1782c7f6f8e7437

 

UNITED STATES 

SECURITIES AND EXCHANGE COMMISSION 

WASHINGTON, DC 20549 

 

FORM 10-Q 

 

(Mark One)

 

 

 

 

þ

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

 

 

For the quarterly period ended September 30, 2012 

  

OR

 

 

 

 

o

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.)

 

 

520 Maryville Centre Drive, 

Suite 400 

Saint Louis, Missouri 63141 

(Address of principal executive offices) 

(314) 529-3600 

(Registrant's telephone number, including area code) 

 

 

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   oNo 

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post 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, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): 

 

 

 

Large accelerated filer o

Accelerated filer þ

 

 

Non-accelerated filer o (Do not check if a smaller reporting company)

Smaller reporting company o

 

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

 

As of October 29, 2012, there were 33,116,905 shares of Common Stock outstanding.    

   

 


 

 

 

 

TABLE OF CONTENTS 

  

 

 

 

 

 

 Part I.

Financial Information

 

 

 

 

 

 

 

 Item 1.

Financial Statements

 

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets as of September 30, 2012 and December 31, 2011

 

 

 

 

 

 

 

 

Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2012 and 2011

 

 

 

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2012 and 2011

 

 

 

 

 

 

Condensed Consolidated Statement of Stockholders’ Equity for the Nine Months Ended September 30, 2012

 

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2012 and 2011

 

 

 

 

 

 

 

 

Notes to Interim Unaudited Condensed Consolidated Financial Statements

 

 

 

 

 

 

 

 Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

14 

 

 

 

 

 

 

 Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

20 

 

 

 

 

 

 

 Item 4.

Controls and Procedures

 

20 

 

 

 

 

 

 

 Part II.

Other Information

 

21 

 

 

 

 

 

 

 Item 1A.

Risk Factors

 

21 

 

 

 

 

 

 

 Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

21 

 

 

 

 

 

 

 Item 5.

Other Information

 

21 

 

 

 

 

 

 

 Item 6.

Exhibits

 

21 

 

 

 

 

 

 

 

Signatures

 

22 

 

  

 

 

 

 

i

 


 

 

 

PART I. FINANCIAL INFORMATION  

   

Item 1. Financial Statements 

  

Perficient, Inc.  

Condensed Consolidated Balance Sheets 

(Unaudited) 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 

2012

 

 

December 31, 

2011

 

ASSETS

 

(In thousands, except share information)

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

3,481 

 

 

$

9,732 

 

Accounts receivable, net

 

 

78,091 

 

 

 

60,892 

 

Prepaid expenses

 

 

1,564 

 

 

 

1,246 

 

Other current assets

 

 

3,097 

 

 

 

3,118 

 

Total current assets

 

 

86,233 

 

 

 

74,988 

 

Property and equipment, net

 

 

4,526 

 

 

 

3,490 

 

Goodwill

 

 

160,199 

 

 

 

132,038 

 

Intangible assets, net

 

 

19,408 

 

 

 

10,128 

 

Other non-current assets

 

 

3,600 

 

 

 

3,288 

 

Total assets

 

$

273,966 

 

 

$

223,932 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

7,538 

 

 

$

5,029 

 

Other current liabilities

 

 

20,678 

 

 

 

18,483 

 

Total current liabilities

 

 

28,216 

 

 

 

23,512 

 

Long-term debt

 

 

11,500 

 

 

 

--

 

Other non-current liabilities

 

 

1,359 

 

 

 

1,461 

 

Total liabilities

 

$

41,075 

 

 

$

24,973 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Common stock (par value $.001 per share; 50,000,000 shares authorized and

 

 

 

 

 

 

 

 

     38,426,203 shares issued and 30,846,332 shares outstanding as of September 30, 2012;

 

 

 

 

 

 

 

 

     36,217,914 shares issued and 28,742,906 shares outstanding as of December 31, 2011)

 

$

38 

 

 

