PERFICIENT INC (PRFT)
10-K
Annual report pursuant to section 13 and 15(d)
Filed on 03/01/2012
Filed Period 12/31/2011
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark one)
þ
o
Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2011
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Commission file number 001-15169
PERFICIENT, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or other jurisdiction of incorporation or organization)
No. 74-2853258
(I.R.S. Employer Identification No.)
520 Maryville Centre Drive, Suite 400
Saint Louis, Missouri 63141
(Address of principal executive offices)
(314) 529-3600
(Registrant's telephone number, including area code)
Title of each class:
Common Stock, $0.001 par value
Name of each exchange on which registered:
The Nasdaq Global Select Market
Securities registered pursuant to Section 12(b) of the Act:
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to
be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes þ No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or
any amendment to this Form 10-K. þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filero
Non-accelerated filero
Accelerated filerþ
Smaller reporting companyo
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ
The aggregate market value of the voting stock held by non-affiliates of the Company was approximately $294.5 million based on the last reported sale price
of the Company's common stock on The Nasdaq Global Select Market on June 30, 2011.
As of February 27, 2012, there were 31,269,447 shares of Common Stock outstanding.
Portions of the definitive proxy statement in connection with the 2012 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange
Commission no later than April 30, 2012, are incorporated by reference in Part III of this Form 10-K.
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Item 15.
Business.
Risk Factors.
Unresolved Staff Comments.
Properties.
Legal Proceedings.
Reserved.
TABLE OF CONTENTS
PART I
PART II
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Selected Financial Data.
Management’s Discussion and Analysis of Financial
Condition and Results of Operations.
Quantitative and Qualitative Disclosures About
Market Risk.
Financial Statements and Supplementary Data.
Changes In and Disagreements With Accountants on
Accounting and Financial Disclosure.
Controls and Procedures.
Other Information.
Directors, Executive Officers and Corporate
Governance.
Executive Compensation.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Certain Relationships and Related Transactions, and
Director Independence.
Principal Accounting Fees and Services.
PART III
Exhibits, Financial Statement Schedules.
PART IV
i
1
5
13
13
13
13
14
15
15
25
26
47
47
47
48
49
49
49
49
50
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
PART I
Some of the statements contained in this annual report that are not purely historical statements discuss future expectations, contain projections of
results of operations or financial condition, or state other forward-looking information. 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 various factors and was derived using numerous assumptions. In some cases, you can identify these so-called forward-looking
statements by words like “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or the
negative of those words and other comparable words. 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 this annual report.
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. We are under no duty to update any of the forward-looking statements after the date of this annual report to conform
such statements to actual results.
All forward-looking statements, express or implied, included in this report and the documents we incorporate by reference and that are attributable
to Perficient, Inc. are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with
any subsequent written or oral forward-looking statements that Perficient, Inc. or any persons acting on our behalf may issue.
Item 1. Business.
Overview
We are an information technology consulting firm serving Forbes Global 2000 (“Global 2000”) and other large enterprise companies with a
primary focus on the United States. We help our clients gain competitive advantage by using Internet-based technologies to make their businesses more
responsive to market opportunities and threats, strengthen relationships with their customers, suppliers and partners, improve productivity, and reduce
information technology costs. We design, build, and deliver business-driven technology solutions using third party software products. Our solutions include
business integration, portals and collaboration, custom applications, technology platform implementations, customer relationship management, enterprise
performance management, enterprise content management, and business intelligence, among others. Our solutions enable our clients to operate a real-time
enterprise that dynamically adapts business processes and the systems that support them to meet the changing demands of an increasingly global, Internet-
driven and competitive marketplace.
Through our experience in developing and delivering business-driven technology solutions for our clients, we have acquired domain expertise that
differentiates our firm. We use project teams that deliver high-value, measurable results by working collaboratively with clients and their partners through a
user-centered, technology-based and business-driven solutions methodology. We believe this approach enhances return-on-investment for our clients by
reducing the time and risk associated with designing and implementing technology solutions.
We serve our clients from locations in 20 markets throughout North America by leveraging a sales team that is experienced and connected through
a common service portfolio, sales process, and performance management system. Our sales process utilizes project pursuit teams that include those of our
information technology colleagues best suited to address a particular prospective client’s needs. Our primary target client base includes companies in North
America with annual revenues in excess of $500 million. We believe this market segment can generate the repeat business that is a fundamental part of our
growth plan. We primarily pursue solutions opportunities where our domain expertise and delivery track record give us a competitive advantage. We also
typically target engagements of up to $5 million in fees, which we believe to be below the target project range of most large systems integrators and beyond
the delivery capabilities of most local boutique consulting firms.
During 2011, we continued to implement a strategy focused on: expanding our relationships with existing and new clients; continuing to make
disciplined acquisitions by acquiring Exervio Consulting, Inc. (“Exervio”) in April 2011 and JCB Partners, LLC (“JCB”) in July 2011; expanding our
technical skill and geographic base by expanding our business both organically and through acquisitions, with a primary focus on the United States;
expanding our brand visibility among prospective clients, employees, and software vendors; leveraging our offshore capabilities in Canada, Europe, China,
and India; and leveraging our existing and pursuing new strategic alliances by targeting leading business advisory companies and technology providers.
1
Our Solutions
We help clients gain competitive advantage by using technology to make their businesses more responsive to market opportunities; strengthen
relationships with customers, suppliers, and partners; improve productivity; and reduce information technology costs. Our business-driven technology
solutions enable these benefits by developing, integrating, automating, and extending business processes, technology infrastructure and software applications
end-to-end within an organization and with key partners, suppliers, and customers. This provides real-time access to critical business applications and
information and a scalable, reliable, secure, and cost-effective technology infrastructure that enables clients to:
• give managers and executives the information they need to make quality business decisions and dynamically adapt their business processes
and systems to respond to client demands, market opportunities, or business problems;
• improve the quality and lower the cost of customer acquisition and care through web-based customer self-service and provisioning;
• reduce supply chain costs and improve logistics by flexibly and quickly integrating processes and systems and making relevant real-time
information and applications available online to suppliers, partners, and distributors;
• increase the effectiveness and value of legacy enterprise technology infrastructure investments by enabling faster application development
and deployment, increased flexibility, and lower management costs; and
• increase employee productivity through better information flow and collaboration capabilities and by automating routine processes to
enable focus on unique problems and opportunities.
Our business-driven technology solutions include the following:
• Business integration and service oriented architectures (SOA). We design, develop, and implement business integration and SOA solutions
that allow our clients to integrate all of their business processes end-to-end and across the enterprise. Truly innovative companies are
extending those processes and eliminating functional friction between the enterprise, core customers, and partners. Our business integration
solutions can extend and extract core applications, reduce infrastructure strains and cost, web-enable legacy applications, provide real-time
insight into business metrics, and introduce efficiencies for customers, suppliers, and partners.
• Enterprise portals and collaboration. We design, develop, implement, and integrate secure and scalable enterprise portals and
collaboration solutions for our clients and their customers, suppliers, and partners that include searchable data systems, collaborative
systems for process improvement, transaction processing, unified and extended reporting, content management, social media/networking
tools, and personalization.
• Custom applications. We design, develop, implement, and integrate custom application solutions that deliver enterprise-specific
functionality to meet the unique requirements and needs of our clients. Our substantial experience with platforms including J2EE, .Net, and
Open-source enables enterprises of all types to leverage cutting-edge technologies to meet business-driven needs.
• Technology platform implementations. We design, develop, and implement technology platform implementations that allow our clients to
establish a robust, reliable Internet-based infrastructure for integrated business applications which extend enterprise technology assets to
employees, customers, suppliers, and partners. Our platform services include application server selection, architecture planning, installation
and configuration, clustering for availability, performance assessment and issue remediation, security services, and technology migrations.
• Customer relationship management (CRM). We design, develop, and implement advanced CRM solutions that facilitate customer
acquisition, service and support, and sales and marketing by understanding our customers’ needs through interviews, requirement gathering
sessions, call center analysis, developing an iterative prototype driven solution, and integrating the solution to legacy processes and
applications.
• Enterprise performance management (EPM). We design, develop, and implement EPM solutions that allow our clients to quickly adapt
their business processes to respond to new market opportunities or competitive threats by taking advantage of business strategies supported
by flexible business applications and IT infrastructures.
• Enterprise content management (ECM). We design, develop, and implement ECM solutions that enable the management of all
unstructured information regardless of file type or format. Our ECM solutions can facilitate the creation of new content and/or provide easy
access and retrieval of existing digital assets from other enterprise tools such as enterprise resource planning (ERP), customer relationship
management, or legacy applications. Our ECM solutions include Enterprise Imaging and Document Management, Web Content
Management, Digital Asset Management, Enterprise Records Management, Compliance and Control, Business Process Management and
Collaboration, and Enterprise Search.
2
• Business intelligence. We design, develop, and implement business intelligence solutions that allow companies to interpret and act upon
accurate, timely, and integrated information. Business intelligence solutions help our clients make more informed business decisions by
classifying, aggregating, and correlating data into meaningful business information. Our business intelligence solutions allow our clients to
transform data into knowledge for quick and effective decision making and can include information strategy, data warehousing, and
business analytics and reporting.
We conceive, build, and implement these solutions through a comprehensive set of services including business strategy, user-centered design,
systems architecture, custom application development, technology integration, package implementation, and managed services.
In addition to our technology solution services, we offer education and mentoring services to our clients. We conduct IBM- and Oracle-certified
training, where we provide our clients both a customized and established curriculum of courses and other education services.
Competitive Strengths
We believe our competitive strengths include:
• Domain Expertise. We have acquired significant domain expertise in a core set of technology solutions and software platforms. These
solutions include business integration, portals and collaboration, custom applications, technology platform implementations, customer
relationship management, enterprise performance management, enterprise content management, and business intelligence, among others.
The platforms in which we have significant domain expertise and on which these solutions are built include IBM, Oracle and Microsoft,
among others.
• Industry Expertise. We serve many of the world’s largest and most respected companies with deep business process experience across a
variety of industries. These industries include healthcare, financial services and banking, telecommunications, automotive, and energy,
among others.
• Delivery Model and Methodology. We believe our significant domain expertise enables us to provide high-value solutions through expert
project teams that deliver measurable results by working collaboratively with clients through a user-centered, technology-based, and
business-driven solutions methodology. Our methodology includes a proven execution process map we developed, which allows for
repeatable, high quality services delivery. The methodology leverages the thought leadership of our senior strategists and practitioners to
support the client project team and focuses on transforming our clients’ business processes to provide enhanced customer value and
operating efficiency, enabled by web technology. As a result, we believe we are able to offer our clients the dedicated attention that small
firms usually provide and the delivery and project management that larger firms usually offer.
• Client Relationships. We have built a track record of quality solutions and client satisfaction through the timely, efficient and successful
completion of numerous projects for our clients. As a result, we have established long-term relationships with many of our clients who
continue to engage us for additional projects and serve as references for us. For the years ending December 31, 2011, 2010 and 2009, 81%,
84% and 92%, respectively, of services revenues were derived from clients who continued to utilize our services from the prior year,
excluding any revenues from acquisitions completed in that year.
• Vendor Relationship and Endorsements. We have built meaningful relationships with software providers, whose products we use to design
and implement solutions for our clients. These relationships enable us to reduce our cost of sales and sales cycle times and increase win
rates by leveraging our partners’ marketing efforts and endorsements. We also serve as a sales channel for our partners, helping them
market and sell their software products. We are an IBM Premier Business Partner, an Oracle Platinum Partner, a Microsoft Gold Certified
Partner and National Systems Integrator, a TeamTIBCO Partner, and an EMC Consulting Preferred Partner. Our vendors have recognized
our relationships with several awards. In 2011 we were named IBM’s Lotus North America Distinguished Partner, making us a three-time
winner of this award. We also received the IBM Information Management Solution Excellence Award and the IBM Information
Management Business Analytics Solution Provider Achievement Award.
• Offshore Capability. We serve our clients from locations in 20 markets throughout North America and, in addition, we operate global
development centers in Hangzhou, China and Chennai, India. These facilities are staffed with colleagues who have specializations that
include application development, adapter and interface development, quality assurance and testing, monitoring and support, product
development, platform migration, and portal development with expertise in IBM, Oracle and Microsoft technologies. In addition to our
offshore capabilities, we employ a number of foreign nationals in the United States on H1-B visas. The facility in Chennai, India is also a
recruiting and development facility used to continue to grow our base of H1-B foreign national colleagues. As of December 31, 2011, we
had 204 colleagues at the Hangzhou, China facility and 205 colleagues with H1-B visas. We intend to continue to leverage our existing
offshore capabilities to support our growth and provide our clients flexible options for project delivery.
3
Competition
The market for the services we provide is competitive and has low barriers to entry. We believe that our competitors fall into several categories,
including:
• small local consulting firms that operate in no more than one or two geographic regions;
• boutique consulting firms, such as Prolifics and Avanade;
• national consulting firms, such as Accenture, Deloitte Consulting and Sapient;
• in-house professional services organizations of software companies; and
• offshore providers, such as Infosys Technologies Limited and Wipro Limited.
We believe that the principal competitive factors affecting our market include domain expertise, track record and customer references, quality of
proposed solutions, service quality and performance, efficiency, reliability, scalability and features of the software platforms upon which the solutions are
based, and the ability to implement solutions quickly and respond on a timely basis to customer needs. In addition, because of the relatively low barriers to
entry into this market, we expect to face additional competition from new entrants. We expect competition from offshore outsourcing and development
companies to continue.
Some of our competitors have longer operating histories, larger client bases, and greater name recognition; and possess significantly greater
financial, technical, and marketing resources than we do. As a result, these competitors may be able to attract customers to which we market our services and
adapt more quickly to new technologies or evolving customer or industry requirements.
Clients
During the year ended December 31, 2011, we provided services to 597 customers. No one customer provided more than 10% of our total revenues
for the years ended 2011, 2010 or 2009.
Employees
As of December 31, 2011, we had 1,484 colleagues, 1,240 of which were billable (excludes 171 billable subcontractors) and 244 which were
involved in sales, administration, and marketing. None of our colleagues are represented by a collective bargaining agreement and we have never experienced
a strike or similar work stoppage. We are committed to the continued development of our colleagues.
Sales and Marketing. As of December 31, 2011, we had a 57 person direct solutions-oriented sales force. We reward our sales force for developing
and maintaining relationships with our clients and seeking out follow-up engagements as well as leveraging those relationships to forge new relationships in
different areas of the business and with our clients’ business partners. Approximately 85% of our sales are executed by our direct sales force. In addition to
our direct sales team, we also have 28 dedicated sales support employees, 19 general managers and three vice-presidents who are engaged in the sales and
marketing efforts.
We have sales and marketing partnerships with software vendors including IBM, Oracle and Microsoft, among others. These companies are key
vendors of open standards-based software commonly referred to as middleware application servers, enterprise application integration platforms, business
process management, business activity monitoring and business intelligence applications, and enterprise portal server software. Our direct sales force works in
tandem with the sales and marketing groups of our partners to identify potential new clients and projects. Our partnerships with these companies enable us to
reduce our cost of sales and sales cycle times and increase win rates by leveraging our partners’ marketing efforts and endorsements.
Recruiting. We are dedicated to hiring, developing, and retaining experienced, motivated technology professionals who combine a depth of
understanding of current Internet and legacy technologies with the ability to implement complex and cutting-edge solutions.
Our recruiting efforts are an important element of our continuing operations and future growth. We generally target technology professionals with
extensive experience and demonstrated expertise. To attract technology professionals, we use a broad range of sources including on-staff recruiters, outside
recruiting firms, internal referrals, other technology companies and technical associations, and the Internet. After initially identifying qualified candidates, we
conduct an extensive screening and interview process.
4
Retention. We believe that our focus on a core set of business-driven technology solutions, applications, and software platforms and our
commitment to career development through continued training and advancement opportunities makes us an attractive career choice for experienced
professionals. Because our strategic partners are established and emerging market leaders, our technology colleagues have an opportunity to work with
cutting-edge information technology. We foster professional development by training our technology colleagues in the skills critical to successful consulting
engagements such as implementation methodology and project management. We believe in promoting from within whenever possible. In addition to an
annual review process that identifies near-term and longer-term career goals, we make a professional development plan available to assist our colleagues with
assessing their skills and developing a detailed action plan for guiding their career development.
Training. To ensure continued development of our technical staff, we place a priority on training. We offer extensive training for our colleagues
around industry-leading technologies. We utilize our education practice to provide continuing education and professional development opportunities for our
colleagues.
Compensation. Our employees have a compensation model that includes base salary and an incentive compensation component. Our tiered
incentive compensation plans help us reach our overall goals by rewarding individuals for their influence on key performance factors. Key performance
metrics include client satisfaction, revenues generated, utilization, profit, and personal skills growth. Senior level employees are eligible to receive restricted
stock awards, which generally vest ratably over a minimum three year period.
Company Wide Practice (CWP) Leaders. Our CWP leadership performs a critical role in maintaining our technology leadership. Consisting of key
employees from several practice areas, the CWP leadership assesses new technologies, partnership opportunities, and serves as lead internal subject matter
experts for their respective domain. The CWP leaders also coordinate thought leadership activities, including white paper authorship and publication and
speaking engagements by our colleagues. Finally, the CWP team identifies services opportunities between and among our strategic partners’ products,
oversees our quality assurance programs, and assists in acquisition-related technology due diligence.
Culture
The Perficient Promise. We have developed the “Perficient Promise,” which consists of the following six simple commitments our colleagues make
to each other:
• we believe in long-term client and vendor relationships built on investment in innovative solutions, delivering more value than the
competition, and a commitment to excellence;
• we believe in growth and profitability and building meaningful scale;
• we believe each of us is ultimately responsible for our own career development and has a commitment to mentor others;
• we believe that Perficient has an obligation to invest in our consultants’ training and education;
• we believe the best career development comes on the job; and
• we love challenging new work opportunities.
We take these commitments seriously because we believe that we can succeed only if the Perficient Promise is kept.
General Information
Our stock is traded on The Nasdaq Global Select Market under the symbol “PRFT.” Our website can be visited at www.perficient.com. We make
available free of charge through our website our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments
to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (“Exchange Act”) as soon as reasonably
practicable after we electronically file such material, or furnish it to, the Securities and Exchange Commission. The information contained or incorporated in
our website is not part of this document.
Item 1A.
Risk Factors.
You should carefully consider the following risk factors together with the other information contained in or incorporated by reference into this
annual report before you decide to buy our common stock. If any of these risks actually occur, our business, financial condition, operating results, or cash
flows could be materially and adversely affected. This could cause the trading price of our common stock to decline and you may lose part or all of your
investment.
5
Risks Related to Our Business
Our results of operations could be adversely affected by volatile, negative or uncertain economic conditions and the effects of these conditions on our
clients’ businesses and levels of business activity.
Our results of operations are affected by the levels of business activities of our clients, which can be affected by economic conditions in the United
States and worldwide. Volatile, negative or uncertain economic conditions in our significant markets could undermine business confidence, both in those
markets and other markets and cause our clients to reduce or defer their spending on new technologies or initiatives or terminate existing contracts, which
would negatively affect our business. Growth in markets we serve could be at a slow rate, or could stagnate, for an extended period of time. Differing
economic conditions and patterns of economic growth and contraction in the geographical regions in which we operate and the industries we serve may affect
demand for our services. A material portion of our revenues and profitability is derived from our clients in North America. Weakening in this market as a
result of high government deficits, credit downgrades or otherwise, could have a material adverse effect on our results of operations. Ongoing economic
volatility and uncertainty affects our business in a number of other ways, including making it more difficult to accurately forecast client demand beyond the
short term and effectively build our revenue and resource plans, particularly in consulting. This could result, for example, in us not having the level of
appropriate personnel where they are needed, and could have a significant negative impact on our results of operations.
A significant portion of our revenue is dependent upon building long-term relationships with our clients and our operating results could suffer if we
fail to maintain these relationships.
