Exhibit 99.1
Ness Technologies Announces
Record First Quarter 2006 Financial Results
Net Income Rises 29% Year-over-Year on a 21% Increase in Revenues
Hackensack, NJ — May 8, 2006 — Ness Technologies, Inc. (NASDAQ: NSTC), a global provider of IT services and solutions, today announced financial results for the first quarter ended March 31, 2006.
First Quarter 2006 Highlights:
· Diluted net earnings per share was $0.18, compared to $0.14 in the first quarter of 2005.
· Operating income increased to $7.9 million, up 35% year-over-year.
· Net income from continuing operations reached a record $6.3 million, up 29% year-over-year.
· Revenues reached a record $107.0 million, up 21% year-over-year.
· Backlog increased to a record $527 million, up 28% year-over-year.
· Global workforce increased by 1,055 sequentially to 7,000.
· Acquisition of Innova Solutions was completed, strengthening Indian offshore capabilities.
“The strength of our first quarter results, including record revenue, net income from continuing operations and backlog sets a solid foundation for achieving our business objectives in 2006, as we enter our second year as a public company,” said Raviv Zoller, President and Chief Executive Officer of Ness Technologies. “Once again, we showed significant momentum in our Eastern European and Indian offshore operations, as well as in our financial services and defense verticals. We also reached two significant benchmarks in the quarter as our backlog surpassed the $500 million milestone and our global headcount reached 7,000 employees. We remain optimistic in our outlook for 2006 based on our proven strategic business model, a robust demand environment within our key geographic and vertical business segments as well as our strong backlog.”
Ness’ first quarter 2006 revenues totaled $107.0 million, an increase of $18.6 million or 21%, compared to $88.4 million in the first quarter of 2005.
First quarter 2006 operating income increased to $7.9 million, an increase of $2.0 million or 35%, compared to $5.9 million in the first quarter of 2005.
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First quarter 2006 net income increased to $6.3 million, an increase of $1.4 million or 29%, compared to $4.9 million in the first quarter of 2005. Diluted net earnings per share for the first quarter of 2006 were $0.18 compared to $0.14 in the first quarter of 2005.
Backlog as of March 31, 2006 increased to $527 million, up 28% compared to $412 million as of March 31, 2005.
“During the first quarter Ness continued to gain operating leverage, as we increased the billable component of our worldwide staff to 87.4% of total employees,” stated Ytzhak Edelman, Chief Financial Officer and deputy to the CEO, Ness Technologies. “We continue to focus on improving operating efficiencies and managing financial expenses across our global platform. Despite the significant use of cash in the first quarter for acquisition payments and prior-period tax payments, we were able to significantly reduce our financial expenses, by 86% compared to the first quarter of 2005. We remain focused on further increasing our operating and net margin, managing our debt-to-equity ratio and integrating our new acquisitions efficiently. These first quarter financial results also mark a change in our quarterly reporting process, as we begin reporting segment data for the first time — in keeping with the strategic alignment of our organizational structure implemented over the last few months.”
Guidance
For the second quarter 2006 Ness expects to generate revenues in the range of $112 million to $118 million and diluted net earnings per share in the range of $0.14 to $0.17. This guidance takes into account the integration costs associated with our acquisition of Innova, which are expected in the second quarter.
For the full year 2006, Ness reiterates its guidance of revenues in the range of $470 million to $485 million and diluted net earnings per share in the range of $0.80 to $0.85, excluding an expected full-year $0.01 impact associated with expensing of stock-based compensation under the Financial Accounting Standards Board’s Statement 123(R), which the Company adopted effective January 1, 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 first quarter 2006 results, which will be simultaneously webcast at 9:00 A.M. Eastern Time / 6:00 A.M. Pacific Time on Monday, May 8, 2006.
To access the Ness Technologies first quarter 2006 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
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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 7,000 employees, Ness maintains operations in 15 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 15, 2006.
