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spk06: Thank you for standing by, and welcome to the 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 1 on your telephone. Please be advised that today's conference may be recorded. Should you require any further assistance, please press star zero. I would now like to hand the conference over to your host, Chairman and CEO, Jeff Davis. Please, go ahead.
spk10: 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 COO. 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. But before we proceed, Paul, will you please read the safe harbor statement?
spk05: 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 means 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 discussions. At times 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 measure prepared in accordance with generally accepted accounting principles. Our 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 under investor relations. Jeff?
spk10: 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 you'll see, that guidance obviously reflects our accelerating momentum and confidence. Perficient's 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 spin, and Perficient's 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 by accelerated demand and strong utilization. And our aggressive global expansion continued recently with two acquisitions that strengthened our ability to drive continued outperformance. Collectively, the addition of Talos Digital and OverActive brought nearly 800 new Latin American-based colleagues to our team, increasing our near-short capacity and capabilities. And I think it's worth pointing out that these additions With these additions, Perficient achieved the milestone of now having more delivery talent offshore than onshore, a truly global organization. In fact, Forrester recently recognized Perficient on its list of global digital service providers for the first time we've met their stringent criteria for inclusion. It's a combination of our strong U.S. presence with a deep and geographically dispersed global footprint that sets Perficient apart. 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 struggle 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 billable colleague is typically more than double and in some cases triple of those firms, and that's because we're engaged in 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, 25% in Latin America, just under half in North America, and about 2% elsewhere. Spreading that global talent 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 employers in Colombia, the acquisition of OverActive brings our presence in South America to now include Argentina, Chile, and Uruguay. where 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, and business is relatively easy to conduct. 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 that expanded before are two most recent nearshore acquisitions. Tom will share the full details regarding large wins during the quarter, but bookings remain 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 eight-figure and beyond opportunities. So with that, I'm going to turn the call over to Paul, who will share the financial results details for the quarter. Paul?
spk05: Thanks, Jeff. Services revenue, excluding reimbursable expenses, were $190.1 million for the third quarter of 2021, a 22.5% increase over the prior year. Services gross margin, excluding reimbursable expenses and SOC compensation, increased 40 basis points to 40.3 percent. SG&A expense was 39.3 million for the third quarter of 21 compared to 34.6 million in the prior year. SG&A as a percentage of revenues decreased to 20.4 percent from 21.9 percent in the third quarter of 2020. Adjusted EBITDA for the third quarter of 2021 was 41.5 million are 21.5 percent of revenues compared to 31.1 million or 19.8 percent of revenues in the third quarter of 2020. The third quarter of 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 from the PSL acquisition becoming fully amortized. Net interest expense for the third quarter of 2021 increased to 3.5 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 percent compared to 27.6 percent in the third quarter of 2020. The increase in the effective tax rate was primarily due to an increase in the Colombian tax rate that occurred in September 2021 and the related non-recurring adjustment to Colombian deferred tax liabilities. Net income increased 182 percent 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, lower SG&A as a percentage of revenues, lower amortization expense, lower loss on extinguishment of debt, lower adjustments to fair value of contingent consideration. Diluted gap earnings per share increased to 48 cents a share for the third quarter of 2021 from 19 cents in the third quarter of 2020. Adjusted earnings per share increased to $0.88 a share for the third quarter of 2021 from $0.67 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 30, 2021, a 22.1 percent increase over the prior year. Services gross margin, including reimbursable expenses and stock compensation, increased 70 basis points to 39.8 percent. 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 20.3 percent from 22.6 percent in the nine months ended September 30, 2020. Adjusted EBITDA for the nine months into September 30, 2021 was $115.1 million or 21.1 percent of revenues compared to $81.3 million or 18.1 percent of revenues in the prior year. The nine months into September 30, 2021 included amortization expense of $17.7 million compared to $15.6 million in the prior year. Net interest expense for the nine months into September 30, 2021 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 percent for the nine months into September 30, 2021 from 24.2 percent for the nine months into September 30, 2020. Net income for the nine months into September 30, 2021 was 47.6 million compared to 21.8 million in the prior year. primarily as a result of higher revenues, gross margins, lower estimated percent of revenues, lower acquisition costs, lower loss from extinguishment of debt, and lower adjustments to fair value of contingent consideration. This resulted in diluted gap earnings per share increasing to $1.39 for the nine months into September 30, 2021, compared to 67 cents in the prior year. Adjusted earnings per share increased to $2.49 for the nine months into September 30, 2021, from $1.74 in the prior year. Our ending billable headcount at September 30, 2021 was 4,827, which includes 4,499 billable consultants and 328 subcontractors. Ending SC&A headcount was 710. Our outstanding debt, net of unamortized debt discounted deferred issuance costs as of September 30, 2021 was 186.5 million. We also had $56.4 million in cash and cash equivalents as of September 30, 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 day 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 Holden for a little more commentary on the metrics. Tom?
