Scient Reports March Quarter Results in Line With Revised Expectations

Apr 25, 2001, 01:00 ET from Scient

    SAN FRANCISCO, April 25 /PRNewswire/ -- Scient (Nasdaq:   SCNT), The
 eBusiness Innovator(TM), today reported its financial results for its fourth
 fiscal quarter and fiscal year ended March 31, 2001.
     Revenues for the fourth fiscal quarter were $27.1 million compared to
 $65.8 million in the same period a year ago.  As previously discussed on the
 April 11, 2001 conference call, the performance for the March quarter was
 impacted by continued economic uncertainty which has caused our clients to
 continue to delay large up-front commitments for technology initiatives. As a
 result, revenue on a sequential basis declined 66%, in line with our revised
 guidance.  The professional services margin totaled 4% in the quarter, well
 below historical levels, due to lower billability and the lower revenue base
 in the quarter, as well as the timing of the restructuring.
     On a pro-forma basis, Scient reported an operating loss of $31.7 million
 (before restructuring charges, and excluding amortization of intangible assets
 and stock compensation charges), and a net loss per diluted share of $0.38 for
 the March 2001 quarter. This compares to a pro forma operating loss of
 $12.7 million, or a net loss per diluted share of $0.13, in the December
 quarter, and pro forma operating income of $3.1 million, or a net gain of
 $0.04 per diluted share in the same period a year ago.  Scient recorded a
 pretax restructuring charge of $57.6 million in the March quarter to cover
 surplus real estate and IT-related assets.
     Revenues for the fiscal year ended March 31, 2001 were $300.2 million, an
 increase of 93% versus revenue of $155.7 million fiscal year ended
 March 31, 2000.  The pro forma operating loss (before restructuring charges
 and excluding amortization of intangible assets and stock compensation
 charges) totaled $31.8 million for fiscal year ended March 31, 2001,
 representing a net loss per diluted share of $0.26.  This compares to a pro
 forma operating loss (excluding stock compensation charges) of $5.3 million or
 a net loss of $0.04 per diluted share for the fiscal year ended
 March 31, 2000.
     Scient ended the March quarter with 1,333 total colleagues compared to
 1,492 at December 31, 2000.  On April 11, 2001, Scient announced that it
 planned to eliminate 675 positions with the potential for an additional
 175 positions depending on business conditions.  Commenting on the status of
 the restructuring, Bob Howe, Chairman and CEO of Scient, stated, "The
 restructuring is proceeding in line with our expectations.  We anticipate that
 the 675 job eliminations will be completed by the end of the June quarter.  In
 addition, we have downsized our management team in keeping with the changes in
 the size of the business."
     Mr. Howe also noted, "Despite the challenging market environment we
 continue to face, Scient's reinvention strategy is underway and is one that we
 believe leverages our strengths, delivers demonstrable results for clients,
 competitively prices our back end services and has more appropriately matched
 our capacity with current market demand.  We believe our success in winning
 new clients is a function of our ability to map clients' business objectives
 to their technology objectives and tailor our approach to meet their needs."
     With respect to Scient's financial projections for the future, Bill Kurtz,
 Executive Vice President and CFO, stated, "We believe the outlook for the rest
 of this year and into next year is heavily dependent on the economy, which at
 this point is still very uncertain.  Therefore, given our lower level of
 predictability, we believe it is prudent at this point to provide near-term
 and long-term financial goals that reflect management's commitment.  With
 respect to the June quarter, we estimate that our cash balance at
 June 30, 2001 should approximate $100-$110 million compared to $161 million in
 cash at March 31, 2001.  We expect to spend approximately $40 million of cash
 in the June quarter on restructuring activities related to both the December
 and March/June quarter actions.  Approximately $5-$10 million is projected to
 be consumed by business operations and an additional $5-$10 million for
 capital expenditures and changes in working capital."
     "Upon successful completion of our restructuring action, Scient expects to
 achieve annual cost savings of approximately $175 million and will have
 lowered its quarterly break-even point to a range of $22-$25 million.  Our
 goal is to reach break-even by the second half of this fiscal year ending
 March 31, 2002.  As a result of repositioning the business, our long-term
 operating model now targets a gross margin in the 45%-50% range and an
 operating margin of approximately 15%," noted Mr. Kurtz.
 
