Sapient Reports Fourth Quarter and Full-Year 2012 Results
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
Business Wire
BOSTON -- February 12, 2013
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 Year Ended December 31,
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 10,848 10,816 40,538 41,364
expenses
Total gross 304,023 273,213 1,161,548 1,062,447
revenues
Operating
expenses:
Project personnel 195,083 170,767 764,843 691,041
expenses
Reimbursable 10,848 10,816 40,538 41,364
expenses
Total project
personnel expenses 205,931 181,583 805,381 732,405
and reimbursable
expenses
Selling and 11,515 9,921 44,661 39,025
marketing expenses
General and
administrative 50,582 45,093 191,599 171,759
expenses
Restructuring and
other related 503 (270 ) 394 6,507
charges (benefits)
Amortization of
purchased 2,941 2,527 11,052 6,813
intangible assets
Acquisition costs
and other related 1,640 556 4,354 1,861
charges
Total operating 273,112 239,410 1,057,441 958,370
expenses
Income from 30,911 33,803 104,107 104,077
operations
Interest and other 871 1,590 4,584 6,342
income, net
Income before 31,782 35,393 108,691 110,419
income taxes
Provision for 12,192 8,407 43,450 37,743
income taxes
Net income $ 19,590 $ 26,986 $ 65,241 $ 72,676
Basic net income $ 0.14 $ 0.19 $ 0.47 $ 0.53
per share
Diluted net income $ 0.14 $ 0.19 $ 0.46 $ 0.51
per share
Weighted average 137,128 139,126 138,188 137,788
common shares
Weighted average
dilutive common 3,749 4,170 3,921 4,208
share equivalents
Weighted average
common shares and 140,877 143,296 142,109 141,996
dilutive common
share equivalents
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 168,951 156,109
for doubtful accounts
Unbilled revenues 72,013 61,735
Deferred tax assets, current portion 15,809 22,739
Prepaid expenses and other current 36,311 22,734
assets
Total current assets 538,819 483,897
Restricted cash, net of current 4,074 3,779
portion
Marketable securities, net of current 1,202 1,290
portion
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 79 629
portion
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 129 324
portion
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 246 407
current portion
Other long-term liabilities 89,785 62,790
Total liabilities 277,947 241,494
Stockholders' equity 520,546 466,362
Total liabilities and stockholders’ $ 798,493 $ 707,856
equity
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 1 37 254 79
of fixed assets
Unrealized loss
(gain) on 723 (52 ) 143 98
financial
instruments
Depreciation and
amortization 9,274 7,957 34,544 26,186
expense
Deferred income 4,242 8,457 13,672 17,924
taxes
Provision for
(recovery of)
allowance for - 8 - 8
doubtful
accounts, net
Stock-based
compensation 6,409 5,019 23,795 19,256
expense
Excess tax
shortfalls
(benefits) from
exercise and 511 (4,391 ) (10,100 ) (4,391 )
release of
stock-based
awards
Non-cash
restructuring - - - 4,564
charges
Changes in
operating assets
and liabilities,
excluding impact
of acquisitions:
Accounts 6,918 (10,779 ) (9,747 ) (15,218 )
receivable
Unbilled (1,754 ) 15,464 (9,463 ) (8,816 )
revenues
Prepaid
expenses and (2,945 ) 3,801 (13,782 ) (2,153 )
other current
assets
Other assets (309 ) (449 ) 316 (1,119 )
Accounts (1,402 ) (3,996 ) (396 ) 4,322
payable
Accrued 5,315 8,084 5,542 14,995
compensation
Payments of
withholding
taxes in
connection (239 ) (427 ) (8,918 ) (10,959 )
with vesting
of
stock-based
awards
Accrued
restructuring (18 ) (886 ) (358 ) (2,425 )
costs
Deferred 4,600 7,424 (105 ) 6,580
revenues
Other current 7,847 5,570 3,777 3,328
liabilities
Other
long-term 5,118 1,102 13,249 6,933
liabilities
Net cash
