Company: HCKT
Filing Date: 2025-02-28
Form Type: 10-K
Source: 0000950170-25-030037
Chunk: 38

Company: HACKETT GROUP, INC.
Filing Date: 2025-02-28
Form: 10-K
Item: Item 1B
Chunk 38
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 of the performance-based restricted stock units fair value as a critical audit matter. Evaluating audit evidence related to significant estimates and assumptions utilized by management, including the derived service period, risk-free rate and dividend yield when calculating the grant date fair value of the performance-based restricted stock units, involved a high degree of auditor judgment, including the use of our valuation specialist. 

Our audit procedures related to the valuation of the performance-based restricted stock units included the following, amount others:

•We obtained an understanding of the relevant controls related to the determination of the grant date fair value of the performance-based restricted stock units and tested such controls for design and operating effectiveness, including management’s estimation process over the assumptions noted above. 

•We tested the accuracy of the data used in measuring the awards by agreeing the underlying inputs, such as the grant date, performance period, and the stock price, among others, back to source documents, such as the performance-based restricted stock unit agreements.

•With the assistance of our valuation specialists, we evaluated the Monte Carlo simulation model methodology and the reasonableness of the valuation assumptions, including the derived service period, risk-free rate and dividend yield.

Valuation of Certain Identifiable Assets Acquired in a Business Combination

As described in Note 1 to the financial statements, on September 16, 2024, the Company executed an agreement to acquire 100% of the equity of LeewayHertz Technologies Private Limited (“LeewayHertz”) for total consideration of $7.8 million. The transaction 

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closed on September 23, 2024 and was accounted for as a business combination using the acquisition method of accounting. The fair values of intangible assets, which consist primarily of customer relationships, were valued using the income approach.

We identified the valuation of customer relationships acquired in the business combination as a critical audit matter because of the significant assumptions management used in estimating their fair values. Auditing management’s assumptions used in the estimates of fair value, including projections of revenue, operating expenses, the customer attrition rate, and the discount rate involved a high degree of auditor judgment and increased audit effort, including the use of our valuation specialists, due to the impact these assumptions have on the estimates of fair value.

Our audit procedures related to the customer relationships acquired in the business combination included the following, among others:

•We obtained an understanding of the relevant controls related to the valuation of the customer relationships and tested such controls for design and operating effectiveness, including management’s estimation process over the assumptions noted above.

•We read the