Perficient (PRFT) 27 Feb 242023 Q4 Earnings call transcript

Ladies and gentlemen, thank you for standing by. Welcome to the Fourth Quarter 2023 Perficient Earnings Conference Call. [Operator Instructions] After the speaker's presentation, there will be a question-and-answer session. [Operator Instructions]

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

everyone. morning, Good Hogan, Tom and CEO. This Perficient's is President today with our Martin, on phone me the is CFO. Paul And I'd like to thank you for your time this morning.

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

and morning, good Tom, Thanks, everyone.

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

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

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

Thanks, discuss Paul. time share and again, and appreciate full results as We Perficient's your Good morning, everybody. we year quarter XXXX. fourth outlook for

particularly behavior. second in recent optimism buying return XXXX challenge in growth, in with a give client us was said, extended have previously of and half. XXXX, have that half we cycles a second the we'll that As shift the discussed, several to weeks sales in happened That things

formidable software This our this in billable skilled life members, colleagues is And head Romania. development the joined their in of and new nearly is acquisition the all, Perficient outside are devices even with we're of of team health these all XXX excited First medical runs incredibly the of nearly United more now who have located industries. the us completed makes team based that joining and XX% provider of earlier sciences Almost care SMEDIX year. Perficient to in count of States.

unique the firm in with our India. what are built across States, only As the Latin our intentions marketplace. become in We're and America and America. for Latin United reminder, depth there global long our already And we a as we're to true Romania replicate in hub term in India we've space Europe, the

confidence sequentially. digits annual for Another nearly data QX double an XXXX bookings, our on point stronger even and contributing up to was basis

greater these won fourth beginning second revenue there's up be to booked talked on in out. The from QX deals. between deals XXXX. the bookings calls primarily on in years, of months quarter deals As the was revenue correlation over larger XX in a of by and $X we the QX XXXX, during XX% We occasion in ramped the year-over-year, will X about strong flat realized quarter million, quarter. driven we The bookings strong than but sequentially X recognized third driving

the drove call. flat, when project I the While sharing of mentioned final we're double-digit on near the mentioned on I the momentum is point the it the what deal large underscores wins volume was A size is earlier. building annual last update the increase that

QX, This [ During team fully as consistency continued several believe be the ramp October, support to we with digital we in Perficient foundation programs closed an will require their second to a relationships ] and quarter. by colleagues program will that the gain XXX expect coming began multiyear we This a initiatives. what early client program example will tapped transformation initiative will revenue and help of be in model will growth. These for program quarters and capacity project-based is serve years. provide

had an industry customer, in and a I of continue services and We intelligence, a manufacturing our excited efficiencies say both multiple to our leaders the in we than Health teams and internal we've have will frameworks, discipline also been verticals, and behalf can platform diversified care decade. around clients working a and for in blended colleagues on global strong expressing XXX interest verticals developing artificial across is subset related operations. we're group, about innovation both demos client perspective and nearly capabilities remain gain our POCs, exploration clients momentum which to AI of A but financial perspective. of industry well our we're world automotive. of Generative and consists strongest across scrum within remain from more each the this

we're research provide in clinical extremely personalized delivering that been understand their AI provide which and language help largest bots providing with talking items language capabilities help intent the I'm generative doing customer with to applications experience, clients data analytic usable our significant responses world, analyze, with I'm detection, proud critical AI projects. chat about predict to and of study researchers natural engaged sentiment. data like Additionally, the of narratives on customer anomaly we've the and companies up. understand customer work can one based AI leading capabilities teams. These pharmaceutical natural the querying, of set

on organizations holistic will provides approach finally, to -- including to AI responsible capabilities PACE our a PACE proactively unlock key ], risks. across a And provide operationalizing in January, controls the the of and factors while All approach policies, of major addressing launched [ adoption, an organization AI and incomes. addresses responsibility in impact and these health advocacies AI AI enablements. we responsibly Gen company benefits which to empowers framework, help global

