~ CEO Jeff Davis to Transition to Executive
Chairman on October 1, 2023 ~
~ President and COO Tom Hogan Appointed Chief
Executive Officer and Joins Board, Each Effective October 1, 2023
~
Perficient, Inc. (Nasdaq: PRFT) (“Perficient”), the leading
global digital consultancy transforming the world’s largest
enterprises and biggest brands, today reported its financial
results for the quarter ended June 30, 2023.
Financial Highlights
For the quarter ended June 30, 2023:
- Revenues increased 4% to $231.1 million from $222.7 million in
the second quarter of 2022;
- Net income remained strong at $26.4 million, but decreased from
$27.8 million in the second quarter of 2022;
- GAAP earnings per share results on a fully diluted basis
decreased 5% to $0.73 from $0.77 in the second quarter of
2022;
- Adjusted earnings per share results (a non-GAAP measure; see
attached schedule, which reconciles to GAAP earnings per share) on
a fully diluted basis decreased 6% to $1.00 from $1.06 in the
second quarter of 2022; and
- Adjusted EBITDA (a non-GAAP measure; see attached schedule,
which reconciles to GAAP net income) decreased 6% to $48.2 million
from $51.2 million in the second quarter of 2022.
“While enterprises are proceeding cautiously amidst conflicting
macroeconomic signals, Perficient’s integrated delivery model that
blends great global talent and depth in North America, Latin
America and India continues to appeal to the world’s leading
companies and biggest brands,” said Jeffrey Davis, chairman and
CEO. “In the second half of the year, we’re focused on continuing
to deliver best-of-breed margins.”
Other Highlights
Among other recent achievements, Perficient:
- Announced that effective October 1, 2023, Mr. Davis will
transition from CEO to Executive Chairman, and Thomas J. Hogan,
Perficient’s President and COO, will succeed Mr. Davis as CEO. Mr.
Hogan will continue to serve as President, a role he has served in
since February 2021. Mr. Hogan joined Perficient in 2008 and began
serving as COO in 2018. The Perficient Board of Directors (the
“Board”) also approved an increase in the size of the Board and
appointed Mr. Hogan to fill the newly-created vacancy, effective as
of October 1, 2023;
- Has added Jill A. Jones, former executive vice president at
Brown-Forman Corp. (NYSE: BFA and BFB), to its Board of Directors
upon her election at the 2023 annual meeting of Perficient’s
stockholders;
- Launched the Perficient Cultural Connections Employee Resource
Group (ERG), a global community of colleagues focused on exploring,
understanding, and advancing the cultural differences that help
shape Perficient’s global workforce;
- Was named a 2023 Top Workplace USA, recognizing Perficient’s
collaborative and people-centric work culture. Perficient ranks
12th on the national list, ranking higher than all other listed
large digital consultancies;
- Received the 2023 Sitecore Partner Award for Excellence in
Business Impact, honoring Perficient’s outstanding performance in
delivering quality solutions using the Sitecore platform that
transform business outcomes;
- Was recognized with Sunbelt Rentals as the 2023 Adobe
Experience Maker Engager Award winner for exceptional achievement
in transforming pipeline creation to drive measurable business
growth;
- Was recognized as a 2023 Microsoft U.S. Partner of the Year
finalist for having a track record of building new cloud-native
apps and providing outstanding solutions and services in Cloud
Native App Development;
- For the fourth year in a row, was recognized in Modern
Healthcare’s annual survey as one of the 10 largest healthcare
management consulting firms; and
- Was included in Forrester’s “Commerce Services Landscape, Q3,
2023” report as a medium-sized consultancy helping companies craft
end-to-end commerce strategies and operate total commerce
experiences.
Business Outlook
The following statements are based on current expectations.
These statements are forward-looking and actual results may differ
materially. See “Safe Harbor Statement” below.
Perficient expects its third quarter 2023 revenue to be in the
range of $220 million to $226 million. Third quarter GAAP earnings
per share is expected to be in the range of $0.56 to $0.60. Third
quarter adjusted earnings per share (a non-GAAP measure; see
attached schedule which reconciles to GAAP earnings per share
guidance) is expected to be in the range of $0.89 to $0.94.
