Perficient (PRFT) 25 Feb 202019 Q4 Earnings call transcript

Ladies and gentlemen, thank you for standing by and welcome to the Q4 Full Year 2019 Perficient Earnings Conference Call. [Operator Instructions] I would now like to hand the conference over to your speaker today, Jeff Davis, Chairman and CEO. Please go ahead sir.

Thank you very much. With me on the call this morning are Paul Martin, our CFO; Tom Logan, our COO. you call. time thank forward we to our to want for and your look I have XX, call we we Obviously, about will after prepared open which comments, up the for XX questions. minutes of

Paul, will the statement Before we you proceed, Safe read Harbor please?

everyone. morning, good and Jeff Thanks,

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

posted Our directly with earnings the Accepted or to of press in reconciliation www.perficient.com. accordance prepared is a our release financial Principles, Generally certain measures non-GAAP including on comparable Accounting website measures at financial most GAAP,

We financial have guidance directly Relations. website which Investor most includes to accordance the posted certain comparable deck reconciliation under of a prepared GAAP on non-GAAP in Jeff? with our a measures also slide

again Well, thanks Paul. joining. once Thanks, for

original expansion XX%. large a this in morning represented by the client and revenue XXth customers that are pleased double-digit a to that well and company was many drove XXXX Perficient, for gaining which margin of discuss the initial In public ways, as broad high-end be earnings with and year several milestone year outlook our anniversary fourth an new resulted strong We our our quarter XXXX provide to exceeded growth relationships of you full expectations as as results on a listing XXXX. our of success expansion major a

performance. continued the leveraging contributed delivery global teams on of to focus and buildup our rapid our strategic Our

there to likely India and hiring meet in aggressively aware, during than that tripled we are As great you year the talent demand. are more our space

and our year revenue basis. sequential every materially during an grew offshore fact, in quarter the In annual on both

later offshore I bit our large than and year, that’s exceeded the will or fourth most share December competitors. the oriented XX% Tom represented the now increased greater offshore matching little a up exceeding during quarter more base revenue of we largest than number. quarter ever, January, a XX%, winning more our the During in our deals, about and success will talk our bookings month then in December that was

obviously, a of in off we to start great terms bookings. are So

are and to into accomplished We lot all embracing XXXX the brands head the of grow they can imagine, are as their performance engineer enterprise create, depend world’s and businesses. on, a proud in we of the biggest and XXXX that Perficient with consultancy and momentum and optimism, digital because largest

practical from competitors love delivers with We and differentiate us start and value nimbleness customers ability, our and think programmatic to Our expand routinely that quickly flexibility smart approach clients. and move in fast and enables it. big, us

I with of Couple you. to examples want share

leading connected provide experience. services with customers a to with a work more continue We investment financial provider

provides including chatbots, timely projects, development commerce innovative enabling of We and several been have conversational cross-platform devices. customers their in at integration which multiple across involved through fingertips information with

sophisticated mobile and multimillion insurance agreement redesign private a the transform service The with extended to retailing and medication project company portal dollar a multiyear, recently process the order home also repurchasing, new a integration includes tracking their medications. that experience. app simplifies delivery of We our health and member of multi-faceted and mobile

with automotive in partnership leading plus develop multiple deliver digital decade global our manufacturer continue innovative to its and business solutions across also We the divisions.

planet, continue that ability stage portfolio a that first need. the to that relationships capability grow and already acquisition economies, in one to are and a on couple this of come highly our helping economic firms we that of find things while our MedTouch, true are best incorporating in biggest some group, other enterprises enhanced regarded are the year. later And of expanding pretty will additional re-platformed search focused and together gain one and enhancing also for they redesigned dealers we global excited to on we engines Most XXXX. information portal, And support their have great here note, discussions with will complete an are recently, we us be domestic dealer global On with work. the excited to hopeful them. win about half we improves the the we and

And share over details for and who with full the quarter fourth results call will Paul? turn that, to will Paul the I the financial year.