     Fiscal Q4 Operational Highlights
     -- Served 36 clients, including 10 new clients:
 
       - 35 enterprise or enterprise-backed clients across global business
         units
       - 1 venture capital-backed startup client
       - 10 international clients
 
     -- Helped 6 clients successfully launch their eBusinesses.
     -- Scient's top five clients accounted for 62% of revenue in the quarter
        compared to 42% in the December quarter. Our largest client, Major
        League Baseball, accounted for approximately 30% of revenue while BP
        Amoco and Key Energy Group each accounted for about 10% of revenue in
        the quarter.
     -- Ongoing relationships with global enterprise clients including Avaya,
        Aviron, Baxter, Boots, BP Amoco, Centocor, Chase Manhattan Bank, Key
        Energy Group, Kingfisher, Microsoft KK (Japan), Morgan Stanley Dean
        Witter, movian.com, ONIWEB, Schneider Logistics, Sun Microsystems,
        Vectant (telecommunications subsidiary of Japanese trading house
        Marubeni), Vectren, Xcel Energy, and Ziff-Davis.
 
     Scient will be holding a conference call to discuss March quarter results
 today at 4:30 p.m. (EDT)/1:30 p.m. (PDT).  Access to the call is as follows:
 
     United States:       800-289-0730; Passcode:  588220
     Outside United States:    913-981-5509; Passcode:  588220
 
     A replay of the April 25th call will be available through May 2, 2001.
 Access to the replay is as follows:
 
     United States:       888-203-1112; Passcode:  588220
     Outside United States:    719-457-0820; Passcode:  588220
 
     About Scient(R): Innovate - For What's Next(TM)
     Led by veterans with experience in both eBusiness and key vertical
 industries, Scient uses eBusiness as a catalyst to help clients unlock the
 value in the enterprise.  Scient's process leverages expertise in technology,
 strategy, and customer experience to help clients create new sources of
 revenue and eliminate cost.  In addition, Scient works with clients to
 increase their organization's abilities to anticipate and capitalize on
 changes in their business environment.
     Scient can be reached at www.scient.com or 415-498-3100.
 
     SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
     Some of the statements in this press release constitute forward-looking
 statements. These statements involve known and unknown risks, uncertainties
 and other factors that may cause our or our industry's actual results, levels
 of activity, performance or achievements to be materially different from any
 future results, levels of activity, performance or achievements expressed or
 implied by such forward-looking statements.  Forward-looking statements relate
 to future events or our future financial performance. In some cases, you can
 identify forward-looking statements by terminology such as "may," "will,"
 "should," "expects," "plans," "anticipates," "believes," "estimates,"
 "predicts," "potential" or "continue" or the negative of such terms or other
 comparable terminology. These statements include but are not limited to
 statements regarding the scope, nature and timing of Scient's expected
 restructuring activities and the anticipated impact of those activities, our
 expectations regarding the future success of the business, future
 profitability, break-even point, margins, cash position, restructuring
 charges, and other operating and financial results, and the success of our
 strategy and corresponding client demand for our services. These statements
 are only projections. Actual events or results may differ materially. Factors
 that could cause or contribute to such differences include but are not limited
 to, the timing and size of client demand for Scient's services; the potential
 loss of or delay by major clients; Scient's ability to hire, train and retain
 the appropriately skilled and qualified personnel; Scient's ability to attract
 and retain new clients; Scient's ability to develop successful relationships
 with partners and other third parties; our ability to accurately price our
 projects and to meet client expectations; our ability to manage and expand
 international operations; our ability to predict and offer responsive services
 to meet market demand; the highly competitive market in which we operate; the
 efficiency and success of our accounts receivable efforts; the accuracy of our
 internal reporting and management systems; our reliance on a limited number of
 clients and our lack of long-term contracts; and the development and
 sustainability of a market for Scient's services.  This list should not be
 considered inclusive of all risk factors. In evaluating these statements, you
 should specifically consider various factors, including the risks factors
 listed in our Form 10-Q for the period ended December 31, 2000 filed with the
 Securities and Exchange Commission. These factors may cause our actual results
 to differ materially from any forward-looking statement.
 
