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 April 1, 2022

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  ☒

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

As of May 5, 2022, there were 31,650,966 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 April 1, 2022 (unaudited) and December 31, 2021	3
	Consolidated Statements of Operations for the Three Months Ended April 1, 2022 and April 2, 2021 (unaudited)	4
	Consolidated Statements of Comprehensive Income for the Three Months Ended April 1, 2022 and April 2, 2021 (unaudited)	5
	Consolidated Statements of Cash Flows for the Three Months Ended April 1, 2022 and April 2, 2021 (unaudited)	6
	Consolidated Statements of Equity for the Three Months Ended April 1, 2022, and April 2, 2021 (unaudited)	7
	Notes to Consolidated Financial Statements (unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	20
Item 4.	Controls and Procedures	20
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	21
Item 1A.	Risk Factors	21
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	21
Item 6.	Exhibits	22
SIGNATURES		23

2

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

The Hackett Group, Inc.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

(unaudited)

	April 1,			December 31,
	2022			2021
ASSETS
Current assets:
Cash	$	47,752		$	45,794
Accounts receivable and contract assets, net of allowance of $3,925 and $2,702 at April 1, 2022 and December 31, 2021, respectively		50,514			50,616
Prepaid expenses and other current assets		5,364			5,766
Total current assets		103,630			102,176
Property and equipment, net		18,212			18,026
Other assets		540			620
Goodwill		84,639			85,070
Operating lease right-of-use assets		1,424			1,649
Total assets	$	208,445		$	207,541
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	8,041		$	7,677
Accrued expenses and other liabilities		21,981			30,297
Contract liabilities (deferred revenue)		15,863			14,616
Operating lease liabilities		2,073			2,299
Total current liabilities		47,958			54,889
Non-current deferred tax liability, net		8,992			7,325
Operating lease liabilities		1,180			1,474
Total liabilities		58,130			63,688
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; 60,004,457 and    59,631,003 shares issued at April 1, 2022 and December 31, 2021, respectively		60			60
Additional paid-in capital		301,488			300,288
Treasury stock, at cost, 28,388,144 and 28,357,145 shares April 1, 2022    and December 31, 2021, respectively		(157,929	)		(157,294	)
Retained earnings		18,303			11,272
Accumulated other comprehensive loss		(11,607	)		(10,473	)
Total shareholders' equity		150,315			143,853
Total liabilities and shareholders' equity	$	208,445		$	207,541

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
	April 1,			April 2,
	2022			2021
Revenue:
Revenue before reimbursements	$	75,108		$	63,410
Reimbursements		556			76
Total revenue		75,664			63,486
Costs and expenses:
Cost of service:
Personnel costs before reimbursable expenses (includes $1,666 and $1,847 of stock compensation expense in 2022 and 2021, respectively)		47,333			41,170
Reimbursable expenses		556			76
Total cost of service		47,889			41,246
Selling, general and administrative costs (includes $933 and $740 of stock compensation expense in 2022 and 2021, respectively)		14,366			13,387
Total costs and operating expenses		62,255			54,633
Income from operations		13,409			8,853
Other expense:
Interest expense		(28	)		(25	)
Income from operations before income taxes		13,381			8,828
Income tax expense		2,876			2,460
Income from continuing operations		10,505			6,368
Loss from discontinued operations		—			(7	)
Net income	$	10,505		$	6,361
Basic net income per common share:
Income per common share from continuing operations	$	0.33		$	0.21
Loss per common share from discontinued operations		-			(0.00	)
Net income per common share	$	0.33		$	0.21
Diluted net income per common share:
Income per common share from continuing operations	$	0.33		$	0.19
Loss per common share from discontinued operations		-			(0.00	)
Net income per common share	$	0.33		$	0.19
Weighted average common shares outstanding:
Basic		31,449			30,207
Diluted		31,844			32,769

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
	April 1,			April 2,
	2022			2021
Net income	$	10,505		$	6,361
Foreign currency translation adjustment		(1,134	)		269
Total comprehensive income	$	9,371		$	6,630

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)

	Quarter Ended
	April 1,			April 2,
	2022			2021
Cash flows from operating activities:
Net income	$	10,505		$	6,361
Plus loss from discontinued operations		—			7
Net income from continuing operations		10,505			6,368
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense		802			874
Amortization expense		144			261
Amortization of debt issuance costs		14			11
Non-cash stock compensation expense		2,599			2,587
(Reversal) provision for doubtful accounts		(23	)		137
(Gain) loss on foreign currency translation		(298	)		61
Deferred income tax expense		1,643			1,378
Changes in assets and liabilities:
Decrease (increase) in accounts receivable and contract assets		177			(6,091	)
Decrease in prepaid expenses and other assets		640			182
Increase (decrease) in accounts payable		363			(1,159	)
Decrease in accrued expenses and other liabilities		(11,760	)		(4,985	)
Increase in contract liabilities		1,248			5,037
Increase in income tax payable		—			1,241
Net cash provided by operating activities		6,054			5,895
Cash flows from investing activities:
Purchases of property and equipment		(993	)		(525	)
Net cash used in investing activities		(993	)		(525	)
Cash flows from financing activities:
Debt issuance costs		(10	)		—
Repurchase of common stock		(3,066	)		(3,716	)
Net cash used in financing activities		(3,076	)		(3,716	)
Effect of exchange rate on cash		(27	)		(4	)
Net increase in cash and cash equivalents		1,958			1,650
Cash at beginning of period		45,794			49,455
Cash at end of period	$	47,752		$	51,105
Supplemental disclosure of cash flow information:
Cash paid (refunded) for income taxes	$	1		$	(181	)
Cash paid for interest	$	-		$	14

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						Retained			Comprehensive			Shareholders'
	Shares		Amount		Capital			Shares			Amount			Earnings			Loss			Equity
Balance at December 31, 2021		59,631	$	60	$	300,288			(28,358	)	$	(157,294	)	$	11,272		$	(10,473	)	$	143,853
Issuance of common stock		373		—		(2,432	)		—			—			—			—			(2,432	)
Treasury stock purchased		—		—		—			(31	)		(635	)		—			—			(635	)
Amortization of restricted stock    units and common stock subject to    vesting requirements		—		—		3,632			—			—			—			—			3,632
Dividends declared		—		—		—			—			—			(3,474	)		—			(3,474	)
Net income		—		—		—			—			—			10,505			—			10,505
Foreign currency translation		—		—		—			—			—			—			(1,134	)		(1,134	)
Balance at April 1, 2022		60,004	$	60	$	301,488			(28,389	)	$	(157,929	)	$	18,303		$	(11,607	)	$	150,315
					Additional												Other			Total
	Common Stock				Paid in			Treasury Stock						Accumulated			Comprehensive			Shareholders'
	Shares		Amount		Capital			Shares			Amount			Deficit			Loss			Equity
Balance at January 1, 2021		57,693	$	58	$	312,039			(27,609	)	$	(144,254	)	$	(17,388	)	$	(9,568	)	$	140,887
Issuance of common stock		294		—		(1,605	)		—			—			—			—			(1,605	)
Treasury stock purchased		—		—		—			(136	)		(2,110	)		—			—			(2,110	)
Amortization of restricted stock    units and common stock subject to    vesting requirements		—		—		2,633			—			—			—			—			2,633
Dividends declared		—		—		—			—			—			(3,254	)		—			(3,254	)
Net income		—		—		—			—			—			6,361			—			6,361
Foreign currency translation		—		—		—			—			—			—			269			269
Balance at April 2, 2021		57,987	$	58	$	313,067			(27,745	)	$	(146,364	)	$	(14,281	)	$	(9,299	)	$	143,181

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 31, 2021, included in the Annual Report on Form 10-K filed by the Company with the SEC on March 4, 2022. The consolidated results of operations for the quarter ended April 1, 2022, 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

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

Revenue is recognized when control of the goods and services provided are transferred to the Company’s customers, in an amount that reflects the consideration it expects 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 the Company satisfies the performance obligations.  

The Company typically satisfies its performance obligations for professional services over time as the related services are provided. The performance obligations related to software support, maintenance and subscriptions to its 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.

The Company generates 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 and software maintenance and support.

In fixed-fee billing arrangements, which would also include contracts with capped fees, the Company agrees to a pre-established fee or fee cap in exchange for a predetermined set of professional services. The Company sets the fees based on its estimates of the costs and timing for completing the engagements. The Company generally recognizes 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 the Company’s 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 milestone driven, with net thirty-day terms, however client terms are subject to change.

8

The Hackett Group, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Basis of Presentation and General Information (continued)

Time-and-material billing arrangements require the client to pay based on the number of hours worked by the Company’s consultants at agreed upon hourly rates. The Company recognizes revenue under time-and-material arrangements as the related services or goods are provided, using the right to invoice practical expedient which allows it 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, however client terms are subject to change.

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 services 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, however client terms are subject to change.

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 maintenance which 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, however client terms are subject to change.

Revenue before reimbursements excludes reimbursable expenses charged to clients. Reimbursements, which include travel and out-of-pocket expenses, are included in revenue, and an equivalent amount of reimbursable expenses is included in cost of service.

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 the Company’s 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 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 right 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.

Differences between the timing of billings and the recognition of revenue are recognized as either contract assets or contract liabilities in the accompanying consolidated balance sheets. Revenue recognized for services performed but not yet billed to clients are recorded as contract assets. Revenue recognized, but for which are not yet entitled to bill because certain events, such as the completion of the measurement period, are recorded as contract assets and included within contract assets. 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. During the quarter ended April 1, 2022, the Company recognized $6.9 million of revenue as a result of changes in the contract liability balance, as compared to $4.0 million for the quarter ended April 2, 2021. 

