Perficient (PRFT) 10 Nov 192019 Q3 Earnings call transcript

Ladies and gentlemen thank you for standing by and welcome to the Quarter 3 2019 Perficient Earnings Conference Call. [Operator Instructions]

I would now like to hand the conference over to your speaker today Mr. Jeff Davis Chairman and CEO. Please go ahead sir.

Jeff is this you Davis. Thank the With our is Martin today and me Tom on CFO; Logan Paul call our COO. I time this questions. have you we'll open for as after call prepared thank to we for the of XX got want typical about which minutes comments up morning to and XX your

Paul, proceed read we you Before the safe-harbor please would statement?

Thanks Jeff and good morning everyone.

to laws. will meanings the today's differ discussed during call that company securities information performance in contained could of this materially refer to we call you today's the different in factors results concerning within discuss to those in be concerning results will things be statements from Some in we to will of statements filings forward-looking encourage the may EPS. cause these than Actual adjusted refer the and future times our At those additional contemplated SEC forward-looking we discussion.

www.perficient.com. press most at principles financial is reconciliation release accepted accounting on of or Our financial a accordance generally non-GAAP in website our comparable prepared directly posted certain including with earnings the GAAP to measures measures guidance We've on directly Investor the Jeff? a also financial includes with comparable to accordance prepared measures in most our of certain website deck a GAAP which reconciliation posted under non-GAAP Relations. slide

Well exclamation milestone through for our first and fourth momentum quarter will XXXX quarter put Coming that strong to results. once that that's a We're the pleased we morning third point our year our to for expectations quarters. Paul. X we're again Thanks joining. this the thanks year and on discuss building We're be been an with to you be communicated year the provision. certainly confident case will

something many variety there's release, believe at guidance. which we're Obviously, anything of is of we in for sustainable. long-term not some saw of from or of are And course a some reality there's now transformation but again external a you a macro benefit raising As digital cyclical. a wins permanent in our powering and play in force our enterprises factors our trend control performance our back. are a view in There the

normal instances is confident survive in level. of to new The a thrive many state

that of any acquisitions DNA a $XXX we've just with success. practice positioned outperform partner of perspective recent a platinum most in ago However At our the core we're fueling the fluid week our to our great capacity to we're of make and years the strategic from did investments because now. saw calls A made that's earned decisions flexible is absolutely up. the focus added a and our and evolving what in environment firm couple and didn't way exist depth. investment market to build from greatly what's the the well always of we're few breadth that example the which status on sales continuing or and confident and we and forward a organically talked evolving the to do We the Adobe. years about we lot recent exist our what's ability balancing even market ground a that on million built of business And now X today ago approaching business now We've is along next. we've

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set out change we So to that.

of First of via Digital and the then rapid introduction Perficient and marketing a sales in through skills messaging. build

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now our taking selling routinely capabilities are Perficient in are genuinely Marketing Officers are of because they unlike the Chief they realize many of. to end-to-end all possesses and dire share competitors Officers and we We need Chief Digital true

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charging properties largest digital North than the vehicles their the X the as vehicle system to delivering the well operator and a world's to platform – products more subscriptions for use government network testing of subsidiary for the one establishing with for integrated electric continue agreement governance digital America. the manufacturer's world's electric vehicle that throughout can properties of stations our Using owners manufacturers. across now years building as their extended fleet We're recently for charging and QA platform leading of XX e-commerce next We automobile optimizing the purchase business. home

provide around to make customer a necessary transform are but shares is gain color channels a luxury with for the digitally customers. details the based bit all on a retailer having things I communicate ability more store ensuring operational provide to just the we're that financial to department the a the there the after effort work scale energy business. and tremendous other Paul support to want excellence results won while And across our also We few this Tom and And Not is interactions. those better communication more able notable they'll chain and experience major would going we of decisions quarter. success informed doing business only to helping underscore their there how rapid all internal they with a be to

up outlook and full To provide wrap year our quarter fourth we'll and then questions. for I'll Paul? take the

