Hackensack, NJ – April 28, 2010 – Ness Technologies, Inc. (NASDAQ: NSTC and TASE: NSTC), a global provider of IT services and solutions, today announced financial results for the quarter ended March 31, 2010.
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First Quarter 2010 Highlights:
- The company delivered year-over-year quarterly revenue growth in each segment, with sequential and year-over-year bookings growth.
- The company announced the acquisition of Gilon Business Insight, Ltd., a provider of business intelligence (BI) services in Israel, further strengthening the company’s position as a leading provider of enterprise solutions. The acquisition is expected to close during the second quarter.
- In connection with its previously announced streamlining of non-strategic and/or unprofitable smaller operations, the company has resolved to sell its software distribution operations in Europe. The company has also signed an agreement to sell its Asia Pacific system integration and application development operations, and the sale is expected to close during the second quarter. Both operations have been reclassified as discontinued operations.
- On a GAAP basis:
-- Quarterly revenues were $133.3 million, up 6% year-over-year.
-- Quarterly operating income was $2.4 million, down 43% compared to the first quarter of 2009 (which included a net gain in operating income of $5.1 million from commissions related to the 2008 sale of the company’s Israeli SAP sales and distribution operations and an insurance settlement related to the company’s 2007 arbitration expense).
-- Quarterly net income from continuing operations was $0.7 million, down 72% year-over-year.
-- Quarterly diluted net earnings per share from continuing operations were $0.02, compared of $0.06 in the first quarter of 2009.
- On a non-GAAP basis ([1]):
-- Quarterly operating income from continuing operations was $5.0 million, down 27% year-over-year.
-- Quarterly net income from continuing operations was $3.4 million, down 28% year-over-year.
-- Quarterly diluted net earnings per share from continuing operations were $0.09, compared to $0.12 in the first quarter of 2009.
- Operating cash flows for the quarter were $4.7 million.
- Cash, cash equivalents and short-term bank deposits were $64.9 million as of March 31, 2010, and net debt declined to $1.4 million, with no short-term debt.
- Backlog from continuing operations as of March 31, 2010 was $663 million, up 4% year-over-year and up 6% sequentially.
- Headcount for continuing operations was approximately 7,470 as of March 31, 2010.
“Our business gained additional positive momentum during the first quarter, with nice bookings growth and solid year-over-year revenue growth,” said Sachi Gerlitz, president and chief executive officer of Ness Technologies. “We won a number of significant deals during the quarter, in all our major geographies. While returning to growth we are also continuing to gear up for margin expansion by focusing on our core, higher-margin service offerings and our core geographic regions. These efforts are supported by our shedding of smaller and non-strategic operations and projects, like our software distribution operations in Europe. We anticipate that our acquisition and the divestitures we announced will better align us with our growth strategy and support our plans for 2010.”
“After a challenging 2009, I feel confident that the majority of our business is out of the woods. Also, in Central and Eastern Europe, where the recession is ongoing, we believe the worst is behind us,” said Ofer Segev, executive vice president and chief financial officer. “We are developing and shaping the company, using M&A and divestitures to better leverage our global offerings, and we continue to focus on improving operations, cash flows and the balance sheet.”
Business Outlook
The company believes the overall economic outlook is continuing to improve, other than in Central and Eastern Europe, where the timing of the recovery remains unknown. Ness continues to expect top line revenue growth and margin expansion in 2010, with a trend of sequentially increasing quarterly revenues and operating margins. The company expects that seasonal variations in its quarterly results will be reduced compared to historical levels, now that its European software distribution operations are not reported within continuing operations.
Ness is reiterating its full year 2010 guidance of revenues from continuing operations in the range of $575 million to $585 million with diluted net earnings per share from continuing operations in the range shown in the reconciliation table below:
|
|
Full year diluted net earnings per share ($) |
|
Low |
High |
|
GAAP basis from continuing operations |
$ 0.09 |
$ 0.17 |
|
Stock-based compensation; amortization of intangible assets; earn-out related to prior-year acquisition; amortization of intangible assets and earn-out related to the acquisition of Gilon |
0.34 |
0.30 |
|
Non-GAAP basis from continuing operations |
$ 0.43 |
$ 0.47 |
The company’s 2010 GAAP guidance excludes any unannounced 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 April 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.
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 first quarter 2010 results. The call, which will be simultaneously webcast, will begin at 8:30 AM Eastern Time / 5:30 AM Pacific Time on Wednesday, April 28, 2010.
To access the Ness Technologies first quarter 2010 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; 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 7,800 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) an earn-out related to a prior-year acquisition; (c) an insurance settlement in the first quarter of 2009 related to a 2007 arbitration expense, net of related expenses, net of taxes; and (d) severance expenses in the first quarter of 2009, 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 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.
([1]) See “Use of Non-GAAP Financial Information” below for more information regarding the company’s use of non-GAAP financial measures.