SAPIENT CORP - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - February 15, 2011

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Exhibit 99.1

Sapient Reports Fourth Quarter and Full-Year 2010 Results

Fourth Quarter Service Revenues Up 21% Over Q4 2009

Full-Year Service Revenues Up 29% Over 2009

BOSTON--(BUSINESS WIRE)--February 15, 2011--Sapient (NASDAQ: SAPE) today reported the following financial results for the fourth quarter and year ended December 31, 2010. For the fourth quarter of 2010:

  • Service revenues were $222.9 million compared to $183.5 million in the fourth quarter of 2009, an increase of 21%. Sequentially, service revenues were up $5.8 million, or 3%, from $217.1 million in the third quarter of 2010. On a constant currency basis, revenues increased 22% over the fourth quarter of 2009 and 1% sequentially.
  • GAAP income from operations was $22.1 million, or 9.9% of service revenues, up 15.1% from $19.2 million, or 10.4% of service revenues, reported in the fourth quarter of 2009.
  • Non-GAAP income from operations was $27.6 million, or 12.4% of service revenues, up 11.3% from $24.8 million, or 13.5% of service revenues, reported in the fourth quarter of 2009.
  • GAAP diluted net income per share was $0.11, compared to $0.51 in the fourth quarter of 2009 which included a non-recurring net tax benefit of $54.8 million, or $0.40 per share.
  • Non-GAAP diluted net income per share was $0.14, compared to $0.11 in the fourth quarter of 2009.

For the year ended December 31, 2010, service revenues were $823.5 million compared to $638.9 million for 2009, an increase of 29%.

“We had a strong finish to 2010 and are proud of the results we achieved for the year, with all three business segments posting excellent growth,” said Sapient President and Chief Executive Officer Alan J. Herrick. “We continue to position the company to help our clients succeed in a rapidly-changing business and consumer environment.”

The company generated cash from operations of $44.0 million in the fourth quarter of 2010, compared to $21.0 million in the fourth quarter of 2009. For the year ended December 31, 2010, cash from operations was $87.3 million, up 126% from $38.7 million for the twelve months ended December 31, 2009. As of December 31, 2010, the company had cash, cash equivalents and marketable securities of $234.1 million. Days sales outstanding was 65 days for the fourth quarter of 2010, improved from 68 days in the third quarter of 2010 and 66 days for the fourth quarter of 2009.

Outlook

Sapient management provided the following guidance:

  • For the first quarter ending March 31, 2011, service revenues are expected to be $228 million or higher.
  • First quarter 2011 non-GAAP operating margin is expected to be 9.5% or better.
  • During the first quarter of 2011, it is expected that there will be a restructuring charge of approximately $5.5 million primarily due to the acceleration of stock-based compensation expense related to the previously-announced transition of Chris Clarke, the founder of Nitro Group, from employee to consultant.
  • For the year ending December 31, 2011, service revenues are expected to grow by 20% or higher.
  • Non-GAAP operating margin for 2011 is expected to be in the range of 12% to 14%.

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:

U.S.: (888) 713-4217

International: (617) 213-4869

Passcode: 94193182

Please use the following link to pre-register for the conference call:

https://www.theconferencingservice.com/prereg/key.process?key=PBNLRFGLF

Please use the following link to access the live webcast of this event as well as an archive of the webcast:

http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=65979&eventID=3698930

The link to the webcast will also be posted at:

http://www.sapient.com/about+us/Investors.htm.

In addition, a re-broadcast of the conference call will be available from February 15 at 7:30 p.m. ET through February 22 at 11:59 p.m. ET. The replay information is as follows:

U.S.: (888) 286-8010

International: (617) 801-6888

Passcode: 48018145

Adjusted (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 has presented service revenues in constant currency terms, which excludes the effect of currency fluctuations between the U.S. dollar and the local functional currencies in countries where the company operates. 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. However, 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 2011 – that involve a number of risks and uncertainties. Actual results could differ materially from management’s expectations. 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 risk factors set forth in the company’s most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q, as filed with the SEC.

