Q2 2021 Perficient Inc Earnings Call

[music] line.

Thank you for standing by.

Welcome to the second quarter 2020.

Only 1 proficient earnings conference call at this time, all participants are in a listen only mode.

After the speaker presentation, there will be a question and answer session.

Ask a question during the session you will need to press star 1 on your telephone.

If you require any further assistance please press star zero.

It is now my pleasure to introduce <unk>, Chairman and CEO, Jeff Davis.

Thank you and good morning, everyone with me on the phone today are Paul Martin, our CFO and Tom Hogan, our President and C. O L. I want to thank you for your time. This morning, we have a great call ahead as usual well have about 10 to 15.

Minutes of prepared comments after which we'll open up the call for questions. Before we proceed Paul would you. Please read the safe Harbor statement.

Thanks, Jeff and good morning, everyone. Some of the things we will discuss on today's call concerning future company performance will be forward looking statements within the meaning of the securities laws.

<unk> results may materially differ from those discussed on these forward looking statements and we encourage you to refer to the additional information contained in our SEC filings concerning factors that could cause those results to be different than contemplated in todays discussion.

At times during this call, we will refer to adjusted EPS and adjusted EBITDA Our earnings release.

<unk>, including a reconciliation of certain non-GAAP financial measures to the most directly comparable financial measures prepared in accordance with generally accepted accounting principles or GAAP is posted on our website at www dot proficient dot com. We've also posted a slide deck, which includes a reconciliation of certain non-GAAP guidance to the most directly.

Actual financial measures prepared in accordance with GAAP on our website under Investor Relations Jeff.

Thanks, Paul and once again good morning, everyone. Thanks for your time. This morning, we're excited to be with you. This morning to discuss our second quarter results and provide an updated outlook for the remainder of 2021 that reflects our accelerating momentum.

And ongoing optimism during the quarter, we built on our Q1 success and continue to gain new customers expand existing relationships and take share as we head into the second half of the year. The business has never been stronger on the heels of 42% organic growth in the first quarter, our offshore revenue grew organically.

<unk>, 75% during the second quarter with total offshore revenue growth of 124% during the quarter.

Our aggressive global expansion is paying dividends not only does it continue to enhance our ability to win larger deals, but it's enabling us to scale more rapidly with existing clients and expand margins along the way.

And existing customers continued to embrace our differentiated delivery model, which I think is really key within the industry couples are strong and high touch domestic presence with the near shore and global delivery capabilities enterprises require today.

During the quarter, we recognized the 1 year anniversary of our expansion into Colombia South America.

Our acquisition of the team now known as proficient Latin America has become a meaningful catalyst of growth and in fact, we've added nearly 100 billable resources in Colombia since acquisition and expect this group like our entire global delivery footprint to continue to expand even faster on a relative basis than our domestic delivery talent, which were also.

Newly more rapidly than ever before as a matter of fact on the first quarter of 2021 or first half of 2021, North American billable head count grew nearly 10% and.

And as the second quarter came to a close we set a record hiring more talent in June and proficient ever has on a single month before resulting in over 16% year.

Over year growth for the quarter.

Tom will share the full details regarding large wins during the quarter shortly but bookings obviously remains strong.

Like Q1, we closed several 7 figure deals across industries as well as an 8 figure deal on the financial services industry, which is a vertical where we're seeing strong investment interest and intent in 'twenty.

Scaling.

The pipeline as I mentioned earlier remains robust and importantly, it's comprised not only of opportunities to expand within existing accounts, but we're also in meaningful discussions with new net new logos around large and long term 7 and 8 figure work streams. In fact net new client acquisition in 2021 is another success.

It's worth highlighting among the dozens of net new clients. We've added this year. There are 9 we consider very substantial large enterprises.

Enterprise accounts, where we believe the potential exists for us to build long term relationships with many millions of dollars a piece.

Per year.

Our strong.

'twenty on our relationships in key partnerships remain a significant differentiator.

In recent weeks proficient was named the 2021 America's recipient of site course partner award for excellence and solution delivery as well as an optimized leap premier platinum partner 1 of just 3 partners in North America way up in North America with this distinction by.

The way and a global finalists for the Microsoft Health care partner of the year Award and.

Paul will speak to the financial resort results. Shortly we were again pleased with the key performance metrics, including utilization, which was up 2 basis points domestically.

And 8 points in our global development centers I should say 2 points domestically.

Strong shape points and our global development centers.

Our global teams are fully integrated and collaborating constantly on our leaders are proactively managing our quickly growing talent pool across the spectrum of accounts on opportunities.

With that I'll turn the call over to Paul who will share the financial results for the second quarter and first half Paul.

Thanks, Jeff Let me start with the second quarter result services revenues, excluding Reimbursable expenses were $181.2 million for the second quarter, a 25, 6% increase over the comparable prior year period.

Gross margins for the quarter ended June 32021 increased 80 basis points to 38.5.

And then compared to the prior year period, SG&A expense was $37.4 million compared to $33.9 million on the comparable prior year period SG&A expense as a percentage of revenue decreased to 23% from 23, 1% in the second quarter of 2020.

Adjusted EBITDA for the second.

$5.2021 was $39 million or 21, 2% of revenue as compared to $26.4 million or 18% of revenues in the second quarter of 2020.

The second quarter of 2021 included amortization expense of $6.3 million compared to $4.4 million on the prior year period. The increase was primarily associated.

Quarter yourself acquisition.

Net interest expense for the second quarter of 2021 increased to $3.4 million from $2.1 million in the comparable prior year period, primarily as a result from the August 2020 convertible debt offering.

Our effective tax rate for the second quarter of 2021 was 27% compared to 31, 8%.

In the second quarter of 2020.

The decrease in the effective tax rate was primarily due to lower non deductible acquisition costs.

Partially offset by lower tax benefits recognized related to research and development as compared to the 3 months ended June 32020.

Net income increased to 151% to $16.6.

For the second quarter from 2021 from $6.6 million in the second quarter of.

2020, primarily as a result from higher gross margins lower SG&A as a percentage of revenue lower acquisition costs and lower adjustments to fair value of contingent consideration diluted GAAP earnings per share increased to 49 cents a share for the same.

Second quarter of 2021 from 20 cents a share in the second quarter of 2020 adjusted earnings per share increased to 84 cents a share for the second quarter of 2021 from 57 cents a share from the second quarter of 2020. Please see the press release from a full reconciliation to GAAP earnings.

Now turn to the year to date results through.

June.

Services revenue, excluding Reimbursable expenses were $347.7 million for the 6 months ended June 32021, or 21, 9% increase over the comparable prior year period gross margin percentage for the 6 months ended June 32021 increased to 120 basis points to 38% compared to the prior.

Year period.

SG&A expense was $71.4 million compared to $67.1 million on the comparable prior year period as G&A expense as a percentage of revenue decreased to 22% from 23% in the 6 months ended June 32020.

Adjusted EBITDA for the 6 months ended June 32020.

'twenty, 1 was $73.6 million or 28% of revenues compared to $50.1 million or 17, 2% of revenues in the comparable prior year period the.

The 6 months ended June 32021 included amortization expense of $13.4 million compared to $8.3 million on the comparable prior year period.

Net interest income.

For the 6 months ended June 32021 on the increase of $6.7 million from $4 million in the comparable prior year period, primarily as a result of the August 2020 convertible debt offering.

The tax rate for the 6 months ended June 32021 was 23, 6% compared to 22, 8% on the comparable prior year period the increasingly.

Effective tax rate was primarily due to the relative decrease in tax benefits recognized related to share based compensation deductions, partially offset by lower non deductible acquisition costs compared to the prior year period.

Net income for the 6 months ended June 32020 was $30.2 million compared to $15.6 million in the comparable prior.

Recently.

Diluted GAAP earnings per share was <unk> 90 cents a share for the 6 months ended June 32021, compared to <unk> 48.

In the prior year period adjusted earnings per share increased to $1.58 for the 6 months ended June 32021 from $1.7 in the comparable prior year period.

Our ending billable head count on June 30.

2021 was 4443, including 40.108 billable consultants and 335 subcontractors. In addition, we had ending SG&A head count of 680, our outstanding debt net of unamortized debt discount and deferred issuance costs as of June 32020.

2020.

Year period was $188.7 million, we also had $86.7 million into cash and cash equivalents as of June 32021, and $199.8 million of unused borrowing capacity on our credit facility again, our balance sheet continues to leave us well positioned to execute against our strategic plan.

1 outstanding on accounts receivable decreased to 69 days at the end of the second quarter compared to 71 days at the end of the second quarter of 2020, I'll now turn the call over to Tom Hogan for a little more commentary Tom. Thanks.

Thank you Paul and good morning, everybody as Jeff mentioned bookings remained strong in the second quarter, we booked 89 deals greater than 500.

Sales during the.