                                 SCIENT CORPORATION
 
                       CONSOLIDATED STATEMENTS OF OPERATIONS
                      (in thousands, except per share amounts)
 
                              Three Months Ended        Twelve Months Ended
                                  March 31,                  March 31,
                              2001         2000          2001          2000
                                 (unaudited)                (unaudited)
 
     Revenues               $27,060       $65,843     $300,177      $155,729
 
 
     Operating expenses
      Professional
       services              25,866        28,175      149,334        70,207
      Selling, general
       and administrative    32,940        34,545      182,624        90,854
      Restructuring Costs    57,579            --      104,799            --
      Amortization of
       intangible assets      1,750            --        4,667            --
      Stock compensation      1,662         3,418        9,402        15,636
 
     Total operating
      expenses              119,797        66,138      450,826       176,697
 
     Loss from operations  (92,737)         (295)    (150,649)      (20,968)
 
     Interest and
      other income, net       2,524         2,528       10,677         4,953
 
     Net Income/(loss)     (90,213)         2,233    (139,972)      (16,015)
 
     Net income/(loss)
      per share:
      Basic                 $(1.31)         $0.04      $(2.13)       $(0.29)
      Diluted               $(1.31)         $0.03      $(2.13)       $(0.29)
 
     Weighted average
      common shares:
      Basic                  68,840        61,781       65,583        54,590
      Diluted                68,840        83,413       65,583        54,590
 
     Pro forma information:
      (unaudited)
     Pro forma net income/
      (loss) (A)          $(29,223)        $3,391    $(21,105)      $(2,639)
     Pro forma net income/
     (loss) per diluted
      share (A)             $(0.38)        $0.04(B)    $(0.26)     $(0.04)(B)
 
      Shares used in
       computing pro
       forma net income/
       (loss) per diluted
       share                 76,056       83,413(B)     82,231       78,892(B)
 
     (A)Excludes stock compensation, restructuring charges, amortization of
     intangible assets, and includes pro forma tax expense of 40% for the
     quarters for the periods ended March 31, 2001
     (B)Includes all common stock equivalents including the conversion of
     Scient's preferred stock, which converted to common stock upon the closing
     of Scient's initial public offering, as if the conversion occurred as of
     the beginning of the period or the date of issuance, if later.
 
 
                                 SCIENT CORPORATION
                        CONDENSED CONSOLIDATED BALANCE SHEET
                                   (in thousands)
 
                                       ASSETS
 
                                                     March 31,      March 31,
                                                       2001           2000
                                                    (unaudited)
     Current assets
      Cash and cash equivalents                       $93,601       $108,102
      Short-term investments                           67,472        121,046
      Accounts receivable, net                         27,139         56,021
      Prepaid expenses and other                       17,005          9,157
       Total current assets                           205,217        294,326
 
     Long-term investments                                 --          3,146
     Property and equipment, net                        8,278         16,063
     Intangibles, net                                   9,351             --
     Other                                              1,198            219
                                                     $224,044       $313,754
 
                        LIABILITIES AND STOCKHOLDERS' EQUITY
 
     Current liabilities
      Bank borrowings, current                            $--         $1,334
      Accounts payable                                  6,357          5,023
      Accrued compensation and benefits                15,047         33,976
      Accrued other expenses                           57,324          9,265
      Deferred revenue                                    105          6,579
      Capital lease obligations, current                3,892          2,624
       Total current liabilities                       82,725         58,801
 
     Bank borrowings, long-term                            --            865
     Capital lease obligations, long-term               2,614          2,052
                                                      $85,339       $ 61,718
 
     Stockholders' equity
      Common stock                                          7              7
      Additional paid-in capital                      313,866        297,688
      Unearned compensation                           (6,321)       (16,784)
      Accumulated deficit                           (168,847)       (28,875)
       Total stockholders' equity                     138,705        252,036
                                                    $ 224,044       $313,754
 
