Perficient, Inc.

Ladies and gentlemen, welcome to the Q4 2020 Perficient Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. If anyone should require assistance during the conference, please press the star then zero on your touchtone telephone. And as a reminder, this conference call is being recorded. I would now like to turn the conference over to your hosts. Chairman and CEO, Mr. Jeff Davis. Sir, please go ahead.

Thank you, and good morning, everybody. This is Jeff Davis. With me on the call today is Paul Martin, our CFO, and Tom Hogan, our COO and President. I'd like to thank you for your time this morning. As typical, we have about 10 to 15 minutes of prepared comments, after which we'll open up the call for questions. Before we proceed, Paul, would you please read the Safe Harbor Statement?

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 meaning of the securities laws. Actual results may materially differ from those discussed in these forward-looking statements, and we encourage you to refer to the additional information contained in our SEC filings concerning factors that could cause those results to be different than contemplated in today's discussion. At times during this call, refer to adjusted EPS or adjusted EBITDA. Our earnings press release, including a reconciliation of certain non-GAAP financial measures to the most directly comparable financial measure prepared in accordance with generally accepted accounting principles, or GAAP, is posted on our website at www.proficient.com. We have also posted a slide deck, which includes a reconciliation of certain non-GAAP guidance to the most directly comparable financial measures prepared in accordance with GAAP on our website and under investor relations. Jeff?

Thanks, Paul. Once again, thanks, everyone, for joining. We're excited to be with you this morning to discuss our fourth quarter and full year 2020 results. But I'll start with this. I am as proud as I've ever been of Perficient, our performance, and our people. In a year marked by uncertainty, challenge, and change, Perficient rallied and rose to its strongest position yet. Our colleagues doubled down on their commitment to our clients and our company, and the result was accelerating revenue growth, record-adjusted earnings, and aggressive global expansion. Given the uncertainty that was beginning to unfold a year ago at this time, I believe our 2020 results says quite a bit about what Perficient is capable of and also where we're headed. As 2021 gets underway, our momentum is building. We're pursuing and winning bigger deals. Bookings are strong. The pipeline is strong. And we've evolved into a global digital consultancy as capable as any competitor in the space. In fact, we're stronger. As we continue to augment our broad North American footprint with fully integrated global delivery teams working across technologies and time zones, we've become even more formidable, particularly against digital firms that exist only offshore and lack our broad market presence in the United States. Fortune 1000 customers expect and require global delivery, but they also appreciate and value in-market talent and high-touch service. Consulting is ultimately about delivering value, but it's also about relationship development. It's also a relationship business, and it's much easier to forge long-term bonds when you can engage locally. The current climate has put some of that on pause, but it will return, and when it does, we'll be in an even more advantageous position. Longer term, it's simply easier to sell and expand accounts when you can walk the halls and establish those personal relationships. It's that blend of local and global which sets Perficient apart, and as I mentioned earlier, we're building upon our solid foundation in the United States with an aggressive global build-up. In fact, since the beginning of 2014, our offshore revenue has had a compound annual growth rate of nearly 30%. And in 2020, our offshore revenue growth grew at a total of 73% and almost 17% organically. Again, that's in the COVID environment. This year, our plans and projections call for even stronger organic offshore growth. in the high 20s is what we've modeled. Our teams in India and Colombia in particular are hiring at great velocity. Paul will speak to the financial results shortly, but we were again pleased with the key performance metrics, including utilization. In Q4 and throughout the entire year, despite the pandemic, the business performed well, and we drove margin expansion and strong profitability. 2020 was full of positive developments. But the most important was certainly our acquisition of PSL Corp in Latin America in the mid-year, in the July time frame. That was our largest deal ever, and we were optimistic. Wins would come quickly and often because our customers have been clamoring for nearshore talent. But the pace of our success integrating those colleagues into project teams at many of our large accounts has surpassed even our most optimistic expectations. The demand is very strong. We're seeing a lot of activity there. So, again, just a great quarter and a great year. and we expect even stronger growth and results in 2021. So with that, I'm going to turn the call over to Paul, who will share the financial results detail for the fourth quarter of 2020. Paul?

Okay. Sorry about that. Thanks, Jeff. Can you hear me now?

Yep.