The second quarter of 2021, which compares to 66 in the year ago period, and you may recall on the first quarter, we booked 92 deals greater than $500000 compared to 71 in the first quarter of 2020, So combined 181 deals greater than $500000 during the first.

Half of the year compared to 137 in the prior year period, I expect we'll see similar gains by the way throughout the remainder of the year.

Nearly 45% of our billable employees are now offshore and that global talented embedded into virtually every single large scale, we win and deliver 1 example of this.

Recent multimillion dollar win an account expansion at a state licensed private health insurance company. They wanted to consolidate the ongoing development of the membership experience platform under a single vendor and selected proficient as their primary partner.

Our global team of experts, who will be responsible for additional experienced development.

Including new development enhancements and testing for the providers member portal deployment.

Jeff also mentioned strength in our financial services vertical.

We also recently expanded our relationship with a global Fintech leader and a strategic partnership with a leading wealth management company to create a next generation wealth management industry platform.

Our team has been instrumental to developing delivering supporting and managing the program, which has resulted in improved financial advisor productivity, a richer client experience and completely digitizing their enterprise wide operations.

That success has now led to our involvement with data management data integration and increased offshore support.

Finally, I want to take a minute to congratulate the 'twenty 2 women, who recently graduated from our inaugural Bright pass program, which is designed to advance stem education and opportunities for underrepresented constituencies communities. We were floored with the level of progress. These students made in a fully funded 14 week program and.

And we're even more excited that the majority of them subsequently accepted offers to join our team full time.

This pilot program was so successful we're planning on announcing 2 more by the end of the year.

So again, a great first half and we're focused on even more of the same in <unk> and with that I'll turn things back over to Jeff to discuss third quarter and remainder of the year.

Thanks, Tom proficient expects its third quarter 2021 revenue to be in the range of $186 million to $191 million.

Third quarter GAAP earnings per share is expected to be in the range of 49 to 52.

Third quarter adjusted earnings per share is expected to be in the range of 83 to 86 and proficient.

Now expects its full year 2021 revenue to be in the range of $723 million to $738 million.

2021 GAAP earnings per share to be in the range of $1.93 to 2.5.

And 2021 adjusted earnings per share to be in the range of $3.20 to $3.30.

<unk> net operator, we can open up the call for questions.

Thank you.

As a reminder to ask a question you will need to press star 1 on your telephone.

So withdraw your question press the pound key.

Our first question comes from the line of Maggie Nolan with William Blair.

So well thank you.

Tom or Jeff I'm I'm wondering if you can provide a little bit more detail on the growth of the offshore revenue.

Is there any pattern there in terms of you know what what type of clients or tenure and then what type of a project work that might be driving the growth here.

Yeah.

Start and let Tom add any color he may want to but.

It's really a combination of a number of sources.

Not the least of which is existing accounts, where we're expanding and taking share more into the offshore and near shore space. So.

So we gain the scale and critical mass now, where we're able to readily scale as.

You can see.

And take on more of that work at existing accounts that said.

There are many many new accounts.

Most of which actually are opening up with.

With some element of offshore and near shore is a component of even those initial engagements. So I think its driven from both sources.

I think that continues it's a strategic focus of ours.

We're really leading with it now.

From a marketing and sales standpoint, so I think we'll continue to see that debt.

That outpacing North America, Tom anything to add.

No I concur.

Nothing debt.

Okay. Thanks, and then on the on the talent side of things you know, you're obviously, adding a lot of talent or there are there any difficult geographies and where you're running into trouble attracting.

Attracting talent or any areas, where you're seeing spiked attrition.

And then your kind of updated thoughts on on you know how willing you are to use subcontractors. Thanks.

Yeah.

Once again I'll I'll kick it off here and again, Tom if you want to anything you may or may not be aware that our talent acquisition, along with HR actually reports to Tom now and has for some time.

Obviously channel and acquisitions, a key focus of ours, we've invested a lot in the talent acquisition team proper, including leadership and and certainly at the recruiter level as well nothing.

Nothing stands out specific to your question there's no.

I say this all the time because it's true.

Even when times are not as good as they are now it's always tough to find good talent.

So so sure in some of the really hot areas that we focus on in.

In the digital space, it's a little harder to find folks and we invest a lot organically.

In training and and sort of growing our own we're doing a fair amount of campus recruiting.

<unk> as well to supplement that attrition.

Attrition has picked up some as you might imagine I think we had a sort of pent up demand. If you will and enjoyed some very low attrition.

During the Covid time frame or the peak of Covid I should say.

But that's a I think a temporary thing and really it's on.

Only returned to kind of normal industry levels.

Around 20% high teens, so I don't think any industry.

I mean, any sorry, geography stands out, particularly.

As you can tell by the results, we're having great success recruiting in India, and Latin America as well as.

North America.

I think we're very optimistic that we'll be able to meet the demand that we're seeing I probably didn't leave you much time, but if you went on anything go read it.

No I think that's right and I guess you also asked about our subcontractors and we continue to utilize subcontractors, where it makes sense for certain skills.

Gills, but we're competing quite nicely for talent attrition has as Jeff mentioned it takes up a little bit we can continue to be a destination that people want to join our projects ever exciting our team has greater values create.

And people are really wanting to join an organization with the value preposition on we have so.

Feeling good about that right now.

Yeah.

Thank you and nice quarter.

Thank you.

Your next question comes from the line of My Inc. Panton with Needham <unk> company.

Thank you good morning.

Let me also echo my congratulations Jeff on the team.

Strong quarter I wanted to.

Start Jeff with your thought around the book to Bill I don't know if you are giving specific metrics around bookings, but if you could provide any sort of qualitative color if not quantitative around how that's been trending maybe more by vertical. If you are seeing strength across the board or are you seeing any sort of pockets of weakness that might end up picking.

Black and then that could be on potential upside catalyst as you move through the back half of 2021 into 2022.

Yeah, I think it's a it's really kind of a tide lifting all boats and I'll tell you Mike I think a lot of it has to do.

There's a little bit of a kind of pent up demand if you will from.

Again from the.

Up this week of Covid, although I think it's far less that.

Then it is the sort of culmination of our ore coming into.

Into fruition all the investments that you've heard me talk about for some time now around our sales team.

As well as our marketing lead generation all of those things are mature.

The pretty nicely.

Over the last couple of years and I think we were beginning to see some of that in 19th Covid was a little bit of a setback, but I think it's driving a lot of it now in terms of industry I mentioned during the prepared statements debt financial services is a is really picking up nicely for us we've got.

On a very strong management consulting capability within that space.

And I've always felt like we'd been underrepresented on the technology side and and that's changing.

We mentioned on any figure deal. There are we're seeing a lot of nice pick up there I would say I feel pretty pretty good about our representation across industries and.

And don't really feel like there's any of that debt.

Necessarily represent any any big opportunity or any big catalysts down the road outside of financial services.

In terms of bookings yeah, we don't provide specifics, but I can certainly provide some color.

We are in Alaska.

About trailing 5 months is about the thing the thing that we focused on focus on most and you know I can.

Can tell you that the bookings certainly reflect.

What we're seeing in the in the revenue.

And there's more to come we've had very very strong bookings this quarter.

And particularly if you look at that trailing 5.

The metric looks very very strong I will tell you our backlog.

As we sit here today and even looking forward into 2022 on particularly into the first quarter because a lot of the bookings that we're realizing now will be again, the highest correlation to revenue will be in the beginning of next year is a very very.

My backlog is the largest that's ever been of course in absolute dollars no surprise there, but it's also the largest ER as a percentage of our look forward forecast so.

We're very excited we're very confident in the sustainability of what we're seeing right now based on the bookings, we're enjoying right now and the pipeline behind that.

Strong as continues to rebuild so we've got a very very a great amount of confidence around again to go forward on the bookings are certainly supporting that.

That's very helpful color, Jeff and then on really.

A quick 1 around margins given some of the headwinds around wage inflation given the strength of demand.

You mentioned, the attrition rates et cetera is pricing starting to uptick given the demand backdrop to help maybe offset some of those headwinds along with the offshore mix should drive.

The margin expansion that you've typically targeted or are you seeing any sort of changes on that front as you move forward.

Our margin expansion.

And I mentioned this at the beginning of the year. So at the beginning of the year I said, we're expecting maybe 50 to 100 bps in gross margin, but 150 to 200 and our EBITDA.

The big difference, there being scale and and I think.

We're going to continue to see that we're running about 40% adjusted gross margin right now.

And.

And we like that I think that's a healthy number for us.

So we're not we're not pressing too to drive rates up too much. We're much more focused on that top line growth that said, we do intend to maintain and possibly expand modestly that debt, 40%, but again I think we will end up right in that sort of 50 to 100.

For the year net.

Next year I would expect something similar again, it's too early to really say, but yeah I do think youre right I think even in order to maintain the 40 you know the industry in general is tightening and we'll see some price upticks and we certainly are.

