prft-20240331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-15169

PERFICIENT, INC.

(Exact name of registrant as specified in its charter)

Delaware

No.

74-2853258

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

555 Maryville University Drive

Suite 600

Saint Louis, Missouri 63141

(Address of principal executive offices)

(314) 529-3600

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 par value	PRFT	The Nasdaq Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements during the past 90 days. þ Yes o No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). þ Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	þ	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ

As of April 25, 2024, there were 35,156,319 shares of Common Stock outstanding.

TABLE OF CONTENTS


Part I.	Financial Information	1

Item 1.	Financial Statements	3

	Condensed Consolidated Balance Sheets as of March 31, 2024 (unaudited) and December 31, 2023	3

	Unaudited Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2024 and 2023	4

	Unaudited Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2024 and 2023	5

	Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2024 and 2023	6

	Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2024 and 2023	7

	Notes to Interim Unaudited Condensed Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	28

Item 4.	Controls and Procedures	29

Part II.	Other Information	29

Item 1A.	Risk Factors	29

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29

Item 5.	Other Information	30

Item 6.	Exhibits	31

	Signatures	32

PART I. FINANCIAL INFORMATION

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained in this Quarterly Report on this Form 10-Q (“Form 10-Q”) are not purely historical statements, discuss future expectations, contain projections of results of operations or financial condition, or state other forward-looking information. Those statements are subject to known and unknown risks, uncertainties, and other factors that could cause the actual results to differ materially from those contemplated by the statements. The “forward-looking” information is based on various factors and was derived using numerous assumptions. In some cases, you can identify these so-called forward-looking statements by words like “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or the negative of those words and other comparable words. You should be aware that those statements only reflect our predictions and are subject to risks and uncertainties. Actual events or results may differ substantially. Important factors that could cause our actual results to be materially different from the forward-looking statements include (but are not limited to) the following:

(1)the impact of the general economy and economic and political uncertainty on our business;

(2)risks associated with potential changes to U.S. and foreign laws, regulations, and policies;

(3)risks associated with the operation of our business generally, including:

a. client demand for our services and solutions;

b. effectively competing in a highly competitive market;

c. risks from international operations including fluctuations in exchange rates;

d. adapting to changes in technologies and offerings;

e. the ongoing transition of our executive leadership team;

f. obtaining favorable pricing to reflect services provided;

g. risk of loss of one or more significant software vendors;

h. maintaining a balance of our supply of skills and resources with client demand;

i. changes to immigration policies;

j. protecting our clients’ and our data and information;

k. changes to tax levels, audits, investigations, tax laws or their interpretation;

l. making appropriate estimates and assumptions in connection with preparing our consolidated financial statements; and

m. maintaining effective internal controls;

(4)risks associated with managing growth organically and through acquisitions;

(5)risks associated with servicing our debt, the potential impact on the value of our common stock from the conditional conversion features of our debt and the associated convertible note hedge transactions;

(6)legal liabilities, including intellectual property protection and infringement or the disclosure of personally identifiable information;

(7)the risks detailed from time to time within our filings with the Securities and Exchange Commission (the “SEC”);

(8)uncertainties associated with the proposed merger of Perficient with an affiliate of BPEA Private Equity Fund VIII (“EQT Asia”);

(9)the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement entered into in connection with the proposed merger;

(10)risks related to disruption of management time from ongoing business operations due to the proposed merger;

(11)the risk that the conditions to the proposed merger may not be satisfied in a timely manner or at all;

(12)the risk of any unexpected costs or expenses resulting from the proposed merger;

(13)restrictions imposed on our business during the pendency of the proposed merger;

(14)the risk of any litigation relating to the proposed merger; and

(15)the risk that the proposed merger and its announcement could have an adverse effect on the ability of Perficient to retain and hire key personnel and to maintain relationships with customers, vendors, partners, employees, stockholders and other business relationships and on its operating results and business generally.

