requirements were issued at a weighted average grant-date fair value of $15.57 per share. As of September 27, 2019, the Company had 96,639 shares of common stock subject to vesting requirements outstanding at a weighted average grant-date fair value of $19.46 per share. As of September 27, 2019, $1.8 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 1.6 years.

Forfeitures for all of the Company’s outstanding equity are recognized as incurred.

8. Shareholders’ Equity

SARs

As of September 27, 2019, the Company had 2.9 million SARs outstanding with an exercise price of $4.00 per share and an expiration date of February 2022.           

Treasury Stock

Under the Company’s share repurchase plan, the Company may repurchase shares of its outstanding common stock either on the open market or through privately negotiated transactions subject to market conditions and trading restrictions. During the nine months ended September 27, 2019, the Company repurchased 193 thousand shares of its common stock at an average price of $15.80, or a total cost of $3.1 million. No shares were repurchased during the three months ended September 27, 2019. As of September 27, 2019, the Company had a total authorization remaining of $3.9 million under the repurchase plan with a total authorization of $142.2 million.

During the nine months ended September 28, 2018, the Company repurchased 53 thousand shares of its common stock at an average price of $18.33 per share for a total cost of $1.0 million.  

The shares repurchased under the share repurchase plan during the quarter and nine months ended September 27, 2019, do not include 5 thousand shares and 129 thousand shares, respectively, which the Company bought back to satisfy employee net vesting obligations for a cost of $88 thousand and $2.5 million, respectively.   During the quarter and nine months ended September 28, 2018, the Company bought back 8 thousand and 191 thousand shares, respectively, at a cost of $0.1 million and $3.3 million, respectively, to satisfy employee net vesting obligations.       

Dividend Program

In early 2019, the Company increased its 2019 annual dividend from $0.34 per share to $0.36 per share to be paid on a semi-annual basis. During the second quarter of 2019, the Company declared its semi-annual dividend of $0.18 per share, which was paid on July 10, 2019, for a total of $5.8 million.These dividends were paid from U.S. domestic sources and are accounted for as an increase to accumulated deficit. Subsequent to September 27, 2019, the Company declared its semi-annual dividend of $0.18 per share for shareholders as of record date December 20, 2019, which is expected to be paid January 7, 2020.

9. Transactions with Related Parties

During the nine months ended September 27, 2019, the Company bought back 28 thousand shares of its common stock from members of its Board of Directors for $0.5 million, or $16.25 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.

15

The Hackett Group, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

11. Geographic and Group Information

Revenue before reimbursements, 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 27,		September 28,		September 27,		September 28,
	2019		2018		2019		2018
Revenue before reimbursements:
North America	$	56,014	$	55,321	$	165,301	$	166,092
International (primarily European countries)		10,741		12,862		31,800		36,836
Revenue before reimbursements from continuing operations	$	66,755	$	68,183	$	197,101	$	202,928

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

	September 27,		December 28,
	2019		2018
Long-lived assets:
North America	$	92,745	$	88,317
International (primarily European countries)		23,211		19,344
Total long-lived assets	$	115,956	$	107,661

As of September 27, 2019 and December 28, 2018, foreign assets included $13.8 million and $14.5 million, respectively, of goodwill related to acquisitions. As of September 27, 2019, foreign assets included $5.6 million of operating lease ROA.   

In the following table (in thousands), U.S. Strategy and Business Transformation Group includes the results of the Company’s domestic Executive Advisory Programs, Benchmarking Services, Business Transformation Practices and IP as a Service offerings (S&BT).  U.S. ERP, EPM and Analytics Solutions includes the results of the Company’s domestic Oracle EEA and SAP Solutions Practices (EEA). International includes results of the Company’s S&BT and EEA Practices, primarily in Europe. The revenue reported in the below table represents revenue following each of the Company’s consultant’s assigned Group and home domicile.

	Quarter Ended				Nine Months Ended
	September 27,		September 28,		September 27,		September 28,
	2019		2018		2019		2018
S&BT	$	27,435	$	26,014	$	78,632	$	76,931
EEA		30,920		29,971		89,049		89,145
International		8,400		12,198		29,420		36,852
Revenue before reimbursements from continuing operations	$	66,755	$	68,183	$	197,101	$	202,928

16

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 and Oracle Cloud Business Application implementation firm. The acquisition of Jibe enhanced 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 initial cash consideration was funded from borrowings under the Revolver. 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 had the opportunity to earn an additional $6.6 million in cash and $4.4 million in Company common stock based on the achievement of the performance targets over the 18 month period following closing for a total of $11.0 million in contingent consideration, a portion of which was to be allocated to key employees in both cash and Company common stock, subject to vesting.  As of October 1, 2019, the earnout was finalized and subsequently settled, resulting in a benefit of $0.1 million and $1.1 million during the quarter and nine months ended September 27, 2019, respectively. During the third quarter and nine months ended September 28, 2018, the Company recorded expense of $0.8 million and a benefit of $3.8 millionin earnings from operations on the consolidated statement of operations related to the contingent earnout liability for the Jibe acquisition earnout expectations.  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. During the quarter and nine months ended September 27, 2019, the Company recorded a benefit of $32 thousand and $0.2 million, respectively, in personnel costs before reimbursements on the consolidated statement of operations leading up to the finalization of the earnout. During the third quarter and nine months ended September 28, 2018, the Company recorded expense of $0.1 million and a benefit of $0.1 millionin earnings from operations on the consolidated statement of operations related to the change in contingent earnout liability for the Jibe acquisition earnout expectations.  

Thesecontingent liabilities have been recorded in the consolidated balance sheet as 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. The Company recorded expense of $34 thousand and a benefit of $0.2 million during the quarter and nine months ended September 27, 2019, ofacquisition-related non-cash stock compensation in cost of sales on the consolidated statement of operations.

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 RPA consulting firm. This acquisition complemented the global strategy and business transformation offerings of the Hackett Group.

The sellers’ purchase consideration was £3.2 million in cash. The closing purchase consideration was funded with the Company’s available funds. In addition, the sellers had 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 had 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 in non-current accrued expenses and other liabilities. The Aecus earnout settlement was completed during the quarter ended September 27, 2019 and resulted in personnelcosts before reimbursements on the consolidated statement of operations of $0.2 million and $24 thousand during the quarter and nine months ended September 27, 2019, respectively related to the cash portion of the earnout.

17

The Hackett Group, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

12. Acquisitions (continued)

Chartered Institute of Management Accountants

Effective October 2017, the Company 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.

13. Subsequent Events

Subsequent to September 27, 2019, the Company expects to record restructuring costs of approximately $2.5 million, primarily for employee severance costs in Europe as well as Australia.  These actions were taken as a result of the continued decline in demand in the Company’s European and Australian markets.  The Company effected these changes to reduce its costs to better align the overall cost structure and organization with anticipated demand for the Company services.

18

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, the impact of Brexit on our business and changes in general economic conditions, interest rates and our ability to obtain additional debt financing if needed. An additional description of our risk factors is set forth in our Annual Report on Form 10-K for the year ended December 28, 2018. 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 IP-based 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 16,500 benchmark and performance studies over 25 years at over 5,900 of the world’s leading companies.

In the following discussion, U.S. Strategy and Business Transformation Group includes the results of our domestic Executive Advisory Programs, Benchmarking Services, Business Transformation Practices and IP as a Service offerings (US S&BT).  U.S. ERP, EPM and Analytics Solutions includes the results of our domestic Oracle EEA and SAP Solutions Practices (US EEA). International includes results of our S&BT and EEA Practices primarily in Europe.

19

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 27,					September 28,					September 27,					September 28,
	2019					2018					2019					2018
Revenue:
Revenue before reimbursements	$	66,755		100.0	%	$	68,183		100.0	%	$	197,101		100.0	%	$	202,928		100.0	%
Reimbursements		5,935					5,535					16,265					16,424
Total revenue		72,690					73,718					213,366					219,352
Costs and expenses:
Cost of service:
Personnel costs before reimbursable expenses		41,026		61.5	%		40,883		60.0	%		120,780		61.3	%		123,635		60.9	%
Stock compensation expense		833					915					2,775					2,915
Acquisition-related compensation expense (benefit)		157					240					(131	)				(549	)
Acquisition-related non-cash stock compensation expense		322					731					690					1,452
Reimbursable expenses		5,935					5,535					16,265					16,424
Total cost of service		48,273					48,304					140,379					143,877
Selling, general and administrative costs		14,085		21.1	%		14,922		21.9	%		43,286		22.0	%		44,164		21.8	%
Non-cash stock compensation expense		776					850					2,268					2,495
Amortization of intangible assets		236					585					789					1,789
Acquisition-related costs		32					—					32					—
Change in acquisition-related contingent consideration liability		(108	)				803					(1,133	)				(3,750	)
Total selling, general, and administrativeexpenses		15,021					17,160					45,242					44,698
Total costs and operating expenses		63,294					65,464					185,621					188,575
Income from operations		9,396		14.1	%		8,254		12.1	%		27,745		14.1	%		30,777		15.2	%
Other expense:
Interest expense		(62	)				(158	)				(268	)				(515	)
Income from continuing operations before income taxes		9,334		14.0	%		8,096		11.9	%		27,477		13.9	%		30,262		14.9	%
Income tax expense		2,427		3.6	%		2,425		3.6	%		6,481		3.3	%		5,618		2.8	%
Income from continuing operations (net of taxes)		6,907					5,671					20,996					24,644
Income (loss) from discontinued operations		2					(514	)				(4	)				(599	)
Net income	$	6,909		10.3	%	$	5,157		7.6	%	$	20,992		10.7	%	$	24,045		11.8	%
Diluted net income per common share	$	0.21				$	0.16				$	0.65				$	0.75

Revenue. We are a global company with operations located in North and South America, Western Europe, Australia and India. Our revenue is denominated in multiple currencies, primarily the U.S. Dollar, British Pound and Euro and as a result is affected by currency exchange rate fluctuations. The impact of currency fluctuations did not have a significant impact on comparisons between the third quarter and nine months ended September 27, 2019 and the comparable periods of 2018. Revenue is analyzed based on geographical location of engagement team personnel.  

Our total Company net revenue from continuing operations, or revenue before reimbursements, decreased by 2.1%, to $66.8 million and 2.9% to $197.1 million in the third quarter and first nine months of 2019, respectively, as compared to $68.2 million and $202.9 million in the same periods of 2018, respectively. In the third quarter of 2019 and 2018, one customer accounted for 6% and 7% of our total revenue, respectively, and during the first nine months of 2018 and both periods in 2019, no customer accounted for more than 5% of our total revenue. See Footnote 11 for revenue by Service Group.

20

US S&BT net revenue increased 5.5%, to $27.4 million, and 2.2%, to $78.6 million during the third quarter and first nine months of 2019,respectively, as compared to the same periods of 2018, driven by strong results across most practices.

EEA net revenue increased 3.2%, to $30.9 million, and decreased less than a one percent, to $89.0 million, during the third quarter and first nine months of 2019, respectively, as compared to the same periods in 2018.  The increase in the third quarter was driven by strong growth from our SAP and Oracle ERP practices, as well as strong cloud revenue growth from our EPM practices partially offsetting our Oracle EPM On-Premise declines.  