 
                     MAKE YOUR OPINION COUNT -  Click Here
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SOURCE Scient
    SAN FRANCISCO, April 25 /PRNewswire/ -- Scient (Nasdaq:   SCNT), The
 eBusiness Innovator(TM), today reported its financial results for its fourth
 fiscal quarter and fiscal year ended March 31, 2001.
     Revenues for the fourth fiscal quarter were $27.1 million compared to
 $65.8 million in the same period a year ago.  As previously discussed on the
 April 11, 2001 conference call, the performance for the March quarter was
 impacted by continued economic uncertainty which has caused our clients to
 continue to delay large up-front commitments for technology initiatives. As a
 result, revenue on a sequential basis declined 66%, in line with our revised
 guidance.  The professional services margin totaled 4% in the quarter, well
 below historical levels, due to lower billability and the lower revenue base
 in the quarter, as well as the timing of the restructuring.
     On a pro-forma basis, Scient reported an operating loss of $31.7 million
 (before restructuring charges, and excluding amortization of intangible assets
 and stock compensation charges), and a net loss per diluted share of $0.38 for
 the March 2001 quarter. This compares to a pro forma operating loss of
 $12.7 million, or a net loss per diluted share of $0.13, in the December
 quarter, and pro forma operating income of $3.1 million, or a net gain of
 $0.04 per diluted share in the same period a year ago.  Scient recorded a
 pretax restructuring charge of $57.6 million in the March quarter to cover
 surplus real estate and IT-related assets.
     Revenues for the fiscal year ended March 31, 2001 were $300.2 million, an
 increase of 93% versus revenue of $155.7 million fiscal year ended
 March 31, 2000.  The pro forma operating loss (before restructuring charges
 and excluding amortization of intangible assets and stock compensation
 charges) totaled $31.8 million for fiscal year ended March 31, 2001,
 representing a net loss per diluted share of $0.26.  This compares to a pro
 forma operating loss (excluding stock compensation charges) of $5.3 million or
 a net loss of $0.04 per diluted share for the fiscal year ended
 March 31, 2000.
     Scient ended the March quarter with 1,333 total colleagues compared to
 1,492 at December 31, 2000.  On April 11, 2001, Scient announced that it
 planned to eliminate 675 positions with the potential for an additional
 175 positions depending on business conditions.  Commenting on the status of
 the restructuring, Bob Howe, Chairman and CEO of Scient, stated, "The
 restructuring is proceeding in line with our expectations.  We anticipate that
 the 675 job eliminations will be completed by the end of the June quarter.  In
 addition, we have downsized our management team in keeping with the changes in
 the size of the business."
     Mr. Howe also noted, "Despite the challenging market environment we
 continue to face, Scient's reinvention strategy is underway and is one that we
 believe leverages our strengths, delivers demonstrable results for clients,
 competitively prices our back end services and has more appropriately matched
 our capacity with current market demand.  We believe our success in winning
 new clients is a function of our ability to map clients' business objectives
 to their technology objectives and tailor our approach to meet their needs."
     With respect to Scient's financial projections for the future, Bill Kurtz,
 Executive Vice President and CFO, stated, "We believe the outlook for the rest
 of this year and into next year is heavily dependent on the economy, which at
 this point is still very uncertain.  Therefore, given our lower level of
 predictability, we believe it is prudent at this point to provide near-term
 and long-term financial goals that reflect management's commitment.  With
 respect to the June quarter, we estimate that our cash balance at
 June 30, 2001 should approximate $100-$110 million compared to $161 million in
 cash at March 31, 2001.  We expect to spend approximately $40 million of cash
 in the June quarter on restructuring activities related to both the December
 and March/June quarter actions.  Approximately $5-$10 million is projected to
 be consumed by business operations and an additional $5-$10 million for
 capital expenditures and changes in working capital."
     "Upon successful completion of our restructuring action, Scient expects to
 achieve annual cost savings of approximately $175 million and will have
 lowered its quarterly break-even point to a range of $22-$25 million.  Our
 goal is to reach break-even by the second half of this fiscal year ending
 March 31, 2002.  As a result of repositioning the business, our long-term
 operating model now targets a gross margin in the 45%-50% range and an
 operating margin of approximately 15%," noted Mr. Kurtz.
 
