Sapient Reports Second Quarter 2013 Results

Sapient Reports Second Quarter 2013 Results

Second Quarter Service Revenues Up 12.7% and Non-GAAP Operating Income Up 32% Compared to Second Quarter 2012

BOSTON--(BUSINESS WIRE)-- Sapient (NAS: SAPE) today reported the following financial results for the second quarter ended June 30, 2013:

  • Service revenues were $314.3 million compared to $279.0 million in the second quarter of 2012, an increase of $35.3 million, or 12.7%. Sequentially, service revenues were up $21.7 million, or 7.4%, from $292.6 million in the first quarter of 2013. On a constant currency basis, revenues increased 13.1% over the second quarter of 2012 and increased 7.7% sequentially.

  • GAAP income from operations was $34.3 million, or 10.9% of service revenues, compared to $23.7 million, or 8.5% of service revenues, reported in the second quarter of 2012.

  • Non-GAAP income from operations was $44.1 million, or 14.0% of service revenues, compared to $33.4 million,or 12.0% of service revenues, reported in the second quarter of 2012.

  • GAAP diluted net income per share was $0.16, compared to $0.10 in the second quarter of 2012.

  • Non-GAAP diluted net income per share was $0.21, compared to $0.14 in the second quarter of 2012.


"We are very pleased with Sapient's strong performance in the second quarter," said Sapient Chief Executive Officer and Co-Chairman Alan J. Herrick. "All three business units posted good growth and are positioned to have a solid second half of 2013."

The company generated cash from operations of $49.8 million in the second quarter of 2013, compared to $17.7 million in the second quarter of 2012. As of June 30, 2013, the company had cash, cash equivalents, restricted cash and marketable securities of $258.0 million. Days sales outstanding was 62 days for the second quarter of 2013, down from 65 days in the first quarter of 2013 and down from 66 days in the second quarter of 2012.

Outlook

Sapient management provided the following guidance:

  • For the third quarter ending September 30, 2013, service revenues are expected to be in the range of $318 million to $325 million.

  • Third quarter 2013 non-GAAP operating margin is expected to be 13.5% to 15.0%.

Webcast and Conference Call

Sapient will host a discussion of its second 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 third quarter, including expected service revenues and expected non-GAAP operating margin, and the expected positioning of the company - 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 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 June 30,

Six Months Ended June 30,

2013

2012

2013

2012

(in thousands, except per share amounts)

Revenues:

Service revenues

$

314,334

$

278,989

$

606,972

$

539,368

Reimbursable expenses

12,273

10,106

22,618

18,889

Total gross revenues

326,607

289,095

629,590

558,257

Operating expenses:

Project personnel expenses

211,536

192,582

418,281

376,352

Reimbursable expenses

12,273

10,106

22,618

18,889

Total project personnel expenses and reimbursable expenses

223,809

202,688

440,899

395,241

Selling and marketing expenses

12,994

11,230

24,786

21,925

General and administrative expenses

53,519

48,243

107,521

94,956

Restructuring and other related (benefits) charges

(31

)

(14

)

1,983

(90

)

Amortization of purchased intangible assets

3,263

2,745

6,920

5,367

Acquisition costs and other related (benefits) charges

(1,284

)

468

(384

)

1,593

Impairment of intangible asset

-

-

1,494

-

Total operating expenses

292,270

265,360

583,219

518,992

Income from operations

34,337

23,735

46,371

39,265

Interest and other income, net

1,200

1,079

2,072

2,901

Income before income taxes

35,537

24,814

48,443

42,166

Provision for income taxes

12,250

10,692

18,626

19,159

Net income

23,287

14,122

29,817

23,007

Less: Net income (loss) attributable to noncontrolling interest

(41

)

-

(87

)

-

Net income attributable to stockholders of Sapient Corporation

$

23,328

$

14,122

$

29,904

$

23,007

Basic net income per share attributable to stockholders of Sapient Corporation

$

0.17

$

0.10

$

0.22

$

0.17

Diluted net income per share attributable to stockholders of Sapient Corporation

$

0.16

$

0.10

$

0.21

$

0.16

Weighted average common shares

138,791

139,310

138,112

139,384

Weighted average dilutive common share equivalents

4,110

4,202

4,446

4,330

Weighted average common shares and dilutive common share equivalents

142,901

143,512

142,558

143,714

Sapient Corporation

Consolidated Unaudited Condensed Balance Sheets

June 30, 2013

December 31, 2012

(in thousands)

ASSETS

Current assets:

Cash and cash equivalents

$

249,523

$

234,038

Marketable securities, current portion

6,016

6,321

Restricted cash, current portion

102

9,026

Accounts receivable

156,182

168,951

Unbilled revenues

92,157

71,842

Deferred tax assets, current portion

15,037

15,809

Prepaid expenses and other current assets

55,323

43,791

Total current assets

574,340

549,778

Marketable securities, noncurrent portion

-

1,202

Restricted cash, noncurrent portion

2,392

2,914

Property and equipment, net

79,847

80,661

Purchased intangible assets, net

26,928

35,050

Goodwill

131,267

128,628

Other noncurrent assets

9,087

8,651

Total assets

$

823,861

$

806,884

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

29,660

$

26,937

Accrued expenses

56,426

52,584

Accrued compensation

84,645

98,106

Accrued restructuring costs, current portion

254

129

Income tax payable

10,478

8,273

Deferred revenues

22,212

27,682

Total current liabilities

203,675

213,711

Accrued restructuring costs, noncurrent portion

435

246

Deferred tax liabilities, noncurrent portion

21,002

19,892

Other long-term liabilities

68,598

66,561

Total liabilities

293,710

300,410

Noncontrolling interest

1,015

-

Stockholders' equity

529,136

506,474

Total liabilities and stockholders' equity

$

823,861

$

806,884

Sapient Corporation

Consolidated Unaudited Statements of Cash Flows

Three Months Ended

Six Months Ended

June 30,

June 30,

2013

2012

2013

2012

(in thousands)

Cash flows from operating activities:

Net income

$

23,287

$

14,122

$

29,817

$

23,007

Adjustments to reconcile net income to net cash provided by operating activities:

Deferred income taxes

2,774

11,115

1,233

11,130

Unrealized loss (gain) on financial instruments

1,045

(252

)

771

(145

)

Loss recognized on disposition of fixed assets