our grown ] Envision is the business to library being proprietary within has than platform. continual capabilities. The capability tool to the module defined [ made progress Online exciting Also XXX more

management. analytics, system addresses many, about New our a product emotional finally, BI vendors marketing management, service employee colleagues X,XXX module The about. management, order content capabilities supporting more. in is community which than were many information we're joins reporting introduced XX information as of management, Perficient's connections for platforms, our and physical, XXX platform focused around topics And marketing types data cultural and giving resource fourth commerce, across and forums connect, on selection platforms disciplines automation, launch personalization, to customer the like now different and collaborate excited financial and more requirements, group, product global causes LiveWell make curriculums passionate and order with women for technology, a of colleague LiveWell, difference colleagues and global they're and customer

with on desire to We enterprise Paul our which to focus over colleagues I'll turn things in greater even our enthusiastic and to And to in programs for financial speak results. leads an continue for, to workforce results and outcomes engaged investing the expressed that, customers.

Tom. Thanks,

to million prior was year. in was year. expense X% in Let XX.X% year. over net revenues the me increase million margin, fourth revenue, the XX.X% the $X.X the million gross of XX.X% of primarily expenses, SG&A income compared were bad rates. XX.X% XX.X% compared in revenues decreased in in of fourth million compared to million reimbursable resulting million in compared year. the balances a year. the expense SG&A in recoveries Services prior of expense the higher quarter quarter $X.X due XX.X% income that compared quarter revenues interest fourth quarter. Adjusted million including was as Net start and $XXX.X million prior Amortization and of with the fourth in $XX.X quarter the a to fourth bonus in percentage $XX.X the quarter interest to fourth was to lower in decrease quarter, primarily to in The expense $X.X the in occurred expenses stock as revenues the was expense in from year. results. prior a million interest to percentage million fourth the debt quarter fourth or excluding Services cash compensation, $X.X and or in prior SG&A in prior higher year, the prior was decrease to $X.X $XX.X expense interest EBITDA reimbursable $XX.X due the to

$X.XX the tax $XX.X in rate fourth fourth income earnings per effective the to prior to Please in the was to release $X.XX the the year. for adjusted compared from prior share in to for in per for decreased compared fourth a to a press quarter quarter the prior the XX.X% earnings earnings. $X.XX year. year. Diluted see year. million in share GAAP a prior decreased $X.XX GAAP quarter was $XX.X Net full share compared the Our share million to XX% reconciliation

EBITDA million XXXX, full Adjusted million essentially flat December prior and million the for primarily group to year December million the the $XXX.X for December expense stock a percentage $XXX.X in million million Services ended to period. year continues XX, of expense interest prior in prior revenues expense year to turning ended interest XX, the peer XX, period. to excluding year, decreased gross expense prior from XXXX, year December XXXX, $X.X were from year income. XX, the for in for prior prior December million to year. of in revenues compared $XXX.X XXXX, in Now comp ended XX.X% average. Amortization or $XX.X compared in expenses to decreased margin, compared for $X.X compared increase the compared which as year to for XXXX, to to ended the XXXX, million Net expenses, Services SG&A to was the year. was $XX.X XX.X% or December the year XX.X% $XXX.X including the million $X.X year year year reimbursable revenues XX% million XX, a ended the $XXX.X year. the was XX.X% exceed in reimbursable of prior SG&A XX, results. ended XX.X% period, revenue, the the the due was

in XX.X% in of tax The XX, compared GAAP the prior XX, and December $X.XX compensation, per December year an ended for year in compared to for was million impact to year. acquisition XX, year. in research the in a stock was for compared decrease the effect the to ended a the ended $XXX.X year. XX, year. Net Adjusted effective costs earnings partially Our XXXX, primarily credit the offset rate due the share to $X.XX to Diluted per to XX.X% effective the XXXX, the benefit in prior December increase ended $XX.X rate tax share to XXXX, December was was XXXX, prior prior decreased by year the decrease million earnings $X.XX compared prior compared the increase income $X.XX in of in the for year year.

