HACKENSACK, New Jersey, February 5 /PRNewswire-FirstCall/ -- Ness
Technologies, Inc. (NASDAQ:NSTC), a global provider of IT services
and solutions, today announced financial results for the quarter
and full year ended December 31, 2007. Fourth Quarter and Full Year
2007 Highlights: - Quarterly revenues were a record $170.0 million,
up 29% year-over-year, while full year revenues were a record
$562.3 million, up 19% year-over-year. - On a GAAP basis, the
company had a fourth quarter operating loss of $5.5 million, a net
loss of $7.1 million and an $0.18 diluted net loss per share. On a
full year basis, operating income was $15.6 million, net income was
$10.1 million and diluted net earnings per share was $0.26. - As
recently announced, last week the company signed a settlement
agreement in a long-running dispute with a client. Under the terms
of the agreement, Ness paid $9 million to the client to settle the
arbitration. In addition to the payment, Ness has taken a charge to
write off accounts receivable and other assets related to the
contract with the client and for legal expenses associated with the
arbitration, together totaling approximately $7 million, and an
additional approximately $5 million of unrelated allowances for
doubtful accounts and other charges. The company took all these
charges in the fourth quarter of 2007, for a total of approximately
$21 million. Excluding the charges, on a non-GAAP basis (1): -
Quarterly operating income was a record $15.0 million, or 8.8% of
revenues, up 86% year-over-year, while full year operating income
was $36.1 million. - Quarterly net income was a record $12.3
million, while full year net income was $29.5 million. - Quarterly
diluted net earnings per share was a record $0.31, while full year
diluted net earnings per share was $0.75. - Operating cash flows
for the full year were a record $16.4 million. - Backlog as of
December 31, 2007 was a record $734 million, up 21% compared to
$606 million as of December 31, 2006. - Headcount reached a new
record of 8,280 as of December 31, 2007. "We had a terrific fourth
quarter, winning numerous significant deals, and as we end the year
we are in the most fertile sales period in the history of the
company," said Sachi Gerlitz, president and chief executive officer
of Ness Technologies. "We settled the arbitration and cleaned up
our balance sheet, taking a significant provision, and we are
positioned for what we believe will be a strong 2008. Our core
business is thriving, as shown by our fourth quarter results, where
we delivered record quarterly and annual revenues and, excluding
the provision, record quarterly operating income. Our global growth
strategy is paying off, as manifested by the fact that almost 60%
of our business in the fourth quarter was generated in North
America and Europe, and our growth in Central Europe was especially
impressive." "We also delivered record quarterly operating cash
flows, as the result of our continued focus on collections and cash
flow generation," stated Ofer Segev, executive vice president and
chief financial officer of Ness. "We took important steps to
improve operating margins in each of our operating segments, and we
are beginning to see the fruit of those decisions. Our balance
sheet and liquidity remain strong, and we feel very confident about
the future." Guidance For the full year 2008, Ness expects to
generate revenues in the range of $635 million to $655 million and
diluted net earnings per share in the range of $1.00 to $1.05.
Guidance includes the effect of an anticipated increase in the
number of outstanding diluted shares to an average of approximately
40 million in 2008, as the result of stock option exercises.
Guidance does not include any contribution to revenues or earnings
per share from future acquisitions. Conference Call Details Ness
Technologies President and Chief Executive Officer, Sachi Gerlitz,
and Chief Financial Officer, Ofer Segev, will also conduct a
conference call to discuss the fourth quarter and full year 2007
results. The call, which will be simultaneously webcast, will be at
8:30 AM Eastern Time / 5:30 AM Pacific Time on Tuesday, February 5,
2008. To access the Ness Technologies fourth quarter and full year
2007 earnings conference call, participants in North America should
dial 1-800-399-0427 and international participants should dial
+1-706-634-5453. A live audio 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 over 8,000 employees, Ness maintains operations in
18 countries, and partners with numerous software and hardware
vendors worldwide. For more information about Ness Technologies,
visit http://www.ness.com/. Use of Non-GAAP Financial Information
In addition to reporting financial results in accordance with
generally accepted accounting principles, or GAAP, Ness uses
various non-GAAP measures of net income and earnings per share,
including (a) exclusion of the one-time provision for extraordinary
