PRFT - Earnings call transcript Q3 2017

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Operator

Good morning, ladies and gentlemen, and welcome to the Q3 2017 Perficient Earnings Conference Call. [Operator Instructions].

As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Mr. Jeff Davis, Chairman and CEO.

Jeffrey Davis

morning, good and you, everyone. Thank joining Thank morning. this you for us the with Paul This Davis, on call is Jeff me is CFO. Martin, our Again, for you to want your I time. thank after few as questions. of And got open a we've prepared call typical remarks, which for we'll the minutes we will you statement. the Harbor please proceed, Paul, before read But Safe

Paul Martin

everyone. good Thank you, morning, Jeff,

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

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

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

Jeffrey Davis

larger this in American the beat We're talked third competitors Thank times to years pleased the sequentially them we We quarters continue quarter third just our several and rose to compete several to higher opportunity gradually over do $XXX margins GAAP again, the North during during that. even able our increase bill basis drive as we between quarter and that in be to upon growth. have for we higher points did and year as rates exists margins also year-over-year offshore well. the there's quarter year opportunities quarter. thank with Services and hit continue intended you higher quarter, you, We'll room prior about Paul. and rates incrementally We've build ADR. largest about Net realize ahead. to you talked We've as continue XXX our year all to the to against that of the Well, joining. our exists be ABR results. them. ability Perficient drive to

Our and for from QX double both our rates realized GDC run bill India China XXXX. digits

Third quarter bookings up year-over-year. were solid, XX%

leader pipeline Our very sales positive anecdotal and quantity terms terms involved. quality our remains were of in is in of the of solid feedback and pursuits both a

quarters confidence that due heading the driving Some and positive moving deeper of super higher and will opportunity the IoT in move the recent even invest that, possibility market. bold and of our tax transformation Pursuing in digital focused corporate We're from the to course, high efforts improvements of and by in coupled macro We're benefiting the within XXXX. in machine to also enterprises up longer-term winning Cloud. space. deals is growth further XXXX with optimistic areas economy into into learning to their Fortune reform

duration differentiation As large increasingly work. to larger proven willing us value, grown demonstrated longer are enterprises brand, give our and our we've and our

client's where in but are recent projects. work the few a excited place are and our large particularly within had we've of project factory development where One very software one is embedded stands trends entities We rather in with have overall in specific months I'm our success agreements framework the site, now about office. teams not to the with on multiple

as it and across considering customer's team increased core multiple well creates for efforts. productivity quality the as development consistently is initiatives first overall Our our extension of And clients.

well relationship for also and accounting expansion. positions course, and delivers commission revenue compliant Of stable this us and

since XXXX . ended look X,XXX of Paul deal on call time we in day here to pride company what the in we around mentioning the worth more XXX someone it's as we've been the that and and it beyond. turn built I Finally, mark before Perficient's great X,XXX And over the than forward the who's results, our history, for counting take to first I move back people, quarter was with financial through with the

turn Paul for the I'll Paul? financial the So results. call to back now

Paul Martin

gross expenses, an in Jeff. Services SG&A third in reimbursable extruding the expenses, for XXXX. XX% you, Total ended from XXXX of a Thank million to increase million or stock $XX.X to and the prior stock points SG&A of compared to XX, quarter. quarter quarter year-ago was increase stock of of September XXXX million, $XX.X XXXX, XXX or increased XXXX, third months $XXX.X margin for the of X compared XX.X% quarter $XX.X in compensation compensation the increased of of in revenues XXXX Services the revenues million $XX.X comparable quarter comparable million to reimbursable third year of In $XXX.X third to million as basis third XX.X%. from XXXX. for the revenues compensation were expenses, percentage XX% the quarter were X% excluding quarter third compared excluding to year XX.X% quarter. a revenues revenue, period. excluding expenses, prior the to increased XX.X%

