- Earnings call transcript Q3 2022

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, and thank you for standing by. Welcome to the Q3 2022 Perficient 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, Chairman and CEO, Jeff Davis. Please go ahead.

Jeff Davis

morning, good and you, everyone. Thank the With our is Martin, today Tom me Hogan, on CFO; our Paul COO. telephone President and I’d for again thank this to your morning. like time you

XX call for comments, about We of questions. XX open the we’ll prepared have up after to which minutes

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

Paul Martin

good and morning, Jeff, you, Thank everyone.

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

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

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

Jeff Davis

little breadth It’s to we’re several North up sales our modest X.X% given seeing projects an up per remains The the mission-critical Paul. share we revenue now or ensure than on all-time X-figure invest XX% delivers our bill an a work we’re margin clients our larger whether deals. to efficiency, macroeconomic Organic -- or third-quarter But thanks, increased seeking revenue quarter longer the investing growth the accelerating concerned do cycles industry. customers and growth or with good to today profitability. average Gross growing primarily prioritize, that overly a Perficient component basis. inputs. pursuing in depth discuss business XX.X% XX% And and you growth strength involves fact, not material environments and XX%. in offshore an earnings XX.X% The must Adjusted deliberating all-time some portfolio, is Well, which apples-to-apples in also our in reached XX%. ever, of the rates anyone strong, is with as increase revenue leveraging in weakness, pipeline high at because as performance organic grew and point. On are answer. of be enterprises adjusted year-over-year, basis, continued and by this cost overall offshore revenue our value as we with and and grew are of reduce our Perficient American fast an during high. were the at period in

Our fully with model integrated the who value local global combination clients resonate continues of global our approach. to delivery and

scale Latin America both India. to continue We in and in

acquisition our acquisition the fact, In those India, regions colleagues. than more headcount Inflection the Ameex QX by of in in Systems Technologies in earlier and closed this Mexico increased XXX Point month of

to We’ve due India and Latin of strength United tremendous positioned and the our in now with uniquely presence we’re discussed, talent. States. in America X build long to we’ve As depth global continue decades meaningful built and

We’ve years States. staff entered are also customers near $X.XX Eventually; is senior to the earnings our augmentation experts, We many They approach emerged our of per medium in a the with quarter. world integrated just for to what however, the a with third earnings our $X.XX, world. of those teams reported overall this ensures top-line we shift of prove reported that pose Our essentially X leaders and also while deliver the will can but value we from in both. XXXX, doubling regions an adjusted and bolt-on margins in And quarter anywhere and peers expand true par in discussed term times it headwind growth. from want not ago, United on mix the share and will are in fully the meaningful resources. third modest accelerant the pandemic.

perspective, up for time during XX% that Just same revenue period. was

performer. earnings, So consistent appreciate growth clearly, as investors will who Perficient value and continued strong a margins, profitability continue to best-in-class

So some for to the with that, Paul I’ll turn numbers. color the on call more back

Paul Martin

Yes.

$X.X expense for adopting from result the primarily or year, third million in $X.X quarter, quarter to prior revenues third year. of quarter XX% to the in and reimbursed to results. million stock increase XX.X% year. excluding was the third third compared and standard an over intangibles expense acquisitions Adjusted was debt of expenses, year-over-year $XX.X revenues quarter in $X.X me the expense XX%. increase as prior revenue, $XXX.X Services in year. the The primarily organic to The of XX.X% $XX for percentage in EBITDA prior of prior decreased third in SG&A Net turn from revenue million from third prior reimbursed the Services accounting in year. prior the excluding Amortization or in million additional expense quarter XXXX. of margin, $XX.X revenue the quarter third in the to gross million new Let expenses compared XX.X% XX.X% compensation expense XXXX in million prior the XXXX. to year. growth was to was in XX.X% first was compared were the quarter the XX.X% the comfortable amortization the to a services in in SG&A million compared was quarter million due $XX.X decreased the year. a a in the as million $X.X interest