Our professional services agreements with clients are, in most cases, terminable on 10 to 30 days’ notice. A client may choose at any time to use
another consulting firm, choose to perform services we provide through their own internal resources, choose not to retain us for additional stages of a project
that involves multiple stages, or try to renegotiate the terms of its contract or cancel or delay additional planned work. Terminations, cancellations, or delays
could result from factors that are beyond our control and unrelated to our work product or the progress of the project, including the business or financial
conditions of the client, changes in ownership or management at our clients, and changes in client strategies, the economy, or markets generally. When
contracts are terminated, we lose the anticipated revenues and might not be able to replace, or it may take significant time to replace, the lost revenue with
other work or eliminated associated costs. Consequently, our results of operations in subsequent periods could be materially lower than expected.
Additionally, termination of a relationship with a significant client or with a group of clients that account for a significant portion of our revenues could
adversely affect our revenues and results of operations.
We may not be able to attract and retain information technology consulting professionals, which could affect our ability to compete effectively.
Our success depends, in large part, upon our ability to attract, train, retain, motivate, manage, and effectively utilize highly skilled information
technology consulting professionals. There is often considerable competition for qualified personnel in the information technology services industry.
Additionally, our technology colleagues are primarily at-will employees. We also use independent subcontractors where appropriate to supplement our
employee capacity. Failure to retain highly skilled technology professionals or hire qualified independent subcontractors would impair our ability to
adequately manage staff and implement our existing projects and to bid for or obtain new projects, which in turn would adversely affect our operating results.
Our success depends on attracting and retaining senior management and key personnel.
The information technology services industry is highly specialized and the competition for qualified management and key personnel is intense. We
believe that our success depends on retaining our senior management team and key technical and business consulting personnel. Retention is particularly
important in our business as personal relationships are a critical element of obtaining and maintaining strong relationships with our clients. In addition, as we
grow our business, our need for senior experienced management and implementation personnel increases. If a significant number of these individuals resign,
or if we are unable to attract top talent, our level of management, technical, marketing, and sales expertise could diminish or otherwise be insufficient for our
growth. We may be unable to achieve our revenues and operating performance objectives unless we can attract and retain technically qualified and highly
skilled sales, technical, business consulting, marketing, and management personnel. These individuals would be difficult to replace, and losing them could
seriously harm our business.
The market for the information technology consulting services we provide is competitive, has low barriers to entry, and is becoming increasingly
consolidated, which may adversely affect our market position.
The market for the information technology consulting services we provide is competitive, rapidly evolving, and subject to rapid technological
change. In addition, there are relatively low barriers to entry into this market and therefore new entrants may compete with us in the future. For example, due
to the rapid changes and volatility in our market, many well-capitalized companies, including some of our partners, that have focused on sectors of the
software and services industry that are not competitive with our business may refocus their activities and deploy their resources to be competitive with us.
6
A significant amount of information technology services are being provided by lower-cost non-domestic resources. The increased utilization of
these resources for U.S.-based projects could result in lower revenues and margins for U.S.-based information technology companies. Our ability to compete
utilizing higher-cost domestic resources and/or our ability to procure comparably priced offshore resources could adversely impact our results of operations
and financial condition.
Our future financial performance will depend, in large part, on our ability to establish and maintain an advantageous market position. We currently
compete with regional and national information technology consulting firms and, to a limited extent, offshore service providers and in-house information
technology departments. Many of the larger regional and national information technology consulting firms have substantially longer operating histories, more
established reputations and potential vendor relationships, greater financial resources, sales and marketing organizations, market penetration, and research and
development capabilities, as well as broader product offerings, greater market presence, and name recognition. We may face increasing competitive pressures
from these competitors. This may place us at a disadvantage to our competitors, which may harm our ability to grow, maintain revenues, or generate net
income.
In recent years, there has been consolidation in our industry and we expect that there will be additional consolidation in the future. As a result of
this consolidation, we expect that we will increasingly compete with larger firms that have broader product offerings and greater financial resources than we
have. We believe that this competition could have a negative effect on our marketing, distribution and reselling relationships, pricing of services and products,
and our product development budget and capabilities. One or more of our competitors may develop and implement methodologies that result in superior
productivity and price reductions without adversely affecting their profit margins. In addition, competitors may win client engagements by significantly
discounting their services in exchange for a client’s promise to purchase other goods and services from the competitor, either concurrently or in the future.
These activities may potentially force us to lower our prices and suffer reduced operating margins. Any of these negative effects could significantly impair our
results of operations and financial condition. We may not be able to compete successfully against new or existing competitors.
We could have liability or our reputation could be damaged if we do not protect client data or information systems or if our information systems are
breached.
We are dependent on information technology networks and systems to process, transmit, and store electronic information and to communicate
among our locations and with our partners and clients. Security breaches of this infrastructure could lead to shutdowns or disruptions of our systems and
potential unauthorized disclosure of confidential information. We are also required at times to manage, utilize, and store sensitive or confidential client or
employee data. As a result, we are subject to numerous U.S. and foreign jurisdiction laws and regulations designed to protect this information, such as various
U.S. federal and state laws governing the protection of individually identifiable information. If any person, including any of our employees, negligently
disregards or intentionally breaches our established controls with respect to such data or otherwise mismanages or misappropriates that data, we could be
subject to monetary damages, fines, and/or criminal prosecution. Unauthorized disclosure of sensitive or confidential client or employee data, whether through
systems failure, employee negligence, fraud or misappropriation could damage our reputation and cause us to lose clients. Similarly, unauthorized access to or
through our information systems or those we develop for our clients, whether by our employees or third parties, could result in negative publicity, legal
liability, and damage to our reputation.
International operations subject us to additional political and economic risks that could have an adverse impact on our business.
We maintain a global development center in Hangzhou, China and a technology consulting recruiting and development facility in Chennai,
India. We are subject to certain risks related to expanding our presence into non-U.S. regions, including risks related to complying with a wide variety of
national and local laws, restrictions on the import and export of certain technologies, and multiple and possibly overlapping tax structures. In addition, we
may face competition from companies that may have more experience with operations in such countries or with international operations generally. We may
also face difficulties integrating new facilities in different countries into our existing operations, as well as integrating employees that we hire in different
countries into our existing corporate culture.
Furthermore, there are risks inherent in operating in and expanding into non-U.S. regions, including, but not limited to:
• political and economic instability;
• global health conditions and potential natural disasters;
• unexpected changes in regulatory requirements;
• international currency controls and exchange rate fluctuations;
• reduced protection for intellectual property rights in some countries; and
• additional vulnerability from terrorist groups targeting American interests abroad.
Any one or more of the factors set forth above could have a material adverse effect on our international operations and, consequently, on our
business, financial condition, and operating results.
7
Immigration restrictions related to H1-B visas could hinder our growth and adversely affect our business, financial condition and results of
operations.
Approximately 16% of our billable workforce is comprised of skilled foreign nationals holding H1-B visas. We also own a recruiting and
development facility in Chennai, India to continue to grow our base of H1-B foreign national colleagues. The H1-B visa classification enables us to hire
qualified foreign workers in positions that require the equivalent of at least a bachelor’s degree in the U.S. in a specialty occupation such as technology
systems engineering and analysis. The H1-B visa generally permits an individual to work and live in the U.S. for a period of three to six years, with some
extensions available. The number of new H1-B petitions approved in any federal fiscal year is limited, making the H1-B visas necessary to bring foreign
employees to the U.S. unobtainable in years in which the limit is reached. If we are unable to obtain all of the H1-B visas for which we apply, our growth
may be hindered.
Our results of operations could materially suffer if we are not able to obtain favorable pricing.
If we are not able to obtain favorable pricing for our services, our revenues and profitability could materially suffer. The rates we are able to charge
for our services are affected by a number of factors, including:
• general economic and political conditions;
• our ability to differentiate, and/or clearly convey the value of, our services;
• the pricing practices of our competitors, including the aggressive use by our competitors of offshore resources to provide lower-cost service
delivery capabilities, or the introduction of new services or products by our competitors;
• our clients’ desire to reduce their costs;
• our ability to charge higher prices where market demand or the value of our services justifies it;
• our ability to accurately estimate, attain, and sustain contract revenues, margins, and cash flows over long contract periods; and
• procurement practices of clients and their use of third-party advisors.
If our negotiated fees do not accurately anticipate the cost and complexity of performing our work, then our contracts could be unprofitable.
We negotiate fees with our clients utilizing a range of pricing structures and conditions, including time and materials and fixed fee contracts. Our
fees are highly dependent on our internal forecasts and predictions about our projects and the marketplace, which might be based on limited data and could
turn out to be inaccurate. If we do not accurately estimate the costs and timing for completing projects, our contracts could prove unprofitable for us or yield
lower profit margins than anticipated. We could face greater risk when negotiating fees for our contracts that involve the coordination of operations and
workforces in multiple locations and/or utilizing workforces with different skillsets and competencies. There is a risk that we will underprice our contracts,
fail to accurately estimate the costs of performing the work, or fail to accurately assess the risks associated with potential contracts. In particular, any
increased or unexpected costs, delays or failures to achieve anticipated cost savings, or unexpected risks we encounter in connection with the performance of
this work, including those caused by factors outside our control, could make these contracts less profitable or unprofitable, which could have an adverse effect
on our profit margin.
We may face potential liability to customers if our customers’ systems fail.
Our technology solutions are often critical to the operation of our customers’ businesses and provide benefits that may be difficult to quantify. If
one of our customers’ systems fails, the customer could make a claim for substantial damages against us, regardless of our responsibility for that failure. The
limitations of liability set forth in our contracts may not be enforceable in all instances and may not otherwise protect us from liability for damages. Our
insurance coverage may not continue to be available on reasonable terms or in sufficient amounts to cover one or more large claims. In addition, a given
insurer might disclaim coverage as to any future claims. Due to the nature of our business, it is possible that we will be sued in the future. If we experience
one or more large claims against us that exceed available insurance coverage or result in changes in our insurance policies, including premium increases, the
imposition of large deductible, or co-insurance requirements, our business and financial results could suffer.
8
Our results of operations and ability to grow could be materially negatively affected if we cannot adapt and expand our services and solutions in
response to ongoing changes in technology and offerings by new entrants.
Our success depends on our ability to continue to develop and implement services and solutions that anticipate and respond to rapid and continuing changes in
technology and industry developments and offerings by new entrants to serve the evolving needs of our clients. Current areas of significant change include
mobility, cloud-based computing and the processing and analyzing of large amounts of data. Technological developments such as these may materially affect
the cost and use of technology by our clients. Our growth strategy focuses on responding to these types of developments by driving innovation for our core
business as well as through new business initiatives beyond our core business that will enable us to differentiate our services and solutions. If we do not
sufficiently invest in new technology and industry developments, or if we do not make the right strategic investments to respond to these developments and
successfully drive innovation, our services and solutions, our results of operations, and our ability to develop and maintain a competitive advantage and
continue to grow could be negatively affected.
In addition, we operate in a quickly evolving environment, in which there currently are, and we expect will continue to be, new technology entrants. New
services or technologies offered by competitors or new entrants may make our offerings less differentiated or less competitive, when compared to other
alternatives, which may adversely affect our results of operations.
Our services may infringe upon the intellectual property rights of others.
We cannot be sure that our services do not infringe on the intellectual property rights of third parties, and we may have infringement claims
asserted against us. These claims may harm our reputation, cause our management to expend significant time in connection with any defense, and cost us
money. We may be required to indemnify clients for any expense or liabilities they incur resulting from claimed infringement and these expenses could
exceed the amounts paid to us by the client for services we have performed. Any claims in this area, even if won by us, can be costly, time-consuming, and
harmful to our reputation.
We have only a limited ability to protect our intellectual property rights, which are important to our success.
Our success depends, in part, upon our ability to protect our proprietary methodologies and other intellectual property. Existing laws of some
countries in which we provide services or solutions might offer only limited protection of our intellectual property rights. We rely upon a combination of trade
secrets, confidentiality policies, nondisclosure, and other contractual arrangements to protect our intellectual property rights. The steps we take in this regard
might not be adequate to prevent or deter infringement or other misappropriation of our intellectual property, and we might not be able to detect unauthorized
use of, or take appropriate and timely steps to enforce, our intellectual property rights.
Depending on the circumstances, we might need to grant a specific client greater rights in intellectual property developed in connection with a
contract than we otherwise generally do. In certain situations, we might forego all rights to the use of intellectual property we help create, which would limit
our ability to reuse that intellectual property for other clients. Any limitation on our ability to provide a service or solution could cause us to lose revenue-
generating opportunities and require us to incur additional expenses to develop new or modified solutions for future projects.
Our ability to attract and retain business may depend on our reputation in the marketplace.
Our services are marketed to clients and prospective clients based on a number of factors. Our corporate reputation is a significant factor in our
clients’ evaluation of whether to engage our services. We believe the Perficient brand name and our reputation are important corporate assets that help
distinguish our services from those of our competitors and also contribute to our efforts to recruit and retain talented employees. However, our corporate
reputation is potentially susceptible to material damage by events such as disputes with clients, information technology security breaches or service outages,
or other delivery failures. Similarly, our reputation could be damaged by actions or statements of current or former clients, competitors, vendors, as well as
members of the investment community and the media. There is a risk that negative information could adversely affect our business. Damage to our reputation
could be difficult and time-consuming to repair, could make potential or existing clients reluctant to select us for new engagements, resulting in a loss of
business, and could adversely affect our efforts with regard to the recruitment and retention of employees and subcontractors. Damage to our reputation could
also reduce the value and effectiveness of the Perficient brand name and could reduce investor confidence in us, materially adversely affecting our share price.
The loss of one or more of our significant software vendors would have a material and adverse effect on our business and results of operations.
Our business relationships with software vendors enable us to reduce our cost of sales and increase win rates through leveraging our vendors’
marketing efforts and strong vendor endorsements. The loss of one or more of these relationships and endorsements could increase our sales and marketing
costs, lead to longer sales cycles, harm our reputation and brand recognition, reduce our revenues, and adversely affect our results of operations.
9
Pursuing and completing potential acquisitions could divert management's attention and financial resources and may not produce the desired
business results.
If we pursue any acquisition, our management could spend a significant amount of time and financial resources to pursue the potential acquisition.
To pay for an acquisition, we might use capital stock, cash, or a combination of both. Alternatively, we may borrow money from a bank or other lender. If we
use capital stock, our stockholders will experience dilution. If we use cash or debt financing, our financial liquidity may be reduced and the interest on any
debt financing could adversely affect our results of operations. From an accounting perspective, an acquisition that does not perform as well as originally
anticipated may involve amortization or the impairment of significant amounts of intangible assets that could adversely affect our results of operations.
Despite the investment of these management and financial resources, and completion of due diligence with respect to these efforts, an acquisition
may not produce the anticipated revenues, earnings, or business synergies for a variety of reasons, including:
• the failure of management and acquired services personnel to perform as expected;
• the acquisition of fixed fee customer agreements that require more effort than anticipated to complete;
• the risks of entering markets in which we have no, or limited, prior experience, including offshore operations in countries in which we have
no prior experience;
• the failure to identify or adequately assess any undisclosed or potential liabilities or problems of the acquired business including legal
liabilities;
• the failure of the acquired business to achieve the forecasts we used to determine the purchase price; or
• the potential loss of key personnel of the acquired business.
These difficulties could disrupt our ongoing business, distract our management and colleagues, increase our expenses, and materially and adversely
affect our results of operations.
We may not be successful at identifying, acquiring, or integrating other businesses.
We have continued our disciplined acquisition strategy designed to enhance our capabilities, expand in emerging markets or develop new services
and solutions. We may not successfully identify suitable acquisition candidates, succeed in completing targeted transactions, or achieve desired results of
operations. Furthermore, we face risks in successfully integrating any businesses we acquire. We might need to dedicate additional management and other
resources, and our organizational structure could make it difficult for us to efficiently integrate acquired businesses into our ongoing operations and assimilate
employees of those businesses into our culture and operations. Accordingly, we might fail to realize the expected benefits or strategic objectives of any
acquisition we make. We might not achieve our expected return on investment, or may lose money. If we are unable to complete the number and kind of
acquisitions for which we plan, or if we are inefficient or unsuccessful at integrating any acquired businesses into our operations, we may not be able to
achieve our planned rates of growth or improve our market share, profitability, or competitive position in specific markets or services.
Our profitability could suffer if we are not able to control our costs.
Our ability to control our costs and improve our efficiency affects our profitability. Since the continuation of pricing pressures could result in
permanent changes in pricing policies and delivery capabilities, we must continuously improve our management of costs. Our short-term cost reduction
initiatives, which focus primarily on reducing variable costs, might not be sufficient to deal with all pressures on our pricing. Our long-term cost-reduction
initiatives, which focus on reductions in costs for service delivery and infrastructure, rely upon our successful introduction and coordination of multiple
geographic and competency workforces and a growing focus on our offshore capabilities. As we increase the number of our colleagues and execute our
strategies for growth, we might not be able to manage significantly larger and more diverse workforces, control our costs or improve our efficiency, and our
profitability could be negatively affected.
Many of our contracts include performance payments that link some of our fees to the attainment of performance or business targets. This could
increase the variability of our revenues and margins.
Many of our contracts include performance clauses that require us to achieve agreed-upon performance standards or milestones. If we fail to satisfy
these measures, it could reduce our fees under the contracts, increase the cost to us of meeting performance standards or milestones, delay expected payments
or subject us to potential damage claims under the contract terms. These provisions could increase the variability in revenues and margins earned on those
contracts.
10
Changes in our level of taxes, and tax audits, investigations and proceedings could have a material adverse effect on our results of operations and
financial condition.
We are subject to income taxes in numerous jurisdictions. We calculate and provide for income taxes in each tax jurisdiction in which we operate.
Tax accounting often involves complex matters and judgment is required in determining our corporate provision for income taxes and other tax liabilities. We
are subject to ongoing tax audits in various jurisdictions. Tax authorities may disagree with our judgments. We regularly assess the likely outcomes of these
audits in order to determine the appropriateness of our tax liabilities. However, our judgments might not be sustained as a result of these audits, and the
amounts ultimately paid could be different from the amounts previously recorded. In addition, our effective tax rate in the future could be adversely affected
by changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, and changes in
tax laws. Furthermore, changes in tax laws, treaties, or regulations, or their interpretation or enforcement, may be unpredictable and could materially
adversely affect our tax position. Any of these occurrences could have a material adverse effect on our results of operations and financial condition.
If we do not effectively manage expected future growth, our results of operations and cash flows could be adversely affected.
Our ability to operate profitably with positive cash flows depends partially on how effectively we manage our expected future growth. In order to
create the additional capacity necessary to accommodate an increase in demand for our services, we may need to implement new or upgraded operational and
financial systems, procedures and controls, open new offices, and hire additional colleagues. Implementation of these new or upgraded systems, procedures,
and controls may require substantial management efforts and our efforts to do so may not be successful. The opening of new offices (including international
locations) or the hiring of additional colleagues may result in idle or underutilized capacity. We continually assess the expected capacity and utilization of our
offices and colleagues. We may not be able to achieve or maintain optimal utilization of our offices and colleagues. If demand for our services does not meet
our expectations, our revenues and cash flows may not be sufficient to offset these expenses and our results of operations and cash flows could be adversely
affected.
If we are unable to collect our receivables or unbilled services, our results of operations, financial condition, and cash flows could be adversely
affected.
Our business depends on our ability to successfully obtain payment from our clients of the amounts they owe us for work performed. We evaluate
the financial condition of our clients and usually bill and collect on relatively short cycles. In limited circumstances, we also extend financing to our clients.
