Hackett Group Q3 2026 Earnings: EPS Rises as Revenue Declines

The Hackett Group (NASDAQ: HCKT) reported Q3 2026 total revenue of $69.8 million, down approximately 4.5% from $73.1 million, while GAAP diluted EPS rose to $0.14 from $0.09. Lower operating costs and higher Oracle and SAP contributions supported profit growth despite continued weakness in Global S&BT, but quarterly cash conversion deteriorated significantly.

Core Earnings Data

For the quarter ended September 25, revenue before reimbursements also declined approximately 4.5% to $68.9 million. Total costs and operating expenses fell faster than revenue, decreasing approximately 7.9% to $62.3 million, which lifted operating income and operating margin.

GAAP net income increased, but adjusted net income declined slightly. Operating cash flow fell to $1.8 million, making cash generation the clearest weakness in the quarterly results.

Adjusted results exclude items including stock-based compensation, stock price award compensation, acquisition-related compensation and costs, amortization, restructuring costs, and related tax effects.

Business and Segment Performance

The revenue decline was concentrated in Global S&BT, the company’s largest segment. Oracle Solutions revenue was slightly lower, but its segment contribution nearly doubled, while SAP Solutions delivered increases in both revenue and contribution.

Total segment contribution increased approximately 7.1% to $21.0 million despite lower companywide revenue. Oracle’s contribution margin rose to approximately 31.5% from 16.4%, and SAP’s increased to approximately 31.5% from 27.3%. Global S&BT’s contribution margin declined to approximately 29.5% from 31.2%.

A Lower Share Count Lifted EPS Despite Weaker Adjusted Earnings

The diluted weighted-average share count fell approximately 9.6% to 24.953 million from 27.615 million. That smaller denominator allowed adjusted EPS to rise even though adjusted net income declined, meaning the adjusted per-share improvement did not come from higher adjusted earnings.

GAAP profit also benefited from lower expenses that are excluded from adjusted results. Stock price award program compensation fell to $1.442 million from $4.768 million, while restructuring costs declined to $1.433 million from $3.112 million. These benefits were partly offset by $1.333 million of acquisition-related noncash stock compensation, compared with a $1.574 million reversal in the prior-year quarter.

The company repurchased approximately $2.5 million of common stock during Q3 and had $16.3 million remaining under its repurchase authorization at quarter-end.

Profitability, Cash Flow, and Balance Sheet

Operating cash flow declined to $1.802 million while capital expenditures increased to $3.151 million. Using operating cash flow less capital expenditures, approximate free cash flow was negative $1.3 million, compared with positive $9.0 million in the prior-year quarter.

Days sales outstanding improved to 64 from 71 a year earlier but increased from 56 in Q2. Accounts receivable and contract assets reached $67.860 million, up from $59.505 million at the end of fiscal 2025, contributing to the importance of the expected Q4 working-capital recovery.

Cash declined to $12.645 million from $18.197 million at fiscal year-end, while long-term debt increased to $86.142 million from $75.818 million. Approximate net debt consequently rose to $73.5 million from $57.6 million, and quarterly net interest expense increased to $1.154 million from $438,000. The company also paid $3.0 million in dividends during Q3, and its board subsequently declared another quarterly dividend of $0.12 per share.

Q4 2026 Guidance

The Q4 revenue outlook brackets the Q3 result even though management expects 6% to 8% fewer available working days because of holidays and vacations. Adjusted EPS is expected to remain at or above the Q3 level, while management anticipates a material sequential recovery in operating cash flow.

Management said the expected cash flow could be used to reduce debt or repurchase shares under its normal capital allocation strategy.

Management Commentary

CEO Ted Fernandez said demand for AI transformation increasingly requires process expertise, proprietary intellectual property, and benchmarks in addition to technology. He added that wider use of the company’s XT and AIX platforms in transformation and software implementation work is beginning to improve sales and delivery productivity.

Management expects those benefits to support operating leverage and margin expansion in 2027, although the release did not provide quantified 2027 targets.

Risks Investors Need to Watch

• Global S&BT weakness: Revenue and contribution declined by double-digit percentages in the company’s largest segment. Continued contraction could offset gains from Oracle and SAP.
• Cash-flow recovery: Q3 operating cash flow fell sharply and approximate free cash flow turned negative. The Q4 outlook depends partly on collecting receivables and reducing working capital.
• Higher leverage and interest expense: Debt increased while cash declined from fiscal year-end, and quarterly net interest expense more than doubled year over year.
• Adjusted earnings quality: Adjusted EPS increased because the diluted share count fell, while adjusted net income declined. Sustained per-share growth will require improved underlying earnings or continued share-count reduction.
• Q4 calendar pressure: The company expects 6% to 8% fewer available days, creating an execution challenge even though its revenue guidance remains close to the Q3 level.

Summary

Hackett Group’s Q3 2026 results combined lower revenue with improved GAAP profitability as reduced expenses and higher Oracle and SAP contributions offset weakness in Global S&BT. The lower share count supported EPS, but adjusted net income declined and cash generation weakened considerably. The main issues for Q4 are whether receivables convert into the expected cash-flow rebound, whether Global S&BT stabilizes, and whether AI-enabled productivity begins to produce sustained operating leverage.