This discussion is not exhaustive, but is designed to highlight important factors that may impact our forward-looking statements. Because the factors referred to above, as well as the statements included under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023, including documents incorporated by reference therein and herein, could cause actual results or outcomes to differ materially from those expressed in any forward-looking statement made by us or on our behalf, you should not place undue reliance on any forward-looking statements.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. We are under no duty to update any of the forward-looking statements after the date of this Form 10-Q to conform such statements to actual results.

All forward-looking statements, express or implied, included in this report and the documents we incorporate by reference that are attributable to Perficient, Inc. and its subsidiaries (collectively, “we,” “us,” “Perficient,” or the “Company”) are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that the Company or any persons acting on our behalf may issue.

Item 1. Financial Statements

Perficient, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share information)


	March 31, 2024 (unaudited)		December 31, 2023
Assets
Current assets:
Cash, cash equivalents and restricted cash	$	118,193	$	128,886
Accounts receivable, net	171,838		178,998
Prepaid expenses	5,758		5,638
Other current assets	13,548		12,431
Total current assets	309,337		325,953
Property and equipment, net	10,375		11,996
Operating lease right-of-use assets	22,812		21,786
Goodwill	613,790		581,387
Intangible assets, net	75,430		71,118
Other non-current assets	53,936		52,364
Total assets	$	1,085,680	$	1,064,604

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	13,919	$	18,688
Other current liabilities	60,104		59,784
Total current liabilities	74,023		78,472
Long-term debt, net	397,446		396,874
Operating lease liabilities	17,915		16,446
Other non-current liabilities	42,566		42,189
Total liabilities	$	531,950	$	533,981
Stockholders’ equity:
Preferred stock (par value $0.001 per share; 8,000,000 authorized; no shares issued or outstanding as of March 31, 2024 and December 31, 2023)	$	—	$	—
Common stock (par value $0.001 per share; 100,000,000 authorized; 53,833,315 shares issued and 34,455,848 shares outstanding as of March 31, 2024; 53,465,127 shares issued and 34,174,200 shares outstanding as of December 31, 2023)	54		53
Additional paid-in capital	448,855		432,160
Accumulated other comprehensive loss	(6,336)		(5,461)
Treasury stock, at cost (19,377,467 shares as of March 31, 2024; 19,290,927 shares as of December 31, 2023)	(377,594)		(373,325)
Retained earnings	488,751		477,196
Total stockholders’ equity	553,730		530,623
Total liabilities and stockholders’ equity	$	1,085,680	$	1,064,604

See accompanying notes to interim unaudited condensed consolidated financial statements.

Perficient, Inc.

Unaudited Condensed Consolidated Statements of Operations

(in thousands, except per share information)


	Three Months Ended
	March 31,
	2024		2023

Revenues	$	215,304	$	231,408


Cost of revenues (exclusive of depreciation and amortization, shown separately below)
Cost of services	139,599		141,688
Stock compensation	2,507		2,524
Total cost of revenues	142,106		144,212

Selling, general and administrative	39,243		39,604
Stock compensation	9,923		4,316
Total selling, general and administrative	49,166		43,920



Depreciation	2,011		2,305
Amortization	4,886		5,817
Acquisition costs	1,393		79
Adjustment to fair value of contingent consideration	41		(2,026)
Income from operations	15,701		37,101

Net interest (income) expense	(767)		505

Net other (income) expense	(45)		75
Income before income taxes	16,513		36,521
Provision for income taxes	4,958		9,721

Net income	$	11,555	$	26,800

Basic net income per share	$	0.34	$	0.79
Diluted net income per share	$	0.33	$	0.75
Shares used in computing basic net income per share	34,149		33,914
Shares used in computing diluted net income per share	36,905		36,697

See accompanying notes to interim unaudited condensed consolidated financial statements.

Perficient, Inc.