We maintain allowances against receivables and unbilled services. Actual losses on client balances could differ from those that we currently anticipate and as
a result we might need to adjust our allowances. There is no guarantee that we will accurately assess the creditworthiness of our clients. Macroeconomic
conditions could also result in financial difficulties for our clients, and as a result could cause clients to delay payments to us, request modifications to their
payment arrangements that could increase our receivables balance, or default on their payment obligations to us. Recovery of client financing and timely
collection of client balances also depends on our ability to complete our contractual commitments and bill and collect our contracted revenues. If we are
unable to meet our contractual requirements, we might experience delays in collection of and/or be unable to collect our client balances, and if this occurs, our
results of operations, financial condition, and cash flows could be adversely affected. In addition, if we experience an increase in the time to bill and collect
for our services, our cash flows could be adversely affected.
Our quarterly operating results may be volatile and may cause our stock price to fluctuate.
Our quarterly revenues, expenses, and operating results have varied in the past and could vary in the future, which could lead to volatility in our
stock price. In addition, many factors affecting our operating results are outside of our control, such as:
• demand for software and services;
• customer budget cycles;
• changes in our customers’ desire for our partners’ products and our services;
• pricing changes in our industry; and
• government regulation and legal developments regarding the use of the Internet.
As a result, if we experience unanticipated changes in the number or nature of our projects or in our employee utilization rates, we could experience
large variations in quarterly operating results.
11
Our revenues may fluctuate quarterly due to seasonality or timing of completion of projects.
We may experience seasonal fluctuations in our services and software revenues. We expect that services revenues in the fourth quarter of a given
year may typically be lower as there are fewer billable days as a result of vacations and holidays. Our software revenues may be higher in the fourth quarter of
a given year as procurement policies of our clients may result in higher technology spending towards the end of budget cycles. While we seek to
counterbalance periodic fluctuations in revenues, we may not be able to avoid declines in services revenues or increases in software revenues. Our inability to
counterbalance these seasonal trends may materially affect our quarter-to-quarter revenues, margins and operating results.
Our services gross margins are subject to fluctuations as a result of variances in utilization and billing rates.
Our services gross margins are affected by trends in the utilization rate of our colleagues, defined as the percentage of our colleagues’ time billed to
customers divided by the total available hours in a period, and in the billing rates we charge our clients. Our operating expenses, including salary, rent, and
administrative expenses, are relatively fixed and cannot be reduced on short notice to compensate for unanticipated variations in the number or size of projects
in process. If a project ends earlier than scheduled, we may need to redeploy our project personnel. Any resulting non-billable time may adversely affect our
gross margins.
The average billing rates for our services may decline due to rate pressures from significant customers and other market factors, including
innovations and average billing rates charged by our competitors. If there is a sustained downturn in the U.S. economy or in the information technology
services industry, rate pressure may increase. Also, our average billing rates will decline if we acquire companies with lower average billing rates than ours.
To sell our products and services at higher prices, we must continue to develop and introduce new services and products that incorporate new technologies or
high-performance features. If we experience pricing pressures or fail to develop new services, our revenues and gross margins could decline, which could
harm our business, financial condition, and results of operations.
We may not be able to maintain profitability.
Although we have been profitable for the past eight years, we may not be able to sustain or increase profitability on a quarterly or annual basis in
the future and in fact could experience decreased profitability. If we fail to meet public market analysts’ and investors’ expectations, the price of our common
stock will likely fall.
Risks Related to Ownership of Our Common Stock
Our stock price has been volatile and may continue to fluctuate widely.
Our common stock is traded on The Nasdaq Global Select Market under the symbol “PRFT.” Our common stock price has been volatile and may
continue to fluctuate widely as a result of announcements of new services and products by us or our competitors, quarterly variations in operating results, the
gain or loss of significant customers, and changes in public market analysts’ estimates and market conditions for information technology consulting firms and
other technology stocks in general.
We periodically review and consider possible acquisitions of companies that we believe will contribute to our long-term objectives. In addition,
depending on market conditions, liquidity requirements, and other factors, from time to time we consider accessing the capital markets. These events may also
affect the market price of our common stock.
Our officers, directors, and 5% and greater stockholders own a large percentage of our voting securities and their interests may differ from other
stockholders.
Our executive officers, directors, and 5% and greater stockholders beneficially own or control approximately 24% of the voting power of our
common stock. This concentration of voting power of our common stock may make it difficult for our other stockholders to successfully approve or defeat
matters that may be submitted for action by our stockholders. It may also have the effect of delaying, deterring, or preventing a change in control of our
company.
12
We may need additional capital in the future, which may not be available to us. The raising of any additional capital may dilute your ownership
percentage in our stock.
We had unrestricted cash, cash equivalents, and investments totaling $9.7 million and a borrowing capacity of $50 million, and a commitment to
increase our borrowing capacity by $25 million, at December 31, 2011. We intend to continue to make investments to support our business growth and may
require additional funds if our capital is insufficient to pursue business opportunities and respond to business challenges. Accordingly, we may need to engage
in equity or debt financings to secure additional funds. If we raise additional funds through further issuances of equity or convertible debt securities, our
existing stockholders could suffer dilution, and any new equity securities we issue could have rights, preferences, and privileges superior to those of holders
of our common stock. Any debt financing secured by us in the future could involve restrictive covenants relating to our capital raising activities and other
financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential
acquisitions. In addition, we may not be able to obtain additional financing on terms favorable to us, if at all. If we are unable to obtain adequate financing or
financing on terms satisfactory to us our ability to continue to support our business growth and to respond to business challenges could be significantly
limited.
It may be difficult for another company to acquire us, and this could depress our stock price.
In addition to the voting securities held by our officers, directors, and 5% and greater stockholders, provisions contained in our certificate of
incorporation, bylaws, and Delaware law could make it difficult for a third party to acquire us, even if doing so would be beneficial to our stockholders. Our
certificate of incorporation and bylaws may discourage, delay, or prevent a merger or acquisition that a stockholder may consider favorable by authorizing the
issuance of “blank check” preferred stock. In addition, provisions of the Delaware General Corporation Law also restrict some business combinations with
interested stockholders. These provisions are intended to encourage potential acquirers to negotiate with us and allow the Board of Directors the opportunity
to consider alternative proposals in the interest of maximizing stockholder value. However, these provisions may also discourage acquisition proposals, or
delay or prevent a change in control, which could harm our stock price.
Item 1B. Unresolved Staff Comments.
None.
Item 2. Properties.
Our principal executive operations are located in St. Louis, Missouri where we have leased approximately 5,100 square feet for these functions. We
lease 26 offices in major markets throughout North America, China, and India. We do not own any real property. We believe our facilities are adequate to
meet our needs in the near future.
Item 3. Legal Proceedings.
We are involved from time to time in various legal proceedings arising in the ordinary course of business. Although the outcome of lawsuits or
other proceedings cannot be predicted with certainty and the amount of any liability that could arise with respect to such lawsuits or other proceedings cannot
be predicted accurately, we do not expect any currently pending matters to have a material adverse effect on the financial position, results of operations, or
cash flows of our company.
Item 4. Reserved.
13
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Our common stock is quoted on The Nasdaq Global Select Market under the symbol “PRFT.” The following table sets forth, for the periods
indicated, the high and low sale prices per share of our common stock as reported on The Nasdaq Global Select Market since January 1, 2010.
PART II
Year Ending December 31, 2011:
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Year Ending December 31, 2010:
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
$
$
High
Low
$
$
13.16
12.76
11.32
10.32
12.01
12.99
9.71
13.00
10.68
9.22
7.09
6.41
8.50
8.91
8.21
9.17
On February 27, 2012, the last reported sale price of our common stock on The Nasdaq Global Select Market was $12.06 per share. There were
approximately 323 stockholders of record of our common stock as of February 27, 2012, including 205 restricted account holders.
We have never declared or paid any cash dividends on our common stock and do not anticipate paying cash dividends in the foreseeable future. Our
credit facility currently prohibits the payment of cash dividends without the prior written consent of the lenders.
Information on our Equity Compensation Plan has been included at Part III, Item 11 of this Form 10-K.
Unregistered Sales of Securities
Our acquisition of speakTECH in December 2010 included an earnings-based contingency, pursuant to which additional consideration could be
realized by speakTECH if certain earnings-based requirements were met. This contingency was achieved during 2011 and, as such, we paid the additional
consideration on December 10, 2011. In connection with this payment, we issued 383,101 unregistered shares of our common stock to speakTECH. We
relied on Section 4(2) and Regulation D of the Securities Act of 1933, as amended, as the basis for exemption from registration. These shares were issued to
speakTECH in a privately negotiated transaction and not pursuant to a public solicitation.
Issuer Purchases of Equity Securities
Prior to 2011, our Board of Directors authorized the repurchase of up to $50.0 million of our common stock. In 2011, the Board of Directors
authorized the repurchase of up to an additional $10.0 million of our common stock for a total repurchase program of $60.0 million at December 31,
2011. The repurchase program expires June 30, 2012. The program could be suspended or discontinued at any time, based on market, economic, or business
conditions. The timing and amount of repurchase transactions will be determined by our management based on its evaluation of market conditions, share
price, and other factors.
Since the program’s inception in 2008, we have repurchased approximately $54.0 million of our outstanding common stock through December 31,
Total Number of
Shares Purchased
Average Price Paid Per
Share (1)
Total Number of Shares
Purchased as Part of
Publicly Announced Plans
or Programs
Approximate Dollar Value of Shares that
May Yet Be Purchased Under the Plans or
Programs
2011.
Period
Beginning Balance as of
October 1, 2011
October 1-31, 2011
November 1-30, 2011
December 1-31, 2011
Ending Balance as of
December 31, 2011
(1) Average price paid per share includes commission.
7,097,567 $
--
55,000
215,000
7,367,567 $
7,097,567 $
-- $
55,000 $
215,000 $
7,367,567
8,271,213
8,271,213
7,756,483
6,004,112
7.29
--
9.36
8.15
7.33
14
Item 6. Selected Financial Data.
The selected financial data presented for, and as of the end of, each of the years in the five-year period ended December 31, 2011, has been
prepared in accordance with accounting principles generally accepted in the United States. The financial data presented is not directly comparable between
periods as a result of two acquisitions in each of 2011 and in 2010 and four acquisitions in 2007.
The following data should be read in conjunction with the Consolidated Financial Statements and the Notes to Consolidated Financial Statements
appearing in Part II, Item 8, and Management’s Discussion and Analysis of Financial Condition and Results of Operations appearing in Part II, Item 7.
2011 2010
2008 2007
Year Ended December 31,
2009
(In thousands)
Income Statement Data:
$262,439 $214,952 $
Revenues
$ 81,134 $ 62,767 $
Gross margin
$ 51,672 $ 45,477 $
Selling, general and administrative
8,095 $ 4,784 $
$
Depreciation and amortization
993 $
1,249 $
Acquisition costs
$
(4) $
1,586 $
Adjustment to fair value of contingent consideration $
-- $
-- $
$
Impairment of intangible assets
$ 18,532 $ 11,517 $
Income from operations
163 $
$
Net interest income
$
Net other income (expense)
68 $
$ 18,645 $ 11,748 $
Income before income taxes
$ 10,747 $ 6,480 $
Net income
68 $
45 $
188,150 $231,488 $218,148
48,333 $ 73,502 $ 75,690
40,042 $ 47,242 $ 41,963
6,265
5,750 $
6,949 $
--
-- $
-- $
--
-- $
-- $
--
-- $
1,633 $
2,541 $ 17,678 $ 27,462
172
20
3,010 $ 17,291 $ 27,654
1,463 $ 10,000 $ 16,230
528 $
(915) $
209 $
260 $
Balance Sheet Data:
Cash, cash equivalents, and short-term investments $
Working capital
Long-term investments
Property and equipment, net
Goodwill and intangible assets, net
Total assets
Total stockholders' equity
As of December 31,
2011 2010 2009 2008 2007
(In thousands)
-- $
3,490 $
9,732 $ 24,008 $ 24,302 $ 22,909 $
8,070
$ 51,476 $ 47,632 $ 50,205 $ 56,176 $ 41,368
--
$
$
3,226
$142,166 $124,056 $111,773 $115,634 $121,339
$223,932 $207,678 $184,810 $194,247 $189,992
$198,959 $177,164 $168,348 $174,818 $165,562
2,254 $
2,355 $
-- $
2,345 $
3,652 $
1,278 $
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following summary together with the more detailed business information and consolidated financial statements and related
notes that appear elsewhere in this annual report and in the documents that we incorporate by reference into this annual report. This annual report may
contain certain “forward-looking” information within the meaning of the Private Securities Litigation Reform Act of 1995. This information involves risks
and uncertainties. Our actual results may differ materially from the results discussed in the forward-looking statements. Factors that might cause such a
difference include, but are not limited to, those discussed in “Risk Factors.”
Overview
We are an information technology consulting firm serving Forbes Global 2000 and other large enterprise companies with a primary focus on the
United States. We help our clients gain competitive advantage by using Internet-based technologies to make their businesses more responsive to market
opportunities and threats, strengthen relationships with their customers, suppliers and partners, improve productivity, and reduce information technology
costs. We design, build, and deliver business-driven technology solutions using third party software products. Our solutions include business analysis, portals
and collaboration, business integration, user experience, enterprise content management, customer relationship management, interactive design, enterprise
performance management, business process management, business intelligence, eCommerce, mobile platforms, custom applications, and technology platform
implementations, among others. Our solutions enable our clients to operate a real-time enterprise that dynamically adapts business processes and the systems
that support them to meet the changing demands of an increasingly global, Internet-driven, and competitive marketplace.
15
Services Revenues
Services revenues are derived from professional services that include developing, implementing, integrating, automating and extending business
processes, technology infrastructure, and software applications. Most of our projects are performed on a time and materials basis, while a smaller portion of
our revenues is derived from projects performed on a fixed fee basis. Fixed fee engagements represented approximately 11% of our services revenues for the
year ended December 31, 2011 compared to 13% and 11% for the years ended December 31, 2010 and 2009, respectively. For time and material projects,
revenues are recognized and billed by multiplying the number of hours our professionals expend in the performance of the project by the established billing
rates. For fixed fee projects, revenues are generally recognized using an input method based on the ratio of hours expended to total estimated hours. Amounts
invoiced and collected in excess of revenues recognized are classified as deferred revenues. On most projects, we are also reimbursed for out-of-pocket
expenses such as airfare, lodging, and meals. These reimbursements are included as a component of revenues. The aggregate amount of reimbursed expenses
will fluctuate depending on the location of our clients, the total number of our projects that require travel, and whether our arrangements with our clients
provide for the reimbursement of travel and other project related expenses.
Software and Hardware Revenues
Software and hardware revenues are derived from sales of third-party software and hardware. Revenues from sales of third-party software and
hardware are generally recorded on a gross basis provided we act as a principal in the transaction. On rare occasions, we do not meet the requirements to be
considered a principal in the transaction and act as an agent. In these cases, revenues are recorded on a net basis. Software and hardware revenues are
expected to fluctuate depending on our clients’ demand for these products.
If we enter into contracts for the sale of services and software or hardware, management evaluates whether each element should be accounted for
separately by considering the following criteria: (1) whether the deliverables have value to the client on a stand-alone basis; and (2) whether delivery or
performance of the undelivered item or items is considered probable and substantially in our control (only if the arrangement includes a general right of return
related to the delivered item). Further, for sales of software and services, management also evaluates whether the services are essential to the functionality of
the software and has fair value evidence for each deliverable. If management concluded that the separation criteria are met, then it accounts for each
deliverable in the transaction separately, based on the relevant revenue recognition policies. Generally, all deliverables of our multiple element arrangements
meet these criteria and are accounted for separately, with the arrangement consideration allocated among the deliverables using vendor specific objective
evidence of the selling price. As a result, we generally recognize software and hardware sales upon delivery to the customer and services consistent with the
policies described herein.
Further, delivery of software and hardware sales, when sold contemporaneously with services, can generally occur at varying times depending on
the specific client project arrangement. Delivery of services generally occurs over a period of time consistent with the timeline as outlined in the client
contract.
There are no significant cancellation or termination-type provisions for our software and hardware sales. Contracts for professional services provide
for a general right, to the client or us, to cancel or terminate the contract within a given period of time (generally a 10 to 30 day notice is required). The client
is responsible for any time and expenses incurred up to the date of cancellation or termination of the contract.
Cost of revenues
Cost of revenues consists primarily of cash and non-cash compensation and benefits, including bonuses and non-cash compensation related to
equity awards. Cost of revenues also includes the costs associated with subcontractors. Third-party software and hardware costs, reimbursable expenses, and
other unreimbursed project related expenses are also included in cost of revenues. Project related expenses will fluctuate generally depending on outside
factors including the cost and frequency of travel and the location of our clients. Cost of revenues does not include depreciation of assets used in the
production of revenues which are primarily personal computers, servers, and other information technology related equipment.
Gross Margins
Our gross margins for services are affected by the utilization rates of our professionals (defined as the percentage of our professionals’ time billed
to clients divided by the total available hours in the respective period), the salaries we pay our professionals, and the average billing rate we receive from our
clients. If a project ends earlier than scheduled, we retain professionals in advance of receiving project assignments, or if demand for our services declines,
our utilization rate will decline and adversely affect our gross margins. Gross margin percentages of third-party software and hardware sales are typically
lower than gross margin percentages for services, and the mix of services and software and hardware for a particular period can significantly impact our total
combined gross margin percentage for such period. In addition, gross margin for software and hardware sales can fluctuate due to pricing and other
competitive pressures.
16
Selling, General, and Administrative Expenses
Selling, general, and administrative expenses (“SG&A”) are primarily composed of sales-related costs, general and administrative salaries, stock
compensation expense, recruiting expense, office costs, bad debts, variable compensation cost, and other miscellaneous expenses. We work to minimize
selling costs by focusing on repeat business with existing clients and by accessing sales leads generated by our software vendors, most notably IBM, Oracle,
and Microsoft, whose products we use to design and implement solutions for our clients. These relationships enable us to reduce our selling costs and sales
cycle times and increase win rates through leveraging our partners’ marketing efforts and endorsements.
Plans for Growth and Acquisitions
Our goal is to continue to build one of the leading independent information technology consulting firms by expanding our relationships with
existing and new clients and through the continuation of our disciplined acquisition strategy. Our future growth plan includes expanding our business with a
primary focus on customers in the United States, both organically and through acquisitions. Given the economic conditions during 2008 and 2009 we
suspended acquisition activity pending improved visibility into the health of the economy. With the return to growth in 2010 we have resumed our disciplined
acquisition strategy as evidenced by our acquisition of Kerdock Consulting, LLC (“Kerdock”) in March 2010, speakTECH in December 2010, Exervio
Consulting, Inc. (“Exervio”) in April 2011, JCB Partners, LLC (“JCB”) in July 2011 and PointBridge Solutions, LLC in February 2012. We also intend to
further leverage our existing offshore capabilities to support our future growth and provide our clients flexible options for project delivery.
Results of Operations
The following table summarizes our results of operations as a percentage of total revenues:
Revenues:
Services revenues
Software and hardware revenues
Reimbursable expenses
Total revenues
Cost of revenues (depreciation and amortization, shown separately below):
Project personnel costs
Software and hardware costs
Reimbursable expenses
Other project related expenses
Total cost of revenues
Services gross margin
Software and hardware gross margin
Total gross margin
Selling, general and administrative
Depreciation and amortization
Acquisition costs
Adjustment to fair value of contingent consideration
Income from operations
Net interest income
Net other income
Income before income taxes
Provision for income taxes
Net income
17
2011
2010
2009
88.8%
6.0
5.2
100.0
86.1%
9.6
4.3
100.0
88.4%
6.9
4.7
100.0
56.9
5.2
5.2
1.8
69.1
33.9
13.5
30.9
19.7
3.1
0.5
0.5
7.1
0.0
0.0
7.1
3.0
4.1%
55.5
8.4
4.3
2.6
70.8
32.6
11.9
29.2
21.2
2.2
0.5
0.0
5.3
0.1
0.0
5.4
2.5
2.9%
61.0
6.2
4.7
2.4
74.3
28.2
10.2
25.7
21.3
3.0
0.0
0.0
1.4
0.1
0.1
1.6
0.8
0.8%
Year Ended December 31, 2011 Compared to Year Ended December 31, 2010
Revenues. Total revenues increased 22% to $262.4 million for the year ended December 31, 2011 from $215.0 million for the year ended December
31, 2010.
