Sapient Reports Third Quarter 2008 Results

Business Wire, Nov 6, 2008

Service Revenues Up 25% Year-Over-Year and Up 7% Sequentially

Non-GAAP Operating Margin 14.7% of Service Revenues

BOSTON -- Sapient (NASDAQ: SAPE) today reported the following financial results for the third quarter ended September 30, 2008:

* Service revenues were $177.7 million, an increase of 25% from $141.6 million in the third quarter of 2007 and a 7% sequential increase from $165.8 million in the second quarter of 2008.

* GAAP income from operations was $20.7 million, or 11.6% of service revenues, more than three times the $6.6 million reported in the third quarter of 2007. Sequentially, GAAP income from operations in the third quarter of 2008 was up $8.5 million from $12.2 million in the second quarter of 2008.

* 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 $26.1 million, or 14.7% of service revenues. This compares to non-GAAP income from operations of $12.5 million, or 8.8% of service revenues, in the third quarter of 2007 and $17.3 million, or 10.4% of service revenues, in the second quarter of 2008.

* GAAP diluted net income per share was $0.14, compared to $0.03 in the third quarter of 2007 and $0.09 in the second quarter of 2008.

* Non-GAAP diluted net income per share was $0.18, compared to $0.08 in the third quarter of 2007 and $0.13 in the second quarter of 2008.

"I am particularly pleased with this quarter's operating performance which is further evidence clients continue to value our highly differentiated services," said Sapient President and Chief Executive Officer Alan J. Herrick. "While the global economic environment is challenging to all companies, we believe we are well positioned with capabilities that are extremely relevant to our clients. We remain committed to our long-term strategy and diligent toward our goal of continually improving operating performance."

The Company generated cash from operations of $33.2 million in the third quarter of 2008, compared to $38.7 million in the third quarter of 2007 and $22.0 million in the second quarter of 2008. Days sales outstanding was 60 days for the third quarter of 2008, improved from 63 days for the second quarter of 2008 and 62 days for the third quarter of 2007.

Outlook

Sapient management provided the following guidance:

* For the fourth quarter ending December 31, 2008, service revenues are expected to be relatively flat with the third quarter, plus or minus 3%, on a constant currency basis. Taking into consideration the significant currency movement thus far in the fourth quarter and assuming stable rates through the end of the quarter, service revenues are expected to be in the range of $164 million to $174 million.

* Fourth quarter non-GAAP operating margin is expected to be in the range of 10% to 13%.

* Service revenues for the full year 2008 are expected to be in the range of $662 million to $672 million, consistent with prior guidance adjusted for currency fluctuations.

* Non-GAAP operating margin for the full year 2008 is expected to be in excess of 10%, consistent with prior guidance.

Webcast and Conference Call

Sapient will host a discussion of its third 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) 713-4215

International: (617) 213-4867

Passcode: 24203733

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

https://www.theconferencingservice.com/prereg/key.pro cess?key=PF8QEP3N7 (Due to the length of this URL, it may be necessary to copy and paste it into your Internet browser's URL address field. You may also need to remove an extra space in the URL if one exists.)

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-eventDe tails&c=65979&eventID=1990268 (Due to the length of this URL, it may be necessary to copy and paste it into your Internet browser's URL address field. You may also need to remove an extra space in the URL if one exists.)

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 November 6th at 6:30 p.m. (EST) through November 20th at 11:59 p.m. (EST). The replay information is as follows:

U.S.: (888) 286-8010

International: (617) 801-6888

Passcode: 56598243

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.