$

36 

 

Additional paid-in capital

 

 

272,232 

 

 

 

248,855 

 

Accumulated other comprehensive loss

 

 

(270 

)

 

 

(279 

)

Treasury stock, at cost (7,579,871 shares as of September 30, 2012;  7,475,008 shares as of December 31, 2011)

 

 

(56,182 

)

 

 

(54,995 

)

Retained earnings

 

 

17,073 

 

 

 

5,342 

 

Total stockholders’ equity

 

 

232,891 

 

 

 

198,959 

 

Total liabilities and stockholders’ equity

 

$

273,966 

 

 

$

223,932 

 

 

See accompanying notes to interim unaudited condensed consolidated financial statements. 

    

 

  

 

 

 


 

 

 

Perficient, Inc. 

Condensed Consolidated Statements of Operations 

(Unaudited) 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended  

September 30,

 

 

Nine Months Ended  

September 30,

 

 

 

2012

 

 

2011

 

 

2012

 

 

2011

 

Revenues

 

(In thousands, except per share data)

 

  Services

 

$

75,948 

 

 

$

62,486 

 

 

$

214,793 

 

 

$

171,911 

 

  Software and hardware

 

 

7,450 

 

 

 

3,868 

 

 

 

17,122 

 

 

 

10,618 

 

  Reimbursable expenses

 

 

4,076 

 

 

 

3,820 

 

 

 

12,053 

 

 

 

9,477 

 

Total revenues

 

 

87,474 

 

 

 

70,174 

 

 

 

243,968 

 

 

 

192,006 

 

Cost of revenues (exclusive of depreciation and amortization, shown separately below)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Project personnel costs

 

 

47,843 

 

 

 

39,292 

 

 

 

136,742 

 

 

 

109,024 

 

  Software and hardware costs

 

 

6,301 

 

 

 

3,425 

 

 

 

14,554 

 

 

 

9,223 

 

  Reimbursable expenses

 

 

4,076 

 

 

 

3,820 

 

 

 

12,053 

 

 

 

9,477 

 

  Other project related expenses

 

 

1,027 

 

 

 

1,320 

 

 

 

2,988 

 

 

 

4,454 

 

Total cost of revenues

 

 

59,247 

 

 

 

47,857 

 

 

 

166,337 

 

 

 

132,178 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross margin

 

 

28,227 

 

 

 

22,317 

 

 

 

77,631 

 

 

 

59,828 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

17,714 

 

 

 

13,797 

 

 

 

49,065 

 

 

 

38,283 

 

Depreciation

 

 

612 

 

 

 

484 

 

 

 

1,590 

 

 

 

1,207 

 

Amortization

 

 

2,258 

 

 

 

1,984 

 

 

 

5,664 

 

 

 

4,663 

 

Acquisition costs

 

 

 

 

 

 

 

 

1,831 

 

 

 

1,231 

 

Adjustment to fair value of contingent consideration

 

 

97 

 

 

 

334 

 

 

 

435 

 

 

 

852 

 

Income from operations

 

 

7,537 

 

 

 

5,717 

 

 

 

19,046 

 

 

 

13,592 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest (expense) income 

 

 

(93 

)

 

 

(1 

) 

 

 

(131 

)

 

 

67 

 

Net other income (expense)

 

 

 

 

 

13 

 

 

 

49 

 

 

 

(6 

)

Income before income taxes

 

 

7,449 

 

 

 

5,729 

 

 

 

18,964 

 

 

 

13,653 

 

Provision for income taxes

 

 

2,307 

 

 

 

2,263 

 

 

 

7,233 

 

 

 

5,627 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

5,142 

 

 

$

3,466 

 

 

$

11,731 

 

 

$

8,026 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic net income per share

 

$

0.17 

 

 

$

0.12 

 

 

$

0.40 

 

 

$

0.29 

 

Diluted net income per share

 

$

0.16 

 

 

$

0.12 

 

 

$

0.38 

 

 

$

0.28 

 

Shares used in computing basic net income per share

 

 

30,021 

 

 

 

27,744 

 

 

 

29,273 

 

 

 

27,679 

 

Shares used in computing diluted net income per share

 

 

31,674 

 

 

 

29,518 

 

 

 

30,844 

 

 

 

29,054 

 

 

 See accompanying notes to interim unaudited condensed consolidated financial statements. 

