Q3 2021 Perficient Inc Earnings Call

October 28, 2021

Thank you for standing by and welcome to be proficient third quarter 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 one on your telephone please be advised that today's conference maybe recorded.

It should you require any further assistance. Please press star zero I would now like to hand, the conference over to your Chairman and CEO, Jeff Davis. Please go ahead.

Well, thank you and thanks, everyone for joining us this morning with me on the call is Paul Martin, our CFO and Tom Hogan, our president and CFO I'd like to thank you all again for your time this morning.

As typical we've got about 10 to 15 minutes of prepared comments after which we'll open up the call for questions.

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

Sure Thanks, Jeff and good morning, everyone. Some of the things we will discuss in today's call concerning future company performance will be forward looking statements within the meanings of the securities laws actual results may materially differ from those discussed in these forward looking statements. We encourage you to refer to the information contained in our SEC filings concerning factors.

It could cause those results to be different than contemplated in todays discussion.

During this call we will refer to adjusted EPS and adjusted EBITDA in our earnings release, including.

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

For the most directly comparable financial measures prepared in accordance with GAAP on our website under Investor Relations.

Thank you Paul and once again, thanks, everyone for joining we're pleased to be with you here. This morning to discuss our third quarter results and provide guidance for the fourth quarter and the remainder of 2021.

As youll see that guidance, obviously reflects our accelerating momentum and confidence.

Proficient strong performance continued in the third quarter as we built upon our first half success continued to gain new customers expand existing relationships and take share as.

As we head into the final weeks of 2021 and look forward to 2022 and beyond our business has never been stronger.

Digital transformation is driving tremendous spend and proficient own transformation has uniquely positioned us as a true next generation global digital consultancy that is poised for robust and sustainable growth.

Organic offshore revenue during the quarter grew 48% driven.

Driven by accelerated demand and strong utilization in our aggressive global expansion continued recently with two acquisitions that strengthen our ability to drive continued outperformance collectively. The addition of tablets digital an overactive brought nearly 800, new Latin American based colleagues to our team increasing our nearshore capacity and capabilities.

And I think it's worth pointing out that these additions that these additions with these additions proficient achieved the milestone of now having more delivery talent offshore than onshore a truly global organization. In fact, Forrester recently recognized proficient on its list of global digital service providers. The first time, we for the first time.

We've met their stringent criteria for inclusion.

But it's a combination of our strong U S presence with a deep and geographically dispersed global footprint that sets proficient apart we.

We certainly compete globally for talent, but in terms of winning work we rarely run into some of the more recognizable digital provider names that lack our domestic footprint and that's because they don't have the relationships, we do and frankly, they've struggled to deliver the type of work that provides the most value to the customer and hence commands the highest rates in fact, our revenue per <unk>.

<unk> colleague is typically more than double and in some cases triple of those firms and that's because we're engaged in a more strategic and mission critical work.

We construct a blended rate that the customer is happy to pay because we're helping them achieve their most important outcomes and we also believe that our strategy of growing a diversified global footprint creates advantage. We now have 25% of our billable colleagues in India at 25% in Latin America, just under half in North North America and about 2% also.

Sure.

Net global talent helps us helps insulate us from some of the geopolitical challenges others have had or may have in the future.

And as we expand globally, we're focused on diversifying within regions as we have in the U S. For example, our footprint in India now includes Chennai, Nagpur, and Bangalore, and while we're now among the top technology provider employers in Colombia.

The acquisition of Overactive. It brings our presence in South America to now include Argentina, Chile and Uruguay.

We're overactive was headquartered as we expand in South America, we build brand and gain access to more talent in more countries, where education and literacy rates are high technology infrastructure and acumen is strong in business is relatively easy to Kentucky.

And the reason we're doing all of this is that our clients are clamoring to work with a vendor that's local and global it's a big differentiator for proficient and key to the results. We're delivering in fact on last quarter's call. We highlighted that 14 of our north American customers have begun to leverage our nearshore team that number now stands at 25 and those relationships.

<unk> chips that expanded our relationship that expanded before our two most recent nearshore acquisitions.

We'll share the full details regarding large wins during the quarter.

Bookings remained strong and as importantly, the pipeline continues to grow in fact, our total pipeline and very importantly, our weighted pipeline is stronger than it's ever been.

We're pursuing hundreds of seven figure deals and many are eight eight figure and beyond our opportunities so with that I'm not turn the call over to Paul who will share the financial results details for the quarter Paul.

Thanks, Joe services revenue, excluding Reimbursable expenses were $190 1 million for the third quarter 2021 'twenty two 5% increase over the prior year services gross margin, excluding reimbursable expenses and stock compensation increased 40 basis points to 43%.

SG&A expense was $39 3 million for the third quarter of 'twenty one.

Compared to $34 6 million in the prior year SG&A as a percentage of revenues decreased to 24% from 21, 9% in the third quarter of 2020 adjusted EBITDA for the third quarter of 2021 was $41 5 million or 21, 5% of revenues compared to $31 one.

Million or 19, 8% of revenues in the third quarter of 2020.

The third quarter quarter, 2021 included amortization of $4 3 million compared to $7 2 million in the prior quarter. The decrease in amortization expense was primarily due to certain intangibles.

<unk> acquisition, becoming fully amortized.

Interest expense for the third quarter of 2021 increased to three.

$5 million from $2 8 million in the prior year, primarily as a result of the August 2020 convertible debt offering.

The tax rate for the third quarter of 2021 was 28, 1% compared to $27.

6% in the third quarter of 2020, the increasingly effective tax rate was primarily due to an increase in the Colombian tax rate that occurred in September 2021, and the related nonrecurring adjustments in Columbia and deferred tax liabilities net income increased 182% to $17 4 million for the third quarter of 2020.

One from $6 2 million in the third quarter of 2020, primarily as a result of higher revenues lower SG&A as a percentage of revenues or amortization expense loss on extinguishment of debt or just the superior value of contingent consideration.

Diluted GAAP earnings per share increase of 48 cents a share for the third quarter 2021 from <unk> 19 in the third quarter of 2020 adjusted earnings per share increased to 88 cents a share for the third quarter of 2021 from <unk> 67 in the third quarter of 2020.

You can see the press release for a full reconciliation to GAAP earnings.

I'll now turn to the year to date results through September services revenue, excluding Reimbursable expenses were $537 8 million for the nine months ended September 32021, 22, 1% increase over the prior year services gross margin, including Reimbursable expenses and stock compensation increased 70 basis points to 39.

8%.

SG&A expense was $110 7 million compared to $101 7 million in the prior year.

<unk> as a percentage of revenues decreased to 23% from 22, 6% in the nine months ended September 32020.

Adjusted EBITDA for the nine months ended September 32021 was $115 1 million or 21, 1% of revenues compared to $81 3 million or 18, 1% of revenues in the prior year. The nine months ended September 32021 included amortization.

$17 7 million compared to $15 6 million in the prior year.

Net interest expense for the nine months ended September 32021 increased to $10 1 million from $6 8 million in the prior year again, primarily as a result of the August 2020.

Convertible debt offering.

Our effective tax rate increased to 25, 3% for the nine months ended September 32021 from 24, 2% for the nine months ended September 32020, net income for the nine months ended September 32021 was $47 6 million compared to $21 8 million in the prior year, primarily as a result.

Higher revenues gross margins will rescue news within our revenues lower acquisition costs lower loss from extinguishment of debt and lower adjustments to fair value of contingent consideration. This resulted in diluted GAAP earnings per share increasing to $1 39 for the nine months ended September 32021, compared to <unk> 67 in the prior year.