International revenue decreased 31.1%, to $8.4 million, and 20.2%, to $29.4 million, during the third quarter and first nine months of 2019, respectively, as compared to the same periods in 2018. This decrease was primarily due to the uncertainties surrounding Brexit which appears to have continued to impact client decision making. In addition to Brexit, a meaningful portion of a European engagement was discontinued when the client was acquired. Total Company international net revenue accounted for 13% and 15% of total Company net revenue during the third quarter and first nine months of 2019, respectively, as compared to 18% for both the same periods in 2018, respectively.

Reimbursements as a percentage of total net revenue were 8.9% and 8.3% during the third quarter and first nine months of 2019, respectively, as compared to 8.1% for the same periods in 2018. Reimbursements are project travel-related expenses passed through to a client with no associated margin.

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 before reimbursable expenses increased slightly to $41.0 million, and decreased 2%, to $120.8 million, for the third quarter and first nine months of 2019, respectively, from $40.9 million and $123.6 million in the same periods of 2018, respectively. Personnel costs before reimbursable expenses, as a percentage of revenue before reimbursements, were 62% and 61% for the third quarter and first nine months of 2019, respectively, as compared to 60% and 61% for the same periods in 2018, respectively.

Non-cash stock compensation expense was $0.8 million and $2.8 million for the third quarter and first nine months of 2019, respectively, as compared to $0.9 million and $2.9 million for the same periods of 2018, respectively.

The acquisition-related compensation expense and benefit in all periods relates 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 is subject to service vesting and as a result has been recorded as compensation expense. The Aecus earnout was settled during the three months ended September 27, 2019 and the Jibe earnout was settled effective October 1, 2019. See Note 12, “Acquisitions” to our consolidated financial statements included in this Quarterly Report on Form 10-Q.

Acquisition related non-cash stock compensation expense in 2019 and 2018 primarily related to our EPM AMS acquisition of Technolab in fiscal 2014 and the Jibe and Aecus acquisitions in 2017. The equity portion of the earnout for Jibe and Aecus resulted in adjustments based on the estimated and final earnout achieved. As discussed above, both earnout achievements have been settled. See Note 12, “Acquisitions” to our consolidated financial statements included in this Quarterly Report on Form 10-Q for further information on the Jibe and Aecus acquisitions.

Selling, General and Administrative Costs (“SG&A”). SG&A primarily consists of salaries, benefits and incentive compensation for the selling, marketing, administrative and executive employees; non-cash compensation expense, amortization of intangible assets, acquisition related costs and various other overhead expenses.

SG&A costs were $14.1 million and $43.3 million for the third quarter and first nine months of 2019, respectively, as compared to $14.9 million and $44.2 million for the same periods in 2018, respectively. These SG&A costs as a percentage of revenue before reimbursements were 21% and 22% during third quarter and first nine months of 2019, respectively, as compared to 22% for both periods in 2018.

Amortization expense was $0.2 million and $0.8 million in the third quarter and first nine months of 2019, respectively, as compared to $0.6 million and $1.8 million in the same periods in 2018. The amortization expense in 2019 and 2018 related to the amortization of the intangible assets acquired in our acquisitions of Jibe and Aecus in the second quarter of 2017, and the buyout of our partner’s joint venture interest in the CGBS Training and Certification Programs in the fourth quarter of 2017. The 2018 amortization expense also includes the amortization of the intangible assets acquired in our 2014 EPM AMS acquisition of Technolab. The intangible assets relate to customer relationships, customer backlog and non-compete agreements. The Jibe and Aecus intangible assets will continue to amortize until 2022, and CGBS Training and Certification Program intangible assets will continue to amortize until 2021.

Non-cash stock compensation expense was $0.8 million and $2.3 million in the third quarter and first nine months of 2019, respectively, as compared to $0.9 million and $2.5 million in the same periods in 2018, respectively.

Acquisition-related Contingent Consideration Liability. The acquisition-related contingent consideration liability related to the cash portion of the Jibe acquisition contingent consideration due to the selling shareholders, which was not subject to vesting, is

21

recorded as part of purchase accounting. The liability was revalued during 2019 and 2018 based on earnout achievement leading up to the final earnout settlement.

Income Taxes. During the third quarter and first nine months of 2019, we recorded $2.4 million and $6.5 million, respectively, of income tax expense related to certain federal, foreign and state taxes which reflected an effective tax rate of 26% and 24%, respectively. In the third quarter and first nine months of 2018, we recorded $2.4 million and $5.6 million, respectively, of income tax expense related to certain federal, foreign and state taxes which reflected an effective tax rate of 30% and 19%, respectively.  

Liquidity and Capital Resources

As of September 27, 2019, and December 28, 2018, we had $16.4 million and $13.8 million, respectively, of cash on the consolidated balance sheets.  We currently believe that available funds (including the cash on hand and funds available for borrowing capacity under our revolving line of credit (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 existing products and services, to respond to competitive pressures or to acquire complementary businesses or technologies. There is no assurance that additional financing would be available when needed or desired.

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

	Nine Months Ended
	September 27,			September 28,
	2019			2018
Cash flows provided by operating activities	$	26,540		$	24,354
Cash flows used in investing activities	$	(3,719	)	$	(7,273	)
Cash flows used in financing activities	$	(20,309	)	$	(21,433	)

Cash Flows from Operating Activities

Net cash provided by operating activities was $26.5 million during the first nine months of 2019, as compared to $24.4 million during the same period in 2018. In 2019, 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 an increase in accounts receivable and contract assets and a decrease in accounts payable due to the timing of vendor payments and a decrease in accrued expenses and liabilities after the payout of 2018 incentive compensation. In 2018, the net cash provided by operating activities was primarily driven by net income adjusted for non-cash items, partially offset by decreases in accounts payable, accrued expenses and other accruals after the payout of 2017 incentive compensation, a decrease in the income tax payable accruals due to the estimated federal tax payments, and an increase in accounts receivable and contract assets.

Cash Flows from Investing Activities

Net cash used in investing activities was $3.7 million and $7.3 million during the first nine months of 2019 and 2018, respectively. During 2019 and 2018, cash flows used in investing activities included investments relating to investments in internal corporate systems, the rollout of new laptops which occurs every three to four years, and our investments relating to the development of our Quantum Leap benchmark technology.  

Cash Flows from Financing Activities

Net cash used in financing activities was $20.3 million and $21.4 million during the first nine months of 2019 and 2018, respectively. The usage of cash in 2019 primarily related to dividend payments of $11.2 million, the repurchase of $5.5 million of the Company’s common stock and net principal paydown under the Revolver of $4.0 million. The usage of cash in 2018 was primarily related to dividend payments of $10.0 million, principal paydown under the Revolver of $7.5 million and the repurchase of $4.3 million of the Company’s common stock.

22

As of September 27, 2019, we had $2.5 million outstanding under the Revolver, with a remaining capacity of approximately $42.5 million. Subsequent to September 27, 2019, the outstanding balance was paid off in full. 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 28, 2018.

23

Item 3.Quantitative and Qualitative Disclosures About Market Risk.

As of September 27, 2019, 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 27, 2019.

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 Chief Executive Officer and Chief 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 Chief Executive Officer and Chief 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.

Changes in Internal Control Over Financial Controls

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 28, 2018.

24

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

Issuer Purchases of Equity Securities

During the quarter ended September 27, 2019, the Company did not repurchase any shares of its common stock under the repurchase plan approved by the Company's Board of Directors. As of September 27, 2019, the Company had $3.9 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 28, 2019							$	3,877,922
June 29, 2019 to July 26, 2019		—	$	—		—	$	3,877,922
July 27, 2019 to August 23, 2019		—	$	—		—	$	3,877,922
August 24, 2019 to September 27, 2019		—	$	—		—	$	3,877,922
		—	$	—		—

Shares repurchased during the quarter and nine months ended September 27, 2019 under the repurchase plan approved by the Company's Board of Directors do not include 5 thousand shares and 129 thousand shares, respectively, for a cost of $88 thousand and $2.5 million, respectively, that the Company bought back to satisfy employee net vesting obligations.  

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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).
10.1*	Amendment to the Registrant’s 1998 Stock Option and Incentive Plan (Amended and Restated as of March 16, 2015) dated October 31, 2019.
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

26

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 6, 2019	/s/ Robert A. Ramirez
	Robert A. Ramirez
	Executive Vice President, Finance and Chief Financial Officer

27

EX-10.1

Exhibit 10.1

AMENDMENT TO

THE HACKETT GROUP, INC. 1998 STOCK OPTION AND INCENTIVE PLAN

(Amended and Restated as of March 16, 2015)

This Amendment (the “Amendment”) to The Hackett Group, Inc. 1998 Stock Option and Incentive Plan, as amended and restated as of March 16, 2015 (the “Plan”), which provides certain protection for recipients of awards under the Plan who are involuntarily terminated following a Change of Control, as such term is defined in the Plan, was adopted by the Board of Directors of The Hackett Group, Inc. (the “Company”) on October 31, 2019, and is effective as of such date.

1. The Plan hereby is amended by adding the following new definition in alphabetical order to Section 2:

“Cause” shall have the meaning, with respect to a Grantee, as set forth in any employment agreement between the Company or any Affiliate and the Grantee; provided, however, that in the absence of an employment agreement containing such definition, “Cause” means, with respect to a Grantee:

(a) the commission of a felony or a crime involving moral turpitude or the commission of any other act or omission involving dishonesty or fraud with respect to the Company or any of its Subsidiaries or any of their customers or suppliers;

(b) conduct tending to bring the Company or any of its Subsidiaries into substantial public disgrace or disrepute;

(c) substantial and repeated failure to perform Grantee’s duties, and such failure is not cured within 30 days after the Grantee receives notice thereof;

(d) gross negligence or willful misconduct with respect to the Company or any of its Subsidiaries; or

(e) any breach of any confidentiality, non-solicitation or non-competition agreement to which Grantee is bound.

2. The Plan is hereby further amended to add the following new sentences to the end of Section 18.3:

“In the event a Grantee’s Grant is assumed, continued, or substituted for in accordance with the immediately preceding sentence, and his or her employment or service is terminated without Cause within twelve (12) months following the consummation of such Change of Control, the Grantee shall be immediately vested in the unvested portion of his or her Grant as of such termination of employment or service. For the avoidance of doubt, the immediately preceding provision shall apply to all Grants under the Plan, regardless of when granted.”

* * *

To record adoption of the Amendment of the Plan by the Board of Directors as of October 31, 2019, the Company has caused its authorized officer to execute this Amendment to the Plan.

The Hackett Group, Inc.

/s/ Frank A. Zomerfeld

Name: Frank A. Zomerfeld

Title: Secretary

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 6, 2019	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 6, 2019	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 27, 2019, 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 6, 2019
By:	/s/ Robert A. Ramirez
	Robert A. Ramirez
	Executive Vice President, Finance and Chief Financial Officer
	November 6, 2019

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

Geographic and Group Information (Tables)

9 Months Ended

Sep. 27, 2019

Segment Reporting [Abstract]

Geographic Revenue before Reimbursement

Revenue before reimbursements, 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 27,		September 28,		September 27,		September 28,
	2019		2018		2019		2018
Revenue before reimbursements:
North America	$	56,014	$	55,321	$	165,301	$	166,092
International (primarily European countries)		10,741		12,862		31,800		36,836
Revenue before reimbursements from continuing operations	$	66,755	$	68,183	$	197,101	$	202,928

Long-Lived Assets Attributable To Geographic Area

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

	September 27,		December 28,
	2019		2018
Long-lived assets:
North America	$	92,745	$	88,317
International (primarily European countries)		23,211		19,344
Total long-lived assets	$	115,956	$	107,661

Revenue By Service Group

In the following table (in thousands), U.S. Strategy and Business Transformation Group includes the results of the Company’s domestic Executive Advisory Programs, Benchmarking Services, Business Transformation Practices and IP as a Service offerings (S&BT).  U.S. ERP, EPM and Analytics Solutions includes the results of the Company’s domestic Oracle EEA and SAP Solutions Practices (EEA). International includes results of the Company’s S&BT and EEA Practices, primarily in Europe. The revenue reported in the below table represents revenue following each of the Company’s consultant’s assigned Group and home domicile.

