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Perficient Inc (NASDAQ:PRFT)
Q4 2019 Earnings Call
Feb 25, 2020, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Q4 Full-Year 2019 Perficient Earnings Conference Call. [Operator Instructions]

I would now like to hand the conference over to your speaker today, Jeff Davis, Chairman and CEO. Please go ahead, sir.

Jeffrey Davis -- Chairman, President and Chief Executive Officer

Thank you very much. With me on the call this morning are Paul Martin, our CFO; and Tom Hogan, our COO. I want to thank you for your time and we look forward to our call. Obviously, we have about 10, 15 minutes of prepared comments, after which, we'll open up the call for questions.

Before we proceed, Paul, would you read the safe-harbor statement, please?

Paul Martin -- Chief Financial Officer

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 meanings 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 those results to be different than contemplated in today's discussions.

At times during this call, we will refer to adjusted EPS. 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've 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. Jeff?

Jeffrey Davis -- Chairman, President and Chief Executive Officer

Thanks, Paul. Once again, thanks for joining. We're pleased to be with you this morning to discuss our fourth quarter and full-year 2019 results as well as provide an initial outlook on 2020. In many ways, 2019, which represented the 20th anniversary of our listing as a public company, was a milestone year for Perficient. A broad expansion of several major client relationships and our success gaining large new customers drove double-digit revenue growth and strong margin expansion that resulted in earnings that exceeded the high-end of our original expectations by 17%.

Our strategic focus on the continued rapid build on the leveraging of our global delivery teams contributed to our performance. As you're likely aware, we more than tripled our space in India during the year, and are hiring great talent aggressively there to meet that demand. In fact, our offshore revenue grew materially in every quarter during the year on both an annual and sequential basis. During the year, our offshore revenue increased more than 20%, and in the fourth quarter, was up greater than 30%. That's a pace matching or exceeding most of our more offshore-oriented competitors.

Tom will talk a little bit later about our success during the quarter. We're winning large deals, but I'll share now that December represented our largest bookings month ever. And then in January, we exceeded the December number. So obviously, we're off to a great start in terms of bookings. We're proud of the performance in all that we accomplished in 2019 and head into 2020 with a lot of momentum and optimism because the world's largest enterprises and biggest brands are embracing Perficient as the digital consultancy they can depend on to imagine, create, engineer, and grow their businesses. Our agility, nimbleness and flexibility differentiate us from competitors and our pragmatic and practical approach delivers value quickly. And that routinely enables us to expand with clients. We think big, start smart, and move fast and customers love it.

Couple of examples I want to share with you. We continue to work with a leading financial services provider to provide customers with a more connected investment experience. We've been involved in several innovative projects, including enabling conversational commerce through development and cross platform integration of chatbots, which provides customers with timely information at their fingertips across multiple devices. We also recently extended our multi-year, multi-million dollar agreement with a private health insurance company to transform their mobile and member portal experience. The multi-faceted project includes a web redesign and new mobile app and the integration of a sophisticated home delivery medication service that simplifies the process of order repurchasing, tracking, and refilling medications.

We also continue our decade-plus partnership with a leading global automotive manufacturer to develop and deliver innovative digital solutions across the business and its multiple divisions. Most recently, we redesigned and replatformed their global dealer portal, incorporating an enhanced search capability that improves the ability for dealers to find the information that they need. And while we continue to gain and grow relationships with the biggest and best enterprises on the planet, true economic engines of our domestic and global economies, we're also focused on expanding and enhancing our portfolio to support them.

On that note, we're excited to have one acquisition completed this year, MedTouch, a great group highly regarded one already helping us win additional work. And we're in later-stage discussions with a couple of other firms that are hopeful some things we'll [Phonetic] be pretty excited about what come together here in the first half of 2020.

With that, I'll turn the call over to Paul, who will share the financial results and details for the fourth quarter and full year. Paul?

Paul Martin -- Chief Financial Officer

Thanks, Jeff. Services revenues were $143.8 million for the fourth quarter of 2019, an 11% increase over the comparable prior-year period. Services gross margin percentage for the fourth quarter of 2019, excluding reimbursable expenses and stock compensation, increased 40 basis points to 39.9% compared to the prior period.