and XX.X% quarter third $XX for the million from the prior $X.XX earnings margins gross quarter the was percent year, from per result Net for as prior quarter SG&A higher from revenue. revenues, a a to a primarily Diluted compared share the rate $X.XX in to tax third per effective a in lower share quarter income share in earnings the XX.X% $XX.X $X.XX Our or year. to increased million $X.XX third from year. in of Adjusted for higher year. share the as XX.X% the third a of GAAP prior the to XX% increased increased share prior

ended period. release the full the XX%. million organic XXXX, ended see as increase excluding XX.X% compared the XX, $XXX.X revenue, X to the September X million in results. reconciliation prior months or in million ended year. from $XXX.X XXXX, services earnings. of prior XX, in months the the $XXX.X to press year. the to new September gross to of the convertible XXXX. Services XX.X% decreased million can or was for the $XX.X GAAP revenue of prior included X year. again, $XXX.X expenses, X the as XX, margin, to turn growth excluding a $XXX.X for months XX.X% expense expense were for standard revenue quarter comp XX.X% September Net of Adjusted debt You the September million year. primarily of X XX, year, ‘XX, $XX.X in XXXX, compared revenues in interest The accounting XX% $XX.X for million months from EBITDA the was amortization year. SG&A stock XXXX, Services percentage for ended the Year-over-year prior SG&A expenses September months now adopting a months first reimbursed million I’ll to XX.X% revenues X over prior prior XX, XX, a year-to-date prior expense in the to compared was to and $X.X compared for the the a of million XXXX, ended million was the ended reimbursable XX.X% decreased for result September in

the million to XX, in income ended the ended the for prior Our gross was year. as as percent GAAP X prior Again, full the XX, Adjusted prior to $XX.X X share $X.XX margins September you compared XX, $X.XX a the press per million share of per increasing GAAP period. see in XX, can to effective increased the primarily XXXX, XX.X% tax XX.X% Diluted lower compared XXXX, the from higher and SG&A a earnings in to was release rate year, reconciliation in the $X.XX to a result to the of earnings. months September ended ended months earnings revenues. $X.XX for compared September X for prior year. revenues, XXXX, for expense, ‘XX months for months September X increased $XX.X Net

XXXX, subcontractors. was Our and ending XX, headcount SG&A XXX. September consultants headcount billable was global X,XXX, at And including X,XXX the XXX

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

as also our cash million credit in capacity had and of unused facility. September XXXX, [$XX.X] We cash on borrowing $XXX.X million and of equivalents XX,

Hogan Tom our now over us for balance very commentary. Our more turn I’ll the little continues strategic plan. well-positioned against call to sheet leave execute a to Tom? to

Tom Hogan

$X in the XX of good We quarter XX than and everybody. morning, XXXX, quarter Paul, million third during booked Thanks, greater to which the compares deals XXXX. of third

As mentioned, The Jeff longer bit stress they close. see way plan some aren’t we already negotiation internally. cycles taking deals a did the They’re as though. to navigate just client going

Our larger wins ever it net the pipeline weighted recent been, to couple daily. quarter. it’s for grow highlight and -- to is unweighted than continues A of

with an into our entered a approve This to supply the modernize Corporation the their platform. new work Global existing technology. cloud client is of our phase have of work Architectural We extension win to chain

to software are service consolidating a team information We XX that ongoing provides with cloud primary Europe, product. platform new supply partnership, continue management East the services [indiscernible] focus part work and America, Africa. Pacific, single legacy of deploy applications building South recently and management chain of Middle won As clients’ global client a our formulation to throughout into experts the with Asia trusted ERP

onshore and support the quality, delivery their and prompted record track switch ability Perficient. proven of the deployment of from Our to previous projects talent provider reputation and to our our offshore enterprise similar to of

incumbent. and example the alternative trifecta superior perceived was Just it India of as a United Lat to team, their Am great our States, all of