Right now at the same time.

We are winning these really large deals.

That that do require or I should say are more competitive and require a little more aggressive pricing.

At the same time, you have less turnover on those deals right. So even though the rates may not be as high the margins still good because you've got higher utilization.

And you have less and less churn of the folks you know hitting dimension between projects.

You know again I feel very good about keeping that 40.40 plus intact.

And likewise I think we'll continue to see solid expansion of the EBITDA line.

Great. Thank you so much for taking my questions.

Thanks, Mike.

Thank you.

Next question comes from the line of Suraj.

Surrendered day with Jefferies.

1 of the things that I kind of wanted to get a little bit more color on is just understanding the.

The visibility that you have in the quarter and how that progresses. So can you walk me through.

So we last provided guidance.

And then kind of where we ended up in terms of coming in above the top end of that guidance.

Is that is that a case of where just there's so much client demand and.

The reservation or the confirmation or conservatism comes from being able to find enough people to.

To fill that demand or how should we think about.

How demand is evolving and how that could potentially volume on a go forward basis.

Yes, I think.

As you noted, it's a pretty dynamic.

Work asked.

Driven largely by a dynamic market.

Of course.

And I think we always try to build in some level of conservatism.

You know assuming that maybe not all of these deals are going to close or or or.

That.

That we're not gonna be hitting necessarily on all cylinders.

I think things came together even.

Even better obviously than we expected and and we've tried to get a little more I'd.

I'd say, a little less aggressive or a little less conservative going forward a little more aggressive.

What we put out there for this quarter and the rest of the year.

But at the same time, we feel very very comfortable on it in terms of visibility what you view.

With.

You know that tends to vary as well, but as I said earlier, we've got a bigger backlog, both absolutely and as a percentage of our overall look forward than we've had before so that's given us the confidence to sort of raise guidance, obviously and feel very good about very confident.

And what we've put out there so.

You opened we do try to be conservative we were probably overly conservative in heights with the benefit of hindsight.

In the second quarter, that's a good good thing I think.

And again, we've tried to get a little more.

Aggressive or the less conservative going forward, because things are going that well the pipeline is that strong.

From bookings continue to perform.

At a level above our historical and at the same time I think that's a sustainable.

That's helpful and then maybe as a follow on it sounds like perhaps the win rates, we're maybe a little bit better than they have been historically is that the right.

Right way to think about.

Some of the commentary you just made about things coming out really good returns on some of the deal wins and stuff or how should we think about things competitively at this point versus maybe where things were historically.

I think our our win rates are in line with.

Historical.

I expect that that will continue I expect that they may even ticked down and what I mean by debt as I alluded to it earlier, but we've added a ton of capacity in sales and keep in mind that we added we've been adding every year really every every quarter every month and.

And a lot of those folks that we've added are coming into their own I mean, they're they're mature it right. So if you go back you know.

People that we hired 2 years ago are really beginning to hit their stride and so I think that's a part of what we're seeing right now and I mentioned. This earlier is that we've got a lot more effective recruiting on boarding.

And supporting.

Our sales team and their success and Oh, that's another factor in all of this debt is relatively new again, we I think we would've seen it last year, if not for Covid, we saw a little bit of it in 19, but I think that's another major factor going forward. So in fact, our win rates are great. We are still a better than 50.

So against the competition and even playing field.

Actually closer to 60 around 60.

But again I wouldn't be shocked if that actually came down a little as we're getting more at bats.

Got it.

Then related to just kind of the demand environment can you talk a little.

About utilization 1 of the things that I was looking at was the head count growth.

Obviously, you're adding at a very fast pace at this point.

How sustainable is some of that as you kind of look further on obviously, you're trying to balance or you know.

Yes.

Use a crystal ball to figure out demand longer term.

At the same time is there any.

Are you also addressing perhaps elevated utilization levels at this point or how should we think about that dynamic.

We actually really feel good about utilization we've talked about.

Of the 80.81.

So.

Sustainable.

Goal across the year right.

And thats seasonal to some degree so first quarter fourth quarter are going to be a.

A little bit lower end of that or maybe even in the high seventy's. Although I think this year it'll be in the low eighties.

And then it does pick up tends to pick up in Q2 and 3 so we're running.

80.

And a half I think or something like that in the first quarter.

In North America, and similarly offshore interesting Lee most of our competitors run higher utilization offshore than we do simply because.

Because we're recruiting as much as we are and and hiring ahead. So that we're prepared for that debt have that.

Net capacity to be prepared for that additional demand.

I think we're comfortable very comfortable with where utilization is right now.

As I mentioned before the recruiting arm as a talent acquisition arm is working extremely well both in North America and elsewhere, we're having great success, Tom mentioned it.

People are excited about the proficient story so we're taking.

Taking employees away from competitors and and at the same time as Tom mentioned with bright pads.

Mentioned with college recruiting we're also bringing in.

New sources right, new sources of supply and doing training on our own and we're really ramping up the capacity.

And scale scalability of that as well so.

Excuse me I think things have gone really well.

That will continue going forward and I think honestly, we just continue.

To tune that.

And get better and better at it and then like I said I think the air as Tom mentioned earlier, I think that proficient story from a recruiting standpoint.

Standpoint is super strong.

And that's very helpful. Thank you Jeff.

Great site on the corner.

Thank you.

Thank you.

Our next question comes from the line of Brian Kingston, Linger with Alliance Global partners.

Hi, guys. Thanks for taking my questions.

And as you continue to shift your mix and delivery.

I guess I'm curious on.

And you mentioned, you're going to get much higher than 40% margins, maybe a short term I don't know if it's long term.

I'm curious what the long term adjusted operating margin EBITDA margin, However, youre looking at it.

Is where do you think long term offshore on site delivery and which can mature team radio company.

Yes, it's a great question.

I.

I mentioned during the prepared statements that onshore is growing extremely well and I think this is really important for.

People to understand something thats extremely unique about us.

Compared to our competition onshore offshore and near shore is that we have the combination of all 3 we've got a phenomenal onshore capability. That's high touch strategic helps clients drive their business goals and understand that and how to support those.

Systems and technology.

And then we've got this great delivery development capability of Super Bright intelligent, great folks offshore and near shore. So.

If you know if I had to guess I would like to see us getting to about a 50.50 mix.

In terms of revenue but.

Uh huh.

On a on a on a positive note.

Onshore keeps growing too so I think it's the combination is that model that continues to grow together now of course offshore and near shore outpacing. So so I do think that debt.

It'll be a while maybe before we got to kind of the.

<unk> 3 <unk> mix.

But it's a really powerful combination and it's really resonating very well I was just with 1 of our largest clients. The other day and they commented debt.

And this is them comparing us to accenture and larger competitors that.

No 1 else has presented us with.

The sort of global capability of offshore or nearshore or onshore and the strength that they've witnessed in each of those in terms of our delivery capability on the skill set. So I think that's a very differentiated model and it's something that's that's working extremely well if you look at us compared to offshore or nearshore.

<unk> 50 theaters I won't name, we all know who they are you know, we're growing 75% and they're doing great they're growing at 25.

But if you look at the like for like right that 35 to 40 dollar an hour range.

Of services, we're growing 3 times as fast as they are so and I think that's because of that combination.

So does that suggest that you can sustain.

Roughly 100 basis points, plus or minus on any given year.

Margin expansion as long as you grow double digits.

Yeah, and so yeah, I'm sorry back to your your EBITDA question I think so I do think we continue to.

To expand EBIT down now keep in mind that we will want to and we already are but we're going to want to continue to reinvest in the business, but I do think our adjusted EBITDA continues to expand I think we'll end the year around 20%, maybe above 20% literally in the year above 20%, but have for the total year over 20 years.

So apply so I think that's implied in our guidance.

And I think we can add to that next year, I think 100 bps as of as a real reasonable expectation for next year.

And again, what's the power of the you know the economies of that scale as we continue to grow the business at the pace we are.

I think absolutely can deliver that kind.

Expansion.

My other question is.

It's been quite some time like for fishing standards since you've completed on the acquisition debt.

Is that because there's so much organic opportunity our valuation is too high right now or maybe some other reasons. So if you can just.

Sure Les.

Walk us through what you're thinking today about M&A.

Yeah, absolutely no we've been very active on the M&A front I think it's a combination of all those things that you mentioned I'm not not accept except the organic like I said, where we're still as active in them and aggressive on M&A as we've always been valuations.

In some cases have gotten a little nutty and I think if you know you followed proficient for very long you know that we've got a very disciplined program.

We're happy to.

To wait for things to come around if we need to if we feel like a deal is that overvalued.

However, that's not necessarily.

So really the issue I think a lot of these are entrepreneurs are looking around at a very healthy environment.

And you know are our feeling like they're going to hold on to their businesses. So we're seeing a combination of all those things.

