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Cognizant Technology SolutionsUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549FORM 10-K(Mark one) Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2014 Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934Commission file number 001-15169PERFICIENT, 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.)555 Maryville University Drive, Suite 600Saint Louis, Missouri 63141(Address of principal executive offices)(314) 529-3600(Registrant's telephone number, including area code)Securities registered pursuant to Section 12(b) of the Act:Title of each class:Common Stock, $0.001 par valueName of each exchange on which registered:The Nasdaq Global Select MarketSecurities registered pursuant to Section 12(g) of the Act: NoneIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No 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 No 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 1934during 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 filingrequirements for the past 90 days. Yes No Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required tobe 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 thatthe registrant was required to submit and post such files). Yes No 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 willnot 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 orany amendment to this Form 10-K. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. Seedefinitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No The aggregate market value of the voting stock held by non-affiliates of the Company was approximately $648,124,350 based on the last reported sale priceof the Company's common stock on The Nasdaq Global Select Market on June 30, 2014.As of March 2, 2015, there were 35,235,117 shares of common stock outstanding.Portions of the definitive proxy statement to be used in connection with the 2015 Annual Meeting of Stockholders, which will be filed with the Securitiesand Exchange Commission no later than April 30, 2015, are incorporated by reference in Part III of this Form 10-K. TABLE OF CONTENTSPART IItem 1.Business.1Item 1A.Risk Factors.6Item 1B.Unresolved Staff Comments.13Item 2.Properties.13Item 3.Legal Proceedings.13Item 4.Mine Safety Disclosures.13 PART IIItem 5.Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.14Item 6.Selected Financial Data.15Item 7.Management's Discussion and Analysis of Financial Condition and Results of Operations.16Item 7A.Quantitative and Qualitative Disclosures About Market Risk.26Item 8.Financial Statements and Supplementary Data.27Item 9.Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.50Item 9A.Controls and Procedures.50Item 9B.Other Information.50 PART IIIItem 10.Directors, Executive Officers and Corporate Governance.51Item 11.Executive Compensation.52Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.52Item 13.Certain Relationships and Related Transactions, and Director Independence.52Item 14.Principal Accounting Fees and Services.52 PART IVItem 15.Exhibits, Financial Statement Schedules.53i PART ISPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTSSome of the statements contained in this Annual Report on Form 10-K that are not purely historical statements discuss future expectations, containprojections of results of operations or financial condition, or state other forward-looking information. Those statements are subject to known and unknownrisks, 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-lookingstatements by words like "may," "will," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential," or "continue" or the negativeof those words and other comparable words. You should be aware that those statements only reflect our predictions and are subject to risks and uncertainties.Actual events or results may differ substantially. Important factors that could cause our actual results to be materially different from the forward-lookingstatements include (but are not limited to) the following: (1)the impact of the general economy and economic uncertainty on our business;(2)risks associated with the operation of our business generally, including: a. client demand for our services and solutions; b. maintaining a balance of our supply of skills and resources with client demand; c. effectively competing in a highly competitive market; d. protecting our clients' and our data and information; e. risks from international operations including fluctuations in exchange rates; f. obtaining favorable pricing to reflect services provided; g. adapting to changes in technologies and offerings; h. risk of loss of one or more significant software vendors; and i. the recent implementation of our new Enterprise Resource Planning system;(3)legal liabilities, including intellectual property protection and infringement or personally identifiable information;(4)risks associated with managing growth organically and through acquisitions; and(5)the risks detailed from time to time within our filings with the Securities and Exchange Commission (the "SEC"). This discussion is not exhaustive, but is designed to highlight important factors that may impact our forward-looking statements. Because the factorsreferred to above, as well as the statements included under the heading "Risk Factors" in this Annual Report on Form 10-K, including documentsincorporated by reference therein and herein, could cause actual results or outcomes to differ materially from those expressed in any forward-lookingstatement made by us or on our behalf, you should not place undue reliance on any forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels ofactivity, performance, or achievements. We are under no duty to update any of the forward-looking statements after the date of this Annual Report on Form10-K 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 toPerficient, Inc. and its subsidiaries (collectively, "Perficient" or the "Company") are expressly qualified in their entirety by this cautionary statement. Thiscautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that Perficient or any personsacting on our behalf may issue.Item 1. Business.OverviewWe are an information technology consulting firm serving Forbes Global 2000 and other large enterprise companies with a primary focus oncustomers in the United States. We help our clients gain competitive advantage by using technologies to make their businesses more responsive to marketopportunities and threats, strengthen relationships with their customers, suppliers and partners, improve productivity, and reduce information technologycosts. We design, build, and deliver business-driven technology solutions using third-party software products. Our solutions include business analytics,portals and collaboration, technology platform implementations, custom applications, commerce, customer relationship management, business integration, enterprise content management, business process management, and management consulting, 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 believe we have acquired domainexpertise that differentiates our firm. We use project teams that deliver high-value, measurable results by working collaboratively with clients and theirpartners through a user-centered, technology-based and business-driven solutions methodology. We believe this approach enhances return-on-investment forour clients by reducing the time and risk associated with designing and implementing technology solutions.1 We serve our clients from locations in multiple markets throughout North America by leveraging a sales team that is experienced and connectedthrough a common service portfolio, sales process, and performance management system. Our sales process utilizes project pursuit teams that include those ofour information technology colleagues best suited to address a particular prospective client's needs. Our primary target client base includes companies inNorth America with annual revenues in excess of $500 million. We believe this market segment can generate the repeat business that is a fundamental part ofour growth plan. We primarily pursue solutions opportunities where our domain expertise and delivery track record give us a competitive advantage. We alsotypically target engagements with $10 million or less in fees, which we believe to be below the target project range of most large systems integrators andbeyond the delivery capabilities of most local boutique consulting firms.During 2014, we continued to implement a strategy focused on: expanding our relationships with existing and new clients; continuing to makedisciplined acquisitions by acquiring ForwardThink Group, Inc. ("ForwardThink") in February, BioPharm Systems, Inc. ("BioPharm") in April, and TrifectaTechnologies, Inc. ("Trifecta") in May; expanding our technical skill and geographic base by expanding our business both organically and throughacquisitions; expanding our brand visibility among prospective clients, employees, and software vendors; leveraging our offshore capabilities in China andIndia; and leveraging our existing, and pursuing new, strategic alliances by targeting leading business advisory companies and technology providers.Approximately 99% of our revenues were derived from clients in the United States during each of the years ended December 31, 2014, 2013 and 2012.Approximately 96% of our total assets were located in the United States as of December 31, 2014 and 97% as of both December 31, 2013, and 2012, with theremainder located in Canada, China, and India.We have been able to extend or enhance our presence in certain markets through acquisitions, as well as expand or enhance the services andsolutions we are able to provide our clients. Through these acquisitions in 2014, we entered or expanded our presence in the New York market among othersand are now able to provide additional services and solutions within the financial services, life sciences and ecommerce verticals. Our acquisition of ZeonSolutions Incorporated and certain related entities (collectively, "Zeon") on January 2, 2015 (as described in Note 15, Subsequent Events, in the Notes toConsolidated Financial Statements) enabled us to broaden and deepen our ecommerce expertise and expand into the Milwaukee, Wisconsin and Ann Arbor,Michigan markets and to begin operating a development center in Nagpur, India.We provide services primarily to the healthcare (health and public services), financial services (including banking and insurance), retail, energy andutilities, telecommunications, electronics and computer hardware, automotive and transport products, manufacturing, business services, and consumer goodsand services industries and markets, among others.Our SolutionsWe help clients gain competitive advantage by using technology to: make their businesses more responsive to market opportunities; strengthenrelationships with customers, suppliers, and partners; improve productivity; and reduce information technology costs. Our business-driven technologysolutions enable these benefits by developing, integrating, automating, and extending business processes, technology infrastructure and softwareapplications end-to-end within an organization and with key partners, suppliers, and customers. This provides real-time access to critical businessapplications 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 systemsto 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 informationand applications available online to suppliers, partners, and distributors;·increase the effectiveness and value of legacy enterprise technology infrastructure investments by enabling faster application development anddeployment, 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 onunique problems and opportunities.Our business-driven technology solutions include the following:·Business analytics. We design, develop, and implement business analytics solutions that allow companies to interpret and act upon accurate, timely, andintegrated information. Business analytics solutions help our clients make more informed business decisions by classifying, aggregating, and correlatingdata into meaningful business information. Our business analytics solutions allow our clients to transform data into knowledge for quick and effectivedecision making and can include information strategy, data warehousing, and business analytics and reporting.·Portals and collaboration. We design, develop, implement, and integrate secure and scalable enterprise portals and collaboration solutions for ourclients and their customers, suppliers, and partners that include searchable data systems, collaborative systems for process improvement, transactionprocessing, unified and extended reporting, content management, social media/networking tools, and personalization.·Platform implementations. We design, develop, and implement technology platform solutions that allow our clients to establish a robust, reliableInternet-based infrastructure for integrated business applications which extend enterprise technology assets to employees, customers, suppliers, andpartners. 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.2 ·Custom applications. We design, develop, implement, and integrate custom application solutions that deliver enterprise-specific functionality to meetthe unique requirements and needs of our clients. Our substantial experience with platforms including J2EE, .Net, and Open-source enables enterprises ofall types to leverage cutting-edge technologies to meet business-driven needs.·Customer relationship management ("CRM"). We design, develop, and implement advanced CRM solutions that facilitate customer acquisition, serviceand 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.·Business integration and service oriented architectures ("SOA"). We design, develop, and implement business integration and SOA solutions that allowour clients to integrate all of their business processes end-to-end and across the enterprise. Truly innovative companies are extending those processes andeliminating functional friction between the enterprise, core customers, and partners. Our business integration solutions can extend and extract coreapplications, reduce infrastructure strains and cost, web-enable legacy applications, provide real-time insight into business metrics, and introduceefficiencies for customers, suppliers, and partners.·Content management ("CM"). We design, develop, and implement CM solutions that enable the management of all unstructured information regardlessof file type or format. Our CM solutions can facilitate the creation of new content and/or provide easy access and retrieval of existing digital assets fromother enterprise tools such as enterprise resource planning, customer relationship management, or legacy applications. Our CM solutions includeEnterprise Imaging and Document Management, Web Content Management, Digital Asset Management, Enterprise Records Management, Complianceand Control, Business Process Management and Collaboration, and Enterprise Search.·Business process management ("BPM"). We design, develop, and implement BPM solutions that allow our clients to quickly adapt their businessprocesses to respond to new market opportunities or competitive threats by taking advantage of business strategies supported by flexible businessapplications and information technology infrastructures.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.We have developed a wide array of intellectual property assets, applications, utilities and products, that enable our clients to speed time to deliveryand reduce total cost of ownership. In addition, we also sell certain internally developed software packages. These foundational tools include configurableSolution Accelerators and Industry Tools that can be customized to solve specific enterprise challenges. Our Solution Accelerators increase the velocity ofsolution development across key horizontal disciplines including business integration, content management, business process management, enterprise searchand tax compliance. Our Industry Tools enable enterprises to address industry-specific business process and workflow challenges. We offer tools for thehealthcare, energy and utilities, financial services and retail industries. Our strong network of partnerships and cross-platform capabilities enable us todevelop and deliver accelerators across a wide spectrum of solution areas and vendor platforms.In addition to our technology solution services and intellectual property assets, we offer education and mentoring services to our clients. Weconduct IBM and Oracle-certified training, where we provide our clients both a customized and established curriculum of courses and other educationservices.Competitive StrengthsWe 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 includebusiness 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 havesignificant domain expertise and on which these solutions are built include IBM, Microsoft, Oracle and salesforce.com, among others.·Industry Expertise. We serve many of the world's largest and most respected companies with extensive business process experience across a variety ofindustries. These industries include healthcare, financial services and banking, retail, energy and utilities, telecommunications, electronics and computerhardware, and automotive and transport products, among others.·Delivery Model and Methodology. We believe our significant domain expertise enables us to provide high-value solutions through expert project teamsthat deliver measurable results by working collaboratively with clients through a user-centered, technology-based, and business-driven solutionsmethodology. Our methodology includes a proven execution process map we developed, which allows for repeatable, high quality services delivery. Themethodology leverages the thought leadership of our senior strategists and practitioners to support the client project team and focuses on transformingour clients' business processes to provide enhanced customer value and operating efficiency, enabled by web technology. As a result, we believe we areable to offer our clients the dedicated attention that small firms usually provide and the delivery and project management that larger firms usually offer. 3 ·Client Relationships. We have built a track record of quality solutions and client satisfaction through the timely, efficient, and successful completion ofnumerous projects for our clients. As a result, we have established long-term relationships with many of our clients who continue to engage us foradditional projects and serve as references for us. For the years ending December 31, 2014, 2013, and 2012, 87%, 86%, and 84%, respectively, of servicesrevenues were derived from clients who continued to utilize our services from the prior year, excluding any revenues from acquisitions completed in thatyear.·Vendor Relationship and Endorsements. We have built meaningful relationships with software providers, whose products we use to design andimplement solutions for our clients. These relationships enable us to reduce our cost of sales and sales cycle times and increase win rates by leveragingour 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, a Microsoft National Solutions Provider and Gold Certified Partner, an Oracle Platinum Partner, and asalesforce.com Platinum Cloud Alliance Partner. In 2014, we received multiple awards and recognition from our partners, including: ·Microsoft West Region Compete Partner of the Year;·Microsoft Central Region Enterprise Office 365 Partner of the Year;·Microsoft East Region NSI Partner of the Year;·Microsoft Central Region Enterprise Cloud Partner of the Year;·IBM Innovation, Pure and Simple Outstanding Collaboration Award; and·IBM Collaboration Solutions Best Digital Experience Award.·Offshore Capability. We serve our clients from locations in multiple markets throughout North America, and, in addition, we operate globaldevelopment centers in Hangzhou, China and Chennai, India. Effective with the acquisition of Zeon in January 2015 (as described in Note 15,Subsequent Events, in the Notes to Consolidated Financial Statements), we are operating a development center in Nagpur, India with approximately 260colleagues. These facilities are staffed with colleagues who have specializations that include application development, adapter and interfacedevelopment, quality assurance and testing, monitoring and support, product development, platform migration, and portal development with expertise inIBM, Microsoft and Oracle technologies. In addition to our offshore capabilities, we employ a number of foreign nationals in the United States on H1-Bvisas. 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, 2014, we had 190 colleagues at the Hangzhou, China facility, 94 colleagues at the Chennai, India facility, and 234 colleagues withH1-B visas. We intend to continue to leverage our existing offshore capabilities to support our growth and provide our clients flexible options forproject delivery.CompetitionThe 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, Cognizant, and Sapient/ Publicis;·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, partnernetwork with leading technology companies, quality of proposed solutions, service quality and performance, efficiency, reliability, scalability and features ofthe software platforms upon which the solutions are based, and the ability to implement solutions quickly and respond on a timely basis to customer needs. Inaddition, because of the relatively low barriers to entry into this market, we expect to face additional competition from new entrants. We expect competitionfrom 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 greaterfinancial, technical, and marketing resources than we do. As a result, these competitors may be able to attract customers to which we market our services andadapt more quickly to new technologies or evolving customer or industry requirements.4 EmployeesAs of December 31, 2014, we had 2,074 colleagues, 1,724 of which were billable (excluding 132 billable subcontractors) and 350 which wereinvolved in sales, administration, and marketing. None of our colleagues are represented by a collective bargaining agreement, and we have neverexperienced a strike or similar work stoppage. We are committed to the continued development of our colleagues.Sales and Marketing. As of December 31, 2014, we had a 96-person direct solutions-oriented sales force. We reward our sales force for developingand maintaining relationships with our clients and seeking out follow-up engagements as well as leveraging those relationships to forge new relationships indifferent areas of the business and with our clients' business partners. Approximately 85% of our sales are executed by our direct sales force. In addition toour direct sales team, we also have 43 dedicated sales support employees, 29 general managers and nine vice-presidents who are engaged in our sales andmarketing efforts.We have sales and marketing partnerships with software vendors including IBM, Microsoft, Oracle and salesforce.com, among others. Thesecompanies are key vendors of open standards-based software commonly referred to as middleware application servers, enterprise application integrationplatforms, business process management, cloud computing applications, business activity monitoring and business intelligence applications, and enterpriseportal server software. Our direct sales force works in tandem with the sales and marketing groups of our partners to identify potential new clients andprojects. 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 ofunderstanding of current Internet and legacy technologies with the ability to implement complex and cutting-edge solutions. We believe in an employee-centered environment that is built on a culture of respect.Retention. We firmly believe in the power of partnership and the spirit of innovation and approach every opportunity with these philosophies inmind. We focus on a core set of business-driven technology solutions, applications, and software platforms and our commitment to our employees' careerdevelopment through continued training and advancement opportunities sets us apart as an employer of choice.Compensation. Our compensation philosophy and programs are designed to attract, retain, motivate and reward employees based on performanceand results. Our tiered incentive compensation plans help us reach our overall goals by rewarding individuals for their influence on key performance factorsand allow for differentiation so that truly stellar performers may be rewarded.Strategic Advisory Team ("SAT"). Our SAT leadership performs a critical role in maintaining our technology leadership. Consisting of keyemployees from several practice areas, the SAT leadership assesses new technologies, partnership opportunities, and serves as lead internal subject matterexperts for their respective domain. The SAT leaders also create and deliver thought leadership activities, including white paper authorship and publicationand speaking engagements. Finally, the SAT identifies services opportunities between and among our strategic partners' products, oversees our qualityassurance programs, and assists in acquisition-related technology due diligence.General InformationOur stock is traded on The Nasdaq Global Select Market under the symbol "PRFT." Our website can be visited at www.perficient.com. We makeavailable 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 amendmentsto those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as soon asreasonably practicable after we electronically file such material with, or furnish it to, the SEC. The information contained or incorporated in our website is notpart of this document.5 Item 1A.Risk Factors.You should carefully consider the following factors together with the other information contained in or incorporated by reference into this AnnualReport on Form 10-K before you decide to buy our common stock. These factors could materially adversely affect our business, financial condition,operating results, cash flows, or stock price. Our business is also subject to general risks and uncertainties that may broadly affect companies, including us.Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also could materially adversely affect our business,financial condition, operating results, cash flows, or stock price.Our results of operations could be adversely affected by volatile, negative or uncertain economic conditions and the effects of these conditions on ourclients' businesses and levels of business activity.Global macroeconomic conditions affect our clients' businesses and the markets they serve. Developments, such as the recent recessions andinstability in the United States and Europe, deteriorations in the Canadian, Chinese and Indian economies, and the inflationary risks associated with highercommodity prices, among other developments, may have an adverse effect on our client's business and, consequently, on our results of operations, revenuegrowth and profitability.Volatile, negative or uncertain economic conditions in the markets we serve have undermined, and could in the future undermine, businessconfidence and cause our clients to reduce or defer their spending on new technologies or initiatives or terminate existing contracts, which would negativelyaffect our business. Growth in markets we serve could be at a slow rate, or could stagnate, in each case, for an extended period of time. Differing economicconditions and patterns of economic growth and contraction in the geographical regions in which we operate and the industries we serve have affected, andmay in the future affect, demand for our services. A material portion of our revenues and profitability is derived from our clients in North America. Weakeningdemand in this market could have a material adverse effect on our results of operations. Ongoing economic volatility and uncertainty affects our business in anumber of other ways, including making it more difficult to accurately forecast client demand beyond the short term and effectively build our revenue andresource plans, particularly in consulting. This could result, for example, in us not having the level of appropriate personnel where they are needed or havingto use involuntary terminations as means to keep our supply of skills and resources in balance.Economic volatility and uncertainty is particularly challenging because it may take some time for the effects and resulting changes in demandpatterns to manifest themselves in our business and results of operations. Changing demand patterns from economic volatility and uncertainty could have asignificant negative impact on our results of operations.Our business depends on generating and maintaining ongoing, profitable client demand for our services and solutions, and a significant reduction insuch demand could materially affect our results of operations.Our revenue and profitability depend on the demand for our services and favorable margins, which could be negatively affected by numerousfactors, many of which are beyond our control and unrelated to our work product. As described above, volatile, negative or uncertain global economicconditions have adversely affected, and could in the future adversely affect, client demand for our services and solutions. In addition, developments in theindustries we serve, which may be rapid, could shift demand to services and solutions where we are less competitive, or might require significant investmentby us to upgrade, enhance or expand our services and solutions to meet that demand. Companies in the industries we serve sometimes seek to achieveeconomies of scale and other synergies by combining with or acquiring other companies. If one of our current clients merges or consolidates with a companythat relies on another provider for its consulting, systems integration and technology, or outsourcing services, we may lose work from that client or lose theopportunity to gain additional work if we are not successful in generating new opportunities from the merger or consolidation. Many of our consultingcontracts are less than 12 months in duration, and these contracts typically permit a client to terminate the agreement with as little as 10 days' notice. If aclient is dissatisfied with our services and we are unable to effectively respond to its needs, the client might terminate existing contracts, or reduce oreliminate spending on the services and solutions we provide. Additionally, a client could choose not to retain us for additional stages of a project, try torenegotiate the terms of its contract or cancel or delay additional planned work. When contracts are terminated or not renewed, we lose the anticipatedrevenues, and it may take significant time to replace the lost revenues. Consequently, our results of operations in subsequent periods could be materiallylower than expected. The specific business or financial condition of a client, changes in management and changes in a client's strategy also are all factors thatcan result in terminations, cancellations or delays. It could also result in pressure to reduce the cost of our services.If we are unable to keep our supply of skills and resources in balance with client demand and attract and retain professionals with strong leadershipskills, our business, the utilization rate of our professionals and our results of operations may be materially adversely affected. Our success depends, in large part, upon our ability to keep our supply of skills and resources in balance with client demand and our ability to attractand retain personnel with the knowledge and skills to lead our business. Experienced personnel in our industry are in high demand, and there is muchcompetition to attract qualified personnel. We must hire, retain and motivate appropriate numbers of talented people with diverse skills in order to serveclients across North America, respond quickly to rapid and ongoing technology, industry and macroeconomic developments and grow and manage ourbusiness. For example, if we are unable to hire or continually train our employees to keep pace with the rapid and continuing changes in technology and theindustries we serve or changes in the types of services clients are demanding we may not be able to develop and deliver new services and solutions to fulfillclient demand. As we expand our services and solutions, we must also hire and retain an increasing number of professionals with different skills andexpectations than those of the professionals we have historically hired and retained. Additionally, if we are unable to successfully integrate, motivate andretain these professionals, our ability to continue to secure work for our services and solutions in those industries may decline.6 We are dependent on retaining our senior executives and other experienced managers, and if we are unable to do so, our ability to develop newbusiness and effectively lead our current projects could be jeopardized. We depend on identifying, developing, and retaining key employees to provideleadership and direction for our businesses. This includes developing talent and leadership capabilities in emerging markets, where the depth of skilledemployees is often limited and competition for these resources is great. Our geographic expansion strategy in emerging markets depends on our ability toattract, retain and integrate both local business leaders and people with the appropriate skills. Similarly, our profitability depends on our ability to effectively utilize personnel with the right mix of skills and experience to perform services forour clients, including our ability to transition employees to new assignments on a timely basis. If we are unable to effectively deploy our employees on atimely basis to fulfill the needs of our clients, our ability to perform our work profitably could suffer. If the utilization rate of our professionals is too high, itcould have an adverse effect on employee engagement and attrition, the quality of the work performed and our ability to staff projects. If our utilization rateis too low, our profitability and the engagement of our employees could suffer. The costs associated with recruiting and training employees are significant.An important element of our global business model is the deployment of our employees around the world, which allows us to move talent as needed.Therefore, if we are not able to deploy the talent we need because of increased regulation of immigration or work visas, including limitations placed on thenumber of visas granted, limitations on the type of work performed or location in which it can be performed, and new or higher minimum salary requirements,it could be more difficult to staff our employees on client engagements and could increase our costs. Our equity-based incentive compensation plans are designed to reward high-performing personnel for their contributions and provide incentives forthem to remain with us. If the anticipated value of these incentives does not materialize because of volatility or lack of positive performance in our stockprice, or if our total compensation package is not viewed as being competitive, our ability to attract and retain the personnel we need could be adverselyaffected. In addition, if we do not obtain the stockholder approval needed to continue granting equity awards under our share plans in the amounts webelieve are necessary, our ability to attract and retain personnel could be negatively affected. There is a risk that at certain points in time and in certain geographical regions, we will find it difficult to hire and retain a sufficient number ofemployees with the skills or backgrounds to meet current and/or future demand. In these cases, we might need to redeploy existing personnel or increase ourreliance on subcontractors to fill certain labor needs, and if not done effectively, our profitability could be negatively impacted. Additionally, if demand forour services were to escalate at a high rate, we may need to adjust our compensation practices, which could put upward pressure on our costs and adverselyaffect our profitability if we are unable to recover these increased costs. At certain times, however, we may also have more personnel than we need in certainskill sets or geographies. In these situations, we must evaluate voluntary attrition and use reduced levels of new hiring and increased involuntaryterminations as means to keep our supply of skills and resources in balance with client demand in those geographies.The market for the information technology consulting services in which we operate is highly competitive, and we might not be able to competeeffectively.The market for the information technology consulting services we provide is competitive, ever evolving, and subject to rapid technological change.Our competitors include: large multinational providers that offer some or all of the services that we do; offshore service providers in lower-cost locations thatoffer services similar to those we offer, often at highly competitive prices and on more aggressive contractual terms; niche solution and service providers orlocal competitors that compete with us in a specific geographic market, industry segment or service area, including companies that provide new or alternativeproducts, service or delivery models; accounting firms that are expanding or building their capabilities to provide certain consulting services, includingthrough acquisitions; and in-house departments of large corporations that use their own resources, rather than engage an outside firm for the types of serviceswe provide.Many of the larger regional and national information technology consulting firms have substantially longer operating histories, more establishedreputations and potential vendor relationships, greater financial resources, sales and marketing organizations, market penetration, and research anddevelopment capabilities, as well as broader product offerings, greater market presence, and name recognition.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, dueto the rapid changes and volatility in our market, many well-capitalized companies, including some of our partners, that have focused on sectors of thesoftware and services industry that are not competitive with our business may refocus their activities and deploy their resources to be competitive with us.Our future financial performance is largely dependent on our ability to compete successfully in the markets we currently serve. If we are unable tocompete successfully, we could lose market share and clients to competitors, which could materially adversely affect our results of operations.In addition, we may face greater competition due to consolidation of companies in the technology sector, through strategic mergers or acquisition.Consolidation activity may result in new competitors with greater scale, a broader footprint or offerings that are more attractive than ours. We believe thatthis competition could have a negative effect on our ability to compete for new work and skilled professionals. One or more of our competitors may developand 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 servicesfrom 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 againstnew or existing competitors.7 We could have liability or our reputation could be damaged if we fail to protect client data or information systems or if our information systems arebreached.We are dependent on information technology networks and systems to process, transmit, and store electronic information and to communicateamong our locations and with our partners and clients. Security breaches of this infrastructure could lead to shutdowns or disruptions of our systems andpotential unauthorized disclosure of confidential information. In providing services to clients, we are also required at times to manage, utilize, and storesensitive or confidential client or employee data. As a result, we are subject to numerous laws and regulations designed to protect this information, such asvarious U.S. federal and state laws governing the protection of personally 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, wecould be subject to monetary damages, regulatory enforcement actions, fines, and/or criminal prosecution. Unauthorized disclosure of sensitive orconfidential client or employee data, whether through systems failure, employee negligence, fraud or misappropriation could damage our reputation andcause us to lose clients. Similarly, unauthorized access to or through our information systems or those we develop for our clients, whether by our employeesor third parties, could result in negative publicity, significant remediation costs, legal liability, and damage to our reputation and could have a materialadverse effect on our results of operations. In addition, our liability insurance might not be sufficient in type or amount to cover us against claims related tosecurity breaches, cyber-attacks and other related breaches.We might not be successful at identifying, acquiring, or integrating other businesses.We have pursued a disciplined acquisition strategy designed to enhance or add to our offerings of services and solutions, or to enable us to expandin certain geographic and other markets. Depending on the opportunities available, we may increase our investment in these acquisitions. In that pursuit, wemay 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. Ongoing business may be disrupted and our management's attention may bediverted by acquisitions, transition or integration activities. In addition, we might need to dedicate additional management and other resources, and ourorganizational structure could make it difficult for us to efficiently integrate acquired businesses into our ongoing operations and assimilate and retainemployees of those businesses into our culture and operations.We might fail to realize the expected benefits or strategic objectives of any acquisition we make. We might not achieve our expected return oninvestment, or we may lose money. We may be adversely impacted by liabilities that we assume from a company we acquire, including from that company'sknown and unknown obligations, intellectual property or other assets, terminated employees, current or former clients, or other third parties, and we may failto identify or adequately assess the magnitude of certain liabilities, shortcomings or other circumstances prior to acquisition, which could result inunexpected legal or regulatory exposure, unfavorable accounting treatment, unexpected increases in taxes, or other adverse effects on our business. If we areunable to complete the number and kind of acquisitions for which we plan, or if we are inefficient or unsuccessful at integrating any acquired businesses intoour operations, we may not be able to achieve our planned rates of growth or improve our market share, profitability, or competitive position in specificmarkets or services.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.Effective with the acquisition of BioPharm in April 2014, we operate in the United Kingdom, effective with the acquisition of Trifecta in May 2014, weoperate in Canada, and effective with the acquisition of Zeon in January 2015 (as described in Note 15, Subsequent Events, in the Notes to ConsolidatedFinancial Statements), we are operating a development center in Nagpur, 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, andmultiple and possibly overlapping tax structures. In addition, we may face competition from companies that may have more experience with operations inthese countries or with international operations generally. We may also face difficulties integrating new facilities in different countries into our existingoperations, 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, including immigration restrictions, tariffs, and other trade barriers and tax regulations, the enforcementof such requirements by applicable governmental authorities and other legal uncertainty;·limitations on our ability to repatriate cash from our international operations;·complexities and additional costs in effectively managing our international operations;·international currency controls and exchange rate fluctuations;·reduced protection for intellectual property rights; and·additional vulnerability from terrorist groups targeting U.S. 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 ourbusiness, financial condition, and operating results.8 Immigration restrictions related to H1-B visas could hinder our growth and adversely affect our business, financial condition and results of operations.Less than 15% of our billable workforce is comprised of skilled foreign nationals holding H1-B visas. We also own a recruiting and developmentfacility in Chennai, India to continue to grow our base of H1-B foreign national colleagues. Effective with the acquisition of Zeon in January 2015 (asdescribed in Note 15, Subsequent Events, in the Notes to Consolidated Financial Statements), we will be expanding our base of 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 aspecialty 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 aperiod 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 visasfor 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 chargefor our services are affected by a number of factors, including, but not limited to:·general economic and political conditions;·the competitive environment in our industry, as described below;·our clients' desire to reduce their costs;·our ability to accurately estimate, attain, and sustain contract revenues, margins, and cash flows over the full contract period; and·procurement practices of clients and their use of third-party advisors.The competitive environment in our industry affects our ability to obtain favorable pricing in a number of ways, any of which could have a materialnegative impact on our results of operations. The less we are able to differentiate our services and solutions and/or clearly convey the value of our servicesand solutions, the more risk we have that they will be seen as commodities, with price being the driving factor in selecting a service provider. In addition, theintroduction of new services or products by competitors could reduce our ability to obtain favorable pricing for the services or products we offer. Competitorsmay be willing, at times, to price contracts lower than us in an effort to enter the market or increase market share. Further, if competitors develop andimplement methodologies that yield greater efficiency and productivity, they may be better positioned to offer services similar to ours at lower prices.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. Ourfees are highly dependent on our internal forecasts and predictions about the level of effort and cost necessary to deliver such services and solutions, whichmight be based on limited data and could turn out to be materially inaccurate. If we do not accurately estimate the level of effort or cost, our contracts couldyield lower profit margins than planned, or be unprofitable. We could face greater risk when negotiating fees for our contracts that involve the coordinationof operations and workforces in multiple locations and/or utilizing workforces with different skillsets and competencies. There is a risk that we willunderprice 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 withthe performance of services, including those caused by factors outside our control, could make these contracts less profitable or unprofitable, which couldhave an adverse effect on our profit margin.Our business could be materially adversely affected if we incur legal liability in connection with providing our services and solutions.We could be subject to significant legal liability and litigation expense if we fail to meet our contractual obligations, or otherwise breachobligations, to third parties, including clients, partners, employees and former employees, and other parties with whom we conduct business, or if oursubcontractors breach or dispute the terms of our agreements with them and impede our ability to meet our obligations to our clients. We may enter intoagreements with non-standard terms because we perceive an important economic opportunity or because our personnel did not adequately follow ourcontracting guidelines. In addition, the contracting practices of competitors, along with the demands of increasingly sophisticated clients, may cause contractterms and conditions that are unfavorable to us to become new standards in the marketplace. We may find ourselves committed to providing services orsolutions that we are unable to deliver or whose delivery will reduce our profitability or cause us financial loss. If we cannot or do not meet our contractualobligations and if our potential liability is not adequately limited through the terms of our agreements, liability limitations are not enforced or a third partyalleges fraud or other wrongdoing to prevent us from relying upon those contractual protections, we might face significant legal liability and litigationexpense and our results of operations could be materially adversely affected. A failure of a client's system based on our services or solutions could alsosubject us to a claim for significant damages that could materially adversely affect our results of operations. In addition to expense, litigation can be lengthyand disruptive to normal business operations, and litigation results can be unpredictable. While we maintain insurance for certain potential liabilities, thisinsurance does not cover all types and amounts of potential liabilities and is subject to various exclusions as well as caps on amounts recoverable. Even if webelieve a claim is covered by insurance, insurers may dispute our entitlement to recovery for a variety of potential reasons, which may affect the timing andthe amount of our recovery, if any.9 Our results of operations and ability to grow could be materially negatively affected if we cannot adapt and expand our services and solutions inresponse 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 continuingchanges in technology and industry developments and offerings by new entrants to serve the evolving needs of our clients. Current areas of significantchange include mobility, cloud-based computing and the processing and analyzing of large amounts of data. Technological developments such as these maymaterially affect the cost and use of technology by our clients. Our growth strategy focuses on responding to these types of developments by drivinginnovation for our core business as well as through new business initiatives beyond our core business that will enable us to differentiate our services andsolutions. If we do not sufficiently invest in new technology and industry developments, or if we do not make the right strategic investments to respond tothese developments and successfully drive innovation, our services and solutions, our results of operations, and our ability to develop and maintain acompetitive 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 otheralternatives, which may adversely affect our results of operations.The loss of one or more of our significant software vendors could have a material and adverse effect on our business and results of operations.We have significant relationships with software vendors including IBM, Oracle, and Microsoft. Our business relationships with these companiesenable us to reduce our cost of acquiring customers and increase win rates through leveraging our vendors' marketing efforts and strong vendorendorsements. The loss of one or more of these relationships and endorsements could increase our sales and marketing costs, lead to longer sales cycles, harmour reputation and brand recognition, reduce our revenues, and adversely affect our results of operations. The financial impact of the loss of one or moresoftware vendors is not reasonably estimable. Our services could 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 could have infringement claimsasserted against us. These claims may harm our reputation, cause our management to expend significant time in connection with any defense, and cost usmoney. We may be required to indemnify clients for any expense or liabilities they incur resulting from claimed infringement and these expenses couldexceed the amounts paid to us by the client for services we have performed. Any claims in this area, even if won by us, could be costly, time-consuming, andharmful 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 somecountries in which we provide services or solutions might offer only limited protection of our intellectual property rights. We rely upon a combination oftrade secrets, confidentiality policies, nondisclosure, and other contractual arrangements to protect our intellectual property rights. These laws are subject tochange at any time and could further restrict our ability to protect our innovations. Our intellectual property rights may not prevent competitors fromindependently developing products and services similar to or duplicative of ours. Further, the steps we take in this regard might not be adequate to prevent ordeter infringement or other misappropriation of our intellectual property by competitors, former employees or other third parties, and we might not be able todetect unauthorized use of, or take appropriate and timely steps to enforce, our intellectual property rights. Enforcing our rights might also requireconsiderable time, money and oversight and we may not be successful in enforcing our rights.Depending on the circumstances, we might need to grant a specific client greater rights in intellectual property developed in connection with acontract than we otherwise generally do. In certain situations, we might forego all rights to the use of intellectual property we help create, which would limitour 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.We believe the Perficient brand name and our reputation are important corporate assets that help distinguish our services from those of ourcompetitors and also contribute to our efforts to recruit and retain talented employees. However, our corporate reputation is potentially susceptible tomaterial damage by events such as disputes with clients, information technology security breaches or service outages, or other delivery failures. Similarly, ourreputation could be damaged by actions or statements of current or former clients, employees, competitors, vendors, as well as members of the investmentcommunity 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 or cause existing clients to terminate our services,resulting in a loss of business, and could adversely affect our recruitment and retention efforts. Damage to our reputation could also reduce the value andeffectiveness of the Perficient brand name and could reduce investor confidence in us, materially adversely affecting our share price.10 Our profitability could suffer if our cost-management strategies are unsuccessful.Our ability to improve or maintain our profitability is dependent on our ability to successfully manage our costs. Our cost management strategiesinclude maintaining appropriate alignment between the demand for our services and our resource capacity, optimizing the costs of service delivery andmaintaining or improving our sales and marketing and general and administrative costs as a percentage of revenues. These actions and other cost-management efforts may not be successful, our efficiency may not be enhanced and we may not achieve desired levels of profitability. Because of thesignificant steps taken in the past to reduce costs, we may not be able to continue to deliver efficiencies in our cost management, to the same degree as in thepast. If we are not effective in reducing our operating costs in response to changes in demand or pricing, we might not be able to manage significantly largerand more diverse workforces as we increase the number of colleagues and execute our growth strategy, control our costs or improve our efficiency, and ourprofitability could be negatively affected.Changes in our level of taxes, audits, investigations and tax proceedings could have a material adverse effect on our results of operations and financialcondition.