HACKENSACK, New Jersey,
July 28, 2010 /PRNewswire-FirstCall/
-- Ness Technologies, Inc. (NASDAQ: NSTC and TASE: NSTC), a global
provider of IT services and solutions, announced today its
financial results for the quarter ended June
30, 2010.
Second Quarter 2010 Highlights:
- Quarterly revenues were $139.7 million, up 10% year-over-year.
- Quarterly operating income was $3.0 million, down 11% year-over-year.
On a non-GAAP basis ([1]), quarterly operating income was $6.0 million,
up 1% year-over-year.
- Quarterly net income from continuing operations was $0.9 million, down
60% year-over-year. On a non-GAAP basis, quarterly net income from
continuing operations was $3.8 million, down 13% year-over-year.
- Quarterly diluted net earnings per share from continuing operations
were $0.02, compared to $0.06 in the second quarter of 2009. On a
non-GAAP basis, quarterly diluted net earnings per share from
continuing operations were $0.10, compared to $0.11 in the second
quarter of 2009.
- Quarterly operating cash flows from continuing operations were $0.4
million.
- Cash, cash equivalents and short-term bank deposits were $53.1 million
as of June 30, 2010.
- Backlog from continuing operations as of June 30, 2010 was $658
million, up 3% year-over-year and 2% sequentially, in constant
currencies.
- Headcount for continuing operations was approximately 7,765 as of June
30, 2010.
- The previously announced acquisition of Gilon Business Insight, Ltd., a
provider of business intelligence services in Israel, closed during the
quarter.
"I am pleased by our performance in the second quarter, as all
our businesses did well, other than in Central and Eastern Europe," said Sachi Gerlitz, president and chief executive
officer of Ness Technologies. "While the timing of the economic
recovery in Central and Eastern
Europe remains uncertain, we continued to improve our
operating efficiency and are encouraged by the increasing demand in
the public sector in the Czech
Republic, where we won several deals. I am optimistic about
continuing our growth in the second half of the year based on the
demand that we see in our pipeline."
- Results by operating segment:
- The company's Software Product Engineering segment, which provides
outsourced software product research and development services to
companies that build or rely on software to generate revenues,
continued to perform well in the second quarter, with
higher-than-normal operating margins and sequential and year-over-year
revenue growth.
- The company's System Integration and Application Development segment
showed good year-over-year revenue growth and sequential non-GAAP
operating margin improvement, with strong performance in the United
States and Israel, and weak performance in Central and Eastern Europe.
- As previously announced, the company no longer reports a separate
Software Distribution segment, as its European software distribution
operations were reclassified as discontinued operations and its
Israeli software distribution operations were reclassified to its
System Integration and Application Development segment, effective as
of January 1, 2010.
"We continued to execute on our operational plans in the second
quarter, and I am encouraged by our results," said Ofer Segev, executive vice president and chief
financial officer. "The restructuring steps we completed through
the end of the first quarter to improve our operating efficiency
have provided a good platform for our planned future growth, as we
work to further drive revenues and increase operating margins in
the second half of 2010."
Business Outlook
Ness continues to expect top line revenue growth and margin
expansion in 2010, with third quarter results in line with second
quarter results, and fourth quarter results significantly better
than third quarter results.
Ness is reiterating its full year 2010 guidance of revenues from
continuing operations in the range of $575
million to $585 million with diluted net earnings per share
from continuing operations in the range shown in the reconciliation
table below:
Full year diluted net earnings
per share ($)
Low High
GAAP basis from continuing operations........ $ 0.12 $ 0.16
Stock-based compensation; amortization of
intangible assets; earn-out and retention
expenses related to prior acquisitions;
acquisition and integration costs of
Gilon acquisition........................... 0.31 0.31
Non-GAAP basis from continuing operations......$ 0.43 $ 0.47
Based on the weakness of European currencies, Ness currently
expects to be near the lower end of the revenue guidance range.
The company's 2010 GAAP guidance excludes any unannounced future
acquisitions or stock-based compensation grants; and the company's
GAAP and non-GAAP guidance further assumes that outstanding diluted
shares will average approximately 39 million in 2010 and that
relevant foreign currency exchange rates will remain at their
levels as on July 23, 2010.
For the reasons set forth elsewhere in this release, Ness'
management believes that non-GAAP earnings per share financial
guidance provides the best comparative basis for investors to
understand and assess the company's on-going operations and
prospects for the future.
Conference Call Details
Sachi Gerlitz, president and
chief executive officer of Ness Technologies, and Ofer Segev, executive vice president and chief
financial officer, will conduct a conference call to discuss the
second quarter 2010 results. The call, which will be simultaneously
webcast, will begin at 8:30 AM Eastern
Time / 5:30 AM Pacific Time /
3:30 PM Israel Time on Wednesday, July 28, 2010.