Frankly, I think the cap gains rate uncertainty is a factor as well.

And the threat of that being retroactive I think has impacted at some all of that said we are actually in advanced stages right now with the acquisition so.

So I do think we'll get another deal or 2 perhaps even 3 on before the end of the year. It's just been a matter of again.

Things aligning.

2 are our standard to be honest.

Great. Thanks, so much.

Thanks, Brian.

Thank you.

Your next question comes from the line of Puneet Jain with J P. Morgan.

Very good quarter guys.

Jeff.

You can find a strong pipeline and bookings in the comments around it.

Then the.

Sequentially flattish to modestly up revenue growth implied in that guidance from Q1 to Q2, <unk> grew 10% on sequential basis and do not expect as much growth from the second.

Half is it just like the normal seasonality.

Or is there some conservatism baked into guidance.

Well.

I think on a year over year basis, the guidance implies basically the same growth for the second half that we enjoyed in Q2, which is actually higher than the first day, which would which would imply.

Better growth in the first half comps.

Comps pick up a little bit and particularly in Q4.

So I think the comps weigh into that and you know.

I think we're trying to be a reasonably conservative as I said before we got a little more aggressive than perhaps we have been in the past.

But I think we're still trying to be conservative and make sure that we.

We did.

Deliver what we say we're going to deliver.

Got you and I'm, sorry, you might have addressed this before.

Are you seeing for big inflation like North of 50, especially on and they are talking about seeing a spike in attrition rates spike in.

We have inflation are you also seeing increased inflation rates I'm on your employee base.

Not really actually.

I think our I think that speaks again to the uniqueness of the opportunity that we have here for firstly I'll say that.

I think we already pay.

A competitive wage I think that's 1 of the reasons that we're able to attract the talent that we attract from some of our competitors and net is that I think we've got a better compensation and benefits package.

Then they do anyway. So so I think we've already got that advantage.

So right now, we're not seeing a sort of runaway.

With inflation, we're anticipating.

Sort of standard Merit increase levels that we've basically applied over the last couple or 3 years maybe.

Maybe a half.

A half point more.

But for the most part and the attrition by the way both in.

Latin America and India.

Ben.

You know quite similar to 2 here and really our experience I think is far better than our competitors and again I think it's all of those things we talked about before I think its culture I think it's.

Already paying a competitive wage to begin with.

And.

Quite honestly I assume they've got some catching up to do.

Yes.

Thank you.

Okay.

Thank you and.

And our next question comes from the line of Vincent Colicchio with Barrington Research.

Yeah, Jeff.

I'm curious.

With the with a nice growth in larger deals.

Are you seeing a flattening of the pyramid benefit margin.

Yes, I think so and now of course, the base of that pyramid is shifting more to to offshore and near shore and I want to be careful about that they have their own career of it as well.

Folks are similarly or equivalent.

Lead a talented skilled experienced.

As onshore, but yes, obviously, there's some scale there.

With these larger deals at the same time those deals do tend to be a little more price competitive. So you know.

I think it's a balance or balances there I do think we made some.

Some some temporary discounts to some of our larger accounts that we're seeing kind of roll off now.

Again, I think it's quite possible, we'll see rates pick up a little bit in the second half, but I'll tell you. Our primary focus right now is preserve margins expand modestly gross margin Europe would.

Or and focus on the topline revenue growth.

And I'm on my my understanding is that it.

The pandemic has been fairly rough in Colombia is that causing any challenges in terms of.

Employees are getting sick and eating too.

Increase.

On a cushion of.

You said lower utilization rates to kind of protect yourself there.

Yeah, it's been a you know our experience has been pretty positive.

You know the demographic rate of our employees is a little different than probably the average.

In both India and Colombia.

And so.

Without getting into anything geopolitical.

Our experience has been pretty good I mean, obviously the whole pandemic is a travesty and a lot of made up on a lot of personal tragedies.

But our folks are younger and they tend to be healthy.

And the biggest disruption sadly tends to be you know.

A family member falling ill or worse.

And then needing to take some time to deal with that but.

In spite of that utilization has a has maintained or even ticked up.

So knock on wood so far.

I would say that our teams have been resilient.

And done an amazing job of dealing with you know a terrible situation and and really the impact to provision has been minimal.

And what was your organic growth in the quarter I missed that.

21, and a half.

Okay.

That's it for me and a nice quarter. Thanks Vince.

Thank you.

Your next question comes from the line of Jack Vander, Our day with Maxim Group.

Great. Thank you good morning, guys. Congrats on another solid quarter and a strong guide.

<unk>.

Couple of questions maybe for Jeff.

Clearly organic growth has been solid.

It really rebounded it sounds like from another analyst question Theres, a lot of activity going on behind the scenes still for acquisitions, that's good to hear.

And I know you guys are in a very thoughtful and finding the right fits that debt. That's all fine I guess I want to revisit your bigger picture kind of multiyear outlook view for organic growth.

I think prior to Covid you guys are targeting like maybe like a general rule of thumb like a 10% or so organic growth I'm kind of like a sustainable target.

On your far outpacing that for this year now on 2021 obviously, but just is there any change in terms of when you look at like the next 3 years 4 years out any reason you'd expect changes.

As to your kind of target organic growth outlook of 10% or whatever it is.

Yeah, I think I think that's right I mean, I think it's a.

Sort of a stair step function right. Once you once you get to a 1 level then you raise the bar and move to the next level. So.

I feel like a 10% probably.

Curfew.

Yeah, we feel really good about you know moving that target up to probably a mid teens or better sustainably.

And again I'll go right back to what I said before about the maturity and the effectiveness of our marketing everything from the wholesale cycle right everything from marketing lead Gen.

And their partnerships.

And probably most importantly.

The capacity and the management team that we've added around sales and we continue to build on so we continue to add capacity ahead of growth.

So that we are fueling that that next level. So.

So yeah, I would say that Oh.

Our plea the 10% is behind us and we're moving on to 15 plus.

Fantastic.

Then question for for Paul.

Hmm.

Maybe more of a clarification or definition kind of question on organic growth.

So when when we're looking at the third quarter revenue guidance.

And I guess the first question is.

Is there an underlying organic revenue growth in your third quarter revenue guidance.

Yes, so the guidance is I think 18% to 21% in Q3.

Because of the timing of acquisitions, essentially everything will be organic effective for.

Again, so yes, because we haven't closed on the acquisition since June of last year.

Okay, great. So that that was done with the question I was kind of walking towards is the denominator in your organic growth Formula now is much more simple when I see your organic and your total revenue growth for the third quarter.

We've passed on 1 year Mark.

<unk> from the last acquisition. So organic is organic is synonymous now with that total revenue growth.

And then of course, if we close another deal that will change a bit but yes for now.

That's where we are.

Great and then just a follow up question on <unk>.

Revenue the revenue beat for the second quarter and.

Now full year revenue guidance raise.

I think the second quarter revenue beat the midpoint of your guidance by about $8 million or so.

And then the full year 'twenty, 1 revenue guidance was with significantly inquiries, but well above that would be which tells me you have a lot of confidence out to your comments about the pipeline.

Line and the backlog is strong and everything seems very very solid here, but just because of the size of the full year raise of revenue is this would you attribute this to split this between.

Organic growth outperformance of offshore and onshore and then I guess, that's really the only way to split it at this point now so is it how much of that raise is offshore.

On the phone and onshore outperformance.

But keep in mind that offshore is still even though it's growing very very quickly.

Only about 15% of revenue so.

I would say that you know let's call it 20%.

And the lion's share of that is still going to be.

Sure sure just by the.

For what is it for Forex.

Rate differential so.

Probably something around 15 in 5 so somewhere in that range. We did I mentioned at least from a head count standpoint, regroup on shore a 16% organic.

In the second quarter. So I think we're seeing that demand and that mix of demand continuing I speak offshore will still be above 50.

Don't know that it'll hit 75.

Good well do that but I would say the breakdowns, probably something something along those lines 15 in.

5.

Okay.

Very helpful. Thank you that's all my questions again solid results guys excellent quarter. Thanks, Jack Thanks, Jeff.

Thank you I'll now turn the call back over to Chairman and CEO, Jeff Davis for any closing remarks.

Well once again, everyone. Thank you for your time today, obviously you can.

And hopefully here our excitement.

And what I think is you know another sort of era for proficient and you can also tell them I think that we're very bullish and confident in fact I'll leave you with this thought our focus and attention is more on 2022 right now than it.

Is the rest of 2021, which given that we're only halfway through the year that's a.

Kind of a unique statement for us and but that'll give you some idea again about our confidence on our outlook. So they can free time today I look forward to talking again in a N a.

Another 90 days take care.

This concludes today's conference call. Thank you for par.

C and you may now disconnect.

[music].

[music].

Thank you for standing by and welcome.