Unaudited Condensed Consolidated Statements of Comprehensive Income

(in thousands)


	Three Months Ended
	March 31,
	2024		2023

Net income	$	11,555	$	26,800
Other comprehensive (loss) income:

Foreign currency translation adjustment, net of tax	(875)		1,772
Comprehensive income	$	10,680	$	28,572

See accompanying notes to interim unaudited condensed consolidated financial statements.

Perficient, Inc.

Unaudited Condensed Consolidated Statements of Stockholders’ Equity

(in thousands)


		Three Months Ended
		March 31,
		2024		2023


Common Stock
Beginning of period		$	53	$	53
	Stock compensation related to restricted stock vesting and retirement savings plan contributions	1		—
End of period		54		53
Additional Paid-in Capital
Beginning of period		432,160		403,866
	Proceeds from the sales of stock through the Employee Stock Purchase Plan	197		240
	Stock compensation related to restricted stock vesting and retirement savings plan contributions	12,506		6,853
	Issuance of stock in conjunction with acquisition including stock attributed to future compensation	3,992		—








End of period		448,855		410,959
Accumulated Other Comprehensive Loss
Beginning of period		(5,461)		(17,519)

	Foreign currency translation adjustment	(875)		1,772
End of period		(6,336)		(15,747)
Treasury Stock
Beginning of period		(373,325)		(354,536)
	Purchases of treasury stock and buyback of shares for taxes	(4,269)		(7,449)

	Stock reacquired for escrow claim	—		(164)
End of period		(377,594)		(362,149)
Retained Earnings
Beginning of period		477,196		378,263

	Net income	11,555		26,800
End of period		488,751		405,063
Total Stockholders’ Equity		$	553,730	$	438,179








		Three Months Ended
		March 31,
Common Stock, shares		2024	2023
Beginning of period		34,174	34,072
	Sales of stock through the Employee Stock Purchase Plan	3	4
	Stock compensation related to restricted stock vesting, retirement savings plan contributions and other	298	191
	Purchases of treasury stock, buyback of shares for taxes and other	(87)	(106)
	Issuance of stock in conjunction with acquisition including stock attributed to future compensation	68	—
	Stock reacquired for escrow claim	—	(2)
End of period		34,456	34,159

See accompanying notes to interim unaudited condensed consolidated financial statements.

Perficient, Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)


	Three Months Ended March 31,
	2024		2023
Operating Activities
Net income	$	11,555	$	26,800
Adjustments to reconcile net income to net cash provided by operations:
Depreciation	2,011		2,305
Amortization	4,886		5,817

Deferred income taxes	(796)		(1,885)
Non-cash stock compensation and retirement savings plan contributions	12,222		6,674
Amortization of debt issuance costs	631		608
Adjustment to fair value of contingent consideration for purchase of businesses	41		(2,026)

Changes in operating assets and liabilities, net of business acquisitions:
Accounts receivable	10,928		18,784
Other assets	(1,360)		5,705
Accounts payable	(4,824)		(9,909)
Other liabilities	(3,323)		(11,542)
Net cash provided by operating activities	31,971		41,331

Investing Activities
Purchase of property and equipment	(319)		(1,015)
Capitalization of internally developed software costs	(341)		(328)
Purchase of businesses, net of cash acquired	(33,157)		28
Net cash used in investing activities	(33,817)		(1,315)

Financing Activities



Payment for credit facility financing fees	—		(683)


Payment of contingent consideration for purchase of business	(4,516)		(21,530)
Proceeds from the sale of stock through the Employee Stock Purchase Plan	197		240
Purchases of treasury stock	—		(2,395)
Remittance of taxes withheld as part of a net share settlement of restricted stock vesting	(4,269)		(5,054)
Net cash used in financing activities	(8,588)		(29,422)
Effect of exchange rate on cash, cash equivalents and restricted cash	(259)		271
Change in cash, cash equivalents and restricted cash	(10,693)		10,865
Cash, cash equivalents and restricted cash at beginning of period	128,886		30,130
Cash, cash equivalents and restricted cash at end of period	$	118,193	$	40,995

See accompanying notes to interim unaudited condensed consolidated financial statements.