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

from the million. for $X.X $X.X XXXX increased million of to quarter fourth expense interest Net

$XX.X to XXXX from recognized deductions to XX% rate year fourth for compared million quarter income prior quarter the million the for Our XXXX. due fourth decrease in XX% XXXX. fourth effective primarily Adjusted was quarter $X.X a XXXX. tax GAAP share-based increased fourth increase the the the tax was XXXX compared $X.XX the in to to full Net to earnings tax per XX.X% quarter of press release for benefits of related fourth in of compensation rate period. Diluted The increased share a the effective per earnings for of share for for to of of $X.XX in from the fourth See to the reconciliation fourth quarter fourth quarter $X.XX increased share XXXX from share to of earnings. quarter XXXX in quarter XXXX. the $X.XX of the GAAP

year $XX.X to expense, excluding year EBITDA increase prior Services in million prior of will $XXX.X the amortization million the SG&A is in of to year. the XXXX Adjusted December year. XX, stock includes for for the year, were December SG&A now $XXX.X stock year. XX prior for which Services ended year. XX% stock the ended consistent compared to turn million $XXX.X and the or XXXX XX.X XX, excluding million the the revenues expense, compensation increased or December basis compensation the $XX.X million full excluding as year prior over to from XX.X% December compensation prior I to expenses $XX.X in reimbursed year results. $XX.X ended margin XXXX, ended points XX, ended revenues compared XX, a million million million percentage was of with percentage year was December a revenues, for gross of the $XX increased year revenues XXX XX.X%. the XXXX

to prior December expense issued ended million for the debt to $X.X September the primarily XX, of of in from the amortization $X.X issuance due in increased interest year XXXX. to discount notes costs million XXXX company’s were convertible Net and senior related year non-cash that

$XX.X year the XX.X% $X.XX for XX% was to earnings increased in to increase rate per tax per for Diluted compared Net $XX.X earnings effective in year. XXXX. $X.XX share increased year XXXX. Our from to $X.XX ended compared in for Adjusted XXXX. million the GAAP million or the XXXX a share prior to XX, income to increased XX.X% XXXX in $X.XX December from XX%

at earning was headcount X,XXX including XXXX XXX subcontractors December billable X,XXX headcount consultants and the SG&A and billable XXX. Our then was XX,

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

of strategic also And million us equivalents December an positioned balance on to additional continues plan. $XX.X XX, and of very cash We XXXX. execute our as had our to cash well leave

the at XXXX. of is sales fourth of XX days the receivable which quarter Our consistent end accounts with days outstanding was on quarter, fourth the

for now call to more will the turn over Hogan little commentary. a Tom? Tom I

Thank you, Paul. Good morning, everybody.

As Jeff remains pipeline top our of bookings on that, mentioned earlier, strong. great recently

As quickly finding as work, are we and are winning opportunities. we pursuing new

million great during are that’s quarter plus more XX and booked fourth bookings. $XXX,XXX of deals fourth a XXXX than January the greater quarter In potential. quarter during greater a now, of a XXXX. $XX again, deals than XX the fact of strong tracking We $X that to compares with fourth million XXXk a bookings few than And yields right having those of larger the on we opportunities dozen

for some those with deal engagements, wins on fourth wins. American more and was up year-over-year, Additionally, larger of $XXX results basis. quarter North an third the X% quarter $X or sizes annual consistent up was ABR

routinely on Perficient closing the larger between gradually continue our rates that and during over was we time gap quarter opportunity increase As of we planning to mentioned for us Wednesday calls, last well. our we course availability than we influences as these have believe which would decisions, remains was it competitors. exists to year, the some only oftentimes our but XX%, fell bit but anticipated the a colleagues’ Christmas something like, not lower on holidays of client given Utilization

active monitoring very metric we business manage closer that utilization. seek you the we and As are to know, to XX%

it has years. While to strategic contributor been success, over the concentration has diversification our our across a the risk industries mitigated

with of Our we represents customer And routes certainly thrilled deep in loyalty Jeff collectively. XXXX firm immediately their mentioned, us patient and technically focused physician patient to while January our routinely vertical. as strength which XX% as and are sciences, on great and experience, of marketing. during quarter, mentioned, health to Jeff that we in a a capabilities began QX acquisition, event the reputation integration strong addition It’s revenue And build enabled are add acquisition has MedTouch. early deep and

