Hackett Group's Net Income Plunges 70% Amid Restructuring, AI Investments

TL;DR

**HCKT's Q3 earnings are a red flag; net income cratered, and while they're buying AI, the debt and restructuring costs are a major drag.**

AI Summary

HACKETT GROUP, INC. (HCKT) reported a significant decline in net income for both the quarter and nine months ended September 26, 2025. Quarterly net income plummeted by 70.3% to $2.547 million from $8.587 million in the prior year, while nine-month net income decreased by 71.8% to $7.351 million from $26.066 million. Total revenue also saw a dip, falling 8.36% to $73.111 million for the quarter and 2.02% to $229.875 million for the nine months. The company incurred $3.112 million in restructuring costs during the quarter and nine months ended September 26, 2025, which were not present in the prior year. Strategic moves include the acquisition of LeewayHertz Technologies Private Limited for $7.8 million in September 2024, aimed at bolstering its generative A.I. capabilities, and the acquisition of Spend Matters LLC for $767 thousand in May 2025 to enhance its procurement and supply chain intelligence. Long-term debt increased substantially to $43.795 million as of September 26, 2025, from $12.734 million at December 27, 2024, reflecting new debt proceeds of $33.000 million. Cash at the end of the period decreased to $13.895 million from $16.366 million.

Why It Matters

This filing reveals a challenging period for HCKT, with a sharp decline in profitability that could concern investors. The significant increase in long-term debt and substantial share repurchases, despite falling net income, suggest a strategic pivot or an attempt to support share price, which warrants close scrutiny. For employees, the $3.112 million in restructuring costs could signal job reductions or operational shifts. Customers might benefit from the enhanced AI and procurement solutions through the LeewayHertz and Spend Matters acquisitions, potentially improving HCKT's competitive standing against rivals in the consulting and technology advisory space.

Risk Assessment

Risk Level: high — The company's net income for the quarter ended September 26, 2025, decreased by 70.3% to $2.547 million from $8.587 million in the prior year, indicating significant operational challenges. Furthermore, long-term debt surged from $12.734 million at December 27, 2024, to $43.795 million at September 26, 2025, representing a 244% increase, which elevates financial leverage and interest rate risk.

Analyst Insight

Investors should exercise caution and consider a 'hold' or 'reduce' position on HCKT. While the strategic acquisitions in AI and procurement are forward-looking, the immediate financial performance, particularly the sharp drop in net income and increased debt, suggests potential headwinds. Monitor future filings for signs of improved profitability and successful integration of the acquired businesses.

Financial Highlights

revenue

$73.111M

total Debt

$43.795M

net Income

$2.547M

cash Position

$13.895M

revenue Growth

-8.36%

Revenue Breakdown

Key Numbers

• $2.547M — Net income for Q3 2025 (70.3% decrease from $8.587M in Q3 2024)
• $7.351M — Net income for nine months ended Sep 26, 2025 (71.8% decrease from $26.066M in prior nine-month period)
• $73.111M — Total revenue for Q3 2025 (8.36% decrease from $79.777M in Q3 2024)
• $229.875M — Total revenue for nine months ended Sep 26, 2025 (2.02% decrease from $234.620M in prior nine-month period)
• $3.112M — Restructuring costs (incurred in Q3 and nine months ended Sep 26, 2025, none in prior year)
• $43.795M — Long term debt, net as of Sep 26, 2025 (increased from $12.734M at Dec 27, 2024)
• $27.926M — Repurchase of common stock for nine months ended Sep 26, 2025 (increased from $2.792M in prior nine-month period)
• $13.895M — Cash at end of period Sep 26, 2025 (decreased from $16.366M at Dec 27, 2024)
• $7.8M — Purchase consideration for LeewayHertz (acquisition closed on September 23, 2024)
• $767K — Cash consideration paid for Spend Matters (acquisition closed on May 15, 2025)

Key Players & Entities

• HACKETT GROUP, INC. (company) — registrant
• LeewayHertz Technologies Private Limited (company) — acquired company
• Spend Matters LLC (company) — acquired company
• SEC (regulator) — Securities and Exchange Commission
• NASDAQ Stock Market (regulator) — exchange where HCKT is registered
• LeewayHertz's founder (person) — executive vice president of Gen A.I. practice
• Global S&BT (company) — operating segment
• Oracle Solutions (company) — operating segment
• SAP Solutions (company) — operating segment