	Quarter Ended				Nine Months Ended
	September 27,		September 28,		September 27,		September 28,
	2019		2018		2019		2018
S&BT	$	27,435	$	26,014	$	78,632	$	76,931
EEA		30,920		29,971		89,049		89,145
International		8,400		12,198		29,420		36,852
Revenue before reimbursements from continuing operations	$	66,755	$	68,183	$	197,101	$	202,928

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Net Income Per Common Share (Tables)

9 Months Ended

Sep. 27, 2019

Earnings Per Share [Abstract]

Reconciliation Of Basic And Diluted Weighted Average Shares

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

	Quarter Ended				Nine Months Ended
	September 27,		September 28,		September 27,		September 28,
	2019		2018		2019		2018
Basic weighted average common shares outstanding		29,876,468		29,478,243		29,794,091		29,332,508
Effect of dilutive securities:
Unvested restricted stock units and common stock subject to vesting requirements issued to employees and non-employees		350,842		684,045		270,776		507,508
Common stock issuable upon the exercise of stock options and share appreciation rights (SARs)		2,343,432		2,431,071		2,348,248		2,374,403
Dilutive weighted average common shares outstanding		32,570,742		32,593,359		32,413,115		32,214,419

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Shareholders' Equity (Narrative) (Details) - USD ($) $ / shares in Units, shares in Thousands		3 Months Ended						9 Months Ended
	Dec. 20, 2019	Sep. 27, 2019	Jun. 28, 2019	Mar. 29, 2019	Sep. 28, 2018	Jun. 29, 2018	Mar. 30, 2018	Sep. 27, 2019	Sep. 28, 2018
Equity, Class of Treasury Stock [Line Items]
Total cost			$ 1,440,000	$ 1,616,000			$ 964,000
Amount available under repurchase plan		$ 3,900,000						$ 3,900,000
Stock repurchase authorized		$ 142,200,000						$ 142,200,000
Shares repurchased for employee net vesting obligations, shares		5			8			129	191
Shares repurchased for employee net vesting obligations, value		$ 88,000			$ 100,000			$ 2,500,000	$ 3,300,000
Dividend declared			$ 0.18
Dividend payment			$ 5,789,000			$ 5,396,000
Dividend declared, date of payment			Jul. 10, 2019
Forecast [Member]
Equity, Class of Treasury Stock [Line Items]
Dividend declared	$ 0.18
Dividend declared, date of payment	Jan. 07, 2020
Dividends payable, date of record	Dec. 20, 2019
Minimum [Member]
Equity, Class of Treasury Stock [Line Items]
Dividend declared								$ 0.34
Maximum [Member]
Equity, Class of Treasury Stock [Line Items]
Dividend declared								$ 0.36
Share Repurchase Plan [Member]
Equity, Class of Treasury Stock [Line Items]
Repurchase of common stock		0						193	53
Purchase price per share								$ 15.80	$ 18.33
Total cost								$ 3,100,000	$ 1,000,000
SARs [Member]
Equity, Class of Treasury Stock [Line Items]
SARs outstanding		2,900						2,900
Exercise price		$ 4.00						$ 4.00
Expiration date								Feb. 28, 2022

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Geographic and Group Information (Narrative) (Details) - USD ($) $ in Millions	Sep. 27, 2019	Sep. 28, 2018
Segment Reporting [Abstract]
Goodwill included in foreign assets	$ 13.8	$ 14.5
Operating lease ROA included in foreign assets	$ 5.6

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Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 27, 2019	Dec. 28, 2018
Current assets:
Cash	$ 16,423	$ 13,808
Accounts receivable and contract assets, net of allowance of $710 and $1,441 at September 27, 2019 and December 28, 2018, respectively	57,890	54,807
Prepaid expenses and other current assets	3,664	4,339
Assets related to discontinued operations		137
Total current assets	77,977	73,091
Property and equipment, net	21,080	19,750
Other assets	2,801	3,704
Goodwill, net	83,782	84,207
Operating lease right-of-use assets	8,293
Total assets	193,933	180,752
Current liabilities:
Accounts payable	5,217	7,429
Accrued expenses and other liabilities	31,450	34,498
Operating lease liabilities	2,678
Liabilities related to discontinued operations	22	2,300
Total current liabilities	39,367	44,227
Long-term deferred tax liability, net	7,704	6,435
Long-term debt	2,500	6,500
Operating lease liabilities	5,615
Total liabilities	55,186	57,162
Commitments and contingencies
Shareholders’ equity:
Preferred stock, $0.001 par value, 1,250,000 shares authorized; none issued and outstanding
Common stock, $0.001 par value, 125,000,000 shares authorized 57,137,480 and 56,607,622 shares issued at September 27, 2019 and December 28, 2018, respectively	58	57
Additional paid-in capital	301,035	296,955
Treasury stock, at cost, 27,280,200 and 27,086,782 shares September 27, 2019 and December 28, 2018, respectively	(139,660)	(136,604)
Accumulated deficit	(10,221)	(25,424)
Accumulated other comprehensive loss	(12,465)	(11,394)
Total shareholders' equity	138,747	123,590
Total liabilities and shareholders' equity	$ 193,933	$ 180,752

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Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Sep. 27, 2019	Sep. 28, 2018
Cash flows from operating activities:
Net income	$ 20,992	$ 24,045
Less loss from discontinued operations	(4)	(599)
Net income from continuing operations	20,996	24,644
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense	2,320	1,857
Amortization expense	789	1,789
Amortization of debt issuance costs	68	68
Non-cash stock compensation expense	5,733	6,932
Provision for doubtful accounts	719	313
Gain on foreign currency translation	(384)	(425)
Release of valuation allowance	1,277	1,565
Changes in assets and liabilities:
Increase in accounts receivable and contract assets	(3,904)	(1,612)
(Increase) decrease in prepaid expenses and other assets	803	(1,352)
Decrease in accounts payable	(2,213)	(3,317)
Decrease in accrued expenses and other liabilities	(1,463)	(3,033)
Increase (decrease) in income tax payable	1,803	(2,476)
Net cash provided by operating activities	26,540	24,354
Cash flows from investing activities:
Purchases of property and equipment	(3,719)	(7,273)
Net cash used in investing activities	(3,719)	(7,273)
Cash flows from financing activities:
Proceeds from issuance of common stock	418	387
Proceeds from borrowings	1,000	5,000
Repayment of borrowings	(5,000)	(12,500)
Dividends paid	(11,196)	(10,048)
Repurchase of common stock	(5,531)	(4,272)
Net cash used in financing activities	(20,309)	(21,433)
Effect of exchange rate on cash	103	17
Net increase (decrease) in cash and cash equivalents	2,615	(4,335)
Cash at beginning of period	13,808	17,512
Cash at end of period	16,423	13,177
Supplemental disclosure of cash flow information:
Cash paid for income taxes	3,410	5,406
Cash paid for interest	$ 227	$ 450

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Shareholders' Equity

9 Months Ended

Sep. 27, 2019

Stockholders Equity Note [Abstract]

Shareholders' Equity

8. Shareholders’ Equity

SARs

As of September 27, 2019, the Company had 2.9 million SARs outstanding with an exercise price of $4.00 per share and an expiration date of February 2022.           

Treasury Stock

Under the Company’s share repurchase plan, the Company may repurchase shares of its outstanding common stock either on the open market or through privately negotiated transactions subject to market conditions and trading restrictions. During the nine months ended September 27, 2019, the Company repurchased 193 thousand shares of its common stock at an average price of $15.80, or a total cost of $3.1 million. No shares were repurchased during the three months ended September 27, 2019.  As of September 27, 2019, the Company had a total authorization remaining of $3.9 million under the repurchase plan with a total authorization of $142.2 million.

During the nine months ended September 28, 2018, the Company repurchased 53 thousand shares of its common stock at an average price of $18.33 per share for a total cost of $1.0 million.  

The shares repurchased under the share repurchase plan during the quarter and nine months ended September 27, 2019, do not include 5 thousand shares and 129 thousand shares, respectively, which the Company bought back to satisfy employee net vesting obligations for a cost of $88 thousand and $2.5 million, respectively.   During the quarter and nine months ended September 28, 2018, the Company bought back 8 thousand and 191 thousand shares, respectively, at a cost of $0.1 million and $3.3 million, respectively, to satisfy employee net vesting obligations.       

Dividend Program

In early 2019, the Company increased its 2019 annual dividend from $0.34 per share to $0.36 per share to be paid on a semi-annual basis. During the second quarter of 2019, the Company declared its semi-annual dividend of $0.18 per share, which was paid on July 10, 2019, for a total of $5.8 million.These dividends were paid from U.S. domestic sources and are accounted for as an increase to accumulated deficit. Subsequent to September 27, 2019, the Company declared its semi-annual dividend of $0.18 per share for shareholders as of record date December 20, 2019, which is expected to be paid January 7, 2020.

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Accrued Expenses and Other Liabilities

9 Months Ended

Sep. 27, 2019

Accrued Liabilities And Other Liabilities Current [Abstract]

Accrued Expenses and Other Liabilities

4. Accrued Expenses and Other Liabilities

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

	September 27,		December 28,
	2019		2018
Accrued compensation and benefits	$	9,392	$	5,012
Accrued bonuses		2,063		5,064
Accrued dividend payable		—		5,407
Acquisition earnout accruals		1,112		2,559
Contract liabilities		9,827		8,259
Accrued sales, use, franchise and VAT tax		2,956		3,077
Non-cash stock compensation accrual		689		872
Income tax payable		3,591		1,769
Other accrued expenses		1,820		2,479
Total accrued expenses and other liabilities	$	31,450	$	34,498

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Acquisitions

9 Months Ended

Sep. 27, 2019

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 and Oracle Cloud Business Application implementation firm. The acquisition of Jibe enhanced 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 initial cash consideration was funded from borrowings under the Revolver. 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 had the opportunity to earn an additional $6.6 million in cash and $4.4 million in Company common stock based on the achievement of the performance targets over the 18 month period following closing for a total of $11.0 million in contingent consideration, a portion of which was to be allocated to key employees in both cash and Company common stock, subject to vesting.  As of October 1, 2019, the earnout was finalized and subsequently settled, resulting in a benefit of $0.1 million and $1.1 million during the quarter and nine months ended September 27, 2019, respectively. During the third quarter and nine months ended September 28, 2018, the Company recorded expense of $0.8 million and a benefit of $3.8 millionin earnings from operations on the consolidated statement of operations related to the contingent earnout liability for the Jibe acquisition earnout expectations.  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. During the quarter and nine months ended September 27, 2019, the Company recorded a benefit of $32 thousand and $0.2 million, respectively, in personnel costs before reimbursements on the consolidated statement of operations leading up to the finalization of the earnout. During the third quarter and nine months ended September 28, 2018, the Company recorded expense of $0.1 million and a benefit of $0.1 millionin earnings from operations on the consolidated statement of operations related to the change in contingent earnout liability for the Jibe acquisition earnout expectations.  