Yep. Sorry about that. Let me turn to the fourth quarter results. Services revenue, including reimbursable expenses, were $158.9 million for the fourth quarter of 2020, a 13.1% increase over the comparable prior year period. Gross margins for the quarter ended December 30, 2020 increased 30 basis points to 38.7 percent compared to the prior year period. SG&A expense was 33 million compared to 34 million in the comparable prior year period. And SG&A expense as a percentage of revenues decreased to 20.3 percent from 23.4 percent in the fourth quarter of 2019. Adjusted EBITDA for the fourth quarter of 2020 was 35 million or 21.5 percent of revenues compared to 26.5 million or 18.3 percent of revenues in the fourth quarter of 2019. The fourth quarter included amortization expense of 7.3 million compared to 4 million in the prior year period, and this increase was primarily associated with the 2020 acquisitions. The fourth quarter included an adjustment to contingent consideration of 5.7 million compared to 0.6 million in the prior year period. This increase is reflective of the favorable performance and outlook of our three 2020 acquisitions, which have performed better than originally anticipated, in large part due to cost reductions resulting from travel and other restrictions caused by the COVID pandemic, and for PSL, quicker than anticipated market demand for nearshore resources. Net interest expense for the fourth quarter of 2020 increased to $3.3 million from $1.9 million in the comparable prior year period, primarily as a result of the August convertible debt offering. Our effective tax rate for the fourth quarter of 2020 was 27.4 percent, compared to 14.2 percent for the fourth quarter of 2019. The increase in the effective pay effective tax rate was primarily due to an increase in non-deductible transaction costs and contingent consideration compared to the three months ended December 31, 2019. Net income decreased 29 percent to 8.4 million for the fourth quarter from 11.8 million in the fourth quarter of 2019 primarily as a result of the adjustments of fair value of contingent consideration, increased amortization and increased interest expense partially offset by our strong and improved operating results. Saluted gap earnings per share decreased to $0.26 a share for the fourth quarter of 2020 from $0.36 in the fourth quarter of 2019. Adjusted earnings per share increased to $0.76 a share for the fourth quarter of 2020 from $0.58 a share in the fourth quarter of 2019. And please see the press release for full reconciliation to gap earnings. I'll now turn to the four-year results. Services revenue, including reimburse expenses, were $599.5 million for the year ended December 31, 2020, a 9.7 percent increase over the prior year. Gross margins for the year ended December 31, 2020 increased 40 basis points to 37.8 percent. SG&A expense increased $134.7 million for the year ended December 31, 2020, from $133.2 million. 4.2 million in the prior year. SG&A expenses, the percentage of revenue decreased to 22 percent from 23.7 percent in the prior year. Adjusted EBITDA for the year ended December 31, 2020 was 116.3 million or 19 percent of revenues compared to 95 million or 16.8 percent of revenues in the prior year. 2020 included amortization expense of 22.9 million compared to 16.2 million in the prior year. The year ended December 31, 2020 included an adjustment to continue consideration of $9.5 million compared to $0.3 million in the prior year. The increase is primarily related to the favorable performance and outlook of our three 2020 acquisitions. That interest expense for the year ended December 31, 2020 increased to $10.1 million from $7.4 million in the prior year, primarily as a result of the August convertible debt offering. Our effective tax rate for the full year was 25.2 percent compared to 22.6 percent in the prior year, and the increase was primarily due to increase in non-deductible transaction costs and contingent consideration. Net income for the year ended December 31, 2020 decreased 18.7 percent to 30.2 million from 37.1 million, again, primarily as a result of adjustments to fair value of consideration, increased amortization, loss on convertible debt extinguishment, Increased acquisition costs and interest expense partially offset by strong operating results. Diluted gap earnings per share decreased to 93 cents from $1.15. Adjusted earnings per share increased to $2.50 for the year end of December 30, 2020 from $2.07 in the prior year. Our ending billable headcount at December 31, 2020 was 3,884, including 3,628 billable colleagues and 256 subcontractors. ending SG&A headcount was 649. Our outstanding debt net of unamortized debt discounted deferred issuance cost at December 31 was 183.6 million. We also had 83.2 million in cash equivalents on the balance sheet and 124.8 million of unused borrowing capacity on our credit facility. Our balance sheet continues to leave us well-positioned to execute on our strategic plan. Finally, day sales outstanding on receivables decreased to 67 days at the end of the fourth quarter compared to 71 days at the end of the fourth quarter of 2019. I'll now turn the call over to Tom Hogan for a little more commentary behind the metrics. Tom?

