Perficient Reports Second Quarter 2020 Results

~ Record North American Bill Rates and Strong Utilization Power Profitability ~

ST. LOUIS–(BUSINESS WIRE)–Perficient, Inc. (Nasdaq: PRFT) (“Perficient”), the leading global digital consultancy transforming the world’s largest enterprises and biggest brands, today reported its financial results for the quarter ended June 30, 2020.

Financial Highlights

For the quarter ended June 30, 2020:

  • Services revenues net of reimbursed expenses increased 5% to $144.3 million from $136.8 million in the second quarter of 2019;
  • Total revenues increased 3% to $146.3 million from $141.9 million in the second quarter of 2019;
  • Net income decreased 23% to $6.6 million from $8.5 million in the second quarter of 2019;
  • GAAP earnings per share results on a fully diluted basis decreased 26% to $0.20 from $0.27 in the second quarter of 2019;
  • Adjusted earnings per share results (a non-GAAP measure; see attached schedule, which reconciles to GAAP earnings per share) on a fully diluted basis increased 10% to $0.57 from $0.52 in the second quarter of 2019; and
  • Adjusted EBITDA (a non-GAAP measure; see attached schedule, which reconciles to GAAP net income) increased 12% to $26.4 million from $23.6 million in the second quarter of 2019.

“Perficient is not only persevering through the business challenges presented by COVID-19, we’re thriving,” said Jeffrey Davis, chairman and CEO. “Impressive utilization, strong average billing rates, and solid bookings including several net new client wins powered a performance our entire team is proud of. Beyond that, we completed the largest acquisition in our history, welcoming more than 600 nearshore colleagues based in Latin America to our team in a development that immediately and substantially grows our capacity to serve our enterprise clients with global talent.”

Other Highlights

Among other recent achievements, Perficient:

  • Expanded its global presence in South America through the acquisition of PSL, a $33 million annual revenue nearshore software development company based in Medellin, Colombia, with additional locations in Bogota and Cali, Colombia;
  • Announced that Nancy Pechloff has been appointed an independent member of the company’s Board of Directors. Ms. Pechloff formerly served as a Senior Managing Director at Protiviti, and brings more than 40 years of experience related to internal controls, corporate governance, Sarbanes-Oxley compliance, and finance across a variety of industries;
  • Received a 2020 Microsoft Health Innovation Award for enabling personalized care with one of the largest healthcare systems in the United States;
  • Announced that Andrea Lampert joined the company as Vice President of People. With experience leading in environments of rapid change and growth, both organic and through mergers and acquisitions, Ms. Lampert is responsible for driving the implementation of strategic HR objectives that focus on the people experience;
  • Was included in the Forrester “Now Tech: Oracle Apps Implementation Service Providers, Q2 2020” report as an implementation service provider supporting clients as they shift to Oracle Cloud; and
  • Added new customer relationships and follow-on projects with leading companies including Ascension Health, Ashley Furniture, Cargill Incorporated, CIGNA Corporation, Essex Property Trust, Herbalife Nutrition, Nestle USA, Porsche, Qualcomm, Sempra Energy, Takeda Pharmaceutical Company, TCF Bank, TD Ameritrade, The Capital Group, and Toyota Motor North America, among others.

Business Outlook

In light of the uncertain duration and scope of the pandemic and its impact on economic and financial markets, we cannot reliably predict the impact of the pandemic on our business, operations or financial results. Accordingly, we have determined not to issue guidance at this time.

Conference Call Details

Perficient will host a conference call regarding second quarter 2020 financial results today at 11 a.m. Eastern.

WHAT: Perficient Reports Second Quarter 2020 Results

WHEN: Thursday, July 30, 2020, at 11 a.m. Eastern

CONFERENCE CALL NUMBERS: 855-246-0403 (U.S. and Canada); 414-238-9806 (International)

PARTICIPANT PASSCODE: 3778686

REPLAY TIMES: July 30, 2020, at 2 p.m. Eastern, through Thursday, Aug. 6, 2020, at 2 p.m. Eastern

REPLAY NUMBER: 855-859-2056 (U.S. and Canada); 404-537-3406 (International)

REPLAY PASSCODE: 3778686

About Perficient

Perficient is a leading global digital consultancy. We imagine, create, engineer, and run digital transformation solutions that help our clients exceed customers’ expectations, outpace competition, and grow their business. With unparalleled strategy, creative, and technology capabilities, we bring big thinking and innovative ideas, along with a practical approach to help the world’s largest enterprises and biggest brands succeed. Traded on the Nasdaq Global Select Market, Perficient is a member of the Russell 2000 index and the S&P SmallCap 600 index. Perficient is an award-winning Adobe Platinum Partner, Platinum Level IBM business partner, a Microsoft National Service Provider and Gold Certified Partner, an Oracle Platinum Partner, a Gold Salesforce Consulting Partner, a Sitecore Platinum Partner, and a VMware Authorized Partner. For more information, visit www.perficient.com.