for to September compensation third compared expense gross stock Thanks $XXX.X revenues XX% SG&A $XX.X XXXX million for comparable excluding quarter of XXX Services the the the period. Services prior-year compensation to increase were percentage a third third XXXX in the percentage expense of comp comparable expenses million basis XX.X% from to in EBITDA ended margin revenues period. reimbursable increased a to Jeff. from as SG&A of over of excluding revenue X the excluding stock prior-year XX.X% XXXX quarter million the the increased points XX.X% in XXXX. months of of the and quarter $XX.X XX increased XXXX $XX.X revenues or prior-year stock compared third quarter in million $XX.X was XX.X% of of Adjusted the to million for quarter XXXX. period. XX.X% or third

quarter of with amortization included is the consistent million $X The expense prior-year which third period.

prior-year company's due and September amortization quarter in $X.X in completed Net interest the issuance third comparable noncash debt convertible primarily XXXX $X.X XXXX. of from cost with million expense discount for to the the increased associated to notes million period senior of offering of

effective third the of $X.XX Our of primarily one-time to in increase for the $X.X third increased XXXX. share quarter XXXX. per XX.X% earnings in increased share third in million quarter rate the third from of the $X.XX GAAP press Adjusted quarter quarter of to a in reconciliation quarter the XXXX. rate income from the in quarter. from the increased XXXX of Diluted for items due $X.XX The See third XXXX. tax quarter XXXX third quarter million the third effective to of was of XXXX $X.XX XXXX share Net XX% compared earnings. tax for of was the per to to in quarter to $X.X GAAP in XX.X% release full earnings the the in third

XXXX XX margin X September million million to the reimbursed XXXX ended a increased the and I'll to or X X for stock expense XX stock expense prior-year increase ended months expense now the as ended XX%. in revenues prior-year million basis the September for $XX.X revenues to September SG&A Adjusted of percentage period. expenses million XX XX months prior-year September turn the in compared revenue period. XXXX Services gross Services to period. through months ended excluding increased from included period. EBITDA or million. comparable XX% September percentage results XXXX and $XX.X year-to-date X $XXX.X for to the was 'XX XX.X% were of X $XX.X ended XX.X% months from $XX over XXXX prior-year compensation XX% XXXX the excluding XX of comparable for comp points increased compensation million excluding the amortization September for months $XX the SG&A XXX comparable stock September. XX a revenues in ended the of X months comparable XX.X% the

Net to issuance due convertible in of related million months company's for noncash September issued discount amortization XX of in period September primarily XXXX $X.X increased cost the XXXX. the $X.X interest from to ended comparable expense the X senior prior-year debt and million to notes

rate from the XXXX prior-year prior-year $XX.X September comparable increased XXXX for XX% comparable in from Net X the for tax share compared $XX.X ended the a period. X million to XX% ended $X.XX was to months Diluted ended months ended XXXX XX September per earnings a year-over-year. for the GAAP Adjusted X the XX% the Our increased X the to in share September effective $X.XX period. income XX from XX period earnings months XX.X% million XXXX comparable to months increased the share for up period. share prior-year comparable per XX in September in $X.XX $X.XX

Our XXX XXXX of consultants XXXX headcount XX billable and was earning XXXX as including September subcontractors. billable

And was SG&A headcount again XXX.

at XXXX. September Our unamortized cost was to compared XX debt and issuance of as deferred of $XXX.X $XXX.X XXXX XX December discount million outstanding debt million net

us We in as XXXX and against also continues our very of strategic cash have XX $XX.X sheet balance leave equivalents positioned September our plans. cash execute to to and well million

accounts XX day quarter the little of XXXX. over the third commentary. of now Hogan the our the to of outstanding end for days quarter the Tom? to at call turn third Tom on XX more receivable I'll were end days a back at Finally sales compared