	Three Months Ended March 31,
	2024		2023
Supplemental Disclosures:
Cash paid for income taxes	$	2,770	$	1,553
Cash paid for interest	$	278	$	136

Non-Cash Investing Activity:
Stock issued for purchase of businesses (stock reacquired for escrow claim)	$	3,809	$	(164)

See accompanying notes to interim unaudited condensed consolidated financial statements.

PERFICIENT, INC.

NOTES TO INTERIM UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024

1. Basis of Presentation

The accompanying interim unaudited condensed consolidated financial statements of Perficient, Inc. and its subsidiaries (collectively, the “Company”) have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and are presented in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) applicable to interim financial information. Accordingly, certain note disclosures have been condensed or omitted. In the opinion of management, the interim unaudited condensed consolidated financial statements reflect all adjustments (consisting of only normal recurring adjustments) necessary for a fair presentation of the Company’s financial position, results of operations and cash flows for the periods presented. These financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto filed with the SEC in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. Certain reclassifications were made to prior year amounts to conform to the 2024 presentation.

2. Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates, and such differences could be material to the financial statements.

There have been no changes to significant accounting policies described in the Annual Report on Form 10-K for the year ended December 31, 2023 that have had a material impact on the Company’s condensed consolidated financial statements and related notes.

3. Recent Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting (Topic 280) Improvements To Reportable Segment Disclosures, which requires additional disclosures about a public entity’s reportable segments and addresses requests from investors and other allocators of capital for additional, more detailed information about a reportable segment’s expenses. The Company will adopt this ASU retrospectively for the annual period beginning on January 1, 2024 and for interim periods beginning on January 1, 2025.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740) Improvements To Income Tax Disclosures, which requires additional disclosures of income tax components that affect the rate reconciliation and income taxes paid, broken out by the applicable taxing jurisdictions. The Company expects to adopt this ASU prospectively for the annual period beginning on January 1, 2025.

4. Revenue

The Company’s revenues consist of services and software and hardware sales. In accordance with Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers, revenues are recognized when control of services or goods are transferred to clients, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services or goods.

Services Revenues

Services revenues are primarily comprised of professional services that include developing, implementing, automating and extending business processes, technology infrastructure, and software applications. The Company’s professional services span multiple industries, platforms and solutions; however, the Company has remained relatively diversified and does not believe that it has significant revenue concentration within any single industry, platform or solution.

Professional services revenues are recognized over time as services are rendered. Most projects are performed on a time and materials basis, while a portion of revenues is derived from projects performed on a fixed fee or fixed fee percent complete basis. For time and material contracts, revenues are generally recognized and invoiced by multiplying the number of hours expended in the performance of the contract by the hourly rates. For fixed fee contracts, revenues are generally recognized and invoiced by multiplying the fixed rate per time period established in the contract by the number of time periods elapsed. For fixed fee percent complete contracts, revenues are generally recognized using an input method based on the ratio of hours expended to total estimated hours, and the client is invoiced according to the agreed-upon schedule detailing the amount and timing of payments in the contract.

Clients are typically billed monthly for services provided during that month but can be billed on a more or less frequent basis as determined by the contract. If the time is worked and approved at the end of a fiscal period and the invoice has not yet been sent to the client, the amount is recorded as revenue once the Company verifies all other revenue recognition criteria have been met, and the amount is classified as a receivable as the right to consideration is unconditional at that point. Amounts invoiced in excess of revenues recognized are contract liabilities, which are classified as deferred revenues in the Unaudited Condensed Consolidated Balance Sheet. The term between invoicing and payment due date is not significant. Contracts for professional services provide for a general right, to the client or the Company, to cancel or terminate the contract within a given period of time (generally 10 to 30 days’ notice is required). The client is responsible for any time and expenses incurred up to the date of cancellation or termination of the contract. Certain contracts may include volume discounts or holdbacks, which are accounted for as variable consideration, but are not typically significant. The Company estimates variable consideration based on historical experience and forecasted sales and includes the variable consideration in the transaction price.

