þ
|
Annual
report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 for the fiscal year ended December 31,
2008
|
o
|
Transition
report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
|
(State
or other jurisdiction of
incorporation
or organization)
|
No.
74-2853258
(I.R.S.
Employer Identification No.)
|
Title
of each class:
Common
Stock, $0.001 par value
|
Name
of each exchange on which registered:
The
Nasdaq Global Select Market
|
Large
accelerated filer
o
|
Accelerated
filer
þ
|
|
Non-accelerated
filer
o
|
Smaller
reporting company
o
|
PART
I
|
|||||
Item
1.
|
Business.
|
1
|
|||
Item
1A.
|
Risk
Factors.
|
10
|
|||
Item
1B.
|
Unresolved
Staff Comments.
|
17
|
|||
Item
2.
|
Properties.
|
18
|
|||
Item
3.
|
Legal
Proceedings.
|
18
|
|||
Item
4.
|
Submission
of Matters to a Vote of Security Holders.
|
18
|
|||
PART
II
|
|||||
Item
5.
|
Market
for Registrant's Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities.
|
19
|
|||
Item
6.
|
Selected
Financial Data.
|
20
|
|||
Item
7.
|
Management's
Discussion and Analysis of Financial Condition and Results of
Operations.
|
21
|
|||
Item
7A.
|
Quantitative
and Qualitative Disclosures About Market Risk.
|
32
|
|||
Item
8.
|
Financial
Statements and Supplementary Data.
|
33
|
|||
Item
9.
|
Changes
In and Disagreements With Accountants on Accounting and Financial
Disclosure.
|
54
|
|||
Item
9A.
|
Controls
and Procedures.
|
54
|
|||
Item
9B.
|
Other
Information.
|
54
|
|||
PART
III
|
|||||
Item
10.
|
Directors,
Executive Officers and Corporate Governance.
|
56
|
|||
Item
11.
|
Executive
Compensation.
|
58
|
|||
Item
12.
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.
|
58
|
|||
Item
13.
|
Certain
Relationships and Related Transactions, and Director
Independence.
|
58
|
|||
Item
14.
|
Principal
Accounting Fees and Services.
|
58
|
|||
PART
IV
|
|||||
Item
15.
|
Exhibits
and Financial Statement Schedules.
|
59
|
Item 1.
|
Business.
|
·
|
Domain Expertise. We
have acquired significant domain expertise in a core set of
business-driven technology solutions and software platforms. These
solutions include, among others, custom applications, portals and
collaboration, eCommerce, customer relationship management, enterprise
content management, business intelligence, business integration, mobile
technology solutions, technology platform implementations and service
oriented architectures and enterprise service bus. The platforms in which
we have significant domain expertise and on which these solutions are
built include IBM WebSphere, Lotus, Information Management and Rational,
TIBCO BusinessWorks, Microsoft.NET, Oracle-Seibel, BEA (acquired by
Oracle), Cognos (acquired by IBM) and Documentum, among
others.
|
·
|
Delivery Model and
Methodology. We believe our significant domain expertise enables us
to provide high-value solutions through expert project teams that deliver
measurable results by working collaboratively with clients through a
user-centered, technology-based and business-driven solutions methodology.
Our eNable Methodology, a proven execution process map we developed,
allows for repeatable, high quality services delivery. The eNable
Methodology leverages the thought leadership of our senior strategists and
practitioners to support the client project team and focuses on
transforming our clients' business processes to provide enhanced customer
value and operating efficiency, enabled by Web technology. As a result, we
believe we are able to offer our clients the dedicated attention that
small firms usually provide and the delivery and project management that
larger firms usually offer.
|
·
|
Client Relationships.
We have built a track record of quality solutions and client satisfaction
through the timely, efficient and successful completion of numerous
projects for our clients. As a result, we have established long-term
relationships with many of our clients who continue to engage us for
additional projects and serve as references for us. Over the past three
years ending December 31, 2008, an average of 82% of revenues was derived
from clients who continued to utilize our services from the prior year,
excluding from the calculation for any revenues from acquisitions
completed in that year.
|
·
|
Vendor Relationship and
Endorsements. We have built meaningful relationships with software
providers, whose products we use to design and implement solutions for our
clients. These relationships enable us to reduce our cost of sales and
sales cycle times and increase win rates by leveraging our partners'
marketing efforts and endorsements. We also serve as a sales channel for
our partners, helping them market and sell their software products. We are
a Premier IBM business partner, a TeamTIBCO partner, a Microsoft Gold
Certified Partner, a Certified Oracle Partner, and an EMC Documentum
Select Services Team Partner. Our vendors have recognized our
relationships with several awards. Most recently, the Company
was honored with IBM’s Information Management 2007 Most Distinguished
Partner (North America) Award and IBM’s Lotus 2008 Most Distinguished
Partner (North America) Award.
|
·
|
Geographic Focus. We
believe we have built one of the leading independent information
technology consulting firms in the United States. We serve our clients
from locations in 19 markets throughout North America. In addition, as of
December 31, 2008, we had 546 colleagues who are part of “national”
business units, who travel extensively to serve clients primarily in North
America and Europe. Our future growth plan includes expanding our business
with a primary focus on the United States, both through increasing the
number of professionals and through opening new offices, both organically
and through acquisitions. We also intend to continue to leverage our
existing offshore capabilities to support our growth and provide our
clients flexible options for project
delivery.
|
·
|
Offshore Capability. We
own and operate a CMMI Level 5 certified global development center in
Hangzhou, China that was acquired in 2007. This facility is staffed with
Perficient colleagues who provide offshore custom application development,
quality assurance and testing services. Additionally, we have a
relationship with an offshore development facility in Bitola, Macedonia.