To access the Ness Technologies second quarter 2010 earnings
conference call, participants in North
America should dial 1-800-399-0427, participants in
Israel should dial 1-80-924-5917
and all other international participants should dial
+1-973-200-3375. 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://investor.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 and TASE:NSTC) is a global
provider of IT and business services and solutions with specialized
expertise in software product engineering; and system integration,
application development, consulting and software distribution. Ness
delivers its portfolio of solutions and services using a global
delivery model combining offshore, near-shore and local teams. With
about 7,800 employees, Ness has operations in North America, Europe, Israel and India, has customers in over 20 countries, and
partners with numerous software and hardware vendors worldwide. For
more information about Ness, 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 adjustments from results based on GAAP to exclude (a)
non-cash stock-based compensation expenses in accordance with
Financial Accounting Standards Board (FASB) Accounting Standards
Codification Topic 718, "Stock Compensation" (formerly, FASB
Statement 123R) and amortization of intangible assets, net of
taxes; (b) earn-out and retention expenses related to prior
acquisitions; (c) an insurance settlement in the first quarter of
2009 related to a 2007 arbitration expense, net of related
expenses, net of taxes; (d) severance expenses in the first quarter
of 2009, net of taxes; and (e) acquisition and integration costs of
its Gilon acquisition, 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 the business internally and as such has
determined that it is important to provide this information to
investors.
Ness also uses these non-GAAP measures in the formulation of its
financial guidance. This requires Ness management to make
assumptions regarding certain factors that could affect future net
income and earnings per share, such as the timing and size of
future potential acquisitions (which could result in additional
non-cash amortization of intangibles), the timing and size of
future potential stock-based compensation grants (which could
result in additional non-cash stock-based compensation expense),
and the timing and size of any one-time income or expenses. The
company discloses such assumptions in conjunction with its
financial guidance.
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, 2010. Ness is under no obligation, 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)
Three months ended Six months ended
June 30, June 30,
2009 2010 2009 2010
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Revenues $ 126,887 $ 139,701 $ 253,168 $ 273,034
Cost of revenues 92,542 102,275 186,901 198,796
Gross profit 34,345 37,426 66,267 74,238
Selling and marketing 9,681 9,838 18,893 19,891
General and administrative 21,233 24,551 44,818 48,893
Insurance settlement related to
2007 arbitration expense, net
of related expenses - - (2,610) -
Commissions related to the sale
of Israeli SAP sales and
distribution operations - - (2,534) -
Total operating expenses 30,914 34,389 58,567 68,784
Operating income 3,431 3,037 7,700 5,454
Financial expenses, net (666) (442) (1,822) (651)
Income before taxes on income 2,765 2,595 5,878 4,803
Taxes on income 537 1,707 1,179 3,217
Net income from continuing
operations $ 2,228 $ 888 $ 4,699 $ 1,586
Net loss from discontinued
operations (1,186) (845) (2,129) (6,232)
Net income (loss) $ 1,042 $ 43 $ 2,570 $ (4,646)
Basic net earnings per share
from continuing operations $ 0.06 $ 0.02 $ 0.12 $ 0.04
Diluted net earnings per share
from continuing operations $ 0.06 $ 0.02 $ 0.12 $ 0.04
Basic net earnings (loss)
per share $ 0.03 $ 0.00 $ 0.07 $ (0.12)
Diluted net earnings (loss)
per share $ 0.03 $ 0.00 $ 0.07 $ (0.12)
Weighted average number of
shares (in thousands)
used in computing basic net
earnings per share from
continuing operations,
basic net earnings (loss)
per share and diluted net
loss per share 38,590 38,161 38,755 38,230
Weighted average number of
shares (in thousands) used in
computing diluted net earnings
per share from continuing
operations and diluted net
earnings per share 39,149 38,592 39,333 38,672
NESS TECHNOLOGIES, INC. AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
U.S. dollars in thousands
Three months ended Six months ended
June 30, June 30,
2009 2010 2009 2010