Other services revenues are comprised of hosting fees, partner referral fees, maintenance agreements, training and internally developed software-as-a-service (“SaaS”) sales. Revenues from hosting fees, maintenance agreements, training and internally developed SaaS sales are generally recognized over time using a time-based measure of progress as services are rendered. Partner referral fees are recorded at a point in time upon meeting specified requirements to earn the respective fee.

On many professional service projects, the Company is also reimbursed for out-of-pocket expenses including travel and other project-related expenses. These reimbursements are included as a component of the transaction price of the respective professional services contract and are invoiced as the expenses are incurred. The Company structures its professional services arrangements to recover the cost of reimbursable expenses without a markup.

Software and Hardware Revenues

Software and hardware revenues are comprised of third-party software and hardware resales, in which the Company is considered the agent, and sales of internally developed software, in which the Company is considered the principal. Third-party software and hardware revenues are recognized and invoiced when the Company fulfills its obligation to arrange the sale, which occurs when the purchase order with the vendor is executed and the customer has access to the software or the hardware has been shipped to the customer. Internally developed software revenues are recognized and invoiced when control is transferred to the customer, which occurs when the software has been made available to the customer and the license term has commenced. Revenues from third-party software and hardware sales are recorded on a net basis, while revenues from internally developed software sales are recorded on a gross basis. There are no significant cancellation or termination-type provisions for the Company’s software and hardware sales, and the term between invoicing and payment due date is not significant.

Revenues are presented net of taxes assessed by governmental authorities. Sales taxes are generally collected and subsequently remitted on all software and hardware sales and certain services transactions as appropriate.

Arrangements with Multiple Performance Obligations

Arrangements with clients may contain multiple promises such as delivery of software, hardware, professional services or post-contract support services. These promises are accounted for as separate performance obligations if they are distinct. For arrangements with clients that contain multiple performance obligations, the transaction price is allocated to the separate performance obligations based on estimated relative standalone selling price, which is estimated by the expected cost plus a margin approach, taking into consideration market conditions and competitive factors. Because contracts that contain multiple performance obligations are typically short term due to the contract cancellation provisions, the allocation of the transaction price to the separate performance obligations is not considered a significant estimate.

Contract Costs

In accordance with the terms of the Company’s sales commission plan, commissions are not earned until the related revenue is recognized. Therefore, sales commissions are expensed as they are earned. Certain sales incentives are accrued based on achievement of specified bookings goals. For these incentives, the Company applies the practical expedient that allows the Company to expense the incentives as incurred because the amortization period would have been one year or less.

Deferred Revenue

The Company’s deferred revenue balance as of March 31, 2024 and December 31, 2023 was $3.3 million and $5.5 million, respectively. Substantially all of the December 31, 2023 deferred revenue balance was recognized in revenue during the three months ended March 31, 2024.

Transaction Price Allocated to Remaining Performance Obligations

Due to the ability of the client or the Company to cancel or terminate the contract within a given period of time (generally 10 to 30 days’ notice is required), the majority of the Company’s contracts have a term of less than one year. The Company does not disclose the value of unsatisfied performance obligations for contracts with an original maturity date of one year or less or time and materials contracts for which the Company has the right to invoice for services performed. Revenue related to unsatisfied performance obligations for remaining contracts as of March 31, 2024 was immaterial.

Disaggregation of Revenue

The following tables present revenue disaggregated by revenue source and pattern of revenue recognition (in millions):


	Three Months Ended March 31,
	2024						2023
	Over Time		Point In Time		Total Revenues		Over Time		Point In Time		Total Revenues
Time and materials contracts	$	154.2	$	—	$	154.2	$	175.5	$	—	$	175.5
Fixed fee percent complete contracts	14.9		—		14.9		14.8		—		14.8
Fixed fee contracts	40.7		—		40.7		36.3		—		36.3
Reimbursable expenses	3.6		—		3.6		2.5		—		2.5
Total professional services fees	213.4		—		213.4		229.1		—		229.1
Other services revenue*	1.2		0.3		1.5		1.4		0.3		1.7
Total services	214.6		0.3		214.9		230.5		0.3		230.8
Software and hardware	—		0.4		0.4		—		0.6		0.6
Total revenues	$	214.6	$	0.7	$	215.3	$	230.5	$	0.9	$	231.4

*Other services revenue primarily consists of hosting fees, maintenance, training, internally developed SaaS revenue and partner referral fees.

