Perficient (PRFT) 31 Oct 232023 Q3 Earnings call transcript

Good day, and thank you for standing by. Welcome to the Perficient Third Quarter 2023 Earnings Conference Call. [Operator Instructions]

Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Tom Hogan, President and CEO. ahead. go Please

time This With everyone. Martin, Hogan, President for Perficient's CFO. Good on is the CEO. your everybody thank me want Paul morning. telephone and I morning, to Tom this today our is

after As the we'll Paul, please call prepared harbor. safe questions. open read some which the usual, for some we'll would have comments, up

Thanks, Tom, and good morning, everyone.

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

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

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

Third you, Once results Quarter. our Quarter Perficient's today and morning, Fourth again, we everyone. good as Thank for Thank discuss Paul. time you for your outlook the

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the with with the of due of We leading provide to like Adobe done Partner based Platinum and Salesforce Americas. We're clients Coveo, in ourselves and their have XXXX ability partner our a the work Adobe's we've strong OneStream, are deep we technologies honor awarded partner, Sitecore, partner highest our of the our Optimizely in partnerships in tier, their industry Digital based who Year highest Emerging designated innovators designation were HCL Summit portfolio on done, partner Azure class-leading are currently as Google, technology cloud interest an and application robust and the for Informatica, to and on Microsoft's partner the solutions highest Salesforce's partner transformation. We're on Commerce. again, partner. the That's we're the a Partners. forefront highest of Microsoft tier top time, in native we Experience partner year development. We're the the designation, work a we've digital of finalist for digital

we're thought also an expertise, significant market In industry our leader addition perspective. with vertical technology to

feedback a featured importantly States. firm in so XXXX. and destination finally, also was an engineers most healthcare for a markets clients, different Perficient Gartner our far been to XX% and XX We've in colleagues the great this annual technologies place the and alone. we the out year work As stating colleague Forrester were in largest work. with of world's been And example, had and a we're recent by named workplace perhaps fifth XX named Healthcare reports And top XX in program consulting collaborate. We've as United to Modern for participation top IT our X

experienced during of business like in our I'm improved align geography. performance, substantially profitability. and and began I'd Second it from with capacity discuss a our trends. every better bottom the Third QX macro Now to specifically to to in steps effect Quarter. to We terms region Quarter Quarter we the our the the confident current rebound as We represented Third the we relates took needs in across utilization

plan quarter, up remains remained outcomes delivering. the to the our of near gross during XX% value our to rates X.X%, business the solid we're run continuing Bill And demonstration customers another margins.

in Our our of delivered truly was history. delivery quarter revenue transformation to entity global a mark with highest underway. Nearly the outside remains the XX% during of the States, our United teams

depth pending approval globally global As that SMEDIX. remaining the government by We to expansion, shift. weeks transaction scale global of of accelerate to structure the excited anticipate acquisition continue announced our projects with recently will fully deliver the and were To in we depth our the ahead. mix we regulatory

to introduce a expansion Merck the coming in the They Perficient a greater excited believe serve new given runs bring presence that specializes SMEDIX to the in ability and the nice skills, we presence a device customers, for relationships growth. We're as manufacturers designing legacy geographic about in SMEDIX of engineers to a existing and expect to opportunity Roche, like history XXX the capabilities larger our for will have also ahead. SMEDIX devices. substantial long of base years Perficient, capabilities really and base. amazing and years only others. healthcare SMEDIX space in set we developers not developing medical various a to and working with of leverage customer And there's roster customer software but

booked Romania the a launch build as in the in can excited in hub a about serve we America as Third build presence flat today. We XX believe deals the we're as we Quarter from down as region Perficient stronger India $X booked of closer scale team year-over-year, global negligibly That's Latin the than XX on in Finally, in key a XXXX. EMEA of Romania we to during Quarter the serve XXXX. We point out a and greater to years. million potential for the Second a operations coming

pipeline weighted growth net QX Our QX will solid. and XXXX for what an remains important look and unweighted indicator like. quite be will bookings

calls, been buying I As environment on This many have drawn out. continues. decisions mentioned

around in come as on one been which of the but hundreds to. is we this to will were scale world. More this we agreement a to client, the However, we've alluding program new come the work with to to the program large deals October, add colleagues able to team multiyear a new of on team, Perficient