The right strong now. might have otherwise already significant momentum work We won business has not have. we

are the We others out-thinking, out-hustling, outperforming are in gaining and space we share.

the turn to XXXX for Jeff will full outlook. I that, with And and back year quarter first things

thanks Well, Tom.

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

trajectory. we a more business. powerful great As and and feel share our much We and future building we have systematically logos, larger the about highlighted, running new gaining are

of range to Perficient the $XXX revenue in million expects be its quarter million. $XXX to first XXXX

earnings the per GAAP quarter in $X.XX. share range expected to to is of First $X.XX be

issuing $X.XX, share $X.XX adjusted to and earnings to the guidance in earnings to a per of quarter range is $XXX be a year of XXXX $X.XX. Perficient $X.XX million $X.XX. million, range revenue to full adjusted share share First of XXXX per per $X.XX of to guidance earnings year $XXX expected a range full year is full XXXX GAAP guidance range

Operator? questions. that, we for can up With open the call

first with Our Instructions] [Operator comes question you. Nolan from Blair. Thank Maggie William

You with question. your may proceed

Hi, you. thank

any So related into you for understand macro the you how XXXX there component is that any into I slowdown, change of the to guidance, then conservatism to within wanted kind the events what as level together guidance well? or came and broader expectation is how XXXX year the baked that versus of any embedded put organic in initial

Sure.

So QX experienced to some that year. range is…. that. last guidance is the that and year going so guidance The The basis is growth is we breakdown organic the this for implies of on for that, it the continue throughout expect trajectory we

For QX, year. the for XX% to it’s X%

for XX% the to X% year.

really it So, relates there been as by there what for would a much, is it. bit little baked in as but not are we we – well I we to are corona, really impacted say seeing not are

typical the did for it’s delay part, the starts seasonality. most So year. clients of A to lot a their

reflected So that’s well. as here

margin about you then that levers you. the on the And various thank have. talked side you of have Okay, things,

kind We we at SG&A have that in EBITDA the utilization kind look you go-forward at is talked adjusted about range the of do really at that are a way normalized you when coming and the the of where can basis versus from in what level expecting. on that business margin be What you level? of expecting should expansion gross

Yes.

that have may and manage in right EBITDA XXX come year, want last the actually did guidance of margin point emphasize line similar revenue. a have we year, highlight gross that offshore. for little XX% we us year. competition implies over growing had our advantage that of it a over business across some to top X% ahead in about earlier is the this other it lot the year expansion got I goal thing there think headwind been most to actually the I talk It’s or of of pace the achieve XXX like as continue We again and will basis why the our year grew enjoy I last an there mentioned to do and XX% And competitions, work can then that see year represent We the that our call, offshore we from and quarter. offshore, that’s be fourth major we of as that rate going our over last a do X% the to digital at part improvement offshore. But and you the of in is rate to bit to even of of going our the at to growth, across I are grew XX% increase. piece XX% drives to think business though factor to the above and

you. Thank

you. Thank

you. Thank

Our from Mayank next question Needham. with Tandon comes

your question. with proceed may You

This for taking Thanks actually good Peterson on Mayank. questions. my Hey, for is morning. Kyle

on Just past MedTouch in here the a you looking talked whether stuff particularly some near-shoring you bit that guys the about potentially guys already I closed hopper Is have additional it’s want think talk I in a options. to discussion. little guys little you have guys for, are kind M&A, pursuing there capabilities? mentioned know anything you in have bit you of

see to want of kind looking Just prioritizing at M&A? are you what guys from

question. good Yes,

going everything to that acquisition to in of is we some element think digital I it. terms target have

fit we So working another and area a that’s about you thing really and one. touched sometime that’s been on excited on finding But near-shore. that good for have are

achieved months. for in near-shore the hopefully and million that both have the do by of very the here done revenue. end first things have digital hopper we half, year some in will already couple get is in which possible our of the run-rate the It’s we of that next about goal So could $XX