The following table reflects the Company’s disaggregation of total revenue for the quarters ended April 1, 2022 and April 2, 2021:

	Quarter Ended
	April 1,		April 2,
	2022		2021
Consulting	$	74,498	$	62,109
Software license sales		1,166		1,301
Total revenue	$	75,664	$	63,486

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 the Company’s 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.  The Company 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 consolidated statements of operations. As of December 31, 2021, and January 1, 2021, the Company had $1.6 million and $1.5 million, respectively, of deferred commissions, of which $0.4 million and $0.2 million was amortized during the first three months of the year 2022 and 2021, respectively.  No impairment loss was recognized relating to the capitalization of deferred commission.

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.

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

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.  

Fair Value

The Company’s financial instruments consist of cash, accounts receivable and contract assets, accounts payable, accrued expenses and other liabilities and contract liabilities. As of April 1, 2022 and December 31, 2021, 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.

COVID-19 Pandemic Impact on the Business

The level of revenue the Company achieves is based on its ability to deliver market leading services and solutions and to deploy skilled teams of professionals quickly. The Company’s results of operations are affected by economic conditions, including macroeconomic conditions and levels of business confidence. In each of the four quarters of 2021, the Company’s revenue before reimbursements and diluted earnings per share grew when compared to the fourth quarter of 2020 reflecting a continuation of improved economic conditions. However, any reversal of these trends or a prolonged economic downturn as a result of the impact of COVID-19 variants, or otherwise, weak or uncertain economic conditions or similar factors could adversely affect our clients' financial condition which may further reduce our clients' demand for our services.

The Company continues to actively manage its business to respond to the impact of the COVID-19 pandemic. At the onset of the pandemic, the Company reduced employee headcount and restricted employee travel to only essential business needs. While headcount has increased and some select non-essential travel is being allowed, most of the Company’s employees continue to work remotely from home. The Company is generally following the requirements, recommendation and protocols published by the U.S. Centers for Disease Control and the World Health Organization, and state and local governments.

10

The Hackett Group, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1.  Basis of Presentation and General Information (continued)

As a response to the ongoing COVID-19 pandemic, the Company has implemented plans to manage its costs and preserve cash at the onset of the COVID-19 pandemic. The Company significantly limited the addition of new employees and third party contracted services, eliminated all travel except where necessary to meet customer needs, and limited discretionary spending. At the end of June 2020, the Company reduced its global workforce by approximately 10% and recorded a $5.0 million restructuring charge. During the fourth quarter of 2020, as a result of and in consideration of the COVID-19 pandemic, and the changing nature of its use of office space for its workforce, the Company evaluated its existing office leases as part of the Company’s transformation initiatives related to real estate. This evaluation resulted in the complete and partial abandonment of certain leased office spaces and an asset impairment charge of $3.9 million for certain lease right-of-use assets and certain property, equipment and leasehold improvements. All client concessions and accounts receivable allowances have been appropriately reflected in our financial statements. To the extent that economic conditions do not continue to improve and the business is again disrupted, the reinstatement of cost management actions will be considered.  Future asset impairment charges, increases in allowance for doubtful accounts, or restructuring charges will be dependent on the severity and duration of the COVID-19 pandemic.

In light of the evolving health, social, economic and business environment, governmental regulations or mandates, and business disruptions that could occur, the potential impact that the COVID-19 pandemic could have on the Company’s financial condition and operating results remains highly uncertain.

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
	April 1,		April 2,
	2022		2021
Basic weighted average common shares outstanding		31,449,408		30,207,490
Effect of dilutive securities:
Unvested restricted stock units and common stock subject    to vesting requirements issued to employees and    non-employees		370,033		264,210
Common stock issuable upon the exercise of stock options    and SARs		24,122		2,297,467
Dilutive weighted average common shares outstanding		31,843,563		32,769,167

Approximately 6 hundred shares and 3 thousand shares of common stock equivalents were excluded from the computations of diluted net income per common share for the quarters ended April 1, 2022 and April 2, 2021, respectively, as inclusion would have had an anti-dilutive effect on diluted net income per common share.   

3. Accounts Receivable and Contract Assets, Net

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

	April 1,			December 31,
	2022			2021
Accounts receivable	$	32,924		$	30,732
Contract assets (unbilled revenue)		21,515			22,586
Allowance for doubtful accounts		(3,925	)		(2,702	)
Accounts receivable and contract assets, net	$	50,514		$	50,616

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

11

The Hackett Group, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

4. Accrued Expenses and Other Liabilities

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

	April 1,		December 31,
	2022		2021
Accrued compensation and benefits	$	6,143	$	7,730
Deferred employer's payroll taxes		1,780		1,780
Accrued bonuses		5,247		13,753
Accrued dividend payable		3,475		-
Restructuring liability		666		740
Accrued sales, use, franchise and VAT tax		1,515		1,783
Non-cash stock compensation accrual		324		1,357
Other accrued expenses		2,831		3,154
Total accrued expenses and other liabilities	$	21,981	$	30,297

As a result of the tax deduction related to the exercise of the 2.9 million SARs in 2021, the Company has recorded an income tax receivable of $2.3 million to prepaid expenses and other current assets on the consolidated balance sheet.

5. Restructuring Costs 

During 2020, the Company recorded restructuring costs of $10.5 million, of which $5.7 million was primarily related to the reduction of staff in Europe and Australia. As of April 1, 2022, the Company had $0.7 million of remaining commitments related to the restructuring charge.  

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

						Exit, Closure and
		Employee Related				Consolidation
		Costs				of Facilities				Total
Accrual balance at January 1, 2021			1,083				1,209				2,292
Cash paid			(1,013	)			(539	)			(1,552	)
Accrual balance at December 31, 2021	$		70		$		670		$		740
Cash paid			—				(74	)			(74	)
Accrual balance at April 1, 2022	$		70		$		596		$		666

6. Leases

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 year and 4 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: 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 the lease liability nor the right of use asset.

The components of lease expense were as follows for the three months ended April 1, 2022 (in thousands):

Operating lease cost	$	257
Total net lease costs	$	257

12

The Hackett Group, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

6. Leases (continued)

The weighted average remaining lease term is 1 year. 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 three months ended April 1, 2022, the Company paid $0.6 million from operating cash flows for its operating leases.

Future minimum lease payments under non-cancellable operating leases as of April 1, 2022, were as follows (in thousands):

2022 (excluding the three months ended April 1, 2022)	$	1,968
2023		1,017
2024		579
Thereafter		-
Total lease payments		3,564
Less imputed interest		(122	)
Total	$	3,442

As of April 1, 2022, the Company does not have any additional operating leases that have not yet commenced.   

7. Credit Facility

The Company has a credit agreement with Bank of America, N.A., which provides for borrowing up to $45.0 million pursuant to a revolving line of credit (the “Revolver”) which has a maturity date of November 30, 2022 (as amended the “Credit Agreement”).

The obligations of Hackett under the Revolver are guaranteed by active existing and future material U.S. subsidiaries of Hackett (the “U.S. Subsidiaries”), and are secured by substantially all of the existing and future property and assets of Hackett and the U.S. Subsidiaries, a 100% pledge of the capital stock of the U.S. Subsidiaries, and a 66% pledge of the capital stock of Hackett’s direct foreign subsidiaries (subject to certain exceptions).

As of April 1, 2022 and December 31, 2021, the Company did not have any outstanding balance  under the Revolver.  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 April 1, 2022, the applicable margin percentage was 1.50% per annum based on the consolidated leverage ratio, in the case of LIBOR rate advances, and 0.75% per annum, in the case of base rate advances. The interest rate of the commitment fees as of April 1, 2022, was 0.125%.

The Company is subject to certain covenants, including total consolidated leverage, fixed cost coverage, adjusted fixed cost coverage and liquidity requirements, each as set forth in the Credit Agreement, subject to certain exceptions.  As of April 1, 2022, the Company was in compliance with all covenants.

8. Stock Based Compensation

During the three months ended April 1, 2022, the Company issued 682,781 restricted stock units at a weighted average grant-date fair value of $19.24 per share. As of April 1, 2022, the Company had 1,353,549 restricted stock units outstanding at a weighted average grant-date fair value of $17.60 per share. As of April 1, 2022, $18.7 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 2.7 years.

As of April 1, 2022, the Company had 2,945 shares of common stock subject to vesting requirements outstanding at a weighted average grant-date fair value of $16.17 per share. As of April 1, 2022, $23 thousand 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 1.5 years.

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

13

The Hackett Group, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

9. Shareholders’ Equity

Stock Appreciation Rights (“SARs”)

As of April 1, 2022, the Company did not have any outstanding SARs. In December 2021, 2.9 million SARs were exercised with an exercise price of $4.00 per share.        

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 three months ended April 1, 2022, the Company repurchased 31 thousand shares of its common stock at an average price of $20.50 per share for a total cost of $0.6 million.  As of April 1, 2022 the Company had a total authorization remaining of $10.6 million under its repurchase plan with a total authorization of $167.2 million.            

During the quarter ended April 2, 2021, the Company repurchased 136 thousand shares of its common stock at an average price of $15.45 per share for a total cost of $2.1 million.  

