Answerthink, Inc. (NASDAQ:ANSR), a strategic business advisory and
technology consulting firm, today announced its financial results
for the second quarter, which ended June 29, 2007. Second quarter
revenue was $45.5 million, a 14% sequential increase from the first
quarter of $39.9 million, driven by The Hackett Group�s sequential
growth of 18%. Compared to the second quarter of 2006, revenues
were down 7% primarily as a result of the Company�s exit from its
Lawson and SAP staff augmentation contracts in 2006 and lower
Business Intelligence revenues. Diluted earnings per share was
$0.03 in the second quarter of 2007 compared to a diluted loss per
share of $0.05 in the first quarter and diluted earnings per share
of $0.05 for the second quarter of 2006. Pro forma diluted earnings
per share was $0.04 in the second quarter of 2007 compared to a pro
forma diluted loss per share of $0.01 in the first quarter of 2007
and pro forma diluted earnings per share of $0.06 in the second
quarter of 2006. Pro forma information is provided to enhance the
understanding of the Company�s financial performance and is
reconciled to the Company�s GAAP information in the accompanying
tables. As of the end of the second quarter of 2007, the Company�s
cash balances, including restricted cash, amounted to $21.5
million. During the quarter, the Company spent $1.75 million to
repurchase 509 thousand shares of the Company�s common stock. As of
the end of the quarter, $4.4 million remained available under the
Company�s share repurchase program authorization. �We are seeing
the introduction of our Transformational Benchmark and the sales
incentive changes we made at the beginning of the year favorably
impact our growth,� said Ted A. Fernandez, Chairman and CEO of
Answerthink. �Specifically, we experienced sequential growth across
all of our Hackett, REL and Best Practice Solutions groups. This
momentum, along with cost management programs also instituted at
the beginning of the year, should continue to favorably impact our
results.� Based on the current economic outlook, the Company
estimates total revenues for the third quarter of 2007 to be in the
range of $44 million to $46 million. The Company also estimates pro
forma diluted earnings per share to be in the range of $0.04 to
$0.06. Other Highlights Globalization Research � New Hackett
research revealed that U.S. and European companies can increase
their savings by over 40% by offshoring back office operations if
they selectively integrate transformation and process improvement
efforts into their globalization initiatives. REL/CFO Total Working
Capital Survey � The Tenth Annual Working Capital Survey, conducted
jointly by REL and CFO Magazine/CFO Europe, found that after nearly
a decade of annual reductions in working capital, the 1,000 largest
U.S. companies showed no improvement in 2006, in large part due to
increased inventory as a result of both slowing sales growth rate
and increased use of overseas manufacturing facilities. At the same
time, the survey found that the 1,000 largest companies in Europe
resumed their working capital improvement in 2006, after stalled
performance last year. Technology ROI Book of Numbers � Hackett
released Book of Numbers� research answering the question �Does IT
Matter?� and demonstrating that the best companies clearly use
information technology as a strategic enabler to create competitive
advantage. Fortune 500 companies with world-class IT organizations
spend 7% more than typical companies on IT, but the investment more
than pays for itself, helping drive lower operating costs of $134
million per year (nearly 5 times the increase in IT spending) in
finance, procurement, human resources, and other back office areas.
European Hackett Best Practices Conference � The Hackett Group
previewed the findings from its 2007 Book of Numbers� research to a
record attendance of over 100 delegates at its Third Annual
European Best Practices Conference, �Leveraging Synergies: Myth or
Reality� in London May 10th and 11th. The two-day invitation-only
event featured presentations by senior executives from 13 of the
world�s most successful global companies including: Allianz,
Britvic, Dow Chemical, Heineken, and Network Rail. Representative
Client Engagements Oracle Implementation for Leading Business
Process Outsourcing Services Provider � This company selected
Answerthink for a comprehensive Oracle implementation designed to
create a single integrated financial reporting system following a
major corporate acquisition. The new system will streamline global
operations and simplify financial reporting and analysis. Hyperion
Implementation for Health Insurance Provider � This company
selected Answerthink to implement Hyperion System 9. The new system
is designed to enable the company to make better business decisions
by offering improved accuracy and timeliness of financial forecasts
and enhanced visibility into profitability by business segment and
region. Private Equity Acquisition Support � REL has begun working
on a large acquisition-related project to improve the target
company�s cash flow with a focus on inventories, payables and
receivables. The project also includes a detailed review of the
organization�s cash flow forecasting and reporting processes.