   

 

 


 

 

 

 

Perficient, Inc. 

Condensed Consolidated Statements of Comprehensive Income 

(Unaudited) 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended 

September 30,

 

 

Nine Months Ended 

September 30,

 

 

2012

 

 

 

2011 

 

 

 

2012 

 

 

 

2011 

 

 

 

(In thousands)

 

 

(In thousands)

Net income

$

5,142 

 

 

$

3,466 

 

 

$

11,731 

 

 

$

8,026 

 

Other comprehensive income, net of reclassification adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Foreign currency translation adjustment

 

49 

 

 

 

(97 

) 

 

 

 

 

 

(50 

) 

  Net unrealized loss on investments

 

--

 

 

 

--

 

 

 

--

 

 

 

(19 

)

Comprehensive income

$

5,191 

 

 

$

3,369 

 

 

$

11,740 

 

 

$

7,957 

 

 

See accompanying notes to interim unaudited condensed consolidated financial statements. 

 

  

 

 

 


 

 

 

Perficient, Inc. 

Condensed Consolidated Statement of Stockholders’ Equity 

Nine Months Ended September 30, 2012 

(Unaudited) 

(In thousands) 

  

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

Common

 

 

Common

 

 

Additional

 

 

Other

 

 

 

 

 

 

 

 

Total

 

 

Stock

 

 

Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Treasury

 

 

Retained

 

 

Stockholders’

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Stock

 

 

Earnings

 

 

Equity

 

Balance at December 31, 2011

28,743 

 

$

36 

 

$

248,855 

 

$

(279 

)

$

(54,995 

)

$

5,342 

 

$

198,959 

 

Proceeds from the exercise of stock options and sales of stock through the Employee Stock Purchase Plan

32 

 

 

 --

 

 

134 

 

 

--

 

 

--

 

 

--

 

 

134 

 

Net tax benefit from stock option exercises and restricted stock vesting

--

 

 

--

 

 

678 

 

 

--

 

 

--

 

 

--

 

 

678 

 

Stock compensation related to restricted stock vesting and retirement savings plan contributions

490 

 

 

--

 

 

6,995 

 

 

--

 

 

--

 

 

--

 

 

6,995 

 

Purchases of treasury stock and buyback of shares for taxes

(105 

)

 

--

 

 

--

 

 

--

 

 

(1,187 

)

 

--

 

 

(1,187 

)

Issuance of stock for acquisitions

1,686 

 

 

 

 

15,570 

 

 

--

 

 

--

 

 

--

 

 

15,572 

 

Net income

--

 

 

--

 

 

--

 

 

--

 

 

--

 

 

11,731 

 

 

11,731 

 

Foreign currency translation adjustment

--

 

 

--

 

 

--

 

 

 

 

--

 

 

--

 

 

 

Balance at September 30, 2012

30,846 

 

$

38 

 

$

272,232 

 

$

(270 

)

$

(56,182 

)

$

17,073 

 

$

232,891 

 

  

See accompanying notes to interim unaudited condensed consolidated financial statements. 

  

  

 

 


 

 

 

Perficient, Inc. 