Safe Harbor Statement

Some of the statements contained in this news release that are not purely historical statements discuss future expectations or state other forward-looking information related to financial results and business outlook for 2020. Those statements are subject to known and unknown risks, uncertainties, and other factors that could cause the actual results to differ materially from those contemplated by the statements. The forward-looking information is based on management’s current intent, belief, expectations, estimates, and projections regarding our company and our industry. You should be aware that those statements only reflect our predictions. Actual events or results may differ substantially. Important factors that could cause our actual results to be materially different from the forward-looking statements include (but are not limited to) those disclosed under the heading “Risk Factors” in our most recently filed annual report on Form 10-K as supplemented by the Risk Factors contained in Part II, Item 1A of our Quarterly Reports on Form 10-Q filed on May 7, 2020 and July 30, 2020, respectively, and the following, many of which are, or may be, amplified by the novel coronavirus (COVID-19) pandemic:

(1) the possibility that our actual results do not meet the projections and guidance contained in this news release;

(2) the impact of the COVID-19 pandemic on our business;

(3) the impact of the general economy and economic and political uncertainty on our business;

(4) risks associated with potential changes to federal, state, local and foreign laws, regulations and policies;

(5) risks associated with the operation of our business generally, including:

a) client demand for our services and solutions;

b) maintaining a balance of our supply of skills and resources with client demand;

c) effectively competing in a highly competitive market;

d) protecting our clients’ and our data and information;

e) risks from international operations including fluctuations in exchange rates;

f) changes to immigration policies;

g) obtaining favorable pricing to reflect services provided;

h) adapting to changes in technologies and offerings;

i) risk of loss of one or more significant software vendors;

j) making appropriate estimates and assumptions in connection with preparing our consolidated financial statements;

k) maintaining effective internal controls; and

l) changes to tax levels, audits, investigations, tax laws or their interpretation;

(6) risks associated with managing growth organically and through acquisitions;

(7) risks associated with servicing our debt, the potential impact on the value of our common stock from the conditional conversion features of our debt and the associated convertible note hedge transactions;

(8) legal liabilities, including intellectual property protection and infringement or the disclosure of personally identifiable information; and

(9) the risks detailed from time to time within our filings with the Securities and Exchange Commission.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. This cautionary statement is provided pursuant to Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended. The forward-looking statements in this release are made only as of the date hereof and we undertake no obligation to update publicly any forward-looking statement for any reason, even if new information becomes available or other events occur in the future.

 

Perficient, Inc.

Unaudited Condensed Consolidated Statements of Operations

(in thousands, except per share information)

 

 

Three Months Ended
June 30,

 

Six Months Ended

June 30,

 

2020

 

2019

 

2020

 

2019

Revenues

 

 

 

 

 

 

 

Services excluding reimbursable expenses

$

144,306

 

 

$

136,844

 

 

$

285,314

 

 

$

265,796

 

Reimbursable expenses

1,530

 

 

4,390

 

 

5,924

 

 

8,304

 

Total services

145,836

 

 

141,234

 

 

291,238

 

 

274,100

 

Software and hardware

503

 

 

635

 

 

663

 

 

1,584

 

Total revenues

146,339

 

 

141,869

 

 

291,901

 

 

275,684

 

 

 

 

 

 

 

 

 

Cost of revenues (exclusive of depreciation and amortization, shown separately below)

 

 

 

 

 

 

 

Cost of services

89,164

 

 

87,784

 

 

180,663

 

 

172,142

 

Stock compensation

1,991

 

 

1,731

 

 

3,709

 

 

3,444

 

Total cost of revenues

91,155

 

 

89,515

 

 

184,372

 

 

175,586

 

 

 

 

 

 

 

 

 

Selling, general and administrative

30,811

 

 

30,493

 

 

61,104

 

 

60,273

 

Stock compensation

3,065

 

 

2,668

 

 

5,993

 

 

5,411

 

Total selling, general and administrative

33,876

 

 

33,161

 

 

67,097

 

 

65,684

 

 

 

 

 

 

 

 