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 requires our judgment to determine our corporate provision for income taxes and other tax liabilities. Weare subject to ongoing tax audits in various jurisdictions. Tax authorities have disagreed, and may in the future disagree, with our judgments, or may takeincreasingly aggressive positions opposing the judgments we make. We regularly assess the likely outcomes of these audits to determine the appropriatenessof 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 theamounts previously recorded. In addition, our effective tax rate in the future could be adversely affected by changes in the mix of earnings in countries withdiffering statutory tax rates, changes in the valuation of deferred tax assets and liabilities and changes in tax laws. Tax rates in the jurisdictions in which weoperate may change as a result of macroeconomic or other factors outside of our control. Increases in the tax rate in any of the jurisdictions in which weoperate could have a negative impact on our profitability. In addition, changes in tax laws, treaties, or regulations, or their interpretation or enforcement, maybe unpredictable and could materially adversely affect our tax position. Any of these occurrences could have a material adverse effect on our results ofoperations 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 tocreate the additional capacity necessary to accommodate an increase in demand for our services, we may need to implement new or upgraded operational andfinancial 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 internationallocations) or the hiring of additional colleagues may result in idle or underutilized capacity. We continually assess the expected capacity and utilization ofour 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 notmeet our expectations, our revenues and cash flows may not be sufficient to offset these expenses and our results of operations and cash flows could beadversely 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 thefinancial condition of our clients and usually bill and collect on relatively short cycles. We have established allowances for losses of receivables andunbilled 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.We might not accurately assess the creditworthiness of our clients. Macroeconomic conditions could also result in financial difficulties for our clients,including bankruptcy and insolvency. This could cause clients to delay payments to us, request modifications to their payment arrangements that couldincrease our receivables balance, or default on their payment obligations to us. Recovery of client financing and timely collection of client balances alsodepends on our ability to complete our contractual commitments and bill and collect our contracted revenues. If we are unable to meet our contractualrequirements, we might experience delays in collection of and/or be unable to collect our client balances, and if this occurs, our results of operations and cashflows 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 adverselyaffected.11 Our stock price and results of operations could fluctuate and be difficult to predict.Our stock price has fluctuated in the past and could continue to fluctuate in the future in response to various factors. These factors include:·changes in macroeconomic or political factors unrelated to our business;·general or industry-specific market conditions or changes in financial markets;·announcements by us or competitors about developments in our business or prospects;·projections or speculation about our business or that of competitors by the media or investment analysts; and·our ability to meet our growth and financial objectives, including with respect to our overall revenue growth, revenue growth for our priority emergingmarkets and earnings per share growth.Our results of operations have varied in the past and could vary significantly from quarter to quarter in the future, making them difficult to predict.Some of the factors that could cause our results of operations to vary include:·the business decisions of our clients to begin to curtail or reduce the use of our services, including in response to changes in macroeconomic or politicalconditions unrelated to our business or general market conditions;·periodic differences between our clients' estimated and actual levels of business activity associated with ongoing work, as well as the stage of completionof existing projects and/or their termination or restructuring;·contract delivery inefficiencies, such as those due to poor delivery or changes in forecasts;·our ability to transition employees quickly from completed to new projects and maintain an appropriate headcount in each of our workforces;·acquisition, integration and operational costs related to businesses acquired;·the introduction of new products or services by us, competitors or partners;·changes in our pricing or competitors' pricing;·our ability to manage costs, including those for our own or subcontracted personnel, travel, support services and severance;·our ability to limit and manage the incurrence of pre-contract costs, which must be expensed without corresponding revenues, which are then recognizedin later periods without the corresponding costs;·changes in, or the application of changes in, accounting principles or pronouncements under U.S. generally accepted accounting principles, particularlythose related to revenue recognition;·currency exchange rate fluctuations;·changes in estimates, accruals or payments of variable compensation to our employees;·global, regional and local economic and political conditions and related risks, including acts of terrorism; and·seasonality, including number of workdays and holidays and summer vacations.As a result of any of the above factors, or any of the other risks described in this Item 1A, "Risk Factors," our stock price could be difficult to predict,and our stock price in the past might not be a good indicator of the price of our stock in the future.We may need additional capital in the future, which may not be available to us. The raising of any additional capital may dilute your ownershippercentage in our stock.As of December 31, 2014, we had unrestricted cash and cash equivalents totaling $10.9 million and a borrowing capacity of $35.8 million, and acommitment to increase our borrowing capacity by $25.0 million. Of the $10.9 million of cash and cash equivalents at December 31, 2014, $5.7 million washeld by our Chinese operations and is considered to be indefinitely reinvested in those operations. We intend to continue to make investments to support ourbusiness 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 equityor convertible debt securities, our existing stockholders could suffer dilution, and any new equity securities we issue could have rights, preferences, andprivileges superior to those of holders of our common stock. Any debt financing secured by us in the future could involve restrictive covenants relating toour capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursuebusiness opportunities, including potential acquisitions. In addition, we may not be able to obtain additional financing on terms favorable to us, if at all. Ifwe 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 tobusiness challenges could be significantly limited.Our officers, directors, and 5% and greater stockholders own a large percentage of our voting securities and their interests may differ from otherstockholders.Our executive officers, directors, and 5% and greater stockholders beneficially own or control approximately 18% of the voting power of ourcommon stock. This concentration of voting power of our common stock may make it difficult for our other stockholders to successfully approve or defeatmatters 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 theCompany.12 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 ofincorporation, 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. Ourcertificate of incorporation and bylaws may discourage, delay, or prevent a merger or acquisition that a stockholder may consider favorable by authorizingthe issuance of "blank check" preferred stock. In addition, provisions of the Delaware General Corporation Law also restrict some business combinations withinterested stockholders. These provisions are intended to encourage potential acquirers to negotiate with us and allow the Board of Directors the opportunityto consider alternative proposals in the interest of maximizing stockholder value. However, these provisions may also discourage acquisition proposals, ordelay or prevent a change in control, which could harm our stock price.Issues arising during the implementation of our Enterprise Resource Planning system could adversely affect the Company's business, financialcondition and results of operations.Effective as of July 1, 2014, the Company implemented an Enterprise Resource Planning ("ERP") system to support the Company's future growthplan and to integrate significant processes. Implementing an ERP system on a widespread basis involves significant changes in business processes andextensive organizational training. In connection with the implementation, the Company may experience temporary business and information technologydisruptions that could adversely affect the Company's business, financial condition and results of operations.Item 1B.Unresolved Staff Comments.None.Item 2.Properties.We have offices in multiple markets throughout North America and in China, India, Canada, and the United Kingdom. In late 2013, we entered intoa new lease agreement which consolidated our St. Louis locations, including our principal executive operations. The transition to the new location occurredover the course of 2014 and did not materially impact the operations of the Company. We do not own any real property; all of our office space is leasedunder long-term leases with varying expiration dates. 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 otherproceedings cannot be predicted with certainty and the amount of any liability that could arise with respect to such lawsuits or other proceedings cannot bepredicted accurately, we do not expect any currently pending matters to have a material adverse effect on the financial position, results of operations, or cashflows of the Company.Item 4.Mine Safety Disclosures.Not applicable.13 PART IIItem 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 periodsindicated, the high and low sale prices per share of our common stock as reported on The Nasdaq Global Select Market since January 1, 2013. High Low Year Ending December 31, 2014: First Quarter $23.40 $17.61 Second Quarter 19.61 16.08 Third Quarter 20.50 14.51 Fourth Quarter 19.10 14.05 Year Ending December 31, 2013: First Quarter $12.38 $11.14 Second Quarter 13.95 10.00 Third Quarter 18.51 12.51 Fourth Quarter 24.11 17.25 On March 2, 2015, the last reported sale price of our common stock on The Nasdaq Global Select Market was $20.06 per share. There wereapproximately 402 stockholders of record of our common stock as of March 2, 2015, including 297 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. Ourcredit 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 in Part III, Item 12 of this Annual Report on Form 10-K.Issuer Purchases of Equity SecuritiesPrior to 2014, our Board of Directors authorized the repurchase of up to $90.0 million of our common stock. On November 4, 2014, our Board ofDirectors authorized the expansion of our stock repurchase program by authorizing the repurchase of up to an additional $10.0 million of our common stockfor a total repurchase program of $100.0 million and extended the expiration date of the program from December 31, 2014 to June 30, 2016. The programcould be suspended or discontinued at any time, based on market, economic, or business conditions. The timing and amount of repurchase transactions willbe determined by our management based on its evaluation of market conditions, share price, and other factors.14 Since the program's inception on August 11, 2008, we have repurchased approximately $81.5 million (9.4 million shares) of our outstandingcommon stock through December 31, 2014.Period Total Numberof SharesPurchased Average PricePaid PerShare (1) Total Numberof SharesPurchased asPart ofPubliclyAnnouncedPlans orPrograms ApproximateDollar Valueof Shares thatMay Yet BePurchasedUnder thePlans orPrograms Beginning Balance as of October 1, 2014 9,145,890 $8.42 9,145,890 $12,989,281 October 1-31, 2014 - - - $12,989,281 November 1-30, 2014 224,259 17.11 224,259 $19,151,975 December 1-31, 2014 38,675 17.33 38,675 $18,481,827 Ending Balance as of December 31, 2014 9,408,824 $8.66 9,408,824 (1)Average price paid per share includes commission.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, 2014, has been preparedin accordance with accounting principles generally accepted in the United States. The financial data presented is not directly comparable between periods asa result of three acquisitions in each of 2014, 2013, and 2012 and two acquisitions in 2011.The following data should be read in conjunction with the Consolidated Financial Statements and the Notes to Consolidated Financial Statementsappearing in Part II, Item 8, and Management's Discussion and Analysis of Financial Condition and Results of Operations appearing in Part II, Item 7. Year Ended December 31, 2014 2013 2012 2011 2010 Income Statement Data: (In thousands, except per share information) Revenues $456,692 $373,325 $327,096 $262,439 $214,952 Gross margin $149,335 $123,099 $103,403 $81,134 $62,767 Selling, general and administrative $90,202 $77,601 $64,853 $51,672 $45,477 Depreciation and amortization $18,187 $11,236 $10,078 $8,095 $4,784 Acquisition costs $3,446 $2,297 $1,871 $1,249 $993 Adjustment to fair value of contingent consideration $(1,463) $287 $517 $1,586 $(4)Income from operations $38,963 $31,678 $26,084 $18,532 $11,517 Net interest (expense) income $(1,438) $(293) $(143) $68 $163 Net other (expense) income $(5) $112 $44 $45 $68 Income before income taxes $37,520 $31,497 $25,985 $18,645 $11,748 Net income $23,163 $21,432 $16,107 $10,747 $6,480 Basic net income per share $0.73 $0.71 $0.54 $0.39 $0.24 Diluted net income per share $0.70 $0.67 $0.52 $0.37 $0.23 15 As of December 31, 2014 2013 2012 2011 2010 Balance Sheet Data: (In thousands) Cash, cash equivalents, and short-term investments $10,935 $7,018 $5,813 $9,732 $24,008 Working capital (1) $76,955 $57,268 $52,277 $51,476 $47,632 Long-term investments $- $- $- $- $2,254 Property and equipment, net $7,966 $7,709 $4,398 $3,490 $2,355 Goodwill and intangible assets, net $282,235 $218,997 $178,286 $142,166 $124,056 Total assets $426,042 $325,749 $267,194 $223,932 $207,678 Long-term debt $54,000 $19,000 $2,800 $- $- Total stockholders' equity $304,728 $259,490 $234,413 $198,959 $177,164 (1) Working capital is total current assets less total current liabilitiesItem 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 relatednotes that appear elsewhere in this Annual Report on Form 10-K and in the documents that we incorporate by reference into this Annual Report on Form10-K. This Annual Report on Form 10-K may contain certain "forward-looking" information within the meaning of the Private Securities Litigation ReformAct of 1995. This information involves risks and uncertainties. Our actual results may differ materially from the results discussed in the forward-lookingstatements. Factors that might cause such a difference include, but are not limited to, those discussed in "Risk Factors."OverviewWe are an information technology consulting firm serving Forbes Global 2000 and other large enterprise companies with a primary focus on theUnited States. We help our clients gain competitive advantage by using Internet-based technologies to make their businesses more responsive to marketopportunities and threats, strengthen relationships with their customers, suppliers and partners, improve productivity, and reduce information technologycosts. 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, andtechnology platform implementations, among others. Our solutions enable our clients to operate a real-time enterprise that dynamically adapts businessprocesses and the systems that support them to meet the changing demands of an increasingly global, Internet-driven, and competitive marketplace.Services RevenuesServices revenues are derived from professional services that include developing, implementing, integrating, automating and extending businessprocesses, technology infrastructure, and software applications. Most of our projects are performed on a time and materials basis, while a smaller portion ofour revenues is derived from projects performed on a fixed fee basis. Fixed fee engagements represented approximately 10% of our services revenues for bothyears ended December 31, 2014 and 2013 compared to 11% for the year ended December 31, 2012. For time and material projects, revenues are recognizedand billed by multiplying the number of hours our professionals expend in the performance of the project by the established billing rates. For fixed feeprojects, revenues are generally recognized using an input method based on the ratio of hours expended to total estimated hours. Amounts invoiced andcollected in excess of revenues recognized are classified as deferred revenues. On most projects, we are also reimbursed for out-of-pocket expenses such asairfare, lodging, and meals. These reimbursements are included as a component of revenues. The aggregate amount of reimbursed expenses will fluctuatedepending on the location of our clients, the total number of our projects that require travel, and whether our arrangements with our clients provide for thereimbursement of travel and other project-related expenses.16 Software and Hardware RevenuesSoftware and hardware revenues are derived from sales of third-party and internally developed 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 therequirements 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 hardwarerevenues 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 forseparately by considering the following criteria: (1) whether the deliverables have value to the client on a stand-alone basis; and (2) whether delivery orperformance of the undelivered item or items is considered probable and substantially in our control (only if the arrangement includes a general right ofreturn related to the delivered item). Further, for sales of software and services, management also evaluates whether the services are essential to thefunctionality of the software and whether management has fair value evidence for each deliverable. If management concludes that the separation criteria aremet, then it accounts for each deliverable in the transaction separately, based on the relevant revenue recognition policies. Generally, all deliverables of ourmultiple element arrangements meet these criteria and are accounted for separately, with the arrangement consideration allocated among the deliverablesusing vendor specific objective evidence of the selling price. As a result, we generally recognize software and hardware sales upon delivery to the customerand 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 thespecific 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 our professional servicesprovide for a general right, to the client or us, to cancel or terminate the contract within a given period of time (generally 10 to 30 days' notice is required).The client is generally responsible for any time and expenses incurred up to the date of cancellation or termination of the contract.Cost of RevenuesCost of revenues consists primarily of cash and non-cash compensation and benefits, including bonuses and non-cash compensation related toequity awards. Cost of revenues also includes the costs associated with subcontractors. Third-party software and hardware costs, reimbursable expenses andother unreimbursed project-related expenses are also included in cost of revenues. Project-related expenses will fluctuate generally depending on outsidefactors including the cost and frequency of travel and the location of our clients. Cost of revenues does not include depreciation of assets used in theproduction of revenues which are primarily personal computers, servers, and other information technology related equipment.Gross MarginsOur gross margins for services are affected by the utilization rates of our professionals (defined as the percentage of our professionals' time billed toclients divided by the total available hours in the respective period), the salaries we pay our professionals, and the average billing rate we receive from ourclients. If a project ends earlier than scheduled, we retain professionals in advance of receiving project assignments, or if demand for our services declines, ourutilization rate will decline and adversely affect our gross margins. Gross margin percentages of third-party software and hardware sales are typically lowerthan gross margin percentages for services, and the mix of services and software and hardware for a particular period can significantly impact our totalcombined gross margin percentage for such period. In addition, gross margin for software and hardware sales can fluctuate due to pricing and othercompetitive pressures. Selling, General, and Administrative ExpensesSelling, general and administrative ("SG&A") expenses are primarily composed of sales-related costs, general and administrative salaries, stockcompensation expense, office costs, recruiting expense, variable compensation costs, research and development, bad debts, and other miscellaneousexpenses. We work to minimize selling costs by focusing on repeat business with existing clients and by accessing sales leads generated by our softwarevendors, most notably IBM, Oracle and Microsoft, whose products we use to design and implement solutions for our clients. These relationships enable us toreduce our selling costs and sales cycle times and increase win rates through leveraging our partners' marketing efforts and endorsements.17 Plans for Growth and AcquisitionsOur goal is to continue to build one of the leading independent information technology consulting firms by expanding our relationships withexisting and new clients and through the continuation of our disciplined acquisition strategy. Our future growth plan includes expanding our business with aprimary focus on customers in the United States, both organically and through acquisitions. Our disciplined acquisition strategy began in January 2000. Wehave continued this strategy through our acquisitions of Kerdock Consulting, LLC in March 2010, speakTECH in December 2010, Exervio Consulting Inc.