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

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

capacity and facility. credit We also borrowing had $XXX.X cash million million $XXX in equivalents of and our under cash unused

a from continue Tom very to the now to XXXX Our over for [ turn plan. execute sheet primarily cash $XXX.X against I'll flows to million outlook. prior in the Tom? cash well increased balance our related million increased call to continues due year the receivable. leave to strategic positioned back ] to $XXX to us inflows Operating in accounts

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

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

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

from Instructions] The Blair. question first Wilson Jesse with comes William [Operator

Jesse ]. is [ Maggie on This for

that first have my the see the second about how for year, first cadence question, half in And the seen months given at So time? about comments to do your have probably growth the the of the due What more to quarter fact to revenue talk this bookings. for X visibility second I of you wanted and this year? you full you

Jesse.

January be So the continues for pipeline us. to robust. good a month was very solid booking

Pipeline go be continues of quarter. there. months to to We have in here the a number

And the have QX. the still feels in a in months it after continue our see number big bookings, left a it or still couple that of of with we're We year still going to like saw chasing. a delay deals deals we in some quarter we have we're month though we left

it the per ramping really half As the you second see my year. revenue, far as of towards comments,

should trends takeouts discretionary for lot of that see a about past. our definitely a conversations. there's spend we're dictate we like and shifting X environments the some think the We some looks have And from the some that nice give But here second the -- I that cost Perficient really and should bookings pace indication first going tone clients we're of some more and ramping. in great to we the what definitely talking from seeing favorable that of give the the are us that that throughout ramp nice half year. ramp quarters

And then can throughout utilization you about to and to helpful. the margin That's be I'm for Okay. follow-up, year? trying gross talk understand what your might my the for expectations this causing profitability year? headwinds

Sure.

utilization with little for the challenging continue some in run margins quarter we to the first -- slower and year. Gross to to holidays, up a always the have the reset December But expect usually some quarter, projects. is like. XX% we'll the with throughout as and we taxes challenging are from the standpoint, ramp business So ramp a time January to XX%, to January the of we we'll be frame, the

we are end challenging year. of gross XX% by to the to margins the margins plan but the half, ramp So the first the in

ramp to to are had higher going from talking Yes particular, continue costs QX, year. are We're will to to higher the this has year's us as quarter. that benefit we jesse, but about fairly higher as close in in first margins impact continue improvement get strategy, margins. that some little full margins will lower year, generally which This we've our offshore, been a some overall the for faster see we've

The Needham. next Mayank question comes Tandon with from

picks ask on had to the is head industry. half of you've wanted What I today? visibility the recovery. I level click across many double second the so only because

some get more client of committed to they to data set, our certain color trying points, projects. maybe more have just terms I'm in So budget

level recovery want So your gauge guidance. I second that's to that on just of confidence in half implied the

Yes.

is seeing to couple which you're what the comments. I a alluded things Mayank, think of I in

to months seeing the typically We X start quite that were where to we First, about start it's see bookings in ramp. -- X strong. QX out, really

off brought that the beginning that ramp second was a in of half here at some the QX as give us and X-figure which deal ramping One to should some that in seeing year. project down a was for low off that were be also nice will applies some deal able continue a continue to throughout second mid- the kick very number kicked nice So as should year. the half nice large of we to to to ramped program year, we will which ramp ramp, have well that we actually hopeful X-figure QX, We're the well. projects

takeout. more about side with I mention our are opening Not budgets and cost earlier, that like have for to definitely in with for We we in, alluded in also a number of as line done a deals we just the were of to will chasing the those up we clients half. conversations We're hopeful see give different conversation now of some by mid the which have of year, we're the also us ramp here here discretionary having versus for half to October. spending were X deal projects second deals second

things us insight what the second like. So what gives the is all together really looks to half those