Adjusted earnings per share increased to $2 49 for the nine months ended September 32021 from $1 74.

Higher year, earning billable headcount at September 32021 was.

4827, which includes 4499 global consultants and 328 subcontractors and the SG&A headcount was 710.

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

At September 32021 was $186 5 million, we also had $56 4 million in cash and cash equivalents as of Sept.

<unk> 2021, and $199 8 million of unused borrowing capacity under our credit facility. Our balance sheet continues to leave us well positioned to execute against our strategic plan and finally, our days sales outstanding on accounts receivable decreased to 71 days from 73 days in the third quarter of 2020, I'll now turn the call over to.

Tom Hogan for a little more commentary on the metrics Tom.

Thank you Paul Good morning, everybody as Jeff mentioned bookings remained strong in the third quarter, we booked 80 deals greater than $500000. During the third quarter of 2021, which compares to 66 in the year ago period.

Global delivery by the way is embedded into virtually every one of those wins here a couple of examples of the work we're doing we're continuing our partnership with a leading health care technology company to consolidate multiple portals until a centralized customer experience. This multiyear multi shore delivery strategy that stands our teams in India Latin.

America, and North America will create a single support portal for their clients' entire line of products, while migrating to a streamline system. The new portal will ultimately reduce call volume and customer self service and transitioned thousands of users to the new site and introduce single sign on functionality.

Another example of our <unk>.

Fishing Latin America team alongside our cross Bu onshore teams are using multiple technology stack to create three custom products that will improve the customer onboarding and support experience for a new financial services client.

Cash access at ticket redemption service provider, our partnership will optimize the client's digital strategy reduce current customer service cost and improve the digital customer and employee experiences.

Currently a self service.

Growing our service business is always a balancing act you're either trying to find demand to support your supply are building supply to meet demand and the current environment. The most pressing challenge is certainly around recruiting and retaining talent.

Good news is we're succeeding on that front as well.

Hiring faster than ever before and the infusion of talent. The two recent acquisitions brought is another lever we can pull to prioritize the accounts with the greatest long term potential and align our talent to our most important opportunities.

As we compete for talent in the market proficient value proposition is resonating as strongly because we've made a conscious effort to build a unique and compelling culture to ensure proficient is perceived as an employer of choice.

As we know it's working because our employees themselves are telling us that they are engaged excited and enthusiastic about proficient.

We recently conducted an all colleague employee engagement survey, where an outstanding 98% of our employees responded standards.

Standard employee survey responses are well below that particularly in a company of our size.

But at proficient colleagues noticed their voices are valued and can and will drive improvement at least based on employee feedback we've done things like increase our maternity and paternity coverage launch wellness programs and services that employees and their families can access we've created thriving employee resource groups, including women in technology in a given.

<unk> the focus is entirely on volunteerism and philanthropy.

Our our colleagues are excited about building curious a proficient because.

We asked for it and react to it but their feedback is collectively helping us grow and shape our future together.

That's a key reason, we feel great about sustaining and growing our performance over time.

So again, a great quarter, we're focused on finishing strong in 2021 and carrying that momentum into 2022 and beyond and with that I'll turn things back over to Jeff to discuss fourth quarter and update our outlook for the full year Jeff.

Thanks, Tom So proficient expects its fourth quarter 2021 revenue to be in the range of $203 million to $209 million fourth quarter GAAP earnings per share is expected to be in the range of 61 to 64 cents fourth quarter adjusted earnings per share is expected to be in the range of 90 to 93.

And proficient expects its full year of 2021 revenue to be in the range of $749 million to $755 million.

'twenty, one GAAP earnings per share in the range of two to $2 to $2.03.

And 2021 and adjusted earnings per share in the range of $3.38 to $3 41, so with that operator, we can open up the call for questions.

Yeah.

Thank you as a reminder to ask a question you will need to press star one on your Touchtone telephone to withdraw your question press the pound key once again Thats star one on your touched on telephone to ask a question. Please standby, while we compile the Q&A roster.

Our first question comes from the line.

Surrender sorry.

Sorry, Surinder time of Jefferies. Your line is open.

Good morning.

Congratulations on the results from it.

Thank you all.

The first question is about the deal pipeline and revenue visibility can you maybe talk you mentioned that I think on a weighted average it's the largest it's ever been at this point.

Can you maybe talk about.

What when you with these large wins what is kind of doing to the overall length of your projects at this point or are we beginning to see some measurable changes in.

In duration here and then maybe can you talk a little bit about.

From a demand perspective, how far in advance do clients now need to kind of lock up resources for you.

Sure. So we are we.

We definitely are seeing are the relationships and the projects extend in duration definitely.

That's the reason the backlog is what it is and by the way when I referred to.

The weighted pipeline and even the backlog because I just referred to I'm talking both obviously in absolute dollars, but also as a percent of our forecast so.

To your to your question or to your point, we're definitely increasing our visibility.

We can we have a pretty clear line of sight into and through Q1 now.

And and really we're getting a pretty good handle on what we think 'twenty two is going to shape up like so.

We're feeling quite good about that and definitely increasing if you take out say the bottom 10% of deals you know doing just simple statistics.

You'll see that the duration of projects as extended substantially over say two or three years ago.

There were 10% I'm, referring to as often.

Oftentimes new relationships start small.

So again, if you kind of take those out you'll see that the rest of it is quite extended.

In terms of our staffing we're actually having great success as Tom mentioned recruiting is going well and.

We're able to staff projects.

Pretty much in real time, I mean, there might be.

Obviously, it is a planning cycle involved and typically a project might only start with an architect.

A team lead.

There's really there they're pulling those plans together and laying them out so there's a sort of an inherent opportunity upfront for us to work on staffing while that planning is underway. So that's working well, we're not experiencing any delays due to staffing.

That's helpful and then.

Industry specific question.

Obviously, you were seeing continued growth from our financial services side on.

On the healthcare side it seems like when I look at revenues on an absolute basis or at least my calculations suggest that they've been kind of flat to down the last couple of quarters any color you can provide there.

In terms of what's going on within financial services, where things seem to be trending really well and in health care, where it seems to be a bit more flat yeah.

Yeah, I mean keep in mind the backdrop there as we're growing 20 plus percent organic so so when you say flat I would say.

It's maybe dropped or flat on a relative basis, but still growing in that double digit range now that shed.

It does ebb and flow like a lot of our industries due to a small degree I would say and in fact, the bookings in health care.

And in the third quarter were really substantial so I actually think we'll see a tick up there as well the good news is that a lot of the reason that.

You're seeing it on a relative basis, maybe slow a little bit.

Is that we're seeing other sectors really pick up and you hit on one that we're really excited about which is financial services. The financial services space. We've got a really formidable management consulting team and do a lot of management consulting in that space and have for a long time and I've often felt and collectively we agreed that we were underrepresented in.

Technology, there so we really put out a concerted effort over the last 12 to 24 months two to address that and you're seeing some of the results of that so we're excited about financial services in the future. There I think that's going to continue to outpace other sectors for US right now and again a lot of it's because we were underrepresented but of course the spend is.

Increasing there as well so.

Hopefully that answers your question.

That's very helpful and then just.

One other question here.

Can you maybe talk a little bit about the dynamics of having a more global footprint at this point.

When I think about obviously, the nearshore capabilities you've added in South America.

Also start thinking about the cost structure in currency fluctuations and so forth.

Is that generally handled through hedging.

