Perficient, Inc. (NASDAQ:PRFT) Q4 2023 Earnings Call Transcript

Perficient, Inc. (NASDAQ:PRFT) Q4 2023 Earnings Call Transcript February 27, 2024

Perficient, Inc. misses on earnings expectations. Reported EPS is $0.99 EPS, expectations were $1.01. Perficient, Inc.  isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Fourth Quarter 2023 Perficient Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. I would like now to turn the conference over to Tom Hogan, President and CEO. Please go ahead.

Tom Hogan: Good morning, everyone. This is Tom Hogan, Perficient’s President and CEO, and with me on the phone today is Paul Martin, our CFO. I’d like to thank you for your time this morning. As usual, we’ll have some prepared comments, after which we’ll open the call up for some questions. Paul, can you please read the safe harbor statement.

Paul Martin: Thanks, Tom, and good morning, everyone. Some of the things we will discuss in today’s call concerning future company performance will be forward-looking statements within the meaning of the securities laws. Actual results may materially differ from those discussed in these forward-looking statements, and we encourage you to refer to the additional information contained in our SEC filings concerning factors that could cause these results to be different than contemplated in today’s discussions. At times during this call, we will refer to adjusted EPS and adjusted EBITDA. Our earnings press release, including a reconciliation of certain non-GAAP financial measures to the most directly comparable financial measures prepared in accordance with generally accepted accounting principles or GAAP, is posted on our website at www.perficient.com.

We have also posted a slide deck, which includes a reconciliation of certain non-GAAP guidance to the most directly comparable financial measures prepared in accordance with GAAP on our website under Investor Relations. Tom?

Tom Hogan: Thanks, Paul. Good morning again everybody. We appreciate your time as we discuss Perficient’s fourth quarter and full year results and share outlook for 2024. As we’ve previously discussed, the second half of 2023 was a challenge with extended sales cycles and a shift in client buying behavior. That said, several things have happened in recent weeks that give us optimism that in 2024 we will return to growth, particularly in the second half. First of all, we’re excited to have completed the acquisition of SMEDIX earlier this year. This team is incredibly skilled in development of software that runs medical devices and their joining Perficient makes us even more formidable provider in the healthcare and life sciences industries.

Almost all of the nearly 200 colleagues who joined Perficient are based in Romania. And with these new team members, nearly 60% of our billable head count is now located outside of the United States. As a reminder, we are unique in the marketplace. We’re the only firm in our space with true global depth across the United States, Latin America and India. And our intentions long-term are for Romania to become our hub in Europe, as we replicate there what we’ve already built in India and Latin America. Another data point contributing to our confidence for 2024 was Q4 bookings, up nearly double digits on an annual basis and even stronger sequentially. As we talked about on occasion on these calls over the years, there is a strong correlation between bookings realized and revenue recognized five to six months out.

The deals we won in Q4 will be ramped in driving revenue beginning in the second quarter. The Q4 strong bookings was driven primarily by larger deals. We booked 56 deals greater than $1 million during the fourth quarter of 2023, flat year-over-year, but sequentially up from 37% in the third quarter of 2023. While annual deal volume was flat, the size of the wins is what drove the near double-digit increase I mentioned earlier. A final point we’re sharing that underscores the momentum building is the update on the large project when I mentioned it on the last call. During October, we closed a multiyear program with a client that will require 100 Perficient colleagues to support their digital transformation initiatives. This program began to ramp in Q4 and we expect the team will be fully up by early second quarter.

This program is an example of what we believe will be several capacity model relationships will gain in coming quarters and years. These programs will help provide revenue consistency and serve as the foundation for continued project-based initiative growth. We continue to remain well-diversified from a customer, industry and platform perspective. Healthcare and financial services remain the strongest verticals, but we’re also excited about our momentum in both manufacturing and automotive. I will say clients across each of our industry verticals we’re expressing strong interest in our perspective and capabilities related to artificial intelligence, and this is a discipline we’ve had for nearly a decade. A subset of leaders within our Generative AI innovation group, which consists of more than 800 colleagues around the world, have been working in global, blended scrum teams developing multiple POCs, client demos and frameworks, both on behalf of clients and an exploration of efficiencies we can gain across internal operations.