And retention been is offshoring know helpful. that on want quick your trending? then on guys digital Are see efforts, seeing you and or talent have scaling That’s attrition increased I just things how the stable are follow-up, front? to one competition, in changes Great. just any and you acquisition rates pretty

XX%, far think better will we It’s about our it which the I healthy high-teens competitors. enjoyed we be. actually rates so where we you like somewhere in company, XX% a like below are But for but We tell XX% – great the number, are is offshore, frankly our retention to I retention. is think I in to Overall, range. XX%, phenomenal than

a attrition the about half XXs. which XX% least a offshore is is I or roughly think Our competition is at mid in

and So we are it in locations of having great success both in terms in of India. attracting retaining talent our all

guys. That’s Alright. color. helpful Thanks

Thank you.

Thank you.

question Our next Singh Jefferies. with from comes Surinder

You may proceed with your question.

closer would over the sense was in consistently when previous generally I high end to impression I would end commentary, bottom to color roughly look that generate the high that firm you that growth. X% for my Can little of more like morning. bit to the range? versus a provide to organic just the guidance revisit that of the able Good be end the on range XX%

initial the around XX% growth as ended Yes, And I just well, X%. our organic around I XX%. midpoint last right of against guidance, year’s believe or where We contrast guidance goal. that’s delivering up this almost our was

are So say going. how our we of first again, and plus be foremost, our XX%, typical reflects want in and sustainably guidance hard XX% we to the but remains judicious over-deliver working I approach to and would goal, the under-promise

or half year? Understood. as consideration in perhaps guidance the well And in is in then global some that maybe you any mentioned for landscape the of in of that considerations political example potentially the domestic either there back evolution events other

just bookings quarter seeing December mentioned the it to hope this statement pipeline not as of to sort and we in have general relates guidance, it’s tell made issue fourth that’s there, bookings than mean, total year demand. to started really, and risk you encompasses think will about conservative our in I continues but I would and question. other again great a I No, are any how I approach And our the I refill. any we

weighted record as of did months fact right is back just in been now X large back bookings. that it’s Our pipeline spite of as we to current the ever

we quarter, houses, quarantined We by folks actually actually right in the very that’s So that seeing affected corona had were in we climate the primarily some January, in of much minimally now are but is positive. first we pretty in where quite and that are here back office. the in now our are fastest their they

normal. so And we see fairly of predict. obviously we can’t things, things Outside

of or shift been Any quarter, I or types projects has one are to color at using, as declining strategy the that be certain of then And in contractors the Any helpful. kind the That’s being specific of on number the is when maybe would there progressed. it’s year for? quick subcontracts appreciated? follow-up you suddenly used were projects that look it guys

absolutely. Yes,

but have on of bringing are a picked we We demand up to people leveraging continue has as strategy subcontractors, as frankly, more employees. comfortable

reliant of get margins capacity driving obviously than are we essentially lower would So them down flexible employees. get rather employees subs less on that have work we with we and of on kind feeling that as that And we are little that anyway. sort

yes, still as headcount but So we reducing that a are a we bit, probably we reducing are move it certainly factor will forward. be or little

then are on the take idea provided to your and the itself have the things the some color in pursuing, time M&A, ideally? at consideration question And around that try you the just capacity multiple one sense good to same Understood. you and on is is the or on pipeline the out timing final there acquisitions space targets

a really much size that of to tend acquisitions the factor that’s we given as the of not Yes, target.

do to, integrated range XX I to relatively even the you ones acquisitions in math is or alluded some to quickly. out XX these smaller there say are if XX XX but but there the Now, larger then

in great got great management infrastructure, to organically place, acquisitions. obviously scale through team a prepared and business through the and $X billion We have beyond

ability and simultaneously So actually. to we have acquisitions integrate and got good capacity manage

for appreciate thank color. I the you Okay, that.