spk11: Thank you, Paul. Good morning, everybody. As Jeff mentioned, bookings remain strong in the third quarter. We booked 80 deals greater than $500,000 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 are a couple of examples of the work we're doing. We're continuing a partnership with a leading healthcare technology company to consolidate multiple portals into a centralized customer experience. This multi-year, multi-shore delivery strategy that spans our teams in India, Latin America, and North America will create a single support portal for the client's entire line of products while migrating to a streamlined system. The new portal will ultimately reduce call volume, enable customer self-service, and transition thousands of users to the new site and introduce single sign-on functionality. Another example are Perficient Latin America team, alongside our Cross-BU onshore teams, are using multiple technology stacks to create three custom products that will improve the customer onboarding and support experience for a new financial services client, a cash access and ticket redemption service provider. Our partnership will optimize the client's digital strategy, reduce current customer service costs, and improve the digital customer and employee experiences. Growing a service business is always a balancing act. You're either trying to find demand to support your supply or building supply to meet demand. In the current environment, the most pressing challenge is certainly around recruiting and retaining talent. The good news is we're succeeding on that front as well. We're 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, Perficient's value proposition is resonating strongly because we've made a conscious effort to build a unique and compelling culture to ensure Perficient is perceived as an employer of choice. As we know, it's working because our employees themselves are telling us that they're engaged, excited, and enthusiastic about Perficient. We recently conducted an all-colleague employee engagement survey, where an outstanding 98% of our employees responded. Standard employee survey responses are well below that, particularly a company of our size. But our proficient colleagues know that their voices are valued and can and will drive improvement. Based on employee feedback, we've done things like increase our fraternity 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, and a Giving ERG that focuses entirely on volunteerism and philanthropy. Our colleagues are excited about building careers with Perficient because we ask 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 outlook for the full year. Jeff?
spk10: Thanks, Tom. So, Proficient expects its fourth quarter 2021 revenue to be in the range of $203 to $209 million. Fourth quarter gap earnings per share is expected to be in the range of $0.61 to $0.64 million. Fourth quarter adjusted earnings per share is expected to be in the range of $0.90 to $0.93. And Perficient expects its full year 2021 revenue to be in the range of $749 to $755 million. 2021 GAAP earnings per share in the range of $2 to $2.03. And 2021 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.
spk06: Thank you. As a reminder, to ask a question, you will need to press star 1 on your touchtone telephone. To withdraw your question, press the pound key. Once again, that's star 1 on your touchtone telephone to ask a question. Please stand by while we compile the Q&A roster. Our first question comes from the line of Surrender Time of Jeffries. Your line is open.
spk09: Good morning. Congratulations on the results, gentlemen. 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 you maybe talk about what – with these large wins, what it's kind of doing to the overall length of your projects at this point? 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?
spk10: Sure. So we definitely are seeing 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 refer to the weighted pipeline, and even the backlog, as I just referred to, I'm talking both obviously in absolute dollars, but also as a percent of our forecast. So to your question or to your point, we're definitely increasing our visibility. We have a pretty clear line of sight through Q1 now. And really, we're getting a pretty good handle on what we think 22 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, yeah, you'll see that the duration of projects has extended substantially over, say, two, three years ago. And the 10% I'm referring to is 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 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, there's a planning cycle involved, and typically a project might only start with an architect, a team lead, as really they're pulling those plans together and laying them out. So there's sort of an inherent – opportunity up front 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.
spk09: That's helpful. And then industry-specific question, obviously we're seeing continued growth on the financial services side. But on the health care 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 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 health care where it seems to be a bit more flat.
spk10: Yeah, I mean, keep in mind the backdrop there is we're growing 20-plus percent organic. So when you say flat, I would say, you know, it's maybe dropped slightly, 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 do, 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 you're seeing it on a relative basis may be 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. In 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're underrepresented in technology there. So we really put out a concerted effort over the last 12 to 24 months to to address that. And you're seeing some of the results of that. So we're excited about financial services and 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.