Thesecontingent liabilities have been recorded in the consolidated balance sheet as 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. The Company recorded expense of $34 thousand and a benefit of $0.2 million during the quarter and nine months ended September 27, 2019, ofacquisition-related non-cash stock compensation in cost of sales on the consolidated statement of operations.

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 RPA consulting firm. This acquisition complemented the global strategy and business transformation offerings of the Hackett Group.

The sellers’ purchase consideration was £3.2 million in cash. The closing purchase consideration was funded with the Company’s available funds. In addition, the sellers had 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 had 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 in non-current accrued expenses and other liabilities. The Aecus earnout settlement was completed during the quarter ended September 27, 2019 and resulted in personnelcosts before reimbursements on the consolidated statement of operations of $0.2 million and $24 thousand during the quarter and nine months ended September 27, 2019, respectively related to the cash portion of the earnout.

12. Acquisitions (continued)

Chartered Institute of Management Accountants

Effective October 2017, the Company 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.

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Basis of Presentation and General Information (Gain and Loss Results for Discontinued Operations) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 27, 2019	Sep. 28, 2018	Sep. 27, 2019	Sep. 28, 2018
Cost of service:
Income (loss) from discontinued operations	$ 2	$ (514)	$ (4)	$ (599)
European REL Working Capital group [Member]
Revenue:
Total revenue		122	92	2,870
Cost of service:
Total cost of service	2	565	43	2,876
Selling, general and administrative costs	(4)	183	52	785
Total costs and operating expenses	(2)	748	95	3,661
Income (loss) from discontinued operations before income taxes	2	(626)	(3)	(791)
Income tax expense (benefit)		(112)	1	(192)
Income (loss) from discontinued operations	2	(514)	(4)	(599)
European REL Working Capital group [Member] | Revenue Before Reimbursements [Member]
Revenue:
Total revenue		60	75	2,404
European REL Working Capital group [Member] | Reimbursements [Member]
Revenue:
Total revenue		62	17	466
Cost of service:
Total cost of service		62	17	466
European REL Working Capital group [Member] | Cost Before Reimbursements [Member]
Cost of service:
Total cost of service	$ 2	$ 503	$ 26	$ 2,410

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Accrued Expenses and Other Liabilities (Details) - USD ($) $ in Thousands	Sep. 27, 2019	Dec. 28, 2018
Accrued Liabilities And Other Liabilities Current [Abstract]
Accrued compensation and benefits	$ 9,392	$ 5,012
Accrued bonuses	2,063	5,064
Accrued dividend payable		5,407
Acquisition earnout accruals	1,112	2,559
Contract liabilities	9,827	8,259
Accrued sales, use, franchise and VAT tax	2,956	3,077
Non-cash stock compensation accrual	689	872
Income tax payable	3,591	1,769
Other accrued expenses	1,820	2,479
Total accrued expenses and other liabilities	$ 31,450	$ 34,498

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Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Sep. 27, 2019	Dec. 28, 2018
Statement Of Financial Position [Abstract]
Accounts receivable and contract assets, allowance	$ 710	$ 1,441
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	57,137,480	56,607,622
Treasury stock, at cost, shares	27,280,200	27,086,782

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Consolidated Statements of Shareholders' Equity - USD ($) shares in Thousands, $ in Thousands	Total	Common Stock [Member]	Additional Paid-in Capital [Member]	Treasury Stock [Member]	Accumulated Deficit [Member]	Accumulated Other Comprehensive Loss [Member]
Balance at Dec. 29, 2017	$ 107,275	$ 56	$ 288,297	$ (134,054)	$ (38,515)	$ (8,509)
Balance, Shares at Dec. 29, 2017		55,745		(26,945)
Issuance of common stock	(3,003)	$ 1	(3,004)
Issuance of common stock, Shares		721
Treasury stock purchased	(964)		1,346	$ (2,310)
Treasury stock purchased, Shares				(126)
Amortization of restricted stock units and common stock subject to vesting requirements	3,557		3,557
Net income	7,367				7,367
Foreign currency translation	1,152					1,152
Balance at Mar. 30, 2018	115,384	$ 57	290,196	$ (136,364)	(31,148)	(7,357)
Ending Balance, Shares at Mar. 30, 2018		56,466		(27,071)
Balance at Dec. 29, 2017	107,275	$ 56	288,297	$ (134,054)	(38,515)	(8,509)
Balance, Shares at Dec. 29, 2017		55,745		(26,945)
Net income	24,045
Foreign currency translation	(1,626)
Balance at Sep. 28, 2018	128,372	$ 57	294,680	$ (136,364)	(19,866)	(10,135)
Ending Balance, Shares at Sep. 28, 2018		56,534		(27,071)
Balance at Mar. 30, 2018	115,384	$ 57	290,196	$ (136,364)	(31,148)	(7,357)
Balance, Shares at Mar. 30, 2018		56,466		(27,071)
Issuance of common stock	205		205
Issuance of common stock, Shares		56
Amortization of restricted stock units and common stock subject to vesting requirements	2,264		2,264
Dividends declared	(5,396)				(5,396)
Net income	11,521				11,521
Foreign currency translation	(2,346)					(2,346)
Balance at Jun. 29, 2018	121,632	$ 57	292,665	$ (136,364)	(25,023)	(9,703)
Ending Balance, Shares at Jun. 29, 2018		56,522		(27,071)
Issuance of common stock	(123)		(123)
Issuance of common stock, Shares		12
Amortization of restricted stock units and common stock subject to vesting requirements	2,138		2,138
Net income	5,157				5,157
Foreign currency translation	(432)					(432)
Balance at Sep. 28, 2018	128,372	$ 57	294,680	$ (136,364)	(19,866)	(10,135)
Ending Balance, Shares at Sep. 28, 2018		56,534		(27,071)
Balance at Dec. 28, 2018	123,590	$ 57	296,955	$ (136,604)	(25,424)	(11,394)
Balance, Shares at Dec. 28, 2018		56,615		(27,086)
Issuance of common stock	(2,372)	$ 1	(2,373)
Issuance of common stock, Shares		394
Treasury stock purchased	(1,616)			$ (1,616)
Treasury stock purchased, Shares				(102)
Amortization of restricted stock units and common stock subject to vesting requirements	2,394		2,394
Net income	7,094				7,094
Foreign currency translation	657					657
Balance at Mar. 29, 2019	129,747	$ 58	296,976	$ (138,220)	(18,330)	(10,737)
Ending Balance, Shares at Mar. 29, 2019		57,009		(27,188)
Balance at Dec. 28, 2018	123,590	$ 57	296,955	$ (136,604)	(25,424)	(11,394)
Balance, Shares at Dec. 28, 2018		56,615		(27,086)
Net income	20,992
Foreign currency translation	(1,071)
Balance at Sep. 27, 2019	138,747	$ 58	301,035	$ (139,660)	(10,221)	(12,465)
Ending Balance, Shares at Sep. 27, 2019		57,137		(27,280)
Balance at Mar. 29, 2019	129,747	$ 58	296,976	$ (138,220)	(18,330)	(10,737)
Balance, Shares at Mar. 29, 2019		57,009		(27,188)
Issuance of common stock	405		405
Issuance of common stock, Shares		121
Treasury stock purchased	(1,440)			$ (1,440)
Treasury stock purchased, Shares				(92)
Amortization of restricted stock units and common stock subject to vesting requirements	1,961		1,961
Dividends declared	(5,789)				(5,789)
Net income	6,989				6,989
Foreign currency translation	(672)					(672)
Balance at Jun. 28, 2019	131,201	$ 58	299,342	$ (139,660)	(17,130)	(11,409)
Ending Balance, Shares at Jun. 28, 2019		57,130		(27,280)
Issuance of common stock	(88)		(88)
Issuance of common stock, Shares		7
Amortization of restricted stock units and common stock subject to vesting requirements	1,781		1,781
Net income	6,909				6,909
Foreign currency translation	(1,056)					(1,056)
Balance at Sep. 27, 2019	$ 138,747	$ 58	$ 301,035	$ (139,660)	$ (10,221)	$ (12,465)
Ending Balance, Shares at Sep. 27, 2019		57,137		(27,280)

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Geographic and Group Information

9 Months Ended

Sep. 27, 2019

Segment Reporting [Abstract]

Geographic and Group Information

11. Geographic and Group Information

Revenue before reimbursements, 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 27,		September 28,		September 27,		September 28,
	2019		2018		2019		2018
Revenue before reimbursements:
North America	$	56,014	$	55,321	$	165,301	$	166,092
International (primarily European countries)		10,741		12,862		31,800		36,836
Revenue before reimbursements from continuing operations	$	66,755	$	68,183	$	197,101	$	202,928

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

	September 27,		December 28,
	2019		2018
Long-lived assets:
North America	$	92,745	$	88,317
International (primarily European countries)		23,211		19,344
Total long-lived assets	$	115,956	$	107,661

As of September 27, 2019 and December 28, 2018, foreign assets included $13.8 million and $14.5 million, respectively, of goodwill related to acquisitions. As of September 27, 2019, foreign assets included $5.6 million of operating lease ROA.   

In the following table (in thousands), U.S. Strategy and Business Transformation Group includes the results of the Company’s domestic Executive Advisory Programs, Benchmarking Services, Business Transformation Practices and IP as a Service offerings (S&BT).  U.S. ERP, EPM and Analytics Solutions includes the results of the Company’s domestic Oracle EEA and SAP Solutions Practices (EEA). International includes results of the Company’s S&BT and EEA Practices, primarily in Europe. The revenue reported in the below table represents revenue following each of the Company’s consultant’s assigned Group and home domicile.

	Quarter Ended				Nine Months Ended
	September 27,		September 28,		September 27,		September 28,
	2019		2018		2019		2018
S&BT	$	27,435	$	26,014	$	78,632	$	76,931
EEA		30,920		29,971		89,049		89,145
International		8,400		12,198		29,420		36,852
Revenue before reimbursements from continuing operations	$	66,755	$	68,183	$	197,101	$	202,928

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Stock Based Compensation

9 Months Ended

Sep. 27, 2019

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock Based Compensation

7. Stock Based Compensation

During the nine months ended September 27, 2019, the Company issued 430,412 restricted stock units at a weighted average grant-date fair value of $18.45 per share. As of September 27, 2019, the Company had 948,144 restricted stock units outstanding at a weighted average grant-date fair value of $17.44 per share. As of September 27, 2019, $10.5 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 2.3 years.

During the nine months ended September 27, 2019, 30,773 shares of common stock subject to vesting requirements were issued at a weighted average grant-date fair value of $15.57 per share. As of September 27, 2019, the Company had 96,639 shares of common stock subject to vesting requirements outstanding at a weighted average grant-date fair value of $19.46 per share. As of September 27, 2019, $1.8 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 1.6 years.

Forfeitures for all of the Company’s outstanding equity are recognized as incurred.

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Accounts Receivable and Contract Assets, Net

9 Months Ended

Sep. 27, 2019

Accounts Receivable And Contract Assets Net Current [Abstract]

Accounts Receivable and Contract Assets, Net

3. Accounts Receivable and Contract Assets, Net

Accounts receivable and contract assets, net, consisted of the following (in thousands):

	September 27,			December 28,
	2019			2018
Accounts receivable	$	41,208		$	35,794
Contract assets		17,392			20,454
Allowance for doubtful accounts		(710	)		(1,441	)
Accounts receivable and contract assets, net	$	57,890		$	54,807

Accounts receivable is net of uncollected advanced billings. Contract assets represent revenue for services performed that have not been invoiced.

