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 September 30, 2023.
Financial Highlights
For the quarter ended September 30, 2023:
- Revenues decreased 2% to $223.2 million from $227.6 million in
the third quarter of 2022;
- Net income remained essentially flat at $22.6 million, compared
to $23.0 million in the third quarter of 2022;
- GAAP earnings per share results on a fully diluted basis
decreased 2% to $0.63 from $0.64 in the third quarter of 2022;
- Adjusted earnings per share results (a non-GAAP measure; see
attached schedule, which reconciles to GAAP earnings per share) on
a fully diluted basis decreased 17% to $0.92 from $1.11 in the
third quarter of 2022; and
- Adjusted EBITDA (a non-GAAP measure; see attached schedule,
which reconciles to GAAP net income) decreased 14% to $45.8 million
from $53.0 million in the third quarter of 2022.
“Our business momentum and performance began to improve during
the third quarter and we expect a solid close to the year,” said
Tom Hogan, President and CEO. “Our enterprise customers continue to
value Perficient’s fully integrated delivery model and the global
talent and depth we’ve built in North America, Latin America, and
India.”
Other Highlights
Among other recent achievements, Perficient:
- Announced it has entered into a purchase agreement to acquire
SMEDIX, Inc., an approximately $12 million revenue healthcare
software engineering firm headquartered in San Diego, California,
with offshore operations located in Cluj-Napoca, Romania. A closing
of the acquisition is targeted in January 2024, subject to
customary closing conditions and regulatory approval. SMEDIX, Inc.
will strengthen Perficient’s healthcare industry software
development capabilities and add global delivery capacity in
Eastern Europe;
- Announced that effective October 1, 2023, Jeffrey Davis, former
Perficient Chairman and CEO, became the Executive Chairman of
Perficient, and Thomas J. Hogan, former Perficient COO, succeeded
Mr. Davis as CEO and joined Perficient’s Board of Directors;
- Announced new and expanded generative AI initiatives, including
the employee-led Generative AI Innovation Group, to help clients
realize the potential of AI and innovate solutions that accelerate
their business;
- Published research revealing a significant consumer
satisfaction gap between electric vehicle (“EV”) and traditional
buying experiences, identifying opportunities for the automotive
industry to improve the car-buying experience;
- Announced its partnership with the Minnesota Timberwolves of
the NBA to further drive brand awareness and strengthen client
relationships in the Minneapolis region and beyond;
- Was recognized by Modern Healthcare as the fifth-largest
healthcare IT consulting firm based on 2022 revenue;
- Celebrated the graduation of 60 students from the Perficient
Bright Paths Program during 2023, a program designed to advance
STEM education and career opportunities for underrepresented
constituencies and communities; and
- Was recognized in Forrester’s “Digital Transformation Services
Landscape, Q3 2023” report as a digital transformation consultancy
across four regions.
Business Outlook
The following statements are based on current expectations.
These statements are forward-looking and actual results may differ
materially. See “Safe Harbor Statement” below.
Perficient expects its fourth quarter 2023 revenue to be in the
range of $221 million to $226 million. Fourth quarter GAAP earnings
per share is expected to be in the range of $0.64 to $0.69. Fourth
quarter adjusted earnings per share (a non-GAAP measure; see
attached schedule which reconciles to GAAP earnings per share
guidance) is expected to be in the range of $0.98 to $1.03.
Perficient narrowed its full year 2023 revenue guidance to a
range of $907 million to $912 million from a range of $900 million
to $916 million, narrowed its 2023 GAAP earnings per share guidance
to a range of $2.74 to $2.79 from a range of $2.73 to $2.84 and
narrowed its 2023 adjusted earnings per share (a non-GAAP measure;
see attached schedule which reconciles to GAAP earnings per share
guidance) guidance to a range of $3.94 to $3.99 from a range of
$3.93 to $4.05.
Conference Call Details
Perficient will host a conference call regarding third quarter
financial results today, October 31, 2023, at 8 a.m. Eastern.
Analysts and investors who wish to ask questions during the
Q&A session can register for the call on
https://register.vevent.com/register/BI2bad8809d0104b0e92f9f303c2d3f311.