Health colleague We to we’ve it’s external strong also recent colleagues well. to colleagues investments experience more nearly we the they improve well of a customer, further. operate. we’re recent in perspective. and them most the diversified already and And continue industry feedback industry making Automotive work. place engagement our more remain from investments quarter. the global all about our expressed value our In these high internal and an our impacts care I’ve also strongest platform average financial increased and colleague of great slowing services attrition the ever made as is XX% the seeing responded even as about Perficient that colleagues below during been. a as where lives, And talked XX% with communities work remained survey, our recommend remain as quarters but industries to and in

was materially partner, were the to For able data Perficient with surveyed. we well-known first and engaged our our additional Their insights partner external us to survey, an engagement time to colleagues exceeded that data feedback. server virtually from glean benchmark results every specific across industry, ever, category provide benchmarks administer findings the enabling us to is our cross-market

groups. and [indiscernible], the they initiatives most colleagues love on that all, of time positive colleagues value working the resource make in internal to each vast and built Our Paths employee deliver the colleagues geography. innovative across silos value are made collaborative borders and based zones, for in and At fourth day, many majority and a total world. Jeff like experience that, Perficient rewards like our to continents differences our into the culture its with community to Perficient to us without telling and or are we’ve And making colleagues. what countries we’ve every efforts, into Technology continue collectively of are and individually turn solutions Perficient world-class for the our is Women they Bright the XXXX. built in that quarter results world-class so internal I’ll customers, in things and and remainder will products which And the the investments of back discuss over our programs They the

Jeff Davis

updating in the its range share in Thank $X.XX its a narrowing of to guidance per And Fourth-quarter range $XXX you, a range $XXX million Tom. per Perficient the to million. expected a $XXX call per revenue full-year is to in and range to ‘XX $X.XX. to $X.XX can to share earnings we share the expected is be adjusted earnings of is open to GAAP earnings $X.XX be quarter of $X.XX. to $XXX Fourth guidance its earnings $X.XX quarter of be per updating up for $X.XX. with guidance adjusted expects Perficient XXXX GAAP of million the to its questions. revenue of ‘XX fourth range range to XX% share to $X.XX that, million, to

Operator

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

Mayank Tandon

quarter, from organic numbers. start a a Jeff, a last had terms XQ I and play your embedded downtick just wanted in the guidance? growth role Did to revised in mentioned that little of I -- delays. your see cancellations impact you bit first in with of

So maybe speak if note, could the just into also that. related to numbers growth you organic for And if just you’re you then XQ could that on give expectations. a your us building

Jeff Davis

say year. health It’s year. build keep Yes, in have that million that into one That back. was you’re still to how well. able impacted the we in about reflected we’re we $X million that account of we mind, QX also knows the represented the $XX had in carried this large quarter and year. I as about this And would Yes, experienced sure. quickly exited last everybody QX, seeing care matter revenue that It cancellations that somewhat guidance really a over

a that a course, unique was we of again, comp. and think I year. a QX now that is had that’s really lapsed. So strong headwind, last a was Obviously, tough And QX situation, really,

in well. that’s as So factored

On at is that X%. midpoint for about is to the say fourth quarter, growth the I the organic want right? Paul,

Paul Martin

X%, the is midpoint. X% it Yes, at

Mayank Tandon

then I could and piggyback And Jeff it. just maybe off that, Got Paul.

XXXX now, process not going going know I what and you’re market seeing you’re should as on organic just model least our think out, growth XQ the uncertain a next So But expectations in expectation of macro? I’m set then year. early given through to that how the realistic building that for right give to part budgeting laid in the good are clients the you we’re this current sure guidance at about is we just baseline

Jeff Davis

-- think between there’s We’ll would Yes, ball. I the so a -- sense and macro on the end be fair. revealed lot crystal that’s I year a no think without of now

starting yes, point. but good think I -- So that’s a

Mayank Tandon

housekeeping item. Just one

recent revenue that terms just contribution could good So acquisitions, in just have So we of X the you impact. the quarter fourth on size in us? a the again, handle from your for

Jeff Davis

Yes.

and I million. million $X think it’s about somewhere $X between

Operator

from next Our question Jefferies Surinder comes LLC. Thind of

Surinder Thind

there like environment. offshore seems to that for increasing demand there’s that to seems talk question a rather top just with top And considerations offshore? them clients by projects, continue work. the relative cost seems like specifically, current about I’d a rather just Jeff, it be so point but desire to line. concerned at the other explicitly it work continuing here like that’s line? and start continued more about onshore being Can around with they’d have you impacting driven Is Or this because are headwind the And for that?

