HACKENSACK, New Jersey, July 29 /PRNewswire-FirstCall/ -- Ness
Technologies, Inc. (NASDAQ:NSTC), a global provider of IT services
and solutions, today announced financial results for the quarter
ended June 30, 2009. Second Quarter 2009 Highlights: - On a GAAP
basis: - Revenues were US$137.2 million, down 20% year-over-year.
Approximately half of the decrease, or US$17.3 million, was due to
foreign currency translation effects on non-dollar revenues. -
Operating income was US$2.1 million, down 81% year-over-year. - Net
income was US$1.0 million, down 87% year-over-year. - Diluted net
earnings per share were US$0.03, compared to US$0.21 in the second
quarter of 2008. - On a non-GAAP basis, excluding stock-based
compensation expenses and amortization of intangibles (1): -
Operating income was US$5.0 million, down 62% year-over-year. - Net
income was US$3.4 million, down 65% year-over-year. - Diluted net
earnings per share were US$0.09, compared to US$0.25 in the second
quarter of 2008. - Cash and cash equivalents and short-term bank
deposits were flat sequentially at US$59.2 million as of June 30,
2009. - Operating cash flows for the quarter were US$6.5 million,
with record year-to-date operating cash flows of US$15.1 million. -
Backlog as of June 30, 2009 was US$682 million, flat sequentially
and down 15% year-over-year. Excluding the negative effect of
foreign currency translation effects from the stronger U.S. dollar,
backlog was down 7% year-over-year. - Headcount was approximately
7,800 as of June 30, 2009. "Although second quarter conditions
remained quite challenging, we are seeing signs that the demand
environment is beginning to stabilize in some of our markets," said
Sachi Gerlitz, president and chief executive officer of Ness
Technologies. "We delivered earnings on plan and modest sequential
revenue growth - on track with our planned recovery - thanks to
significant ongoing efforts by our management and staff, and we are
seeing pipeline growth again in some parts of the company. It feels
good to be turning back from defense to offense." Results by
operating segment: - The company's Software Product Engineering
segment, which provides outsourced software product research and
development services to companies who build or rely on software to
generate revenues, performed well in the second quarter, with solid
operating margins and moderate year-over-year revenue growth. - The
company's System Integration and Application Development segment
continued to be impacted in the second quarter by the worldwide
economic slowdown, but it delivered sequentially higher operating
margins on steady revenues. - The company's Software Distribution
segment, which resells third-party enterprise software licenses,
underperformed significantly in the second quarter, turning in a
small operating loss on a moderate sequential revenue decline. "We
continued to generate good operating cash flows and our balance
sheet remains strong, despite the economic environment," said Ofer
Segev, executive vice president and chief financial officer. "Our
cost management during the last two quarters helped us remain
profitable, and we are a much more efficient company now, which we
believe will pay benefits in the future as we resume growth and
margin expansion into a recovering economy." Guidance In line with
Ness' financial guidance practices, the company provides earnings
per share guidance on a non-GAAP basis only. 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. Ness reiterates its full year guidance of non-GAAP diluted
net earnings per share in the range of US$0.40 to US $0.60 and
revenues in the range of US $590 million to US $620 million. This
guidance assumes that foreign currency exchange rates remain at
July levels. 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 2009 results. The
call, which will be simultaneously webcast, will begin at 8:30 AM
Eastern Time / 5:30 AM Pacific Time on Wednesday, July 29, 2009. To
access the Ness Technologies second quarter 2009 earnings
conference call, participants in North America should dial
1-800-399-0427 and 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) is a global
provider of IT and business services and solutions with specialized
expertise in software product engineering; system integration,
application development and 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 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 adjustments from results based on GAAP to exclude (a)
