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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
 
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2022 
OR
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)
DelawareNo.74-2853258
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
555 Maryville University Drive
Suite 600
Saint Louis, Missouri 63141
(Address of principal executive offices)
(314) 529-3600
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.001 par valuePRFTThe Nasdaq Global Select Market

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

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

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No þ

As of July 28, 2022, there were 34,602,966 shares of Common Stock outstanding.



TABLE OF CONTENTS
 
   
   
 
   
 
   
 
   
 
   
 
   
 
   
   
   
   
   
   
   
   
   
 




PART I. FINANCIAL INFORMATION
 
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
 
Certain statements contained in this Quarterly Report on this Form 10-Q (“Form 10-Q”) are not purely historical statements, discuss future expectations, contain projections of results of operations or financial condition, or state other forward-looking information. Those statements are subject to known and unknown risks, uncertainties, and other factors that could cause the actual results to differ materially from those contemplated by the statements. The “forward-looking” information is based on various factors and was derived using numerous assumptions. In some cases, you can identify these so-called forward-looking statements by words like “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or the negative of those words and other comparable words. You should be aware that those statements only reflect our predictions and are subject to risks and uncertainties. Actual events or results may differ substantially. Important factors that could cause our actual results to be materially different from the forward-looking statements include (but are not limited to) the following, many of which are, or may be, amplified by the novel coronavirus (COVID-19) pandemic:
 
1.the impact of the general economy and economic and political uncertainty on our business;
2.the impact of the COVID-19 pandemic on our business;
3.risks associated with potential changes to federal, state, local and foreign laws, regulations, and policies;
4.risks associated with the operation of our business generally, including:
a.client demand for our services and solutions;
b.effectively competing in a highly competitive market;
c.risks from international operations including fluctuations in exchange rates;
d.adapting to changes in technologies and offerings;
e.obtaining favorable pricing to reflect services provided;
f.risk of loss of one or more significant software vendors;
g.maintaining a balance of our supply of skills and resources with client demand;
h.changes to immigration policies;
i.protecting our clients’ and our data and information;
j.changes to tax levels, audits, investigations, tax laws or their interpretation;
k.making appropriate estimates and assumptions in connection with preparing our consolidated financial statements; and
l.maintaining effective internal controls;
5.risks associated with managing growth organically and through acquisitions;
6.risks associated with servicing our debt, the potential impact on the value of our common stock from the conditional conversion features of our debt and the associated convertible note hedge transactions;
7.legal liabilities, including intellectual property protection and infringement or the disclosure of personally identifiable information; and
8.the risks detailed from time to time within our filings with the Securities and Exchange Commission (the “SEC”).

This discussion is not exhaustive, but is designed to highlight important factors that may impact our forward-looking statements. Because the factors referred to above, as well as the statements included under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021, including documents incorporated by reference therein and herein, could cause actual results or outcomes to differ materially from those expressed in any forward-looking statement made by us or on our behalf, you should not place undue reliance on any forward-looking statements.
 
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. We are under no duty to update any of the forward-looking statements after the date of this Form 10-Q to conform such statements to actual results.
 
All forward-looking statements, express or implied, included in this report and the documents we incorporate by reference that are attributable to Perficient, Inc. and its subsidiaries (collectively, “we,” “us,” “Perficient,” or the “Company”) are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that the Company or any persons acting on our behalf may issue.

1


Item 1. Financial Statements

Perficient, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share information)
 