Hedging or do you pay people in U S dollars or how should we think about the complexity that that adds to your expense and potentially the volatility for them yes.

Yep. It adds some complexity of course, given the scale that overactive wasn't really PSL that we did last year mature businesses that have good infrastructure.

We're gonna be combining overtime, but leaving a lot of it largely intact.

Because they operate exclusively in South America, and they've got really strong management there. So we're leveraging that.

Two to address that complexity as it were but yeah, we hedge.

We don't pay in U S dollars, we pay in local currency and we use hedging vehicles too to address volatility and it's worked very well thus.

Thus far.

We'll see how it plays out there's some you know we're entering a little more some countries that are a little more volatility, but so far we've had great success in hedging.

Thank you I'll get back in the queue.

Sure.

Thank you. Our next question comes from Maggie Nolan of William Blair. Your line is open.

Hi, I wanted to ask about some of the newer geographies as well can you talk about how you're building a hiring engine there and thoughts about your ability to grow these new locations organically going forward.

Yes, absolutely kind of as I just alluded to.

These are these organizations have strong talent acquisition capability already in place. So while we are obviously going to plug that into sort of centralized engine from helping them from a marketing standpoint.

And getting a getting out there with the branding. The reality is again, we're going to continue to leverage the ta.

Have in place and they've had great. These are these are fast growing businesses and had been for a while.

So they've got a formidable team in place and they will be leveraging that and scaling it.

As we as we need to and I believe we will need to because the demand there is just tremendous.

Okay, and then you've been operating comfortably above the 20% adjusted EBITDA level in terms of margin for a couple of quarters here. When we think about a little bit more long term, what's the balance youre envisioning for reinvesting into the business for growth.

Versus.

Letting margins kind of continue to expand that you're delivering.

Delivery footprint has changed that much yep. Good question of course, we've continued to reinvest in the business all along the way so there's not sort of a stair step function. There that's going to kick in along the way, we're going to continue that level of investment.

Which is typically sort of at or with our growth level.

Particularly focused on on sales but of course, it's also focused on our employees as Tom went through a number of areas and programs that we invest in and of course, Theres training and recruiting involved.

In terms of a lot of that reinvestment again, I think that's more of a kind of a linear straight.

Straight line in any kind of a stair step so I see that continue at the level that it is.

In terms of adjusted EBITDA or EBITDA margins I do think there is expansion opportunity continuing we're enjoying some nice economies I've mentioned before that.

This year you know, we're clearly on a path to be around a couple of hundred basis point expansion on EBITDA looking forward will we continue at that clip of expansion, probably not but I do think it will continue to expand in.

I, probably wouldnt hazard, a guess too much into next year, but you know I think maybe half of that is achievable. So obviously, what we will be providing guidance on next year later, but we feel good about again some continued at least modest expansion and if you consider a 100 basis points modest and.

I think that's going to continue for quite some time and still allow for reinvestment.

Yeah.

Okay. Thanks, Congrats on another beat right.

Thanks Maggie.

Yeah.

Thank you. Our next question comes from Tandon of meet them you question. Please.

Thank you good morning, Congrats Jeff.

I just wanted to go back to the revenue trajectory. So could you just give us a sense of what the implied organic growth is in the fourth quarter and then for fiscal 'twenty, One and then based on your comments around the demand picture.

Should we expect another year of at least low double digit growth in 2022, even though you're not giving specific guidance, maybe just some color. So we can.

Be more.

Appropriate with our models as we look out into next year I'm happy to do that.

So yes, the implied guidance at the midpoint for Q4 is just over 22021%.

And that's at the mid point and obviously our goal will be to come in above that so the implied is again around 2021 and yeah. As we look ahead to next year and I mentioned earlier that we're getting some good visibility certainly into Q1 and even the first half.

We're feeling really good about sustaining growth levels at or near where we're at so I think.

Yes double digits for sure and I would say you know probably a high teens.

Don't see any reason right now where we can't sustain.

<unk> that we're that we're driving right now as we look ahead and looking at our pipeline and looking at the bookings that we're enjoying in the bookings that we're putting up now.

I'm merely impact Q1, and Q2 so Q.

Q4 is in the bag so.

Those are good indicators of deck that we'll be able to sustain high growth level similar to what we're enjoying now.

That's great to hear and then just turning to the balance sheet I was curious in terms of funding the overactive acquisition.

Given the cash on hand, and access to credit could you just talk about what your plans are and then maybe potentially building in some more ammunition for future M&A, but that is something on the agenda.

Sure you know that.

The MLS.

Paul chime in here as well, but in terms of funding overactive, we had cash on the balance sheet. We did take a small draw on the line I think $40 million or so.

To make up the balance of that but you know our cash flow is tremendous we are.

Our free cash flow is really good and so even when we do these large acquisitions that we've done over the last 12 months or so.

We're able to pay that down pretty quickly so I point back to PSL and that was it.

What eight figure nine figure deal and.

We ended up here a year later with still $50 million on the balance sheet. So I think the line that we have is maybe it is more than adequate to do what we do accomplish what we want to but Paul is there anything you'd like to add to that.

No I think I think the main.

We did a combination of cash has drawn a line as Jeff said to fund the overactive deal Q4, specifically is generally a strong cash flow generation quarter. So so that will help us.

And as always we look at our balance sheet and opportunities what are we going to do to continue to fund our growth and we feel we're well positioned to do so.

While our line has a 200 million plus an accordion feature right.

That's correct I think it's a 75 million accordion feature and a $200 million.

We have $40 million or $50 million against right now.

Right very helpful. Thanks, so much Jeff and Paul.

Thanks, Mike sure.

Excellent.

Thank you. Our next question comes from Brian Ken Smith of <unk>.

<unk> Global partners your question please.

Hey, guys great results.

Given <unk> accelerating can you talk about where utilization in nutrition are and your goals for utilization and then you highlighted increased wage pressure I think most of that coming from the U S. So can you talk about if you see that impacting the P&L at all over the next 12 months that offset some of that margin expansion.

Yeah Fair question, so utilization is running.

Any to 82%, which we've sustained now for several quarters. If you go back even into 2020, frankly during kind of the toughest part of the pandemic. We were still over 80. So 80 to 82 is a is the range that we like to be in and we feel confident as sustainable.

In terms of attrition our attrition has kicked up a little bit I think there was some pent up demand I mean, we were in the low <unk>.

You know double digits, 11% I think was the bottom last year during the height of the pandemic.

So I think we're seeing a little bit of a tick up there that I believe is probably temporary but we're a little over 20% and 22, 23%.

In this past quarter on an annualized basis year to date, it's actually still below 20 on an annualized basis, our goal around that by the way is 15% to 20% I think generally below 15 is unhealthy just like above 20 is costly. So so our goal would be to be somewhere around the middle of that but you know.

Given the circumstances in the environment we're in.

I think we.

We can expect.

The higher end of that 15 to 20 and as Tom pointed out in the early part of the call.

We were really shoring up a very strong or I should say scaling up a very strong platform with the talent acquisition that we've got in place. So the team has done an amazing job there of recruiting against that but also Oh recruiting you know on top of that obviously tremendous growth and as I said before we're not.

Or anything.

How much is due to labor shortages, so we're able to meet our demands.

And are you now in terms of in terms of wage inflation.

I don't know that I don't recall anybody necessarily alluding to that but.

Yeah, we're seeing about 3% I mean, we're not seeing anything yet.

<unk> sort of our normal raise pool in any given year.

So so right now.

Wage increases this year will be around 3%, maybe three to four somewhere in there.

