February 14, 2012

Sapient Reports Fourth Quarter and Full-Year 2011 Results

Full-Year 2011 Service Revenues Up 24% Over 2010 Led By 33% Growth in SapientNitro

Full-Year 2011 Non-GAAP Operating Margin Increased to 13.2% Resulting In a 54% Increase in Non-GAAP Operating Profit Dollars

BOSTON--(BUSINESS WIRE)-- Sapient (NASDAQ: SAPE) today reported the following financial results for the fourth quarter and year ended December 31, 2011. For the fourth quarter of 2011:

  • Service revenues were $262.2 million compared to $222.9 million in the fourth quarter of 2010, an increase of $39.3 million or 18%. Sequentially, service revenues were flat with the third quarter of 2011. On a constant currency basis, revenues increased 18% over the fourth quarter of 2010 and 1% sequentially.
  • GAAP income from operations was $33.4 million, or 12.8% of service revenues, up 52% from $22.1 million, or 9.9% of service revenues, reported in the fourth quarter of 2010.
  • Non-GAAP income from operations was $41.3 million, or 15.7% of service revenues, up 50% from $27.6 million, or 12.4% of service revenues, reported in the fourth quarter of 2010.
  • GAAP diluted net income per share was $0.19, compared to $0.11 in the fourth quarter of 2010.
  • Non-GAAP diluted net income per share was $0.23, compared to $0.14 in the fourth quarter of 2010.

For the year ended December 31, 2011, service revenues were $1.02 billion compared to $823.5 million for 2010, an increase of 24%. GAAP income from operations for full-year 2011 was $104.2 million, an increase of $40.3 million or 63%, from $63.9 million in 2010. Non-GAAP income from operations was $135.1 million for 2011, an increase of $47.4 million or 54%, from $87.7 million in 2010.

"I'm very pleased with our 2011 performance. Revenue growth of 24% coupled with a 54% increase in non-GAAP profit dollars is excellent performance in any environment," said Sapient President and Chief Executive Officer Alan J. Herrick. "Exceeding $1 billion in revenue is a significant milestone in Sapient's history and is evidence of the value we create for our clients. Our unique culture and passionate teams across the world continue to deliver great work further enhancing our leadership position."

The company generated cash from operations of $69.7 million in the fourth quarter of 2011, an increase of 58% from $44.0 million generated in the fourth quarter of 2010. For the year ended December 31, 2011, cash flow from operations was $132.6 million, up 87% from $70.9 million for the year ended December 31, 2010. As of December 31, 2011, the company had cash, cash equivalents and marketable securities of $225.6 million. Days sales outstanding was 63 days for the fourth quarter of 2011, down from 66 days in the third quarter of 2011 and 65 days for the fourth quarter of 2010.

Outlook

Sapient management provided the following guidance:

  • For the first quarter ending March 31, 2012, service revenues are expected to be in the range of $262 million to $266 million.
  • First quarter 2012 non-GAAP operating margin is expected to be 9.5% or higher.
  • For the year ending December 31, 2012, service revenues are expected to grow by 13% to 16%.
  • Non-GAAP operating margin for 2012 is expected to be 13% or modestly higher.

Webcast and Conference Call

Sapient will host a discussion of its fourth quarter results at 4:30 p.m. ET today, which will be broadcast live on the Internet. The dial-in information for the conference call is:

US: (877) 291-1296

International: (720) 259-9209

In addition, a re-broadcast of the webcast will be available in the investors section of www.sapient.com.

