3 Reasons 2021 Could Be Perficient’s ‘Strongest Year’ Yet

‘Just more than two months ago, we issued a full year forecast that called for accelerating revenue growth and increasing profitability,’ CEO Jeffrey Davis said in a recent earnings call. ‘Since then, the velocity and intensity of our momentum has only grown.’

Perficient is on a roll. International growth, a strong sales pipeline and accolades from vendors and Wall Street are among the reasons executives at the digital consultancy are bold on their expected performance this year.

CEO Jeffrey Davis (pictured above) told listeners on the company’s most recent earnings call that the company saw no negative financial effects from COVID-19, that it’s on a hiring spree in multiple countries and hopes to close two or three acquisitions this year, one by the third quarter.

“Just more than two months ago, we issued a full year forecast that called for accelerating revenue growth and increasing profitability,” Davis told listeners on the April 29 earnings call. “Since then, the velocity and intensity of our momentum has only grown.”

Perficient, based in St. Louis and one of the few publicly traded channel partner companies, reported total revenue of $169.3 million for the first quarter of its fiscal year, representing the three months ended March 1. That revenue is a 16 percent increase year over year and 4 percent growth over the prior quarter. And in April, Red Hat named Perficient — No. 55 on CRN’s Solution Provider 500 for 2020 — the North American Application Platform Success Partner of the Year.

The company has turned to hiring to help its growth, with 300-plus new employees in North America and hundreds in India and Colombia. Perficient closed on three acquisitions during the first half of 2020. And although no new acquisitions are pending, potential Latin American acquisitions could be on the horizon, Davis said. “I’m still optimistic we can get a couple or three deals done this year,” he said.

“Nothing has slowed us down in the second quarter so far,” Davis said. “And at the moment, I can’t see anything that prevents 2021 from becoming the strongest year in Perficient’s history.”

The St. Louis-based company has partnerships with vendors including IBM, Red Hat, Microsoft, Salesforce, AWS, Google and Oracle. Davis told investors that Perficient is competing with major channel partners and beating the competition in offshore digital capabilities.

Here’s what else you need to know.

Growth At Home...

Perficient reported North American utilization rates at or above its 80 percent goal for the past four quarters.

COVID-19 did not hurt Perficient’s finances, with no quarterly contraction in 2020. And Perficient landed 92 deals with contract values greater than $500,000, a year-over-year increase of 30 percent and increase from the previous quarter of 31 percent, with customers clamoring for help with digital transformation.

Perficient’s earnings elicited positive write-ups from at least two investment banks.

“The organic growth acceleration from 3% in 2020 to 12% in 2021 (per our forecast) adds confidence to our view that the company is well positioned to grow rapidly over the next few years,” according to an analyst note from Barrington Research. “In addition, management’s plan to rapidly grow the offshore business, which is experiencing strong demand, should enable it to drive solid margin improvement over the next few years.”

A note from William Blair & Co. called Perficient “well positioned to grow faster than the broader IT services industry given its end-to-end approach to digital transformation, consulting capabilities, and digital marketing expertise.”

“We expect strong demand for digital transformation will ramp up in the wake of COVID-19, and we believe that Perficient can sustain a consistent 10% organic CAGR (compound annual growth rate) coming out of the pandemic given the company’s strong win rates and large deal wins,” according to the report. “Long term, we are confident that the company can build on the momentum of its restructured salesforce and execute on margin-expansion initiatives. Further, we expect the company to continue its acquisition strategy to supplement top-line growth. Perficient targets three to four acquisitions a year totaling roughly $50 million in runrate revenue.”

Perficient executives told investors to expect second quarter revenue in the range of $173 million to $179 million and full year 2021 revenue between $685 million to $710 million.

The stock traded at $67.45 Wednesday, up about 3 percent from the day of the earnings call and about 44 percent year to date.

… And Growth Abroad

Perficient saw organic offshore revenue growth during the quarter of 42 percent, with total offshore revenue more than doubling year over year. More than 40 percent of its delivery resources are now offshore.

“New and existing customers are aggressively embracing our differentiated delivery model, which couples a strong and high-touch domestic presence with the nearshore and global delivery capabilities enterprises require today,” Davis said April 29.

He continued: “In some cases, we’re helping clients maximize their budget potential by transitioning some work to offshore. And by that, I want to be clear, the budget remains the same. So the outcome is a win-win for both the client and us.”

Davis told investors he expects to grow the company’s margins through more offshore work, which represents 14 percent of the company’s revenue, about double year over year.

Success In Multiple Verticals

Perficient reported 24 percent growth year over year growth in its health care, pharmaceuticals and life sciences booking, which represented 32 percent of its first quarter revenue. From the previous quarter, however, this vertical fell 1 percent.

Leisure, media and entertainment grew 25 percent quarter over quarter and represented 6 percent of first quarter revenue.

Retail and consumer goods grew 17 percent quarter over quarter and represented 9 percent of first quarter revenue.

Perficient did see a drop in its manufacturing vertical, which declined 15 percent quarter over quarter and represented 9 percent of first quarter revenue.

Auto and transportation grew 16 percent quarter over quarter and represented 10 percent of first quarter revenue.

Financial services, banking and insurance bookings were up 17 percent year over year and represented 17 percent of first quarter revenue. From the previous quarter, this vertical increased 11 percent.

Among the new deals Perficient landed is the overhauling of a non-profit health insurance provider’s legacy website, mobile experience and customer portal, a contract of at least $10 million.

Another example of recent work was an investment banking services holding company that hired Perficient to create a centralized location to interact with information. The second phase of the project will require Perficient’s delivery team to expand to more than 130 onshore and offshore subject matter experts providing expertise on data platforms and core development solutions.

“That’s really the type of success that really underscores the traction we have in the market and how well we’re executing right now,” Perficient President and Chief Operating Officer Tom Hogan said on the April 29 call. “We still cannot travel to meet our customers and prospects, and we’re not working on-site anywhere, yet we have won more large deals than ever before during Q1.”