Segment Data (1): (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Revenues from
continuing operations:
Software Product Engineering $ 25,688 $ 28,060 $ 50,654 $ 54,457
System Integration and
Application Development.. 101,199 111,641 202,514 218,577
$ 126,887 $ 139,701 $ 253,168 $ 273,034
Operating income (loss) from
continuing operations:
Software Product Engineering $ 4,096 $ 4,388 $ 8,210 $ 8,241
System Integration and
Application Development.. 3,228 2,746 8,539 5,973
Unallocated Expenses (3,893) (4,097) (9,049) (8,760)
$ 3,431 $ 3,037 $ 7,700 $ 5,454
Geographic Data:
Revenues from
continuing operations:
Israel $ 42,371 $ 51,327 $ 87,641 $ 98,966
Europe 38,601 38,164 75,074 77,165
North America 43,544 48,381 86,023 93,630
Asia and the Far East 2,371 1,829 4,430 3,273
$ 126,887 $ 139,701 $ 253,168 $ 273,034
(1) The company no longer reports a separate Software
Distribution segment, as its European software distribution
operations were reclassified as discontinued operations and its
Israeli software distribution operations were reclassified to its
System Integration and Application Development segment, effective
as of January 1, 2010. Segment data
for prior periods has been restated 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
Six months ended
June 30,
2009 2010
(Unaudited) (Unaudited)
Cash flows from operating activities:
Net income (loss) $ 2,570 $ (4,646)
Adjustments required to reconcile net
income (loss) to net cash provided by
(used in) operating activities:
Net loss from discontinued operations 2,129 6,232
Stock-based compensation 1,756 1,600
Currency fluctuation of restricted cash
and short-term bankmdeposits - (415)
Depreciation and amortization 8,423 8,631
Loss (gain) on sale of property and equipment
and impairment and sale of cost investments (205) 79
Commissions related to the sale of Israeli
SAP sales and distribution operations (2,534) -
Decrease (increase) in trade
receivables, net 38,709 (6,719)
Decrease (increase) in unbilled receivables 894 (5,680)
Decrease (increase) in other accounts
receivable and prepaid expenses (1,949) 1,423
Decrease (increase) in work-in-progress (343) 1,393
Increase in long-term prepaid expenses (346) (540)
Deferred income taxes, net 513 847
Increase (decrease) in trade payables (13,387) 11,473
Decrease in advances from customers and
deferred revenues (1,200) (2,851)
Decrease in other accounts payable and
accrued expenses (14,810) (8,369)
Increase in other long-term liabilities 472 882
Increase (decrease) in accrued severance
pay, net (1,384) 266
Net cash used in discontinued operations. (1,853) (3,712)
Net cash provided by (used in)
operating activities 17,455 (106)
Cash flows from investing activities:
Consideration from sale of a
consolidated subsidiary - 1,711
Net cash paid for acquisition of a
consolidated subsidiary - (16,259)
Cash paid for acquisition of
intangible assets - (513)
Additional payments in connection with
acquisitions of subsidiaries in
prior periods (14,395) (1,330)
Proceeds from maturity of (investment in)
short-term bank deposits, net (15,778) 10,791
Proceeds from sale of property
and equipment 703 -
Purchase of property and equipment and
capitalization of software developed
for internal use (4,864) (5,287)
Net cash used in discontinued operations (1,808) -
Net cash used in investing activities (36,142) (10,887)
Cash flows from financing activities:
Repurchase of shares (2,037) (2,169)
Acquired subsidiary's dividend to its
former shareholder (683) -
Short-term bank loans and credit, net (4,560) 6,361
Proceeds from long-term debt 15,000 13,364
Principal payments of long-term debt (2,161) (8,701)
Net cash provided by financing activities 5,559 8,855
Effect of exchange rate changes on cash
and cash equivalents (1,101) (2,987)
Decrease in cash and cash equivalents (14,229) (5,125)
Cash and cash equivalents at the beginning
of the period 44,585 40,218
Cash and cash equivalents at the end of
the period $ 30,356 $ 35,093
NESS TECHNOLOGIES, INC. AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands
December June 30,
31, 2009 2010
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 40,218 $ 35,093
Restricted cash 2,470 2,474
Short-term bank deposits 25,939 15,556
Trade receivables, net of allowance for
doubtful accounts 131,452 136,725
Unbilled receivables 28,012 32,625
Other accounts receivable and prepaid expenses 27,832 26,677
Work in progress 9,690 7,111
Total assets attributed to discontinued
operations 43,212 28,391
Total current assets 308,825 284,652