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 North America, 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 31, Twelve Months Ended December 31,
2010   2009 2010   2009
 
(in thousands, except per share amounts)
Revenues:
Service revenues $ 222,880 $ 183,450 $ 823,511 $ 638,884
Reimbursable expenses   9,633     7,851     40,008   27,794  
Total gross revenues   232,513     191,301     863,519   666,678  
Operating expenses:
Project personnel expenses 148,815 119,523 563,930 435,859
Reimbursable expenses   9,633     7,851     40,008   27,794  
Total project personnel expenses and reimbursable expenses 158,448 127,374 603,938 463,653
Selling and marketing expenses 10,663 9,460 38,833 31,931
General and administrative expenses 40,056 33,693 150,877 118,018
Restructuring and other related (benefit) charges (34 ) (273 ) 414 4,548
Amortization of purchased intangible assets 1,321 1,700 5,448 5,146
Acquisition costs and other related charges   -     179     111   2,962  
Total operating expenses 210,454 172,133 799,621 626,258
                     
Income from operations 22,059 19,168 63,898 40,420
 
Interest and other income, net   1,218     689     3,705   3,156  
 
Income before income taxes 23,277 19,857 67,603 43,576
Provision for income taxes 7,590 8,043 23,798 13,735
Benefit from release of valuation allowance   -     (58,285 )   -   (58,285 )
(Benefit from) provision for income taxes   7,590     (50,242 )   23,798   (44,550 )
Net income $ 15,687   $ 70,099   $ 43,805 $ 88,126  
 
Basic net income per share $ 0.12   $ 0.54   $ 0.33 $ 0.69  
Diluted net income per share $ 0.11   $ 0.51   $ 0.32 $ 0.66  
 
Weighted average common shares 133,582 129,273 132,060 127,969
Weighted average dilutive common share equivalents   6,288     7,089     6,669   4,912  

Weighted average common shares and dilutive common share equivalents

  139,870     136,362     138,729   132,881  
 
Sapient Corporation
Consolidated Unaudited Condensed Balance Sheets
 
 
December 31, 2010 December 31, 2009
(in thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 219,448 $ 195,678
Marketable securities, current portion 8,861 16,082
Restricted cash, current portion 1,416 393
Accounts receivable, less allowance for doubtful accounts 136,300 111,987
Unbilled revenues 49,765 47,426
Deferred tax assets, current portion 23,220 27,616
Prepaid expenses and other current assets   21,256   24,893
Total current assets 460,266 424,075
Marketable securities, net of current portion 1,269 1,362
Restricted cash, net of current portion 3,093 2,308
Property and equipment, net 35,571 29,229
Purchased intangible assets, net 17,629 23,061
Goodwill 77,865 76,004
Deferred tax assets, net of current portion 20,860 33,521
Other assets   7,619   5,359
 
Total assets $ 624,172 $ 594,919
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 18,714 $ 19,238
Accrued compensation 66,609 49,147
Accrued restructuring costs, current portion 3,129 3,727
Deferred revenues, current portion 18,558 19,544
Other current liabilities   52,011   55,855
Total current liabilities 159,021 147,511
Accrued restructuring costs, net of current portion - 2,994
Deferred tax liability, net of current portion 831 1,579
Other long-term liabilities   22,015   16,634
Total liabilities 181,867 168,718
 
Stockholders' equity   442,305   426,201
 
Total liabilities and stockholders’ equity $ 624,172 $ 594,919
 
Sapient Corporation
Consolidated Unaudited Statements of Cash Flows
       
 
 
Three Months Ended Twelve Months Ended
December 31, December 31,
2010 2009 2010 2009
 
(in thousands)
 
Cash flows from operating activities:
Net income $ 15,687 $ 70,099 $ 43,805 $ 88,126
Adjustments to reconcile net income to net cash provided by operating activities:
(Gain) loss recognized on disposition of fixed assets (275 ) 127 (35 ) 85
Unrealized (gain) loss on financial instruments (28 ) (17 ) 139 44
Unrealized loss (gain) on marketable securities, net - - (132 ) (103 )
Depreciation and amortization expense 5,625 5,649 21,662 21,130
Deferred income taxes 13,470 (833 ) 16,231 869
(Recovery of) provision for doubtful accounts, net (227 ) (614 ) (227 ) 215
Income tax benefit from release of valuation allowance - (58,285 ) - (58,285 )
Stock-based compensation expense 4,232 3,993 18,156 14,921
Changes in operating assets and liabilities, net of acquisition:
Accounts receivable (15,020 ) (17,486 ) (24,474 ) (8,805 )
Unbilled revenues 16,388 1,940 (2,447 ) (1,286 )
Prepaid expenses and other current assets 8,350 9,515 1,738 (3,255 )
Sales of trading marketable securities - - 16,425 -
Other assets (824 ) (1,226 ) (2,205 ) (141 )
Accounts payable (2,403 ) (196 ) (1,299 ) 3,484
Accrued compensation 6,347 4,497 17,202 (12,030 )
Payments of withholding taxes in connection with vesting of stock-based awards (510 ) (469 ) (10,031 ) (5,018 )
Accrued restructuring costs (1,091 ) (1,449 ) (3,548 ) (1,207 )
Deferred revenues 3,266 4,163 (900 ) 3,325
Other accrued liabilities (11,380 ) 525 (7,945 ) (5,373 )
Other long-term liabilities   2,420     1,062     5,195     2,016  
 
