Perficient Inc (PRFT) 2010 Q4 法說會逐字稿

Good day ladies and gentlemen and welcome to the fourth quarter 2010 Perficient earnings conference call. My name is Lacey, and I'll be your coordinator for today. (Operator Instructions)As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's call Mr. Jeff Davis, CEO and President. Please proceed.

Thank you very much. This is Jeff Davis; with me on the call today is Paul Martin, our CFO. I want to thank you all for your time this morning; as usual we've got about 10 to 15 minutes of prepared comments after which we'll open the call for questions. Before we move on, Paul will you please read the Safe Harbor statement?

Sure. Thanks Jeff 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. We encourage you to refer to the additional information contained in our SEC filings concerning factors that could cause those results to be different than contemplated in today's discussion.

In addition, our earnings press release included 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. It is posted on our website at www.perficient.com under news and events. We have also posted a reconciliation of certain non-GAAP goals with the most directly comparable financial measures prepared in accordance with GAAP on our website, again at www.perficient.com under investor relations.

Jeff?

Alright thanks Paul. Well, thanks again everyone for joining. Obviously, pleased to be with you here this morning and sharing our results for 2010, and our guidance for 2011.

Perficient finished 2010 pretty strong I feel with a solid fourth quarter performance. Revenues for the fourth quarter were up 18% year-over-year. And similar to last quarter, Q3, margin expansion resulted in impressive gains in EBITDA and that is stock comp up 59% year-over-year. As well as cash EPS with a non-GAAP EPS that we refer to often up 70% year-over-year, so nice expansion on the margins. And as we mentioned before, we expect this trend to continue as we're able to grow the revenues over the next several years, I believe both EBITDAS and cash EPS will grow at even faster pace than the top line revenue. You'll see that reflected, by the way, in our 2011 cash earnings per share guidance; this we'll discuss a little later.

So services revenue near the high end of our guidance range coupled with a very strong quarter for software sales as we sometimes see in the fourth quarter, and I think it's a good indicator overall for the market health, as we head forward. Helped us beat the consensus quarterly estimates on both revenue and earnings lines for the quarter. Two other important developments in the fourth quarter were the expansion of our board of directors; we added a couple of excellent tenured folks to the board, as I'm sure you saw, as well as our December acquisition of speakTECH. The speakTECH acquisition closed near the end of the year, so top line contributions from that were pretty minimal in the fourth quarter numbers. Of course our Q1 2011 guidance speaks on a 4 quarters contribution from that business, which not only expanded our portfolio, but really added to our geographic footprint, establishing a presence in southern California and expanding a presence Austin. And also strengthened a key partnership with Microsoft as well.

Also in the fourth quarter, billing rates for US employees increased slightly to $120 an hour, up from $119. While utilization is always impacted in the fourth quarter due to the seasonality around holidays, vacations, et cetera, we hit 79%, which was consistent with Q4 2009. And we expect, and are already in fact seeing, that rebound in the first quarter back toward the mid 80s again.

In addition to the solid delivery performance, bookings during the fourth quarter I think were particularly exciting and really that's continued year-to-date in 2011. Very very strong. We sold 17 deals north of $500,000 during the quarter. And to provide a little perspective on where the market is relative to a year ago and that recovery that I mentioned a second ago, that compares with only 6 deals north of $500,000 during the fourth quarter of 2009. So, I think it's attributable to the fact that we saw clients far more willing to commit to larger, longer term projects before years end in 2010 compared to in 2009. So, we had a lot of things in back log and signed up by the end of the year. We don't provide specific numbers on bookings, but I do want to mention that December 2010 was much stronger than December 2009 and the momentum has helped us get off to a solid start in 2011 bookings as well. As I mentioned I'll talk to you on that a little bit more later.

Another thing I think is worth notable is that the last 3 months from December to the end of February of this year, so from December 2010 through February 2011, 25% of the projects we booked came from new clients. So we're seeing again, more indications of health returning to our industry and we're able to sign up new bookings from new clients. Those represented, by the way, about 12% of the booked revenue in total for that period. Again those are healthy numbers, and I think are an indicator of what I expect to be driving some organic growth for us this year, I believe stronger than last year. And when we engage with new clients, we typically start with a relatively small project, deliver value, execute well against those, prove our capabilities, and then earn the trust of that client to win larger engagements and expand the relationship.That is why I think what we're seeing there in the new client editions, which is unique for this year, over the last couple of years is a good indicator again, of a return of stronger organic growth.

We exited the year with plenty of cash, and no debt. I'm going the talk a little about our plans around stock repurchase and M&A after Paul's comments. I definitely look at 2010 as a very meaningful year for Perficient in many ways. We officially moved our headquarters to St. Louis, and having persevered through the recession, like many companies we're able again to return to solid growth. We re-ignited our M&A program, and made meaningful progress in some key focused areas. Some areas I'm going to do a little deeper dive on later, but some exciting developments, including the introduction of maintenance and support offerings, leveraging our China GDC. That is going to help us establish more recurring revenue than we have today. It has been very well received and we're already starting to get early on solid traction with that offering. And of course I've talked about this before, but really substantial success with the healthcare vertical.

I think it is also notable that we exited 2010 with a revenue run rate that exceeded the full year results we posted in 2008, which was the strongest top line performance in the Company's history. Again, we're going to talk about 2011 a little bit in a few minutes, but we expect it is going to be the first of several consecutive years where revenue and earnings will climb substantially. We're excited in general on the outlook and I'll touch on that in a minute. Before I do that I'm going to turn the call back over to Paul to discuss the quarterly financial details.

Thanks Jeff.Total revenues for the fourth quarter of 2010 were $55.9 million, an 18% increase over the year ago quarter. Services revenue for the fourth quarter of 2010 excluding reimbursable expenses, increased 13% to $46.8 million over the comparable prior year period. Sequential organic services revenue growth was minus 3.5% in the fourth quarter following the expected seasonal trend. Services gross margin for the fourth quarter 2010 excluding stock compensation and reimbursable expenses increased to 33.4% compared to 30.6% in the fourth quarter of 2009, continuing our trend of year-over-year margin improvement.

SG&A expense increased to $10.9 million in the fourth quarter from 2010 from $9.6 million in the comparable prior year quarter. Excluding non-cash stock compensation, SG&A expense was $8.2 million, compared to $7.8 million in the fourth quarter of 2009. SG&A excluding stock comp as a percentage of revenue was 14.6% in the fourth quarter 2010, compared to 16.4% in the fourth quarter of 2009. Stock compensation expense was $2.7 million in the fourth quarter in 2010, compared to $1.8 million in 2009. The fourth quarter of 2010 stock compensation was impacted by a nonrecurring charge of $800,000 associated with our former chairman separation agreement.