Thanks, Paul. Good morning, everybody. We realized another solid quarter for bookings, large wins with many existing and net new customers. We booked 70 deals greater than $500,000 during the fourth quarter of 2020. That compares to 66 in the third quarter of 2020 and 65 in the year-ago period. As I mentioned last quarter, I think that number really underscores our traction in the market and how well we're executing right now. We can't travel to meet with our customers or prospects, and we're not working at any of our client sites, yet large deal win volumes up sequentially and year over year. Our fully integrated global pursuit and delivery model is helping us win customers and projects. An example of The many meaningful new client wins during Q4 2020 involves deploying an offshore delivery strategy with the leading maker of packaging processes and materials to support the growth of their commerce capabilities. We will build the client's first commerce website to enable the scale of its products to the mid-market. The new site will be built to scale with the company with their long-term goal of creating a commerce environment to support B2B sales for their even larger clients. Proficient has always been a unique and compelling place to build your career, and that is resonating even more with our colleagues right now. Jeff mentioned on the last call that our employee satisfaction is the highest it's ever been. We've done a lot of things in the recent years to build culture and ensure our colleagues view Proficient as the extraordinary place it is. A great example was our Make a December Difference campaign of kindness that we were able to launch in December of last year. Because of the success we had in 2020, we were able to grant each and every one of our global colleagues the equivalent of 100 U.S. dollars to brighten someone's day during the holiday season. To surprise a stranger, give to a charity, donate to a first responder, a healthcare hero, we put no strings on these funds, only that they had to give it away. And the stories of giving that emerged were truly remarkable. Our concept inspired others beyond proficient to do the same. The funds were multiplied many times over as colleagues matched our contribution or raised more funds within their greater communities. Proudly, we inspired a lot of other pay it forward type programs as well. One of my favorite stories of giving came from our team in India, where many colleagues pooled their funds, gathered additional donations, then purchased a dialysis machine for a healthcare facility serving very needy patients. This effort alone will benefit hundreds of people for more than a decade and literally save lives. At the end of such a challenging year for so many, we were so proud to be able to not only grow our business and deliver strong results for shareholders, but inspire our colleagues and communities with this program and investment. With that, I'll turn things back over to Jeff to discuss Q1 and our 2021 outlook.

Thanks, Tom. Well, before I get into guidance, I did want to mention one additional item we included in the news release this morning, something I'm very excited about, and that is that Tom has done an exemplary job since being appointed COO a couple of years back. It's, of course, a team effort, but he's played a key and leading role in driving the operational excellence that has powered our performance. I'm happy the board approved my recommendation that he be named president going forward. His ambition, energy, and enthusiasm are well-suited for the immense opportunity ahead, so I want to congratulate Tom. As for guidance, Proficient expects its first quarter 2021 revenue to be in the range of $165 to $168 million. First quarter gap earnings per share is expected to be in the range of $0.31 to $0.34. First quarter adjusted earnings per share is expected to be in the range of $0.65 to $0.68. Perficient expects its full-year 2021 revenue to be in the range of $670 to $704 million. 2021 GAAP earnings per share is expected to be in the range of $1.57 to $1.72. And 2021 adjusted earnings per share is expected to be in the range of $2.85 to $3. And with that, Operator, we can open up the call for questions.

And ladies and gentlemen, if you have questions at this time, simply press the star, then the number one key on your touchtone telephone. One moment, please, for our first question. And our first question comes from the line of Maggie Nolan with William Blair. Your line is open.

Thank you, and congrats to you, Tom. I had a question earlier. about the growth in billable employees. So that metric has been fairly strong year over year and sequentially in the last couple of quarters here. So I'm wondering what the expectations are for hiring over the course of the year, and then what would be kind of the normalized level of additions when you set acquisitions aside?

Yeah, I think it's, you know, if you look at the midpoint of our guidance for the year, we're about 10% organic. I don't expect much of that to come through rates. increases. We're trying to maintain very competitive rates, but leverage offshore and building on our pyramid to drive additional margin expansion, which we've also guided to. So in terms of headcount, you can expect about 10% across the board, and I should say probably five or six in the U.S., and the rest offshore. And of course, the offshore is actually multiplied by the rate differential. So, you know, we'll be hiring a lot. We are currently hiring a lot.

