Operating Income Increases 49% on a 27% Increase in Revenues, With Record Backlog, Up 25% Year-Over-Year, and Strong Operating Cash Flows
HACKENSACK, New Jersey, May 5 /PRNewswire-FirstCall/ -- Ness Technologies, Inc. (NASDAQ:NSTC), a global provider of IT services and solutions, today announced financial results for the quarter ended March 31, 2008.
First Quarter 2008 Highlights: - Revenues were $159.7 million, up 27% year-over-year.
- Operating income was $10.0 million, up 49% year-over-year.
- Net income was $6.9 million, up 21% year-over-year.
- Diluted net earnings per share was $0.18, up 20% compared to $0.15 in
the first quarter of 2007.
- Non-GAAP diluted net earnings per share was $0.22, up 29% compared to
$0.17 in the first quarter of 2007 ([1]).
- Operating cash flows for the quarter were $1.9 million, after payment
of the $9.5 million arbitration settlement provided for in the fourth
quarter of 2007.
- Backlog as of March 31, 2008 was a record $791 million, up 25% compared
to $631 million as of March 31, 2007.
- Headcount declined sequentially to 7,800 as of March 31, 2008, due to
the previously announced exit of low-margin, non-strategic staff
supplementation businesses in Israel, the U.S. and Asia Pacific. Billable
headcount in Ness India increased during the quarter by 200 employees. "We had a solid first quarter, very much in line with our expectations, as we closed a number of large, strategically important new deals," said Sachi Gerlitz, president and chief executive officer of Ness Technologies. "Key drivers for the quarter included significantly improved operating margins in our Israeli commercial business as well as record first quarter performance from our European operations, which recorded strong organic growth and very good operating margins. We continued to optimize our business, spinning out or reducing low-margin, non-core staff supplementation business activity in Israel, the U.S. and Asia Pacific. With record backlog and a strong sales pipeline, we remain optimistic about our outlook for the future." "Overall, we had a great quarter in which we overcame the slowing of the economy and the significant weakening of the U.S. dollar during the first quarter to deliver solid bottom line earnings," stated Ofer Segev, executive vice president and chief financial officer. "Operating cash flows in the quarter were strong in what is typically our weakest cash flow quarter of the year. We generated $11.4 million of operating cash from business operations, a first quarter record, from which we paid the previously announced $9.5 million arbitration settlement payment that we provided for in the fourth quarter. This performance reaffirms that our focus on cash generation is working. Our balance sheet and liquidity remain strong, and we feel confident about the future." Guidance For the full year 2008, Ness reiterates its guidance of diluted net earnings per share in the range of $1.00 to $1.05, and increases its revenue guidance to the range of $660 million to $680 million.
The increase in top line guidance accounts for increased revenues attributable to the weakness of the U.S. dollar and the strength of the Israeli shekel, as the company's foreign revenues are re-measured into dollars for consolidated reporting.
Conference Call Details Ness Technologies president and chief executive officer, Sachi Gerlitz, and executive vice president and chief financial officer, Ofer Segev, will also conduct a conference call to discuss the first quarter 2008 results. The call, which will be simultaneously webcast, will begin at 8:30 AM Eastern Time / 5:30 AM Pacific Time on Monday, May 5, 2008.