SG&A expenses, excluding stock compensation, increased to $30.9 million in the fourth quarter of 2019 from $29.9 million in the comparable prior-year period. SG&A, excluding stock compensation as a percentage of revenue, decreased to 21.3% from 22.7% in the fourth quarter of 2018. Adjusted EBITDA for the fourth quarter of 2019 was $26.5 million or 18.3% of revenues compared to $21.7 million or 16.4% of revenues in the fourth quarter of 2018. The fourth quarter included amortization expense of $4 million compared to $4.3 million in the prior period. Net interest expense for the fourth quarter of 2019 increased to $1.9 million from $1.8 million.

Our effective tax rate for the fourth quarter of 2019 was 14.2% compared to 22% for the fourth quarter of 2018. The decrease in effective tax rate was primarily due to the increase in tax benefits recognized related to share-based compensation deductions compared to the prior-year period.

Net income increased 58% to $11.8 million for the fourth quarter of 2019 from $7.5 million in the fourth quarter of 2018. Diluted GAAP earnings per share increased to $0.36 a share for the fourth quarter of 2019 from $0.23 in the fourth quarter of 2018. Adjusted earnings per share increased to $0.58 a share for the fourth quarter of 2019 from $0.47 in the fourth quarter of 2018. See the press release for full reconciliation to GAAP earnings.

I'll now turn into the full-year results. Services revenues were $561.9 million for the year ended December 31, 2019, a 14% increase over the prior year. Services gross margin percentage for the year ended December 31, 2019, excluding reimbursable expenses and stock compensation, increased 170 basis points to 39.2%. SG&A expense, excluding stock compensation, increased to $122.9 million for the year ended December 31, 2019 from $108.3 million in the prior year. SG&A expenses, excluding stock compensation as a percentage of revenues, was $21.7 million, which is consistent with the prior year.

Adjusted EBITDA for the year ended December 31, 2019 was $95 million or 16.8% of revenues compared to $76.5 million or 15.3% of revenues in the prior year. The year ended December 31 included $16.2 million of amortization compared to $16.4 in the prior year. Net interest expense for the year ended December 31, 2019, increased to $7.4 million from $3.6 million in the prior year, primarily due to non-cash amortization of debt discount and issuance costs related to the Company's convertible senior debt notes that were issued in September of 2018.

Our effective tax rate for the year was 22.6% compared to 24.1% in the prior year. Net income increased 51% to $37.1 million for 2019 from $24.6 million in 2018. Diluted GAAP earnings per share increased to $1.15 for the year ended December 31, 2019 from $0.73 in 2018. Adjusted earnings per share increased to $2.07, or 30% increase compared to the $1.59 in 2018.

Our earning billable headcount at December 31, 2019 was 3,138, including 2,904 billable consultants and 234 subcontractors. And the SG&A headcount was 550. Our outstanding debt, net of amortized debt discount and deferred issuance costs as of December 31, 2019, was $124.7 million. We also had an additional $70.7 million of cash and cash equivalents as of December 31, 2019. Our balance sheet continues to leave us very well positioned to execute on our strategic plan. Our day sales outstanding on accounts receivable was 71 days at the end of the fourth quarter, which is consistent with the fourth quarter of 2018.

I'll now turn the call over to Tom Hogan for a little more commentary. Tom?

Tom Hogan -- Chief Operating Officer

Thanks, Paul. Good morning, everybody. As Jeff mentioned earlier, great bookings recently, on top of that, our pipeline remained strong. As quickly as we're winning work, we're finding and pursuing new opportunities. In fact, right now, we're attracting more than a dozen opportunities larger than $5 million, with a few of those having $10 million plus potential. And again, that's on the heels of a strong fourth quarter of bookings and a great January bookings.

We booked 65 deals greater than $500,000 during the first quarter of 2019. That compares to 49 deals $500,000 greater during the fourth quarter of 2018. Additionally, deal size of those engagements was up your year-over-year, so more wins and larger wins. North American ABR was $149 for the fourth quarter, consistent with third quarter results, up $3 or 2% on an annual basis.

