Hackensack, NJ – February 3, 2010 – Ness Technologies, Inc. (NASDAQ: NSTC and TASE: NSTC), a global provider of IT services and solutions, today announced financial results for the quarter and full year ended December 31, 2009.
[
Download Full Results]
Fourth Quarter and Full Year 2009 Highlights:
· The company delivered sequential revenue growth in all segments, supported by sequential bookings growth.
· The company significantly expanded the scope of its previously announced fourth quarter restructuring activities, recording a charge for restructuring, severance and related project costs of $17.5 million compared to its previously stated expectations of $7 to $9 million, as it reorganized, reduced, sold or closed selected smaller operations that were unprofitable or that it determined were not strategic to its planned future operations and growth; and it also wrote off a deferred tax asset of $4.1 million.
· Results are not comparable to previously provided guidance, as they exclude $7 million of 2009 revenues and $0.02 of 2009 diluted net earnings per share, which were reclassified as discontinued operations following the sale of the company’s operations in the Netherlands.
· On a GAAP basis:
§ Quarterly revenues were $145.9 million, up 11% sequentially and down 13% year-over-year; and full year revenues were $547.4 million, down 17%, about one third of which was due to foreign exchange re-measurement effects on non-dollar revenues.
§ Quarterly operating loss was $16.5 million, compared to income of $5.3 million in the fourth quarter of 2008; and full year operating loss was $9.4 million, compared to income of $49.2 million in 2008.
§ Quarterly net loss from continuing operations was $23.4 million, compared to income of $4.2 million in the fourth quarter of 2008; and full year net loss from continuing operations was $20.4 million, compared to income of $34.9 million in 2008.
§ Quarterly diluted net loss per share from continuing operations was $0.61, compared to earnings of $0.11 in the fourth quarter of 2008; and full year 2009 diluted net loss per share was $0.53, compared to earnings of $0.88 in 2008.
· On a non-GAAP basis ([1]):
§ Quarterly operating income from continuing operations was $5.7 million, up 15% sequentially and down 52% year-over-year; while full year operating income was $21.8 million, down 56% year-over-year.
§ Quarterly net income from continuing operations was $3.4 million, up 7% sequentially and down 63% year-over-year; while full year net income was $13.6 million, down 63% year-over-year.
§ Quarterly diluted net earnings per share from continuing operations were $0.09, compared to $0.23 in the fourth quarter of 2008; while full year diluted earnings per share were $0.35, compared to $0.93 in 2008.
· Operating cash flows for the quarter and the full year were all-time records of $25.8 million and $60.2 million, respectively.
· Cash, cash equivalents and short-term bank deposits reached $71.9 million as of December 31, 2009, up $13.2 million from December 31, 2008.
· Backlog as of December 31, 2009 was $650 million, up 1% sequentially in constant currencies, net of discontinued operations, and down 12% year-over-year.
· Headcount was approximately 7,835 as of December 31, 2009.
“2009 was not an easy year for Ness, but we emerged from it strengthened in several important ways,” said Sachi Gerlitz, president and chief executive officer of Ness Technologies. “First, we delivered sequentially higher revenues in all operating segments in the quarter, indicating that we are back on a growth path. Second, excluding the cost of the restructuring, we showed sequential improvement in operating margins in all segments. And third, we are better prepared for 2010, having undertaken an important restructuring effort in the fourth quarter in which we dealt with several unprofitable or non-strategic delivery operations – thereby removing a drag on our performance. Our optimism for 2010 is supported by our improved book-to-bill ratio and by our resumption of backlog growth.”
· 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, continued to perform well in the fourth quarter, with solid operating margins on revenues that are beginning to ramp up again.
§ The company’s System Integration and Application Development segment showed sequential improvement in revenues and non-GAAP operating margins, as bookings increased and the pipeline grew. On a GAAP basis, segment results were affected by the restructuring charges.
§ The company’s Software Distribution segment, which resells third-party enterprise software licenses, was expected to perform well in its seasonally strong fourth quarter. Although revenues and non-GAAP operating margins increased sequentially, the results were below expectations as large license deals in this economically sensitive segment continued to be deferred. The company took action in the fourth quarter to adjust fixed costs, and, as a result, incurred restructuring charges in this segment as well.
“We continued to deliver excellent operating cash flows, despite the tough economic climate, thanks to strong customer relationships and effective collections efforts,” said Ofer Segev, executive vice president and chief financial officer. “The strength of our balance sheet and cash flows allowed us to reduce our short-term debt, bringing our net debt to essentially zero. With the restructuring largely behind us, our strong balance sheet positions us well for growth going forward.”
Business Outlook
The company believes the overall economic outlook is improving, though some uncertainties remain. Ness expects top line growth and margin expansion in 2010, with a trend of sequentially increasing quarterly revenues and operating margins, except for the third quarter, which is expected to be similar to the second quarter due to the effect of holiday and vacation seasonality.
Ness is establishing full year 2010 guidance for revenues in the range of $575 million to $585 million and diluted net earnings per share in the range shown in the reconciliation table below:
|
Low |
High |
| GAAP basis |
$ 0.21 |
$ 0.25 |
| Stock-based compensation; amortization of intangible assets; earn-out related to prior-year acquisition |
0.22 |
0.22 |
The company’s 2010 GAAP guidance excludes any 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 39.5 million in 2010 and that foreign currency exchange rates will remain at their average levels for January 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.
Goodwill Impairment Test
At the end of each calendar year, the company is required to perform an impairment test on its goodwill. The 2009 test is under way, and the company expects it 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, 2009. 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 2009 results. The call, which will be simultaneously webcast, will begin at 8:30 AM Eastern Time / 5:30 AM Pacific Time on Wednesday, February 3, 2010.
To access the Ness Technologies fourth quarter and full year 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 and TASE: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 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) a gain related to the sale of the company’s Israeli SAP sales and distribution operations in the third quarter of 2008, net of related expenses and other charges, net of taxes; (c) a write-down of the company’s Israeli severance pay fund assets in the fourth quarter of 2008, net of taxes; (d) an insurance settlement in the first quarter of 2009 related to a 2007 arbitration expense, net of related expenses, net of taxes; (e) severance expenses in the first quarter of 2009, net of taxes; (f) an earn-out in the fourth quarter of 2009 related to a prior-year acquisition; and (g) a charge in the fourth quarter of 2009 for restructuring, severance and related project costs, 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 uses these non-GAAP measures also 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 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.
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