Services
Revenues
Software and
Hardware
Revenues
Reimbursable
Expenses
Total Revenues
For the Year Ended
December
31, 2011
Financial Results
(in thousands)
For the Year Ended
December
31, 2010
Explanation for Increases Over Prior Year Period
(in thousands)
Total Increase/
(Decrease) Over Prior
Year Period
Increase Attributable to
Acquired Companies*
Increase/ (Decrease)
Attributable to Base
Business**
$
233,166
$
185,173
$
47,993
$
38,014
15,624
13,649
262,439
$
20,556
9,223
214,952
$
(4,932)
4,426
47,487
$
$
26
931
38,971
$
$
9,979
(4,958)
3,495
8,516
* Defined as revenues generated by professionals from companies acquired during 2010 and 2011.
**Defined as businesses owned as of January 1, 2010.
Services revenues increased 26% to $233.2 million for the year ended December 31, 2011 from $185.2 million for the year ended December 31,
2010. The increase in services revenues is primarily due to acquisitions during 2010 and 2011. Services revenues attributable to our base business increased
$10.0 million while services revenues attributable to acquired companies increased $38.0 million, resulting in a total increase of $48.0 million.
Software and hardware revenues decreased 24% to $15.6 million for the year ended December 31, 2011 from $20.6 million for the year ended
December 31, 2010 due to the decrease in the volume and magnitude of software renewals as compared to 2010. Reimbursable expenses increased 48% to
$13.6 million for the year ended December 31, 2011 from $9.2 million for the year ended December 31, 2010 primarily as a result of the increase in services
revenue. We did not realize any profit on reimbursable expenses.
Cost of Revenues. Cost of revenues increased 19% to $181.3 million for the year ended December 31, 2011 from $152.2 million for the year ended
December 31, 2010. The increase in cost of revenues was directly related to the increase in revenues, specifically the increase in headcount to support the
Company’s ongoing revenue-producing projects. The average number of colleagues performing services, including subcontractors, increased to 1,317 for the
year ended December 31, 2011 from 1,065 for the year ended December 31, 2010.
Gross Margin. Gross margin increased 29% to $81.1 million for the year ended December 31, 2011 from $62.8 million for the year ended
December 31, 2010. Gross margin as a percentage of revenues increased to 30.9% for the year ended December 31, 2011 from 29.2% for the year ended
December 31, 2010, primarily due to an increase in services gross margin. Services gross margin, excluding reimbursable expenses, increased to 33.9% or
$79.0 million for the year ended December 31, 2011 from 32.6% or $60.3 million for the year ended December 31, 2010. The increase in services gross
margin was primarily a result of a higher average bill rate. The average bill rate for our professionals, excluding subcontractors, increased to $116 per hour for
the year ended December 31, 2011 from $106 per hour for the year ended December 31, 2010, primarily due to the improved pricing opportunities as the
market for our services continues to improve. The average bill rate for the year ended December 31, 2011, excluding China, was $125 per hour compared to
$119 per hour for the year ended December 31, 2010.
Selling, General and Administrative. SG&A expenses increased 14% to $51.7 million for the year ended December 31, 2011 from $45.5 million for
the year ended December 31, 2010 due primarily to fluctuations in expenses as detailed in the following table:
Selling, General and Administrative Expense (in millions)
Sales-related costs
Salary expense
Stock compensation expense
Recruiting expense
Bad debt expense
Variable compensation expense
Other
Total
For the Year Ended
December 31, 2011
For the Year Ended
December 31, 2010
Increase
/ (Decrease)
14.9 $
11.3
6.9
3.9
1.0
0.7
13.0
51.7 $
11.9 $
9.2
8.6
2.3
--
2.3
11.2
45.5 $
3.0
2.1
(1.7)
1.6
1.0
(1.6)
1.8
6.2
$
$
18
SG&A expenses, as a percentage of revenues, decreased slightly to 19.7% for the year ended December 31, 2011 from 21.2% for the year ended
December 31, 2010. Bonus expense decreased as a percentage of revenues compared to the prior year period as a result of more aggressive bonus targets in
2011. Stock compensation expense decreased as a percentage of revenues due to less expense recorded in 2011 as a result of the separation of our former
Chairman of the Board of Directors in the fourth quarter 2010. These decreases were offset by an increase in recruiting and bad debt expense as a percentage
of revenues, which were directly related to the increase in headcount and sales, respectively.
Depreciation. Depreciation expense increased 111% to $1.8 million for the year ended December 31, 2011 from $0.8 million for the year ended
December 31, 2010. The increase in depreciation expense was mainly attributable to increased capital expenditures during 2010 and 2011 and the increase in
leasehold improvements related to the expansion of our facility in China. Depreciation expense as a percentage of services revenue, excluding reimbursable
expenses, was 0.8% and 0.4% for the year ended December 31, 2011 and 2010, respectively.
Amortization. Amortization expense increased 60% to $6.3 million for the year ended December 31, 2011 from $4.0 million for the year ended
December 31, 2010. The increase in amortization expense was due to the addition of intangible assets acquired as a result of the Company’s acquisition
activity during 2010 and 2011.
Acquisition Costs. Acquisition-related costs of $1.2 million were incurred during 2011 related to the acquisition of Exervio and JCB compared to
$1.0 million during 2010 related to the acquisition of Kerdock and speakTECH. Acquisition-related costs were incurred for legal, accounting and valuation
services performed by third parties.
Adjustment to Fair Value of Contingent Consideration. An adjustment of $1.6 million was made during the year ended December 31, 2011 for the
accretion of the fair value estimate for the earnings-based contingent consideration related to the speakTECH and Exervio acquisitions.
Provision for Income Taxes. We provide for federal, state, and foreign income taxes at the applicable statutory rates adjusted for non-deductible
expenses. Our effective tax rate decreased to 42.4% for the year ended December 31, 2011 from 44.8% for the year ended December 31, 2010. The decrease
in the effective rate was due primarily to the effect of state taxes and permanent items over a larger income base and lower non-deductible stock
compensation.
Year Ended December 31, 2010 Compared to Year Ended December 31, 2009
Revenues. Total revenues increased 14% to $215.0 million for the year ended December 31, 2010 from $188.2 million for the year ended December
31, 2009.
For the Year Ended
December
31, 2010
Financial Results
(in thousands)
For the Year Ended
December
31, 2009
Explanation for Increases Over Prior Year Period
(in thousands)
Total Increase Over
Prior Year Period
Increase Attributable to
Acquired Companies*
Increase Attributable to Base
Business**
Services
Revenues
Software and
Hardware
Revenues
Reimbursable
Expenses
Total Revenues
$
$
185,173
$
166,397
$
18,776
$
7,956
20,556
9,223
214,952
$
12,968
8,785
188,150
$
7,588
438
26,802
$
1,667
470
10,093
$
$
10,820
5,921
(32)
16,709
*Defined as companies acquired during 2010; no companies were acquired in 2009.
**Defined as businesses owned as of January 1, 2010.
Services revenues increased 11% to $185.2 million for the year ended December 31, 2010 from $166.4 million for the year ended December 31,
2009. The increase in services revenues was due to an increase in demand for our services and the acquisition of Kerdock and speakTECH. Services
revenues attributable to our base business increased $10.8 million while services revenues attributable to acquired companies increased $8.0 million, resulting
in a total increase of $18.8 million.
Software and hardware revenues increased 59% to $20.6 million for the year ended December 31, 2010 from $13.0 million for the year ended
December 31, 2009 due to an increase in the sale of new software licenses and renewals of software licenses. Reimbursable expenses increased 5% to $9.2
million for the year ended December 31, 2010 from $8.8 million for the year ended December 31, 2009 as a result of the increase in services revenue. We did
not realize any profit on reimbursable expenses.
19
Cost of Revenues. Cost of revenues increased 9% to $152.2 million for the year ended December 31, 2010 from $139.8 million for the year ended
December 31, 2009. The increase in cost of revenues was directly related to the increase in revenues, specifically the increase in services revenues. The
average number of colleagues performing services, including subcontractors, increased to 1,065 for the year ended December 31, 2010 from 1,028 for the year
ended December 31, 2009. Management will continue to manage the cost structure to match demand.
Gross Margin. Gross margin increased 30% to $62.8 million for the year ended December 31, 2010 from $48.3 million for the year ended
December 31, 2009. Gross margin as a percentage of revenues increased to 29.2% for the year ended December 31, 2010 from 25.7% for the year ended
December 31, 2009 primarily due to an increase in services gross margin. Services gross margin, excluding reimbursable expenses, increased to 32.6% or
$60.3 million for the year ended December 31, 2010 from 28.2% or $47.0 million for the year ended December 31, 2009. The increase in services gross
margin was primarily a result of higher utilization and management’s continued efforts to manage the cost structure. The average utilization rate of our
colleagues, excluding subcontractors, increased to 81% for the year ended December 31, 2010 compared to 75% for the year ended December 31, 2009. The
average bill rate for our colleagues, excluding subcontractors, remained flat at $106 per hour for the year ended December 31, 2010 compared to the year
ended December 31, 2009. The average bill rate for our colleagues, excluding subcontractors and offshore employees, increased to $119 for the year ended
December 31, 2010 from $114 for the year ended December 31, 2009. Software and hardware gross margin increased to 11.9% or $2.4 million for the year
ended December 31, 2010 from 10.2% or $1.3 million for the year ended December 31, 2009. The increase in software and hardware margin was directly
related to the increase in higher margin software and hardware sales during 2010.
Selling, General and Administrative. SG&A expenses increased 14% to $45.5 million for the year ended December 31, 2010 from $40.0 million for
the year ended December 31, 2009 due primarily to fluctuations in expenses as detailed in the following table:
Selling, General and Administrative Expense (in millions)
Sales-related costs
Salary expense
Stock compensation expense
Recruiting expense
Variable compensation expense
Bad debt expense
Other
Total
For the Year Ended
December 31, 2010
For the Year Ended
December 31, 2009
$
$
11.9 $
9.2
8.6
2.3
2.3
--
11.2
45.5 $
Increase
0.3
0.4
1.5
0.5
1.9
0.5
0.4
5.5
11.6 $
8.8
7.1
1.8
0.4
(0.5)
10.8
40.0 $
SG&A expenses, as a percentage of revenues, decreased slightly to 21.2% for the year ended December 31, 2010 from 21.3% for the year ended
December 31, 2009. Bonus and stock compensation expense increased as a percentage of revenues compared to the prior year period as a result of achieving
the company-wide performance goals and the separation of the Chairman of the Board, respectively. These increases were offset by a decrease in sales-related
costs and salary expenses as a percentage of revenues. These decreases were primarily related to management’s continued efforts to manage the cost structure.
Depreciation. Depreciation expense decreased 44% to $0.8 million for the year ended December 31, 2010 from $1.5 million for the year ended
December 31, 2009. The decrease in depreciation expense was mainly attributable to various assets becoming fully depreciated and the modification of the
estimated useful life of computer hardware from two to three years in first quarter of 2010. Depreciation expense as a percentage of services revenue,
excluding reimbursable expenses, was 0.4% and 0.9% for the year ended December 31, 2010 and 2009, respectively.
Amortization. Amortization expense decreased 7% to $4.0 million for the year ended December 31, 2010 from $4.3 million for the year ended
December 31, 2009 due to the completion of amortization of certain acquired intangible assets during 2009 and 2010, partially offset by the addition of
amortization related to acquired intangible assets.
Acquisition Costs. Acquisition-related costs of $1.0 million were incurred during 2010 related to the acquisition of Kerdock and
speakTECH. Acquisition-related costs were incurred for legal, accounting, and valuation services performed by third parties.
Net Interest Income. We had interest income of $163,000, net of interest expense, for the year ended December 31, 2010, compared to interest
income of $209,000, net of interest expense, for the year ended December 31, 2009. Net interest income in 2009 included interest received on the outstanding
balance of a client note receivable.
Net Other Income or Expense. We had other income of $72,000, net of other expense, for the year ended December 31, 2010 compared to other
income of $260,000, net of other expense, for the year ended December 31, 2009. Net other income during 2009 was primarily related to government
incentives received by our China operations.
20
Provision for Income Taxes. We provide for federal, state, and foreign income taxes at the applicable statutory rates adjusted for non-deductible
expenses. Our effective tax rate decreased to 44.8% for the year ended December 31, 2010 from 51.4% for the year ended December 31, 2009. The decrease
in the effective rate was due primarily to the effect of state taxes and permanent items over a larger income base and larger earnings in certain nontaxable
foreign jurisdictions.
Liquidity and Capital Resources
Selected measures of liquidity and capital resources are as follows (in millions):
As of December 31,
2011 2010 2009
Cash, cash equivalents, and investments
$ 9.7 $ 26.3 $ 28.0
Working capital (including cash and cash equivalents) $ 51.5 $ 47.6 $ 50.2
$ 50.0 $ 50.0 $ 50.0
Amounts available under credit facilities
Net Cash Provided By Operating Activities
Net cash provided by operating activities for the year ended December 31, 2011 was $14.3 million compared to $18.7 million and $22.6 million for
the years ended December 31, 2010 and 2009, respectively. For the year ended December 31, 2011, the components of operating cash flows were net income
of $10.7 million plus non-cash charges of $17.6 million, partially offset by investments in working capital of $14.0 million. The primary components of
operating cash flow for the year ended December 31, 2010 were net income of $6.5 million plus non-cash charges of $14.3 million, partially offset by
investments in working capital of $2.1 million. The primary components of operating cash flows for the year ended December 31, 2009 were net income of
$1.5 million plus non-cash charges of $15.0 million and net working capital reductions of $6.1 million. The decrease in cash resulting from operating
activities as of December 31, 2011 is primarily related to the decrease in accounts payable and other liabilities and the increase in accounts receivable.
Accounts payable and other liabilities decreased due to paying down higher accrued software costs and variable compensation liabilities during 2011. Our
days sales outstanding as of December 31, 2011 increased to 78 days compared to 73 days at December 31, 2010 and 2009. Days sales outstanding have
increased as of December 31, 2011 due to slower paying customers, partially related to new customers both from existing lines of business and acquisitions
made during 2010 and 2011.
Net Cash Used in Investing Activities
For the year ended December 31, 2011, we used $19.4 million for the purchase of businesses and acquisition-related costs, $3.0 million primarily
on leasehold improvements and to develop certain software, offset by $13.6 million in proceeds received from the sale and maturity of our investments. For
the year ended December 31, 2010, we used $4.3 million in cash to purchase investments, $4.9 million for the purchase of Kerdock and speakTECH, and $1.3
million in cash to purchase equipment and develop software. For the year ended December 31, 2009, we used $10.0 million in cash to purchase investments
and $0.7 million in cash to purchase equipment and develop software.
Net Cash Provided By Financing Activities
During the year ended December 31, 2011, we received proceeds of $3.7 million from exercises of stock options and sales of stock through our
Employee Stock Purchase Plan and we realized an excess tax benefit of $1.8 million related to vesting of stock awards and stock option exercises. We used
$1.2 million to settle the contingent consideration for the purchase of speakTECH, $11.8 million to repurchase shares of our common stock through the stock
repurchase program, $0.8 million to remit taxes withheld as part of a net share settlement of restricted stock vesting, and $0.3 million in fees related to our
credit facility. During the year ended December 31, 2010, we received proceeds of $1.5 million from exercises of stock options and sales of stock through our
Employee Stock Purchase Plan and we realized an excess tax benefit of $1.5 million related to vesting of stock awards and stock option exercises. We used
$1.9 million to settle the contingent consideration for the purchase of Kerdock and $14.7 million to repurchase shares of our common stock through the stock
repurchase program. For the year ended December 31, 2009, we received proceeds of $1.0 million from exercises of stock options and sales of stock through
our Employee Stock Purchase Plan and we realized an excess tax benefit of $0.6 million related to vesting of stock awards and stock option exercises. We
used $18.4 million to repurchase shares of our common stock through the stock repurchase program.
Availability of Funds from Bank Line of Credit Facilities
On May 23, 2011, we renewed and extended the term of our Credit Agreement (the “Credit Agreement”) with Silicon Valley Bank (“SVB”), U.S.
Bank National Association, and Bank of America, N.A. The Credit Agreement provides for revolving credit borrowings up to a maximum principal amount
of $50.0 million, subject to a commitment increase of $25.0 million. The Credit Agreement also allows for the issuance of letters of credit in the aggregate
amount of up to $500,000 at any one time; outstanding letters of credit reduce the credit available for revolving credit borrowings. Substantially all of our
assets are pledged to secure the credit facility.
21
All outstanding amounts owed under the Credit Agreement become due and payable no later than the final maturity date of May 23,
2015. Borrowings under the credit facility bear interest at our option of SVB’s prime rate (4.00% on December 31, 2011) plus a margin ranging from 0.00%
to 0.50% or one-month LIBOR (0.295% on December 31, 2011) plus a margin ranging from 2.50% to 3.00%. The additional margin amount is dependent on
the level of outstanding borrowings. As of December 31, 2011, we had $50.0 million of maximum borrowing capacity. We incur an annual commitment fee
of 0.30% on the unused portion of the line of credit.
As of December 31, 2011, we were in compliance with all covenants under our credit facility and we expect to be in compliance during the next
twelve months.
Stock Repurchase Program
Prior to 2011, our Board of Directors authorized the repurchase of up to $50.0 million of our common stock. In 2011, the Board of Directors
authorized the repurchase of up to an additional $10.0 million of our common stock for a total repurchase program of $60.0 million at December 31,
2011. The repurchase program expires June 30, 2012.
We established written trading plans in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934 (the “Exchange Act”), under which
we made a portion of our stock repurchases. Additional repurchases will be at times and in amounts as the Company deems appropriate and will be made
through open market transactions in compliance with Rule 10b-18 of the Exchange Act, subject to market conditions, applicable legal requirements, and other
factors.
Since the program’s inception on August 11, 2008, we have repurchased approximately $54.0 million of our outstanding common stock through
December 31, 2011.
Lease Obligations
There were no material changes outside the ordinary course of business in lease obligations or other contractual obligations in 2011 as disclosed in
Note 12, Commitments and Contingencies, in the Notes to Consolidated Financial Statements.
Contractual Obligations
We have incurred commitments to make future payments under contracts such as leases. Maturities under these contracts are set forth in the
following table as of December 31, 2011 (in thousands):
Payments Due by Period
Contractual Obligations
Total
Operating lease obligations $10,254 $
$10,254 $
Total
Less Than
1 Year
3-5
1-3
Years
Years
2,458 $4,387 $2,851 $
2,458 $4,387 $2,851 $
More
Than 5
Years
558
558
Conclusion
If our capital is insufficient to fund our activities in either the short- or long-term, we may need to raise additional funds. In the ordinary course of
business, we may engage in discussions with various persons in connection with additional financing. If we raise additional funds through the issuance of
equity securities, our existing stockholders’ percentage ownership will be diluted. These equity securities may also have rights superior to our common stock.
Additional debt or equity financing may not be available when needed or on satisfactory terms. If adequate funds are not available on acceptable terms, we
may be unable to expand our services, respond to competition, pursue acquisition opportunities, or continue our operations.
We believe that the currently available funds, access to capital from our credit facility, and cash flows generated from operations will be sufficient
to meet our working capital requirements and other capital needs for the next twelve months.
Critical Accounting Policies
Our accounting policies are described in Note 2, Summary of Significant Accounting Policies, in the Notes to Consolidated Financial Statements.
We believe our most critical accounting policies include revenue recognition, accounting for goodwill and intangible assets, purchase accounting, accounting
for stock-based compensation, and income taxes.