Adjusted (Non-GAAP) Financial Measures

Sapient provides non-GAAP financial measures to complement reported GAAP results. Management believes these measures help illustrate underlying trends in the company's business and uses the measures to establish budgets and operational goals, communicated internally and externally, for managing the company's business and evaluating its performance. The company anticipates that it will continue to report both GAAP and certain non-GAAP financial measures in its financial results, including non-GAAP results that exclude stock-based compensation expense, restructuring and other related charges, amortization of purchased intangible assets, acquisition costs and other related charges, and income tax benefits or provisions resulting from changes in the valuation allowance. In addition, the company has presented service revenues in constant currency terms, which excludes the effect of currency fluctuations between the U.S. dollar and the functional currency of the entity in which the revenue was transacted. The effect is excluded by translating the current period's local currency service revenues into U.S. dollars using the average local currency exchange rates that were in effect during the prior period of comparison. However, because the company's reported non-GAAP financial measures are not calculated according to GAAP, these measures are not comparable to GAAP and may not necessarily be comparable to similarly described non-GAAP measures reported by other companies within the company's industry. Consequently, Sapient's non-GAAP financial measures should not be evaluated in isolation or supplant comparable GAAP measures, but, rather, should be considered together with its consolidated financial statements, which are prepared according to GAAP.

Safe Harbor Statement

This press release contains forward-looking statements — in particular, the financial guidance for the first quarter and full-year 2012, including expected service revenues and expected non-GAAP operating margin — that involve a number of risks and uncertainties. All forward looking statements are based upon current expectations and beliefs and various assumptions. Actual results could differ materially from management's expectations and the forward-looking statements contained in this release. A number of factors could cause actual events to differ materially from those indicated, including, without limitation: the continued acceptance of the company's services; a reduction in the demand for the company's services in light of the current economic environment; the company's ability to accurately set fees for and complete its current and future client projects on a timely basis, successfully manage risks associated with its international operations, manage its growth and projects effectively, successfully integrate and achieve anticipated benefits from acquisitions, and continue to attract and retain high-quality employees; and other risks and uncertainties as set forth in the company's filings with the SEC, including without limitation the most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q. Any forward-looking statement speaks only as of the date on which it is made, and the company undertakes no obligation to update any forward-looking statements for any reason, including to reflect events or circumstances after the date on which such statements are made or to reflect the occurrence of anticipated or unanticipated events or circumstances, except as required by law.

About Sapient

Sapient is a global services company that helps clients transform in the areas of business, marketing, and technology. The company operates three divisions that enable clients to gain a competitive advantage and succeed in an increasingly digital world. SapientNitro, Sapient Global Markets and Sapient Government Services fuse insight, creativity and technology to drive innovation and to help clients navigate complex business problems. Our approach is the subject of case studies used by MBA programs at Harvard and Yale. The company has operations in North America, Europe, and Asia-Pacific. For more information, visit www.sapient.com.

Sapient is a registered service mark of Sapient Corporation.

                 
 
Sapient Corporation
Consolidated Unaudited Condensed Statements of Operations
 
Three Months Ended December 31,   Twelve Months Ended December 31,
2011   2010   2011 2010
 
(in thousands, except per share amounts)
Revenues:
Service revenues $ 262,154 $ 222,880 $ 1,020,840 $ 823,511
Reimbursable expenses   10,816     9,633     41,364   40,008

Total gross revenues

  272,970     232,513     1,062,204   863,519
Operating expenses:
Project personnel expenses 170,767 148,815 690,821 563,930
Reimbursable expenses   10,816     9,633     41,364   40,008
Total project personnel expenses and reimbursable expenses 181,583 158,448 732,185 603,938
Selling and marketing expenses 9,921 10,663 39,025 38,833
General and administrative expenses 45,223 40,056 171,641 150,877
Restructuring and other related (benefits) charges (270 ) (34 ) 6,507 414
Amortization of purchased intangible assets 2,527 1,321 6,813 5,448
Acquisition costs and other related charges   556     -     1,861   111
Total operating expenses   239,540     210,454     958,032   799,621
Income from operations 33,430 22,059 104,172 63,898
Interest and other income, net   1,590     1,218     6,342   3,705
Income before income taxes 35,020 23,277 110,514 67,603
Provision for income taxes   7,866     7,590     36,896   23,798
Net income $ 27,154   $ 15,687   $ 73,618 $ 43,805
 
Basic net income per share $ 0.20   $ 0.12   $ 0.53 $ 0.33
Diluted net income per share $ 0.19   $ 0.11   $ 0.52 $ 0.32
 
Weighted average common shares 139,126 133,582 137,788 132,060
Weighted average dilutive common share equivalents   4,170     6,288     4,208   6,669