Jeff Davis

that’s it’s a of combination both. I And Yes, think right.

years. XX have of an -- we So top accounts tenure have average XX our

lot we And lot a that offshore So the our they. digital have lot of have as evolved over evolved space. time, capabilities a -- and a long particularly, in have nearshore period we’ve around

X the in native really digitally most completely offshore for that We’re part anywhere exist delivery nearshore ago. our years centers. didn’t and And

evolved So lot the And that higher for a growth value that of pace nearshore. all certainly, brings. of is definitely to the a these for things offshore, motivation it have

aren’t cost when is it don’t definitely it cost factor. So know that a to I always services. sensitive comes clients

Surinder Thind

offshore when -- is projects project existing for Fair there’s and shifts is Are call, assuming what internal projects? In the that transitioning as with work offshore new existing the enough. then I’m then that there, cycle is that or is a would And work clients that realignment offshore? primarily it new sense, what clients to the generally as about most well? I new Or of well. a

Jeff Davis

number still experience. prefer of generally a Yes, cycle. the who clients It’s And a it’s there’s a onshore new good question.

onshore. industry sticking have great with on clients mean XXX% I a are health care. But most still is there clients an transitioned. basis are So example that

just would So no And now I it kind necessity. of a that’s that care another. cycle, of one offshore. health ago, think mentioned companies the that or isn’t with X-year years some competitive in X work I way And we can’t touch leveraging

Surinder Thind

then generated teams? point At percentage And offshore about offshore. of one this by are the question in time what it. related your to Got revenues more

Jeff Davis

XX%. It’s a approaching It’s below probably little XX%.

XX%. it to what should acquisitions, these to getting as be refer right of though, by point the looking With forward to a latest I way. us tipping around XX%, I’m

point they’re the to to accelerated the making top-line contribute offshore to the that’s growth to nearshore where really think helping already in addition I we’ll see margin. and contributions gross

Surinder Thind

bit Understood. We’ve maybe simply Or projects? say, cost. you? starting And does you But delaying well, then about color that impact projects Is question earlier final of client change guys the in about, they my to more there’s are focus here the types maybe to from, the that are let’s sales commentary Or Any heard a what they’re comment that? is you seeing? your on focus of increase the existing on? on how competitors nature asking that particularly cycle.

Jeff Davis

has mix still primarily customer products I wouldn’t the services, that Yes. cetera. say really It’s drivers et acquisition, of and the support, customer new changed much.

Of mix around gains do of far. cycles in in, it’s I I the sales they’re much climate has waiting efficiency don’t we’re well. the as And think that a the changed that think of oversimplification work say midterm. maybe to course, there’s lot so extending, for terms

well. think there’s factor So do there you as a

those that I we’re I people evolution are know through introduces in through are tend to which continue, at more a on to prioritization they taking In And projects will cases, a the process, going have working approach. still that year’s move So go that delay. expect some cautious little reprioritization. but we’re stage of forward. this do We that where think do some just clients

Operator

comes next Stanley. Morgan Lee Jonathan from of Our question

Jonathan Lee

not some it’s necessarily questions. quarter, in of some prior given And softness on build want macro signaled I you the to the priorities, Last of environment. change client the

your has contemplated a last from macro evolved over months? perspective? few in how the that What’s outlook So

