What The Hackett Group (HCKT) Said on Its Q3 Earnings Call

Key Points

• Q3 revenue before reimbursements was $68.9 million, up from $68.3 million in Q2, while adjusted EPS was $0.39, at the high end of guidance. Adjusted gross margin improved to 44.9%, and adjusted EBITDA margin rose to 22.4% year over year.
• Management said its AI platforms are boosting sales and delivery productivity, and could eventually be used in more than 90% of engagements. Clients are increasingly incorporating AI into broader transformation projects; the company expects net revenue growth as early as 2027.
• Q4 guidance calls for revenue of $68 million to $70 million and adjusted EPS of $0.39 to $0.41, with fewer billing days and an extra fiscal week weighing on results. The company also expects $15 million to $20 million in operating cash flow and plans to use cash to reduce debt or repurchase shares.

The Hackett Group NASDAQ: HCKT reported third-quarter 2026 revenue before reimbursements of $68.9 million and adjusted diluted earnings per share of $0.39, with management pointing to improving margins and productivity from its AI-enabled delivery platforms.

Chairman and CEO Ted Fernandez said the company’s AI transition strategy is centered on using proprietary platforms to support enterprise transformation and software implementation work. He said the company is seeing clients shift away from technology-first AI experimentation toward programs focused on measurable return on investment, process redesign and operating-model changes.

“Meaningful ROI from AI transformation requires more than technology,” Fernandez said. “It requires deep transformation expertise and IP to reimagine critical processes, along with AI benchmarks to accurately quantify the value opportunity.”

Third-Quarter Results and Segment Performance

Revenue before reimbursements rose from $68.3 million in the second quarter to $68.9 million in the third quarter, despite fewer available billable days, according to Chief Financial Officer Robert Ramirez. Adjusted earnings per share of $0.39 reached the high end of the company’s guidance range.

Adjusted gross margin was 44.9%, up from 44.1% in the prior quarter and 42.6% a year earlier. Adjusted EBITDA totaled $15.4 million, or 22.4% of revenue before reimbursements, compared with $15.3 million, or 21.2% of revenue before reimbursements, in the prior-year quarter.

GAAP net income was $3.6 million, or $0.14 per diluted share, compared with $4.4 million, or $0.09 per diluted share, in the prior-year period.

• Global S&BT revenue before reimbursements was $36.6 million, up 3% sequentially.
• Oracle Solutions revenue before reimbursements was $15.9 million, up 4% sequentially.
• SAP Solutions revenue before reimbursements was $16.4 million, down 6% sequentially, reflecting lower value-added reseller software sales compared with the preceding quarter.

Ramirez said the company recorded sequential gross-margin improvement across all segments. He attributed the results in part to increased sales and delivery productivity from the use of its AI-enabled platforms, as well as related headcount reductions and resource-alignment actions.

Adjusted selling, general and administrative expense was $16.6 million, or 24.1% of revenue before reimbursements, down from $17.4 million, or 25.5%, in the second quarter. The decline was primarily tied to AI-transition productivity actions, Ramirez said.

AI Platforms and Market Strategy

Fernandez said The Hackett Group’s XT platform applies its benchmark intelligence, best practices and transformation expertise to identify performance gaps, quantify potential value and develop transformation plans. Its AIX platform is designed to improve the speed, quality, productivity and value realization of software implementation engagements.

Management said the two platforms could eventually be used in more than 90% of the company’s current engagements. Fernandez said early adoption is beginning to improve how the company sells, staffs and delivers work, although he characterized the company as being in the early stages of the transition.

During the question-and-answer session, Fernandez said the company expects net revenue growth “as early as possible” in 2027 as new work is sold at higher margins and platform adoption expands. He said the company expects its Global S&BT business to benefit from a newer version of XT that can establish client baselines and develop transformation solutions more quickly than the company’s traditional approach.

Management also described a changing AI sales environment. Fernandez said that rather than pursuing standalone AI-first programs, clients are increasingly adding AI components to broader transformation and enterprise-application initiatives. He said nearly all new enterprise-transformation and software-implementation opportunities now include an AI component.

The company continues to discuss more formal go-to-market arrangements with its three active channel partners. Fernandez said potential partner relationships would involve Hackett participating directly in client opportunities and value-realization work, rather than primarily transferring intellectual property to partners.

Fourth-Quarter Outlook

For the fourth quarter, The Hackett Group forecast total net revenue of $68 million to $70 million, adjusted gross margin of approximately 48.5% at the midpoint and adjusted diluted earnings per share of $0.39 to $0.41.

The company said the quarter will have 6% to 8% fewer available billing days than the third quarter due to holidays and vacation time. Its fiscal 2026 calendar also includes a 14-week fourth quarter because of an additional week in the fiscal year. Ramirez said the extra week is expected to reduce fourth-quarter adjusted diluted EPS by approximately $0.03 because it carries a full week of payroll and related costs while producing limited incremental revenue during the holiday period.

Management expects fourth-quarter adjusted EBITDA margin to be approximately 23% to 24% of revenue before reimbursements. The company also expects to incur an AI transition charge of approximately $1 million during the quarter.

Ramirez said fourth-quarter cash flow from operations is expected to be between $15 million and $20 million, correcting an earlier verbal reference to $20 million to $20 million. The company expects accounts receivable to decline by $4 million to $5 million, and said cash flow would be used to reduce debt or repurchase shares.

Balance Sheet and Capital Allocation

The company ended the third quarter with $12.6 million in cash, down from $14.2 million at the end of the second quarter. Operating cash flow was $1.8 million during the quarter, primarily reflecting net income adjusted for noncash activity and partially offset by higher accounts receivable.

The Hackett Group repurchased 226,000 shares during the quarter at an average price of $10.85 per share, totaling about $2.5 million. It had $16.3 million remaining under its share-repurchase authorization at quarter-end.

Total debt outstanding was $86.1 million. During the quarter, the company amended and restated its credit facility, extending its maturity date and increasing borrowing capacity to $125 million. The board also declared a quarterly dividend of $0.12 per share, payable Jan. 8, 2027, to shareholders of record as of Dec. 24, 2026.

About The Hackett Group (NASDAQ:HCKT)

The Hackett Group, Inc is a global business and technology consulting firm that helps organizations improve performance, transform operations and adopt digital technologies. Its services are informed by proprietary research, benchmarking data and best-practice insights across major corporate functions.

The company advises clients on finance, human resources, procurement, information technology, supply chain management and other enterprise operations. Its offerings include benchmarking and performance studies, business transformation programs, enterprise performance management, technology consulting and implementation services.

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