22
Revenue Recognition and Allowance for Doubtful Accounts
Revenues are primarily derived from professional services provided on a time and materials basis. For time and material contracts, revenues are
recognized and billed by multiplying the number of hours expended in the performance of the contract by the established billing rates. For fixed fee projects,
revenues are generally recognized using an input method based on the ratio of hours expended to total estimated hours. Amounts invoiced and collected in
excess of revenues recognized are classified as deferred revenues. On many projects we are also reimbursed for out-of-pocket expenses such as airfare,
lodging, and meals. These reimbursements are included as a component of revenues. Revenues from software and hardware sales are generally recorded on a
gross basis considering our role as a principal in the transaction. On rare occasions, we enter into a transaction where we are not the principal. In these cases,
revenue is recorded on a net basis.
Unbilled revenues represent the project time and expenses that have been incurred, but not yet billed to the client, prior to the end of the fiscal
period. For time and materials projects, the client is invoiced for the amount of hours worked multiplied by the billing rates as stated in the contract. For fixed
fee arrangements, the client is invoiced according to the agreed-upon schedule detailing the amount and timing of payments in the contract. Clients are
typically billed monthly for services provided during that month, but can be billed on a more or less frequent basis as determined by the contract. If the time
and expenses are worked/incurred and approved at the end of a fiscal period and the invoice has not yet been sent to the client, the amount is recorded as
unbilled revenue once we verify all other revenue recognition criteria have been met.
Revenues are recognized when the following criteria are met: (1) persuasive evidence of the customer arrangement exists; (2) fees are fixed and
determinable; (3) delivery and acceptance have occurred; and (4) collectability is deemed probable. Our policy for revenue recognition in instances where
multiple deliverables are sold contemporaneously to the same customer is in accordance with ASC Subtopic 985-605, Software – Revenue Recognition (“ASC
Subtopic 985-605”), ASC Subtopic 605-25, Revenue Recognition – Multiple-Element Arrangements, and ASC Section 605-10-S99 (Staff Accounting Bulletin
Topic 13, Revenue Recognition). Specifically, if we enter into contracts for the sale of services and software or hardware, then we evaluate whether each
element should be accounted for separately by considering the following criteria: (1) whether the deliverables have value to the client on a stand-alone basis;
and (2) whether delivery or performance of the undelivered item or items is considered probable and substantially in our control (only if the arrangement
includes a general right of return related to the delivered item). Further, for sales of software and services, we also evaluate whether the services are essential
to the functionality of the software and we have fair value evidence for each deliverable. If we have concluded that the separation criteria are met, then we
account for each deliverable in the transaction separately, based on the relevant revenue recognition policies. Generally, all deliverables of our multiple
element arrangements meet these criteria and are accounted for separately, with the arrangement consideration allocated among the deliverables using vendor
specific objective evidence of the selling price. As a result, we generally recognize software and hardware sales upon delivery to the customer and services
consistent with the policies described herein.
Further, delivery of software and hardware sales, when sold contemporaneously with services, can generally occur at varying times depending on
the specific client project arrangement. Delivery of services generally occurs over a period of time consistent with the timeline as outlined in the client
contract.
There are no significant cancellation or termination-type provisions for our software and hardware sales. Contracts for professional services provide
for a general right, to the client or to us, to cancel or terminate the contract within a given period of time (generally a 10 to 30 day notice is required). The
client is responsible for any time and expenses incurred up to the date of cancellation or termination of the contract.
We may provide multiple services under the terms of an arrangement and we are required to assess whether one or more units of accounting are
present. Service fees are typically accounted for as one unit of accounting, as fair value evidence for individual tasks or milestones is not available. We
follow the guidelines discussed above in determining revenues; however, certain judgments and estimates are made and used to determine revenues
recognized in any accounting period. If estimates are revised, material differences may result in the amount and timing of revenues recognized for a given
period.
Revenues are presented net of taxes assessed by governmental authorities. Sales taxes are generally collected and subsequently remitted on all
software and hardware sales and certain services transactions as appropriate.
Allowance for doubtful accounts is based upon specific identification of likely and probable losses. Each accounting period, accounts receivable is
evaluated for risk associated with a client’s inability to make contractual payments, historical experience and other currently available information. Billed and
unbilled receivables that are specifically identified as being at risk are provided for with a charge to revenue or bad debts as appropriate in the period the risk
is identified. Considerable judgment is used in assessing the ultimate realization of these receivables, including reviewing the financial stability of the client,
evaluating the successful mitigation of service delivery disputes, and gauging current market conditions. If the evaluation of service delivery issues or a
client’s ability to pay is incorrect, future reductions to revenue or bad debt expense may be incurred.
23
Goodwill, Other Intangible Assets, and Impairment of Long-Lived Assets
Goodwill represents the excess purchase price over the fair value of net assets acquired, or net liabilities assumed, in a business combination. In
accordance with ASC Topic 350, Intangibles – Goodwill and Other (“ASC Topic 350”), we perform an annual impairment test of goodwill. We evaluate
goodwill as of October 1 each year and more frequently if events or changes in circumstances indicate that goodwill might be impaired. As required by ASC
Topic 350, the impairment test is accomplished using a two-step approach. The first step screens for impairment and, when impairment is indicated, a second
step is employed to measure the impairment.
Our annual goodwill impairment test was performed as of October 1, 2011. Our fair value as of the annual testing date exceeded our book value
and consequently, no impairment was indicated.
Our fair value was determined by weighting the results of two valuation methods: 1) market capitalization based on the average price of our
common stock, including a control premium, for a reasonable period of time prior to the evaluation date (generally 15 days) and 2) a discounted cash flow
model. The fair value calculated using our average common stock price (including a control premium) was weighted 40% while the value calculated by the
discounted cash flow model was weighted 60% in our determination of our overall fair value. While the use of our average common stock price, plus a
control premium, may be considered the best evidence of fair value in ASC Topic 350, we believe the volatility in our stock price, and in the market overall,
are not always consistently aligned with our financial results or outlook. The discounted cash flow approach allows us to calculate our fair value based on
operating performance and meaningful financial metrics.
A key assumption used in the calculation of our fair value using our average common stock price was the consideration of a control premium. We
reviewed industry premium data and determined an appropriate control premium for the analysis based on the low end of any premium received in
transactions over the past several years.
Significant estimates used in the discounted cash flow model included projections of revenue growth, net income margins, discount rate, and
terminal business value. The forecasts of revenue growth and net income margins are based upon our long-term view of the business and are used by senior
management and the Board of Directors to evaluate operating performance. The discount rate utilized was estimated using the weighted average cost of
capital for our industry. The terminal business value was determined by applying a growth factor to the latest year for which a forecast exists.
Other intangible assets include customer relationships, non-compete arrangements, trade name, and internally developed software, which are being
amortized over the assets’ estimated useful lives using the straight-line method. Estimated useful lives range from one to eight years. Amortization of
customer relationships, non-compete arrangements, trade name, and internally developed software is considered an operating expense and is included in
“Amortization” in the accompanying Condensed Consolidated Statements of Operations. The Company periodically reviews the estimated useful lives of its
identifiable intangible assets, taking into consideration any events or circumstances that might result in a lack of recoverability or revised useful life.
Purchase Accounting
We allocate the purchase price of our acquisitions to the assets and liabilities acquired, including identifiable intangible assets, based on their
respective fair values at the date of acquisition. Such fair market value assessments require significant judgments and estimates that can change materially as
additional information becomes available. The purchase price is allocated to intangibles based on our estimate and an independent valuation. We finalize the
purchase price allocation within twelve months of the acquisition date as certain initial accounting valuation estimates are finalized.
Accounting for Stock-Based Compensation
We estimate the fair value of stock option awards on the date of grant utilizing a modified Black-Scholes option pricing model. The Black-Scholes
option valuation model was developed for use in estimating the fair value of short-term traded options that have no vesting restrictions and are fully
transferable. However, certain assumptions used in the Black-Scholes model, such as expected term, can be adjusted to incorporate the unique characteristics
of our stock option awards. Option valuation models require the input of somewhat subjective assumptions including expected stock price volatility and
expected term. We believe it is unlikely that materially different estimates for the assumptions used in estimating the fair value of stock options granted would
be made based on the conditions suggested by actual historical experience and other data available at the time estimates were made. Restricted stock awards
are valued at the price of our common stock on the date of the grant.
24
Income Taxes
To record income tax expense, we are required to estimate our income taxes in each of the jurisdictions in which we operate. In addition, income
tax expense at interim reporting dates requires us to estimate our expected effective tax rate for the entire year. This involves estimating our actual current tax
liability together with assessing temporary differences that result in deferred tax assets and liabilities and expected future tax rates.
Recent Accounting Pronouncements
Our recent accounting pronouncements are fully described in Note 2, Summary of Significant Accounting Policies, in the Notes to Consolidated
Financial Statements.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements, except operating lease commitments as disclosed in Note 12, Commitments and Contingencies, in the
Notes to Consolidated Financial Statements.
Item 7A.Quantitative and Qualitative Disclosures About Market Risk.
We are exposed to market risks related to changes in foreign currency exchange rates and interest rates. We believe our exposure to market risks is
immaterial.
Exchange Rate Sensitivity
We are exposed to market risks associated with changes in foreign currency exchange rates because we generate a portion of our revenues and incur
a portion of our expenses in currencies other than the U.S. dollar. As of December 31, 2011, we were exposed to changes in exchange rates between the U.S.
dollar and the Canadian dollar, between the U.S. dollar and the Chinese Yuan, and between the U.S. dollar and the Indian Rupee. We have not hedged
foreign currency exposures related to transactions denominated in currencies other than U.S. dollars. Our exposure to foreign currency risk is not significant.
Interest Rate Sensitivity
We had unrestricted cash, cash equivalents, and investments totaling $9.7 million at December 31, 2011 and $26.3 million at December 31,
2010. The unrestricted cash and cash equivalents are held for working capital purposes. We do not enter into investments for trading or speculative purposes.
Due to the short-term nature of these investments, we believe that we do not have any material exposure to changes in the fair value of our investment
portfolio as a result of changes in interest rates. Declines in interest rates, however, will reduce future interest income.
25
Item 8. Financial Statements and Supplementary Data.
PERFICIENT, INC.
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2011 AND 2010
ASSETS
Current assets:
Cash and cash equivalents
Short-term investments
Total cash, cash equivalents, and short-term investments
Accounts receivable, net of allowance for doubtful accounts of $1,057 in 2011 and $228 in 2010
Prepaid expenses
Other current assets
Total current assets
Long-term investments
Property and equipment, net
Goodwill
Intangible assets, net
Other non-current assets
Total assets
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
Other current liabilities
Total current liabilities
Other non-current liabilities
Total liabilities
Commitments and contingencies (see Note 12)
Stockholders’ equity:
Common stock ($0.001 par value per share; 50,000,000 shares authorized and 36,217,914 shares issued and
28,742,906 shares outstanding as of December 31, 2011; 33,373,410 shares issued and 27,275,936 shares
outstanding as of December 31, 2010)
Additional paid-in capital
Accumulated other comprehensive loss
Treasury stock, at cost (7,475,008 shares as of December 31, 2011; 6,097,474 shares as of December 31, 2010)
Retained earnings (deficit)
Total stockholders’ equity
Total liabilities and stockholders’ equity
See accompanying notes to consolidated financial statements.
26
December 31,
2011
2010
(In thousands, except share information)
$
$
$
$
$
$
9,732
--
9,732
60,892
1,246
3,118
74,988
--
3,490
132,038
10,128
3,288
223,932
5,029
18,483
23,512
1,461
24,973
36
248,855
(279)
(54,995)
5,342
198,959
223,932
$
$
$
$
$
$
12,707
11,301
24,008
48,496
1,270
2,584
76,358
2,254
2,355
115,227
8,829
2,655
207,678
6,072
22,654
28,726
1,788
30,514
33
224,966
(225)
(42,205)
(5,405)
177,164
207,678
PERFICIENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009
Revenues:
Services
Software and hardware
Reimbursable expenses
Total revenues
Cost of revenues (exclusive of depreciation and amortization, shown separately below):
Project personnel costs
Software and hardware costs
Reimbursable expenses
Other project related expenses
Total cost of revenues
Gross margin
Selling, general and administrative
Depreciation
Amortization
Acquisition costs
Adjustment to fair value of contingent consideration
Income from operations
Net interest income
Net other income
Income before income taxes
Provision for income taxes
Net income
Basic net income per share
Diluted net income per share
Shares used in computing basic net income per share
Shares used in computing diluted net income per share
$
$
$
2011
Year Ended December 31,
2010
(In thousands, except share and per share information)
166,397
$
12,968
8,785
188,150
185,173
20,556
9,223
214,952
233,166
15,624
13,649
262,439
2009
$
$
149,243
13,521
13,649
4,892
181,305
81,134
51,672
1,754
6,341
1,249
1,586
18,532
68
45
18,645
7,898
10,747
0.39
0.37
27,745,312
29,184,286
119,304
18,108
9,223
5,550
152,185
62,767
45,477
830
3,954
993
(4)
11,517
163
68
11,748
5,268
6,480
0.24
0.23
26,856,481
28,303,547
$
$
$
114,877
11,641
8,785
4,514
139,817
48,333
40,042
1,483
4,267
--
--
2,541
209
260
3,010
1,547
1,463
0.05
0.05
27,538,300
28,558,160
$
$
$
See accompanying notes to consolidated financial statements.
27
PERFICIENT, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009
(In thousands)
Balance at December 31, 2008
Proceeds from the exercise of stock options and sales of stock
through the Employee Stock Purchase Plan
Net tax shortfall from stock option exercises and restricted stock
vesting
Stock compensation related to restricted stock vesting and
retirement savings plan contributions
Purchases of treasury stock
Net unrealized loss on investments
Foreign currency translation adjustment
Net income
Total comprehensive income
Balance at December 31, 2009
Proceeds from the exercise of stock options and sales of stock
through the Employee Stock Purchase Plan
Net tax benefit from stock option exercises and restricted stock
vesting
Stock compensation related to restricted stock vesting and
retirement savings plan contributions
Purchases of treasury stock
Issuance of stock for acquisitions
Net unrealized gain on investments
Foreign currency translation adjustment
Net income
Total comprehensive income
Balance at December 31, 2010
Proceeds from the exercise of stock options and sales of stock
through the Employee Stock Purchase Plan
Net tax benefit from stock option exercises and restricted stock
vesting
Stock compensation related to restricted stock vesting and
retirement savings plan contributions
Purchases of treasury stock
Issuance of stock for acquisitions
Net unrealized loss on investments
Foreign currency translation adjustment
Net income
Total comprehensive income
Balance at December 31, 2011
Common Common Additional
Stock Stock Paid-in Comprehensive Treasury Earnings Stockholders'
Shares Amount Capital
28,502 $
(338) $ (9,179) $ (13,348) $
Stock (Deficit)
30 $ 197,653 $
Retained
174,818
Equity
Total
Loss
Accumulated
Other
298
--
973
(2,690)
--
--
--
--
27,083 $
381
--
920
(1,559)
451
--
--
--
--
27,276 $
814
--
929
(1,378)
1,102
--
--
--
--
28,743 $
1
--
974
(459)
9,835
1
--
--
--
--
--
--
--
--
--
--
32 $ 208,003 $
--
--
1,468
1,038
10,830
1
--
--
3,627
--
--
--
--
--
--
--
--
--
33 $ 224,966 $
1
--
3,711
1,219
9,177
1
--
--
9,782
1
--
--
--
--
--
--
--
--
36 $ 248,855 $
--
--
--
--
--
--
--
--
--
--
-- (18,350)
--
--
(5)
--
--
70
1,463
--
--
--
--
--
(273) $ (27,529) $ (11,885) $
--
--
--
--
--
--
--
--
--
--
-- (14,676)
--
--
--
--
--
25
--
--
23
6,480
--
--
--
--
--
(225) $ (42,205) $ (5,405) $
--
--
--
--
--
--
--
--
--
--
-- (12,790)
--
--
--
--
--
(19)
--
(35)
--
-- 10,747
--
--
--
--
5,342 $
(279) $ (54,995) $
975
(459)
9,836
(18,350)
(5)
70
1,463
1,528
168,348
1,468
1,038
10,831
(14,676)
3,627
25
23
6,480
6,528
177,164
3,712
1,219
9,178
(12,790)
9,783
(19)
(35)
10,747
10,693
198,959
See accompanying notes to consolidated financial statements.
28
PERFICIENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009
OPERATING ACTIVITIES
Net income
Adjustments to reconcile net income to net cash provided by operations:
Depreciation
Amortization
Deferred income taxes
Non-cash stock compensation and retirement savings plan contributions
Tax benefit from stock option exercises and restricted stock vesting
Adjustment to fair value of contingent consideration for purchase of business
Changes in operating assets and liabilities, net of acquisitions:
Accounts and note receivable
Other assets
Accounts payable
Other liabilities
Net cash provided by operating activities
INVESTING ACTIVITIES
Proceeds from sales and maturity of investments
Purchase of investments
Purchase of property and equipment
Capitalization of software developed for internal use
Purchase of businesses
Net cash used in investing activities
2011
Year Ended December 31,
2010
(In thousands)
2009
$ 10,747 $
6,480 $ 1,463
1,754
6,341
531
9,178
(1,838)
1,586
(7,587)
(320)
(1,522)
(4,550)
14,320
13,555
--
(2,776)
(179)
(19,385)
(8,785)
830
3,954
205
10,831
(1,531)
(4)
1,483
4,267
(18)
9,836
(583)
--
9,427
(5,491)
(342)
1,626
(884)
642
1,189
(2,086)
18,731 22,563
--
--
(9,984)
(4,252)
(415)
(1,161)
(311)
(160)
(4,941)
--
(10,514) (10,710)
FINANCING ACTIVITIES
Proceeds from short-term borrowings
Payments on short-term borrowings
Payments for credit facility financing fees
Payment of contingent consideration for purchase of business
Tax benefit from stock option exercises and restricted stock vesting
Proceeds from the exercise of stock options and sales of stock through the Employee Stock Purchase Plan
Purchases of treasury stock
Remittance of taxes withheld as part of a net share settlement of restricted stock vesting
Net cash used in financing activities
Effect of exchange rate on cash and cash equivalents
Change in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
14,000
(14,000)
(306)
(1,244)
1,838
3,712
(11,791)
(747)
(8,538)
28
(2,975)
12,707
$ 9,732 $
--
--
--
(1,875)
1,531
1,468
--
--
--
--
583
975
(14,676) (18,350)
--
(13,552) (16,792)
5
67
(5,268)
(4,934)
17,975 22,909
12,707 $ 17,975
--
Supplemental disclosures:
Cash paid for interest
Cash paid for income taxes
Non-cash activities:
Stock issued for purchase of businesses (net of stock reacquired for escrow claim)
Stock issued for settlement of contingent consideration for purchase of business
Estimated fair value of contingent consideration for purchase of business
5 $
$
$ 7,810 $
$ 6,616 $
$ 2,915 $
$ 2,377 $
22 $
50
4,265 $ 1,831
2,859 $
768 $
3,339 $
--
--
--
See accompanying notes to consolidated financial statements.
29
PERFICIENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2011
1. Description of Business and Principles of Consolidation
Perficient, Inc. (the “Company”) is an information technology consulting firm. The Company helps its clients use Internet-based technologies to
make their businesses more responsive to market opportunities and threats; strengthen relationships with customers, suppliers, and partners; improve
productivity; and reduce information technology costs. The Company designs, builds, and delivers solutions using a core set of middleware software products
developed by third party vendors. The Company’s solutions enable its clients to meet the changing demands of an increasingly global, Internet-driven, and
competitive marketplace.
The Company is incorporated in Delaware. The consolidated financial statements include the accounts of the Company and its wholly owned
subsidiaries. All material intercompany accounts and transactions have been eliminated in consolidation.
2. Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to
make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates, and
such differences could be material to the financial statements.