LONG-TERM ASSETS:
Long-term prepaid expenses and other assets 6,083 6,575
Unbilled receivables 4,654 4,417
Deferred income taxes, net 3,608 2,442
Severance pay fund 53,145 53,726
Property and equipment, net 35,739 34,019
Intangible assets, net 10,016 11,672
Goodwill 263,541 265,039
Total long-term assets 376,786 377,890
Total assets $ 685,611 $ 662,542
CURRENT LIABILITIES:
Short-term bank credit $ 500 $ 8,792
Current maturities of long-term debt 21,332 24,035
Trade payables 30,914 40,573
Advances from customers and deferred revenues 40,639 36,134
Other accounts payable and accrued expenses 99,464 94,256
Total liabilities attributed to discontinued
operations 25,461 14,561
Total current liabilities 218,310 218,351
LONG-TERM LIABILITIES:
Long-term debt, net of current maturities 50,836 46,965
Other long-term liabilities 6,689 7,276
Deferred income taxes 2,045 2,489
Accrued severance pay 56,443 57,311
Total long-term liabilities 116,013 114,041
Total stockholders' equity 351,288 330,150
Total liabilities and stockholders'equity 685,611 $ 662,542
NESS TECHNOLOGIES, INC. AND ITS SUBSIDIARIES RECONCILIATION
OF SUPPLEMENTAL NON-GAAP FINANCIAL INFORMATION EXCLUDING
STOCK-BASED COMPENSATION; AMORTIZATION OF INTANGIBLE ASSETS;
EARN-OUT AND RETENTION EXPENSES RELATED TO PRIOR ACQUISITIONS;
INSURANCE SETTLEMENT RELATED TO 2007 ARBITRATION EXPENSE, NET
OF RELATED EXPENSES; SEVERANCE EXPENSES; ACQUISITION AND
INTEGRATION COSTS OF GILON ACQUISITION; ALL NET OF TAXES
U.S. dollars in thousands (except per share data)
Three months ended Six months ended
June 30, June 30,
2009 2010 2009 2010
Statements of Income Data:(Unaudited) (Unaudited) (Unaudited) (Unaudited)
GAAP gross profit $ 34,345 $ 37,426 $ 66,267 $ 74,238
Stock-based compensation 57 116 120 155
Amortization of intangible
assets 187 136 376 189
Severance expenses - - 966 -
Non-GAAP gross profit $ 34,589 $ 37,678 $ 67,729 $ 74,582
GAAP operating income $ 3,431 $ 3,037 $ 7,700 $ 5,454
Stock-based compensation 828 331 1,756 1,160
Amortization of intangible
assets 1,729 1,452 3,365 2,720
Earn-out and retention
expenses related to prior
acquisitions - 497 - 977
Insurance settlement related to
2007 arbitration expense, net
of related expenses - - (2,610) -
Severance expenses - - 2,646 -
Acquisition and integration
costs of Gilon acquisition - 728 - 728
Non-GAAP operating income $ 5,988 $ 6,045 $ 12,857 $ 11,039
GAAP operating margin 2.7% 2.2% 3.0% 2.0%
Non-GAAP operating margin 4.7% 4.3% 5.1% 4.0%
GAAP net income from
continuing operations $ 2,228 $ 888 $ 4,699 $ 1,586
Stock-based compensation;
amortization of intangible
assets; earn-out and
retention expenses related
to prior acquisitions;
insurance settlement in
respect of 2007 arbitration
expense, net of related
expenses; severance expenses;
acquisition and integration
costs of Gilon acquisition;
all net of taxes 2,085 2,866 4,282 5,518
Non-GAAP net income from
continuing operations $ 4,313 $ 3,754 $ 8,981 $ 7,104
GAAP diluted net earnings
per share from continuing
operations $ 0.06 $ 0.02 $ 0.12 $ 0.04
Stock-based compensation;
amortization of intangible
assets; earn-out and retention
expenses related to prior
acquisitions; insurance
settlement in respect of 2007
arbitration expense, net of
related expenses; severance
expenses; acquisition and
integration costs of Gilon
acquisition; all net
of taxes 0.05 0.07 0.11 0.14
Non-GAAP diluted net earnings
per share from continuing
operations $ 0.11 $ 0.10 $ 0.23 $ 0.18
Segment Data:
Software Product Engineering:
GAAP operating income $ 4,096 $ 4,388 $ 8,210 $ 8,241
Amortization of intangible
assets 38 38 76 76
Non-GAAP operating income $ 4,134 $ 4,426 $ 8,286 $ 8,317
System Integration and
Application Development:
GAAP operating income $ 3,228 $ 2,746 $ 8,539 $ 5,973
Amortization of intangible
assets 1,691 1,414 3,289 2,644
Earn-out and retention
expenses related to prior
acquisitions - 497 - 977
Insurance settlement related
to 2007 arbitration
expense, net of related
expenses - - (2,610) -
Severance expenses - - 1,293 -
Acquisition and integration costs
of Gilon acquisition. - 728 - 728
Non-GAAP operating income $ 4,919 $ 5,385 $ 10,511 $ 10,322
---------------------------------
([1]) See "Use of Non-GAAP Financial Information" for more
information regarding the company's use of non-GAAP financial
measures.
Media Contact:
David Kanaan
Intl: +972-54-425-5307
Email: media.int@ness.com
Investor Relations Contact:
Drew Wright
USA: +1-201-488-3262
Email: investor@ness.com
SOURCE Ness Technologies Inc