non-cash stock-based compensation expenses in accordance with SFAS
123R and amortization of intangible assets, net of taxes; (b) an
insurance settlement related to a 2007 arbitration expense, net of
related expenses, net of taxes; and (c) severance expenses, 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 16, 2009. 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. (1) See
"Use of Non-GAAP Financial Information" below for more information
regarding Ness' use of non-GAAP financial measures. 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, 2008
2009 2008 2009 (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Revenues $ 170,586 $ 137,243 $ 330,318 $ 273,677 Cost of revenues
117,995 99,839 232,385 201,433 Gross profit 52,591 37,404 97,933
72,244 Selling and marketing 14,538 11,792 27,746 22,953 General
and administrative 26,817 23,474 48,922 48,931 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
41,355 35,266 76,668 66,740 Operating income 11,236 2,138 21,265
5,504 Financial expenses, net (1,032) (647) (2,448) (2,032) Income
before taxes on income 10,204 1,491 18,817 3,472 Taxes on income
2,114 449 3,833 902 Net income $ 8,090 $ 1,042 $ 14,984 $ 2,570
Basic net earnings per share $ 0.21 $ 0.03 $ 0.38 $ 0.07 Diluted
net earnings per share $ 0.21 $ 0.03 $ 0.38 $ 0.07 Weighted average
number of shares (in thousands) used in computing basic net
earnings per share 39,214 38,590 39,208 38,755 Weighted average
number of shares (in thousands) used in computing diluted net
earnings per share 39,426 39,149 39,462 39,333 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, 2008 2009 2008 2009 Segment Data (1):
(Unaudited) (Unaudited) (Unaudited) (Unaudited) Revenues: Software
Product $ 24,739 $ 25,688 $ 45,268 $ 50,654 Engineering System
Integration and Application Development 126,547 104,145 251,120
207,570 Software Distribution 19,300 7,410 33,930 15,453 $ 170,586
$ 137,243 $ 330,318 $ 273,677 Operating Income (Loss): Software
Product $ 2,061 $ 4,096 $ 3,262 $ 8,210 Engineering System
Integration and Application Development 8,409 2,445 18,516 4,633
Software Distribution 4,082 (510) 5,049 1,710 Unallocated Expenses
(3,316) (3,893) (5,562) (9,049) $ 11,236 $ 2,138 $ 21,265 $ 5,504
Geographic Data: Revenues: Israel $ 59,979 $ 42,371 $ 120,502 $
87,641 Europe 58,368 45,096 108,599 88,120 North America 45,006
43,544 86,920 86,023 Asia and the Far East 7,233 6,232 14,297
11,893 $ 170,586 $ 137,243 $ 330,318 $ 273,677 (1) Effective
October 1, 2008, the company reorganized its reportable segments to
correspond to its three primary service lines. Prior period segment
data has 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 Six months ended June 30 2008 2009 (Unaudited)
(Unaudited) Cash flows from operating activities: Net income $
14,984 $ 2,570 Adjustments required to reconcile net income to net
cash provided by operating activities: Stock-based
compensation-related expenses 1,539 1,756 Currency fluctuation of
long-term debt 5 - Depreciation and amortization 8,426 9,281
Arbitration settlement and related charges (9,452) - Loss (gain) on
sale of property and equipment 6 (280) Loss from impairment of cost
investments - 75 Commissions related to the sale of Israeli SAP
sales and distribution operations - (2,534) Decrease in trade
receivables, net. 5,967 42,292 Decrease (increase) in unbilled
receivables (6,519) 2,181 Increase in other accounts receivable and
prepaid expenses (971) (1,838) Increase in work-in-progress (2,861)
(355) Decrease (increase) in long-term prepaid expenses 926 (210)
Deferred income taxes, net 3,674 145 Increase (decrease) in trade
payables 268 (15,467) Increase (decrease) in advances from
customers and deferred revenues 7,498 (683) Increase in other
long-term liabilities 341 293 Decrease in other accounts payable
and accrued expenses (7,191) (20,563) Decrease in accrued severance
pay net (1,748) (1,542) Net cash provided by operating activities
14,892 15,121 Cash flows from investing activities: Additional
payments in connection with acquisitions of subsidiaries in prior
periods (5,973) (16,203) Proceeds from maturity of (investment in)
short-term bank deposits, net 2,655 (15,920) Proceeds from sale of
property and equipment 102 703 Purchase of property and equipment
and capitalization of software developed for internal use (6,539)
(5,045) Net cash used in investing activities (9,755) (36,465) Cash
