EX-99.1 2 a5424697ex99-1.txt EXHIBIT 99.1 Exhibit 99.1 Sapient Reports First Quarter 2007 Financial Results First Quarter Service Revenues Increase 39% Year over Year Separately Reports Completion of Stock-Based Compensation Review CAMBRIDGE, Mass.--(BUSINESS WIRE)--June 12, 2007--Sapient (NASDAQ: SAPE) today announced its financial results for the first quarter ended March 31, 2007. First Quarter Financial Results For the first quarter of 2007, Sapient reported service revenues of $121.3 million, an increase of 39% year over year. On a non-GAAP basis (excluding stock-based compensation expense, restructuring and other related charges, amortization of purchased intangible assets and $3.2 million of expense relating to the stock-based compensation review and restatement), Sapient reported first quarter income from operations of $7.7 million, or 6.4% of service revenues. This compares to non-GAAP income from operations of $1.9 million, or 2.2% of service revenues, for the first quarter of 2006. On a GAAP basis, Sapient reported first quarter income from continuing operations of $0.8 million, compared to a loss from continuing operations of $1.2 million in the first quarter of 2006. Non-GAAP diluted income per share from continuing operations for the first quarter was $0.07, compared to $0.03 for the first quarter of 2006. On a GAAP basis, diluted income per share from continuing operations for the first quarter was $0.01, compared to a diluted loss per share of $0.01 for the first quarter of 2006. "Our revenue growth continues to validate our strategy," said Alan J. Herrick, chief executive officer and president of Sapient. "Clients recognize that we have a unique and valuable proposition they're not finding anywhere else. We're ahead of the curve in delivering services based on the new intersections of marketing, business and technology." The Company used cash of $18 million in operations in the first quarter of 2007 due largely to the payout of seasonal compensation expenses, comparable to the use of $19 million in cash for the first quarter of 2006. Cash, cash equivalents and marketable securities totaled $108.3 million at March 31, 2007. Days sales outstanding (in accounts receivable and unbilled revenue, net of deferred revenue) was 79 days compared to 85 days for the first quarter of 2006. Financial Outlook Sapient management provided the following financial guidance for the second quarter ending June 30, 2007: -- Service revenues are expected to be in excess of $126 million. -- Non-GAAP operating margins are expected to be in excess of 7%. -- Expenses related to the stock-based compensation review and restatement are expected to be approximately $3.3 million. Completion of Stock-Based Compensation Review Sapient also announced today in a separate press release that it completed its stock-based compensation review and filed with the Securities and Exchange Commission its Annual Report on Form 10-K for the fiscal year ended December 31, 2006 and its Quarterly Reports on Form 10-Q for the quarters ended June 30, 2006 and September 30, 2006. Further, the Company announced its intent to file by June 15, 2007 its Form 10-Q for the quarter ended March 31, 2007. For further details please refer to that press release. Webcast and Conference Call Sapient will host a discussion of its first quarter at 5:00 p.m. (ET) today, which will be broadcast live on the Internet. For webcast registration information, please go to http://www.sapient.com/about+us/investors.htm. To listen to the call live, please dial 866-800-8652 (inside the U.S.) or 617-614-2705 (outside the U.S.) and enter passcode 65373231 when prompted. A re-broadcast of the call will be available from today at 7:00 p.m. (ET) through June 19 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 87733070 when prompted. Adjusted (Non-GAAP) Financial Measures Sapient provides non-GAAP financial measures to complement reported GAAP results. Management believes the measures help illustrate underlying trends in the Company's business and uses the measures to establish budgets and operational goals, communicated internally and externally, in managing the Company's business and evaluating its performance. The Company anticipates that it will continue reporting both GAAP and certain non-GAAP financial measures in its financial results, including non-GAAP results 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 efforts. Forward-Looking Statements This press release contains forward-looking statements that involve a number of risks and uncertainties, in particular the financial guidance for future periods. 