In the second quarter 2021 proficient earnings conference call.

At this time all participants are in a listen only mode.

After the speaker presentation, there will be a question and answer session.

To ask a question during the session you will need to press star 1 on your telephone.

If you require any further assistance please.

Press Star Zero.

It is now my pleasure to introduce <unk>, Chairman and CEO, Jeff Davis.

Thank you and good morning, everyone with me on the phone today are Paul Martin, our CFO and Tom Hogan, our President and C. O L. I want to thank you for your time. This morning, we have a great call ahead.

Can you draw well have about 10 to 15 minutes of prepared comments after which we'll open up the call for questions.

Before we proceed Paul would you please read the safe Harbor statement.

Thanks, Jeff and good morning, everyone. Some of the things we will discuss on today's call concerning future company performance will be forward looking statements within the meanings.

On the securities laws actual results may materially differ from those discussed on these forward looking statements and we encourage you to refer to the additional information contained in our SEC filings concerning factors that could cause those results to be different than contemplated in todays discussion at times. During this call we will refer to adjusted EPS and adjusted.

As you saw our earnings release, including a reconciliation of certain non-GAAP financial measures to the most directly comparable financial measures prepared in accordance with generally accepted accounting principles or GAAP is posted on our website at www dot proficient dot com. We've also posted a slide deck, which includes a reconciliation of certain non.

<unk> EBIT guidance to the most directly comparable financial measures prepared in accordance with GAAP on our website under Investor Relations Jeff.

Thanks, Paul and once again, good morning, everyone and thanks for your time. This morning, we're excited to be with you. This morning to discuss our second quarter results and provide an updated outlook for the remainder of 2021 net.

Non-GAAP, it's our accelerating momentum.

And ongoing optimism during the quarter, we built on our Q1 success and continue to gain new customers expand existing relationships and take share as we head into the second half of the year. The business has never been stronger on the heels of 42% organic growth in the first quarter.

Offshore revenue grew organically 7.5% during the second quarter with total offshore revenue growth of 124% during the quarter.

Our aggressive global expansion is paying dividends not only does it continue to enhance our ability to win larger deals, but it's enabling us to scale more rapidly with existing clients and.

Our margins along the way.

New and existing customers continued to embrace our differentiated delivery model, which I think is really key within the industry, coupled with a strong and high touch domestic presence with the near shore and global delivery capabilities enterprises require today.

During the quarter, we recognized the 1 year anniversary of our expansion.

Expand into Columbia, South America.

Our acquisition of the team now known as proficient Latin America has become a meaningful catalyst of growth. In fact, we've added nearly 100 billable resources in Colombia since acquisition and expect this group like our entire global delivery footprint to continue to expand even faster on a relative basis than.

On the delivery talent, which we're also scaling more rapidly than ever before as a matter of fact on the first quarter of 2020..1 first half of 2021, North American billable head count grew nearly 10%.

And as the second quarter came to a close we set a record hiring more talent in June and proficient ever has on a single month before.

Resulting in over 16% year over year growth for the quarter and Tom will share the full details regarding large wins during the quarter shortly but bookings obviously remains strong.

Like Q1, we closed several 7 figure deals across industries as well as an 8 figure deal on the financial services industry, which is a vertical where we're seeing.

<unk> strong investment interest and intent in 2021.

The pipeline as I mentioned earlier remains robust and importantly, it is comprised not only of opportunities to expand within existing accounts, but we're also in meaningful discussions with new net new logos around large and long term 7 and 8 figure work streams in fact net new client.

Position in 2021 is another success worth highlighting among the dozens of net new clients. We've added this year. There are 9 we consider very substantial large enterprises.

Enterprise accounts, where we believe the potential exists for us to build long term relationships with many millions of dollars a piece.

And every year.

Our strong channel relationships in key partnerships remain a significant differentiator.

In recent weeks proficient was named the 2021 America's recipient of site course partner award for excellence and solution delivery as well as an optimized leap premier platinum partner 1 of just 3 partners in North America.

The North America with this distinction by the way.

And a global finalists for the Microsoft Health care partner of the year Award.

Paul will speak to the financial resort results. Shortly we were again pleased with the key performance metrics, including utilization, which was up 2 basis points domestically.

And 8 points in our global developers.

Centres I should say 2 points domestically and 8 points in our global development centers.

Our global teams are fully integrated and collaborating constantly on our leaders are proactively managing our quickly growing talent pool across the spectrum of accounts on opportunities. So with that I'll turn the call over to Paul who will share the financial results for the second quarter and first.

Hassle.

Thanks, Jeff Let me start with the second quarter results services revenues, excluding Reimbursable expenses were $181.2 million for the second quarter, a 25, 6% increase over the comparable prior year period.

Gross margins for the quarter ended June 32021 increased 80 basis.

Development points to 38, 5% compared to the prior year period, SG&A expense was $37.4 million compared to $33.9 million on the comparable prior year period as G&A expense as a percentage of revenue decreased to 23% from 23, 1% in the second quarter of 2020.

Basis, adjusted EBITDA for the second quarter of 2021 was $39 million or 21, 2% of revenue as compared to $26.4 million or 18% of revenues in the second quarter of 2020. The second quarter of 2021 included amortization expense of $6.3 million compared to $4.4 million on the prior year period.

The increase is primarily associated with the PSL acquisition net interest expense for the second quarter of 2021 increased to $3.4 million from $2.1 million in the comparable prior year period, primarily as a result of the August 2020 convertible debt offering.

Our effective tax rate for the second quarter of 2021 was 27.

So compared to 31, 8% in the second quarter of 2020, the decrease from the effective tax rate was primarily due to lower non deductible acquisition costs.

Partially offset by lower tax benefits recognized related to research and development as compared to the 3 months ended June 32020.

Net income increased to 100.

7.1% to $16.6 million for the second quarter of 2021 from $6.6 million in the second quarter of.

2020, primarily as a result of higher gross margins lower SG&A as a percentage of revenue lower acquisition costs and lower adjustments to fair value of contingent consideration diluted GAAP earnings per.

Third increased to 49 cents a share for the second quarter of 2021 from <unk> 20, a share in the second quarter of 2020 adjusted earnings per share increased to 84 cents a share for the second quarter of 2021 from 57 cents a share from the second quarter of 2020. Please see the press release from a full reconciliation to GAAP earnings I'll now.

Now turn to the year to date results through June.

Services revenue, excluding Reimbursable expenses were $347.7 million for the 6 months ended June 32021, or 21, 9% increase over the comparable prior year period gross margin percentage for the 6 months ended June 32021 increased to 120 basis points.

For 38% compared to the prior year period.

SG&A expense was $71.4 million compared to $67.1 billion on the comparable prior year period as G&A expense as a percentage of revenue decreased to 22% from 23% in the 6 months ended June 32020.

Adjusted EBITDA.

For the 6 months ended June 32021 was $73.6 million or 28% of revenues compared to $50.1 million or 17, 2% of revenues in the comparable prior year period.

The 6 months ended June 32021 included amortization expense on <unk>.

$14.4 million compared to $8.3 million in the comparable prior.

A year period.

Net interest expense for the 6 months ended June 32021 on the increased to $6.7 million from $4 million in the comparable prior year period, primarily as a result of the August 2020 convertible debt offering.

The tax rate for the 6 months ended June 32021 was 23, 6% compared to 22, 8% on.

On a comparable prior year period, the increase from the effective tax rate was primarily due to the relative decrease in tax benefits recognized related to share based compensation deductions, partially offset by lower non deductible acquisition costs compared to the prior year period.

Net income for the 6 months ended June 32020 was $30.2 million compared to $15.

$6 million in the comparable prior year period diluted GAAP earnings per share was <unk> 90 cents a share for the 6 months ended June 32021, compared to <unk> 48 in the prior year period adjusted earnings per share increased to $1.58 for the 6 months ended June 32021 from $1.7 in the comparable prior year period.

Our ending billable headcount at June 32021 was 4443, including 40.108 billable consultants and 335 subcontractors. In addition, we had ending SG&A head count of 680 <unk>.

Our outstanding debt net of unamortized debt discount and deferred issuance costs as of June 30.

<unk> 2020.

2021 was $188.7 million, we also had $86.7 million in cash and cash equivalents as of June 32021, and $199.8 million of unused borrowing capacity on our credit facility again, our balance sheet continues to leave us well positioned to execute against.

Strategic plan.

Day sales outstanding on accounts receivable decreased to 69 days at the end of the second quarter compared to 71 days at the end of the second quarter of 2020, I'll now turn the call over to Tom Hogan for a little more commentary Tom.

Thank you Paul and good morning, everybody as Jeff mentioned bookings remained strong in the second quarter, we booked 80.

89 deals greater than 500000 during the second quarter of 2021, which compares to <unk> 66 in the year ago period, and you may recall on the first quarter, we booked 92 deals greater than $500000 compared to 71 in the first quarter of 2020, So combined 181 deals greater than 500.