The shares repurchased under the share repurchase plan during the quarter ended April 1, 2022, do not include 126 thousand shares which the Company bought back to satisfy employee net vesting obligations for a cost of $2.4 million. In addition, the shares repurchased under the share repurchase plan during the quarter ended April 2, 2021, do not include 108 thousand shares which the Company bought back to satisfy employee net vesting obligations at a cost of $1.6 million.       

Dividend Program

In 2021, the Company increased the annual dividend from $0.38 per share to $0.40 per share to be paid on a quarterly basis and during the first quarter of 2022, the Company further increased the annual dividend to $0.44 per share. During the first quarter of 2022, the Company declared its first quarterly dividend to shareholders of $3.5 million and which was paid in April 2022. These dividends were paid from U.S. domestic sources and are accounted for as an increase to accumulated deficit. Subsequent to April 1, 2022, the Company declared its second quarterly dividend in 2022 to be paid in July 2022.

10. Transactions with Related Parties

During the three months ended April 1, 2022, the Company bought back 31 thousand shares of its common stock from members of its Board of Directors for $0.6 million, or $20.50 per share.

11. 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.

12. 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
	April 1,		April 2,
	2022		2021
United States	$	64,392	$	55,259
Europe		7,537		5,558
Other (Australia, Canada, India and Uruguay)		3,735		2,669
Total revenue	$	75,664	$	63,486

14

The Hackett Group, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

12. Geographic and Group Information (continued)

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

	April 1,		December 31,
	2022		2021
Long-lived assets:
United States	$	89,158	$	89,199
Europe		15,060		15,584
Other (Australia, Canada, India and Uruguay)		597		582
Total long-lived assets	$	104,815	$	105,365

As of April 1, 2022 and December 31, 2021, foreign assets included $14.6 million and $15.1 million, respectively, of goodwill related to acquisitions.

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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 in these sections. 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 could impact such forward-looking statements include, among others, the impact of the coronavirus (COVID-19) pandemic and our ability to mitigate or manage disruptions posed by COVID-19 pandemic, changes in worldwide and U.S. economic conditions that impact business confidence and the demand for our products and services, 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 the geopolitical conflict involving Russia and Ukraine on our business and changes in general economic conditions, inflation, interest rates and our ability to obtain additional debt financing if needed. For a discussion of risks and actions taken in response to the COVID-19 pandemic, see “Our results of operations have been adversely affected and could in the future be materially adversely impacted by the coronavirus pandemic (COVID-19)” under Item 1A, “Risk Factors” of our Annual Report on Form 10-K. An additional description of our risk factors is described in Part I – Item 1A, “Risk Factors”. 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. Many of the risks, uncertainties and other factors identified in our Annual Report on Form 10-K for the year ended December 31, 2021 have been amplified by the COVID-19 pandemic.

OVERVIEW

The following Management's Discussion and Analysis ("MD&A") is intended to help the reader understand the results of operations and financial condition of Hackett. MD&A is provided as a supplement to, and should be read in conjunction with, our consolidated financial statements and the accompanying notes to our consolidated financial statements included in this Quarterly Report on Form 10-Q.

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 nearly 20,000 benchmark and performance studies over 27 years at over 7,000 of the world’s leading companies.

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

COVID-19 Pandemic Impact on Our Business

The level of revenue we achieve is based on our ability to deliver market leading services and solutions and to deploy skilled teams of professionals quickly. Our results of operations are affected by economic conditions, including macroeconomic conditions and levels of business confidence. In the first quarter of 2021, our revenue before reimbursements and diluted earnings per share grew when compared to the fourth quarter of 2020, reflecting a continuation of improved economic conditions.  However, any reversal of these trends or a prolonged economic downturn as a result of the COVID-19 pandemic or otherwise, weak or uncertain economic conditions or similar factors could adversely affect our clients’ financial condition which may further reduce our clients’ demand for our services.  

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We are actively managing our business to respond to the impact of the COVID-19 pandemic. We are generally following the requirements and protocols published by the U.S. Centers for Disease Control and the World Health Organization, and state and local governments.

In light of the evolving health, social, economic and business environment, governmental regulations or mandates, and business disruptions that could occur, the potential impact that the COVID-19 pandemic could have on our financial condition and operating results remains highly uncertain.

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, our results of operations(in thousands and unaudited):

	Quarter Ended
	April 1,			April 2,
	2022			2021
Revenue:
Revenue before reimbursements	$	75,108		$	63,410
Reimbursements		556			76
Total revenue		75,664			63,486
Costs and expenses:
Cost of service:
Personnel costs before reimbursable expenses (includes $1,666 and $1,847 of stock compensation expense in 2022 and 2021, respectively)		47,333			41,170
Reimbursable expenses		556			76
Total cost of service		47,889			41,246
Selling, general and administrative costs (includes $933 and $740 of stock compensation expense in 2022 and 2021, respectively)		14,366			13,387
Total costs and operating expenses		62,255			54,633
Income from operations		13,409			8,853
Other expense:
Interest expense		(28	)		(25	)
Income from continuing operations before income taxes		13,381			8,828
Income tax expense		2,876			2,460
Income from continuing operations (net of taxes)		10,505			6,368
Loss from discontinued operations		—			(7	)
Net income	$	10,505		$	6,361
Diluted net income per common share	$	0.33		$	0.19

Revenue. We are a global company with operations located in the United States and Western Europe. 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 first quarter of 2022 and the comparable period of 2021. In this MD&A, we discuss revenue based on geographical location of engagement team personnel.  

The following table sets forth revenue by group for the periods indicated (in thousands):

	Quarter Ended
	April 1,		April 2,
	2022		2021
S&BT	$	29,980	$	25,759
EEA		37,965		32,192
International		7,719		5,535
Total revenue	$	75,664	$	63,486

Our Company total revenue increased 19%, to $75.7 million in the first quarter of 2022, as compared to $63.5 million in the same period of 2021. Our revenue before reimbursements and reimbursable expenses were both affected from the economic disruption of the COVID-19 pandemic and as we transitioned to a remote service delivery model throughout the U.S. and Europe. In the first

17

quarter of 2022 one customer accounted for 7% of our total revenue. In the first quarter of 2021, no customer accounted for more than 5% of our total revenue.

S&BT total revenue was $30.0 million during the first quarter of 2022, as compared to $25.8 million in the same period of 2021, reflecting the continued sequential growth since the second quarter of 2020, which includes strong growth from our research advisory offerings.

EEA total revenue was $38.0 million during the first quarter of 2022, as compared to $32.2 million in the same period of 2021, primarily driven by the large ERP and EPM Oracle engagements and continuing growth of our OneStream implementation practice, partially offset by the transition of large SAP year end engagements.  

Hackett international total revenue increased 39% in the first quarter of 2022, as compared to the same period in 2021, primarily due to U.S. driven global engagements and strong Hackett Institute sales. The Company’s international total revenue accounted for 10% and 9% of Company total revenue during the first quarters of 2022 and 2021, respectively.

Reimbursements as a percentage of Company total revenue were 0.7% and 0.1% during the first quarters of 2022 and 2021, respectively. Reimbursements are project travel-related expenses passed through to a client with no associated operating margin. The low level of reimbursements in both periods is directly attributable to the decreases in travel requirements resulting from the COVID-19 pandemic. At this time, due to the immergence of the hybrid operating model, we do not expect reimbursements to return to pre-pandemic levels.

Cost of Service. Cost of service consists of personnel costs before reimbursable expenses, which includes 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 which are travel and other expenses passed through to a client and are associated with projects.

Personnel costs before reimbursable expenses, increased 15%, to $47.3 million, for the first quarter of 2022 from $41.2 million in the same period of 2021. The higher costs were primarily a result of hiring activities and increased utilization of subcontractors to support revenue growth, as well as increases in incentive compensation accruals commensurate with Company performance.  Personnel costs as a percentage of total revenue were 63% for the first quarter of 2022 and 65% for the first quarter of 2021.

Non-cash stock compensation expense, included in personnel costs before reimbursable expenses was $1.7 million for the first quarter of 2022, as compared to $1.6 million for the same period of 2021.

Acquisition related non-cash stock compensation expense, included in personnel costs before reimbursable expenses, was $4 thousand and $248 thousand in 2022 and 2021, respectively, primarily related to equity issued in relation to 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 increased 7%, to $14.4 million, for the first quarter of 2022, as compared to $13.4 million for the same period in 2021. This increase is primarily due to increased incentive compensation accruals commensurate with Company performance. SG&A costs as a percentage of total revenue were 19% and 21% during the first quarters of 2022 and 2021, respectively.

Non-cash stock compensation expense, included in SG&A, was $0.9 million for the first quarter of 2022, as compared to $0.7 million for the same period of 2021. The increase is due to higher incentive compensation accruals commensurate with Company performance.

Amortization expense, included in SG&A, was $0.1 million in the first quarter of 2022, as compared to $0.3 million in the same period in 2021. The amortization expense relates to the amortization of the intangible asset acquired in our acquisitions and the buyout of our partner’s joint venture interest in the CGBS Training and Certification Programs in 2017. The intangible assets related to the acquisitions will continue to amortize until the end of the year.

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Income Taxes. During the first quarter of 2022, we recorded $2.9 million of income tax expense related to certain federal, foreign and state taxes which reflected an effective tax rate of 22%. In the first quarter of 2021, we recorded $2.5 million of income tax expense related to certain federal, foreign and state taxes which reflected an effective tax rate of 28%.  

