Breaking Down The Hackett Group, Inc. (HCKT) Financial Health: Key Insights for Investors

You're looking at The Hackett Group, Inc. (HCKT) and seeing a classic consulting pivot story: strong growth in a new, high-margin area but with clear headwinds in legacy segments. The near-term financial picture for the 2025 fiscal year shows a company aggressively investing in its Generative AI (Gen AI) platform, which is reflected in the Q1 2025 adjusted diluted earnings per share (EPS) of $0.41, which hit the high end of their guidance, but this is tempered by a sequential revenue dip, with Q3 revenue before reimbursements settling at $72.2 million, down from Q2's $77.6 million. Here's the quick math: based on the reported quarters and Q4 guidance, the company is on track for approximately $296 million in total revenue for 2025, which is a slight contraction driven by the expected decline in their Oracle Solutions segment. Still, the market sees significant upside, with Wall Street analysts maintaining a Moderate Buy consensus and an average 12-month price target that suggests a potential return to the $27.00 to $29.67 range. The company is defintely putting its money where its mouth is, announcing an equity buyback of up to $40 million in November 2025, a classic sign of management confidence. The question is whether the Gen AI momentum-now in over 50% of new client engagements-can outrun the legacy revenue drag fast enough to justify the current valuation and the analyst optimism.

Revenue Analysis

You need a clear picture of where The Hackett Group, Inc. (HCKT) is making its money, especially as they aggressively pivot to Generative AI (Gen AI). The direct takeaway is this: HCKT's revenue growth is slowing, with Q3 2025 showing a 7% year-over-year (YoY) decline, but their strategic shift to Gen AI consulting is the sole driver of growth in their core segment, which is keeping the overall business afloat.

Looking at the trailing twelve months (TTM) ending September 26, 2025, HCKT reported total revenue of $303.48 million, which is a modest 0.91% increase YoY. Honestly, that near-flat growth tells you the traditional business is struggling, but the Gen AI push is a material change in their revenue mix. The business is now structured around three key segments, plus a crucial recurring revenue component.

Segment Contribution and the Gen AI Pivot

The company's revenue streams are primarily service-based, broken down into three solution segments, with a growing portion coming from their subscription-based intellectual property (IP as a Service) and advisory services. For the second quarter of 2025 (Q2 2025), which reported total revenues before reimbursements of $77.6 million, here's how the segments contributed:

• Global S&BT (Services & Business Transformation): This is the powerhouse, delivering $43.6 million in Q2 2025. This segment saw a 5% YoY increase, driven almost entirely by strong demand for Gen AI consulting and implementation offerings.
• Oracle Solutions: Revenue here was approximately $20.5 million in Q2 2025. This segment is facing headwinds, with one source indicating a 7.5% YoY decline in Q2.
• SAP Solutions: This segment brought in $13.5 million in Q2 2025, which was actually up 11% YoY, largely due to implementation services tied to prior software sales.

Here's the quick math on the segment mix for Q2 2025, showing where the revenue concentration lies:

The Shifting Revenue Landscape

The most significant change in The Hackett Group, Inc.'s revenue stream is the accelerated pivot to Generative AI. Management has noted that over 50% of new engagements now include Gen AI elements, and the higher-margin Gen AI work is contributing to improved adjusted gross margins, which hit 42.8% in Q2 2025. This is defintely a high-impact area.

What this estimate hides is the underlying weakness in non-AI-related consulting, which is why the overall revenue growth rate is so low. For example, the Global S&BT segment would have been up 10% in Q2 2025 if you excluded the softness in their OneStream practice. The company is banking on new platforms like AI XPLR V4 to accelerate growth and attract channel partners, which should help offset declines in the Oracle and SAP segments, which are expected to be down in Q4 2025. Approximately 21% of HCKT's total revenues before reimbursements are recurring, coming from multiyear and subscription-based contracts, providing a stable base. For a deeper dive into the valuation implications of this strategic shift, check out Breaking Down The Hackett Group, Inc. (HCKT) Financial Health: Key Insights for Investors.

Your action item is clear: Monitor the Gen AI revenue growth rate in the next two quarters; if it slows, the overall revenue picture will turn negative quickly.