Against our dollars during the first half of the year compared to 137 in the prior year period.

You will see similar gains by the way throughout the remainder of the year.

Nearly 45% of our billable employees are now offshore and that global talented embedded into virtually every single large share we win and deliver.

1 example of this is our recent multimillion dollar win an account expansion at a state licensed private health insurance company. They wanted to consolidate the ongoing development of their membership guest experience platform under a single vendor and selected proficient as their primary partner.

Our global team of experts who will be responsible.

We will experience development.

Including new development enhancements and testing for the providers member portal deployment.

Jeff also mentioned strength in our financial services vertical.

We also recently expanded our relationship with a global Fintech leader and our strategic partnership with a leading wealth management company to create a next generation.

For default management industry platform.

Our team has been instrumental to developing delivering supporting and managing the program, which has resulted in improved financial advisor productivity, a richer client experience and completely digitizing their enterprise wide operations.

That success has now led to our involvement with data management data integration.

<unk> increased offshore support.

Finally, I want to take a minute to congratulate the 'twenty 2 women, who recently graduated from our inaugural Bright pass program, which is designed to advanced stem education and opportunities for underrepresented constituencies communities. We were floored with the level of progress. These students made and are fully funded.

At 14 week program and we're even more excited that the majority of them. Subsequently accepted offers to join our team full time.

This pilot program was so successful we're planning on announcing 2 more by the end of the year.

So again, a great first half and we're focused on even more of the same in <unk> and with that I'll turn things back over to Jeff to discuss third quarter.

<unk> the remainder of the year.

Thanks, Tom proficient expects its third quarter 2021 revenue to be in the range of $186 million to $191 million.

Third quarter GAAP earnings per share is expected to be in the range of 49 to 52.

Third quarter adjusted earnings per share is expected to be in the range.

<unk> of <unk> 83 to 86 and proficient now expects its full year 2021 revenue to be in the range of $723 million to $738 million.

2021, GAAP earnings per share to be in the range of $1.93 to 2.5 and.

And 2021 adjusted earnings per share to be in the range of $3.20.

2 to $3.30, so with that operator, we can open up the call for questions.

Thank you.

A minder to ask a question you will need to press star 1 on your telephone.

So withdraw your question press the pound key.

Our first question comes from the line of Maggie Nolan with William.

William Blair.

Thank you.

Tom or Jeff I'm wondering if you can provide a little bit more detail on the growth of the offshore revenue is.

Is there any pattern there in terms of.

What type of clients or tenure and then what type of project work that maybe.

Driving the growth here.

Yeah, I'll start and let Tom add any color he may want to but.

Really a combination of a number of sources.

Not the least of which is existing accounts, where we're expanding and taking share more into the offshore and nearshore space.

So we gain the scale.

Critical mass now, where we're able to readily scale as you can see and and take on more of that work at existing accounts that said there.

There are many many new accounts.

Most of which actually are opening up with.

With some element of offshore and near shore is a component of even those initial.

Scale agents, so I think its driven from both sources.

I think that continues it's a strategic focus of ours.

We're really leading with it now.

From a marketing and sales standpoint, so I think we'll continue to see that debt that.

That outpacing North America, Tom anything to add.

No it.

Confer nothing.

Nothing debt.

Okay. Thanks, and then on the on the talent side of things.

You're obviously, adding a lot of challenge are there are there any.

Difficult geographies, and where are you running into trouble.

Attracting talent.

Engaged or any areas, where you're seeing spike attrition and then your kind of updated thoughts on on.

How willing you are to use subcontractors Inc.

Yeah, I you once again I'll kick it off here and again, Tom if you on or anything that you may or may not be aware that our talent acquisition along with H.

You are actually reports to Tom now and has for some time.

Obviously talent acquisitions, a key focus of ours, we've invested a lot in the talent acquisition team proper.

Including our leadership and and certainly at the recruiter level as well nothing stands out specific to your question there's no.

I say this all the time because it's true.

Even when times are not as good as they are now it's always tough to find good talent.

So so sure in some of the really hot areas that we focus on.

In the digital space, it's a little harder to find folks and we invest a lot organically.

And training and.

And sort of growing our own we're doing a fair amount of campus recruiting.

As well to supplement that.

Attrition has picked up some as you might imagine I think we had a sort of pent up demand. If you will and enjoyed some very low attrition.

During the Covid time frame or the peak of Covid I should say.

But.

But that's I think a temporary thing and really it's only returned to kind of normal industry levels.

Round, 20% high teens, so I don't think any industry I mean, any sorry, geography stands out particularly.

As you can tell by the results, we're having great success.

Got.

In India, and Latin America, as well as North America.

And I think we're very optimistic that we'll be able to to meet the demand that we're seeing I probably didn't leave you much time, but if you went on anything go read it.

No I think that's right and I guess, you also asked about our subcontractors and we continue.

To utilize subcontractors, where it makes sense for certain skills, but we're competing quite nicely for talent attrition has as Jeff mentioned, it takes up a little bit weak.

So continue to be a destination that people want to join our projects have are exciting our team has greater values, great and people are really wanted to join.

Recruiting on organization, but the value proposition that we have so I'm feeling good about that right now.

Okay.

Thank you and nice quarter.

Thank you.

And our next question comes from the line of My Inc. Painted with Needham <unk> company.

Thank you on good morning.

Helane on you also echo my congratulations Jeff on the team strong quarter.

I wanted to start Jeff with your thoughts around the book to Bill I don't know if you are giving specific metrics around bookings, but if you could provide any sort of qualitative color if not quantitative or on hold.

That's been trending maybe more by vertical that you are seeing strength across.

Or have you seen any sort of pockets of weakness that might end up picking up the slack and then that could be on potential upside catalyst as you move through the back half of 2021 into 2022.

Yeah, I think it's a it's really kind of a tide lifting all boats and I'll tell you Mike I think a lot of it has to do you know I think there's a little bit of.

The board of Pent up demand if you will from again.

Again from the peak of Covid, although I think it's far less that.

Then it is the sort of culmination or coming to into.

Into fruition all the investments that you've heard me talk about for some time now on around our sales team.

As well as our Mark.

Kind of a lead generation all of those things are maturing very nicely.

Over the last couple of years and I think we were beginning to see some of that in 19th Covid was a little bit of a setback, but I think that's driving a lot of it now in terms of industry I mentioned during the prepared statements debt financial services is.

<unk> is really picking up nicely for us.

We've got a very strong management consulting capability within that space.

And I've always felt like we've been on underrepresented on the technology side and and.

And that's changing.

We mentioned on any figure deal there were seeing a lot of nice pick up there I would say I feel pretty pretty.

<unk> good about our representation across industries, and and don't really feel like there's any of that debt you know necessarily represent any any big opportunity or any big catalysts down the road outside of financial services.

In terms of bookings yeah, we don't provide specifics, but I can certainly provide some.

Pretty pillar.

We are in the last about trailing 5 months is about the thing the thing that we focused on focus on most and you.

I can tell you that the bookings certainly reflect.

What we're seeing in the in the revenue.

And there's more to come we've had very very strong bookings.

This quarter end.

And particularly if you look at that trailing 5 month metric looks very very strong I will tell you our backlog.

As we sit here today and even looking forward into 2022.

Particularly into the first quarter, because a lot of the bookings that we're realizing now will be again the.

A highest correlation to revenue will be in the beginning of next year is a very very strong on the backlog is the largest it's ever been of course in absolute dollars no surprise there, but it's also the largest as a percentage of our look forward forecast so.

We're very excited we're very confident in the sustainability of what we're seeing right now based.

Bookings were enjoying right now and the pipeline behind that just continues to rebuild so we've got a very very a great amount of confidence around again to go forward on the bookings are certainly supporting that.

That's very helpful color, Jeff and then a really quick 1 around margins given some of the head.

Headwinds around wage inflation, given the strength of demand you mentioned, the attrition rates et cetera is pricing starting to uptick given the demand backdrop to help maybe offset some of those headwinds along with the offshore mix should drive.

The margin expansion that you've typically targeted or are you seeing any sort of changes on that front.

And as you move forward.

I think on margin expansion and I mentioned this at the beginning of the year. So at the beginning of the year I said, we're expecting maybe 50 to 100 bps in gross margin about 150 to 200 and our EBITDA.

The big difference, there being scale and and I think.

I think we're going to continue to see that we're running.

Running about 40% adjusted gross margin right now.

And and we like that I think it's a healthy number for us. So we're not we're not pressing too to drive rates up too much. We're much more focused on that top line growth that said, we do intend to maintain and possibly expand modestly that debt 40%, but.

Again, I think we will end up right in that sort of 50 to 100 range for the year.

Next year I would expect something similar again, it's too early to really say, but yeah. I do think you're right I think even in order to maintain the 40 <unk>.