Revenue Recognition and Allowance for Doubtful Accounts
Revenues are primarily derived from professional services provided on a time and materials basis. For time and material contracts, revenues are
recognized and billed by multiplying the number of hours expended in the performance of the contract by the established billing rates. For fixed fee projects,
revenues are generally recognized using an input method based on the ratio of hours expended to total estimated hours. Amounts invoiced and collected in
excess of revenues recognized are classified as deferred revenues. On many projects the Company is also reimbursed for out-of-pocket expenses such as
airfare, lodging, and meals. These reimbursements are included as a component of revenues. Revenues from software and hardware sales are generally
recorded on a gross basis considering the Company’s role as a principal in the transaction. On rare occasions, the Company enters into a transaction where it
is not the principal. In these cases, revenue is recorded on a net basis.
Unbilled revenues represent the project time and expenses that have been incurred, but not yet billed to the client, prior to the end of the fiscal
period. For time and materials projects, the client is invoiced for the amount of hours worked multiplied by the billing rates as stated in the contract. For fixed
fee arrangements, the client is invoiced according to the agreed-upon schedule detailing the amount and timing of payments in the contract. Clients are
typically billed monthly for services provided during that month, but can be billed on a more or less frequent basis as determined by the contract. If the time
and expenses are worked/incurred and approved at the end of a fiscal period and the invoice has not yet been sent to the client, the amount is recorded as
unbilled revenue once the Company verifies all other revenue recognition criteria have been met.
Revenues are recognized when the following criteria are met: (1) persuasive evidence of the customer arrangement exists; (2) fees are fixed and
determinable; (3) delivery and acceptance have occurred; and (4) collectability is deemed probable. The Company’s policy for revenue recognition in
instances where multiple deliverables are sold contemporaneously to the same customer is in accordance with Financial Accounting Standards Board
(“FASB”) Accounting Standards Codification (“ASC”) Subtopic 985-605, Software – Revenue Recognition (“ASC Subtopic 985-605”), ASC Subtopic
605-25, Revenue Recognition – Multiple-Element Arrangements, and ASC Section 605-10-S99 (Staff Accounting Bulletin Topic 13, Revenue Recognition).
Specifically, if the Company enters into contracts for the sale of services and software or hardware, then the Company evaluates whether each element should
be accounted for separately by considering the following criteria: (1) whether the deliverables have value to the client on a stand-alone basis; and (2) whether
delivery or performance of the undelivered item or items is considered probable and substantially in the control of the Company (only if the arrangement
includes a general right of return related to the delivered item). Further, for sales of software and services, the Company also evaluates whether the services
are essential to the functionality of the software and if it has fair value evidence for each deliverable. If the Company has concluded that the separation criteria
are met, then it accounts for each deliverable in the transaction separately, based on the relevant revenue recognition policies. Generally, all deliverables of the
Company’s multiple element arrangements meet these criteria and are accounted for separately, with the arrangement consideration allocated among the
deliverables using vendor specific objective evidence of the selling price. As a result, the Company generally recognizes software and hardware sales upon
delivery to the customer and services consistent with the policies described herein.
30
PERFICIENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
DECEMBER 31, 2011
Further, delivery of software and hardware sales, when sold contemporaneously with services, can generally occur at varying times depending on
the specific client project arrangement. Delivery of services generally occurs over a period of time consistent with the timeline as outlined in the client
contract.
There are no significant cancellation or termination-type provisions for the Company’s software and hardware sales. Contracts for professional
services provide for a general right, to the client or the Company, to cancel or terminate the contract within a given period of time (generally a 10 to 30 day
notice is required). The client is responsible for any time and expenses incurred up to the date of cancellation or termination of the contract.
The Company may provide multiple services under the terms of an arrangement and is required to assess whether one or more units of accounting
are present. Service fees are typically accounted for as one unit of accounting, as fair value evidence for individual tasks or milestones is not available. The
Company follows the guidelines discussed above in determining revenues; however, certain judgments and estimates are made and used to determine
revenues recognized in any accounting period. If estimates are revised, material differences may result in the amount and timing of revenues recognized for a
given period.
Revenues are presented net of taxes assessed by governmental authorities. Sales taxes are generally collected and subsequently remitted on all
software and hardware sales and certain services transactions as appropriate.
An allowance for doubtful accounts is based upon specific identification of likely and probable losses. Each accounting period, accounts receivable
is evaluated for risk associated with a client’s inability to make contractual payments, historical experience, and other currently available information.
Cash and Cash Equivalents
Cash equivalents consist primarily of cash deposits and investments with original maturities of 90 days or less when purchased.
Property and Equipment
Property and equipment are recorded at cost. Depreciation of property and equipment is computed using the straight-line method over the useful
lives of the assets (generally one to five years). Leasehold improvements are amortized over the shorter of the life of the lease or the estimated useful life of
the assets.
Goodwill, Other Intangible Assets, and Impairment of Long-Lived Assets
Goodwill represents the excess purchase price over the fair value of net assets acquired, or net liabilities assumed, in a business combination. In
accordance with ASC Topic 350, Intangibles – Goodwill and Other (“ASC Topic 350”), the Company performs an annual impairment test of goodwill. The
Company evaluates goodwill as of October 1 each year and more frequently if events or changes in circumstances indicate that goodwill might be impaired.
As required by ASC Topic 350, the impairment test is accomplished using a two-step approach. The first step screens for impairment and, when impairment
is indicated, a second step is employed to measure the impairment.
Other intangible assets include customer relationships, non-compete arrangements, trade names, and internally developed software, which are being
amortized over the assets’ estimated useful lives using the straight-line method. Estimated useful lives range from one to eight years. Amortization of
customer relationships, non-compete arrangements, trade names, and internally developed software is considered an operating expense and is included in
“Amortization” in the accompanying Condensed Consolidated Statements of Operations. The Company periodically reviews the estimated useful lives of its
identifiable intangible assets, taking into consideration any events or circumstances that might result in a lack of recoverability or revised useful life.
The Company will continue to monitor the trend of its stock price, other market indicators, and its operating results to determine whether there is a
triggering event that may require the Company to perform an interim impairment test in the future and record impairment charges to earnings, which could
adversely affect the Company’s financial results.
31
PERFICIENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
DECEMBER 31, 2011
Income Taxes
The Company accounts for income taxes in accordance with ASC Subtopic 740-10, Income Taxes (“ASC Subtopic 740-10”), and ASC Section
740-10-25, Income Taxes – Recognition (“ASC Section 740-10-25”). ASC Subtopic 740-10 prescribes the use of the asset and liability method whereby
deferred tax asset and liability account balances are determined based on differences between financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets are subject to tests of
recoverability. A valuation allowance is provided for such deferred tax assets to the extent realization is not judged to be more likely than not. ASC Subtopic
740-10-25 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or
expected to be taken in a tax return. ASC Subtopic 740-10-25 also provides guidance on derecognition, classification, treatment of interest and penalties, and
disclosure of such positions.
Earnings Per Share
Basic earnings per share is computed by dividing net income available to common stockholders by the weighted-average number of common shares
outstanding during the period. Diluted earnings per share includes the weighted average number of common shares outstanding and the number of equivalent
shares which would be issued related to the stock options, unvested restricted stock, and warrants using the treasury method, unless such additional equivalent
shares are anti-dilutive.
Stock-Based Compensation
Stock-based compensation is accounted for in accordance with ASC Topic 718, Compensation – Stock Compensation (“ASC Topic 718”). Under
this method, the Company recognizes share-based compensation ratably using the straight-line attribution method over the requisite service period. In
addition, pursuant to ASC Topic 718, the Company is required to estimate the amount of expected forfeitures when calculating share-based compensation,
instead of accounting for forfeitures as they occur.
Deferred Rent
Certain of the Company’s operating leases contain predetermined fixed escalations of minimum rentals during the original lease terms. For these
leases, the Company recognizes the related rental expense on a straight-line basis over the life of the lease and records the difference between the amounts
charged to operations and amounts paid as accrued rent expense.
Fair Value of Financial Instruments
Cash equivalents, accounts receivable, accounts payable, other accrued liabilities, and debt are stated at amounts which approximate fair value due
to the near term maturities of these instruments. Investments are stated at amounts which approximate fair value based on quoted market prices or other
observable inputs.
Treasury Stock
The Company uses the cost method to account for repurchases of its own stock.
Segment Information
The Company operates as one reportable operating segment according to ASC Topic 280, Segment Reporting, which establishes standards for the
way that business enterprises report information about operating segments. The chief operating decision maker formulates decisions about how to allocate
resources and assess performance based on consolidated financial results. The Company also has one reporting unit for purposes of the goodwill impairment
analysis discussed above.
32
PERFICIENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
DECEMBER 31, 2011
Recent Accounting Pronouncements
Effective January 1, 2011, the Company adopted ASC Subtopic 605-25, Revenue Recognition – Multiple-Element Arrangements (“ASC Subtopic
605-25”). This statement is an amendment to the accounting standards related to the accounting for revenue in arrangements with multiple deliverables
including how the arrangement consideration is allocated among delivered and undelivered items of the arrangement. Among the amendments, this standard
eliminates the use of the residual method for allocating arrangement consideration and requires an entity to allocate the overall consideration to each
deliverable based on an estimated selling price of each individual deliverable in the arrangement in the absence of having vendor-specific objective evidence
or other third party evidence of fair value of the undelivered items. This standard also provides further guidance on how to determine a separate unit of
accounting in a multiple-deliverable revenue arrangement and expands the disclosure requirements about the judgments made in applying the estimated
selling price method and how those judgments affect the timing or amount of revenue recognition. The adoption of ASC Subtopic 605-25 did not have a
material impact on the Company’s consolidated financial statements.
Effective January 1, 2011, the Company adopted ASC Subtopic 985-605, Software – Revenue Recognition. This standard clarifies the existing
accounting guidance such that tangible products that contain both software and non-software components that function together to deliver the product’s
essential functionality shall be excluded from the scope of the software revenue recognition accounting standards. Accordingly, sales of these products may
fall within the scope of other revenue recognition accounting standards or may now be within the scope of this standard and may require an allocation of the
arrangement consideration for each element of the arrangement. The adoption of ASC Subtopic 985-605 did not have a material impact on the Company’s
consolidated financial statements.
In June 2011, the FASB issued ASU 2011-05, Presentation of Comprehensive Income (“ASU 2011-05”). ASU 2011-05 requires entities to report
components of comprehensive income in either (1) a continuous statement of comprehensive income or (2) two separate but consecutive statements. Under
the two-statement approach, the first statement would include components of net income, and the second statement would include components of other
comprehensive income. This ASU does not change the items that must be reported in other comprehensive income. These provisions are effective
prospectively for fiscal years beginning after December 15, 2011 and for interim periods within those fiscal years. Although adopting ASU 2011-05 will not
impact the accounting for comprehensive income, it will affect the presentation of components of comprehensive income by eliminating the practice of
showing these items within the Consolidated Statements of Changes in Stockholders’ Equity.
In August 2011, the FASB issued ASU 2011-08, Intangibles – Goodwill and Other (“ASU 2011-08”). ASU 2011-08 permits an entity to make a
qualitative assessment of whether it is more likely than not that a reporting unit’s fair value is less than its carrying amount before applying the two-step
goodwill impairment test. If an entity concludes it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, it need not
perform the two-step impairment test. These provisions are effective prospectively for fiscal years beginning after December 15, 2011 and for interim periods
within those fiscal years. The adoption of ASU 2011-08 is not expected to have a material impact on the Company’s consolidated financial statements.
3. Net Income Per Share
The following table presents the calculation of basic and diluted net income per share (in thousands, except per share information):
Net income
Basic:
Weighted-average shares of common stock outstanding
Shares used in computing basic net income per share
Year Ended December 31,
2011 2010 2009
$10,747 $ 6,480 $ 1,463
27,745 26,856 27,538
27,745 26,856 27,538
Effect of dilutive securities:
610
Stock options
6
Warrants (1)
404
Restricted stock subject to vesting
--
Contingently issuable shares (2)
--
Shares issuable for acquisition consideration (3)
Shares used in computing diluted net income per share (4) 29,184 28,304 28,558
279
5
578
222
355
659
7
774
--
8
Basic net income per share
Diluted net income per share
$
$
0.39 $
0.37 $
0.24 $
0.23 $
0.05
0.05
33
PERFICIENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
DECEMBER 31, 2011
(1) All outstanding warrants expired on December 30, 2011.
(2) Represents the Company’s estimate of shares to be issued to speakTECH pursuant to the Agreement and Plan of Merger and Exervio
Consulting, Inc. (“Exervio”) pursuant to the Asset Purchase Agreement. Refer to Note 7 for further discussion.
(3) Represents the shares held in escrow pursuant to the Agreement and Plan of Merger with speakTECH and pursuant to the Asset Purchase
Agreements with Exervio and JCB Partners, LLC (“JCB”) as part of the consideration. These shares were not included in the calculation of
basic net income per share due to the uncertainty of their ultimate status.
(4) As of December 31, 2011, approximately 5,000 options for shares and 273,000 shares of restricted stock were excluded. These shares were
excluded from shares used in computing diluted net income per share because they would have had an anti-dilutive effect.
4. Investments
The Company invests a portion of its excess cash in short-term and long-term investments. The short-term investments typically consist of U.S.
treasury bills, U.S. agency bonds, and corporate bonds with original maturities greater than three months and remaining maturities of less than one year. The
long-term investments typically consist of corporate bonds with original maturities of greater than one year.
During the second quarter 2011, the Company sold all of its short- and long-term investments to fund acquisition activity. The realized gains and
losses for these investments were immaterial. As of December 31, 2011, the Company’s investments consisted of cash equivalents with original maturities of
less than three months.
5. Concentration of Credit Risk and Significant Customers
Cash and accounts receivable potentially expose the Company to concentrations of credit risk. Cash is placed with highly rated financial
institutions. The Company provides credit, in the normal course of business, to its customers. The Company generally does not require collateral or up-front
payments. The Company performs periodic credit evaluations of its customers and maintains allowances for potential credit losses. Customers can be denied
access to services in the event of non-payment. During 2011, a substantial portion of the services the Company provided were built on IBM, Oracle, and
Microsoft platforms, among others, and a significant number of the Company’s clients are identified through joint selling opportunities conducted with and
through sales leads obtained from the relationships with these vendors. Due to the Company’s significant fixed operating expenses, the loss of sales to any
significant customer could result in the Company’s inability to generate net income or positive cash flow from operations for some time in the
future. However, the Company has remained relatively diversified, with no one customer providing more than 10% of total revenues during 2011, 2010 or
2009.
6. Employee Benefit Plans
The Company has a qualified 401(k) profit sharing plan available to full-time employees who meet the plan’s eligibility requirements. This defined
contribution plan permits employees to make contributions up to maximum limits allowed by the Internal Revenue Code of 1986 (the “Code”). The Company,
at its discretion, matches a portion of the employee’s contribution under a predetermined formula based on the level of contribution and years of service. For
2011, the Company made matching contributions of 50% (25% in cash and 25% in Company stock) of the first 6% of eligible compensation deferred by the
participant. The Company recognized $3.2 million, $2.5 million, and $2.6 million of expense for the matching cash and Company stock contribution in 2011,
2010, and 2009, respectively. All matching contributions vest over a three year period of service.
The Company has a deferred compensation plan for officers, directors, and certain sales personnel. The plan is designed to allow eligible
participants to accumulate additional income through a nonqualified deferred compensation plan that enables them to make elective deferrals of compensation
to which they will become entitled in the future. As of December 31, 2011, the deferred compensation liability balance was $1.6 million compared to $1.5
million as of December 31, 2010.
34
PERFICIENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
DECEMBER 31, 2011
7. Business Combinations
Acquisition of Kerdock Consulting, LLC (“Kerdock”)
On March 26, 2010, the Company acquired substantially all of the assets of Kerdock, pursuant to the terms of an Asset Purchase Agreement. The
Company estimated the total allocable purchase price consideration to be $5.3 million. The purchase price estimate was comprised of $1.5 million in cash
paid and $1.1 million of Company common stock issued at closing, increased by $2.7 million representing the fair value of additional earnings-based
contingent consideration. The contingency was achieved during 2010 and as such, the Company accelerated the payment of the contingent consideration and
paid $1.9 million in cash and issued stock worth $0.8 million in November 2010. The Company incurred approximately $0.4 million in transaction costs,
which were expensed when incurred. The results of the Kerdock operations have been included in the Company’s consolidated financial statements since the
acquisition date.
The Company has allocated the total purchase price consideration between tangible assets, identified intangible assets, liabilities, and goodwill as
follows (in millions):
Acquired tangible assets
Acquired intangible assets
Liabilities assumed
Goodwill
Total purchase price
$
$
2.1
1.6
(1.2)
2.8
5.3
The Company estimates that the intangible assets acquired have useful lives of nine months to five years.
Acquisition of speakTECH
On December 10, 2010, the Company acquired speakTECH pursuant to the terms of an Agreement and Plan of Merger. The Company estimated
the total allocable purchase price consideration to be $9.4 million. The purchase price estimate was comprised of $4.3 million in cash paid (included $0.9
million in assumed shareholder debt) and $1.8 million of Company common stock, increased by $3.3 million representing the fair value estimate of additional
earnings-based contingent consideration that may be realized by speakTECH’s selling interest holders 12 months after the closing date of the acquisition. The
contingency was achieved during 2011 and as such, the Company accelerated the payment of the contingent consideration and paid $1.5 million in cash and
issued stock worth $2.9 million in December 2011. The Company incurred approximately $0.6 million in transaction costs, which were expensed when
incurred. The results of the speakTECH operations have been included in the Company’s consolidated financial statements since the acquisition date.
The Company has allocated the total purchase price consideration between tangible assets, identified intangible assets, liabilities, and goodwill as
follows (in millions):
Acquired tangible assets
Acquired intangible assets
Liabilities assumed
Goodwill
Total purchase price
$
$
4.3
3.3
(6.1)
7.9
9.4
The Company estimated the intangible assets acquired to have useful lives of seven months to five years.
The Company made immaterial adjustments to the fair value estimates of speakTECH related to net working capital amounts and deferred taxes to
reflect new information obtained as the Company finalized its fair value estimates during the fourth quarter 2011.
Acquisition of Exervio
On April 1, 2011, the Company acquired substantially all of the assets of Exervio pursuant to the terms of an Asset Purchase Agreement. Exervio
is based in Charlotte, North Carolina and is a business and management consulting firm focused on program and project management, process improvement,
and data/business analytics. The acquisition of Exervio will enhance the Company’s management consulting skills and qualifications, as well as extend the
Company’s presence in North Carolina and Georgia.
35
PERFICIENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
DECEMBER 31, 2011
The Company has initially estimated the total allocable purchase price consideration to be $11.2 million. The initial purchase price estimate is
comprised of $6.5 million in cash paid and $2.8 million of Company common stock issued at closing, increased by $1.9 million representing the initial fair
value estimate of additional earnings-based contingent consideration, which may be partially realized by the Exervio selling shareholders 12 months after the
closing date of the acquisition, and the remainder potentially realized 18 months after the closing date of the acquisition. If the contingency is achieved, 25%
of the earnings-based contingent consideration will be paid in cash and 75% will be issued in stock to the Exervio selling shareholders. The contingent
consideration is recorded in “Other current liabilities” on the Consolidated Balance Sheet as of December 31, 2011. The Company incurred approximately
$0.6 million in transaction costs, which were expensed when incurred.
The Company has estimated the allocation of the total purchase price consideration between tangible assets, identified intangible assets, liabilities,
and goodwill as follows (in millions):
Acquired tangible assets
Acquired intangible assets
Liabilities assumed
Goodwill
Total purchase price
$
$
2.6
4.5
(1.1)
5.2
11.2
The Company estimates that the intangible assets acquired have useful lives of nine months to seven years.
The amounts above represent the fair value estimates as of December 31, 2011 and are subject to subsequent adjustment as the Company obtains
additional information during the measurement period and finalizes its fair value estimates. Any subsequent adjustments to these fair value estimates
occurring during the measurement period will result in an adjustment to goodwill or income, as applicable.