FAQ

Risk Factors

• Integration of Acquired Businesses [medium — operational]: The company has made two recent acquisitions, LeewayHertz and Spend Matters, to bolster its AI and procurement intelligence capabilities. Successful integration of these businesses, including their technology, personnel, and cultures, is critical for realizing the intended strategic benefits and avoiding disruption to existing operations. Failure to integrate effectively could lead to underperformance of these new ventures.
• Increased Indebtedness [medium — financial]: Long-term debt has significantly increased from $12.734 million to $43.795 million, largely due to new debt proceeds of $33.000 million. This higher debt level increases financial leverage and interest expense, potentially impacting profitability and financial flexibility, especially if revenue or earnings decline.
• Competitive Landscape in AI and Consulting [medium — market]: The acquisitions in generative AI and procurement intelligence place Hackett Group in highly competitive and rapidly evolving markets. The company faces competition from established players and agile startups. Maintaining a competitive edge requires continuous innovation and effective differentiation of its service offerings.
• Reliance on Professional Services [medium — operational]: The company primarily generates revenue from professional services, which can be cyclical and dependent on client spending. A slowdown in client demand or project cancellations, as suggested by the revenue decline, can significantly impact financial performance.
• Restructuring Costs Impacting Profitability [low — financial]: The company incurred $3.112 million in restructuring costs during the nine months ended September 26, 2025, which were not present in the prior year. These costs directly reduce net income and can signal underlying challenges or strategic shifts that may continue to affect profitability.

Industry Context

The consulting industry, particularly in areas like AI and digital transformation, is highly competitive and dynamic. Hackett Group operates within this landscape, facing pressure to innovate and deliver specialized solutions. The recent acquisitions in generative AI and procurement intelligence indicate a strategic focus on high-growth, in-demand service areas, aiming to differentiate from competitors.

Regulatory Implications

As a publicly traded company, Hackett Group must adhere to SEC regulations for financial reporting, including timely and accurate disclosures in its 10-Q filings. The company's use of accounting standards like ASC 280 for segment reporting and its handling of business combinations are subject to audit and regulatory scrutiny.

What Investors Should Do

1. Monitor integration progress of LeewayHertz and Spend Matters.
2. Analyze the impact of increased debt on financial flexibility and profitability.
3. Evaluate the sustainability of revenue decline and the effectiveness of cost management.
4. Assess the competitive positioning in the Gen AI and procurement intelligence markets.

Key Dates

• 2024-09-16: Agreement to acquire LeewayHertz Technologies Private Limited — Marks a strategic move to enhance generative AI capabilities.
• 2024-09-23: Acquisition of LeewayHertz closed — Integration of AI technology consulting firm begins.
• 2025-05-15: Acquisition of Spend Matters LLC closed — Strengthens procurement and supply chain intelligence offerings.
• 2025-09-26: End of the nine-month period for the 10-Q filing — Reporting period for significant revenue and net income declines, and increased debt.
• 2024-12-27: Previous fiscal year-end — Baseline for comparison of debt levels ($12.734M).

Glossary

Generative A.I. (Gen A.I.)

A type of artificial intelligence that can create new content, such as text, images, music, or code, based on patterns learned from existing data. (Hackett Group is strategically investing in this area through acquisitions to offer advanced client solutions.)

ASC 280, Segment Reporting

An accounting standard that guides how companies should report information about their operating segments, including revenue, profit or loss, and assets. (Used by Hackett Group to define and report its three operating segments: Global S&BT, Oracle Solutions, and SAP Solutions.)

Business Combination

The accounting treatment for when two companies merge or one company acquires another, involving the recognition of assets acquired and liabilities assumed at fair value. (Applies to the acquisitions of LeewayHertz and Spend Matters, impacting the company's balance sheet and goodwill.)

Goodwill

An intangible asset that arises when a company acquires another company for a price greater than the fair value of its identifiable net assets. (Hackett Group has $90.565 million in goodwill as of September 26, 2025, reflecting past acquisitions.)

Performance Obligations

In revenue recognition, these are distinct promises to a customer to transfer goods or services. (Hackett Group identifies and allocates transaction prices to these obligations to recognize revenue appropriately over time or at a point in time.)

Year-Over-Year Comparison

Compared to the prior year's comparable periods, Hackett Group has experienced a significant downturn. Total revenue for the quarter ended September 26, 2025, decreased by 8.36% to $73.111 million, and net income plummeted by 70.3% to $2.547 million. The nine-month period shows a similar trend with revenue down 2.02% to $229.875 million and net income down 71.8% to $7.351 million. Notably, the current period incurred $3.112 million in restructuring costs, absent in the prior year, and long-term debt has more than tripled to $43.795 million, while cash reserves have slightly decreased.

Filing Documents

• hckt-20250926.htm (10-Q) — 2564KB
• hckt-ex31_1.htm (EX-31.1) — 20KB
• hckt-ex31_2.htm (EX-31.2) — 20KB
• hckt-ex32.htm (EX-32) — 19KB
• 0001193125-25-267231.txt ( ) — 10112KB
• hckt-20250926.xsd (EX-101.SCH) — 1103KB
• hckt-20250926_htm.xml (XML) — 2126KB

- FINANCIAL INFORMATION

PART I - FINANCIAL INFORMATION Page Item 1.

Financial Statements

Financial Statements Consolidated Balance Sheets as of September 26, 2025 (unaudited) and December 27, 2024 3 Consolidated Statements of Operations for the Three and Nine Months Ended September 26, 2025, and September 27, 2024, (unaudited) 4 Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 26, 2025, and September 27, 2024, (unaudited) 5 Consolidated Statements of Cash Flows for the Nine Months Ended September 26, 2025, and September 27, 2024, (unaudited) 6 Consolidated Statements of Shareholders' Equity for the Three and Nine Months Ended September 26, 2025, and September 27, 2024, (unaudited) 7

Notes to Consolidated Financial Statements ( unaudited )

Notes to Consolidated Financial Statements ( unaudited ) 8 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 22 Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 27 Item 4.