We but come. have are to win this hopeful of win, more programs we as an many decisions to other indicator

We mentioned have them, just large to sight to October. opportunities. need previously, we this As of like one we many line have I close did in

We a from automotive. platform financial but continue and stronger to industry Healthcare diversified services and by in verticals, the customer, remain well both we're remain perspective. our excited manufacturing and momentum also

recently experience. a for EVs car to and adoption results last to better opportunity and X,XXX mentioned by enhancing As dealers customers significant earnings purchasing the call, rationale in legacy revealed than the to of understand dealers buying automakers barriers we and the surveyed vehicles. accelerate more I electric automotive The the

their go-to-market been brands already collaborating large have with We EV initiatives. on several

also are We from interest seeing automakers.

helping not sites. active company of I and an to from our GAI applications business, approaches the implement exploring utility project costs mention over and in-house installation call. chain have generative and development designers Perficient is the to research, are software potential We EV all opportunity. This to XXX Perficient cogeneration than mentioned launch like content a of comprised areas to to and expertise community marketing, completed these last XX note. We're opportunity applying the across on industry AI generative and insights perspectives had strategists, for testing group quarter's to whom expertise is supply generative an EV of more innovation taking the previously. AI engage with each focus is including brings currently a of AI. on not world, and experiencing around global digital developers demonstrate continues design, the the of function charging group just and also reduce This time Perficient's unique

clients and AI streamline dozens achieve additional We launch identify help new continually and platforms their efficiencies leading use to are create underway. clients user operations, experiences, AI we've help working of with multiple have like them Ryder, cases that them goals. Salesforce AI that and and will and also Alongside solutions to deployed POCs we Microsoft, POCs and improve develop Google, delivered

of I want other things I'm close a mentioning excited couple by about. to

forward. going structure our The first organization the of is executive

layer And next instead a For to CEO, foreseeable to many plan to CFO for future business. the President and of aspects responsible tenure disciplines Senior the and Vice and I'm X the years, of various significant has My without operate COO executives roles. had with various of a Perficient expertise COO. executives for is then promoted Perficient

to Vice Officer. Adomite promoted has Susan Senior Principal been Accounting addition, In President,

the Vice to will we understood coming work Perficient serve myself, far more forward, them in I known the as to is we we other that senior I'm team, firmly as Presidents of mentioned, into executive widely each global intend and Going alongside Paul, build Susan Senior Perficient's as provision expect. And ensure brand and thrilled and years.

can going area investments consistently support And and in of with be tend coming and more firms we'll much focus routinely to goals. prioritizing and so gap the more forward I with compete and to in get And the larger efforts wins. years those We close Perficient branding beat in brand exposure. budgets additional this

difference to their our And and the for rallied help with want of to communities. across for here that. a recent And finally, strongly Action make September, globe We Hunger and donations to through around a we're In our volunteerism. colleagues colleagues and during that I ERG, together Perficient clients, just conjunction did of security month. believe support combat for thank each food our offices colleagues our we the for our from giving world Perficient

in X,XXX than that, Paul can things Paul? over to I'll Perficient and meals to more pounds turn serve And donated more financial speak with Collectively, results. X,XXX food to to of package than the those need.