Thank you.

Thank you.

with Our Brian next Global from question Alliance Partners. Kinstlinger comes

You may proceed question. with your

coronavirus, taking is on Hey, that. January, about at in apparent a when the record. were Clearly, your It guys. bookings talked as may everyone talking questions. about to want have Thanks follow-up for been my not I and

get global you impact? China? if in on at you meaningful any to nervous curious slowdown in business tones a going am related about enterprises February conversations bookings the I in were So clearly seen a their so as record, changed customers in what’s Have impact to have

bookings far I making another least again February strong so as up in strong mentioned mean, but will through I bookings are No, be second it pretty on quarter are very in pipeline. as the and the April our nicely, weighted a well think should be month record, into projected at I

nothing We are any anecdotally delaying of of directly. We’ve the feedback not to impacting heard hearing terms move our really to actually clients our got of forward that clients have in major from effect. their to one clients. coronavirus – any decisions course, we And anything of

actually We and are steam full ahead its in doing engagement. big on project that China for a

Interesting.

on time long So about that acquisition. you ask an made you something touched to wanted I

haven’t China? where delivery are about countries? located other what talked of China remind India in We you us offshore that you was can versus your China-based versus delivery, percentage is And

couple of have offshore. And of are is got We in which there about XXs compared XX hours XXX employees Shanghai. total to we – about Hangzhou, Southwest

XX%. more little than a it’s So

your over in your was see that business bookings of Great. January, of seeing as That’s outlier strong, the – mix as in terms gains verticals of the the XQ or so well year? are are may business verticals course there the share then that does that helpful. that mimic any And

the it’s No, with consistent breakdown. current

the by services, is leads etcetera sciences breakdown. health pretty So financial much automotive, same retail way, followed the

standpoint. all So it’s vertical a from tide lifting a boats

outpacing I platforms, Adobe it is that from do if Great. factors have for other Last that? are demand appeared related question your you the see what driving and continuing is services so

Adobe’s I robust lots everybody already talking am a the robust implements software think very And to it’s sold. business have it’s primarily modules very do. it’s marketing manager I a the what testament tool, share. their they that is and think expansion Well, component an with of It’s also initially. I capabilities of not that being different think of that about. I I that

or are So further but to a and to share great I of installations. sort would is that space, now coming lot that there implement a say two, one, X in also drive that around are enhancements clients of enhancements take around our further for back they those around continue X

Great. Thanks much. so

Brian. Thanks,

Thank you.

Our next Colicchio question comes Vincent with Barrington Research. from

You your question. may proceed with

is Yes. expect very growth a Jeff, that growth? be you we year well there or to robust, see slowing had mentioned in that this the double-digit as growth should will offshore

will. believe I we

will even XX%. might about it think to be last was be stronger last similar recall that I year, and year

new what add top am look and a concentration does sounds you relatively pieces business, it of number large to your curious It of sequentially? like continue I like changing, year-over-year is XX

I it’s check probably as on right. flat to Paul would specific say, a component. it’s going the is I double think But basis flat number. relative a

a about it’s the as probably of So same. staying percent revenue,

has. It

was XX% and same. So it was quarter, Vince, the fourth so in XX% in with top revenues it stayed of or essentially XX XX% XXXX, XXXX

Okay. said expansion in missed what year, I margin for And EBITDA you was that? this expected of what terms then

guidance And I look bps if that. think XXX, there. our that’s good I feel implied in at XXX about you

X% for year the offshore levers gross expansion of a through there the achieved rate net way pull. increase about driven to have so across cost We XX%. where north the shift of against year of got increases obviously are about substantial well mix margins of We backdrop some only last as by employees still X.X%, lot the as

answering thanks my for Okay, questions.