Paul. you, Thank

you're into seeing really utilization move And lives. to proactively needle This a As been even designed these in group simplify improved Jeff earlier, ABR identifying opportunities margins further way. focused colleagues’ on operations we spearheading translating – the which multi-faceted mentioned efforts impacts a our and are our broad the and senior executives improve and multiphase of array of meaningful initiatives to operationally. leaders

tools technologies all that $X for we customer grow Perficient we our processes to some organization we the relationships. future. even and focus and if revenue Fundamentally more and we're recognize on we're that what will doing beyond require collectively gaining different can is growing today. So that planning do our We billion

inherent is difference with running XXXXX today. in business than say employees a There's there have we what

fund processes looking the So remains and their our to we the simplify of businesses. we're further and board we business organization focus our colleagues’ can customers how lives and to across overwhelming our technologies advancing on ensure used

improved rigorous scenarios and now right in that. For when be But with will global also or of size. to example and continue driving with inherently our more triples doubles modeling utilization are that a talent workforce do supply resource complex we'll balancing on lot management and appreciate aligning opportunities we focus demand with we

for this complexity. planning we're So

ahead As we're we trying large accounts are the years in footprint to our grow there that very these complexities address continue as now additional to well. at

we create the need we velocity and do how to. when scale example For

is As streams that the we across for foundation investing Perficient. just We're and well-coordinated different very we multiple of years into to accounts sure customers The ensure penetrate energy we large ahead. business our make mutual and time do going work in fashion in scaling the to lines departments that drives materially larger success broadly how business are more a and properly. be these

best the growth we're the opportunity now double-digit in same ourselves drive seeing give future. the to we So that

number XX during deals of back the attention deals $XXXX than the year below Notably in our We did to and quarter quarter. quarter meaningfully that a greater just it's XX quarter. the we we here third to booked greater than the put deals Turning large XXXX. prior than compares $XXXX during

success XX% work. noting in our of impact growth strong Health services rapidly by sciences XX% is terms and manufacturing we're its for global XX% and reputation roster. of the global in of to differentiated accelerating a we of worth meaningful Also Health the are sciences build financial growth and represent and each quarter remains integration delivery our continue one revenue. revenue driving in delivery during on with where us having teams profitability of an our much at and client industry followed automotive representing we approach to

quarter collectively Hours’ XX% issued You higher and the and the ever up might our Nagpur was in than have seen we've India. quarter Bangalore volume in the release third they've year investments Chennai were hours’ prior offshore in In revenue space tripled made versus around period. the volume we particular earlier been.

slight teams As see also driver we've be to contributions. and sure talked space and rapid also the headwind to of critically continue we because note margin competitively a it's course about expansion India To to expansion. participate important key top of their a is but before we offshore growth are line offshore our of we the make to to

year that over to I'll updated turn with And quarter and Jeff back fourth outlook full things for guidance.

Tom. Well thanks

and fronts. So succeed in on several many summary on we continue to cylinders fire

and larger We more business. are systematically new and powerful much a logos gaining winning share building

great our trajectory. colleagues the our shareholders. feel growing We we customers and better and future bigger our our And are about for and

carry We and will very the which off XXXX great be into get strongly year another growth. momentum new expect year to to start end we and a that in solid XXXX expect

per quarter of Now its of share revenue to to expected $X.XX. guidance. guidance expects be Fourth returning full $X.XX earnings per revenue GAAP to to range $X.XX Raising is range and earnings to the to in quarter of share from range be $X.XX its from of $X.XX. to XXXX million its raising $X.XX. to earnings to $XXX million provided is previously Perficient the be in the $XXX to narrowing is to Fourth to per $X.XX range fourth $XXX the range guidance million share $X.XX raising to GAAP XXXX million. $X.XX to $XXX adjusted to quarter $X.XX year range earnings share XXXX million. to $XXX in $X.XX range $XXX $X.XX and million Perficient from expected per XXXX adjusted guidance

questions. we up operator the can that call open with And for

[Operator Instructions] Jefferies. with Your first comes Surinder Thind the from question line of

is line open. Your

Another really good quarter.

