Hackensack, NJ – February 2, 2011 – 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.
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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:
|
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.
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 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.
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