Perficient reduced its full year 2023 revenue guidance to a
range of $900 million to $916 million from a range of $945 million
to $985 million, reduced its 2023 GAAP earnings per share guidance
to a range of $2.73 to $2.84 from a range of $3.24 to $3.40 and
reduced its 2023 adjusted earnings per share (a non-GAAP measure;
see attached schedule which reconciles to GAAP earnings per share
guidance) guidance to a range of $3.93 to $4.05 from a range of
$4.60 to $4.75.
Conference Call Details
Perficient will host a conference call regarding second quarter
financial results today, July 27, 2023, at 11 a.m. Eastern.
Analysts and investors who wish to ask questions during the
Q&A session can register for the call on
https://register.vevent.com/register/BIec555ee83c9a4f5c94ff854133b408f2.
Registrants will receive confirmation with dial-in details.
A live webcast of the event can be accessed on
https://perficient.gcs-web.com/events/event-details/q2-2023-perficient-earnings-conference-call.
A replay of the webcast will be available on
https://perficient.gcs-web.com/ starting approximately two hours
after the event and will be archived on the site for one year.
About Perficient
Perficient is the leading global digital consultancy. We
imagine, create, engineer, and run digital transformation solutions
that help our clients exceed customers’ expectations, outpace
competition, and grow their business. With unparalleled strategy,
creative, and technology capabilities, we bring big thinking and
innovative ideas, along with a practical approach to help the
world’s largest enterprises and biggest brands succeed. Traded on
the Nasdaq Global Select Market, Perficient is a member of the
Russell 2000 index and the S&P SmallCap 600 index. For more
information, visit www.perficient.com.
Safe Harbor Statement
Some of the statements contained in this news release that are
not purely historical statements discuss future expectations or
state other forward-looking information related to financial
results and business outlook for 2023. Those statements are subject
to known and unknown risks, uncertainties, and other factors that
could cause the actual results to differ materially from those
contemplated by the statements. The forward-looking information is
based on management’s current intent, belief, expectations,
estimates, and projections regarding our company and our industry.
You should be aware that those statements only reflect our
predictions. Actual events or results may differ substantially.
Important factors that could cause our actual results to be
materially different from the forward-looking statements include
(but are not limited to) those disclosed under the heading “Risk
Factors” in our most recently filed annual report on Form 10-K and
other securities filings, and the following:
(1)
the possibility that our actual results do
not meet the projections and guidance contained in this news
release;
(2)
the impact of the general economy and
economic and political uncertainty on our business;
(3)
risks associated with potential changes to
federal, state, local and foreign laws, regulations, and
policies;
(4)
risks associated with the operation of our
business generally, including:
a. client demand for our services and
solutions;
b. effectively competing in a highly
competitive market;
c. risks from international operations
including fluctuations in exchange rates;
d. adapting to changes in technologies and
offerings;
e. the ongoing transition of our executive
leadership team;
f. obtaining favorable pricing to reflect
services provided;
g. risk of loss of one or more significant
software vendors;
h. maintaining a balance of our supply of
skills and resources with client demand;
i. changes to immigration policies;
j. protecting our clients’ and our data
and information;
k. changes to tax levels, audits,
investigations, tax laws or their interpretation;
l. making appropriate estimates and
assumptions in connection with preparing our consolidated financial
statements; and
m. maintaining effective internal
controls;
(5)
risks associated with managing growth
organically and through acquisitions;
(6)
risks associated with servicing our debt,
the potential impact on the value of our common stock from the
conditional conversion features of our debt and the associated
convertible note hedge transactions;
(7)
legal liabilities, including intellectual
property protection and infringement or the disclosure of
personally identifiable information; and
(8)
the risks detailed from time to time
within our filings with the Securities and Exchange Commission.
Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee
future results, levels of activity, performance, or achievements.
This cautionary statement is provided pursuant to Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. The forward-looking
statements in this release are made only as of the date hereof and
we undertake no obligation to update publicly any forward-looking
statement for any reason, even if new information becomes available
or other events occur in the future.
Perficient, Inc.