Through this facility we contract with a team of professionals with
expertise in IBM, TIBCO and Microsoft technologies and with
specializations that include application development, adapter and
interface development, quality assurance and testing, monitoring and
support, product development, platform migration, and portal development.
In addition to our offshore capabilities, we employ a substantial number
of foreign nationals in the United States on H1-B visas. In
2007, we acquired a recruiting facility in Chennai, India, to continue to
grow our base of H1-B foreign national colleagues. As of
December 31, 2008, we had 133 colleagues at the Hangzhou, China facility
and 215 colleagues with H1-B visas.
|
·
|
give
managers and executives the information they need to make quality business
decisions and dynamically adapt their business processes and systems to
respond to client demands, market opportunities or business
problems;
|
·
|
improve
the quality and lower the cost of customer acquisition and care through
Web-based customer self-service and
provisioning;
|
·
|
reduce
supply chain costs and improve logistics by flexibly and quickly
integrating processes and systems and making relevant real-time
information and applications available online to suppliers, partners and
distributors;
|
·
|
increase
the effectiveness and value of legacy enterprise technology infrastructure
investments by enabling faster application development and deployment,
increased flexibility and lower management costs;
and
|
·
|
increase
employee productivity through better information flow and collaboration
capabilities and by automating routine processes to enable focus on unique
problems and opportunities.
|
·
|
Enterprise portals and
collaboration. We design, develop, implement and integrate secure
and scalable enterprise portals for our clients and their customers,
suppliers and partners that include searchable data systems, collaborative
systems for process improvement, transaction processing, unified and
extended reporting and content management and
personalization.
|
·
|
Business integration.
We design, develop and implement business integration solutions that allow
our clients to integrate all of their business processes end-to-end and
across the enterprise. Truly innovative companies are extending those
processes, and eliminating functional friction, between the enterprise and
core customers and partners. Our business integration solutions can extend
and extract core applications, reduce infrastructure strains and cost,
Web-enable legacy applications, provide real-time insight into business
metrics and introduce efficiencies for customers, suppliers and
partners.
|
·
|
Enterprise content management
(ECM). We design, develop and implement ECM solutions that enable
the management of all unstructured information regardless of file type or
format. Our ECM solutions can facilitate the creation of new content
and/or provide easy access and retrieval of existing digital assets from
other enterprise tools such as enterprise resource planning (ERP),
customer relationship management or legacy applications. Perficient's ECM
solutions include Enterprise Imaging and Document Management, Web Content
Management, Digital Asset Management, Enterprise Records Management,
Compliance and Control, Business Process Management and Collaboration and
Enterprise Search.
|
·
|
Customer relationship
management (CRM). We design, develop and implement advanced CRM
solutions that facilitate customer acquisition, service and support,
sales, and marketing by understanding our customers' needs through
interviews, facilitated requirements gathering sessions and call center
analysis, developing an iterative, prototype driven solution and
integrating the solution to legacy processes and
applications.
|
·
|
Service oriented architectures
(SOA) and enterprise service bus. We design, develop and implement
SOA and enterprise service bus solutions that allow our clients to quickly
adapt their business processes to respond to new market opportunities or
competitive threats by taking advantage of business strategies supported
by flexible business applications and IT
infrastructures.
|
·
|
Business intelligence.
We design, develop and implement business intelligence solutions that
allow companies to interpret and act upon accurate, timely and integrated
information. By classifying, aggregating and correlating data into
meaningful business information, business intelligence solutions help our
clients make more informed business decisions. Our business intelligence
solutions allow our clients to transform data into knowledge for quick and
effective decision making and can include information strategy, data
warehousing and business analytics and
reporting.
|
·
|
eCommerce. We design,
develop and implement secure and reliable eCommerce infrastructures that
dynamically integrate with back-end systems and complementary applications
that provide for transaction volume scalability and sophisticated content
management.
|
·
|
Mobile technology
solutions. We design, develop and implement mobile technology
solutions that deliver wireless capabilities to carriers, Mobile Virtual
Network Operators (MVNO), Mobile Virtual Network Enablers (MVNE), and the
enterprise. Perficient's expertise with wireless technologies such as SIP,
MMS, WAP, and GPRS are coupled with our deep expertise in mobile content
delivery. Our secure and scalable solutions can include mobile content
delivery systems; wireless value-added services including SIP, IMS, SMS,
MMS and Push-to-Talk; custom developed applications to pervasive devices
including Symbian, WML, J2ME, MIDP, Linux; and customer care solutions
including provisioning, mediation, rating and
billing.
|
·
|
Technology platform
implementations. We design, develop and implement technology
platform implementations that allow our clients to establish a robust,
reliable Internet-based infrastructure for integrated business
applications which extend enterprise technology assets to employees,
customers, suppliers and partners. Our Platform Services include
application server selection, architecture planning, installation and
configuration, clustering for availability, performance assessment and
issue remediation, security services and technology
migrations.