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Net Income Per Common Share (Reconciliation of Basic and Diluted Weighted Average Shares) (Details) - shares	3 Months Ended		9 Months Ended
	Sep. 27, 2019	Sep. 28, 2018	Sep. 27, 2019	Sep. 28, 2018
Earnings Per Share [Abstract]
Basic weighted average common shares outstanding	29,876,468	29,478,243	29,794,091	29,332,508
Unvested restricted stock units and common stock subject to vesting requirements issued to employees and non-employees	350,842	684,045	270,776	507,508
Common stock issuable upon the exercise of stock options and share appreciation rights (SARs)	2,343,432	2,431,071	2,348,248	2,374,403
Dilutive weighted average common shares outstanding	32,570,742	32,593,359	32,413,115	32,214,419

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Leases (Narrative) (Details) $ in Millions	3 Months Ended	9 Months Ended
	Sep. 27, 2019 USD ($)	Sep. 27, 2019 USD ($)
Lessee Lease Description [Line Items]
Weighted average remaining lease term	5 years 1 month 6 days	5 years 1 month 6 days
Weighted average discount rate	4.00%	4.00%
Operating lease payments	$ 0.7	$ 2.0
Lessee, operating lease not yet commenced description		As of September 27, 2019, the Company does not have any additional operating leases that have not yet commenced that create significant rights and obligations for the Company.
Five Year Opt-Out Option for London Office Lease [Member]
Lessee Lease Description [Line Items]
Weighted average remaining lease term	3 years 3 months 18 days	3 years 3 months 18 days
London Office Lease [Member]
Lessee Lease Description [Line Items]
Operating lease opt-out option	5 years	5 years
Minimum [Member]
Lessee Lease Description [Line Items]
Operating leases terms	1 year	1 year
Maximum [Member]
Lessee Lease Description [Line Items]
Operating leases terms	10 years	10 years

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Leases (Tables)

9 Months Ended

Sep. 27, 2019

Leases [Abstract]

Components of Lease Expense

The components of lease expense during the three and nine months ended September 27, 2019, were as follows (in thousands):

	Three Months		Nine Months
Operating lease cost	$	692	$	2,091
Total net lease costs	$	692	$	2,091

Future Minimum Lease Payments Under Non-Cancellable Operating Leases

Future minimum lease payments under non-cancellable operating leases as of September 27, 2019, were as follows (in thousands):

2019 (excluding the nine months ended September 27, 2019)	$	688
2020		2,362
2021		1,931
2022		1,676
2023		733
2024 and thereafter		1,831
Total lease payments		9,221
Less imputed interest		(928	)
Total	$	8,293

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Basis of Presentation and General Information (Tables)

9 Months Ended

Sep. 27, 2019

Summary of Disaggregation of Total Revenue Including Reimbursable Expenses

The following table reflects the Company’s disaggregation of total revenue including reimbursable expenses for the quarters and nine months ended September 27, 2019 and September 28, 2018:

	Quarter Ended				Nine Months Ended
	September 27,		September 28,		September 27,		September 28,
	2019		2018		2019		2018
Consulting	$	65,971	$	67,614	$	194,710	$	200,903
Software License Sales		784		569		2,391		2,025
Revenue before reimbursements from continuing operations	$	66,755	$	68,183	$	197,101	$	202,928

European REL Working Capital group [Member]

Summary of Discontinued Operations

The following table includes the carrying amounts of the major classes of assets and liabilities presented in discontinued operations in our consolidated balance sheet:

	September 27,		December 28,
	2019		2018
ASSETS
Accounts receivable and contract assets (no allowance as of September 27, 2019 and December 28, 2018)	$	—	$	137
Assets related to discontinued operations	$	—	$	137
LIABILITIES
Accrued expenses and other liabilities (1)	$	22	$	2,300
Liabilities related to discontinued operations	$	22	$	2,300
(1) The balance at December 28, 2018, primarily represents the accrued severance related to terminated employees.

1. Basis of Presentation and General Information (continued)

The following table presents the gain and loss results for the Company’s discontinued operations:

	Quarter Ended						Nine Months Ended
	September 27,			September 28,			September 27,			September 28,
	2019			2018			2019			2018
Revenue:
Revenue before reimbursements	$	—		$	60		$	75		$	2,404
Reimbursements		—			62			17			466
Total revenue		—			122			92			2,870
Costs and expenses:
Cost of service:
Personnel costs before reimbursable expenses		2			503			26			2,410
Reimbursable expenses		—			62			17			466
Total cost of service		2			565			43			2,876
Selling, general and administrative costs		(4	)		183			52			785
Total costs and operating expenses		(2	)		748			95			3,661
Income (loss) from discontinued operations before income taxes		2			(626	)		(3	)		(791	)
Income tax expense (benefit)		—			(112	)		1			(192	)
Income (loss) from discontinued operations	$	2		$	(514	)	$	(4	)	$	(599	)

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Transactions with Related Parties (Narrative) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended			9 Months Ended
	Jun. 28, 2019	Mar. 29, 2019	Mar. 30, 2018	Sep. 27, 2019
Related Party Transaction [Line Items]
Total cost	$ 1,440	$ 1,616	$ 964
Director [Member]
Related Party Transaction [Line Items]
Repurchase of common stock				28
Total cost				$ 500
Purchase price per share				$ 16.25

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Geographic and Group Information (Revenue By Service Group) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 27, 2019	Sep. 28, 2018	Sep. 27, 2019	Sep. 28, 2018
Segment Reporting Information [Line Items]
Revenue before reimbursements from continuing operations	$ 72,690	$ 73,718	$ 213,366	$ 219,352
Revenue Before Reimbursements [Member]
Segment Reporting Information [Line Items]
Revenue before reimbursements from continuing operations	66,755	68,183	197,101	202,928
S&BT [Member] | Revenue Before Reimbursements [Member]
Segment Reporting Information [Line Items]
Revenue before reimbursements from continuing operations	27,435	26,014	78,632	76,931
EEA [Member] | Revenue Before Reimbursements [Member]
Segment Reporting Information [Line Items]
Revenue before reimbursements from continuing operations	30,920	29,971	89,049	89,145
International [Member] | Revenue Before Reimbursements [Member]
Segment Reporting Information [Line Items]
Revenue before reimbursements from continuing operations	$ 8,400	$ 12,198	$ 29,420	$ 36,852

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Net Income Per Common Share

9 Months Ended

Sep. 27, 2019

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.

Diluted 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 27,		September 28,		September 27,		September 28,
	2019		2018		2019		2018
Basic weighted average common shares outstanding		29,876,468		29,478,243		29,794,091		29,332,508
Effect of dilutive securities:
Unvested restricted stock units and common stock subject to vesting requirements issued to employees and non-employees		350,842		684,045		270,776		507,508
Common stock issuable upon the exercise of stock options and share appreciation rights (SARs)		2,343,432		2,431,071		2,348,248		2,374,403
Dilutive weighted average common shares outstanding		32,570,742		32,593,359		32,413,115		32,214,419

Approximately 26 thousand shares and 39 thousand 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 27, 2019, respectively, as compared to 1 thousand shares and 2 thousand shares for the quarter and nine months ended September 28, 2018, respectively, as their inclusion would have had an anti-dilutive effect on diluted net income per common share.   

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Document and Entity Information - shares	9 Months Ended
	Sep. 27, 2019	Oct. 31, 2019
Cover [Abstract]
Trading Symbol	HCKT
Entity Registrant Name	HACKETT GROUP, INC.
Entity Central Index Key	0001057379
Document Type	10-Q
Document Period End Date	Sep. 27, 2019
Amendment Flag	false
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q3
Current Fiscal Year End Date	--12-27
Entity Filer Category	Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Common Stock, Shares Outstanding		29,896,607
Title of 12(b) Security	Common Stock, par value $.001 per share
Security Exchange Name	NASDAQ
Entity Shell Company	false
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity File Number	333-48123
Entity Tax Identification Number	65-0750100
Entity Address, Address Line One	1001 Brickell Bay Drive
Entity Address, Address Line Two	Suite 3000
Entity Address, City or Town	Miami
Entity Address, State or Province	FL
Entity Address, Postal Zip Code	33131
City Area Code	305
Local Phone Number	375-8005
Entity Incorporation, State or Country Code	FL
Document Quarterly Report	true
Document Transition Report	false

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Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 27, 2019	Sep. 28, 2018	Sep. 27, 2019	Sep. 28, 2018
Statement Of Income And Comprehensive Income [Abstract]
Net income	$ 6,909	$ 5,157	$ 20,992	$ 24,045
Foreign currency translation adjustment	(1,056)	(432)	(1,071)	(1,626)
Total comprehensive income	$ 5,853	$ 4,725	$ 19,921	$ 22,419

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Leases (Future Minimum Lease Payments Under Non-Cancellable Operating Leases) (Details) - USD ($) $ in Thousands	Sep. 27, 2019	Dec. 29, 2018
Leases [Abstract]
2019 (excluding the nine months ended September 27, 2019)	$ 688
2020	2,362
2021	1,931
2022	1,676
2023	733
2024 and thereafter	1,831
Total lease payments	9,221
Less imputed interest	(928)
Total	$ 8,293	$ 9,000

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Basis of Presentation and General Information (Carrying Amounts of Major Classes of Assets and Liabilities Presented in Discontinued Operations) (Parenthetical) (Details) - USD ($) $ in Thousands	Sep. 27, 2019	Dec. 28, 2018
European REL Working Capital group [Member]
Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items]
Accounts receivable and contract assets, allowance	$ 0	$ 0

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Accounts Receivable and Contract Assets, Net (Details) - USD ($) $ in Thousands	Sep. 27, 2019	Dec. 28, 2018
Accounts Receivable And Contract Assets Net Current [Abstract]
Accounts receivable	$ 41,208	$ 35,794
Contract assets	17,392	20,454
Allowance for doubtful accounts	(710)	(1,441)
Accounts receivable and contract assets, net	$ 57,890	$ 54,807

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Transactions with Related Parties

9 Months Ended

Sep. 27, 2019

Related Party Transactions [Abstract]

Transactions with Related Parties

9. Transactions with Related Parties

During the nine months ended September 27, 2019, the Company bought back 28 thousand shares of its common stock from members of its Board of Directors for $0.5 million, or $16.25 per share.

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Leases

9 Months Ended

Sep. 27, 2019

Leases [Abstract]

Leases

5. Leases

As described in Note 1 “Recently Issued Accounting Standards”, effective December 29, 2018, the Company adopted the new lease accounting standard. The Company has operating leases for office space and, to a much lesser extent, operating leases for equipment. The Company’s office leases are between terms of 1 and 10 years. Rents usually increase annually in accordance with defined rent steps or are based on current year consumer price index adjustments. Some of the lease agreements contain one or more of the following provisions or clauses: tenant allowances, rent holidays, lease premiums, and rent escalation clauses. There are typically no purchase options, residual value guarantees or restrictive covenants. When renewal options exist, the Company generally does not deem them to be reasonably certain to be exercised, and therefore the amounts are not recognized as part of our lease liability nor our right of use asset.

