NSTC Ness Technologies, Inc. (MM)

Net Income Rises 49% Year-over-Year on a 24% Increase in Revenues HACKENSACK, New Jersey, July 26 /PRNewswire-FirstCall/ -- Ness Technologies, Inc. (NASDAQ:NSTC), a global provider of IT services and solutions, today announced financial results for the second quarter ended June 30, 2006. Second Quarter 2006 Highlights: - Fully diluted net earnings per share were $0.16, compared to $0.11 in Q2 of 2005. - Net income reached $6.0 million, up 49% year-over-year. - Operating income at $7.5 million, up 52% year-over-year. - Revenues reached a record $116.6 million, up 24% year-over-year. - Backlog increased to a record $532 million, up 27% year-over-year. - Global workforce increased to 7,160. "We had a strong second quarter, with record revenues and the highest operating margin and net income we've ever recorded for the second quarter, which is our slowest quarter of the year due to seasonality factors," said Raviv Zoller, President and Chief Executive Officer of Ness Technologies. "Our Indian offshore and Eastern European operations as well as our Technologies and Systems Group all continued to perform well, with growing revenues and continually improving profitability. The integration of our 2005 acquisitions was completed successfully, and the integration of our first quarter acquisition of Innova is progressing according to schedule, although we still have not extracted all the potential benefits. We remain optimistic in our outlook, given the strong demand environment and our proven strategic business model." Ness' second quarter 2006 revenues totaled $116.6 million, an increase of $22.4 million or 24%, setting a new quarterly record and driven by both organic and non-organic growth, compared to $94.2 million in the second quarter of 2005. Second quarter 2006 operating income rose to $7.5 million, an increase of $2.6 million or 52%, compared to $4.9 million in the second quarter of 2005. The corresponding margin growth was 120 basis points. Second quarter 2006 net income increased to $6.0 million, an increase of $2.0 million or 49%, compared to $4.0 million in the second quarter of 2005. Diluted net earnings per share for the second quarter of 2006 were $0.16 compared to $0.11 in the second quarter of 2005. Backlog as of June 30, 2006 increased to $532 million, up 27% compared to $418 million as of June 30, 2005. "We continued to gain operating leverage during the second quarter, as our percentage of billable employees increased to 88.0%," stated Ytzhak Edelman, Chief Financial Officer and deputy to the President and CEO, Ness Technologies. "We remain focused on further increasing our operating and net margin, managing our debt-to-equity ratio and controlling our financial expenses." Guidance For the third quarter 2006 Ness expects to generate revenues in the range of $119 million to $125 million and diluted net earnings per share in the range of $0.20 to $0.22. For the full year 2006, Ness reiterates its guidance of revenues in the range of $470 million to $485 million and diluted net earnings per share in the range of $0.80 to $0.85, excluding an expected full-year $0.01 impact associated with expensing of stock-based compensation under the Financial Accounting Standards Board's Statement 123(R), which the Company adopted effective January 1, 2006. Conference Call Details Ness Technologies President and Chief Executive Officer, Raviv Zoller, and Chief Financial Officer and deputy to the President and CEO, Ytzhak Edelman, will conduct a conference call to discuss the second quarter 2006 results, which will be simultaneously webcast at 9:00 A.M. Eastern Time / 6:00 A.M. Pacific Time on Wednesday, July 26, 2006. To access the Ness Technologies second quarter 2006 earnings conference call participants in North America should dial 1-800-399-0427 and international participants should dial +1-706-634-5453. A live webcast of the conference call will be available on the investor relations page of the Ness Technologies corporate web site at http://www.ness.com/. Please visit the web site at least 15 minutes early to register for the teleconference webcast and download any necessary audio software. A replay of the call will be available on the web site approximately two hours after the conference call is completed. About Ness Technologies Ness Technologies (NASDAQ:NSTC) is a global provider of end-to-end IT services and solutions designed to help clients improve competitiveness and efficiency. Specializing in outsourcing and offshore, systems integration and application development, software and consulting, and quality assurance and training, Ness serves a blue-chip client base of over 500 public and private-sector customers. With over 7,000 employees, Ness maintains operations in 15 countries across North America, Europe and Asia, and more than 100 alliances and partnerships around the world. For more information