Unaudited Consolidated
Statements of Operations
(in thousands, except per
share information)
Three Months Ended
June 30,
Six Months Ended
June 30,
2023
2022
2023
2022
Revenues
Services excluding reimbursable
expenses
$
228,573
$
219,835
$
456,957
$
439,310
Reimbursable expenses
2,127
2,428
4,596
4,387
Total services
230,700
222,263
461,553
443,697
Software and hardware
405
475
960
1,152
Total revenues
231,105
222,738
462,513
444,849
Cost of revenues (exclusive of
depreciation and amortization, shown separately below)
Cost of services
143,560
134,356
285,248
270,446
Stock compensation
2,608
2,406
5,132
4,834
Total cost of revenues
146,168
136,762
290,380
275,280
Selling, general and administrative
39,390
37,150
78,994
75,926
Stock compensation
4,787
3,710
9,103
7,185
Total selling, general and
administrative
44,177
40,860
88,097
83,111
Depreciation
2,224
2,005
4,529
3,878
Amortization
5,523
5,998
11,340
11,977
Acquisition costs
(71
)
61
8
360
Adjustment to fair value of contingent
consideration
(2,701
)
(2,487
)
(4,727
)
(3,466
)
Income from operations
35,785
39,539
72,886
73,709
Net interest expense
296
805
801
1,692
Net other expense
387
153
462
386
Income before income taxes
35,102
38,581
71,623
71,631
Provision for income taxes
8,740
10,799
18,461
16,713
Net income
$
26,362
$
27,782
$
53,162
$
54,918
Basic net income per share
$
0.78
$
0.82
$
1.57
$
1.62
Diluted net income per share
$
0.73
$
0.77
$
1.48
$
1.52
Shares used in computing basic net income
per share
33,988
33,914
33,951
33,879
Shares used in computing diluted net
income per share
36,717
36,785
36,707
36,812
Net income used in computing diluted net
income per share
$
26,935
$
28,332
$
54,295
$
56,088
Perficient, Inc.
Condensed Consolidated Balance
Sheets
(in thousands)
June 30, 2023
(unaudited)
December 31, 2022
Assets
Current assets:
Cash and cash equivalents
$
60,471
$
30,130
Accounts receivable, net
186,124
202,298
Prepaid expenses
6,383
6,432
Other current assets
15,652
16,756
Total current assets
268,630
255,616
Property and equipment, net
15,298
17,970
Operating lease right-of-use assets
25,606
27,088
Goodwill
575,173
565,161
Intangible assets, net
79,391
88,937
Other non-current assets
49,594
41,116
Total assets
$
1,013,692
$
995,888
Liabilities and Stockholders’
Equity
Current liabilities:
Accounts payable
$
16,220
$
24,351
Other current liabilities
62,071
104,780
Total current liabilities
78,291
129,131
Long-term debt, net
395,731
394,587
Operating lease liabilities
19,964
18,528
Other non-current liabilities
45,015
43,515
Total liabilities
$
539,001
$
585,761
Stockholders’ equity:
Preferred stock
$
—
$
—
Common stock
53
53
Additional paid-in capital
418,123
403,866
Accumulated other comprehensive loss
(10,142
)
(17,519
)
Treasury stock
(364,768
)
(354,536
)
Retained earnings
431,425
378,263
Total stockholders’ equity
474,691
410,127
Total liabilities and stockholders’
equity
$
1,013,692
$
995,888
Perficient, Inc.
Unaudited Condensed
Consolidated Statements of Cash Flow
(in thousands)
Six Months Ended June
30,
2023
2022
Net income
$
53,162
$
54,918
Adjustments to reconcile net income to net
cash provided by operations
18,662
24,901
Changes in operating assets and
liabilities, net of business acquisitions
(6,713
)
(45,839
)
Net cash provided by operating
activities
65,111
33,980
Net cash used in investing
activities
(3,553
)
(6,728
)
Net cash used in financing
activities
(31,830
)
(12,250
)
Effect of exchange rate on cash and cash
equivalents
613
(544
)
Change in cash and cash equivalents
30,341
14,458
Cash and cash equivalents at beginning of
period
30,130
24,410
Cash and cash equivalents at end of
period
$
60,471
$
38,868
See the Company's Form 10-Q for
the full consolidated statements of cash flows.