EBITDAS, defined as earnings before interest, taxes, depreciation, amortization, and stock compensation for the fourth quarter of 2010 was $8.3 million or 14.8% of revenues compared to $5.2 million or 11% of revenues for the fourth quarter of 2009. We reported net income of $1.3 million for the fourth quarter of 2010, compared to $600,000 for the fourth quarter of 2009. Diluted GAAP earnings per share increased to $0.05 a share for the fourth quarter of 2010 from $0.02 a share for the fourth quarter of 2009. This is in spite of the fourth quarter of 2010, including nonrecurring charges for transaction costs and incremental stock compensation associated with the former chairman separation agreement. Non-GAAP earnings per share increased to $0.17 a share for the fourth quarter of 2010 from $0.10 for the fourth quarter of 2009.

Our effective tax rate for the fourth quarter of 2010 was 60%, compared to 59.4% for the fourth quarter of 2009. Our ending billable head count for 2010 was approximately 1,200, including roughly 1,000 billable consultants and 200 subcontractors. Ending SG&A head count for 2010 was 174, which includes 10 SG&A employees related to our recently acquired speakTECH business.

Now let me turn to the full year results. For the full year ended December 31, 2010, revenues were $215 million, a 14% increase over the comparable period last year. Year-to-date services revenue for the year ended December 31, 2010 excluding reimbursable expenses were $185.2 million, an increase of 11% over the comparable prior year period. Organic services revenue growth was 6% on a trailing 4 quarters basis. Services gross margin for the year ended December 31, 2010 excluding stock compensation and reimbursable expenses increased to 33.8% from 29.9% in the prior year. Higher domestic average billing rates and improved utilization of our workforce helped drive the year-to date-improvement.

SG&A expense for the year ended December 31, 2010 was $45.5 million compared to $40 million in the comparable prior year period. Excluding non-cash stock compensation, SG&A expense was $36.8 million, compared to $32.9 million in the comparable prior year period. The increase in SG&A was primarily driven by higher bonus, stock compensation, and recruiting expense. SG&A excluding stock compensation as a percentage of revenues was 17.1% for the year ended December 31, 2010, compared to 17.5% for the year ended December 31, 2009. EBITDAS for 2010 was $28.1 million, or 13.1% of revenues compared to $18.1 million, or 9.6% of revenues in 2009.

Net income for 2010 was $6.5 million compared to $1.5 million for 2009. Diluted GAAP earnings per share increased to $0.23 from $0.05 a share for the year ended December 31, 2009. Non-GAAP earnings per share for the year ending December 31, 2010 were $0.59 per share, up 64% from the $0.36 per share reported in 2009. Our effective tax rate for the year ended December 31, 2010 was 44.8%, compared to 51.4% for the comparable prior year period. The decrease in the effective tax rate is due primarily to the effect of state income taxes and permanent items over a larger income base and a larger benefit from certain non-taxable foreign income, which was partially offset by an impact of non-deductable transaction costs and the limitation on the deductibility of certain compensation costs.

During the fourth quarter, we spent $1.4 million and repurchased 120,000 shares under our share repurchase program. Since inception, we have spent $42.2 million on repurchasing 6.1 million shares. We continue to believe that our share repurchases will drive future accretion and shareholder value. We also continue to generate strong operating cash flow. For the year ended December 31, 2010, we had operating cash flow of $18.7 million compared to $22.6 million for the prior year; the decrease is primarily the result of an increase in accounts receivable, associated with funding our growth.

We ended the quarter with no debt and $26.3 million in cash, cash equivalents and investments, which was down slightly compared to 2009 as a result of spending $14.7 million during 2010 on share repurchase, and around $5 million for the cash portion of our acquisitions. Our day sales outstanding, our DSOs for the fourth quarter were 73 days and that is consistent and within our stated goal of 70 to 75 days. I'll now turn the call back over to Jeff for a little more commentary behind the measures.

Thanks Paul. Again, from our perspective, a really solid quarter and year for 2010. Perficient's diversity from a solutions, technology platform, and client perspective continued in the fourth quarter; we have always enjoyed nice diversity and the fourth quarter was no exception.

Our top 5 customers combined to represent just 25% of revenues. I referenced our success in the health care vertical earlier, and that accounted for 25% of our revenues during the quarter, the fourth quarter. And that compares to only 16% in the fourth quarter of 2009, so really strong headway there in that vertical. It was followed in the quarter by telecom at 14%, energy at 9%, but based on the success that we have enjoyed with a dedicated health care industry practice, we're planning to make more investments. And as I believe I've mentioned in the past in the vertical practices in 2011, the top of our list is financial services, which is an area we expect to see a lot of opportunity in moving forward. So we're targeting that industry for our next dedicated vertical practice this year. And again, I think that will be the first one and hopefully we'll establish a second one before the end of the year.

From a solutions perspective, portals, business integration, CRM, remained our strongest disciplines with enterprise performance management as our fastest growing new solution area. Very very solid space in an area that we really entered into in a big way with the Kerdock acquisition that we did in the early part of 2010. And I referenced the balance sheet earlier, and our success in restarting M&A in 2010. In 2011 we'll be looking to execute 3 to 4 acquisitions they could add as much as $50 million run rate revenues perhaps beyond this year. And by the way, that is a number that we achieved slightly higher than actually in 2007.

Of course those plans are subject to finding the right deals at the right price. As always, I think we've demonstrated good discipline around that. That is really the reason that we only executed two transactions last year. But the market has really improved on the M&A front; we're seeing a lot more healthy businesses out there that are available and interested in joining Perficient. So we've got a nice pipe line there. And really that combined with the improving industry that I referred to before, I think it is key timing right now to capitalize on those opportunities and really drive the growth going forward.

So to summarize, solid quarter and year. 2010 we really got back to what we expect will now be several years of annual growth where we're shooting for double digit compound annual growth organic in an active M&A program. So 6% last year, I think the mid point of our guidance this year is about 8% organic. And we're actually shooting for more than that; from kind of a bonusable goal standpoint, we actually have internal targets that are higher than that. That all comes together, we're targeting $500 million annual revenue run rate by the end of the year 2013. You have heard me mention that before. I do think we are on track to hit that. A lot of things have to fall in place obviously for that to occur. We took Perficient from just under $57 million in revenues in 2004 to more than $230 million in 2008; over 4 years, quadrupled the business. I'm confident with the determination and discipline we've demonstrated over time that we can achieve that level of growth again and perhaps beyond.

