Sapient Reports Third Quarter 2013 Results

  Sapient Reports Third Quarter 2013 Results

  Third Quarter Service Revenues Up 12% and Non-GAAP Operating Income Up 17%
                        Compared to Third Quarter 2012

Business Wire

BOSTON -- November 5, 2013

Sapient (NASDAQ: SAPE) today reported the following financial results for the
third quarter ended September 30, 2013:

  *Service revenues were $323.8 million compared to $288.5 million in the
    third quarter of 2012, an increase of $35.3 million, or 12.2%.
    Sequentially, service revenues were up $9.5 million, or 3.0%, from $314.3
    million in the second quarter of 2013. On a constant currency basis,
    revenues increased 13.0% over the third quarter of 2012 and 3.2%
    sequentially.
  *GAAP income from operations was $38.4 million, or 11.9% of service
    revenues, compared to $32.2 million, or 11.2% of service revenues,
    reported in the third quarter of 2012.
  *Non-GAAP income from operations was $48.9 million, or 15.1% of service
    revenues, compared to $41.8 million,  or 14.5% of service revenues,
    reported in the third quarter of 2012.
  *GAAP diluted net income per share was $0.19, compared to $0.15 in the
    third quarter of 2012.
  *Non-GAAP diluted net income per share was $0.24, compared to $0.20 in the
    third quarter of 2012.

“We are really pleased with our performance in the quarter,” said Sapient
Chief Executive Officer and Co-Chairman Alan J. Herrick. “All three business
units grew nicely and we continued to expand non-GAAP operating profit. We
remain excited about our competitive position and our opportunities for
further growth despite the uncertain macroeconomic environment.”

The company generated cash from operations of $35.1 million in the third
quarter of 2013, compared to $38.2 million in the third quarter of 2012. As of
September 30, 2013, the company had cash, cash equivalents, restricted cash
and marketable securities of $282.2 million. Days sales outstanding was 69
days for the third quarter of 2013, up from 62 days in the second quarter of
2013 and 67 days in the third quarter of 2012.

Outlook

Sapient management provided the following guidance:

  *For the fourth quarter ending December 31, 2013, service revenues are
    expected to be in the range of $320 million to $328 million.
  *Fourth quarter 2013 non-GAAP operating margin is expected to be 14.5% to
    16.0%.

Webcast and Conference Call

Sapient will host a discussion of its third 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 fourth 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.

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 September 30,  Nine Months Ended
                                                     September 30,
                    2013           2012          2013       2012    
                  (in thousands, except per share amounts)
Revenues:
Service           $  323,793        $  288,467       $ 930,765     $ 827,835
revenues
Reimbursable        11,087          10,801        33,705      29,690  
expenses
Total gross         334,880         299,268       964,470     857,525 
revenues
Operating
expenses:
Project
personnel            218,977           194,543         637,258       570,895
expenses
Reimbursable        11,087          10,801        33,705      29,690  
expenses
Total project
personnel
expenses and         230,064           205,344         670,963       600,585
reimbursable
expenses
Selling and
marketing            11,968            11,221          36,754        33,146
expenses
General and
administrative       52,136            46,652          159,657       141,608
expenses
Restructuring
and other
related              (28      )        (19      )      1,955         (109    )
(benefits)
charges
Amortization of
purchased            3,007             2,744           9,927         8,111
intangible
assets
Acquisition
costs and other
related              (1,268   )        1,121           (1,652  )     2,714
(benefits)
charges
Impairment of
intangible          596             -             2,090       -       
asset
Total operating     296,475         267,063       879,694     786,055 
expenses
Income from          38,405            32,205          84,776        71,470
operations
Interest and
other income,       1,340           812           3,412       3,713   
net
Income before        39,745            33,017          88,188        75,183
income taxes
Provision for       12,986          12,041        31,612      31,200  
income taxes
Net income           26,759            20,976          56,576        43,983
Less: Net
income (loss)
attributable to     (88      )       -             (175    )    -       
noncontrolling
interest
Net income
attributable to
stockholders of   $  26,847        $  20,976       $ 56,751     $ 43,983  
Sapient
Corporation
                                                                   
Basic net
income per
share
attributable to   $  0.19          $  0.15         $ 0.41       $ 0.32    
stockholders of
Sapient
Corporation
Diluted net
income per
share
attributable to   $  0.19          $  0.15         $ 0.40       $ 0.31    
stockholders of
Sapient
Corporation
                                                                   
Weighted
average common       139,959           136,883         139,202       138,544
shares
Weighted
average
dilutive common     2,302           3,275         3,731       3,979   
share
equivalents
Weighted
average common
shares and          142,261         140,158       142,933     142,523 
dilutive common
share
equivalents
                                                                   
                                                                   
                                                                   
                                                                   
                                                                   


