The Hackett Group, Inc. reports 76.5% Net Income decline in 2020 and 7.1 pp EBITDA Margin decline from 13.6% to 6.5%
02/23/2021 • About The Hackett Group, Inc. (
$HCKT) • By InTwits
The Hackett Group, Inc. reported FY2020 financial results today. Overall the company's long term financial model is characterised by the following facts:
- The Hackett Group, Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.8%. At the same time it's a lot of higher than industry average of 7.3%.
- CAPEX is quite volatile: $2m in FY2020, $5m in FY2019, $10m in FY2018, $7m in FY2017, $3m in FY2016
- The company has potentially unprofitable business model: ROIC is 5.8%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The Hackett Group, Inc.'s Revenue dropped on 15.2%. Annual revenue decline showed slowdown in FY20Q4 - revenue dropped on 14.2%. Revenue decline was worsened by EBITDA margin decline. EBITDA Margin decreased on 7.1 pp from 13.6% to 6.5% in FY2020.
Gross Margin dropped on 11.4 pp from 41.9% to 30.5% in FY2020. SG&A as a % of Revenue increased slightly on 0.57 pp from 22.0% to 22.5% in FY2020.
Net Income margin decreased on 6.0 pp from 8.2% to 2.3% in FY2020. During the last 5 years Net Income margin topped in FY2017 at 9.9% and was declining since that time.
Investments (CAPEX, working capital and M&A)
In FY2020 The Hackett Group, Inc. had CAPEX/Revenue of 0.79%. The Hackett Group, Inc.'s CAPEX/Revenue decreased slightly on 1.6 pp from 2.4% in FY2017 to 0.79% in FY2020. For the last three years the average CAPEX/Revenue was 1.9%. During the last 5 years CAPEX as a % of Revenue topped in FY2018 at 3.4% and was declining since that time.
Return on investment
The company operates at low ROIC (5.8%) and ROE (3.9%). ROIC dropped on 15.9 pp from 21.7% to 5.8% in FY2020. ROE dropped on 13.9 pp from 17.8% to 3.9% in FY2020. ROIC declined at -5.4 pp per annum in FY2016-FY2020. During FY2016-FY2020 ROE topped in FY2017 at 28.3% and was declining since that time.
Leverage (Debt)
Company's Net Debt / EBITDA is -2.8x and Debt / EBITDA is 0.4x. Debt dropped on 23.1% while cash surged on 90.5%.
The Hackett Group, Inc. has no short term refinancing risk: cash is higher than short term debt (1,887.6%).
Valuation and dividends
The company's trades at EV/EBITDA 29.0x and P/E 90.7x.
Management team
The company's CEO is Ted A Fernandez. Ted A Fernandez has 20 years tenure with the company. The Hackett Group, Inc.'s CFO Roberto A Ramirez has spent 13 years with the company.
Financial and operational results
FY ended 01/01/2021
The Hackett Group, Inc. ($HCKT) key annual financial indicators| mln. $ | 2016 | 2017 | 2018 | 2019 | 2020 | 2020/2019 |
|---|
P&L
|
|---|
| Revenue | 288.6 | 276.6 | 285.9 | 282.5 | 239.5 | -15.2% |