Liquidity and Capital Resources

As of April 1, 2022, and December 31, 2021, we had $47.8 million and $45.8 million, respectively, classified in cash on the consolidated balance sheets.  We currently believe that available funds (including the cash on hand and funds available for borrowing under our credit facility) and cash flows generated by operations will be sufficient to fund our working capital and capital expenditure requirements, including working capital, debt payments, lease obligations and capital expenditures for at least the next twelve months and beyond. We may decide to raise additional funds in order to fund expansion, to develop new or further enhance products and services, to respond to competitive pressures, or to acquire complementary businesses or technologies. There is no assurance that additional financing would be available when needed or desired. Our cash requirements have not changed materially from those disclosed in Item 7 included in Part II of our Annual Report on Form 10-K for the year ended December 31, 2021.

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

	Quarter Ended
	April 1,			April 2,
	2022			2021
Cash flows provided by operating activities	$	6,054		$	5,895
Cash flows used in investing activities	$	(993	)	$	(525	)
Cash flows used in financing activities	$	(3,076	)	$	(3,716	)

Cash Flows from Operating Activities

Net cash provided by operating activities was $6.1 million during the first three months of 2022, as compared to $5.9 million during the same period in 2021. In 2022, the net cash provided by operating activities was primarily due to net income adjusted for non-cash items, partially offset by the decrease in accrued liabilities and other accruals primarily due to the payout of the 2021 incentive compensation payments. In 2021, the net cash provided by operating activities was primarily due to net income adjusted for non-cash items and an increase in contract liabilities and income taxes payable, partially offset by an increase in accounts receivable and contract assets and a decrease in accrued liabilities and other accruals resulting from the payout of 2020 incentive compensation payments.

Cash Flows from Investing Activities

Net cash used in investing activities was $1.0 million during the first three months of 2022, as compared to $0.5 million during the same period in 2021. During both periods, cash flows used in investing activities primarily related to investments for the development of our Quantum Leap benchmark technologies. The investing activities in 2022 also included purchases of computer equipment.

Cash Flows from Financing Activities

Net cash used in financing activities was $3.1 million and $3.7 million during 2022 and 2021, respectively. The usage of cash in the first three months of both 2022 and 2021 primarily related to the repurchase of $3.1 million and $3.7 million, respectively, of the Company’s common stock.

As of April 1, 2022, we did not have any outstanding borrowings under our revolving line of credit (the “Revolver”), leaving us with a capacity of approximately $45.0 million. See Note 7, “Credit Facility,” to our consolidated financial statements included in this Quarterly Report on Form 10-Q for more information.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

As of April 1, 2022, 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. Under our current credit agreement which expires in November 2022, he 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 ended April 1, 2022. Upon renewal of our credit agreement in November 2022, the interest rate will change from LIBOR to a different benchmark index, which is yet to be determined.

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.  

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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.

For a discussion of our potential risks and uncertainties, see the risk factor below and the information under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021 (the “Annual Report”).

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 31, 2021.

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

Issuer Purchases of Equity Securities

During the quarter ended April 1, 2022, the Company repurchased 31 thousand shares of its common stock under the repurchase plan approved by the Company's Board of Directors. As of April 1, 2022, the Company had $10.6 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 December 31, 2021							$	11,244,246
January 1, 2022 to January 28, 2022		—	$	—		—	$	11,244,246
January 29, 2022 to February 25, 2022		30,999	$	20.50		30,999	$	10,608,767
February 26, 2022 to April 1, 2022		—	$	—		—	$	10,608,767
		30,999	$	20.50		30,999

Shares repurchased during the quarter ended April 1, 2022 under the repurchase plan approved by the Company's Board of Directors do not include 126 thousand shares for a cost of $2.4 million 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).
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**	Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the inline XBRL document.
101.SCH**	Inline XBRL Taxonomy Extension Schema
101.CAL**	Inline XBRL Taxonomy Extension Calculation Linkbase
101.DEF**	Inline XBRL Taxonomy Extension Definition Linkbase
101.LAB**	Inline XBRL Taxonomy Extension Label Linkbase
101.PRE**	Inline XBRL Taxonomy Extension Presentation Linkbase
104**	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* Filed herewith

** Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability.

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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: May 11, 2022	/s/ Robert A. Ramirez
	Robert A. Ramirez
	Executive Vice President, Finance and Chief Financial Officer

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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:  May 11, 2022	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:  May 11, 2022	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 April 1, 2022, 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
	May 11, 2022
By:	/s/ Robert A. Ramirez
	Robert A. Ramirez
	Executive Vice President, Finance and Chief Financial Officer
	May 11, 2022

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

XML

Document and Entity Information - shares	3 Months Ended
	Apr. 01, 2022	May 05, 2022
Cover [Abstract]
Trading Symbol	HCKT
Entity Registrant Name	Hackett Group, Inc.
Entity Central Index Key	0001057379
Document Type	10-Q
Document Period End Date	Apr. 01, 2022
Amendment Flag	false
Document Fiscal Year Focus	2022
Document Fiscal Period Focus	Q1
Current Fiscal Year End Date	--12-30
Entity Filer Category	Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Common Stock, Shares Outstanding		31,650,966
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

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Apr. 01, 2022	Dec. 31, 2021
Current assets:
Cash	$ 47,752	$ 45,794
Accounts receivable and contract assets, net of allowance of $3,925 and $2,702 at April 1, 2022 and December 31, 2021, respectively	50,514	50,616
Prepaid expenses and other current assets	5,364	5,766
Total current assets	103,630	102,176
Property and equipment, net	18,212	18,026
Other assets	540	620
Goodwill	84,639	85,070
Operating lease right-of-use assets	1,424	1,649
Total assets	208,445	207,541
Current liabilities:
Accounts payable	8,041	7,677
Accrued expenses and other liabilities	21,981	30,297
Contract liabilities (deferred revenue)	15,863	14,616
Operating lease liabilities	2,073	2,299
Total current liabilities	47,958	54,889
Non-current deferred tax liability, net	8,992	7,325
Operating lease liabilities	1,180	1,474
Total liabilities	58,130	63,688
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; 60,004,457 and 59,631,003 shares issued at April 1, 2022 and December 31, 2021, respectively	60	60
Additional paid-in capital	301,488	300,288
Treasury stock, at cost, 28,388,144 and 28,357,145 shares April 1, 2022 and December 31, 2021, respectively	(157,929)	(157,294)
Retained earnings	18,303	11,272
Accumulated other comprehensive loss	(11,607)	(10,473)
Total shareholders' equity	150,315	143,853
Total liabilities and shareholders' equity	$ 208,445	$ 207,541

XML

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Apr. 01, 2022	Dec. 31, 2021
Statement Of Financial Position [Abstract]
Accounts receivable and unbilled revenue, allowance	$ 3,925	$ 2,702
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	60,004,457	59,631,003
Treasury stock, at cost, shares	28,388,144	28,357,145

XML

Consolidated Statements of Operations - USD ($) $ in Thousands	3 Months Ended
	Apr. 01, 2022	Apr. 02, 2021
Revenue:
Total revenue	$ 75,664	$ 63,486
Cost of service:
Total cost of service	47,889	41,246
Selling, general and administrative costs (includes $933 and $740 of stock compensation expense in 2022 and 2021, respectively)	14,366	13,387
Total costs and operating expenses	62,255	54,633
Income from operations	13,409	8,853
Other expense:
Interest expense	(28)	(25)
Income from operations before income taxes	13,381	8,828
Income tax expense	2,876	2,460
Income from continuing operations	10,505	6,368
Loss from discontinued operations		(7)
Net income	$ 10,505	$ 6,361
Basic net income per common share:
Income per common share from continuing operations	$ 0.33	$ 0.21
Loss per common share from discontinued operations		0.00
Net income per common share	0.33	0.21
Diluted net income per common share:
Income per common share from continuing operations	0.33	0.19
Loss per common share from discontinued operations		(0.00)
Net income per common share	$ 0.33	$ 0.19
Weighted average common shares outstanding:
Basic	31,449,408	30,207,490
Diluted	31,843,563	32,769,167
Revenue Before Reimbursements [Member]
Revenue:
Total revenue	$ 75,108	$ 63,410
Reimbursements [Member]
Revenue:
Total revenue	556	76
Cost of service:
Total cost of service	556	76
Cost Before Reimbursements [Member]
Cost of service:
Total cost of service	$ 47,333	$ 41,170

XML

Consolidated Statements of Operations (Parenthetical) - USD ($) $ in Thousands	3 Months Ended
	Apr. 01, 2022	Apr. 02, 2021
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Total share based compensation	$ 2,599	$ 2,587
Cost Of Sales [Member]
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Total share based compensation	1,666	1,847
Selling General And Administrative Expenses [Member]
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Total share based compensation	$ 933	$ 740

XML

Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended
	Apr. 01, 2022	Apr. 02, 2021
Statement Of Income And Comprehensive Income [Abstract]
Net income	$ 10,505	$ 6,361
Foreign currency translation adjustment	(1,134)	269
Total comprehensive income	$ 9,371	$ 6,630