Weighted average common shares and dilutive common share equivalents

  143,296     139,870     141,996   138,729
 
 
 
 
 

Sapient Corporation
Consolidated Unaudited Condensed Balance Sheets
             
 
December 31, 2011 December 31, 2010
(in thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 212,406 $ 219,448
Marketable securities, current portion 7,748 8,861
Restricted cash, current portion 426 1,416
Accounts receivable, less allowance for doubtful accounts 156,109 136,300
Unbilled revenues 61,712 49,765
Deferred tax assets, current portion 19,966 23,938
Prepaid expenses and other current assets   22,734   21,256
Total current assets 481,101 460,984
Marketable securities, net of current portion 3,779 1,269
Restricted cash, net of current portion 1,290 3,093
Property and equipment, net 64,257 35,571
Purchased intangible assets, net 36,822 17,629
Goodwill 107,971 77,865
Deferred tax assets, net of current portion 9,227 19,692
Other assets   8,591   7,619
 
Total assets $ 713,038 $ 623,722
 

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable $ 25,389 $ 18,714
Accrued compensation 77,721 66,609
Accrued restructuring costs, current portion 324 3,129
Deferred revenues 25,599 18,558
Other current liabilities   61,680   52,011
Total current liabilities 190,713 159,021
Accrued restructuring costs, net of current portion 407 -
Other long-term liabilities   42,514   22,396
Total liabilities 233,634 181,417
 
Stockholders' equity   479,404   442,305
 
Total liabilities and stockholders' equity $ 713,038 $ 623,722
 
 
 
 
 

Sapient Corporation
Consolidated Unaudited Statements of Cash Flows
                       
 
Three Months Ended Twelve Months Ended
December 31, December 31,
  2011     2010     2011     2010  
 
(in thousands)
Cash flows from operating activities:
Net income $ 27,154 $ 15,687 $ 73,618 $ 43,805
Adjustments to reconcile net income to net cash provided by operating activities:
Loss (gain) recognized on disposition of fixed assets 37 (275 ) 79 (35 )
Unrealized (gain) loss on financial instruments (52 ) (28 ) 98 139
Unrealized gain on marketable securities, net - - - (132 )
Depreciation and amortization expense 7,957 5,625 26,186 21,662
Deferred income taxes 8,862 13,470 18,023 16,231
Provision for (recovery of) doubtful accounts, net 8 (227 ) 8 (227 )
Non-cash restructuring charges - - 4,564 -
Stock-based compensation expense 5,019 4,232 19,256 18,156
Changes in operating assets and liabilities, net of impact of acquisitions:
Accounts receivable (10,779 ) (15,020 ) (15,218 ) (24,474 )
Unbilled revenues 15,464 16,388 (8,816 ) (2,447 )
Prepaid expenses and other current assets 3,801 8,350 (2,153 ) 1,738
Other assets (449 ) (824 ) (1,119 ) (2,205 )
Accounts payable (3,996 ) (2,403 ) 4,322 (1,299 )
Accrued compensation 8,084 6,347 14,995 17,202
Payments of withholding taxes in connection with vesting of stock-based awards (427 ) (510 ) (10,959 ) (10,031 )
Accrued restructuring costs (886 ) (1,091 ) (2,425 ) (3,548 )
Deferred revenues 7,667 3,266 6,823 (900 )
Other current liabilities 973 (11,380 ) (1,489 ) (7,945 )
Other long-term liabilities   1,232     2,420     6,815     5,195  
 
Net cash provided by operating activities   69,669     44,027     132,608     70,885  
 
Cash flows from investing activities:
Cash paid for acquisitions, net of cash acquired - - (44,602 ) (3,163 )
Purchases of property and equipment and cost of internally developed software (6,801 ) (6,234 ) (35,512 ) (21,253 )
Sales and maturities of marketable securities classified as trading - - - 16,425
Sales and maturities of marketable securities not classified as trading 2,018 - 6,488 881
Purchases of marketable securities (2,121 ) (8,781 ) (6,904 ) (8,781 )
Cash (paid) received on financial instruments, net (658 ) 134 (851 ) 669
Change in restricted cash   (239 )   (1,762 )   415     (1,789 )
 