 June 30, 2022 (unaudited)December 31, 2021
Assets
Current assets:  
Cash and cash equivalents$38,868 $24,410 
Accounts receivable, net196,620 177,602 
Prepaid expenses7,020 5,400 
Other current assets8,825 7,296 
Total current assets251,333 214,708 
Property and equipment, net20,192 14,747 
Operating lease right-of-use assets32,170 33,353 
Goodwill512,716 515,229 
Intangible assets, net69,211 81,277 
Other non-current assets41,321 23,258 
Total assets$926,943 $882,572 
Liabilities and Stockholders’ Equity   
Current liabilities:  
Accounts payable$20,588 $26,074 
Other current liabilities73,484 93,877 
Total current liabilities94,072 119,951 
Long-term debt, net393,478 326,126 
Operating lease liabilities22,900 23,898 
Other non-current liabilities49,762 47,832 
Total liabilities$560,212 $517,807 
Stockholders’ equity:  
Preferred stock (par value $0.001 per share; 8,000,000 authorized; no shares issued or outstanding as of June 30, 2022 and December 31, 2021)
$ $ 
Common stock (par value $0.001 per share; 100,000,000 authorized; 52,771,977 shares issued and 33,992,717 shares outstanding as of June 30, 2022; 52,534,967 shares issued and 33,881,196 shares outstanding as of December 31, 2021)
53 53 
Additional paid-in capital383,987 423,235 
Accumulated other comprehensive loss(8,861)(5,843)
Treasury stock, at cost (18,779,260 shares as of June 30, 2022; 18,653,771 shares as of December 31, 2021)
(337,237)(324,412)
Retained earnings328,789 271,732 
Total stockholders’ equity366,731 364,765 
Total liabilities and stockholders’ equity$926,943 $882,572 
 
See accompanying notes to interim unaudited condensed consolidated financial statements.

2


Perficient, Inc.
Unaudited Condensed Consolidated Statements of Operations
(in thousands, except per share information)
Three Months Ended June 30,Six Months Ended June 30,
 2022202120222021
  
Revenues$222,738 $184,136 $444,849 $353,477 
Cost of revenues (cost of services, exclusive of depreciation and amortization, shown separately below)136,762 113,180 275,280 219,242 
Selling, general and administrative40,860 37,424 83,111 71,403 
Depreciation2,005 1,615 3,878 3,075 
Amortization5,998 6,333 11,977 13,385 
Acquisition costs61  360 68 
Adjustment to fair value of contingent consideration(2,487)(510)(3,466)4 
Income from operations39,539 26,094 73,709 46,300 
Net interest expense805 3,367 1,692 6,663 
Net other expense153 9 386 131 
Income before income taxes38,581 22,718 71,631 39,506 
Provision for income taxes10,799 6,145 16,713 9,340 
Net income$27,782 $16,573 $54,918 $30,166 
Basic net income per share$0.82 $0.52 $1.62 $0.95 
Diluted net income per share$0.77 $0.49 $1.52 $0.90 
Shares used in computing basic net income per share33,914 31,922 33,879 31,893 
Shares used in computing diluted net income per share36,785 33,867 36,812 33,500 
 
See accompanying notes to interim unaudited condensed consolidated financial statements.

3


Perficient, Inc.
Unaudited Condensed Consolidated Statements of Comprehensive Income
(in thousands)
Three Months Ended June 30,Six Months Ended June 30,
 2022202120222021
 
Net income$27,782 $16,573 $54,918 $30,166 
Other comprehensive loss:
Foreign currency translation adjustment, net of tax(6,824)(1,273)(3,018)(5,559)
Comprehensive income$20,958 $15,300 $51,900 $24,607 
 
See accompanying notes to interim unaudited condensed consolidated financial statements.

4


Perficient, Inc.
Unaudited Condensed Consolidated Statements of Stockholders Equity
(in thousands)
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Common Stock
Beginning of period$53 $51 $53 $50 
Stock compensation related to restricted stock vesting and retirement savings plan contributions   1 
End of period53 51 53 51 
Additional Paid-in Capital
Beginning of period377,927 465,156 423,235 459,866 
Proceeds from the sales of stock through the Employee Stock Purchase Plan293 106 575 211 
Stock compensation related to restricted stock vesting and retirement savings plan contributions5,767 4,956 11,684 10,141 
Cumulative effect of accounting changes (See Note 3)— — (51,507)— 
End of period383,987 470,218 383,987 470,218 
Accumulated Other Comprehensive Loss
Beginning of period(2,037)(540)(5,843)3,746 
Foreign currency translation adjustment(6,824)(1,273)(3,018)(5,559)
End of period(8,861)(1,813)(8,861)(1,813)
Treasury Stock
Beginning of period(333,400)(299,367)(324,412)(289,225)
Purchases of treasury stock and buyback of shares for taxes(3,837)(6,903)(12,825)(17,045)
End of period(337,237)(306,270)(337,237)(306,270)
Retained Earnings
Beginning of period301,007 233,234 271,732 219,641 
Cumulative effect of accounting changes (See Note 3)— — 2,139 — 
Net income27,782 16,573 54,918 30,166 
End of period328,789 249,807 328,789 249,807 
      Total Stockholders’ Equity$366,731 $411,993 $366,731 $411,993 

