Sapient Reports First Quarter 2013 Results First Quarter Service Revenues Up 12.4% Compared to First Quarter 2012 Business Wire BOSTON -- May 15, 2013 Sapient (NASDAQ: SAPE) today reported the following financial results for the first quarter ended March 31, 2013. These results are consistent with the preliminary results issued on May 9, 2013. *Service revenues were $292.6 million compared to $260.4 million in the first quarter of 2012, an increase of $32.3 million, or 12.4%. Sequentially, service revenues were down $0.5 million, or 0.2%, from $293.2 million in the fourth quarter of 2012. On a constant currency basis, revenues increased 12.8% over the first quarter of 2012 and increased 0.3% sequentially. *GAAP income from operations was $12.0 million, or 4.1% of service revenues, compared to $15.5 million, or 6.0% of service revenues, reported in the first quarter of 2012. *Non-GAAP income from operations was $27.3 million, or 9.3% of service revenues, compared to $24.3 million, or 9.4% of service revenues, reported in the first quarter of 2012. *GAAP diluted net income per share was $0.05, compared to $0.06 in the first quarter of 2012. *Non-GAAP diluted net income per share was $0.12, compared to $0.10 in the first quarter of 2012. “Despite a slower start to the year, our business is well positioned competitively and showing strong momentum,” said Sapient Chief Executive Officer and Co-Chairman Alan J. Herrick. “Both SapientNitro and Sapient Global Markets are well positioned for growth.” The company used cash from operations of $9.4 million in the first quarter of 2013, compared to a use of $13.8 million in the first quarter of 2012. As of March 31, 2013, the company had cash, cash equivalents, restricted cash and marketable securities of $226.0 million. Days sales outstanding was 65 days for the first quarter of 2013, up from 63 days in the fourth quarter of 2012 and down from 69 days in the first quarter of 2012. Outlook Sapient management provided the following guidance which is also consistent with the guidance provided on May 9, 2013: *For the second quarter ending June 30, 2013, service revenues are expected to be in the range of $300 million to $310 million. Both SapientNitro and Sapient Global Markets are expected to grow sequentially, with the majority of the growth coming from SapientNitro. *Second quarter 2013 non-GAAP operating margin is expected to be 12% or higher. Tax Liabilities Review The company completed its self-initiated review and analysis of tax liabilities relating to cross–border mobility of employees into various countries. As a result, the company made immaterial revisions to previously reported financial results for the years 2006 through 2012 totaling $14.1 million, which is consistent with the Company’s previously estimated range of $12 million to $18 million, as reported on May 9, 2013. Webcast and Conference Call Sapient will host a discussion of its first 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 expected growth of SapientNitro and Sapient Global Markets; the financial guidance for the second quarter of 2013, including expected service revenues and expected non-GAAP operating margin; and estimated tax liabilities resulting from cross-border mobility of employees into various countries – 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; the final amount of tax owed to various countries relating to the cross-border mobility of 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 March 31, 2013 2012 (in thousands, except per share amounts) Revenues: Service revenues $ 292,638 $ 260,379 Reimbursable expenses 10,345 8,783 Total gross revenues 302,983 269,162 Operating expenses: Project personnel expenses 206,745 183,770 Reimbursable expenses 10,345 8,783 Total project personnel expenses and reimbursable 217,090 192,553 expenses Selling and marketing 11,792 10,695 expenses General and administrative 54,002 46,713 expenses Restructuring and other 2,014 (76 ) related charges (benefits) Amortization of purchased 3,657 2,622 intangible assets Acquisition costs and other 900 1,125 related charges Impairment of intangible 1,494 - asset Total operating expenses 290,949 253,632 Income from operations 12,034 15,530 Interest and other income, 872 1,822 net Income before income taxes 12,906 17,352 Provision for income taxes 6,376 8,467 Net income 6,530 8,885 Less: Net income (loss) attributable to (46 ) - noncontrolling interest Net income attributable to stockholders of Sapient $ 6,576 $ 8,885 Corporation Basic net income per share attributable to stockholders $ 0.05 $ 0.06 of Sapient Corporation Diluted net income per share attributable to stockholders of $ 0.05 $ 0.06 Sapient Corporation Weighted average common 137,425 139,458 shares Weighted average dilutive 4,781 4,458 common share equivalents Weighted average common shares and dilutive common 142,206 143,916 share equivalents Sapient Corporation Consolidated Unaudited Condensed Balance Sheets March 31, 2013 December 31, 2012 (in thousands) ASSETS Current assets: Cash and cash equivalents $ 214,050 $ 234,038 Marketable securities, current 6,460 6,321 portion Restricted cash, current portion 465 9,026 Accounts receivable 158,354 168,951 Unbilled revenues 89,963 71,842 Deferred tax assets, current 17,890 15,809 portion Prepaid expenses and