History in general is tightening and we'll see some price upticks and we certainly are.

Right now at the same time, we're winning these really large deals.

That do require.

They are more competitive and require a little more aggressive pricing.

At the same time, you have less turnover on those deals right. So even though the rates may not be as high the margins still good because you've got higher utilization.

We have less and less churn of the folks hitting dimension between projects. So.

You know again I feel very good about keeping that 40.40 plus intact.

And likewise I think we'll continue to see solid expansion of the EBITDA line.

Great. Thank you so much for taking my questions.

Thanks, Mike.

Thank you and.

And our next question comes from the line of surrender day with Jefferies.

Good morning, guys.

1 of the things that I kind of wanted to get a little bit more color on is just understanding the.

The visibility that you have in the quarter and then how about.

So can you walk me through when you last provided guidance.

Then kind of where we ended up in terms of.

Coming in above the top end of that guidance.

Is that is that a case of were just there is so much client demand and.

The reservation or the conservation.

Or conservatism comes from being able to find enough people to fill that demand or how should we think about.

How demand is evolving and how that could potentially volume on a go forward basis.

Yes, I think look.

As you noted, it's a pretty dynamic.

Work.

<unk> <unk>.

Driven largely by a dynamic market of course, and I think we always try to build in some level of conservatism.

I'm, assuming that maybe not all of these deals are going to close or or or.

That.

That we're not gonna be hitting necessarily on all cylinders.

I.

Things came together, even better obviously than we expected.

And we've tried to get a little more I'd.

I'd say, a little less aggressive or a little less conservative going forward a little more aggressive.

In terms of what we put out there for this quarter on the rest of the year debt.

At the same time.

We feel very very comfortable on it in terms of visibility what you opened with.

That tends to vary as well, but as I said earlier, we've got a bigger backlog, both absolutely and as a percent of our overall look forward than we've had before so that's given us the confidence.

To sort of raise guidance, obviously and feel very good about.

Very confident.

What we've put out there. So we do try to be conservative we were probably overly conservative and heightened with the benefit of hindsight.

In the second quarter, that's a good good thing I think.

And again, we've tried to get a little more.

Aggressive or little less conservative going forward because.

Because things are going that well the pipeline is that strong bookings continue to perform.

At a level above our historical and at the same time I think that's sustainable.

That's helpful and then maybe as a follow on it sounds like perhaps the win rates we're maybe.

<unk>, a little bit better than they have been historically is that the right way to think about.

Some of that come through just made about you know things coming out.

Good day.

The deal wins and stuff or how should we think about things competitively at this point versus.

Maybe where things were historically, yes.

I think our.

Our win rates are in line with historical.

I expect that that will continue I expect that they may even ticked down and what I'm EBIT, Ed as I alluded to it earlier, but we've added a ton of capacity in sales and keep in mind that we added we've been adding every year.

Really every.

Our every quarter every month and.

A lot of those folks that we've added are coming into their own I mean, they're mature right. So if you go back you know people that we hired 2 years ago are really beginning to hit their stride and so I think that's a part of what we're seeing right now and I mentioned this earlier.

Is that we've got a lot more effective recruiting.

Fruiting onboarding.

And supporting.

Our sales team and their success and.

That's another factor in all of this debt.

It was relatively new again, we I think we would have seen it last year, if not for Covid, we saw a little bit of it in 19.

But I think that's another major factor going forward so in.

In fact, our win rates are great. We are still a better than 50% against the competition and even playing field.

Actually closer to 60 around 60.

But again I wouldn't be shocked if that actually came down a little as we're getting more at that.

Got it and then related to just.

Just kind of the demand environment.

Can you talk a little bit about utilization 1 of the things that I was looking at was the head count growth.

Obviously, you're adding at a very fast pace at this point.

How sustainable is some of that as you kind of look further.

Further on obviously, you're trying to balance.

Use a crystal ball to figure out if demand longer term.

Time is there any.

Are you also addressing perhaps elevated utilization levels at this point or how should we think about that dynamic.

We actually really feel good about utilization.

About kind of 80.81 is.

Stable.

Goal across the year right.

And thats seasonal it's to some degree so first quarter fourth quarter are going to be a little bit lower end of that or maybe even on the high seventy's. Although I think this year it will be in the low eighties.

And then you know it does pick up it tends to pick.

We've talked in Q2 and 3 so we're running.

82, and a half I think or something like that in the first quarter.

In North America, and similarly offshore.

Interesting Lee most of our competitors run higher utilization offshore than we do.

Simply too.

Because we're recruiting as much as we are and and.

And so that we're prepared for that debt have that capacity to be prepared for that additional demand. So I think we're comfortable very comfortable with where utilization is right now.

As I mentioned before the recruiting arm as a channel and acquisition arm is working extremely well both in North America and elsewhere, we're having.

Hiring at success, Tom mentioned it.

People are excited about the proficient story so we're.

Taking employees away from competitors and and at the same time as Tom mentioned with bright pads.

I mentioned with college recruiting we're also bringing in.

New sources right new sources of supply.

And doing training on our own and we're really ramping up the capacity and scale scalability of that as well so.

Excuse me I think things have gone really well.

I think that will continue going forward and I think honestly, we just continue to tune that and get better and better at it and like I said I think that the air as Tom mentioned.

And earlier I think the proficient story from a recruiting standpoint is <unk>.

Strong.

And that's very helpful. Thank you, Jeff and congratulations on the quarter.

<unk>.

Thank you and our next question comes from the line of Brian Kingston Linger with Alliance Global partners.

Hi, guys. Thanks for taking my questions.

<unk>.

As you continue to shift your mix from delivery.

I guess I'm curious on.

And youre not going to get much higher than 40% margins, maybe a short term I don't know if it's long term.

Various what the long term.

Adjusted operating margin EBITDA margin hardly youre looking at it is where do you think long term offshore on site, delivering which can mature channel radio company.

Yeah, It's a great question.

<unk>.

I mentioned during the prepared statements that onshore is growing.

Extremely well.

I think this is really important for people to understand something thats extremely unique about us.

<unk> to our competition onshore offshore and near shore is that we have the combination of all 3.

Got a phenomenal onshore capability, that's high touch strategic helps clients drive.

Ive their business goals and understand that and how to support those through systems and technology.

And then we've got this great delivery development capability of Super Bright intelligent great folks on.

Sure a near shore so.

If if.

If I had to guess I'd like to see us getting to about.

At a 50.50 mix.

In terms of revenue but.

On a on a.

On a positive note.

Onshore keeps growing too so I think it's the combination is that model that continues to grow together now of course offshore and near shore outpacing. So so I do think that debt.

It'll be a while maybe before we got to kind of the 50.50 mix.

But it's a really powerful combination and it's really resonating very well I was just with 1 of our largest clients. The other day and they commented debt.

And this is them comparing us to accenture and larger competitors that you know.

No 1 else has presented us with the.

On the sort of global capability of offshore or nearshore.

Or onshore and the strength that they have witnessed in each of those in terms of our delivery capability on the skill set so I think that's a very differentiated model and it's something that's that's working.

Working extremely well if you look at us compared to offshore or nearshore competitors.

Won't name, we all know who they are we're growing 75% and they're doing great. They are growing at 25.

But if you look at the like for like right that 35 to $40 an hour range.

Our services.

Going.

3 times as fast as they are so and I think that's because of that combination.

So does that suggest that you can sustain.

Roughly 100 basis points, plus or minus on any given year on.

Margin expansion as long as you grow double digits.

Yeah.

And so yeah, I'm sorry back to your your EBITDA question I think so I do think we continue to expand EBIT down now keep in mind that we will want to and we already are but we're going to want to continue to reinvest in the business, but I do think our adjusted EBITDA continues to expand I think we'll end the year around 20% maybe above.

20% literally in the year above 20%, but have for the total year over 20 years or so plus I think that's implied in our guidance and and I think we can add to that next year I think 100 bps as a as a real reasonable expectation for next year.

Again, it's the power of the you know the economies of that scale.

As we continue to grow the business at the pace. We are I think absolutely you can deliver that kind of expansion.

My other question is I think.

Quite some time by proficient standards since you've completed an acquisition debt.

Is that because there's so much organic opportunity.

Our valuation is too high right now or maybe some other reasons. So if you can just maybe help us walk us through what you're thinking today about M&A.

Absolutely no we've been very active on the M&A front I think it's a combination of all those things that you mentioned I'm not not accept except the organic like I said, where we're still as active.

And aggressive on M&A as we've always been valuations.

In some cases have gotten a little nutty and I think if you know you.

You followed proficient for very long you know that we've got a very disciplined program and we're happy to.

You know to wait for things to come around.

Around if we need to if we feel like a deal is that overvalued.

However, that's not necessarily the issue I think a lot of these.