spk09: Yeah, 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, 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 having a local friend?
spk10: Yeah, it adds some complexity. Of course, given the scale that Overactive was, and really, you know, PSL that we did last year, mature businesses that had good infrastructure that, you know, and that we're going to be combining over time, 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 yeah, we hedge. We don't pay in U.S. dollars. We pay in local currency, and we use hedging vehicles to address volatility. It's worked very well thus far, and we'll see how it plays out. We're entering a little more Some countries, there's a little more volatility, but so far we've had great success in hedging.
spk09: Thank you. I'll get back to Nick. Sure.
spk06: Thank you. Our next question comes from Maggie Nolan of William Blair. Your line is open.
spk04: Hi. I wanted to ask about some of those newer geographies as well. Can you talk about how you're building – a hiring engine there, thoughts about your ability to grow these new locations organically going forward?
spk10: Yeah, absolutely. Kind of as I just alluded to, you know, these organizations have strong talent acquisition capability already in place. So while we're obviously going to plug that into sort of our centralized engine from, you know, helping them from a marketing standpoint and getting out there with the branding, the reality is, again, we're going to continue to leverage the TA that they have in place. And they've had great – these are fast-growing businesses and have 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 need to. And I believe we will need to because the demand there is just tremendous.
spk04: Okay. And then you've been operating, you know, comfortably above the 20% adjusted EBITDA level in terms of margins 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 versus letting margins kind of continue to expand as your delivery footprint has changed so much?
spk10: 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. And it's particularly focused 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, there's training and recruiting involved in terms of a lot of that reinvestment. Again, I think that's more of kind of a linear approach. straight line and any kind of a stair step. So I see that, you know, continue at the level that it is. In terms of adjusted EBITDA or EBITDA margins, I do think there's expansion opportunity continuing. You know, we're enjoying some nice economies I've mentioned before that I think this year, you know, we're clearly on a path to be around a couple 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. And, you know, I probably wouldn't hazard a guess too much into next year. But, you know, I think maybe half of that is achievable. So obviously we'll be providing guidance on next year later. But we feel good about, again, some continued at least modest expansion. And if you consider 100 basis points modest. And I think that's going to continue for quite some time and still allow for reinvestment.
spk04: Okay, thanks. Congrats on another beaten race. Thanks, Maggie.
spk06: Thank you. Our next question comes from Yang Tandon of Needham. Your question, please.
spk02: 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 21? 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 colors so we can be more appropriate with our models as we look out into next year?
spk10: Happy to do that. So, yeah, the implied guidance at the midpoint for Q4 is just over 20%, 20%, 21%. And that's at the midpoint, and obviously our goal will be to come in above that. So the implied is, again, around 20%, 21%. 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, you know, growth levels at or near where we're at. So I think, yes, double digits for sure. And I would say, you know, probably high teens. And, you know, I don't see any reason right now that we can't sustain, you know, the levels that we're driving right now as we look ahead. and looking at our pipeline and looking at the bookings that we're enjoying and the bookings that we're putting up now, you know, primarily impact, you know, Q1 and Q2. So, you know, Q4 is in the bag. So those are good indicators that we'll be able to sustain, you know, high growth levels similar to what we're enjoying now.
spk02: 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 then the 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?
spk10: Sure. You know, the MLS let 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. You know, 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, you know, that was a, what, eight-figure, nine-figure deal. And, you know, we ended up here a year later with still $50 million on the balance sheet. So I think the line that we have is more than adequate to accomplish what we want to. But, Paul, is there anything you'd like to add to that?
spk05: No, I think the main thing, you know, we did a combination of cash and a draw on the line, as Jeff said, to fund the overactive deal. Q4 specifically is generally a strong cash flow generation quarter, so that will help us. And, you know, as always, you know, we look at our balance sheet and opportunities on, you know, what are we going to do to continue to fund our growth, and we feel we're well positioned to do so.
spk10: And, Paul, our line is $200 million plus an accordion feature, right?
spk05: That's correct. I think it's a $75 million accordion feature in a $200 million line.
spk10: Yeah, which we have $40 million or $50 million against right now.
spk02: Right. That's very helpful. Thanks so much, Jeff and Paul.
spk10: Thanks, Maya.
spk06: Sure. Thanks, Maya. Thank you. Our next question comes from Brian Kintzlinger of Alliance Global Partners. Your question, please.