Registrants will receive confirmation with dial-in details.
A live webcast of the event can be accessed on
https://perficient.gcs-web.com/events/event-details/q3-2023-perficient-earnings-conference-call.
A replay of the webcast will be available on
https://perficient.gcs-web.com/ starting approximately two hours
after the event and will be archived on the site for one year.
About Perficient
Perficient is the 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. 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 2023. 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 and
other securities filings, and the following:
(1) the possibility that our actual results
do not meet the projections and guidance contained in this news
release;
(2) the impact of the general economy and
economic and political uncertainty on our business;
(3) risks associated with potential changes
to federal, state, local and foreign laws, regulations, and
policies;
(4) risks associated with the operation of
our business generally, including:
a. client demand for our services and
solutions;
b. effectively competing in a highly
competitive market;
c. risks from international operations
including fluctuations in exchange rates;
d. adapting to changes in technologies and
offerings;
e. the ongoing transition of our executive
leadership team;
f. obtaining favorable pricing to reflect
services provided;
g. risk of loss of one or more significant
software vendors;
h. maintaining a balance of our supply of
skills and resources with client demand;
i. changes to immigration policies;
j. protecting our clients’ and our data and
information;
k. changes to tax levels, audits,
investigations, tax laws or their interpretation;
l. making appropriate estimates and
assumptions in connection with preparing our consolidated financial
statements; and
m. maintaining effective internal
controls;
(5) risks associated with managing growth
organically and through acquisitions;
(6) 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;
(7) legal liabilities, including intellectual
property protection and infringement or the disclosure of
personally identifiable information; and
(8) 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 of 1933, as amended, 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 Consolidated
Statements of Operations
(in thousands, except per
share information)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023
2022
2023
2022
Revenues
Services excluding reimbursable
expenses
$
219,467
$
224,934
$
676,424
$
664,244
Reimbursable expenses
3,193
2,110
7,789
6,497
Total services
222,660
227,044
684,213
670,741
Software and hardware
578
570
1,538
1,722
Total revenues
223,238
227,614
685,751
672,463
Cost of revenues (exclusive of
depreciation and amortization, shown separately below)
Cost of services
140,899
134,195
426,147
404,641
Stock compensation
2,080
2,221
7,212
7,055
Total cost of revenues
142,979
136,416
433,359
411,696
Selling, general and administrative
37,483
40,440
116,477
116,366
Stock compensation
4,626
3,833
13,729
11,018
Total selling, general and
administrative
42,109
44,273
130,206
127,384
Depreciation
2,194
2,355
6,723
6,233
Amortization
5,032
6,087
16,372
18,064
Acquisition costs
456
2,148
464
2,508
Adjustment to fair value of contingent
consideration
(1,748
)
3,115
(6,475
)
(351
)
Income from operations
32,216
33,220
105,102
106,929
Net interest (income) expense
(7
)
616
794
2,308
Net other expense
236
20
698
406
Income before income taxes
31,987
32,584
103,610
104,215
Provision for income taxes
9,391
9,569
27,852
26,282
Net income
$
22,596
$
23,015
$
75,758
$
77,933
Basic net income per share
$
0.66
$
0.68
$
2.23
$
2.30
Diluted net income per share
$
0.63
$
0.64
$
2.11
$
2.17
Shares used in computing basic net income
per share
33,989
33,861
33,964
33,873
Shares used in computing diluted net
income per share
36,713
36,663
36,709
36,763
Net income used in computing diluted net
income per share
$
23,135
$
23,554
$
77,432
$
79,645
Perficient, Inc.