expenses taken in the fourth quarter of 2007 and (b) adjustments
from results based on GAAP to exclude non-cash stock-based
compensation expenses in accordance with SFAS 123R and amortization
of intangible assets, net of taxes. Ness' management believes the
non-GAAP financial information provided in this release is useful
to investors' understanding and assessment of Ness' on-going core
operations and prospects for the future. The presentation of this
non-GAAP financial information is not intended to be considered in
isolation or as a substitute for results prepared in accordance
with GAAP. Management uses both GAAP and non-GAAP information in
evaluating and operating business internally and as such has
determined that it is important to provide this information to
investors. 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 14, 2007. Ness is under no obligation to, and
expressly disclaims any obligation to, update or alter its
forward-looking statements, whether as a result of such changes,
new information, subsequent events or otherwise. NESS TECHNOLOGIES,
INC. AND ITS SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF
INCOME U.S. dollars in thousands (except per share data) Statement
of Operations Data: Three months ended Year ended December 31,
December 31, 2006 2007 2006 2007 (Unaudited) (Unaudited) Revenues $
131,527 $ 170,039 $ 474,318 $ 562,302 Cost of revenues 97,312
120,273 342,104 399,356 Gross profit 34,215 49,766 132,214 162,946
Selling and marketing 9,700 13,116 35,315 41,735 General and
administrative 16,443 26,982 63,288 90,439 Arbitration settlement
charges - 15,210 - 15,210 Total operating expenses 26,143 55,308
98,603 147,384 Operating income (loss) 8,072 (5,542) 33,611 15,562
Financial expenses, net (150) (468) (1,280) (30) Gain on sale of
cost investment 5,001 - 5,001 - Other income (expenses), net (88)
(644) 348 (817) Income (loss) before taxes on income 12,835 (6,654)
37,680 14,715 Taxes on income 3,518 446 8,035 4,628 Equity in
losses and gain from disposal of an affiliate 271 - 168 - Net
income (loss) $ 9,588 $ (7,100) $ 29,813 $ 10,087 Basic net
earnings (loss) per share $ 0.26 $ (0.18) $ 0.83 $ 0.26 Diluted net
earnings (loss) per share $ 0.25 $ (0.18) $ 0.82 $ 0.26 Weighted
average number of shares (in thousands) used in computing basic net
earnings (loss) per share 37,589 39,195 35,999 39,076 Weighted
average number of shares (in thousands) used in computing diluted
net earnings (loss) per share 38,499 39,195 36,549 39,510 NESS
TECHNOLOGIES, INC. AND ITS SUBSIDIARIES CONDENSED CONSOLIDATED
STATEMENTS OF INCOME U.S. dollars in thousands Three months ended
Year ended December 31, December 31, Segment Data: 2006 2007 2006
2007 (Unaudited) (Unaudited) Revenues: Ness North America (1) $
23,611 $ 26,169 $ 93,359 $ 105,139 Technologies & Systems Group
(TSG) 14,434 14,106 56,391 57,383 Ness Europe (1) 31,031 46,338
98,081 126,886 Ness Israel 51,043 55,680 190,009 203,396 Other (1)
11,408 27,746 36,478 69,498 $131,527 $ 170,039 $ 474,318 $ 562,302
Operating Income (Loss): Ness North America (1) $ 2,335 $ 1,692 $
11,139 $ 8,272 Technologies & Systems Group (TSG) 1,462 1,352
6,929 7,035 Ness Europe (1) 2,255 4,255 7,955 10,212 Ness Israel
4,996 (10,974) 14,154 (3,189) Other (1) (351) 2,890 650 6,199
Unallocated Expenses (2,625) (4,757) (7,216) (12,967) $ 8,072 $
(5,542) $ 33,611 $ 15,562 Geographic Data: Revenues: Israel $
62,128 $ 66,721 $ 227,992 $ 250,388 North America 32,337 37,665
125,277 134,800 Europe 33,527 58,130 104,376 151,454 Asia Pacific
3,535 7,523 16,673 25,660 $ 131,527 $ 170,039 $ 474,318 $ 562,302
(1) On January 1, 2007, we expanded our Managed Strategic Services
(MSS) segment to include the non-financial services portions of
Ness Innovative Business Services (formerly Innova), a component of
our "Other" segment, and we changed the name of MSS to Ness North
America; and we moved our Ness UK organization from our "Other"
segment to our Ness Europe segment. 2006 results for these three
segments have been reclassified to reflect the current organization
of the segments. NESS TECHNOLOGIES, INC. AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS U.S. dollars in
thousands Year ended December 31, 2006 2007 (Unaudited) Cash flows
from operating activities: Net income $ 29,813 $ 10,087 Adjustments
required to reconcile net income to net cash provided by (used in)
operating activities: Stock-based compensation-related expenses 583
1,610 Equity in losses and gain from disposal of an affiliate (168)
- Currency fluctuation of long-term debt 116 87 Depreciation and
amortization 12,161 13,619 Deferred income taxes, net (730) (1,915)
Loss on sale of property and equipment 198 224 Excess tax benefits
related to exercise of options (2,343) 146 Gain on sale of cost
investment (5,001) - Loss on impairment of cost investment - 730
Realized gain on sale of marketable securities (128) - Increase in
trade receivables, net (22,895) (15,580) Increase in unbilled