As we routinely mentioned on these calls, we believe opportunity remains for us to continue to increase rates gradually over time, closing the gap that exists between Perficient and some of our larger competitors. Utilization during the quarter was 78%, a bit lower than we would like, but it was something we anticipated given the Christmas holiday fell on Wednesday last year, which of course, influences not only our colleagues' planning decisions, but oftentimes our clients' availability as well. As you know, we're very active in monitoring that metric and we seek to manage the business closer to 80% utilization.

While our diversification across the industries has been a strategic contributor to our success has mitigated concentration risk over the years, our deep strength in health sciences which represents 32% of revenue during the quarter has routinely and certainly enabled us to build deep roots and strong reputation in that vertical. And while it was technically a Q1 2020 event, as Jeff mentioned, we're thrilled to add our capabilities with their early January addition of MedTouch. It's a great firm focused on patient acquisition, customer experience, patient acquisition, and loyalty and physician marketing. And as Jeff mentioned, integration began immediately. Collectively, we've already won significant work we might otherwise not have. The business has strong momentum right now. We're out-thinking, out-hustling, outperforming others in the space and we're gaining share.

And with that, I'll turn things back to Jeff for the first quarter and full-year 2020 outlook.

Jeffrey Davis -- Chairman, President and Chief Executive Officer

Thanks, Tom. So in summary, we continue to firing on main cylinders and succeed on several fronts. As we've highlighted, we're winning new logos, gaining share, and systematically building a much larger and more powerful business. We feel great about the future in our trajectory. Perficient expects its first quarter 2020 revenue to be in the range of $143 million to $149 million. First quarter GAAP earnings per share is expected to be in the range of $0.25 to $0.28. First quarter adjusted earnings per share is expected to be in the range of $0.49 to $0.52. Perficient is issuing a full-year 2020 revenue guidance range of $610 million to $640 million, a full-year 2020 GAAP earnings per share guidance range of $1.36 to $1.51 and a full-year 2020 adjusted earnings per share guidance range of $2.30 to $2.45.

So with that, we can open up the call for questions. Operator?

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from Maggie Nolan with William Blair. You may proceed with your question.

Maggie Nolan -- William Blair -- Analyst

Hi. Thank you. So, I wanted to understand how you came into the year for the initial 2020 guidance. Is there any level of conservatism baked into the guidance related to macro events or any broader slowdown, any change in kind of how you put that together versus 2019? And then, what is the organic component embedded within that expectation as well?

Jeffrey Davis -- Chairman, President and Chief Executive Officer

Sure. So, some of the basis for it is the breakdown that we experienced last year, so -- and we expect that growth trajectory is going to continue throughout the year and the guidance implies that. The organic range on this guidance is for Q1 is [Speech Overlap] 5% and 10% [Phonetic] for the year. So, we're -- I would say, there's a little bit baked in there as well, or what we're seeing as it relates to corona, but really not much. We're not really that impacted by it. So for the most part, it's just typical seasonality. A lot of clients did delay their starts to the year. So, that's reflected here as well.

Maggie Nolan -- William Blair -- Analyst

Okay, thank you. And then on the margin side of things, you've talked about the various levers that you have. You've talked about kind of that normalized utilization range that we should be expecting. What are you expecting in a way of the expansion at the adjusted EBITDA level kind of on a go-forward basis? And where is that really coming from in the business when you look at gross margin versus what you can do with the SG&A level?

Jeffrey Davis -- Chairman, President and Chief Executive Officer

Yeah. I think guidance implies like 100 basis points to 200 basis points expansion this year of EBITDA. And some of that will come from rate improvement, as we had last year where our goal is going to be similar, 2% to 3% rate increase. We did manage to achieve 2% across the year last year. But the other major factor that I do want to talk about and highlight is offshore. As I mentioned in the earlier part of the call, our offshore grew over 20% last year, 21% across the year, and actually grew over 30% in the fourth quarter. We enjoy over 50% gross margin in that work. And we're going to continue to emphasize that growth even though it may represent a little bit of a headwind to topline revenue. It's the right thing to do for the business, and we've got an advantage there and that we've been digital offshore, I think actually ahead of a lot of our competition. That's why again you can see us growing that piece of our business at a pace at or above most of our competition there that drives offshore.