Tom. Thanks,

and million EBITDA Adjusted for and was to the the quarter XX.X% as compared million Third reimbursable decreases over expense prior interest to $X the increases the Quarter, revenues XX.X% in of $XXX,XXX expenses in primarily Turning offset prior to interest the $XXX.X Services in in compared million in bonus to in prior SG&A percentage a of decrease $XXX,XXX The prior to $XX.X margin, current expenses $XX.X in in the Third $X.X compensation in compared due was of Third band a reimbursable in from prior excluding was XX.X% immaterial XX.X% year, to year. Amortization expense, year. SG&A results. percentage was Quarter $XX.X head compared million the Quarter decreased in related revenues to partially of a expense income excluding decrease in Third Quarter year. XX.X% costs. was Quarter the $XX in prior SG&A year. million by to revenues expense expense million in primarily the and compared count in as Net the the X% interest year. the prior Services, XX.X% was Third the expenses debt year. to the revenues sales million or net Quarter or the Revenues, gross of stock income year. of Third benefit were

million Adjusted XX.X%. compared the release rate year. to prior share, year. Third million full reconciliation from the to a share earnings. Our the $XX.X Quarter per earnings year for $X.XX decreased $X.XX the a Net prior can for XXXX earnings effective decreased XXXX to was to Diluted Quarter income the compared $X.XX was share per and our press share you in $XX tax of and in a GAAP GAAP to for the Quarter see Third $X.XX prior for Third in

comp in the the expense period. SG&A were year the a XX% SG&A million ended prior revenues was Now turning percentage XX.X% to XXXX, months over to prior margin months X XXXX, period. reimbursable Services for the revenues, the increased and million XX.X% the ended of X% $X.X months months $XXX.X XX% from EBITDA a expenses ended million September to XX.X% prior million was September decrease the million XX, XXXX, in to XX, Adjusted of in September year, for compared year-to-date September million primarily prior of $XXX.X million to X as year Services excluding X due compared year. months for XXXX, X the the to results. in year XXXX, $XXX ended prior September $X.X million compared reimbursable expense to prior to XX, for excluding from compared prior ended for XX, was revenues the the year. stock expense revenues X million period. September gross was in million increase interest X expenses $XXX.X additional the months $XXX.X the XX, for in income. period. Amortization or XX, $XX.X the XXXX, $XX.X $X.X Net or interest ended XX.X%

for an acquisition deductions the share the the to XX, year press X September from in $X.XX the compensation credits, per partially research adjustments the $X.XX rate for to limitation by prior a Section XXXX, September for ended comparable tax $X.XX a year. for Diluted to to compared prior related due compensation a tax per and X months in XX.X% period. months benefits million you to prior rate in in benefits effective tax to ended ended compared million XX, decrease compared XX, the offset comparable September see ended effective XXXX, months the income GAAP earnings XXXM period. year XXXX, was primarily Our release year in share the $XX.X prior September for for and the year share-based compared for the to to Again, The tax to earnings $XX.X full period. Adjusted XX.X% increase in the can XXXX, $X.XX the was decrease decreased in months X period. Net X prior XX, increase was the reconciliation GAAP results. the decreased

billable count subcontractors. was at including September XXX consultants ending XX, was XXXX, and Ending XXX. SG&A X,XXX X,XXX head Our head count billable

debt, issuance outstanding Our costs net was XX, at of XXXX, million. deferred September $XXX.X

cash cash and in In September addition, capacity million credit facility. our XX, unused of million at XXXX, we $XX.X and on equivalents had borrowing $XXX

to plan. balance very positioned execute well strategic sheet Our our us against leaves

cash the cash collection the X flows to receivable. September due for to Tom call I'll period over ended accounts of the Tom? to for from XXXX, months inflows increased year $XX.X primarily Finally, the operating to prior $XX.X million million XX, comparable turn now related back outlook.