Profitability Metrics

You're looking for a clear read on The Hackett Group, Inc. (HCKT)'s underlying financial health, and the margins tell the real story of operational efficiency. The direct takeaway is that while the company's Gross Profit Margin is competitive with the industry median, its Net Profit Margin is significantly better, despite substantial non-cash charges related to its strategic pivot into Generative AI (Gen AI).

Let's break down the core profitability ratios using the most recent 2025 fiscal year data. The Hackett Group, Inc.'s Q1 2025 Gross Profit Margin stood at a solid 35.77% on revenue of approximately $77.9 million. This shows strong control over the cost of delivering its consulting and advisory services.

Here's the quick math on the key Q2 2025 margins, which reflect the core business performance:

• Gross Profit Margin: Approximately 35.3% (Based on Q1's $27.85 million Gross Profit on $77.87 million in revenue, which is a very stable figure).
• Operating Profit Margin: Approximately 5.40% (Q1 2025 Operating Income of $4.20 million divided by revenue).
• Net Profit Margin (GAAP): Approximately 2.15% (Q2 2025 Net Income of $1.7 million on $78.9 million in revenue).

This is a low Net Profit Margin, but you have to look deeper. The GAAP (Generally Accepted Accounting Principles) Net Income is heavily impacted by non-cash compensation expenses-specifically, in Q2 2025, these non-cash charges were $5.1 million, or $0.18 per diluted share. The company's Adjusted Diluted Earnings Per Share (EPS) for Q3 2025 was $0.37, which gives a much cleaner view of core operating profitability.

Industry Comparison and Operational Efficiency

The Hackett Group, Inc. is performing well against the median of the Management Consulting Services industry (SIC 8742). The industry median Gross Margin in 2024 was 35.8%, which is right in line with HCKT's 35.77% for Q1 2025. This suggests excellent cost management and pricing power that is on par with its peers.

The real outperformance is in the Net Profit. The median Net Profit Margin for the industry in 2024 was actually a negative -2.7%. The Hackett Group, Inc.'s Q2 2025 GAAP Net Profit Margin of 2.15%, even with the non-cash charges, is a significant positive deviation. This company is defintely converting revenue to profit better than the average consulting firm.

The trend in profitability over time shows a clear strategic shift. The lower GAAP net income in 2025 is directly tied to aggressive investment in Gen AI platforms and the related non-cash compensation from acquisitions like LeewayHertz. This is a conscious decision to trade near-term GAAP profit for future growth in the high-margin Gen AI advisory space. The management is mapping out a new revenue stream. You can learn more about who is investing in this shift by Exploring The Hackett Group, Inc. (HCKT) Investor Profile: Who's Buying and Why?

To summarize the comparison, here's how The Hackett Group, Inc. stacks up:

The key action for you is to focus on the Adjusted EPS and Operating Margin, as these figures strip out the noise from the strategic, non-cash investments. The company's operating efficiency is clearly superior, but the near-term GAAP net income will remain suppressed as the Gen AI transition continues.

Debt vs. Equity Structure

The Hackett Group, Inc. (HCKT) maintains a conservative capital structure, prioritizing equity and retained earnings over heavy debt. Your key takeaway here is that the company's financial leverage is well below the typical industry average, suggesting a lower risk profile from a solvency standpoint.

As of the third quarter of 2025, The Hackett Group, Inc.'s total debt stood at approximately $44 million. This debt is primarily long-term, with the long-term debt component reported at $43.8 million as of September 2025. This leaves a minimal amount-around $0.2 million-as implied short-term debt, which is often the current portion of long-term borrowings or a small balance on their credit facility. The company is not heavily reliant on short-term creditors, which is defintely a good sign for liquidity.

The most telling metric is the debt-to-equity (D/E) ratio, which measures how much debt a company uses to finance its assets relative to the value of shareholders' equity. The Hackett Group, Inc.'s D/E ratio is approximately 0.46. Here's the quick math: with shareholders' equity at about $114.415 million as of Q1 2025, the company has far more equity than debt on its balance sheet.