we little to it as ramp quite growth I Now bit the ramp the And what saw is for the half range a year, will think, the the will the time is we XXXX in end period. us at second question compared next more quarters. group, a it looks ultimately Is peer couple see that of going to of tell be our of nice for the wavered really honestly, the like. give which our year, number top for that

to clients I pricing utilization you're around of having from the trajectory get And ties then Got that what revenue and can a of the sense into sort a the your side. color. quick That's it. with follow-up, push then wanted you conversations as very helpful on

not by to acquisition? think actually last count the and Or that's get head you organically you all least, that but today? Or Tom, fourth for the full sense towards mentioned, I the that then XX%, increase you're want year? is the driven are quarter, in saw -- the just but if is where we a number hiring progressing

big Mayank. things the head a was of A of Acquisition count couple different there, in increase. part QX

it and the in far I half of that from something As is we're perspective, think year. the second seeing definitely as clients to we'll what the work revenue the

to the we're the what I curve like. the that deals going really that great question is I brought think going just new when I'm think right of not types QX. now talent and sure about of growth we the after look ramping into

So wanna? Paul, do you

Yes.

So Mayank, manage we continue count the XX%. to head

X the more really ramping up the with picking throughout and in X. QX growth will count head QX, in the year, start So numbers

still Okay. to Tom, you gas just And comments, clear, utilization still in to the have want to I have at where are on you higher? levels then Or do you you drive also do -- get and just left sustain, to be already then any pricing. tank wanted your

other of that think I the the was question. part

Yes.

think utilization, a States, in global we're like the a on standpoint, allows cost. on think that this have a deals a From United together, based mentioned, us our there we're to to pricing allows we'll slower we XX% place maintain at where for our So pricing as X-month in us we're in is in type to the that spot. that. make sure in which be really little the closing keep I flexible very We'll working at projects, deals project-based model mind I organization. we'll that really utilization lower X- We're January. around pricing appropriately be good a we're QX of a Well XX% little

United the have in really to leverage So we But as States. pricing where maintain as global mind, the we'll is our the in we pricing we margins levers the need pass to to on teams. continue model keep

allows competitive standpoint. where United the price be in India, to those on in can Latin in we as States a our have our America well, to our utilizing margins are headcount. get from to teams global teams nice utilizing we price in us Obviously, target the So the leveraging regions price sacrifice don't because

price can see impact an shouldn't margins we really global be sensitive adverse network. we because So our to utilizing

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

I'm especially wage wins the relates speak new as if and it to hires? can trends, wondering, you and pricing new to first,

pricing we but say downward now, would I seeing is Yes. -- I pretty as tremendous aggressive we're not mean a right pressure.

We're to we quarter-over-quarter. to as again, not where conversation was going to price that's to to versus essentially aggressive price our really on aggressive ABR get continue the deals. think ABRs. flat seeing to Once global win we're that really on having I ship comes have in individual teams, get

are they then discussed, the generally? projects new large are with larger And on replacing existing you've projects? you're that customers Or slightly where smaller they wins with customers

necessarily with expanding is smaller our within a projects projects. the Not big replacing of We're part footprint it. clients big

growth have expand, always as has But We logos building nice our land new some relationships. on been thesis well. and

relationship You that top as see grow accounts continue size well our year-over-year XX of that in to as relationship. in the

expanding is clients. within current footprint current majority our the So

we person as Brian, talked win in was project. the in health also XXX-plus quarter, care, big of about, And the there

it's a is So mix consistent existing clients, we run business. of how as were most the of which both. said, our themselves But Tom with deals

is last fourth less guidance, on Great. typically, the quarter days. My billable quarter question first the

large You've ramping. project got a

falling to drop fourth of wins of you first the of just me an that's can it understand replacing full of a that I end off not a typically, wondering, acquisition that big wondering middle low just the You've it. the partial opposed are have give in think, last are if quarter going projects there's guidance, quarter. year I'm is that the I'm quarter, help quarter and from that. a you as to got lack a at to, that