|
·
|
Custom applications. We
design, develop, implement and integrate custom application solutions that
deliver enterprise-specific functionality to meet the unique requirements
and needs of our clients. Perficient's substantial experience with
platforms including J2EE, .Net and open-source - plus our flexible
delivery structure - enables enterprises of all types to leverage
cutting-edge technologies to meet business-driven
needs.
|
·
|
iterative
and results oriented;
|
·
|
centered
around a flexible and repeatable
framework;
|
·
|
collaborative
and customer-centered in that we work with not only our clients but with
our clients' customers in developing our
solutions;
|
·
|
focused
on delivering high value, measurable results;
and
|
·
|
grounded
by industry leading project
management.
|
·
|
Grow Relationships with
Existing and New Clients. We intend to continue to solidify and
expand enduring relationships with our existing clients and to develop
long-term relationships with new clients by providing them with solutions
that generate a demonstrable, positive return-on-investment. Our incentive
plan rewards our project managers to work in conjunction with our sales
people to expand the nature and scope of our engagements with existing
clients.
|
·
|
Continue Making Purchases of
Equity Securities. In an ongoing effort to provide the
most value to our stockholders, the Board of Directors authorized the
repurchase of up to $20.0 million of our common stock as part of a program
that expires at the end of June 2010. We believe our stock is
undervalued and the repurchase program is the best use of a portion of our
excess cash at this time. We will continually re-evaluate the
position of our stock price and will seek additional authorization to
repurchase our common stock if we believe
appropriate.
|
·
|
Continue Making Disciplined
Acquisitions Once
the Economic Environment and Relative Valuations Improve. The
information technology consulting market is a fragmented industry and we
believe there are a substantial number of smaller privately held
information technology consulting firms that can be acquired and be
accretive to our financial results. We have a track record of successfully
identifying, executing and integrating acquisitions that add strategic
value to our business. Our established culture and infrastructure
positions us to successfully integrate each acquired company, while
continuing to offer effective solutions to our clients. From April 2004
through November 2007, we have acquired and integrated 12 information
technology consulting firms. Given the current economic conditions, the
Company has temporarily suspended making additional acquisitions pending
improved visibility into the health of the economy and the information
technology sector and improvement of the relative valuation between the
Company’s common stock price and the private market valuations of
potential acquisitions.
|
·
|
Expand Geographic Base.
We believe we have built one of the leading independent information
technology consulting firms in the United States. We serve our customers
from our network of 19 offices throughout North America. In addition, as
of December 31, 2008, we had 546 colleagues who are part of “national”
business units, who travel extensively to serve clients primarily in North
America and Europe. Our future growth plan includes expanding our business
with a primary focus on the United States, both through increasing the
number of professionals and through opening new offices, both organically
and through acquisitions. We also intend to continue to leverage our
existing ‘offshore’ capabilities to support our growth and provide our
clients flexible options for project
delivery.
|
·
|
Enhance Brand
Visibility. Our focus on a core set of business-driven technology
solutions, applications and software platforms and a targeted customer and
geographic market has given us market visibility. In addition, we believe
we have achieved critical mass in size, which has enhanced our visibility
among prospective clients, employees and software vendors. As we continue
to grow our business, we intend to highlight to customers and prospective
customers our leadership in business-driven technology solutions and
infrastructure software technology
platforms.
|
·
|
Invest in Our People and
Culture. We have developed a culture built on teamwork, a passion
for technology and client service, and a focus on cost control and the
bottom line. As a people-based business, we continue to invest in the
development of our professionals and to provide them with entrepreneurial
opportunities and career development and advancement. Our technology,
business consulting and project management ensure that client team best
practices are being developed across the company and our recognition
program rewards teams for implementing those practices. We believe this
results in a team of motivated professionals with the ability to deliver
high-quality and high-value services for our
clients.
|
·
|
Leverage Existing and Pursue
New Strategic Alliances. We intend to continue to develop alliances
that complement our core competencies. Our alliance strategy is targeted
at leading business advisory companies and technology providers and allows
us to take advantage of compelling technologies in a mutually beneficial
and cost-competitive manner. Many of these relationships, and in
particular IBM, result in our partners, or their clients, utilizing us as
the services firm of choice.
|
·
|
Expand and Enhance Our
Industry Vertical Focus. In 2008 we launched two
industry focused practices, healthcare and communications. The
goals of these industry verticals is to recruit and retain consultants
with specific industry expertise and to ‘mine’ and leverage the
intellectual property the Company has and accumulates as we serve clients
within these industries. Expanding these verticals will help
the Company in terms of revenue generation as well as market expansion
beyond our geographic and solution focused business units. Some
other industries we have meaningful expertise in include energy, consumer
product goods, manufacturing and distribution, and financial
services.