X fair An the value of the recorded of net XXXX, the The was the third in continue ended $X.X value to of acquisition million environment. during the wholesale fair and contingent related adjustment XX, $X.X value expense. market consideration to $X.X quarter included fair compared months consideration accretion million liability to September of RAS Adjustment -- the impact amortization million

million compensation quarter growth Lower $X.XX a ended third million to XXXX due months rate Adjusted in effective quarter quarter $X.XX for year. to rate of third quarter increased from the X earnings income Net XXXX per the tax XXXX. to for for the of $X.XX the to third compared in GAAP for share of XXXX quarter a XX, from expense amortization share of XXXX was Our divided outstanding transaction share research tax XX.X%, share in $X unusual third the the Diluted primarily per consideration produced stock increased the credit period. to diluted value quarter noncash from adjustable September XX% tax plus XXXX. the of earnings for by related per fair the $X.X share taxes quarter the in third XXXX. $X.XX related tax XXXX in other of average XXXX additional GAAP third GAAP third effective third was from EPS of XX.X% transactions share shares Adjusted a quarter the impact net and XXXX. cost net of

months reimbursable was Revenue SG&A of revenues year X,XXX, million, X including XXXX, SG&A headcount the $XX XXXX, prior period. turn stock revenue, million prior $XX.X excluding period. stock comparable X and X compensation a for year XXX. percentage ended ended Services ended expenses comparable the expense, as expenses the XX, and revenues year $XXX.X XX.X% million I'll Services in and subcontractors, or the increased was excluding the to of flat in XXX XX, September from compared X% XX, the stock revenue year for XX.X% XXXX, $XXX.X period. excluding global XX, decrease XX.X% SG&A ended XXXX. $XX.X was of XX.X% to year to for reimbursable headcount comparable September Our or months expense, of the period. EBITDAS XXXX, prior months compared compensation, million months prior the ended million XX, XXXX, was in was September to now September billable X,XXX a was X months X-months margin for excluding million, results. decreased essentially for XX.X% for prior XX% comparable consultants XX, the compensation September $XX.X for to from XXXX, the gross September in the period. over X the months ended X

XXXX to $XX.X million year amortization in amortization o period. recorded X consideration adjustment the $X.X continued million RAS comparable fair to the fXXXX, XXXX and and And was of additional acquisitions. adjustment increase continue is consideration For intangible XXXX, compared months XX, September fair value due value ended the $X.X to the related X million months The from September of estimate the assets net to in quarter. Bluetube addition during included of the the prior represents liability the the from which impact to the the a ended accretion

an for Adjusted share the months ended in GAAP XX.X% to XX, XXXX, of X ended for to that $X.XX from for $X.XX period. September Chinese increased year of $XX of months and compared from are per $X.XX ended the X months the during The company's no XX% the subsidiary a primarily months rate We tax no to of September in ended X XXXX share September earnings $XX.X the effective ended XXXX. the September XX, decreased due tax was September poor million -- GAAP September XX, ended ended third X increase outstanding per longer earnings was with decreased due $X.XX rate earnings the XXXX. XX, RAS was from months Diluted share X the for effective income Our $XX Clarity XX, $XX.X months XXXX. part XXXX debt, of quarter for increase prior X for increase to that year the reinvestment. million The acquisition XXXX, the compared from XX, comparable XXXX. end. to million primarily Net million

well Our us sheet on positioned our leave balance plan. continues acting strategic to

I'll that Jeff? last compared to day year XX XX, more comments, on point sales outstanding year XXXX, end. call little receivable and XX to now over turn the back Jeff account Finally, was at our at at September XX same for

Jeffrey Davis

in in each. the XX first third $X.X million million. average in XX to they sold at each average XXXX, $X.X Paul. the quarter That million of each and $XXX,XXX deals XX $X.XX compares second quarter Thanks, that actually during and We quarter, the

