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    HCKT
    Earnings call· Jun 2026(Q2 FY26)

    HACKETT GROUP Q2 FY26 earnings call HCKT

    Aug 4, 2026 Source

    Executive summary

    The Hackett Group Q2 FY26 — AI-Enabled Platform Strategy Drives Inflection Point

    The Hackett Group is undergoing a significant AI transition, shifting to an AI-enabled platform-led model. The successful closure of over $30 million in new deals, driven by their XT and AIX platforms, marks an operational and financial inflection point, with sequential revenue and EPS growth expected in Q3. The company is focusing on integrating AI into broader enterprise transformation rather than stand-alone AI-first strategies, leading to improved delivery productivity and margin expansion.

    Highlights

    5

    • Closed several significant proposals totaling over $30 million, expected to drive improving sequential revenues and year-over-year EPS growth in Q3.

    • Adjusted diluted earnings per share of $0.34 was at the midpoint of guidance.

    • Total company adjusted gross margin improved sequentially to 44.1% from 42.3%.

    • Net cash provided from operating activities was $15.2 million.

    • Repurchased 377,000 shares for approximately $4 million at an average of $10.58 per share.

    Concerns

    4

    • IBM chose to defer joint go-to-market activities.

    • Global S&BT segment revenue decreased sequentially by 2% as clients questioned AI-first ROI.

    • Oracle Solutions segment revenue decreased sequentially by 1%.

    • Q2 revenue before reimbursements of $68.3 million came in slightly below the low end of guidance.

    Guidance & targets

    6
    CategoryTargetConfidence
    Revenue before reimbursements
    $68 million to $70 million
    high materiality
    High
    Adjusted diluted net income per share
    $0.37 to $0.39
    high materiality
    High
    Adjusted gross margin as a percentage of revenues before reimbursements
    46% to 47%
    medium materiality
    High
    Adjusted SG&A and interest expense
    approximately $19 million
    medium materiality
    High
    Adjusted EBITDA as a percentage of revenues before reimbursements
    21.5% to 22.5%
    medium materiality
    High
    GAAP effective tax rate on adjusted earnings
    26.5%
    low materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Global S&BT
    Sequential decrease as clients continue to question the underlying value and ROI of AI-first adoption strategies. Expected to sequentially improve in Q3.
    		$35.6 million—-2%—
    Oracle Solutions
    Sequential decrease. Expected to sequentially improve in Q3 as AIX and XT platforms attract new clients.
    		$15.3 million—-1%—
    SAP Solutions
    Sequential increase primarily driven by increased volume of software sales and corresponding implementation services. Expected to sequentially decrease in Q3 due to lower VAR software sales.
    		$17.4 million—9%—

    Operational metrics

    16
    Adjusted diluted EPS
    $0.34at midpoint of guidance
    Q2 FY26

    Reported for the second quarter.

    Adjusted gross margin
    44.1%up from 42.3% QoQ
    Q2 FY26

    Improved sequentially across all segments.

    Adjusted SG&A
    $17.4 millionup from $16.1 million QoQ
    Q2 FY26

    Sequential increase primarily due to timing of marketing-related events and foreign currency movements.

    Adjusted EBITDA
    $13.9 millionvs $13.8 million QoQ
    Q2 FY26

    Reported for the second quarter.

    GAAP net income
    $4.4 millionvs $4.3 million QoQ
    Q2 FY26

    Reported for the second quarter.

    Cash balances
    $14.2 millionup from $6.1 million QoQ
    end of Q2 FY26

    At the end of the second quarter.

    Net cash provided from operating activities
    $15.2 million
    Q2 FY26

    Primarily driven by net income adjusted for noncash activity and decreases in accounts receivable.

    Net debt reduction
    $6.1 million
    Q2 FY26

    Achieved during the quarter.

    Shares repurchased
    377,000
    Q2 FY26

    Repurchased during the quarter.

    Remaining stock purchase authorization
    $18.1 million
    end of Q2 FY26

    At the end of the second quarter.

    DSO (revised calculation)
    56down from 67 days QoQ
    Q2 FY26

    Revised calculation to exclude VAR-related revenues and receivables.

    Accounts receivable decrease
    $8.4 million
    Q2 FY26

    Decreased from the previous quarter as expected.

    Third quarter dividend
    $0.12
    Q3 FY26

    Declared by the Board of Directors subsequent to quarter end.

    Total debt outstanding
    $81 million
    end of Q2 FY26

    Balance at the end of the second quarter.

    Credit facility borrowing capacity
    $125 million
    subsequent to Q2 FY26

    Amended and restated subsequent to quarter end to extend maturity date and increase borrowing capacity.

    AI transition charge
    approximately $1 million
    Q3 FY26

    Expected to be incurred in the third quarter and excluded from non-GAAP financial results.

    Industry KPIs

    3
    MetricValueDetails
    Headcount dso56days
    Bookings tcv book to billover $30 millionUSD
    Genai ai book of businessincreasing

    Product announcements

    2
    ProductTypeDetails
    XT Version 2launch
    XTA platformlaunch

    Deals & partnerships

    4
    IBMGlobal go-to-market collaboration

    Executed and launched in March, but IBM has chosen to defer joint go-to-market activities at the moment.