The components of lease expense during the three and nine months ended September 27, 2019, were as follows (in thousands):

	Three Months		Nine Months
Operating lease cost	$	692	$	2,091
Total net lease costs	$	692	$	2,091

The weighted average remaining lease term is 5.1 years.  Assuming the Company exercises its opt-out option in year 5 for its London office lease, the weighted average remaining lease term would be 3.3 years. The weighted average discount rate utilized is 4%. The discount rates applied to each lease, reflects the Company’s estimated incremental borrowing rate. This includes an assessment of the Company’s credit rating to determine the rate that the Company would have to pay to borrow, on a collateralized basis for a similar term, an amount equal to our lease payments in a similar economic environment. For the quarter and nine months ended September 27, 2019, the Company paid $0.7 million and $2.0 million, respectively, from operating cash flows for operating leases.

5. Leases (continued)

Future minimum lease payments under non-cancellable operating leases as of September 27, 2019, were as follows (in thousands):

2019 (excluding the nine months ended September 27, 2019)	$	688
2020		2,362
2021		1,931
2022		1,676
2023		733
2024 and thereafter		1,831
Total lease payments		9,221
Less imputed interest		(928	)
Total	$	8,293

As of September 27, 2019, the Company does not have any additional operating leases that have not yet commenced that create significant rights and obligations for the Company.

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Accounts Receivable and Contract Assets, Net (Tables)

9 Months Ended

Sep. 27, 2019

Accounts Receivable And Contract Assets Net Current [Abstract]

Accounts Receivable and Contract Assets, Net

Accounts receivable and contract assets, net, consisted of the following (in thousands):

	September 27,			December 28,
	2019			2018
Accounts receivable	$	41,208		$	35,794
Contract assets		17,392			20,454
Allowance for doubtful accounts		(710	)		(1,441	)
Accounts receivable and contract assets, net	$	57,890		$	54,807

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Subsequent Events

9 Months Ended

Sep. 27, 2019

Subsequent Events [Abstract]

Subsequent Events

13. Subsequent Events

Subsequent to September 27, 2019, the Company expects to record restructuring costs of approximately $2.5 million, primarily for employee severance costs in Europe as well as Australia.  These actions were taken as a result of the continued decline in demand in the Company’s European and Australian markets.  The Company effected these changes to reduce its costs to better align the overall cost structure and organization with anticipated demand for the Company services.

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Basis of Presentation and General Information (Narrative) (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 27, 2019	Sep. 28, 2018	Sep. 27, 2019	Sep. 28, 2018	Dec. 29, 2018	Dec. 28, 2018	Dec. 29, 2017
Basis Of Presentation And General Information [Line Items]
Revenue recognized as a result of change in contract liability	$ 3,800,000	$ 4,200,000	$ 12,000,000	$ 14,000,000
Deferred commissions						$ 1,200,000	$ 1,400,000
Commissions expense	400,000	100,000	900,000	700,000
Impairment loss recognized to capitalization of deferred commission	0	$ 0	0	$ 0
Additional operating liabilities	8,293,000		8,293,000		$ 9,000,000
Additional operating ROU	$ 8,293,000		$ 8,293,000		$ 9,000,000
Minimum [Member]
Basis Of Presentation And General Information [Line Items]
Business relationship agreement period			6 months
Maximum [Member]
Basis Of Presentation And General Information [Line Items]
Business relationship agreement period			12 months
Customer contract period			12 months

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Subsequent Events (Narrative) (Details) $ in Millions	Sep. 28, 2019 USD ($)
Subsequent Event [Member]
Subsequent Event [Line Items]
Restructuring costs	$ 2.5

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Stock Based Compensation (Narrative) (Details) $ / shares in Units, $ in Millions	9 Months Ended
	Sep. 27, 2019 USD ($) $ / shares shares
Restricted Stock Units (RSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares granted | shares	430,412
Weighted average grant-date fair value | $ / shares	$ 18.45
Shares outstanding | shares	948,144
Nonvested weighted average grant-date fair value | $ / shares	$ 17.44
Compensation expense | $	$ 10.5
Weighted average period	2 years 3 months 18 days
Common Stock Subject to Vesting Requirements [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares granted | shares	30,773
Weighted average grant-date fair value | $ / shares	$ 15.57
Shares outstanding | shares	96,639
Nonvested weighted average grant-date fair value | $ / shares	$ 19.46
Compensation expense | $	$ 1.8
Weighted average period	1 year 7 months 6 days

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Geographic and Group Information (Long-Lived Assets Attributable To Geographic Area) (Details) - USD ($) $ in Thousands	Sep. 27, 2019	Dec. 28, 2018
Revenues from External Customers and Long-Lived Assets [Line Items]
Total long-lived assets	$ 115,956	$ 107,661
North America [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total long-lived assets	92,745	88,317
International (Primarily European Countries) [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total long-lived assets	$ 23,211	$ 19,344

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Basis of Presentation and General Information (Summary of Disaggregation of Total Revenue Including Reimbursable Expenses (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 27, 2019	Sep. 28, 2018	Sep. 27, 2019	Sep. 28, 2018
Disaggregation Of Revenue [Line Items]
Revenue before reimbursements from continuing operations	$ 72,690	$ 73,718	$ 213,366	$ 219,352
Consulting [Member]
Disaggregation Of Revenue [Line Items]
Revenue before reimbursements from continuing operations	65,971	67,614	194,710	200,903
Software License Sales [Member]
Disaggregation Of Revenue [Line Items]
Revenue before reimbursements from continuing operations	784	569	2,391	2,025
Revenue Before Reimbursements [Member]
Disaggregation Of Revenue [Line Items]
Revenue before reimbursements from continuing operations	$ 66,755	$ 68,183	$ 197,101	$ 202,928

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Accrued Expenses and Other Liabilities (Tables)

9 Months Ended

Sep. 27, 2019

Accrued Liabilities And Other Liabilities Current [Abstract]

Components Of Accrued Expenses And Other Liabilities

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

	September 27,		December 28,
	2019		2018
Accrued compensation and benefits	$	9,392	$	5,012
Accrued bonuses		2,063		5,064
Accrued dividend payable		—		5,407
Acquisition earnout accruals		1,112		2,559
Contract liabilities		9,827		8,259
Accrued sales, use, franchise and VAT tax		2,956		3,077
Non-cash stock compensation accrual		689		872
Income tax payable		3,591		1,769
Other accrued expenses		1,820		2,479
Total accrued expenses and other liabilities	$	31,450	$	34,498

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Basis of Presentation and General Information (Policies)

9 Months Ended

Sep. 27, 2019

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 28, 2018, included in the Annual Report on Form 10-K filed by the Company with the SEC on March 8, 2019. The consolidated results of operations for the quarter and nine months ended September 27, 2019, 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.

Revenue Recognition

Revenue Recognition

We generate substantially all of our revenue from providing professional services to our clients. We also generate revenue from software licenses, software support, maintenance and subscriptions to our executive and best practices advisory programs. A single contract could include one or multiple performance obligations. For those contracts that have multiple performance obligations, we allocate the total transaction price to each performance obligation based on its relative standalone selling price.  We determine the standalone selling price based on the respective selling price of the individual elements when they are sold separately.  

Revenue is recognized when control of the goods and services provided are transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods and services using the following steps: 1) identify the contract, 2) identify the performance obligations, 3) determine the transaction price, 4) allocate the transaction price to the performance obligations in the contract, and 5) recognize revenue as or when we satisfy the performance obligations.  

We typically satisfy our performance obligations for professional services over time as the related services are provided. The performance obligations related to software support, maintenance and subscriptions to our executive and best practice advisory programs are typically satisfied evenly over the course of the service period. Other performance obligations, such as software licenses, are satisfied at a point in time.

We generate our revenue under four types of billing arrangements: fixed-fee (including software license revenue); time-and-materials; executive and best practice advisory services; and software sales, maintenance and support.

In fixed-fee billing arrangements, which would also include contracts with capped fees, we agree to a pre-established fee or fee cap in exchange for a predetermined set of professional services. We set the fees based on our estimates of the costs and timing for completing the engagements. We generally recognize revenue under fixed-fee or capped fee arrangements using a proportionate performance approach, which is based on work completed to-date as compared to estimates of the total services to be provided under the engagement. Estimates of total engagement revenue and cost of services are monitored regularly during the term of the engagement. If our estimates indicate a potential loss, such loss is recognized in the period in which the loss first becomes probable and reasonably estimable. The customer is invoiced based on the contractual agreement between the parties, typically bi-weekly, monthly or mile-stone driven, with net thirty-day terms.

Time-and-material billing arrangements require the client to pay based on the number of hours worked by our consultants at agreed upon hourly rates. We recognize revenue under time-and-material arrangements as the related services or goods are provided, using the right to invoice practical expedient which allows us to recognize revenue in the amount based on the number of hours worked and the agreed upon hourly rates.  The customer is invoiced based on the contractual agreement between the parties, typically bi-weekly, monthly or milestone driven, with net thirty-day terms.

1. Basis of Presentation and General Information (continued)

Advisory services contracts are typically in the form of a subscription agreement which allows the customer access to the Company’s executive and best practice advisory programs.  There is typically a single performance obligation and the transaction price is the contractual amount of the subscription agreement.  Revenue from advisory service contracts is recognized ratably over the life of the agreements.  Customers are typically invoiced at the inception of the contract, with net thirty-day terms.

The resale of software and maintenance contracts are in the form of SAP America software license or maintenance agreements provided by SAP America.  SAP is the principal and the Company is the agent in these transactions as the Company does not obtain title to the software and the maintenance is sold simultaneously.  The transaction price is the Company’s agreed-upon percentage of the software license or maintenance amount in the contract with the vendor.  Revenue for the resale of software licenses is recognized upon contract execution and customer’s receipt of the software. Revenue from maintenance contracts is recognized ratably over the life of the agreements.  The customer is typically invoiced at contract inception, with net thirty-day terms.

Expense reimbursements that are billable to clients are included in total revenue, and are substantially all billed as time-and-material billing arrangements.  Therefore, the Company recognizes all reimbursable expenses as revenue as the related services are provided, using the right to invoice practical expedient. Reimbursable expenses are recognized as expenses in the period in which the expense is incurred.  Any expense reimbursements that are billable to clients under fixed-fee billing arrangements are recognized in line with the proportionate performance approach.  

The payment terms and conditions in our customer contracts vary. The agreements entered into in connection with a project, whether time-and-materials-based or fixed-fee or capped-fee based, typically allow clients to terminate early due to breach or for convenience with 30 days’ notice. In the event of termination, the client is typically contractually required to pay for all time, materials and expenses incurred by the Company through the effective date of the termination. In addition, from time to time the Company enters into agreements with its clients that limit its ability to enter into business relationships with specific competitors of that client for a specific time period. These provisions typically prohibit the Company from performing a defined range of services which it might otherwise be willing to perform for potential clients. These provisions are generally limited to six to twelve months and usually apply only to specific employees or the specific project team.

Sales tax collected from customers and remitted to the applicable taxing authorities is accounted for on a net basis, with no impact to revenue.

Differences between the timing of billings and the recognition of revenue are recognized as either unbilled services or contract liabilities in the accompanying consolidated balance sheets. Revenue recognized for services performed but not yet billed to clients are recorded as unbilled services. Revenue recognized, but for which the Company is not yet entitled to bill because certain events, such as the completion of the measurement period, are recorded as contract assets and included within unbilled services. Client prepayments are classified as contract liabilities and recognized over future periods as earned in accordance with the applicable engagement agreement. See Note 3 for the accounts receivable and contract asset balances and see Note 4 for the contract liabilities balances. During the quarter and nine months ended September 27, 2019, the Company recognized $3.8 million and $12.0 million, respectively, of revenue as a result of changes in contract liabilities liability balance, as compared to $4.2 million and $14.0 million for the quarter and nine months ended September 28, 2018, respectively. 