To your point.

Part of our part of the reason that we're able to to afford that without affecting the P&L. Much is clearly the shift to or I should say the incremental revenue going to offshore which is a very very high margin.

Delivery service right in the 50% to 55% range and we're often seeing rates ticked up again as well so we've got a.

You know some incentives in place and driving the sales team to modestly push rates up we don't want to price ourselves out of anything we want to maintain this growth momentum as I mentioned earlier so.

So we're very careful about that because you have been able to inch up rates were up about.

In North America were up about $2 from last quarter. So that's about one 5% on a single quarter I'm that doesn't suggest that we're gonna do 6% over a year.

But we are seeing them shut off which will help offset that cost.

That's great.

A couple.

Quick ones on overactive it sounds like a trailing 12 months a $40 million can you tell us what organic growth wise.

Utilization similar or is it lower human absorbed people and then just comment on their geography do they have a local customers that don't have that arbitrage or are they all north.

North American and European customers. Thank you all for me.

Yeah, no. The utilization there is about the same as us their organic growth has been higher large law of large numbers. So there the organic growth I want to say it has been in the 30 plus percent maybe close to 40.

And again similar utilization so we weren't looking at it as sort of overnight capacity, we're looking more at their access to the talent pool, which they have demonstrated.

To perform very well with.

And and Yeah. There is there are local customers. There are some are.

Domestic customers in Latin America.

Probably brought a little more than PSL did but we also gained some from PSL. Obviously, we continue to or we intend to continue to service that that market, but we also intend to drive a lot of demand or a lot of increased demand from.

From our existing client base, which is mostly North America, but we've got some global customers as well.

Great. Thanks, so much.

Thank you.

Yeah.

Thank you. Our next question comes from Puneet Jain of.

J P. Morgan. Please go ahead.

High teens call it next year.

Classification.

We expect our organic growth or reported.

No I was speaking just organic.

But that's great like that would be like very bullish like with like.

The current growth rate continuing into next year, So would you attribute that to.

To like strong demand trends as clients continue to spend in digital media.

<unk> be more driven by patient specific type of such as more efficient from a P.

That you didn't have before.

I think it's the latter and you've probably heard me talk about this for a while now you know we've we've been getting many years ago now.

We had done a lot of work on our sales platform in terms of the organization the tools the prescriptive nature of quotas.

Et cetera, and really equipping that team we've improved our onboarding, we recruit improved our talent acquisition. There. So that we're getting better success out of our sales folks that were hiring we've got a very robust platform now that is very scalable.

As I mentioned earlier, that's where a lot of our reinvestment in the business will go will be to increasing our sales capacity because we know that if we get to the table we win more than we lose so we're going to continue to focus on that and I think a lot of it is coming from that.

Evidence of that by the way all point to our top 50 customers, where we're growing those relationships at about 15%. That's total total revenue growth and keep in mind that many of those same customers now are really embracing our offshore and near shore capability, So that incremental 15% is actually coming from offshore.

For sure, which is running a you know a rate that's about a quarter of our U S rate. So if.

If you think about the hours involved in that you know we're growing very substantially on those accounts, they're they're spilled theres not increasing that much even in digital it's not increasing that much. So a lot of our growth is actually coming from taking share away from competitors.

I mean, that's that's the point of a Bad example, and you know I think that's going to continue not just in the top 50.

But in other accounts as well and then lastly, I would say certainly.

The market is good for digital transformation services digital experience.

So we're in a good spot as well it just in certain sensitive in terms of the broader market.

Got it.

I appreciate that and good luck in America as Big as India in terms of deliveries.

Footprint, how do we think about your.

Global diversification plan to navigate any.

And the two regions.

So what type of services you are.

Deliver from each one of them.

I think at any given point in time, there are some skills that might be more prevalent or stronger in a given region.

Obviously, our goal overtime is to sort of neutralize that and have the ability to.

To choose for anything that we're delivering choose any location in terms of sourcing a.

Experts that deliver that so.

For the most part the skills are very similar super capable great people and again, our long term goal would be that that everybody has a has some level of skill and pretty much everything we do so that again, we've got options to pick and choose wherever it makes the most sense for the client.

To draw on those deliveries resources.

Got it thank you.

Thank you.

Thank you. Our next question comes from Vincent Colicchio of Barrington. Your question. Please.

Yeah, Jeff a follow up on the last question. So what is your target for your geographic footprint.

Are you do you know yet.

What I mean, as you know what portion of offshore versus onshore.

You know I think first and foremost we're going to continue to take advantage of what we're seeing out there and you know as you can see we've been driving a 48% plus I think it was 75, even in the second quarter and and that's again why we've done those acquisitions, we see just a tremendous opportunity there.

I think our I think going forward you know.

Sort of Notionally I'd like to see offshore and near shore at a kind of get to what I think is a tipping point of maybe 50% in terms of revenue right. So we already mentioned that we're already there in terms of our consultants.

And and I'd like to see us get there in terms of revenue, where we'll really begin to see I think that that strong.

Long margin from those other regions really really driving some margin expansion for the company our windows.

When does that come about you know its tough to say if we can continue to drive.

The growth that we are now and I believe we will I don't see any reason we can't.

In terms of the offshore then you know I think it's about three years out where we could be approaching that level.

And can you provide an update on pricing.

Are we seeing any inflation given the market.

We're definitely seeing more openness among clients.

They're they're seeing it.

It's interesting, it's actually a real advantage for us, particularly in existing accounts, where.

We can see a lot of competitors really struggling to come up with resources and.

And that's actually opening up some opportunities for us so.

In terms of our rate increases, yes, again more openness to that we're getting a cola as an example, built into Msas now where that was difficult in the past of course, our business has changed now where MSA as you know in the past may have been short lived but as you know our focus on land and expand and maintaining those relationships and the average.

10 year those top 50 is I want to say about nine or 10 years. So so we're going back and even when we're renewing a new msas with those existing accounts, they're tolerant to to build in Cola and certainly in new accounts, we're getting higher rates than existing accounts. So I think there is tolerance and I think that's going to increase in fact.

We're doing are working hard to get out in front of it we've got our sales team pretty focused on that and we know that more is coming so we want to be on the front end of that.

Where do you stand with some of the discounts you gave during the pandemic.

Have some return to normal.

In terms of sorry, actually I would say I would say substantially all.

But you know you might recall.

Debt that we've pretty much cut those off in the first part of this year. So I'd say as we stand here today, there probably aren't many if any at all sort of pandemic discounts.

And last question I must have missed what was the organic growth in the quarter.

20% to 22%.

Thanks, great job in the quarter.

Makes sense.

Okay.

Thank you and as a reminder to ask a question. Please press star one on you touched on the telephone again Thats Star one on you touched on the telephone to ask a question.

Our next question comes from the line of Jack vendor Art of Maxim Group. Your question. Please.

Great. Good morning, guys. Thanks for taking my questions.

It's all a solid quarter solid guidance again.

Jeff first first question for you.

In your prepared remarks, you mentioned that revenue per billable call. It just typically more than double and sometimes triple relative to some of the other notable names in the space you said I think more due to strategic and mission critical work.

Our first question were you referring to your overall billable employees and or was this just offshore nearshore available employees.

That's overall, so overall overall our revenue per per employee, although I will tell you that our offshore or nearshore is typically above theirs as well.

Okay fantastic well interesting more so encouraging because of the fact that your average billable rates are.

Far below what you charge relative to some of the larger competitors.

Is this sort of average revenue Delta outperformance something you think that is sustainable.