receivables (10,479) (468) Decrease (increase) in other accounts
receivable and prepaid expenses 529 (4,057) Decrease (increase) in
inventories and work in progress 2,363 (1,956) Increase in
long-term prepaid expenses and other assets (419) (991) Increase
(decrease) in trade payables (994) 4,553 Increase (decrease) in
advances from customers and deferred revenues 20,995 (5,555)
Increase in other long-term liabilities 749 1,748 Increase
(decrease) in other accounts payable and accrued expenses (20,560)
13,879 Increase in accrued severance pay, net 455 285 Net cash
provided by operating activities 4,245 16,446 Cash flows from
investing activities: Net cash paid for acquisition of consolidated
subsidiaries (23,401) (36,865) Proceeds from sale of cost
investment, net 3,135 1,866 Additional payments in connection with
acquisitions of subsidiaries in prior periods (5,162) (10,241)
Proceeds from maturity of (investment in) short-term bank deposits
38,368 (682) Proceeds from sale of marketable securities 2,779 -
Investment in affiliate at cost (727) - Proceeds from sale of
property and equipment 605 293 Purchase of property and equipment
and capitalization of software development costs for internal use
(13,224) (11,563) Capitalization of software development costs
(233) - Net cash provided by (used in) investing activities 2,140
(57,192) Cash flows from financing activities: Exercise of options
30,234 2,957 Excess tax benefits related to exercise of options
2,343 (146) Short-term bank loans and credit, net (19,764) (11,983)
Proceeds from long-term debt - 45,813 Principal payments of
long-term debt (7,730) (3,901) Net cash provided by financing
activities 5,083 32,740 Effect of exchange rate changes on cash and
cash equivalents 1,628 4,428 Increase (decrease) in cash and cash
equivalents 13,096 (3,578) Cash and cash equivalents at the
beginning of the year 33,579 46,675 Cash and cash equivalents at
the end of the year $ 46,675 $ 43,097 NESS TECHNOLOGIES, INC. AND
ITS SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS U.S. dollars
in thousands December 31, 2006 2007 (Unaudited) CURRENT ASSETS:
Cash and cash equivalents $ 46,675 $ 43,097 Restricted cash 518 602
Short-term bank deposits 1,509 2,361 Trade receivables, net of
allowance for doubtful accounts 136,934 184,861 Unbilled
receivables 28,635 40,320 Other accounts receivable and prepaid
expenses 15,357 27,887 Inventories and work in progress 411 2,563
Total current assets 230,039 301,691 LONG-TERM ASSETS: Long-term
prepaid expenses and other assets 6,480 8,014 Investments at cost
1,193 564 Unbilled receivables 14,985 8,919 Deferred income taxes
7,670 5,441 Severance pay fund 42,321 49,731 Total long-term assets
72,649 72,669 Property and equipment, net 28,279 34,072 Intangible
assets, net 8,336 13,518 Goodwill 201,718 267,604 Total assets
541,021 $ 689,554 CURRENT LIABILITIES: Short-term bank credit $
4,477 $ 2,819 Current maturities of long-term debt 4,420 1,662
Trade payables 42,524 55,118 Advances from customers and deferred
revenues 29,942 29,228 Other accounts payable and accrued expenses
76,128 119,798 Total current liabilities 157,491 208,625 LONG-TERM
LIABILITIES: Long-term debt, net of current maturities 2,151 46,926
Other long-term liabilities 1,552 5,135 Deferred income taxes 141
956 Accrued severance pay 47,031 57,465 Total long-term liabilities
50,875 110,482 Total stockholders' equity 332,655 370,447 Total
liabilities and stockholders' equity $ 541,021 $ 689,554 NESS
TECHNOLOGIES, INC. AND ITS SUBSIDIARIES RECONCILIATION TO
SUPPLEMENTAL NON-GAAP FINANCIAL INFORMATION U.S. dollars in
thousands (except per share data) Three months Year ended ended
December December 31, 2007 31, 2007 GAAP operating income (loss) $
(5,542) $ 15,562 Arbitration settlement and other charges 20,574
20,574 Non-GAAP operating income $ 15,032 $ 36,136 GAAP net income
(loss) $ (7,100) $ 10,087 Arbitration settlement and other charges,
net of taxes 19,371 19,371 Non-GAAP net income $ 12,271 $ 29,458
GAAP earnings (loss) per share (diluted) $ (0.18) $ 0.26 Adjustment
to earnings (loss) per share (diluted) 0.49 0.49 Non-GAAP earnings
per share (diluted) $ 0.31 $ 0.75 Number of shares (in thousands)
used in computing GAAP earnings (loss) per share (diluted) 39,195
39,512 Adjustment of number of shares 149 - Number of shares (in
thousands) used in computing non-GAAP earnings per share (diluted)
39,344 39,512 (1) See "Use of Non-GAAP Financial Information" below
for more information regarding Ness' use of non-GAAP financial
measures. Ness Technologies media contact: David Kanaan USA:
1-888-244-4919 Intl: +972-3-540-8188 Email: Ness Technologies
investor contact: Drew Wright USA: 1-201-488-3262 Email:
DATASOURCE: Ness Technologies Inc CONTACT: Ness Technologies media
contact: David Kanaan, USA: 1-888-244-4919, Intl: +972-3-540-8188,
Email: ; Ness Technologies investor contact: Drew Wright, USA:
1-201-488-3262, Email:
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