|
·
|
Leverage Offshore
Capabilities. Our solutions and services are primarily delivered at
the customer site and require a significant degree of customer
participation, interaction and specialized technology
expertise. We can compliment this with lower cost offshore
technology professionals to perform less specialized roles on our solution
engagements, enabling us to fully leverage our United States colleagues
while offering our clients a highly competitive blended average rate. We
own and operate a CMMI Level 5 certified global development center in
Hangzhou, China that is staffed with Perficient colleagues who provide
offshore custom application development, quality assurance and testing
services and we maintain an exclusive arrangement with an offshore
development and delivery firm in Macedonia. In addition to our offshore
capabilities, we employ a substantial number of H1-B foreign nationals in
the United States. In 2007, we acquired a recruiting facility
in Chennai, India, to continue to grow our base of H1-B foreign national
colleagues. As of December 31, 2008 we had 133 colleagues at
the Hangzhou, China facility and 215 colleagues with H1-B
visas.
|
·
|
small
local consulting firms that operate in no more than one or two geographic
regions;
|
·
|
regional
consulting firms such as Brulant, Prolifics and MSI Systems
Integrators;
|
·
|
national
consulting firms, such as Accenture, BearingPoint, Deloitte Consulting,
Ciber, and Sapient;
|
·
|
in-house
professional services organizations of software companies;
and
|
·
|
to
a limited extent, offshore providers such as Infosys Technologies Limited
and Wipro Limited.
|
·
|
we
believe in long-term client and vendor relationships built on investment
in innovative solutions, delivering more value than the competition and a
commitment to excellence;
|
·
|
we
believe in growth and profitability and building meaningful
scale;
|
·
|
we
believe each of us is ultimately responsible for our own career
development and has a commitment to mentor
others;
|
·
|
we
believe that Perficient has an obligation to invest in our consultants'
training and education;
|
·
|
we
believe the best career development comes on the job;
and
|
·
|
we
love challenging new work
opportunities.
|
Item 1A.
|
Risk
Factors.
|
·
|
continue
to develop our technology
expertise;
|
·
|
enhance
our current services;
|
·
|
develop
new services that meet changing customer
needs;
|
·
|
advertise
and market our services; and
|
·
|
influence
and respond to emerging industry standards and other technological
changes.
|
·
|
security;
|
·
|
intellectual
property ownership;
|
·
|
privacy;
|
·
|
taxation;
and
|
·
|
liability
issues.
|
·
|
political
and economic instability;
|
·
|
global
health conditions and potential natural
disasters;
|
·
|
unexpected
changes in regulatory requirements;
|
·
|
international
currency controls and exchange rate
fluctuations;
|
·
|
reduced
protection for intellectual property rights in some countries;
and
|
·
|
additional
vulnerability from terrorist groups targeting American interests
abroad.
|
·
|
demand
for software and services;
|
·
|
customer
budget cycles;
|
·
|
changes
in our customers' desire for our partners' products and our
services;
|
·
|
pricing
changes in our industry; and
|
·
|
government
regulation and legal developments regarding the use of the
Internet.
|
·
|
difficulties
in the integration of services and personnel of the acquired
business;
|
·
|
the
failure of management and acquired services personnel to perform as
expected;
|
·
|
the
acquisition of fixed fee customer agreements that require more effort than
anticipated to complete;
|
·
|
the
risks of entering markets in which we have no, or limited, prior
experience, including offshore operations in countries in which we have no
prior experience;
|
·
|
the
failure to identify or adequately assess any undisclosed or potential
liabilities or problems of the acquired business including legal
liabilities;
|
·
|
the
failure of the acquired business to achieve the forecasts we used to
determine the purchase price; or
|
·
|
the
potential loss of key personnel of the acquired
business.
|
Item
1B.
|
Unresolved
Staff Comments.
|
Item 2.
|
Properties.
|
Item 3.
|
Legal
Proceedings.
|
Item 4.
|
Submission
of Matters to a Vote of Security
Holders.
|
Item 5.
|
Market
for Registrant's Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities.
|
High
|
Low
|
|||||||
Year
Ending December 31, 2008:
|
||||||||
First
Quarter
|
$
|
17.08
|
$
|
6.43
|
||||
Second
Quarter
|
11.91
|
7.82
|
||||||
Third
Quarter
|
10.94
|
6.04
|
||||||
Fourth
Quarter
|
6.80
|
2.31
|
||||||
Year
Ending December 31, 2007:
|
||||||||
First
Quarter
|
$
|
21.55
|
$
|
16.02
|
||||
Second
Quarter
|
23.29
|
18.51
|
||||||
Third
Quarter
|
25.19
|
18.91
|
||||||
Fourth
Quarter
|
24.75
|
14.65
|
Period
|
Total
Number of Shares Purchased
|
Average
Price Paid Per
Share
(1)
|
Total
Number of Shares Purchased as Part of Publicly Announced Plans or
Programs
|
Approximate
Dollar Value of Shares that May Yet Be Purchased Under the Plans or
Programs (2)
|
||||||||||||
Beginning
Balance as of October 1, 2008
|
637,031
|
637,031
|
$
|
5,213,570
|
||||||||||||
October
1-31, 2008
|
91,018
|
5.22
|
91,018
|
$
|
4,745,283
|
|||||||||||
November
1-30, 2008
|
671,887
|
3.59
|
671,887
|
$
|
2,672,362
|
|||||||||||
December
1-31, 2008
|
448,364
|
4.25
|
448,364
|
$
|
10,821,786
|
|||||||||||
Ending
Balance as of December 31, 2008
|
1,848,300
|
1,848,300
|
(1)
|
Average
price paid per share includes
commission.