Additionally, we’re engaged with our clients, delivering significant usable AI projects. I’m talking about applications which should provide personalized responses based on customer intent and natural language analytic, chat bots to help customer experience, analyze, understand and understand the customer sentiment. I’m extremely proud of the work we’ve been doing with one of the largest and leading pharmaceutical companies in the world providing AI capabilities to their clinical research teams. These AI capabilities provide researchers with data anomaly detection, natural language querying, generative narratives of data that can help predict critical items like study setup. All of these AI capabilities will help provide a major global impact on health incomes.

And finally, in January we launched our PACE framework, which provides a holistic approach to responsibility and approach to responsibly operationalizing AI across an organization and empowers organizations to unlock the benefits of AI, while proactively addressing risks. PACE addresses the key factors in responsible gen AI adoption, including company policies, adverse’, controls and enablement. Also exciting is the continuing progress being made to our proprietary Envision online platform. The business capability library module within the tool has grown to more than 700 defined capabilities, new capabilities were introduced for marketing and commerce, order management, customer service and product information management. The platform selection module now addresses more than 8,000 system requirements, 500 vendors and 80 different types of platforms across disciplines like order management, analytics, marketing automation, product information management, customer data platforms, personalization, BI reporting and many, many more.

And finally, we’re excited about the launch of Perficient’s fourth employee resource group, LiveWell, which is a global colleague community focused on supporting our colleagues with physical, emotional and financial curriculum and content. LiveWell joins women in technology, giving and cultural connections as forums for our global colleagues to connect, collaborate and make a difference around topics and cause that passionate about. We continue to focus on investing in programs our colleagues expressed desire for, which results in an enthusiastic and engaged workforce and leads to even greater outcomes for our enterprise customers. And with that, I’ll turn things over to Paul to speak to the financial results.

Paul Martin: Thanks Tom. Let me start with the fourth quarter results. Services revenue including reimbursable expenses were $216.5 million in the fourth quarter, a 5% decrease over the prior year. Services gross margin, excluding reimbursable expenses and stock compensation was 37.7% in the fourth quarter compared to 40.8% in the prior year. SG&A expense was $40.3 million in the fourth quarter compared to $43.7 million in the prior year. SG&A expense as a percentage of revenues decreased to 18.3% to 18.8% in the prior year. The decrease in SG&A expense as a percentage of revenues was primarily due to lower bonus expense and bad debt recoveries that occurred in the fourth quarter. Adjusted EBITDA was $46.7 million or 21.1% of revenues in the fourth quarter compared to $54.3 million or 23.4% of revenues in the prior year.

Amortization expense was $4.3 million in the fourth quarter compared to $6.5 million in the prior year. Net interest income was $0.4 million in the fourth quarter compared to $0.8 million of net interest expense in the prior year, primarily due to $1.2 million increase in interest income resulting from higher cash balances and higher interest rates. Our effective tax rate was 29.5% in the fourth quarter compared to 28% in the prior year. Net income was $23.2 million for the fourth quarter compared to $26.5 million in the prior year. Diluted GAAP earnings per share decreased to $0.65 a share compared to $0.74 in the prior year and adjusted earnings per share decreased to $0.99 a share for the fourth quarter from $1.14 in the prior year. Please see the press release for a full reconciliation to GAAP earnings.

Now turning to the full year results. Services revenue including reimbursable expenses were $892.9 million for the year ended December 31, 2023, essentially flat compared to the prior year. Services gross margin, excluding reimbursable expenses and stock comp was 38% for the year ended December 31, 2023 compared to 40.2% in the prior year period. SG&A expense was $170.6 million for the year ended December 31, 2023 compared to a $171.1 million in the prior year period. SG&A expense as a percentage of revenues decreased to 18.8% from 18.9% in the prior year. Adjusted EBITDA for the year ended December 31, 2023 was $190.7 million or 21.4% of revenues compared to $205.8 million or 22.2% of revenues in the prior year period, which continues to exceed the peer group average.