other current 47,454 43,791 assets Total current assets 534,636 549,778 Marketable securities, noncurrent 1,202 1,202 portion Restricted cash, noncurrent portion 3,845 2,914 Property and equipment, net 79,943 80,661 Purchased intangible assets, net 30,309 35,050 Goodwill 131,440 128,628 Other noncurrent assets 9,421 8,651 Total assets $ 790,796 $ 806,884 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 25,781 $ 26,937 Accrued expenses 45,099 52,584 Accrued compensation 75,759 98,106 Accrued restructuring costs, 979 129 current portion Income tax payable 9,455 8,273 Deferred revenues 27,867 27,682 Total current liabilities 184,940 213,711 Accrued restructuring costs, 510 246 noncurrent portion Deferred tax liabilities, 20,517 19,892 noncurrent portion Other long-term liabilities 69,520 66,561 Total liabilities 275,487 300,410 Noncontrolling interest 1,169 - Stockholders' equity 514,140 506,474 Total liabilities and stockholders’ $ 790,796 $ 806,884 equity Sapient Corporation Consolidated Unaudited Statements of Cash Flows Three Months Ended March 31, 2013 2012 (in thousands) Cash flows from operating activities: Net income $ 6,530 $ 8,885 Adjustments to reconcile net income to net cash used in operating activities: Deferred income taxes (1,541 ) 15 Unrealized (gain) loss on financial (274 ) 107 instruments Loss recognized on disposition of fixed 762 47 assets Depreciation and amortization expense 10,666 8,086 Impairment of intangible asset 1,494 - Stock-based compensation expense 7,156 5,148 Excess tax benefits from exercise and (463 ) - release of stock-based awards Non-cash restructuring charges 146 - Changes in operating assets and liabilities, excluding impact of acquisitions: Accounts receivable 9,981 19,911 Unbilled revenues (18,359 ) (27,152 ) Prepaid expenses and other current assets (3,114 ) 1,400 Other noncurrent assets 127 196 Accounts payable (350 ) (5,389 ) Other accrued liabilities (332 ) (23 ) Accrued restructuring costs 978 (208 ) Accrued compensation (22,641 ) (22,591 ) Deferred revenues (360 ) (4,488 ) Other long-term liabilities 187 2,247 Net cash used in operating activities (9,407 ) (13,809 ) Cash flows from investing activities: Purchases of property and equipment and cost (6,396 ) (10,162 ) of internally developed software Cash paid for acquisitions, net of cash (4,948 ) - acquired Sales and maturities of marketable - 1,900 securities classified as available-for-sale Purchases of marketable securities (100 ) (86 ) Acquisition of cost method investment (200 ) - Cash received on financial instruments, net 177 56 Change in restricted cash balances 2,029 112 Net cash used in investing activities (9,438 ) (8,180 ) Cash flows from financing activities: Principal payments under capital lease - (20 ) obligations Excess tax benefits from exercise and 463 - release of stock-based awards Proceeds from stock option plans 1,029 457 Net cash provided by financing activities 1,492 437 Effect of exchange rate changes on cash and (2,635 ) 6,107 cash equivalents Net decrease in cash and cash equivalents (19,988 ) (15,445 ) Cash and cash equivalents, at beginning of 234,038 212,406 period Cash and cash equivalents, at end of period $ 214,050 $ 196,961 Sapient Corporation Unaudited Reconciliation of Non-GAAP Financial Measures Three Months Ended March 31, 2013 2012 (in thousands, except per share amounts) Service revenues $ 292,638 $ 260,379 GAAP income from operations $ 12,034 $ 15,530 Stock-based compensation 7,156 5,148 expense Restructuring and other 2,014 (76 ) related charges (benefits) Amortization of purchased 3,657 2,622 intangible assets Acquisition costs and other 900 1,125 related charges Impairment of intangible 1,494 - asset Non-GAAP income from $ 27,255 $ 24,349 operations GAAP operating margin 4.1 % 6.0 % Effect of adjustments 5.2 % 3.4 % detailed above Non-GAAP operating margin 9.3 % 9.4 % GAAP net income attributable to stockholders of Sapient $ 6,576 $ 8,885 Corporation Stock-based compensation 4,585 3,243 expense, net of tax Restructuring and other related charges (benefits), 1,359 (54 ) net of tax Amortization of purchased 2,748 2,091 intangible assets, net of tax Acquisition costs and other 608 796 related charges, net of tax Impairment of intangible 1,133 - asset, net of tax Non-GAAP net income attributable to stockholders $ 17,009 $ 14,961 of Sapient Corporation GAAP basic income per share attributable to stockholders $ 0.05 $ 0.06 of Sapient Corporation Effect of adjustments 0.07 0.05 detailed above Non-GAAP basic income per share attributable to $ 0.12 $ 0.11 stockholders of Sapient Corporation GAAP and Non-GAAP weighted 137,425 139,458 average common shares GAAP diluted income per share attributable to stockholders $ 0.05 $ 0.06 of Sapient Corporation Effect of adjustments noted above and change in dilution 0.07 0.04 noted below Non-GAAP diluted income per share attributable to $ 0.12 $ 0.10 stockholders of Sapient Corporation GAAP and Non-GAAP weighted average common shares and 142,206 143,916 dilutive common share equivalents Contact: Investor Relations Contact: Sapient Dean Ridlon, +1-617-963-1598 firstname.lastname@example.org or Media Contact: Sapient Stacy Simpson, +1-914-830-8510 email@example.com
Sapient Reports First Quarter 2013 Results
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