|
(2)
|
The
additional program to repurchase up to $10.0 million of the Company’s
outstanding common stock was approved by the Company’s Board of Directors
on December 17, 2008. This is in addition to the repurchase
authority for up to $10.0 million of the Company’s common stock approved
by the Company’s Board of Directors on March 26, 2008. The repurchase
program expires June 30, 2010.
|
Item 6.
|
Selected
Financial Data.
|
Year
Ended December 31,
|
||||||||||||||||||||
2008
|
2007
|
2006
|
2005
|
2004
|
||||||||||||||||
Income Statement
Data:
|
(In
thousands)
|
|||||||||||||||||||
Revenues
|
$
|
231,488
|
$
|
218,148
|
$
|
160,926
|
$
|
96,997
|
$
|
58,848
|
||||||||||
Gross
margin
|
$
|
73,502
|
$
|
75,690
|
$
|
53,756
|
$
|
32,418
|
$
|
18,820
|
||||||||||
Selling,
general and administrative
|
$
|
47,242
|
$
|
41,963
|
$
|
32,268
|
$
|
17,917
|
$
|
11,068
|
||||||||||
Depreciation and
amortization
|
$
|
6,949
|
$
|
6,265
|
$
|
4,406
|
$
|
2,226
|
$
|
1,209
|
||||||||||
Impairment
of intangible assets
|
$
|
1,633
|
$
|
--
|
$
|
--
|
$
|
--
|
$
|
--
|
||||||||||
Income
from operations
|
$
|
17,678
|
$
|
27,462
|
$
|
17,082
|
$
|
12,275
|
$
|
6,543
|
||||||||||
Net
interest income (expense)
|
$
|
528
|
$
|
172
|
$
|
(407
|
)
|
$
|
(643
|
)
|
$
|
(134
|
)
|
|||||||
Net
other income (expense)
|
$
|
(915
|
) |
$
|
20
|
$
|
174
|
$
|
43
|
$
|
32
|
|||||||||
Income
before income taxes
|
$
|
17,291
|
$
|
27,654
|
$
|
16,849
|
$
|
11,675
|
$
|
6,441
|
||||||||||
Net
income
|
$
|
10,000
|
$
|
16,230
|
$
|
9,567
|
$
|
7,177
|
$
|
3,913
|
As
of December 31,
|
||||||||||||||||||||
2008
|
2007
|
2006
|
2005
|
2004
|
||||||||||||||||
Balance
Sheet Data:
|
(In
thousands)
|
|||||||||||||||||||
Cash
and cash equivalents
|
$ | 22,909 | $ | 8,070 | $ | 4,549 | $ | 5,096 | $ | 3,905 | ||||||||||
Working
capital
|
$ | 56,176 | $ | 41,368 | $ | 24,859 | $ | 17,078 | $ | 9,234 | ||||||||||
Property
and equipment, net
|
$ | 2,345 | $ | 3,226 | $ | 1,806 | $ | 960 | $ | 806 | ||||||||||
Goodwill
and intangible assets, net
|
$ | 115,634 | $ | 121,339 | $ | 81,056 | $ | 52,031 | $ | 37,340 | ||||||||||
Total
assets
|
$ | 194,247 | $ | 189,992 | $ | 131,000 | $ | 84,935 | $ | 62,582 | ||||||||||
Current
portion of long term debt and line of credit
|
$ | -- | $ | -- | $ | 1,201 | $ | 1,581 | $ | 1,379 | ||||||||||
Long-term
debt and line of credit, less current portion
|
$ | -- | $ | -- | $ | 137 | $ | 5,338 | $ | 2,902 | ||||||||||
Total
stockholders' equity
|
$ | 174,818 | $ | 165,562 | $ | 107,352 | $ | 65,911 | $ | 44,622 |
Management's
Discussion and Analysis of Financial Condition and Results of
Operations.
