EX-99.1 2 a5083333ex991.txt EXHIBIT 99.1 Exhibit 99.1 Sapient Reports Fourth Quarter and Year-End Financial Results; Fourth Quarter Revenues Increase 28% Year-over-Year; Annual Revenues Grow 26% CAMBRIDGE, Mass.--(BUSINESS WIRE)--Feb. 16, 2006--Sapient (NASDAQ: SAPE), a business innovator, today announced financial results for its fourth quarter and year ended December 31, 2005. Fourth Quarter Financial Highlights -- Quarterly service revenues were $84.7 million, up 28% over the fourth quarter of 2004. -- Quarterly diluted EPS was $0.09 on a GAAP basis, or $0.07 excluding stock-based compensation, restructuring charges, and certain one-time tax benefits. -- Quarterly operating margin was 9% on a GAAP basis, or 11% excluding stock-based compensation and restructuring charges. -- Operating cash flow for the fourth quarter exceeded $30 million. -- Days Sales Outstanding (DSO) decreased 20 days from the previous quarter. 2005 Year-End Financial Highlights -- Annual service revenues were $319.5 million, up 26% over 2004 service revenues. -- Annual diluted EPS was $0.21 on a GAAP basis, or $0.24 excluding stock-based compensation, restructuring charges, and certain one-time tax benefits. -- Long-term revenues increased to 34% of 2005 revenues from 25% of revenues in 2004. "We closed out 2005 on a strong note, both financially and strategically. Our revenues were up 28% versus the same quarter last year, and we generated significant cash flow," said Jerry A. Greenberg, Sapient's co-chairman and co-chief executive officer. "Looking forward, we see great opportunity to expand our business in a number of high-growth markets, including marketing services and SAP consulting and business intelligence, as well as business solution areas such as trading and risk management, customer billing and self-service, e-commerce, and quality assurance." Consolidated service revenues for the fourth quarter of 2005 were $84.7 million, a 4% increase from service revenues of $81.7 million for the third quarter of 2005, and a 28% increase from the fourth quarter of 2004. Consolidated service revenues for the year ended December 31, 2005 were $319.5 million, a 26% increase from the year ended December 31, 2004. "Operating cash flow exceeded $30 million in the fourth quarter, which is the result of strong operating performance and a significant improvement in our working capital position," said Scott Krenz, Sapient's chief financial officer. "I believe our fourth quarter performance highlights the strong cash generating capability of Sapient's business model." Operating income, net income, and earnings per share amounts for the fourth quarter and full year are presented below, in accordance with U.S. generally accepted accounting principles (GAAP) and also using certain adjusted (non-GAAP) financial measures. GAAP Results: 2005 2004 ------------------------------------------------------- -------------- Full Full Year Q4 Q3 Year Q4 ---------------------------------------- ------- ------ ------- ------ Operating Income $21.6M $7.5M $6.2M $22.5M $8.7M ---------------------------------------- ------- ------ ------- ------ Operating Margin 7% 9% 8% 9% 13% ---------------------------------------- ------- ------ ------- ------ Net Income $26.6M $11.4M $6.3M $22.8M $8.0M ---------------------------------------- ------- ------ ------- ------ EPS (fully diluted basis) $0.21 $0.09 $0.05 $0.18 $0.06 ---------------------------------------- ------- ------ ------- ------ Results Using Adjusted (Non-GAAP) Financial Measures, Excluding Stock-Based Compensation Expense, Restructuring Charges, and Certain One-time Tax Benefits: 2005 2004 ------------------------------------------------------- -------------- Full Full Year Q4 Q3 Year Q4 ----------------------------------------- ------ ------ ------- ------ Adj. Operating Income $29.7M $9.3M $7.1M $24.4M $8.9M ----------------------------------------- ------ ------ ------- ------ Adj. Operating Margin 9% 11% 9% 10% 13% ----------------------------------------- ------ ------ ------- ------ Adj. Net Income $30.4M $9.0M $7.1M $24.1M $7.5M ----------------------------------------- ------ ------ ------- ------ Adj. EPS (fully diluted basis) $0.24 $0.07 $0.06 $0.19 $0.06 ----------------------------------------- ------ ------ ------- ------ Adjusted operating income for 2005 excludes $1.8 million in stock-based compensation and $6.3 million of restructuring charges, of which $6.0 million is attributable to adjustments to previous lease-related restructuring charges. Adjusted operating income for 2004 excludes $0.8 million in stock-based compensation and $1.1 million of restructuring charges, which is attributable to adjustments to previous lease-related restructuring charges. Adjusted net income for the full year and fourth quarter of 2005 excludes a one-time $4.3 million tax benefit related to the reversal of a deferred tax valuation allowance in Germany. Adjusted net income for the full year and fourth quarter of 2004 excludes a one-time $0.6 million tax benefit related to the reversal of a deferred tax valuation allowance in the United Kingdom. A reconciliation of the non-GAAP financial measures presented above is included in the accompanying financial tables. 