("Exervio") in April 2011, JCB Partners, LLC in July 2011, PointBridge Solutions, LLC ("PointBridge") in February 2012, Nascent Systems, LP ("Nascent") inJune 2012, Northridge Systems, Inc. ("Northridge") in July 2012, TriTek Solutions, Inc. ("Tritek") and Clear Task, Inc. ("Clear Task") in May 2013,CoreMatrix Systems, LLC ("CoreMatrix") in October 2013, ForwardThink in February 2014, BioPharm in April 2014 and Trifecta in May 2014. On January2, 2015 we acquired Zeon Solutions Incorporated (as described in Note 15, Subsequent Events, in the Notes to Consolidated Financial Statements). We alsointend to further leverage our existing offshore capabilities to support our future growth and provide our clients flexible options for project delivery.When analyzing revenue growth by base business compared to acquired companies in the Results of Operations section below, revenue attributableto base business is defined as revenue from an acquired company that has been owned for a full four quarters after the date of acquisition.Results of OperationsThe following table summarizes our results of operations as a percentage of total revenues:Revenues:2014 2013 2012Services revenues84.7% 87.5% 87.6%Software and hardware revenues11.5 8.1 7.7Reimbursable expenses3.8 4.4 4.7Total revenues100.0 100.0 100.0Cost of revenues (depreciation and amortization, shown separately below): Project personnel costs52.5 54.4 55.9Software and hardware costs10.3 7.1 6.6Reimbursable expenses3.8 4.4 4.7Other project-related expenses0.7 1.1 1.2Total cost of revenues67.3 67.0 68.4Services gross margin*37.2 36.6 34.8Software and hardware gross margin*10.5 11.8 14.5Total gross margin32.7 33.0 31.6Selling, general and administrative19.7 20.8 19.8Depreciation and amortization4.0 3.0 3.1Acquisition costs0.8 0.6 0.6Adjustment to fair value of contingent consideration(0.3) 0.1 0.2Income from operations8.5 8.5 7.9Net interest (expense) income(0.3) (0.1) 0.0Net other (expense) income(0.0) 0.0 0.0Income before income taxes8.2 8.4 7.9Provision for income taxes3.1 2.7 3.0Net income5.1% 5.7% 4.9%* Services and software and hardware gross margins are based on their percentage of respective revenues.18 Year Ended December 31, 2014 Compared to Year Ended December 31, 2013Revenues. Total revenues increased 22% to $456.7 million for the year ended December 31, 2014 from $373.3 million for the year ended December31, 2013. Financial Results Explanation for Increases OverPrior Year Period (in thousands) (in thousands) For the YearEndedDecember 31,2014 For the YearEnded December31, 2013 Total IncreaseOver Prior YearPeriod IncreaseAttributable toAcquiredCompanies Increase/(Decrease)Attributableto Base Business Services Revenues $386,668 $326,589 $60,079 $44,633 $15,446 Software and Hardware Revenues 52,776 30,224 22,552 1,795 20,757 Reimbursable Expenses 17,248 16,512 736 1,067 (331)Total Revenues $456,692 $373,325 $83,367 $47,495 $35,872 Services revenues increased 18% to $386.7 million for the year ended December 31, 2014 from $326.6 million for the year ended December 31,2013. The increase in services revenues is primarily due to acquisitions during 2014 and 2013. Services revenues attributable to our base business increased$15.5 million while services revenues attributable to acquired companies increased $44.6 million, resulting in a total increase of $60.1 million.Software and hardware revenues increased 75% to $52.8 million for the year ended December 31, 2014 from $30.2 million for the year endedDecember 31, 2013 primarily due to an increase in volume and magnitude of initial and renewal software license sales compared to 2013. Reimbursableexpenses increased 4% to $17.2 million for the year ended December 31, 2014 from $16.5 million for the year ended December 31, 2013 primarily as a resultof the increase in services revenue. We did not realize any profit on reimbursable expenses.Cost of Revenues. Cost of revenues increased 23% to $307.4 million for the year ended December 31, 2014 from $250.2 million for the year endedDecember 31, 2013. The increase in cost of revenues was directly related to the increase in revenues attributable to the Company's acquisitions and basebusiness. More specifically, the increase in the cost of revenue is due to the increase in headcount to support the Company's ongoing revenue-producingprojects and increased software revenue. The average number of colleagues performing services, including subcontractors, increased to 1,830 for the yearended December 31, 2014 from 1,640 for the year ended December 31, 2013.Gross Margin. Gross margin increased 21% to $149.3 million for the year ended December 31, 2014 from $123.1 million for the year endedDecember 31, 2013. Gross margin as a percentage of revenues decreased to 32.7% for the year ended December 31, 2014 from 33.0% for the year endedDecember 31, 2013, primarily due to the significant increase in software and hardware sales which typically have lower margins than services. Services grossmargin, excluding reimbursable expenses, increased to 37.2% or $143.8 million for the year ended December 31, 2014 from 36.6% or $119.5 million for theyear ended December 31, 2013. The increase in services gross margin was primarily a result of higher average bill rates. The average bill rate for ourprofessionals increased to $135 per hour for the year ended December 31, 2014 from $123 per hour for the year ended December 31, 2013, primarily due tothe improved pricing opportunities as the market for our services continues to improve. The average bill rate for the year ended December 31, 2014,excluding offshore delivery centers, was $147 per hour compared to $135 per hour for the year ended December 31, 2013.Selling, General and Administrative. SG&A expenses increased 16% to $90.2 million for the year ended December 31, 2014 from $77.6 million forthe year ended December 31, 2013 due primarily to fluctuations in expenses as detailed in the following table. SG&A expenses, as a percentage of revenues,decreased to 19.8% for the year ended December 31, 2014 from 20.8% for the year ended December 31, 2013.Selling, General and Administrative Expense (in millions) For the YearEndedDecember 31,2014 For the YearEndedDecember 31,2013 Increase/(Decrease) PercentageChange Sales-related costs $29.2 $24.4 $4.8 20%Salary expense 19.4 15.9 3.5 22 Stock compensation expense 8.6 7.9 0.7 9 Office costs 6.5 5.9 0.6 10 Recruiting expense 5.1 4.7 0.4 9 Marketing expense 5.0 3.1 1.9 61 Variable compensation expense 2.2 2.9 (0.7) (24)Research and development 0.5 1.0 (0.5) (50)Bad debt expense 1.1 0.4 0.7 175 Other 12.6 11.4 1.2 11 Total $90.2 $77.6 $12.6 16%19 Depreciation. Depreciation expense increased 14% to $3.7 million for the year ended December 31, 2014 from $3.3 million for the year endedDecember 31, 2013. The increase in depreciation expense was mainly attributable to increased capital expenditures and acquisitions. Depreciation expenseas a percentage of revenues was 0.8% and 0.9% for the years ended December 31, 2014 and 2013, respectively.Amortization. Amortization expense increased 81% to $14.5 million for the year ended December 31, 2014 from $8.0 million for the year endedDecember 31, 2013. The increase in amortization expense was due to the addition of intangible assets acquired as a result of the Company's acquisitionactivity during 2014 and 2013 and the purchase and implementation of an ERP system.Acquisition Costs. Acquisition-related costs of $3.4 million were incurred during 2014 related to the acquisition of ForwardThink, BioPharm,Trifecta, and Zeon compared to $2.3 million during 2013 related to the acquisition of TriTek, Clear Task, and CoreMatrix. Acquisition-related costs wereincurred for legal, accounting, tax, investment bank and advisor fees, and valuation services performed by third parties.Adjustment to Fair Value of Contingent Consideration. An adjustment of $1.5 million was recorded during the year ended December 31, 2014which represented the net impact of the fair market value adjustments to the earnings-based contingent consideration of the Clear Task and CoreMatrixacquisitions. An adjustment of $0.3 million was made during the year ended December 31, 2013 for the accretion of the fair value estimate for the earnings-based contingent consideration related to the Clear Task and CoreMatrix acquisitions.Provision for Income Taxes. We provide for federal, state, and foreign income taxes at the applicable statutory rates adjusted for non-deductibleexpenses. The effective income tax rate increased to 38.3% for the year ended December 31, 2014 from 32.0% for the year ended December 31, 2013. Oureffective tax rate for the year ended December 31, 2014 only included the tax benefit for the 2014 research and development credit and domestic productiondeduction and the 2010 research and development tax credit. Our effective tax rate for the year ended December 31, 2013 included the benefit for theresearch and development credit for 2012 and 2013 and domestic production deduction for 2010, 2011, 2012 and 2013.Year Ended December 31, 2013 Compared to Year Ended December 31, 2012Revenues. Total revenues increased 14% to $373.3 million for the year ended December 31, 2013 from $327.1 million for the year ended December31, 2012. Financial Results Explanation for Increases OverPrior Year Period (in thousands) (in thousands) For the YearEndedDecember 31,2013 For the YearEnded December31, 2012 Total IncreaseOver Prior YearPeriod IncreaseAttributable toAcquiredCompanies IncreaseAttributableto Base Business Services Revenues $326,589 $286,548 $40,041 $27,614 $12,427 Software and Hardware Revenues 30,224 25,188 5,036 606 4,430 Reimbursable Expenses 16,512 15,360 1,152 918 234 Total Revenues $373,325 $327,096 $46,229 $29,138 $17,091 Services revenues increased 14% to $326.6 million for the year ended December 31, 2013 from $286.5 million for the year ended December 31,2012. The increase in services revenues is primarily due to acquisitions during 2013 and 2012. Services revenues attributable to our base business increased$12.4 million while services revenues attributable to acquired companies increased $27.6 million, resulting in a total increase of $40.0 million.Software and hardware revenues increased 20% to $30.2 million for the year ended December 31, 2013 from $25.2 million for the year endedDecember 31, 2012 due to the increase in the volume and magnitude of software renewals as compared to 2012. Reimbursable expenses increased 8% to$16.5 million for the year ended December 31, 2013 from $15.4 million for the year ended December 31, 2012 primarily as a result of the increase in servicesrevenue. We did not realize any profit on reimbursable expenses.Cost of Revenues. Cost of revenues increased 12% to $250.2 million for the year ended December 31, 2013 from $223.7 million for the year endedDecember 31, 2012. The increase in cost of revenues was directly related to the increase in revenues attributable to the Company's base business and throughacquisitions. More specifically, the increase in the cost of revenue is due to the increase in headcount to support the Company's ongoing revenue-producingprojects. The average number of colleagues performing services, including subcontractors, increased to 1,640 for the year ended December 31, 2013 from1,518 for the year ended December 31, 2012.20 Gross Margin. Gross margin increased 19% to $123.1 million for the year ended December 31, 2013 from $103.4 million for the year endedDecember 31, 2012. Gross margin as a percentage of revenues increased to 33.0% for the year ended December 31, 2013 from 31.6% for the year endedDecember 31, 2012, primarily due to an increase in services gross margin. Services gross margin, excluding reimbursable expenses, increased to 36.6% or$119.5 million for the year ended December 31, 2013 from 34.8% or $99.8 million for the year ended December 31, 2012. The increase in services grossmargin was primarily a result of a higher average bill rate. The average bill rate for our professionals increased to $123 per hour for the year ended December31, 2013 from $119 per hour for the year ended December 31, 2012, primarily due to the improved pricing opportunities as the market for our servicescontinues to improve. The average bill rate for the year ended December 31, 2013, excluding China and India, was $135 per hour compared to $129 per hourfor the year ended December 31, 2012.Selling, General and Administrative. SG&A expenses increased 20% to $77.6 million for the year ended December 31, 2013 from $64.9 million forthe year ended December 31, 2012 due primarily to fluctuations in expenses as detailed in the following table. SG&A expenses, as a percentage of revenues,increased to 20.8% for the year ended December 31, 2013 from 19.8% for the year ended December 31, 2012.Selling, General and Administrative Expense (in millions) For the YearEndedDecember 31,2013 For the YearEndedDecember 31,2012 Increase/(Decrease) PercentageChange Sales-related costs $24.4 $21.4 $3.0 14%Salary expense 15.9 13.1 2.8 21 Stock compensation expense 7.9 7.0 0.9 13 Office costs 5.9 4.8 1.1 23 Recruiting expense 4.7 4.1 0.6 15 Marketing expense 3.1 2.3 0.8 35 Variable compensation expense 2.9 1.7 1.2 71 Research and development 1.0 - 1.0 NM Bad debt expense 0.4 0.7 (0.3) (43)Other 11.4 9.8 1.6 16 Total $77.6 $64.9 $12.7 20%* NM - Not MeaningfulDepreciation. Depreciation expense increased 45% to $3.3 million for the year ended December 31, 2013 from $2.3 million for the year endedDecember 31, 2012. The increase in depreciation expense was mainly attributable to increased capital expenditures during 2013 and 2012 and acquisitions. Depreciation expense as a percentage of revenues was 0.9% and 0.7% for the year ended December 31, 2013 and 2012, respectively.Amortization. Amortization expense increased 2% to $8.0 million for the year ended December 31, 2013 from $7.8 million for the year endedDecember 31, 2012. The increase in amortization expense was due to the addition of intangible assets acquired as a result of the Company's acquisitionactivity during 2013 and 2012.Acquisition Costs. Acquisition-related costs of $2.3 million were incurred during 2013 related to the acquisition of TriTek, Clear Task, andCoreMatrix compared to $1.9 million during 2012 related to the acquisition of PointBridge, Nascent, and Northridge. Acquisition-related costs wereincurred for legal, accounting, and valuation services performed by third parties.Adjustment to Fair Value of Contingent Consideration. An adjustment of $0.3 million was made during the year ended December 31, 2013 for theaccretion of the fair value estimate for the earnings-based contingent consideration related to the Clear Task and CoreMatrix acquisitions. The adjustment of$0.5 million made during the year ended December 31, 2012 related to the Exervio acquisition.Provision for Income Taxes. We provide for federal, state, and foreign income taxes at the applicable statutory rates adjusted for non-deductibleexpenses. Our effective tax rate decreased to 32.0% for the year ended December 31, 2013 from 38.0% for the year ended December 31, 2012. The decrease inthe effective rate was due primarily to the research and development tax credit for 2013, the research and development tax credit for 2012, which wasapproved by Congress in January 2013 and recorded in the first quarter of 2013, and the U.S. domestic production deduction for 2010, 2011, 2012, and 2013.21 Liquidity and Capital ResourcesSelected measures of liquidity and capital resources are as follows (in millions): As of December 31, 2014 2013 2012 Cash and cash equivalents (1) $10.9 $7.0 $5.8 Working capital (including cash and cash equivalents) (2) $77.0 $57.3 $52.3 Amounts available under credit facilities $35.8 $55.8 $47.2 (1) The balance at December 31, 2014 includes $4.5 million held by our Indian subsidiary which was used to purchase the Indian assets of Zeon SolutionsIncorporated (as described in Note 15, Subsequent Events, in the Notes to Consolidated Financial Statements). It also included $5.7 million held by ourChinese subsidiary which is not available to fund domestic operations unless the funds were repatriated. We currently do not plan or foresee a need torepatriate such funds.(2) Working capital is total current assets less total current liabilitiesNet Cash Provided By Operating ActivitiesNet cash provided by operating activities for the year ended December 31, 2014 was $34.0 million compared to $46.9 million and $39.2 million forthe years ended December 31, 2013 and 2012, respectively. For the year ended December 31, 2014, the components of operating cash flows were net incomeof $23.2 million plus non-cash charges of $27.4 million and net working capital investments of $16.6 million. The primary components of operating cashflows for the year ended December 31, 2013 were net income of $21.4 million plus non-cash charges of $21.5 million and net working capital reductions of$3.9 million. The primary components of operating cash flow for the year ended December 31, 2012 were net income of $16.1 million plus non-cash chargesof $18.5 million and net working capital reductions of $4.6 million.Net Cash Used in Investing ActivitiesFor the year ended December 31, 2014, we used $46.5 million for acquisitions and $7.1 million for purchases of equipment and to develop certainsoftware for internal use including significant efforts associated with the implementation of a new internal ERP system placed in service in 2014. For the yearended December 31, 2013, we used $38.4 million for acquisitions and $8.0 million for purchases of equipment and to develop certain software for internaluse including significant efforts associated with the implementation of a new ERP system. For the year ended December 31, 2012, we used $36.6 million foracquisitions and $2.1 million for purchases of equipment and to develop certain software for internal use.Net Cash Provided By Financing ActivitiesFor the year ended December 31, 2014, we received proceeds of $265.1 million from our line of credit and we realized a tax benefit of $2.6 millionrelated to the vesting of stock awards and stock option exercises plus $1.5 million in proceeds from the exercise of stock options and sales of stock throughthe Employee Stock Purchase Plan. In 2014, we made payments of $230.1 million on our line of credit, used $7.7 million to repurchase shares of our commonstock through the stock repurchase program, used $6.6 million to remit taxes withheld as part of a net share settlement of restricted stock vesting, and used$1.2 million to settle the contingent consideration for the purchase of Clear Task. For the year ended December 31, 2013, we received proceeds of $181.2million from our line of credit and we realized a tax benefit of $2.6 million related to vesting of stock awards and stock option exercises plus $0.3 million inproceeds from the exercise of stock options and sales of stock through the Employee Stock Purchase Plan. We made payments of $165.0 million on our lineof credit, used $13.8 million to repurchase shares of our common stock through the stock repurchase program, used $4.3 million to remit taxes withheld aspart of a net share settlement of restricted stock vesting, and paid $0.4 million in fees related to our credit facility. For the year ended December 31, 2012, wereceived proceeds of $134.9 from our line of credit and we realized a tax benefit of $1.1 million related to vesting of stock awards and stock option exercisesplus $0.2 million in proceeds from the exercises of stock options and sales of stock through our Employee Stock Purchase Plan. We made payments of$132.1 million on our line of credit, used $6.1 million to repurchase shares of our common stock through the stock repurchase program, used $1.9 million toremit taxes withheld as part of a net share settlement of restricted stock vesting, and paid $0.6 million to settle a portion of the contingent consideration forthe acquisition of Exervio.22 Availability of Funds from Credit FacilityOn July 31, 2013, we renewed and extended the term of our credit agreement with Silicon Valley Bank ("SVB"), U.S. Bank National Association, andBank of America, N.A. As renewed, the credit agreement provided for revolving credit borrowings up to a maximum principal amount of $75.0 million,subject to a commitment increase of $25.0 million. The Company and the Lenders entered into a first amendment to the credit agreement, effective as of May7, 2014, pursuant to which the Company and the Lenders increased the amount of available borrowing capacity thereunder by $15.0 million, allowing forrevolving credit borrowings up to a maximum principal amount of $90.0 million. The Company and the Lenders entered into a second amendment andconsent to the credit agreement (as amended, the "Credit Agreement"), effective as of January 2, 2015, pursuant to which the Company and the Lendersincreased the amount of available borrowing capacity thereunder by $35.0 million, allowing for revolving credit borrowings up to a maximum principalamount of $125.0 million, subject to an additional commitment increase of $50.0 million. Refer to Note 15, Subsequent Events, in the Notes to ConsolidatedFinancial Statements for further discussion.The Credit Agreement also allows for the issuance of letters of credit in the aggregate amount of up to $5.0 million at any one time; outstandingletters of credit reduce the credit available for revolving credit borrowings. As of December 31, 2014, the Company had one outstanding letter of credit in theamount of $0.2 million to secure an office space lease. Substantially all of our 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 July 31, 2017. Borrowings under the Credit Agreement bear interest at our option of SVB's prime rate (4.00% on December 31, 2014) plus a margin ranging from 0.00% to0.50% or one-month LIBOR (0.17% on December 31, 2014) plus a margin ranging from 2.00% to 2.50%. The additional margin amount is dependent on thelevel of outstanding borrowings. As of December 31, 2014, we had $35.8 million of maximum borrowing capacity. We incur an annual commitment fee of0.30% on the unused portion of the line of credit.At December 31, 2014, we were in compliance with all covenants under the Credit Agreement and we expect to remain in compliance during thenext 12 months.Stock Repurchase ProgramPrior to 2014, our Board of Directors authorized the repurchase of up to $90.0 million of our common stock. On November 4, 2014, our Board ofDirectors authorized the expansion of our stock repurchase program by authorizing the repurchase of up to an additional $10.0 million of our common stockfor a total repurchase program of $100.0 million and extended the expiration date of the program from December 31, 2014 to June 30, 2016. From time to time, we establish a written trading plan in accordance with Rule 10b5-1 of the Exchange Act, pursuant to which we make a portion ofour stock repurchases. Additional repurchases will be at times and in amounts as the Company deems appropriate and will be made through open markettransactions 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 $81.5 million (9.4 million shares) of our outstandingcommon stock through December 31, 2014.Contractual ObligationsFor the year ended December 31, 2014, there were no material changes outside the ordinary course of business in lease obligations or othercontractual obligations. See Note 11, Commitments and Contingencies, in the Notes to Consolidated Financial Statements for further description of ourcontractual obligations.As of December 31, 2014, there was $54.0 million outstanding under the Credit Agreement as compared to $19.0 million as of December 31, 2013.The amounts are classified as "Long-term debt" within the Consolidated Balance Sheets and will become due and payable no later than the final maturitydate of July 31, 2017.We have incurred commitments to make future payments under contracts such as leases and the Credit Agreement. Maturities under these contractsare set forth in the following table as of December 31, 2014 (in thousands): Payments Due by Period Contractual ObligationsTotal Less Than1 Year 1-3Years 3-5Years MoreThan 5Years Operating lease obligations $18,943 $4,812 $8,124 $3,931 $2,076 Total debt 54,000 -- 54,000 -- -- Total $72,943 $4,812 $62,124 $3,931 $2,076 23 ConclusionIf 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 ofbusiness, we may engage in discussions with various persons in connection with additional financing. If we raise additional funds through the issuance ofequity 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, wemay be unable to expand our services, respond to competition, pursue acquisition opportunities, or continue our operations.Of the total cash and cash equivalents reported on the consolidated balance sheet as of December 31, 2014 of $10.9 million, approximately $5.7million was held by the Company's Chinese operations and is considered to be indefinitely reinvested in those operations. The Company has no intention ofrepatriating cash from its Chinese operations in the foreseeable future.We believe that the currently available funds, access to capital from our credit facility, and cash flows generated from operations will be sufficient tomeet our working capital requirements and other capital needs for the next 12 months.Critical Accounting PoliciesOur 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.Revenue Recognition and Allowance for Doubtful AccountsRevenues are primarily derived from professional services provided on a time and materials basis. For time and material contracts, revenues arerecognized 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 inexcess 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 agross 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 fiscalperiod. 