Maggie Nolan -- William Blair -- Analyst

Thank you.

Jeffrey Davis -- Chairman, President and Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from Mayank Tandon with Needham. You may proceed with your question.

Kyle Peterson -- Needham -- Analyst

Hey, good morning. This is actually Kyle Peterson on for Mayank. Thanks for taking my questions. And just talk a little bit on M&A. I know you guys have closed MedTouch already. You guys mentioned that you have some stuff kind of in the hopper here in discussion. Is there anything in particular you guys are looking for whether it's additional capabilities? I think in the past, you guys have talked a little bit about potentially pursuing near-shoring options, just kind of want to see what you guys are looking at and prioritizing from M&A?

Jeffrey Davis -- Chairman, President and Chief Executive Officer

Yeah, good question. I think everything that we target in terms of acquisition is going to have some digital element to it. So, that's the thing one. But you touched on another area that we're really excited about and have been working for some time on finding a good fit. And that's nearshore. So, we do have some things in the hopper in both digital and in nearshore that hopefully, we'll get done here in the next couple of months. It's very possible that by the end of the first half, we've kind of already achieved our goal for the year, which is about $50 million of run rate revenue.

Kyle Peterson -- Needham -- Analyst

Great. That's helpful. And then, just one quick follow up. And I know you guys have been scaling on digital and your offshoring efforts. Just want to see how the talent acquisition and retention is trending? Are you seeing any increased competition, change in attrition rates, or are things pretty stable on that front?

Jeffrey Davis -- Chairman, President and Chief Executive Officer

We enjoy great retention. Overall for the Company, I think we're in the high teens, which is about what we like to be. We like it below 20%. But frankly 15% I think is actually a healthy number, so somewhere in 15% to 20% range, but I'll tell you in offshore, our retention rates are phenomenal, far better than our competitors. Our offshore attrition is about 15%, which is I think a half roughly or at least the competitions in the mid-20s. So, we're having great success both in terms of attracting talent and retaining it in all of our locations in India.

Kyle Peterson -- Needham -- Analyst

All right. That's a helpful color. Thanks, guys.

Jeffrey Davis -- Chairman, President and Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from Surinder Thind with Jefferies. You may proceed with your question.

Surinder Thind -- Jefferies -- Analyst

Good morning. I would just like to revisit the guidance for roughly the 5% to 10% organic growth. Can you provide a little bit more color on the bottom-end of that range versus the high-end in the sense that when I look back over previous commentary, my impression was that the firm would be able to generally consistently generate closer to the high-end of that range?

Jeffrey Davis -- Chairman, President and Chief Executive Officer

Yeah. That's our goal. And I just contrast this against last year's guidance, initial guidance as well, where I believe the midpoint of our organic growth was around 6%. We ended up delivering almost 11% or right around 11%. So, first and foremost, I'd say the guidance reflects our typical approach of working hard to under-promise and over-deliver. And again, a 10% or 10% plus, sustainably remains our goal, but if we wanted to be judicious in how we're going.

Surinder Thind -- Jefferies -- Analyst

Understood. And then you mentioned that potentially there's some consideration of either global events or perhaps any other considerations as well in that guidance, for example, maybe an evolution in the domestic political landscape.

Jeffrey Davis -- Chairman, President and Chief Executive Officer

That's a great question. And I think it's -- again, other than the statement I just made about our general conservative approach to guidance, I would hope sort of encompasses any risk there. But I'll tell you, we mentioned bookings in December and really the fourth quarter in total, and how bookings have started this year, and we're not seeing any issue as it relates to demand. I mean, our pipeline continues to refill. Our current weighted pipeline right now is as large as it's ever been in spite of the fact that we just had two back-to-back months of record booking.

So, the climate that we're in right now that we're seeing is actually quite positive. We were affected very minimally by corona here in the first quarter, primarily in January where we actually had some of our folks quarantined in their houses. But that's pretty much past us now. And they're back in the office. And so, we see things fairly normal, outside of things, we obviously can't predict.