So lastly, commenting on the first quarter of 2011 in the full year, the Company expects first quarter services and software revenue, including reimbursed expenses to be in the range of $55 million to $59 million, comprised of $51.5 million to $54 million of revenue from services including reimbursed expenses, and $3.5 million to $5 million of revenue from sales of software. The mid point of the first quarter guidance represents about 17% growth over the first quarter 2010 revenue. The Company is issuing full year revenue guidance range of $235 million to $255 million, and cash earnings per share for the year of $0.70 to $0.80. So with that, we'll open the call up for questions. Operator?

(Operator Instructions)And our first question will come from the line of Brian Kinstlinger, with Sidoti & Company. Please proceed.

Hello. How are you? I had a couple of questions on demand. First I'm going to look backwards at the fourth quarter. I think in the last call and I think you have been clear that you thought that in the fourth quarter you can buck the trend and probably be flat to maybe up if you got lucky in the December quarter on services, which wasn't the case. What kind of materialized in the December quarter? Was it slower bookings in the beginning of the quarter that caused you to have the normal seasonality that you thought maybe you could buck the trend for?

Yes, we've done a lot of analysis on that of course Brian, and I think it was really the kind of softer bookings that we talked about in the third quarter, actually that sort of set in, in a little bigger way than we that they would or had anticipated they would in the fourth quarter. And some of that they actually carried over a little bit to the first quarter, although given the backlog that I talked about before, the bookings that we've had this year we're really very optimistic actually about the outlook going forward. But I'd say that is the primary reason for fourth quarter. Of course seasonality, we had been up pretty substantially for three of the prior four quarters, so we had a pretty good vacation head and things like that. But it was primarily the softer bookings that we saw in the third quarter, and that trend shifted, by the way, by about midway through the fourth quarter.

Okay. And there is a little bit of disconnect, you mentioned really strong bookings in the December quarter and you've started off really strong through February. If I back out the acquisitions, and I obviously only have my assumptions in acquisitions and what they're going to provide. But you've talked about the combined revenues, and I don't think they're declining; it seems that the services revenue is flat December to March, and now you have more billing days I would think. So I guess I am curious why with all the strong bookings and the strong demand trends you're talking about, organically you're really looking for a revenue that is pretty similar to the December quarter.

Yes that's right, and again I think it is the Q3 bookings, our bookings tend to lag -- our revenue tends to lag bookings rather, about four months roughly. And of course for each soft month you have, you have got to burn that off. So we're seeing revenue pick up pretty substantially here in March. And as I kind of alluded to, Q2 looks to be quite a substantial quarter for us from where we sit right now.

So you're exactly right. I think it is not so much a disconnect as it is the benefit of those big bookings will be more in the second quarter than we're realizing yet in the first quarter. But as you can tell by the full year guidance both on top line and cash earnings per share, I don't think that's something that we won't be able to recover from. So a little slower first quarter, but I think overall we expect a very strong second quarter and strong remainder of the year.

I think one thing that I'd add to that Brian is that as Jeff mentioned earlier, the number of large deals are up, and I think we saw in some cases, some of those were a little bit slow to get started here in Q1, but I think the good news related to that -- bookings are in place and they very well set the table for us heading into Q2.

Great, now with all that said and the last question for demand as I look forward, now I've assumed, and I'm sure it may be right or wrong, but $16 million of revenue from your new acquisition, your newest one and maybe a modest increase from the other one that's organic -- so speakTECH and Kerdock -- but I back those out, you got about 2% to 11% organic revenue growth. And I guess I'm interested because last quarter you talked about managing 2011 to double-digit growth. And you're talking about a lot of strong bookings. So I guess I'm wondering why it seems a little bit lower maybe than I would have thought. Has anything changed in the last couple of months to maybe temper your positioning for the year?

No, I think -- well, the only thing that's changed like I said is a little slower start on revenue than we'd like at the beginning of the year. By the way, the organic number is 4% to 14% for the year, that is the range. So, and I mentioned before, our midpoint sitting right around 8% or 9%, really 9%, and I'm still pushing very hard for double-digit. That is what we would like to get to. So marketwise, anecdotally as well as the bookings that we're seeing, very, very strong. I do think we had this patch that was a carryover from the third quarter of last year.

But we're coming out of that now. And we don't see anything that would indicate that we're going to see that again this year. I think that was genuinely a factor of concerns about the economy in the middle year last year, we saw a pull back on the part of our clients. We don't see that happening again this year. We're having much more long-term conversations with our clients, a lot more budgets to spend this year than in the prior. It's a matter of I think timing and lining that all up. And again we're starting to see that now. And I think you'll see that in our Q2 result as well. And also as Paul mentioned, a lot of the engagements that we've signed are larger, more complex engagements, and they do take a little more time to get ramped up and running at sort of full speed. One quick comment too; you mentioned the billable days, seasonality aside, so taking vacations out of it, in actuality we have one less billable day in the first quarter than we did in the fourth quarter.

Right. Sorry, I meant the vacation days, you're right. The last question I had, which did you guys mention the metrics on the average deal sizes and numbers, did I miss that?

Average deals -- well yes, I think we talked about just deals over $500,000.

Right, I think in the past, at some point you'd given how many deals and the average size, or is that not something you have given every quarter?

I don't think we did it every quarter but -- go ahead --

Yes, we have it here, so the average deal size in Q4, some of these have all the phases in them, it's like 358 deals with a deal size of $130,000, versus the third quarter was $105,000. As we mentioned, there were 17 deals over $500,000 in the fourth quarter versus 11 in the third quarter, so it kind of all drives up that average.

Okay, thanks guys.

Thanks Brian.

And our next question will come from the line of John Maietta with Needham and Company. Please proceed.

Hello, thanks very much. Jeff, I was wondering if you could talk a little bit about Kerdock and whether or not you are happy in terms of how it is tracking with regards to cross-sale activity. And the same deal for speakTECH, maybe if you could just speak to kind of the plans for cross sale with that business. Granted, you picked up a bunch of, new skill sets with that acquisition, so maybe not as leverageable across the base.

Yes, no absolutely, the Kerdock acquisition has been fantastic, the organic growth within that business unit has been very good. Cross sales have been great. These 2 acquisitions, really, even speakTECH even though it is early on, have really integrated very quickly, and I always try to measure integration strategically, not by how quickly we cut over email and things like that of course. It's a matter of how quickly these guys are being leveraged and cross-selling exactly to your question. And we have been very, very happy with both so far. And of course as you probably know, we were a national systems integrator with Microsoft. SpeakTECH was as well. I think our respective rankings were 10 and 14, and combined we have got to be somewhere in the top five. So it really helps us with the visibility with Microsoft as well. It's a great SharePoint shop. SharePoint 10 I think is going to be a strong area of demand. And we're well positioned for that. And we're already leveraging substantially in cross sale the skills that they bring to the table.

