Market Overview

Perficient Reports Second Quarter 2018 Results

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~GAAP Earnings Per Share and Net Income More Than Doubled; Adjusted
Earnings Per Share Up 31%; Perficient Raises Adjusted Earnings Per Share
Guidance~

Perficient,
Inc.
(NASDAQ:PRFT) ("Perficient"), the leading digital
transformation consulting firm serving Global 2000® and other large
enterprise customers throughout North America, today reported its
financial results for the quarter ended June 30, 2018.

Financial Highlights

For the quarter ended June 30, 2018:

  • Services revenue increased 12% to $120.9 million from $107.8 million
    in the second quarter of 2017;
  • Total revenue increased 4% to $121.8 million from $117.0 million in
    the second quarter of 2017;
  • Net income increased 143% to $5.8 million from $2.4 million in the
    second quarter of 2017;
  • GAAP earnings per share results on a fully diluted basis increased to
    $0.17 from $0.07 in the second quarter of 2017;
  • 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 to $0.38 from $0.29 in the second quarter of
    2017; and
  • EBITDAS (a non-GAAP measure; see attached schedule, which
    reconciles to GAAP net income) increased to $18.4 million from $16.9
    million in the second quarter of 2017.

"The second quarter represented the third consecutive quarter that
Perficient has delivered double-digit services revenue growth. Momentum
entering the second half remains solid," said Jeffrey Davis, chairman
and CEO. "Our unique and compelling value proposition, comprehensive
portfolio, strong partnerships, nimble structure and depth of expertise
are leading to share gains as enterprises increasingly turn to
Perficient for their digital transformation needs."

Other Highlights

Among other recent achievements, Perficient:

  • Expanded and deepened its search engine optimization and content
    services capabilities with the acquisition of Stone
    Temple Consulting Corporation
    , an award-winning Boston-based
    digital marketing agency;
  • Announced that its agency, Perficient Digital, won a Silver award for
    website design in the 2018
    Creativity International Awards
    for work completed for OhioHealth.
    With its new consolidated, responsive website, OhioHealth is better
    positioned to deliver personalized experiences, and has enabled deeper
    loyalty between patients and providers; and
  • Added new customer relationships and follow-on projects with such
    leading companies as AAA Life Insurance, BCBS Michigan, Caterpillar
    Inc., Leggett and Platt, Marathon Petroleum, Mastercard, Mohawk
    Industries, Oshkosh Corp., TD Ameritrade, Tiaa-Cref and Trinity Health.

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 2018 revenue to be in the range of
$122 million to $127 million. Third quarter GAAP earnings per share is
expected to be in the range of $0.18 to $0.21. 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 $0.38 to $0.41.

Perficient is narrowing its previously provided full year 2018 revenue
guidance range to $490 million to $505 million, adjusting its 2018 GAAP
earnings per share guidance range to $0.65 to $0.75 as a result of
transactional costs and additional amortization for the recent
acquisition, and raising its 2018 adjusted earnings per share (a
non-GAAP measure; see attached schedule which reconciles to GAAP
earnings per share guidance) guidance range to $1.45 to $1.55.

Conference Call Details

Perficient will host a conference call regarding second quarter 2018
financial results today at 10 a.m. Eastern.

WHAT: Perficient Reports Second Quarter 2018 Results

WHEN: Thursday, Aug. 2, 2018, at 10 a.m. Eastern

CONFERENCE CALL NUMBERS: 855-246-0403 (U.S. and Canada);
414-238-9806 (International)

PARTICIPANT PASSCODE: 5979827

REPLAY TIMES: Thursday, Aug. 2, 2018, at 1 p.m. Eastern, through
Thursday, Aug. 9, 2018 at 1 p.m. Eastern

REPLAY NUMBER: 855-859-2056 (U.S. and Canada) 404-537-3406
(International)

