12. Acquisitions

Jibe Consulting, Inc.

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

The sellers’ purchase consideration was $5.4 million 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 Company’s 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 have the opportunity to earn an additional $6.6 million in cash and $4.4 million in Company common stock based on the achievement of the performance targets over the 18 month period following closing for a total of $11.0 million in contingent consideration, a portion of which will be allocated to key employees in both cash and Company stock.

12. Acquisitions (continued)

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. Due to the projected earnout results, during the second quarter of 2018, the acquisition-related purchase consideration and compensation expense allocated to both the selling shareholders and key employees resulted in a benefit. During the three and six months ended June 29, 2018, the Company recorded a benefit of $4.6 million in earnings from operations on the consolidated statement of operations related to the reduction of a contingent earnout liability for the Jibe acquisition. During the three and six months ended June 29, 2018, the Company recorded, in personnel costs before reimbursements on the consolidated statement of operations, a benefit of $0.3 million and $0.2 million, respectively, related to the key employees’ portion of the cash related contingent consideration. These contingent 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. As mentioned above, due to the projected results, the Company recorded for the three and six months ended June 29, 2018, a benefit of $0.6 million and benefit of $0.4 million, respectively, of acquisition-related non-cash stock compensation in cost of sales on the consolidated statement of operations.

The purchase price was allocated to tangible and intangible assets acquired and liabilities assumed based on their estimated fair values. The fair value of identifiable intangible assets acquired was based on estimates and assumptions made by management at the time of the acquisition. The following table presents the purchase price allocation of the assets acquired and liabilities assumed, based on the fair values:

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

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

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

The acquisition was not material to the Company's results of operations, financial position or cash flows and therefore, the pro forma impact of these acquisitions is not presented. Jibe contributed $12.3 million of revenue before reimbursable expenses and contribution before depreciation, amortization, interest, corporate overhead allocation and taxes totaled $1.2 million for the year ended December 29, 2017. The acquisition related costs incurred in the second quarter of 2017 totaled $0.2 million and were all classified in selling, general and administrative costs in the Company’s consolidated statements of operations. All goodwill is expected to be deductible for tax purposes.

12. Acquisitions (continued)

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 complements 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 and in non-current accrued expenses and other liabilities. During the first quarter of 2018, the acquisition related compensation expense for Aecus resulted in a benefit due to the estimated results of the contingent earnout calculation.

During the first quarter of 2018, the Company recorded a £0.5 million compensation benefit from acquisition-related cash and non-cash compensation for the cash portion of the contingent consideration. During the quarter and six months ended June 29, 2018, the Company recorded compensation expense of £0.1 million and a compensation benefit of £0.4 million, respectively, from acquisition-related cash compensation for the cash portion of the contingent consideration.

During the quarter and six months ended June 29, 2018, the Company recorded compensation expense of £6 thousand and a compensation benefit of £16 thousand, respectively, from acquisition-related non-cash compensation for the equity portion of the contingent consideration in cost of sales on the consolidated statement of operations.

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

12. Acquisitions (continued)

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

The acquisition was not material to the Company's results of operations, financial position or cash flows and therefore, the pro forma impact of these acquisitions is not presented. Aecus contributed $3.9 million of revenue before reimbursable expenses and contribution before depreciation, amortization, interest, corporate overhead allocation and taxes totaled $0.5 million during the year ended December 29, 2017. The acquisition related costs incurred during the year ended December 29, 2017 totaled $0.1 million and were all classified in selling, general and administrative costs in the Company’s consolidated statements of operations. The goodwill and intangibles resulting from this transaction are not expected to be deductible under UK tax regulations.

Chartered Institute of Management Accountants

Effective October 2017, Hackett-REL, Ltd., a subsidiary of the Company located in the United Kingdom, acquired The Chartered Institute of Management Accountants' share of the Certified GBS Professionals program. This acquisition allows those studying under the program and their employers to benefit further from the Company’s sector specific expertise and focus on the growing global business services market. Purchase consideration was $2.0 million in cash and was funded with the Company’s available funds. Also in connection with this transaction, the Alliance and Program Development Agreement between the Company, Hackett-REL, Ltd. and The Chartered Institute of Management Accountants was terminated. The acquired intangible asset has a definite life which will be amortized over 4 years.