CAMBRIDGE, Mass. — Feb. 28, 2008 — Sapient (NASDAQ: SAPE) today reported the following financial results for the fourth quarter ended December 31, 2007:
• Service revenues were $155.0 million, an increase of 36% from $113.6 million in the fourth quarter of 2006.
• GAAP income from operations was $10.4 million, or 6.7% of service revenues, an increase of $9.9 million from GAAP income from operations of $0.5 million in the fourth quarter of 2006.
• Non-GAAP income from operations (excluding stock-based compensation expense, restructuring and other related charges, amortization of purchased intangible assets, and expense relating to the stock-based compensation review and restatement) was $16.3 million, or 10.5% of service revenues. This compares to non-GAAP income from operations of $9.6 million or 8.4% of service revenues in the fourth quarter of 2006.
• GAAP diluted income per share from continuing operations increased to $0.07 from a loss of $0.01 in the fourth quarter of 2006.
• Non-GAAP diluted income per share from continuing operations was $0.12, compared to $0.06 in the fourth quarter of 2006.
“Our impressive revenue growth and continued strong operating performance improvements in the fourth quarter are a testament to our highly distinctive market position, as well as our focus on operational efficiencies,” said Alan J. Herrick, Sapient’s president and chief executive officer. “With strong demand for our services, we are well positioned for further expansion in our core markets and service sectors.”
The Company generated cash from operations of $31.7 million in the fourth quarter of 2007, compared to $23.8 million in the fourth quarter of 2006. Sapient ended 2007 with cash, cash equivalents and marketable securities of $178.1 million and no debt. Days sales outstanding was 57 days for the fourth quarter of 2007, improved from 62 days in the third quarter of 2007 and 70 days in the fourth quarter of 2006. During the fourth quarter of 2007, Sapient repurchased 96,298 shares of its common stock for $0.6 million.
As of December 31, 2007, the Company held approximately $41.6 million of marketable securities invested in auction rate securities collateralized by student loans and municipal debt. None of the securities held by the Company were collateralized by residential, commercial mortgages or sub-prime loans. The auction rate securities held by the Company are private placement securities with long-term maturities for which the interest rates reset through an auction process every 7 to 35 days. The auctions have historically provided a liquid market for these securities. Certain of the Company’s investments in auction rate securities began to experience failed auctions beginning on February 13, 2008. Since then, the continued uncertainty in the credit markets has caused additional auctions to fail and prevented the Company from liquidating certain of our holdings.
As of February 27, 2008, the Company held auction rate securities with principal of $28 million. The Company is currently in the process of obtaining current valuations on these securities, but believes that any impairment will be temporary in nature and will not result in a charge to earnings. Based on the Company’s ability to access its cash and other short-term investments, the Company does not anticipate that the current lack of liquidity of these investments will materially affect its ability to operate the business in the ordinary course.
Outlook
Sapient management provided the following guidance:
For the first quarter ending March 31, 2008:
1. Service revenues are expected to be $155 million or higher.
2. Non-GAAP operating margin is expected to be 7.5% or higher
For the year ending December 31, 2008:
1. Service revenue growth in 2008 is expected to be in the 20% to 25% range
2. Non-GAAP operating margin is expected to be 10% or higher, with the fourth quarter in the range of 13% to 16%
Webcast and Conference Call
Sapient will host a discussion of its fourth quarter results at 5:00 p.m. (EST) today, which will be broadcast live on the Internet. The dial-in information for the conference call is:
U.S.: (888) 679-8018
International: (617) 213-4845
Passcode: 42130249
Please use the following link to pre-register for the conference call as well as to access the live webcast of this event:
http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=65979&eventID=1600695.
In addition, a re-broadcast of the conference call will be available from February 28th at 7:00 p.m. (EST) through March 10th at 11:59 p.m. (EST). The replay information is as follows:
U.S.: (888) 286-8010
International: (617) 801-6888
Passcode: 65093751
The archived webcast of this event may be accessed at:
http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=65979&eventID=1600695
This link will also be posted at http://www.sapient.com/about+us/Investors.htm.
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 which exclude stock-based compensation expense, restructuring and other related charges, amortization of purchased intangible assets and expense relating to the stock-based compensation review and restatement.
Safe Harbor Statement
This press release contains forward-looking statements that involve a number of risks and uncertainties, in particular the financial guidance for future periods. Actual results could differ materially from management’s expectations. A number of factors could cause actual events to differ materially from those indicated. Such factors include, without limitation: the continued acceptance of the Company’s services; 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, and continue to attract and retain high-quality employees; as well as 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, a global services firm, operates two groups—Sapient Interactive and Sapient Consulting—that help clients compete, evolve and grow in an increasingly complex marketplace. Sapient Interactive provides brand and marketing strategy, award-winning creative work, web design and development and emerging media expertise. Sapient Consulting provides business and IT strategy, process and systems design, package implementation and custom development, as well as outsourcing services such as testing, maintenance and support.
Sapient’s passion for client success—evidenced by its ability to foster collaboration, drive innovation and solve challenging problems—is the subject of case studies on leadership and organizational behavior used by MBA students at both Harvard and Yale. Leading clients, including BP, Essent Energie, Harrah's Entertainment, Hilton International, Janus, Sony Electronics and Verizon, rely on the company’s unique approach to drive growth and market momentum. Headquartered in Cambridge, Massachusetts, Sapient operates across North America, Europe and India. For more information, please visit www.sapient.com.
To view the financial schedules that are part of this release, click here.
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Sapient is a registered service mark of Sapient Corporation.