To access the Ness Technologies first quarter 2008 earnings conference call, participants in North America should dial 1-800-399-0427 and international participants should dial +1-706-634-5453. 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://www.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 end-to-end IT services and solutions designed to help clients improve competitiveness and efficiency. The Ness portfolio of solutions and services consists of software product development, including both offshore and near-shore outsourcing; system integration, application development and consulting; and software distribution. With 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 non-cash stock-based compensation expenses in accordance with SFAS 123R and amortization of intangible assets, 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 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, INC. AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
U.S. dollars in thousands (except per share data)
Three months
ended
March 31,
Statement of Operations Data: 2007 2008
(Unaudited)
$ $
Revenues............................................. 125,778 159,732
Cost of
revenues....................................... ...... 89,676 114,390
Gross
profit................................................ 36,102 45,342 Selling and
marketing................................ 9,472 13,208
General and
administrative........................................ 19,914 22,105
Total operating
expenses.............................................. 29,386 35,313 Operating
income............................................... 6,716 10,029
Financial income (expenses),
net.................................................. 389 (1,416)
Other income,
net........................................................ 6 -
Income before taxes on
income............................................... 7,111 8,613 Taxes on
income................................................. 1,396 1,719
Net
income............................................... $ 5,715 $ 6,894 Basic net earnings per
share..................... ........................... $ 0.15 $ 0.18
Diluted net earnings per
share................................................. $ 0.15 $ 0.18 Weighted average number of shares (in thousands) used in computing
basic net earnings per share......................... 38,872 39,201
Weighted average number of shares (in thousands) used in computing
diluted net earnings per share....................... 39,335 39,342
NESS TECHNOLOGIES, INC. AND ITS SUBSIDIARIES
RECONCILIATION OF SUPPLEMENTAL FINANCIAL INFORMATION
U.S. dollars in thousands (except per share data)
Three months
ended
March 31,
2007 2008
(Unaudited)
GAAP net $ $
income............................................. 5,715 6,894
Stock-based
compensation....................................... 376 891
Amortization of intangible
assets............................................... 870 1,470
Taxes on stock-based compensation and amortization of intangible
assets......................... (184) (476)
Non-GAAP net $ $
income.......................... .................. 6,777 8,779 GAAP diluted net earnings per
share.............................................. $ 0.15 $ 0.18
Stock-based
compensation....................................... 0.01 0.02
Amortization of intangible
assets.............................................. 0.02 0.04
Taxes on stock-based compensation and amortization of intangible
assets...................................... (0.00) (0.01)
Non-GAAP diluted net earnings per
share.............................................. $ 0.17 $ 0.22 Weighted average number of shares (in thousands) used in computing
non-GAAP diluted net earnings per share............ 39,335 39,342
NESS TECHNOLOGIES, INC. AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
U.S. dollars in thousands
Three months
ended
March 31,
Segment Data: 2007 2008
(Unaudited)
Revenues:
Ness North $ $
America........................................... 26,101 27,067
Technologies & Systems Group 14,153 16,538
(TSG)............................................................. Ness 22,874 40,160
Europe............................................................ Ness 50,600 51,302
Israel............................................................ 12,050 24,665
Other............................................................. $ $
125,778 159,732
Operating Income (Loss):
Ness North $ 2,003 $ 1,095
America.............................................................. Technologies & Systems Group 2,370 2,215
(TSG)................................................................ Ness 1,451 4,483
Europe............................................................... Ness 3,089 4,694
Israel............................................................... 593 (212)
Other................................................................ Unallocated (2,790) (2,246)
Expenses.............................................................
$ 6,716 $10,029
Geographic Data: Revenues:
$ $
Israel............................................ 60,633 60,523
North 34,388 41,914
America........................................................ 25,301 50,231
Europe.............................................................. Asia 5,456 7,064
Pacific.............................................................. $ $
125,778 159,732
NESS TECHNOLOGIES, INC. AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands
Three months ended
March 31,
2007 2008
(Unaudited)
Cash flows from operating activities:
Net
income........................................ $ 5,715 $ 6,894
Adjustments required to reconcile net income to net cash provided by
(used in) operating activities:
Stock-based compensation-related
expenses.............................. 376 891
Currency fluctuation of long-term
debt................................. 19 5
Depreciation and
amortization......................... 2,942 4,118
Arbitration
settlement............................ - (9,452)