Great. Thank you. And then I wanted to follow up on both the demand environment and the competitive environment, particularly in your healthcare and banking and financial services segments. You know, we've seen a lot of potential competitive new entrants into the healthcare space on the services side. and then interested in kind of the strong performance that you were able to put up this quarter in banking and financial services.

Yeah, it's interesting. You know, we're not necessarily seeing any new players that we're experiencing. It tends to be the majors that we've always competed with in the space. And, in fact, we had a knockout Q4 in terms of health care bookings. You know, health care is about 33% of revenue. We did about 42% in bookings. And likewise in financial services, we probably are seeing more competition, but that's because we're penetrating that market more. A lot of our revenue comes from management consulting, business consulting in that sector. But we've managed to expand those relationships now into technology consulting as well. So we're seeing nice growth there as well. And frankly, not competition that we're terribly concerned about. In fact, I'm certain we're taking share away, at least in financial services.

Great. Well, congrats on the momentum and the guidance. Thanks.

Thanks, Maggie.

And our next question comes from the line of Brian Genslinger from Alliance Global Partners. Your line is open.

Hi. Good morning, guys. Thanks for taking my questions. As you look at your industry verticals of focus, which of them do you think is most behind in terms of executing on the digital transformation strategy, and how do you see that change over the next year or two?

That's a great question. I almost want to say all of them. I think retail is probably ahead. Obviously, retail on the brick and mortar side is waning, and, you know, clearly the business model is changing pretty rapidly. So that's forcing them to drive accelerated transformation, and they're probably further ahead is the way I would describe it. And I think there's plenty of runway, you know, everywhere else. It's pretty fascinating. We're doing a lot even in manufacturing and sort of, you know, what people might consider older businesses to do transformation, but I still think health care, given the high volume and high-touch nature of that business, and by high volume I mean customers or patients, as it were, is similar to retail in many ways, and they've got a lot of catching up to do still in that industry. But I still think there's opportunity across all sectors, and, in fact, there's sort of the prisoner's dilemma effect that – there's a lot of leapfrogging going on and this is a very dynamic environment. You know, the tools behind digital transformation are very dynamic, changing and evolving rapidly. And so it's sort of a constant process more than a one and done type of environment. So I would say in terms of digital transformation, like I said, retail is probably ahead. The rest are probably similarly behind financial services might be a little bit ahead of the curve, but that's, that's how I would cap it.

Great. And then, In the fourth quarter as well as thus far in the first quarter, are the majority of your bookings coming from digital transformation? And in addition, are these generally new logos? Are they existing logos? I mean, obviously, everyone's got to adapt to the changing consumer behaviors.

Yep. It's a strong combination, actually. And I would say... The vast majority, 90-plus percent of those bookings are absolutely square in the middle of digital transformation. But there's a lot of new logos in there as well, to your question. We've got a long track record of maintaining good tenure, stickiness, as it were, and strong relationships. A lot of our business is repeat business, 90-plus percent typically. And I think we'll see that 90 percent come down a little in a positive way. not in dollars, but as a relative percent of the business, as we do add new logos. And we have added quite a number. We've got a number of new accounts that have joined us in the last, say, six months, starting out kind of small, as is typical if you think about the life cycle of an engagement, and yet to ramp up this year. So we're expecting to see a lot of that activity ramping up throughout the year and additional logos coming in. It's a very major focus that we have.

which is a perfect segue to my last question. Can you take us through a typical roadmap of a digital transformation program? For example, is there initial design that's small? Is there initial development that's small? And how does that change with follow-on projects over the course of years, especially as it pertains to larger customers?

Yeah, absolutely. I mean, it typically starts in what we prefer to be in the lifecycle is with strategy. And that strategy tends to center around some user experience, whether that's our client's customer, an end customer, or a corp to corp, or even internal. So really the requirements are developed first, and sometimes high level, so you can get that strategy mapped out, and then you go deeper on the requirements and then begin to engage in the technology implementation, whatever that is, typically a lot of custom development. A lot of data as well. So that life cycle, you can think of it as for a given project, you can think of it as sort of a bell curve. But typically our engagements are made up of a number of projects, so they overlap. And our relationships are actually made up of a number of engagements so that they overlap. So we tend to get a pretty steady stream coming out of a relationship, if that makes sense.

Great. Thanks so much.

And our next question comes from the line of Mayunk Tandon of DDM. Your line is open.

