United States
Securities and Exchange Commission
Washington, DC 20549
Form 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): February 28, 2023
(Exact Name of Registrant as Specified in its Charter)
| (State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||||||
(Address of principal executive offices)
(314) 529-3600
(Registrant’s telephone number, including area code)
| Not Applicable | ||
| (Former Name or Former Address, if Changed Since Last Report) | ||
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On February 28, 2023, Perficient, Inc. (“Perficient”) announced its financial results for the three and twelve months ended December 31, 2022. A copy of the press release is being furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated by reference into this Item 2.02.
In accordance with General Instruction B.2 of Form 8-K, the information in this Current Report on Form 8-K, including Exhibits 99.1 and 99.2, shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section, nor shall such information and Exhibits be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
ITEM 7.01 REGULATION FD DISCLOSURE
Financial Results Presentation
On February 28, 2023, Perficient posted on the Investor Relations page of its website at www.perficient.com a slide presentation related to its fourth quarter ended December 31, 2022 financial results and operating metrics. A copy of the slide presentation is furnished as Exhibit 99.2 to this Current Report on Form 8-K. The information contained or incorporated in our website is not part of this filing.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
(d)Exhibits.
| Exhibit | |||||
| Number | Description | ||||
| Perficient, Inc. Press Release, dated February 28, 2023, announcing financial results for the three and twelve months ended December 31, 2022 | |||||
| Perficient, Inc. Q4 2022 Financial Results Presentation | |||||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | ||||
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| PERFICIENT, INC. | |||||||||||
| Date: | February 28, 2023 | By: | /s/ Paul E. Martin | ||||||||
| Paul E. Martin | |||||||||||
| Chief Financial Officer | |||||||||||
EXHIBIT 99.1
For more information, please contact:
Bill Davis, Perficient, 314-529-3555
bill.davis@perficient.com
PERFICIENT REPORTS FOURTH QUARTER AND FULL YEAR 2022 RESULTS
~ Continued Expansion of Best-of-Breed Profitability Metrics During the Quarter and Year ~
ST. LOUIS (February 28, 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 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. 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, August 2020, and September 2018 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 December 31, | Year Ended December 31, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| GAAP Net Income | $ | 26,459 | $ | 4,529 | $ | 104,392 | $ | 52,091 | |||||||||||||||
| Adjustments: | |||||||||||||||||||||||
| Income tax provision (benefit) | 10,287 | (5,732) | 36,569 | 10,392 | |||||||||||||||||||
| 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 | |||||||||||||||||||
| Amortization of debt discount and issuance costs | 609 | 3,330 | 2,431 | 11,014 | |||||||||||||||||||
| Loss on extinguishment of debt | — | 28,746 | — | 28,996 | |||||||||||||||||||
| Foreign exchange loss and other | (230) | 167 | 197 | 424 | |||||||||||||||||||
| Stock compensation | 6,501 | 5,999 | 24,574 | 23,060 | |||||||||||||||||||
| Adjusted Net Income Before Tax | 51,843 | 45,424 | 196,601 | 153,442 | |||||||||||||||||||
| Adjusted income tax (1) | 12,961 | 10,811 | 49,917 | 37,593 | |||||||||||||||||||
| Adjusted Net Income | $ | 38,882 | $ | 34,613 | $ | 146,684 | $ | 115,849 | |||||||||||||||
| GAAP Earnings Per Share (diluted) | $ | 0.74 | $ | 0.13 | $ | 2.90 | $ | 1.50 | |||||||||||||||
| Adjusted Earnings Per Share (diluted) | $ | 1.14 | $ | 1.00 | $ | 4.28 | $ | 3.50 | |||||||||||||||
| Shares used in computing GAAP Earnings Per Share (diluted) | 36,636 | 35,902 | 36,731 | 34,670 | |||||||||||||||||||
| Dilution offset from convertible note hedge transactions | (2,395) | (1,383) | (2,422) | (1,564) | |||||||||||||||||||
| Shares used in computing Adjusted Earnings Per Share (diluted) | 34,241 | 34,519 | 34,309 | 33,106 | |||||||||||||||||||
| Net income used in computing GAAP Earnings Per Share (diluted) | $ | 27,008 | $ | 4,529 | $ | 106,653 | $ | 52,091 | |||||||||||||||