Transformational Benchmarking for Petroleum Services Company � This
company selected Hackett to perform global benchmarks and develop
strategic transformation plans�for Finance and Human Resources. New
executive leadership is planning to use the results of Hackett�s
work to�identify, quantify, and prioritize performance improvement
and cost reduction opportunities across operations in over 90
countries. G&A Transformation Effort for Healthcare Products
Company � This company contracted with The Hackett Group for the
first phase of a transformation program involving the General &
Administrative functions of its European operations. The goal of
the effort is to reduce costs, improve service quality and address
restructuring of the company�s global operations. At 5:00 P.M. ET
on Tuesday, July 31, 2007, the senior management of Answerthink,
Inc. will host a conference call to discuss second quarter earnings
results for the period ending June 29, 2007. The number for the
conference call is (800) 779-0375, [Passcode: Second Quarter,
Leader: Ted A. Fernandez]. For International callers, please dial
(210) 234-8000. Please dial in at least 5-10 minutes prior to start
time. If you are unable to participate on the conference call, a
rebroadcast will be available beginning at 8:00 P.M. ET on Tuesday,
July 31, 2007 and will run through 5:00 P.M. ET on Tuesday, August
14, 2007. To access the rebroadcast, please dial (800) 944-8789.
For International callers, please dial (402) 220-3521. In addition,
Answerthink will also be webcasting this conference call live
through the StreetEvents.com service. To participate, simply visit
http://www.answerthink.com approximately 10 minutes prior to the
start of the call and click on the conference call link provided.
An online replay of the call will be available after 8:00 P.M. ET
on Tuesday, July 31, 2007 and will run through 5:00 P.M. ET on
Tuesday, August 14, 2007. To access the call, visit
http://www.answerthink.com or http://www.streetevents.com. About
Answerthink Answerthink, Inc. (www.answerthink.com) is a leading
business and technology consulting firm that enables companies to
achieve world-class business performance. By leveraging the
comprehensive database of The Hackett Group, Answerthink's business
and technology solutions help clients significantly improve
performance and maximize returns on technology investments.
Answerthink's capabilities include benchmarking, business
transformation, business applications, business intelligence, and
offshore application development and support. Founded in 1997,
Answerthink has offices throughout the United States and in Europe
and India. About The Hackett Group The Hackett Group, a global
strategic advisory firm, is a leader in best practice research and
advisory programs, benchmarking and transformation consulting
services, including shared services, offshoring and outsourcing
advice. Utilizing�best practices and implementation insight from
more than 4,000�benchmarking studies, executives use Hackett's
empirically based approach to quickly define and prioritize
initiatives, and to leverage proven strategies that enable
world-class performance.�Through its sister company REL, Hackett
offers�working capital�solutions focused on delivering significant
cash flow improvements.�Hackett has worked with 2,700 major
corporations and government agencies, including 88% of the Dow
Jones Global Titans and 73% of the Fortune 100. For more
information, visit www.thehackettgroup.com. About REL REL is a
world leading consulting firm dedicated to delivering sustainable
cash flow improvement across business operations. REL�s tailored
solutions balance client trade-offs between working capital,
operating costs and service performance. REL�s expertise has helped
clients free up billions of dollars/euros/pounds in cash, creating
the financial freedom to fund acquisitions, pension liabilities,
product development, debt reduction and share buy-back programs.