Sapient Corporation
Consolidated Unaudited Condensed Balance Sheets
                                                          
                                        
                                        September 30, 2013   December 31, 2012
                                        (in thousands)
ASSETS
Current assets:
Cash and cash equivalents               $      272,756       $     234,038
Marketable securities, current                 7,310               6,321
portion
Restricted cash, current portion               101                 9,026
Accounts receivable                            175,618             168,951
Unbilled revenues                              104,865             71,842
Deferred tax assets, current portion           16,281              15,809
Prepaid expenses and other current            44,742             43,791
assets
Total current assets                           621,673             549,778
Marketable securities, noncurrent              -                   1,202
portion
Restricted cash, noncurrent portion            2,042               2,914
Property and equipment, net                    83,166              80,661
Purchased intangible assets, net               24,068              35,050
Goodwill                                       134,359             128,628
Other noncurrent assets                       8,914              8,651
                                                             
Total assets                            $      874,222       $     806,884
                                                             
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable                        $      25,166        $     26,937
Accrued expenses                               48,892              52,584
Accrued compensation                           105,422             98,106
Accrued restructuring costs, current           383                 129
portion
Income tax payable                             17,427              8,273
Deferred revenues                             23,326             27,682
Total current liabilities                      220,616             213,711
Accrued restructuring costs,                   94                  246
noncurrent portion
Deferred tax liabilities, noncurrent           20,798              19,892
portion
Other long-term liabilities                   66,440             66,561
Total liabilities                              307,948             300,410
                                                             
Noncontrolling interest                       923                -
                                                             
Stockholders' equity                          565,351            506,474
                                                             
Total liabilities and stockholders’     $      874,222       $     806,884
equity
                                                             
                                                             
                                                             
                                                             
                                                             


Sapient Corporation
Consolidated Unaudited Statements of Cash Flows
                                                           
                           
                         Three Months Ended          Nine Months Ended
                         September 30,               September 30,
                          2013        2012        2013        2012    
                         (in thousands)
Cash flows from
operating activities:
  Net income             $ 26,759      $ 20,976      $ 56,576      $ 43,983
  Adjustments to
  reconcile net income
  to net cash used in
  operating
  activities:
    Deferred income        (1,841  )     (1,700  )     (608    )     9,430
    taxes
    Unrealized (gain)
    loss on financial      (683    )     (435    )     88            (580    )
    instruments
    Loss recognized on
    disposition of         33            168           1,043         334
    fixed assets
    Depreciation and
    amortization           9,684         8,771         30,160        25,270
    expense
    Loss recognized on
    sale of
    available-for-sale     -             -             28            -
    marketable
    securities
    Impairment of          596           -             2,090         -
    intangible asset
    Stock-based
    compensation           8,152         5,773         23,142        17,386
    expense
    Excess tax
    benefits from
    exercise and           (555    )     (7,240  )     (2,024  )     (10,611 )
    release of
    stock-based awards
    Non-cash
    restructuring          -             -             146           -
    charges
    Changes in
    operating assets
    and liabilities,
    excluding impact
    of acquisitions:
         Accounts          (17,880 )     (23,105 )     (6,659  )     (16,665 )
         receivable
         Unbilled          (11,961 )     11,354        (32,984 )     (7,686  )
         revenues
         Prepaid
         expenses and      9,851         (764    )     5,773         (10,837 )
         other current
         assets
         Other
         noncurrent        35            672           (144    )     (371    )
         assets
         Accounts          (4,255  )     (836    )     907           (4,399  )
         payable
         Other accrued     1,820         10,229        6,550         11,816
         liabilities
         Accrued           19,067        13,399        (72     )     (6,726  )
         compensation
         Accrued
         restructuring     (229    )     (78     )     (56     )     (340    )
         costs
         Deferred          935           1,038         (4,979  )     (4,069  )
         revenues
         Other
         long-term        (4,459  )    22          (3,525  )    (3,829  )
         liabilities
    Net cash provided
    by operating          35,069      38,244      75,452      42,106  
    activities
                                                                   
Cash flows from
investing activities:
  Purchases of
  property and
  equipment and cost       (9,442  )     (5,891  )     (27,201 )     (28,406 )
  of internally
  developed software
  Proceeds from sale
  of property and          -             32            -             32
  equipment
  Cash paid for
  acquisitions, net of     -             -             (4,993  )     -
  cash acquired
  Sales and maturities
  of marketable
  securities               -             -             1,372         1,900
  classified as
  available-for-sale
  Purchases of
  marketable
  securities               (1,665  )     (120    )     (1,916  )     (326    )
  classified as
  available-for-sale
  Acquisition of cost     -             -             (200    )     -
  method investment
  Cash (paid) received
  on financial             (1,701  )     102           (1,624  )     (78     )
  instruments, net
  Change in restricted    426         827         3,941       (891    )
  cash balances
    Net cash used in
    investing             (12,382 )    (5,050  )    (30,621 )    (27,769 )
    activities
                                                                   