And.

Our trend do you expect to continue over the next couple of years.

I'm trying to understand why you have such a I guess, a better say utilization factor, but you also just putting their employees to work more than others, even even if at a lower rate how how are you sustaining us.

Yeah, I don't think it's utilization so much I imagine that they run similar utilization to us and again, we're not running crazy utilization.

And kind of the low Eighty's is again, something we can sustain and have for quite some time now.

So I think it's actually more.

You know more a factor of where I think this is I know this is it and this is I think a really critical differentiator for us. It is the north American presence that we have that allows us to established.

Stablish very strategic relationships with the majority of our clients our clients, which are in the U S.

And so once we've established those and demonstrated the value that we bring to the table and the strategic nature.

We're able to command stronger rates certainly in North America, but then that extends to our offshore and near shore capability and you know the clients.

Place a value on the solution that we're delivering.

And again, we started earlier in the cycle than a lot of our competitors do and by that I mean, we're starting with ideation, we're starting with what is the business problem or business opportunity that the clients are trying to address so as we establish ourselves as an end to end provider with those clients and I'll kind of point back to those top 50 again.

And on the relationships that we have there those are not staff augmentation.

No those are a strategic solution driven engagements and and now we're able to extend more and more of that work into our offshore and nearshore capability with.

With very attractive rates, there as well.

Great Fantastic.

And then just one last question maybe for Tom.

You had 80 large deals in this third quarter and I'm not sure. If you touched on this during your prepared remarks, but are you able to provide any additional color regarding the number of seven figure and eight figure deals that either you closed in the third quarter or you expect to close in the upcoming.

Quarters, just because you touched on that last quarter.

Yeah, I didn't I didn't cover that Jack I'll tell you that our pipeline continues to grow and the number of deals continues to accelerate as Jeff mentioned the number of deals we're chasing is more than ever as far as the six and seven figure deals.

And don't have the numbers handy, but I will tell you Jack that they're accelerating and year over year I don't have it in front of me, but continue to increase the large deals that are coming into the pipeline.

Okay Fair enough, that's all I need to know great quarter guys.

Back in the queue.

Thanks, Brad.

Thank you at this time I'd like to turn the call back over to Jeff Davis for closing remarks, Sir.

All right well as you can see things are going very well at proficient and were super excited not only about.

The past results, but clearly the fourth quarter and we've talked a lot about.

The longer term outlook, as well and particularly 'twenty two because we've got great visibility and end to end feel really strongly about so we'll look forward to speaking to all of you again in February. Thank you for your time today.

And this concludes today's conference call. Thank you for participating you may now disconnect.

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Today's conference May be recorded she didn't require any further assistance. Please press star zero I would now like to hand, the conference over to your Chairman and CEO, Jeff Davis. Please go ahead.

As typical we've got about 10 to 15 minutes of prepared comments after which we'll open up the call for questions.

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

Sure Thanks, Jeff and good morning, everyone. Some of the things we will discuss in today's call concerning future company performance will be forward looking statements within the meanings of the securities laws actual results may materially differ from those discussed in these forward looking statements. 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 in our earnings release, including our.

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

The most directly comparable financial measures prepared in accordance with GAAP on our website under Investor Relations Jeff.

Thank you Paul and once again, thanks, everyone for joining we're pleased to be with you here. This morning to discuss our third quarter results and provide guidance for fourth quarter and the remainder of 2021.

As youll see that guidance, obviously reflects our accelerating momentum and confidence proficiency.

Proficient strong performance continued in the third quarter as we built upon our first half success continued to gain new customers expand existing relationships and take share as we head into the final weeks of 2021 and look forward to 2022 and beyond our business has never been stronger.

Digital transformation is driving tremendous spend and proficient own transformation as uniquely positioned us as a true next generation global digital consultancy that is poised for robust and sustainable growth.

Organic offshore revenue during the quarter grew 48% driven.

We've met their stringent criteria for inclusion.

But it's a combination of a strong U S presence with a deep and geographically dispersed global footprint that sets proficient apart we.

<unk> colleague is typically more than double and in some cases triple of those firms and that's because we're engaged in a more strategic and mission critical work.

Sure.

Net global talent helps us it helps insulate us from some of the geopolitical challenges others have had or may have in the future.

And as we expand globally, we're focused on diversifying within regions as we have in the U S. For example, our footprint in India now includes Chennai, Nagpur and Bangalore and while we are now among the top technology provider employers in Colombia.

The acquisition of Overactive. It brings our presence in South America to now include Argentina, Chile and Uruguay.

<unk> chips that expanded our relationship that expanded before our two most recent nearshore acquisitions.

We'll share the full details regarding large wins during the quarter.

Bookings remained strong and as importantly, the pipeline continues to grow in fact, our total pipeline and very importantly, our weighted pipeline is stronger than it's ever been.

Thanks, Joe services revenue, excluding Reimbursable expenses were $190 1 million for the third quarter 2021, 22, 5% increase over the prior year services gross margin, excluding reimbursable expenses and stock compensation increased 40 basis points to 43%.

SG&A expense was $39 3 million for the third quarter of 'twenty one.

Compared to $34 6 million in the prior year SG&A as a percentage of revenues decreased to 24% grew 21, 9% in the third quarter of 2020 adjusted EBITDA for the third quarter of 2021 was $41 5 million or 21, 5% of revenues compared to $31 one.

Million or 19, 8% of revenues in the third quarter of 2020.

The third quarter quarter, 2021 included amortization of $4 3 million compared to $7 2 million in the prior quarter. The decrease in amortization expense was primarily due to certain intangibles.

<unk> acquisition, becoming fully amortized.

Interest expense for the third quarter of 2021 increased to three.

$5 million from $2 8 million in the prior year, primarily as a result of the August 2020 convertible debt offering our effective tax rate for the third quarter of 2021 was 28, 1% compared to 27, 6% in the third quarter of 2020, the increasingly effective tax rate was primarily due to an increase in the Colombian tax rate.

That occurred in September 2021, and the related nonrecurring adjustments in Columbia, and deferred tax liabilities net income increased 182% to $17 4 million for the third quarter of 2021 from $6 2 million in the third quarter of 2020, primarily as a result of higher revenues and lower SG&A as a percentage of revenues.

Our amortization expense lower loss on extinguishment of debt or just the superior value of contingent consideration.

Diluted GAAP earnings per share increase of 48 cents a share for the third quarter 2021 from <unk> 19 in the third quarter of 2020.

Adjusted earnings per share increased to 88 cents a share for the third quarter of 2021 from <unk> 67 in the third quarter of 2020.

You can see the press release for a full reconciliation to GAAP earnings.

8%.

SG&A expense was $110 7 million compared to $101 7 million in the prior year and SG&A as a percentage of revenues decreased to 23% from 22, 6% in the nine months ended September 32020.

<unk> 6 million in the prior year.

Net interest expense for the nine months ended September 32021 increased to $10 1 million from $6 8 million in the prior year again, primarily as a result of the August 2020.

Convertible debt offering.

Our effective tax rate increased to 25, 3% for the nine months ended September 32021 from 24, 2% for the nine months ended September 32020, net income for the nine months ended September 32021 were $47 6 million compared to $21 8 million in the prior year, primarily as a result of higher.

Revenues gross margins lower SG&A as a percent of revenues lower acquisition costs lower loss from extinguishment of debt and other adjustments to fair value of contingent consideration. This resulted in diluted GAAP earnings per share increasing to $1 39 for the nine months ended September 32021, compared to <unk> 67.