Compare that 0.46 to the industry average for Consulting Services, which is closer to 0.55, and the median for Management Consulting Services, which was around 1.01 in 2024. The Hackett Group, Inc. is significantly less leveraged than its peers. This low D/E ratio signals strong financial stability and a reduced burden of interest expense, which is critical in a rising-rate environment.

Balancing Debt and Equity Funding

The company's financing strategy shows a clear preference for using internal cash flow and a flexible credit facility for growth and capital returns, rather than large, permanent debt issuances. They use debt strategically, not as a primary funding source.

• Credit Facility Use: The Hackett Group, Inc. borrowed $21 million from its credit facility in Q3 2025, indicating an active, flexible use of debt to manage working capital or fund specific initiatives, like share repurchases.
• Equity Funding: The focus is on returning capital to shareholders. The Board authorized a $40 million increase in the share repurchase program in Q3 2025, bringing the total available balance to $52.6 million. They already executed a repurchase of $11.7 million in stock in Q1 2025. This is a direct use of equity capital to boost earnings per share.
• Dividends: The company also declared a quarterly dividend of $0.12 per share in Q3 2025, another signal of a mature, cash-generating business that prioritizes equity holders.

They are using debt tactically to fund a significant capital return program, a common move for companies with stable cash flow and a low D/E ratio. For a deeper look into who is benefiting from this capital allocation, you should check out Exploring The Hackett Group, Inc. (HCKT) Investor Profile: Who's Buying and Why?

Liquidity and Solvency

When you look at The Hackett Group, Inc. (HCKT), the immediate picture is one of solid, stable liquidity. Their ability to cover near-term obligations is defintely strong. The company's current ratio, which measures current assets against current liabilities, sits at an impressive 1.88 for the trailing twelve months (TTM) ending November 2025. That means for every dollar of short-term debt, they have almost two dollars in assets that can be converted to cash within a year.

Even better, the quick ratio (or acid-test ratio), which strips out less-liquid assets like inventory, is also very healthy at 1.67. This tells me The Hackett Group, Inc. isn't relying on selling off office furniture or old software licenses to pay its bills. It's a consulting and advisory business, so its quick assets-mainly cash and accounts receivable-are the real story, and they look good.

Working Capital and Receivables

The working capital position, while strong by the ratios, shows a near-term risk. Working capital is simply your current assets minus current liabilities. The strong ratio implies a healthy dollar amount of working capital, but the trend in collecting cash is slowing down. The Days Sales Outstanding (DSO)-the average number of days it takes to collect payment after a sale-rose to 73 days in the first quarter of 2025, up from 66 days in the prior quarter. That's a clear signal of customers taking longer to pay, which ties up cash.

Here's the quick math: slow collections mean less cash available for immediate use. You want to see that DSO figure come down in the coming quarters, as management has suggested they expect. This is a crucial operational lever, and The Hackett Group, Inc. knows it; their own 2025 Working Capital Survey highlights that the average Cash Conversion Cycle (CCC) for large U.S. companies is 37 days, suggesting a significant opportunity for their clients-and themselves-to unlock liquidity.

Cash Flow: Operations, Investing, and Financing

The company's cash flow statement reveals a powerful engine for generating cash from its core business, but also an aggressive capital allocation strategy. For the last twelve months, cash flow from operations was robust at $41.88 million, translating to a strong free cash flow of $35.00 million after accounting for capital expenditures of -$6.88 million. That's a lot of cash flow. Operating cash flow in Q1 2025 alone was $4.2 million, a nice bump from the $2.8 million in Q1 2024.

The real action is in the financing section. The Hackett Group, Inc. is using its balance sheet to return capital to shareholders and fund growth. This is a sign of confidence, but it adds debt. Look at the key financing moves in 2025:

• Q1 2025: Repurchased $11.7 million of stock.
• Q3 2025: Announced a $40 million Dutch tender offer (a method for a company to buy back its own stock) to acquire approximately 8% of common stock.

This tender offer, while accretive to earnings per share, is expected to be debt-funded. So, while the debt-to-equity ratio of 0.46 is still manageable, keep an eye on how much leverage they take on to execute these buybacks. You can dive deeper into this capital strategy in Exploring The Hackett Group, Inc. (HCKT) Investor Profile: Who's Buying and Why?

