Exhibit 99.1
PRESS RELEASE | 
|
Ness Technologies Announces Record Fourth
Quarter and Full Year 2005 Financial Results
Full Year Net Income Rises 51% on a 27% Increase in Revenues
Quarterly Net Income Increased to $6.8 Million or $0.18 per Diluted Share
Hackensack, NJ – February 16, 2006 – Ness Technologies, Inc. (NASDAQ: NSTC), a global provider of IT services and solutions, today announced financial results for the fourth quarter and full year ended December 31, 2005.
Fourth Quarter and Full Year 2005 Highlights:
• Quarterly revenues reached a record $105.1 million, up 28% year-over-year. Full year revenues increased to $385.4 million, up 27% from 2004.
• Quarterly operating income increased to a record $8.0 million, while full year operating income excluding non-cash stock compensation expenses reached $28.4 million, up 35% from 2004.
• Quarterly net income reached a record $6.8 million, and full year net income increased to $21.7 million, up 51% from 2004.
• Backlog increased to $450 million, up 12% year-over-year.
• Global workforce increased by 220 sequentially to 5,945, an increase of 18% year-over-year.
Commenting on today’s results, Raviv Zoller, President and Chief Executive Officer of Ness Technologies said, “We are pleased to report record top and bottom line results for 2005, as we complete our first full year of operation as a public company. For the first time, our quarterly revenue exceeded $100 million, and we achieved our stated goal of increasing our non-Israeli revenue to over 50% of total revenue through our increased presence in North America, Europe and Asia-Pacific. The strength of these results reflects our success in implementing the key elements of our targeted vertical and geographic strategy and our ability to build long-term recurring revenue streams by delivering significant value to our customers and business partners.”
Ness’ fourth quarter 2005 revenues totaled $105.1 million, an increase of $22.7 million or 28%, compared to $82.3 million in the fourth quarter of 2004. Revenues for the full year ended December 31, 2005 totaled $385.4 million, an increase of $80.9 million or 27%, compared to $304.5 million for the full year ended December 31, 2004.
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Fourth quarter 2005 operating income increased to $8.0 million, an increase of $1.9 million or 31%, compared to $6.1 million in the fourth quarter of 2004. Operating income excluding non-cash stock compensation expenses of $2.0 million for the full year ended December 31, 2005 totaled $28.4 million, an increase of $7.4 million or 35%, compared to $21.1 million for the full year ended December 31, 2004.
Fourth quarter 2005 net income increased to $6.8 million, an increase of $1.4 million or 26%, compared to $5.4 million in the fourth quarter of 2004. Diluted net earnings per share for the fourth quarter of 2005 were $0.18 compared to $0.16 in the fourth quarter of 2004. Net income in the quarter included extraordinary income of $0.5 million, which is not reflected in earnings per share. Full year 2005 net income increased to $21.7 million, an increase of $7.3 million or 51%, compared to $14.4 million in the full year 2004. Excluding non-cash stock compensation expenses and extraordinary income, full year 2005 net income increased to $22.9 million, an increase of $8.5 million or 59%, compared to $14.4 million in the full year 2004. Diluted net earnings per share for the full year of 2005 excluding non-cash stock compensation expenses were $0.63 compared to $0.53 in the full year of 2004. The year-over-year diluted net earnings per share comparison was impacted by the change in share count since the fourth quarter of 2004, when Ness completed its initial public offering.
Backlog as of December 31, 2005 increased to $450 million, up 12% compared to $401 million as of December 31, 2004.
“The strength of our fourth quarter results was supported by steadily rising billable headcount with limited increases in non-billable headcount, and a continuing focus on internal operating efficiencies,” stated Ytzhak Edelman, Chief Financial Officer and deputy to the CEO, Ness Technologies. “The initiatives we announced two quarters ago to reduce our financial expenses are continuing to drive measurable improvements. We are focused on further increasing our operating and net margin, managing our debt-to-equity ratio and integrating new acquisitions efficiently. Looking ahead to 2006, we feel positive about our outlook based on the strength in demand for IT services within our target vertical and geographic markets as well as the visibility provided by our strong backlog.”
Guidance
For the first quarter 2006 Ness expects to generate revenues in the range of $105 million to $109 million and diluted net earnings per share in the range of $0.17 to $0.19.
For the full year 2006, Ness expects to generate revenues in the range of $470 million to $485 million, representing year-over-year growth of 22% to 26%, and diluted net earnings per share in the range of $0.80 to $0.85, excluding an expected $0.01 impact associated with expensing of stock-based compensation under the Financial Accounting Standards Board’s Statement 123(R), which we adopted effective January 1, 2006.
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These estimates include the contribution of Ness’ recently announced acquisition of Innova Solutions (OLAS Software Solutions, Inc.), which is expected to close prior to March 31, 2006 and the effect of an anticipated increase in the number of total number of outstanding diluted shares to an average of 37 million in 2006.
Conference Call Details
Ness Technologies President and Chief Executive Officer Raviv Zoller and Chief Financial Officer and deputy to the CEO Ytzhak Edelman will conduct a conference call to discuss the fourth quarter and full year 2005 results, which will be simultaneously webcast, at 9:00 AM Eastern Time / 6:00 AM Pacific Time on Thursday, February 16, 2006.
To access the Ness Technologies fourth quarter and full year 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 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 over 5,900 employees, Ness maintains operations in 16 countries across North America, Europe and Asia, and more than 100 alliances and partnerships around the world. For more information about Ness Technologies, visit www.ness.com.
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 31, 2005.
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Media contact:
David Kanaan
USA: 1-888-244-4919
Intl: +972-3-540-8188
Email: media.int@ness.com
Investor contact:
Drew Wright
USA: 1-888-267-8160
Email: investor@ness.com
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NESS TECHNOLOGIES, INC.
AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
U.S. dollars in thousands (except per share data)
| | Three months ended
December 31, | | Year ended
December 31, | |
| | 2004 | | 2005 | | 2004 | | 2005 | |
Statement of Operations Data: | | | | | | | | | |
Revenues | | $ | 82,348 | | $ | 105,094 | | $ | 304,525 | | $ | 385,436 | |
Cost of revenues | | 57,432 | | 75,056 | | 212,034 | | 275,465 | |
Provision for losses (reverse of losses) on uncompleted contracts, net | | 150 | | (76 | ) | (309 | ) | (232 | ) |
Gross profit | | 24,766 | | 30,114 | | 92,800 | | 110,203 | |
| | | | | | | | | |
Selling and marketing | | 6,754 | | 7,919 | | 25,706 | | 29,033 | |
General and administrative | | 11,900 | | 14,192 | | 46,042 | | 54,730 | |
Total operating expenses | | 18,654 | | 22,111 | | 71,748 | | 83,763 | |
Operating income | | 6,112 | | 8,003 | | 21,052 | | 26,440 | |
Financial income (expenses), net | | 866 | | (224 | ) | (3,461 | ) | (1,521 | ) |
Other expenses, net | | (170 | ) | (232 | ) | (91 | ) | (243 | ) |
Income before taxes on income | | 6,808 | | 7,547 | | 17,500 | | 24,676 | |
Taxes on income | | 1,362 | | 1,241 | | 2,320 | | 3,518 | |
Equity in net earnings (losses) of affiliates | | 4 | | (37 | ) | (647 | ) | (65 | ) |
Minority interests in losses (earnings) of a subsidiary | | (91 | ) | — | | (156 | ) | 101 | |
Income from continuing operations | | 5,359 | | 6,269 | | 14,377 | | 21,194 | |
Extraordinary income, net of taxes | | — | | 495 | | — | | 495 | |
Net income | | 5,359 | | 6,764 | | 14,377 | | 21,689 | |
Allocation of undistributed earnings on Class B Convertible Preferred stock | | — | | — | | (1,356 | ) | — | |
Net income after allocation of undistributed earnings | | $ | 5,359 | | $ | 6,764 | | $ | 13,021 | | $ | 21,689 | |
| | | | | | | | | |
| | | | | | | | | |
Basic net earnings per share | | $ | 0.17 | | $ | 0.19 | | $ | 0.58 | | $ | 0.63 | |
Diluted net earnings per share | | $ | 0.16 | | $ | 0.19 | | $ | 0.53 | | $ | 0.61 | |
| | | | | | | | | |
Basic net earnings per share excluding extraordinary income | | $ | 0.17 | | $ | 0.18 | | $ | 0.58 | | $ | 0.62 | |
Diluted net earnings per share excluding extraordinary income | | $ | 0.16 | | $ | 0.18 | | $ | 0.53 | | $ | 0.59 | |
| | | | | | | | | |
Weighted average number of shares (in thousands) used in computing basic net earnings per share | | 32,323 | | 34,708 | | 22,292 | | 34,413 | |
Weighted average number of shares (in thousands) used in computing diluted net earnings per share | | 34,497 | | 35,618 | | 24,748 | | 35,661 | |
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NESS TECHNOLOGIES, INC.
AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands
| | December 31, | | December 31, | |
| | 2004 | | 2005 | |
| | | | | |
CURRENT ASSETS: | | | | | |
Cash and cash equivalents | | $ | 104,229 | | $ | 33,579 | |
Short-term bank deposits | | — | | 39,561 | |
Marketable securities | | 383 | | 2,651 | |
Trade receivables (net of allowance for doubtful accounts) | | 75,183 | | 99,097 | |
Unbilled receivables | | 20,327 | | 28,545 | |
Other accounts receivable and prepaid expenses | | 9,127 | | 13,664 | |
Inventories and work in progress | | 1,168 | | 2,506 | |
Total current assets | | 210,417 | | 219,603 | |
| | | | | |
LONG-TERM ASSETS: | | | | | |
Long-term prepaid expenses | | 3,655 | | 4,816 | |
Marketable securities | | 69 | | 32 | |
Deferred income taxes | | 4,823 | | 5,271 | |
Severance pay fund | | 33,558 | | 35,845 | |
Total long-term assets | | 42,105 | | 45,964 | |
| | | | | |
Property and equipment, net | | 18,879 | | 21,308 | |
Other intangible assets, net | | 4,265 | | 7,938 | |
Goodwill | | 149,090 | | 154,259 | |
Total assets | | $ | 424,756 | | $ | 449,072 | |
| | | | | |
CURRENT LIABILITIES: | | | | | |
Short-term bank loans and credit | | $ | 1,275 | | $ | 21,011 | |
Current maturities of long-term debt | | 13,364 | | 6,365 | |
Trade payables | | 31,280 | | 35,259 | |
Advances from customers | | 7,679 | | 7,670 | |
Other accounts payable and accrued expenses | | 64,271 | | 77,495 | |
Total current liabilities | | 117,869 | | 147,800 | |
| | | | | |
LONG-TERM LIABILITIES: | | | | | |
Long-term debt, net of current maturities | | 36,918 | | 6,791 | |
Excess of losses over investment in affiliates | | 306 | | 257 | |
Accrued severance pay | | 36,888 | | 39,722 | |
Minority interests | | 295 | | — | |
Total long-term liabilities | | 74,407 | | 46,770 | |
| | | | | |
Total stockholders’ equity | | 232,480 | | 254,502 | |
Total liabilities and stockholders’ equity | | $ | 424,756 | | $ | 449,072 | |
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