|
Revenues:
|
2008
|
2007
|
2006
|
|||||||||
Services
revenues
|
89.6
|
%
|
87.8
|
%
|
85.6
|
%
|
||||||
Software
and hardware revenues
|
4.6
|
6.5
|
9.0
|
|||||||||
Reimbursable
expenses
|
5.8
|
5.7
|
5.4
|
|||||||||
Total
revenues
|
100.0
|
100.0
|
100.0
|
|||||||||
Cost
of revenues (exclusive of depreciation and amortization, shown separately
below):
|
||||||||||||
Project
personnel costs
|
56.6
|
52.6
|
52.3
|
|||||||||
Software
and hardware costs
|
3.7
|
5.5
|
7.5
|
|||||||||
Reimbursable
expenses
|
5.7
|
5.7
|
5.4
|
|||||||||
Other
project related expenses
|
2.2
|
1.5
|
1.3
|
|||||||||
Total
cost of revenues
|
68.2
|
65.3
|
66.5
|
|||||||||
Services
gross margin
|
34.4
|
38.4
|
37.4
|
|||||||||
Software
and hardware gross margin
|
19.4
|
15.9
|
16.1
|
|||||||||
Total
gross margin
|
31.8
|
34.7
|
33.5
|
|||||||||
Selling,
general and administrative
|
20.4
|
19.2
|
20.1
|
|||||||||
Depreciation
and intangibles amortization
|
3.0
|
2.9
|
2.7
|
|||||||||
Impairment
of intangibles
|
0.7
|
0.0
|
0.0
|
|||||||||
Income
from operations
|
7.7
|
12.6
|
10.6
|
|||||||||
Interest
income (expense), net
|
0.2
|
0.1
|
(0.3
|
)
|
||||||||
Other
income (expense), net
|
(0.4
|
)
|
0.0
|
0.1
|
||||||||
Income
before income taxes
|
7.5
|
12.7
|
10.5
|
|||||||||
Provision
for income taxes
|
3.2
|
5.2
|
4.5
|
|||||||||
Net
income
|
4.3
|
%
|
7.5
|
%
|
6.0
|
%
|
Financial
Results
|
Explanation
for Increases/(Decreases) Over Prior Year Period
|
|||||||||||||||||||
(in
thousands)
|
(in
thousands)
|
|||||||||||||||||||
For
the Year Ended
December
31, 2008
|
For
the Year Ended
December
31, 2007
|
Total
Increase/ (Decrease) Over Prior Year Period
|
Increase
Attributable to Acquired Companies*
|
Increase/
(Decrease) Attributable to Base Business**
|
||||||||||||||||
Services
Revenues
|
$
|
207,480
|
$
|
191,395
|
$
|
16,085
|
$
|
29,611
|
$
|
(13,526
|
) | |||||||||
Software
and Hardware Revenues
|
10,713
|
14,243
|
(3,530
|
)
|
1,871
|
(5,401
|
) | |||||||||||||
Reimbursable
Expenses
|
13,295
|
12,510
|
785
|
1,372
|
(587
|
) | ||||||||||||||
Total
Revenues
|
$
|
231,488
|
$
|
218,148
|
$
|
13,340
|
$
|
32,854
|
$
|
(19,514
|
) |
Increase
/ (Decrease)
|
||||
Selling, General, and Administrative
Expense
|
(in
millions)
|
|||
Stock
compensation expense
|
$
|
1.7
|
||
Office
and technology-related costs
|
1.5
|
|||
Salary
expense
|
1.4
|
|||
Sales
related costs
|
1.0
|
|||
Bad
debt expense
|
0.8
|
|||
Customer
dispute settlement
|
0.8
|
|||
Other
|
0.6
|
|||
Bonus
expense
|
(2.6
|
)
|
||
Net
increase
|
$
|
5.2
|
Financial
Results
|
Explanation
for Increases/(Decreases) Over Prior Year Period
|
|||||||||||||||||||
(in
thousands)
|
(in
thousands)
|
|||||||||||||||||||
For
the Year Ended
December
31, 2007
|
For
the Year Ended
December
31, 2006
|
Total
Increase/ (Decrease) Over Prior Year Period
|
Increase
Attributable to Acquired Companies*
|
Increase/
(Decrease) Attributable to Base Business**
|
||||||||||||||||
Services
Revenues
|
$
|
191,395
|
$
|
137,722
|
$
|
53,673
|
$
|
43,437
|
$
|
10,236
|
||||||||||
Software
and Hardware Revenues
|
14,243
|
14,435
|
(192
|
) |
1,570
|
(1,762
|
) | |||||||||||||
Reimbursable
Expenses
|
12,510
|
8,769
|
3,741
|
2,578
|
1,163
|
|||||||||||||||
Total
Revenues
|
$
|
218,148
|
$
|
160,926
|
$
|
57,222
|
$
|
47,585
|
$
|
9,637
|
Increase
/ (Decrease)
|
||||
Selling,
General, and Administrative Expense
|
(in
millions)
|
|||
Sales
related costs
|
$
|
3.4
|
||
Stock
compensation expense
|
2.5
|
|||
Salary
expense
|
1.9
|
|||
Bad
debt expense
|
0.8
|
|||
Office
and technology-related costs
|
1.6
|
|||
Recruiting
and training-related costs
|
0.8
|
|||
Other
|
0.5
|
|||
Bonus
expense
|
(1.8
|
)
|
||
Net
increase
|
$
|
9.7
|
As
of December 31,
|
||||||||
2008
|
2007
|
|||||||
Cash
and cash equivalents
|
$
|
22.9
|
$
|
8.1
|
||||
Working
capital (including cash and cash equivalents)
|
$
|
56.2
|
$
|
41.5
|
||||
Amounts
available under credit facilities
|
$
|
49.9
|
$
|
49.8
|
|
Payments
Due by Period
|
|||||||||||||||||||
Contractual
Obligations
|
Total
|
Less
Than
1
Year
|
1-3
Years
|
3-5
Years
|
More
Than
5
Years
|
|||||||||||||||
Operating
lease obligations
|
$ | 7,673 | $ | 2,258 | $ | 3,884 | $ | 1,216 | $ | 315 | ||||||||||
Total
|
$ | 7,673 | $ | 2,258 | $ | 3,884 | $ | 1,216 | $ | 315 |
·
|
Level
1 – Quoted prices in active markets for identical assets or
liabilities.