Prior year.

Adjusted earnings per share increased to $2 49 for the nine months ended September 32021 from $1 74 prior year.

Billable headcount at September 32021 was 4827, which includes 4499 global consultants and 328 subcontractors and the SG&A headcount was 710.

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

At September 32021 was $186 5 million, we also had $56 4 million in cash and cash equivalents.

Remember through 2021, and $199 8 million of unused borrowing capacity under our credit facility. Our balance sheet continues to leave us well positioned to execute against our strategic plan and finally, our days sales outstanding on accounts receivable decreased to 71 days from 73 days in the third quarter of 2020, I will now turn the call over to <unk>.

Tom Hogan for a little more commentary on the metrics.

Home delivery by the way is embedded into virtually every one of those wins.

Here are a couple of examples of the work we're doing we're continuing our partnership with a leading health care technology company to consolidate multiple portals until a centralized customer experience. This multi year multi shore delivery strategy that spanned our teams in India, Latin America, and North America will create a single support portal for their clients.

<unk> entire line of products, while migrating to a streamline system. The new portal will ultimately reduce call volume enable customer self service and transitioned thousands of users to the new site and introduce single sign on functionality.

Another example are proficient Latin America team alongside our cross Bu onshore teams are using multiple technology stack to create three custom products that will improve the customer onboarding and support experience for a new financial services client.

Cash access and ticket redemption service provider, our partnership will optimize the client's digital strategy reduce current customer service cost and improve the digital customer and employee experiences.

Currently a self service.

Growing our service business is always a balancing act here, they're trying to find demand to support your supply are building supply to meet demand and the current environment. The most pressing challenge is certainly around recruiting and retaining talent.

Good news is we're succeeding on that front as well.

As we compete for talent in the market proficient the value proposition is resonating strongly because we've made a conscious effort to build a unique and compelling culture to ensure proficient is perceived as an employer of choice.

As we know it's working because our employees themselves.

Are telling us that they are engaged excited and enthusiastic about proficient. We recently conducted an all colleague employee engagement survey, where an outstanding 98% of our employees responded.

Stan employee survey responses are well below that particularly a company of our size.

But a proficient colleagues noticed their voices are valued and can and will drive improvement at least based.

Based on employee feedback, we've done things like increase our paternity and maternity coverage launch wellness programs and services that employees and their families can access we've created thriving employee resource groups, including women in technology and are giving <unk>. The focus is entirely on volunteerism and philanthropy.

Our our colleagues are excited about building curious a proficient because.

We asked for it and react to it but their feedback is collectively helping us grow and shape our future together.

That is a key reason, we feel great about sustaining and growing our performance over time.

Thanks, Tom so proficient expects.

Fourth quarter 2021 revenue to be in the range of $203 million to $209 million fourth quarter GAAP earnings per share is expected to be in the range of 61 to 64 cents fourth quarter adjusted earnings per share is expected to be in the range of 90 to 93.

And proficient expects its full year of 2021 revenue to be in the range of $749 million to $755 million.

<unk> 21, GAAP earnings per share in the range of two to $2 to $2.03.

And 2021 and adjusted earnings per share in the range of $3.38 to $3 41.

So with that operator, we can open up the call for questions.

Thank you as a reminder to ask a question you will need to press star one on your Touchtone telephone to withdraw your question press the pound key once again Thats star one on your Touchtone telephone to ask a question. Please standby, while we compile the Q&A roster.

Our first question comes from the line.

Surrender sorry.

Sorry, Surinder time of Jefferies. Your line is open.

Good morning.

Congratulations on the results from it.

Thank you.

My first question is about the deal pipeline and revenue visibility can you maybe talk you mentioned that I think on a weighted average it's the largest it's ever been at this point can.

Can you maybe talk about.

What when you with these large wins what is kind of doing to the overall length of your projects at this point or are we beginning to see some measurable changes.

In duration here and then maybe can you talk a little bit about.

From a demand perspective, how far in advance do clients now need to kind of lock up resources for you.

Sure. So we are.

We definitely are seeing are the relationships and the projects extend in duration definitely.

That's the reason the backlog is what it is and by the way when I referred to.

The weighted pipeline and even the backlog because I just referred to I'm talking both obviously in absolute dollars, but also as a percent of our forecast so.

To your to your question or to your point, we're definitely increasing our visibility.

We can we have a pretty clear line of sight into and through Q1 now.

And and really we're getting a pretty good handle on what we think 'twenty two is going to shape up like so.

We're feeling quite good about that and definitely increasing if you take out say the bottom 10% of deals doing just simple statistics.

Yes, you'll see that the.

The duration of projects as extended substantially over say two three years ago.

There were 10% I'm, referring to as often.

Oftentimes new relationships start small.

So again, if you kind of take those out you will see that the rest of it is quite extended.

In terms of.

Staffing, we're actually having great success as Tom mentioned.

Recruiting is going well and.

We're able to staff projects.

Pretty much in real time, I mean, there might be.

Obviously, it is a planning cycle involved and typically a project might only start with an architect.

A team lead.

There's really they're pulling those plans together and laying them out so there's a sort of an inherent.

Opportunity upfront for us to work on staffing while that planning is underway. So that's working well, we're not experiencing any delays due to staffing.

That's helpful and then.

Industry specific question.

Obviously, youre seeing continued growth from the financial services side.

On the healthcare side it seems like when I look at revenues on an absolute basis or at least my calculations suggest that they've been kind of flat to down the last couple of quarters.

Any color you can provide there.

In terms of what's going on within financial services, where things seem to be trending really well in health care, where it seems to be a bit more flat yeah.

Yeah, I mean keep in mind the backdrop there as we're growing 20 plus percent organic so so when you say flat I would say, it's maybe dropped or flat on a relative basis, but still growing in that double digit range now that said.

It does ebb and flow like a lot of our industries due to a small degree I would say and in fact, the bookings in health care.

In the third quarter were really substantial so I actually think we'll see a tick up there as well the good news is that a lot of the reason that.

That youre seeing it on a relative basis, maybe slow a little bit.

Is that we're seeing other sectors really pick up and you hit on one that we're really excited about which is financial services and financial services space. We've got a really formidable management consulting team and do a lot of management consulting in that space and have for a long time and I've often felt and collectively we agreed that we were underrepresented in.

Technology, there so we really put out a concerted effort over the last 12 to 24 months to address that and you're seeing some of the results of that so we're excited about financial services in the future. There I think that's going to continue to outpace other sectors for US right now and again a lot of it's because we were underrepresented but of course the spenders.

Increasing there as well so.

Hopefully that answers your question.

That's very helpful and then just.

One other question here.

Can you maybe talk a little bit about that.

The dynamics of having a more global footprint at this point.

When I think about obviously the nearshore capabilities you've added in South America I also start thinking about the cost structure in currency fluctuations and so forth.

Is that generally handled through.

Hedging or do you pay people in U S dollars or how should we think about the complexity that that adds to your expense and potentially the volatility for them yes.

Yep. It adds some complexity of course, given the scale that overactive wasn't really PSL that we did last year.

Mature businesses that have good infrastructure debt and that we're going to be combining overtime, but leaving a lot of it largely intact.

Because they operate exclusively in South America, and they've got really strong management there. So we're leveraging that.

To address that complexity as it were but yes, we hedge we.

We don't pay in U S dollars, we pay in local currency.

We use hedging vehicles too to address volatility and it's worked very well thus.

Thus far in <unk>.

We'll see how it plays out there's some you know we're entering a little more some countries that are a little more volatility, but so far we've had great success in hedging.

