HACKENSACK, New Jersey,
February 2, 2011
/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 and full year
ended December 31, 2010.
Fourth Quarter and Full Year 2010 Highlights:
- Quarterly revenues were a record $157.4 million, up 16% year-over-year;
and full year revenues were $571.8 million, up 12% year-over-year.
- Quarterly operating income was $7.3 million, compared to a loss of
$11.3 million in the fourth quarter of 2009; and full year operating
Income was $16.4 million, up from $0.3 million in 2009.
On a non-GAAP basis[1], quarterly operating income was $10.1
million, up 87% year-over-year; and full year operating income was
$27.7 million, up 11% year-over-year. On a GAAP and non-GAAP basis,
quarterly operating income and operating margin improved sequentially,
reaching the highest levels in nine quarters.
- Quarterly net income from continuing operations was $5.3 million,
compared to a loss of $17.4 million in the fourth quarter of 2009; and
full year net income from continuing operations was $8.4 million,
compared to a loss of $10.0 million in 2009.
On a non-GAAP basis, quarterly net income from continuing operations
was $6.7 million, up 109% year-over-year; and full year net income from
continuing operations was $17.9 million, up 5% year-over-year. On a
GAAP and non-GAAP basis, quarterly net income and net margin from
Continuing operations improved sequentially, reaching the highest
levels in nine quarters.
- Quarterly diluted net earnings per share from continuing operations
were $0.14, compared to a loss of $0.45 in the fourth quarter of 2009;
and full year diluted net earnings per share from continuing operations
were $0.22, compared to a loss of $0.26 in 2009.
On a non-GAAP basis, quarterly diluted net earnings per share from
continuing operations were $0.17, up from $0.08 in the fourth quarter
of 2009; and full year diluted net earnings per share from continuing
operations were $0.46, up from $0.44 in 2009.
- In Central and Eastern Europe, operating margin continued to recover,
hitting the highest level in eight quarters.
- Operating cash flows from continuing operations for the quarter and the
full year were $16.7 million and $9.3 million, respectively.
- Cash, cash equivalents and short-term bank deposits were $41.5 million
as of December 31, 2010.
- Backlog from continuing operations as of December 31, 2010 was $635
million, up 1% year-over-year.
- Headcount for continuing operations was approximately 7,710 as of
December 31, 2010.
"We had a good fourth quarter and I am particularly proud of the
operating margin expansion we delivered; this steady progress is a
direct result of our strategy to focus on differentiation, global
offerings and higher-margin revenue streams," said Sachi Gerlitz, president and chief executive
officer of Ness Technologies. "As we continue our long-term
priority to maximize margin expansion in 2011, we feel that we are
on a solidly upward trajectory with a good outlook for the coming
year."
- 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 fourth quarter, with a strong
quarterly operating margin and good year-over-year revenue growth.
- The company's System Integration and Application Development segment
showed significant year-over-year revenue growth and operating margin
improvement, with very good performance in Israel and continued
improvement 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 are pleased by the major recovery we implemented in 2010, as
seen in our strong fourth quarter numbers, which speak for
themselves," said Ofer Segev,
executive vice president and chief financial officer. "We will
continue to focus on excelling in our operations, driving to
increase the bottom line, generate good operating cash flows and
maintain our strong liquidity."
Business Outlook
The company expects top line growth and operating margin
expansion in 2011 with a trend of sequentially increasing quarterly
revenues and operating margin, except for the second quarter, which
is expected to be similar to the first quarter, especially in
operating income, due to the seasonal effect of the lower number of
working days during the quarter in Israel, one of our largest employee
locations.
Ness is establishing full year 2011 guidance for revenues from
continuing operations in the range of $595
million to $605 million and diluted net earnings per share
from continuing operations in the range shown in the reconciliation
table below:
Full year diluted net earnings per share ($)
Low High
GAAP basis from continuing operations $0.42 $0.48
Stock-based compensation; amortization
of intangible assets; retention
expenses related to prior acquisitions;
net of taxes 0.15 0.15
Non-GAAP basis from continuing operations $0.57 $0.63
The company's 2011 GAAP guidance excludes future 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 2011 and relevant foreign currency
exchange rates at their average levels in January 2011.
