Net Income Increased to $4 Million, Up 37% Year-Over-Year
HACKENSACK, New Jersey, August 10 - Ness Technologies, Inc. (NASDAQ: NSTC), a global provider of IT services and solutions, today announced financial results for the quarter ended June 30, 2005.
Second Quarter 2005 Highlights:
- Revenues reached a record $94 million, up 28% year-over-year.
- Net income increased to $4 million, up 37% year-over-year, after
expensing a $0.8 million (after tax) non-recurring non-cash stock
compensation expense.
- Backlog increased to $418 million, up 22% year-over year.
- Global workforce increased by 260 sequentially to 5,430.
- Ness Romania, formerly known as Radix Company SA, financial results
consolidated for the first time.
"The second quarter of 2005 was very eventful for Ness as we continued to execute on our strategic plan of expanding our global platform for delivering IT services and solutions," said Raviv Zoller, President and Chief Executive Officer of Ness Technologies. "We are making significant progress towards our financial goals while strategically investing in the continued growth of our business. During the second quarter we consolidated Ness Romania, formerly Radix SA for the first time, thus growing our Eastern European footprint."
Second quarter 2005 revenues reached $94.2 million, an increase of $20.3 million or 28% from $73.9 million in the second quarter of 2004.
Gross margin at 28% declined sequentially due to historical second quarter seasonality related to holidays, resulting in fewer billing days in Israel. Based on the location of the end customer, non-Israeli revenues in the second quarter 2005 were 49% of total revenues, up from 43% in the first quarter.
Second quarter 2005 operating and net income include non-cash stock based award compensation expense of $1.3 million related to redeemable option awards for which the Company is required by GAAP to recognize in this quarter based upon the likelihood that redemption rights will be exercised, based on the Company's stock price, which net of applicable income taxes had the effect of reducing net income by $0.8 million. The Company expects that no additional expenses will be recorded in conjunction with such redeemable options.
Second quarter 2005 operating income, totaled $4.9 million, representing an increase of $0.6 million or 13% compared to the $4.3 million reported in the second quarter of 2004.
Second quarter 2005 net income, totaled $4.0 million, representing an increase of $1.1 million or 37% compared to the $2.9 million reported in the second quarter of 2004.
Diluted net earnings per share for the second quarter 2005 were $0.11 compared to $0.12 in the second quarter 2004. Excluding the non-cash stock compensation expense, diluted net earnings per share for the second quarter 2005 were $0.14.
Backlog as of June 30, 2005 increased to $418 million, up 22% compared to $342 million as of June 30, 2004.
As of June 30, 2005, Ness' cash and cash equivalent position was $92 million, as compared to $44 million as of June 30, 2004 and $109 million as of March 31, 2005. The sequential decrease was a result of investments in acquisitions the Company made in Eastern Europe, and delays in payments caused by the late approval of the budget of the government of Israel.
"Ness had a very solid quarter of year-over-year financial performance, with record revenues and growing profitability. Our backlog remains strong and continues to provide a solid foundation for our future growth prospects. We have taken steps to further reduce our financial expenses and to maintain a lower level of foreign exchange exposure. Overall, our core business remains solid and we stand confident in our expectations that these efforts to improve financial efficiencies will achieve the desired results," said Ytzhak Edelman, Executive Vice President and Chief Financial Officer.
Guidance
For the third quarter 2005 Ness expects to generate revenues in the range of $95 million to $96 million and diluted net earnings per share of $0.17 to $0.18.
The Company is increasing its 2005 annual revenue guidance of $370 million to $375 million to the range of $376 million to $381 million based on expected revenues of Ness Romania. Full year 2005 diluted net earnings per share guidance has been revised from a range of $0.70 to $0.75 to a range of $0.63 to $0.66, reflecting the unexpected negative impact of financial expenses as well as, the short-term impact of ramping significant new contracts in the Company's fourth quarter 2005.
The aforementioned earnings per share guidance excludes impact of the non-cash expense related to redeemable options in accordance with the relevant GAAP guidelines.