Thank you I'll get back in the queue sure.

Thank you. Our next question comes from Maggie Nolan of William Blair. Your line is open.

Yes, absolutely kind of as I just alluded to.

These are these organizations have strong talent acquisition capability already in place. So while we were obviously going to plug that into sort of our centralized engine from helping them from a marketing standpoint.

And getting a getting out there with the branding.

The reality is again, we're going to continue to leverage the ta.

Have in place and they've had great. These are these are fast growing businesses and had been for a while.

So they've got a formidable team in place and again, we'll be leveraging that and scaling it.

As we as we need to and I believe we will need to because the demand there is just tremendous.

Okay, and then you've been operating comfortably above the 20% adjusted EBITDA level in terms of margin for a couple of quarters here. When we think about a little bit more long term, what's the balance you're envisioning for reinvesting into the business for growth.

<unk> versus <unk>.

Letting margins kind of continue to expand that you're delivering.

Delivery footprint has changed that much yes. Good question of course, we've continued to reinvest in the business all along the way so there's not sort of a stair step function. There that's going to kick in along the way, we're going to continue that level of investment.

Which is typically sort of at or with our growth level.

In terms of a lot of that reinvestment again, I think that's more of a kind of a linear straight.

Straight line in any kind of a stair step so I see that continuing at the level that it is.

In terms of adjusted EBITDA or EBITDA margins I do think there is expansion opportunity continuing we're enjoying some nice economies I've mentioned before that.

This year, we're clearly on a path to be around a couple of hundred basis point expansion on EBITDA looking forward will we continue at that clip of expansion, probably not but I do think it will continue to expand in.

I, probably wouldnt hazard, a guess too much into next year, but you know I think maybe half of that is achievable. So obviously, we will be providing guidance on next year later.

But we feel good about again some continued at least modest expansion and if you consider a 100 basis points modest and I.

I think that's going to continue for quite some time and still allow for reinvestment.

Yeah.

Okay. Thanks, Congrats on another beat right.

Thanks Maggie.

Thank you. Our next question comes from Tandon of Needham Your question. Please.

Thank you good morning, Jeff.

Should we expect another year of at least low double digit growth in 2022, even though you're not giving specific guidance, maybe just some color. So we can.

B a more appropriate with our models as we look out into next year I'm happy to do that.

So yes, the implied guidance at the midpoint for Q4 is just over 22021%.

And that's at the mid point and obviously, our goal will be to to come in above that so the implied is again around 2021 and yeah. As we look ahead to next year and I mentioned earlier that we're getting some good visibility certainly into Q1 and even the first half.

We're feeling really good about sustaining growth levels at or near where we're at so I think yeah.

Yes double digits for sure.

And I would say you know probably a high teens and I don't I don't see any reason right now what we can sustain.

The levels that we're that we're driving right now as we look ahead and looking at our pipeline and looking at the bookings that we're enjoying in the bookings that we're putting up now.

Primarily impact Q1, and Q2, so Q4 is in the bag. So.

Those are good indicators of deck that we'll be able to sustain high growth levels similar to what we're enjoying now.

That's great to hear and then just turning to the balance sheet I was curious in terms of funding the overactive acquisition.

The cash on hand, and access to credit could you just talk about what your plans are and then maybe potentially building in some more ammunition for future M&A if that is something on the agenda.

Sure you know the.

The MLS.

Paul chime in here as well, but in terms of funding overactive, we had cash on the balance sheet. We did take a small draw on the line I think $40 million or so.

To make up the balance of that but you know our cash flow is tremendous. We are you know are a free cash flow is really good and so even when we do these large acquisitions that we've done over the last 12 months or so.

We're able to pay that down pretty quickly so I point back to PSL and that was it.

What eight figure nine figure deal and.

We ended up here a year later with still $50 million on the balance sheet. So I think the alignment. We have is maybe it is more than adequate to do what we do accomplish what we want to but Paul is there anything you'd like to add to that.

No I think that's I think the main thing we did a combination of cash or draw on the line as Jeff said to fund the overactive deal Q4, specifically it is generally a strong cash flow generation quarter. So.

Help us.

And as always we look at our balance sheet and opportunities on what are we going to do to continue to fund our growth and we feel we're well positioned to do so.

While our line has a 200 million plus an accordion feature it.

That's correct I think it's a 75 million accordion feature and a $200 million alignment.

We have $40 million or $50 million against right now.

Right very helpful. Thanks, so much Jeff and Paul.

Thanks, Mike sure.

Excellent.

Thank you. Our next question comes from Brian Kim Smith of <unk>.

<unk> Global partners your question please.

Hey, guys great results.

Yeah Fair question. So utilization is running you know.

Annie to 82%, which we sustained now for several quarters. If you go back even into 2020, frankly during kind of the toughest part of the pandemic. We were still over 80. So 80 to 82 is a is the range that we like to be in and we feel confident as sustainable.

In terms of attrition.

Attrition has kicked up a little bit I think there was some pent up demand I mean, we were in the low <unk>.

You know double digits, 11% I think was the bottom last year during the height of the pandemic.

So I think we're seeing a little bit of a tick up there that I believe is probably temporary but we're a little over 20% and 22, 23%.

In this past quarter on an annualized basis year to date, it's actually still below 20 on an annualized basis.

Our goal around that by the way is 15% to 20%.

I think generally below 15 is unhealthy just like above 20 is costly. So so our goal would be to be somewhere around the middle of that but you know given the circumstances in the environment. We're in.

I think we.

We can expect.

The higher end of that 15 to 20 and as Tom pointed out in the early part of the call.

We are really shoring up a very strong or I should say scaling up a very strong platform with the talent acquisition that we've got in place. So the team has done an amazing job there of recruiting against that but also our recruiting on top of that obviously got tremendous growth and as I said before we're not experiencing.

We're answering.

Hindrances due to labor shortages, so we're able to meet our demands.

And.

In terms of in terms of wage inflation.

I don't know that I don't recall anybody necessarily alluding to that but.

Yeah, we're seeing about 3% I mean, we're not seeing anything yet.

<unk> sort of our normal raise pool in any given year.

So so right now.

Wage increases this year will be around 3%, maybe three to four somewhere in there.

But to your point.

Part of our <unk>.

Part of the reason that we're able to to afford that without affecting the P&L. Much is clearly the shift to or I should say the incremental revenue going to offshore which is a very very high margin.

Delivery service right in the 50% to 55% range and we're often seeing rates tick up again as well so we've got out.

So we're very careful about that but we just haven't been able to inch up rates were up about in North America were up about $2 from last quarter. So that's about one 5% on a single quarter I'm that doesn't suggest that we're gonna do 6% over a year.

Well, we are seeing a jump off which will help offset that cost.

That's great.

A couple.

Quick ones on overactive it sounds like a trailing 12 months a $40 million can you tell us what organic growth wise.

Utilization similar or is it lower you can absorb people and then just comment on their geography do they have a local customers that don't have that arbitrage or are they all north.

North American and European customers. Thank you all for me.

Yeah, no. The utilization there is about the same as us their organic growth has been higher large you know a law of large numbers. So there the organic growth I want to say, it's been in the 30 plus percent maybe close to 40.

And again similar utilization so we weren't looking at it as sort of overnight capacity, we're looking more at their access to the talent pool, which they have demonstrated.

To perform very well with.

And and Yeah. There is there are local customers there are some.

Domestic customers in Latin America.

