The Hackett Group, Inc. (HCKT): BCG Matrix [Dec-2025 Updated]

Honestly, looking at The Hackett Group, Inc. (HCKT) in late 2025, you see a company in the middle of a major shift: aggressively chasing the high-margin Gen AI opportunity, which already delivered a 43.4% gross margin in Q1, while simultaneously dealing with the fallout from legacy practices. This pivot isn't cheap, evidenced by $3.1 million in restructuring costs, and it means some areas, like the Oracle Solutions Segment that dropped 25% year-over-year, are now firmly in the 'Dog' quadrant. We've mapped this portfolio using the BCG Matrix to show you precisely where The Hackett Group, Inc. (HCKT) needs to pour capital and where they need to harvest cash now. Read on to see the full picture.

Background of The Hackett Group, Inc. (HCKT)

You're looking at The Hackett Group, Inc. (HCKT), which stands as a leading global strategy and operations consulting firm, specializing in performance benchmarking and business process reengineering. Honestly, the firm has pivoted hard into the future, positioning itself as a premier generative artificial intelligence (Gen AI) consultancy and executive advisory firm focused on enabling what they call Digital World Class® performance. This means their work helps major enterprises optimize everything from their service delivery models to their outsourcing options across functions like HR and IT.

Let's look at the numbers as of late 2025. For the third quarter of 2025, The Hackett Group, Inc. reported total revenues before reimbursements of $72.2 million, which was a decrease of 7% compared to the same period last year. Adjusted diluted earnings per share for that quarter landed at $0.37. To give you a sense of scale, their total consultant headcount stood at 1,317 at the end of the third quarter. Still, they are managing expectations, forecasting fourth-quarter revenues before reimbursements to be in the range of $69.5 million to $71 million.

The core of The Hackett Group, Inc.'s current offering revolves around deep expertise across key business functions. You'll find them deeply involved in Finance & Accounting, Global Business Services, Sourcing & Procurement, and Supply Chain, among others. A major driver of their current strategy is the integration of Gen AI, evidenced by their proprietary Hackett AI XPLR™ asset, which helps clients design Gen AI solutions. In fact, over 50% of their new engagements in the second quarter of 2025 included these AI elements, showing a clear shift in their revenue mix toward these newer, high-tech advisory services.

The Hackett Group, Inc. (HCKT) - BCG Matrix: Stars

The business units categorized as Stars for The Hackett Group, Inc. (HCKT) are those operating in the high-growth Generative Artificial Intelligence (Gen AI) consulting space, where the company is aggressively investing to secure market leadership.

Gen AI Consulting Practice: High-growth area with aggressive investment, expected to accelerate growth in 2026.

The market validates this high-growth positioning; The Hackett Group, Inc.'s 2025 Key Issues Study revealed that 89% of enterprises are actively advancing Gen AI initiatives, a significant increase from just 16% in the prior year. This market acceleration is expected to continue, with industry trends suggesting the Gen AI consulting market will grow at a 38.4% CAGR through 2030. Management is actively growing Gen AI revenues, which is the core of their strategic pivot, as over 50% of the company's new engagements now incorporate Gen AI elements.

AI XPLR and ZBrain Platforms: Proprietary, high-margin platforms driving new client acquisition and channel partner interest.

The proprietary platforms are central to capturing this growth. The Hackett Group, Inc. unveiled AI XPLR™ 4.0 in September 2025, building on the launch of AI XPLR™ 3.0 in April 2025, which provided thousands of industry-specific Gen AI solutions and tens of thousands of AI agents. These platforms, including ZBrain™, are designed to move clients from ideation to executable agentic workflows at unprecedented speed, leveraging The Hackett Group, Inc.'s transformation intellectual property. This platform-based approach is intended to differentiate The Hackett Group, Inc. in a competitive landscape.

Higher Margin Revenue: Gen AI segment contributes to an improved adjusted gross margin of 43.4% in Q1 2025.

The higher profitability of the Gen AI segment is directly impacting the firm's overall margin structure. For the first quarter of 2025, the adjusted gross margin on revenues before reimbursements improved to 43.4%, up from 41.4% in the first quarter of the prior year, with the Gen AI segment being the primary driver of this improvement. This focus on high-margin services underpins the strategic investment required to maintain Star status, even as the company manages near-term costs.