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 helps clients innovate their businesses in the areas of marketing, 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 Consolidated Unaudited Condensed Balance Sheets March 31, 2007 December 31, 2006 --------------- ----------------- (in thousands) ASSETS Current assets: Cash and cash equivalents $ 53,058 $ 75,022 Marketable securities 55,204 51,859 Restricted cash, current portion 516 551 Accounts receivable, less allowance for doubtful accounts 89,609 75,402 Unbilled revenues 33,081 34,201 Prepaid expenses and other current assets 22,796 20,565 --------------- ----------------- Total current assets 254,264 257,600 Restricted cash, net of current portion 1,171 1,338 Property and equipment, net 27,412 27,623 Purchased intangible assets, net 7,008 7,550 Goodwill 38,929 38,929 Other assets 8,342 9,024 --------------- ----------------- Total assets $ 337,126 $ 342,064 =============== ================= LIABILITIES, REDEEMABLE COMMON STOCK AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 8,745 $ 9,818 Accrued compensation 27,750 33,077 Accrued restructuring costs, current portion 4,108 3,867 Deferred revenues, current portion 10,808 14,871 Other accrued liabilities 48,057 47,068 --------------- ----------------- Total current liabilities 99,468 108,701 Accrued restructuring costs, net of current portion 10,355 11,741 Deferred revenues, net of current portion 794 865 Other long-term liabilities 6,050 5,780 --------------- ----------------- Total liabilities 116,667 127,087 Redeemable common stock 480 480 Stockholders' equity 219,979 214,497 --------------- ----------------- Total liabilities, redeemable common stock and stockholders' equity $ 337,126 $ 342,064 =============== ================= Sapient Corporation Consolidated Unaudited Statements of Operations Three Months Ended ------------------------------------------------- March 31, December September June 30, March 31, 2007 31, 2006 30, 2006 2006 2006 --------- --------- --------- --------- --------- As Restated (in thousands, except per share amounts) Revenues: Service revenues $121,295 $113,561 $106,924 $ 98,003 $ 87,094 Reimbursable expenses 4,494 5,521 4,193 3,378 2,969 --------- --------- --------- --------- --------- Total revenues 125,789 119,082 111,117 101,381 90,063 --------- --------- --------- --------- --------- Operating expenses: Project personnel expenses 83,830 73,228 72,811 66,232 57,942 Reimbursable expenses 4,494 5,521 4,193 3,378 2,969 --------- --------- --------- --------- --------- Total project personnel expenses and reimbursable expenses 88,324 78,749 77,004 69,610 60,911 Selling and marketing expenses 7,608 6,933 5,670 4,589 6,833 General and administrative expenses 29,504 31,471 29,993 24,244 23,314 Restructuring and other related charges (112) 577 187 334 814 Amortization of intangible assets 542 841 842 844 1,037 --------- --------- --------- --------- --------- Total operating expenses 125,866 118,571 113,696 99,621 92,909 --------- --------- --------- --------- --------- (Loss) income from operations (77) 511 (2,579) 1,760 (2,846) Interest and other income 1,303 1,447 1,180 2,160 1,380 --------- --------- --------- --------- --------- Income (loss) from continuing operations before income taxes, discontinued operations and cumulative effect of accounting change 1,226 1,958 (1,399) 3,920 (1,466) Provision for (benefit from) income taxes 451 3,062 (2,134) 3,742 (238) --------- --------- --------- --------- --------- Income (loss) from continuing operations before discontinued operations and cumulative effect of accounting change 775 (1,104) 735 178 (1,228) Loss from discontinued operations - - - (65) (368) Gain on