Got it. Okay. And with regards to the M&A pipeline, is there -- it sounds like you feel better about the help with the targets that you're looking at. And are those targets concentrated in any one area as far as industry, vertical, specialty, et cetera, geography?

I would say we're seeing a good portfolio or a good -- good opportunity in pipeline around -- across the board for the most part. As I mentioned before, financial services we greenfielded the health care practice. We are in the process of doing the same thing for financial services but we're also looking for acquisitions in that space, and we have actually identified a couple of potentials there. We've also identified a couple of other good opportunities. So I would say right now we're really encouraged about the M&A pipeline and what's out there.

We talked about last year the challenge being particularly in the first half of the year. Finding businesses that had a decent track record of health, which it was a very -- you go back 12 months obviously you get into 2009, which was a rough time for the industry. So by the end of the year we had identified a lot of businesses that had recovered nicely. Demonstrated a good health for a 12- or more-month run rate. And put those in our pipeline. And we have got things under way right now. I am -- I would say very confident. I mentioned three to four deals. I am very confident that we'll hit three this year.

And we're not going to be too aggressive like we always say, you have got to integrate these businesses and make sure that you're getting the value that you're paying. But I would be surprised if we can't get three deals done this year. The pipeline is that strong at least.

In terms of the greenfield investment on the financial services side, is the pace of that investment going to be front end loaded in the year or be kind of spread across the full year?

I think it will be spread across the full year. It is similar to what we did with healthcare, there were a few lessons learned. I think we're smarter now in terms of greenfielding these. As I mentioned before, we couldn't have asked for a better success and better return on the investment. But it is pretty spread out. You don't have to -- you don't go out and hire 20 people day one and you have got a number of them sitting around. So we'll be spreading it out throughout the year.

Good, that's okay. Thank you.

Thank you.

And our next question will come from the line of Peter Heckmann with Avondale Partners. Please proceed.

Good morning guys, nice quarter. When you look at employment market, are there any areas where you're having difficulty hiring qualified people? Is it on a regional basis, what do you see in terms of compensation expectations?

Great question. I'll start by answering this the way I always do. And that is that even through the recession, hiring good people is always hard. This industry, while it took a hit to some degree -- there were always places I think for qualified IT people, particularly with specialty skills.

So my answer to your question is, it is always tougher. And today is no exception to hire people with those specific skills that you want and good experience in that specific technology. By the way, as a result of that, right now we're doing a lot of training. We have had great success by bringing in a class of folks that we have trained on IBM Commerce as an example, that we brought in essentially as college grads, and initially even as interns and now have turned about, I want to say eight or 10 FTEs into commerce-ready people by training them through IBM. So we're doing more of that sort of thing.

In terms of your question about compensation, if it is a good one, I'm glad to highlight this. The reality is for the turnover, both voluntary and involuntary that we had last year, the people that we replaced -- the new hires coming in were coming in below the compensation for the people that were moving out. So we actually managed to bring overall base compensation for the delivery folks down last year, along with actually giving merit increases.

So we're -- we're optimistic that that is going to continue. We're able to expand the bottom of our pyramid more. We have got larger engagements that have roles for less experienced resources, and I think it's going to help us bring that cost down.

Okay, that's great. And then as regards, the mix to H1B in offshore, how do you see that shaking out in 2011?

I think the H1B, I believe on a relative basis, will continue to decline. There are less H1B folks available. We're also still enjoying as I said before, maybe less of a need for them as we're able to fill out the pyramid with less experienced, US-based resources. We are still by the way leveraging H1Bs, we actually got a couple of L1 programs now that we're leveraging as well as a method of mitigating the H1B constraints. And then offshore, I certainly expect we'll grow on a relative basis, outpace everything else. Each quarter goes by, more and more of our revenue involves offshore.

So while offshore itself is, I want to say, less than 5% or right around 5% of our total revenue, the reality is something on the order of 30% or better of our revenue is leveraging offshore resources. So we don't pursue the offshore model. We've got a hybrid model that actually works very well for us, it allows us to get a lot better margins actually than the pure offshore for those offshore resources; $35 an hour, 60% plus gross margin. But the other fact there is that our leverage isn't one to 10, or one to 20, it is more of one to one or maybe one to two.

Okay, that is helpful. And then last question, are you seeing any more shift to fixed price contracts?

Actually no, our fixed price percentage of revenue has come down, declined. And we're seeing that trend continue -- we're certainly -- it is still going to be a factor. And we have always said 15% or less, and it is actually down around 11% or so now. It seems that as budgets have recovered, clients are a little more willing to engage on a time-materials basis than they are on fixed fee, because they've got more budget flexibility. And the reality is we work really hard to educate our customers that the fixed-fee arrangement is not really as beneficial as they might think. It really limits and constrains flexibility for them. And we always work very, very hard to meet our client's budget requirements anyway. So, we'd rather have the flexibility to adjust scope and adjust some of the factors to help meet their budgets than be boxed in on a fixed fee. So we do a lot in educating them from the sales process to kind of avoid that. Because we don't think it is good for them.

Got it, got it. Alright thanks, I appreciate it.

Thank you.

And our next question will come from the line of George Price with BB&T Capital Markets. Please proceed.

Hello, thanks very much guys, good morning. First thing is -- just wonder if I could get some assumptions around the 2011 guidance -- maybe from the margin side, what kind of EBITDAs margin you're expecting. If you have GAAP-operating margin assumption that kind of underlies it as well?

Sure, Paul is going to find that for you. Just to -- kind of set the stage for that. It is our goal -- as I mentioned before, I alluded to obviously, we're bonused for performance of the business. And our internal goals are to actually to add 200 to 300 basis points to both gross margin on services net of stock comp as well as EBITDA net of stock comp this year. So we're looking to get to 36% plus, 37% perhaps for the year and then a higher run rate on gross margin, and then 15% to 16% again on EBITDAs, with ending the year, on a higher run rate than that. That is what our bonuses are built around. But Paul you want to just -- ?

From a GAAP perspective in our GAAP guidance, the difference between the cash EPS and GAAP EPS, the range is $0.30 to $0.32, which I think the delta in 2010 was $0.38. So that GAAP will compress a combination of factors, some of the one-time costs in stock compensation that we talked about in my earlier remarks as well as the transaction costs that we had in 2010. And the assumptions that we have done with no acquisitions, don't repeat.

I'm sorry Paul. I am sorry if I missed it. So the GAAP was $0.30 to $0.32 for 2011?

Yes, so in our guidance of $0.70 to $0.80, you take $0.30 to $0.32 off to get back to GAAP EPS.

Oh, okay.

So -- and I'm comparing that to -- that difference in 2010 was $0.38.

It was roughly $0.40 to $0.50.

Got you, got you. Okay. How about tax rate and just do you have a number for stock comp expense that you anticipate in 2011?