Hey, good morning. This is actually Kyle Peterson. I'm from Mayunk. Thanks for taking the questions. Just wanted to start off on the margins and kind of what your assumptions are, you know, especially on the gross margin side in 2021. I believe that, you know, as you guys are continuing to move work offshore, should we expect to see some gross margin leverage? here in 2021, and will this be partially offset by any, like, increase in T&E or anything in the back half of the year, assuming things kind of normalize in the world?

Yeah, sure. Great question. We're expecting margin expansion this year, probably 50 to 100 basis points. You know, our longstanding goal we've talked a lot about is, you know, adjusted gross margin, that is netting stock comp. of 40%, and I think that's right about where we'll be this year. I think our model reflects that. But we've got a number of economies below that. We've got great scale that's really kicking in. So I actually expect, and I think the model, if you back into it, reflects probably about a 150 to 200 basis point increase in adjusted EBITDA. T&E will return to a higher level probably in the second half of the year, we're expecting. I think it's going to take a ramp to get there. By the way, for us, all T&E is below the EBITDA line, I mean the gross margin line, so it won't affect gross margin. But I think we'll be able to absorb it. It's reflected in our model and in our guidance, and that still reflects, like I said, about 150, 200 basis point increases.

Great, that's helpful. And then maybe if we could just switch over to the M&A pipeline. I know the PSL deal was a little bigger than you guys have normally done, but do you think, like, that is integrated? And, like, are you ready to do another deal? And if so, like, what are you guys looking for for potential targets?

Yeah, absolutely. And I'll answer the – well, I'll tell you, yes, PSL is integrated. You know, that's always sort of an ongoing exercise. But in this case, it was really straightforward. As I mentioned in the script, we've got a lot of business going there in early stages that I think will expand a lot. So that's goodness as it relates to PSL. But, yeah, we're absolutely in the hunt again. We took a little pause after PSL, one, because of the uncertainty of the pandemic, but also because it was a larger size, to your point. But we've got a number of things in the pipeline in terms of the focus of It's certainly digital. We're also interested in potentially more near-shore type deals as we are rapidly scaling to meet demand that we're seeing increase rapidly. But beyond that, from a skill set standpoint, it's cloud, it's custom app dev, it's the typical analytics, data, commerce actually is another spot. We're seeing good demand everywhere and looking to scale the business kind of across the board, but again, really all digital.

Great. That's good color. Nice quarter, guys. Thank you.

And our next question comes from the line of Vincent Colicchio from Barrington Research. Your line is open.

What would your target be for bill rate increases for 2021?

You know, probably in the sort of 1% to 2% range, Vince. You know, I think our philosophy on bill rates is we want to stay as competitive as we can. There's probably a lower runway there. But, again, we've got, I think, such great opportunity in the offshore mix, shifting more work offshore to drive margins that we're comfortable, you know, keeping the rates kind of down so we can stay competitive. The other point I'll make on margins is, And, you know, kudos to Tom and team on this. But, you know, our average salary, consultant salary in North America last year was actually down 1%, despite the fact that we gave normal merit increases in the sort of 3% to 4% range, which is industry standard. We were down about 1%, and that's because of that pyramid I alluded to earlier. We're actually able to hire people more at the lower end of the bottom or base of the pyramid, as we're taking on larger and longer-term engagements. So those are the levers around margin. We're going to hold rates probably, again, maybe 1%, 2%, but we're not going to be too aggressive on that.

And how is your visibility when you're putting together your outlook for the year compared to what it was like pre-pandemic?

Oh, I think right now we've got the largest backlog we ever have. So we've had really, really strong bookings here in the second half of 20. Bookings have started off strong this year. And so as we sit here today, we've definitely got the largest backlog, certainly in absolute dollars, but also as a percent of our total forecast going forward. So visibility right now is the best it's been in recent memory.

All right. And what was the organic growth in the quarter and for the year? I'm sorry if I missed that.

No problem. It was about 3% for both, I believe. Yeah, about 2% for the year, about 3% in the quarter. And our guidance for Q1 is 8% and for the year is 10. It's all organic.

Okay. That's all for me. Thank you. Nice job. Thanks, Vince.

And once again, to queue for questions, please press the star one. Our next question comes from the line of Jack Vanderaard of Maxine Group. Your line is open.