Condensed Consolidated Statements of Cash Flows 

(Unaudited) 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended 

September 30,

 

 

 

2012

 

2011

 

 

 

(In thousands)

 

OPERATING ACTIVITIES

 

 

 

Net income

 

$

11,731 

 

 

$

8,026 

 

Adjustments to reconcile net income to net cash provided by operations:

 

 

 

 

 

 

 

 

   Depreciation

 

 

1,590 

 

 

 

1,207 

 

   Amortization

 

 

5,664 

 

 

 

4,663 

 

   Deferred income taxes

 

 

243 

 

 

 

1,251 

 

   Non-cash stock compensation and retirement savings plan contributions

 

 

6,995 

 

 

 

6,760 

 

   Tax benefit from stock option exercises and restricted stock vesting

 

 

(781 

)

 

 

(1,554 

)

   Adjustment to fair value of contingent consideration for purchase of business

 

 

435 

 

 

 

852 

 

 

 

 

 

 

 

 

 

 

Changes in operating assets and liabilities, net of acquisitions:

 

 

 

 

 

 

 

 

   Accounts receivable

 

 

(9,161 

)

 

 

(9,310 

) 

   Other assets

 

 

1,510 

 

 

 

(2,379 

) 

   Accounts payable

 

 

1,768 

 

 

 

(2,532 

)

   Other liabilities

 

 

855 

 

 

 

(5,111 

)

Net cash provided by operating activities

 

 

20,849 

 

 

 

1,873 

 

 

 

 

 

 

 

 

 

 

INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

Proceeds from maturity of investments

 

 

--

 

 

 

13,555 

 

Purchase of property and equipment

 

 

(1,391 

)

 

 

(2,393 

)

Capitalization of software developed for internal use

 

 

(107 

)

 

 

(111 

)

Purchase of business and related costs

 

 

(36,412 

)

 

 

(19,020 

)

Net cash used in investing activities

 

 

(37,910 

)

 

 

(7,969 

)

 

 

 

 

 

 

 

 

 

FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Payment of credit facility financing fees

 

 

--

 

 

 

(299 

) 

Proceeds from line of credit

 

 

116,100 

 

 

 

14,000 

 

Payments on line of credit

 

 

(104,600 

)

 

 

(14,000 

)

Payment of contingent consideration for purchase of business

 

 

(425 

)

 

 

--

 

Tax benefit on stock option exercises and restricted stock vesting

 

 

781 

 

 

 

1,554 

 

Proceeds from the exercise of stock options and sales of stock through the Employee Stock Purchase Plan

 

 

134 

 

 

 

3,605 

 

Purchase of treasury stock

 

 

(605 

)

 

 

(9,525 

Remittance of taxes withheld as part of a net share settlement of restricted stock vesting

 

 

(582 

)

 

 

--

 

Net cash provided by (used in) financing activities

 

 

10,803 

 

 

 

(4,665 

)

Effect of exchange rate on cash and cash equivalents

 

 

 

 

 

13 

 

Change in cash and cash equivalents

 

 

(6,251 

)

 

 

(10,748 

Cash and cash equivalents at beginning of period

 

 

9,732 

 

 

 

12,707 

 

Cash and cash equivalents at end of period

 

$

3,481 

 

 

$

1,959 

 

 

 

 

 

 

 

 

 

 

Supplemental disclosures:

 

 

 

 

 

 

 

 

Cash paid for income taxes

 

$

6,071 

 

 

$

5,691 

 

 

 

 

 

 

 

 

 

 

Non-cash activity:

 

 

 

 

 

 

 

 

Stock issued for purchase of business

 

$

15,572 

 

 

$

6,838 

 

Estimated fair value of contingent consideration for purchase of business

 

$

1,474 

 

 

$

2,206 

 

 

See accompanying notes to interim unaudited condensed consolidated financial statements.

 

 


 

 

 

PERFICIENT, INC. 

NOTES TO INTERIM UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 

SEPTEMBER 30, 2012 

 

1. Basis of Presentation 

  

The accompanying interim unaudited condensed consolidated financial statements of Perficient, Inc. (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States 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 footnote 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, 2011. Operating results for the three and nine months ended September 30, 2012 may not be indicative of the results for the full fiscal year ending December 31, 2012.

  

2. Summary of Significant Accounting Policies 

  

Use of Estimates 

  

The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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. 