Amortization expense was $20.6 million for the year ended December 31, 2023 compared to $24.5 million in the prior year. Net interest expense for the year ended December 31, 2023 decreased to $0.4 million from $3.2 million in the prior year primarily due to a $2.7 million increase in interest income. Our effective tax rate was 27.5% for the year ended December 31, 2023 compared to 25.9% in the prior year. The increase in the effective tax rate was primarily due to a decrease in research credit benefit and an increase in the impact of stock compensation, partially offset by a decrease in the effective acquisition costs compared to the prior year. Net income for the year ended December 31, 2023 was $98.9 million compared to $104.4 million in the prior year.

Diluted GAAP earnings per share decreased to $2.76 for the year ended December 31, 2023 compared to $2.90 in the prior year. Adjusted earnings per share was $3.95 for the year ended December 31, 2023 compared to $4.28 in the prior year. Our ending billable headcount at December 31, 2023 was 5,849 including 5,578 billable consultants and 271 subcontractors. Ending SG&A headcount was 969. Our outstanding debt, net of deferred issuance costs as of December 31, 2023 was $396.9 million. We also had $128.9 million in cash and cash equivalents and $300 million of unused borrowing capacity under our credit facility. Our balance sheet continues to leave us very well positioned to continue to execute against our strategic plan. Operating cash flows increased to $103 million (ph) in 2023 from $118.1 million in the prior year, primarily due to increased cash inflows related to accounts receivable.

I’ll now turn the call back over to Tom for the outlook. Tom?

Tom Hogan: Thank you, Paul. Perficient expects its first quarter 2024 revenue to be in the range of $212 million to $218 million. First quarter GAAP earnings per share is expected to be in the range of $0.31 to $0.35. First quarter adjusted earnings per share is expected to be in the range of $0.74 to $0.79. Perficient expects its full year 2024 revenue to be in the range of $925 million to $965 million. Expects its 2024 GAAP earnings per share to be in the range of $2.64 to $2.77, and expects its 2024 adjusted earnings per share to be in the range of $4.05 to $4.20. And with that, operator, we can open up the call for questions.

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Q&A Session

Operator: Thank you. [Operator Instructions] The first question comes from Jesse Wilson with William Blair. Your line is open.

Jesse Wilson: Hi. Good morning, guys. This is Jesse on for Maggie. So for my first question, I wanted to talk about bookings. What have you seen in the first two months of this year and how do you see the cadence of revenue growth for the full year, given your comments about the second half and due to the fact that you probably have more visibility to the second quarter at this time?

Tom Hogan: Hi. Good morning, Jesse. So the pipeline continues to be very robust. January was a good solid booking month for us. We have a number of months to go here in the quarter. Pipeline continues to be there. We continue to see the delay though in our bookings we saw in Q4 and still number of deals we’re still going after that, we still have a couple of months left or a month left here in the quarter with some big deals we’re still chasing. As far as revenue, per my comments, you really see it ramping towards the second half of the year. I think there’s a lot of great conversations. We definitely see a tone from our clients shifting from the cost take-outs and talking more about some of that discretionary spend that were definitely a favorable environment for Perficient in the past, and we’re seeing some nice trends that should give — that give us some indication that we should have some nice second half ramping.

But the first two quarters here and the bookings are going to really dictate what that ramp looks like and the pace of the ramp throughout the year.

Jesse Wilson: Okay. That’s helpful. And then for my follow up, can you talk about your expectations for gross margin and utilization throughout the year. I’m trying to understand what might be causing the headwinds to profitability this year.

