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
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.
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:
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.
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.
Consolidated Unaudited Condensed Statements of Operations
Three Months Ended June 30,
Six Months Ended June 30,
(in thousands, except per share amounts)
Total gross revenues
Project personnel expenses
Total project personnel expenses and reimbursable expenses
Selling and marketing expenses
General and administrative expenses
Restructuring and other related (benefits) charges
Amortization of purchased intangible assets
Acquisition costs and other related (benefits) charges
Impairment of intangible asset
Total operating expenses
Income from operations
Interest and other income, net
Income before income taxes
Provision for income taxes
Less: Net income (loss) attributable to noncontrolling interest
Net income attributable to stockholders of Sapient Corporation
Basic net income per share attributable to stockholders of Sapient Corporation
Diluted net income per share attributable to stockholders of Sapient Corporation
Weighted average common shares
Weighted average dilutive common share equivalents
Weighted average common shares and dilutive common share equivalents
Consolidated Unaudited Condensed Balance Sheets
June 30, 2013
December 31, 2012
Cash and cash equivalents
Marketable securities, current portion
Restricted cash, current portion
Deferred tax assets, current portion
Prepaid expenses and other current assets
Total current assets
Marketable securities, noncurrent portion
Restricted cash, noncurrent portion
Property and equipment, net
Purchased intangible assets, net
Other noncurrent assets
LIABILITIES AND STOCKHOLDERS' EQUITY
Accrued restructuring costs, current portion
Income tax payable
Total current liabilities
Accrued restructuring costs, noncurrent portion
Deferred tax liabilities, noncurrent portion
Other long-term liabilities
Total liabilities and stockholders' equity
Consolidated Unaudited Statements of Cash Flows
Three Months Ended
Six Months Ended
Cash flows from operating activities:
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred income taxes
Unrealized loss (gain) on financial instruments
Loss recognized on disposition of fixed assets