Paul. range expects to be its in GAAP earnings adjusted to call per in to full Perficient open year operator, range is Fourth be $XXX XXXX to to be GAAP share And $XXX earnings $XXX per be in that, adjusted for of $X.XX Quarter to Fourth in the range to million. in expected $X.XX per $X.XX. range million revenue to you, Thank the of range million. to the be to up XXXX be of $X.XX. revenue earnings can million expects Quarter in share the $XXX of of $X.XX the range we expected the earnings $X.XX is Fourth XXXX quarter of to the share XXXX $X.XX. to per questions. the share with And $X.XX. Perficient

line [Operator with of Instructions] Our comes first question the from Mayank Needham. Tandon

What maybe get just start, based strength budgets And clients demand. areas in? weaker year? So any basically inflection wanted clients? some do early your the you are when some trying on next of with seeing more for read some you're Tom, your the are from spots? to indications current conversations What might to I thoughts point the a on with on in get we with on think your growth conversations of

I then can right customer is reserved. leverage would of a lot cost from lower honestly, of Sure. cycle of lot a what a Mayank, seeing efficiency. demand Tells costs perspective. a technology organizations still from of business. The on And demand see of where the we're they perspective, the say, perspective, operational a and kind some takeout data to to to use internally, From conversations, looking look now,

a I kick think it there's to are I people think in. is excited lot about when going about XXXX, a concern but of

but lot individuals there. of of a demand thinking lot are still a out about still good So A of conversations, think I lot XXXX.

to have I in little XXXX. think still the going beginning we're a slowing of

and midway too XXXX, couple I we're through hopefully in SKUs We big right over we coming some get before much XXXX my turning see there. programs deals now large get have a some of of chasing we'll as with but these nice

start hire to going you hiring on question sort any So to to start this actually to ramp have the demand show then And then that? some about That's starting of know tailwinds. in Got on able organically? where the visibility that also to utilization. it. were quarter, to head crank see. might of good might I pricing organically? you would when any But you do your up back when signals when up And anticipation you mentioned you expectation then count need

ramping a joining we going but folks Quarter, to will I be and bit that hundred of First That's adding Perficient. Well, members over to up? ramp an program alluded October. I'm of That's to come. a couple This to organic we that in the growth. optimistic. hundred will closed It that Will just team that's couple more organic Fourth be be and

Just And for here housekeeping is expand Where how item. much on? more room you from utilization today? can utilization

want run be our that that's We low specific potentially. stated at XX% but will project be been XXs, company going situational it There the really goal. be the has times to in on based to might a

XX% at running the organization are We that number.

up and that So QX. things holidays coming some like in

around XX%, keep to it'll that's it. we So though, at and where that's we intend are and where be

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

contract you discuss strength which are industries was A about the win which on you October, that in industry you follow-up beginning particularly on talked And then signs large see that seeing of demand, can in? to which turning, that in?

programs though. lumpy, The doing orders consent couple see We those chasing bit there. healthcare in. a be continuously compliance can nice there, of which now at a order. as that services that was there's been services and lumpy Sure. growth financial coming in is something more right work has are still times, happens some see we're Financial tail rather the been looking we But bit in one work, some The large then nice, healthcare. has for next a of fulfilled, regulatory a we're

industry, bit of Looking back that to now tepid. into in right it's get a transformation and true the work digital more although manufacturing. Automotive

some conversations. have there, We new nice on going some things

As the and new great healthcare, conversations with some financial haven't automotive has worked manufacturers be within to those the new we us started that program continue with are for I EV before, nice areas areas manufacturing. that and historically services, mentioned,

headcount in percentage your back And and you as side? it then to utilization on that Quarter headcount similar sequentially. offshore you've the Great. margin, Third is what you the Can the the down gets reconcile Second ratio to your moves the which then total lowest the of a gross Quarter with Is was quarters? was in XX%? And several the made X%

Yes. The factor. that, what utilization into comes is the Brian, beginning is And really QX. part a of really big

go-forward around with at So where XXs you're the you in XX% Paul, that in And offset so capacity, looking now want also well the Fourth anything we margin. probably add see that Latin and But America the have XX% we world, back was high from perspective, intention be ratios be seeing we in the U.S. We'll right there? that's in that are got those back to we've check. as get margin. that India. to where as Quarter to to and

Yes.