Tom Hogan: Sure. So from a utilization standpoint, the January timeframe, December is challenging with the holidays with January usually a little slower to the ramp of some projects, but we ramp-up to be 80% we expect for the quarter, and we’ll continue to run the business at 80% throughout the year. Gross margins in the first quarter are always challenging as we have some reset to taxes and the likes. So margins are challenging in the first half. But we plan to ramp the gross margins to the 40% by the end of the year.

Paul Martin: Jesse, margins are generally lower in the first quarter. This year in particular, we’ve had some higher benefit costs that will impact Q1. But our overall strategy you’re talking about, as we continue to ramp faster offshore, which has higher margins. We’re going to continue to see some improvement from that, that we’ll get us fairly close to this year’s margins are a little higher for the full year.

Jesse Wilson: Okay. Thank you, both. I’ll hop back in the queue.

Tom Hogan: Thank you.

Operator: Please stand by for the next question. The next question comes from Mayank Tandon with Needham. Your line is open.

Mayank Tandon: Thank you. Good morning, Tom and Paul. I wanted to double click on the second half recovery. What is the level of visibility today? I only ask because you’ve had so many head picks across the industry. So I’m just trying to get maybe some more data points, more color in terms of our client budget set. Have they committed to certain projects? So just wanted to gauge your level of confidence on that second half recovery that’s implied in the guidance.

Tom Hogan: Yeah. I think, Mayank, what you’re seeing is a couple of things which I alluded to in the comments. First, the bookings in Q4 were quite strong. We see — it’s typically about five to six months out, where we start seeing that really start to ramp. So that applies for some nice second half ramp. The large program that we kicked off in Q4 should be ramped in Q2, which should have some nice ramp as well for the year. We’re also seeing a number of projects we were able to kick off here at the beginning of the year. One project actually was a mid-to-low eight-figure deal that was brought down to a seven-figure deal that we continue and are very hopeful that we’ll continue to ramp throughout the year, which will give us some nice second half ramping as well.

We also have a number of deals we’re chasing, like we were for the deal related in October. We’re hopeful to have one of those deals also done here by mid of the year, which will give us some ramp for the second half. Not to mention as alluded to earlier, we definitely see a different conversation with our clients of budgets opening up here and having conversations now about second half projects that are more in line with spending for the discretionary side versus just cost takeout. So all those things together is what really gives us the insight to what the second half looks like. Now the question ultimately is what that ramp looks like. Is it the ramp that we see at the top-end of our range for the second half of the year, which will give us a really nice growth number for the year I think compared to our peer group or is it going to be a little bit more waivered as we saw in 2023 time period, and quite honestly, time will tell, but in a couple of quarters.

Mayank Tandon: Got it. That’s very helpful color. And then as a quick follow-up, I wanted to get a sense of the conversations you’re having with your clients around pricing and then that ties into sort of the revenue trajectory from what you can push on the utilization side. I think you mentioned, Tom, 80%, but just wanted to get a sense if that’s the number for the full year or is that what you’re progressing towards? And then last but not least, are you actually hiring organically today or is the head count increase that we saw in the fourth quarter all driven by the acquisition?

Tom Hogan: The acquisition was a big part of the Q4 headcount increase. A couple of different things there, Mayank. As far as the clients and what we’re seeing from the revenue perspective, it definitely is something that I think will work to in the second half of the year. I think the question, when I think about the types of deals that we’re going after right now and the ramping of the great new talent we brought in Q4, I’m just not really sure what that growth curve is going to look like. So, Paul, you want to take it?

Paul Martin: Yeah. So, Mayank, we continue to manage the head count to 80%, so what the numbers in Q1 ramping throughout the year, the head count growth will really start picking up more in Q2, Q3 and Q4.

Mayank Tandon: Okay. And then do you still have — just to be clear, do you still have any gas left in the tank to drive utilization higher or are you already at levels where you want to sustain.? And then also, just wanted to get your comments, Tom, around pricing that was the other part of the question.