Yes, so as far as the tax -- the tax rate should be around 40%, so I think that is a pretty solid 40% to 41% on the tax rate. The stock compensation, as we talked about, there was the one-time cost in the fourth quarter. So it should be fairly comparable and actually slightly lower than the third-quarter run rate from 2010.

Okay, and -- and just -- I think I missed part of that. So that $800,000, you said was of stock comp in fourth quarter was chairman separation?

Yes, so we had stock comp, and I believe this may just be the SG&A number but, of $3.3 million in Q4, versus like $2.466 million in the previous quarter. So sort of $800,000 of that is one-time. So it should be similar to that third-quarter run rate, maybe slightly lower.

Okay. And I realize that you're looking at the -- you're looking at the margin and looking at running the business on an ex-stock comp business, but I guess as growth and margins kind of normalize, and when you look at more comparable figures when you're looking at other IT consulting companies, it's really -- most other companies in this industry are ultimately focusing on GAAP operating margins, the theory that especially in the higher-end people-based business, right? If you're not paying in stock, you have to pay in cash. If that shifts, something that you have thought about and that you would consider?

Yes, so certainly when we put in our new stock compensation plan back in, I guess it was in 2009, the number of shares available in that plan, certainly are lower than we had previously. And as a result of that, the grants have been lower than they were prior to that date. And you'll certainly see as -- we have a five-year vesting on our stock comp, so that runs off over a five-year period, so as we see some of the other stock comp drop off from grants back in the 2005, 2006 timeframe, we expect to see that continue to decline over time.

Yes, it certainly is a percentage of revenue.

Yes.

As we grow of course, the stock comp is part of our, kind of philosophy. So as we expand the business, you can expect some offset of the overhang due to the new grants. We're actually working on a new plan there, too. We may be actually shortening the vesting on those, and issuing less shares as a result of that as well to help with some of the overhang there.

Okay, and just you mentioned the maintenance and support work that you're starting up out of China. I might have missed it, but did you mention how much -- what percent of revenue that is? And if you could talk maybe a little bit about maybe the economics of that kind of business, versus your more core-project-based business, and what kind of impact it might have on results going forward?

Sure. I think it will be a while before you see a material impact. Right now, we literally just kicked it off this year. So the revenue is quite low. We're targeting by the end of the year, somewhere between $4 billion and $6 billion. Now this is a greenfielded effort, so we believe that's going to help drive some of the organic growth. There's a couple of points of organic growth there.But again, the big picture -- that's not going to have a huge impact on margins. However, to answer your question, I come to a couple of facts about that.

We have a lot of recurring revenue that isn't necessarily contracted as recurring revenue. But we do tend to sign a lot of contracts with customers on an annual basis and essentially renew those contracts every year, and they get adjusted every year; so it's not a five-year contract. So it's not quite the reliability of some other recurring revenue.But this -- this will be more along those lines. So one of the benefits of course is some recurring revenue. And I do believe it is going to continue to grow. The reception has been fantastic so far. And in terms of the metrics on it, gross margins right now, we're projecting north of 50%. So it should be a very profitable business -- it gives us a lot of flexibility in terms of how we deploy the resources, which will allow us to manage to a substantial gross margin level on it.

Okay, and I guess the -- the GAAP tax rate in the quarter was higher why? I apologize if I missed that.

Yes. So there is a couple of drivers of that, George. The first is when we did the acquisition of speakTECH, there is transaction costs and based on the structure of the transaction, those costs aren't deductible, so that drove six or seven points in the rate. And then there's also, in the GAAP rate, the impact of certain compensation, principally related to stock grants that isn't fully deductible. And the amount of that is driven in essence by the stock price when the stuff vests, and the vestings that occurred in December were at a higher price and so that drove the GAAP on the quarter -- I believe there was about 10 points associated with that.

And is that -- have you kind of factored that in, when you're talking about the 40% for the year?

The 40% for 2011?

Yes.

Yes, so part of that was associated with our former chairman. So the impact of that in 2011 will be less.

Okay, last question, you didn't -- I don't think you mentioned how much as a percent of revenue financials were, if you could repeat it.

Yes, it is actually -- I don't think I did mention it. But it's actually picked up a lot. It is double digits for us now. It was 12% in the fourth quarter. So again, that is one of the reasons we're focused on that; we're certainly seeing a return to growth there for us. What has happened in the financial services industry and why we believe it is still really just scraping the surface for the kind of work that we do. Obviously in the last couple of years, massive consolidation and a lot of back-office, heavy-lifting work that has been done by larger firms, putting in back-office systems, et cetera. And one of the things that we believe is happening now and we validated this both through some of the companies we talked to in the acquisition process, as well as our own sort of anecdotal and empirical evidence is that as that work is wrapping up, these customers are now moving on to more high-touch portal collaboration, integration, business and intelligence projects that will be built on top of those platforms. So we believe that will be a nice opportunity for us moving forward.

Okay great, thank you for taking my questions.

And our next question will come from the line of Matt McCormack with BGB Securities. Please proceed.

Yes hello, good morning. In terms of your guides I guess could you talk about what is implied in terms of pricing throughout the year as well as head count growth and utilization of those employees?

I'm sorry, Matt, can you repeat that?

Sure, in terms of your guidance, what is implied in terms of pricing? As well as head count growth and utilizations?

Yes, good question, I think we -- I believe we can influence pricing again this year. We're working hard to do that. I think we can -- and not only pricing but of course the profitability. But I think we can get probably 100 or 200 basis points of pricing improvements. So of that 8% midpoint growth, I do believe 100 to 200 basis points of that can come from the ABR for the year.

Okay, and then I guess head count should we expect that to grow, roughly that midpoint at organic, or should we expect utilization to increase and have that head count growth lower--

Sorry, I would say yes that it is probably the midpoint minus that, 1% to 2% roughly. However, we have done a little bit of hiring ahead, based on what we're seeing, and the outlook over the last couple of quarters. So there is I think an opportunity to squeeze a little more out of utilization. So if we're tracking to that 8%, lets say we're probably hiring maybe 5% -- increasing head count maybe 5% to 6% if our ABR expectations and utilization expectations come to fruition.

Okay. And then in terms of those 17 deals, can you talk about which verticals they kind of fell in, if it was roughly in line with your vertical mix as a percentage of revenue? And additionally to strengthen those in those new signings, is that -- do you think that relates to the economy or do you think that is related to the investments you have been making in your sales force?

I think it is a combination. I'll start at the end. I think it is a combination of the two. Certainly we're seeing some improvement. And honestly things certainly look better now from what we can see. You have to have a crystal ball to predict what it is going to look like in six months, but as we sit here today it looks better than it did a year ago, and obviously substantially better than it did two to three years ago. So certainly some of it is due to the economy and the industry improving.

