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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 September 30, 2021 
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 October 21, 2021, there were 32,938,449 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 and 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, 2020, 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)
 
 September 30, 2021 (unaudited)December 31, 2020
Assets
Current assets:  
Cash and cash equivalents$56,405 $83,204 
Accounts receivable, net165,041 133,085 
Prepaid expenses6,711 5,575 
Other current assets3,762 4,646 
Total current assets231,919 226,510 
Property and equipment, net12,127 11,902 
Operating lease right-of-use assets34,944 38,539 
Goodwill438,173 427,928 
Intangible assets, net52,482 63,571 
Other non-current assets17,986 17,311 
Total assets$787,631 $785,761 
Liabilities and Stockholders’ Equity   
Current liabilities:  
Accounts payable$19,168 $25,613 
Other current liabilities90,056 103,267 
Total current liabilities109,224 128,880 
Long-term debt, net186,527 183,624 
Operating lease liabilities25,590 29,098 
Other non-current liabilities43,038 50,081 
Total liabilities$364,379 $391,683 
Stockholders’ equity:  
Preferred stock (par value $0.001 per share; 8,000,000 authorized; no shares issued or outstanding as of September 30, 2021 and December 31, 2020)
$ $ 
Common stock (par value $0.001 per share; 100,000,000 authorized; 50,628,570 shares issued and 32,065,433 shares outstanding as of September 30, 2021; 50,296,453 shares issued and 32,074,094 shares outstanding as of December 31, 2020)
51 50 
Additional paid-in capital471,586 459,866 
Accumulated other comprehensive (loss) income(3,214)3,746 
Treasury stock, at cost (18,563,137 shares as of September 30, 2021; 18,222,359 shares as of December 31, 2020)
(312,374)(289,225)
Retained earnings267,203 219,641 
Total stockholders’ equity423,252 394,078 
Total liabilities and stockholders’ equity$787,631 $785,761 
 
See accompanying notes to interim unaudited condensed consolidated financial statements.

2


Perficient, Inc.
Unaudited Condensed Consolidated Statements of Operations
(in thousands, except share and per share information)
Three Months Ended September 30,Nine Months Ended September 30,
 2021202020212020
  
Revenues$192,820 $157,678 $546,297 $449,579 
Cost of revenues (cost of services, exclusive of depreciation and amortization, shown separately below)118,260 96,704 337,502 281,076 
Selling, general and administrative39,316 34,566 110,719 101,663 
Depreciation1,607 1,388 4,682 3,993 
Amortization4,317 7,237 17,702 15,557 
Acquisition costs1,264 57 1,332 3,657 
Adjustment to fair value of contingent consideration42 2,061 46 3,793 
Income from operations28,014 15,665 74,314 39,840 
Net interest expense3,481 2,808 10,144 6,795 
Loss on extinguishment of debt250 4,337 250 4,337 
Net other expense (income)103 (9)234 (17)
Income before income taxes24,180 8,529 63,686 28,725 
Provision for income taxes6,784 2,352 16,124 6,965 
Net income$17,396 $6,177 $47,562 $21,760 
Basic net income per share$0.54 $0.19 $1.49 $0.68 
Diluted net income per share$0.48 $0.19 $1.39 $0.67 
Shares used in computing basic net income per share31,987 31,873 31,925 31,800 
Shares used in computing diluted net income per share35,893 32,649 34,177 32,509 
 
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 September 30,Nine Months Ended September 30,
 2021202020212020
 
Net income$17,396 $6,177 $47,562 $21,760 
Other comprehensive loss:
Foreign currency translation adjustment, net of tax(1,401)(1,074)(6,960)(2,126)
Comprehensive income$15,995 $5,103 $40,602 $19,634 
 