 

Depreciation

1,317

 

 

1,070

 

 

2,605

 

 

2,086

 

Amortization

4,398

 

 

4,010

 

 

8,320

 

 

8,147

 

Acquisition costs

1,787

 

 

616

 

 

3,600

 

 

578

 

Adjustment to fair value of contingent consideration

2,067

 

 

116

 

 

1,732

 

 

(308)

 

Income from operations

11,739

 

 

13,381

 

 

24,175

 

 

23,911

 

 

 

 

 

 

 

 

 

Net interest expense

2,061

 

 

1,863

 

 

3,987

 

 

3,656

 

Net other income

(15)

 

 

(9)

 

 

(8)

 

 

(44)

 

Income before income taxes

9,693

 

 

11,527

 

 

20,196

 

 

20,299

 

Provision for income taxes

3,084

 

 

2,999

 

 

4,613

 

 

4,745

 

 

 

 

 

 

 

 

 

Net income

$

6,609

 

 

$

8,528

 

 

$

15,583

 

 

$

15,554

 

 

 

 

 

 

 

 

 

Basic net income per share

$

0.21

 

 

$

0.27

 

 

$

0.49

 

 

$

0.50

 

Diluted net income per share

$

0.20

 

 

$

0.27

 

 

$

0.48

 

 

$

0.48

 

Shares used in computing basic net income per share

31,888

 

 

31,343

 

 

31,763

 

 

31,359

 

Shares used in computing diluted net income per share

32,377

 

 

32,040

 

 

32,444

 

 

32,166

 

 

Perficient, Inc.

Condensed Consolidated Balance Sheets

(in thousands)

 

 

 

June 30, 2020

(unaudited)

 

December 31, 2019

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

19,544

 

 

$

70,728

 

Accounts receivable, net

 

127,907

 

 

129,118

 

Prepaid expenses

 

5,679

 

 

4,647

 

Other current assets

 

6,226

 

 

7,404

 

Total current assets

 

159,356

 

 

211,897

 

Property and equipment, net

 

12,488

 

 

12,170

 

Operating lease right-of-use assets

 

35,571

 

 

27,748

 

Goodwill

 

417,403

 

 

335,564

 

Intangible assets, net

 

75,798

 

 

37,953

 

Other non-current assets

 

14,838

 

 

15,160

 

Total assets

 

$

715,454

 

 

$

640,492

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

$

16,085

 

 

$

23,081

 

Other current liabilities

 

81,098

 

 

61,503

 

Total current liabilities

 

97,183

 

 

84,584

 

Long-term debt, net

 

139,044

 

 

124,664

 

Operating lease liabilities

 

25,175

 

 

19,649

 

Other non-current liabilities

 

43,999

 

 

30,580

 

Total liabilities

 

305,401

 

 

259,477

 

Stockholders’ equity:

 

 

 

 

Preferred stock

 

 

 

 

Common stock

 

50

 

 

49

 

Additional paid-in capital

 

475,147

 

 

455,465

 

Accumulated other comprehensive loss

 

(3,702)

 

 

(2,650)

 

Treasury stock

 

(266,485)

 

 

(261,624)

 

Retained earnings

 

205,043

 

 

189,775

 

Total stockholders’ equity

 

410,053

 

 

381,015

 

Total liabilities and stockholders’ equity

 

$

715,454

 

 

$

640,492

 

About Non-GAAP Financial Information

This news release includes non-GAAP financial measures. For a description of these non-GAAP financial measures, including the reasons management uses each measure, and reconciliations of these non-GAAP financial measures to the most directly comparable financial measures prepared in accordance with Generally Accepted Accounting Principles (“GAAP”), please see the section entitled “About Non-GAAP Financial Measures” and the accompanying tables entitled “Reconciliation of GAAP to Non-GAAP Measures.”

About Non-GAAP Financial Measures

Perficient provides non-GAAP financial measures for adjusted EBITDA (earnings before interest, income taxes, depreciation, amortization, stock compensation, acquisition costs and adjustment to fair value of contingent consideration), adjusted net income, and adjusted earnings per share data as supplemental information regarding Perficient’s business performance. Perficient believes that these non-GAAP financial measures are useful to investors because they provide investors with a better understanding of Perficient’s past financial performance and future results. Perficient’s management uses these non-GAAP financial measures when it internally evaluates the performance of Perficient’s business and makes operating decisions, including internal operating budgeting, performance measurement, and the calculation of bonuses and discretionary compensation. Management excludes stock-based compensation related to restricted stock awards, the amortization of intangible assets, amortization of debt discounts and issuance costs related to convertible senior notes, acquisition costs, adjustments to the fair value of contingent consideration, net other income and expense, the impact of other infrequent or unusual transactions, and income tax effects of the foregoing, when making operational decisions.