So X.X XX last compared averaging again, averaging deals year. XX on basis, to year-over-year X.X a

as size, earlier, last solid growth large obviously, and and versus As year. mentioned volume deal I've add

half health expect in represented fourth quarter's from to services mentioned see the we automotive second revenue. quarter, a at financial And revenue X% consumer increase XX%, goods quarter, automotive the I X%. similar the we services, XX% retail there. And XX%, the call, during goods realized results last financial the During strong Healthcare verticals health and XX% sciences consumer on retail at we anticipated vertical. quarter. during and sciences, of

significant worth the mentioning see and building pipeline of financial And opportunity arms where in we expect already that the momentum industry to It's though of these right industry have Several and but the we've are well XXXX. as are success into major where extends really in just is vertical the foundation some I large chain and we in beyond the clients, automotive. growth the an have enterprises. as supply solid well. vertical customers, services Another always of as manufacturers now. solid manufacturers automotive

million, in quarter the software the range our fourth services expects Perficient $XXX results for to year. full $XXX for revenue sales million reimburse now of $XXX attention to $XXX be turning $XX and from software. revenue reimburse expenses including million comprised So and and from $XX services quarter excluding million expenses reimbursed of expected XXXX -- to and the of for to million million of fourth the to year revenue

the Perficient's it's adjusting XXXX Third $X.XX. revenue $X.XX quarter a to expected of and adjusted year a to of $XXX.X share provided earnings narrowing earnings and share and $XXX.X narrowing full guidance to be guidance range XXXX $X.XX. to per million and to range adjusted range full per is previously year $X.XX of million in adjusting as

up that, open call with any So for can Operator? questions. the we

Operator

Instructions]. [Operator

line of comes from Taminco. Your the Tandon the from question first Mayank

Mayank Tandon

number pretty on your a get and revenue in for revenue. narrowed software, were of guidance year lower. the a a Jeff except just hardware is Can to was sense service look questions the and maybe full process comment you few around here. at they XQ, you But what guidance. for Wanted the had the decline thought But is the good, on If maybe guidance? I margins. and good positive XQ for Paul,

Jeffrey Davis

normally Yes, little quarter, is see based than of seeing kind a normal seasonality the fourth I on more the which actually would think we history. we're past in

the may year, And adjustment -- to that's is the And it's more expenses. point continue know we're we industry positive SaaS that I all in about a work X and Most or internationally a services. overall, reimbursement Cloud software sequentially. sequentially, in , think down DBC, as around, And and only points, on likewise, way actually way -- we're to maybe down be You of the which in more one our do for well. experiencing X guided -- seeing industry in both less is software but It, reimbursed and as that requirements, expenses. ships obviously, we're travel down we're model a the the taking which software is down

reimburse software adjustment modest So most it's a and in is adjustment expenses. of services, the

Mayank Tandon

strong. Got it. business But remained underlying

Health good. is pretty strong, care You bookings broad-based said were growth.

So would seasonality? that nothing of on outside going really your fundamental in just impacting that's services be guidance,

Jeffrey Davis

exactly right. that's Yes,

like year-over-year X% the in guidance organic quarter growth this think services. to X% represents I

Mayank Tandon

the was third in what And services? it. Got quarter growth organic in

Jeffrey Davis

it down X%. about, Down was yes, about

Mayank Tandon

bill you What quarter Got into revenue your of that that bill rate it, you increase terms increases you obviously, importantly, terms mentioned quarter, nice rates, fourth okay. And the then is in saw and 'XX? in expectation helped a as margins. in more but go the in

Jeffrey Davis

and with to same to X% while. the talk know, about about for We'll You going a X% stick try per we're guidance, year. this

we do So of to XXXX QX sense. to 'XX be X% makes to QX X% if -- expect that about above

X% year. the it's to X% So across

Mayank Tandon

then me. one last And Okay. for question

around there -- Washington been especially your of overall uptick business. on terms looking healthcare. obviously are it seeing hasn't seen or -- In for in Is revenue, clarity company-specific healthcare much you've nice ahead in a into 'XX you

wondering any what's tailwind? your could a somewhat thought just would you just of a company helpful. of that would just provide and services if get for in kind healthcare that be for actually process around IoT do market, If be course, clarity, I'm So both we potential going generally

Jeffrey Davis

Yes, absolutely.