|
·
|
Level
2 – Inputs other than Level 1 that are observable, either directly or
indirectly, such as quoted prices for similar assets or liabilities;
quoted prices in markets that are not active; or other inputs that are
observable or can be corroborated by observable market data for
substantially the full term of the assets or
liabilities.
|
·
|
Level
3 – Unobservable inputs that are supported by little or no market activity
and that are significant to the fair value of the assets or
liabilities.
|
Item
7A.
|
Quantitative
and Qualitative Disclosures About Market
Risk.
|
Item
8.
|
Financial
Statements and Supplementary Data.
|
December
31,
|
||||||||
2008
|
2007
|
|||||||
ASSETS
|
(In
thousands, except share information)
|
|||||||
Current
assets:
|
||||||||
Cash
and cash equivalents
|
$
|
22,909
|
$
|
8,070
|
||||
Accounts
and note receivable, net of allowance for doubtful accounts of $1,497 in
2008 and $1,475 in 2007
|
47,584
|
50,855
|
||||||
Prepaid
expenses
|
1,374
|
1,182
|
||||||
Other
current assets
|
3,157
|
4,142
|
||||||
Total
current assets
|
75,024
|
64,249
|
||||||
Property
and equipment, net
|
2,345
|
3,226
|
||||||
Goodwill
|
104,178
|
103,686
|
||||||
Intangible
assets, net
|
11,456
|
17,653
|
||||||
Other
non-current assets
|
1,244
|
1,178
|
||||||
Total
assets
|
$
|
194,247
|
$
|
189,992
|
||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable
|
$
|
4,509
|
$
|
4,160
|
||||
Other
current liabilities
|
14,339
|
18,550
|
||||||
Total
current liabilities
|
18,848
|
22,710
|
||||||
Deferred
income taxes
|
--
|
1,549
|
||||||
Other
non-current liabilities
|
581
|
171
|
||||||
Total
liabilities
|
$
|
19,429
|
$
|
24,430
|
||||
Commitments
and contingencies (see Notes 4 and 10)
|
||||||||
Stockholders'
equity:
|
||||||||
Common
stock ($0.001 par value per share; 50,000,000 shares authorized and
30,350,700 shares issued and 28,502,400 shares outstanding as of December
31, 2008; 29,423,296 shares issued and outstanding as of December 31,
2007)
|
$
|
30
|
$
|
29
|
||||
Additional
paid-in capital
|
197,653
|
188,998
|
||||||
Accumulated
other comprehensive loss
|
(338
|
) |
(117
|
)
|
||||
Treasury
stock, at cost (1,848,300 shares as of December 31, 2008)
|
(9,179
|
) |
--
|
|||||
Accumulated
deficit
|
(13,348
|
) |
(23,348
|
)
|
||||
Total
stockholders' equity
|
174,818
|
165,562
|
||||||
Total
liabilities and stockholders' equity
|
$
|
194,247
|
$
|
189,992
|
Year
Ended December 31,
|
||||||||||||
2008
|
2007
|
2006
|
||||||||||
Revenues:
|
(In
thousands, except per share information)
|
|||||||||||
Services
|
$
|
207,480
|
$
|
191,395
|
$
|
137,722
|
||||||
Software
and hardware
|
10,713
|
14,243
|
14,435
|
|||||||||
Reimbursable
expenses
|
13,295
|
12,510
|
8,769
|
|||||||||
Total
revenues
|
231,488
|
218,148
|
160,926
|
|||||||||
Cost
of revenues (exclusive of depreciation and amortization, shown separately
below):
|
||||||||||||
Project
personnel costs
|
131,019
|
114,692
|
84,161
|
|||||||||
Software
and hardware costs
|
8,639
|
11,982
|
12,118
|
|||||||||
Reimbursable
expenses
|
13,295
|
12,510
|
8,769
|
|||||||||
Other
project related expenses
|
5,033
|
3,274
|
2,122
|
|||||||||
Total
cost of revenues
|
157,986
|
142,458
|
107,170
|
|||||||||
Gross
margin
|
73,502
|
75,690
|
53,756
|
|||||||||
Selling,
general and administrative
|
47,242
|
41,963
|
32,268
|
|||||||||
Depreciation
|
2,139
|
1,553
|
948
|
|||||||||
Amortization
|
4,810
|
4,712
|
3,458
|
|||||||||
Impairment
of intangible assets
|
1,633
|
--
|
--
|
|||||||||
Income
from operations
|
17,678
|
27,462
|
17,082
|
|||||||||
Interest
income
|
555
|
239
|
102
|
|||||||||
Interest
expense
|
(27
|
) |
(67
|
)
|
(509
|
)
|
||||||
Other
income (expense)
|
(915
|
) |
20
|
174
|
||||||||
Income
before income taxes
|
17,291
|
27,654
|
16,849
|
|||||||||
Provision
for income taxes
|
7,291
|
11,424
|
7,282
|
|||||||||
Net
income
|
$
|
10,000
|
$
|
16,230
|
$
|
9,567
|
||||||
Basic
net income per share