some like would year the a with a I about Can the next not potential quarter or line industry. in you necessarily question maybe of about the but that. on the that be next think organic would perspective you for kind trends are term firm for of the longer-term little from within clients top talk longer growth what congratulations So the of to guys what an actually is? seeing kind start outlook you your and

a But question. the that I about long great a That's business beyond that's the achieving think And the we've limit. XX%. goal talked firmly of don't for time I believe grow we that. can

we've in lot it made also As And there. I as here. times, mentioned and prepared in believe dry statements, investments got I a the of lot I powder us sales mentioned a we've get several of will

got that is that. investments But got we've proof of is. yet yield We've to So result. it

beyond the predictions that. believe So further of be above we than I probably couldn't XX% go go should that there's in XX% I won't bottom terms no reason think and substantially but

at investments should expect terms end about of guys cycle the getting that that run far of a we a how to related closer made have that be where in cycle just in forth? full so but I'll say point an are to to little next rates? be then be it's where you've to, sales that might the of that benefit past in feel you always equilibrium into maybe you a the that where say guys year force think you're continued of kind of made that and maybe are that And the think investments months Understood. should you the or seeing with like XX cadence? we we then over the going toward I kind year you of investment – kind respect bit just bit is understanding where the after let's of So of

exactly. Yes

I on nail It's an think the ongoing and the to process investment. you be ongoing hit going head.

very bookings pipeline been an solid forward. I have However and our now seeing think meaningful very, we're seeing and results looking we're incredible

think the these basis team person but So we're now by continues and a increases. months results per productivity go momentum gain on if seeing again to XX that I

we'll of process. investment probably to ongoing to will think do next I meaningful So the X continue over will then And be a to state steady be year results that year. point more it and but your from next it see an ongoing

additional Got then question. one it. And

the more to given their business as about related profiles. India or there kind – Just you conduct of higher-margin guys spoke the more operations ability the the and over of the strength move from business to

a flow have and basis. past some And year-over-year improvement – guys talked that goal also in of up have like quickly? ramp to You able there's number. about point anticipated. XXX you're how there I little would than margin a ebb or talk how to things It bit of operations Obviously, have about the kind on going been faster about for or basis the strength seems moving just

Yes.

of that is aggressively some in breaks clients. margin great It factors to opportunity very offshore. I by a demand our ahead competitive that's which in got In because unique obviously the news. cases moving cases. about driven But the space think budgets of the offering the I it's And affords that's design growing many that approach XX% by also that again business. hybrid rest gross we we're by get us we've think into take

obviously better of massive frankly offshore and to on that's in be for opportunities exciting work cities good sort to and interesting are their continue. Our ability more as only centers to of and people in I have we right career. scale who these very want get current locations that's more there the right you and right technology I we noted. attractive for mean think in out the commoditized has engaged of been And going the sort to

and that way. of building out and recruiting team great along coming So we've quality organization there great had that success with the

Okay, guys. thank you

Thank you.

Next comes the Maggie line from from Nolan Blair. question of William

open. line is Your

into or I And clients? strength performed whether this non-top driven wanted how to XX new or non-top be in then have that existing dig year quarter was accounts XX? to by top non-top that accounts compared the the your

question. That's a great Yes.

have added focus a on number front. and logos So definitely year. big the new we emphasis this for us sales of a It's

combination So a both. it's of been

serve we're for levels, we're have or still from to share able really they and expanding of we're not But on last over rationalize our a on XX% definitely been even sort they're how running continue accounts in Historically top I share those top we'll away but also. our closes. and top we've see above accounts. if it's now number taking CAGR talked like up. them basis competitors. think is XXX XX% to that – our of to at looks the However Obviously expand there well their as Below kind we strategy a go-forward several Obviously, to building has and right to executing there years it organic before focus spend the it goal that XX% the those accounts the year. performed increasing land XX of

both a new it's as the increasing work have accounts. of as well winning in logos combination So existing we that

job you XXXX at of levels? closer year? utilization seen to you utilization do down that this then Are XXXX think this comfortable your back kind kind operating of and these elevated Okay nice done come Or levels increasing you've to in in needs a year. you've