But I certainly believe, again in particular the area of health care, that those investments are paying off as well. We are with three of the Blue Cross Blue Shield, three states on expanding leveraging the work that we're doing there to expand those relationships to other states. We're working with one of, or I believe actually the largest group buying organization in healthcare in the country. They have introduced us to their, group members. So we're working with them in substantial work there as well as expanding to their members. So those things are definitely the result of the investments we made around health care. And again that's got us -- we've got a model that is proven, that is working there and got us bullish about investing more in the verticals as I mentioned earlier.

So it is a combination, I think, of the two. In terms of the breakdown of the 17 deals north of $500,000, I don't know if we break that down by industry or not, but I'm going to tell you I'm confident that it is going to be pretty much along the lines that we break down our industry. We're not seeing huge shifts of one industry versus the other, other than what I have said before. We see health care growing a little faster paced than others I think because of those investments, and we're starting to see financial services pick up on a -- relatively faster than some other industries. I think that is primarily actually more recovery. And as I said before, them moving on to the kind of work that we do now as their consolidations have concluded and the work there is concluded.

Okay thanks, and just a quick housekeeping. Can you review the head count statistics for the fourth quarter one more time, please? Thanks.

Sure, the total billable head counts including the speakTECH acquisition that we completed in December was approximately 1,200. And that is about 1,000 employees and 200 subcontractors.

Okay great, thank you.

And our next question will come from the line of Ryan Hunter with Wedge Partners. Please proceed.

Good morning gentlemen, thanks for taking my questions. I wanted to ask you, I didn't hear -- and maybe you did mention. I apologize, I didn't hear a utilization rate number for the fourth quarter.

It is 79% for US-based employees, which is the majority of our staff and who we tend to track most closely.

Okay, and so a little bit lower than normal, is that basically due to the fewer projects that happen in the quarter?

I think it is more seasonality, it's pretty much consistent with what we had in Q4 2009. And we typically see utilization fall to about 80% or a little below in the fourth quarter of every year, primarily due to the holidays, Thanksgiving, Christmas, and vacations associated with those.

Okay, and still expecting getting back to the 85% target range for 2011?

That is exactly where we're moving to. 82% to 84% is kind of our advertised sustainable range. But we're going to push to run it as high in that range as we can, while still investing in the business of course. We need to be building as we move ahead as we see again, a big opportunity or nice opportunity here to grow the business.

Okay, thanks Jeff, and then you did mention that new accounts over the last three months comprised about 25% of projects. Looking out into the pipeline for what you can see right now obviously for 2011, is that rate hold stable or does it expand?

Yes, I would say it probably does hold stable. We -- that is one of the unique things about that I was trying to highlight there about the pipeline as we see it now, even relative to a year ago is many more new client opportunities in that pipeline, which again I think is a validation of continued recovery for the industry, and more clients entering the buying cycle and being willing to spend.

During the recession, one of the things that's always challenging is that everybody kind of hunkers down and sticks with the vendors that they're familiar with. It's hard to break into new accounts during a contracting period, and as that is getting behind us now, we're seeing more and more opportunity to open up new accounts. Which as I said before, I think should drive some substantial organic growth opportunities for us.

Great, and I know that has been a core target for your strategy for this year. Do you think that, that 25% over the long term is about the right mix? I know I think I remember you used to be about 15% historically with 85% of revenues coming from your existing clientele.

Yes, so keep in mind that 25% is -- is 25% of deals and it was about 12% of revenue. Although, I don't think it will be as high as 25%. But honestly I would like to see it at 20% or better. We're going to continue to get that recurring revenue because of the excellent work we do with our existing clients.

So we're going to continue to maintain those relationships and obviously the higher we can drive that 15%, that you correctly identified, to 20% or 25%, that is just all the more growth that we're having by really taking share and expanding our market on top of the fact that that existing recurring client base I believe is going to have more budgets and continue to spend more money. So it is kind of a two-pronged opportunity there for organic growth.

Okay, thanks for the color there. And then I guess the last question I had for you is back to around the speakTECH acquisition, one of the things I noted, I guess this is where you had in the press release that they had, some additional capabilities around -- whatever term you want to use, but enterprise, social computing seems to be the more popular one these days. Can you talk a little bit about the capabilities there and then the opportunity you see from that skill set?

Yes, absolutely, thanks for bringing it up, actually it is one of the things about that acquisition that we're particularly excited about. So these guys did work directly for Myspace, as an example, on that product and continue to maintain a relationship there. So collaboration, social media is a definite focus of theirs, among as I mentioned just SharePoint in general. Of course of that a lot of that is on Microsoft technology, so the two go together.

Another area that they're working on, have good experience in and are working with a large client right now on is actually Facebook for commerce. And if you follow Facebook that is a big part of their strategy moving forward, is actually running commerce -- using their engine as a commerce engine. And these guys were when we acquired them, and still are right in the middle of a substantial engagement with like I said a Fortune 100 company that I can't mention. And we're excited about that. I think that could really open up a lot of opportunity for us there. So great skills there.

Aaron Sloman, the guy who founded and runs that business, and now is one of our general managers managing that business with us. Is an ex-Microsoft guy, very, very connected and just a great thought leader, cutting-edge guy along with his team. So we're excited about the social media aspect of it.

And then I guess -- sorry I know I said that was going to be the last one but just to extend that, how does that particular skill set align with your vertical market strategy, in terms of the enterprise social computing? To me it doesn't seem like it's that great of a great fit for health care, but I could be wrong there.

I think that would be real early for health care, I think health care is just trying to catch up to the 21 century. So I do think -- however, one of the things that you're seeing, a rapid adaption to -- is a demand for transparency in health care and consumerism in health care and really focusing on the end consumer, and social media may well emerge as a strong play there. So right now we don't necessarily see it as tied to any specific vertical, other than probably consumer.

That retail thing that I mentioned I think is going to be sort of the next wave of social media. Social media as commerce, so that is one obviously if you want to look at consumer products and retail space, it's probably going to be pretty strong. But I could see a play in health care a little bit down the road as well. But right now, like I said, I think that health care is working on kind of crawling before they walk.

All right, that is helpful. Thanks guys. Congratulations on the year.

And our next question will come from the line of Brian Gaines with Springhouse Capital. Please proceed.

Hey guys just following up on something that you talked about. You talked about bookings being up strongly. Can you give any kind of percentage increase, either sequentially or year-over-year of what happened in the fourth quarter and maybe some year-to-date color?

