NSTC Ness Technologies, Inc. (MM)

Operating Income Rises 33% and Net Income Rises 32% Year-over-Year on a 22% Increase in Revenues HACKENSACK, New Jersey, November 2 /PRNewswire-FirstCall/ -- Ness Technologies, Inc. (NASDAQ:NSTC), a global provider of IT services and solutions, today announced financial results for the third quarter ended September 30, 2006. Third Quarter 2006 Highlights: - Fully diluted net earnings per share were $0.22, compared to $0.17 in Q3 of 2005. - Net income reached $7.9 million, up 32% year-over-year. - Operating income at $10.2 million, up 33% year-over-year. - Revenues reached a record $119.1 million, up 22% year-over-year. - Backlog increased to a record $548 million, up 25% year-over-year. - Global workforce increased to 7,240. "I am very pleased to report that we had a strong third quarter, with record revenues and the highest operating margin and net income we've ever recorded," said Raviv Zoller, President and Chief Executive Officer of Ness Technologies. "We signed strategic deals that should have a positive long-term impact on results. We remain optimistic in our outlook, given the strong demand environment and our proven strategic business model." Ness' third quarter 2006 revenues totaled $119.1 million, an increase of $21.4 million or 22%, setting a new quarterly record and driven by both organic and non-organic growth, compared to $97.7 million in the third quarter of 2005. Operating income rose to a record $10.2 million, an increase of $2.5 million or 33%, compared to $7.7 million in the third quarter of 2005. Net income increased to a record $7.9 million, an increase of $1.9 million or 32%, compared to $6.0 million in the third quarter of 2005. Fully diluted earnings per share were $0.22 compared to $0.17 in the third quarter of 2005. Backlog as of September 30, 2006 increased to $548 million, up 25% compared to $439 million as of September 30, 2005. "We had strong operating cash flows in the quarter, resulting in an increase in our net cash position of over $9 million," 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 fourth quarter 2006 Ness expects to generate revenues of at least $132 million. Ness expects fourth quarter diluted net earnings of at least $0.25. 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 third quarter 2006 results, which will be simultaneously webcast at 9:00 A.M. Eastern Time / 6:00 A.M. Pacific Time on Thursday, November 2, 2006. To access the Ness Technologies third 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. Ness specializes in outsourcing and offshore, systems integration and application development, software and consulting, and quality assurance and training. With 7,200 employees, Ness maintains operations in 14 countries, and partners with over 100 software and hardware vendors worldwide. 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. 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: NESS TECHNOLOGIES, INC. AND ITS SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME U.S. dollars in thousands (except per share data) Three months ended Nine months ended September 30, September 30, 2005 2006 2005 2006 (unaudited) (unaudited) Statement of Operations Data: Revenues......................$ 97,719 $ 119,135 $ 280,342 $ 342,791 Cost of revenues........................69,628 85,095 200,252 244,792 Gross profit..........................28,091 34,040 80,090 97,999 Selling and marketing........................7,081 8,391 21,114 25,615 General and administrative................. 13,344 15,489 40,538 46,845 Total operating expenses........................20,425 23,880 61,652 72,460 Operating income.......................... 7,666 10,160 18,438 25,539 Financial expenses, net...............................(383) (492) (1,297) (1,130) Other income (expenses), net................................(14) (8) (10) 436 Income before taxes on income...........................7,269 9,660 17,131 24,845 Taxes on income...........................1,252 1,709 2,277 4,517 Equity in net losses of affiliates.........................- (13) (29) (103) Minority interests in losses of a subsidiary.........................- - 101 - Net income.........................$ 6,017 $ 7,938 $ 14,926 $ 20,225 Basic net earnings per share...........................$ 0.17 $ 0.22 $ 0.43 $ 0.56 Diluted net earnings per share...........................$ 0.17 $ 0.22 $ 0.42 $ 0.55 Weighted average number of shares (in thousands) used in computing basic net earnings per share...........................34,648 35,910 34,314 35,820 Weighted average number of shares (in thousands) used in computing diluted net earnings per share...........................35,499 36,897 35,562 36,776 NESS TECHNOLOGIES, INC. AND ITS SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME U.S. dollars in thousands (except per share data) Three months ended Nine months ended September 30, September 30, 2005 2006 2005 2006 Segment Data: (unaudited) (unaudited) Revenues: Managed Strategic Services (MSS)........................$ 18,998 $ 18,935 $ 60,375 $ 60,829 Technologies & Systems Group (TSG)....................12,414 14,538 35,165 41,958 Ness Europe....................14,624 19,285 36,324 58,898 Ness Israel.........................43,700 50,652 127,570 138,966 Other...........................7,983 15,725 20,908 42,140 $ 97,719 $ 119,135 $ 280,342 $ 342,791 Operating Income (Loss): Managed Strategic Services (MSS)................$ 1,770 $ 2,243 $ 5,122 $ 7,630 Technologies & Systems Group (TSG).....................1,869 2,275 4,952 5,467 Ness Europe..........................1,683 1,493 4,165 5,410 Ness Israel..........................4,065 4,621 9,824 9,158 Other..............................72 870 (352) 2,465 Unallocated Expenses.......................(1,793) (1,342) (5,273) (4,591) $ 7,666 $ 10,160 $ 18,438 $ 25,539 NESS TECHNOLOGIES, INC. AND ITS SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS U.S. dollars in thousands December September 31, 30, 2005 2006 (unaudited) CURRENT ASSETS: Cash and cash equivalents....................$ 33,579 $ 40,186 Short-term bank deposits.........................39,561 4,862 Marketable securities........................2,651 - Trade receivables (net of allowance for doubtful accounts)..................... 99,097 103,567 Unbilled receivables......................21,500 39,459 Other accounts receivable and prepaid expenses....................... 13,664 19,627 Inventories and work in progress..........................2,506 720 Total current assets..........................212,558 208,421 LONG-TERM ASSETS: Long-term prepaid expenses..........................4,816 6,482 Marketable securities...........................32 118 Trade and unbilled receivables.......................7,045 12,133 Deferred income taxes.............................5,271 3,884 Severance pay fund.............................35,845 41,270 Total long-term assets...........................53,009 63,887 Property and equipment, net..............................21,308 25,418 Other intangible assets, net...............................7,938 9,028 Goodwill........................159,421 186,324 Total assets........................$ 454,234 $ 493,078 CURRENT LIABILITIES: Short-term bank loans and credit.........................$ 21,011 $ 25,639 Current maturities of long-term debt..............................6,862 6,387 Trade payables.........................35,259 28,512 Advances from customers.........................7,670 9,078 Other accounts payable and accrued expenses.........................82,657 79,410 Total current liabilities.....................153,459 149,026 LONG-TERM LIABILITIES: Long-term debt, net of current maturities........................6,294 2,697 Excess of losses over investment in affiliates..........................257 480 Accrued severance pay..............................39,722 45,295 Total long-term liabilities......................46,273 48,472 Total stockholders' equity..........................254,502 295,580 Total liabilities and stockholders' equity........................$ 454,234 $ 493,078 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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