spk08: Hey, guys. Great results. Given growth accelerating, can you talk about where utilization and attrition are and your goals for utilization, and then you highlighted increased wage pressure. I think most of that comes from the U.S., so can you talk about if you see that impact in the P&L at all over the next 12 months that offset some of that margin expansion?
spk10: Yeah, a fair question. So utilization is running, you know, 80% to 82%, which we've sustained now for several quarters, if you go back. You know, even into 2020, frankly, during kind of the toughest part of the pandemic, we were still over 80. So 80 to 82 is the range that we like to be in and we feel confident is sustainable. In terms of attrition, our attrition has picked up a little bit. I think there was some pent-up demand. I mean, we were in the low, 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 kick-up there that I believe is probably temporary, but we're a little over 20%, I think 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 genuinely below 15% is unhealthy, just like above 20% is costly. So our goal would be to be somewhere around the middle of that. But, you know, given the circumstances and the environment we're in, I think we can expect, you know, 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 of talent acquisition that we've got in place. So the team's done an amazing job there of recruiting against that But also recruiting, you know, on top of that, obviously, our tremendous growth. And as I said before, we're not experiencing, you know, hindrances due to labor shortages. So we're able to meet our demands. And, you know, in terms of wage inflation, I don't know that – I don't recall anybody necessarily alluding to that. But, you know, we're seeing about 3%. I mean, we're not seeing anything yet – That's above sort of our normal raise pool in any given year. So right now, the wage increases this year will be around 3%, maybe 3% to 4%, somewhere in there. But to your point, part of the reason that we're able to afford that without it 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 revenue. delivery service right in the 50-55% range and we're actually seeing rates tick up again as well so we've got 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 we're very careful about that but we have been able to inch up rates a bit we're up about in North America we're up about $2 from last quarter So that's about 1.5% in a single quarter. That doesn't suggest that we're going to do 6% over a year, but we are seeing them tip off, which will help offset that cost.
spk08: That's great. Just a couple quick ones on overactive. It sounds like trailing 12 months of $40 million. Can you tell us what organic growth was? Is your utilization similar, or is it lower so you can absorb people? And then just comment on their geography. Do they have local customers that don't have that arbitrage, or are they all North American and European customers? Thank you. Come on for me.
spk10: Yeah, no, the utilization there is about the same as us. Their organic growth has been higher, you know, a lot of large numbers. So their organic growth, I want to say, has been in the 30-plus percent, maybe close to 40. And, again, similar utilization there. 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've demonstrated to perform very well with. And, yeah, there are local customers. There are some domestic customers in Latin America. They probably brought a little more than PSL did. We also gained some from PSL. Obviously, we intend to continue to service that market. but we also intend to drive a lot of demand or a lot of increased demand from, you know, our existing client base, which is mostly North America, but we've got some global customers as well.
spk08: Great. Thanks so much.
spk10: Thank you.
spk06: Thank you. Our next question comes from Puneet Jain of JP Morgan. Please go ahead.
spk00: Hey, thanks for taking my question. Um, So high teens growth for next year. Just a clarification. Did you mean that organic growth or reported growth including acquisition cost reduction?
spk10: No, I was speaking just to organic.
spk00: That's great. Like that would be like very bullish like if like the current growth rate continuing to next year. So would you attribute that to Industry-wide strong demand trends as clients continue to spend in digital areas, or would that be more driven by proficient specific drivers such as more efficient delivery that you didn't have before?
spk10: I think it's the latter. And you've probably heard me talk about this for a while now. You know, we've been getting many years ago now. We have done a lot of work on our sales platform, you know, 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've improved our talent acquisition there so that we're getting better success out of sales folks that we're 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 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. I think a lot of it's coming from that. Evidence of that, by the way, I'll point to our top 50 customers, where we're growing those relationships at about 15%. That's total revenue growth. And keep in mind that many of those same customers now are really embracing our offshore and nearshore capability. So that incremental 15% is actually coming from Offshore and nearshore, which is running a rate that's about a quarter of our U.S. rate. So if you think about the hours involved in that, we're growing very substantial in those accounts. Their SPID is 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. That's the point of that example. And 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, just in certain sense in terms of the broader market.
spk00: Got you. I appreciate that. And with Latin America as big as India in terms of delivery footprint, how do you think about your further global diversification plans? And are there any differences in the two regions in terms of what type of services you deliver from each one of them?
spk10: Yeah, I think at any given point in time, there are some skills that might be more prevalent or stronger at 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 in terms of sourcing the experts that deliver that. So for the most part, you know, the skills are very similar, super capable, great people. And, again, our long-term goal would be that everybody has some level of skill in 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 delivery resources.