In-depth process expertise, analytical rigor, and collaborative
client relationships enable REL to deliver an exceptional return on
investment in a short timeframe. REL has delivered work in over 60
countries for the Global 2000. This press release contains
�forward-looking statements'' within the meaning of the Private
Securities Litigation Reform Act of 1995 and involve known and
unknown risks, uncertainties and other factors that may cause
Answerthink's actual results, performance or achievements to be
materially different from the results, performance or achievements
expressed or implied by the forward-looking statements. Factors
that impact such forward-looking statements include, among others,
the ability of the products, services, or practices mentioned in
this release to deliver the desired effect, our ability to
effectively integrate acquisitions into our operations, our ability
to attract additional business, our ability to effectively market
and sell our product offerings and other services, the timing of
projects and the potential for contract cancellations by our
customers, changes in expectations regarding the information
technology industry, our ability to attract and retain skilled
employees, possible changes in collections of accounts receivable,
risks of competition, price and margin trends, foreign currency
fluctuations, changes in general economic conditions and interest
rates as well as other risks detailed in the Company's Annual
Report on Form 10-K for the fiscal year ended December 29, 2006
filed with the Securities and Exchange Commission. We undertake no
obligation to update or revise publicly any forward-looking
statements, whether as a result of new information, future events
or otherwise, except as required by law. Answerthink, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per
share data) (unaudited) � � Quarter Ended Six Months Ended � June
29, June 30, June 29, June 30, � 2007 2006 2007 2006 Revenues:
Revenues before reimbursements $40,505 $43,950 $76,666 $88,846
Reimbursements 5,007 5,046 8,723 9,981 Total revenues 45,512 48,996
85,389 98,827 � Costs and expenses: Cost of service: � Personnel
costs before reimbursable expenses (includes $360 and $326 and $624
and $546 of stock compensation expense in the quarters and six
months ended June 29, 2007 and June 30, 2006, respectively) (3) �
23,267 24,996 44,783 51,460 Reimbursable expenses 5,007 5,046 8,723
9,981 Total cost of service 28,274 30,042 53,506 61,441 � �
Selling, general and administrative costs (includes $701 and $819
and $1,445 and $1,675 of stock compensation expense in the quarters
and six months ended June 29, 2007 and June 30, 2006, respectively)
(3) � 15,843 16,603 33,347 34,396 Restructuring costs - - - 6,313
Loss from misappropriation, net of collections - 23 (350) 302 Total
costs and operating expenses 44,117 46,668 86,503 102,452 Income
(loss) from operations 1,395 2,328 (1,114) (3,625) Other income
(expense): Interest income 215 163 455 353 Interest expense (91)
(38) (93) (143) Income (loss) before income taxes 1,519 2,453 (752)
(3,415) Income tax expense 68 332 135 697 Net income (loss) $ 1,451
$2,121 $ (887) $ (4,112) � Basic net income (loss) per common
share: Net income (loss) per common share $ 0.03 $0.05 $ (0.02) $
(0.09) Weighted average common shares outstanding 44,713 44,626
44,746 44,572 � Diluted net income (loss) per common share (1): Net
income (loss) per common share $ 0.03 $0.05 $ (0.02) $ (0.09)
Weighted average common and common equivalent shares outstanding
45,834 46,594 44,746 44,572 � � Pro forma data (2): Income (loss)
before income taxes $ 1,519 $2,453 $ (752) $ (3,415) Restructuring
costs - - - 6,313 Stock compensation expense 1,061 1,145 2,069
2,221 Amortization of intangible assets 348 834 712 1,804
Professional fees related to the loss from misappropriation 56 -
239 - Loss from misappropriation, net of collections - 23 (350) 302
Pro forma income before income taxes 2,984 4,455 1,918 7,225 Pro
forma income tax expense 1,194 1,782 767 2,890 Pro forma net income
$ 1,790 $2,673 $ 1,151 $ 4,335 � Pro forma basic net income (loss)
per common share $ 0.04 $0.06 $ 0.03 $ 0.10 Weighted average common
shares outstanding 44,713 44,626 44,746 44,572 � Pro forma diluted
net income (loss) per common share $ 0.04 $0.06 $ 0.03 $ 0.09 �
Weighted average common and common equivalent shares outstanding
45,834 46,594 45,776 46,573 (1) Potentially diluted shares were
excluded from the diluted loss per share calculations for the six
months ended June 29, 2007 and June 30, 2006 as their effects would
have been anti-dilutive to the loss incurred by the Company. (2)
The Company provides pro forma earnings results (which exclude
amortization of intangible assets, stock compensation expense,
restructuring costs, loss from misappropriation, net of collections
and professional fees related to the loss from misappropriation,
and include a normalized tax rate) as a complement to results