  

Revenue Recognition 

  

Revenues are primarily derived from professional services provided on a time and materials basis. For time and material contracts, revenues are recognized and billed by multiplying the number of hours expended in the performance of the contract by the established billing rates. For fixed fee projects, revenues are generally recognized using an input method based on the ratio of hours expended to total estimated hours. Amounts invoiced and collected in excess of revenues recognized are classified as deferred revenues. On many projects the Company is also reimbursed for out-of-pocket expenses such as airfare, lodging, and meals.  These reimbursements are included as a component of revenues. Revenues from software and hardware sales are generally recorded on a gross basis considering the Company’s role as a principal in the transaction.  On rare occasions, the Company enters into a transaction where it is not the principal.  In these cases, revenue is recorded on a net basis. 

  

Unbilled revenues represent the project time and expenses that have been incurred, but not yet billed to the client, prior to the end of the fiscal period.  For time and materials projects, the client is invoiced for the amount of hours worked multiplied by the billing rates as stated in the contract. For fixed fee arrangements, 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 and expenses are worked/incurred 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 unbilled revenue once the Company verifies all other revenue recognition criteria have been met. 

 

Revenues are recognized when the following criteria are met: (1) persuasive evidence of the customer arrangement exists; (2) fees are fixed and determinable; (3) delivery and acceptance have occurred; and (4) collectability is deemed probable. The Company’s policy for revenue recognition in instances where multiple deliverables are sold contemporaneously to the same customer is in accordance with Financial Accounting Standards Board Accounting Standards Codification (“ASC”) Subtopic 985-605, Software – Revenue Recognition, ASC Subtopic 605-25, Revenue Recognition – Multiple-Element Arrangements, and ASC Section 605-10-S99 (Staff Accounting Bulletin Topic 13, Revenue Recognition). Specifically, if the Company enters into contracts for the sale of services and software or hardware, then the Company evaluates whether each element should be accounted for separately by considering the following criteria: (1) whether the deliverables have value to the client on a stand-alone basis; and (2) whether delivery or performance of the undelivered item or items is considered probable and substantially in the control of the Company (only if the arrangement includes a general right of return related to the delivered item). Further, for sales of software and services, the Company also evaluates whether the services are essential to the functionality of the software and if it has fair value evidence for each deliverable. If the Company concludes that the separation criteria are met, then it accounts for each deliverable in the transaction separately, based on the relevant revenue recognition policies. Generally, all deliverables of the Company’s multiple element arrangements meet these criteria and are accounted for separately, with the arrangement consideration allocated among the deliverables using vendor specific objective evidence of the selling price. As a result, the Company generally recognizes software and hardware sales upon delivery to the customer and services consistent with the policies described herein. 

 

 

 


 

 

 

 

 


 

 

 

Further, delivery of software and hardware sales, when sold contemporaneously with services, can generally occur at varying times depending on the specific client project arrangement. Delivery of services generally occurs over a period of time consistent with the timeline as outlined in the client contract.  

 

There are no significant cancellation or termination-type provisions for the Company’s software and hardware sales. 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 day notice is required). The client is responsible for any time and expenses incurred up to the date of cancellation or termination of the contract. 

 

The Company may provide multiple services under the terms of an arrangement and is required to assess whether one or more units of accounting are present.  Service fees are typically accounted for as one unit of accounting, as fair value evidence for individual tasks or milestones is not available.  The Company follows the guidelines discussed above in determining revenues; however, certain judgments and estimates are made and used to determine revenues recognized in any accounting period. If estimates are revised, material differences may result in the amount and timing of revenues recognized for a given period. 

 

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. 

  

Fair Value of Financial Instruments 

  

Cash equivalents, accounts receivable, accounts payable, other accrued liabilities, and debt are stated at amounts which approximate fair value due to the near term maturities of these instruments.  