Jeff Davis

primarily conservative earlier macro I of And little the climate. say as itself admittedly, I’ve in current I QX, taken we more to be think, macro also we yes, comments. Yes. little I that to thought. And a more in on the We’ve guidance approach alluded a as think, definitely what would than understandably, saw given revealing is prepared kind

softer do I I like said. So little think dramatic, Not environment. it’s a though,

putting We’re result. good still a up

I hitting really guidance we’ve in at confident that the tried think will although quite to is this guidance conservative solid, be very and midpoint. feel I that say

Jonathan Lee

talk pricing seeing? more, be to sort may That’s to current us helpful you what’s the the price? just color. contemplating then able Can And that may. macro of given as relates if take you headwinds your through one And I of it some outlook up you environment, being

Jeff Davis

that’s pretty Yes, North up is, in you, has XX% U.S., part pretty of the to fact the interesting of managed what been America, India that nicely. intuition in matter the has similar. nearshore actually, we’ve call, spite tell We X.X% mentioned and rates move for I been and earlier the about

say, good and I’d So power, pricing really quite we’ve just decent, got based results. on that’s

move clients been the fact up successfully much and think negotiate an what price for able as once appropriate those I to to able the decision bear. the make that. have So make that as market what to supports is again, we’ve And -- we we ahead will rates believe we been commitments, move move

-- term, if might late maybe into But Now looks to of the like it’s forward know, think going moving year, momentum I next that medium as I change. continue. that now, -- right mid don’t

Operator

Jain of JP from comes next question Puneet Morgan. Our

Puneet Jain

about to margins. ask I wanted

forma for Given a company entire margins like acquisitions, we about the recent X going the on basis? think pro forward should how

Jeff Davis

mentioned existing neutral, I we demand will the nearshore made margins acquired particular. -- acquisitions newly our base I not as are We price uncommon. those drive expect in improvement into But expand. client we’ve businesses, be I that X that’s to think somewhat the going from that more the and

this to see going we’re going gross saying, similar results year. I When be to basis say points year, think not gosh, year, maybe store. I I what macro But So XX year probably I’d higher And about think margin. environment next in started this margins. we’re gross to thing in it’s I reiterate, next to trying want the the really depending drive holds same

really expansion, margin EBITDA. of on In terms focused more we’re

that’s right is it exactly going results to bps flow increase to the leverage So I with XXX bps end competitive of investors put us pleased want encourage And hundred able offset but increases, cost being versus And on letting I maintain wage expansion right, I’m of we and pricing result think up inflation focus see to all going we’re gross that closer through. the EBITDA this to to the now a think are I’d price very what of -- we’re that. margin, offshore seeing and on. to also year. that to may couple up drive I

Puneet Jain

it it. revenue mix rising to should we offshore Got Got cash interest And use M&A, of XX% potential it. that given term? environment, specifically then as priorities over about M&A how to rate medium to further think relates increase of

Jeff Davis

Yes, absolutely.

So primary of are cash uses stock and M&A the for us of X course, buyback.

front, months. the So was some things expanded expansion release some midterms We on. just of over of a we buyback, -- buyback think primarily may eye may there. that direction think the on next do still in million. And actually M&A an press keep we’re program Board on couple approved slow going the have close again, just as I a macro terms the in additional here we in work to that again, our do we, But to it continue that of bit I to pipeline $XX determine the the the pace

powder approval So buybacks. for about I that, million got want to dry $XX in say with we’ve

certainly that, we’ll levels of price. at these So stock pursuing be certainly the

a I think of accretive. use certainly and great it’s cash

Puneet Jain

let the organic for it. often that. buyback rate cut-off you Got up quickly me models? investments whether on And your for M&A, internally adjust follow internal or it’s for How

Jeff Davis

get you did Paul, know, don’t I that? that. catch quite didn’t I

Paul Martin

please? mind repeating you Would that

Puneet Jain

you those rates? decisions adjust for cash often you of use So internally, that do like how rate -- the cutoff use you

Paul Martin

process. on on annually annually those we that based evaluate We our look budget the rates, on macro, the based interest based environment, really as at of part

Operator

comes question Vincent of from Research. Colicchio next Barrington Our

Vincent Colicchio

Yes.

