February 12, 2013

Sapient Reports Fourth Quarter and Full-Year 2012 Results

Fourth Quarter Service Revenues Up 12% Compared to Fourth Quarter 2011

Full-year 2012 Revenues Up 10% Compared to 2011

BOSTON--(BUSINESS WIRE)-- Sapient (NASDAQ: SAPE) today reported its financial results for the fourth quarter and year ended December 31, 2012.

For the fourth quarter of 2012:

  • Service revenues were $293.2 million compared to $262.4 million in the fourth quarter of 2011, an increase of $30.8 million, or 11.7%. Sequentially, service revenues were up $4.7 million, or 1.6%, from $288.5 million in the third quarter of 2012. On a constant currency basis, revenues increased 11.5% over the fourth quarter of 2011 and increased 1.3% sequentially.
  • GAAP income from operations was $30.9 million, or 10.5% of service revenues, compared to $33.8 million, or 12.9% of service revenues, reported in the fourth quarter of 2011.
  • Non-GAAP income from operations was $42.4 million, or 14.5% of service revenues, compared to $41.6 million, or 15.9% of service revenues, reported in the fourth quarter of 2011.
  • GAAP diluted net income per share was $0.14, compared to $0.19 in the fourth quarter of 2011.
  • Non-GAAP diluted net income per share was $0.20, compared to $0.23 in the fourth quarter of 2011.

For the year ended December 31, 2012:

  • Service revenues were $1.12 billion compared to $1.02 billion for 2011, an increase of 9.8%.
  • GAAP income from operations was $104.1 million, compared to $104.1 million in 2011.
  • Non-GAAP income from operations was $143.7 million, an increase of $8.7 million or 6.4%, from $135.0 million in 2011.
  • GAAP diluted net income per share was $0.46, compared to $0.51 in 2011.
  • Non-GAAP diluted net income per share was $0.65, compared to $0.66 in 2011.

"The company posted solid growth in 2012 despite the challenging economic environment, expanding our client relationships globally through continued delivery of highly differentiated capabilities," said Sapient Chief Executive Officer and Co-Chairman Alan J. Herrick. "In addition to our growth, the company's strategic position was further strengthened through a combination of investments and acquisitions. While the economic environment remains unsettled, we believe the company is positioned to have an even stronger year in 2013."

The company generated cash flow from operations of $63.9 million in the fourth quarter of 2012, compared to $68.9 million in the fourth quarter of 2011. For the year ended December 31, 2012, cash flow from operations was $107.6 million compared to $131.9 million for the year ended December 31, 2011. As of December 31, 2012, the company had cash, cash equivalents, restricted cash and marketable securities of $251.0 million. Days sales outstanding was 63 days for the fourth quarter of 2012, down from 67 days in the third quarter of 2012 and the same as 63 days in the fourth quarter of 2011.

Outlook

Sapient management provided the following guidance:

  • For the first quarter ending March 31, 2013, service revenues are expected to be in the range of $295.0 million to $300.0 million.
  • First quarter 2013 non-GAAP operating margin is expected to be 9.2% to 10.2%.
  • For the year ending December 31, 2013, service revenues are expected to grow by 10.0% or higher.
  • Non-GAAP operating margin for 2013 is expected to be 12.8% 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

To access the live webcast of the event, please click on the link below:

http://sape.client.shareholder.com/events.cfm

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

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 may present 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. 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 2013, including expected service revenues, expected non-GAAP operating margin and the Company's performance in 2013 — 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, including mPhasize and iThink, 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 Reports 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 The Americas, 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,   Year Ended December 31,
  2012     2011     2012     2011
(in thousands, except per share amounts)
Revenues:
Service revenues $ 293,175 $ 262,397 $ 1,121,010 $ 1,021,083
Reimbursable expenses   10,848   10,816     40,538   41,364
Total gross revenues   304,023   273,213     1,161,548   1,062,447
Operating expenses:
Project personnel expenses 195,083 170,767 764,843 691,041
Reimbursable expenses   10,848   10,816     40,538   41,364
Total project personnel expenses and reimbursable expenses 205,931 181,583 805,381 732,405
Selling and marketing expenses 11,515 9,921 44,661 39,025
General and administrative expenses 50,582 45,093 191,599 171,759
Restructuring and other related charges (benefits) 503 (270 ) 394 6,507
Amortization of purchased intangible assets 2,941 2,527 11,052 6,813
Acquisition costs and other related charges   1,640   556     4,354   1,861
Total operating expenses   273,112   239,410     1,057,441   958,370
Income from operations 30,911 33,803 104,107 104,077
Interest and other income, net   871   1,590     4,584   6,342
Income before income taxes 31,782 35,393 108,691 110,419
Provision for income taxes   12,192   8,407     43,450   37,743
Net income $ 19,590 $ 26,986   $ 65,241 $ 72,676
 