provided in accordance with Generally Accepted Accounting
Principles (GAAP). These non-GAAP results are provided to enhance
the users' overall understanding of the Company's current financial
performance and its prospects for the future. The Company believes
the non-GAAP results provide useful information to both management
and investors by excluding certain expenses that it believes are
not indicative of its core operating results. The non-GAAP measures
are included to provide investors and management with an
alternative method for assessing operating results in a manner that
is focused on the performance of ongoing operations and to provide
a more consistent basis for comparison between quarters. Further,
these non-GAAP results are one of the primary indicators management
uses for planning and forecasting in future periods. In addition,
since the Company has historically reported non-GAAP results to the
investment community, it believes the inclusion of non-GAAP numbers
provides consistency in its financial reporting. The presentation
of this additional information should not be considered in
isolation or as a substitute for results prepared in accordance
with accounting principles generally accepted in the United States
of America. (3) Certain items in the quarter and six months ended
June 30, 2006 have been reclassified to conform with the June 29,
2007 presentation. Answerthink, Inc. CONDENSED CONSOLIDATED BALANCE
SHEETS (in thousands) (unaudited) June 29, December 29, � � 2007 �
2006 ASSETS � Current assets: Cash and cash equivalents $ 20,865 $
19,585 Accounts receivable and unbilled revenue, net 34,905 35,818
Prepaid expenses and other current assets 2,326 1,558 Total current
assets 58,096 56,961 � Restricted cash 600 600 Property and
equipment, net 5,110 5,183 Other assets 3,212 3,870 Goodwill 68,278
66,652 Total assets $ 135,296 $ 133,266 � LIABILITIES AND
SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 4,935
$ 5,427 Accrued expenses and other liabilities 28,943 24,773 Total
current liabilities 33,878 30,200 Accrued expenses and other
liabilities, non-current 4,338 4,611 Total liabilities 38,216
34,811 � Shareholders' equity 97,080 98,455 Total liabilities and
shareholders' equity $ 135,296 $ 133,266 Answerthink, Inc.
Supplemental Financial Data (unaudited) � Quarter Ended June 29,
2007 March 30, 2007 June 30, 2006 Revenue Breakdown by Group: (in
thousands) � The Hackett Group Benchmarking and Business
Transformation (5) (8) $ 23,292 $ 19,303 $ 22,372 Membership
Advisory Programs (6) 3,863 3,613 3,194 Total The Hackett Group
27,155 22,916 25,566 � Best Practice Solutions (7) (8) 18,357
16,961 23,430 Total Revenues $ 45,512 $ 39,877 $ 48,996 � � � � �
Revenue Concentration: (% of total revenues) � Top customer 3% 3%
4% Top 5 customers 12% 13% 16% Top 10 customers 20% 23% 27% � � Key
Metrics and Other Financial Data: The Hackett Group revenue per
professional (in thousands)(8) $ 402 $ 345 $ 387 Membership
Advisory - Annualized Contract Value (4) $ 15,094 $ 14,412 $ 11,359
Best Practice Solutions consultant utilization rate (8) 65% 63% 76%
Best Practice Solutions gross billing rate per hour (8) $ 176 $ 171
$ 156 Consultant headcount (8) 556 563 642 Total headcount (8) 756
770 838 Days sales outstanding (DSO) 70 71 80 Cash provided by
(used in) operating activities (in thousands)(8) $ (344) $ 4,209 $
1,522 Depreciation and amortization (in thousands) $ 873 $ 900 $
1,458 � Share Repurchase Program: Shares purchased since inception
(in thousands) 7,667 7,158 6,534 Cost of shares repurchased since
inception (in thousands) $ 25,616 $ 23,867 $ 22,119 Average per
share cost of shares purchased since inception $ 3.34 $ 3.33 $ 3.39
Remaining authorization (in thousands) $ 4,359 $ 6,133 $ 7,881 � �
(4) We define "Annualized Contract Value" as of the quarter-end as
the aggregate annualized revenue attributed to all agreements in
effect on such date, without regard to the remaining duration of
any such agreement. � (5) Comparison of a client's demand drivers,
costs and practices to a peer group in order to empirically
identify and define an organization's ability to improve
performance at a process level and to identify and compare business
practices utilized by world-class performers. Additionally,
strategic consulting support that utilizes Hackett best practice
implementation content and tools to enable clients to accelerate
transformation to world-class performance. � (6) Annual or
multi-year contract that provides clients with on-demand access to
world-class performance metrics and best practices research and
advice. � (7) The Best Practice solutions group includes Best
Practice Implementation of ERP Software, which is primarily Oracle
and SAP, and business performance management solutions, which is
primarily Hyperion. � (8) Certain items in the quarter ended June
30, 2006 have been reclassified to conform with the June 29, 2007
presentation. �
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