Three Months Ended June 30,Six Months Ended June 30,
Common Stock, shares2022202120222021
Beginning of period34,018 32,151 33,881 32,074 
Sales of stock through the Employee Stock Purchase Plan3 2 5 4 
Stock compensation related to restricted stock vesting and retirement savings plan contributions13 18 232 272 
Purchases of treasury stock and buyback of shares for taxes(41)(100)(125)(279)
End of period33,993 32,071 33,993 32,071 

See accompanying notes to interim unaudited condensed consolidated financial statements.
5


Perficient, Inc.
Unaudited Condensed Consolidated Statements of Cash Flows 
 (in thousands)
Six Months Ended June 30,
 20222021
Operating Activities
Net income$54,918 $30,166 
Adjustments to reconcile net income to net cash provided by operations:
Depreciation3,878 3,075 
Amortization11,977 13,385 
Deferred income taxes(389)(963)
Non-cash stock compensation and retirement savings plan contributions11,686 10,320 
Amortization of debt discount and issuance costs1,215 5,090 
Adjustment to fair value of contingent consideration for purchase of businesses(3,466)4 
Changes in operating assets and liabilities, net of acquisitions:  
Accounts receivable(18,458)(16,366)
Other assets(3,447)(5,371)
Accounts payable(5,977)2,173 
Other liabilities(17,957)(11,633)
Net cash provided by operating activities33,980 29,880 
Investing Activities  
Purchase of property and equipment(6,240)(3,623)
Capitalization of internally developed software costs(421)(569)
Purchase of businesses, net of cash acquired(67)(12)
Net cash used in investing activities(6,728)(4,204)
Financing Activities  
Payment for credit facility financing fees (633)
Payment of contingent consideration for purchase of business (4,208)
Proceeds from the sale of stock through the Employee Stock Purchase Plan575 211 
Purchases of treasury stock(3,818)(11,802)
Remittance of taxes withheld as part of a net share settlement of restricted stock vesting(9,007)(5,243)
Net cash used in financing activities(12,250)(21,675)
Effect of exchange rate on cash and cash equivalents(544)(519)
Change in cash and cash equivalents14,458 3,482 
Cash and cash equivalents at beginning of period24,410 83,204 
Cash and cash equivalents at end of period$38,868 $86,686 

Six Months Ended June 30,
20222021
Supplemental Disclosures:
Cash paid for income taxes$17,453 $10,014 
Cash paid for interest$523 $1,455 
Non-Cash Investing Activity:
Liability incurred for purchase of property and equipment$3,628 $ 

See accompanying notes to interim unaudited condensed consolidated financial statements.
6


PERFICIENT, INC.
NOTES TO INTERIM UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2022
 
1. Basis of Presentation
 
The accompanying interim unaudited condensed consolidated financial statements of Perficient, Inc. and its subsidiaries (collectively, the “Company”) have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and are presented in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) applicable to interim financial information. Accordingly, certain note disclosures have been condensed or omitted. In the opinion of management, the interim unaudited condensed consolidated financial statements reflect all adjustments (consisting of only normal recurring adjustments) necessary for a fair presentation of the Company’s financial position, results of operations and cash flows for the periods presented. These financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto filed with the SEC in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

Through June 30, 2022, the Company had not experienced a material impact to its business, operations or financial results as a result of the novel coronavirus (COVID-19) pandemic. However, the Company’s operating results for the three and six months ended June 30, 2022 are not necessarily indicative of future results, particularly in light of the COVID-19 pandemic and its continuing effects on domestic and global economies. For more information, refer to the statements included under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021.