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 fixedfee arrangements, the client is invoiced according to the agreed-upon schedule detailing the amount and timing of payments in the contract. Clients aretypically 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 timeand 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 asunbilled 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 anddeterminable; (3) delivery and acceptance have occurred; and (4) collectability is deemed probable. Our policy for revenue recognition in instances wheremultiple deliverables are sold contemporaneously to the same customer is in accordance with Accounting Standards Board Accounting StandardsCodification ("ASC") Subtopic 985-605, Software – Revenue Recognition, 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 andsoftware or hardware, then we evaluate whether each element should be accounted for separately by considering the following criteria: (1) whether thedeliverables have value to the client on a stand-alone basis; and (2) whether delivery or performance of the undelivered item or items is considered probableand substantially in our control (only if the arrangement includes a general right of return related to the delivered item). Further, for sales of software andservices, we also evaluate whether the services are essential to the functionality of the software and we have fair value evidence for each deliverable. If wehave concluded that the separation criteria are met, then we account for each deliverable in the transaction separately, based on the relevant revenuerecognition policies. Generally, all deliverables of our multiple element arrangements meet these criteria and are accounted for separately, with thearrangement consideration allocated among the deliverables using vendor specific objective evidence of the selling price. As a result, we generally recognizesoftware 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 thespecific 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 providefor a general right, to the client or to us, to cancel or terminate the contract within a given period of time (generally 10 to 30 days' notice is required). Theclient is responsible for any time and expenses incurred up to the date of cancellation or termination of the contract.24 We may provide multiple services under the terms of an arrangement and we are required to assess whether one or more units of accounting arepresent. Service fees are typically accounted for as one unit of accounting, as fair value evidence for individual tasks or milestones is not available. Wefollow the guidelines discussed above in determining revenues; however, certain judgments and estimates are made and used to determine revenuesrecognized in any accounting period. If estimates are revised, material differences may result in the amount and timing of revenues recognized for a givenperiod.Revenues are presented net of taxes assessed by governmental authorities. Sales taxes are generally collected and subsequently remitted on allsoftware 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 isevaluated for risk associated with a client's inability to make contractual payments, historical experience and other currently available information. Billedand 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 therisk is identified. Considerable judgment is used in assessing the ultimate realization of these receivables, including reviewing the financial stability of theclient, evaluating the successful mitigation of service delivery disputes, and gauging current market conditions. If the evaluation of service delivery issues ora client's ability to pay is incorrect, future reductions to revenue or bad debt expense may be incurred.Goodwill, Other Intangible Assets, and Impairment of Long-Lived AssetsGoodwill represents the excess purchase price over the fair value of net assets acquired, or net liabilities assumed, in a business combination. Inaccordance with ASC Topic 350, Intangibles – Goodwill and Other ("ASC Topic 350"), we perform an annual impairment test of goodwill. We evaluategoodwill as of October 1 each year and more frequently if events or changes in circumstances indicate that goodwill might be impaired. ASC Topic 350permits, but does not require, an assessment of qualitative factors to determine whether it is more likely than not that our fair value is less than our carryingamount before applying the two-step goodwill impairment test. If it is more likely than not that our fair value is less than our carrying amount, the two-stepgoodwill impairment test will be conducted. The first step screens for impairment and, when impairment is indicated, a second step is employed to measurethe impairment. We elected to go directly to step one rather than making a more-likely-than-not assessment based on an evaluation of qualitative factors.Our annual goodwill impairment test was performed as of October 1, 2014. Our fair value as of the annual testing date exceeded our book value andconsequently, 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 ourcommon stock, including a control premium, for a reasonable period of time prior to the evaluation date (generally 15 days) and (2) a discounted cash flowmodel. The fair value calculated using our average common stock price (including a control premium) was weighted 40% while the value calculated by thediscounted cash flow model was weighted 60% in our determination of our overall fair value. While the use of our average common stock price, plus acontrol 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 overall market,are not always consistently aligned with our financial results or outlook. The discounted cash flow approach allows us to calculate our fair value based onoperating 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. Wereviewed industry premium data and determined an appropriate control premium for the analysis.Significant estimates used in the discounted cash flow model included projections of revenue growth, net income margins, discount rate, andterminal 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 seniormanagement and the Board of Directors to evaluate operating performance. The discount rate utilized was estimated using the weighted average cost ofcapital 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, customer backlog, and internally developedsoftware, which are being amortized over the assets' estimated useful lives using the straight-line method. Estimated useful lives range from less than one yearto ten years. Amortization of customer relationships, non-compete arrangements, trade name, customer backlog, and internally developed software isconsidered an operating expense and is included in "Amortization" in the accompanying Consolidated Statements of Operations. The Company periodicallyreviews the estimated useful lives of its identifiable intangible assets, taking into consideration any events or circumstances that might result in a lack ofrecoverability or revised useful life.25 Purchase AccountingWe allocate the purchase price of our acquisitions to the assets and liabilities acquired, including identifiable intangible assets, based on theirrespective fair values at the date of acquisition. Such fair market value assessments require significant judgments and estimates that can change materially asadditional information becomes available. The purchase price is allocated to intangibles based on our estimate and an independent valuation. We finalize thepurchase price allocation within 12 months of the acquisition date as certain initial accounting valuation estimates are finalized.Accounting for Stock-Based CompensationThe fair value of restricted stock awards are based on the value of our common stock on the date of the grant. Stock-based compensation isaccounted for in accordance with ASC Topic 718, Compensation – Stock Compensation ("ASC Topic 718"). Under this method, the Company recognizesshare-based compensation ratably using the straight-line attribution method over the requisite service period. In addition, pursuant to ASC Topic 718, theCompany is required to estimate the amount of expected forfeitures when calculating share-based compensation, instead of accounting for forfeitures as theyoccur.Income TaxesWe calculate and provide for income taxes in each jurisdiction in which we operate. Deferred tax assets and liabilities, measured using enacted taxrates, are recognized for the future tax consequences of temporary differences between financial reporting and tax bases of assets and liabilities. A valuationallowance reduces the deferred tax assets to the amount that is more likely than not to be realized. We have established liabilities or reduced assets foruncertain tax positions when we believe those tax positions are not more likely than not of being sustained if challenged. We evaluate these uncertain taxpositions and adjust the related tax assets and liabilities in light of changing facts and circumstances each quarter.Recently Adopted Accounting PronouncementsOur recently adopted accounting pronouncements are fully described in Note 2, Summary of Significant Accounting Policies, in the Notes toConsolidated Financial Statements.Off-Balance Sheet ArrangementsWe have no off-balance sheet arrangements, except operating lease commitments as disclosed in Note 11, Commitments and Contingencies, in theNotes 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 isimmaterial.Exchange Rate SensitivityWe are exposed to market risks associated with changes in foreign currency exchange rates because we generate a portion of our revenues and incura portion of our expenses in currencies other than the U.S. dollar. As of December 31, 2014, we were exposed to changes in exchange rates between the U.S.dollar and the Canadian dollar, Chinese Yuan, Indian Rupee, British Pound, and Euro. Historically, we have not hedged foreign currency exposures related totransactions denominated in currencies other than U.S. dollars. However, we will continue to assess the need to do so prospectively to reduce our exposureand related volatility to our consolidated Balance Sheet, Statement of Operations, and Cash Flows. Our exposure to foreign currency risk is not significant.Interest Rate SensitivityAs of December 31, 2014, there was $54.0 million outstanding and $35.8 million of available borrowing capacity under our credit facility. Ourinterest expense will fluctuate as the interest rate for the line of credit floats based, at our option, on our lead lender's prime rate plus a margin or the one-month LIBOR rate plus a margin. Based on the $54.0 million outstanding on the line of credit as of December 31, 2014, an increase in the interest rate of 100basis points would add $540,000 of interest expense per year, which is not considered material to our financial position or results of operations.We had unrestricted cash and cash equivalents totaling $10.9 million at December 31, 2014 and $7.0 million at December 31, 2013. Theunrestricted cash and cash equivalents are held for working capital purposes. We do not enter into investments for trading or speculative purposes. Due to theshort-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 aresult of changes in interest rates. Declines in interest rates, however, will reduce future interest income.26 Item 8.Financial Statements and Supplementary Data.PERFICIENT, INC.CONSOLIDATED BALANCE SHEETSAS OF DECEMBER 31, 2014 AND 2013 December 31, 2014 2013 ASSETS (In thousands, except shareinformation) Current assets: Cash and cash equivalents $10,935 $7,018 Accounts receivable, net 113,928 78,887 Prepaid expenses 2,476 2,569 Other current assets 4,679 6,759 Total current assets 132,018 95,233 Property and equipment, net 7,966 7,709 Goodwill 236,130 193,510 Intangible assets, net 46,105 25,487 Other non-current assets 3,823 3,810 Total assets $426,042 $325,749 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $22,035 $7,667 Other current liabilities 33,028 30,298 Total current liabilities 55,063 37,965 Long-term debt 54,000 19,000 Other non-current liabilities 12,251 9,294 Total liabilities $121,314 $66,259 Commitments and contingencies (see Note 11) Stockholders' equity: Common stock ($0.001 par value per share; 50,000,000 shares authorized and 43,174,676 shares issued and 32,854,802shares outstanding as of December 31, 2014; 40,843,435 shares issued and 31,341,276 shares outstanding as ofDecember 31, 2013) $43 $41 Additional paid-in capital 334,645 297,997 Accumulated other comprehensive loss (651) (378)Treasury stock, at cost (10,319,874 shares as of December 31, 2014; 9,512,545 shares as of December 31, 2013) (95,353) (81,051)Retained earnings 66,044 42,881 Total stockholders' equity 304,728 259,490 Total liabilities and stockholders' equity $426,042 $325,749 See accompanying notes to consolidated financial statements.27 PERFICIENT, INC.CONSOLIDATED STATEMENTS OF OPERATIONSFOR THE YEARS ENDED DECEMBER 31, 2014, 2013 AND 2012 Year Ended December 31, 2014 2013 2012 Revenues: (In thousands, except per share information) Services $386,668 $326,589 $286,548 Software and hardware 52,776 30,224 25,188 Reimbursable expenses 17,248 16,512 15,360 Total revenues 456,692 373,325 327,096 Cost of revenues (exclusive of depreciation and amortization, shown separately below): Project personnel costs 239,862 202,897 182,719 Software and hardware costs 47,235 26,648 21,536 Reimbursable expenses 17,248 16,512 15,360 Other project-related expenses 3,012 4,169 4,078 Total cost of revenues 307,357 250,226 223,693 Gross margin 149,335 123,099 103,403 Selling, general, and administrative 90,202 77,601 64,853 Depreciation 3,734 3,262 2,251 Amortization 14,453 7,974 7,827 Acquisition costs 3,446 2,297 1,871 Adjustment to fair value of contingent consideration (1,463) 287 517 Income from operations 38,963 31,678 26,084 Net interest expense (1,438) (293) (143)Net other (expense) income (5) 112 44 Income before income taxes 37,520 31,497 25,985 Provision for income taxes 14,357 10,065 9,878 Net income $23,163 $21,432 $16,107 Basic net income per share $0.73 $0.71 $0.54 Diluted net income per share $0.70 $0.67 $0.52 Shares used in computing basic net income per share 31,698 30,294 29,536 Shares used in computing diluted net income per share 33,158 31,808 31,086 See accompanying notes to consolidated financial statements.28 PERFICIENT, INC.CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMEFOR THE YEARS ENDED DECEMBER 31, 2014, 2013 AND 2012(In thousands) Year Ended December 31, 2014 2013 2012 Net Income $23,163 $21,432 $16,107 Other comprehensive income, net of reclassification adjustments: Foreign currency translation adjustment (273) (72) (27)Comprehensive income $22,890 $21,360 $16,080 See accompanying notes to consolidated financial statements.29 PERFICIENT, INC.CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITYFOR THE YEARS ENDED DECEMBER 31, 2014, 2013 AND 2012(In thousands) CommonStockShares CommonStockAmount Additional Paid-inCapital AccumulatedOther ComprehensiveLoss TreasuryStock Retained Earnings Total Stockholders'Equity Balance at December 31, 2011 28,743 $36 $248,855 $(279) $(54,995) $5,342 $198,959 Proceeds from the exercise of stockoptions and sales of stockthrough the Employee StockPurchase Plan 56 - 202 - - - 202 Net tax benefit from stock optionexercises and restricted stockvesting - - 855 - - - 855 Stock compensation related torestricted stock vesting andretirement savings plancontributions 950 1 9,589 - - - 9,590 Purchases of treasury stock andbuybacks of shares for taxes (724) - - - (7,975) - (7,975)Issuance of stock for acquisitions 1,800 2 16,700 - - - 16,702 Net income - - - - - 16,107 16,107 Foreign currency translationadjustment - - - (27) - - (27)Balance at December 31, 2012 30,825 $39 $276,201 $(306) $(62,970) $21,449 $234,413 Proceeds from the exercise of stockoptions and sales of stockthrough the Employee StockPurchase Plan 80 - 332 - - - 332 Net tax benefit from stock optionexercises and restricted stockvesting - - 2,578 - - - 2,578 Stock compensation related torestricted stock vesting andretirement savings plancontributions 949 - 11,034 - - - 11,034 Purchases of treasury stock andbuyback of shares for taxes (1,313) - - - (18,081) - (18,081)Issuance of stock for acquisitions 800 2 7,852 - - - 7,854 Net income - - - - - 21,432 21,432 Foreign currency translationadjustment - - - (72) - - (72)Balance at December 31, 2013 31,341 $41 $297,997 $(378) $(81,051) $42,881 $259,490 Proceeds from the exercise of stockoptions and sales of stockthrough the Employee StockPurchase Plan 210 - 1,451 - - - 1,451 Net tax benefit from stock optionexercises and restricted stockvesting - - 2,577 - - - 2,577 Stock compensation related torestricted stock vesting andretirement savings plancontributions 961 1 12,718 - - - 12,719 Purchases of treasury stock andbuyback of shares for taxes (807) - - - (14,302) - (14,302)Issuance of stock for acquisitions 1,150 1 19,902 - - - 19,903 Net income - - - - - 23,163 23,163 Foreign currency translationadjustment - - - (273) - - (273)Balance at December 31, 2014 32,855 $43 $334,645 $(651) $(95,353) $66,044 $304,728 See accompanying notes to consolidated financial statements.30 PERFICIENT, INC.CONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE YEARS ENDED DECEMBER 31, 2014, 2013 AND 2012 Year Ended December 31, 20142013 2012 OPERATING ACTIVITIES (In thousands)Net income $23,163 $21,432 $16,107 Adjustments to reconcile net income to net cash provided by operations: Depreciation 3,734 3,262 2,251 Amortization 14,453 7,974 7,827 Deferred income taxes 662 1,604 (613)Non-cash stock compensation and retirement savings plan contributions 12,719 11,034 9,590 Tax benefit from stock option exercises and restricted stock vesting (2,607) (2,618) (1,061)Adjustment to fair value of contingent consideration for purchase of business (1,463) 287 517 Changes in operating assets and liabilities, net of acquisitions: Accounts receivable (27,050) 1,462 (818)Other assets 5,220 (126) 1,074 Accounts payable 14,344 (361) 2,190 Other liabilities (9,142) 2,901 2,147 Net cash provided by operating activities 34,033 46,851 39,211 INVESTING ACTIVITIES Purchase of property and equipment (3,674) (4,649) (1,923)Capitalization of software developed for internal use (3,474) (3,329) (187)Purchase of businesses, net of cash acquired (46,447) (38,434) (36,560)Net cash used in investing activities (53,595) (46,412) (38,670) FINANCING ACTIVITIES Payments for credit facility financing fees - (399) - Proceeds from line of credit 265,100 181,150 134,900 Payments on line of credit (230,100) (164,950) (132,100)Payment of contingent consideration for purchase of business (1,196) - (556)Tax benefit from stock option exercises and restricted stock vesting 2,607 2,618 1,061 Proceeds from the exercise of stock options and sales of stock through the Employee Stock PurchasePlan 1,451 332 202 Purchases of treasury stock (7,702) (13,794) (6,118)Remittance of taxes withheld as part of a net share settlement of restricted stock vesting (6,600) (4,287) (1,857)Net cash provided by (used in) financing activities 23,560 670 (4,468)Effect of exchange rate on cash and cash equivalents (81) 96 8 Change in cash and cash equivalents 3,917 1,205 (3,919)Cash and cash equivalents at beginning of period 7,018 5,813 9,732 Cash and cash equivalents at end of period $10,935 $7,018 $5,813 Supplemental disclosures: Cash paid for interest $1,279 $273 $168 Cash paid for income taxes $10,552 $7,862 $9,687 Non-cash activities: Stock issued for purchase of businesses (net of stock reacquired for escrow claim) $19,173 $7,854 $14,411 Stock issued for settlement of contingent consideration for purchase of business $730 $- $2,199 Estimated fair value of contingent consideration for purchase of business $127 $5,114 $- Accrued additions to property and equipment $- $1,488 See accompanying notes to consolidated financial statements.31 PERFICIENT, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER 31, 20141. Description of Business and Principles of ConsolidationPerficient, Inc. (the "Company") is an information technology consulting firm. The Company helps its clients use Internet-based technologies tomake their businesses more responsive to market opportunities and threats; strengthen relationships with customers, suppliers, and partners; improveproductivity; and reduce information technology costs. The Company designs, builds, and delivers solutions using a core set of middleware softwareproducts 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-ownedsubsidiaries. All material intercompany accounts and transactions have been eliminated in consolidation.2. Summary of Significant Accounting PoliciesUse of EstimatesThe preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management tomake estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of thefinancial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates, andsuch differences could be material to the financial statements.Revenue RecognitionRevenues are primarily derived from professional services provided on a time and materials basis. For time and material contracts, revenues arerecognized 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 inexcess of revenues recognized are classified as deferred revenues. On many projects the Company is also reimbursed for out-of-pocket expenses such asairfare, lodging, and meals. These reimbursements are included as a component of revenues. Revenues from software and hardware sales are generallyrecorded 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 isnot 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 fiscalperiod. 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 fixedfee arrangements, the client is invoiced according to the agreed-upon schedule detailing the amount and timing of payments in the contract. Clients aretypically 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 timeand 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 asunbilled 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 anddeterminable; (3) delivery and acceptance have occurred; and (4) collectability is deemed probable. The Company's policy for revenue recognition ininstances where multiple deliverables are sold contemporaneously to the same customer is in accordance with Financial Accounting Standards Board ASCSubtopic 985-605, Software – Revenue Recognition, 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 orhardware, then the Company evaluates whether each element should be accounted for separately by considering the following criteria: (1) whether thedeliverables have value to the client on a stand-alone basis; and (2) whether delivery or performance of the undelivered item or items is considered probableand 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 ofsoftware and services, the Company also evaluates whether the services are essential to the functionality of the software and if it has fair value evidence foreach deliverable. If the Company has concluded that the separation criteria are met, then it accounts for each deliverable in the transaction separately, basedon the relevant revenue recognition policies. Generally, all deliverables of the Company's multiple element arrangements meet these criteria and areaccounted 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 describedherein.32 Further, delivery of software and hardware sales, when sold contemporaneously with services, can generally occur at varying times depending on thespecific 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 professionalservices provide for a general right, to the client or the Company, to cancel or terminate the contract within a given period of time (generally 10 to 30 days'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 arepresent. Service fees are typically accounted for as one unit of accounting, as fair value evidence for individual tasks or milestones is not available. TheCompany follows the guidelines discussed above in determining revenues; however, certain judgments and estimates are made and used to determinerevenues recognized in any accounting period. If estimates are revised, material differences may result in the amount and timing of revenues recognized for agiven period.Revenues are presented net of taxes assessed by governmental authorities. Sales taxes are generally collected and subsequently remitted on allsoftware and hardware sales and certain services transactions as appropriate.Allowance for Doubtful AccountsAn allowance for doubtful accounts is based upon specific identification of likely and probable losses. Each accounting period, accounts receivableis evaluated for risk associated with a client's inability to make contractual payments, historical experience, and other currently available information.Stock-Based CompensationStock-based compensation is accounted for in accordance with ASC Topic 718, Compensation – Stock Compensation ("ASC Topic 718"). Underthis method, the Company recognizes share-based compensation ratably using the straight-line attribution method over the requisite service period. Inaddition, 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.Income TaxesThe 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 deferredtax asset and liability account balances are determined based on differences between financial reporting and tax bases of assets and liabilities and aremeasured 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 ofrecoverability. A valuation allowance is provided for such deferred tax assets to the extent realization is not judged to be more likely than not. ASC Subtopic740-10-25 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken orexpected to be taken in a tax return. ASC Subtopic 740-10-25 also provides guidance on derecognition, classification, treatment of interest and penalties, anddisclosure of such positions.Cash and Cash EquivalentsCash and cash equivalents consist of all cash balances and liquid investments with original maturities of three months or less.Property and EquipmentProperty and equipment are recorded at cost. Depreciation of property and equipment is computed using the straight-line method over the usefullives of the assets (generally one to seven years). Leasehold improvements are amortized over the shorter of the life of the lease or the estimated useful life ofthe assets.33 Goodwill and Intangible AssetsGoodwill represents the excess purchase price over the fair value of net assets acquired, or net liabilities assumed, in a business combination. Inaccordance with ASC Topic 350, Intangibles – Goodwill and Other ("ASC Topic 350"), the Company performs an annual impairment test of goodwill. TheCompany evaluates goodwill as of October 1 each year and more frequently if events or changes in circumstances indicate that goodwill might be impaired.ASC Topic 350 permits, but does not require, an assessment of qualitative factors to determine whether it is more likely than not that the fair value is less thanthe carrying amount of the Company before applying the two-step goodwill impairment test. If it is more likely than not that the fair value is less than thecarrying amount of the Company, the two-step goodwill impairment test will be conducted. The first step screens for impairment and, when impairment isindicated, a second step is employed to measure the impairment. The Company has elected to go directly to step one rather than making a more-likely-than-not assessment based on an evaluation of qualitative factors.The Company performed its annual impairment test of goodwill as of October 1, 2014. Based on the test performed, the Company's fair value as ofthe annual testing date exceeded its book value and consequently, no impairment was indicated. The Company's fair value was determined by weighting theresults of two valuation methods: (1) market capitalization based on the average price of the Company's common stock, including a control premium, for areasonable period of time prior to the evaluation date (generally 15 days) and (2) a discounted cash flow model. The fair value calculated using theCompany's average common stock price (including a control premium) was weighted 40% while the value calculated by the discounted cash flow model wasweighted 60% in the Company's determination of its overall fair value.Other intangible assets include customer relationships, non-compete arrangements, trade names, customer backlog, and internally developedsoftware, which are being amortized over the assets' estimated useful lives using the straight-line method. Estimated useful lives range from less than one yearto ten years. Amortization of customer relationships, non-compete arrangements, trade names, customer backlog, and internally developed software isconsidered an operating expense and is included in "Amortization" in the accompanying Consolidated Statements of Operations. The Company periodicallyreviews the estimated useful lives of its identifiable intangible assets, taking into consideration any events or circumstances that might result in a lack ofrecoverability or revised useful life.Fair Value of Financial InstrumentsCash equivalents, accounts receivable, accounts payable, and other accrued liabilities are stated at amounts which approximate fair value due to thenear term maturities of these instruments. The Company's long-term debt balance approximates fair market value. Investments are stated at amounts whichapproximate fair value based on quoted market prices or other observable inputs.Treasury StockThe Company uses the cost method to account for repurchases of its own stock.Segment and Geographic InformationThe Company operates as one reportable operating segment according to ASC Topic 280, Segment Reporting, which establishes standards for theway that business enterprises report information about operating segments. The chief operating decision maker formulates decisions about how to allocateresources and assess performance based on consolidated financial results. The Company also has one reporting unit for purposes of the goodwill impairmentanalysis discussed above. Approximately 99% of the Company's revenues were derived from clients in the United States during each of the years endedDecember 31, 2014, 2013 and 2012. Less than 1% of the Company's non-current assets were located outside the United States as of each of the years endedDecember 31, 2014 and 2013.Recently Adopted Accounting PronouncementsOn May 28, 2014, the Financial Accounting Standards Board issued ASU No. 2014-09, Revenue from Contracts with Customers, which requires anentity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replacemost existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard is effective for the Company on January 1, 2017.Early application is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is evaluatingthe effect that ASU 2014-09 will have on its consolidated financial statements and related disclosures. The Company has not yet selected a transition methodnor has it determined the effect of the standard on its ongoing financial reporting.34 3. Net Income Per ShareBasic earnings per share is computed by dividing net income available to common stockholders by the weighted-average number of common sharesoutstanding during the period. Diluted earnings per share includes the weighted average number of common shares outstanding and the number of equivalentshares which would be issued related to the stock options, unvested restricted stock, and warrants using the treasury method, unless such additionalequivalent shares are anti-dilutive.The following table presents the calculation of basic and diluted net income per share (in thousands, except per share information): Year Ended December 31, 2014 2013 2012 Net income $23,163 $21,432 $16,107 Basic: Weighted-average shares of common stock outstanding 31,698 30,294 29,536 Shares used in computing basic net income per share 31,698 30,294 29,536 Effect of dilutive securities: Stock options 61 152 194 Restricted stock subject to vesting 553 674 621 Contingently issuable shares (1) 13 - 81 Shares issuable for acquisition consideration (2) 833 688 654 Shares used in computing diluted net income per share 33,158 31,808 31,086 Basic net income per share $0.73 $0.71 $0.54 Diluted net income per share $0.70 $0.67 $0.52 Anti-dilutive options and restricted stock not included in the calculation of diluted net income pershare 73 1 12 (1)For the year ended December 31, 2014, this represents the Company's estimate of shares to be issued to Clear Task, Inc. ("Clear Task") pursuant to theAsset Purchase Agreement. For the year ended December 31, 2012, this represents the Company's estimate of shares to be issued to Exervio Consulting ,Inc. pursuant to the Asset Purchase Agreement.