Surinder Thind -- Jefferies -- Analyst

That's helpful. And then, one quick follow-up on the quarter. When I kind of look at the number of subcontractors you guys are using, it's been steadily declining as the year's progressed. Any shift in strategy, or is it specific to maybe certain projects or types of projects that the contractors are being used for? Any color there would be appreciated.

Jeffrey Davis -- Chairman, President and Chief Executive Officer

Yeah, absolutely. We continue to have a strategy of leveraging subcontractors, but as demand has picked up, frankly, we're more comfortable bringing people on as employees. So, we don't -- we're feeling less reliance sort of on that flexible capacity business [Phonetic] work and intentionally kind of driving that down. The margins that we get on subs obviously are little lower than we get with employees. And we'd rather have them as employees anyway. So, yeah, we're probably reducing or we certainly are reducing that headcount a little bit, but it'll still be a factor as we move forward.

Surinder Thind -- Jefferies -- Analyst

Understood. And then just one final question on the M&A. You provide some good color on the pipeline and the targets that you're pursuing. Is there consideration around the timing itself in the sense your capacity to take on multiple acquisitions at the same time, or is the idea to try and space things out ideally?

Jeffrey Davis -- Chairman, President and Chief Executive Officer

Yeah, that's really not as much of a factor, given the size of the acquisitions that we tend to target. There's some larger ones out there, if you do the math, that I alluded to. But these smaller acquisitions, say 10 to 15, or even 10 to 20 [Phonetic] range, are integrated relatively quickly. We've got a great team in place, great management infrastructure prepared to scale the business to $1 billion and beyond, obviously, organically and through acquisition. So, we've got good capacity and ability to manage and integrate acquisitions simultaneously.

Surinder Thind -- Jefferies -- Analyst

Okay. Thank you for the color. Appreciate that.

Jeffrey Davis -- Chairman, President and Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from Brian Kinstlinger with Alliance Global Partners. You may proceed with your question.

Brian Kinstlinger -- Alliance Global Partners -- Analyst

Hey, guys. Thanks for taking my questions. Clearly, everyone's talking about coronavirus. I want to follow up on that. It may not have been apparent, and as talked about in January when your bookings were a record. So, I'm curious if you've seen a slowdown in bookings in February, clearly you had a record, so, any meaningful impact? Have customers' tones changed in conversations, as enterprises getting nervous about the global impact to their business related to what's going on in China?

Jeffrey Davis -- Chairman, President and Chief Executive Officer

No. I mean, bookings so far in February are, I think, going to be up again pretty nicely, maybe not another record, but should be a strong month in our projected bookings through at least April and into the second quarter are very strong as well, as I mentioned on the weighted pipeline. We're not hearing any feedback anecdotally from really any of our clients in terms of the coronavirus impacting their decisions to move forward or delaying anything. Directly, we've heard nothing to that effect. And of course, we actually got clients, one of our major clients, we're doing a big project for actually in China, and it's full steam ahead on that engagement.

Brian Kinstlinger -- Alliance Global Partners -- Analyst

Interesting. So, you touched on something I wanted to ask about a long time that you made an acquisition we haven't talked about that was China-based delivery. What percentage of your offshore delivery is China versus India versus other countries? And can you remind us where you are located in China?

Jeffrey Davis -- Chairman, President and Chief Executive Officer

We're in Hangzhou, which is about a couple hours southwest of Shanghai. And we've got about 90 -- 80 employees there compared to 700 in total offshore, so it's a little more than 10%.

Brian Kinstlinger -- Alliance Global Partners -- Analyst

Great. That's helpful. And then, the 4Q bookings as well as January that was so strong, does that mimic the mix of your business in terms of verticals? Are there any outlier verticals that are seeing -- that may see share gains in your business at the course of the year?

Jeffrey Davis -- Chairman, President and Chief Executive Officer

No, it's consistent with the current right now. So, health sciences leading the way followed by financial services, automotive, retail, etc., it's pretty much the same breakdown. So, it's a tide lifting all boats from a vertical standpoint.