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 September 30,Nine Months Ended September 30,
2021202020212020
Common Stock
Beginning of period$51 $50 $50 $49 
Stock compensation related to restricted stock vesting and retirement savings plan contributions  1 1 
End of period51 50 51 50 
Additional Paid-in Capital
Beginning of period470,218 475,147 459,866 455,465 
Proceeds from the sales of stock through the Employee Stock Purchase Plan152 94 363 210 
Stock compensation related to restricted stock vesting and retirement savings plan contributions5,006 4,419 15,147 13,824 
Issuance of stock in conjunction with acquisition including stock attributed to future compensation4,162 23 4,162 10,184 
Equity component of 2025 convertible notes, net of tax 36,386  36,386 
Debt issuance costs of 2025 convertible notes allocated to equity, net of tax (1,155) (1,155)
Purchase of hedges on 2025 convertible notes, net of tax (36,387) (36,387)
Proceeds from issuance of warrants on 2025 convertible notes 22,218  22,218 
Equity component of repurchase of 2023 convertible notes(8,963)(49,856)(8,963)(49,856)
Proceeds from sale of hedges related to 2023 convertible notes6,053 47,338 6,053 47,338 
Purchases of warrants related to 2023 convertible notes(5,042)(40,699)(5,042)(40,699)
End of period471,586 457,528 471,586 457,528 
Accumulated Other Comprehensive (Loss) Income
Beginning of period(1,813)(3,702)3,746 (2,650)
Foreign currency translation adjustment(1,401)(1,074)(6,960)(2,126)
End of period(3,214)(4,776)(3,214)(4,776)
Treasury Stock
Beginning of period(306,270)(266,485)(289,225)(261,624)
Purchases of treasury stock and buyback of shares for taxes(6,104)(11,112)(23,149)(15,973)
End of period(312,374)(277,597)(312,374)(277,597)
Retained Earnings
Beginning of period249,807 205,043 219,641 189,775 
Cumulative effect of accounting changes   (315)
Net income17,396 6,177 47,562 21,760 
End of period267,203 211,220 267,203 211,220 
      Total Shareholders’ Equity$423,252 $386,425 $423,252 $386,425 

5


Three Months Ended September 30,Nine Months Ended September 30,
Common Stock, shares2021202020212020
Beginning of period32,071 32,272 32,074 31,687 
Sales of stock through the Employee Stock Purchase Plan2 3 6 7 
Stock compensation related to restricted stock vesting and retirement savings plan contributions11 22 283 380 
Purchases of treasury stock and buyback of shares for taxes(62)(255)(341)(369)
Issuance of stock in conjunction with acquisition including stock attributed to future compensation43  43 337 
End of period32,065 32,042 32,065 32,042 

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


Perficient, Inc.
Unaudited Condensed Consolidated Statements of Cash Flows 
 (in thousands)
Nine Months Ended September 30,
 20212020
Operating Activities
Net income$47,562 $21,760 
Adjustments to reconcile net income to net cash provided by operations:
Depreciation4,682 3,993 
Amortization17,702 15,557 
Loss on extinguishment of debt250 4,337 
Deferred income taxes(1,258)(1,436)
Non-cash stock compensation and retirement savings plan contributions16,008 14,160 
Amortization of debt discount and issuance costs7,684 4,345 
Adjustment to fair value of contingent consideration for purchase of businesses46 3,793 
Changes in operating assets and liabilities, net of acquisitions:  
Accounts receivable(30,155)3,382 
Other assets(924)1,079 
Accounts payable(4,830)(7,372)
Other liabilities(18,632)(3,979)
Net cash provided by operating activities38,135 59,619 
Investing Activities  
Purchase of property and equipment(5,892)(3,880)
Capitalization of internally developed software costs(762)(1,245)
Purchase of businesses, net of cash acquired(14,872)(90,190)
Net cash used in investing activities(21,526)(95,315)
Financing Activities  
Proceeds from issuance of 2025 convertible notes 230,000 
Payment for 2025 convertible notes issuance costs (7,303)
Purchase of 2025 convertible notes hedges (48,944)
Proceeds from issuance of 2025 convertible notes warrants 22,218 
Payments for repurchase of 2023 convertible notes(13,907)(170,720)
Proceeds from sale of of hedges related to 2023 convertible notes6,053 47,338 
Repurchase of warrants related to 2023 convertible notes(5,042)(40,699)
Payment for credit facility financing fees(633) 
Proceeds from line of credit 28,000 
Payments on line of credit (28,000)
Payment of contingent consideration for purchase of business(6,470)(876)
Proceeds from the sale of stock through the Employee Stock Purchase Plan363 210 
Purchases of treasury stock(17,906)(11,112)
Remittance of taxes withheld as part of a net share settlement of restricted stock vesting(5,243)(4,861)
Net cash (used in) provided by financing activities(42,785)15,251 
Effect of exchange rate on cash and cash equivalents(623)(251)
Change in cash and cash equivalents(26,799)(20,696)
Cash and cash equivalents at beginning of period83,204 70,728 
Cash and cash equivalents at end of period$56,405 $50,032 