REPLAY PASSCODE: 5979827

About Perficient

Perficient is the leading digital transformation consulting firm serving
Global 2000® and enterprise customers throughout North America. With
unparalleled information technology, management consulting, and creative
capabilities, Perficient and its Perficient
Digital
agency deliver vision, execution, and value with outstanding
digital experience, business optimization, and industry solutions. Our
work enables clients to improve productivity and competitiveness; grow
and strengthen relationships with customers, suppliers, and partners;
and reduce costs. Perficient's professionals serve clients from a
network of offices across North America and offshore locations in India
and China. Traded on the Nasdaq Global Select Market, Perficient is a
member of the Russell 2000 index and the S&P SmallCap 600 index.
Perficient is an award-winning Premier Level IBM business partner, a
Microsoft National Service Provider and Gold Certified Partner, an
Oracle Platinum Partner, an Adobe Premier Partner, and a Gold Salesforce
Consulting Partner. 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 2018. 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 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 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) maintaining a balance of our supply of skills and resources with
client demand;

c) effectively competing in a highly competitive market;

d) protecting our clients' and our data and information;

e) risks from international operations including fluctuations in
exchange rates;

f) changes to immigration policies;

g) obtaining favorable pricing to reflect services provided;

h) adapting to changes in technologies and offerings;

i) risk of loss of one or more significant software vendors;

j) making appropriate estimates and assumptions in connection with
preparing our consolidated financial statements;

k) maintaining effective internal controls; and

l) changes to tax levels, audits, investigations, tax laws or their
interpretation;

(5) legal liabilities, including intellectual property protection and
infringement or the disclosure of personally identifiable information;

(6) risks associated with managing growth organically and through
acquisitions; and

(7) 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.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except per share data)
   
Three Months Ended June 30,     Six Months Ended June 30,
2018     2017 2018     2017
 
Revenues
Services $ 120,912 $ 107,756 $ 241,107 $ 211,777
Software and hardware   886   9,270   1,632   16,269
Total revenues   121,798   117,026   242,739   228,046
 
Cost of revenues (exclusive of depreciation and amortization, shown
separately below)
Cost of services 78,041 68,523 155,739 136,136
Software and hardware costs - 7,727 - 13,692
Stock compensation   1,554   1,385   3,082   2,752
Total cost of revenues   79,595   77,635   158,821   152,580
 
Selling, general and administrative 25,345 23,868 51,713 47,236
Stock compensation   2,539   2,260   4,911   4,576
Total selling, general and administrative 27,884 26,128 56,624 51,812
 
Depreciation 1,028 1,205 2,062 2,464
Amortization 4,137 3,537 8,020 7,162
Acquisition costs 542 893 840 1,383
Adjustment to fair value of contingent consideration   121   (597)   1,091   (439)
Income from operations   8,491   8,225   15,281   13,084
 
Net interest expense 513 657 887 1,004
Net other expense (income)   52   (51)   49   (69)
Income before income taxes 7,926 7,619 14,345 12,149
Provision for income taxes   2,077   5,210   3,567   7,030
Net income $ 5,849 $ 2,409 $ 10,778 $ 5,119
 
Basic earnings per share $ 0.18 $ 0.07 $ 0.33 $ 0.15
Diluted earnings per share $ 0.17 $ 0.07 $ 0.32 $ 0.15
 
Shares used in computing basic earnings per share 32,772 32,942 32,762 33,161
Shares used in computing diluted earnings per share 33,889 33,747 33,894 34,080
 
PERFICIENT, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands)
 
    June 30,     December 31,
2018 2017
ASSETS
Current assets:
Cash and cash equivalents $ 10,359 $ 6,307
Accounts receivable, net 107,286 112,194
Prepaid expenses 4,523 4,470
Other current assets   3,483   6,237
Total current assets 125,651 129,208
Property and equipment, net 6,678 7,145
Goodwill 315,405 305,238
Intangible assets, net 48,995 51,066
Other non-current assets   7,811   6,403
Total assets $ 504,540 $ 499,060
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 14,495 $ 23,196
Other current liabilities   41,662   38,077
Total current liabilities 56,157 61,273
Long-term debt 56,000 55,000
Other non-current liabilities   18,631   16,436
Total liabilities 130,788 132,709
 
Stockholders' equity:
Common stock 48 47
Additional paid-in capital 414,610 403,906
Accumulated other comprehensive loss (2,474) (1,822)
Treasury stock (177,301) (163,871)
Retained earnings   138,869   128,091
Total stockholders' equity   373,752   366,351
Total liabilities and stockholders' equity $ 504,540 $ 499,060
 

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 EBITDAS (earnings
before interest, income taxes, depreciation, amortization, stock
compensation, acquisition costs and adjustment to fair value of
contingent consideration), 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, acquisition costs, adjustments to the fair value of contingent
consideration, 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 EBITDAS 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 EBITDAS, 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 EBITDAS, 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 EBITDAS, 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 EBITDAS, 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.