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

There have been no changes to significant accounting policies described in the Annual Report on Form 10-K for the year ended December 31, 2021 that have had a material impact on the Company’s condensed consolidated financial statements and related notes, other than the changes described in Note 3, Recent Accounting Pronouncements.

3. Recent Accounting Pronouncements

In August 2020, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”), which simplifies the accounting for convertible instruments. The guidance removes certain accounting models that separate the embedded conversion features from the host contract for convertible instruments, requiring bifurcation only if the convertible debt feature qualifies as a derivative or for convertible debt issued at a substantial premium. The ASU removes certain settlement conditions required for equity contracts to qualify for the derivative scope exception, permitting more contracts to qualify for the exception. In addition, the guidance eliminates the treasury stock method to calculate diluted earnings per share for convertible instruments and requires the use of the if-converted method. The ASU is effective for annual reporting periods beginning after December 15, 2021, including interim reporting periods within those annual periods. The ASU allows entities to use a modified or full retrospective transition method. Under the modified approach, entities will apply the guidance to all financial instruments that are outstanding as of the beginning of the year of adoption with the cumulative effect recognized as an adjustment to the opening balance of retained earnings. Under the full retrospective method, entities will apply the guidance to all outstanding financial instruments for each prior reporting period presented. The Company adopted this ASU on January 1, 2022 under the modified retrospective method of transition. Upon adoption, the Company recorded a $2.1 million cumulative-effect adjustment that increased the opening balance of retained earnings on the consolidated balance sheet, largely due to the reduction in non-cash interest expense associated with the historical separation of debt and equity components for the Company's convertible senior notes (the “Notes”) described in Note 11, Long-Term Debt. The Company also recorded an increase to long-term debt, net of $66.2 million, a net change in the deferred tax balance of $16.8 million, and a decrease to additional paid-in capital of $51.5 million due to no longer separating the embedded conversion feature of the Notes. Upon adoption, the Company's interest expense recognized has been reduced as a result of accounting for the convertible debt instrument as a single liability measured at its amortized cost. This adoption did not have a material impact on the consolidated statement of cash flows. Upon adoption,
7


the Company prospectively utilized the if-converted method to calculate the impact of convertible instruments on diluted earnings per share. For the three and six months ended June 30, 2022, shares used in computing diluted net income per share increased by 2.2 million shares due to the change from the treasury stock method to the if-converted method.

In October 2021, the FASB issued ASU No. 2021-08, Business Combinations - Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (Subtopic 805), which requires an acquirer to recognize and measure contract assets and liabilities acquired in a business combination in accordance with Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (Topic 606) rather than adjust them to fair value at the acquisition date. The Company plans to adopt this ASU on January 1, 2023. The Company is currently evaluating the related impact of the new guidance on its financial statements.

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

Services Revenues

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

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

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

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

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




8


Software and Hardware Revenues

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

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

Arrangements with Multiple Performance Obligations

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

Contract Costs

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

Deferred Revenue

The Company’s deferred revenue balance as of June 30, 2022 and December 31, 2021 was $6.4 million and $8.2 million, respectively. Substantially all of the December 31, 2021 deferred revenue balance was recognized in revenue during the six months ended June 30, 2022.

Transaction Price Allocated to Remaining Performance Obligations
 
Due to the ability of the client or the Company to cancel or terminate the contract within a given period of time (generally 10 to 30 days’ notice is required), the majority of the Company’s contracts have a term of less than one year. The Company does not disclose the value of unsatisfied performance obligations for contracts with an original maturity date of one year or less or time and materials contracts for which the Company has the right to invoice for services performed. Revenue related to unsatisfied performance obligations for remaining contracts as of June 30, 2022 was immaterial.