Conference Call Details
Ness Technologies President and Chief Executive Officer Raviv Zoller and Executive Vice President and Chief Financial Officer Ytzhak Edelman will conduct a conference call to discuss the second quarter 2005 results, which will be simultaneously webcast at 9:00 A.M. Eastern Time/6:00 A.M. Pacific Time on Wednesday, August 10, 2005
To access the Ness Technologies second quarter 2005 earnings conference call, participants in North America should dial 1-800-399-0427 and international participants should dial 1-706-634-5453. A live 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. Specializing in outsourcing and offshore, systems integration and application development, software and consulting, and quality assurance and training, Ness serves a blue-chip client base of over 500 public- and private-sector customers. With approximately 5,500 employees, Ness maintains operations in 15 countries across North America, Europe and Asia Pacific, and more than 100 alliances and partnerships around the world. For more information about Ness, visit http://www.ness.com.
Forward Looking Statements:
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements often are proceeded 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 31, 2005.
Investor Contact: Media Contact:
Daphna Golden David Kanaan
Intl: +972-3-7666816 Intl: +972-3-5408188
US: 1-888- 267-8160 US: 1-888- 244-4919
Email: daphna.golden@ness.com Email: media.int@ness.com
Allan Jordan
Phone: 646-284-9452
Email: media@ness.com
NESS TECHNOLOGIES, INC
AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands
June 30, December
2005 31, 2004
unaudited
Current assets:
Cash and cash equivalents 91,907 104,229
Marketable securities 387 383
Trade receivables (net of allowance
for doubtful accounts) 82,552 75,183
Unbilled receivables 25,097 20,327
Other accounts receivable and
pre-paid expenses 10,354 9,127
Work in progress 2,192 1,168
Total current assets 212,489 210,417
Long-term assets:
Long-term prepaid expenses 5,293 3,724
Deferred income taxes 5,516 4,823
Severance pay fund 33,490 33,558
Total long-term assets 44,299 42,105
Property and equipment, net 21,258 18,879
Other intangible assets, net 5,959 4,265
Goodwill 149,876 149,090
Total assets 433,881 424,756
Current liabilities:
Short term bank loans and credit 1,214 1,275
Current maturities of long-term debt 17,681 13,364
Trade payables 27,638 31,280
Advances from customers 8,381 7,679
Other accounts payable and accrued
expenses 66,465 64,271
Total current liabilities 121,379 117,869
Long-term liabilities:
Long-term debt, net of current
maturities 31,939 36,918
Excess of losses over investment in
affiliate 237 306
Accrued severance pay 37,119 36,888
Minority interests 0 295
Total long-term liabilities 69,295 74,407
Total stockholders' equity 243,207 232,480
Total liabilities and
stockholders' equity 433,881 424,756
NESS TECHNOLOGIES, INC
AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
U.S. dollars in thousands (except per share data)
Six months ended Three months ended
June 30, June 30
2005 2004 2005 2004
unaudited unaudited
Revenues 182,623 145,025 94,218 73,879
Cost of revenues 130,526 100,148 68,046 51,742
Gross profit 52,097 44,877 26,172 22,137
Operating expenses:
Selling and marketing 14,033 12,130 7,002 6,044
General and administrative 25,394 23,095 12,966 11,698
Stock base award
compensation 1,897 102 1,286 51
Total operating expenses 41,324 35,327 21,254 17,793
Operating income 10,772 9,550 4,917 4,344
Financial expenses, net 914 3,150 494 781
Other income, net 4 95 10 11
Income before taxes
on income 9,862 6,495 4,433 3,574
Taxes on income 1,025 485 423 596
Equity in net losses
of affiliates 29 648 27 33
Minority interests in losses
(earnings) of subsidiary 101 (35) 0 (35)
Net income 8,909 5,327 3,983 2,910
Allocation of undistributed
earnings on Class B
Convertible Preferred stock 0 (802) 0 (436)
Net income after allocation
of undistributed earnings 8,909 4,525 3,983 2,474
Basic net earnings per share 0.26 0.24 0.12 0.13
Diluted net earnings per
share 0.25 0.21 0.11 0.12
Weighted average number of
shares (In thousands) used
in computing basic net
earnings per share 34,147 18,890 34,540 18,890
Weighted average number of
shares (In thousands) used
in computing diluted net
earnings per share 35,594 21,247 35,644 21,202