Write-off of Unamortized Credit Facility Fees

Perficient entered into a new credit agreement during the second quarter
of 2017. In connection with the new agreement, Perficient wrote off
unamortized credit facility fees associated with the former credit
agreement. Perficient believes that excluding this non-cash write-off
from its non-GAAP financial measures is useful to investors because the
expense is infrequent and not reflective of the company's business
performance.

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
EBITDAS, 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.

Tax Impact of China Repatriation

During the second quarter of 2017, Perficient determined that as a
result of changes in the business and macroeconomic environment, the
foreign earnings of the company's Chinese subsidiary were no longer
permanently reinvested and may repatriate available earnings from time
to time. A provision for the expected taxes on repatriation of these
earnings was recorded in the amount of $2.5 million during the three and
six months ended June 30, 2017. Perficient believes that excluding this
incremental tax expense from its non-GAAP financial measures is useful
to investors because this expense is infrequent and can cause comparison
of current and historical financial results to be difficult.

 
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,
2018     2017 2018     2017
GAAP Net Income $ 5,849 $ 2,409 $ 10,778 $ 5,119
Adjustments:
Provision for income taxes 2,077 5,210 3,567 7,030
Amortization 4,137 3,537 8,020 7,162
Acquisition costs 542 893 840 1,383
Adjustment to fair value of contingent consideration 121 (597) 1,091 (439)
Write-off of unamortized credit facility fees - 246 - 246
Stock compensation   4,093   3,645   7,993   7,328
Adjusted Net Income Before Tax 16,819 15,343 32,289 27,829
Adjusted income tax (1)   4,037   5,554   7,814   9,963
Adjusted Net Income $ 12,782 $ 9,789 $ 24,475 $ 17,866
 
GAAP Earnings Per Share (diluted) $ 0.17 $ 0.07 $ 0.32 $ 0.15
Adjusted Earnings Per Share (diluted) $ 0.38 $ 0.29 $ 0.72 $ 0.52
Shares used in computing GAAP and Adjusted Earnings Per Share
(diluted)
33,889 33,747 33,894 34,080
(1)     The estimated adjusted effective tax rate of 24.0% and 36.2% for the
three months ended June 30, 2018 and 2017, respectively, and 24.2%
and 35.8% for the six months ended June 30, 2018 and 2017,
respectively, has been used to calculate the provision for income
taxes for non-GAAP purposes. The estimated adjusted effective tax
rate for the three and six months ended June 30, 2017 excludes the
tax impact of the China repatriation.
 
PERFICIENT, INC.
RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(unaudited)
(in thousands)
 
    Three Months Ended June 30,     Six Months Ended June 30,
2018     2017 2018     2017
GAAP Net Income $ 5,849 $ 2,409 $ 10,778 $ 5,119
Adjustments:
Provision for income taxes 2,077 5,210 3,567 7,030
Net interest expense 513 657 887 1,004
Net other expense (income) 52 (51) 49 (69)
Depreciation 1,028 1,205 2,062 2,464
Amortization 4,137 3,537 8,020 7,162
Acquisition costs 542 893 840 1,383
Adjustment to fair value of contingent consideration 121 (597) 1,091 (439)
Stock compensation   4,093   3,645   7,993   7,328
EBITDAS (1) $ 18,412 $ 16,908 $ 35,287 $ 30,982
(1)     EBITDAS 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. EBITDAS 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 2018     Full Year 2018
Low end of     High end of Low end of     High end of

adjusted goal

adjusted goal

adjusted goal

adjusted goal

GAAP EPS $ 0.18 $ 0.21 $ 0.65 $ 0.75
Non-GAAP adjustment (1):
Non-GAAP reconciling items 0.26 0.26 1.03 1.03
Tax effect of reconciling items   (0.06)   (0.06)   (0.23)   (0.23)
Adjusted EPS $ 0.38 $ 0.41 $ 1.45 $ 1.55
(1)     Non-GAAP adjustment represents the impact of amortization expense,
stock compensation, acquisition costs, and adjustments to fair value
of contingent consideration, net of the tax effect of these
adjustments, divided by fully diluted shares. Perficient currently
expects both its Q3 2018 and full year 2018 GAAP effective income
tax rate to be between 26% and 27%.

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