The following table summarizes key financial data related to the current operating environment and the Gen AI focus as of the first half of 2025:

Gen AI Revenue: Management is actively growing Gen AI revenues, which is the core of their strategic pivot.

The strategic pivot is evident in the financial guidance and commentary. While Q2 2025 revenue before reimbursements guidance was between $76 million and $77.5 million, the actual result of $77.6 million showed strong demand for Gen AI services, despite some traditional segments declining. The company is making significant investments, which is typical for a Star, even as it manages restructuring charges of $1.5-$2 million expected in Q3 2025. The goal is to convert this high-growth consulting work into recurring revenue streams over time, which would transition this unit toward Cash Cow status.

The firm is using cash flow to support this growth strategy, having spent $11.7 million on repurchasing 379,000 shares in Q1 2025, indicating confidence in its long-term value proposition derived from this pivot. The Gen AI segment is expected to accelerate growth into 2026, requiring continued investment to maintain its leadership position in this high-growth market.

The Hackett Group, Inc. (HCKT) - BCG Matrix: Cash Cows

You're looking at the core engine of The Hackett Group, Inc., the business units that generate consistent, high-margin cash flow to fund the rest of the portfolio. These Cash Cows operate in mature service areas where The Hackett Group has secured a dominant, market-leading position.

Executive Advisory Programs represent a key Cash Cow, built on a foundation of established, recurring revenue streams derived from the firm's intellectual property (IP). This offering provides fact-based guidance through access to the Best Practices Intelligence Center™, which is grounded in The Hackett Group's more than 27,000 benchmarking engagements with nearly 9,100 major corporations worldwide. The advisory programs are tailored to specific functions and leverage proprietary tools to assess improvement journeys, which supports the low-investment, high-return profile of a Cash Cow.

The Global S&BT Segment (Core Advisory) is the largest contributor, acting as the primary base for corporate funding. This segment generated $42.4 million in revenue before reimbursements for the third quarter of 2025. This scale in a core advisory market signifies the high market share required for a Cash Cow designation.

The firm supports shareholder returns directly from this generated cash, as seen with the Quarterly Dividend. The Board declared a quarterly dividend of $0.12 per share in the first quarter of 2025, which is a direct payout from these stable earnings.

The ability to generate surplus cash is evident in the Operating Cash Flow figures. The Hackett Group generated $4.2 million in cash flow from operations in the first quarter of 2025. This cash was immediately deployed to support capital returns and strategic positioning, which is the classic 'milking' strategy for a Cash Cow.

Here's a quick look at how that Q1 2025 operating cash flow was allocated to support shareholder value:

• Operating Cash Flow generated: $4.2 million
• Share repurchases: $11.7 million (379,000 shares at an average price of $30.93)
• Declared Quarterly Dividend: $0.12 per share

The firm's strategy for this cash is clear: use the strong cash flow to continue the stock buyback program, which included a $40 million Dutch tender offer authorization in Q3 2025, rather than solely focusing on paying down the credit facility balance.

The financial snapshot of this core segment in Q3 2025 highlights its cash-generating nature:

For the fourth quarter of 2025 outlook, management expected cash flow from operations to be up on a sequential basis, reinforcing the stability of this cash-generating unit.

The Hackett Group, Inc. (HCKT) - BCG Matrix: Dogs

Dogs are business units or products characterized by low market share in low-growth markets. They typically neither generate significant cash nor consume much, but they tie up capital that could be deployed elsewhere. For The Hackett Group, Inc., the Oracle Solutions Segment currently exhibits characteristics aligning with this quadrant, driven by specific headwinds.

The Oracle Solutions Segment showed a significant contraction in the third quarter of 2025. Revenues before reimbursements for this segment registered at $16.4 million for Q3 2025, marking a year-over-year decline of 25% compared to the same period in the prior year. This performance contrasts sharply with the company's overall revenue before reimbursements, which was $72.2 million in Q3 2025.

This revenue contraction is attributed to specific, non-recurring, or declining project streams within the segment. The primary factor cited was the wind-down of a major post-go-live engagement within the Oracle practice area. Furthermore, the segment experienced weakness in specific traditional offerings, such as the OneStream implementation practice, which offset the momentum seen in newer Generative AI consulting and implementation services.