  

3. Stock-Based Compensation 

  

Stock-based compensation is accounted for in accordance with ASC Topic 718, Compensation – Stock Compensation (“ASC Topic 718”). The Company recognizes stock-based compensation ratably using the straight-line attribution method over the requisite service period. In addition, pursuant to ASC Topic 718, the Company is required to estimate the amount of expected forfeitures when calculating stock-based compensation, instead of accounting for forfeitures as they occur. 

 

Stock Award Plans 

  

The Company made various award grants under the 2009 Long-Term Incentive Plan prior to May 2012.  In May 2012, the Company’s stockholders approved the 2012 Long-Term Incentive Plan (the “Incentive Plan”), which had been previously approved by the Company’s Board of Directors.  The Incentive Plan allows for the granting of various types of stock awards, not to exceed a total of 2.5 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.  

 

Stock-based compensation cost recognized for the three and nine months ended September 30, 2012 was approximately $2.5 million and $7.0 million, respectively, which included $0.4 million and $1.1 million, respectively, of expense for retirement savings plan contributions.  The associated current and future income tax benefits recognized for the three and nine months ended September 30, 2012 were approximately $0.8 million and $2.3 million, respectively.  Stock-based compensation cost recognized for the three and nine months ended September 30, 2011 was approximately $2.4 million and $6.8 million, respectively, which included $0.3 million and $0.8 million, respectively, of expense for retirement savings plan contributions.  The associated current and future income tax benefits recognized for the three and nine months ended September 30, 2011 were approximately $0.8 million and $2.2 million, respectively. As of September 30, 2012, there was $13.6 million of total unrecognized compensation cost related to non-vested stock-based awards. This cost is expected to be recognized over a weighted-average period of two years. 

  

Stock option activity for the nine months ended September 30, 2012 was as follows (in thousands, except exercise price information):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Range of Exercise Prices

 

 

Weighted-Average Exercise Price

 

Options outstanding at January 1, 2012

 

 

358 

 

 

$

0.03 – 9.19

 

 

$

4.61 

 

Options exercised

 

 

(25 

)

 

 

0.03 – 7.48

 

 

 

2.23 

 

Options canceled

 

 

(9 

)

 

 

1.15 – 4.40

 

 

 

1.45 

 

Options outstanding at September 30, 2012

 

 

324 

 

 

 

0.50 – 9.19

 

 

 

4.88 

 

Options vested at September 30, 2012

 

 

324 

 

 

 

0.50 – 9.19

 

 

 

4.88 

 

  

 

 


 

 

 

Restricted stock activity for the nine months ended September 30, 2012 was as follows (in thousands, except fair value information):

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Weighted-Average

Grant Date Fair

Value

 

Restricted stock awards outstanding at January 1, 2012

 

 

2,043 

 

 

$

9.16 

 

Awards granted

 

 

413 

 

 

 

11.78 

 

Awards vested

 

 

(396 

)

 

 

9.37 

 

Awards forfeited

 

 

(132 

)

 

 

8.86 

 

Restricted stock awards outstanding at September 30, 2012

 

 

1,928 

 

 

$

9.68 

 

 

  

 

4. 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

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2012

 

 

2011

 

 

2012

 

 

2011

 

Net income

 

$

5,142 

 

 

$

3,466 

 

 

$

11,731 

 

 

$

8,026 

 

Basic:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average shares of common stock outstanding

 

 

30,021 

 

 

 

27,744 

 

 

 

29,273 

 

 

 

27,679 

 

Shares used in computing basic net income per share

 

 

30,021 

 

 

 

27,744 

 

 

 

29,273 

 

 

 

27,679 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock options

 

 

190 

 

 

 

228 

 

 

 

201 

 

 

 

313 

 

Warrants (1)

 

 

--

 

 

 

 

 

 

--

 

 

 

 

Restricted stock subject to vesting

 

 

662 

 

 

 

548 

 

 

 

619 

 

 

 

592 

 

Contingently issuable shares (2)

 

 

104 

 