Thank you. Good morning, guys. Congrats on the strong quarter. Congrats to you as well, Tom. It'll start with a question for you then. So, Tom, in terms of large deals, 70 in the fourth quarter, which is good to see. Just given this was a year-end quarter, can you provide some color on maybe two things? In terms of timing of when those deals closed throughout the fourth quarter, there's any noticeable changes from prior years like back in loaded or is it kind of evenly distributed? And then the second one, how many potential large deals maybe got pushed into 2021 that may just kind of got pushed out or delayed for whatever reason that maybe could have closed in the fourth quarter?

So so thank you for the congratulations on the. Compare Q4 year over year, really not much of a difference. We definitely see it spread throughout Q4. I think by nature, some of it's a little bit closer towards the end as people wrap up some of their physical years. but no real material difference between year over year when it came to closing deals. We always see some deals slipping from quarter to quarter. Nothing sticks out in 2020 compared to previous years. So we have some nice deals that we closed in Q4, some nice ones in Q1. Some move every quarter of a quarter. Nothing sticks out on that one though, Jeff.

Great. That's helpful. Thanks, Tom. And then a question for Jeff. You know, an analyst just asked about this as well, but in your prepared remarks, you know, bookings are strong, pipeline strong, everything seems strong, which is great. But can you maybe just talk about back to kind of the visibility topic? You know, throughout 2020, it was kind of a common theme was potential contract cancellation risk. Maybe can you just update that view that you have in terms of how you were kind of perceiving this? unexpected, I know it's a tough question, but unexpected contract cancellations, you know, from a few months ago and where that view is for today now?

Yeah, I think in terms of going forward, I'll really just speak to that. You know, we always bake in a fair amount of conservatism in our guidance and in our forecast. You know, there is an ebb and flow always, but I will tell you in terms of any impact from COVID, it really appears to be behind us as it relates to contract concerns. In fact, what we are seeing is a significant pickup in demand that I think is probably related to some pent-up demand, projects that were delayed or not even embarked on last year. I think we're seeing that now. I'll tell you anecdotally, our sales team is busier than ever. So while that is a factor, it always is. Like I said, there's always an ebb and flow. We feel like we've reflected – uh, studying that here. And, uh, and like I said, that we're reasonable, reasonable, um, in terms of, uh, conservatism and the, and the forecast.

Okay, great. That's helpful. That's it for me. Thanks guys. And congrats on a strong quarter again. Thank you.

And our next question comes from the line of surrender. Tied up Jeffrey. Your line is open.

Hi Jeff. Um, Just a big picture question here. Can you talk a little bit about the nature of the projects that you're seeing in the sense that our clients at this point in time starting to embark on bigger projects that are like maybe different than the times that they had last year? Or they still are they kind of biting off, you know, shorter term projects where they're maybe going to get something done that's going to pay dividends within the next year or these like bigger things that they're thinking about at this point?

I would say they're increasing, definitely. Like I said, the demand that we're seeing, pretty bullish. People are embarking on pretty major programs now. And I don't know that it's a fundamental shift, again, related to COVID from last year to this year. Some of it, quite frankly, is how we've managed to elevate our relationships with a lot of the clients that we already had. including major Fortune 50 companies where we've managed to become now a preferred vendor, one of only six globally. So we're seeing with that obviously comes more larger, longer-term opportunities. That said, digital transformation is about speed and nimbleness, and so you have to yield some results along the way. Gone are the days of a three-year program before you produce any result. It's much more iterative now. So, you know, but that doesn't mean, again, a $90 million relationship over four years involves a lot of, again, a lot of iteration, a lot of deliverables along the way, and you're building on a foundation. And then by that time, as I said before, kind of the prisoner's dilemma, you know, it's time to go back and enhance. So it's sort of perpetual.

Got it. That's helpful. And then just a clarification on the growth of offshore revenues. From a definitions perspective, is that refers to the revenues that are generated by offshore staff, or is it non-North America-based revenues, meaning from a client perspective?

No, it's offshore staff.

Yep. Okay. Thank you.

Sure.

That's it. Thank you.

And at this time, I would like to turn it back to our Chairman and CEO, Mr. Jeff Davis, for the closing remarks.

All right. Well, once again, thank you all for your time today. Appreciate it. And I look forward to speaking to you in a couple months with some more great results. Thank you. Take care.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect. Have a lovely day.