Tom Hogan: Yeah. So utilization, I think we’re in a good spot. We were at a place where around 80% of the United States will maintain that. Utilization is a little lower. So we think of our global utilization together will be at 80% for the organization, will be there in Q1, like I mentioned, slower in January. From a pricing standpoint, keep in mind that the project base, the deals that we’re working on allows us to really have a very flexible pricing model that we’re closing deals three to six-month type projects, which allows us to really make sure we’re pricing appropriately based on our cost. So we’ll continue to pass on as we need to the pricing model to maintain the margins in United States. But keep in mind, really where we have the pricing levers as well as we leverage our global teams.

So, utilizing our teams in India, leveraging our teams in Latin America, allows us to be competitive from a price standpoint, obviously the margins are nice in those regions as well, where we don’t have to sacrifice on price in the United States, so we can get to the price target utilizing our global headcount. So, we shouldn’t see really an adverse impact to margins because we can be price sensitive utilizing our global network of consumers.

Mayank Tandon: Great. Thank you so much.

Operator: One moment for the next question. The next question comes from Brian Kinstlinger with Alliance Global Partners. Your line is open.

Brian Kinstlinger: Great. Thanks so much for taking my questions. I’m wondering first if you can speak to the pricing and wage trends, especially as it relates to new wins and new hires?

Tom Hogan: Yeah. I mean, the pricing is pretty aggressive right now. But I would say we’re not seeing a tremendous downward pressure, I think ABR essentially was flat quarter-over quarter. We’re not seeing that we’re going to have to really get price aggressive to win deals. Once again, as we continue to ship to our global teams, that’s really where the conversation comes in on price versus having to get aggressive on individual ABRs.

Brian Kinstlinger: And then — thank you. And then, on the large wins that you’ve discussed, are they with existing customers where you’re replacing slightly smaller projects with larger projects, or are they new customers generally?

Tom Hogan: Not necessarily replacing smaller projects with big projects. They’re expanding the footprint within our clients is a big part of it. We have some nice new logos as well. But our thesis on growth has always been land and expand, building relationships, you see that in our top 50 accounts that continue to grow year-over-year in the relationship as well as size of relationship. So the majority is expanding current footprint within our current clients.

Paul Martin: And Brian, as we talked about, there was also in the quarter that the big win in healthcare of a 100% plus project. So it’s a mix of both. But as Tom said, most of the deals themselves were existing clients, which is consistent with how we run our business.

Brian Kinstlinger: Great. My last question on the first quarter guidance, typically for the fourth quarter’s less billable days, you’ve got a large project ramping, you’ve got an acquisition that’s going to give a full quarter as opposed to, I think, a partial quarter. I’m just wondering at the low-end of guidance, is it that you have projects that are falling off and a lack of wins in the middle of last year that are replacing it? I’m just wondering typically there is not that big of a drop from the fourth quarter to the first quarter, if you can help me understand that? Thank you.

Tom Hogan: Sure. It’s not a full quarter with the acquisition. It’s just the perspective there. But quite honestly, it’s just the ramp that we saw in January what you’re seeing there is, as we end projects, start next project in that calendar year, some years are very seamless and they continue to move from one calendar cycle to the next. Others, we see some challenge of clients being ready to onboard and bring people into projects, and I really liked what you’re seeing there. So it’s not necessarily understanding where people are going to go. It’s really ramping them into their current engagements that we know about.

Paul Martin: And I think clients have been a little more cautious, particularly early in the quarter on ramping up project size. So, as a result of that we had some delays that affected the Q1 estimate.

Brian Kinstlinger: Great. Thank you, guys

Operator: Please standby for the next question.. The next question comes from Vincent Colicchio with Barrington Research. Your line is open.

Vincent Colicchio: Yeah, Tom. How do you feel about the direction of client budget? Is it still sort of difficult to assess that?