XML

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Apr. 01, 2022	Apr. 02, 2021
Cash flows from operating activities:
Net income	$ 10,505	$ 6,361
Plus loss from discontinued operations		7
Net income from continuing operations	10,505	6,368
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense	802	874
Amortization expense	144	261
Amortization of debt issuance costs	14	11
Total share based compensation	2,599	2,587
(Reversal) provision for doubtful accounts	(23)	137
(Gain) loss on foreign currency translation	(298)	61
Deferred income tax expense	1,643	1,378
Changes in assets and liabilities:
Decrease (increase) in accounts receivable and contract assets	177	(6,091)
Decrease in prepaid expenses and other assets	640	182
Increase (decrease) in accounts payable	363	(1,159)
Decrease in accrued expenses and other liabilities	(11,760)	(4,985)
Increase in contract liabilities	1,248	5,037
Increase in income tax payable		1,241
Net cash provided by operating activities	6,054	5,895
Cash flows from investing activities:
Purchases of property and equipment	(993)	(525)
Net cash used in investing activities	(993)	(525)
Cash flows from financing activities:
Debt issuance costs	(10)
Repurchase of common stock	(3,066)	(3,716)
Net cash used in financing activities	(3,076)	(3,716)
Effect of exchange rate on cash	(27)	(4)
Net increase in cash and cash equivalents	1,958	1,650
Cash at beginning of period	45,794	49,455
Cash at end of period	47,752	51,105
Supplemental disclosure of cash flow information:
Cash paid (refunded) for income taxes	$ 1	(181)
Cash paid for interest		$ 14

XML

Consolidated Statements of Equity - USD ($) shares in Thousands, $ in Thousands	Total	Common Stock [Member]	Additional Paid-in Capital [Member]	Treasury Stock [Member]	Retained Earnings (Accumulated Deficit) [Member]	Accumulated Other Comprehensive Loss [Member]
Balance at Jan. 01, 2021	$ 140,887	$ 58	$ 312,039	$ (144,254)	$ (17,388)	$ (9,568)
Balance, Shares at Jan. 01, 2021		57,693		(27,609)
Issuance of common stock	(1,605)		(1,605)
Issuance of common stock, Shares		294
Treasury stock purchased	(2,110)			$ (2,110)
Treasury stock purchased, Shares				(136)
Amortization of restricted stock units and common stock subject to vesting requirements	2,633		2,633
Dividends declared	(3,254)				(3,254)
Net income	6,361				6,361
Foreign currency translation	269					269
Balance at Apr. 02, 2021	143,181	$ 58	313,067	$ (146,364)	(14,281)	(9,299)
Ending Balance, Shares at Apr. 02, 2021		57,987		(27,745)
Balance at Dec. 31, 2021	143,853	$ 60	300,288	$ (157,294)	11,272	(10,473)
Balance, Shares at Dec. 31, 2021		59,631		(28,358)
Issuance of common stock	(2,432)		(2,432)
Issuance of common stock, Shares		373
Treasury stock purchased	(635)			$ (635)
Treasury stock purchased, Shares				(31)
Amortization of restricted stock units and common stock subject to vesting requirements	3,632		3,632
Dividends declared	(3,474)				(3,474)
Net income	10,505				10,505
Foreign currency translation	(1,134)					(1,134)
Balance at Apr. 01, 2022	$ 150,315	$ 60	$ 301,488	$ (157,929)	$ 18,303	$ (11,607)
Ending Balance, Shares at Apr. 01, 2022		60,004		(28,389)

XML

Basis of Presentation and General Information

3 Months Ended

Apr. 01, 2022

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 31, 2021, included in the Annual Report on Form 10-K filed by the Company with the SEC on March 4, 2022. The consolidated results of operations for the quarter ended April 1, 2022, 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

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

Revenue is recognized when control of the goods and services provided are transferred to the Company’s customers, in an amount that reflects the consideration it expects 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 the Company satisfies the performance obligations.  

The Company typically satisfies its performance obligations for professional services over time as the related services are provided. The performance obligations related to software support, maintenance and subscriptions to its 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.

The Company generates 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 and software maintenance and support.

In fixed-fee billing arrangements, which would also include contracts with capped fees, the Company agrees to a pre-established fee or fee cap in exchange for a predetermined set of professional services. The Company sets the fees based on its estimates of the costs and timing for completing the engagements. The Company generally recognizes 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 the Company’s 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 milestone driven, with net thirty-day terms, however client terms are subject to change.

1. Basis of Presentation and General Information (continued)

Time-and-material billing arrangements require the client to pay based on the number of hours worked by the Company’s consultants at agreed upon hourly rates. The Company recognizes revenue under time-and-material arrangements as the related services or goods are provided, using the right to invoice practical expedient which allows it 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, however client terms are subject to change.

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 services 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, however client terms are subject to change.

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 maintenance which 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, however client terms are subject to change.

Revenue before reimbursements excludes reimbursable expenses charged to clients. Reimbursements, which include travel and out-of-pocket expenses, are included in revenue, and an equivalent amount of reimbursable expenses is included in cost of service.

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 the Company’s 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 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 right 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.

Differences between the timing of billings and the recognition of revenue are recognized as either contract assets or contract liabilities in the accompanying consolidated balance sheets. Revenue recognized for services performed but not yet billed to clients are recorded as contract assets. Revenue recognized, but for which are not yet entitled to bill because certain events, such as the completion of the measurement period, are recorded as contract assets and included within contract assets. 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. During the quarter ended April 1, 2022, the Company recognized $6.9 million of revenue as a result of changes in the contract liability balance, as compared to $4.0 million for the quarter ended April 2, 2021. 

The following table reflects the Company’s disaggregation of total revenue for the quarters ended April 1, 2022 and April 2, 2021:

	Quarter Ended
	April 1,		April 2,
	2022		2021
Consulting	$	74,498	$	62,109
Software license sales		1,166		1,301
Total revenue	$	75,664	$	63,486

1.  Basis of Presentation and General Information (continued)

Capitalized Sales Commissions

Sales commissions earned by the Company’s 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.  The Company 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 consolidated statements of operations. As of December 31, 2021, and January 1, 2021, the Company had $1.6 million and $1.5 million, respectively, of deferred commissions, of which $0.4 million and $0.2 million was amortized during the first three months of the year 2022 and 2021, respectively.  No impairment loss was recognized relating to the capitalization of deferred commission.

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.

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

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.  

Fair Value

The Company’s financial instruments consist of cash, accounts receivable and contract assets, accounts payable, accrued expenses and other liabilities and contract liabilities. As of April 1, 2022 and December 31, 2021, 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.

COVID-19 Pandemic Impact on the Business

The level of revenue the Company achieves is based on its ability to deliver market leading services and solutions and to deploy skilled teams of professionals quickly. The Company’s results of operations are affected by economic conditions, including macroeconomic conditions and levels of business confidence. In each of the four quarters of 2021, the Company’s revenue before reimbursements and diluted earnings per share grew when compared to the fourth quarter of 2020 reflecting a continuation of improved economic conditions. However, any reversal of these trends or a prolonged economic downturn as a result of the impact of COVID-19 variants, or otherwise, weak or uncertain economic conditions or similar factors could adversely affect our clients' financial condition which may further reduce our clients' demand for our services.

The Company continues to actively manage its business to respond to the impact of the COVID-19 pandemic. At the onset of the pandemic, the Company reduced employee headcount and restricted employee travel to only essential business needs. While headcount has increased and some select non-essential travel is being allowed, most of the Company’s employees continue to work remotely from home. The Company is generally following the requirements, recommendation and protocols published by the U.S. Centers for Disease Control and the World Health Organization, and state and local governments.

1.  Basis of Presentation and General Information (continued)

As a response to the ongoing COVID-19 pandemic, the Company has implemented plans to manage its costs and preserve cash at the onset of the COVID-19 pandemic. The Company significantly limited the addition of new employees and third party contracted services, eliminated all travel except where necessary to meet customer needs, and limited discretionary spending. At the end of June 2020, the Company reduced its global workforce by approximately 10% and recorded a $5.0 million restructuring charge. During the fourth quarter of 2020, as a result of and in consideration of the COVID-19 pandemic, and the changing nature of its use of office space for its workforce, the Company evaluated its existing office leases as part of the Company’s transformation initiatives related to real estate. This evaluation resulted in the complete and partial abandonment of certain leased office spaces and an asset impairment charge of $3.9 million for certain lease right-of-use assets and certain property, equipment and leasehold improvements. All client concessions and accounts receivable allowances have been appropriately reflected in our financial statements. To the extent that economic conditions do not continue to improve and the business is again disrupted, the reinstatement of cost management actions will be considered.  Future asset impairment charges, increases in allowance for doubtful accounts, or restructuring charges will be dependent on the severity and duration of the COVID-19 pandemic.

In light of the evolving health, social, economic and business environment, governmental regulations or mandates, and business disruptions that could occur, the potential impact that the COVID-19 pandemic could have on the Company’s financial condition and operating results remains highly uncertain.

XML

Net Income Per Common Share

3 Months Ended

Apr. 01, 2022

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
	April 1,		April 2,
	2022		2021
Basic weighted average common shares outstanding		31,449,408		30,207,490
Effect of dilutive securities:
Unvested restricted stock units and common stock subject    to vesting requirements issued to employees and    non-employees		370,033		264,210
Common stock issuable upon the exercise of stock options    and SARs		24,122		2,297,467
Dilutive weighted average common shares outstanding		31,843,563		32,769,167

Approximately 6 hundred shares and 3 thousand shares of common stock equivalents were excluded from the computations of diluted net income per common share for the quarters ended April 1, 2022 and April 2, 2021, respectively, as inclusion would have had an anti-dilutive effect on diluted net income per common share.   