About Non-GAAP Financial Information
This news release includes non-GAAP financial measures. For a
description of these non-GAAP financial measures, including the
reasons management uses each measure, and reconciliations of these
non-GAAP financial measures to the most directly comparable
financial measures prepared in accordance with Generally Accepted
Accounting Principles (“GAAP”), please see the section entitled
“About Non-GAAP Financial Measures” and the accompanying tables
entitled “Reconciliation of GAAP to Non-GAAP Measures.”
About Non-GAAP Financial Measures
Perficient provides non-GAAP financial measures for adjusted
EBITDA (earnings before interest, income taxes, depreciation,
amortization, stock compensation, loss on extinguishment of debt,
acquisition costs, adjustment to fair value of contingent
consideration and other acquisition adjustments), adjusted net
income, and adjusted earnings per share data as supplemental
information regarding Perficient’s business performance. Perficient
believes that these non-GAAP financial measures are useful to
investors because they provide investors with a better
understanding of Perficient’s past financial performance and future
results. Perficient’s management uses these non-GAAP financial
measures when it internally evaluates the performance of
Perficient’s business and makes operating decisions, including
internal operating budgeting, performance measurement, and the
calculation of bonuses and discretionary compensation. Management
excludes stock-based compensation related to restricted stock
awards, the amortization of intangible assets, amortization of debt
issuance costs related to convertible senior notes, loss on
extinguishment of debt, acquisition costs, adjustments to the fair
value of contingent consideration, other acquisition adjustments,
net other income and expense, the impact of other infrequent or
unusual transactions, and income tax effects of the foregoing, when
making operational decisions.
Perficient believes that providing the non-GAAP financial
measures to its investors is useful because it allows investors to
evaluate Perficient’s performance using the same methodology and
information used by Perficient’s management. Specifically, adjusted
net income is used by management primarily to review business
performance and determine performance-based incentive compensation
for executives and other employees. Management uses adjusted EBITDA
to measure operating profitability, evaluate trends, and make
strategic business decisions.
Non-GAAP financial measures are subject to inherent limitations
because they do not include all of the expenses included under GAAP
and because they involve the exercise of discretionary judgment as
to which charges are excluded from the non-GAAP financial measure.
However, Perficient’s management compensates for these limitations
by providing the relevant disclosure of the items excluded in the
calculation of adjusted EBITDA, adjusted net income, and adjusted
earnings per share. In addition, some items that are excluded from
adjusted net income and adjusted earnings per share can have a
material impact on cash. Management compensates for these
limitations by evaluating the non-GAAP measure together with the
most directly comparable GAAP measure. Perficient has historically
provided non-GAAP financial measures to the investment community as
a supplement to its GAAP results to enable investors to evaluate
Perficient’s business performance in the way that management does.
Perficient’s definition may be different from similar non-GAAP
financial measures used by other companies and/or analysts.
The non-GAAP adjustments, and the basis for excluding them, are
outlined below:
Amortization
Perficient has incurred expense on amortization of intangible
assets primarily related to various acquisitions. Management
excludes these items for the purposes of calculating adjusted
EBITDA, adjusted net income, and adjusted earnings per share.
Perficient believes that eliminating this expense from its non-GAAP
financial measures is useful to investors because the amortization
of intangible assets can be inconsistent in amount and frequency,
and is significantly impacted by the timing and magnitude of
Perficient’s acquisition transactions, which also vary
substantially in frequency from period to period.
Acquisition Costs
Perficient incurs transaction costs related to merger and
acquisition-related activities which are expensed in its GAAP
financial statements. Management excludes these items for the
purposes of calculating adjusted EBITDA, adjusted net income, and
adjusted earnings per share. Perficient believes that excluding
these expenses from its non-GAAP financial measures is useful to
investors because these are expenses associated with each
transaction and are inconsistent in amount and frequency causing
comparison of current and historical financial results to be
difficult.