(2)For the year ended December 31, 2014, this represents the shares held in escrow pursuant to: (i) the Agreement and Plan of Merger with NorthridgeSystems, Inc. ("Northridge"); (ii) the Asset Purchase Agreement with Nascent Systems, LP ("Nascent"); (iii) the Agreement and Plan of Merger withTriTek Solutions, Inc. ("TriTek"); (iv) the Asset Purchase Agreement with Clear Task; (v) the Asset Purchase Agreement with CoreMatrix Systems, LLC("CoreMatrix"); (vi) the Agreement and Plan of Merger with ForwardThink Group Inc. ("ForwardThink"); (vii) the Asset Purchase Agreement withBioPharm Systems, Inc.("BioPharm"); and (viii) the Asset Purchase Agreement with Trifecta Technologies, Inc. and Trifecta Technologies Canada,Limited ("Trifecta") as part of the consideration. For the year ended December 31, 2013, this represents the shares held in escrow pursuant to: (i) theAgreement and Plan of Merger with Northridge; (ii) the Asset Purchase Agreement with Nascent; (iii) the Agreement and Plan of Merger with TriTek;(iv) the Asset Purchase Agreement with Clear Task; and (v) the Asset Purchase Agreement with CoreMatrix as part of the consideration. For the yearended December 31, 2012, this represents the shares held in escrow pursuant to: (i) the Agreement and Plan of Merger with speakTECH; (ii) the AssetPurchase Agreement with PointBridge Solutions, LLC; (iii) the Asset Purchase Agreement with Nascent; and (iv) the Agreement and Plan of Mergerwith Northridge as part of the consideration.4. Concentration of Credit Risk and Significant CustomersCash and accounts receivable potentially expose the Company to concentrations of credit risk. Cash is placed with highly rated financialinstitutions. The Company provides credit, in the normal course of business, to its customers. The Company generally does not require collateral or up-frontpayments. The Company performs periodic credit evaluations of its customers and maintains allowances for potential credit losses. Customers can be deniedaccess to services in the event of non-payment. During 2014, a substantial portion of the services the Company provided were built on IBM, Oracle, andMicrosoft platforms, among others, and a significant number of the Company's clients are identified through joint selling opportunities conducted with andthrough sales leads obtained from the relationships with these vendors. Due to the Company's significant fixed operating expenses, the loss of sales to anysignificant 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 its largest customer only representing approximately 4% of total revenues excludingreimbursable expenses for the year ended December 31, 2014 and 3% of total revenues excluding reimbursable expenses for both years ended December 31,2013 and 2012.35 5. Employee Benefit PlansThe Company has a qualified 401(k) profit sharing plan available to full-time employees who meet the plan's eligibility requirements. This definedcontribution plan permits employees to make contributions up to maximum limits allowed by the Internal Revenue Code of 1986, as amended (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 yearsof service. For 2014, the Company made matching contributions of 50% (25% in cash and 25% in Company stock) of the first 6% of eligible compensationdeferred by the participant. The Company recognized $4.0 million, $3.3 million, and $3.3 million of expense for the matching cash and Company stockcontribution in 2014, 2013, and 2012, respectively. All matching contributions vest over a three-year period of service.The Company has a nonqualified deferred compensation plan for certain U.S. personnel. The plan is designed to allow eligible participants toaccumulate additional income through elective deferrals of compensation which will be paid in the future. As of December 31, 2014 and 2013, the deferredcompensation liability balance was $2.8 million and $2.3 million, respectively.6. Business CombinationsAcquisition of TriTekOn May 1, 2013, the Company acquired TriTek, pursuant to the terms of an Agreement and Plan of Merger. TriTek was an IBM-focused enterprisecontent management and business process management consulting firm. The acquisition of TriTek further enhanced the Company's existing capabilities andfurther positioned the Company as the IBM solution provider of choice for enterprises across North America.The Company's total allocable purchase price consideration was $21.1 million. The purchase price was comprised of $17.0 million in cash paid and$4.1 million of Company common stock issued at closing. The Company incurred approximately $0.8 million in transaction costs, which were expensedwhen incurred.The Company allocated the total purchase price consideration between tangible assets, identified intangible assets, liabilities, and goodwill asfollows (in millions):Acquired tangible assets $11.9 Acquired intangible assets 6.2 Liabilities assumed (6.1)Goodwill 9.1 Total purchase price $21.1 The Company estimated that the intangible assets acquired have useful lives of eight months to eight years.Acquisition of Clear TaskOn May 17, 2013, the Company acquired Clear Task, pursuant to the terms of an Asset Purchase Agreement. Clear Task provided salesforce.comimplementations and customizations for enterprise customers. Clear Task's professionals helped clients implement Service Cloud, Sales Cloud, Chatter andplatform engagement solutions to strengthen customer, employee and partner relationships, and maintain their competitive advantage. The acquisition ofClear Task further expanded the Company's cloud capabilities to include offerings from each of the world's leading cloud computing providers - IBM,Microsoft, Oracle and salesforce.com.The Company's total allocable purchase price consideration was $8.6 million. The purchase price was comprised of $6.0 million in cash paid and$1.2 million of Company common stock issued at closing increased by $1.4 million representing the initial fair value estimate of additional earnings-basedcontingent consideration, which was realized by the Clear Task selling shareholders 12 months after the closing date of the acquisition. The contingency wasachieved during 2014 and the Company paid $3.6 million in contingent consideration, which represents the maximum cash and stock payout pursuant to theAsset Purchase Agreement. 80% of the earnings-based contingent consideration was paid in cash and 20% was issued in stock to the Clear Task sellingshareholders. The Company incurred approximately $0.6 million in transaction costs, which were expensed when incurred.36 The Company allocated the total purchase price consideration between tangible assets, identified intangible assets, liabilities, and goodwill asfollows (in millions):Acquired tangible assets $2.1 Acquired intangible assets 1.6 Liabilities assumed (0.8)Goodwill 5.7 Total purchase price $8.6 The Company estimated that the intangible assets acquired have useful lives of five months to five years.Acquisition of CoreMatrixOn October 11, 2013, the Company acquired CoreMatrix, pursuant to the terms of an Asset Purchase Agreement. CoreMatrix was a salesforce.comcloud computing services and solutions firm. The acquisition of CoreMatrix provides the Company with the comprehensive capacity to sell and deliversalesforce.com solutions across North America.The Company's total allocable purchase price consideration was $24.5 million. The purchase price was comprised of $18.6 million in cash paid and$2.5 million of Company common stock issued at closing increased by $3.4 million representing the initial fair value estimate of additional earnings-basedcontingent consideration. CoreMatrix did not realize the first earnings-based contingency as of 12 months after the closing date of the acquisition. Thesecond earnings-based contingency, if achieved 24 months from the acquisition closing date, will consist of 80% cash and 20% stock paid to the CoreMatrixselling shareholders. As of December 31, 2014, the Company's best estimate of the fair value of the earnings-based contingent consideration is zero. Theadjustment from the initial fair market value was recorded in "Adjustment to fair value of contingent consideration" on the Consolidated Statement ofOperations. The Company incurred approximately $0.8 million in transaction costs, which were expensed when incurred.The Company allocated the total purchase price consideration between tangible assets, identified intangible assets, liabilities, and goodwill asfollows (in millions):Acquired tangible assets $3.6 Acquired intangible assets 4.8 Liabilities assumed (1.5)Goodwill 17.6 Total purchase price $24.5 The Company estimated that the intangible assets acquired have useful lives of six months to ten years.Acquisition of ForwardThink On February 10, 2014, the Company acquired ForwardThink, pursuant to the terms of an Agreement and Plan of Merger. ForwardThink was afinancial services and solutions consulting firm. The acquisition of ForwardThink expanded the Company's financial services vertically, including theCompany's presence in New York. The Company has initially estimated the total allocable purchase price consideration to be $40.1 million. The purchase price was comprised of$26.9 million in cash paid (net of cash acquired) and $13.2 million of Company common stock issued at closing. The Company incurred approximately $1.3million in transaction costs, which were expensed when incurred. The Company acquired certain equity awards which were replaced with a cash incentiveplan pursuant to the Agreement and Plan of Merger. These awards are recognized separately from the acquisition of assets and assumptions of liabilities inthe business combination and will be recognized as compensation expense within the Consolidated Statements of Operations. Approximately $0.8 millionof expense will be recorded over three years and will be recognized ratably over the awards service period.37 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 $4.5 Acquired intangible assets 18.0 Liabilities assumed (11.9)Goodwill 29.5 Total purchase price $40.1 The Company estimated that the intangible assets acquired have useful lives of eleven months to six years.The amounts above represent the fair value estimates as of December 31, 2014, and are subject to subsequent adjustment as the Company obtainsadditional information during the measurement period and finalizes its fair value estimates. Any subsequent adjustments to these fair value estimatesoccurring during the measurement period will result in an adjustment to goodwill or income, as applicable.Acquisition of BioPharm On April 1, 2014, the Company acquired substantially all of the assets of BioPharm Systems, Inc., a California corporation ("California BioPharm"),and all of the outstanding stock of BioPharm Systems, Inc., a Delaware corporation (together with California BioPharm, "BioPharm"), pursuant to the terms ofan Asset Purchase Agreement and a Stock Purchase Agreement. BioPharm was a business and information technology consulting firm focused on the lifesciences industry. The acquisition of BioPharm expanded the Company's industry vertical expertise with the addition of a dedicated life sciences vertical.The Company has initially estimated the total allocable purchase price consideration to be $16.3 million. The purchase price was comprised of$11.2 million in cash paid (net of cash acquired) and $5.1 million in Company common stock issued at closing. The Company incurred approximately $0.7million 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 $3.4 Acquired intangible assets 8.4 Liabilities assumed (1.2)Goodwill 5.7 Total purchase price $16.3 The Company estimated that the intangible assets acquired have useful lives of nine months to ten years. The amounts above represent the fair value estimates as of December 31, 2014, and are subject to subsequent adjustment as the Company obtainsadditional information during the measurement period and finalizes its fair value estimates. Any subsequent adjustments to these fair value estimatesoccurring during the measurement period will result in an adjustment to goodwill or income, as applicable.Acquisition of Trifecta On May 7, 2014, the Company acquired substantially all of the assets related to the eCommerce business of Trifecta Technologies, Inc. and TrifectaTechnologies Canada, Limited (together, "Trifecta"), pursuant to the terms of an Asset Purchase Agreement. Trifecta was a business and informationtechnology consulting firm focused on IBM WebSphere Commerce solutions. The acquisition of Trifecta expanded our ability to deliver larger, morepowerful commerce solutions.38 The Company has initially estimated the total allocable purchase price consideration to be $13.6 million. Of the $13.6 million in total allocablepurchase price consideration, $8.2 million was paid in cash and the remainder represents an assumption of liabilities. 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 $1.6 Acquired intangible assets 5.2 Liabilities assumed (5.7)Goodwill 7.1 Total purchase price $8.2 The Company estimated that the intangible assets acquired have useful lives of eight months to five years.The amounts above represent the fair value estimates as of December 31, 2014 and are subject to subsequent adjustment as the Company obtainsadditional information during the measurement period and finalizes its fair value estimates. Any subsequent adjustments to these fair value estimatesoccurring during the measurement period will result in an adjustment to goodwill or income, as applicable.The results of the TriTek, Clear Task, CoreMatrix, ForwardThink, BioPharm, and Trifecta operations have been included in the Company'sconsolidated financial statements since the respective acquisition dates.The aggregate amounts of revenue and net income of ForwardThink, BioPharm, and Trifecta included in the Company's Consolidated Statements ofOperations from the respective acquisition dates to December 31, 2014 are as follows (in thousands): AcquisitionDate toDecember 31,2014 Revenues $48,108 Net income $4,917 Pro-forma Results of Operations (Unaudited)The following presents the unaudited pro-forma combined results of operations of the Company with ForwardThink, BioPharm, and Trifecta for theyear ended December 31, 2014 and TriTek, Clear Task, CoreMatrix, ForwardThink, BioPharm, and Trifecta for the year ended December 31, 2013, aftergiving effect to certain pro-forma adjustments related to the amortization of acquired intangible assets and assuming ForwardThink, BioPharm, and Trifectawere acquired as of the beginning of 2013 and TriTek, Clear Task, and CoreMatrix were acquired as of the beginning of 2012. These unaudited pro-formaresults are presented in compliance with the adoption of ASU 2010-29, Business Combinations (Topic 805): Disclosure of Supplementary Pro FormaInformation for Business Combinations, and are not necessarily indicative of the actual consolidated results of operations had the acquisitions actuallyoccurred on January 1, 2013 or January 1, 2012 or of future results of operations of the consolidated entities (in thousands except per share data): December 31, 2014 2013 Revenues $467,825 $452,036 Net income $27,544 $26,986 Basic net income per share $0.84 $0.84 Diluted net income per share $0.83 $0.81 Shares used in computing basic net income per share 32,736 31,990 Shares used in computing diluted net income per share 33,350 33,304 39 7. Goodwill and Intangible AssetsGoodwillActivity related to goodwill consisted of the following (in thousands): 2014 2013 Balance, beginning of year $193,510 $160,936 Preliminary purchase price allocations for acquisitions (Note 6) 42,278 32,041 Purchase accounting adjustments 342 533 Balance, end of year $236,130 $193,510 Intangible Assets with Definite LivesFollowing is a summary of the Company's intangible assets that are subject to amortization (in thousands): Year Ended December 31, 2014 2013 GrossCarryingAmount AccumulatedAmortization NetCarryingAmount GrossCarryingAmount AccumulatedAmortization NetCarryingAmount Customer relationships $54,389 $(16,595) $37,794 $31,156 $(10,835) $20,321 Non-compete agreements 1,601 (866) 735 1,477 (715) 762 Customer backlog 2,341 (2,265) 76 402 (170) 232 Trade name 167 (148) 19 159 (83) 76 Internally developed software 8,897 (1,416) 7,481 4,604 (508) 4,096 Total $67,395 $(21,290) $46,105 $37,798 $(12,311) $25,487 The estimated useful lives of identifiable intangible assets are as follows:Customer relationships3 – 10 yearsNon-compete agreements3 – 5 yearsCustomer backlog8 – 11 monthsInternally developed software1 – 7 yearsTrade name1 yearThe weighted average amortization periods for customer relationships and non-compete agreements are six years and five years, respectively. Totalamortization expense for the years ended December 31, 2014, 2013, and 2012 was approximately $14.5 million, $8.0 million, and $7.8 million, respectively.Estimated annual amortization expense for the next five years ended December 31 is as follows and excludes the impact of the acquisitionreferenced in Note 15, Subsequent Events (in thousands):2015 $10,906 2016 $9,683 2017 $7,323 2018 $6,363 2019 $5,466 Thereafter $6,364 40 8. Stock-Based CompensationStock Option PlansThe Company made various award grants under the 2009 Long-Term Incentive Plan prior to May 2012 and under the 2012 Long Term IncentivePlan prior to May 2014. In May 2014, the Company's stockholders approved the Amended and Restated 2012 Long-Term Incentive Plan (the "IncentivePlan"), which had been previously approved by the Company's Board of Directors. The Incentive Plan allows for the granting of various types of stockawards, not to exceed a total of 5.0 million shares, to eligible individuals. The Compensation Committee of the Board of Directors administers the IncentivePlan and determines the terms of all stock awards made under the Incentive Plan.Stock option activity for the year ended December 31, 2014 was as follows (in thousands, except exercise price and remaining contractual termsinformation): Shares Weighted-AverageExercise Price Weighted-AverageRemainingContractualTerms (InYears) (1) AggregateIntrinsic Value Options outstanding at December 31, 2013 222 $6.08 0.94 $3,845 Options exercised (2) (196) 6.14 $2,507 Options canceled (14) 3.94 Options outstanding at December 31, 2014 12 $7.48 0.09 $139 Options vested, December 31, 2014 12 $7.48 0.09 $139 (1)Stock options have a maximum contractual term of 10 years.(2)The total aggregate intrinsic value of stock options exercised during 2013 and 2012 was $1.0 million and $0.4 million, respectively.Restricted stock activity for the year ended December 31, 2014 was as follows (in thousands, except fair value information): Shares Weighted-AverageGrant DateFairValue Restricted stock awards outstanding at December 31, 2013 1,699 $12.13 Awards granted (1) 773 $18.56 Awards vested (2) (844) $11.53 Awards forfeited (122) $14.21 Restricted stock awards outstanding at December 31, 2014 1,506 $15.39 (1)The weighted average grant date fair value of shares granted during 2013 and 2012 was $14.62 and $11.31, respectively.(2)The total fair value of restricted shares vested during the years ended December 31, 2014, 2013 and 2012 was $15.1 million, $13.4 million and$9.7 million, respectively.The Company recognized $13.4 million, $11.1 million, and $9.6 million of share-based compensation expense during 2014, 2013 and 2012,respectively, which included $2.0 million, $1.7 million, and $1.4 million of expense for retirement savings plan contributions, respectively. The associatedcurrent and future income tax benefit recognized during 2014, 2013 and 2012 was $4.1 million, $3.6 million, and $3.2 million, respectively. As of December31, 2014, there was $17.2 million of total unrecognized compensation cost related to non-vested share-based awards. This cost is expected to be recognizedover a weighted-average period of two years. Generally restricted stock awards vest over a three to five year requisite service period.41 Employee Stock Purchase PlanThe Employee Stock Purchase Plan (the "ESPP") is a broadly-based stock purchase plan in which any eligible employee may elect to participate byauthorizing 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 anemployee 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 calendaryear and the Compensation Committee of the Company has set the current annual participation limit at $12,500. During the year ended December 31, 2014,approximately 15,200 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 purchaseprice 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 thefavorable tax treatment afforded by Section 423.9. Line of CreditOn July 31, 2013, we renewed and extended the term of our credit agreement with Silicon Valley Bank ("SVB"), U.S. Bank National Association, andBank of America, N.A. As renewed, the credit agreement provided for revolving credit borrowings up to a maximum principal amount of $75.0 million,subject to a commitment increase of $25.0 million. The Company and the Lenders entered into a first amendment to the credit agreement, effective as of May7, 2014, pursuant to which the Company and the Lenders increased the amount of available borrowing capacity thereunder by $15.0 million, allowing forrevolving credit borrowings up to a maximum principal amount of $90.0 million. The Company and the Lenders entered into a second amendment andconsent to the credit agreement (as amended, the "Credit Agreement"), effective as of January 2, 2015, pursuant to which the Company and the Lenders,including Wells Fargo, National Association, as a new lender, increased the amount of available borrowing capacity thereunder by $35.0 million, allowingfor revolving credit borrowings up to a maximum principal amount of $125.0 million, subject to an additional commitment increase of $50.0 million. Referto Note 15, Subsequent Events, for further discussion.The Credit Agreement also allows for the issuance of letters of credit in the aggregate amount of up to $5.0 million at any one time; outstandingletters of credit reduce the credit available for revolving credit borrowings. As of December 31, 2014, the Company had one outstanding letter of credit inthe amount of $0.2 million to secure an office space lease. Substantially all of our 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 July 31, 2017.Borrowings under the Credit Agreement bear interest at our option of SVB's prime rate (4.00% on December 31, 2014) plus a margin ranging from 0.00% to0.50% or one-month LIBOR (0.17% on December 31, 2014) plus a margin ranging from 2.00% to 2.50%. The additional margin amount is dependent on thelevel of outstanding borrowings. As of December 31, 2014, we had $35.8 million of maximum borrowing capacity. We incur an annual commitment fee of0.30% 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 maintaina ratio of earnings before interest, taxes, depreciation, and amortization ("EBITDA") plus stock compensation and minus income taxes paid and capitalexpenditures 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 aratio of current maturities of long-term debt to EBITDA plus stock compensation and minus income taxes paid and capital expenditures of not more than 2.75to 1.00.At December 31, 2014, the Company was in compliance with all covenants under the Credit Agreement.10. Income TaxesThe Company files income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions. The Internal Revenue Service (the"IRS") has completed examinations of the Company's U.S. income tax returns or the statute has passed on returns for the years through 2010. The Company's2011 and 2012 U.S. income tax returns are currently under examination by the IRS.As of December 31, 2014, the Company had U.S. Federal tax net operating loss carry forwards of approximately $3.3 million that will begin toexpire 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 theCode. The annual limitation may result in the expiration of net operating losses before utilization.42 Significant components of the provision for income taxes are as follows (in thousands): Year Ended December 31, 2014 2013 2012 Current: Federal $10,973 $7,292 $8,405 State 1,846 883 1,704 Foreign 876 286 382 Total current 13,695 8,461 10,491 Deferred: Federal 550 1,455 (581)State 112 149 (32)Total deferred 662 1,604 (613)Total provision for income taxes $14,357 $10,065 $9,878 The components of pretax income for the years ended December 31, 2014, 2013 and 2012 are as follows (in thousands): Year Ended December 31, 2014 2013 2012 Domestic $33,937 $29,280 $23,533 Foreign 3,583 2,217 2,452 Total $37,520 $31,497 $25,985 For the year ended December 31, 2014, foreign operations included Canada, China, India, and the United Kingdom.For the year ended December 31, 2013 and 2012, foreign operations included Canada, China, and India.43 Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reportingpurposes and the amounts used for income tax purposes. Significant components of the Company's deferred taxes as of December 31, 2014 and 2013 are asfollows (in thousands): December 31, 2014 2013 Deferred tax assets: Accrued liabilities $1,172 $1,172 Bad debt reserve 352 365 Net operating losses 1,265 1,510 Deferred compensation 3,060 2,728 Intangibles - 2,101 Acquisition-related costs 380 490 Total deferred tax assets 6,229 8,366 Deferred tax liabilities: Prepaid expenses 809 829 Equity in undistributed foreign earnings 125 125 Goodwill and Intangibles 12,176 7,594 Fixed assets 1,352 1,372 Total deferred tax liabilities 14,462 9,920 Net deferred tax liability $(8,233) $(1,554)Management regularly assesses the likelihood that