Yes. I think we kind of look at it on a rolling or trailing 90 days basis. So Paul's going to get you that specific stat. I actually wanted to come back before we get that back to a question that Brian had asked and point something out also that I think you will find interesting. So for the fourth quarter of 2010 bookings, just for going back to the fourth quarter, not the trailing 90 days but the fourth quarter, we had 38 deals that were north of $360,000. So 55% of our bookings, in the fourth quarter came from those larger deals. That compares with only 39% in the fourth quarter of '09.

So just from a contrast standpoint, we had 39% of our total revenue booked in '09 from deals north of $350,000 versus 55% in the fourth quarter of last year. So again, a testament to I think the recovery, the larger deals that we're able to sign now et cetera -- and I think Paul you got that year-over-year?

Yes, we look at kind of a trailing year-over-year 90 day basis. So in the fourth quarter we were up 50% plus -- over the comparable period in the prior year. And as you fast forward that through February it is up on a trailing 90 day basis it is up about 11%.

Okay thanks.

Edwin Fowler, SmallCap Report.

Good morning gentlemen, that was a great report. Nice to see the services growth here picking up. Getting back to the medical side, we're seeing a trend of doctors joining hospitals and -- could you give me a little color on how you -- what you're doing for the hospitals and what you're penetration is in this particular market?

Yes, it is a good question, we certainly do a lot of work on the provider side as well as the payer's side; payer's side for us is a larger percentage for sure of revenue in our healthcare space right now. But as I mentioned we're penetrating the provider side. I can't give you a specific breakdown simply because I don't have it. But we are working with a number of hospital organizations.

And to your point, you're exactly right, you're seeing doctors consolidating into hospitals, and hospitals consolidating into hospital systems, combining with 1 another and running systems so that they can I think lower their cost as a percentage -- as investment in a lot of these kinds of things as well as the buying capabilities et cetera, much better as they're ban together. And we're working with a number of hospital systems right now, again, primarily around the electronic medical records, requirements, health information, exchange requirements. These legislative requirements that honestly a lot of these guys are simply not ready for.

As I look at the deadlines that are out there now, it kind of reminds me a little bit of Sarbanes-Oxley -- I suspect that some of those may end up having to slip simply because of the -- because of the providers and even payers may not be ready -- may not be able to comply. But that, to us, amounts to a number of years of opportunity for us, and I think it's going to continue.

And in that same regard, from what I am hearing, a lot of the hospitals are having trouble integrating their older workers into these new systems, particularly in the new Cerner systems, do you work with Cerner in any way?

We do a lot of integration with Cerner and Epic as well. So what we do primarily is the integration So of those, if you will, medical ERP type systems and actually pull that data out, normalize the data so it will comply to as an example, the Edifecs 5010 standard, which is a big leap forward from the old 4010 standard. So that is exactly the kind of work that we're doing. So we're not implementing those products of course, for the most part have already been implemented. What people need to do now obviously is get that data out of them and make it useful and be able to exchange it through these exchanges and through EDI et cetera.

And the hospitals have more than enough funds to do all of this new integration -- in light of what is going on in Washington?

I hope so. I can tell you this. As we have seen it with the states and the Blue Cross experience as an example, and with some of the hospitals there were some stimulus dollars thrown at this, I don't think it was honestly very material. And these -- this legislation was passed some time ago -- was not part of Obama Care. So, this is going forward I think kind of no matter what happens with that. What we have seen again with the Blues, and some other experiences that we had is they will pretty much stop spending money everywhere else and focus on this because it's been the legislated and they don't have a choice. And what's more, is that because of this legislation some of the systems are there, some of the systems have the funds readily available. Some of them where ahead of curve.

And so it's going to create a competition as well. Especially when you look at a lot of the healthcare choices, especially on the payer side are driven by the companies that pay the benefits for the employees, so 1 of the things that companies are going to be looking for as a qualification criteria for their providers is, are you compliant with these requirements. And so there is a competition -- I view it as they should be spending their last penny they have on this, so they're going to be out of business.

Right. How do you -- how do you -- how do you respond to -- I mean you're excellent stock buy backs, and your nice growth and your cash flow. This -- was very strategic but what are you doing to grow your cash flow?

Well, it certainly as we grow the business cash, this is a strong I'm -- I'm going to let Paul comment on this. This is a strong cash flow business. So as we expand top line, other than funding SIM-AR -- we're going to see -- that is a short term effect, but we're going to see cash flow expand dramatically. I'll let Paul comment on that in a second, but I want to mention also on the buy back, we've got about $6 million or so left on the authorization on that, so we're still active on the buy back. However, of course as we are getting more aggressive on the M&A front, we'll be applying some more of the cash investing in that direction. But Paul you want to comment more on cash flow generation?

Yes, I think Jeff covered it fairly well, 1 nice thing obviously about the services business, is that your EBITDA, so to speak, pretty much drops through the bottom line. You don't have many other cash costs besides that, I think our CapEx runs 1% of revenues or less, and other than that in taxes, we don't have any debt, there really aren't any other cash costs. So we'll continue to generate cash as we have done over the last 3 or 4 years, and we'll reinvest that a couple different ways as Jeff said. We're planning to be more aggressive with our M&A plan, but we'll still strategically and opportunistically buy back our shares. And we see that has and will continue to generate further accretion.

And one last question, I haven't received my annual report and proxy yet, but when have you set a date for the annual meeting?

I believe it's June 6. Let me look -- first week of June for sure.

And the proxy will be out in April, we'll be announcing those dates when, Paul? In the next few weeks.

Next 2 or 3 weeks.

Thank you very much Paul.

Brian Kinstlinger, Sidoti & Company.

When I look at the telecom vertical that you guys got -- in 2 quarters it's down 25%, the run rate, and come down each of the last 2 quarters. Maybe if you could talk about what is driving that, is that going to continue? Is that just 1 customer? Is that either left or ended development projects, any color would be helpful, thank you.

Yes, Brian, I think there's going to be some lumpiness there, I guess is the best way I would describe it. 4, we went from what, 18% to 14% from the first quarter to the tenth quarter. It is -- by the way I think it is less a function of it contracting in absolute dollars as maybe some of the other verticals picking up some steam around it. So that is part of the effect there.

But there is also some lumpiness. And we're renewing contracts right now with a couple of our major customers there, and actually still in talks with others. So we think it is going to continue to be a pretty healthy vertical for us. It is a fairly under served vertical, so that is 2 of the things we like about it. And I think it's going to remain that way. We're positioned pretty well in it.

The $3 million drop, when you say lumpiness is -- is the result of just contracts ending and new work having to be found in customers and is that generally what you're saying?

Yes, I think that is right -- I think with any of these industries you're going to see that from time to time where you're exactly right. We have a couple of 3 large accounts in there. While we may have a dozen customers in that industry, typically a lot of the revenue is going to come from 3 or 4 of the large ones. And certainly it is cyclic in terms of their budgets, we certainly saw some budgets fall off near the end of the year that we understand right now. Some are them are already renewed and the others we're being told will this year.