disposal of discontinued operations - - - 4,834 - --------- --------- --------- --------- --------- Income (loss) before cumulative effect of accounting change 775 (1,104) 735 4,947 (1,596) Cumulative effect of accounting change - - - - 154 --------- --------- --------- --------- --------- Net income (loss) $ 775 $ (1,104) $ 735 $ 4,947 $ (1,442) ========= ========= ========= ========= ========= Basic income (loss) per share from continuing operations $ 0.01 $ (0.01) $ 0.01 $ 0.00 $ (0.01) ========= ========= ========= ========= ========= Diluted income (loss) per share from continuing operations $ 0.01 $ (0.01) $ 0.01 $ 0.00 $ (0.01) ========= ========= ========= ========= ========= Basic net income (loss) per share $ 0.01 $ (0.01) $ 0.01 $ 0.04 $ (0.01) ========= ========= ========= ========= ========= Diluted net income (loss) per share $ 0.01 $ (0.01) $ 0.01 $ 0.04 $ (0.01) ========= ========= ========= ========= ========= Weighted average common shares 123,301 123,190 123,051 124,373 124,173 Weighted average dilutive common share equivalents 3,593 - 3,074 2,725 - --------- --------- --------- --------- --------- Weighted average common shares and dilutive common share equivalents 126,894 123,190 126,125 127,098 124,173 ========= ========= ========= ========= ========= Sapient Corporation Consolidated Unaudited Statements of Cash Flows Three Months Ended ---------------------------------------------------- March 31, December September June 30, March 31, 2007 31, 2006 30, 2006 2006 2006 -------------------- ---------- ---------- --------- As Restated (in thousands) Cash flows from operating activities: Net income (loss)$ 775 $ (1,104) $ 735 $ 4,947 $ (1,442) Adjustments to reconcile net income to net cash (used in) provided by operating activities: Loss recognized on disposition of fixed assets 8 44 - 42 42 Depreciation and amortization expense 3,449 3,642 3,384 3,144 3,410 Deferred income taxes 216 80 (66) 333 161 Provision for allowance for doubtful accounts, net 156 225 293 695 563 Stock-based compensation expense 4,167 3,983 2,868 2,637 2,922 Non-cash restructuring costs (112) - - - - Gain on disposal of discontinued operations - - - (4,834) - Cumulative effect of accounting change - - - - (154) Changes in operating assets and liabilities: Accounts receivable (14,166) 10,735 1,901 (22,421) 2,792 Unbilled revenues 1,167 (2,683) (753) 1,050 (13,689) Prepaid expenses and other current assets (2,676) (2,860) 3,495 (339) (7,658) Other assets 767 (14) (16) (3,149) 7 Accounts payable (1,300) (1,120) 3,269 928 (2,955) Accrued compensation (5,439) 4,134 5,718 3,884 (7,840) Accrued restructuring costs (1,060) (439) (1,843) (2,353) (1,089) Deferred revenues (4,155) 1,381 1,814 1,855 (2,370) Other accrued liabilities 256 7,662 (5,916) 11,324 8,310 Other long- term liabilities (17) 136 70 623 70 --------- --------- --------- --------- --------- Net cash (used in) provided by operating activities (17,964) 23,802 14,953 (1,634) (18,920) --------- --------- --------- --------- --------- Cash flows from investing activities: Cash paid for acquisition, including transaction costs, net of cash received - - (991) (183) (26,481) Cash received for sale of discontinued operations, net, and payment to minority stockholders 436 134 - 5,142 - Purchases of property and equipment and cost of internally developed software (1,725) (5,273) (2,982) (3,736) (2,342) Sales and maturities of marketable securities 33,000 37,100 31,110 40,725 42,576 Purchases of marketable securities (36,345) (34,294) (37,666) (22,257) (22,234) Restricted cash 220 506 (720) (4) (5) --------- --------- --------- --------- --------- Net cash (used in) provided by investing activities (4,414) (1,827) (11,249) 19,687 (8,486) --------- --------- --------- --------- --------- Cash flows from financing activities: Principal payments under capital lease obligation (37) (33) (34) (33) (35) Proceeds from stock option and purchase plans - 625 358 1,930 2,593 Repurchases of common stock - - (1,153) (10,741) (6,216) --------- --------- --------- --------- --------- Net cash (used in) provided by financing activities (37) 592 (829) (8,844) (3,658) --------- --------- --------- --------- --------- Effect