For the reasons set forth elsewhere in this release, Ness'
management believes that non-GAAP financial guidance provides the
best comparative basis for investors to understand and assess the
company's on-going operations and prospects for the future.
Goodwill Impairment Test
At the end of each calendar year, the company is required to
perform an impairment test on its goodwill. The 2010 test is under
way, and the company expects it will be completed before the filing
of its Annual Report on Form 10-K. If the company determines any
portion of goodwill is impaired, it would recognize a non-cash
charge that would impact GAAP earnings and earnings per share for
the quarter and year ended December 31,
2010, which would be reported in the company's Annual Report
on Form 10-K. Such a charge would not impact the non-GAAP financial
information presented in this press release.
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
fourth quarter and full year 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, February 2, 2011.
To access the Ness Technologies fourth quarter and full year
2010 earnings conference call, participants should dial one of the
following numbers
North America 1-800-399-0427
Israel 1-80-924-5917
All other locations +1-973-200-3375
and provide the password "NESS" to the operator. 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.
[1] See "Use of Non-GAAP Financial Information" below for more
information regarding the company's use of non-GAAP financial
measures.
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 7,700 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 in the second quarter of 2010, 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 on 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 Year ended
December 31, December 31,
2009 2010 2009 2010
(Unaudited) (Unaudited) (Unaudited)
Revenues $ 135,577 $ 157,407 $ 511,947 $ 571,787
Cost of revenues 109,380 111,422 386,061 412,934
Gross profit 26,197 45,985 125,886 158,853
Selling and marketing 12,242 11,754 41,168 41,187
General and administrative 25,253 26,948 89,592 101,242
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 37,495 38,702 125,616 142,429
Operating income (loss) (11,298) 7,283 270 16,424
Financial expenses, net (788) (686) (2,998) (1,826)
Income before taxes on
Income (12,086) 6,597 (2,728) 14,598
Taxes on income 5,266 1,341 7,271 6,189
Net income (loss) from
continuing operations $ (17,352) $ 5,256 $ (9,999) $ 8,409
Net loss from
discontinued operations. (38,514) (1,162) (42,455) (8,193)
Net income (loss) $ (55,866) $ 4,094 $ (52,454) $ 216
Basic net earnings (loss)
per share from continuing
operations $ (0.45) $ 0.14 $ (0.26) $ 0.22
Diluted net earnings (loss)
per share from continuing
operations $ (0.45) $ 0.14 $ (0.26) $ 0.22
Basic net earnings (loss)
per share $ (1.45) $ 0.11 $ (1.36) $ 0.01
Diluted net earnings (loss)
per share $ (1.45) $ 0.11 $ (1.36) $ 0.01
Weighted average number
of shares (in thousands)
used in computing basic
net earnings (loss) per
share from continuing
operations, basic net
earnings (loss) per share,
diluted net loss per share
from continuing operations
and diluted net loss per
share 38,436 38,053 38,598 38,128
Weighted average number
of shares (in thousands)
used in computing diluted
net earnings per share
from continuing operations
and diluted net earnings
per share 38,838 38,433 39,100 38,733
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,
2009 2010 2009 2010
Segment Data (1): (Unaudited) (Unaudited) (Unaudited)
Revenues from
continuing operations:
Software Product
Engineering $ 26,248 $ 29,530 $ 102,523 $ 112,866
System Integration and
Application Development 109,329 127,877 409,424 458,921
$ 135,577 $ 157,407 $ 511,947 $ 571,787
Operating income
(loss) from continuing
operations:
Software Product
Engineering $ 3,569 $ 4,410 $ 15,388 $ 16,326
System Integration and
Application Development (9,125) 8,646 2,573 18,621