about Ness Technologies, visit http://www.ness.com/. Forward Looking Statement This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements often are preceded by words such as "believes," "expects," "may," "anticipates," "plans," "intends," "assumes," "will" or similar expressions. Forward-looking statements reflect management's current expectations, as of the date of this press release, and involve certain risks and uncertainties. Ness' actual results could differ materially from those anticipated in these forward looking statements as a result of various factors. Some of the factors that could cause future results to materially differ from the recent results or those projected in forward-looking statements include the "Risk Factors" described in Ness' Annual Report of Form 10-K filed with the Securities and Exchange Commission on March 15, 2006. NESS TECHNOLOGIES, INC. AND ITS SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME U.S. dollars in thousands (except per share data) Three months ended Six months ended June 30, June 30, 2005 2006 2005 2006 (unaudited) (unaudited) Statement of Operations Data: Revenues $94,218 $116,614 $182,623 $223,656 Cost of revenues 68,033 83,734 130,526 159,403 Provision for losses on uncompleted contracts, net 13 246 98 294 Gross profit 26,172 32,634 51,999 63,959 Selling and marketing 7,002 8,733 14,033 17,224 General and administrative 14,253 16,426 27,194 31,356 Total operating expenses 21,255 25,159 41,227 48,580 Operating income 4,917 7,475 10,772 15,379 Financial expenses, net (494) (577) (914) (638) Other income, net 10 483 4 444 Income before taxes on income 4,433 7,381 9,862 15,185 Taxes on Income 423 1,340 1,025 2,808 Equity in net losses of affiliates (27) (90) (29) (90) Minority interests in losses of a subsidiary - - 101 - Net income $3,983 $ 5,951 $ 8,909 $12,287 Basic net earnings per share $ 0.12 $ 0.17 $ 0.26 $0.35 Diluted net earnings per share $ 0.11 $ 0.16 $ 0.25 $0.34 Weighted average number of shares (in thousands) used in computing basic net earnings per share 34,541 35,602 34,147 35,239 Weighted average number of shares (in thousands) used in computing diluted net earnings per share 35,644 36,718 35,594 36,335 NESS TECHNOLOGIES, INC. AND ITS SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME U.S. dollars in thousands (except per share data) Three months ended Six months ended June 30, June 30, 2005 2006 2005 2006* (unaudited) (unaudited) Segment Data: Revenues: Managed Strategic Services (MSS) $21,754 $22,331 $41,377 $41,894 Technologies & Systems Group (TSG) 11,104 12,671 22,751 27,419 Ness Europe 14,048 21,174 21,700 39,613 Ness Israel 41,192 44,219 83,870 88,314 Other 6,120 16,219 12,925 26,416 $94,218 $116,614 $182,623 $223,656 Operating Income (Loss): Managed Strategic Services(MSS) $1,903 $3,027 $3,352 $5,387 Technologies & Systems Group (TSG) 1,302 1,331 3,083 3,192 Ness Europe 1,684 2,404 2,482 3,917 Ness Israel 2,541 1,401 5,759 4,537 Other (103) 1,102 (424) 1,595 Unallocated Expenses (2,410) (1,790) (3,480) (3,249) $4,917 $7,475 $10,772 $15,379 * As adjusted NESS TECHNOLOGIES, INC. AND ITS SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS U.S. dollars in thousands December 31, June 30, 2005 2006 (unaudited) CURRENT ASSETS: Cash and cash equivalents $ 33,579 $ 32,821 Short-term bank deposits 39,561 24,134 Marketable securities 2,651 - Trade receivables (net of allowance for doubtful accounts) 99,097 109,378 Unbilled receivables 28,545 41,812 Other accounts receivable and prepaid expenses 13,664 15,501 Inventories and work in progress 2,506 599 Total current assets 219,603 224,245 LONG-TERM ASSETS: Long-term prepaid expenses 4,816 6,044 Marketable securities 32 126 Deferred income taxes 5,271 4,534 Severance pay fund 35,845 39,149 Total long-term assets 45,964 49,853 Property and equipment, net 21,308 24,781 Other intangible assets, net 7,938 10,246 Goodwill 159,421 173,403 Total assets $454,234 $482,528 CURRENT LIABILITIES: Short-term bank loans and credit $21,011 $44,485 Current maturities of long-term debt 6,862 6,598 Trade payables 35,259 24,221 Advances from customers 7,670 10,829 Other accounts payable and accrued expenses 82,657 69,820 Total current liabilities 153,459 155,953 LONG-TERM LIABILITIES: Long-term debt, net of current maturities 6,294 4,939 Excess of losses over investment in affiliates 257 451 Accrued severance pay 39,722 42,909 Total long-term liabilities 46,273 48,299 Total stockholders' equity 254,502 278,276 Total liabilities and stockholders' equity $454,234 $482,528 Media contact: David Kanaan USA: 1-888-244-4919 Intl: +972-3-540-8188 Email: Investor contact: Drew Wright USA: 1-888-267-8160 Email: DATASOURCE: Ness Technologies Inc CONTACT: Media contact: David Kanaan, USA: 1-888-244-4919, Intl: +972-3-540-8188, Email: . Investor contact: Drew Wright, USA: 1-888-267-8160, Email:

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