They probably brought a little more than PSL did but we also gained some from PSL. Obviously, we continue to or we intend to continue to service that that market, but we also intend to drive a lot of demand or a lot of increased demand.

From our existing client base, which is mostly North America, but we've got some global customers as well.

Great. Thanks, so much.

Thank you.

Yeah.

Thank you. Our next question comes from Puneet Jain of.

J P. Morgan. Please go ahead.

Hey, Thanks for taking my question.

High teens curve for next year.

Classification.

We expect our organic growth or reported.

I personally talked to this.

No I was speaking just organic.

That's great that would be like very bullish like with like the Permian growth rate continuing into next year. So would you attribute that to.

Just to like strong demand trends as clients continue to spend in Bristol, Indiana or.

Or look back.

Be more driven by frustration supposed to take time, but that's just more of a symptom of pain.

But you didn't have before.

I think it's the latter and you've probably heard me talk about this for a while now we've been getting many years ago. Now we had done a lot of work on our sales platform in terms of the organization the tools the prescriptive nature of quotas.

Etcetera, and really equipping that team we've improved our onboarding, we recruit improved our talent acquisition. There. So that we're getting better success out of our sales folks that were hiring we've got a very robust platform now that is very scalable and as I mentioned earlier, that's where a lot of our reinvestment in the business will go will be too.

Creasing, our sales capacity, because we know that if we get to the table we win more than we lose so we're going to continue to focus on that and I think a lot of it is coming from that.

For sure, which is running a you know a rate that's about a quarter of our U S rate. So if.

That's the point of a Bad example, and you know I think that's going to continue not just in the top 50.

But in other accounts as well and then lastly, I would say certainly.

The market is good for digital transformation services digital experience.

So we're in a good spot as well it just in certain sensitive in terms of the broader market.

Got it.

I appreciate that and good luck in America as Big as India in terms of delivery.

Footprint, how do we think about your Oh globally.

Like I said plants and not at any cost.

And the two regions in terms of what type of services you.

From each one of them.

Yeah, I think at any given point in time.

There are some skills that might be more prevalent or stronger in a given region.

Obviously, our goal over time is to sort of neutralize that and have the ability.

To choose for anything that we're delivering choose any location in terms of sourcing a.

Experts to deliver that so for.

Got it thank you.

Thank you.

Thank you. Our next question comes from Vincent Colicchio of Barrington. Your question. Please.

Yeah, Jeff a follow up on the last question. So what is your target.

For your geographic footprint.

Are you do you know yet.

And what I mean.

As you know what portion of offshore versus onshore.

I think our I think going forward, you know sort of notionally I'd like to see offshore and near shore.

At kind of get to what I think is a tipping point of maybe 50% in terms of revenue right. So we already mentioned that we're already there in terms of our consultants.

And and I'd like to see us get there in terms of revenue, where we'll really begin to see I think that that strong margin from those other regions really really driving some margin expansion for the company.

When does that come about you know its tough to say if we can continue to drive.

The growth that we are now and I believe we will I don't see any reason we can't.

In terms of the offshore then you know I.

I think it's about three years out where we could be approaching that level.

And can you provide an update on pricing.

Are we seeing any inflation given the market.

We're definitely seeing more openness.

Clients are.

They're there they're seeing it.

It's interesting, it's actually a real advantage for us, particularly in existing accounts, where.

We can see a lot of competitors really struggling to come up with resources and.

And that's actually opening up some opportunities for us so.

In terms of our rate increases, yes, again more openness to that we're getting a cola as an example, built into Msas now where that was difficult in the past of course, our business has changed now where MSA as you know in the past may have been short lived but as you know our our focus on land and expand and maintaining those relationships and the average.

N year those top 50 is I want to say about nine or 10 years. So so we're going back and even when we're renewing a new msas with those existing accounts. They are tolerant to to build in Cola and certainly in new accounts, we're getting higher rates than existing accounts. So I think the risk tolerance and I think that's going to increase in fact.

We're doing are working hard to get out in front of it we've got our sales team pretty focused on that and we know that more is coming so we want to be on the front end of that.

Where do you stand with some of the discounts you gave during the pandemic.

Have some return to normal.

In terms of sorry, actually I would say I would say substantially all but.

Might recall.

That we've pretty much cut those off in the first part of this year. So I'd say as we stand here today, there probably aren't many if any at all sort of pandemic discounts.

And last question I must have missed what was the organic growth in the quarter.

20% to 22%.

Thanks, great job in the quarter it makes sense.

Okay.

Thank you and as a reminder to ask a question. Please press star one on you touched on the telephone again Thats star one on your touch.

On the telephone to ask a question.

Our next question comes from the line of Jack vendor Art of Maxim Group. Your question. Please.

Yes.

Great. Good morning, guys. Thanks for taking my questions.

It's all a solid quarter solid guidance again.

Jeff first first question for you.

In your prepared remarks, you mentioned that revenue per billable call. It just typically more than double and sometimes triple relative to some of the other notable names in the space and you said I think more due to strategic and mission critical work.

First question were you referring to your overall billable employees.

Or was this just offshore nearshore federal employees.

That's overall, so overall overall our revenue per per employee, although I will tell you that our offshore or nearshore is typically above theirs as well.

Okay fantastic well interesting more so encouraging because of the fact that your average billable rates are far below what you charge relative to some of the larger competitors is this sort of average revenue Delta outperformance something that you think that is sustainable.

And.

Yeah, I try and do you expect to continue over the next couple of years.

I'm trying to understand why you have such a I guess, a a better say utilization factor, but youre also just putting their employees to work more than others, even even if at a lower rate how how are you sustaining us.

Yeah, I don't think it's utilization so much I imagine that they run similar utilization to us and again, we're not running crazy utilization.

And kind of the low Eighty's is again, something we can sustain and have for quite some time now.

I think it's actually more you know more a factor of where I think this is I know this is it and this is I think a really critical differentiator for us. It is the north American presence that we have.

It allows us to established.

<unk> very strategic relationships with the majority of our clients our clients, which are in the U S.

And and so once we've established those and demonstrated the value that we bring to the table and the strategic nature.

We're able to command stronger rates.

Certainly in North America, but then that extends to our offshore and near shore capability.

The clients are.

Place a value on the solution that we're delivering.

And again, we start earlier in the cycle than a lot of our competitors do and by that I mean, we're starting with ideation, we're starting with what is the business problem or business opportunity that the clients are trying to address so as we establish ourselves as an end to end provider with those clients and I'll kind of point back to those top 50 <unk>.

Again.

The relationships that we have there those are not staff augmentation.

You know those are strategic solution, driven engagements and and now we're able to extend more and more of that work into our offshore and nearshore capability.

With a very attractive rates there as well.

Great Fantastic.

I appreciate that and then just one last question maybe for Tom.

And don't have the numbers handy, but I'll tell you Jack that they're accelerating and year over year I don't have it in front of me, but continue to increase the large deals that are coming into the pipeline.

Okay Fair enough, that's all I need to know great quarter, guys I'll hop back in the queue.

Thanks, Jack Thanks, Neil.

Thank you at this time I'd like to turn the call back over to Jeff Davis for closing remarks, Sir.

Alright, well as you can see things are going very well at proficient and were super excited not only about.

The past results, but clearly the fourth quarter and we've talked a lot about.

The longer term outlook, as well and particularly 'twenty to do we've got great visibility and end to end I feel really strongly about so we'll look forward to speaking to all of you again in February. Thank you for your time today.

And this concludes today's conference call. Thank you for participating you may now disconnect.

Q3 2021 Perficient Inc Earnings Call

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