Adjustment to Fair Value of Contingent Consideration
Perficient is required to remeasure its contingent consideration
liability related to acquisitions each reporting period until the
contingency is settled. Any changes in fair value are recognized in
earnings. Management excludes these items for the purposes of
calculating adjusted EBITDA, adjusted net income, and adjusted
earnings per share. Perficient believes that excluding these
adjustments from its non-GAAP financial measures is useful to
investors because they are related to acquisitions and are
inconsistent in amount and frequency from period to period.
Amortization of Debt Issuance Costs
On November 9, 2021, Perficient issued $380.0 million aggregate
principal amount of 0.125% Convertible Senior Notes due 2026, and
on August 14, 2020, Perficient issued $230.0 million aggregate
principal amount of 1.250% Convertible Senior Notes due 2025 (the
“2026 Notes,” and “2025 Notes,” respectively, and collectively, the
“Notes”) in private placements to qualified institutional
purchasers. Issuance costs attributable to the Notes, in addition
to issuance costs related to Perficient’s credit agreement, are
being amortized to interest expense over their respective terms.
Perficient believes that excluding these non-cash expenses from its
non-GAAP financial measures is useful to investors because the
expenses are not reflective of Perficient’s business
performance.
Foreign Exchange Loss (Gain)
Non-operating foreign currency exchange gains and losses,
inclusive of gains and losses on related foreign exchange forward
contracts not designated as hedging instruments for accounting
purposes, are reported in net other expense (income) in our
consolidated statements of operations. As our operations expand
into countries outside of the United States, foreign exchange gains
and losses have and will become increasingly material. Perficient
believes that excluding these gains and losses from its non-GAAP
financial measures is useful to investors because foreign exchange
gains and losses will vary as the underlying currencies fluctuate,
which makes it difficult to compare current and historical
results.
Stock Compensation
Perficient incurs stock-based compensation expense under
Financial Accounting Standards Board Accounting Standards
Codification Topic 718, Compensation - Stock Compensation.
Perficient excludes stock-based compensation expense and the
related tax effects for the purposes of calculating adjusted
EBITDA, adjusted net income, and adjusted earnings per share
because stock-based compensation is a non-cash expense, which
Perficient believes is not reflective of its business performance.
The nature of stock-based compensation expense also makes it very
difficult to estimate prospectively, since the expense will vary
with changes in the stock price and market conditions at the time
of new grants, varying valuation methodologies, subjective
assumptions, and different award types, making the comparison of
current results with forward-looking guidance potentially difficult
for investors to interpret. The tax effects of stock-based
compensation expense may also vary significantly from period to
period, without any change in underlying operational performance,
thereby obscuring the underlying profitability of operations
relative to prior periods. Perficient believes that non-GAAP
measures of profitability, which exclude stock-based compensation,
are widely used by analysts and investors.
Dilution Offset from Convertible Note Hedge Transactions
It is Perficient’s current intent to settle conversions of the
Notes through combination settlement, which involves repayment of
the principal portion in cash and any excess of the conversion
value over the principal amount in shares of our common stock.
Perficient excludes the shares that are issuable upon conversions
of the Notes because Perficient expects that the dilution from such
shares will be offset by the convertible note hedge transactions
entered into in November 2021 and August 2020 in connection with
the issuance of the Notes.
Perficient, Inc.
Reconciliation of GAAP to
Non-GAAP Measures
(unaudited)
(in thousands, except per
share data)
Three Months Ended June
30,
Six Months Ended June
30,
2023
2022
2023
2022
GAAP Net Income
$
26,362
$
27,782
$
53,162
$
54,918
Adjustments:
Provision for income taxes
8,740
10,799
18,461
16,713
Amortization
5,523
5,998
11,340
11,977
Acquisition costs
(71
)
61
8
360
Adjustment to fair value of contingent
consideration
(2,701
)
(2,487
)
(4,727
)
(3,466
)
Amortization of debt issuance costs
631
608
1,239
1,215
Foreign exchange loss
382
158
471
373
Stock compensation
7,395
6,116
14,235
12,019
Adjusted Net Income Before Tax
46,261
49,035
94,189
94,109
Adjusted income tax (1)
11,843
12,700
24,207
24,186
Adjusted Net Income
$
34,418
$
36,335
$
69,982
$
69,923
GAAP Earnings Per Share (diluted)
$
0.73
$
0.77
$
1.48
$
1.52
Adjusted Earnings Per Share (diluted)
$
1.00
$
1.06
$
2.04
$
2.03
Shares used in computing GAAP Earnings Per
Share (diluted)
36,717
36,785
36,707
36,812
Dilution offset from convertible note
hedge transactions
(2,430
)
(2,431
)
(2,430
)
(2,431
)
Shares used in computing Adjusted Earnings
Per Share (diluted)
34,287
34,354
34,277
34,381
Net income used in computing GAAP Earnings
Per Share (diluted)
$
26,935
$
28,332
$
54,295
$
56,088
(1)
The estimated adjusted effective tax rate
of 25.6% and 25.9% for the three months ended June 30, 2023 and
2022, respectively, and 25.7% for both the six months ended June
30, 2023 and 2022, has been used to calculate the provision for
income taxes for non-GAAP purposes.