| Gross Profit | 125.3 | 114.7 | 121.0 | 118.4 | 73.1 | -38.3% |
| SG&A | 62.1 | 63.3 | 64.1 | 62.1 | 54.0 | -13.0% |
| EBITDA | 38.1 | 33.2 | 38.4 | 38.4 | 15.6 | -59.3% |
| Net Income | 21.5 | 27.4 | 23.9 | 23.3 | 5.5 | -76.5% |
Balance Sheet
|
|---|
| Cash | 19.7 | 17.5 | 13.8 | 26.0 | 49.5 | 90.5% |
| Short Term Debt | 0.0 | 0.0 | 0.0 | 2.7 | 2.6 | -3.2% |
| Long Term Debt | 7.0 | 19.0 | 6.5 | 5.3 | 3.5 | -33.3% |
Cash flow
|
|---|
| Capex | 3.2 | 6.5 | 9.6 | 4.6 | 1.9 | -58.6% |
Ratios
|
|---|
| Revenue growth | 10.6% | -4.1% | 3.4% | -1.2% | -15.2% | |
| EBITDA growth | 42.8% | -12.9% | 15.6% | -0.1% | -59.3% | |
|
|---|
| Gross Margin | 43.4% | 41.5% | 42.3% | 41.9% | 30.5% | -11.4% |
| EBITDA Margin | 13.2% | 12.0% | 13.4% | 13.6% | 6.5% | -7.1% |
| SG&A, % of revenue | 21.5% | 22.9% | 22.4% | 22.0% | 22.5% | 0.6% |
| Net Income Margin | 7.5% | 9.9% | 8.4% | 8.2% | 2.3% | -6.0% |
| CAPEX, % of revenue | 1.1% | 2.4% | 3.4% | 1.6% | 0.8% | -0.8% |
|
|---|
| ROIC | 31.7% | 23.8% | 24.6% | 21.7% | 5.8% | -15.9% |
| ROE | 22.9% | 28.3% | 20.7% | 17.8% | 3.9% | -13.9% |
| Net Debt/EBITDA | -0.3x | 0.0x | -0.2x | -0.5x | -2.8x | -2.3x |
The Hackett Group, Inc. ($HCKT) key quoterly financial indicators
| mln. $ | FY20Q1 | FY20Q2 | FY20Q3 | FY20Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 70 | 53 | 58 | 59 | | 3.5% | -28.3% | -20.3% | -14.2% |
| EBITDA | 9 | -3 | 6 | 3 | | -8.6% | -129.0% | -43.3% | -39.2% |
| Net Income | 6 | -4 | 3 | 1 | | -22.1% | -156.3% | -56.8% | -60.9% |
Balance Sheet
|
|---|
| Cash | 23 | 37 | 43 | 49 | | 118.4% | 124.0% | 162.8% | 90.5% |
| Short Term Debt | 3 | 3 | 3 | 3 | | 3.1% | 13.7% | 0.0% | -3.2% |
| Long Term Debt | 7 | 6 | 6 | 4 | | -49.7% | -37.8% | -31.1% | -33.3% |
Ratios
|
|---|
| Gross Margin | 40.9% | 26.7% | 34.7% | 34.3% | | -1.3% | -18.0% | -8.6% | -9.5% |
| EBITDA Margin | 13.4% | -6.4% | 11.0% | 5.6% | | -1.8% | -22.1% | -4.4% | -2.3% |
| Net Income Margin | 7.9% | -7.5% | 5.2% | 1.5% | | -2.6% | -17.0% | -4.3% | -1.8% |
Peers in IT Consulting & Other Services
Below you can find The Hackett Group, Inc. benchmarking vs. other companies in IT Consulting & Other Services industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| CLPS Incorporation ($CLPS) | - | 8.1% | 56.0% | 32.7% | 37.7% |
| Endava plc ($DAVA) | - | 38.1% | 36.5% | 32.3% | 21.9% |
| EPAM Systems, Inc. ($EPAM) | - | 25.0% | 27.1% | 24.5% | 15.9% |
| Switch, Inc. ($SWCH) | - | 18.8% | 7.3% | 13.9% | 10.7% |
| Perficient, Inc. ($PRFT) | - | -0.4% | 2.7% | 13.5% | 8.2% |
| |
|---|
| Median (14 companies) | 8.3% | 4.8% | 4.3% | 7.6% | 2.3% |
|---|
| The Hackett Group, Inc. ($HCKT) | - | -4.1% | 3.4% | -1.2% | -15.2% |