(1)The estimated adjusted effective tax rate of 25.0% and 23.8% for the three months ended December 31, 2022 and 2021, respectively, and 25.4% and 24.5% for the year ended December 31, 2022 and 2021, respectively, 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 December 31, | Year Ended December 31, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| GAAP Net Income | $ | 26,459 | $ | 4,529 | $ | 104,392 | $ | 52,091 | |||||||||||||||
| Adjustments: | |||||||||||||||||||||||
| Income tax provision (benefit) | 10,287 | (5,732) | 36,569 | 10,392 | |||||||||||||||||||
| Net interest expense | 846 | 3,908 | 3,154 | 14,052 | |||||||||||||||||||
| Net other (income) expense | (246) | 167 | 160 | 401 | |||||||||||||||||||
| 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 | |||||||||||||||||||
| Loss on extinguishment of debt | — | 28,746 | — | 28,996 | |||||||||||||||||||
| Stock compensation | 6,501 | 5,999 | 24,574 | 23,060 | |||||||||||||||||||
| Adjusted EBITDA (1) | $ | 54,349 | $ | 47,718 | $ | 205,805 | $ | 162,855 | |||||||||||||||
(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) | ||
| Q1 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 | $ | 0.67 | $ | 0.73 | $ | 3.24 | $ | 3.40 | |||||||||||||||
| Non-GAAP adjustment (1): | |||||||||||||||||||||||
| Non-GAAP reconciling items | 0.43 | 0.43 | 1.69 | 1.70 | |||||||||||||||||||
| Tax effect of reconciling items | (0.09) | (0.10) | (0.33) | (0.35) | |||||||||||||||||||
| Adjusted EPS | $ | 1.01 | $ | 1.06 | $ | 4.60 | $ | 4.75 | |||||||||||||||
(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. Upon adoption of ASU 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) 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. Perficient currently expects its Q1 2023 and full year 2023 GAAP effective income tax rate to be approximately 26% and 27%, respectively. Perficient currently expects its Q1 2023 and full year 2023 estimated adjusted effective income tax rate to be approximately 26%. 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) | Q1 2023 | Full Year 2023 | |||||||||
| GAAP Fully Diluted Shares (2) | 36.7 | 36.7 | |||||||||
| Non-GAAP adjustment (3): | |||||||||||
| Dilution offset from convertible note hedge transactions | (2.4) | (2.4) | |||||||||
| Adjusted Fully Diluted Shares | 34.3 | 34.3 | |||||||||
(2)Upon adoption of ASU 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) on January 1, 2022, Perficient prospectively utilizes the if-converted method to calculate the impact of convertible instruments on GAAP diluted earnings per share.
(3)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.
Q4 2022 Financial Results February 28, 2023
2 Safe Harbor Statement Some of the statements contained in this presentation that are not purely historical statements, including our GAAP EPS guidance and Adjusted EPS guidance, as well as our effective income tax rate and GAAP and adjusted fully diluted shares for 2023, 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 are disclosed under the heading “Risk Factors” in our most recently filed annual report on Form 10-K. 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 presentation 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.
3 Q1 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 $ 0.67 $ 0.73 $ 3.24 $ 3.40 Non-GAAP adjustment (1): Non-GAAP reconciling items 0.43 0.43 1.69 1.70 Tax effect of reconciling items (0.09) (0.10) (0.33) (0.35) Adjusted EPS $ 1.01 $ 1.06 $ 4.60 $ 4.75 (in millions) Q1 2023 Full Year 2023 GAAP fully diluted shares (2) 36.7 36.7 Non-GAAP adjustment (3): Dilution offset from convertible note hedge transactions (2.4) (2.4) Adjusted fully diluted shares 34.3 34.3 Reconciliation of Adjusted GAAP Measures The following table provides a reconciliation of Perficient, Inc. GAAP EPS guidance to Adjusted EPS guidance: (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. Upon adoption of ASU 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) 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. Perficient currently expects its Q1 2023 and full year 2023 GAAP effective income tax rate to be approximately 26% and 27%, respectively. Perficient currently expects its Q1 2023 and full year 2023 estimated adjusted effective income tax rate to be approximately 26%. 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. (2) Upon adoption of ASU 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) on January 1, 2022, Perficient prospectively utilizes the if-converted method to calculate the impact of convertible instruments on GAAP diluted earnings per share. (3) 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. Note further discussion and reconciliation of Perficient, Inc. non-GAAP financial measures can be found in our earnings press release and Form 8-K furnished February 28, 2023.