lot with in a there seeing saw calendar we it's project to to ready to full year there. and clients really what a quarter a of we end next. Others, But we being ramp what years bring a one people next that acquisition. move there. not It's the It's projects, January, calendar in perspective honestly, from cycle and some that continue -- seeing you're just into quite challenge onboard just the see you're as start that are very some seamless, they and of projects,

the it's know people where So engagements really necessarily that It's about. understanding ramping going them not are go. we current into to

more on I have a in particularly early size. quarter ramping cautious, think clients up been the little project

the result had that, So as of delays estimate. QX a we affected some that

The next with Vince comes Research. from Barrington question Colicchio

how direction it do about Is the client assess Yes. feel of Tom, difficult still to budgets? sort that? you of

a conversations assess. It's difficult the tone I optimistic to is though will definite having. there say that we're in more

also So we'll to and now, buying projects rubber the seeing seeing that road the right up, the ramp discussing we're as hits But reengagement as definitely see in projects far we process. delayed were when those as We're seeing XXXX. when say, to of bookings has which good, and takeouts. were operations, to that lot those I the optimization conversations that having a cost mentioned is closing with some the which lead earlier we're to regarding and having associated them of

it, late from Vince We revenue-generating in part is to to We're are spend return of want more the XXXX keep spend, because rubber bookings through, becoming that I the hit that our but as to and XXXX they optimistic were back. conversations early wanted definitely part hold projects XXXX, see here the road more tone in see around clients come customers, seeing discretionary with but more engagement XXXX. delayed seeing a more the in regarding the I saying

that on doing acquisition question year. be a Eastern European to for a you And year. usually to some Will Should We'll you be And active? a Will example? I this side. expect be to back you think there we X it? be the deals, theme do

interest, of yes, nothing long XXXX. very we'll we'd we done in QX, way being something see that always we'll active. Europe. at to and now, are but in great for are conversations, so looking our what looking to we benefit but like but be to add to and could to but in imminent to acquisition then and we'll point. geographic targeting are really we have what right portfolio conversations that QX, happens our Europe a go will in acquisitive to We're nothing and continue I have said, in say All are We is at a we in this report else Hopefully, really something with portfolio done

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

Tom clear. there's so I can things feel been commentary in so it's quarter, you some since Tom, be decisions, bit, project cancellations. buying like Okay. Paul. major quarter? last Last starts believe halts covered but and Great. customer some project a and just just and visibility regarding was I little delayed there no or Do but maybe general have improved

quarter, not I I'm it's sure same about the quarter. think last since honestly, quite last the as

I half good knock point, little horizon, your a QX think see had delays, major this XXXX. we continue on decisions. like always wood. there's don't any saw more really what lumpiness I'd forward in this know conversations. in cancellations. change we to back We're moving have To we've some I into to conversation to that we going then cancellations business bit. insight. always is we major the I keep The to haven't with and see a first seen around on the is buying though have I insight But not pipeline. these in

of insight we'll towards XXXX first half that the is bit see the but And here a more same. the is same, being positive in remains the I'd say, the bookings. the of So tone, difference where turns

Okay. And follow-up, a then maybe for just or either Great. Tom. maybe Paul

guys ago, you quarters organic targets. talking Just organic about a growth want few to longer-term and growth were -- think I

potential comments towards support on XXXX? organic back growth half you the strength. bookings your the plan heading your growth? confidence what's see year to a Do overall double-digit rebound Just or just the around into of the or given Just organic

change. business So the does not thesis of long-term

you like-for-like We XX% and of our produced business have number to ago. of our when business type years growth, a provided XX% a teens non-U.S.-based of peers with think growth of

will aggressive. to teens be Will we single digit may think that in we to get to see for XXs U.S. I the non-U.S.-based As high continue grow, we we low in and then XXXX? there see that continue that