Acquisition of JCB
On July 1, 2011, the Company acquired substantially all of the assets of JCB pursuant to the terms of an Asset Purchase Agreement. JCB is based
in Denver, Colorado and is a business and technology consulting firm focused on enterprise performance management, analytics, and business intelligence
solutions, primarily leveraging the IBM Cognos suite of software products. The acquisition of JCB will further enhance the Company’s position in business
intelligence and enterprise performance management and increase access to CFO suites, as well as extend the Company’s presence in Denver, Chicago, and
Northern and Southern California.
The Company has initially estimated the total allocable purchase price consideration to be $16.6 million. The initial purchase price estimate is
comprised of $12.5 million in cash paid and $4.1 million of Company common stock issued at closing. The Company incurred approximately $0.6 million in
transaction costs, which were expensed when incurred.
The Company has estimated the allocation of the total purchase price consideration between tangible assets, identified intangible assets, liabilities,
and goodwill as follows (in millions):
Acquired tangible assets
Acquired intangible assets
Liabilities assumed
Goodwill
Total purchase price
$
$
2.8
3.0
(1.3)
12.1
16.6
The Company estimates that the intangible assets acquired have useful lives of six months to five years.
The amounts above represent the fair value estimates as of December 31, 2011 and are subject to subsequent adjustment as the Company obtains
additional information during the measurement period and finalizes its fair value estimates. Any subsequent adjustments to these fair value estimates
occurring during the measurement period will result in an adjustment to goodwill or income, as applicable.
The results of the Exervio and JCB operations have been included in the Company’s consolidated financial statements since the acquisition date.
36
PERFICIENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
DECEMBER 31, 2011
The amounts of revenue and net income of Exervio and JCB included in the Company’s Consolidated Statements of Operations from the
acquisition date to December 31, 2011 are as follows (in thousands):
Acquisition Date to
December 31, 2011
20,367
823
Revenues $
Net income $
Pro-forma Results of Operations (Unaudited)
The following presents the unaudited pro-forma combined results of operations of the Company with Kerdock, speakTECH, Exervio, and JCB for
the years ended December 31, 2011 and 2010, after giving effect to certain pro-forma adjustments related to the amortization of acquired intangible assets and
assuming Kerdock, speakTECH, Exervio, and JCB were acquired as of the beginning of 2010. These unaudited pro-forma results are presented in compliance
with the adoption of Accounting Standards Update (“ASU”) 2010-29, Business Combinations (Topic 805): Disclosure of Supplementary Pro Forma
Information for Business Combinations, and are not necessarily indicative of the actual consolidated results of operations had the acquisitions actually
occurred on January 1, 2010 or of future results of operations of the consolidated entities (in thousands):
December 31,
2011 2010
Revenues $274,596 $257,906
5,770
Net income $ 12,905 $
PointBridge Solutions, LLC (“PointBridge”)
In February 2012, the Company acquired substantially all of the assets of PointBridge. Refer to Note 16, Subsequent Events, for further discussion.
8. Goodwill and Intangible Assets
The Company performed its annual impairment test of goodwill as of October 1, 2011. As required by ASC Topic 350, the impairment test is
accomplished using a two-step approach. The first step screens for impairment and, when impairment is indicated, a second step is employed to measure the
impairment. The Company also reviews other factors to determine the likelihood of impairment. Based on the test performed, the Company’s fair value as of
the annual testing date exceeded its book value and consequently, no impairment was indicated.
The Company’s fair value was determined by weighting the results of two valuation methods: 1) market capitalization based on the average price of
the Company’s common stock, including a control premium, for a reasonable period of time prior to the evaluation date (generally 15 days) and 2) a
discounted cash flow model. The fair value calculated using the Company’s average common stock price (including a control premium) was weighted 40%
while the value calculated by the discounted cash flow model was weighted 60% in the Company’s determination of its overall fair value.
Goodwill
Activity related to goodwill consisted of the following (in thousands):
Balance, beginning of year
Preliminary purchase price allocations for acquisitions (Note 7)
Purchase accounting adjustments
Balance, end of year
37
2011
2010
115,227
17,169
(358)
132,038
$
$
104,168
11,059
--
115,227
$
$
PERFICIENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
DECEMBER 31, 2011
Intangible Assets with Definite Lives
Following is a summary of the Company’s intangible assets that are subject to amortization (in thousands):
Year ended December 31,
2011
2010
Customer relationships
Non-compete agreements
Customer backlog
Trade name
Internally developed software
Total
$
$
Gross Carrying
Amount
Gross Carrying
Amount
$
$
Accumulated
Amortization
(11,976)
(309)
--
(84)
(477)
(12,846)
Net
Carrying Amount
8,737
764
--
68
559
10,128
$
$
20,713
1,073
--
152
1,036
22,974
$
$
$
$
Accumulated
Amortization
(12,169)
(413)
--
(25)
(397)
(13,004)
Net
Carrying Amount
7,374
618
51
144
642
8,829
$
$
19,543
1,031
51
169
1,039
21,833
The estimated useful lives of identifiable intangible assets are as follows:
Customer relationships
2 - 8 years
Non-compete agreements3 - 5 years
Internally developed
software
Trade name
3 - 5 years
1 - 3 years
The weighted average amortization periods for customer relationships and non-compete agreements are 6 years and 5 years, respectively. Total
amortization expense for the years ended December 31, 2011, 2010, and 2009 was approximately $6.3 million, $4.0 million, and $4.3 million, respectively.
Estimated annual amortization expense for the next five years ended December 31 is as follows (in thousands):
$
$
$
$
$
$
4,162
2,677
1,504
664
510
611
2012
2013
2014
2015
2016
Thereafter
9. Stock-Based Compensation
Stock Option Plans
The Company made various stock option and award grants under the 1999 Stock Option/Stock Issuance Plan (the “1999 Plan”) prior to May
2009. In April 2009, the Company’s stockholders approved the 2009 Long-Term Incentive Plan (the “Incentive Plan”), which had been previously approved
by the Company’s Board of Directors. The Incentive Plan allows for the granting of various types of stock awards, not to exceed a total of 1.5 million shares,
to eligible individuals. The Compensation Committee of the Board of Directors will administer the Incentive Plan and determine the terms of all stock awards
made under the Incentive Plan.
38
PERFICIENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
DECEMBER 31, 2011
A summary of changes in stock options during 2011, 2010, and 2009 is as follows (in thousands, except exercise price information):
Options outstanding at January 1, 2009
Options granted
Options exercised
Options canceled
Options outstanding at December 31, 2009
Options granted
Options exercised
Options canceled
Options outstanding at December 31, 2010
Options granted
Options exercised
Options canceled
Options outstanding at December 31, 2011
Shares Range of Exercise Prices Weighted-Average Exercise Price Aggregate Intrinsic Value
2,030 $
--
(279)
(47)
1,704 $
--
(369)
(136)
1,199 $
--
(802)
(39)
358 $
0.03 – 16.94 $
--
0.10 – 7.48
0.03 – 13.25
0.03 – 16.94 $
--
0.03 – 10.00
1.01 – 16.94
0.03 – 9.19 $
--
0.03 – 9.19
1.41 – 7.48
0.03 – 9.19 $
4.81
--
3.04 $
5.35
5.08
--
3.66 $
13.53
4.56
--
4.49 $
5.58
4.61 $
5,598
1,932
2,480
1,043
Options vested, December 31, 2009
Options vested, December 31, 2010
Options vested, December 31, 2011
1,532 $
1,113 $
358 $
0.03 – 16.94 $
0.03 – 9.19 $
0.03 – 9.19 $
4.95
4.43
4.61 $
1,932
The following is additional information related to stock options outstanding at December 31, 2011:
Options Outstanding
Options Exercisable
Range of Exercise
Prices
0.03 – 2.28
3.10 – 4.72
6.31 – 9.19
0.03 – 9.19
$
$
$
$
Weighted
Average
Exercise
Price
1.68
3.38
6.62
4.61
Options
106,018
60,394
191,276
357,688
$
$
$
$
Weighted
Average
Remaining
Contractual
Life (Years)
1.54
2.47
3.03
2.50
Options
106,018
60,394
191,276
357,688
$
$
$
$
Weighted
Average
Exercise
Price
1.68
3.38
6.62
4.61
At December 31, 2011, 2010, and 2009, the weighted-average remaining contractual life of outstanding options was 2.50, 1.54, and 3.40 years,
respectively. Generally stock options have a maximum contractual term of ten years.
Restricted stock activity for the year ended December 31, 2011 was as follows (in thousands, except fair value information):
Restricted stock awards outstanding at January 1, 2011
Awards granted (1)
Awards vested
Awards canceled or forfeited
Restricted stock awards outstanding at December 31, 2011
Shares
2,606
720
(822)
(461)
2,043
$
$
$
$
$
Weighted-Average
Grant Date Fair
Value
8.97
10.31
10.07
8.76
9.16
(1) Includes the issuance of 97,800 shares of restricted stock to former JCB employees. The grants vest in 20% increments annually over a 5-year
period. If the recipient is not employed by the Company for any reason during the 5-year period, then any unvested shares will be forfeited.
39
PERFICIENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
DECEMBER 31, 2011
The weighted average grant date fair value of shares granted during 2010 and 2009 was $10.42 and $6.92, respectively. The total fair value of
restricted shares vesting during the years ended December 31, 2011, 2010 and 2009 was $7.8 million, $9.3 million and $6.7 million, respectively.
The Company recognized $9.2 million, $10.8 million and $9.8 million of share-based compensation expense during 2011, 2010 and 2009,
respectively, which included $1.1 million, $0.9 million and $0.9 million of expense for retirement savings plan contributions, respectively. The associated
current and future income tax benefit recognized during 2011, 2010 and 2009 was $3.1 million, $3.8 million and $3.4 million, respectively. As of December
31, 2011, there was $15.1 million of total unrecognized compensation cost related to non-vested share-based awards. This cost is expected to be recognized
over a weighted-average period of three years. The Company’s average estimated forfeiture rate for share based awards for the year ended December 31, 2011
was 7%, which was calculated using historical forfeiture experience. Generally restricted stock awards vest over a three to five year requisite service period.
At December 31, 2011, 0.4 million shares were reserved for future issuance upon exercise of outstanding options. At December 31, 2011, there
were 2.0 million shares of restricted stock outstanding under the 1999 Plan and the Incentive Plan.
Employee Stock Purchase Plan
The Employee Stock Purchase Plan (the “ESPP”) was initiated January 1, 2006 and is a broadly-based stock purchase plan in which any eligible
employee may elect to participate by authorizing the Company to make payroll deductions in a specific amount or designated percentage to pay the exercise
price of an option. In no event will an employee be granted ability under the ESPP that would permit the purchase of common stock with a fair market value
in excess of $25,000 in any calendar year and the Compensation Committee of the Company has set the current annual participation limit at $12,500. During
the year ended December 31, 2011, approximately 11,400 shares were purchased under the ESPP.
There are four three-month offering periods in each calendar year beginning on January 1, April 1, July 1, and October 1, respectively. The
purchase price of shares offered under the ESPP is an amount equal to 95% of the fair market value of the common stock on the date of purchase (occurring
on, respectively, March 31, June 30, September 30, and December 31). The ESPP is designed to comply with Section 423 of the Code and thus is eligible for
the favorable tax treatment afforded by Section 423.
10. Line of Credit
On May 23, 2011, the Company renewed and extended the term of its Credit Agreement (the “Credit Agreement”) with Silicon Valley Bank
(“SVB”), U.S. Bank National Association, and Bank of America, N.A. The Credit Agreement provides for revolving credit borrowings up to a maximum
principal amount of $50.0 million, subject to a commitment increase of $25.0 million. The Credit Agreement also allows for the issuance of letters of credit
in the aggregate amount of up to $500,000 at any one time; outstanding letters of credit reduce the credit available for revolving credit
borrowings. Substantially all of the Company’s assets are pledged to secure the credit facility.
All outstanding amounts owed under the Credit Agreement become due and payable no later than the final maturity date of May 23,
2015. Borrowings under the credit facility bear interest at the Company’s option of SVB’s prime rate (4.00% on December 31, 2011) plus a margin ranging
from 0.00% to 0.50% or one-month LIBOR (0.295% on December 31, 2011) plus a margin ranging from 2.50% to 3.00%. The additional margin amount is
dependent on the level of outstanding borrowings. As of December 31, 2011, the Company had $50.0 million of maximum borrowing capacity. An annual
commitment fee of 0.30% is incurred on the unused portion of the line of credit.
The Company is required to comply with various financial covenants under the Credit Agreement. Specifically, the Company is required to
maintain a ratio of earnings before interest, taxes, depreciation, and amortization (“EBITDA”) plus stock compensation and minus income taxes paid and
capital expenditures to interest expense and scheduled payments due for borrowings on a trailing three months basis annualized of not less than 2.00 to 1.00
and a ratio of current maturities of long-term debt to EBITDA plus stock compensation and minus income taxes paid and capital expenditures of not more
than 2.75 to 1.00.
11. Income Taxes
The Company files income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions. The Internal Revenue Service
(“IRS”) has completed examinations of the Company’s U.S. income tax returns or the statute has passed on years through 2007. The IRS completed its
examination of the Company’s 2009 income tax return during 2011 and the proposed adjustments to the Company’s tax positions were not material.
40
PERFICIENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
DECEMBER 31, 2011
Under the provisions of the ASC Subtopic 740-10-25, the Company had no unrecognized tax benefits as of December 31, 2011 or 2010.
As of December 31, 2011, the Company had U.S. Federal tax net operating loss carry forwards of approximately $5.9 million that will begin to
expire in 2020 if not utilized. Utilization of net operating losses may be subject to an annual limitation due to the “change in ownership” provisions of the
Code. The annual limitation may result in the expiration of net operating losses before utilization.
Significant components of the provision for income taxes are as follows (in thousands):
Current:
Federal
State
Foreign
Total current
Year Ended December 31,
2011 2010 2009
$ 6,358 $ 4,009 $ 1,173
385
7
7,367 5,063 1,565
996 1,043
11
13
Deferred:
(16)
Federal
(2)
State
Total deferred
(18)
Total provision for income taxes $ 7,898 $ 5,268 $ 1,547
487
44
531
192
13
205
The components of pretax income for the years ended December 31, 2011, 2010 and 2009 are as follows (in thousands):
Year Ended December 31,
2011 2010 2009
Domestic $ 17,614 $ 9,770 $ 2,995
Foreign 1,031 1,978
15
$ 18,645 $ 11,748 $ 3,010
Total
For the year ended December 31, 2011, 2010 and 2009, foreign operations included Canada, China and India.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred taxes as of December 31, 2011 and
2010 are as follows (in thousands):
December 31,
2011 2010
Deferred tax assets:
Current deferred tax assets:
$ 568 $ 539
Accrued liabilities
273
Net operating losses
Bad debt reserve
260
Net current deferred tax assets $1,250 $1,072
385
297
41
PERFICIENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
DECEMBER 31, 2011
December 31,
2011 2010
Non-current deferred tax assets:
Net operating losses and capital loss
Fixed assets
Deferred compensation
Goodwill and intangibles
Accrued liabilities
Acquisition-related costs
Equity in undistributed foreign earnings
Net non-current deferred tax assets
$1,873 $1,407
--
183
1,908 2,510
456
2,847
170
236
152
295
--
43
$7,159 $4,921
December 31,
2011 2010
Deferred tax liabilities:
Current deferred tax liabilities:
Deferred income
Prepaid expenses
Net current deferred tax liabilities
Non-current deferred tax liabilities:
Equity in undistributed foreign earnings
Goodwill and intangibles
Accrued liabilities
Fixed assets
Total non-current deferred tax liabilities
$
-- $
53
403 363
$ 403 $ 416
$ 123 $
--
6,832 5,338
--
34
--
87
$7,076 $5,338
Net current deferred tax asset
Net non-current deferred tax asset (liability) $
$ 847 $ 656
83 $ (417)
Management regularly assesses the likelihood that deferred tax assets will be recovered from future taxable income. To the extent management
believes that it is more likely than not that a deferred tax asset will not be realized, a valuation allowance is established. Management believes it is more
likely than not that the Company will generate sufficient taxable income in future years to realize the benefits of its deferred tax assets. The Company’s net
current deferred tax asset is included in other assets and the net non-current deferred tax liability is included in other non-current liabilities on the
Consolidated Balance Sheet.
The federal corporate statutory rate is reconciled to the Company’s effective income tax rate as follows:
Federal corporate statutory rate
Year Ended December 31,
2011
2009
2010
34.6% 34.2% 34.0%
State taxes, net of federal benefit
Effect of foreign operations
Stock compensation
Non-deductible acquisition costs
Other
4.1
(0.9)
1.4
2.1
1.1
5.7
(3.7)
4.5
1.7
2.4
8.4
--
7.4
--
1.6
Effective income tax rate
42.4% 44.8% 51.4%
The effective income tax rate decreased to 42.4% for the year ended December 31, 2011 from 44.8% for the year ended December 31, 2010
primarily due to the effect of state taxes and permanent items over a larger income base and lower non-deductible stock compensation.
42
PERFICIENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
DECEMBER 31, 2011
12. Commitments and Contingencies
The Company leases office space and certain equipment under various operating lease agreements. The Company has the option to extend the term
of certain lease agreements. Future minimum commitments under these lease agreements as of December 31, 2011 are as follows (in thousands):
2012
2013
2014
2015
2016
Thereafter
Total minimum lease payments $
Operating
Leases
2,458
$
2,429
1,958
1,482
1,369
558
10,254
Rent expense for the years ended December 31, 2011, 2010, and 2009 was approximately $2.9 million, $2.5 million, and $2.7 million, respectively.
13. Balance Sheet Components
December 31,
2011 2010
(In thousands)
Accounts receivable:
Accounts receivable
Unbilled revenues
Allowance for doubtful accounts (1,057)
Total
$44,438 $33,406
17,511 15,318
(228)
$60,892 $48,496
Property and Equipment:
Computer hardware (useful life of 3 years)
Leasehold improvements (useful life of 5 years)
Software (useful life of 1 year)
Furniture and fixtures (useful life of 5 years)
Less: Accumulated depreciation
Total
Other current liabilities:
Accrued variable compensation
Payroll related costs
Accrued subcontractor fees
Estimated fair value of contingent consideration liability (Note 7)
Deferred revenues
Accrued medical claims expense
Acquired liabilities
Other current liabilities
Total
Other non-current liabilities:
Deferred compensation liability
Deferred income taxes
Other non-current liabilities
Total
43
$
$
5,710
1,801
1,494
1,474
(6,989)
3,490
$
$
$
$
6,998 $
2,504
2,392
2,377
1,041
902
239
2,030
18,483 $
$
$
1,141
309
11
1,461
$
$
5,064
1,159
1,287
1,160
(6,315)
2,355
8,456
1,986
2,631
3,339
1,121
810
2,244
2,067
22,654
1,162
417
209
1,788
PERFICIENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
DECEMBER 31, 2011
14. Allowance for Doubtful Accounts
Activity in the allowance for doubtful accounts is summarized as follows for the years presented (in thousands):
Balance, beginning of year
Charges (reductions) to expense
Uncollected balances written off, net of recoveries
Balance, end of year
Year ended December 31,
2011 2010 2009
$ 1,497
$
$ 315
228
(448)
1,037
(734)
315
(68)
(19)
$
$ 1,057
(208)
$ 228
15. Quarterly Financial Results (Unaudited)
The following tables set forth certain unaudited supplemental quarterly financial information for the years ended December 31, 2011 and 2010. The
quarterly operating results are not necessarily indicative of future results of operations (in thousands except per share data).