|
$
|
0.34
|
$
|
0.58
|
$
|
0.38
|
||||||
Diluted
net income per share
|
$
|
0.33
|
$
|
0.54
|
$
|
0.35
|
||||||
Shares
used in computing basic net income per share
|
29,412,329
|
27,998,093
|
25,033,337
|
|||||||||
Shares
used in computing diluted net income per share
|
30,350,616
|
30,121,962
|
27,587,449
|
Common
|
Common
|
Additional
|
Accumulated
Other
|
Total
|
||||||||||||||||||||||||
Stock
|
Stock
|
Paid-in
|
Comprehensive
|
Treasury
|
Accumulated
|
Stockholders'
|
||||||||||||||||||||||
Shares
|
Amount
|
Capital
|
Loss
|
Stock
|
Deficit
|
Equity
|
||||||||||||||||||||||
Balance
at December 31, 2005
|
23,295 | $ | 23 | $ | 115,120 | $ | (87 | ) | $ | -- | $ | (49,145 | ) | $ | 65,911 | |||||||||||||
Bay
Street, Insolexen, and EGG acquisition purchase accounting
adjustments
|
1,499 | 2 | 17,989 | -- | -- | -- | 17,991 | |||||||||||||||||||||
Warrants
exercised
|
145 | -- | 146 | -- | -- | -- | 146 | |||||||||||||||||||||
Stock
options exercised
|
1,672 | 2 | 4,001 | -- | -- | -- | 4,003 | |||||||||||||||||||||
Purchases
of stock under the Employee Stock Purchase Plan
|
6 | -- | 86 | -- | -- | -- | 86 | |||||||||||||||||||||
Tax
benefit of stock option exercises and restricted stock
vesting
|
-- | -- | 6,554 | -- | -- | -- | 6,554 | |||||||||||||||||||||
Stock
compensation
|
83 | -- | 3,132 | -- | -- | -- | 3,132 | |||||||||||||||||||||
Foreign
currency translation adjustment
|
-- | -- | -- | (38 | ) | -- | -- | (38 | ) | |||||||||||||||||||
Net
income
|
-- | -- | -- | -- | -- | 9,567 | 9,567 | |||||||||||||||||||||
Total
comprehensive income
|
-- | -- | -- | -- | -- | -- | 9,529 | |||||||||||||||||||||
Balance
at December 31, 2006
|
26,700 | $ | 27 | $ | 147,028 | $ | (125 | ) | $ | -- | $ | (39,578 | ) | $ | 107,352 | |||||||||||||
E
Tech, Tier1, BoldTech, and ePairs acquisition purchase accounting
adjustments
|
1,250 | 1 | 24,975 | -- | -- | -- | 24,976 | |||||||||||||||||||||
Stock
options exercised
|
1,160 | 1 | 3,696 | -- | -- | -- | 3,697 | |||||||||||||||||||||
Purchases
of stock under the Employee Stock Purchase Plan
|
11 | -- | 206 | -- | -- | -- | 206 | |||||||||||||||||||||
Tax
benefit of stock option exercises and restricted stock
vesting
|
-- | -- | 6,889 | -- | -- | -- | 6,889 | |||||||||||||||||||||
Stock
compensation
|
302 | -- | 6,204 | -- | -- | -- | 6,204 | |||||||||||||||||||||
Foreign
currency translation adjustment
|
-- | -- | -- | 8 | -- | -- | 8 | |||||||||||||||||||||
Net
income
|
-- | -- | -- | -- | -- | 16,230 | 16,230 | |||||||||||||||||||||
Total
comprehensive income
|
-- | -- | -- | -- | -- | 16,238 | ||||||||||||||||||||||
Balance
at December 31, 2007
|
29,423 | $ | 29 | $ | 188,998 | $ | (117 | ) | $ | -- | $ | (23,348 | ) | $ | 165,562 | |||||||||||||
E
Tech and ePairs acquisition purchase accounting
adjustments
|
(19 | ) | -- | (290 | ) | -- | -- | -- | (290 | ) | ||||||||||||||||||
Stock
options exercised
|
338 | 1 | 726 | -- | -- | -- | 727 | |||||||||||||||||||||
Purchases
of stock under the Employee Stock Purchase Plan
|
29 | -- | 196 | -- | -- | -- | 196 | |||||||||||||||||||||
Tax expense
of stock option exercises and restricted stock vesting
|
-- | -- | (922 | ) | -- | -- | -- | (922 | ) | |||||||||||||||||||
Stock
compensation and retirement savings plan
contributions
|
579 | -- | 8,945 | -- | -- | -- | 8,945 | |||||||||||||||||||||
Purchases
of treasury stock
|
(1,848 | ) | -- | -- | -- | (9,179 | ) | -- | (9,179 | ) | ||||||||||||||||||
Foreign
currency translation adjustment
|
-- | -- | -- | (221 | ) | -- | -- | (221 | ) | |||||||||||||||||||
Net
income
|
-- | -- | -- | -- | -- | 10,000 | 10,000 | |||||||||||||||||||||
Total
comprehensive income
|
-- | -- | -- | -- | -- | 9,779 | ||||||||||||||||||||||
Balance
at December 31, 2008
|
28,502 | $ | 30 | $ | 197,653 | $ | (338 | ) | $ | (9,179 | ) | $ | (13,348 | ) | $ | 174,818 |
Year
Ended December 31,
|
||||||||||||
2008
|
2007
|
2006
|
||||||||||
OPERATING
ACTIVITIES
|