Net cash used in investing activities   (7,801 )   (16,643 )   (80,966 )   (17,011 )
 
Cash flows from financing activities:
Principal payments under capital lease obligations (20 ) (21 ) (74 ) (83 )
Proceeds from credit facilities - 1,330 10,387 4,380
Repayment of amounts borrowed under credit facilities - - (14,807 ) -
Proceeds from stock option and purchase plans 1,773 2,747 10,161 8,690
Tax benefits from stock plans 3,651 - 3,651 -
Repayment of acquired debt - - (3,766 ) -
Dividends paid on common stock   -     (11 )   (48,873 )   (46,843 )
 
Net cash provided by (used in) financing activities   5,404     4,045     (43,321 )   (33,856 )
 
Effect of exchange rate changes on cash and cash equivalents   (10,160 )   (1,910 )   (15,363 )   3,752  
 
Increase (decrease) in cash and cash equivalents 57,112 29,519 (7,042 ) 23,770
Cash and cash equivalents, at beginning of period   155,294     189,929     219,448     195,678  
Cash and cash equivalents, at end of period $ 212,406   $ 219,448   $ 212,406   $ 219,448  
 
 
 
 
 

Sapient Corporation
Unaudited Reconciliation of Non-GAAP Financial Measures
       
 
Three Months Ended December 31, Twelve Months Ended December 31,
  2011     2010     2011     2010  
 
(in thousands, except per share amounts)
 
Service revenues $ 262,154   $ 222,880   $ 1,020,840   $ 823,511  
 
GAAP income from operations $ 33,430 $ 22,059 $ 104,172 $ 63,898
Stock-based compensation expense 5,019 4,232 19,256 18,156
Restructuring and other related (benefits) charges (270 ) (34 ) 6,507 414
Amortization of purchased intangible assets 2,527 1,321 6,813 5,448
Acquisition costs and other related charges 556 - 1,861 111
Stock-based compensation review and restatement benefit   -       (3,500 )   (301 )
Non-GAAP income from operations $ 41,262   $ 27,578   $ 135,109   $ 87,726  
 
GAAP operating margin 12.8 % 9.9 % 10.2 % 7.8 %
Effect of adjustments detailed above   2.9 %   2.5 %   3.0 %   2.9 %
Non-GAAP operating margin   15.7 %   12.4 %   13.2 %   10.7 %
                 
 
GAAP net income $ 27,154 $ 15,687 $ 73,618 $ 43,805
Stock-based compensation expense, net of tax 3,155 2,655 12,058 11,296
Restructuring and other related (benefits) charges, net of tax (173 ) (20 ) 3,999 352
Amortization of purchased intangible assets, net of tax 1,959 1,034 5,364 4,231
Acquisition costs and other related charges, net of tax 411 - 1,312 66
Stock-based compensation review and restatement benefit, net of tax   -     -     (2,085 )   (179 )
Non-GAAP net income $ 32,506   $ 19,356   $ 94,266   $ 59,571  
                 
 
GAAP basic income per share $ 0.20 $ 0.12 $ 0.53 $ 0.33
Effect of adjustments detailed above   0.03     0.02     0.15     0.12  
Non-GAAP basic income per share $ 0.23   $ 0.14   $ 0.68   $ 0.45  
 
GAAP and Non-GAAP weighted average common shares   139,126     133,582     137,788     132,060  
 
 
GAAP diluted income per share $ 0.19 $ 0.11 $ 0.52 $ 0.32
Effect of adjustments noted above and change in dilution noted below   0.04     0.03     0.14     0.11  
Non-GAAP diluted income per share $ 0.23   $ 0.14   $ 0.66   $ 0.43  
 
GAAP and Non-GAAP weighted average common shares and dilutive common share equivalents   143,296     139,870     141,996     138,729  
                                 

Investor Relations Contact:
Sapient
Dean Ridlon,+1-617-963-1598
dridlon@sapient.com
or
Media Contact:
Sapient
David LaBar,+1-646-478-9846
dlabar@sapient.com

Source: Sapient Corporation

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