Potential Liquidity Concerns and Strengths

The Hackett Group, Inc. is fundamentally liquid and solvent. The 1.88 current ratio and 1.67 quick ratio are clear strengths. The primary concern is the rising DSO; if clients continue to delay payments, it will put pressure on the cash balance, which was $10.1 million at the end of Q2 2025. The strength is the high operating cash flow, which acts as a fantastic buffer. The firm is choosing to use that cash flow for aggressive shareholder returns, which is a calculated risk, but a sign of a mature, cash-generating business.

Valuation Analysis

You're looking at The Hackett Group, Inc. (HCKT) and wondering if the recent stock dip makes it a bargain or a value trap. The short answer is that while the trailing valuation looks expensive, the forward-looking metrics and analyst targets suggest the stock is currently undervalued, assuming the company hits its growth forecasts.

The stock has had a rough 2025, with its price near the 52-week low. Specifically, shares were trading around $18.16 as of late November 2025, a sharp drop from the 52-week high of $34.02. This decline translates to a year-to-date performance of roughly -38.10%, which is defintely a tough run. This is why you must look past the rearview mirror.

When you break down the core valuation multiples, you see a story of transition. The trailing twelve-month (TTM) Price-to-Earnings (P/E) ratio sits high at about 46.74x, which makes the stock look expensive compared to the broader market. However, the forward P/E ratio, which is based on expected 2025 earnings, drops dramatically to approximately 11.09x. Here's the quick math: that massive difference implies analysts expect a huge jump in earnings per share (EPS) in the near term, likely driven by their generative AI and digital transformation consulting focus.

Other key valuation metrics also show this contrast:

• Price-to-Book (P/B) Ratio: The P/B ratio is approximately 4.74x, which is higher than many traditional consulting firms, reflecting the company's asset-light, intellectual property-based model.
• Enterprise Value-to-EBITDA (EV/EBITDA): The TTM EV/EBITDA is around 17.04x. This multiple is a bit elevated compared to its historical median, but still reasonable for a high-growth-potential software and services firm.

The dividend picture is complex, too. The Hackett Group, Inc. pays an annual dividend of $0.48 per share, giving a decent forward dividend yield of about 2.70%. The TTM payout ratio is an unsustainable-looking 126.32%, meaning they paid out more than they earned over the last year. But, the forward-looking payout ratio drops to an estimated 33.57%, which aligns with the expected earnings recovery and makes the dividend look much safer going into 2026. Cash flow is what matters most for dividends, still.

Analyst consensus leans positive, giving the stock a 'Moderate Buy' rating. The average 12-month price target is $27.00, which represents a significant upside of over 48% from the current price of $18.16. What this estimate hides is the execution risk: if the expected earnings growth doesn't materialize, the forward P/E of 11.09x is meaningless, and the stock is indeed overvalued at 46.74x trailing earnings. For a deeper dive into the company's fundamentals, check out the full post: Breaking Down The Hackett Group, Inc. (HCKT) Financial Health: Key Insights for Investors.

Your action is clear: Finance should track the Q4 2025 and Q1 2026 earnings reports closely, specifically focusing on the EPS growth rate to validate that low forward P/E. If they hit the numbers, the stock is a buy at this price.

Risk Factors

You need a clear picture of what could derail The Hackett Group, Inc. (HCKT)'s strategic pivot, and honestly, the risks are concentrated in execution and market volatility right now. The core challenge is managing a rapid transition to generative artificial intelligence (GenAI) solutions while legacy segments decline.

The immediate financial risk comes from the ongoing operational shift. In Q3 2025, the company set aside a restructuring reserve of between $1.5 million and $2 million, which naturally impacted short-term profitability. This is the cost of moving fast, but it's a necessary investment to stay relevant.

Here's the quick math on the segment performance risk:

• Legacy Decline: The Oracle Solutions segment is shrinking fast, with Q3 2025 revenue before reimbursements at $16.4 million, representing a sharp 25% decrease year-over-year. This is a real headwind.
• Q4 Outlook: Management expects this segment's revenue to be down another 15% compared to the prior year in Q4 2025, so the decline is persistent.
• Profitability Squeeze: The net profit margin recently dropped to 5.5%, a noticeable fall from the prior year's 11.7%, which points to the pressure from both restructuring costs and segment shifts.