    ServiceNowAlliance for joint client pursuits

    Alliance launched, pursuing a list of clients identified by both sides.

    TCSJoint client engagements

    Currently closing a meaningful engagement and pursuing another.

    GenpactNew initiative for joint client pursuits

    New initiative launching, with a first list of clients being reviewed.

    Risks & headwinds

    4
    Client decision-making uncertainty

    Clients' decision-making continues to be impacted by macroeconomic and ROI return uncertainty.

    Mitigation: Focusing on outcome-oriented solutions that accelerate value realization and reduce transformation risk; aligning resources to clients focused on measurable enterprise value.

    Client confusion on AI-first ROI

    Clients continue to question the underlying value of AI and are also confused by the return on investment of AI-first adoption strategies.

    Mitigation: Emphasizing that real ROI requires reimagining how work gets done and understanding strategic IP, rather than simply deploying AI tools. Pursuing AI adoption through broader enterprise transformation engagements.

    IBM partnership deferralcurrent

    IBM has chosen to defer joint go-to-market activities at the moment.

    Mitigation: Expanding channel strategy with other partners like ServiceNow, TCS, and Genpact.

    Competition for talent

    Competition for experienced talent and experienced delivery and market-facing executives with strong technology agility continues.

    Mitigation: Overall turnover remained at acceptable levels during the quarter, and that trend is expected to continue.

    What to watch in Q3 FY26

    5

    AI Transition Progress

    by year-end
    Current20% of potential captured
    Target50% of potential captured

    Why it matters

    Indicates the pace of internal transformation and realization of margin/productivity benefits from AI-enabled platforms.

    We spent a lot of time talking about that. We were -- I don't want to say early innings, but if you said what kind of potential are we capturing 20% at the moment, do we believe that we should be closer to 50% by year-end? Yes.

    Q&A highlights

    5

    What is the reasoning behind the IBM deferral, and can you provide more details on the programs with TCS and Genpact?

    IBM's deferral was unexpected but likely due to changing priorities. Hackett has launched a ServiceNow alliance, is closing a meaningful engagement with TCS, and is launching a new initiative with Genpact. AI project opportunities are increasingly coming from traditional transformation initiatives, requiring collaboration with partners.

    “First, look, the IBM, if you want to call it, hold, caught us a little bit by surprise. However, we know that their priorities were changing throughout the quarter. So beyond that, we'll continue to wait for any guidance that they may have going forward. With that said, we did launch our ServiceNow alliance and are pursuing a list of clients that have been identified by both sides. We are currently actually closing a meaningful engagement with TCS and have another one that is currently being pursued as well. And we're launching a new initiative with Genpact that will include a list of joint clients that we believe we should be jointly pursuing.”

    asked by George Sutton · answered by Ted Fernandez

    2 min read6 chapters

    Detailed Narrative

    01

    AI Transition and Platform Strategy

    The Hackett Group is aggressively transitioning to an AI-enabled, platform-led model, moving from traditional consulting to a more scalable approach. This involves proprietary platforms like AI XPLR for solution ideation, XT for enterprise transformation, AIX for software implementation, and the newly launched XTA for data assurance. These platforms leverage Hackett's benchmarks, process IP, and Solution Language Model to enhance delivery productivity and client value.

    02

    Operational and Financial Inflection Point

    The company successfully closed several significant proposals totaling over $30 million towards the end of Q2 FY26. These deals, driven by the adoption of their new platforms, are expected to lead to improving sequential revenues and year-over-year EPS growth in Q3. This marks a significant operational and financial inflection point, with positive impacts anticipated for Q4 and a strong setup for 2027.

    03

    Client AI Adoption Strategy Evolution

    Clients are increasingly cautious about stand-alone AI-first adoption strategies, instead opting to pursue AI initiatives that emanate from broader enterprise transformation and application implementation engagements. This trend aligns with Hackett's established relationships and capabilities, leading to more AI engagements and reducing reliance on channel partners. AI scope is being included or extended in nearly all new engagements.

    04

    Partnerships and Channel Expansion

    While a global go-to-market collaboration with IBM is currently deferred, Hackett is actively expanding its channel strategy. They have launched an alliance with ServiceNow, are pursuing meaningful engagements with TCS, and are launching a new initiative with Genpact. These partnerships are expected to contribute to Hackett's pipeline and Q3 performance by accelerating client decision-making and expanding reach.

    05

    Gross Margin Expansion and Productivity Gains

    The transition to AI-enabled delivery platforms and strategic headcount actions are driving significant improvements in gross margins. The adjusted gross margin on revenues before reimbursements increased to 44.1% in Q2 FY26 from 42.3% in the prior quarter. Further margin improvements are expected in Q3, with guidance set at 46% to 47%, reflecting enhanced productivity and value delivery.

    06

    Market Outlook and Competitive Differentiation

    Hackett believes it is an early leader in platform-enabled solution services, which analysts increasingly describe as 'service as a product.' They emphasize that AI success is 'process first, domain-specific, and orchestration-driven,' requiring deep understanding of business process context for true value realization. Their unique position stems from embedding AI into proprietary platforms, combined with world-class benchmarks and process expertise.

    AI-generated summary of the company’s earnings call. Not investment advice.