Unallocated Expenses (5,742) (5,773) (17,691) (18,523)
$ (11,298) $ 7,283 $ 270 $ 16,424
Geographic Data:
Revenues from
continuing operations:
Israel $ 45,254 $ 61,583 $ 174,800 $ 212,263
North America 44,676 46,724 172,814 188,911
Europe 43,830 45,049 155,723 160,663
Asia and the Far East 1,817 4,051 8,610 9,950
$ 135,577 $ 157,407 $ 511,947 $ 571,787
(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
Year ended
December 31,
2009 2010
(Unaudited)
Cash flows from operating activities:
Net income (loss) $ (52,454) $ 216
Adjustments required to reconcile
net income (loss) to net cash
provided by operating activities:
Net loss from discontinued
Operations 42,455 8,193
Stock-based Compensation 4,073 3,227
Currency fluctuation of restricted
cash and short-term bank deposits - (1,067)
Depreciation and Amortization 17,838 18,097
Loss (gain) on sale of property and
Equipment (138) 771
Decrease (increase) in trade receivables,
net 41,683 (26,867)
Decrease (increase) in unbilled
Receivables 11,184 (3,705)
Increase in other accounts receivable
and prepaid expenses (1,110) (5,110)
Decrease (increase) in work-in-progress (7,317) 2,599
Decrease in long-term prepaid Expenses 415 125
Deferred income taxes, Net 1,772 1,517
Decrease in trade payables (6,677) (12)
Increase (decrease) in advances from
customers and deferred
revenues 11,942 (4,374)
Increase in other accounts
payable and accrued expenses 2,368 14,605
Increase in other long-term
Liabilities 809 1,180
Decrease in accrued severance pay,
Net (3,322) (120)
Net cash used in discontinued
Operations (2,311) (6,843)
Net cash provided by operating
Activities 61,210 2,432
Cash flows from investing activities:
Consideration from sale of a consolidated
Subsidiary - 1,711
Net cash paid for acquisition of a
consolidated subsidiary - (17,197)
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 (19,257) 17,982
Proceeds from sale of property and
Equipment 796 41
Purchase of property and equipment
and capitalization of software developed
for internal use (11,841) (10,195)
Net cash used in discontinued
Operations (1,808) -
Net cash used in investing
Activities (46,505) (9,501)
Cash flows from financing activities:
Exercise of Options - 4
Repurchase of shares (2,299) (2,169)
Acquired subsidiary's dividend
to its former shareholder (1,430) -
Short-term bank loans and credit,
Net (15,470) 12,557
Proceeds from long-term Debt 15,085 13,364
Principal payments of long-term Debt (12,254) (21,198)
Net cash provided by discontinued
Operations 821 -
Net cash provided by (used in)
financing activities (15,547) 2,558
Effect of exchange rate changes on
cash and cash equivalents (3,525) (5,734)
Decrease in cash and cash
Equivalents (4,367) (10,245)
Cash and cash equivalents at the
beginning of the period 44,585 40,218
Cash and cash equivalents at the end
of the period $ 40,218 $ 29,973
NESS TECHNOLOGIES, INC. AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands
December 31,
2009 2010
(Unaudited)
CURRENT ASSETS:
Cash and cash Equivalents $ 40,218 $ 29,973
Restricted Cash 2,470 2,578
Short-term bank Deposits 25,939 8,913
Trade receivables, net of allowance
for doubtful accounts 131,452 165,623
Unbilled Receivables 28,012 34,850
Other accounts receivable and prepaid
expenses 27,832 34,081
Work in Progress 9,690 5,613
Total assets attributed to
discontinued Operations 43,212 31,626
Total current assets 308,825 313,257
LONG-TERM ASSETS:
Long-term prepaid expenses and
other assets 6,083 5,656
Unbilled Receivables 4,654 2,828
Deferred income taxes, net 3,608 2,186
Severance pay Fund 53,145 59,583
Property and equipment, net 35,739 35,545
Intangible assets, net 10,016 9,481
Goodwill 263,541 282,383
Total long-term Assets 376,786 397,662
Total assets $ 685,611 $ 710,919
CURRENT LIABILITIES:
Short-term bank credit $ 500 $ 16,543
Current maturities of long-term Debt 21,332 26,160
Trade Payables 30,914 31,682
Advances from customers and
deferred Revenues 40,639 36,921