I'll answer that. Tom let

the we're business. increased think some we are – the and in nice grow higher room to are some investing enable have I right us business utilization areas with to the to help lower. But our sales in think I some

a into number I XX% utilization XXXX. think good that still as is look we around the

me growth more one quarter? the the in then And organic Right. for rate

extra XX%. point about an quarter. in want was out there I the day to It was

kind the to on you basis around a year-over-year guide that if is there X%. it's way midpoints normalize kind think by XX%. So around of the our for QX And normalize of I

Thank you.

with question comes Next from Needham Mayank line the Tandon of Incorporated.

open. Your is line

organic go growth. to Wanted quarter Congrats once on the again. to the back

XX% quarter third on the So the what you said for fourth just quarter. X% based in

the to you're it If year. end what somewhere should going for full let's up that that number we...yes call go case is sorry. the how ahead XX% in So

the guidance say actually to X% for year. XX% the to want is I

Right.

So that's years. obviously prior from a tremendous acceleration

see. to great So

what's So organic I XXXX confidence just could your clients it's some in the spending in the terms still trajectory budgets replicate this the insights feedback about game of point on of core could your you the level know levels the thinking from in within based maybe growth at provide XXXX? 'XX's but that client growth you early base

excellent. It's

now. actually more our I hard all think the is exceed we pipeline the getting seeing and no the that anywhere. opportunity. as dollars anecdotal fast clients at right can look back But to we're slowdown XXXX point the and your way well from as And we're more things

couple I of for reasons think that. a there's

think new the the that number factor this accounts I we've But digital logos I and in a year what is beginning, think for the I enterprise I that the million the $XX accounts pretty emphasizing potential we environment mentioned consider to As really of added. be the that I plus us. accounts added it's is other sales keep important macro have think annual good. but We've capacity the enterprise

what that's So going and we're building. the that's portfolio after we're

And I accelerated yield to relationships we're many more probably in where think they're growth in of and more going stages and growth. those early

million. many million a starting accounts like of a in think them them lot to at actually about into initial way can say start And $X If $XXX XXX $X.X turn the million a and year. of the multimillion those that by account but something you we relationship start $X

size to of of sort the up begin You there. implied kind growth can

I I I very about we and feel we up X% year. year beat XX% next that to can put next feel the believe So very good about year. this good

on And one then question final margins.

to margin going XXXX? that the into you look gross I XXX XXX as Is EBITDA. past said bps forward on model still XXX think the on in services you've

Yes.

guide, I Good right? our think – yes question. so,

of you into midpoint about if at the both puts those back right here actually us on this for guide XXX around our So year.

is XXX Going very think year into I doable. another next

very a offshore out. We've margin leverage delivery both SG&A. in organization. and sustainable mentioned But lot As probably we've of got high within have Tom delivering economies probably got but utilization about we the levered is

to XXX margin EBITDA again another So in yields I XXX to to XXX next XX XXX gross maybe year believe.

Thank you.

from from comes Vincent the line question Research. Next Barrington Colicchio of

line Your is open.

a broad-based nice project? large in growth healthcare. ramp wondering is the of there? contribution Or had you the are your You up I'm increase from that seeing

both. It's

continue and – guess to medium-sized a off going and some some science with of pretty a our We the second quarter large slower gain which well. year the new I so which there there very of accounts this start rate share run of probably that actually starting to accounts mid we accelerate multimillion space in large are added meaningful think large as accounts a That but number I we've those next within logos little health said but into off or starting year. as will

I'd that there and certified we're gotten with in are we and one got getting accounts on snowballing, number India healthcare the completed of in seeing healthcare work we've providers. There's we're and thing And couple is as growing. as doing additional of a add those first

bookings terms in And what verticals and strongest in categories the solution were of growth quarter?