Perficient believes that providing the non-GAAP financial measures to its investors is useful because it allows investors to evaluate Perficient’s performance using the same methodology and information used by Perficient’s management. Specifically, adjusted net income is used by management primarily to review business performance and determine performance-based incentive compensation for executives and other employees. Management uses adjusted EBITDA to measure operating profitability, evaluate trends, and make strategic business decisions.

Non-GAAP financial measures are subject to inherent limitations because they do not include all of the expenses included under GAAP and because they involve the exercise of discretionary judgment as to which charges are excluded from the non-GAAP financial measure. However, Perficient’s management compensates for these limitations by providing the relevant disclosure of the items excluded in the calculation of adjusted EBITDA, adjusted net income, and adjusted earnings per share. In addition, some items that are excluded from adjusted net income and adjusted earnings per share can have a material impact on cash. Management compensates for these limitations by evaluating the non-GAAP measure together with the most directly comparable GAAP measure. Perficient has historically provided non-GAAP financial measures to the investment community as a supplement to its GAAP results to enable investors to evaluate Perficient’s business performance in the way that management does. Perficient’s definition may be different from similar non-GAAP financial measures used by other companies and/or analysts.

The non-GAAP adjustments, and the basis for excluding them, are outlined below:

Amortization

Perficient has incurred expense on amortization of intangible assets primarily related to various acquisitions. Management excludes these items for the purposes of calculating adjusted EBITDA, adjusted net income, and adjusted earnings per share. Perficient believes that eliminating this expense from its non-GAAP financial measures is useful to investors because the amortization of intangible assets can be inconsistent in amount and frequency, and is significantly impacted by the timing and magnitude of Perficient’s acquisition transactions, which also vary substantially in frequency from period to period.

Acquisition Costs

Perficient incurs transaction costs related to merger and acquisition-related activities which are expensed in its GAAP financial statements. Management excludes these items for the purposes of calculating adjusted EBITDA, adjusted net income, and adjusted earnings per share. Perficient believes that excluding these expenses from its non-GAAP financial measures is useful to investors because these are expenses associated with each transaction and are inconsistent in amount and frequency causing comparison of current and historical financial results to be difficult.

Adjustment to Fair Value of Contingent Consideration

Perficient is required to remeasure its contingent consideration liability related to acquisitions each reporting period until the contingency is settled. Any changes in fair value are recognized in earnings. Management excludes these items for the purposes of calculating adjusted EBITDA, adjusted net income, and adjusted earnings per share. Perficient believes that excluding these adjustments from its non-GAAP financial measures is useful to investors because they are related to acquisitions and are inconsistent in amount and frequency from period to period.

Amortization of Debt Discount and Debt Issuance Costs

On September 11, 2018, Perficient issued $143.8 million aggregate principal amount of 2.375% Convertible Senior Notes due 2023 (the “Notes”) in a private placement to qualified institutional purchasers. In accordance with accounting for debt with conversions and other options, Perficient bifurcated the principal amount of the Notes into liability and equity components. The resulting debt discount is being amortized to interest expense over the period from the issuance date through the contractual maturity date of September 15, 2023. Issuance costs related to the Notes were allocated pro rata based on the relative fair values of the liability and equity components. Issuance costs attributable to the liability component of the Notes, in addition to issuance costs related to Perficient’s credit agreement, are being amortized to interest expense over their respective terms. Perficient believes that excluding these non-cash expenses from its non-GAAP financial measures is useful to investors because the expenses are not reflective of the company’s business performance.

Stock Compensation

Perficient incurs stock-based compensation expense under Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation – Stock Compensation. Perficient excludes stock-based compensation expense and the related tax effects for the purposes of calculating adjusted EBITDA, adjusted net income, and adjusted earnings per share because stock-based compensation is a non-cash expense, which Perficient believes is not reflective of its business performance. The nature of stock-based compensation expense also makes it very difficult to estimate prospectively, since the expense will vary with changes in the stock price and market conditions at the time of new grants, varying valuation methodologies, subjective assumptions, and different award types, making the comparison of current results with forward-looking guidance potentially difficult for investors to interpret. The tax effects of stock-based compensation expense may also vary significantly from period to period, without any change in underlying operational performance, thereby obscuring the underlying profitability of operations relative to prior periods. Perficient believes that non-GAAP measures of profitability, which exclude stock-based compensation are widely used by analysts and investors.