Basic net income per share $ 0.14 $ 0.19   $ 0.47 $ 0.53
Diluted net income per share $ 0.14 $ 0.19   $ 0.46 $ 0.51
 
Weighted average common shares 137,128 139,126 138,188 137,788
Weighted average dilutive common share equivalents   3,749   4,170     3,921   4,208
Weighted average common shares and dilutive common share equivalents   140,877   143,296     142,109   141,996
 
 
 
 
 

 
Sapient Corporation
Consolidated Unaudited Condensed Balance Sheets
   

 

December 31, 2012 December 31, 2011
(in thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 234,178 $ 212,406
Marketable securities, current portion 6,321 7,748
Restricted cash, current portion 5,236 426
Accounts receivable, net of allowance for doubtful accounts 168,951 156,109
Unbilled revenues 72,013 61,735
Deferred tax assets, current portion 15,809 22,739
Prepaid expenses and other current assets   36,311   22,734
Total current assets 538,819 483,897
Restricted cash, net of current portion 4,074 3,779
Marketable securities, net of current portion 1,202 1,290
Property and equipment, net 82,833 64,877
Purchased intangible assets, net 35,050 36,822
Goodwill 127,864 107,971
Deferred tax assets, net of current portion 79 629
Other assets   8,572   8,591
 
Total assets $ 798,493 $ 707,856
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 26,937 $ 25,389
Accrued restructuring costs, current portion 129 324
Accrued compensation 83,885 77,721
Deferred revenues 27,163 24,720
Other current liabilities   49,802   50,143
Total current liabilities 187,916 178,297
Accrued restructuring costs, net of current portion 246 407
Other long-term liabilities   89,785   62,790
Total liabilities 277,947 241,494
 
Stockholders' equity   520,546   466,362
 
Total liabilities and stockholders' equity $ 798,493 $ 707,856
 
 
 
 
 

 
Sapient Corporation
Consolidated Unaudited Statements of Cash Flows
             
 
Three Months Ended Year Ended
December 31, December 31,
  2012     2011     2012     2011  
(in thousands)
Cash flows from operating activities:
Net income $ 19,590 $ 26,986 $ 65,241 $ 72,676
Adjustments to reconcile net income to net cash used in operating activities:
Loss recognized on disposition of fixed assets 1 37 254 79
Unrealized loss (gain) on financial instruments 723 (52 ) 143 98
Depreciation and amortization expense 9,274 7,957 34,544 26,186
Deferred income taxes 4,242 8,457 13,672 17,924
Provision for (recovery of) allowance for doubtful accounts, net - 8 - 8
Stock-based compensation expense 6,409 5,019 23,795 19,256
Excess tax shortfalls (benefits) from exercise and release of stock-based awards 511 (4,391 ) (10,100 ) (4,391 )
Non-cash restructuring charges - - - 4,564
Changes in operating assets and liabilities, excluding impact of acquisitions:
Accounts receivable 6,918 (10,779 ) (9,747 ) (15,218 )
Unbilled revenues (1,754 ) 15,464 (9,463 ) (8,816 )
Prepaid expenses and other current assets (2,945 ) 3,801 (13,782 ) (2,153 )
Other assets (309 ) (449 ) 316 (1,119 )
Accounts payable (1,402 ) (3,996 ) (396 ) 4,322
Accrued compensation 5,315 8,084 5,542 14,995
Payments of withholding taxes in connection with vesting of stock-based awards (239 ) (427 ) (8,918 ) (10,959 )
Accrued restructuring costs (18 ) (886 ) (358 ) (2,425 )
Deferred revenues 4,600 7,424 (105 ) 6,580
Other current liabilities 7,847 5,570 3,777 3,328
Other long-term liabilities   5,118     1,102     13,249     6,933  
Net cash provided by operating activities   63,881     68,929     107,664     131,868  
 