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Accounts Receivable and Contract Assets, Net

3 Months Ended

Apr. 01, 2022

Receivables 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):

	April 1,			December 31,
	2022			2021
Accounts receivable	$	32,924		$	30,732
Contract assets (unbilled revenue)		21,515			22,586
Allowance for doubtful accounts		(3,925	)		(2,702	)
Accounts receivable and contract assets, net	$	50,514		$	50,616

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

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Accrued Expenses and Other Liabilities

3 Months Ended

Apr. 01, 2022

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):

	April 1,		December 31,
	2022		2021
Accrued compensation and benefits	$	6,143	$	7,730
Deferred employer's payroll taxes		1,780		1,780
Accrued bonuses		5,247		13,753
Accrued dividend payable		3,475		-
Restructuring liability		666		740
Accrued sales, use, franchise and VAT tax		1,515		1,783
Non-cash stock compensation accrual		324		1,357
Other accrued expenses		2,831		3,154
Total accrued expenses and other liabilities	$	21,981	$	30,297

As a result of the tax deduction related to the exercise of the 2.9 million SARs in 2021, the Company has recorded an income tax receivable of $2.3 million to prepaid expenses and other current assets on the consolidated balance sheet.

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Restructuring Costs

3 Months Ended

Apr. 01, 2022

Restructuring And Related Activities [Abstract]

Restructuring Costs

5. Restructuring Costs 

During 2020, the Company recorded restructuring costs of $10.5 million, of which $5.7 million was primarily related to the reduction of staff in Europe and Australia. As of April 1, 2022, the Company had $0.7 million of remaining commitments related to the restructuring charge.  

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

						Exit, Closure and
		Employee Related				Consolidation
		Costs				of Facilities				Total
Accrual balance at January 1, 2021			1,083				1,209				2,292
Cash paid			(1,013	)			(539	)			(1,552	)
Accrual balance at December 31, 2021	$		70		$		670		$		740
Cash paid			—				(74	)			(74	)
Accrual balance at April 1, 2022	$		70		$		596		$		666

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Leases

3 Months Ended

Apr. 01, 2022

Leases [Abstract]

Leases

6. Leases

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 year and 4 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: 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 the lease liability nor the right of use asset.

The components of lease expense were as follows for the three months ended April 1, 2022 (in thousands):

Operating lease cost	$	257
Total net lease costs	$	257

6. Leases (continued)

The weighted average remaining lease term is 1 year. 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 three months ended April 1, 2022, the Company paid $0.6 million from operating cash flows for its operating leases.

Future minimum lease payments under non-cancellable operating leases as of April 1, 2022, were as follows (in thousands):

2022 (excluding the three months ended April 1, 2022)	$	1,968
2023		1,017
2024		579
Thereafter		-
Total lease payments		3,564
Less imputed interest		(122	)
Total	$	3,442

As of April 1, 2022, the Company does not have any additional operating leases that have not yet commenced.   

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Credit Facility

3 Months Ended

Apr. 01, 2022

Debt Disclosure [Abstract]

Credit Facility

7. Credit Facility

The Company has a credit agreement with Bank of America, N.A., which provides for borrowing up to $45.0 million pursuant to a revolving line of credit (the “Revolver”) which has a maturity date of November 30, 2022 (as amended the “Credit Agreement”).

The obligations of Hackett under the Revolver are guaranteed by active existing and future material U.S. subsidiaries of Hackett (the “U.S. Subsidiaries”), and are secured by substantially all of the existing and future property and assets of Hackett and the U.S. Subsidiaries, a 100% pledge of the capital stock of the U.S. Subsidiaries, and a 66% pledge of the capital stock of Hackett’s direct foreign subsidiaries (subject to certain exceptions).

As of April 1, 2022 and December 31, 2021, the Company did not have any outstanding balance  under the Revolver.  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 April 1, 2022, the applicable margin percentage was 1.50% per annum based on the consolidated leverage ratio, in the case of LIBOR rate advances, and 0.75% per annum, in the case of base rate advances. The interest rate of the commitment fees as of April 1, 2022, was 0.125%.

The Company is subject to certain covenants, including total consolidated leverage, fixed cost coverage, adjusted fixed cost coverage and liquidity requirements, each as set forth in the Credit Agreement, subject to certain exceptions.  As of April 1, 2022, the Company was in compliance with all covenants.

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Stock Based Compensation

3 Months Ended

Apr. 01, 2022

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock Based Compensation

8. Stock Based Compensation

During the three months ended April 1, 2022, the Company issued 682,781 restricted stock units at a weighted average grant-date fair value of $19.24 per share. As of April 1, 2022, the Company had 1,353,549 restricted stock units outstanding at a weighted average grant-date fair value of $17.60 per share. As of April 1, 2022, $18.7 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 2.7 years.

As of April 1, 2022, the Company had 2,945 shares of common stock subject to vesting requirements outstanding at a weighted average grant-date fair value of $16.17 per share. As of April 1, 2022, $23 thousand 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 1.5 years.

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

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Shareholders' Equity

3 Months Ended

Apr. 01, 2022

Stockholders Equity Note [Abstract]

Shareholders' Equity

9. Shareholders’ Equity

Stock Appreciation Rights (“SARs”)

As of April 1, 2022, the Company did not have any outstanding SARs. In December 2021, 2.9 million SARs were exercised with an exercise price of $4.00 per share.        

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 three months ended April 1, 2022, the Company repurchased 31 thousand shares of its common stock at an average price of $20.50 per share for a total cost of $0.6 million.  As of April 1, 2022 the Company had a total authorization remaining of $10.6 million under its repurchase plan with a total authorization of $167.2 million.            

During the quarter ended April 2, 2021, the Company repurchased 136 thousand shares of its common stock at an average price of $15.45 per share for a total cost of $2.1 million.  

The shares repurchased under the share repurchase plan during the quarter ended April 1, 2022, do not include 126 thousand shares which the Company bought back to satisfy employee net vesting obligations for a cost of $2.4 million. In addition, the shares repurchased under the share repurchase plan during the quarter ended April 2, 2021, do not include 108 thousand shares which the Company bought back to satisfy employee net vesting obligations at a cost of $1.6 million.       

Dividend Program

In 2021, the Company increased the annual dividend from $0.38 per share to $0.40 per share to be paid on a quarterly basis and during the first quarter of 2022, the Company further increased the annual dividend to $0.44 per share. During the first quarter of 2022, the Company declared its first quarterly dividend to shareholders of $3.5 million and which was paid in April 2022. These dividends were paid from U.S. domestic sources and are accounted for as an increase to accumulated deficit. Subsequent to April 1, 2022, the Company declared its second quarterly dividend in 2022 to be paid in July 2022.

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Transactions with Related Parties

3 Months Ended

Apr. 01, 2022

Related Party Transactions [Abstract]

Transactions with Related Parties

10. Transactions with Related Parties

During the three months ended April 1, 2022, the Company bought back 31 thousand shares of its common stock from members of its Board of Directors for $0.6 million, or $20.50 per share.

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Litigation

3 Months Ended

Apr. 01, 2022

Commitments And Contingencies Disclosure [Abstract]

Litigation

11. Litigation

The Company is involved in legal proceedings, claims, and litigation arising in the ordinary course of business not specifically discussed herein. In the opinion of management, the final disposition of such matters will not have a material adverse effect on the Company’s financial position, cash flows or results of operations.

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Geographic and Group Information

3 Months Ended

Apr. 01, 2022

Segment Reporting [Abstract]

Geographic and Group Information

12. 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
	April 1,		April 2,
	2022		2021
United States	$	64,392	$	55,259
Europe		7,537		5,558
Other (Australia, Canada, India and Uruguay)		3,735		2,669
Total revenue	$	75,664	$	63,486

12. Geographic and Group Information (continued)

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

	April 1,		December 31,
	2022		2021
Long-lived assets:
United States	$	89,158	$	89,199
Europe		15,060		15,584
Other (Australia, Canada, India and Uruguay)		597		582
Total long-lived assets	$	104,815	$	105,365

As of April 1, 2022 and December 31, 2021, foreign assets included $14.6 million and $15.1 million, respectively, of goodwill related to acquisitions.

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Basis of Presentation and General Information (Policies)

3 Months Ended

Apr. 01, 2022

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 31, 2021, included in the Annual Report on Form 10-K filed by the Company with the SEC on March 4, 2022. The consolidated results of operations for the quarter ended April 1, 2022, 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

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

Revenue is recognized when control of the goods and services provided are transferred to the Company’s customers, in an amount that reflects the consideration it expects 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 the Company satisfies the performance obligations.  

The Company typically satisfies its performance obligations for professional services over time as the related services are provided. The performance obligations related to software support, maintenance and subscriptions to its 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.

The Company generates 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 and software maintenance and support.

In fixed-fee billing arrangements, which would also include contracts with capped fees, the Company agrees to a pre-established fee or fee cap in exchange for a predetermined set of professional services. The Company sets the fees based on its estimates of the costs and timing for completing the engagements. The Company generally recognizes 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 the Company’s 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 milestone driven, with net thirty-day terms, however client terms are subject to change.

1. Basis of Presentation and General Information (continued)

Time-and-material billing arrangements require the client to pay based on the number of hours worked by the Company’s consultants at agreed upon hourly rates. The Company recognizes revenue under time-and-material arrangements as the related services or goods are provided, using the right to invoice practical expedient which allows it 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, however client terms are subject to change.