Controls and Procedures

Controls and Procedures 27 Item 5. Other Information 27

- OTHER INFORMATION

PART II - OTHER INFORMATION Item 1.

Legal Proceedings

Legal Proceedings 28 Item 1A.

Risk Factors

Risk Factors 28 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 28 Item 6. Exhibits 29

— FINANCI AL INFORMATION

PART I — FINANCI AL INFORMATION

FINANCI AL STATEMENTS

ITEM 1. FINANCI AL STATEMENTS The Hackett Group, Inc. CONSOLIDATED BA LANCE SHEETS (in thousands, except share data) (unaudited) September 26, December 27, 2025 2024 ASSETS Current assets: Cash $ 13,895 $ 16,366 Accounts receivable and contract assets, net of allowance of $ 2,437 and $ 2,377 at September 26, 2025 and December 27, 2024, respectively 57,286 57,079 Prepaid expenses and other current assets 9,196 2,901 Total current assets 80,377 76,346 Property, software and equipment, net 23,084 20,343 Other assets 369 350 Intangible assets, net 3,575 2,312 Goodwill 90,565 89,782 Operating lease right-of-use assets 2,687 2,744 Total assets $ 200,657 $ 191,877 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 4,621 $ 6,503 Accrued expenses and other liabilities 24,537 30,789 Contract liabilities 11,896 11,118 Income tax payable 424 3,753 Operating lease liabilities 1,183 965 Total current liabilities 42,661 53,128 Deferred tax liability, net 11,074 8,464 Long term debt, net 43,795 12,734 Operating lease liabilities 1,503 1,977 Total liabilities 99,033 76,303 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; 61,892,815 and 61,031,629 shares issued at September 26, 2025 and December 27, 2024, respectively 62 61 Additional paid-in capital 347,679 332,285 Treasury stock, at cost, 34,762,000 and 33,540,472 shares September 26, 2025 and December 27, 2024, respectively ( 308,949 ) ( 281,022 ) Retained earnings 75,772 78,311 Accumulated other comprehensive loss ( 12,940 ) ( 14,061 ) Total shareholders' equity 101,624 115,574 Total liabilities and shareholders' equity $ 200,657 $

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 1. B asis 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 the 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 27, 2024, included in the Annual Report on Form 10-K filed by the Company with the SEC on February 28, 2025. The consolidated results of operations for the quarter and nine months ended September 26, 2025 , 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. Business Combination LeewayHertz On September 16, 2024, the Company executed

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 1. Basis of Presentation and General Information (continued) Amount Useful Life Category (in thousands) (in years) Customer Relationships $ 2,200 5 Technology 200 2 Non-Compete 100 2 Total $ 2,500 Also, in connection with the acquisition, the Company and LeewayHertz 's founder are creating a joint venture whereby The Hackett Group will contribute its AI XPLR platform and LeewayHertz will contribute its ZBrain Gen A.I. platform. T he Company has committed to fund up to $ 10.0 million of development costs related to the ZBrain Gen A.I. platform subject to the business plans approved by the JV Board of Directors. The integration of AI XPLR and the ZBrain Gen A.I. orchestration solution will enable the joint venture to provide advanced and tailored Gen AI solutions to its clients. Spend Matters On May 15, 2025, Hackett acquired certain assets and liabilities of Spend Matters LLC ("Spend Matters"), a leading provider of data-backed technology and solutions intelligence in the procurement and supply chain sectors. At closing, Hackett paid cash consideration of $ 767 thousand. As a result of the acquisition, the Company recognized provisional intangible assets of $ 2.0 million, with a remaining weighted average useful life of 2.8 years. Due to the timing of the completion of the acquisition, the purchase price and related allocation are preliminary and could be revised because of adjustments made to the purchase price, additional information obtained regarding assets acquired and liabilities assumed, and revisions of provisional estimates of fair values. The purchase price allocation will be finalized within the measurement period of up to one year from the acquisition date. Segment Reporting Segments are defined as components of a company that engage in business activities from which they earn revenue and incur expenses, and for which separate financial information

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 1. Basis of Presentation and General Information (continued) Foreign December 27, Additions/ Currency September 26, 2024 Adjustments Translation 2025 Global S&BT $ 63,090 $ 26 $ 757 $ 63,873 Oracle Solutions 16,699 — — 16,699 SAP Solutions 9,993 — — 9,993 Goodwill $ 89,782 $ 26 $ 757 $ 90,565 Revenue Recognition The Company primarily generates its revenue from providing professional services to its clients. The Company also generates revenue from software-related sales, software maintenance and support 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 maintenance and support and subscriptions to its executive and best practice advisory programs are typically satisfied evenly over the course of the service period

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 1. Basis of Presentation and General Information (continued) 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 the 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 bil

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