Loss on sale of property and
equipment............................. 21 19
Decrease in trade receivables,
net.................................. 2,140 12,146
Increase in unbilled
receivables.......................... (10,799) (5,515)
Increase in other accounts receivable and prepaid
expenses........................... (3,601) (1,948)
Decrease (increase) in work-in-progress
..................................... 185 (1)
Decrease (increase) in long-term prepaid
expenses.............................. (974) 128
Deferred income taxes,
net.................................. 621 1,667
Decrease in trade
payables............................. (4,988) (3,412)
Increase in advances from customers and deferred
revenues.............................. 7,283 3,658
Increase in other long-term
liabilities.......................... - 428
Increase (decrease) in other accounts payable and accrued
expenses................................ 393 (6,472)
Decrease in accrued severance pay,
net............................................. (123) (1,243)
Net cash provided by (used in) operating
activities.......................... (790) 1,911 Cash flows from investing activities:
Proceeds from sale of cost
investment.......................... 1,866 -
Investment in short-term bank deposits,
net................................... (1,587) (1,626)
Proceeds from sale of property and
equipment................................ 54 47
Purchase of property and equipment and capitalization of software
developed for internal use (2,564) (3,504)
Net cash used in investing
activities............................. (2,231) (5,083) Cash flows from financing activities:
Exercise of
options.................................. 1,299 142
Dividend to former shareholders of an acquired
subsidiary.............................. - (5,714)
Short-term bank loans and credit,
net................................... (1,346) 7,196
Proceeds from long-term
debt....................................... - 24,961
Principal payments of long-term
debt........................................... (1,452) (1,457)
Net cash provided by (used in) financing
activities...................... (1,499) 25,128 Effect of exchange rate changes on cash and cash
equivalents......................... ...... 349 730
Increase (decrease) in cash and cash
equivalents.............................. (4,171) 22,686
Cash and cash equivalents at the beginning of the
period...................................... 46,675 43,097
Cash and cash equivalents at the end of the
period........................................$ 42,504 $ 65,783
NESS TECHNOLOGIES, INC. AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands
December March 31,
31, 2007 2008
(Unaudited)
CURRENT ASSETS:
Cash and cash
equivalents...................................... $ 43,097 $ 65,783
Restricted
cash.................................. .......... 602 -
Short-term bank
deposits..................... ................... 2,361 4,520
Trade receivables, net of allowance for doubtful
accounts....................................... 184,074 182,055
Unbilled
receivables.................................... 38,211 47,179
Other accounts receivable and prepaid
expenses......................................... 31,677 34,552
Work in
progress........................................... 2,563 2,748
Total current
assets............................................ 302,585 336,837 LONG-TERM ASSETS:
Long-term prepaid expenses and other
assets........................................... 8,014 8,122
Investments at
cost............................................. 564 616
Unbilled
receivables...................................... 8,919 9,483
Deferred income taxes, net
................................................. 7,806 13,052
Severance pay
fund............................................... 49,731 52,809
Property and equipment,
net.............................................. 34,072 36,518
Intangible assets,
net.............................................. 17,011 16,677 Goodwill.......................................... 263,444 272,246
Total long-term
assets............................................ 389,561 409,523 Total
assets...........................................$ 692,146 $ 746,360 CURRENT LIABILITIES:
Short-term bank
credit......................................... $ 2,819 $ 11,009
Current maturities of long-term
debt............................................. 1,662 2,930
Trade
payables......................................... 54,964 54,891
Advances from customers and deferred
revenues............................................29,119 35,355
Other accounts payable and accrued
expenses.......................................... 120,661 107,265
Total current
liabilities....................................... 209,225 211,450 LONG-TERM LIABILITIES:
Long-term debt, net of current
maturities....................................... 47,191 72,203
Other long-term liabilities
................................................. 4,864 5,557
Deferred income
taxes........................................... 2,228 2,053
Accrued severance
pay................................................ 57,465 59,846
Total long-term
liabilities...................................... 111,748 139,659 Total stockholders'
equity............................................ 371,173 395,251
Total liabilities and stockholders'
equity...........................................$ 692,146 $ 746,360 -----------------------------------
([1]) See "Use of Non-GAAP Financial Information" below for more information regarding Ness' use of non-GAAP financial measures.
Ness Technologies media contact:
David Kanaan
USA: 1-888-244-4919
Intl: +972-3-540-8188
Email: Ness Technologies investor contact:
Drew Wright
USA: +1-201-488-3262
Email: DATASOURCE: Ness Technologies Inc CONTACT: Ness Technologies media contact: David Kanaan, USA: 1-888-244-4919, Intl: +972-3-540-8188, Email: ; Ness Technologies investor contact:, Drew Wright, USA: +1-201-488-3262, Email:
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