Tom Hogan: Vincent, it’s difficult to assess. I will say that there is a definite more optimistic tone though in the conversations we’re having. So we’ll see when the rubber hits the road as far as the buying process. But as we’re seeing right now, projects that we are seeing delayed in 2023, we’re definitely seeing reengagement and discussing when to ramp those projects up, which is good, which has the lead to closing those and having some bookings associated with them. I’ll also say and I mentioned earlier that a lot of the conversations we’re having we’re regarding optimization of operations, the cost take-outs. We are seeing a return to conversations regarding more discretionary spend, more revenue generating spend with customers, projects that were delayed in 2023 because they wanted to hold back.

We’re seeing more engagement around that in 2024. But as I keep saying, Vincent, I want to see the rubber hit the road and see the bookings come through. But the tone from our clients definitely is becoming more optimistic here in the late part of 2023, early part of 2024.

Vincent Colicchio: And question on the acquisition side, should we expect you to be active? I think you usually do three a year. Will we be back to that this year and will there be a theme to it? Will you be doing some Eastern European deals, for example?

Tom Hogan: We are active. We’re always looking for great acquisition to really benefit our portfolio and then geographic. I will say that Europe is of interest, and we are in conversations and looking at where we can add to our portfolio in Europe. All that being said, yes, we are very acquisitive and will continue to be so in 2024. Hopefully, we’ll have something done in Q2, but a long way to go, but nothing too imminent right now, but we are targeting. We’d like to have something done in Q2, but we’ll see what happens in conversations, but nothing else really to report at this point.

Vincent Colicchio: Thanks, Tom.

Operator: Please standby for the next question. The next question comes from Jack Vander Aarde with Maxim Group. Your line is now open.

Jack Vander Aarde: Okay. Great. Good morning, Tom and Paul. Thanks for taking my questions. Tom, so I believe it’s been covered a little bit, but just so I can be clear. Last quarter there some commentary regarding some delayed project starts and maybe customer buying decisions, but there was no major project halts or cancellations. Do you feel like visibility and just things in general have improved since last quarter? Thanks.

Tom Hogan: Hey, good morning. I’m not sure about since last quarter, quite honestly. I think it’s the same as last quarter. I think we have some good insight. To your point, we haven’t seen major cancellations. We’re not in conversations. There’s always lumpiness of this business a little bit, but I don’t see any major cancellations on the horizon, knock on wood. The conversation though that we’ve always had is really more around delays, and then we continue to have insight into the pipeline. I keep going back to what we saw in Q4 2023, I’d like to see a change in this first half is moving forward with these buying decisions. So the inside I’d say is the same, remains the same and the difference being is a bit more of a positive tone, but we’ll see where that turns here towards the first half of 2023 in the bookings.

Jack Vander Aarde: Okay. Great. And then maybe just a follow-up, maybe for either Paul or Tom. Yeah, I’m just wondering — I think a few quarters ago you guys were talking about organic growth and longer-term organic growth targets. Just given your comments on the bookings strength, do you see the potential to support a double-digit organic growth rebound towards the back half of the year or just heading into 2025? Just what’s your confidence or overall plan around organic growth? Thanks.

Tom Hogan: So long-term thesis of the business does not change. We have provided and produced with our peers. When you think of a like-for-like business of our non-U.S, based business of teens to 20% type growth, 30% growth a number of years ago. As we continue to grow, we continue to see that we will see that high teens to low 20s for non-U.S. based and then single digit in the U.S. Will we get there in 2024? I think that may be aggressive. I think from all the conversations we’re having, the pipeline, what we’re seeing at the macro level, we are favorable to a 2025 returning to those volumes where we be in the double-digit organic growth perspective. There’s a lot of variables in there as far as the macro, but that is the thesis of the business.

And I’d like to think we are at that run rate towards the second half of the year, but it’s not going to be implied obviously of an organic number for 2024. But if we can get some of these bookings and we start seeing the discretionary spend come back 2025, I think is a good environment for Perficient.