See accompanying notes to interim unaudited condensed consolidated financial statements.
7


Nine Months Ended September 30,
20212020
Supplemental Disclosures:
Cash paid for income taxes$14,713 $3,782 
Cash paid for interest$3,137 $3,321 
Non-Cash Investing Activity:
Stock issued for purchase of businesses $3,803 $8,729 
Liability incurred for purchase of property and equipment$ $500 

See accompanying notes to interim unaudited condensed consolidated financial statements.
8


PERFICIENT, INC.
NOTES TO INTERIM UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
 
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, 2020.

Through September 30, 2021, 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, operating results for the three and nine months ended September 30, 2021 are not necessarily indicative of the results that may be expected for the year ended December 31, 2021, particularly in light of the COVID-19 pandemic, including emerging variants, and its effects on domestic and global economies. To limit the spread of COVID-19, governments have imposed, and may continue to impose, among other things, travel and business operation restrictions and stay-at-home orders and social distancing guidelines, causing some businesses to adjust, reduce or suspend operating activities. While certain of these restrictions and guidelines have been lifted or relaxed, they may be reinstituted in response to continuing effects of the pandemic, including as a result of emerging variants. These disruptions and restrictions could adversely affect our operating results due to, among other things, reduced demand for our services and solutions, requests for discounts or extended payment terms, or customer bankruptcies. 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, 2020.

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, 2020 that have had a material impact on the Company’s condensed consolidated financial statements and related notes.

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), 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, with early adoption permitted no earlier than the fiscal year beginning after December 15, 2020. 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 will adopt this
9


ASU on January 1, 2022 and is currently evaluating the method of adoption and the related impact of the new guidance on earnings per share and on its financial statements.

In May 2021, the FASB issued ASU No. 2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40), which addresses the accounting for certain modifications or exchanges of freestanding equity-classified written call options. This amendment is effective for all entities, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted. The Company is evaluating the effects, if any, of the adoption of the new guidance on its financial statements and disclosures.

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

Services Revenues

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

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

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

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

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




10


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 September 30, 2021 and December 31, 2020 was $7.5 million and $9.4 million, respectively. Substantially all of the December 31, 2020 deferred revenue balance was recognized in revenue during the nine months ended September 30, 2021.

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 September 30, 2021 was immaterial.
 













11


Disaggregation of Revenue

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

 Three Months Ended September 30,
20212020
 Over TimePoint In TimeTotal RevenuesOver TimePoint In TimeTotal Revenues
Time and materials contracts$146,675 $ $146,675 $114,581 $ $114,581 
Fixed fee percent complete contracts11,572  11,572 13,920  13,920 
Fixed fee contracts28,678  28,678 22,836  22,836 
Reimbursable expenses2,316  2,316 1,513  1,513 
Total professional services fees189,241  189,241 152,850  152,850 
Other services revenue*2,694 484 3,178 3,368 537 3,905 
Total services191,935 484 192,419 156,218 537 156,755 
Software and hardware 401 401  923 923 
Total revenues$191,935 $885 $192,820 $156,218 $1,460 $157,678 

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

 Nine Months Ended September 30,
20212020
 Over TimePoint In TimeTotal RevenuesOver TimePoint In TimeTotal Revenues
Time and materials contracts$414,540 $ $414,540 $316,866 $ $316,866 
Fixed fee percent complete contracts35,252  35,252 39,556  39,556 
Fixed fee contracts77,726  77,726 72,124  72,124 
Reimbursable expenses7,132  7,132 7,437  7,437 
Total professional services fees534,650  534,650 435,983  435,983 
Other services revenue*8,691 1,583 10,274 10,314 1,696 12,010 
Total services543,341 1,583 544,924 446,297 1,696 447,993 
Software and hardware 1,373 1,373  1,586 1,586 
Total revenues$543,341 $2,956 $546,297 $446,297 $3,282 $449,579 

* 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 September 30,Nine Months Ended September 30,
 2021202020212020
United States$189,334 $154,078 $535,491 $440,140 
Other countries3,486 3,600 10,806 9,439 
Total revenues$192,820 $157,678 $546,297 $449,579 

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
12


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.