Top companies by Gross margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Gartner, Inc. ($IT) | 61.3% | 60.1% | 63.1% | 63.5% | 67.2% |
| Teradata Corporation ($TDC) | 51.2% | 47.5% | 47.4% | 50.3% | 55.5% |
| Switch, Inc. ($SWCH) | 47.0% | 47.6% | 44.7% | 47.5% | 45.4% |
| Perficient, Inc. ($PRFT) | 31.1% | 33.3% | 35.8% | 37.4% | 37.8% |
| Cognizant Technology Solutions Corporation ($CTSH) | 39.9% | 38.2% | 39.0% | 36.6% | 35.9% |
| |
|---|
| Median (14 companies) | 28.8% | 28.8% | 29.4% | 35.1% | 34.4% |
|---|
| The Hackett Group, Inc. ($HCKT) | 43.4% | 41.5% | 42.3% | 41.9% | 30.5% |
Top companies by EBITDA margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Switch, Inc. ($SWCH) | 37.0% | 28.5% | 39.8% | 44.1% | 47.8% |
| Amdocs Limited ($DOX) | 18.7% | 18.9% | 16.1% | 19.0% | 21.2% |
| Gartner, Inc. ($IT) | 15.0% | 7.1% | 13.0% | 16.2% | 19.8% |
| EPAM Systems, Inc. ($EPAM) | 13.5% | 13.9% | 15.3% | 17.9% | 19.4% |
| Accenture plc ($ACN) | 15.9% | 14.8% | 16.3% | 16.7% | 18.7% |
| |
|---|
| Median (14 companies) | 6.7% | 6.9% | 7.2% | 14.6% | 13.6% |
|---|
| The Hackett Group, Inc. ($HCKT) | 13.2% | 12.0% | 13.4% | 13.6% | 6.5% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Switch, Inc. ($SWCH) | 90.2% | 106.4% | 67.9% | 66.6% | 67.8% |
| Amdocs Limited ($DOX) | 3.5% | 3.4% | 5.8% | 3.1% | 4.9% |
| ServiceSource International, Inc. ($SREV) | 10.4% | 7.2% | 6.5% | 4.7% | 4.0% |
| Endava plc ($DAVA) | 2.4% | 4.1% | 2.5% | 2.6% | 2.8% |
| EPAM Systems, Inc. ($EPAM) | 2.5% | 2.1% | 2.0% | 4.3% | 2.6% |
| |
|---|
| Median (14 companies) | 1.2% | 1.4% | 1.5% | 2.4% | 2.2% |
|---|
| The Hackett Group, Inc. ($HCKT) | 1.1% | 2.4% | 3.4% | 1.6% | 0.8% |
Top companies by ROIC, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Accenture plc ($ACN) | 81.3% | 61.7% | 66.1% | 62.1% | 40.7% |
| EPAM Systems, Inc. ($EPAM) | 18.2% | 18.9% | 21.2% | 20.2% | 19.4% |
| Cognizant Technology Solutions Corporation ($CTSH) | 21.3% | 21.9% | 23.8% | 20.4% | 17.5% |
| Amdocs Limited ($DOX) | 13.0% | 14.4% | 11.9% | 15.9% | 14.5% |
| Gartner, Inc. ($IT) | 41.0% | -0.2% | 6.9% | 10.8% | 12.7% |
| |
|---|
| Median (14 companies) | 7.3% | 4.7% | 6.9% | 9.9% | 9.6% |
|---|
| The Hackett Group, Inc. ($HCKT) | 31.7% | 23.8% | 24.6% | 21.7% | 5.8% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Switch, Inc. ($SWCH) | 4.0x | 3.2x | 3.3x | 4.0x | 4.0x |
| Gartner, Inc. ($IT) | 0.6x | 11.7x | 4.1x | 4.1x | 2.6x |
| Perficient, Inc. ($PRFT) | 0.4x | 1.0x | 1.3x | 1.0x | 1.5x |
| ServiceSource International, Inc. ($SREV) | 156.0x | - | -35.5x | 2.9x | 0.6x |
| Teradata Corporation ($TDC) | -1.1x | -1.5x | -1.3x | 0.9x | 0.5x |
| |
|---|
| Median (12 companies) | 0.3x | 0.6x | 0.8x | 0.3x | -0.1x |
|---|
| The Hackett Group, Inc. ($HCKT) | -0.3x | 0.0x | -0.2x | -0.5x | -2.8x |