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 services 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, however client terms are subject to change.

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 maintenance which 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, however client terms are subject to change.

Revenue before reimbursements excludes reimbursable expenses charged to clients. Reimbursements, which include travel and out-of-pocket expenses, are included in revenue, and an equivalent amount of reimbursable expenses is included in cost of service.

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 the Company’s 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 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 right 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.

Differences between the timing of billings and the recognition of revenue are recognized as either contract assets or contract liabilities in the accompanying consolidated balance sheets. Revenue recognized for services performed but not yet billed to clients are recorded as contract assets. Revenue recognized, but for which are not yet entitled to bill because certain events, such as the completion of the measurement period, are recorded as contract assets and included within contract assets. 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. During the quarter ended April 1, 2022, the Company recognized $6.9 million of revenue as a result of changes in the contract liability balance, as compared to $4.0 million for the quarter ended April 2, 2021. 

The following table reflects the Company’s disaggregation of total revenue for the quarters ended April 1, 2022 and April 2, 2021:

	Quarter Ended
	April 1,		April 2,
	2022		2021
Consulting	$	74,498	$	62,109
Software license sales		1,166		1,301
Total revenue	$	75,664	$	63,486

1.  Basis of Presentation and General Information (continued)

Capitalized Sales Commissions

Sales commissions earned by the Company’s 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.  The Company 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 consolidated statements of operations. As of December 31, 2021, and January 1, 2021, the Company had $1.6 million and $1.5 million, respectively, of deferred commissions, of which $0.4 million and $0.2 million was amortized during the first three months of the year 2022 and 2021, respectively.  No impairment loss was recognized relating to the capitalization of deferred commission.

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.

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

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.  

Fair Value

Fair Value

The Company’s financial instruments consist of cash, accounts receivable and contract assets, accounts payable, accrued expenses and other liabilities and contract liabilities. As of April 1, 2022 and December 31, 2021, 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.

COVID-19 Pandemic Impact on Our Business

COVID-19 Pandemic Impact on the Business

The level of revenue the Company achieves is based on its ability to deliver market leading services and solutions and to deploy skilled teams of professionals quickly. The Company’s results of operations are affected by economic conditions, including macroeconomic conditions and levels of business confidence. In each of the four quarters of 2021, the Company’s revenue before reimbursements and diluted earnings per share grew when compared to the fourth quarter of 2020 reflecting a continuation of improved economic conditions. However, any reversal of these trends or a prolonged economic downturn as a result of the impact of COVID-19 variants, or otherwise, weak or uncertain economic conditions or similar factors could adversely affect our clients' financial condition which may further reduce our clients' demand for our services.

The Company continues to actively manage its business to respond to the impact of the COVID-19 pandemic. At the onset of the pandemic, the Company reduced employee headcount and restricted employee travel to only essential business needs. While headcount has increased and some select non-essential travel is being allowed, most of the Company’s employees continue to work remotely from home. The Company is generally following the requirements, recommendation and protocols published by the U.S. Centers for Disease Control and the World Health Organization, and state and local governments.

1.  Basis of Presentation and General Information (continued)

As a response to the ongoing COVID-19 pandemic, the Company has implemented plans to manage its costs and preserve cash at the onset of the COVID-19 pandemic. The Company significantly limited the addition of new employees and third party contracted services, eliminated all travel except where necessary to meet customer needs, and limited discretionary spending. At the end of June 2020, the Company reduced its global workforce by approximately 10% and recorded a $5.0 million restructuring charge. During the fourth quarter of 2020, as a result of and in consideration of the COVID-19 pandemic, and the changing nature of its use of office space for its workforce, the Company evaluated its existing office leases as part of the Company’s transformation initiatives related to real estate. This evaluation resulted in the complete and partial abandonment of certain leased office spaces and an asset impairment charge of $3.9 million for certain lease right-of-use assets and certain property, equipment and leasehold improvements. All client concessions and accounts receivable allowances have been appropriately reflected in our financial statements. To the extent that economic conditions do not continue to improve and the business is again disrupted, the reinstatement of cost management actions will be considered.  Future asset impairment charges, increases in allowance for doubtful accounts, or restructuring charges will be dependent on the severity and duration of the COVID-19 pandemic.

In light of the evolving health, social, economic and business environment, governmental regulations or mandates, and business disruptions that could occur, the potential impact that the COVID-19 pandemic could have on the Company’s financial condition and operating results remains highly uncertain.

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Basis of Presentation and General Information (Tables)

3 Months Ended

Apr. 01, 2022

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Summary of Disaggregation of Total Revenue

The following table reflects the Company’s disaggregation of total revenue for the quarters ended April 1, 2022 and April 2, 2021:

	Quarter Ended
	April 1,		April 2,
	2022		2021
Consulting	$	74,498	$	62,109
Software license sales		1,166		1,301
Total revenue	$	75,664	$	63,486

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Net Income Per Common Share (Tables)

3 Months Ended

Apr. 01, 2022

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
	April 1,		April 2,
	2022		2021
Basic weighted average common shares outstanding		31,449,408		30,207,490
Effect of dilutive securities:
Unvested restricted stock units and common stock subject    to vesting requirements issued to employees and    non-employees		370,033		264,210
Common stock issuable upon the exercise of stock options    and SARs		24,122		2,297,467
Dilutive weighted average common shares outstanding		31,843,563		32,769,167

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Accounts Receivable and Contract Assets, Net (Tables)

3 Months Ended

Apr. 01, 2022

Receivables Net Current [Abstract]

Accounts Receivable and Contract Assets, Net

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

	April 1,			December 31,
	2022			2021
Accounts receivable	$	32,924		$	30,732
Contract assets (unbilled revenue)		21,515			22,586
Allowance for doubtful accounts		(3,925	)		(2,702	)
Accounts receivable and contract assets, net	$	50,514		$	50,616

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Accrued Expenses and Other Liabilities (Tables)

3 Months Ended

Apr. 01, 2022

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):

	April 1,		December 31,
	2022		2021
Accrued compensation and benefits	$	6,143	$	7,730
Deferred employer's payroll taxes		1,780		1,780
Accrued bonuses		5,247		13,753
Accrued dividend payable		3,475		-
Restructuring liability		666		740
Accrued sales, use, franchise and VAT tax		1,515		1,783
Non-cash stock compensation accrual		324		1,357
Other accrued expenses		2,831		3,154
Total accrued expenses and other liabilities	$	21,981	$	30,297

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Restructuring Costs (Tables)

3 Months Ended

Apr. 01, 2022

Restructuring And Related Activities [Abstract]

Schedule of Activity in Restructuring Expense Accruals

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

						Exit, Closure and
		Employee Related				Consolidation
		Costs				of Facilities				Total
Accrual balance at January 1, 2021			1,083				1,209				2,292
Cash paid			(1,013	)			(539	)			(1,552	)
Accrual balance at December 31, 2021	$		70		$		670		$		740
Cash paid			—				(74	)			(74	)
Accrual balance at April 1, 2022	$		70		$		596		$		666

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Leases (Tables)

3 Months Ended

Apr. 01, 2022

Leases [Abstract]

Components of Lease Expense

The components of lease expense were as follows for the three months ended April 1, 2022 (in thousands):

Operating lease cost	$	257
Total net lease costs	$	257

Future Minimum Lease Payments Under Non-Cancellable Operating Leases

Future minimum lease payments under non-cancellable operating leases as of April 1, 2022, were as follows (in thousands):

2022 (excluding the three months ended April 1, 2022)	$	1,968
2023		1,017
2024		579
Thereafter		-
Total lease payments		3,564
Less imputed interest		(122	)
Total	$	3,442

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Geographic and Group Information (Tables)

3 Months Ended

Apr. 01, 2022

Segment Reporting [Abstract]

Geographic Revenue before Reimbursements

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
	April 1,		April 2,
	2022		2021
United States	$	64,392	$	55,259
Europe		7,537		5,558
Other (Australia, Canada, India and Uruguay)		3,735		2,669
Total revenue	$	75,664	$	63,486

Long-Lived Assets Attributable To Geographic Areas

12. Geographic and Group Information (continued)

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

	April 1,		December 31,
	2022		2021
Long-lived assets:
United States	$	89,158	$	89,199
Europe		15,060		15,584
Other (Australia, Canada, India and Uruguay)		597		582
Total long-lived assets	$	104,815	$	105,365

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Basis of Presentation and General Information (Narrative) (Details) - USD ($)	3 Months Ended
	Apr. 01, 2022	Apr. 02, 2021	Jan. 01, 2021	Jun. 26, 2020	Dec. 31, 2021
Basis Of Presentation And General Information [Line Items]
Revenue recognized as a result of change in contract liability	$ 6,900,000	$ 4,000,000.0
Deferred commissions			$ 1,500,000		$ 1,600,000
Commissions expense	400,000	200,000
Impairment loss recognized to capitalization of deferred commission	$ 0	$ 0
COVID-19 [Member]
Basis Of Presentation And General Information [Line Items]
Global workforce reduced, percentage				10.00%
Restructuring costs				$ 5,000,000.0
Asset impairment charges			$ 3,900,000
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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Basis of Presentation and General Information (Summary of Disaggregation of Total Revenue (Details) - USD ($) $ in Thousands	3 Months Ended
	Apr. 01, 2022	Apr. 02, 2021
Disaggregation Of Revenue [Line Items]
Total revenue	$ 75,664	$ 63,486
Consulting [Member]
Disaggregation Of Revenue [Line Items]
Total revenue	74,498	62,109
Software License Sales [Member]
Disaggregation Of Revenue [Line Items]
Total revenue	$ 1,166	$ 1,301