4 Financial Metrics (in thousands, except per share data) THREE MONTHS ENDED DECEMBER 31, TWELVE MONTHS ENDED DECEMBER 31, 2022 2021 % Change 2022 2021 % Change Revenues $ 232,599 $ 214,730 8 % $ 905,062 $ 761,027 19 % Services Revenues (excluding reimbursable expenses) $ 228,806 $ 210,253 9 % $ 893,050 $ 748,045 19 % Cost of Services (excluding reimbursable expenses and stock compensation)* $ 135,545 $ 125,170 8 % $ 533,689 $ 448,737 19 % Services Revenues Net of Cost $ 93,261 $ 85,083 10 % $ 359,361 $ 299,308 20 % % of Services Revenues 40.8 % 40.5 % 40.2 % 40.0 % Adjusted EBITDA** $ 54,349 $ 47,718 14 % $ 205,805 $ 162,855 26 % % of Services Revenues 23.8 % 22.7 % 23.0 % 21.8 % Adjusted Net Income** $ 38,882 $ 34,613 12 % $ 146,684 $ 115,849 27 % % of Services Revenues 17.0 % 16.5 % 16.4 % 15.5 % GAAP EPS $ 0.74 $ 0.13 469 % $ 2.90 $ 1.50 93 % Amortization 0.19 0.17 0.72 0.71 Stock Compensation 0.19 0.17 0.72 0.70 Debt Related Adjustments*** 0.05 0.94 0.21 1.28 Foreign Exchange Loss and Other - - 0.01 0.01 Acquisition Costs / Earnout Adjustments 0.05 0.07 0.11 0.12 Tax Effect of Above Reconciling Items (0.08) (0.48) (0.39) (0.82) Adjusted EPS** $ 1.14 $ 1.00 14 % $ 4.28 $ 3.50 22 % * Cost of Services excludes depreciation and amortization. ** Note further discussion and reconciliation of Perficient, Inc. non-GAAP financial measures can be found in our earnings press release and Form 8-K furnished February 28, 2023. *** Debt Related Adjustments includes amortization of debt discount and debt issuance costs, loss on extinguishment of debt, dilution offset from convertible note hedge transactions, and an adjustment to remove the interest expense on convertible notes which was added back in the calculation of diluted GAAP EPS under the if-converted method.
5 (in thousands) Q4 2022 Q4 2021 % Change Services Revenue (excluding reimbursable expenses) $ 228,806 $ 210,253 9 % $ $ Software and Hardware Revenue $ 919 $ 932 NM* $ $ Headcount Q4 2022 Q4 2021 Average Ending Average Ending Offshore/Nearshore Billable Employees (a) 3,385 3,486 2,569 2.755 Onshore Billable Employees (b) 2,463 2,458 2,443 2,458 Subcontractors 364 377 388 400 Total Billable Headcount 6,212 6,321 5,400 5,613 SG&A Headcount 944 949 811 866 Total Headcount 7,156 7,270 6,211 6,479 (a) Offshore/Nearshore includes all employees, excluding Onshore (b) Onshore includes US, Canada, and the United Kingdom * "NM" means not meaningful. Operating Metrics
6 Industry Data Revenue by Industry Q4 2022 Q3 2022 Q4 2021 Financial Services/Banking/Insurance 22% 20% 22% Healthcare/Pharma/Life Sciences 21% 23% 27% Manufacturing 10% 9% 8% Leisure, Media, and Entertainment 9% 10% 9% Automotive and Transportation 9% 10% 9% Electronics and Computer Hardware 7% 8% 5% Retail and Consumer Goods 7% 7% 8% Business Services 5% 5% 5% Other 10% 8% 7%