provided by 63,881 68,929 107,664 131,868
operating
activities
Cash flows from
investing activities:
Cash paid for
acquisitions, net of (17,524 ) - (17,524 ) (44,602 )
cash acquired
Proceeds from sale
of property and 332 - 364 -
equipment
Purchases of
property and
equipment and cost (7,891 ) (6,801 ) (38,057 ) (35,512 )
of internally
developed software
Proceeds from sales
and maturities of
marketable - 2,018 1,900 6,488
securities
classified as
available-for-sale
Purchases of
marketable
securities (89 ) (2,121 ) (415 ) (6,904 )
classified as
available-for-sale
Cash received (paid)
on financial 28 (658 ) (50 ) (851 )
instruments, net
Change in restricted (823 ) (239 ) (1,710 ) 415
cash
Net cash used in
investing (25,967 ) (7,801 ) (55,492 ) (80,966 )
activities
Cash flows from
financing activities:
Principal payments
under capital lease - (20 ) (47 ) (74 )
obligations
Proceeds from credit - - - 10,387
facilities
Repayment of amounts
borrowed under - - - (14,807 )
credit facilities
Proceeds from stock 247 1,773 1,320 10,161
option plans
Tax (shortfalls)
benefits from stock (511 ) 4,391 10,100 4,391
plans
Repayment of - - - (3,766 )
acquired debt
Dividends paid on - - - (48,873 )
common stock
Repurchases of - - (44,603 ) -
common stock
Net cash (used
in) provided by (264 ) 6,144 (33,230 ) (42,581 )
financing
activities
Effect of exchange
rate changes on cash (2,993 ) (10,160 ) 2,830 (15,363 )
and cash equivalents
Increase (decrease) in
cash and cash 34,657 57,112 21,772 (7,042 )
equivalents
Cash and cash
equivalents, at 199,521 155,294 212,406 219,448
beginning of period
Cash and cash
equivalents, at end of $ 234,178 $ 212,406 $ 234,178 $ 212,406
period
Sapient Corporation
Unaudited Reconciliation of Non-GAAP Financial Measures
Three Months Ended Year Ended December 31,
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 $ 30,911 $ 33,803 $ 104,107 $ 104,077
operations
Stock-based
compensation 6,409 5,019 23,795 19,256
expense
Restructuring
and other
related 503 (270 ) 394 6,507
charges
(benefits)
Amortization
of purchased 2,941 2,527 11,052 6,813
intangible
assets
Acquisition
costs and 1,640 556 4,354 1,861
other related
charges
Stock-based
compensation
review and - - - (3,500 )
restatement
benefit
Non-GAAP income $ 42,404 $ 41,635 $ 143,702 $ 135,014
from operations
GAAP operating 10.5 % 12.9 % 9.3 % 10.2 %
margin
Effect of
adjustments 4.0 % 3.0 % 3.5 % 3.0 %
detailed above
Non-GAAP 14.5 % 15.9 % 12.8 % 13.2 %
operating margin
GAAP net income $ 19,590 $ 26,986 $ 65,241 $ 72,676
Stock-based
compensation 4,119 3,155 15,051 12,058
expense, net
of tax
Restructuring
and other
related 352 (173 ) 279 3,999
charges
(benefits),
net of tax
Amortization
of purchased
intangible 2,335 1,959 8,793 5,364
assets, net of
tax
Acquisition
costs and
other related 1,088 411 2,965 1,312
charges, net
of tax
Stock-based
compensation
review and - - - (2,085 )
restatement
benefit, net
of tax
Non-GAAP net $ 27,484 $ 32,338 $ 92,329 $ 93,324
income
GAAP basic income $ 0.14 $ 0.19 $ 0.47 $ 0.53
per share
Effect of
adjustments 0.06 0.04 0.20 0.15
detailed above
Non-GAAP basic $ 0.20 $ 0.23 $ 0.67 $ 0.68
income per share
GAAP and Non-GAAP
weighted average 137,128 139,126 138,188 137,788
common shares
GAAP diluted $ 0.14 $ 0.19 $ 0.46 $ 0.51
income per share
Effect of
adjustments
noted above 0.06 0.04 0.19 0.15
and change in
dilution noted
below
Non-GAAP diluted $ 0.20 $ 0.23 $ 0.65 $ 0.66
income per share
GAAP and Non-GAAP
weighted average
common shares and 140,877 143,296 142,109 141,996
dilutive common
share equivalents
Contact:
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
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