The following table presents revenue disaggregated by geographic area, as determined by the billing address of customers (in millions):


	Three Months Ended March 31,
	2024		2023
United States	$	205.6	$	223.5
Other countries	9.7		7.9
Total revenues	$	215.3	$	231.4

5. Stock-Based Compensation

Stock-based compensation is accounted for in accordance with ASC Topic 718, Compensation – Stock Compensation. Under this guidance, the Company recognizes share-based compensation ratably using the straight-line attribution method over the requisite service period, which is generally three years. The fair value of restricted stock awards is based on the value of the Company’s common stock on the date of the grant.

The Company’s Third Amended and Restated 2012 Long Term Incentive Plan (as amended, the “Incentive Plan”) allows for the granting of various types of stock awards, not to exceed a total of 8.5 million shares, to eligible individuals. The Compensation Committee of the Board of Directors administers the Incentive Plan and determines the terms of all stock awards made under the Incentive Plan. As of March 31, 2024, there were 1.8 million shares of common stock available for issuance under the Incentive Plan.

Stock-based compensation cost recognized for the three months ended March 31, 2024 was $12.4 million, which included $1.0 million of expense for retirement savings plan contributions. The associated current and future income tax benefit recognized was $3.7 million for the three months ended March 31, 2024. Stock-based compensation cost recognized for the three months ended March 31, 2023 was $6.8 million, which included $1.1 million of expense for retirement savings plan contributions. The associated current and future income tax benefit recognized was $1.8 million for the three months ended March 31, 2023.

On February 23, 2024, Jeffrey S. Davis resigned his employee position as Executive Chairman of the Company, effective as of March 1, 2024. Mr. Davis is continuing as the non-executive Chairman of the Board of Directors. In connection with Mr. Davis’s resignation, the Board of Directors approved an amendment to certain existing restricted stock award agreements. Due to the resignation of Mr. Davis as Executive Chairman of the Company and the related restricted stock award amendment, the incremental share based compensation expense recorded during the three months ended March 31, 2024 was approximately $5.6 million.

Restricted Stock Awards (“RSAs”)

Restricted stock activity for the three months ended March 31, 2024 was as follows (shares in thousands):


	RSAs (Shares)	Weighted-Average Grant Date Fair Value
Restricted stock awards outstanding at December 31, 2023	714	$	70.80
Awards granted	195	69.04
Awards vested	(194)	73.93
Awards forfeited	(17)	68.42
Restricted stock awards outstanding at March 31, 2024	698	$	69.50

As of March 31, 2024, there was $37.0 million of total unrecognized compensation cost related to non-vested RSAs with a weighted-average remaining life of two years.

Performance Stock Awards (“PSAs”)

In connection with the announcement of Thomas J. Hogan’s promotion to Chief Executive Officer, the Company granted a PSA of 10,842 shares to Mr. Hogan on July 25, 2023 under the Incentive Plan with terms determined at the discretion of the Compensation Committee of the Board of Directors. The actual number of shares subject to the PSA that will be eligible to vest is based on the achievement of a relative total shareholder return (“TSR”) target as compared to the TSR realized by each of the companies comprising the Nasdaq Composite Index over a three-year period. The grant date fair value of $80.90 per share was based on a Monte Carlo simulation model as of the date of the award. PSA related stock-based compensation cost recognized for the three months ended March 31, 2024 was $0.1 million. As of March 31, 2024, there was $0.7 million of total unrecognized compensation cost related to unvested PSAs, expected to be recognized over a period of three years.

