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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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