~ Continued Expansion of Best-of-Breed Profitability Metrics During the Quarter and Year ~
ST. LOUIS–(BUSINESS WIRE)–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 and year ended December 31, 2022.
Financial Highlights
For the quarter ended December 31, 2022:
Revenues increased 8% to $232.6 million from $214.7 million in the fourth quarter of 2021;
Net income increased to $26.5 million from $4.5 million in the fourth quarter of 2021, primarily due to the loss from extinguishment of debt of $28.7 million in prior year;
GAAP earnings per share results on a fully diluted basis increased 469% to $0.74 from $0.13 in the fourth quarter of 2021;
Adjusted earnings per share results (a non-GAAP measure; see attached schedule, which reconciles to GAAP earnings per share) on a fully diluted basis increased 14% to $1.14 from $1.00 in the fourth quarter of 2021; and
Adjusted EBITDA (a non-GAAP measure; see attached schedule, which reconciles to GAAP net income) increased 14% to $54.3 million from $47.7 million in the fourth quarter of 2021.
For the year ended December 31, 2022:
Revenues increased 19% to $905.1 million from $761.0 million in 2021;
Net income increased 100% to $104.4 million from $52.1 million in 2021, primarily as a result of higher revenues, lower costs as a percent of revenues, lower interest expense and the loss from extinguishment of debt of $29.0 million in the prior year;
GAAP earnings per share results on a fully diluted basis increased 93% to $2.90 from $1.50 in 2021;
Adjusted earnings per share results (a non-GAAP measure; see attached schedule, which reconciles to GAAP earnings per share) on a fully diluted basis increased 22% to $4.28 from $3.50 in 2021; and
Adjusted EBITDA (a non-GAAP measure; see attached schedule, which reconciles to GAAP net income) increased 26% to $205.8 million from $162.9 million in 2021.
“The fourth quarter capped another year of solid growth and increasing profitability for Perficient,” said Jeffrey Davis, chairman and CEO. “The world’s largest enterprises and biggest brands continue to advise that our fully integrated delivery model that seamlessly blends great global talent and depth in North America, Latin America, and India is unique in the marketplace and exactly what they require. Perficient is as well-regarded and well-positioned as we’ve ever been, and we’re confident that 2023 will prove to be another year of strong revenue and earnings growth.”
Other Highlights
Among other recent achievements, Perficient:
Was named the 2022 Informatica Cloud Modernization Partner of the Year, recognizing Perficient’s excellence and commitment to delivering high-impact Informatica cloud solutions;
Received three eHealthcare Awards for empowering leading healthcare providers to reach their customers with engaging, effective, and scalable digital experiences;
For the second year in a row, was recognized by Modern Healthcare as the fourth-largest healthcare IT consulting firm based on revenue and the number of health information technology contracts and consultants;
Announced the launch of two national training bootcamps as part of Perficient Bright Paths, a program designed to advance STEM education and career opportunities for underrepresented constituencies and communities;
Was featured in Forrester’s Salesforce Consulting Services Landscape report on how partners help accelerate time to value, reimagine business models and processes, and manage organizational change for maximum results; and
Was named a 2023 Best Place to Work by the St. Louis Business Journal and a 2022 Top Workplace by the Detroit Free Press, the Dallas Morning News, and the Orange County Register, adding to recent best workplace distinctions awarded in St. Louis, Chicago, Denver, Minneapolis, and Southern California.
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 first quarter 2023 revenue to be in the range of $227 million to $233 million. First quarter GAAP earnings per share is expected to be in the range of $0.67 to $0.73. First 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 $1.01 to $1.06.
Perficient is providing its full year 2023 revenue guidance in the range of $945 million to $985 million, 2023 GAAP earnings per share guidance in the range of $3.24 to $3.40 and 2023 adjusted earnings per share (a non-GAAP measure; see attached schedule which reconciles to GAAP earnings per share guidance) guidance in the range of $4.60 to $4.75.
