The Hackett Group NASDAQ: HCKT reported first-quarter 2026 results that reflected what management described as ongoing macro-driven demand pressure and “elongated client decision cycles” tied in part to uncertainty around AI return on investment. Company leaders also emphasized that Hackett is in the midst of what Chairman and CEO Ted Fernandez called a major shift toward an “AI platform-enabled sales and delivery model,” a transition they believe will ultimately improve productivity, margins, and market positioning but has created near-term disruption.
First-quarter results and segment performance
On the call, CFO Robert Ramirez said total revenue before reimbursements was $67.8 million, down 11% from the first quarter of 2025. Ramirez noted that reimbursable expenses—primarily travel costs passed through to clients—were 1.4% of revenues before reimbursements, compared with 2.1% in the prior-year period.
By segment, Ramirez reported:
- Global Strategy & Business Transformation (S&BT): revenue before reimbursements of $36.4 million, down 15% year over year. Ramirez said client decision-making remained elongated, but he expects sequential improvement in Q2, along with margin improvement as AI-enabled delivery scales and as prior headcount actions flow through.
- Oracle Solutions: revenue before reimbursements of $15.4 million, down 24% year over year. Ramirez said the segment “stabilized from the completion of a large client engagement,” which will continue to pressure year-over-year comparisons until Q3. He also said the company expects sequential revenue and gross margin improvement in Q2 and beyond.
- SAP Solutions: revenue before reimbursements of $16.0 million, up 21% year over year. Ramirez attributed the increase to implementation services tied to higher software sales volume during 2025, noting that many of those software sales included “significant implementation fees.”
Ramirez said approximately 24% of total company revenues before reimbursements were recurring, multi-year, or subscription-based, including executive advisory, application management services (AMS), and GenAI license contracts.
Margins, earnings, and headcount
Ramirez reported adjusted cost of sales of $39.2 million, representing 57.7% of revenues before reimbursements, compared with 56.6% in the prior-year quarter. Adjusted gross margin was 42.3%, down from 43.4% a year earlier.
Fernandez pointed to early productivity benefits in platform-supported work, saying first-quarter project margins in the U.S. Strategy and Business Transformation group rose by about 500 basis points due to leverage from the company’s XT and Hackett AI XPLR platforms. However, he said those benefits were offset in Q1 by lower utilization as the company adjusted headcount to reflect realized productivity gains.
Consultant headcount ended the quarter at 1,247, down from 1,301 in the prior quarter and 1,332 in the first quarter of 2025. Ramirez said the year-over-year decline was “primarily due to actions taken to reduce staff to be commensurate with productivity improvements we have realized from our AI delivery platforms.”
Adjusted SG&A totaled $16.1 million, or 23.7% of revenues before reimbursements, down from $18.4 million, or 24.1%, a year earlier. Ramirez attributed the decrease mainly to reduced variable compensation.
Adjusted EBITDA was $13.8 million, or 20.3% of revenues before reimbursements, compared with $15.7 million, or 20.7%, in the prior-year quarter. On a GAAP basis, net income was $4.3 million, or $0.17 per diluted share, compared with $3.1 million, or $0.11, a year earlier. Adjusted net income was $8.7 million, or $0.34 per diluted share, which Fernandez said was “at the low end of our quarterly guidance.”
Cash, receivables, and capital return
Hackett ended the quarter with $6.1 million in cash, down from $18.2 million at the end of the prior quarter. Ramirez said net cash used in operating activities was $5.1 million, primarily driven by net income adjusted for non-cash items, “more than offset by increases in accounts receivable and decreases in accrued expenses,” including payment of 2025 performance bonuses.
Ramirez also discussed working capital dynamics, saying the company revised its days sales outstanding (DSO) calculation to exclude certain value-added reseller (VAR) revenues and receivables that carry multi-year terms. DSO was 67 days, up from 55 days at year-end, driven by milestone delivery terms on several large technology engagements. He said the company expects accounts receivable to decline by roughly $8 million to $9 million by the end of the second quarter, and noted that $4 million of VAR-related receivables expected in Q1 were delayed by SAP but collected in early Q2.
During the quarter, the company repurchased 333,000 shares at an average price of $13.94 for approximately $4.6 million. Remaining repurchase authorization was $22 million. The board declared a second-quarter dividend of $0.12 per share, payable July 6, 2026, to shareholders of record on June 22, 2026.
AI platform transition and go-to-market partnerships
Fernandez framed the company’s strategy around shifting from labor-based consulting toward what he said industry analysts describe as “service as a product.” He highlighted an “integrated suite of proprietary AI platforms,” including Hackett AI XPLR, Hackett Process Intelligence IP, an acquired agentic orchestration platform called ZBrain (from LeewayHertz), and delivery platforms XT and AIX to support business transformation and software implementation services.
He argued that many enterprises have adopted AI broadly but are struggling to realize ROI, not because of limitations in large language models but due to insufficient workflow intelligence, undocumented exceptions, fragmented systems, and governance gaps. Fernandez said Hackett’s “process first” approach and benchmark-based process intelligence are positioned to address those shortcomings, particularly as companies move into what he called “the agentic era,” which increases automation complexity and heightens requirements around security, compliance, monitoring, and governance.
On partnerships, Fernandez said the company executed and launched a global go-to-market collaboration with IBM during the quarter. While he said the partnership should have “limited impact” in Q2, he told analysts he expects it to “start to occur during the second quarter, but actually start being noticeable as we get into the third quarter,” citing the scale of opportunities. He also said Hackett received inbound calls from “some of the large hyperscalers” asking the company to demonstrate its capabilities.
Fernandez also discussed engagement with process mining users, including Celonis. He said Hackett launched a marketing campaign to process mining users in the quarter and has seen a “very strong response” to an offer allowing users to access Hackett AI XPLR, adding that the company would like to see some of that convert in Q2. On ServiceNow, Fernandez said the company was “a little stuck in signing an agreement,” attributing delays to intellectual property infringement rights and related terms—an issue he said also took time to resolve with IBM.
Second-quarter guidance and Q3 “inflection point” commentary
For the second quarter of 2026, Ramirez guided revenue before reimbursements of $68.5 million to $70.0 million and adjusted diluted EPS of $0.33 to $0.35. He said the company expects Global S&BT and Oracle revenues to be sequentially higher than Q1 but down year over year, while SAP revenue should be up year over year but down sequentially due to lower VAR sales.
Ramirez guided adjusted gross margin of approximately 44% to 45%, with adjusted SG&A and interest expense of about $19.5 million and adjusted EBITDA margin of roughly 20% to 21%. He also said the company expects an AI transition charge of about $500,000 in Q2, primarily severance tied to headcount reductions from increasing leverage of GenAI delivery platforms. Those charges will be excluded from non-GAAP results, and Ramirez said they are expected to decrease but could continue through 2026.
Both Ramirez and Fernandez characterized Q3 as an “inflection point,” with Fernandez saying the combination of easier Oracle comparisons and platform-related margin benefits should support year-over-year adjusted EPS growth even on flat revenues, as the company works through the operational and go-to-market changes tied to its platform-enabled model.
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.
Featured Stories
This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.
Before you consider The Hackett Group, you'll want to hear this.
MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and The Hackett Group wasn't on the list.
While The Hackett Group currently has a Hold rating among analysts, top-rated analysts believe these five stocks are better buys.
View The Five Stocks Here
Enter your email address and we’ll send you MarketBeat’s list of ten stocks set to soar in Spring 2026, despite the threat of tariffs and what's happening in Iran. These ten stocks are incredibly resilient and are likely to thrive in any economic environment.
Get This Free Report