2005 Business Highlights -- Sapient expanded its relationships with both new and long-term clients, including Allstate Canada, Avis Europe, BP, Cinergy, Cingular, Enbridge Gas Distribution, Essent Energie, Harrah's Entertainment, Janus Capital Group, Kaiser Permanente, Orange, PacifiCorp, Royal Bank of Scotland, Royal Mail, Scotiabank, Sony Electronics, T-COM, the U.S. Marine Corps, Verizon, Vertex, and Vodafone. -- Sapient acquired Business Information Solutions, LLC (BIS), an SAP services provider. The acquisition expanded Sapient's capabilities in high-growth areas such as business intelligence, NetWeaver strategy and integration, and SAP support. Sapient is currently providing SAP services to more than 50 clients, including industry leaders such as BP and PacifiCorp. -- Sapient announced its plans to acquire Planning Group International (PGI), an integrated marketing agency, in December 2005. The acquisition was completed on January 3, 2006 and positions Sapient to help clients exploit the possibilities created by the rapid evolution of media, advertising, and technology. -- Sapient expanded its operations in India, moving to new offices in Delhi and Bangalore. This expansion reflects the increasing demand for Sapient's Global Distributed Delivery(SM) model. More than 50% of the company's workforce is based in Sapient's two India offices. -- Sapient was recognized as one of the best places to work across the globe: -- Consulting Magazine awarded Sapient the highest honor, "Career Champion," in its "2005 10 Best Consulting Firms to Work for in North America" issue. -- Businessworld, the largest selling Indian business magazine, ranked Sapient #2 in its "Top 25 Great Places to Work 2005" report. -- Business Today ranked Sapient #7 in its "Best Companies to Work for in India" survey. -- Capital magazine, a leading German publication, ranked Sapient #9 in its "Germany's Best Employers" survey for 2005. Webcast and Conference Call Sapient will host a discussion of fourth quarter and year-end results in a conference call today at 4:30 p.m. (ET), which will be broadcast live on the Internet. For webcast registration information, please go to http://www.sapient.com/about+us/investors.htm. It is advisable to register at least 15 minutes prior to the call to download and install any necessary audio software. A re-broadcast of the call will be available from February 16 at 6:30 p.m. (ET) through February 23 at 11:59 p.m. (ET) by dialing 888-286-8010 (within the U.S.) or 617-801-6888 (outside the U.S.) and entering passcode 33308087 when prompted. Adjusted (Non-GAAP) Financial Measures Sapient provides these non-GAAP financial measures to complement results provided in accordance with GAAP, as management believes the measures help illustrate underlying trends in the Company's business and uses the measures to establish budgets and operational goals that are communicated internally and externally, manage the Company's business and evaluate its performance. The Company anticipates that it will continue reporting both GAAP and certain non-GAAP financial measures in its financial results, including reporting non-GAAP results based on the exclusion of stock-based compensation expense. Forward-Looking Statements This press release contains forward-looking statements that involve a number of risks and uncertainties. There are a number of factors that 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 timely complete its current and future client projects, its ability to successfully manage risks associated with its international operations, its ability to manage its growth, and projects effectively, and its ability to continue to attract and retain high quality employees, as well as other 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 business innovator, helps clients achieve extraordinary results from their customer relationships, business operations, and technology. Leveraging a unique approach, breakthrough thinking, and disciplined execution, Sapient leads its industry in delivering the right business results on time and on budget. Sapient works with clients that are driven to make a difference, including BP, Essent Energie, Harrah's Entertainment, Hilton International, Janus, National Institutes of Health (NIH), Sony Electronics, the U.S. Marine Corps, and Verizon. Founded in 1990, Sapient is headquartered in Cambridge, Massachusetts, and operates across North America, Europe, and India. More information about Sapient can be found at www.sapient.com. Sapient is a registered service mark of Sapient Corporation. SAPIENT CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS December December 31, 31, 2005 2004 ----------- --------- (Unaudited) (In thousands) ASSETS Current assets: Cash and cash equivalents $69,948 $66,779 Restricted cash and marketable investments 86,607 41,340 Accounts receivable, net 60,062 51,278 Unbilled revenues on contracts 16,849 16,875 Deferred tax assets 112 - Prepaid expenses and other current assets 10,371 9,052 ----------- --------- Total current assets 243,949 185,324 Restricted cash and marketable investments 1,217 67,460 Net fixed assets and other assets 21,277 15,361 Goodwill and net intangible assets 14,710 643 Deferred tax assets 5,204 815 ----------- --------- Total assets $286,357 $269,603 =========== ========= LIABILITIES, REDEEMABLE COMMON STOCK AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses $46,926 $42,679 Accrued restructuring costs, current portion 8,640 10,560 Income taxes payable 4,428 4,116 Deferred revenues