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 September 30, 2021, there were 1.3 million shares of common stock available for issuance under the Incentive Plan.
 
Stock-based compensation cost recognized for the three and nine months ended September 30, 2021 was $6.3 million and $17.1 million, respectively, which included $1.1 million and $3.0 million, respectively, of expense for retirement savings plan contributions. The associated current and future income tax benefit recognized was $1.6 million and $4.1 million for the three and nine months ended September 30, 2021, respectively. Stock-based compensation cost recognized for the three and nine months ended September 30, 2020 was $4.7 million and $14.4 million, respectively, which included $0.8 million and $2.5 million, respectively, of expense for retirement savings plan contributions. The associated current and future income tax benefit recognized was $1.5 million and $4.4 million for the three and nine months ended September 30, 2020, respectively. As of September 30, 2021, there was $22.5 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 nine months ended September 30, 2021 was as follows (shares in thousands):

 
 SharesWeighted-Average
Grant Date Fair Value
Restricted stock awards outstanding at December 31, 2020905 $35.34 
Awards granted192 55.82 
Awards vested(240)29.97 
Awards forfeited(59)35.98 
Restricted stock awards outstanding at September 30, 2021798 $41.83 

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

Three Months Ended September 30,Nine Months Ended September 30,
 2021202020212020
Net income$17,396 $6,177 $47,562 $21,760 
Basic:
Weighted-average shares of common stock outstanding31,987 31,873 31,925 31,800 
Shares used in computing basic net income per share31,987 31,873 31,925 31,800 
Effect of dilutive securities:
Restricted stock subject to vesting613 444 536 414 
Shares issuable for acquisition consideration (1)66 310 166 238 
Shares issuable for conversion of convertible senior notes2,252 22 1,515 57 
Shares issuable for exercise of warrants975  35  
Shares used in computing diluted net income per share35,893 32,649 34,177 32,509 
Basic net income per share$0.54 $0.19 $1.49 $0.68 
Diluted net income per share$0.48 $0.19 $1.39 $0.67 
 
13


(1)For the three and nine months ended September 30, 2021, 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 MedTouch LLC (“MedTouch”); (iii) the Asset Purchase Agreement with Catalyst Networks, Inc. (“Brainjocks”); (iv) the Stock Purchase Agreement with the shareholders of Productora de Software S.A.S. (“PSL”); and (v) the Purchase Agreement with Talos (as defined in Note 9 - Business Combinations), as part of the consideration. For the three and nine months ended September 30, 2020, this represents the shares held in escrow pursuant to: (i) the Asset Purchase Agreement with RAS & Associates, LLC (“RAS”); (ii) the Asset Purchase Agreement with Zeon; (iii) the Asset Purchase Agreement with Stone Temple Consulting Corporation (“Stone Temple”); (iv) the Asset Purchase Agreement with Sundog Interactive, Inc. (“Sundog”); (v) the Asset Purchase Agreement with MedTouch; (vi) the Asset Purchase Agreement with Brainjocks; and (vii) the Stock Purchase Agreement with the shareholders of 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 September 30,Nine Months Ended September 30,
 2021202020212020
Restricted stock subject to vesting   139 
Convertible senior notes 7,942  4,451 
Warrants related to the issuance of convertible senior notes 8,274 4,451 8,274 
Total anti-dilutive securities 16,216 4,451 12,864 

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 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 $257.5 million (16.1 million shares) of outstanding common stock through September 30, 2021.

7. Balance Sheet Components

September 30, 2021 (unaudited)December 31, 2020
Accounts receivable:(in thousands)
Billed accounts receivable, net$101,857 $85,998 
Unbilled revenues, net63,184 47,087 
Total$165,041 $133,085 
Property and equipment:  
Computer hardware (useful life of 3 years)
$18,366 $15,640 
Software (useful life of 1 to 7 years)
6,015 5,342 
Furniture and fixtures (useful life of 5 years)
4,493 4,597 
Leasehold improvements (useful life of 5 years)
7,476 6,607 
Less: Accumulated depreciation(24,223)(20,284)
Total$12,127 $11,902 
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Other current liabilities:  
Estimated fair value of contingent consideration liability (1)$29,940 $33,943 
Accrued variable compensation22,591 27,527 
Current operating lease liabilities11,133 10,321 
Payroll related costs8,726