Entrepreneurs are looking around at a very healthy environment.

And.

Our feeling like they're going to hold on to their businesses. So we're seeing a combination of all those things frankly.

And the cap gains rate uncertainty is a factor as well and and you know the.

The threat of that being retroactive I think has impacted at some all of that said we are actually in advanced stages right now with the acquisition.

So I do think we'll get another deal or 2.

Perhaps even 3 done before the end of.

I think.

It's just been a matter of again, you know those things aligning to our standard to be honest.

Great. Thanks, so much.

Thanks, Brian.

Thank you.

Next question comes from the line of Puneet Jain with J P. Morgan.

Of the year.

Very good quarter guys.

Jeff How do you believe you can find a strong pipeline and bookings on the comments around improved win rates.

Sequencing, new factors to modestly up revenue growth implied in that guidance from Q1 to Q2.

You grew 10% on sequential basis, and do not expect as much growth in the second half is it just like the normal seasonality.

Or is there some conservatism baked into guidance.

Well [noise] excuse me I think on a year over year basis, the guidance implies basically the same.

Growth for the second half that we enjoyed in Q2, which is actually higher than the first day, which would which would imply better growth in the first half.

Comps pick up a little bit and particularly in Q4.

So I think the comps weigh into that and you know I think we're trying to be a reasonably conservative as I said before we got a little more aggressive.

<unk> been in the past.

But I think we're still trying to be conservative and make sure that we are we are deliver what we say we're going to deliver.

Got to and I'm, sorry, you might have addressed this before.

What are you seeing for wage inflation like north of.

<unk>, specifically in India are talking about to a spike in attrition rates spike in <unk>.

We have inflation.

Do you also see increased inflation rates I'm on your employee base.

Not really actually I think our I think that speaks again to the uniqueness.

<unk> of the opportunity that we have here, firstly I'll say that.

I think we already pay.

A competitive wage I think that's 1 of the reasons that we're able to attract the talent that we attract from some of our competitors and net is that I think we've got a better compensation and benefits package.

Then they do anyway. So so I think we've already.

Got that advantage.

So right now we're not seeing.

Sort of runaway wage inflation, you know we're anticipating.

Sort of standard Merit increase levels that we've basically applied over the last couple or 3 years.

A half a half point more.

But for the most part.

And the attrition by the way both on a flattened.

Latin America and India.

Have been quite similar to here and really our experience I think is far better than our competitors and again I think it's all of those things when we talk about before I think its culture I think its already paying a competitive wage to begin with.

And.

Quite honestly I assume they've got some catching up to do.

Understood. Thank you thank.

Thank you.

Thank you.

Question comes from the line of Vincent Colicchio with Barrington Research.

Yeah, Jeff I'm curious.

With the with a nice growth in larger deals.

Are you seeing a flattening of the pyramid benefit margin.

Yes, I think so and now of course, the base of that pyramid.

It is shifting more to to offshore and near shore I wanted to.

Be careful about that they have their own pyramid as well those folks are similarly, or equivalently, a talented skilled experienced as onshore, but yes, obviously theres some scale there.

With these larger deals but at the same time those deals do tend to be a little more price competitive so.

You know I think it's a balance or balances there I do think we made some.

Some some temporary discounts to some of our larger accounts that we're seeing kind of roll off now.

So again I think it's quite possible, we'll see rates pick up a little bit in the second half, but I'll tell you.

Our primary focus right now is preserve margins expand modestly gross margin your would you say that before.

And focus on the topline revenue growth.

And I'm on my understanding is that the pandemic has been fairly rough in Colombia is that causing any challenges in terms of <unk>.

Employee.

We're getting sick and needing to.

Increase.

On a cushion of.

Lower utilization rates to kind of protect yourself there.

Yeah, it's been a you know our experience has been pretty positive.

You know the demographic right of our employees is a little different than probably the average.

And both India and Colombia.

And so without getting into anything geopolitical.

Our experience has been pretty good I mean, obviously the whole pandemic is a travesty and a lot of made up of a lot of personal tragedies.

But our folks are are younger are they.

Healthy.

And the biggest disruption sadly tends to be you know a family member falling ill or worse, and then needing to take some time to deal with that but in spite of that utilization has you know has maintained or even ticked up so you know knock.

Tend to be good so far.

I would say that our teams have been resilient and done an amazing job on dealing with you know a terrible situation and and really the impact to proficient has been minimal.

And what was your organic growth in the quarter I missed that.

'twenty 1.

Back on line.

Okay.

So for me not a nice quarter. Thanks Vince.

Thank you. Your next question comes from the line of Jack Vander, Our day with Maxim Group.

Great. Thank you good morning, guys. Congrats on another solid quarter and a strong guide.

On a couple of questions maybe for Jeff.

The organic growth has been solid that's really rebounded it sounds like from another analyst question Theres a lot of activity going on behind the scenes still for acquisitions, that's good to hear.

And I know you guys have been very thoughtful and finding the right fit that's all fine I.

Revisit your bigger picture kind of multiyear outlook view for organic growth I think prior to Covid you guys are targeting like maybe like a general rule of thumb like a 10% or so organic growth on kind of like a sustainable target.

Sure.

Far outpacing that for this year now in 2021obviously.

I guess I wanted just is there any change in terms of when you look at like the next 3 years 4 years out any reason you'd expect changes to your kind of target organic growth outlook of 10% or whatever it is.

Yeah, I think I think that's right I mean, I think it's a.

Sort of a stair step function right. Once you once you get to 1 level.

Could you raise the bar and move to the next level, So I feel like a 10% probably in the rearview.

Yeah, we feel really good about our you know moving that target up to probably mid.

Mid teens or better sustainably and again I'll go right back to what I said before about the maturity.

On the effectiveness of our marketing everything from the wholesale cycle right everything from marketing lead Gen or partnerships.

And probably most importantly.

Capacity and and the management team that we've added around sales and that we continue to build on so we continue to add capacity ahead of growth.

So that we're looking at that next level so.

So yeah, I would say that again, hopefully the 10% is behind us and we're moving on to 15 plus.

Fantastic and then.

Question for Paul.

Maybe more of a clarification or.

Kind of question on organic growth. So when we're looking at the third quarter revenue guidance I guess first question is yes.

Is there an underlying organic revenue growth in your third quarter revenue guidance.

Yes, so the guidance is I think 18% to 21% in Q3.

And because of the timing of acquisitions, essentially everything will be organic effective for Q3. So.

We haven't closed on the acquisition since June of last year.

Okay, great. So that that was done on the question is kind of walking towards is the denominator in your organic growth Formula now is much more simple.

When I see your organic and your total revenue growth for the third quarter.

<unk> passed the 1 year Mark now from the last acquisition so on.

Organic is organic is synonymous now with that total revenue growth.

Alright, and then of course, if we close another deal then that'll change a bit but yes for now.

That's who we are.

Great and then just a follow up question on <unk>.

On revenue the revenue beat for the second quarter and then the full year revenue guidance raise.

I think the second quarter revenue beat the midpoint of your guidance by about $8 million or so.

And then.

The full year 'twenty, 1 on revenue guidance was with significantly increased.

But well above that would be.

Which tells me you have a lot of confidence on to your comments about the pipeline and the backlog is strong and everything seems very very solid here, but just because of the size of the full year range of revenue is this would you attribute this to split this between.

Organic growth outperformance offshore and onshore.

Sure and then I guess, that's really the only way to split it at this point now so is it how much of that raise is offshore and onshore outperformance.

Keep in mind that offshore is still even though it's growing very very quickly.

Still only about 15% of revenue so.

It's I.

I would say that you know let's call it 20%.

And the lion's share of that is still going to be onshore just by the.

For what is it for Forex.

Rate differential.

So.

Probably something around 15 in 5 so somewhere in that range.

We did I mentioned at least from a head count standpoint, we grew.

Onshore, 16% organic in the second quarter. So I think we're seeing that demand and that mix of demand continuing I speak offshore will still be above 50.

I don't know that it'll hit 75.

Good could well do that.

But I would say the breakdowns, probably something something along those lines 15 in and 5.

Okay very helpful. Thank you that's all my questions again solid results guys excellent coordinates check.

Thanks, Jeff.

Thank you.

Now I'll turn the call back over to chairman and CEO.

Jeff Davis for any closing remarks.

Well once again, everyone. Thank you for your time today, obviously, you can see and hopefully here our excitement.

And and what I think is.

Another sort of error for a proficient and.

You can also tell I think that we're very bullish.

And confident in fact I'll leave you with this thought our focus and attention is more on 2022 right now than it is the rest of 2021, which given that we're only halfway through the year that's a.

Kind of a unique statement for us and.

But that'll give you some idea again about our confidence in our outlook. So thank you for your time today I look forward is.

Talking again.

Another 90 days take care.

This concludes today's conference call. Thank you for participating and you may now disconnect.