on contracts 6,691 9,285 ----------- --------- Total current liabilities 66,685 66,640 Deferred tax liabilities 188 - Accrued restructuring costs, net of current portion 11,985 15,003 Other long term liabilities 3,243 2,027 ----------- --------- Total liabilities 82,101 83,670 Redeemable common stock 671 - Stockholders' equity 203,585 185,933 ----------- --------- Total liabilities, redeemable common stock and stockholders' equity $286,357 $269,603 =========== ========= SAPIENT CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME Three months ended Twelve months ended December 31, December 31, -------------------- ------------------- 2005 2004 2005 2004 -------------------- ------------------- (Unaudited) (In thousands, except per share amounts) Revenues: Service revenues $84,662 $66,401 $319,496 $253,936 Reimbursable expenses 2,683 3,189 12,431 12,100 ----------- -------- --------- --------- Total gross revenues 87,345 69,590 331,927 266,036 ----------- -------- --------- --------- Operating expenses: Project personnel costs, before reimbursable expenses 49,590 35,703 190,084 143,202 Reimbursable expenses 2,683 3,189 12,431 12,100 ----------- -------- --------- --------- Total project personnel costs 52,273 38,892 202,515 155,302 ----------- -------- --------- --------- Selling and marketing costs 3,578 3,549 14,029 15,208 General and administrative costs 22,642 18,276 86,387 71,371 Restructuring and other related charges 1,018 - 6,268 1,108 Amortization of intangible assets 382 129 1,104 515 ----------- -------- --------- --------- Total operating expenses 79,893 60,846 310,303 243,504 ----------- -------- --------- --------- Income from operations 7,452 8,744 21,624 22,532 Interest and other income, net 1,090 940 4,412 2,720 ----------- -------- --------- --------- Income before income taxes 8,542 9,684 26,036 25,252 Provision for income taxes 1,408 2,298 3,677 3,068 Benefit from release of valuation allowance (4,289) (635) (4,289) (635) ----------- -------- --------- --------- Net income $11,423 $8,021 $26,648 $22,819 =========== ======== ========= ========= Basic and diluted net income per share: Basic net income per share $0.09 $0.06 $0.21 $0.19 Diluted net income per share $0.09 $0.06 $0.21 $0.18 Weighted average common shares 124,917 123,955 124,725 123,040 Dilutive common share equivalents 3,194 6,904 4,573 5,418 ----------- -------- --------- --------- Weighted average common shares and dilutive common share equivalents 128,111 130,859 129,298 128,458 =========== ======== ========= ========= SAPIENT CORPORATION CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS Year Ended Year Ended December December 31, 31, 2005 2004 ----------- ----------- (Unaudited) (In thousands) Cash flows from operating activities: Net income $26,648 $22,819 ----------- ----------- Net cash provided by operating activities 26,937 20,258 ----------- ----------- ----------- ----------- Net cash used in investing activities (11,683) (30,256) ----------- ----------- ----------- ----------- Net cash (used in) provided by financing activities (10,386) 7,708 ----------- ----------- Effect of exchange rate changes on cash and cash equivalents (1,699) 1,477 Increase (decrease) in cash and cash equivalents 3,169 (813) Cash and cash equivalents, at beginning of period 66,779 67,592 ----------- ----------- Cash and cash equivalents, at end of period $69,948 $66,779 =========== =========== Sapient Corporation Reconciliation of Non-GAAP Financial Measures YTD 2005 Q4 2005 Q3 2005 YTD 2004 Q4 2004 Q3 2004 Service revenues $319,496 $84,662 $81,747 $253,936 $66,401 $64,193 --------- -------- -------- --------- -------- -------- Income from operations - GAAP $21,624 $7,452 $6,212 $22,532 $8,744 $7,497 Add: stock- based compensation 1,770 853 873 779 133 224 Add: restructuring and other related charges 6,268 1,018 - 1,108 - 241 --------- -------- -------- --------- -------- -------- Income from operations - non-GAAP $29,662 $9,323 $7,085 $24,419 $8,877 $7,962 ========= ======== ======== ========= ======== ======== Operating margin - non-GAAP 9% 11% 9% 10% 13% 12% Sapient Corporation Reconciliation of Non-GAAP Financial Measures YTD 2005 Q4 2005 Q3 2005 YTD 2004 Q4 2004 Q3 2004 Net income - GAAP $26,648 $11,423 $6,310 $22,819 $8,021 $7,833 Add: stock- based compensation 1,770 853 873 779 133 224 Add: restructuring and other related charges 6,268 1,018 - 1,108 - 241 Add: Benefit from release of valuation allowance (4,289) (4,289) - (635) (635) - -------- -------- -------- -------- -------- -------- Net income - non-GAAP $30,397 $9,005 $7,183 $24,071 $7,519 $8,298 ======== ======== ======== ======== ======== ======== Adjusted - basic and diluted net income per share: Adjusted - basic net income per share $0.24 $0.07 $0.06 $0.20 $0.06 $0.07 Adjusted - diluted net income per share $0.24 $0.07 $0.06 $0.19 $0.06 $0.06 Weighted average common shares 124,725 124,917 125,361 123,040 123,955 123,172 Dilutive common share equivalents 4,573 3,194 4,631 5,418 6,904 5,290 ----------------- -------- -------------------------- Weighted average common shares and dilutive common share equivalents 129,298 128,111 129,992 128,458 130,859 128,462 ================= ======== ========================== CONTACT: Sapient Investor Relations: Luciana Duarte, +1-617-374-0310 lduarte@sapient.com or Media Relations: Jenny McLean, +1-310-264-5277 jmclean@sapient.com