The outlook for this segment suggests the challenges are near-term. The guidance for the fourth quarter of 2025 indicates this segment is expected to continue contracting, with revenue projected to be down by over 15% year-over-year. This sustained negative trajectory points toward a unit that requires strategic reassessment rather than aggressive investment.

The performance of these lower-growth areas impacts overall firm metrics, even as high-growth areas pivot toward GenAI. For instance, the firm's Adjusted Diluted Earnings Per Share for Q3 2025 was $0.37, down from $0.43 in Q3 2024, reflecting the pressure from these underperforming areas alongside other restructuring costs.

Here's a look at the segment revenue comparison:

The weakness extends beyond the Oracle Solutions Segment to other traditional practices that are not yet seeing the acceleration from new technology adoption. The eProcurement practice, for example, was noted as a drag on the Global S&BT segment performance in the prior year, suggesting persistent softness in certain legacy technology or process areas.

The key indicators pointing to the Dogs classification for these units include:

• Revenue before reimbursements for Oracle Solutions was $16.4 million in Q3 2025.
• The segment experienced a 25% revenue decline year-over-year in Q3 2025.
• Q4 2025 guidance implies continued revenue contraction of over 15% for the segment.
• Specific practices like OneStream showed weakness in Q3 2025.
• The firm's Q4 2025 total revenue before reimbursements guidance is a range of $69.5 million to $71.0 million, suggesting continued pressure.

Expensive turn-around plans are generally ill-advised for Dogs; the focus should be on minimizing cash consumption. The Hackett Group, Inc. is clearly prioritizing investment in areas like GenAI, which is where the growth is expected to accelerate in 2026, leaving these lower-growth, legacy-dependent units candidates for divestiture or severe cost containment. Finance: draft scenario analysis for divesting non-core practice lines by next Wednesday.

The Hackett Group, Inc. (HCKT) - BCG Matrix: Question Marks

You're looking at business units that are in high-growth markets but haven't captured significant market share yet. These are the cash consumers, the ones that require heavy funding to scale up before they can generate real returns. For The Hackett Group, Inc., this quadrant is defined by emerging or pivoting service lines where the market is expanding rapidly, but the firm's current penetration is low relative to the potential.

The primary focus here is on the strategic pivot toward Generative AI (Gen AI) capabilities, which is a high-growth area, but the associated costs and market adoption curve place these efforts squarely in the Question Mark category for now. These areas consume cash today with the hope of becoming tomorrow's Stars.

The financial snapshot for The Hackett Group, Inc. as of the third quarter of 2025 highlights the cost and the mixed results of these growth bets:

The SAP Solutions Segment is a clear example of a Question Mark. It showed positive momentum with revenues reaching $13.4 million before reimbursements in Q3 2025, representing a 4% increase year-over-year. However, the CEO noted that Q4 is expected to be down due to the timing of software sales from the prior year, indicating volatility and an inability to consistently capture market share despite the growing market for SAP-related services.

The necessary investment to transition the business is evident in the reported costs. The company incurred $3.1 million in restructuring costs during Q3 2025 alone as it executes its pivot to Gen AI. This cost, which equates to $0.08 per diluted earnings per share, is a direct cash drain associated with repositioning for future growth. This heavy investment is required to transition clients from traditional services to the new Gen AI platforms, such as the recently released AI XPLR V4.

The broader market uncertainty is reflected in other service lines, which compete for the same investment capital needed for the Gen AI Question Marks. You see this pressure when looking at the segment performance:

• Global Strategy & Business Transformation (Global S&BT) revenue was down 2% year-over-year to $42.4 million in Q3 2025, partially due to weakness in OneStream implementation offerings.
• Oracle Solutions segment revenue saw a significant year-over-year decrease of 25% to $16.4 million in Q3 2025, attributed to protracted client decision-making.
• The company is actively managing its cash position, reporting $13.9 million in cash balances as of September 26, 2025, while simultaneously announcing a $40.0 million Dutch tender offer to buy back stock, signaling a decision to allocate capital toward shareholder return rather than solely funding all Question Marks.

The strategy for these Question Marks is clear: invest heavily in the Gen AI pivot to rapidly gain market share, or risk them decaying into Dogs. The immediate financial reality is that these growth-oriented areas are currently losing the company money on a GAAP basis, as evidenced by the $3.1 million restructuring charge impacting Q3 2025 net income.

Finance: draft 13-week cash view by Friday.