said, million-dollar-plus which pipeline declining the healthy, deal you pipeline? So in is sizes deals, Jeff, year-over-year the in are I’m curious, the decline with

Jeff Davis

pretty But consistent. of And That’s are tends had business. the the sizes There delays. up flow. fact again, deal that kind about talked that nature was the number some we why deals. to of lumpy the seen chalk that’s I’d more to the just of Actually, we bookings how

we’ll think reflect pick -- but up of And those does slower to I the time We able it frames of again that expect experiencing. some still quarter. be the some in decision fourth we’re

Vincent Colicchio

I’m And in did and with hitting deals cross-sell Are objectives nearshore base? on your the curious, ‘XX, existing you Overactive. Talos there you the

Jeff Davis

really, been highest are, really they’ve say, demand think Yes, The in don’t I’d end strong. soon. customers that’s going Yes. nearshore right to is that’s anytime the component I And now.

Just is benefit. the time zone a alone such

Vincent Colicchio

one one. maybe last And

do You had expect mentioned with the a care, to you’ve for sequential decline year-over-year you big When health growth? which return sequential to declines that in a client. had reason you

Jeff Davis

got new that pipeline have a lot we I that. the better part the do going to it’s But there. rebuild think least of year deals of and to do the first kind of a us the We’ve half in out of in new opportunities, lot probably at next take of logos for works.

And that industries, particularly see sometime is on got a of The so of financial think half steam of first year. good coming news in we’ve next services. big turn -- again in a head I lot the other we’ll

Operator

of question next come Kinstlinger Global. will Alliance Brian Our from

Unidentified Analyst

X-figure that cetera? financial the in, strong industry you et they’re it’s multiple to This pursuing deals? you Could your beginning care, call, for Brian. very mentioned services, these of you’re and pipeline What is allude remains health that Sherman the X-figure still on whether At deals.

Jeff Davis

It’s both.

Unidentified Analyst

of heavy sort shift any like see one this you Do in direction?

Jeff Davis

a probably are X number not great Those stand right as particular now. certainly, But mentioned, a a would work heavy good to I shift in Yes. have automotive it’s terms health in manufacturing we say, in accelerating, But industries. on than there’s of lot close and and similar a cross-section, care still like of out. other demand, well. would across beyond is financial I of services say relationships going probably beyond I

Operator

Our from Maggie [Operator Instructions] question William next Nolan comes Blair. of

Unidentified Analyst

Nolan. maybe on [indiscernible] I’m for Maggie

about the bit off wanted talking expected Or And factor? guidance increases the than growth. offshore sales it cycle And more bigger factor start a for the or so -- just was change? to quarter? Was a stronger in was were the little a it I

Jeff Davis

positive. it line, accelerated would contributor, a cycle factor. major sales the of big probably a our the was maybe it is a again, say expectations, increase was beyond I course, probably I Yes. in I But but think, little think which, bit is

So strong forward. looks and be been to going strong it’s

Unidentified Analyst

you Does expected hiring that ramp hold up true half. in originally second to year-end? as And to then the still look we

Jeff Davis

Certainly, it’s U.S. with in we going shift a slower -- as the little this on. mix

net we’re that, a lot think but offshore or the that? a nearshore. U.S., on What Tom hiring hiring faster definitely in have I offshore So net percent the headcount? couple we’re organically -- you want both than do up and Paul, on was say, the organic I the on to nearshore

Tom Hogan

bit sequentially, Yes, or X%, X% this has that. the maybe I up acquisition little than definitely a in higher it but was without -- think, it

Operator

over would time, this Davis I to remarks. conference for to the like At closing turn back Jeff

Jeff Davis

Well, right. you thank All again. all once

quarter. quarter of great about to Another in for to you speaking look your what time Perficient, appreciate forward today fourth a the will I’m and confident days be great quarter and XXX about

you So time. for all thank your

Operator

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

disconnect. may You now

Perficient (PRFT) 30 Oct 222022 Q3 Earnings call transcript