we on running little So utilization a were offshore. lower

the the a gross mix offshore. of we So done going of a move But headcount was increased forward, offshore, work to that's made in as of of increase the adjustments there impact as be quarter continue margins. as sort more XX% we driver to also we the to

that around over little bill Can break area on on other and than site? great the offshore Last Great. is X% bit they to rates hear Are have. one both I down pricing? you It's a stronger X%. up that are question

offshore, It's a larger increase. little higher percent a

that's slightly lot it's a -- work doing X.X% nature that below there, we're the that think onshore. the of I the of and

Thind next question Our comes with of the LLC. from Surinder line Jefferies

that that confident of away? you large on out that at the you the the scale QX comment made expand point? of Is that call can is would how deal large result win as you about just that hold And comment up for deal being were if Tom, of at the a take beginning profitability. bottom to the a the

The large deal win, it up. would still hold

is, win. action element. Obviously, capacity really are is business, So we think organic going where that's forward. alignment we and now, comes moving it seeing that's seeing adjust keep decisions in seeing capacity -- the sight to demand be happen comes is definitely from I more some the good back where the take to get we don't made But that took I that really have what the we've we to got forward. to comment we're us and headcount need the of had right feel made where we and we we large close around an for be. line where current for are utilization work of in move see growth demand, that from we the seeing actions that confident we that adjustments My make to our very made capacity, QX the Quarter the Surinder seeing a world. to QX I get it going and is that backwards to Third to in needs had And to

been now. the journey on for that's of years helpful. then Obviously, a have on that And you guys something That's a number initiatives. branding

Just And in measure do of terms about maybe on the that any color then those when you're initiatives? you you how return expanding getting? them talk

Sure.

-- so we a of things couple So on that.

brand. [indiscernible] when have our it been there an We comes to on

us. in at we for excited to Timberwolves awareness. And the going Quarter announce always are have us to to We Third that another to look the market return market market more we some came for with and the by Minnesota what's terms get great brand

constantly that doing ourselves with. Keeping I need we aware making -- to this where are are we spend. showing matter the we team to and a dedicated and/or don't to domains what we what lot there. in do there. as the want are And want is track. that increase lighten were are that geographies at have impressions robust in we sure from and have we And people and spending, a about on that from come branding sure just who making also presence we're mind wins pretty track does A leads play given it's perspective the specifically of a We we we track it's and have do that we looking a is up and not those really have a those. are there. overall efforts It's actually and we team to that going intention of marketing prioritizing of branding

Got it. And then as kind of the final Romania question. It sounds off using and point. like jumping you spoke that about a

international the understood is I trajectory at there? if an idea international about that point? this correctly, how So should there the is we longer-term bigger push Or think

Sure.

looking when -- looking to they're we provide looking around we European U.S.-based that for talent, the and in services customers have for for us number best customers, with of independent been there've of perspective they Europe a been a that first, are work have and for the where an them. Eastern presence world Eastern So our Perficient. from customers

point jumping primarily presence the as So in U.S.-based that's be going to the off for Europe. with customers

our U.S.-based addition it's coming European U.S.-based service to at that, going European is we'll the ability the America. Over clients more market. years, really time, aggressively talent with do as with a provide European also and to clients over with now, the after presence. right In Eastern to there look But India Latin into we

question the with from comes next Divya line Our of Goyal Scotiabank.

-- at basis, on things. obviously, from quarter this Paul, the And a best But quarterly in of side year this mentioned an bit, little that model how on on go-forward standpoint? utilization you the around XX.X%. annual do in to provided came SG&A came think you've just some wanted discuss can you we or a this color I obviously a

Yes.

where the So XX%-ish run margins with We margin. general, gross EBITDA talk now. it relatively is in consistent SG&A about, should XX% and

we're continue quarter high office maintain So have performance in That and somewhat into it's and SG&A think and to growth. vary 'XX. get And leverage the business going by positioned some to to reduce quarter revenue over costs based costs, we But things I on will other fixed time. teens. well run move as slight we

helpful. That's

a the On business generic had I front, question.