Cash flows from investing activities:
Cash paid for acquisitions, net of cash acquired (17,524 ) - (17,524 ) (44,602 )
Proceeds from sale of property and equipment 332 - 364 -
Purchases of property and equipment and cost of internally developed software (7,891 ) (6,801 ) (38,057 ) (35,512 )
Proceeds from sales and maturities of marketable securities classified as available-for-sale - 2,018 1,900 6,488
Purchases of marketable securities classified as available-for-sale (89 ) (2,121 ) (415 ) (6,904 )
Cash received (paid) on financial instruments, net 28 (658 ) (50 ) (851 )
Change in restricted cash   (823 )   (239 )   (1,710 )   415  
Net cash used in investing activities   (25,967 )   (7,801 )   (55,492 )   (80,966 )
 
Cash flows from financing activities:
Principal payments under capital lease obligations - (20 ) (47 ) (74 )
Proceeds from credit facilities - - - 10,387
Repayment of amounts borrowed under credit facilities - - - (14,807 )
Proceeds from stock option plans 247 1,773 1,320 10,161
Tax (shortfalls) benefits from stock plans (511 ) 4,391 10,100 4,391
Repayment of acquired debt - - - (3,766 )
Dividends paid on common stock - - - (48,873 )
Repurchases of common stock   -     -     (44,603 )   -  
Net cash (used in) provided by financing activities   (264 )   6,144     (33,230 )   (42,581 )
 
Effect of exchange rate changes on cash and cash equivalents   (2,993 )   (10,160 )   2,830     (15,363 )
 
Increase (decrease) in cash and cash equivalents 34,657 57,112 21,772 (7,042 )
Cash and cash equivalents, at beginning of period   199,521     155,294     212,406     219,448  
Cash and cash equivalents, at end of period $ 234,178   $ 212,406   $ 234,178   $ 212,406  
 
 
 
 
 

 
Sapient Corporation
Unaudited Reconciliation of Non-GAAP Financial Measures
         
 
Three Months Ended December 31, Year Ended December 31,
  2012     2011     2012     2011  
(in thousands, except per share amounts)
 
Service revenues $ 293,175   $ 262,397   $ 1,121,010   $ 1,021,083  
 
GAAP income from operations $ 30,911 $ 33,803 $ 104,107 $ 104,077
Stock-based compensation expense 6,409 5,019 23,795 19,256
Restructuring and other related charges (benefits) 503 (270 ) 394 6,507
Amortization of purchased intangible assets 2,941 2,527 11,052 6,813
Acquisition costs and other related charges 1,640 556 4,354 1,861
Stock-based compensation review and restatement benefit   -     -     -     (3,500 )
Non-GAAP income from operations $ 42,404   $ 41,635   $ 143,702   $ 135,014  
 
GAAP operating margin 10.5 % 12.9 % 9.3 % 10.2 %
Effect of adjustments detailed above   4.0 %   3.0 %   3.5 %   3.0 %
Non-GAAP operating margin   14.5 %   15.9 %   12.8 %   13.2 %
                   
 
GAAP net income $ 19,590 $ 26,986 $ 65,241 $ 72,676
Stock-based compensation expense, net of tax 4,119 3,155 15,051 12,058
Restructuring and other related charges (benefits), net of tax 352 (173 ) 279 3,999
Amortization of purchased intangible assets, net of tax 2,335 1,959 8,793 5,364
Acquisition costs and other related charges, net of tax 1,088 411 2,965 1,312
Stock-based compensation review and restatement benefit, net of tax   -     -     -     (2,085 )
Non-GAAP net income $ 27,484   $ 32,338   $ 92,329   $ 93,324  
                   
 
GAAP basic income per share $ 0.14 $ 0.19 $ 0.47 $ 0.53
Effect of adjustments detailed above   0.06     0.04     0.20     0.15  
Non-GAAP basic income per share $ 0.20   $ 0.23   $ 0.67   $ 0.68  
 
GAAP and Non-GAAP weighted average common shares   137,128     139,126     138,188     137,788  
 
 
GAAP diluted income per share $ 0.14 $ 0.19 $ 0.46 $ 0.51
Effect of adjustments noted above and change in dilution noted below   0.06     0.04     0.19     0.15  
Non-GAAP diluted income per share $ 0.20   $ 0.23   $ 0.65   $ 0.66  
 
GAAP and Non-GAAP weighted average common shares and dilutive common share equivalents   140,877     143,296     142,109     141,996  
                                 

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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