6. Net Income per Share

The following table presents the calculation of basic and diluted net income per share (in thousands, except per share information):


	Three Months Ended
	March 31,
	2024		2023
Net income, basic	$	11,555	$	26,800
Add back interest expense on convertible notes, net of tax	534		560
Net income, diluted	$	12,089	$	27,360

Basic:
Weighted-average shares of common stock outstanding	34,149		33,914
Shares used in computing basic net income per share	34,149		33,914
Effect of dilutive securities:
Restricted stock and performance stock awards subject to vesting	177		154
Shares issuable for acquisition consideration (1)	149		199
Shares issuable for conversion of convertible senior notes	2,430		2,430

Shares used in computing diluted net income per share	36,905		36,697

Basic net income per share	$	0.34	$	0.79
Diluted net income per share	$	0.33	$	0.75

(1)For the three months ended March 31, 2024, this represents the shares held in escrow pursuant to: (i) the Asset Purchase Agreement with Zeon Solutions Incorporated and certain related entities (collectively, “Zeon”); (ii) the Purchase Agreement with Talos LLC, Talos Digital LLC, Talos Digital SAS and TCOMM SAS (collectively, “Talos”); (iii) the Stock Purchase Agreement with the shareholders of Izmul S.A. (“Overactive”); (iv) the Purchase Agreement with the shareholders of Ameex Technologies Corporation (“Ameex”); and (v) the Purchase Agreement with the shareholders of SMEDIX, Inc. (“SMEDIX”), as part of the consideration. For the three months ended March 31, 2023, this represents the shares held in escrow pursuant to: (i) the Asset Purchase Agreement with Zeon; (ii) the Asset Purchase Agreement with Catalyst Networks, Inc. (“Brainjocks”); (iii) the Stock Purchase Agreement with the shareholders of Productora de Software S.A.S. (“PSL”); (iv) the Purchase Agreement with Talos; (v) the Stock Purchase Agreement with the shareholders of Overactive; (vi) the Stock Purchase Agreement with the shareholders of Inflection Point Systems, Inc.; and (vii) the Purchase Agreement with the shareholders of Ameex, as part of the consideration.

The number of anti-dilutive securities not included in the calculation of diluted net income per share were as follows (in thousands):


	Three Months Ended
	March 31,
	2024	2023
Restricted stock and performance stock awards subject to vesting	109	276

Warrants related to the issuance of convertible senior notes	2,431	2,431
Total anti-dilutive securities	2,540	2,707

See Note 11, Long-term Debt for further information on the convertible senior notes and warrants related to the issuance of convertible notes.

The Company’s Board of Directors authorized the repurchase of up to $375.0 million of Company common stock through a stock repurchase program expiring December 31, 2024. The program could be suspended or discontinued at any time,

based on market, economic, or business conditions. The timing and amount of repurchase transactions will be determined by management based on its evaluation of market conditions, share price, and other factors. Since the program’s inception on August 11, 2008, the Company has repurchased approximately $291.1 million (16.5 million shares) of outstanding common stock through March 31, 2024.

7. Balance Sheet Components


	March 31, 2024 (unaudited)		December 31, 2023
Accounts receivable:	(in millions)
Billed accounts receivable, net	$	97.6	$	119.9
Unbilled revenues, net	74.2		59.1
Total	$	171.8	$	179.0


Other current assets:
Miscellaneous receivables	$	3.5	$	3.1
Contractual commitment asset	3.4		3.0
Income tax receivable	3.2		2.7
Other current assets	3.4		3.6
Total	$	13.5	$	12.4


Property and equipment:
Computer hardware (useful life of 3 years)	$	25.5	$	26.7
Software (useful life of 1 to 7 years)	9.1		9.2
Furniture and fixtures (useful life of 5 years)	4.3		4.5
Leasehold improvements (useful life of 5 years)	7.8		7.8
Less: Accumulated depreciation	(36.3)		(36.2)
Total	$	10.4	$	12.0