Brian Kinstlinger -- Alliance Global Partners -- Analyst

Great. Last question I have is, it appeared demand from your Adobe-related services is outpacing other platforms. Do you see that continuing? And if so, what are the driving factors for that?

Jeffrey Davis -- Chairman, President and Chief Executive Officer

I do. And I think it's an Adobe share. I also think it's the expansion of software that they've already sold. It's a very robust -- the marketing manager component of their business is what I'm talking primarily about. And I think it's a testament to that they have very robust tool, with lots of different modules and capabilities that not everybody implements initially. So I would say one, they continue to take great share in that space. But two, there's also a lot of our clients that are now that coming back around for sort of around two or three to drive further enhancements and implement further enhancements around those installations.

Brian Kinstlinger -- Alliance Global Partners -- Analyst

Great. Thanks so much.

Jeffrey Davis -- Chairman, President and Chief Executive Officer

Thanks, Brian.

Operator

Thank you. Our next question comes from Vincent Colicchio with Barrington Research. You may proceed with your question.

Vincent Colicchio -- Barrington Research -- Analyst

Yeah, Jeff, you had mentioned that the offshore growth is very robust. Should we expect to see double-digit growth this year as well? Or will it be a slowing in that growth?

Jeffrey Davis -- Chairman, President and Chief Executive Officer

I believe we will. I think it'll be a year similar to last year, might even be stronger. And we recall that last year was about 21%.

Vincent Colicchio -- Barrington Research -- Analyst

It sounds like you continue to add a large number of relatively large piece of new business. I'm curious, is your Top 10 concentration is changing? What does it look like year-over-year and sequentially?

Jeffrey Davis -- Chairman, President and Chief Executive Officer

I'd say it's probably flat as a component, Paul is going to double check the specific number, but I think it's flat as a relative basis, right. So as a percent of revenue, it's probably stayed about the same.

Paul Martin -- Chief Financial Officer

Yeah. So, Vincent, it was 32% -- our Top 10 were 32% of revenues in 2019, the fourth quarter was 31% in 2018, so essentially stayed the same.

Vincent Colicchio -- Barrington Research -- Analyst

Okay. And then I missed what you said in terms of EBITDA margin expansion expected for this year? What was that?

Jeffrey Davis -- Chairman, President and Chief Executive Officer

Yeah, I think 100 bps to 200 bps, if you look at our guidance that's implied in there. And I feel good about that. We've got a lot of levers still to pull. We achieved about 2% rate increase last year across the year. I guess the backdrop by the way of net cost increases for employees of only about 0.7%. So, obviously, some expansion driven there, as well as the substantial mix shift to offshore where gross margins are north of 50%.

Vincent Colicchio -- Barrington Research -- Analyst

Okay, thanks for answering my questions.

Jeffrey Davis -- Chairman, President and Chief Executive Officer

Thanks, Vincent.

Operator

Thank you. Our next question comes from Jack Vander Aarde with Maxim Group. You may proceed with your question.

Jack Vander Aarde -- Maxim Group -- Analyst

Hey, guys. So, total billable headcount was up about almost 1% QoverQ. North American headcount was flat QoverQ. Can you just provide any additional color around that dynamic? Is there a reason for this? Or am I just looking into it too much? And where do you see this trending I guess throughout 2020? Will it continue to increase?

Jeffrey Davis -- Chairman, President and Chief Executive Officer

Yeah. Your question is related to the difference between offshore and onshore. So, offshore -- onshore flat and offshore growing.

Jack Vander Aarde -- Maxim Group -- Analyst

That's right. North American headcount seems to have been flat from last quarter on a quarter-end basis.

Jeffrey Davis -- Chairman, President and Chief Executive Officer

Yeah. And that's by design, managing seasonality of Q4 and working to maintain a solid level of utilization. We always try to slow down on hiring, particularly domestically. And I would say during a normal period, we might even slow down a little bit offshore. However, given the demand that we're seeing there and the growth at the pace that we're enjoying there, we're actually hiring quite a lot there. And in fact, hiring a little bit to the bench where our costs are lower, and we're able to do that.

