Company: HCKT
Filing Date: 2025-02-28
Form Type: 10-K
Source: 0000950170-25-030037
Chunk: 37

Company: HACKETT GROUP, INC.
Filing Date: 2025-02-28
Form: 10-K
Item: Item 1B
Chunk 37
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 high degree of subjectivity and increased audit effort.

Our audit procedures related to the Company’s revenue recognition for fixed-fee billing arrangements included the following, among others:

•We obtained an understanding of the relevant controls related to fixed-fee billing arrangements and tested such controls for design and operating effectiveness, including controls over management’s estimation of the amount of revenue to recognize for customer contracts where revenue is recognized over time as work progresses. 

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•We evaluated management’s ability to estimate progress towards completion by performing a historical review of completed contracts to determine the accuracy and precision of the Company’s estimation process. During this analysis we evaluated completed contracts in order to determine if previous estimates to complete were consistent with actual hours incurred to complete the contract.

•We tested a sample of fixed-fee billing arrangements as follows:

•Evaluated whether the contracts were properly included in management’s calculation of estimated contract revenue based on the terms and conditions of each contract, including whether continuous transfer of control to the customer occurred as progress was made toward completion of the performance obligations.

•Compared the transaction prices to the consideration expected to be received based on current rights and obligations under the contracts and any modifications or change orders that were agreed upon with the customers.

•Assessed the terms in the customer agreement and evaluated the appropriateness of management’s identification of performance obligations based on the underlying goods and services included in the contract. 

•Tested the completeness and accuracy of management’s calculation of progress toward completion to date for the performance obligations by comparing actual costs incurred to date to source documents and recalculating revenue recognized based on actual costs incurred to date as a percentage of total estimated costs.

•Evaluated management’s estimates of costs to complete the performance obligations by comparing the inputs to source documents.

•Performed analytical procedures to evaluate the amount of revenue recognized to date and related actual costs incurred to date, by comparing changes in the estimated costs at completion, including changes to budgeted revenue when relevant, for a sample of contracts throughout the period. 

Valuation of Performance-Based Restricted Stock Units

As described in Note 10 on September 16 and 17, 2024, the Company granted its Chief Executive Officer, Chief Financial Officer and certain other Company leaders performance-based restricted stock units which are eligible to vest based on the achievement of certain stock price hurdles and the satisfaction of service conditions. The grant date fair value of the performance-based restricted stock units was $29.7 million. A Monte Carlo simulation was utilized to determine the grant date fair value. 

We identified the Company’s valuation