Summary of HCKT Q1 2026 Earnings Call

1Key Financial Results and Metrics

Total Revenues: $67.8 million, down 11% year-over-year.

Adjusted Earnings Per Share (EPS): $0.34, at the low end of guidance, compared to $0.41 in Q1 2025.

GAAP Net Income: $4.3 million, or $0.17 per share, up from $3.1 million, or $0.11 per share in the prior year.

Adjusted Gross Margin: 42.3%, down from 43.4% year-over-year.

Consultant Headcount: 1,247, down from 1,301 in the previous quarter and 1,332 year-over-year.

Cash Flow: Net cash utilized in operations was $5.1 million, with cash balances at $6.1 million, down from $18.2 million.

2Strategic Updates and Business Highlights

Hackett Group is transitioning to an AI platform-enabled sales and delivery model, aiming to enhance client value and operational efficiency.

Significant investments in AI capabilities, including the integration of proprietary platforms like AI XPLR and the acquisition of LeewayHertz.

Early signs of productivity improvements and increased project margins in the U.S. Strategy & Business Transformation (SBT) Group, although offset by lower utilization rates.

A new partnership with IBM aims to expand market reach and client opportunities, with expectations for noticeable impacts in Q3.

3Forward Guidance and Outlook

Q2 Revenue Guidance: Expected to range from $68.5 million to $70 million, with anticipated sequential growth across segments.

Adjusted EPS Guidance for Q2: Projected between $0.33 and $0.35.

Gross Margin Expectations: Anticipated to improve to approximately 44% to 45% in Q2.

Long-term Outlook: Q3 is viewed as an inflection point for revenue growth and adjusted EPS exceeding the prior year, assuming flat revenues year-on-year.

4Bad News, Challenges, or Points of Concern

Continued macroeconomic uncertainty and elongated client decision cycles are impacting demand.

Revenue declines in the Global SBT segment (down 15% year-over-year) and Oracle Solutions segment (down 24% year-over-year).

The company incurred an AI transition charge of approximately $500,000 in Q2 due to headcount reductions.

Increased Days Sales Outstanding (DSO) to 67 days from 55 days at year-end, attributed to milestone delivery terms on large engagements.

5Notable Q&A Insights

CEO Ted Fernandez acknowledged the short-term disruption due to the transition to AI platforms but expressed optimism about margin improvements and productivity benefits in upcoming quarters.

The partnership with IBM is expected to yield significant opportunities, with initial benefits anticipated in Q2 and more substantial impacts by Q3.

There is a growing recognition among clients of the need for detailed workflow intelligence to realize AI value, which aligns with Hackett's capabilities.

Competitive pressures are acknowledged, but Hackett believes its unique process analysis and AI XPLR capabilities provide a substantial market advantage. This summary encapsulates the key points from the earnings call, highlighting both the challenges and strategic initiatives that define Hackett Group's current position and future outlook.