spk00: Got you. Thank you.
spk10: Thank you.
spk06: Thank you. Our next question comes from Vincent Colicchio of Barrington. Your question, please.
spk07: Yeah, Jeff, a follow-up on the last question. So what is your target for your geographic footprint? Do you know yet? What I mean is what portion offshore versus onshore?
spk10: I think first and foremost, we're going to continue to take advantage of what we're seeing out there As you can see, we've been driving 48% plus. I think it was 75% even in the second quarter. That's, again, why we've done those acquisitions. We see just a tremendous opportunity there. I think going forward, sort of notionally, I'd like to see offshore and nearshore get to what I think is a tipping point of maybe 50% in terms of revenue. We already mentioned that We're already there in terms of consultants. And I'd like to see us get there in terms of revenue where we'll really begin to see, I think, that strong margin from those other regions really, really driving some margin expansion for the company. When does that come about? You know, it's 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 growth. then I think it's about three years out where we could be approaching that level.
spk07: And can you provide an update on pricing? Are we seeing any inflation given the market?
spk10: We're definitely seeing more openness among clients. 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 that's actually opening up some opportunities for us. So in terms of rate increases, yes, again, more openness to that. We're getting COLA, as an example, built into MSAs now where that was difficult in the past. Of course, our business has changed now where MSAs, you know, in the past may have been short-lived. But as you know, our focus on land and expand and maintaining these relationships in the average 10-year of those top 50 is, I want to say, about 9 or 10 years. So we're going back, and even when we're renewing new MSAs with those existing accounts, they're tolerant 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 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.
spk07: Where do you stand with some of the discounts you gave during the pandemic? Have some returned to normal in terms of pricing?
spk10: Yeah, actually, I would say substantially all. But, you know, you might recall that we 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.
spk07: And last question, I must have missed. What was organic growth in the quarter?
spk10: Twenty-two, 22%.
spk07: Thanks. Great job with the quarter.
spk10: Thanks, Vince.
spk06: Thank you. As a reminder, to ask a question, please press star 1 on your touchtone telephone. Again, that's star 1 on your touchtone telephone to ask a question. Our next question comes from the line of Jack VanderAard of Maxim Group. Your question, please.
spk03: Great. Good morning, guys. Thanks for taking my questions. Solid quarter, solid guidance again. Jeff, first question for you. In your prepared remarks, you mentioned that revenue per billable colleague is 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 billable employees?
spk10: That's overall, so overall revenue per employee, although I will tell you that our offshore and nearshore is typically above theirs as well.
spk03: Okay, fantastic. Well, and that just seems 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 and Is this sort of average revenue delta outperformance something you think that is sustainable? And, you know, over the trend you expect to continue over the next couple of years? I'm just trying to understand why you have such a, I guess, a better, is this a utilization factor, but you're also just putting your employees to work more than others, even if at a lower rate? How are you sustaining this?
spk10: 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 80s is, again, something we can sustain and have for quite some time now. So I think it's actually more a factor of – or 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 establish – establish very strategic relationships with the majority of 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 in a strategic nature, we're able to command stronger rates, certainly in North America, but then that extends to our offshore and nearshore capability. You know, the clients 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 again and the relationships that we have there, those are not staff augmentation. Those are strategic, solution-driven engagements. And now we're able to extend more and more of that work into our offshore and nearshore capability with very attractive rates there as well.
spk03: Great. Fantastic. I appreciate that. 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 code regarding the number of seven-figure and eight-figure deals that Either you close in the third quarter or you expect to close in the upcoming quarters just because you touched on that last quarter.
spk11: Yeah, I didn't cover that, Jack, but I'll tell you that the pipeline continues to grow and the number of deals continues to accelerate. Jeff mentioned The number of deals we're chasing is more than ever as far as the six- and seven-figure deals. I 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.
spk03: Okay. Fair enough. That's all I need to know. Great quarter, guys. I'll hop back in the queue. Thanks, Jack.
spk06: Thanks, Jack. Thank you. At this time, I'd like to turn the call back over to Jeff Davis for closing remarks. Sir?
spk10: All right. Well, as you can see, things are going very well at Perficient, and we're 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 22, that we've got great visibility into and feel really strongly about. So we'll look forward to speaking to all of you again in February. Thank you for your time today.
spk06: And this concludes today's conference call. Thank you for participating. You may now disconnect.
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