Ness generates record full year operating cash flows of $31 million Ness delivers full year revenue growth of 19%
Hackensack, NJ – February 4, 2009 – 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, 2008.
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Fourth Quarter and Full Year 2008 Highlights:
• On a GAAP basis:
Quarterly revenues were $170.4 million, flat year-over-year; while full year revenues were a record $664.8 million, up 18.7% year-over-year.
Quarterly operating income, after a non-cash charge of $2.9 million from a write-down in the value of the company’s externally managed Israeli severance pay fund, was $5.5 million, compared to a loss of $5.5 million in fourth quarter 2007; while full year operating income was a record $49.8 million, up 220% year-over-year.
Quarterly net income was $4.3 million, compared to a loss of $7.1 million in fourth quarter 2007; while full year net income was a record $35.5 million, up 252% year-over-year.
Quarterly diluted net earnings per share were $0.11, compared to a loss of $0.18 in the fourth quarter of 2007; while full year diluted earnings per share were a record $0.89, compared to $0.26 in 2007.
• On a non-GAAP basis, excluding the write-down in the company’s Israeli severance pay fund; a $13 million gain from the third quarter 2008 sale of its SAP distribution unit, net of related expenses and other charges; a $21 million fourth quarter 2007 arbitration charge, including related and other one-time expenses; stock-based compensation expenses; and amortization of intangibles, net of taxes ( ):
Quarterly revenues were $170.4 million, flat year-over-year; while full year revenues were a record $668.0 million, up 19.2% year-over-year.
Quarterly operating income was $12.2 million, down 30.4% year-over-year; while full year operating income was a record $50.3 million, up 18.9% year-over-year.
Quarterly net income was $9.3 million, down 32.4% year-over-year; while full year net income was a record $37.2 million, up 8.8% year-over-year.
Quarterly diluted net earnings per share were $0.24, compared to $0.35 in the fourth quarter of 2007; while full year diluted earnings per share were $0.94, compared to $0.87 in 2007.
• Cash and cash equivalents, restricted cash and short-term bank deposits totaled $58.7 million as of December 31, 2008.
• Operating cash flows for the full year were a record $30.9 million, up 92% year-over-year.
• Backlog as of December 31, 2008 was $736 million, down 3.7% sequentially on currency effects, and flat year-over-year, compared to $734 million as of December 31, 2007.
• Headcount reached a new record of 8,425 as of December 31, 2008.
• Fourth quarter revenues were impacted by foreign exchange headwinds resulting from the strengthening U.S. dollar versus third quarter average exchange rates, by about $7 million. Reported backlog was affected by the strengthening dollar by about $26 million.
• Effective October 1, 2008, the company reorganized its reportable segments to correspond to its three primary service lines: software product engineering; system integration and application development; and software distribution.
The company’s software product engineering segment, which provides outsourced software product research and development services to independent software vendors and other companies who depend on software R&D, performed very well in the fourth quarter.
The company’s system integration and application development segment met or exceeded expectations in the fourth quarter, except in its U.S.-based financial services vertical, which recorded a loss in the fourth quarter and as a result the company restructured its U.S. and India operations to meet changing client demand.
The company’s software distribution segment, which resells third-party enterprise software licenses, significantly improved its performance in the fourth quarter versus its unexpectedly weak third quarter, though it remained a little below historical norms.
“2008 was a year of growth and further implementation of our business strategy. We did well, considering the macro-economic climate, thanks to the solid fundamentals of our core business units and our beneficial geographic diversification,” said Sachi Gerlitz, president and chief executive officer of Ness Technologies. “Like everyone else, we are tightening our belts for the challenges expected in the next few quarters until the economy begins to recover. This macro downturn, though challenging for some parts of our business, has introduced opportunities in our software product engineering segment as well as our defense and homeland security market, both of which should do well in 2009. I remain confident about the fundamentals of our business and its longer-term profitability, as we navigate through the uncertain economy of 2009.”
“We delivered on our non-GAAP earnings per share guidance, and produced operating cash flows that were better than expected,” said Ofer Segev, executive vice president and chief financial officer. “Our balance sheet and cash position remain solid, and we expect to deliver positive cash flows in 2009. We are continuing to adjust our business to the new climate and to reorganize and strengthen our affected units. We believe that we will perform with relative strength in these uncertain times, following an adjustment period in the beginning of the year.”
Guidance
In line with Ness’ previously announced shift in financial guidance practices, for 2009 the company is providing 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.
For the full year 2009, Ness expects to generate non-GAAP diluted net earnings per share in the range of $0.65 to $0.85. For the full year 2009, Ness expects to generate revenues in the range of $665 million to $695 million, which represents 4% to 8% of constant currency revenue growth, net of acquisitions and divestitures.
Guidance assumes average outstanding diluted shares of approximately 40 million in 2009.
Goodwill Impairment Test
At the end of each calendar year, the company is required to perform an impairment test on its goodwill. The 2008 test is under way, which the company expects will be completed by mid-March. 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, 2008. Such a non-cash 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 also conduct a conference call to discuss the fourth quarter and full year 2008 results. The call, which will be simultaneously webcast, will begin at 8:30 AM Eastern Time / 5:30 AM Pacific Time on Wednesday, February 4, 2009.
To access the Ness Technologies fourth quarter and full year 2008 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 over 8,300 employees, Ness maintains operations in 18 countries, and partners with numerous software and hardware vendors worldwide. For more information about Ness Technologies, visit 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) the company’s non-cash write-down of assets in its Israeli severance pay fund, (c) the company’s one-time gain in the third quarter of 2008 from the sale of its Israeli SAP sales and distribution division, net of related expenses and other charges, net of taxes, and (d) the company’s one-time charge in the fourth quarter of 2007 from the settlement of an arbitration with a former customer, including related and other one-time expenses. 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 17, 2008. 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 media contact:
David Kanaan
USA: 1-888-244-4919
Intl: + 972-3-540-8188
Email: media.int@ness.com
Ness Technologies investor contact:
Drew Wright
USA: 1-201-488-3262
Email: investor@ness.com