The following table reflects the Company’s disaggregation of total revenue including reimbursable expenses for the quarters and nine months ended September 27, 2019 and September 28, 2018:

	Quarter Ended				Nine Months Ended
	September 27,		September 28,		September 27,		September 28,
	2019		2018		2019		2018
Consulting	$	65,971	$	67,614	$	194,710	$	200,903
Software License Sales		784		569		2,391		2,025
Revenue before reimbursements from continuing operations	$	66,755	$	68,183	$	197,101	$	202,928

1. Basis of Presentation and General Information (continued)

Capitalized Sales Commissions

Sales commissions earned by our sales force are considered incremental and recoverable costs of obtaining a contract with a customer. These costs are deferred and then amortized as project revenue is recognized.  We determined the period of amortization by taking into consideration the customer contract period, which are generally less than 12 months. Commission expense is included in Selling, General and Administrative Costs in the accompanying condensed consolidated statements of operations. As of December 28, 2018, and December 29, 2017, the Company had $1.2 million and $1.4 million, respectively, of deferred commissions, of which $0.4 million and $0.9 million was amortized during the quarter and nine months of 2019 and $0.1 million and $0.7 million for the same periods in 2018. No impairment loss was recognized relating to the capitalization of deferred commission during either years.

Practical Expedients

The Company does not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less.  The Company does not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the customer and the transfer of the promised goods or services to the customer will be less than one year.

Discontinued Operations

Discontinued Operations

The Company’s European REL Working Capital group’s sales had declined over the past several years as European countries have experienced continued economic recoveries and improved cash balances.  Companies are holding high cash reserves which drove working capital project sales of this group down across all of Europe. The REL practice had a limited pipeline of potential client engagements; therefore, the Company made the strategic decision to exit the business at the end of fiscal year 2018.

The following table includes the carrying amounts of the major classes of assets and liabilities presented in discontinued operations in our consolidated balance sheet:

	September 27,		December 28,
	2019		2018
ASSETS
Accounts receivable and contract assets (no allowance as of September 27, 2019 and December 28, 2018)	$	—	$	137
Assets related to discontinued operations	$	—	$	137
LIABILITIES
Accrued expenses and other liabilities (1)	$	22	$	2,300
Liabilities related to discontinued operations	$	22	$	2,300
(1) The balance at December 28, 2018, primarily represents the accrued severance related to terminated employees.

1. Basis of Presentation and General Information (continued)

The following table presents the gain and loss results for the Company’s discontinued operations:

	Quarter Ended						Nine Months Ended
	September 27,			September 28,			September 27,			September 28,
	2019			2018			2019			2018
Revenue:
Revenue before reimbursements	$	—		$	60		$	75		$	2,404
Reimbursements		—			62			17			466
Total revenue		—			122			92			2,870
Costs and expenses:
Cost of service:
Personnel costs before reimbursable expenses		2			503			26			2,410
Reimbursable expenses		—			62			17			466
Total cost of service		2			565			43			2,876
Selling, general and administrative costs		(4	)		183			52			785
Total costs and operating expenses		(2	)		748			95			3,661
Income (loss) from discontinued operations before income taxes		2			(626	)		(3	)		(791	)
Income tax expense (benefit)		—			(112	)		1			(192	)
Income (loss) from discontinued operations	$	2		$	(514	)	$	(4	)	$	(599	)

Fair Value

Fair Value

The Company’s financial instruments consist of cash and cash equivalents, accounts receivable and contract assets, accounts payable, accrued expenses and other liabilities and debt. As of September 27, 2019 and December 28, 2018, 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 February 2016, the FASB issued guidance on leases which supersedes the current lease guidance. The core principle establishes a right-of-use (ROU) model that requires lessees to recognize the assets and liabilities that arise from nearly all leases on the balance sheet. Accounting applied by lessees has remain largely consistent with previous guidance. The Company adopted the amended guidance effective December 29, 2018, including interim periods within this fiscal year, using the effective date as the date of initial application. Consequently, on adoption, the Company recognized additional operating liabilities of approximately $9.0 million, with corresponding ROU assets of approximately the same amount based on the present value of the remaining minimum rental payments under current leasing standards for existing operating leases. The amended guidance did not have a material impact on the Company’s consolidated statements of comprehensive income or its consolidated statements of cash flows. See Note 5 for additional information.

1. Basis of Presentation and General Information (continued)

In July 2018, the FASB issued ASU 2018-09, which affects a wide variety of topics in the Codification and applies to all reporting entities within the scope of the affected accounting guidance.  The amendments in the ASU represent changes that clarify, correct errors in, or make minor improvements to the Codification.  Ultimately, the amendments make the Codification easier to understand and apply by eliminating inconsistencies and providing clarifications.  Some of the amendments in this ASU do not require transition guidance and are effective upon issuance of the ASU, while many of the amendments have transition guidance with effective dates for annual periods beginning after December 15, 2018.  The adoption of the amendments in this ASU did not have a material impact on the Company’s consolidated financial statements and related disclosures.

In January 2017, the FASB issued ASU 2017-04, which eliminates Step 2 from the goodwill impairment test. For public companies, this update will be effective for interim and annual periods beginning after December 15, 2019, with early adoption permitted for interim and annual goodwill impairment test with a measurement date after January 1, 2017. The Company does not expect the guidance to have a material impact on the Company’s 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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Credit Facility (Narrative) (Details) - USD ($)		3 Months Ended	9 Months Ended
	Nov. 06, 2019	Sep. 27, 2019	Sep. 27, 2019	May 09, 2016	Feb. 28, 2012
Revolving line of credit facility [Member]
Line of Credit Facility [Line Items]
Borrowing capacity under credit facility				$ 45,000,000	$ 20,000,000
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%
Payment of principal		$ 2,000,000	$ 4,000,000
Outstanding balance		$ 2,500,000	$ 2,500,000
Interest rate		3.30%	3.30%
Revolving line of credit facility [Member] | Subsequent Event [Member]
Line of Credit Facility [Line Items]
Repayment of remaining outstanding amount	$ 2,500,000
Revolving line of credit facility [Member] | London Interbank Offered Rate (LIBOR) [Member]
Line of Credit Facility [Line Items]
Margin percentage base rate			1.25%
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

XML

Geographic and Group Information (Geographic Revenue before Reimbursements) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 27, 2019	Sep. 28, 2018	Sep. 27, 2019	Sep. 28, 2018
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue before reimbursements from continuing operations	$ 72,690	$ 73,718	$ 213,366	$ 219,352
Revenue Before Reimbursements [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue before reimbursements from continuing operations	66,755	68,183	197,101	202,928
Revenue Before Reimbursements [Member] | North America [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue before reimbursements from continuing operations	56,014	55,321	165,301	166,092
Revenue Before Reimbursements [Member] | International (Primarily European Countries) [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue before reimbursements from continuing operations	$ 10,741	$ 12,862	$ 31,800	$ 36,836

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Acquisitions (Narrative) (Details) $ in Thousands, £ in Millions			1 Months Ended	3 Months Ended		9 Months Ended
	May 01, 2017 USD ($)	Apr. 06, 2017 GBP (£)	Oct. 31, 2017 USD ($)	Sep. 27, 2019 USD ($)	Sep. 28, 2018 USD ($)	Sep. 27, 2019 USD ($)	Sep. 28, 2018 USD ($)
Business Acquisition [Line Items]
Non-cash stock compensation expense						$ 5,733	$ 6,932
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
Common stock vesting period	4 years
Contingent consideration	$ 11,000
Contingent consideration performance period	18 months
Cash compensation (expense) benefit				$ 100	$ (800)	1,100	3,800
Jibe Consulting, Inc [Member] | Cost of Sales [Member]
Business Acquisition [Line Items]
Non-cash stock compensation expense				34		(200)
Jibe Consulting, Inc [Member] | Key Employees [Member]
Business Acquisition [Line Items]
Cash compensation (expense) benefit				32	$ (100)	200	$ 100
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
Cash compensation (expense) benefit				$ 200		$ 24
Acquired percentage		100.00%
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]
Business Acquisition [Line Items]
Purchase consideration			$ 2,000

XML

Consolidated Statements of Operations - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 27, 2019	Sep. 28, 2018	Sep. 27, 2019	Sep. 28, 2018
Revenue:
Total revenue	$ 72,690	$ 73,718	$ 213,366	$ 219,352
Cost of service:
Total cost of service	48,273	48,304	140,379	143,877
Stock compensation expense	1,155	1,646	3,465	4,367
Selling, general and administrative costs	14,353	15,507	44,107	45,953
Stock compensation expense	776	850	2,268	2,495
Change in acquisition-related contingent consideration liability	(108)	803	(1,133)	(3,750)
Total costs and operating expenses	63,294	65,464	185,621	188,575
Income from operations	9,396	8,254	27,745	30,777
Other expense:
Interest expense	(62)	(158)	(268)	(515)
Income from operations before income taxes	9,334	8,096	27,477	30,262
Income tax expense	2,427	2,425	6,481	5,618
Income from continuing operations	6,907	5,671	20,996	24,644
Income (loss) from discontinued operations	2	(514)	(4)	(599)
Net income	$ 6,909	$ 5,157	$ 20,992	$ 24,045
Basic net income per common share:
Income per common share from continuing operations	$ 0.23	$ 0.19	$ 0.70	$ 0.84
Income (loss) per common share from discontinued operations	0.00	(0.02)	0.00	(0.02)
Basic net income per common share	0.23	0.17	0.70	0.82
Diluted net income per common share:
Income per common share from continuing operations	0.21	0.18	0.65	0.77
Income (loss) per common share from discontinued operations	0.00	(0.02)	0.00	(0.02)
Diluted net income per common share	$ 0.21	$ 0.16	$ 0.65	$ 0.75
Weighted average common shares outstanding:
Basic	29,876,468	29,478,243	29,794,091	29,332,508
Diluted	32,570,742	32,593,359	32,413,115	32,214,419
Revenue Before Reimbursements [Member]
Revenue:
Total revenue	$ 66,755	$ 68,183	$ 197,101	$ 202,928
Reimbursements [Member]
Revenue:
Total revenue	5,935	5,535	16,265	16,424
Cost of service:
Total cost of service	5,935	5,535	16,265	16,424
Cost Before Reimbursements [Member]
Cost of service:
Total cost of service	$ 41,183	$ 41,123	$ 120,649	$ 123,086

XML

Basis of Presentation and General Information

9 Months Ended

Sep. 27, 2019

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 28, 2018, included in the Annual Report on Form 10-K filed by the Company with the SEC on March 8, 2019. The consolidated results of operations for the quarter and nine months ended September 27, 2019, 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.

Revenue Recognition

We generate substantially all of our revenue from providing professional services to our clients. We also generate revenue from software licenses, software support, maintenance and subscriptions to our executive and best practices advisory programs. A single contract could include one or multiple performance obligations. For those contracts that have multiple performance obligations, we allocate the total transaction price to each performance obligation based on its relative standalone selling price.  We determine the standalone selling price based on the respective selling price of the individual elements when they are sold separately.  

Revenue is recognized when control of the goods and services provided are transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods and services using the following steps: 1) identify the contract, 2) identify the performance obligations, 3) determine the transaction price, 4) allocate the transaction price to the performance obligations in the contract, and 5) recognize revenue as or when we satisfy the performance obligations.  