Net cash provided by operating activities   44,027     20,995     87,310     38,712  
Cash flows from investing activities:
Cash paid for acquisitions - (4,888 ) (3,163 ) (19,057 )
Purchases of property and equipment and cost of internally developed software (6,234 ) (2,489 ) (21,253 ) (9,419 )
Sales and maturities of marketable securities not classified as trading - 227 881 4,023
Purchases of marketable securities not classified as trading (8,781 ) - (8,781 ) -
Cash received on financial instruments, net 134 181 669 479
Change in restricted cash   (1,762 )   8     (1,789 )   (122 )
 
Net cash used in investing activities   (16,643 )   (6,961 )   (33,436 )   (24,096 )
Cash flows from financing activities:
Principal payments under capital lease obligation (21 ) (26 ) (83 ) (34 )
Proceeds from line of credit 1,330 - 4,380 -
Proceeds from stock option plans 2,747 462 8,690 1,373
Windfall benefit from exercise and release of stock-based awards - 29 - 29
Dividends paid on common stock   (11 )   -     (46,843 )   -  
 
Net cash provided by (used in) financing activities   4,045     465     (33,856 )   1,368  
Effect of exchange rate changes on cash and cash equivalents   (1,910 )   5,510     3,752     10,354  
 
Increase in cash and cash equivalents 29,519 20,009 23,770 26,338
Cash and cash equivalents, at beginning of period   189,929     175,669     195,678     169,340  
Cash and cash equivalents, at end of period $ 219,448   $ 195,678   $ 219,448   $ 195,678  
 
Sapient Corporation
Unaudited Reconciliation of Non-GAAP Financial Measures
       
 
Three Months Ended December 31, Twelve Months Ended December 31,
2010 2009 2010 2009
 
(in thousands, except per share amounts)
 
Service revenues $ 222,880   $ 183,450   $ 823,511   $ 638,884  
 
GAAP income from operations $ 22,059 $ 19,168 $ 63,898 $ 40,420
Stock-based compensation expense 4,232 3,993 18,156 14,921
Restructuring and other related (benefit) charges (34 ) (273 ) 414 4,548
Amortization of purchased intangible assets 1,321 1,700 5,448 5,146
Acquisition costs and other related charges - 179 111 2,962
Stock-based compensation review and restatement benefit  

-

    -     (301 )   (992 )
Non-GAAP income from operations $ 27,578   $ 24,767   $ 87,726   $ 67,005  
 
GAAP operating margin 9.9 % 10.4 % 7.8 % 6.3 %
Effect of adjustments detailed above   2.5 %   3.1 %   2.9 %   4.2 %
Non-GAAP operating margin   12.4 %   13.5 %   10.7 %   10.5 %
                                 
 
GAAP net income $ 15,687 $ 70,099 $ 43,805 $ 88,126
Income tax benefit from release of valuation allowance - (58,285 ) - (58,285 )
Stock-based compensation expense, net of tax (1) 2,655 2,481 11,296 9,239
Restructuring and other related (benefit) charges, net of tax (1) (20 ) (163 ) 352 2,916
Amortization of purchased intangible assets, net of tax (1) 1,034 1,013 4,231 3,065
Acquisition costs and other related charges, net of tax (1) - 107 66 1,764
Stock-based compensation review and restatement benefit, net of tax (1)  

-

    -     (179 )   (591 )
Non-GAAP net income $ 19,356   $ 15,252   $ 59,571   $ 46,234  
                                 
 
GAAP basic income per share $ 0.12 $ 0.54 $ 0.33 $ 0.69
Effect of adjustments detailed above   0.02     (0.42 )   0.12     (0.33 )
Non-GAAP basic income per share $ 0.14   $ 0.12   $ 0.45   $ 0.36  
 
GAAP and Non-GAAP weighted average common shares   133,582     129,273     132,060     127,969  
 
 
GAAP diluted income per share $ 0.11 $ 0.51 $ 0.32 $ 0.66
Effect of adjustments noted above and change in dilution noted below   0.03     (0.40 )   0.11     (0.31 )
Non-GAAP diluted income per share $ 0.14   $ 0.11   $ 0.43   $ 0.35  
 
GAAP and Non-GAAP weighted average common shares and dilutive common share equivalents   139,870     136,362     138,729     132,881  
 
                                 
 
(1) 2009 Non-GAAP amounts have been recast to reflect 2010 effective tax rate for comparative purposes.

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

SAPIENT CORP Reports