rate we'd having, variables conversations the to the macro I of think the as growth obviously, at think but run pipeline, as of seeing to start we not going seeing from there level, double-digit the it's get of volumes business. we're those what spend a towards some we are And year, far macro, like we returning be the we're second we're XXXX the all for these lot implied, thesis can I the but the a environment Perficient. a organic XXXX, to an bookings if is of in the where at organic of perspective. There's to that good XXXX think, come favorable is half that in, the discretionary but in be number for back,

this Jack, we from And I innings. all the big is there's think one in at transformation do. but is projects early level, uncertainty the that things there's discretionary in seen our relatively view, timing, been still is the digital some of ROI we've it's as to

get [ about turned back a way, ] And the meaningful ticket think we feel we're I in when how positioned. well they funded. eventually So gets very

The next question Puneet with Jain from JPMorgan. comes

about already is large of at contract. to people. the that visibility guidance, I how much How low are numbers. a want also large health Paul, revenue care So maybe full at client, point also, under is -- ask I to this XXX year's mentioned ask year I the want midpoint the And you think, to

in the million million fair So it revenue to to fully contract $XX when $XX is should be about annual assume ramped? that

insight, our that Puneet, the than keeping less mind X months. project length in typically is So

obviously, run. however, be business we've we that think have I we for I say range have would perspective, second to of -- the but from and from the would grow a that the insight organization, the pipeline backlog line we majority in to we the not In abnormal perspective us pipeline to already a the the So work will booked, just and capitalize part. of we on sight of to business about to where know can regards a have have. lot insights do

Yes.

in So ramp people. the regards health hundred couple into care to a the notionally account, of going that's to

fully contract be also probably been for So the that there opportunities project. we size out a under ramped nice or have it's October and it's of ramping -- customer. It's the end should additional starting and quarter, that by there's in pieces obviously, the with November

level perspective, is is more the on client at And the it for than the just challenge ramping our level.

have consume majors to able providing well out move as the a to We that be the relationship. one much as of that decline talent the they've actually ability we're decided of the as matter to to faster from ramp

So from the some shifting work, shall transfer organization place of is which we us, knowledge taking there's and Southern well. say, to

us, by we dictated bit fully ramp which initially be our prepare the to client why than a isn't little ramp the So us anticipated is slower absorb team. seeing to as also able we're

nice in it's to Romania. like addition And see

my question was PSL in so an I is much. believe, America got that like into run when Perficient, home grew So absolute like acquisition, for that Latin you through business XXXX,

So client what Central be what now a getting in you early, can expect look but Europe, talk locations? are about are you you conversations into you or little like could seeing ramp bit that like anything it Romania for

for large as been in to were in they've early. a step interested will of ago. so portfolio most I of of We analogy European well. ability some will now interested Latin And were that run. them. just with quite number I foothold have to our the organizations clients full relationships our agree, a came presence, nice and Europe. hit the there I say say, it that by U.S.-based looking customers offerings batter's was is box forward to into going a that Fortune Europe, though, asking into that the month proficient home or Also, acquisition America here that to in representing our home I run. that have agree having some way. service and SMEDIX finished keep some are as a another

about excited once there. med run high that acquisitions, I'm conversation we're I areas another very really but a Europe the bit is that hit of the engineers different America Latin nice take focused Perficient. that are Once time. portfolio bidirectional So think think into really now some bringing home early, excitement through little I was it's still from team for still comes us about for our going SMEDIX on to of region. great will mentioned, a But be talented but It really device, again, right and excited place in to I is phase.

And think PSL. to did what with Puneet we similar I

We PSL. did, I fully think, I that's we to said have so now think I said, build and big to so that a to Yes, similar beachhead, a Eastern with Tom for we Europe, us. opening remarks, his speak, opportunity what intend, as in as Central in out,

turn questions further no to closing I call Hogan at show the now for Tom like would time. I remarks. to back this

here thank look shortly All of you, to right. QX about Look where the next connecting forward QX. we in and months to couple for talk Well, everybody.

So you. have a great day, everybody. Thank

Thank you your call. for participation This the conference does today's program. conclude in

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