true. it think and continues to be for I I've I a said while, believe

the and primary I fits way whether largely does we've in healthcare, that certainly and for that by it way, And treatment away. the of in shift reason that doing think around we all positioned of in Washington work most The the little go the it's we're the starts again, a valley, around Washington. for digital create work large But it's are evidence impact the for business think of service. to better we're as some back. bit in way, industry doesn't unaffected doing as part, comes along the a introduced as demonstrated always we've and patient time the thesis seen. I seeing it space, consumer, well EBITDAS as even outcomes the And we're paradigm more this that a as is consumerism, the is, transformation

That's at So work more of I Washington more It's anything the that the I that of, that I is The it's, consumer-oriented business drives and . continues. I independent we're think think that sort And like states. everything do. said, competitive. become has doing we don't that the doing. see of become honestly most industry And

Operator

You're next question SunTrust. line Franc the of from comes Atkins with

Francis Atkins

And addition the in you're attract little that's talent work to ahead your a bit getting. people of, what you wanted terms about of tight? remind then kind headcount doing or growth Do Can environment some hire in more relative in I secondly, you, nice more you pipeline the to keep of good or concurrent and ask with philosophy to this and side business, that? headcount. the are us of getting

Jeffrey Davis

Good questions.

in ahead. do in rarely very We hire skill and supply. demand sometimes we it's that's when So a special

terms and them XX%, the XX%, and high and For XXs part, That's most we we the philosophy keep pipelines is little in goal away long-stated closes, warm. on our our on. Keeping get that with candidates that's question utilization work the achieved we allows bringing them in available bring the pipeline billable as quarter. keep warm, And what this us them our areas. And to hiring work -- candidate the of and right in in bit as that of again, ahead, so a specialty is.

how of we terms recruit. In

helpful, I actually. very think is our culture

and and. it's it's tell Deloitte You can most very competitors to business a here. far entrepreneurial different I compare like people Accenture, more that primary our us like far that, you

keep with them do and Despite an performance. up And able they think So give in I in the demand, can in us show to we're helps that we platform opportunity them. and to to retention. uptick reward try recruiting for that people what

Francis Atkins

X.X. what a helpful. margins of up going great, pick of Okay, behind that? going forward in company, And deal the that nice to size, that's Anything for then and And does roadmap? do visibility terms in

Jeffrey Davis

Yes. something I it. there's say behind would that

of the years. more it's detail, think into this, sales. on a last but strategic of I drive sales realize lot we've couple taken to made beginning over we've that actions into some of approach investments I a much won't provision

those better specific seeing will of combination or this accounts think or believe that. more resources, terms of the I culmination of yield in growth. that have we're that we of focus on accounts, beginning to see fruition And particularly course, results, the We is

revenue these The with are going gross, are to brand not at not see level that the other our deals, as XX% and thing the larger up our that by fact but that we bookings that grow do invited engagements. absolutely -- -- has to also that's to longer-duration growth. more we're why, participate in larger, more way, we are That's complex level only while But engagements. of due year-over-year,

of you us better to occurred deals that point, $X.X million your So will, us extra future. to the that visibility. question, -- does But is have on earlier obviously an if lot that to average, on a your the get extension give those

We than to what have put in place build we as a revenue going absolute higher we can percentage with growth. backlog ever better obviously a have before, expect which in and helps foundation do dollars year, next we and that XXXX on a of us both drive into

Francis Atkins

services? a weakness some there? is call larger vertical. Okay, services the while my of and question last some Any strength great. on the trends heard or or in Any that strengthen could of the banks your there's out little regional And changes insurance areas of financial you bit banks We've from are peers more. struggling financial

Jeffrey Davis

digital think X. that's the has fully to do exhausted, industry -- of get introducing that our have what digital grow. time I actually next we're have, stability You right organization. we transformation that It's leverage margin work we actually or vertical which And saw the right it of in more lot is that of we work. got in to lot we past, in high haven't today. where and and more we would the a the a than done. which opportunities consulting, excellent than is that going the weakness technical be programs fast-growing stable. But I we're is we we're encouraging. quarter doing to doing certainly more today's work. don't part need that some will returned any work call in I management in think to drive it in know, But us for to us A We've places the underway