deferred tax assets will be recovered from future taxable income. To the extent managementbelieves 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 morelikely than not that the Company will generate sufficient taxable income in future years to realize the benefits of its deferred tax assets.The federal corporate statutory tax rate is reconciled to the Company's effective income tax rate as follows: Year Ended December 31, 2014 2013 2012 Federal statutory rate35.0%35.0%35.0%State taxes, net of federal benefit4.5 4.3 4.4 Effect of foreign operations(1.0) (1.3) (1.8) Stock compensation2.6 1.7 1.8 Non-deductible acquisition costs0.7 0.2 0.8 Research and development tax credit(3.3) (5.7) (2.7) U.S. domestic production deduction(0.9) (3.1) - Other0.7 0.9 0.5 Effective tax rate38.3%32.0%38.0%The effective income tax rate increased to 38.3% for the year ended December 31, 2014 from 32.0% for the year ended December 31, 2013. Theeffective rate for the year ended December 31, 2014 only included the tax benefit for the 2014 research and development credit and domestic productiondeduction and the 2010 research and development tax credit. The effective tax rate for the year ended December 31, 2013 included the benefit for theresearch and development credit for 2012 and 2013 and domestic production deduction for 2010, 2011, 2012 and 2013.44 Under the provisions of the ASC Subtopic 740-10-25, Income Taxes - Recognition, the Company had an unrecognized tax benefit of $0.5 million asof both December 31, 2014 and 2013. If the Company's assessment of unrecognized tax benefits is not representative of actual outcomes, the Company'sfinancial statements could be significantly impacted in the period of settlement or when the statute of limitations expires.The following table is a reconciliation of beginning and ending balances of total amounts of gross unrecognized tax benefits (in thousands): December 31, 2014 2013 Balance at beginning of year $519 $79 Unrecognized tax benefits related to current year 211 440 Reductions for tax positions of prior years (185) - Balance at end of year $545 $519 11. Commitments and ContingenciesCertain of the Company's operating leases contain predetermined fixed escalations of minimum rentals during the original lease terms. For theseleases, the Company recognizes the related rental expense on a straight-line basis over the life of the lease and records the difference between the amountscharged to operations and amounts paid as accrued rent expense.The Company leases office space and certain equipment under various operating lease agreements. The Company has the option to extend the termof certain lease agreements. Future minimum commitments under these lease agreements as of December 31, 2014 are as follows (in thousands): OperatingLeases 2014 $4,812 2015 4,452 2016 3,672 2017 2,245 2018 1,686 Thereafter 2,076 Total minimum lease payments $18,943 Rent expense for the years ended December 31, 2014, 2013, and 2012 was approximately $5.4 million, $4.9 million, and $3.8 million, respectively.45 12. Balance Sheet Components December 31, 2014 2013 (In thousands) Accounts receivable: Accounts receivable $82,994 $56,376 Unbilled revenues 31,845 23,274 Allowance for doubtful accounts (911) (763)Total $113,928 $78,887 Property and Equipment: Computer hardware (useful life of 3 years) $10,221 $8,104 Furniture and fixtures (useful life of 5 years) 2,442 1,891 Leasehold improvements (useful life of 5 years) 2,075 1,997 Software (useful life of 1 to 7 years) 6,828 6,042 Less: Accumulated depreciation (13,600) (10,325)Total $7,966 $7,709 Other current liabilities: Accrued variable compensation $15,060 $13,467 Deferred revenues 5,945 3,590 Payroll related costs 1,614 2,035 Accrued subcontractor fees 871 2,551 Accrued medical claims expense 1,615 1,296 Acquired liabilities 2,603 1,680 Estimated fair value of contingent consideration liability (Note 6) - 1,606 Other current liabilities 5,320 4,073 Total $33,028 $30,298 Other non-current liabilities: Deferred compensation liability $2,773 $2,160 Deferred income taxes 8,912 2,345 Estimated fair value of contingent consideration liability (Note 6) - 3,508 Other non-current liabilities 566 1,281 Total $12,251 $9,294 46 13. Allowance for Doubtful AccountsActivity in the allowance for doubtful accounts is summarized as follows for the years presented (in thousands): Year Ended December 31, 2014 2013 2012 Balance, beginning of year $763 $724 $1,057 Charges to expense 934 280 744 Uncollected balances written off, net of recoveries (786) (241) (1,077)Balance, end of year $911 $763 $724 14. Quarterly Financial Results (Unaudited)The following tables set forth certain unaudited supplemental quarterly financial information for the years ended December 31, 2014 and 2013. Thequarterly operating results are not necessarily indicative of future results of operations (in thousands except per share data). Three Months Ended, March 31,2014 June 30,2014 September 30,2014 December 31,2014 (Unaudited) Total revenues $97,170 $116,709 $116,971 $125,842 Gross margin 31,459 37,848 39,537 40,491 Income from operations 5,421 11,416 12,395 9,730 Income before income taxes 5,274 11,040 11,943 9,263 Net income 3,045 6,387 7,306 6,424 Basic net income per share 0.10 0.20 0.23 0.20 Diluted net income per share 0.09 0.19 0.22 0.19 Three Months Ended, March 31,2013 June 30,2013 September 30,2013 December 31,2013 (Unaudited) Total revenues $84,935 $94,167 $96,758 $97,465 Gross margin 25,514 30,598 33,863 33,124 Income from operations 5,208 7,538 10,346 8,586 Income before income taxes 5,249 7,402 10,257 8,590 Net income 4,123 4,562 7,234 5,513 Basic net income per share 0.14 0.15 0.24 0.18 Diluted net income per share 0.13 0.14 0.23 0.17 47 15. Subsequent EventsAcquisition of Zeon SolutionsOn January 2, 2015, the Company acquired substantially all of the assets of Zeon Solutions Incorporated, a Wisconsin corporation, Grand RiverInteractive LLC, a Michigan limited liability company, and their Indian affiliate, Zeon Solutions Private Limited (collectively, "Zeon"), an e-commercesolutions consulting firm, pursuant to the terms of an Asset Purchase Agreement, for approximately $38.5 million, of which approximately $22.3 million wascash and $13.4 was Company common stock issued at closing increased by $2.8 million representing the initial fair value estimate of additional earnings-based contingent consideration, which may be realized by Zeon 12 months after the closing date of the acquisition. The acquisition of Zeon expands theCompany's expertise in the support of e-commerce solutions.Goodwill and intangible assets are expected to be recorded on the Consolidated Balance Sheet from the acquisition of Zeon. As of March 5, 2015,the initial accounting for the business combination has not been completed, including the measurement of certain intangible assets and goodwill.Acquisition costs for the year ended December 31, 2014 were $1.0 million.Amendment to the Credit AgreementThe Company and the Lenders entered into a second amendment and consent to the Company's credit agreement (the "Amendment"), pursuant towhich the Company and the Lenders increased the amount of available borrowing capacity under the Credit Agreement by $35.0 million, effective as ofJanuary 2, 2015, thereby allowing for revolving credit borrowings up to a maximum principal amount of $125.0 million, subject to an additionalcommitment increase of $50.0 million. Additionally, under the Amendment, Wells Fargo, National Association became party to the Credit Agreement as alender to the Company.48 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMThe Board of Directors and StockholdersPerficient, Inc.:We have audited the accompanying consolidated balance sheets of Perficient, Inc. and subsidiaries (the "Company") as of December 31, 2014 and 2013, andthe related consolidated statements of operations, comprehensive income, changes in stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 2014. We also have audited the Company's internal control over financial reporting as of December 31, 2014, based oncriteria established in Internal Control – Integrated Framework (2013) 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 financialreporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report onInternal Control over Financial Reporting. Our responsibility is to express an opinion on these consolidated financial statements and an opinion on theCompany'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 thatwe plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effectiveinternal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included examining, on atest basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimatesmade by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtainingan understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design andoperating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessaryin 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 reportingand the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal controlover financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are beingmade only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention ortimely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate.The Company acquired ForwardThink Group, Inc. ("ForwardThink") in February 2014, BioPharm Systems, Inc. ("BioPharm") in April 2014, and TrifectaTechnologies, Inc. and Trifecta Technologies Canada, Limited (together, "TriFecta") in May 2014, and management excluded from its assessment of theeffectiveness of the Company's internal control over financial reporting as of December 31, 2014, ForwardThink's, BioPharm's, and TriFecta's internal controlover financial reporting associated with 18% and 11% of the Company's total assets and total revenues, respectively, included in the consolidated financialstatements of the Company as of and for the year ended December 31, 2014. Our audit of internal control over financial reporting of the Company as ofDecember 31, 2014 also excluded an evaluation of the internal control over financial reporting of ForwardThink, BioPharm, and Trifecta.In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Perficient, Inc. andsubsidiaries as of December 31, 2014 and 2013, and the results of their operations and their cash flows for each of the years in the three-year period endedDecember 31, 2014, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects,effective internal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control – Integrated Framework (2013)issued by the Committee of Sponsoring Organizations of the Treadway Commission./s/ KPMG LLPSt. Louis, MissouriMarch 5, 201549 Item 9.Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.None.Item 9A.Controls and Procedures.Evaluation of Disclosure Controls and ProceduresWe have established disclosure controls and procedures to ensure that material information relating to the Company, including its consolidatedsubsidiaries, is made known to the officers who certify the Company's financial reports and to other members of senior management and the Board ofDirectors.We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company's reports underthe Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information isaccumulated and communicated to management, including the principal executive officer and principal financial officer of the Company, as appropriate, toallow timely decisions regarding required disclosure. The Company's management, with the participation of the Company's principal executive officer andprincipal financial officer, has evaluated the effectiveness of the Company's disclosure controls and procedures as of the end of the fiscal year covered by thisAnnual Report on Form 10-K. Based on that evaluation, the Company's principal executive and principal financial officers have determined that theCompany's disclosure controls and procedures were effective.Management's Report on Internal Control over Financial ReportingOur management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange Act Rule13a-15(f). In fulfilling this responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of controlprocedures. The objectives of internal control include providing management with reasonable, but not absolute, assurance that assets are safeguarded againstloss from unauthorized use or disposition, and that transactions are executed in accordance with management's authorization and recorded properly to permitthe preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States. Under the supervisionand with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of theeffectiveness of our internal control over financial reporting based on the framework in Internal Control - Integrated Framework (2013) issued by theCommittee of Sponsoring Organizations of the Treadway Commission. Based on our assessment under those criteria, management concluded that theCompany's internal control over financial reporting was effective as of December 31, 2014.The Company acquired ForwardThink in February 2014, BioPharm in April 2014, and Trifecta in May 2014. 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 ofDecember 31, 2014. In total, ForwardThink, BioPharm, and Trifecta represented 18% and 11% of the Company's total assets and total revenues, respectively,as of and for the year ended December 31, 2014. Excluding identifiable intangible assets and goodwill recorded in the business combination, ForwardThink,BioPharm, and Trifecta represented 2% of the Company's total assets as of December 31, 2014.KPMG LLP, our independent registered public accounting firm, has audited our financial statements for the year ended December 31, 2014 includedin this Annual Report on Form 10-K, and has issued its report on the effectiveness of internal control over financial reporting as of December 31, 2014, whichis included herein.Changes in Internal Control Over Financial ReportingThere was no change in the Company's internal control over financial reporting as defined in Exchange Act Rule 13a-15(f) during the quarter endedDecember 31, 2014, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting except for the systemimplementation described below.Effective as of July 1, 2014, the Company implemented an Enterprise Resource Planning ("ERP") system to support the Company's future growthplan and to integrate significant processes. Implementing our ERP system resulted in significant changes in business processes and extensive organizationaltraining. The Company believes it has taken and will continue to take the necessary steps to monitor and maintain appropriate internal controls during thistransition period. These steps include deploying resources to mitigate internal control risks, and performing additional verifications and testing to ensuredata integrity. The ERP system implementation resulted in a significant redesign of business processes, some of which relate to internal control over financialreporting and disclosure controls and procedures.Item 9B.Other Information.None.50 PART IIIItem 10.Directors, Executive Officers and Corporate Governance.Executive OfficersOur executive officers, including their ages as of the date of this filing are as follows:Name Age PositionJeffrey S. Davis 50 President and Chief Executive OfficerKathryn J. Henely 50 Chief Operating OfficerPaul E. Martin 54 Chief Financial Officer, Treasurer and SecretaryJeffrey S. Davis became the Chief Executive Officer and a member of the Board in 2009. He previously served as the Chief Operating Officer of theCompany following its acquisition of Vertecon in April 2002, and was named the Company's President in 2004. He served the same role of Chief OperatingOfficer at Vertecon from October 1999 to its acquisition by the Company. Before Vertecon, Mr. Davis was a Senior Manager and member of the leadershipteam in Arthur Andersen's Business Consulting Practice, where he was responsible for defining and managing internal processes, while managing businessdevelopment 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 theboard 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 as the Company's Chief Operating Officer in 2009. Ms. Henely joined the Company in the St. Louis officefollowing its acquisition of Vertecon in 2002. Ms. Henely was the General Manager of the St. Louis office and the Vice President for the Company's largestbusiness group, which included several local and national business units along with the Company's offshore development center in China. Prior to herappointment to Chief Operating Officer she actively participated in the due diligence and integration of several acquisitions within her business group.Additionally, she led the establishment of the Company Wide Practices and Corporate Recruiting organization. Ms. Henely received her M.S. in ComputerScience 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 in 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 withmulti-billion dollar revenue. From 1995 to February 1999, Mr. Martin was Chief Financial Officer of Rawlings Sporting Goods Company, Inc., a publiclytraded multi-million dollar revenue sporting goods manufacturer and distributor. Mr. Martin received a B.S. degree with honors in accounting from theUniversity of Missouri – St. Louis. Mr. Martin is also a member of the board of the St. Louis chapter of Autism Speaks.Additional information with respect to Directors and Executive Officers of the Company is incorporated by reference to the Company's proxystatement to be used in connection with the 2015 Annual Meeting of Stockholders (the "Proxy Statement") under the captions "Directors and ExecutiveOfficers," "Composition and Meetings of the Board of Directors and Committees," and "Section 16(a) Beneficial Ownership Reporting Compliance." TheProxy Statement will be filed pursuant to Regulation 14A within 120 days of the end of the Company's fiscal year.Codes of Conduct and EthicsInformation on this subject is found in the Proxy Statement under the caption "Certain Relationships and Related Transactions" and is incorporatedherein by reference.Audit Committee of the Board of DirectorsInformation on this subject is found in the Proxy Statement under the caption "Compensation and Meetings of the Board of Directors andCommittees" and is incorporated herein by reference.51 Item 11.Executive Compensation.Information on this subject is found in the Proxy Statement under the captions "Compensation of Directors," "Compensation of Executive Officers,""Directors and Executive Officers," "Compensation Committee Report," and "Compensation Committee Interlocks and Insider Participation" and isincorporated herein by reference.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.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 incorporatedherein by reference.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 incorporatedherein by reference.52 PART IVItem 15.Exhibits, Financial Statement Schedules.1.Financial StatementsThe following consolidated statements are included in Part III, Item 8 under the following captions:IndexPageConsolidated Balance Sheets27Consolidated Statements of Operations28Consolidated Statements of Comprehensive Income29Consolidated Statements of Changes in Stockholders' Equity30Consolidated Statements of Cash Flows31Notes to Consolidated Financial Statements32Report of Independent Registered Public Accounting Firm492.Financial Statement SchedulesNo 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 requiredinformation is set forth in the applicable financial statements or notes thereto.3.ExhibitsSee Index to Exhibits.53 SIGNATURESPursuant 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 onits behalf by the undersigned, thereunto duly authorized. PERFICIENT, INC. By:/s/ Paul E. MartinDate: March 5, 2015Paul E. Martin Chief Financial Officer(Principal Financial Officer and Principal AccountingOfficer)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 substitutionand 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 eachcapacity stated below any and all amendments (including post-effective amendments) to this Annual Report on Form 10-K, and to file the same, with allexhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact andagents, 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 thepremises, 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 andagents 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 theregistrant and in the capacities and on the dates indicated.Signature Title Date /s/ Jeffrey S. Davis Director, President and Chief Executive Officer March 5, 2015Jeffrey S. Davis (Principal Executive Officer) /s/ Paul E. Martin Chief Financial Officer March 5, 2015Paul E. Martin (Principal Financial Officer and Principal Accounting Officer) /s/ Ralph C. Derrickson Director March 5, 2015Ralph C. Derrickson /s/ John S. Hamlin Director March 5, 2015John S. Hamlin /s/ James R. Kackley Director March 5, 2015James R. Kackley /s/ David S. Lundeen Director March 5, 2015David S. Lundeen 54 INDEX TO EXHIBITS ExhibitNumber Description 2.1 Asset Purchase Agreement by and among CoreMatrix Systems, LLC, Frank McMahon and Paul Nix and Perficient, Inc. dated as of October11, 2013, previously filed with the Securities and Exchange Commission as an Exhibit to our Current Report on Form 8-K filed on October16, 2013 and incorporated herein by reference 2.2 Agreement and Plan of Merger, dated as of February 10, 2014, by and among Perficient, Inc., Garden MS Co., ForwardThink Group Inc.,each of the Principals and Robert Shinbrot, in his capacity as the Representative, previously filed with the Securities and ExchangeCommission as an Exhibit to our Current Report on Form 8-K filed on February 11, 2014 and incorporated herein by reference 2.3 Asset Purchase Agreement, dated as of December 18, 2014, by and among Perficient, Inc., Zeon Solutions Incorporated, Grand RiverInteractive LLC and Rupesh Agrawal, previously filed with the Securities and Exchange Commission as an Exhibit to our Current Reporton Form 8-K filed on December 19, 2014 and incorporated herein by reference 3.1 Certificate of Incorporation of Perficient, Inc., previously filed with the Securities and Exchange Commission as an Exhibit to ourRegistration Statement on Form SB-2 (File No. 333-78337) declared effective on July 28, 1999 by the Securities and Exchange Commissionand incorporated herein by reference 3.2 Certificate of Amendment to Certificate of Incorporation of Perficient, Inc., previously filed with the Securities and Exchange Commissionas an Exhibit to our Form 8-A filed with the Securities and Exchange Commission pursuant to Section 12(g) of the Securities Exchange Actof 1934 on February 15, 2005 and incorporated herein by reference 3.3 Certificate of Amendment to Certificate of Incorporation of Perficient, Inc., previously filed with the Securities and Exchange Commissionas an Exhibit to our Registration Statement on Form S-8 (File No. 333-130624) filed on December 22, 2005 and incorporated herein byreference 3.4 Amended and Restated Bylaws of Perficient, Inc., previously filed with the Securities and Exchange Commission as an Exhibit to ourAnnual Report on Form 10-K for the year ended December 31, 2012 and incorporated herein by reference 4.1 Specimen Certificate for shares of Perficient, Inc. common stock, previously filed with the Securities and Exchange Commission as anExhibit to our Quarterly Report on Form 10-Q filed on May 7, 2009 and incorporated herein by reference 10.1† Perficient, Inc. Amended and Restated 1999 Stock Option/Stock Issuance Plan, previously filed with the Securities and ExchangeCommission as an Exhibit to our Annual Report on Form 10-K for the year ended December 31, 2005 and incorporated herein by reference 10.2† Perficient, Inc. 2009 Long-Term Incentive Plan, as amended, previously filed with the Securities and Exchange Commission as an Exhibitto our Current Report on Form 8-K filed on February 25, 2010 and incorporated herein by reference 10.3† Form of Stock Option Agreement, previously filed with the Securities and Exchange Commission as an Exhibit to our Annual Report onForm 10-KSB for the year ended December 31, 2004 and incorporated herein by reference 10.4† Perficient, Inc. Employee Stock Purchase Plan, previously filed with the Securities and Exchange Commission as Appendix A to ourSchedule 14A filed on October 13, 2005 and incorporated herein by reference 10.5† Form of Restricted Stock Agreement, previously filed with the Securities and Exchange Commission as an Exhibit to our Annual Report onForm 10-K for the year ended December 31, 2005 and incorporated herein by reference 10.6† Form of Restricted Stock Agreement, previously filed with the Securities and Exchange Commission as an Exhibit to our Quarterly Reporton Form 10-Q filed May 6, 2010 and incorporated herein by reference 10.7† Perficient, Inc. 2012 Long-Term Incentive Plan, previously filed with the Securities and Exchange Commission as Appendix A to ourSchedule 14A filed on April 19, 2012 and incorporated herein by reference 10.8† Amended and Restated Employment Agreement with Chief Executive Officer of Perficient, Inc. previously filed with the Securities andExchange Commission as an Exhibit to our Current Report on Form 8-K filed on December 23, 2011 and incorporated herein by reference 10.9† Amended and Restated Employment Agreement with Chief Financial Officer of Perficient, Inc. previously filed with the Securities andExchange Commission as an Exhibit to our Current Report on Form 8-K filed on December 23, 2011 and incorporated herein by reference 10.10 Second Amended and Restated Credit Agreement by and among Silicon Valley Bank, Bank of America, N.A., and US Bank, N.A., andPerficient, Inc. dated effective as of July 31, 2013, previously filed with the Securities and Exchange Commission as an Exhibit to ourQuarterly Report on Form 10-Q filed on August 1, 2013 and incorporated herein by reference 10.11† Amended and Restated Perficient, Inc. 2012 Long-Term Incentive Plan, previously filed with the Securities and Exchange Commission asAppendix A to our Schedule 14A filed on April 14, 2014 and incorporated herein by reference 10.12 Amendment No. 1 to Second Amended and Restated Credit Agreement, dated May 7, 2014, by and among Perficient, Inc., the Lenders partythereto and Silicon Valley Bank, as Lead Arranger, Book Manager, Swingline Lender and as Administrative Agent for the Lenders,previously filed with the Securities and Exchange Commission as an Exhibit to our Quarterly Report on Form 10-Q filed on May 8, 2014and incorporated herein by reference 10.13† Form of Restricted Stock Award Agreement (Non-Employee Director Award), previously filed with the Securities and ExchangeCommission as an Exhibit to our Quarterly Report on Form 10-Q filed on July 31, 2014 and incorporated herein by reference 10.14† Form of Restricted Stock Award and Non-Competition Agreement (Employee Grant), previously filed with the Securities and ExchangeCommission as an Exhibit to our Quarterly Report on Form 10-Q filed on July 31, 2014 and incorporated herein by reference 10.15† Form of Restricted Stock Unit Award and Non-Competition Agreement (Employee Grant), previously