Disaggregation of Revenue

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

9


 Three Months Ended June 30,
20222021
 Over TimePoint In TimeTotal RevenuesOver TimePoint In TimeTotal Revenues
Time and materials contracts$170,555 $ $170,555 $139,274 $ $139,274 
Fixed fee percent complete contracts13,540  13,540 12,100  12,100 
Fixed fee contracts33,095  33,095 26,571  26,571 
Reimbursable expenses2,428  2,428 2,562  2,562 
Total professional services fees219,618  219,618 180,507  180,507 
Other services revenue*1,966 679 2,645 2,880 388 3,268 
Total services221,584 679 222,263 183,387 388 183,775 
Software and hardware 475 475  361 361 
Total revenues$221,584 $1,154 $222,738 $183,387 $749 $184,136 

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

 Six Months Ended June 30,
20222021
 Over TimePoint In TimeTotal RevenuesOver TimePoint In TimeTotal Revenues
Time and materials contracts$342,183 $ $342,183 $267,865 $ $267,865 
Fixed fee percent complete contracts27,909  27,909 23,680  23,680 
Fixed fee contracts64,303  64,303 49,048  49,048 
Reimbursable expenses4,387  4,387 4,816  4,816 
Total professional services fees438,782  438,782 345,409  345,409 
Other services revenue*3,912 1,003 4,915 5,997 1,099 7,096 
Total services442,694 1,003 443,697 351,406 1,099 352,505 
Software and hardware 1,152 1,152  972 972 
Total revenues$442,694 $2,155 $444,849 $351,406 $2,071 $353,477 

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

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

Three Months Ended June 30,Six Months Ended June 30,
 2022202120222021
United States$212,302 $180,350 $423,925 $346,158 
Other countries10,436 3,786 20,924 7,319 
Total revenues$222,738 $184,136 $444,849 $353,477 

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



10


Stock Award Plans
 
The Company’s Second Amended and Restated 2012 Long Term Incentive Plan (as amended, the “Incentive Plan”) allows for the granting of various types of stock awards, not to exceed a total of 7.0 million shares, to eligible individuals. The Compensation Committee of the Board of Directors administers the Incentive Plan and determines the terms of all stock awards made under the Incentive Plan. As of June 30, 2022, there were 1.1 million shares of common stock available for issuance under the Incentive Plan.
 
Stock-based compensation cost recognized for the three and six months ended June 30, 2022 was $6.1 million and $12.0 million, respectively, which included $1.1 million and $2.2 million, respectively, of expense for retirement savings plan contributions. The associated current and future income tax benefit recognized was $1.7 million and $2.8 million for the three and six months ended June 30, 2022, respectively. Stock-based compensation cost recognized for the three and six months ended June 30, 2021 was $5.5 million and $10.8 million, respectively, which included $1.1 million and $2.0 million, respectively, of expense for retirement savings plan contributions. The associated current and future income tax benefit recognized was $1.6 million and $3.2 million for the three and six months ended June 30, 2021, respectively. As of June 30, 2022, there was $32.4 million of total unrecognized compensation cost related to non-vested share-based awards with a weighted-average remaining life of two years.    

Restricted stock activity for the six months ended June 30, 2022 was as follows (shares in thousands):

 
 SharesWeighted-Average
Grant Date Fair Value
Restricted stock awards outstanding at December 31, 2021642 $55.34 
Awards granted151 98.67 
Awards vested(208)41.78 
Awards forfeited(22)64.10 
Restricted stock awards outstanding at June 30, 2022563 $71.63 

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

11


Three Months Ended June 30,Six Months Ended June 30,
 2022202120222021
Net income, basic$27,782 $16,573 $54,918 $30,166 
Add back interest expense on convertible notes, net of tax (1)550  1,170  
Net income, diluted$28,332 $16,573 $56,088 $30,166 
Basic:
Weighted-average shares of common stock outstanding33,914 31,922 33,879 31,893 
Shares used in computing basic net income per share33,914 31,922 33,879 31,893 
Effect of dilutive securities:
Restricted stock subject to vesting266 460 319 461 
Shares issuable for acquisition consideration (2)91 188 91 217 
Shares issuable for conversion of convertible senior notes (1)2,431 1,251 2,431 893 
Shares issuable for exercise of warrants83 46 92 36 
Shares used in computing diluted net income per share36,785 33,867 36,812 33,500 
Basic net income per share$0.82 $0.52 $1.62 $0.95 
Diluted net income per share$0.77 $0.49 $1.52 $0.90 
 