flows from financing activities: Exercise of options 165 -
Repurchase of shares - (2,037) Acquired subsidiary's dividend to
its former shareholder (10,048) (683) Short-term bank loans and
credit, net 4,523 (6,361) Proceeds from long-term debt 25,090
15,000 Principal payments oflong-term debt (1,972) (2,161) Net cash
provided by financing activities 17,758 3,758 Effect of exchange
rate changes on cash and cash equivalents (1,525) 2,982 Increase
(decrease) in cash and cash equivalents 21,370 (14,604) Cash and
cash equivalents at the beginning of the period 43,097 50,659 Cash
and cash equivalents at the end of the period $ 64,467 $ 36,055
NESS TECHNOLOGIES, INC. AND ITS SUBSIDIARIES CONDENSED CONSOLIDATED
BALANCE SHEETS U.S. dollars in thousands December 31, 2008 June 30,
2009 (Unaudited) CURRENT ASSETS: Cash and cash equivalents $ 50,659
$ 36,055 Restricted cash 2,331 2,398 Short-term bank deposits 5,703
20,775 Trade receivables, net of allowance for doubtful accounts
200,118 153,710 Unbilled receivables 35,585 33,713 Other accounts
receivable and prepaid expenses 31,344 34,864 Work in progress
1,532 2,808 Total current assets 27,272 284,323 LONG-TERM ASSETS:
Long-term prepaid expenses and other assets 6,806 6,998 Unbilled
receivables 9,220 8,553 Deferred income taxes net 8,356 7,338
Severance pay fund 46,478 46,910 Property and equipment,net 36,733
34,999 Intangible assets, net 22,073 18,271 Goodwill 290,055
290,654 Total long-term assets 419,721 413,723 Total assets
$746,993 $ 698,046 CURRENT LIABILITIES: Short-term bank credit $
18,072 $ 11,265 Current maturities of long-term Debt 7,089 18,928
Trade payables 47,072 27,935 Advances from customers and deferred
revenues 33,280 31,571 Other accounts payable and accrue expenses
124,697 88,620 Total current liabilities 230,210 178,319 LONG-TERM
LIABILITIES: Long-term debt,net of current maturities 60,973 61,999
Other long-term liabilities 6,444 6,469 Deferred income taxes 2,673
1,991 Accrued severance pay 55,014 53,512 Total long-term
liabilities 125,104 123,971 Total stockholders' equity 391,679
395,756 Total liabilities and stockholders' equity $ 746,993 $
698,046 NESS TECHNOLOGIES, INC. AND ITS SUBSIDIARIES RECONCILIATION
OF SUPPLEMENTAL NON-GAAP FINANCIAL INFORMATION EXCLUDING
STOCK-BASED COMPENSATION; AMORTIZATION OF INTANGIBLE ASSETS;
INSURANCE SETTLEMENT RELATED TO 2007 ARBITRATION EXPENSE, NET OF
RELATED EXPENSES; SEVERANCE EXPENSES; NET OF TAXES U.S. dollars in
thousands (except per share data) Three months ended Six months
ended June 30, June 30, 2008 2009 2008 2009 (Unaudited) (Unaudited)
(Unaudited) (Unaudited) GAAP gross profit 2,591 $ 37,404 $ 97,933 $
72,244 Stock-based compensation 63 57 145 120 Amortization of
intangible assets 225 187 446 376 Severance expenses - - - 966
Non-GAAP gross profit $ 52,879 $ 37,648 $ 98,524 $ 73,706 GAAP
operating income $ 11,236 $ 2,138 $ 21,265 $ 5,504 Stock-based
compensation 648 828 1,539 1,756 Amortization of intangible assets
1,487 2,070 2,957 4,033 Insurance settlement related to 2007
arbitration expense, net of related expenses - - - (2,610)
Severance expenses - - - 2,646 Non-GAAP operating income $ 13,371 $
5,036 $ 25,761 $ 11,329 GAAP operating margin 6.6% 1.6% 6.4% 2.0%
Non-GAAP operating margin 7.8% 3.7% 7.8% 4.1% GAAP net income $
8,090 $ 1,042 $ 14,984 $ 2,570 Stock-based compensation;
amortization of intangible assets; insurance settlement in respect
of 2007 arbitration expense, net of related expenses; severance
expenses; net of taxes 1,649 2,326 3,534 4,754 Non-GAAP net income
$ 9,739 $ 3,368 $ 18,518 $ 7,324 GAAP diluted net earnings per
share $ 0.21 $ 0.03 $ 0.38 $ 0.07 Stock-based compensation;
amortization of intangible assets; insurance settlement in respect
of 2007 arbitration expense, net of related expenses; severance
expenses; net of taxes 0.04 0.06 0.09 0.12 Non-GAAP diluted net
earnings per share $ 0.25 $ 0.09 $ 0.47 $ 0.19 Media Contact -
United States: John Fitzsimmons USA: +1-781-223-5833 Email: Media
Contact - Israel: David Kanaan Intl: +972-54- 425-5307 Email:
Investor Relations Contact: Drew Wright USA: +1-201-488-3262 Email:
DATASOURCE: Ness Technologies Inc CONTACT: Media Contact - United
States: John Fitzsimmons, USA: +1-781-223-5833, Email: ; Media
Contact - Israel: David Kanaan, Intl: +972-54-425-5307, Email: ;
Investor Relations Contact: Drew Wright, USA: +1-201-488-3262,
Email:
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