Perficient, Inc.
Reconciliation of GAAP to
Non-GAAP Measures
(unaudited)
(in thousands)
Three Months Ended June
30,
Six Months Ended June
30,
2023
2022
2023
2022
GAAP Net Income
$
26,362
$
27,782
$
53,162
$
54,918
Adjustments:
Provision for income taxes
8,740
10,799
18,461
16,713
Net interest expense
296
805
801
1,692
Net other expense
387
153
462
386
Depreciation
2,224
2,005
4,529
3,878
Amortization
5,523
5,998
11,340
11,977
Acquisition costs
(71
)
61
8
360
Adjustment to fair value of contingent
consideration
(2,701
)
(2,487
)
(4,727
)
(3,466
)
Stock compensation
7,395
6,116
14,235
12,019
Adjusted EBITDA (1)
$
48,155
$
51,232
$
98,271
$
98,477
(1)
Adjusted EBITDA is a non-GAAP performance
measure and is not intended to be a performance measure that should
be regarded as an alternative to or more meaningful than either
GAAP operating income or GAAP net income. Adjusted EBITDA measures
presented may not be comparable to similarly titled measures
presented by other companies.
Perficient, Inc.
Reconciliation of GAAP to
Non-GAAP Measures
(unaudited)
Q3 2023
Full Year 2023
Low end of adjusted
goal
High end of adjusted
goal
Low end of adjusted
goal
High end of adjusted
goal
GAAP EPS
$
0.56
$
0.60
$
2.73
$
2.84
Non-GAAP adjustment (1):
Non-GAAP reconciling items
0.44
0.44
1.57
1.57
Tax effect of reconciling items
(0.11
)
(0.10
)
(0.37
)
(0.36
)
Adjusted EPS
$
0.89
$
0.94
$
3.93
$
4.05
(1)
Non-GAAP adjustment represents the impact
of amortization expense, stock compensation, amortization of debt
issuance costs, foreign exchange gains and losses, acquisition
costs and adjustments to fair value of contingent consideration,
net of the tax effect of these adjustments, divided by adjusted
fully diluted shares. Perficient currently expects its Q3 2023 and
full year 2023 GAAP effective income tax rate to be approximately
30% and 27%, respectively. Perficient currently expects its Q3 2023
and full year 2023 estimated adjusted effective income tax rate to
be approximately 29% and 27%, respectively. Perficient’s estimates
of GAAP and adjusted fully diluted shares for 2023 are included in
the following table. These estimates could be affected by share
repurchases, shares issued in conjunction with future acquisitions,
changes in share price and the potential impact from the
conditional conversion features of our debt.
(in millions)
Q3 2023
Full Year 2023
GAAP Fully Diluted Shares
36.9
36.8
Non-GAAP adjustment (2):
Dilution offset from convertible note
hedge transactions
(2.4
)
(2.4
)
Adjusted Fully Diluted Shares
34.5
34.4
(2)
Non-GAAP adjustment represents the
exclusion of shares that are issuable upon conversion of our
convertible notes due to the expectation that shares relating to
the principal amount of our convertible notes will be paid in cash
and any excess will be offset by the convertible note hedge
transactions entered into in August 2020 and November 2021.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230727057752/en/
Bill Davis, Perficient, 314-529-3555
bill.davis@perficient.com
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