(1)Upon adoption of ASU 2020-06 on January 1, 2022, the Company prospectively utilized the if-converted method to calculate the impact of convertible instruments on diluted earnings per share. Prior period amounts have not been adjusted due to the adoption of ASU 2020-06 under the modified retrospective method.
(2)For the three and six months ended June 30, 2022, this represents the shares held in escrow pursuant to: (i) the Asset Purchase Agreement with Zeon Solutions Incorporated and certain related entities (collectively, “Zeon); (ii) the Asset Purchase Agreement with Catalyst Networks, Inc. (“Brainjocks); (iii) the Stock Purchase Agreement with the shareholders of Productora de Software S.A.S. (“PSL); (iv) the Purchase Agreement with Talos (as defined in Note 9 - Business Combinations); and (v) the Stock Purchase Agreement with the shareholders of Izmul S.A. (“Overactive), as part of the consideration. For the three and six months ended June 30, 2021, this represents the shares held in escrow pursuant to: (i) the Asset Purchase Agreement with Zeon; (ii) the Asset Purchase Agreement with MedTouch LLC (“Medtouch); (iii) the Asset Purchase Agreement with Brainjocks; and (iv) the Stock Purchase Agreement with PSL, as part of the consideration.

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

Three Months Ended June 30,Six Months Ended June 30,
 2022202120222021
Restricted stock subject to vesting78  79  
Warrants related to the issuance of convertible senior notes1,980 4,451 1,980 4,451 
Total anti-dilutive securities2,058 4,451 2,059 4,451 

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

The Company’s Board of Directors authorized the repurchase of up to $315.0 million of Company common stock through a stock repurchase program expiring December 31, 2022. The program could be suspended or discontinued at any time, based on market, economic, or business conditions. The timing and amount of repurchase transactions will be determined by
12


management based on its evaluation of market conditions, share price, and other factors. Since the program’s inception on August 11, 2008, the Company has repurchased approximately $265.2 million (16.2 million shares) of outstanding common stock through June 30, 2022.

7. Balance Sheet Components

June 30, 2022 (unaudited)December 31, 2021
Accounts receivable:(in thousands)
Billed accounts receivable, net$115,547 $120,892 
Unbilled revenues, net81,073 56,710 
Total$196,620 $177,602 
Other current assets:
 Miscellaneous receivables$1,965 $1,576 
Contractual commitment asset1,074 1,736 
Federal/state income tax receivable4,547 2,504 
Other current assets1,239 1,480 
Total$8,825 $7,296 
Property and equipment:
Computer hardware (useful life of 3 years)
$24,544 $21,382 
Software (useful life of 1 to 7 years)
11,653 6,018 
Furniture and fixtures (useful life of 5 years)
4,524 4,599 
Leasehold improvements (useful life of 5 years)
7,770 7,850 
Less: Accumulated depreciation(28,299)(25,102)
Total$20,192 $14,747 
Other non-current assets:  
Non-current unbilled revenue$3,191 $3,210 
Company owned life insurance (“COLI) asset
9,623 10,807 
Long term deposits1,750 1,653 
Credit facility deferred finance fees, net548 619 
Other non-current assets9,500 5,629 
Deferred income taxes16,709 1,340 
Total$41,321 $23,258 
Other current liabilities:
Estimated fair value of contingent consideration liability (Note 9)$18,179 $21,644 
Accrued variable compensation14,238 31,244 
Current operating lease liabilities11,301 11,543 
Payroll related costs9,444 9,523 
Deferred revenues6,360 8,167 
Other current liabilities5,572 5,648 
Accrued medical claims expense2,937 2,605 
Professional fees1,454 1,727 
Accrued IT expenses3,999 1,776 
Total$73,484 $93,877 
13


Other non-current liabilities:June 30, 2022 (unaudited)December 31, 2021
Deferred income taxes$10,743 $13,075 
Reserve for uncertain tax positions20,447 19,127 
Deferred compensation liability8,545 9,458 
Other non-current liabilities7,335 3,462 
Non-current software accrual2,692 2,710 
Total$49,762 $