Cash flows from
financing activities:
  Principal payments
  under capital lease      -             (7      )     -             (47     )
  obligations
  Excess tax benefits
  from exercise and        555           7,240         2,024         10,611
  release of
  stock-based awards
  Proceeds from stock      743           206           2,703         1,073
  option plans
  Repurchases of          -           (7,583  )    -           (44,603 )
  common stock
    Net cash provided
    by (used in)          1,298       (144    )    4,727       (32,966 )
    financing
    activities
                                                                   
Effect of exchange
rate changes on cash      (752    )    6,512       (10,840 )    5,744   
and cash equivalents
                                                                   
Net increase
(decrease) in cash and     23,233        39,562        38,718        (12,885 )
cash equivalents
Cash and cash
equivalents at            249,523     159,959     234,038     212,406 
beginning of period
Cash and cash
equivalents at end of    $ 272,756    $ 199,521    $ 272,756    $ 199,521 
period
                                                                   
                                                                   
                                                                   
                                                                   
                                                                   


Sapient Corporation
Unaudited Reconciliation of Non-GAAP Financial Measures
                                                             
                                                                   
                         Three Months Ended         Nine Months Ended
                         September 30,               September 30,
                          2013        2012        2013        2012    
                         (in thousands, except per share amounts)
                                                                   
Service revenues         $ 323,793    $ 288,467    $ 930,765    $ 827,835 
                                                                   
GAAP income from         $ 38,405      $ 32,205      $ 84,776      $ 71,470
operations
    Stock-based
    compensation           8,152         5,773         23,142        17,386
    expense
    Restructuring and
    other related          (28     )     (19     )     1,955         (109    )
    (benefits) charges
    Amortization of
    purchased              3,007         2,744         9,927         8,111
    intangible assets
    Acquisition costs
    and other related      (1,268  )     1,121         (1,652  )     2,714
    (benefits) charges
    Impairment of         596         -           2,090       -       
    intangible asset
Non-GAAP income from     $ 48,864     $ 41,824     $ 120,238    $ 99,572  
operations
                                                                   
GAAP operating margin      11.9    %     11.2    %     9.1     %     8.6     %
    Effect of
    adjustments           3.2     %    3.3     %    3.8     %    3.4     %
    detailed above
Non-GAAP operating        15.1    %    14.5    %    12.9    %    12.0    %
margin
                                                          
                                                                   
GAAP net income
attributable to          $ 26,847      $ 20,976      $ 56,751      $ 43,983
stockholders of
Sapient Corporation
    Stock-based
    compensation           5,227         3,641         14,842        10,932
    expense, net of
    tax
    Restructuring and
    other related
    (benefits)             (17     )     (11     )     1,334         (73     )
    charges, net of
    tax
    Amortization of
    purchased              2,253         2,183         7,450         6,458
    intangible assets,
    net of tax
    Acquisition costs
    and other related
    (benefits)             (1,142  )     737           (1,426  )     1,877
    charges, net of
    tax
    Impairment of
    intangible asset,     452         -           1,585       -       
    net of tax
Non-GAAP net income
attributable to          $ 33,620     $ 27,526     $ 80,536     $ 63,177  
stockholders of
Sapient Corporation
                                                          
                                                                   
GAAP basic income per
share attributable to    $ 0.19        $ 0.15        $ 0.41        $ 0.32
stockholders of
Sapient Corporation
    Effect of
    adjustments           0.05        0.05        0.17        0.14    
    detailed above
Non-GAAP basic income
per share attributable   $ 0.24       $ 0.20       $ 0.58       $ 0.46    
to stockholders of
Sapient Corporation
                                                                   
GAAP and Non-GAAP
weighted average          139,959     136,883     139,202     138,544 
common shares
                                                                   
                                                                   
GAAP diluted income
per share attributable   $ 0.19        $ 0.15        $ 0.40        $ 0.31
to stockholders of
Sapient Corporation
    Effect of
    adjustments noted
    above and change      0.05        0.05        0.16        0.13    
    in dilution noted
    below
Non-GAAP diluted
income per share
attributable to          $ 0.24       $ 0.20       $ 0.56       $ 0.44    
stockholders of
Sapient Corporation
                                                                   
GAAP and Non-GAAP
weighted average
common shares and         142,261     140,158     142,933     142,523 
dilutive common share
equivalents
                                                           

Contact:

Investor Relations Contact:
Sapient
Dean Ridlon, +1-617-963-1598
dridlon@sapient.com
or
Media Contact:
Sapient
MaryLiz Ghanem, +1-212-912-3063
mghanem@sapient.com
 
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