Dilution Offset from Convertible Note Hedge Transactions

It is Perficient’s current intent to settle conversions of the Notes through combination settlement, which involves repayment of the principal portion in cash and any excess of the conversion value over the principal amount in shares of our common stock. We exclude the shares that are issuable upon conversions of the Notes because we expect that the dilution from such shares will be offset by the convertible note hedge transactions entered into in September 2018 in connection with the issuance of the Notes.

Perficient, Inc.

Reconciliation of GAAP to Non-GAAP Measures

(unaudited)

(in thousands, except per share data)

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2020

 

2019

 

2020

 

2019

GAAP Net Income

$

6,609

 

 

$

8,528

 

 

$

15,583

 

 

$

15,554

 

Adjustments:

 

 

 

 

 

 

 

Provision for income taxes

3,084

 

 

2,999

 

 

4,613

 

 

4,745

 

Amortization

4,398

 

 

4,010

 

 

8,320

 

 

8,147

 

Acquisition costs

1,787

 

 

616

 

 

3,600

 

 

578

 

Adjustment to fair value of contingent consideration

2,067

 

 

116

 

 

1,732

 

 

(308)

 

Amortization of debt discount and issuance costs

1,215

 

 

1,160

 

 

2,416

 

 

2,307

 

Stock compensation

5,056

 

 

4,399

 

 

9,702

 

 

8,855

 

Adjusted Net Income Before Tax

24,216

 

 

21,828

 

 

45,966

 

 

39,878

 

Adjusted income tax (1)

5,909

 

 

5,304

 

 

11,216

 

 

9,611

 

Adjusted Net Income

$

18,307

 

 

$

16,524

 

 

$

34,750

 

 

$

30,267

 

 

 

 

 

 

 

 

 

GAAP Earnings Per Share (diluted)

$

0.20

 

 

$

0.27

 

 

$

0.48

 

 

$

0.48

 

Adjusted Earnings Per Share (diluted)

$

0.57

 

 

$

0.52

 

 

$

1.07

 

 

$

0.94

 

 

 

 

 

 

 

 

 

Shares used in computing GAAP Earnings Per Share (diluted)

32,377

 

 

32,040

 

 

32,444

 

 

32,166

 

Dilution offset from convertible note hedge transactions

 

 

 

 

(77)

 

 

 

Shares used in computing Adjusted Earnings Per Share (diluted)

32,377

 

 

32,040

 

 

32,367

 

 

32,166

 

 

(1) The estimated adjusted effective tax rate of 24.4% and 24.3% for the three months ended June 30, 2020 and 2019, respectively, and 24.4% and 24.1% for the six months ended June 30, 2020 and 2019, respectively, has been used to calculate the provision for income taxes for non-GAAP purposes. 

 

Perficient, Inc.

Reconciliation of GAAP to Non-GAAP Measures

(unaudited)

(in thousands)

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2020

 

2019

 

2020

 

2019

GAAP Net Income

$

6,609

 

 

$

8,528

 

 

$

15,583

 

 

$

15,554

 

Adjustments:

 

 

 

 

 

 

 

Provision for income taxes

3,084

 

 

2,999

 

 

4,613

 

 

4,745

 

Net interest expense

2,061

 

 

1,863

 

 

3,987

 

 

3,656

 

Net other income

(15)

 

 

(9)

 

 

(8)

 

 

(44)

 

Depreciation

1,317

 

 

1,070

 

 

2,605

 

 

2,086

 

Amortization

4,398

 

 

4,010

 

 

8,320

 

 

8,147

 

Acquisition costs

1,787

 

 

616

 

 

3,600

 

 

578

 

Adjustment to fair value of contingent consideration

2,067

 

 

116

 

 

1,732

 

 

(308)

 

Stock compensation

5,056

 

 

4,399

 

 

9,702

 

 

8,855

 

Adjusted EBITDA (1)

$

26,364

 

 

$

23,592

 

 

$

50,134

 

 

$

43,269

 

 

(1) Adjusted EBITDA is a non-GAAP performance measure and is not intended to be a performance measure that should be regarded as an alternative to or more meaningful than either GAAP operating income or GAAP net income. Adjusted EBITDA measures presented may not be comparable to similarly titled measures presented by other companies.

 

Contacts

Bill Davis, Perficient, 314-529-3555

bill.davis@perficient.com

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