Paul Martin: Jack, I think, from our view, digital transformation is still in the relatively early innings. And one of the things we’ve seen is there’s been all this uncertainty is at some level it’s discretionary as to timing, but there’s big ROI in the projects that we do. So eventually they get funded. And when the spigot gets — turn back on in a meaningful way, I think we feel very well about our position.

Jack Vander Aarde: Okay. Excellent. I appreciate the color, guys. Thank you.

Operator: One moment for the next question. The next question comes from Puneet Jain with JPMorgan. Your line’s open.

Puneet Jain: Hey. Thanks for taking my question. So I want to ask — I also want to ask about visibility to this year’s revenue numbers. How much of, like the full year guidance, maybe at the midpoint or at the low-point is already under contract? And also how large is that — the large healthcare client? I think Paul you mentioned 100 people. So is it fair to assume that the contract should be about $10 million to $15 million in annual revenue when fully ramped?

Tom Hogan: So the insight, Puneet, keeping in mind that our project length is typically less than six months. So I think we’ve insight from a pipeline perspective. However, from a backlog perspective, that will be abnormal for us to have the majority of the range already booked. It’s just not the business we run. I would say we have line of sight to where we can and will grow the organization, but obviously have a lot of work to do to capitalize on the insights we know about business and the pipeline that we have. In regards to the second part?

Paul Martin: Yeah. So in regards to the healthcare account, that’s going to ramp into the notionally a couple of 100 people. So obviously it’s an nice size project. It’s been ramping starting probably in October or November and should be fully ramped for the pieces that we have under contract by the end of the quarter, and there’s also additional opportunities out there with that customer.

Tom Hogan: And just for perspective, the challenge on the ramping is more at the client level than it is at our level. We have the ability to ramp much faster as a matter, the client to be able to consume the talent that we’re providing, as well as they’ve actually decided to move out one of the majors from that relationship. So there is some knowledge transfer and shifting of work, shall we say, from this other organization to us, which is taking place as well. So the ramp isn’t fully dictated by us, which is why we’re also seeing a little bit slower ramp than we initially anticipated as the client prepares to be able to absorb our team.

Puneet Jain: Got it. And it’s nice to see like addition in Romania. So my question is, like when you got into Latin America through PSL acquisition, I believe in 2020, that was an absolute homerun for Perficient, like that business grew so much. So now that you are getting into Central Europe, can you talk about like what client conversations look like? It could be a little bit early, but are you seeing anything or what you expect for ramp in Romania locations?

Tom Hogan: I agree, by the way, Puneet. I agree that Latin America was a homerun and looking forward to step into the batter’s box to keep that analogy going and hit another homerun. I will say it is early. We just finished that acquisition here a month or so ago. I will say though that a number of our clients are quite interested in now as having a foothold into Europe. Most of our U.S.-based customers have some — large Fortune organizations have some European presence and they’ve been asking for our ability to service them in Europe. Also there were some nice relationships that came with SMEDIX that we’re interested in representing the full portfolio of Perficient offerings to as well. So I think that bidirectional excitement is really there.

Once I mentioned — once again it’s still early, still in the conversation phase, but I think Europe is going to be a nice place for us to hit another homerun for Perficient. It will take a little bit of time. Latin America was great through some acquisitions and I’m really excited about the team that comes with SMEDIX, very high talented engineers that right now are focused on med device, but we’re really excited about bringing different areas of our portfolio into that region.

Paul Martin: And I think similar to what we did with PSL, we have a beachhead, so to speak, now in Central Eastern Europe, similar to what we did as I said with PSL. Yeah. So we fully intend I think to build that out as Tom said in his opening remarks, and I think that’s a big opportunity for us.

Puneet Jain: Okay. Thank you.

Operator: I show no further questions at this time. I would now like to turn the call back to Tom Hogan for closing remarks.

Tom Hogan: All right. Well, thank you, everybody. Look forward to connecting here shortly in the next couple of months to talk about Q1, and where we look for Q2. So have a great day, everybody. Thank you.

Operator: Thank you for your participation in today’s conference call. This does conclude the program. You may now disconnect.