I'm as by introducing as grow that in the able accounts of stable, more optimistic, in for long it to had be that while. stays we've So industry, we'll portfolio the a

Operator

You're the next from Sidoti. Joan line of question with Tong comes

Joan Tong

couple in A for X% revenue? And organic volume year-over-year for of X% you're organic Are quarter. questions you -- so numbers the here. the you and about talking revenue those Are growth X% -- the third organic quarter, fourth was decline growth said number? looking to or

Paul Martin

services Net revenue.

Joan Tong

Yes, net.

net it's revenue. services So

So your rate go average up. went bill --

obviously, be, would volume lower assume than you numbers those just I So provided. Right? that

Jeffrey Davis

Little bit.

continue that ship mind Now keep in though offshore. next to will

of So you not GAAP of a it's as might calculated. much as as sort

throwing are we offshore faster are volume in inshore. than we So

Joan Tong

sense. Did went year-over-year. bookings it, Make I get up you And XX% Got right? Jeff, sense. mentioned, got it. Make then that number

Jeffrey Davis

That's right.

Joan Tong

healthcare How about talk about Usually well? healthcare? bookings as you like

Jeffrey Davis

have We'll don't look it finger. I up. that my on

Paul Martin

about looks was was it quarter strongly like from in a the fairly working's up perspective. think I It XX%, year-over-year. it

Jeffrey Davis

XX%. Okay,

Joan Tong

also of, would as the the rate well terms say, nicely I of Okay. to contributed, cut bill as Jeff, in obviously any, XXXX, migration in mostly very read by increase. XXXX the and early -- capacity your offshore help margins expanded sort

margin will to So what's of next expansion these think them X all you X or thinking one elements? you're year, terms or a in Which more contribute year? next of

Jeffrey Davis

to a soft X. pretty be get There offshore. combination your Well macs. I'm we'll quite ABR in think not year, that the got it. greater to still had running of the comp. We we able sure be apparently will utilization did is put given expansion to this I up point of we've opportunity a the question, out and I probably think, close can But sustainable we

at margins expand, had modestly. least, to we Although

basis We best-in-class kind XXX haven't in or us offshore guys. you done modelling know but actually puts which the yet detail, of, so, points in,

Joan Tong

improvement, we we volume should year You see a how volume, then about think And forward? more well? little Should up going resources, about deals. sales Sure. bigger next pick to Sure. bit talk as

Jeffrey Davis

Yes, absolutely.

I that had, the have. base with that have, client we X points bookings we the that think we

to a said can X% I bumps we good going which think the in to X% growth, I of we've I XXXX. plus, for I've that. think XX% think this XXXX, at be sustained and before, maybe to shot X% that sustain we're kind is range QX. where And got going to And X% in up

certainly So we expect definitely with But because [indiscernible]. well, we'll volume, as drive to that's additional that, offshore, onshore grow some volume.

Joan Tong

then capability? maybe And you capabilities well? it. and mentioned some AI, you comfortable you when Do and got or that acquisition IoT at were think X Okay, going finally, that the AI focusing feel have the IoT, like you those areas, you forward, of as do look current

Jeffrey Davis

actually a We quite have capabilities. a of bit

mentioned I've partnered we're including Watson, healthcare, before, the some key think but like this possible various are we leveraging I things that, oncology with with And lot and a engines. around doing today. [indiscernible] IBM in

So certainly that have capability. we

But got of people Watson or Clarity, practice so think in things we've that well. like yes, with the capability then year got as dedicated XX they of already, drive a space X.X yes, and to year that. recently, we've ago. over the fair And absolutely, things IoT, a and acquisition the number experience years from I or

for they've the the know management shelf things IoT done with company, and like our inventory, product in But consumer such and name, mention And inventory large going grocery stores I if using that. so space stores things it. as the would to was monitory

work underway. those So is already

Paul Martin

thing I add. want one There's to Okay. other

ultra-bookings. XX% a of revenues strong flat second from Our were the profit And quarter. for relatively very bookings quarter was