Condensed Consolidated Balance
Sheets
(in thousands)
September 30, 2023
(unaudited)
December 31, 2022
Assets
Current assets:
Cash and cash equivalents
$
80,087
$
30,130
Accounts receivable, net
185,140
202,298
Prepaid expenses
6,840
6,432
Other current assets
19,148
16,756
Total current assets
291,215
255,616
Property and equipment, net
13,918
17,970
Operating lease right-of-use assets
23,588
27,088
Goodwill
577,628
565,161
Intangible assets, net
74,882
88,937
Other non-current assets
47,266
41,116
Total assets
$
1,028,497
$
995,888
Liabilities and Stockholders’
Equity
Current liabilities:
Accounts payable
$
15,307
$
24,351
Other current liabilities
54,992
104,780
Total current liabilities
70,299
129,131
Long-term debt, net
396,303
394,587
Operating lease liabilities
18,052
18,528
Other non-current liabilities
41,154
43,515
Total liabilities
$
525,808
$
585,761
Stockholders’ equity:
Preferred stock
$
—
$
—
Common stock
53
53
Additional paid-in capital
424,989
403,866
Accumulated other comprehensive loss
(8,705
)
(17,519
)
Treasury stock
(367,669
)
(354,536
)
Retained earnings
454,021
378,263
Total stockholders’ equity
502,689
410,127
Total liabilities and stockholders’
equity
$
1,028,497
$
995,888
Perficient, Inc.
Unaudited Condensed
Consolidated Statements of Cash Flow
(in thousands)
Nine Months Ended September
30,
2023
2022
Net income
$
75,758
$
77,933
Adjustments to reconcile net income to net
cash provided by operations
34,168
36,148
Changes in operating assets and
liabilities, net of business acquisitions
(21,442
)
(42,640
)
Net cash provided by operating
activities
88,484
71,441
Net cash used in investing
activities
(4,811
)
(52,413
)
Net cash used in financing
activities
(34,223
)
(21,227
)
Effect of exchange rate on cash and cash
equivalents
507
(1,366
)
Change in cash and cash equivalents
49,957
(3,565
)
Cash and cash equivalents at beginning of
period
30,130
24,410
Cash and cash equivalents at end of
period
$
80,087
$
20,845
See the Company's Form 10-Q for the full
consolidated statements of cash flows.
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 income taxes, interest, depreciation,
amortization, acquisition costs, adjustment to fair value of
contingent consideration, stock compensation and the impact of
other infrequent or unusual transactions), 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 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 Issuance Costs
On November 9, 2021, Perficient issued $380.0 million aggregate
principal amount of 0.125% Convertible Senior Notes due 2026, and
on August 14, 2020, Perficient issued $230.0 million aggregate
principal amount of 1.250% Convertible Senior Notes due 2025 (the
“2026 Notes,” and “2025 Notes,” respectively, and collectively, the
“Notes”) in private placements to qualified institutional
purchasers. Issuance costs attributable to 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 Perficient’s business
performance.
Foreign Exchange Loss (Gain)
Non-operating foreign currency exchange gains and losses,
inclusive of gains and losses on related foreign exchange forward
contracts not designated as hedging instruments for accounting
purposes, are reported in net other expense (income) in our
consolidated statements of operations. As our operations expand
into countries outside of the United States, foreign exchange gains
and losses have and will become increasingly material. Perficient
believes that excluding these gains and losses from its non-GAAP
financial measures is useful to investors because foreign exchange
gains and losses will vary as the underlying currencies fluctuate,
which makes it difficult to compare current and historical
results.
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.
Business Optimization
Perficient incurs severance costs for business optimization,
which are not part of an ongoing written or substantive plan, and
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 expenses are
infrequent causing comparison of current and historical financial
results to be difficult.
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.
Perficient excludes the shares that are issuable upon conversions
of the Notes because Perficient expects that the dilution from such
shares will be offset by the convertible note hedge transactions
entered into in November 2021 and August 2020 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 September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
GAAP Net Income
$
22,596
$
23,015
$
75,758
$
77,933
Adjustments:
Provision for income taxes
9,391
9,569
27,852
26,282
Amortization
5,032
6,087
16,372
18,064
Acquisition costs
456
2,148
464
2,508
Adjustment to fair value of contingent
consideration
(1,748
)
3,115
(6,475
)
(351
)
Amortization of debt issuance costs
631
607
1,870
1,822
Foreign exchange loss
246
54
717
427
Stock compensation
6,706
6,054
20,941
18,073
Business optimization (1)
922
—
922
—
Adjusted Net Income Before Tax
44,232
50,649
138,421
144,758
Adjusted income tax (2)
12,650
12,764
36,820
36,913
Adjusted Net Income
$
31,582
$
37,885
$
101,601
$
107,845
GAAP Earnings Per Share (diluted)
$
0.63
$
0.64
$
2.11
$
2.17
Adjusted Earnings Per Share (diluted)
$
0.92
$
1.11
$
2.96
$
3.14
Shares used in computing GAAP Earnings Per
Share (diluted)
36,713
36,663
36,709
36,763
Dilution offset from convertible note
hedge transactions
(2,430
)
(2,431
)
(2,430
)
(2,431
)
Shares used in computing Adjusted Earnings
Per Share (diluted)
34,283
34,232
34,279
34,332
Net income used in computing GAAP Earnings
Per Share (diluted)
$
23,135
$
23,554
$
77,432
$
79,645
(1)
Business optimization includes $0.7
million of severance costs related to billable resources and $0.2
million of severance costs related to non-billable resources for
both the three and nine months ended September 30, 2023.