Conference Call Details
Perficient will host a conference call regarding fourth quarter financial results today, February 28, 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/BIcb6c01d8051c4253ad86beaa1616727c. 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/q4-2022-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 impact of the health emergencies and pandemics on our business which may amplify certain of the other factors contained herein;
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 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
December 31,
Year Ended
December 31,
2022
2021
2022
2021
Revenues
Services excluding reimbursable expenses
$
228,806
$
210,253
$
893,050
$
748,045
Reimbursable expenses
2,874
3,545
9,371
10,677
Total services
231,680
213,798
902,421
758,722
Software and hardware
919
932
2,641
2,305
Total revenues
232,599
214,730
905,062
761,027
Cost of revenues (exclusive of depreciation and amortization, shown separately below)
Cost of services
138,419
128,715
543,060
459,414
Stock compensation
2,588
2,596
9,643
9,399
Total cost of revenues
141,007
131,311
552,703
468,813
Selling, general and administrative
39,831
38,297
156,197
138,758
Stock compensation
3,913
3,403
14,931
13,661
Total selling, general and administrative
43,744
41,700
171,128
152,419
Depreciation
2,285
1,716
8,518
6,398
Amortization
6,454
5,751
24,518
23,453
Acquisition costs
1,145
2,482
3,653
3,814
Adjustment to fair value of contingent consideration
618
152
267
198
Income from operations
37,346
31,618
144,275
105,932
Net interest expense
846
3,908
3,154
14,052
Loss on debt extinguishment
—
28,746
—
28,996
Net other (income) expense
(246
)
167
160
401
Income (loss) before income taxes
36,746
(1,203
)
140,961
62,483
Income tax provision (benefit)
10,287
(5,732
)
36,569
10,392
Net income
$
26,459
$
4,529
$
104,392
$
52,091
Basic net income per share
$
0.78
$
0.14
$
3.08
$
1.62
Diluted net income per share
$
0.74
$
0.13
$
2.90
$
1.50
Shares used in computing basic net income per share
33,856
33,027
33,869
32,202
Shares used in computing diluted net income per share
36,636
35,902
36,731
34,670
Net income used in computing diluted net income per share
$
27,008
$
4,529
$
106,653
$
52,091
Perficient, Inc.
Consolidated Balance Sheets
(in thousands)
December 31, 2022
December 31, 2021
Assets
Current assets:
Cash and cash equivalents
$
30,130
$
24,410
Accounts receivable, net
202,298
177,602
Prepaid expenses
6,432
5,400
Other current assets
16,756
7,296
Total current assets
255,616
214,708
Property and equipment, net
17,970
14,747
Operating lease right-of-use assets
27,088
33,353
Goodwill
565,161
515,229
Intangible assets, net
88,937
81,277
Other non-current assets
41,116
23,258
Total assets
$
995,888
$
882,572
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
$
24,351
$
26,074
Other current liabilities
104,780
93,877
Total current liabilities
129,131
119,951
Long-term debt, net
394,587
326,126
Operating lease liabilities
18,528
23,898
Other non-current liabilities
43,515
47,832
Total liabilities
$
585,761
$
517,807
Stockholders’ equity:
Preferred stock
$
—
$
—
Common stock
53
53
Additional paid-in capital
403,866
423,235
Accumulated other comprehensive loss
(17,519
)
(5,843
)
Treasury stock
(354,536
)
(324,412
)
Retained earnings
378,263
271,732
Total stockholders’ equity
410,127
364,765
Total liabilities and stockholders’ equity
$
995,888
$
882,572
Perficient, Inc.
Consolidated Statements of Cash Flow
(in thousands)
Year Ended December 31,
2022
2021
Net income
$
104,392
$
52,091
Adjustments to reconcile net income to net cash provided by operations
51,484
78,951
Changes in operating assets and liabilities, net of business acquisitions
(37,808
)
(46,126
)
Net cash provided by operating activities
118,068
84,916
Net cash used in investing activities
(81,750
)
(119,052
)
Net cash used in financing activities
(29,078
)
(23,839
)
Effect of exchange rate on cash and cash equivalents
(1,520
)
(819
)
Change in cash and cash equivalents
5,720
(58,794
)
Cash and cash equivalents at beginning of period
24,410
83,204
Cash and cash equivalents at end of period
$
30,130
$
24,410
See the Company’s Form 10-K 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 discounts and 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 Discount and Debt Issuance Costs
On November 9, 2021, Perficient issued $380.0 million aggregate principal amount of 0.125% Convertible Senior Notes due 2026, on August 14, 2020, Perficient issued $230.0 million aggregate principal amount of 1.250% Convertible Senior Notes due 2025, and on September 11, 2018, Perficient issued $143.8 million aggregate principal amount of 2.375% Convertible Senior Notes due 2023 (the “2026 Notes,” “2025 Notes,” and “2023 Notes,” respectively, and collectively, the “Notes”) in private placements to qualified institutional purchasers. In accordance with accounting for debt with conversions and other options prior to the adoption of Accounting Standards Update No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”), Perficient bifurcated the principal amount of the Notes into liability and equity components. The resulting debt discounts were amortized to interest expense over the period from the issuance dates through the respective contractual maturity dates. Upon adoption of ASU 2020-06 on January 1, 2022, Perficient no longer records amortization of debt discount as a result of accounting for the convertible debt instrument as a single liability measured at its amortized cost. 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.
Loss on Extinguishment of Debt
Perficient repurchased its remaining outstanding 2023 Notes and partially repurchased its 2025 Notes in 2021, which resulted in a loss on extinguishment of debt. Perficient believes that excluding this loss 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.
Contacts
Bill Davis, Perficient, 314-529-3555
[email protected]