So that front clients could there, seeing other you corporates Broadly because migration when that lot Tom, been trend do -- see is a speaking, industries go-forward out the a provide hear trending significant on I to the optimization. some of that a given more cloud we where part business the basis you're of historically the cloud color. across if you're speak about But migration, a when cloud growing? and such we lot what has on you

Cloud of the depends divide terms lot doing well, and it cloud you say optimization is cloud. -- those I would cloud up, a we're X on the optimization migrations. how work on

as have the So of I infrastructure a just work. a get a say applications experience in that really tech as as out of the have they're to migration customer and/or is product those of didn't It's of definitely well lot necessarily the necessarily applications that an on-prem modernization cloud. There applications of cloud, takeout product understanding organizations the these migration a happening. and cloud in lot takeouts new not better scale debt new development, we're at doing some really effort. It's looking and work But better on-prem for of that perspective rationalizations well as hundreds environment. thousands in are they in and lot even cost that's

and a of how their the necessarily utilizing cloud do to not really an modernizing migration cloud, the So but platforms they to are understanding so.

what hear here it is do to is your network to and So there? the cloud comes hybrid stabilization stay and when I see balance a from response on you infrastructure on-prem between some

the think to cloud think here I infrastructure stay, I presence. every hybrid to is but organization their is maximize looking

helpful. That's Yes.

exactly bit discussion provide the specifically? you're the sector a you automation on work that little for you that during did and here question last one your there. automation EV sector kind Just color the the Could of comments doing more on

there. There's a lot

lot chain So to e-commerce, and understanding infrastructure working AI how allocations sub-brands. We're amount also There management. understanding of some around recharging from of, We're in-car generative we're tremendous doing in the networks dealer configure. supply downstream for to a a tools the around I from that everything industry. networks number the a mentioned, on doing also we're perspective, a we're as EV the doing customer is experience, technology, working and

lot That's a exciting. your Thanks comments. for

Barrington Our line of the next Vincent question comes Research. with Colicchio from

Yes, seeing rates, should Or you bill in Tom. saw rate Curious, we are the any there? continue pressure them expect at to you quarter? growing the

we'll The business. we America rate, costs Not Latin happen to there growth and necessarily from think see continue pressure. the offset the bill to India, that from as moderate in both and U.S. growing I continue

grow ABR, think to is growth. but not I to I want some there room that's drive intention. overall the

with is the ABR said, we're sure That we're make if larger price and where on based being we're staying spend. larger competitive. not losing I'm getting So to okay it wins deals

So there against when increases is et maintaining making at it's sure But some the more ABR. think take really, on margin, we cetera. we the big making we're ABR, offsetting look we're sure salaries, to I room some have guys for

ABR there's I That's of bit but that not increases. little think room I not board. there, the substantial a expect looking would across intention the we're

from a on AI to you question. one meaningful have picture expect efficiencies your do business? And generative big impact coating When

It's a great question, Vince.

with that. leverage playing lot POCs different think I of a we're we and how

a off. is I think long cogeneration way

that something not for impact I think will that is years. have honestly meaningful a quite

the around we specifically elements are some there see efficiencies, will life that cycle testing. software think I development

creating but think efficiencies lot of in have foreseeable we around challenges as ways off. some think continue maybe But the and And see the and to future. content. already a gathering, requirement cogeneration, generating far I those specifically we'll that's the conversations, think around throughout a with XXXX I as still assets code, CISOs seeing I we're

showing to question Hogan to from no William this Tom Wilson over for call the time. next back of with Our at closing Jesse remarks. Blair. And I'm questions like the line currently I'd hand comes further

thank I First the forward in Quarter your for right. getting look to to everybody, expectations. our year together and All back Fourth time full Well, then you, today. Quarter XXXX discuss and

thank you, So great Have day. everybody. a

This Thank you concludes for call. today's conference participating.

may You disconnect. now