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Sapient Corp. Reports Operating Results (10-Q)

November 05, 2009 | About:
10qk

10qk

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Sapient Corp. (SAPE) filed Quarterly Report for the period ended 2009-09-30.

Sapient Corporation 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 Sony Electronics the U.S. Marine Corps and Verizon. Sapient Corp. has a market cap of $1.09 billion; its shares were traded at around $8.28 with a P/E ratio of 16.9 and P/S ratio of 1.6.

Highlight of Business Operations:

Our service revenues for the three months ended September 30, 2009 were $165.5 million, a 7% decrease compared to service revenues for the same period in 2008. Our service revenues for the nine months ended September 30, 2009 were $455.4 million, an 8% decrease compared to service revenues for the same period in 2008. The decrease in service revenues for the three and nine months ended September 30, 2009 is primarily due to the appreciation of the U.S. dollar against foreign currencies that our international revenues are denominated in, pricing pressures and a decrease in demand for our services, primarily in our North America operating segment, offset by incremental acquisition revenue.

For the three months ended September 30, 2009 we reported income from operations of $7.8 million compared to $20.7 million for the same period in 2008. We reported net income of $5.9 million for the three months ended September 30, 2009 compared to net income of $18.1 million for the same period in 2008. For the nine months ended September 30, 2009 we reported income from operations of $21.3 million compared to $38.7 million for the same period in 2008. We reported net income of $18.0 million for the nine months ended September 30, 2009 compared to net income of $36.8 million for the same period in 2008. The decrease in operating income and net income for the three and nine months ended September 30, 2009, is primarily due to a decrease in service revenues and an increase in restructuring charges (see Restructuring and Other Related Charges), offset by decreases in general and administrative expenses.

For the nine months ended September 30, 2009 $201.6 million of our service revenues and $240.7 million of our operating expenses were denominated in foreign currencies. Due to the U.S. dollars appreciation, beginning in the second half of 2008, our service revenues and operating expenses were significantly affected when compared to our results of operations for the three and nine months ended September 30, 2008. As a result, our discussion and analysis of our results of operations will include, when significant to managements analysis, a comparison in local currency terms which excludes the effect of the U.S. dollars appreciation. For a discussion of our exposure to exchange rates see Item 3. Quantitative and Qualitative Disclosures About Market Risk. In addition, during the second quarter of 2009 we completed integrating the operations of our August 6, 2008, acquisition of Derivatives Consulting Group, LLC (DCG).

Finally, during the third quarter of 2008, we identified errors totaling $1.3 million in the recording of project personnel consulting expense of which approximately $1.0 million and $0.4 million understated income in the first and second quarter of 2008, respectively. We recorded a reduction to project personnel expenses of $1.3 million in the third quarter of 2008 to correct the error and correctly reflect the nine months ended September 30, 2008. Management concluded that the impact of these errors was not material to the prior periods or the three months ended September 30, 2008.

Our service revenues decreased by 7% in U.S. dollars for the three months ended September 30, 2009 compared to the same period in 2008. Service revenues were $172.9 million in local currency terms, a decrease of 3% compared to the same period in 2008. The decrease in local currency terms was due to pricing pressures and a decrease in demand, primarily in our North America operating segment (see Results by Operating Segment), offset by incremental revenue from the Nitro acquisition. Nitros service revenues for the three months ended September 30, 2009 were $11.6 million.

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