 

 

467 

 

 

 

107 

 

 

 

156 

 

Shares issuable for acquisition consideration (3)

 

 

697 

 

 

 

525 

 

 

 

644 

 

 

 

307 

 

Shares used in computing diluted net income per share

 

 

31,674 

 

 

 

29,518 

 

 

 

30,844 

 

 

 

29,054 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic net income per share

 

$

0.17 

 

 

$

0.12 

 

 

$

0.40 

 

 

$

0.29 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted net income per share

 

$

0.16 

 

 

$

0.12 

 

 

$

0.38 

 

 

$

0.28 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Anti-dilutive options and restricted stock not included in the calculation of diluted net income per share

 

 

14 

 

 

 

519 

 

 

 

14 

 

 

 

319 

 

 

(1)

All outstanding warrants expired on December 30, 2011. 

(2)

Represents the Company’s estimate of shares to be issued to Exervio Consulting, Inc. (“Exervio”) pursuant to the Asset Purchase Agreement. Refer to Note 7 for further discussion. 

(3)

Represents the shares held in escrow pursuant to the Agreements and Plans of Merger with speakTECH and Northridge Systems, Inc. (“Northridge”) and pursuant to the Asset Purchase Agreements with PointBridge Solutions, LLC (“PointBridge”) and Nascent Systems, LP (“Nascent”) as part of the consideration. These shares were not included in the calculation of basic net income per share due to the uncertainty of their ultimate status. 

 

  

 

 

 

 


 

 

 

5. Commitments and Contingencies   

 

The Company leases office space and certain equipment under various operating lease agreements. The Company has the option to extend the term of certain lease agreements. Future minimum commitments under these lease agreements as of September 30, 2012 are as follows (in thousands):

 

 

 

 

 

  

 

Operating

Leases

 

2012 remaining

 

$

961 

 

2013

 

 

3,153 

 

2014

 

 

2,542 

 

2015

 

 

2,005 

 

2016

 

 

1,907 

 

Thereafter

 

 

2,227 

 

Total minimum lease payments

 

$

12,795 

 

 

  

  

6. Balance Sheet Components

 

 

 

 

 

 

 

 

 

 

 

September 30,

2012

 

 

December 31,

2011

 

 

 

 

(in thousands)

 

Accounts receivable:

 

 

 

 

 

 

 

 

Accounts receivable

 

$

54,346 

 

 

$

44,438 

 

Unbilled revenues

 

 

24,885 

 

 

 

17,511 

 

Allowance for doubtful accounts

 

 

(1,140 

)

 

 

(1,057 

)

Total

 

$

78,091 

 

 

$

60,892 

 

 

 

 

 

 

 

 

 

 

 

Property and equipment:

 

 

 

 

 

 

 

 

Computer hardware (useful life of 3 years)

 

$

6,808 

 

 

$

5,710 

 

Furniture and fixtures (useful life of 5 years)

 

 

1,907 

 

 

 

1,474 

 

Leasehold improvements (useful life of 5 years)

 

 

1,711 

 

 

 

1,801 

 

Software (useful life of 1 year)

 

 

1,858 

 

 

 

1,494 

 

Less: Accumulated depreciation

 

 

(7,758 

)

 

 

(6,989 

)

Total

 

$

4,526 

 

 

$

3,490 

 

 

 

 

 

 

 

 

 

 

 

Other current liabilities:

 

 

 

 

 

 

 

 

Accrued variable compensation

 

$

7,963 

 

 

$

6,998 

 

Estimated fair value of contingent consideration liability (Note 7)

 

 

1,474 

 

 

 

2,377 

 

Accrued subcontractor fees

 

 

2,218 

 

 

 

2,392 

 

Payroll related costs

 

 

2,877 

 

 

 

2,504 

 

Accrued medical claims expense

 

 

1,122 

 

 

 

902 

 

Accrued reimbursable expense

 

 

1,159 

 

 

 

651