Operator

line from Maxim group. Kinstlinger comes with question next the of your Brian And

Brian Kinstlinger

I X those services ballpark? a Bluetube, revenue quick in in RAS have don't the me $XX.X are and this If the tell a question. that first, reasonable, Clarity, comparison, that and numbers from is year-over-year assume acquisitions Paul, is million

Paul Martin

pretty little -- that's may Yes, probably it's light bit but a close. be

Brian Kinstlinger

was my it back I I been X% it's services the in bookings, despite past, especially otherwise But to in mean, is, year, volume growth. -- the Okay. so. half about the grow X% question hasn't or guess, solid challenge it of That makes been sense. of a

So to the year what that revenue post rate this growth? confidence continue and these you organic solid move to be you'd growth gives bill offshore despite to to bookings, the able above

Paul Martin

we up I mean, bookings substantially. mean, replay if the they're pretty numbers, I Well

Now as I that on said goes of work of there's there's have is to you before, acquisitions, chunk actually longer-term that into deals. issue a don't replace. that, chunk that duration The that's a

So back a the the momentum Brian, We, I years, it when it's reorganization, structure doing think whole growth have sales. certain that All work in And little of, come sales lot specifically, was compensation done will and that. build. But strong. been I'll you've kind of We've there. tell structure. really turn work these organization the you, to both a degree, to

I bookings said the months, we're going again, before, probably quarter-over-quarter. as the I'm right before, and were months. to there's X seeing but of to one-to-one. you're said tight the about be some As XX%, bookings never The up And certainly case I've And it's and co-relation, will bookings. where fruition is corelation's trailing X it for sure be, is time about degree past growth the

a very strong QX in just that X% QX And QX. get and X% the October we bookings We already. had then XX%, have QX in QX. So in had to we'll anticipate, is us bookings year-over-year. growth we to going in in to up again And

we'll grow quarter And to that think first to again a place, with sustainable the X% expect see expect begin I half I the that's least to X% in XX%. And that that, next the we first new So that at X% in or model range. again, year. of can in

Brian Kinstlinger

I question Last have. Great.

IP a especially as services as a bunch, guys, curious does are of Indian the scheme you revenue renewity trying there of what look maintenance, increase don't I Perficient value landscape thought the management in lot but replacing a revenue. Clarity. creates much of customers, it repeat a old tale think somehow but realize to or renewity As comes I'm add evaluated have it recurring I revenue. not the of has from terms at guys, projects. long recurring your

Perficient improve of So way change that future, to recurring in the the revenue? is increase content there or a strategy can, the

Paul Martin

Sure. doing the talk $XX talk approach It's been but running exactly a good That or about a -- I X-year about our, our I of already. clients. that of from We're about to prepared lot X a be is software-factory that comments. that. commitments question. that, we've that mentioned out Those We lot tend don't a in let's rung a XX% some of call some million deals. it, renew that. that to revenue. expect would is annually, call increase. of recurring those million I We X-year X But or about base are a that, of sort We're basis. those of very $X long month. now And but monthly deals fix I say of solid that

Operator

Davis for now like the conference Jeff showing closing back am I time. remarks. to would no further questions to I turn at this

Jeffrey Davis

for thank about you. your look speaking for in right, today. see Thank the year again and forward XXXX. late or February early to again, you talking all, time we what We'll All March,

Operator

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

You disconnect. may now

Jeffrey Davis	Chairman, CEO & President
Paul Martin	CFO, Treasurer and Secretary
Mayank Tandon	Needham & Company
Francis Atkins	SunTrust Robinson Humphrey
Joan Tong	Sidoti & Company
Brian Kinstlinger	Maxim Group LLC

Perficient (PRFT) 2 Nov 172017 Q3 Earnings call transcript