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Net Income Per Common Share (Reconciliation of Basic and Diluted Weighted Average Shares) (Details) - shares	3 Months Ended
	Apr. 01, 2022	Apr. 02, 2021
Earnings Per Share [Abstract]
Basic weighted average common shares outstanding	31,449,408	30,207,490
Unvested restricted stock units and common stock subject to vesting requirements issued to employees and non-employees	370,033	264,210
Common stock issuable upon the exercise of stock options and SARs	24,122	2,297,467
Dilutive weighted average common shares outstanding	31,843,563	32,769,167

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Net Income Per Common Share (Narrative) (Details) - shares	3 Months Ended
	Apr. 01, 2022	Apr. 02, 2021
Earnings Per Share [Abstract]
Antidilutive common share equivalents	600	3,000

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Accounts Receivable and Contract Assets, Net (Details) - USD ($) $ in Thousands	Apr. 01, 2022	Dec. 31, 2021
Receivables Net Current [Abstract]
Accounts receivable	$ 32,924	$ 30,732
Contract assets (unbilled revenue)	21,515	22,586
Allowance for doubtful accounts	(3,925)	(2,702)
Accounts receivable and contract assets, net	$ 50,514	$ 50,616

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Accrued Expenses and Other Liabilities (Details) - USD ($) $ in Thousands	Apr. 01, 2022	Dec. 31, 2021
Accrued Liabilities And Other Liabilities Current [Abstract]
Accrued compensation and benefits	$ 6,143	$ 7,730
Deferred employer's payroll taxes	1,780	1,780
Accrued bonuses	5,247	13,753
Accrued dividend payable	3,475
Restructuring liability	666	740
Accrued sales, use, franchise and VAT tax	1,515	1,783
Non-cash stock compensation accrual	324	1,357
Other accrued expenses	2,831	3,154
Total accrued expenses and other liabilities	$ 21,981	$ 30,297

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Accrued Expenses and Other Liabilities (Narrative) (Details) - USD ($) shares in Millions, $ in Millions	12 Months Ended
	Dec. 31, 2021	Apr. 01, 2022
Accrued Expenses and Other Liabilities [Line Items]
Income tax receivable		$ 2.3
Stock Appreciation Rights ("SARs") [Member]
Accrued Expenses and Other Liabilities [Line Items]
Shares exercised	2.9

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Restructuring Costs (Narrative) (Details) - USD ($) $ in Thousands	3 Months Ended
	Apr. 01, 2022	Dec. 31, 2021	Jan. 01, 2021
Restructuring Cost And Reserve [Line Items]
Restructuring costs	$ 10,500
Restructuring Reserve	666	$ 740	$ 2,292
Europe and Australia [Member]
Restructuring Cost And Reserve [Line Items]
Restructuring costs	$ 5,700

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Restructuring Costs (Schedule of Activity in Restructuring Expense Accruals) (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Apr. 01, 2022	Dec. 31, 2021
Restructuring Cost And Reserve [Line Items]
Accrual beginning balance	$ 740	$ 2,292
Cash paid	(74)	(1,552)
Accrual ending balance	666	740
Employee Related Costs [Member]
Restructuring Cost And Reserve [Line Items]
Accrual beginning balance	70	1,083
Cash paid		(1,013)
Accrual ending balance	70	70
Exit Closure and Consolidation of Facilities [Member]
Restructuring Cost And Reserve [Line Items]
Accrual beginning balance	670	1,209
Cash paid	(74)	(539)
Accrual ending balance	$ 596	$ 670

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Leases (Narrative) (Details) $ in Millions	3 Months Ended
	Apr. 01, 2022 USD ($)
Lessee Lease Description [Line Items]
Weighted average remaining lease term	1 year
Weighted average discount rate	4.00%
Operating lease payments	$ 0.6
Lessee, operating lease not yet commenced description	As of April 1, 2022, the Company does not have any additional operating leases that have not yet commenced
Minimum [Member]
Lessee Lease Description [Line Items]
Operating leases terms	1 year
Maximum [Member]
Lessee Lease Description [Line Items]
Operating leases terms	4 years

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Leases (Components of Lease Expense) (Details) $ in Thousands	3 Months Ended
	Apr. 01, 2022 USD ($)
Leases [Abstract]
Operating lease cost	$ 257
Total net lease costs	$ 257

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Leases (Future Minimum Lease Payments Under Non-Cancellable Operating Leases) (Details) $ in Thousands	Apr. 01, 2022 USD ($)
Leases [Abstract]
2022 (excluding the three months ended April 1, 2022)	$ 1,968
2023	1,017
2024	579
Total lease payments	3,564
Less imputed interest	(122)
Total	$ 3,442

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Credit Facility (Narrative) (Details) - Revolving line of credit facility [Member] - USD ($)	3 Months Ended
	Apr. 01, 2022	Dec. 31, 2021
Line of Credit Facility [Line Items]
Borrowing capacity under credit facility	$ 45,000,000.0
Maturity date	Nov. 30, 2022
Pledge of capital stock to U.S. subsidiaries	100.00%
Pledge of capital stock to direct foreign subsidiaries	66.00%
Outstanding balance	$ 0	$ 0
Commitment fees percentage	0.125%
London Interbank Offered Rate (LIBOR) [Member]
Line of Credit Facility [Line Items]
Margin percentage base rate	1.50%
Base Rate [Member]
Line of Credit Facility [Line Items]
Margin percentage base rate	0.75%

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Stock Based Compensation (Narrative) (Details) $ / shares in Units, $ in Thousands	3 Months Ended
	Apr. 01, 2022 USD ($) $ / shares shares
Restricted Stock Units [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares granted | shares	682,781
Weighted average grant-date fair value | $ / shares	$ 19.24
Shares outstanding | shares	1,353,549
Nonvested weighted average grant-date fair value | $ / shares	$ 17.60
Compensation expense | $	$ 18,700
Weighted average period	2 years 8 months 12 days
Common Stock Subject to Vesting Requirements [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares outstanding | shares	2,945
Nonvested weighted average grant-date fair value | $ / shares	$ 16.17
Compensation expense | $	$ 23
Weighted average period	1 year 6 months

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Shareholders' Equity (Narrative) (Details) - USD ($)	1 Months Ended	3 Months Ended		12 Months Ended
	Apr. 30, 2022	Apr. 01, 2022	Apr. 02, 2021	Dec. 31, 2021	Apr. 02, 2022
Equity, Class of Treasury Stock [Line Items]
Total cost		$ 635,000	$ 2,110,000
Amount available under repurchase plan		10,600,000
Stock repurchase authorized		$ 167,200,000
Shares repurchased for employee net vesting obligations, shares		126,000	108,000
Shares repurchased for employee net vesting obligations, value		$ 2,400,000	$ 1,600,000
Dividend declared		$ 0.44
Dividend payment		$ 3,474,000	$ 3,254,000
Subsequent Event [Member]
Equity, Class of Treasury Stock [Line Items]
Dividend payment	$ 3,500,000
Dividends payable, date declared, year					2022
Dividends payable, date to be paid, year and month					2022-07
Minimum [Member]
Equity, Class of Treasury Stock [Line Items]
Dividend declared				$ 0.38
Maximum [Member]
Equity, Class of Treasury Stock [Line Items]
Dividend declared				$ 0.40
Share Repurchase Plan [Member]
Equity, Class of Treasury Stock [Line Items]
Repurchase of common stock		31,000	136,000
Purchase price per share		$ 20.50	$ 15.45
Total cost		$ 600,000	$ 2,100,000
Stock Appreciation Rights ("SARs") [Member]
Equity, Class of Treasury Stock [Line Items]
SARs outstanding		0		2,900,000
Exercise price				$ 4.00

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Transactions with Related Parties (Narrative) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Apr. 01, 2022	Apr. 02, 2021
Related Party Transaction [Line Items]
Total cost	$ 635	$ 2,110
Director [Member]
Related Party Transaction [Line Items]
Repurchase of common stock	31
Total cost	$ 600
Purchase price per share	$ 20.50

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Geographic and Group Information (Geographic Revenue before Reimbursements) (Details) - USD ($) $ in Thousands	3 Months Ended
	Apr. 01, 2022	Apr. 02, 2021
Revenues from External Customers and Long-Lived Assets [Line Items]
Total revenue	$ 75,664	$ 63,486
United States [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total revenue	64,392	55,259
Europe [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total revenue	7,537	5,558
Other (Australia, Canada, India and Uruguay) [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total revenue	$ 3,735	$ 2,669

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Geographic and Group Information (Long-Lived Assets Attributable To Geographic Areas) (Details) - USD ($) $ in Thousands	Apr. 01, 2022	Dec. 31, 2021
Revenues from External Customers and Long-Lived Assets [Line Items]
Total long-lived assets	$ 104,815	$ 105,365
United States [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total long-lived assets	89,158	89,199
Europe [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total long-lived assets	15,060	15,584
Other (Australia, Canada, India and Uruguay) [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total long-lived assets	$ 597	$ 582

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Geographic and Group Information (Narrative) (Details) - USD ($) $ in Millions	Apr. 01, 2022	Dec. 31, 2021
Segment Reporting [Abstract]
Goodwill included in foreign assets	$ 14.6	$ 15.1