The Hackett Group (NASDAQ:HCKT) reported fourth-quarter results that exceeded the high end of its revenue guidance, as management emphasized an accelerating shift toward generative AI-enabled delivery and a growing portfolio of licensable platforms intended to expand margins and open new revenue streams.
Quarterly results and segment performance
For the fourth quarter of fiscal 2025, Hackett posted revenue before reimbursements of $74.8 million and adjusted EPS of $0.40, which CEO Ted Fernandez said were “above and at the high of our quarterly guidance, respectively.” CFO Rob Ramirez noted that reimbursable expenses—primarily travel-related costs passed through to clients—represented 1.2% of revenue before reimbursements, compared with 1.3% in the prior quarter and 2.3% a year earlier.
- Global S&BT: $38.6 million, down 11% year over year. Ramirez said AI is becoming “an increasing percentage” of client engagements as traditional and AI-oriented services converge, and he expects Global S&BT revenue to be sequentially higher in Q1.
- Oracle Solutions: $14.0 million, down 20% year over year. Management attributed improving delivery productivity to the new AI X platform and said it expects sequential revenue and gross margin improvement in Q1, with continued improvement through the year.
- SAP Solutions: $22.2 million, up 32% year over year, driven primarily by “strong software-related sales” and SAP’s success in driving S/4HANA Cloud migrations. Ramirez said the company expects demand for SAP services to remain strong throughout the year, supported by software and related implementation fees.
Ramirez added that approximately 22% of total company revenue before reimbursements was recurring, multiyear, or subscription-based, including executive advisory, application managed services, and GenAI license contracts. He said Hackett is seeing “the natural migration of IP access requests” toward IP embedded in platforms such as Ask Hackett and AI Explorer.
Margins, profitability, and headcount
On costs and profitability, Hackett reported adjusted cost of sales of $40.0 million, or 53.4% of revenue before reimbursements, versus 52.3% in the prior year. Adjusted gross margin was 46.6%, compared with 47.7% a year ago. Consultant headcount ended the quarter at 1,301, compared with 1,317 in the prior quarter and 1,284 at the end of Q4 2024.
Adjusted SG&A totaled $20.0 million, and Ramirez said the year-over-year increase was primarily due to incremental commissions tied to higher license sales in the SAP Solutions segment. Adjusted EBITDA was $15.9 million, or 21.3% of revenue before reimbursements, down from 25.2% in the prior-year quarter.
On a GAAP basis, net income was $5.6 million, or $0.21 per diluted share, compared with $3.6 million, or $0.12, in the prior-year quarter. The quarter included $1.8 million of non-cash stock compensation expense and $1.1 million of acquisition-related compensation expense. Adjusted net income was $10.9 million, or $0.40 per diluted share, compared with $0.47 a year earlier.
GenAI platform strategy and licensing plans
Fernandez focused much of his prepared remarks on the company’s GenAI transition and platform expansion, describing an effort over the past two years to embed Hackett’s proprietary intellectual property into “GenAI-enabled platforms” designed for what he called the “agentic enterprise era.” He said Hackett’s strategy is to move from labor-based delivery toward “labor-led services” supported by platforms and benchmarking IP, with an expectation of “meaningful margin increases” over time.
Fernandez highlighted AI Explorer (also referred to as XPLR), saying version 5 is now licensable. He described AI Explorer as supporting enterprise-wide solution simulation, ideation, and agentic workflow design, backed by solution-specific ROI analysis. He said the platform is powered by Hackett’s proprietary “Hackett Solution Language Model” and informed by Hackett’s process benchmarks and best-practice “process intelligence IP.”
He also listed newer platforms introduced to support additional service lines:
- XT for business transformation engagements
- AI X for enterprise application implementation engagements
- Ask Hackett to support executive applied intelligence programs
In the Q&A session, Fernandez said the company expects to begin licensing the platform suite as it progresses through the year. He described a model where clients may use AI Explorer as part of a consulting engagement and then choose to license one or both of its modules afterward, depending on their needs. He also said Hackett is “not making our platform available to clients for free,” and that pricing discussions are increasingly based on quoting outcomes and deliverables rather than rates, with licensing addressed during the engagement where applicable.
Partnership initiatives and go-to-market efforts
Fernandez said Hackett has spent nearly six months demonstrating AI Explorer with a global technology and consulting company and expects to finalize a global go-to-market collaboration agreement “shortly,” with the goal of jointly serving new and existing clients. In response to an analyst question, he said the partner also wants to announce the relationship, and Hackett would announce it inter-quarter if signed.
Fernandez also said Hackett plans to launch a go-to-market pilot initiative with ServiceNow “this month,” after pursuing the opportunity for several months. Separately, he reiterated Hackett’s view that its ability to ingest output from Celonis and other process mining platforms into AI Explorer can accelerate ideation and solution recommendations for customers pursuing transformation initiatives.
Capital return, cash flow, and Q1 outlook
Hackett ended the quarter with $18.2 million in cash, up from $13.9 million in the prior quarter, and generated $19.1 million of net cash from operating activities. Days sales outstanding was 71 days, unchanged from the prior quarter.
Ramirez said the company executed a tender offer funded in part through its credit facility, repurchasing 2.1 million shares at an average price of $20.30 per share for a total cost of approximately $42 million. Outstanding debt ended the quarter at $76 million. After quarter end, the board increased share repurchase authorization by $13.6 million, bringing total authorization to $25 million, and declared a $0.12 per share dividend for Q1 with a March 20, 2026 record date and an April 3, 2026 payment date.
For the first quarter of fiscal 2026, Hackett guided to revenue before reimbursements of $70.5 million to $72.0 million and adjusted EPS of $0.34 to $0.36. Ramirez said Global S&BT and Oracle Solutions are expected to be down year over year but up sequentially, while SAP Solutions revenue is expected to remain up year over year. The company also expects $1.0 million to $1.5 million of AI transition charges in Q1, primarily severance tied to headcount reductions as GenAI delivery platforms drive productivity improvements; those charges will be excluded from adjusted results.
About The Hackett Group (NASDAQ:HCKT)
The Hackett Group is a global strategic advisory firm specializing in business transformation, benchmarking and research. Leveraging a proprietary data repository and the Hackett Methodology®, the company helps organizations optimize performance across enterprise functions. Its advisory services span digital transformation, process optimization and operational excellence, enabling clients to identify best practices, streamline workflows and achieve sustainable cost savings.
Through detailed benchmarking studies and industry research, The Hackett Group delivers actionable insights into finance, procurement, human resources, information technology and supply chain management.