(2)
The estimated adjusted effective tax rate
of 28.6% and 25.2% for the three months ended September 30, 2023
and 2022, respectively, and 26.6% and 25.5% for the nine months
ended September 30, 2023 and 2022, 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 September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
GAAP Net Income
$
22,596
$
23,015
$
75,758
$
77,933
Adjustments:
Provision for income taxes
9,391
9,569
27,852
26,282
Net interest (income) expense
(7
)
616
794
2,308
Net other expense
236
20
698
406
Depreciation
2,194
2,355
6,723
6,233
Amortization
5,032
6,087
16,372
18,064
Acquisition costs
456
2,148
464
2,508
Adjustment to fair value of contingent
consideration
(1,748
)
3,115
(6,475
)
(351
)
Stock compensation
6,706
6,054
20,941
18,073
Business optimization (1)
922
—
922
—
Adjusted EBITDA (2)
$
45,778
$
52,979
$
144,049
$
151,456
(1)
Business optimization includes $0.7
million of severance costs related to billable resources and $0.2
million of severance costs related to non-billable resources for
both the three and nine months ended September 30, 2023.
(2)
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.
Perficient, Inc.
Reconciliation of GAAP to
Non-GAAP Measures
(unaudited)
Q4 2023
Full Year 2023
Low end of adjusted
goal
High end of adjusted
goal
Low end of adjusted
goal
High end of adjusted
goal
GAAP EPS
$
0.64
$
0.69
$
2.74
$
2.79
Non-GAAP adjustment (1):
Non-GAAP reconciling items
0.44
0.44
1.56
1.56
Tax effect of reconciling items
(0.10
)
(0.10
)
(0.36
)
(0.36
)
Adjusted EPS
$
0.98
$
1.03
$
3.94
$
3.99
(1)
Non-GAAP adjustment represents the impact
of amortization expense, acquisition costs, adjustments to fair
value of contingent consideration, amortization of debt issuance
costs, foreign exchange gains and losses, stock compensation and
business optimization costs, net of the tax effect of these
adjustments, divided by adjusted fully diluted shares. Perficient
currently expects its Q4 2023 and full year 2023 GAAP effective
income tax rate to be approximately 27%. Perficient currently
expects its Q4 2023 and full year 2023 estimated adjusted effective
income tax rate to be approximately 26% and 27%, respectively.
Perficient’s estimates of GAAP and adjusted fully diluted shares
for 2023 are included in the following table. These estimates could
be affected by share repurchases, shares issued in conjunction with
future acquisitions, changes in share price and the potential
impact from the conditional conversion features of our debt.
(in millions)
Q4 2023
Full Year 2023
GAAP Fully Diluted Shares
36.7
36.7
Non-GAAP adjustment (2):
Dilution offset from convertible note
hedge transactions
(2.4)
(2.4)
Adjusted Fully Diluted Shares
34.3
34.3
(2)
Non-GAAP adjustment represents the
exclusion of shares that are issuable upon conversion of our
convertible notes due to the expectation that shares relating to
the principal amount of our convertible notes will be paid in cash
and any excess will be offset by the convertible note hedge
transactions entered into in August 2020 and November 2021.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231031448586/en/
For more information, please contact: Bill Davis, Perficient,
314-529-3555 bill.davis@perficient.com
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