Thanks, Vince.

Thank you.

comes Aarde from with Maxim Group. Jack Vander Our question next

with You may proceed your question.

guys. Hey,

color additional you that it where and this I up about too for XXXX? American throughout Q-over-Q, a almost headcount reason looking that I am Is just total it trending I around North don’t billable this or flat guess increase? there headcount just provide Will see was to X% can So Q-over-Q, do know you much continue dynamic? was any into

Yes.

and offshore the to offshore onshore, so difference related is onshore question growing. flat between Your and

been basis? have quarter headcount from quarter to a right. on seems flat end That’s American North last

design, might seasonality of a would managing normal I on and Yes. of always we even by We level offshore. bit particularly QX And working a maintain period to hiring, utilization. slowdown solid try to And slowdown domestically. that’s little during say

However, demand actually to are do fact in and hiring a lower we we growth that enjoying are and quite that a we to that hiring bench given here lot bit the where the our and that. little the costs able are pace there are seeing there are we

we would saw offshore offshore American in XXXX growth up And you our quarter have quarter I get a accelerating will fourth acquisition lift actually year-over-year and the when North we potentially and – was quarter closed with strongest the and the into that’s the see headcount. first

of they it, large if your changes doing regard bit okay. of in win their dipping little you are – strategy, is although of of And and the seeing competitors any rates was Got pretty helpful. then a That’s quarter strong in impact to And the of the in value there last terms are so quarter quarter, any with of where still this going being the rates number and pricing wondering win up last there? year-over-year, just changes with future? dollar see yours after largest any deals you the then number the kind

compete The happy they are are behaving have the Actually, and are kind price. competitors formidable go to I they would of and same always no. say, where on they

So a to skills it’s comes as down it price really just not differential, well.

What of the not new about part on of am concerned think anything going front. question? your going second forward. sort competitive I So that’s was continue I the to

like those you see rates forward, it do win answered that? going you sounds but Where

as enough, win sales Yes, as have as because them we increase they are ever rates our and capacity. been to I interestingly mid-XXs strong go expected down

revealed see thought actually little our out as staying and a in more reality that, down sales. you We bit come the rates I there mid-XXs. our they swinging results are solid we but more, can pretty win maybe the best are is getting the you of in are again

a So they indicator. good are

Okay, excellent. Thank me. That’s for you. it

Thanks, Jack.

Instructions] Securities. from Klee you. Thank Our National next question Allen with [Operator comes

proceed question. You with your may

were? this this if but tell sure and fourth not operating you at moment, am I hi, for can cash you CapEx quarter have flow us what Yes,

sorry, Yes, the be Q should the am – today. should later I out K

next provide that two we that. to will hour on where yes, So be or be happy the will

And reasonable what impact then on material have is it on you Okay. operating based know working today will on capital assume a XXXX cash to flow? not that

Yes.

driver the capital biggest is of for working us So AR.

days days we sales fourth outstanding had quarter. in We relatively inline XX the stay the to the expect with

will capital working needs growth. scale with essentially So

so flow was $XX of like, is developed capitalization And cost, software $X.X of the looks activities cash by operating and the provided million and internally million. combination PP&E about

And quarter? was in then your might what but rate did the growth you Okay, great. missed say have organic this, fourth I

about Yes, fourth quarter was X%.

Great. Alright. Thank much. you so

Thank you.

further Thank you. at to And any like Davis any turn now Jeff time. remarks. I back am to not would this I for showing further call questions the over

again thank of couple months. and Well, today. for all Alright. in you time your We talking to you appreciate it look forward a to

today’s concludes for Thank conference you. gentlemen, Thank participating. this you call. and Ladies

disconnect. now may You