Other non-current assets:
Non-current unbilled revenue	$	1.3	$	2.2
Company owned life insurance asset	13.9		12.6
Long term deposits	1.9		1.8
Credit facility deferred finance fees, net	1.0		1.0
Other non-current assets	13.6		13.2
Deferred income taxes	22.2		21.6
Total	$	53.9	$	52.4


Other current liabilities:
Estimated fair value of contingent consideration liability (Note 9)	$	6.4	$	4.5
Accrued variable compensation	13.1		15.9
Current operating lease liabilities	6.4		7.0
Payroll related costs	11.2		11.1
Deferred revenues	3.3		5.5
Income tax payable	4.7		1.5
Other current liabilities	5.8		4.8
Accrued medical claims expense	2.3		3.2
Professional fees	1.8		1.3
Accrued IT expenses	5.1		5.0
Total	$	60.1	$	59.8


	March 31, 2024 (unaudited)		December 31, 2023
Other non-current liabilities:	(in millions)
Deferred income taxes	$	5.4	$	5.9
Reserve for uncertain tax positions	18.4		17.7
Deferred compensation liability	12.5		11.0
Other non-current liabilities	4.6		5.0
Non-current software accrual	1.7		2.6
Total	$	42.6	$	42.2

8. Allowance for Credit Losses

In accordance with ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, the Company evaluates its allowance based on expected losses rather than incurred losses, which is known as the current expected credit loss model. The allowance is determined using the loss rate approach and is measured on a collective (pool) basis when similar risk characteristics exist. Where financial instruments do not share risk characteristics, they are evaluated on an individual basis. The allowance is based on relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts.

Activity in the allowance for credit losses is summarized as follows (in millions):


	Three Months Ended March 31,
	2024		2023


Opening balance at January 1	$	2.5	$	5.8
Charges to expense, net of recoveries	(0.1)		—
Other (1)	(0.5)		(1.2)
Balance at March 31	$	1.9	$	4.6

(1) Other is primarily related to uncollected balances written off and currency translation adjustments.

9. Business Combinations

2024 Acquisition

On January 16, 2024, the Company acquired all of the outstanding capital stock of SMEDIX. SEMDIX is a healthcare software engineering firm headquartered in San Diego, California, with offshore operations located in Cluj-Napoca, Romania. The acquisition of SMEDIX continued to strengthen our healthcare industry digital capabilities, enhance our global delivery capacity, and expand further within Eastern Europe. SMEDIX added more than 175 professionals and strategic client relationships focused in the biomedical and healthcare industry. The Company’s total allocable purchase price consideration was $43.6 million, net of cash acquired. The Company incurred approximately $1.7 million in transaction costs, which were expensed when incurred. The amount of goodwill deductible for tax purposes is $33.6 million.

The acquisition date fair value of the consideration transferred for SMEDIX consisted of the following (in millions):


	SMEDIX
Cash, net of cash acquired	$	33.2
Company common stock issued at closing	3.8
Contingent consideration (1)	6.4		(2)
Net working capital adjustment due to the seller(s)	0.2
Total allocable purchase price consideration	$	43.6

(1)Represents the initial fair value estimate of additional revenue and earnings-based contingent consideration, which may be realized by the sellers 12 months after the closing date of the acquisition.

(2)The maximum cash payout that may be realized by the sellers in the SMEDIX acquisition is $14.4 million. As of March 31, 2024, the fair value of the contingent consideration was $6.4 million.

The Company has estimated the preliminary allocation of the total purchase price consideration between tangible assets, identified intangible assets, liabilities, and goodwill as follows (in millions):


	SMEDIX
Acquired tangible assets	$	4.9
Identified intangible assets	8.9
Liabilities assumed	(3.1)
Goodwill	32.9
Total allocable purchase price consideration	$	43.6

SEC Form 10-Q filed by Perficient Inc.