1 last question, I don't know if you're going to provide this because I don't know what size customer it is. But is Blue Cross Blue Shield, collectively now a 10% customer? I guess I'm just trying to figure out. I think you mentioned you were in 3 different states. So I'm trying to get a sense for how much, if you keep adding those states, it could add potentially.

And we don't look at it collectively. We looked at them separately. Because they're in fact managed completely separately and funded separately. But I'll estimate for you, I'm certain that the 3 combined right now are not 10%. And I don't think they're going to grow to that level, just because I see us -- I don't think any 1 of them individually -- and even -- I mean it could, I suppose, if we end up with 10 of them, which is not impossible. The aggregate could end up being 10%. It's possible.

Right, thanks so much.

George Price, BB&T Capital Markets.

Just had a couple of first -- just obviously you're -- you're sticking with China as your offshore platform. I was curious if you had thought to consider any India-based resources, anymore depending on what the market is, it is kind of looking for and maybe comment on a little bit on client comfort levels with China. I know, I have heard in some cases that there is sometimes less comfort with China than say with India, just curious on how you guys view that and what you're hearing.

Yes, another good question. I'll come back to the kind of China versus India comfort level thing. But the answer is yes, we're I think always looking for opportunities to expand. And honesty, hedge our offshore a little bit. We're real happy with the results there. Wage inflation has been low. Attrition has been very good, we've got a good loyalty base there, particularly among our senior managers -- our senior leaders there, it's been rock solid. It's been a great experience there. However, you've always got to keep an eye towards hedging everything I think if you can.

So I would like to see us -- I think it would be very interesting for us, and I think quite a positive if we can get into India through an acquisition. We are doing a little bit of work there now. We used to have just a recruiting office; I think we have got about 8 FTEs there now that are doing a little bit of offshore. Of course that is quite small in the big picture. We're going to continue to build on that. I don't think it's going to be very material for us from the greenfielding standpoint any time soon.

But yes we're looking at opportunities to acquire, much like we got the China offshore capability was through a bolt -- the acquisition of a company called Bolttech that we did in the fourth quarter -- or third quarter of 2007. And we would do that again if we saw that opportunity. But in terms of the comfort level, for our customers -- we're seeing actually I would say improvement there, occasionally -- some sort of media hype around the IP, at risk IP, which frankly I don't think it is any better in India than it is in China or anywhere elsewhere where you don't have the legal reach. So we're seeing I think some easing of that, less angst and concern about it. Particularly as we have proven it more and are building more and more references that we can leverage.

Okay. And -- any -- I guess do you anticipate any material impact from an increase in investments, either in China or India to build those up, excluding the impact, obviously of an acquisition?

I don't think so, beyond what we did last year. We have maintained a pretty healthy pace of investment, really I want to say through the end of '07, through '08 and '09, particularly if you look at it as a percent of revenue. So I don't think you're going to see much change.Our investment in healthcare is very self funding now, so that's not -- I wouldn't even call it an investment, I would call it an up and running business unit that we're just growing. So we'll pick up where we dropped off investment there with financial services in some of these other areas. So as a percent of revenue, I don't see any big changes.

And 1 other thing I would add on that, we are going to do some capital investment associated with building out a bigger facility in China but it is under a $1 million. And it's CapEx, so it is not a huge number.

Right, and just going back to kind of the middle of last year, there is a little bit of heightened concern around the economy, and that made the bookings a little sluggish, the client is a little concerned on the outlook. Any impact or any sense that you're getting from your client base now related to the unrest in the Middle East, and the higher oil prices resulting from that, is that something that is weighing on anybody to any extent?

I think it is early for us to know that, honestly, I haven't heard any of that, but that doesn't mean there is no discussion of it. 1 thing I will tell you is, I can definitely state that we have observed over the last 3 years is that as each 1 of these scares comes about, and there is some impact or not impact or it is not dramatic or the earth doesn't stop spinning, I think like all the rest of us our clients get more and more adjusted to that I guess, or immune to it. So I think they're blocking out the noise more now than they were maybe a year ago. That isn't to say there is no concern. I am sure there is, we should all be concerned to some degree in terms of the impact on recovery. But we're not seeing it yet. And I have some optimism that we won't, at least like we did last year.

Okay. And then just finally, did you give the average bill rate in the quarter, and turn over if -- and if I did I apologize but if you could repeat them.

Yes, bill rate was $120 for US based employees, Paul what was the total?

The total was $104 up from $102 in the third quarter.

Okay. And then attrition or turnover.

Yes, the voluntary was in the mid 20s, so we saw some pick up this year as the economy picked back up, but we see that going down into 2011.

Okay, and I mean that is a trend that -- we've seen that a number of -- number of companies, particularly the offshore companies. Is that -- have you been able to pick out any trends in terms of where the attrition is, more of a problem, is it purely a wage issue? Is wage inflation something that you factored into your profitability assumptions going forward?

It is, and we expect also -- so from an offshore standpoint our attrition rates have been actually quite positive, and better than in the US. So wage inflation is something that we factored in for offshore. For the US, I'm optimistic that we'll be able to more than offset that by building out the pyramid as I mentioned before.

1 of the things I think is important to understand about the attrition we're seeing right now is that we had extremely low, abnormally low attrition in '08, '09, in particular in the first part of last year, so I would say much like our client's sort of pent-up demand, I think we had some pent-up desire to move on or change careers or change jobs that there were no opportunities to do so during the recession, or less opportunities.So we're seeing a pick up now that there are more opportunities.

Honestly the folks where we've seen that mostly are not sort of our -- our key employees. I'll say it that way, so we're not terrible concerned about it. I think it is a temporary effect. I think it's actually literally cyclic and it'll calm down now as we sort of shed that pent-up desire. And we're seeing some evidence of that already this quarter. So I'm not overly concerned about it. And I don't think it is really as much wage driven as it is time for a change. These are largely a young employee base; attrition in this industry tends to run fairly high normally. I think [centers] normal voluntary efficient rate during a healthy environment is about 25%, and that is kind of what we're seeing now, which is high for us, but would be about normal for us.

Okay, great, thanks for taking my questions.

Thank you.

Ladies and gentlemen, this concludes the Q&A portion of the call. I will now turn the call back over to Mr. Jeff Davis for any closing remarks.

Well thank you all for your time today, as you can tell we are excited about the outlook for 2011 and beyond. I think Perficient is well on track to getting back to the kind of performance we were producing pre-recession, and we'll look forward to speaking with all of you at the end of the quarter, thank you.

Thank you for your participation in today's conference. This concludes your presentation, you may now disconnect. Good day everyone.