BOSTON, Mass. — February 19, 2009 — Sapient (NASDAQ: SAPE) today reported the following financial results for the fourth quarter ended December 31, 2008:
• Service revenues were $164.7 million, compared to $155.0 million in the fourth quarter of 2007, an increase of 6% (16% on a constant currency basis), including the effects of the Derivatives Consulting Group acquisition in the third quarter of 2008.
• GAAP income from operations was $26.0 million, or 15.8% of service revenues, up 150% over the $10.4 million reported in the fourth quarter of 2007.
• Non-GAAP income from operations (excluding stock-based compensation expense, restructuring and other related charges, amortization of purchased intangible assets and a credit relating to the stock-based compensation review and restatement) was $27.9 million, or 16.9% of service revenues. This is an increase of 71% over non-GAAP income from operations of $16.3 million, or 10.5% of service revenues, in the fourth quarter of 2007.
• GAAP diluted net income per share was $0.20, compared to $0.07 in the fourth quarter of 2007.
• Non-GAAP diluted net income per share was $0.21, compared to $0.12 in the fourth quarter of 2007.
“Our solid fourth quarter completes a successful 2008 in which we achieved 21% revenue growth and more than tripled our operating profit,” said Sapient President and Chief Executive Officer Alan J. Herrick. “While the current economic environment will make 2009 a more challenging year, we believe our client value proposition, coupled with our fiscal discipline, will position us well as the year progresses.”
The Company generated cash from operations of $36.7 million in the fourth quarter of 2008, compared to $31.7 million in the fourth quarter of 2007. As of December 31, 2008, the Company had cash, cash equivalents and marketable securities of $192.6 million. Days sales outstanding was 61 days for the fourth quarter of 2008, compared to 60 days for the third quarter of 2008 and 57 days for the fourth quarter of 2007.
For the twelve months ended December 31, 2008:
• Service revenues were $662.4 million, compared to $546.4 million in 2007, an increase of 21% (23% on a constant currency basis), including the effects of the Derivatives Consulting Group acquisition in the third quarter of 2008.
• GAAP income from operations was $64.6 million, or 9.8% of service revenues, more than three times the $18.3 million reported in 2007.
• 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 $82.7 million, or 12.5% of service revenues. This is a 78% increase over non-GAAP income from operations of $46.4 million, or 8.5% of service revenues, in 2007.
• GAAP diluted net income per share was $0.48, compared to $0.12 in 2007.
• Non-GAAP diluted net income per share was $0.62, compared to $0.34 in 2007.
In response to the impact of current global economic conditions on the Company’s demand environment, Sapient announced that it recently took action to reduce its people count by approximately 500, or approximately 8% of its workforce, primarily across its North America and India operations. The Company expects to continue to hire in 2009 in targeted areas, including trading and risk management, marketing services and government services. The workforce reduction is expected to create annualized cost savings of approximately $18 million. In connection with this action, exited employees have received cash severance packages and outplacement assistance. The Company expects to take a restructuring charge of approximately $2.6 million in the first quarter of 2009.
Outlook
Sapient management provided the following guidance:
• For the first quarter ending March 31, 2009, service revenues are expected to be in the range of $140 million to $145 million, including an approximate $17 million negative currency impact compared to the first quarter of 2008.
• First quarter non-GAAP operating margin is expected to be 7% or higher.
Webcast and Conference Call
Sapient will host a discussion of its fourth quarter results at 4:30 p.m. (EST) today, which will be broadcast live on the Internet. The dial-in information for the conference call is:
U.S.: (888) 680-0860
International: (617) 213-4852
Passcode: 52330071
Please use the following link to pre-register for the conference call:
https://www.theconferencingservice.com/prereg/key.process?key=PWF9DHM9H
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=2081434
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 19 at 7:30 p.m. (EST) through March 5 at 11:59 p.m. (EST). The replay information is as follows:
U.S.: (888) 286-8010
International: (617) 801-6888
Passcode: 49030726
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 and expense relating to the stock-based compensation review and restatement. However, because the Company’s reported non-GAAP financial measures are not calculated according to GAAP, these measures may not necessarily be comparable to GAAP or 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 future periods and the expectation of savings from the restructuring – 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, 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, Hilton International, Janus, Sony Electronics and Verizon, rely on the company’s unique approach to drive growth and market momentum. Headquartered in Boston, Sapient operates across North America, Europe and India. For more information, please visit www.sapient.com.
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To view the financial schedules that are part of this release, click here.