     Fiscal Q4 Operational Highlights
     -- Served 36 clients, including 10 new clients:
 
       - 35 enterprise or enterprise-backed clients across global business
         units
       - 1 venture capital-backed startup client
       - 10 international clients
 
     -- Helped 6 clients successfully launch their eBusinesses.
     -- Scient's top five clients accounted for 62% of revenue in the quarter
        compared to 42% in the December quarter. Our largest client, Major
        League Baseball, accounted for approximately 30% of revenue while BP
        Amoco and Key Energy Group each accounted for about 10% of revenue in
        the quarter.
     -- Ongoing relationships with global enterprise clients including Avaya,
        Aviron, Baxter, Boots, BP Amoco, Centocor, Chase Manhattan Bank, Key
        Energy Group, Kingfisher, Microsoft KK (Japan), Morgan Stanley Dean
        Witter, movian.com, ONIWEB, Schneider Logistics, Sun Microsystems,
        Vectant (telecommunications subsidiary of Japanese trading house
        Marubeni), Vectren, Xcel Energy, and Ziff-Davis.
 
     Scient will be holding a conference call to discuss March quarter results
 today at 4:30 p.m. (EDT)/1:30 p.m. (PDT).  Access to the call is as follows:
 
     United States:       800-289-0730; Passcode:  588220
     Outside United States:    913-981-5509; Passcode:  588220
 
     A replay of the April 25th call will be available through May 2, 2001.
 Access to the replay is as follows:
 
     United States:       888-203-1112; Passcode:  588220
     Outside United States:    719-457-0820; Passcode:  588220
 
     About Scient(R): Innovate - For What's Next(TM)
     Led by veterans with experience in both eBusiness and key vertical
 industries, Scient uses eBusiness as a catalyst to help clients unlock the
 value in the enterprise.  Scient's process leverages expertise in technology,
 strategy, and customer experience to help clients create new sources of
 revenue and eliminate cost.  In addition, Scient works with clients to
 increase their organization's abilities to anticipate and capitalize on
 changes in their business environment.
     Scient can be reached at www.scient.com or 415-498-3100.
 
     SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
     Some of the statements in this press release constitute forward-looking
 statements. These statements involve known and unknown risks, uncertainties
 and other factors that may cause our or our industry's actual results, levels
 of activity, performance or achievements to be materially different from any
 future results, levels of activity, performance or achievements expressed or
 implied by such forward-looking statements.  Forward-looking statements relate
 to future events or our future financial performance. In some cases, you can
 identify forward-looking statements by terminology such as "may," "will,"
 "should," "expects," "plans," "anticipates," "believes," "estimates,"
 "predicts," "potential" or "continue" or the negative of such terms or other
 comparable terminology. These statements include but are not limited to
 statements regarding the scope, nature and timing of Scient's expected
 restructuring activities and the anticipated impact of those activities, our
 expectations regarding the future success of the business, future
 profitability, break-even point, margins, cash position, restructuring
 charges, and other operating and financial results, and the success of our
 strategy and corresponding client demand for our services. These statements
 are only projections. Actual events or results may differ materially. Factors
 that could cause or contribute to such differences include but are not limited
 to, the timing and size of client demand for Scient's services; the potential
 loss of or delay by major clients; Scient's ability to hire, train and retain
 the appropriately skilled and qualified personnel; Scient's ability to attract
 and retain new clients; Scient's ability to develop successful relationships
 with partners and other third parties; our ability to accurately price our
 projects and to meet client expectations; our ability to manage and expand
 international operations; our ability to predict and offer responsive services
 to meet market demand; the highly competitive market in which we operate; the
 efficiency and success of our accounts receivable efforts; the accuracy of our
 internal reporting and management systems; our reliance on a limited number of
 clients and our lack of long-term contracts; and the development and
 sustainability of a market for Scient's services.  This list should not be
 considered inclusive of all risk factors. In evaluating these statements, you
 should specifically consider various factors, including the risks factors
 listed in our Form 10-Q for the period ended December 31, 2000 filed with the
 Securities and Exchange Commission. These factors may cause our actual results
 to differ materially from any forward-looking statement.
 