Health care the continue way. to lead

we to Its profile industry. I really really And and penetrating sort the job underserved is we we and within despite continue manufacturing services in continues revenue particularly were growing. be XX% it think of nice well which think bookings. manufacturing did to our a really do of And I automotive same in financial and as XX% market an healthcare.

each probably of those to quarter. ahead within was wanted I nicely bookings So the of that little a nicely bookings revenue. or And say the think I all of grew contributed to those

a So top in relative growth we're on seeing those X continuing basis verticals.

offshore you foreseeable double-digit accelerating year-over-year is press growth growth headcount had Should The offshore the in into kind recent future of to that quarters expect continue release. in that the and on side? we

Yes definitely.

better the we're a expect of grow Our probably offshore say And getting of rest X continue more a more points business. to solid little visibility to things that. being crystallized. I or the would driving again would I is in expectation a proactive ahead

more. XX we're if a to I up next offshore maybe plus year would be XX So business, plus expect as putting

Thank you.

from comes the line question from Allen Klee Next of Securities. National

is line open. Your

represented Pricing of percent year-over-year increase? what the

ABR right? was up X% about year-over-year, believe Tom I

Yes right X%.

salespeople been Okay. you with it have of of feedback And clients changing the to how your any potential takes long have heard time and deals? clients close as of working

I say sort of appreciably over cycles the or sales year don't I extended consistent. they think would have last or contracted remain so.

year-over-year it's to been consistent. think our a basis cycle. I pretty on is So typical days XX XX

about feel do of Great. the And health how M&A your pipeline? you

good. the of a – We're and very is how very we've We've go taken had pipeline times The acquisitions. couple we been strategic quite to where in altar selective about pass. have a we

So more deals choosy. by this very again we have certainly we're done could But now. some year

number year. impossible I said we pipeline. close year that So in of something end opportunities next before high-quality get a a do to the the us would have they of deal in quarter Unlikely or will not the actually expect that's but done X first the

Group. of the question line Jack Vander Maxim Next from Aarde comes from

just up is year? believe growth me XQ again with that your organic for you quarter another midpoint guidance of that around mentioned performance. on great you clarify for was I full quickly or Could following And for the X%

That's XQ.

XX%. on And year they – we're X% like which is to the very excited

the for you're it. was Got million? for initial your if if the relative or sure not So how then a year. a outlook just midpoint of acquisition follow up, run $XX of I to contribution literally I the not but I'm this provide is think Sundog at perspective Sundog about revenue And to, performed X.X% from able rate

that best acquisitions it's Yes. I bring manufacturing but for clients in say the we're and a done. one I will numbers and had focus don't them alluded They're anecdotally on go-to-partner you manufacturing give vice manufacturing we versa. of a performing that specific that certainly Salesforce have really we've They I can know into already the able earlier. to I to

the they there – as to were have well. brought the table Some portfolio they running represented

it's gone on I have So in my run that but front very, it's that in just doubt I There's mind of no certainly me. it's above say would very well. rate. don't the number

think it that? question just quick deals And a was was is then to track the large I over my what is as in how problem. it large was that you XXXXXX total quarter? real What count? No relates last deal

to was XX XX compared ago. Yes a it year deals

And then...

pointed I out have as was last you as XXXXXX we up well just the that – give don't year. But I higher were can't the that tier under substantially below but the handsomely year-over-year. deals than that fell percentages

large And is unexpected any of it. deals have industry quarter from any in that maybe you particular did new? that this were vertical Got kind

to on let I'll Tom comment that.

think the ordinary out have there. I we don't No. anything of

have think a I we strong quarter.

there of excited ordinary QX no. we deals lining and nice the some think nothing about for out but are I up QX

bluebirds. no So

as of the like to call over the Mr. question moment. to Jeff No would Davis. turn back I

All your you'll time hope another all speaking for and it and to Thanks. thank quarter then. quarter look you right. was year we year. today. expect to Well We you I agree next Perficient great another a great forward for great

your and and this Ladies concludes conference. today’s for Thank day. gentlemen, a you participation have wonderful

disconnect. all may You