of exchange rate changes on cash and cash equivalents 451 1,501 419 (831) 398 --------- --------- --------- --------- --------- (Decrease) increase in cash and cash equivalents (21,964) 24,068 3,294 8,378 (30,666) Cash and cash equivalents, at beginning of period 75,022 50,954 47,660 39,282 69,948 --------- --------- --------- --------- --------- Cash and cash equivalents, at end of period $ 53,058 $ 75,022 $ 50,954 $ 47,660 $ 39,282 ========= ========= ========= ========= ========= Sapient Corporation Unaudited Reconciliation of Non-GAAP Financial Measures Three Months Ended ------------------------------------------------- March 31, December September June 30, March 31, 2007 31, 2006 30, 2006 2006 2006 ------------------------------------------------- As Restated (in thousands, except per share amounts) Service revenues $121,295 $113,561 $106,924 $ 98,003 $ 87,094 GAAP (loss) income from operations (77) 511 (2,579) 1,760 (2,846) Stock-based compensation review and restatement expenses 3,195 3,663 4,395 - - Stock-based compensation expense 4,167 3,983 2,868 2,637 2,922 Restructuring and other related charges (112) 577 187 334 814 Amortization of purchased intangible assets 542 841 842 844 1,037 --------- --------- --------- --------- --------- Non-GAAP income from operations $ 7,715 $ 9,575 $ 5,713 $ 5,575 $ 1,927 ========= ========= ========= ========= ========= GAAP operating margin 0% 0% -2% 2% -3% Effect of adjustments detailed above 6% 8% 7% 4% 5% --------- --------- --------- --------- --------- Non-GAAP operating margin 6% 8% 5% 6% 2% ========= ========= ========= ========= ========= ---------------------------------------------------------------------- GAAP income (loss) from continuing operations before discontinued operations and cumulative effect of accounting change $ 775 $ (1,104) $ 735 $ 178 $ (1,228) --------- --------- --------- --------- --------- Pre-tax adjustments: Operating expenses: Stock-based compensation review and restatement expenses 3,241 3,663 4,395 - - Stock-based compensation expense 4,167 3,983 2,868 2,637 2,922 Restructuring and other related charges (112) 577 187 334 814 Amortization of purchased intangible assets 542 841 842 844 1,037 --------- --------- --------- --------- --------- Total net adjustments 7,838 9,064 8,292 3,815 4,773 --------- --------- --------- --------- --------- Non-GAAP income from continuing operations before discontinued operations and cumulative effect of accounting change $ 8,613 $ 7,960 $ 9,027 $ 3,993 $ 3,545 ========= ========= ========= ========= ========= ---------------------------------------------------------------------- GAAP basic income (loss) per share from continuing operations $ 0.01 $ (0.01) $ 0.01 $ 0.00 $ (0.01) Effect of adjustments detailed above 0.06 0.07 0.06 0.03 0.04 --------- --------- --------- --------- --------- Non-GAAP basic income per share from continuing operations $ 0.07 $ 0.06 $ 0.07 $ 0.03 $ 0.03 ========= ========= ========= ========= ========= GAAP weighted average common shares 123,301 123,190 123,051 124,373 124,173 ========= ========= ========= ========= ========= Non-GAAP weighted average common shares 123,301 123,190 123,051 124,373 124,173 ========= ========= ========= ========= ========= GAAP diluted income (loss) per share from continuing operations $ 0.01 $ (0.01) $ 0.01 $ 0.00 $ (0.01) Effect of adjustments noted above and change in dilution noted below 0.06 0.07 0.06 0.03 0.04 --------- --------- --------- --------- --------- Non-GAAP diluted income per share from continuing operations $ 0.07 $ 0.06 $ 0.07 $ 0.03 $ 0.03 ========= ========= ========= ========= ========= GAAP weighted average common shares and dilutive common share equivalents 126,894 123,190 126,125 127,098 124,173 ========= ========= ========= ========= ========= Non-GAAP weighted average common shares and dilutive common share equivalents 126,894 126,251 126,125 127,098 127,518 ========= ========= ========= ========= ========= CONTACT: Media Contact: FAMA PR Jeff Drew, 617-758-4145 Cell: 617-233-5109 jeff@famapr.com or Investor Contact: Sapient Noelle Faris, 617-374-3682 nfaris@sapient.com