Paul Martin -- Chief Financial Officer

And we saw accelerating growth offshore. And the fourth quarter was actually our strongest year-over-year quarter offshore. And I'd add when we get into the first quarter of 2020 with the acquisition that's closed and potentially another one, you'll see a lift in North American headcount.

Jack Vander Aarde -- Maxim Group -- Analyst

Got it. Okay. That's helpful. And then, so with the number of and the dollar value of the large deals being pretty strong this quarter after kind of dipping a little bit last quarter, although last quarter is still up year-over-year. Just wondering if you're seeing any changes with regard to the largest competitors of yours in terms of their pricing strategy, are they doing any changes there? And then, is there any impact in your win rates and where you see win rates going in the future?

Jeffrey Davis -- Chairman, President and Chief Executive Officer

Actually, I would say no. The competitors are behaving in kind of the same way they always have. And they're formidable and they're happy to go compete on price. So, it's not just a price differential, it really comes down to skills as well. So, I think that's going to continue going forward. I'm not concerned about anything new sort of on the competitor front. What was the second part of your question?

Jack Vander Aarde -- Maxim Group -- Analyst

Where do you see those win rates going forward? But sounds like you answered that.

Jeffrey Davis -- Chairman, President and Chief Executive Officer

Yeah, win rates are as strong as they've ever been, mid-60s. And interestingly enough, because I expected them to go down as we increase our sales capacity, we're getting more and fast [Phonetic]. And you can see the results of that revealed in our sales. I actually thought our win rates would maybe come down a little bit, again as we're out there swinging more, but the reality is it stayed pretty solid in the mid-60s. So, another good indicator.

Jack Vander Aarde -- Maxim Group -- Analyst

Okay, excellent. Thank you. That's it from me.

Jeffrey Davis -- Chairman, President and Chief Executive Officer

Thanks, Jack.

Operator

Thank you. [Operator Instructions] Our next question comes from Allen Klee with National Securities. You may proceed with your question.

Allen Klee -- National Securities -- Analyst

Yes. Hi. I'm not sure if you have this at this moment, but can you tell us for fourth quarter, what operating cash flow and capex were?

Jeffrey Davis -- Chairman, President and Chief Executive Officer

So, the K should be out later today. So, that will be out in the next hour or two, we'll be happy to provide that.

Allen Klee -- National Securities -- Analyst

Okay. And then, is it reasonable to assume that working capital will not have a material impact on -- based on what you know today on 2020 operating cash flow?

Jeffrey Davis -- Chairman, President and Chief Executive Officer

Yeah. So, the biggest driver of working capital for us is AR. We expect the day sales outstanding to stay relatively aligned with the 71 days we had in the fourth quarter. So, working capital needs will certainly scale with growth. So, the cash flow provided by operating activities was $78 million and the combination of PP&E and capitalization of internally developed software cost effective is about $9.2 million.

Allen Klee -- National Securities -- Analyst

Okay, great. And then, I might have missed this. But did you say what your organic growth rate was in the fourth quarter?

Jeffrey Davis -- Chairman, President and Chief Executive Officer

Yeah. Fourth quarter was about 9%.

Allen Klee -- National Securities -- Analyst

Great. All right. Thank you so much.

Jeffrey Davis -- Chairman, President and Chief Executive Officer

Thank you.

Operator

Thank you. And I'm not showing any further questions at this time. I would now like to turn the call back over to Jeff Davis for any further remarks.

Jeffrey Davis -- Chairman, President and Chief Executive Officer

Alright. Well, thank you all for your time today. We appreciate it, and look forward to talking to you again in a couple of months.

Operator

[Operator Closing Remarks]

Duration: 34 minutes

Call participants:

Jeffrey Davis -- Chairman, President and Chief Executive Officer

Paul Martin -- Chief Financial Officer

Tom Hogan -- Chief Operating Officer

Maggie Nolan -- William Blair -- Analyst

Kyle Peterson -- Needham -- Analyst

Surinder Thind -- Jefferies -- Analyst

Brian Kinstlinger -- Alliance Global Partners -- Analyst

Vincent Colicchio -- Barrington Research -- Analyst

Jack Vander Aarde -- Maxim Group -- Analyst

Allen Klee -- National Securities -- Analyst

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