                                 SCIENT CORPORATION
 
                       CONSOLIDATED STATEMENTS OF OPERATIONS
                      (in thousands, except per share amounts)
 
                              Three Months Ended        Twelve Months Ended
                                  March 31,                  March 31,
                              2001         2000          2001          2000
                                 (unaudited)                (unaudited)
 
     Revenues               $27,060       $65,843     $300,177      $155,729
 
 
     Operating expenses
      Professional
       services              25,866        28,175      149,334        70,207
      Selling, general
       and administrative    32,940        34,545      182,624        90,854
      Restructuring Costs    57,579            --      104,799            --
      Amortization of
       intangible assets      1,750            --        4,667            --
      Stock compensation      1,662         3,418        9,402        15,636
 
     Total operating
      expenses              119,797        66,138      450,826       176,697
 
     Loss from operations  (92,737)         (295)    (150,649)      (20,968)
 
     Interest and
      other income, net       2,524         2,528       10,677         4,953
 
     Net Income/(loss)     (90,213)         2,233    (139,972)      (16,015)
 
     Net income/(loss)
      per share:
      Basic                 $(1.31)         $0.04      $(2.13)       $(0.29)
      Diluted               $(1.31)         $0.03      $(2.13)       $(0.29)
 
     Weighted average
      common shares:
      Basic                  68,840        61,781       65,583        54,590
      Diluted                68,840        83,413       65,583        54,590
 
     Pro forma information:
      (unaudited)
     Pro forma net income/
      (loss) (A)          $(29,223)        $3,391    $(21,105)      $(2,639)
     Pro forma net income/
     (loss) per diluted
      share (A)             $(0.38)        $0.04(B)    $(0.26)     $(0.04)(B)
 
      Shares used in
       computing pro
       forma net income/
       (loss) per diluted
       share                 76,056       83,413(B)     82,231       78,892(B)
 
     (A)Excludes stock compensation, restructuring charges, amortization of
     intangible assets, and includes pro forma tax expense of 40% for the
     quarters for the periods ended March 31, 2001
     (B)Includes all common stock equivalents including the conversion of
     Scient's preferred stock, which converted to common stock upon the closing
     of Scient's initial public offering, as if the conversion occurred as of
     the beginning of the period or the date of issuance, if later.
 
 
                                 SCIENT CORPORATION
                        CONDENSED CONSOLIDATED BALANCE SHEET
                                   (in thousands)
 
                                       ASSETS
 
                                                     March 31,      March 31,
                                                       2001           2000
                                                    (unaudited)
     Current assets
      Cash and cash equivalents                       $93,601       $108,102
      Short-term investments                           67,472        121,046
      Accounts receivable, net                         27,139         56,021
      Prepaid expenses and other                       17,005          9,157
       Total current assets                           205,217        294,326
 
     Long-term investments                                 --          3,146
     Property and equipment, net                        8,278         16,063
     Intangibles, net                                   9,351             --
     Other                                              1,198            219
                                                     $224,044       $313,754
 
                        LIABILITIES AND STOCKHOLDERS' EQUITY
 
     Current liabilities
      Bank borrowings, current                            $--         $1,334
      Accounts payable                                  6,357          5,023
      Accrued compensation and benefits                15,047         33,976
      Accrued other expenses                           57,324          9,265
      Deferred revenue                                    105          6,579
      Capital lease obligations, current                3,892          2,624
       Total current liabilities                       82,725         58,801
 
     Bank borrowings, long-term                            --            865
     Capital lease obligations, long-term               2,614          2,052
                                                      $85,339       $ 61,718
 
     Stockholders' equity
      Common stock                                          7              7
      Additional paid-in capital                      313,866        297,688
      Unearned compensation                           (6,321)       (16,784)
      Accumulated deficit                           (168,847)       (28,875)
       Total stockholders' equity                     138,705        252,036
                                                    $ 224,044       $313,754
 
 
                     MAKE YOUR OPINION COUNT -  Click Here
                http://tbutton.prnewswire.com/prn/11690X24446759
 
 SOURCE  Scient