Other accounts payable and accrued
Expenses 99,464 120,450
Total liabilities attributed
to discontinued operations 25,461 13,663
Total current liabilities 218,310 245,419
LONG-TERM LIABILITIES:
Long-term debt, net of current
Maturities 50,836 36,756
Other long-term Liabilities 6,689 7,942
Deferred income Taxes 2,045 2,246
Accrued severance pay 56,443 63,026
Total long-term Liabilities 116,013 109,970
Total stockholders' Equity 351,288 355,530
Total liabilities and stockholders'
Equity $ 685,611 $ 710,919
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 Year ended
December 31, December 31,
2009 2010 2009 2010
Statements of Income Data: (Unaudited) (Unaudited)(Unaudited) (Unaudited)
GAAP gross
Profit $ 26,197 $ 45,985 $ 125,886 $ 158,853
Stock-based compensation 20 56 203 260
Amortization of intangible
Assets 210 152 791 481
Severance expenses 380 - 1,346 -
Restructuring and related
project Costs 11,058 - 11,058 -
Non-GAAP gross Profit $ 37,865 $ 46,193 $ 139,284 $ 159,594
GAAP operating income (loss)$(11,298) $ 7,283 $ 270 $ 16,424
Stock-based Compensation 1,454 856 4,073 2,767
Amortization of intangible
Assets 1,893 1,645 7,118 5,936
Earn-out and retention expenses
related to prior acquisitions 1,032 282 1,032 1,816
Insurance settlement related
to 2007 arbitration expense,
net of related expenses - - (2,610) -
Severance Expenses 1,301 - 3,947 -
Restructuring and related
project costs 11,009 - 11,009 -
Acquisition and integration
costs of Gilon acquisition - - - 728
Non-GAAP operating income $ 5,391 $ 10,066 $ 24,839 $ 27,671
GAAP operating Margin -8.3% 4.6% 0.1% 2.9%
Non-GAAP operating Margin 4.0% 6.4% 4.9% 4.8%
EBITDA $ (4,025) $ 13,131 $ 23,213 $ 39,104
Insurance settlement
related to 2007 arbitration
expense, net of related
expenses - - (2,610) -
Severance expenses 1,301 - 3,947 -
Restructuring and
related project costs 11,009 - 11,009 -
Acquisition and integration
costs of Gilon acquisition - - - 728
Non-GAAP EBITDA $ 8,285 $ 13,131 $ 35,559 $ 39,832
EBITDA Margin -3.0% 8.3% 4.5% 6.8%
Non-GAAP EBITDA Margin 6.1% 8.3% 6.9% 7.0%
GAAP net income (loss) from
continuing operations $ (17,352) $ 5,256 $ (9,999) $ 8,409
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 20,574 1,464 27,079 9,487
Non-GAAP net income from
continuing operations $ 3,222 $ 6,720 $ 17,080 $ 17,896
NESS TECHNOLOGIES, INC. AND ITS SUBSIDIARIES
RECONCILIATION OF SUPPLEMENTAL NON-GAAP FINANCIAL INFORMATION (CONTINUED)
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 Year ended
December 31, December 31,
2009 2010 2009 2010
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
GAAP diluted net earnings
(loss) per share from
continuing Operations $ (0.45) $ 0.14 $ (0.26) $ 0.22
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 0.53 0.04 0.70 0.24
Non-GAAP diluted net earnings
per share from continuing
operations $ 0.08 $ 0.17 $ 0.44 $ 0.46
Segment Data:
Software Product Engineering:
GAAP operating Income $ 3,569 $ 4,410 $ 15,388 $ 16,326
Amortization of intangible
Assets 38 37 153 152
Restructuring and related project
Costs 308 - 308 -
Non-GAAP operating income $ 3,915 $ 4,447 $ 15,849 $ 16,478
System Integration and
Application Development:
GAAP operating income
(loss) $ (9,125) $ 8,646 $ 2,573 $ 18,621
Amortization of intangible
Assets 1,855 1,608 6,965 5,784
Earn-out and retention
expenses related to prior
acquisitions 1,032 282 1,032 1,816
Insurance settlement related
to 2007 arbitration expense,
net of related expenses - - (2,610) -
Severance expenses. - - 1,293 -
Restructuring and related
project costs 11,870 - 11,870 -
Acquisition and integration
costs of Gilon acquisition - - - 728
Non-GAAP operating income $ 5,632 $ 10,536 $ 21,123 $ 26,949
Media Contact:
David Kanaan
Intl: +972-54-425-5307
Email: media.int@ness.com
Investor Relations Contacts:
Drew Wright
USA: +1-201-488-3262
Email: investor@ness.com
Maya Lustig
Israel: +972-3-767-5110
Email: maya.lustig@ness.com
SOURCE Ness Technologies Inc