Sapient Reports First Quarter 2013 Results

  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
dridlon@sapient.com
or
Media Contact:
Sapient
Stacy Simpson, +1-914-830-8510
stacy.simpson@sapient.com
 
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