We typically satisfy our performance obligations for professional services over time as the related services are provided. The performance obligations related to software support, maintenance and subscriptions to our executive and best practice advisory programs are typically satisfied evenly over the course of the service period. Other performance obligations, such as software licenses, are satisfied at a point in time.

We generate our revenue under four types of billing arrangements: fixed-fee (including software license revenue); time-and-materials; executive and best practice advisory services; and software sales, maintenance and support.

In fixed-fee billing arrangements, which would also include contracts with capped fees, we agree to a pre-established fee or fee cap in exchange for a predetermined set of professional services. We set the fees based on our estimates of the costs and timing for completing the engagements. We generally recognize revenue under fixed-fee or capped fee arrangements using a proportionate performance approach, which is based on work completed to-date as compared to estimates of the total services to be provided under the engagement. Estimates of total engagement revenue and cost of services are monitored regularly during the term of the engagement. If our estimates indicate a potential loss, such loss is recognized in the period in which the loss first becomes probable and reasonably estimable. The customer is invoiced based on the contractual agreement between the parties, typically bi-weekly, monthly or mile-stone driven, with net thirty-day terms.

Time-and-material billing arrangements require the client to pay based on the number of hours worked by our consultants at agreed upon hourly rates. We recognize revenue under time-and-material arrangements as the related services or goods are provided, using the right to invoice practical expedient which allows us to recognize revenue in the amount based on the number of hours worked and the agreed upon hourly rates.  The customer is invoiced based on the contractual agreement between the parties, typically bi-weekly, monthly or milestone driven, with net thirty-day terms.

1. Basis of Presentation and General Information (continued)

Advisory services contracts are typically in the form of a subscription agreement which allows the customer access to the Company’s executive and best practice advisory programs.  There is typically a single performance obligation and the transaction price is the contractual amount of the subscription agreement.  Revenue from advisory service contracts is recognized ratably over the life of the agreements.  Customers are typically invoiced at the inception of the contract, with net thirty-day terms.

The resale of software and maintenance contracts are in the form of SAP America software license or maintenance agreements provided by SAP America.  SAP is the principal and the Company is the agent in these transactions as the Company does not obtain title to the software and the maintenance is sold simultaneously.  The transaction price is the Company’s agreed-upon percentage of the software license or maintenance amount in the contract with the vendor.  Revenue for the resale of software licenses is recognized upon contract execution and customer’s receipt of the software. Revenue from maintenance contracts is recognized ratably over the life of the agreements.  The customer is typically invoiced at contract inception, with net thirty-day terms.

Expense reimbursements that are billable to clients are included in total revenue, and are substantially all billed as time-and-material billing arrangements.  Therefore, the Company recognizes all reimbursable expenses as revenue as the related services are provided, using the right to invoice practical expedient. Reimbursable expenses are recognized as expenses in the period in which the expense is incurred.  Any expense reimbursements that are billable to clients under fixed-fee billing arrangements are recognized in line with the proportionate performance approach.  

The payment terms and conditions in our customer contracts vary. The agreements entered into in connection with a project, whether time-and-materials-based or fixed-fee or capped-fee based, typically allow clients to terminate early due to breach or for convenience with 30 days’ notice. In the event of termination, the client is typically contractually required to pay for all time, materials and expenses incurred by the Company through the effective date of the termination. In addition, from time to time the Company enters into agreements with its clients that limit its ability to enter into business relationships with specific competitors of that client for a specific time period. These provisions typically prohibit the Company from performing a defined range of services which it might otherwise be willing to perform for potential clients. These provisions are generally limited to six to twelve months and usually apply only to specific employees or the specific project team.

Sales tax collected from customers and remitted to the applicable taxing authorities is accounted for on a net basis, with no impact to revenue.

Differences between the timing of billings and the recognition of revenue are recognized as either unbilled services or contract liabilities in the accompanying consolidated balance sheets. Revenue recognized for services performed but not yet billed to clients are recorded as unbilled services. Revenue recognized, but for which the Company is not yet entitled to bill because certain events, such as the completion of the measurement period, are recorded as contract assets and included within unbilled services. Client prepayments are classified as contract liabilities and recognized over future periods as earned in accordance with the applicable engagement agreement. See Note 3 for the accounts receivable and contract asset balances and see Note 4 for the contract liabilities balances. During the quarter and nine months ended September 27, 2019, the Company recognized $3.8 million and $12.0 million, respectively, of revenue as a result of changes in contract liabilities liability balance, as compared to $4.2 million and $14.0 million for the quarter and nine months ended September 28, 2018, respectively. 

The following table reflects the Company’s disaggregation of total revenue including reimbursable expenses for the quarters and nine months ended September 27, 2019 and September 28, 2018:

	Quarter Ended				Nine Months Ended
	September 27,		September 28,		September 27,		September 28,
	2019		2018		2019		2018
Consulting	$	65,971	$	67,614	$	194,710	$	200,903
Software License Sales		784		569		2,391		2,025
Revenue before reimbursements from continuing operations	$	66,755	$	68,183	$	197,101	$	202,928

1. Basis of Presentation and General Information (continued)

Capitalized Sales Commissions

Sales commissions earned by our sales force are considered incremental and recoverable costs of obtaining a contract with a customer. These costs are deferred and then amortized as project revenue is recognized.  We determined the period of amortization by taking into consideration the customer contract period, which are generally less than 12 months. Commission expense is included in Selling, General and Administrative Costs in the accompanying condensed consolidated statements of operations. As of December 28, 2018, and December 29, 2017, the Company had $1.2 million and $1.4 million, respectively, of deferred commissions, of which $0.4 million and $0.9 million was amortized during the quarter and nine months of 2019 and $0.1 million and $0.7 million for the same periods in 2018. No impairment loss was recognized relating to the capitalization of deferred commission during either years.

Practical Expedients

The Company does not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less.  The Company does not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the customer and the transfer of the promised goods or services to the customer will be less than one year.

Discontinued Operations

The Company’s European REL Working Capital group’s sales had declined over the past several years as European countries have experienced continued economic recoveries and improved cash balances.  Companies are holding high cash reserves which drove working capital project sales of this group down across all of Europe. The REL practice had a limited pipeline of potential client engagements; therefore, the Company made the strategic decision to exit the business at the end of fiscal year 2018.

The following table includes the carrying amounts of the major classes of assets and liabilities presented in discontinued operations in our consolidated balance sheet:

	September 27,		December 28,
	2019		2018
ASSETS
Accounts receivable and contract assets (no allowance as of September 27, 2019 and December 28, 2018)	$	—	$	137
Assets related to discontinued operations	$	—	$	137
LIABILITIES
Accrued expenses and other liabilities (1)	$	22	$	2,300
Liabilities related to discontinued operations	$	22	$	2,300
(1) The balance at December 28, 2018, primarily represents the accrued severance related to terminated employees.

1. Basis of Presentation and General Information (continued)

The following table presents the gain and loss results for the Company’s discontinued operations:

	Quarter Ended						Nine Months Ended
	September 27,			September 28,			September 27,			September 28,
	2019			2018			2019			2018
Revenue:
Revenue before reimbursements	$	—		$	60		$	75		$	2,404
Reimbursements		—			62			17			466
Total revenue		—			122			92			2,870
Costs and expenses:
Cost of service:
Personnel costs before reimbursable expenses		2			503			26			2,410
Reimbursable expenses		—			62			17			466
Total cost of service		2			565			43			2,876
Selling, general and administrative costs		(4	)		183			52			785
Total costs and operating expenses		(2	)		748			95			3,661
Income (loss) from discontinued operations before income taxes		2			(626	)		(3	)		(791	)
Income tax expense (benefit)		—			(112	)		1			(192	)
Income (loss) from discontinued operations	$	2		$	(514	)	$	(4	)	$	(599	)

Fair Value

The Company’s financial instruments consist of cash and cash equivalents, accounts receivable and contract assets, accounts payable, accrued expenses and other liabilities and debt. As of September 27, 2019 and December 28, 2018, 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 February 2016, the FASB issued guidance on leases which supersedes the current lease guidance. The core principle establishes a right-of-use (ROU) model that requires lessees to recognize the assets and liabilities that arise from nearly all leases on the balance sheet. Accounting applied by lessees has remain largely consistent with previous guidance. The Company adopted the amended guidance effective December 29, 2018, including interim periods within this fiscal year, using the effective date as the date of initial application. Consequently, on adoption, the Company recognized additional operating liabilities of approximately $9.0 million, with corresponding ROU assets of approximately the same amount based on the present value of the remaining minimum rental payments under current leasing standards for existing operating leases. The amended guidance did not have a material impact on the Company’s consolidated statements of comprehensive income or its consolidated statements of cash flows. See Note 5 for additional information.

1. Basis of Presentation and General Information (continued)

In July 2018, the FASB issued ASU 2018-09, which affects a wide variety of topics in the Codification and applies to all reporting entities within the scope of the affected accounting guidance.  The amendments in the ASU represent changes that clarify, correct errors in, or make minor improvements to the Codification.  Ultimately, the amendments make the Codification easier to understand and apply by eliminating inconsistencies and providing clarifications.  Some of the amendments in this ASU do not require transition guidance and are effective upon issuance of the ASU, while many of the amendments have transition guidance with effective dates for annual periods beginning after December 15, 2018.  The adoption of the amendments in this ASU did not have a material impact on the Company’s consolidated financial statements and related disclosures.

In January 2017, the FASB issued ASU 2017-04, which eliminates Step 2 from the goodwill impairment test. For public companies, this update will be effective for interim and annual periods beginning after December 15, 2019, with early adoption permitted for interim and annual goodwill impairment test with a measurement date after January 1, 2017. The Company does not expect the guidance to have a material impact on the Company’s 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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Basis of Presentation and General Information (Carrying Amounts of Major Classes of Assets and Liabilities Presented in Discontinued Operations) (Details) - USD ($) $ in Thousands	Sep. 27, 2019	Dec. 28, 2018
ASSETS
Assets related to discontinued operations		$ 137
LIABILITIES
Liabilities related to discontinued operations	$ 22	2,300
European REL Working Capital group [Member]
ASSETS
Accounts receivable and contract assets (no allowance as of September 27, 2019 and December 28, 2018)		137
Assets related to discontinued operations		137
LIABILITIES
Accrued expenses and other liabilities	22	2,300
Liabilities related to discontinued operations	$ 22	$ 2,300

XML

Net Income Per Common Share (Narrative) (Details) - shares shares in Thousands	3 Months Ended		9 Months Ended
	Sep. 27, 2019	Sep. 28, 2018	Sep. 27, 2019	Sep. 28, 2018
Earnings Per Share [Abstract]
Antidilutive common share equivalents	26	1	39	2

XML

Leases (Components of Lease Expense) (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 27, 2019	Sep. 27, 2019
Leases [Abstract]
Operating lease cost	$ 692	$ 2,091
Total net lease costs	$ 692	$ 2,091

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Litigation

9 Months Ended

Sep. 27, 2019

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.

XML

Credit Facility

9 Months Ended

Sep. 27, 2019

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”, and together with the Revolver, the “Credit Facility”).  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 (the “Credit Agreement”) 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.

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 28, 2019, the Company paid down $2.0 million and a net $4.0 million under the Revolver, respectively,which had a balance of $2.5 million outstanding as of September 27, 2019. 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 Credit Agreement. As of September 27, 2019, the applicable margin percentage was 1.25% 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 27, 2019, was 3.3%. Subsequent to September 27, 2019, the Company paid off the remaining $2.5 million balance outstanding under the Revolver.

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.  As of September 27, 2019, the Company was in compliance with all covenants.