The external risks are classic consulting sector concerns, but amplified by the AI revolution. Economic conditions remain a factor, causing clients to delay large IT budget allocations and creating 'lumpy demand' for digital transformation services. Plus, the competition in GenAI is fierce; everyone is chasing that market, which puts pressure on The Hackett Group, Inc. (HCKT)'s market share, even with their new platforms like AI XPLR and ZBrain.

To be fair, the company has clear mitigation strategies in place to counter these risks. They are doubling down on GenAI, with over 50% of new engagements now including GenAI elements. That's a strong pivot. They're also using financial engineering to support the stock and return capital, announcing a Dutch tender offer to repurchase up to $40 million of common stock and increasing the share repurchase program authorization to $52.6 million as of Q3 2025. This defintely helps stabilize the stock price during a period of operational flux.

What this estimate hides is the execution risk in integrating their recent acquisitions, like LeewayHertz and Spend Matters, which is crucial for their GenAI strategy but adds complexity. Still, the Q4 2025 guidance projects a recovery, with adjusted diluted earnings per share expected between $0.38 and $0.40 and adjusted gross margin climbing back to approximately 46% to 47%, suggesting they believe the restructuring is paying off. You can dive deeper into the full analysis of the company's financial health here: Breaking Down The Hackett Group, Inc. (HCKT) Financial Health: Key Insights for Investors.

Growth Opportunities

The Hackett Group, Inc. (HCKT) is making a decisive pivot to Generative Artificial Intelligence (Gen AI), which is the single most important growth driver for the near term. This strategic focus is designed to offset softness in legacy segments, positioning the company as a key architect for enterprise Gen AI journeys. In fact, over 50% of new client engagements now include Gen AI elements, showing strong market traction for this shift.

The company's future growth is tied directly to its ability to monetize its proprietary platforms and advisory services. They are spending money now to make money later, which is why you see restructuring costs impacting GAAP earnings. The strategic acquisitions of companies like LeewayHertz and the expenses related to Spend Matters are part of building out this full-stack Gen AI capability.

Future Revenue and Earnings Estimates

To get a clear picture of The Hackett Group, Inc.'s financial trajectory for the full 2025 fiscal year, we need to combine the reported quarterly results with the latest guidance. Here's the quick math for the full year, based on the midpoint of the Q4 2025 guidance:

What this estimate hides is the segment-level volatility. While the Global S&BT and SAP Solutions segments are expected to be up year-over-year, the Oracle Solutions segment is projected to be down by over 20% compared to the prior year, reflecting the shift away from older enterprise resource planning (ERP) systems.

Key Growth Drivers and Competitive Edge

The company's competitive advantage is built on a dual foundation of deep intellectual property (IP) and new, proprietary AI platforms. They are not just a consulting firm; they are an IP and platform-based advisory firm.

• AI XPLR V4 Platform: This product innovation, released in Q3 2025, is a key differentiator. It helps clients rapidly identify and design Gen AI solutions and agentic workflows by considering their existing technology landscape, which accelerates implementation success.
• Digital World Class® Benchmarking: This core competency provides data-driven insights that clients use to measure their performance against top-tier peers. This allows The Hackett Group, Inc. to promise and deliver quantifiable, breakthrough results, like the reported 2.6X higher ROI for their Digital World Class® Procurement clients.
• Strategic Partnerships: The firm is actively expanding its reach through alliances, such as the strategic agreement with Civic Initiatives, LLC, which is focused on driving growth in the public procurement sector. A strategic alliance was also formed with Salonis to strengthen its market position.

The firm's focus on Gen AI is defintely a high-risk, high-reward move, but their established reputation and proprietary platforms like AI XPLR and ZBrain™ give them a strong starting position. You can see their underlying philosophy in their Mission Statement, Vision, & Core Values of The Hackett Group, Inc. (HCKT).

The next action for investors is to monitor the Q4 2025 earnings release for any update on the projected revenue mix, specifically the growth rate of the Global S&BT and SAP Solutions segments, as these are the ones expected to carry the growth momentum.