filed with the Securities andExchange Commission as an Exhibit to our Quarterly Report on Form 10-Q filed on July 31, 2014 and incorporated herein by reference 10.16† Amended and Restated Employment Agreement with Chief Executive Officer of Perficient, Inc., effective as of January 1, 2015, previouslyfiled with the Securities and Exchange Commission as an Exhibit to our Quarterly Report on Form 10-Q filed on November 6, 2014 andincorporated herein by reference 10.17† Amended and Restated Employment Agreement with Chief Financial Officer of Perficient, Inc., effective as of January 1, 2015, previouslyfiled with the Securities and Exchange Commission as an Exhibit to our Quarterly Report on Form 10-Q filed on November 6, 2014 andincorporated herein by reference 10.18* Amendment No. 2 and Consent to Second Amended and Restated Credit Agreement, dated January 2, 2015, by and among Perficient, Inc.,the Lenders party thereto and Silicon Valley Bank, as Lead Arranger, Book Manager, Swingline Lender and as Administrative Agent for theLenders 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 adoptedpursuant to Section 906 of the Sarbanes-Oxley Act of 2002 101* The following financial information from Perficient, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2014, formatted inXBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of December 31, 2014 and 2013, (ii) ConsolidatedStatements of Operations for the years ended December 31, 2014, 2013, and 2012, (iii) Consolidated Statements of Comprehensive Incomefor the years ended December 31, 2014, 2013, and 2012, (iv) Consolidated Statements of Shareholders' Equity for the years ended December31, 2014, 2013, and 2012, (v) Consolidated Statements of Cash Flows for the years ended December 31, 2014, 2013, and 2012, and (vi) theNotes to Consolidated Financial Statements † Identifies an Exhibit that consists of or includes a management contract or compensatory plan or arrangement. * Filed herewith.55 EXHIBIT 10.18AMENDMENT NO. 2 AND CONSENTTOSECOND AMENDED AND RESTATED CREDIT AGREEMENTThis Amendment No. 2 and Consent to Second Amended and Restated Credit Agreement (this "Amendment") is entered into this 2 day of January,2015, by and among Perficient, Inc., a Delaware corporation ("Borrower"), the several banks and other financial institutions or entities from time to timeparties to the Credit Agreement (as defined below) ("Lenders") and Silicon Valley Bank, as Lead Arranger, Book Manager, Swingline Lender, and asAdministrative Agent for the Lenders ("Administrative Agent"). Capitalized terms used herein without definition shall have the same meanings given themin the Credit Agreement (as defined below).RecitalsA. Whereas, Borrower, Lenders and Administrative Agent have entered into that certain Second Amended and Restated Credit Agreement,dated as of July 31, 2013 and amended by Amendment No. 1 to Second Amended and Restated Credit Agreement, dated May 7, 2014 (as may be furtheramended, restated, or otherwise modified, the "Credit Agreement"), pursuant to which Lenders agreed to extend certain credit facilities to Borrower;B. Whereas, Wells Fargo Bank, National Association ("Wells Fargo") desires to become a new Lender under the Credit Agreement throughexecution of this Amendment;C. Whereas, Borrower has informed Lenders and Administrative Agent that it desires: (i) to increase the Revolving Commitment by$35,000,000 pursuant to Section 2.21 of the Credit Agreement and (ii) that Lenders and Administrative Agent waive the aggregate consideration limitcontained in Section 7.4(a) (Fundamental Changes) of the Credit Agreement for acquisitions;D. Whereas, the undersigned Lenders (constituting the "Required Lenders" as defined in the Credit Agreement) and Administrative Agenthave agreed to make the increase available, provide a limited waiver to the requirements in Section 7.4(a) and make certain amendments to the CreditAgreement as more fully set forth below, but only to the extent, in accordance with the terms, subject to the conditions and in reliance upon therepresentations and warranties set forth below.Now, Therefore, in consideration of the foregoing recitals and other good and valuable consideration, the receipt and adequacy of which ishereby acknowledged, and intending to be legally bound, the parties hereto agree as follows:1 Agreement1. Limited Waiver and Consent.1.1Consent to Payment of Aggregate Consideration In Excess of Section 7.4(a) Limit. TheAdministrative Agent and the Required Lenders consent to Borrower's payment of cash consideration for the acquisition ofassets of Zeon Solutions, Inc., Grand River, Inc. and Zeon Solutions Private Limited pursuant to the terms and subject to theconditions set forth in the acquisition agreements therefor provided to Administrative Agent (collectively, the "ZeonAcquisition") in excess of the $25,000,000 limit and of aggregate consideration for the Zeon Acquisition in excess of the$35,000,000 limit as provided in Section 7.4(a), provided that: (i) such consideration (including earn outs) shall not exceed$38,500,000 in the aggregate and (ii) the acquisition shall otherwise comply with the requirements of Section 7.4(a)(ii) and(iii). The Zeon Acquisition shall be deemed a "Permitted Acquisition" under the Credit Agreement.2. Amendments to Credit Agreement.2.1Recitals. The second "Whereas" clause in the Recitals of the Credit Agreement is hereby amended asfollows:"WHEREAS, the Lenders have agreed to extend certain credit facilities to the Borrower, upon the terms and conditions specified in thisAgreement, in an aggregate amount not to exceed $125,000,000, plus any commitment increase as provided for in Section 2.21, consistingof a revolving loan facility in an aggregate principal amount of up to $125,000,000; a letter of credit sub-facility in the amount of$10,000,000 (as a sublimit of the revolving loan facility) and a swingline sub-facility in the aggregate availability amount of $10,000,000(as a sublimit of the revolving loan facility); and"2.2Section 1.1 (Defined Terms). Section 1.1 of the Credit Agreement is hereby amended as follows:""Commitment Fee Rate": twenty (20) basis points per annum."""Total L/C Commitments": at any time, the sum of all L/C Commitments at such time, as the same may be reduced from time to timepursuant to Section 2.6 or 3.5(b). The amount of the Total L/C Commitments on the effective date of Amendment No. 2 and Consent toSecond Amended and Restated Credit Agreement is $10,000,000."""Total Revolving Commitments" at any time, the aggregate amount of the Revolving Commitments then in effect. The original amountof the Total Revolving Commitments on the effective date of Amendment No. 2 and Consent to Second Amended and Restated CreditAgreement is $125,000,000. The L/C Commitments and the Swingline Commitment are each sublimits of the Total RevolvingCommitments."2 2.3Section 2.21(a) (Increase of Commitments). Section 2.21(a) to the Credit Agreement is herebyamended and restated in its entirety as follows:"If no Default or Event of Default shall have occurred and be continuing, the Borrower may at any time from time to time prior to theRevolving Termination Date request one or more increases of the Revolving Commitments by notice to the Administrative Agent inwriting of the amount of such proposed increase (each such notice, a "Commitment Increase Notice"); provided, however, that, theaggregate amount of the Revolving Commitments as so increased shall not exceed $175,000,000. Any such Commitment Increase Noticedelivered with respect to any proposed increase in the Revolving Commitments may offer one or more Revolving Lenders an opportunityto subscribe for its Applicable Percentage (with respect to the existing Revolving Commitments (prior to such increase)) of the increasedRevolving Commitments. The Administrative Agent shall, within five (5) Business Days after receipt of a Commitment Increase Notice,notify each Lender of such request. Each Lender desiring to increase its Revolving Commitment shall notify the Administrative Agent inwriting no later than ten (10) Business Days after receipt of notice from the Administrative Agent. Any Lender that does not notify theAdministrative Agent within the time period specified above that it will increase its Revolving Commitment will be deemed to haverejected such offer. Any agreement by a Lender to increase its Revolving Commitment shall be irrevocable."2.4Section 10.5(b) (Indemnification by the Borrower). Section 10.5(b) to the Credit Agreement ishereby amended and restated in its entirety as follows:"The Borrower shall indemnify the Administrative Agent (and any sub-agent thereof), each Lender (including the Issuing Lender), and eachRelated Party of any of the foregoing Persons (each such Person being called an "Indemnitee") against, and hold each Indemnitee harmlessfrom, any and all losses, claims, damages, liabilities, penalties and related expenses (including the fees, charges and disbursements of anycounsel for any Indemnitee) including fees and time charges and disbursements for attorneys who may be employees of any Indemnitee,incurred by any Indemnitee or asserted against any Indemnitee by any Person (including the Borrower or any other Loan Party) other thansuch Indemnitee and its Related Parties arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement,any other Loan Document or any agreement or instrument contemplated hereby or thereby, the performance by the parties hereto of theirrespective obligations hereunder or thereunder or the consummation of the transactions contemplated hereby or thereby, (ii) any Loan orLetter of Credit or the use or proposed use of the proceeds therefrom (including any refusal by the Issuing Lender to honor a demand forpayment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of suchLetter of Credit), (iii) any actual or alleged presence or release of Materials of Environmental Concern on or from any property owned oroperated by the Borrower or any of its Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation or proceeding relatingto any of the foregoing, whether based on contract, tort or any other theory, whether brought by a third party or by the Borrower or anyother Loan Party, and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee,be available to the extent that such losses, claims, damages, liabilities penalties or related expenses (x) are determined by a court ofcompetent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of suchIndemnitee or (y) result from a claim brought by the Borrower or any other Loan Party against an Indemnitee for breach in bad faith of suchIndemnitee's obligations hereunder or under any other Loan Document, if the Borrower or such Loan Party has obtained a final andnonappealable judgment in its favor on such claim as determined by a court of competent jurisdiction. This Section 10.5(b) shall not applywith respect to Taxes other than any Taxes that represent losses, claims, damages, etc. arising from any non-Tax claim.3 2.5Schedule 1.1(a) (Commitments). Schedule 1.1(a) to the Credit Agreement is hereby amended andrestated in its entirety as set forth on Schedule 1.1(a) attached hereto.3. Joinder of Wells Fargo. Wells Fargo (a) hereby agrees to all of the provisions of the Credit Agreement, (b) hereby agrees to become a party thereto,as a Lender, with all of the rights and obligations applicable to a Lender thereunder, including, without limitation, the obligation to make extensions ofcredit to the Borrower in an aggregate principal amount not to exceed the amount of its Revolving Commitment, as set forth opposite its name in Schedule1.1A to the Credit Agreement, as such amount may be changed from time to time as provided in the Credit Agreement; and (c) its address for notice shall beas set forth beneath its signature to this Amendment. 4. Fees. Fees will be paid in accordance with the Fee Letter.5. Limitation of Amendment.5.1 The amendments set forth in Section 1 above, are effective for the purposes set forth herein and shallbe limited precisely as written and shall not be deemed (a) to be a consent to any amendment, waiver or modification of anyother term or condition of the Credit Agreement or any other Loan Documents, (b) to be a consent to any future amendment ormodification or waiver to any instrument or agreement the execution and delivery of which is consented to hereby, or to anywaiver of any of the provisions thereof, or (c) otherwise prejudice any right or remedy which Lenders and Administrative Agentmay now have or may have in the future under or in connection with any Loan Document.5.2This Amendment shall be construed in connection with and as part of the Loan Documents and allterms, conditions, representations, warranties, covenants and agreements set forth in the Credit Agreement and other LoanDocuments, except as herein amended, are hereby ratified and confirmed and shall remain in full force and effect.6. Representations and Warranties. To induce Lenders and Administrative Agent to enter into this Amendment, Borrower and each Guarantor herebyrepresent and warrant to Lenders and Administrative Agent as follows:4 6.1Immediately after giving effect to this Amendment (a) the representations and warranties containedin the Loan Documents are true, accurate and complete in all material respects as of the date hereof (except to the extent suchrepresentations and warranties relate to an earlier date, in which case they are true, accurate and complete as of such date), and(b) no Event of Default has occurred and is continuing;6.2Borrower and each Guarantor has the power and authority to execute and deliver this Amendmentand to perform its obligations under the Loan Documents, as amended by this Amendment;6.3The organizational documents of Borrower and each Guarantor delivered to Lenders andAdministrative Agent on the Closing Date pursuant to Section 5.1(d) remain true, accurate and complete and have not beenamended, supplemented or restated and are and continue to be in full force and effect;6.4The execution and delivery by Borrower and each Guarantor of this Amendment and theperformance by Borrower and each Guarantor of its obligations under the Loan Documents, as amended by this Amendment, donot and will not contravene (a) any law or regulation binding on or affecting Borrower, (b) any contractual restriction with aPerson binding on Borrower, (c) any order, judgment or decree of any court or other governmental or public body or authority,or subdivision thereof, binding on Borrower or any Guarantor, or (d) the organizational documents of Borrower or anyGuarantor;6.5The execution and delivery by Borrower and each Guarantor of this Amendment and theperformance by Borrower or any Guarantor of its obligations under the Loan Documents, as amended by this Amendment, donot require any order, consent, approval, license, authorization or validation of, or filing, recording or registration with, orexemption by any governmental or public body or authority, or subdivision thereof, binding on Borrower or any Guarantor,except as already has been obtained or made;6.6This Amendment has been duly executed and delivered by Borrower and each Guarantor and is thebinding obligation of Borrower and each Guarantor, enforceable against Borrower or each Guarantor in accordance with itsterms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, liquidation, moratorium orother similar laws of general application and equitable principles relating to or affecting creditors' rights; and6.7As of the date hereof, it has no defenses against the obligations to pay any amounts under theObligations. Borrower and each Guarantor acknowledge that Lenders and Administrative Agent have acted in good faith andhave conducted in a commercially reasonable manner each of their relationships with Borrower and each Guarantor inconnection with this Amendment and in connection with the Loan Documents.Borrower and each Guarantor understands and acknowledges that Lenders and Administrative Agent are entering into this Amendment in reliance upon, andin partial consideration for, the above representations and warranties, and agrees that such reliance is reasonable and appropriate.5 7. Effectiveness. This Amendment shall be deemed effective upon the satisfaction of the following conditions precedent, such date being the"Increase Effective Date":7.1Amendment to Credit Agreement. Each Loan Party and Administrative Agent shall have dulyexecuted and delivered this Amendment to Administrative Agent.7.2Expenses. Borrower shall have paid all expenses (including all reasonable attorneys' fees andreasonable expenses), as described in Section 10.5 of the Credit Agreement, incurred and invoiced through the date of thisAmendment.7.3Board Authorization. Borrower and each Guarantor shall have delivered evidence satisfactory tothe Administrative Agent that Borrower's and each Guarantor's respective Boards of Directors have authorized incurrence ofadditional debt in connection with the increase in the Total Revolving Commitment.7.4Joinder of ForwardThink. Borrower shall take or shall cause ForwardThink Group Inc. to take allactions necessary to fulfill the requirements for new Subsidiaries pursuant to 6.11(c) of the Credit Agreement and as otherwiserequired for new Subsidiaries under the Loan Documents.8. Funding of Increase. Notwithstanding anything to the contrary contained in Section 2.2 of the Credit Agreement, the initial advance of allor any portion of the Increase, whether an ABR Loan or a Eurodollar Loan, shall be made five (5) Business Days following Administrative Agent's receipt ofan irrevocable Notice of Funding. Such initial advance is an extension of credit subject to Section 5.2 of the Credit Agreement. 9. Integration. This Amendment and any documents executed in connection herewith or pursuant hereto contain the entire agreementbetween the parties with respect to the subject matter hereof and supersede all prior agreements, understandings, offers and negotiations, oral or written, withrespect thereto and no extrinsic evidence whatsoever may be introduced in any judicial or arbitration proceeding, if any, involving this Amendment; exceptthat any financing statements or other agreements or instruments filed by Administrative Agent with respect to each Loan Party shall remain in full force andeffect. 10. Counterparts. This Amendment may be signed in any number of counterparts, and by different parties hereto in separate counterparts,with the same effect as if the signatures to each such counterpart were upon a single instrument. All counterparts shall be deemed an original of thisAmendment. 11. Governing Law; Venue. THIS AMENDMENT SHALL BE GOVERNED BY AND SHALL BE CONSTRUED AND ENFORCED INACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. Each party hereto hereby irrevocably and unconditionally submits to the exclusivejurisdiction of the State and Federal courts in the Northern District of the State of California. [Signature page follows.]6 IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 2 and Consent to Second Amended and Restated Credit Agreementto be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written.BORROWER:PERFICIENT, INC.By: /s/ Paul E. Martin Name: Paul E. Martin Title: CFO IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 2 and Consent to Second Amended and Restated Credit Agreementto be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written.GUARANTOR:BOLDTECH INTERNATIONAL, LLC By: Perficient, Inc.Its: Sole MemberBy: /s/ Paul E. Martin Name: Paul E. Martin Title: CFO IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 2 and Consent to Second Amended and Restated Credit Agreementto be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written.GUARANTOR:FORWARDTHINK GROUP INC. By: /s/ Paul E. Martin Name: Paul E. Martin Title: CFO IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 2 and Consent to Second Amended and Restated Credit Agreementto be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written.ADMINISTRATIVE AGENT:SILICON VALLEY BANKBy: /s/ Matt Kelty Name: Matt Kelty Title: VP IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 2 and Consent to Second Amended and Restated Credit Agreementto be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written.LENDER:SILICON VALLEY BANKas Issuing Lender and as a LenderBy: /s/ Matt Kelty Name: Matt Kelty Title: VP IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 2 and Consent to Second Amended and Restated Credit Agreementto be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written.LENDER:BANK OF AMERICA, N.A.,as a LenderBy: /s/ Andrew L. Massaro Name: Andrew L. Massaro Title: Assistant Vice President IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 2 and Consent to Second Amended and Restated Credit Agreementto be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written.LENDER:U.S. BANK, N.A.,as a LenderBy: /s/ Justin Hastings Name: Justin Hastings Title: Vice President IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 2 and Consent to Second Amended and Restated Credit Agreementto be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written.LENDER:WELLS FARGO BANK, NATIONAL ASSOCIATION,as a LenderBy: /s/ Joshua Isaker Name: Joshua D. Isaker Title: Portfolio Manager Address for Notices: Wells Fargo, N.A. Wholesale Loan Servicing East 7711 Plantation Road Roanoke, VA 24019 SCHEDULE 1.1ACOMMITMENTSAND AGGREGATE EXPOSURE PERCENTAGESREVOLVING COMMITMENTSLender RevolvingCommitment RevolvingPercentageSilicon Valley Bank $42,000,000 33.6%Bank of America, N.A. $31,500,000 25.2%U.S. Bank, N.A. $31,500,000 25.2%Wells Fargo $20,000,000 16.0%L/C COMMITMENTLender L/C Commitment L/C PercentageSilicon Valley Bank $10,000,000 100%SWINGLINE COMMITMENTLender SwinglineCommitment SwinglinePercentageSilicon Valley Bank $10,000,000 100% EXHIBIT 21.1 SubsidiariesSubsidiariesJurisdictionPerficient, Inc.DelawarePerficient Canada Corp.Province of Ontario, CanadaBoldTech International LLCColoradoPerficient China, Ltd.People’s Republic of ChinaPerficient India Private LimitedIndiaForwardThink Group Inc.DelawareBioPharm Systems, Inc.DelawarePerficient UK Ltd.United Kingdom EXHIBIT 23.1Consent of Independent Registered Public Accounting FirmThe Board of DirectorsPerficient, Inc.:We consent to the incorporation by reference in the registration statements (No. 333-198589, No. 333-118839, No. 333-130624, No. 333-147730, No. 333-157799, No. 333-160465, and No. 333-183422) on Form S-8 of Perficient, Inc. (the "Company") of our report dated March 5, 2015, with respect to theconsolidated balance sheets of the Company as of December 31, 2014 and 2013, and the related consolidated statements of operations, comprehensiveincome, changes in stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 2014, and the effectiveness ofinternal control over financial reporting as of December 31, 2014, which report appears in the December 31, 2014 annual report on Form 10-K of theCompany.Our report dated March 5, 2015, on the effectiveness of internal control over financial reporting as of December 31, 2014, contains an explanatory paragraphthat states the Company acquired ForwardThink Group Inc. ("ForwardThink") in February 2014, BioPharm Systems, Inc. ("BioPharm") in April 2014, andTrifecta Technologies, Inc. and Trifecta Technologies Canada, Limited (together, "Trifecta") in May 2014, and management excluded from its assessment ofthe effectiveness of the Company's internal control over financial reporting as of December 31, 2014, ForwardThink's, BioPharm's, and Trifecta's internalcontrol over financial reporting associated with 18% and 11% of the Company's total assets and total revenues, respectively, included in the consolidatedfinancial statements of the Company as of and for the year ended December 31, 2014. Our audit of internal control over financial reporting of the Company asof December 31, 2014 also excluded an evaluation of the internal control over financial reporting of ForwardThink, BioPharm, and Trifecta. /s/ KPMG LLPSt. Louis, MissouriMarch 5, 2015 EXHIBIT 31.1CERTIFICATIONSI, Jeffrey S. Davis, certify that:1. I have reviewed this annual report on Form 10-K of Perficient, Inc.;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 thestatements 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 thefinancial 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 inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for theregistrant and have:(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure 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 report is being prepared;(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposesin accordance with generally accepted accounting principles;(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recentfiscal 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, theregistrant's internal control over financial reporting; and5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, tothe registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant's ability to record, process, summarize and report financial information; and(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controlover financial reporting. Date: March 5, 2015 /s/ Jeffrey S. Davis Jeffrey S. Davis Chief Executive Officer EXHIBIT 31.2CERTIFICATIONSI, Paul E. Martin, certify that:1. I have reviewed this annual report on Form 10-K of Perficient, Inc.;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 thestatements 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 thefinancial 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 inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for theregistrant and have:(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure 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 report is being prepared;(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposesin accordance with generally accepted accounting principles;(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recentfiscal 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, theregistrant's internal control over financial reporting; and5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, tothe registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant's ability to record, process, summarize and report financial information; and(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controlover financial reporting. Date: March 5, 2015 /s/ Paul E. Martin Paul E. Martin Chief Financial Officer EXHIBIT 32.1CERTIFICATION OFCHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICERPursuant 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, 2014 thatcontains financial statements of Perficient, Inc. (the "Company") filed for such period and that is being filed concurrently with the Securities and ExchangeCommission on the date hereof (the "Report"), each of the undersigned officers of the Company hereby certify that:1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: March 5, 2015By: /s/ Jeffrey S. Davis Jeffrey S. Davis Chief Executive Officer (Principal Executive Officer)Date: March 5, 2015By: /s/ Paul E. Martin Paul E. Martin Chief Financial Officer (Principal Financial Officer)
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