March 31,
2011
June 30,
Three Months Ended,
September 30,
2011
(Unaudited)
2011
December 31,
2011
$
Total revenues
$
Gross margin
Income from operations
$
Income before income taxes $
Net income
$
Basic net income per share $
Diluted net income per share $
56,245 $ 65,587 $
16,289 $ 21,222 $
3,054 $ 4,881 $
3,036 $ 4,888 $
1,793 $ 2,767 $
0.10 $
0.07 $
0.10 $
0.06 $
70,174 $
22,317 $
5,717 $
5,729 $
3,466 $
0.12 $
0.12 $
March 31,
2010
June 30,
Three Months Ended,
September 30,
2010
(Unaudited)
2010
December 31,
2010
$
Total revenues
$
Gross margin
Income from operations
$
Income before income taxes $
Net income
$
Basic net income per share $
Diluted net income per share $
16. Subsequent Events
48,915 $ 55,460 $
13,419 $ 16,952 $
1,542 $ 3,270 $
1,575 $ 3,303 $
868 $ 2,051 $
0.08 $
0.03 $
0.07 $
0.03 $
54,648 $
16,451 $
3,531 $
3,599 $
2,253 $
0.08 $
0.08 $
70,433
21,306
4,940
4,992
2,721
0.10
0.09
55,929
15,945
3,174
3,271
1,308
0.05
0.05
On February 9, 2012, the Company acquired substantially all of the assets of PointBridge pursuant to the terms of an Asset Purchase Agreement for
approximately $22.0 million, consisting of $14.4 million in cash and approximately $7.6 million of Perficient common stock. PointBridge is based in
Chicago, Illinois and is a services revenue business and technology consulting firm focused on collaboration, web content management, unified
communications and business intelligence, primarily leveraging Microsoft technologies. The acquisition of PointBridge will further enhance the Company’s
position amongst the very largest and most capable Microsoft systems integrator consulting firms, as well as extend the Company’s presence in the Chicago,
Milwaukee and Boston markets.
44
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders
Perficient, Inc.:
We have audited the accompanying consolidated balance sheets of Perficient, Inc. and subsidiaries (the Company) as of December 31, 2011 and 2010, and the
related consolidated statements of operations, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2011.
We also have audited the Company’s internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control —
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is
responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the
effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting.
Our responsibility is to express an opinion on these consolidated financial statements and an opinion on the Company’s internal control over financial
reporting based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective
internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included examining, on a
test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary
in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over
financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect
the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being
made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
45
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
The Company acquired Exervio Consulting, Inc. (Exervio) and JCB Partners, LLC (JCB) in April and July 2011, respectively, and management excluded
from its assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2011, Exervio’s and JCB’s internal
control over financial reporting associated with 12% and 8% of the Company’s total assets and total revenues, respectively, included in the consolidated
financial statements of the Company as of and for the year ended December 31, 2011. Our audit of internal control over financial reporting of the Company as
of December 31, 2011 also excluded an evaluation of the internal control over financial reporting of Exervio and JCB.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Perficient, Inc. and
subsidiaries as of December 31, 2011 and 2010, and the results of their operations and their cash flows for each of the years in the three-year period ended
December 31, 2011, in conformity with U.S. generally accepted accounting principles. Also in our opinion, Perficient, Inc. and subsidiaries maintained, in all
material respects, effective internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control — Integrated
Framework issued by the COSO.
St. Louis, Missouri
February 29, 2012
/s/ KPMG LLP
46
Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.
None.
Item 9A.Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We have established disclosure controls and procedures to ensure that material information relating to the Company, including its consolidated
subsidiaries, is made known to the officers who certify the Company’s financial reports and to other members of senior management and the Board of
Directors.
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s reports
under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such
information is accumulated and communicated to management, including the principal executive officer and principal financial officer of the Company, as
appropriate, to allow timely decisions regarding required disclosure. The Company’s management, with the participation of the Company’s principal
executive officer and principal financial officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the
fiscal year covered by this Annual Report on Form 10-K. Based on that evaluation, the Company’s principal executive and principal financial officers have
determined that the Company’s disclosure controls and procedures were effective.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange Act
Rules 13a-15(f). In fulfilling this responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of
control procedures. The objectives of internal control include providing management with reasonable, but not absolute, assurance that assets are safeguarded
against loss from unauthorized use or disposition, and that transactions are executed in accordance with management’s authorization and recorded properly to
permit the preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States. Under the
supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an
evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control - Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway Commission. Based on our assessment under those criteria, management concluded that the
Company’s internal control over financial reporting was effective as of December 31, 2011.
The Company acquired Exervio Consulting, Inc. (“Exervio”) and JCB Partners, LLC (“JCB”) in April and July of 2011, respectively. As permitted
by SEC guidance, management excluded these acquired companies from its assessment of the effectiveness of the Company’s internal control over financial
reporting as of December 31, 2011. In total, Exervio and JCB represented 12% and 8% of the Company’s total assets and total revenues, respectively, as of
and for the year ended December 31, 2011. Excluding identifiable intangible assets and goodwill recorded in the business combination, Exervio and JCB
represented 2% of the Company’s total assets as of December 31, 2011.
KPMG LLP, our independent registered public accounting firm, has audited our financial statements for the year ended December 31, 2011
included in this Form 10-K, and has issued its report on the effectiveness of internal control over financial reporting as of December 31, 2011, which is
included herein.
Changes in Internal Control Over Financial Reporting
There have not been any changes in the Company’s internal control over financial reporting as defined in Exchange Act Rule 13a-15(f) during the
quarter ended December 31, 2011, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial
reporting.
Item 9B. Other Information.
None.
47
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Executive Officers
Our executive officers, including their ages as of the date of this filing are as follows:
Name
Jeffrey S. Davis
Kathryn J. Henely
Paul E. Martin
Age
47
47
51
Position
President and Chief Executive Officer
Chief Operating Officer
Chief Financial Officer, Treasurer and Secretary
Jeffrey S. Davis became the Chief Executive Officer and a member of the Board on September 1, 2009. He previously served as the Chief
Operating Officer of the Company after the closing of the acquisition of Vertecon in April 2002 and was named the Company’s President in 2004. He served
the same role of Chief Operating Officer at Vertecon from October 1999 to its acquisition by Perficient. Before Vertecon, Mr. Davis was a Senior Manager
and member of the leadership team in Arthur Andersen’s Business Consulting Practice, where he was responsible for defining and managing internal
processes, while managing business development and delivery of all products, services and solutions to a number of large accounts. Mr. Davis also served in
a leadership position at Ernst & Young LLP in the Management Consulting practice and in industry at Boeing, Inc. and Mallinckrodt, Inc. Mr. Davis is an
active volunteer member of the board of directors of the Cystic Fibrosis Foundation of St. Louis and a member of the University of Missouri Trulaske College
of Business advisory board. Mr. Davis has a M.B.A. from Washington University and a B.S. degree in Electrical Engineering from the University of Missouri.
Kathryn J. Henely was appointed the Company’s Chief Operating Officer on November 3, 2009. Ms. Henely joined the Company in 1999 as a
Director in the St. Louis office. She was promoted to General Manager in 2001 and to Vice President of Corporate Operations in 2006. Ms. Henely has been
the Vice President for the Company’s largest business group including several local and national business units along with our offshore development center in
China. She actively participated in the due diligence and integration of several acquisitions within her business group. Additionally, she led the establishment
of our Company Wide Practices and Corporate Recruiting organization. Ms. Henely received her M.S. in Computer Science from the University of Missouri-
Rolla and her B.S. in Computer Science from the University of Iowa.
Paul E. Martin joined the Company in August 2006 as Chief Financial Officer, Treasurer and Secretary. From August 2004 until February 2006,
Mr. Martin was the Interim co-Chief Financial Officer and Interim Chief Financial Officer of Charter Communications, Inc. (“Charter”), a publicly traded
multi-billion dollar revenue domestic cable television multi-system operator. From April 2002 through April 2006, Mr. Martin was the Senior Vice President,
Principal Accounting Officer and Corporate Controller of Charter and was Charter’s Vice President and Corporate Controller from March 2000 to April 2002.
Prior to Charter, Mr. Martin was Vice President and Controller for Operations and Logistics for Fort James Corporation, a manufacturer of paper products
with multi-billion dollar revenues. From 1995 to February 1999, Mr. Martin was Chief Financial Officer of Rawlings Sporting Goods Company, Inc., a
publicly traded multi-million dollar revenue sporting goods manufacturer and distributor. Mr. Martin received a B.S. degree with honors in accounting from
the University of Missouri – St. Louis. Mr. Martin is also a member of the University of Missouri – St. Louis School of Business Leadership Council.
Additional information with respect to Directors and Executive Officers of the Company is incorporated by reference to the Proxy Statement under
the captions “Directors and Executive Officers”, “Composition and Meetings of the Board of Directors and Committees”, and “Section 16(a) Beneficial
Ownership Reporting Compliance.” The Proxy Statement will be filed pursuant to Regulation 14A within 120 days of the end of the Company's fiscal year.
Codes of Conduct and Ethics
Information on this subject is found in the Proxy Statement under the caption “Certain Relationships and Related Transactions” and is incorporated
herein by reference. The Proxy Statement will be filed pursuant to Regulation 14A within 120 days of the end of the Company's fiscal year.
Audit Committee of the Board of Directors
Information on this subject is found in the Proxy Statement under the caption “Compensation and Meetings of the Board of Directors and
Committees” and is incorporated herein by reference. The Proxy Statement will be filed pursuant to Regulation 14A within 120 days of the end of the
Company’s fiscal year.
48
Item 11. Executive Compensation.
Information on this subject is found in the Proxy Statement under the captions “Compensation of Directors and Executive Officers,” “Directors and
Executive Officers,” “Compensation Committee Report,” and “Compensation Committee Interlocks and Insider Participation” and is incorporated herein by
reference. The Proxy Statement will be filed pursuant to Regulation 14A within 120 days of the end of the Company's fiscal year.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Information on this subject is found in the Proxy Statement under the captions “Security Ownership of Certain Beneficial Owners and
Management,” “Directors and Executive Officers,” and “Equity Compensation Plan Information” and is incorporated herein by reference. The Proxy
Statement will be filed pursuant to Regulations 14A within 120 days of the end of the Company’s fiscal year.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Information on this subject is found in the Proxy Statement under the caption “Certain Relationships and Related Transactions” and incorporated
herein by reference. The Proxy Statement will be filed pursuant to Regulation 14A within 120 days of the end of the Company’s fiscal year.
Item 14. Principal Accounting Fees and Services.
Information on this subject is found in the Proxy Statement under the caption “Principal Accounting Firm Fees and Services” and incorporated
herein by reference. The Proxy Statement will be filed pursuant to Regulation 14A within 120 days of the end of the Company’s fiscal year.
49
Item 15. Exhibits, Financial Statement Schedules.
1. Financial Statements
PART IV
The following consolidated statements are included within Item 8 under the following captions:
Page(s)
Index
Consolidated Balance Sheets
26
Consolidated Statements of Operations
27
Consolidated Statements of Changes in Stockholders’ Equity
28
Consolidated Statements of Cash Flows
29
30
Notes to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm 45-46
2. Financial Statement Schedules
No financial statement schedules are required to be filed by Items 8 and 15(b) because they are not required or are not applicable, or the required
information is set forth in the applicable financial statements or notes thereto.
3. Exhibits
See Index to Exhibits starting on page 52.
50
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Date: March 1, 2012
PERFICIENT, INC.
By:
/s/ Paul E. Martin
Paul E. Martin
Chief Financial Officer(Principal Financial Officer and Principal
Accounting Officer)
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Jeffrey S. Davis and Paul E.
Martin, and each of them (with full power to each of them to act alone), his or her true and lawful attorney-in-fact and agent, with full power of substitution
and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign on his or her behalf individually and in each
capacity stated below any and all amendments (including post-effective amendments) to this annual report, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents
and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents and either of them, or their
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature
/s/ Jeffrey S. Davis
Jeffrey S. Davis
/s/ Paul E. Martin
Paul E. Martin
/s/ Ralph C. Derrickson
Ralph C. Derrickson
/s/ Edward L. Glotzbach
Edward L. Glotzbach
/s/ John S. Hamlin
John S. Hamlin
/s/ James R. Kackley
James R. Kackley
/s/ David S. Lundeen
David S. Lundeen
/s/ David D. May
David D. May
Title
Director, President and Chief Executive Officer
(Principal Executive Officer)
Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)
Director
Director
Director
Director
Director
Director
51
Date
March 1, 2012
March 1, 2012
March 1, 2012
March 1, 2012
March 1, 2012
March 1, 2012
March 1, 2012
March 1, 2012
INDEX TO EXHIBITS
Exhibit
Number
3.1
3.2
3.3
3.4
4.1
4.2
10.1†
10.2†
10.3†
10.4†
10.5†
10.6†
10.7†
10.8†
Description
Certificate of Incorporation of Perficient, Inc., previously filed with the Securities and Exchange Commission as an Exhibit to our
Registration Statement on Form SB-2 (File No. 333-78337) declared effective on July 28, 1999 by the Securities and Exchange Commission
and incorporated herein by reference
Certificate of Amendment to Certificate of Incorporation of Perficient, Inc., previously filed with the Securities and Exchange Commission
as an Exhibit to our Form 8-A filed with the Securities and Exchange Commission pursuant to Section 12(g) of the Securities Exchange Act
of 1934 on February 15, 2005 and incorporated herein by reference
Certificate of Amendment to Certificate of Incorporation of Perficient, Inc., previously filed with the Securities and Exchange Commission
as an Exhibit to our Registration Statement on Form S-8 (File No. 333-130624) filed on December 22, 2005 and incorporated herein by
reference
Bylaws of Perficient, Inc., previously filed with the Securities and Exchange Commission as an Exhibit to our Current Report on Form 8-K
filed November 9, 2007 and incorporated herein by reference
Specimen Certificate for shares of Perficient, Inc. common stock, previously filed with the Securities and Exchange Commission as an
Exhibit to our Quarterly Report on Form 10-Q (File No. 001-15169) filed May 7, 2009 and incorporated herein by reference
Form of Common Stock Purchase Warrant, previously filed with the Securities and Exchange Commission as an Exhibit to our Current
Report on Form 8-K (File No.001-15169) filed on January 17, 2002 and incorporated herein by reference
Perficient, Inc. Amended and Restated 1999 Stock Option/Stock Issuance Plan, previously filed with the Securities and Exchange
Commission as an Exhibit to our Annual Report on Form 10-K for the year ended December 31, 2005 and incorporated by reference herein
Perficient, Inc. 2009 Long-Term Incentive Plan, as amended, previously filed with the Securities and Exchange Commission as an Exhibit to
our Current Report on Form 8-K filed February 25, 2010 and incorporated herein by reference
Form of Stock Option Agreement, previously filed with the Securities and Exchange Commission as an Exhibit to our Annual Report on
Form 10-KSB for the fiscal year ended December 31, 2004 and incorporated herein by reference
Perficient, Inc. Employee Stock Purchase Plan, previously filed with the Securities and Exchange Commission as Appendix A to the
Registrant's Schedule 14A (File No. 001-15169) on October 13, 2005 and incorporated herein by reference
Form of Restricted Stock Agreement, previously filed with the Securities and Exchange Commission as an Exhibit to our Annual Report on
Form 10-K for the year ended December 31, 2005 and incorporated by reference herein
Form of Restricted Stock Agreement, previously filed with the Securities and Exchange Commission as an Exhibit to our Quarterly Report
on Form 10-Q for the quarter ended March 31, 2010 and incorporated by reference herein
Employment Agreement between Perficient, Inc. and Paul E. Martin dated and effective January 1, 2012, previously filed as an Exhibit to
our Current Report on Form 8-K (File No. 001-15169) filed on December 23, 2011 and incorporated herein by reference
Employment Agreement between Perficient, Inc. and Jeffrey S. Davis dated December 22, 2011, and effective as of January 1, 2012,
previously filed as an Exhibit to our Current Report on Form 8-K (File No. 001-15169) filed on December 23, 2011 and incorporated herein
by reference
52
Exhibit
Number
10.9
Description
Amended and Restated Credit Agreement by and among Silicon Valley Bank, Bank of America, N.A., and U.S. Bank, N.A., and Perficient,
Inc. dated effective as of May 23, 2011, previously filed with the Securities and Exchange Commission as an Exhibit to our Current Report
on Form 8-K (File No. 001-15169) filed on May 26, 2011 and incorporated herein by reference
21.1*
Subsidiaries
23.1*
Consent of KPMG LLP
24.1*
Power of Attorney (included on the signature page hereto)
31.1*
Certification by the Chief Executive Officer of Perficient, Inc. as required by Section 302 of the Sarbanes-Oxley Act of 2002
31.2*
Certification by the Chief Financial Officer of Perficient, Inc. as required by Section 302 of the Sarbanes-Oxley Act of 2002
32.1*
Certification by the Chief Executive Officer and Chief Financial Officer of Perficient, Inc. pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
† Identifies an Exhibit that consists of or includes a management contract or compensatory plan or arrangement.
* Filed herewith.
53
Subsidiaries
Perficient, Inc.
Perficient Canada Corp.
BoldTech International LLC
Perficient China, Ltd.
Perficient India Private Limited
Subsidiaries
Jurisdiction
Delaware
Province of Ontario, Canada
Colorado
People’s Republic of China
India
Exhibit 21.1
Consent of Independent Registered Public Accounting Firm
Exhibit 23.1
The Board of Directors and Stockholders
Perficient, Inc.:
We consent to the incorporation by reference in the registration statements (No. 333-89076, No. 333-42624, No. 333-100490, No. 333-116549,
No. 333-117216, No. 333-123177, No. 333-129054, No. 333-138602, No. 333-142267, No. 333-145899, No. 333-147687, No. 333-148978, and
No. 333-152274) on Form S-3 and (No. 333-42626, No. 333-44854, No. 333-75666, No. 333-118839, No. 333-130624, No. 333-147730, No. 333-157799,
and No. 333-160465) on Form S-8 of Perficient, Inc. (the Company) of our report dated February 29, 2012, with respect to the consolidated balance sheets of
the Company as of December 31, 2011 and 2010, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the
years in the three-year period ended December 31, 2011, and the effectiveness of internal control over financial reporting as of December 31, 2011, which
report appears in the December 31, 2011 annual report on Form 10-K of the Company.
Our report dated February 29, 2012, on the effectiveness of internal control over financial reporting as of December 31, 2011, contains an explanatory
paragraph that states the Company acquired Exervio Consulting, Inc. (Exervio) and JCB Partners, LLC (JCB) in April and July 2011, respectively, and
management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2011, Exervio’s
and JCB’s internal control over financial reporting associated with 12% and 8% of the Company’s total assets and total revenues, respectively, included in the
consolidated financial statements of the Company as of and for the year ended December 31, 2011. Our audit of internal control over financial reporting of the
Company as of December 31, 2011 also excluded an evaluation of the internal control over financial reporting of Exervio and JCB.
St. Louis, Missouri
February 29, 2012
/s/ KPMG LLP
Exhibit 31.1
I, Jeffrey S. Davis, certify that:
1. I have reviewed this annual report on Form 10-K of Perficient, Inc.;
CERTIFICATIONS
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13(a)-15(f) and 15d-15(f))
for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting,
to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: March 1, 2012
By:
/s/ Jeffrey S. Davis
Jeffrey S. Davis
Chief Executive Officer and President
Exhibit 31.2
I, Paul E. Martin, certify that:
1. I have reviewed this annual report on Form 10-K of Perficient, Inc.;
CERTIFICATIONS
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13(a)-15(f) and 15d-15(f)) for
the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting,
to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: March 1, 2012
By:
/s/ Paul E. Martin
Paul E. Martin
Chief Financial Officer
CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND
CHIEF FINANCIAL OFFICER
Exhibit 32.1
Pursuant to 18 U.S.C. Sec. 1350 and in connection with the accompanying report on Form 10-K for the fiscal year ended December 31, 2011 that contains
financial statements for such period and that is being filed concurrently with the Securities and Exchange Commission on the date hereof (the “Report”), each
of the undersigned officers of Perficient, Inc. (the “Company”), hereby certifies that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: March 1, 2012
Date: March 1, 2012
By:
By:
/s/ Jeffrey S. Davis
Jeffrey S. Davis
Chief Executive Officer and President
/s/ Paul E. Martin
Paul E. Martin
Chief Financial Officer