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
March 31, | |
| | 2005 | | 2006 | |
| | (unaudited) | |
Statement of Operations Data: | | | | | |
Revenues | | $ | 88,405 | | $ | 107,042 | |
Cost of revenues | | 62,492 | | 75,667 | |
Provision for losses (reverse of losses) on uncompleted contracts, net | | 85 | | 48 | |
Gross profit | | 25,828 | | 31,326 | |
| | | | | |
Selling and marketing | | 7,031 | | 8,491 | |
General and administrative | | 12,942 | | 14,930 | |
Total operating expenses | | 19,973 | | 23,421 | |
| | | | | |
Operating income | | 5,855 | | 7,905 | |
Financial income (expenses), net | | (426 | ) | (61 | ) |
Other expenses, net | | — | | (39 | ) |
Income before taxes on income | | 5,429 | | 7,805 | |
| | | | | |
Taxes on income | | 602 | | 1,468 | |
Equity in net earnings (losses) of affiliates | | (2 | ) | — | |
Minority interests in losses (earnings) of a subsidiary | | 101 | | — | |
Net income | | $ | 4,926 | | $ | 6,337 | |
| | | | | |
Basic net earnings per share | | $ | 0.15 | | $ | 0.18 | |
Diluted net earnings per share | | $ | 0.14 | | $ | 0.18 | |
| | | | | |
Weighted average number of shares (in thousands) used in computing basic net earnings per share | | 33,755 | | 34,870 | |
Weighted average number of shares (in thousands) used in computing diluted net earnings per share | | 35,545 | | 36,180 | |
| | Revenues | | Operating Income | |
| | Three months ended
March 31, | | Three months ended
March 31, | |
| | 2005 | | 2006 | | 2005 | | 2006 | |
| | (unaudited) | | (unaudited) | |
Segment Data: | | | | | | | | | |
Managed Strategic Services (MSS) | | $ | 19,623 | | $ | 22,101 | | $ | 1,883 | | $ | 2,939 | |
Technologies & Systems Group (TSG) | | 11,647 | | 12,296 | | 1,640 | | 1,861 | |
Ness Europe | | 7,652 | | 18,439 | | 797 | | 1,513 | |
Ness Israel | | 42,678 | | 44,009 | | 3,217 | | 2,621 | |
Other | | 6,805 | | 10,197 | | (321 | ) | 461 | |
Unallocated Expenses | | — | | — | | (1,361 | ) | (1,490 | ) |
| | $ | 88,405 | | $ | 107,042 | | $ | 5,855 | | $ | 7,905 | |
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NESS TECHNOLOGIES, INC.
AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands
| | December 31, | | March 31, | |
| | 2005 | | 2006 | |
| | | | (unaudited) | |
CURRENT ASSETS: | | | | | |
Cash and cash equivalents | | $ | 33,579 | | $ | 31,238 | |
Short-term bank deposits | | 39,561 | | 26,573 | |
Marketable securities | | 2,651 | | 2,659 | |
Trade receivables (net of allowance for doubtful accounts) | | 99,097 | | 99,517 | |
Unbilled receivables | | 28,545 | | 37,345 | |
Other accounts receivable and prepaid expenses | | 13,664 | | 15,290 | |
Inventories and work in progress | | 2,506 | | 1,126 | |
Total current assets | | 219,603 | | 213,748 | |
| | | | | |
LONG-TERM ASSETS: | | | | | |
Long-term prepaid expenses | | 4,816 | | 5,377 | |
Marketable securities | | 32 | | 115 | |
Deferred income taxes | | 5,271 | | 2,292 | |
Severance pay fund | | 35,845 | | 35,605 | |
Total long-term assets | | 45,964 | | 43,389 | |
| | | | | |
Property and equipment, net | | 21,308 | | 24,316 | |
Other intangible assets, net | | 7,938 | | 11,282 | |
Goodwill | | 159,421 | | 169,232 | |
Total assets | | $ | 454,234 | | $ | 461,967 | |
| | | | | |
CURRENT LIABILITIES: | | | | | |
Short-term bank loans and credit | | $ | 21,011 | | $ | 36,442 | |
Current maturities of long-term debt | | 6,862 | | 6,433 | |
Trade payables | | 35,259 | | 30,607 | |
Advances from customers | | 7,670 | | 8,593 | |
Other accounts payable and accrued expenses | | 82,657 | | 73,409 | |
Total current liabilities | | 153,459 | | 155,484 | |
| | | | | |
LONG-TERM LIABILITIES: | | | | | |
Long-term debt, net of current maturities | | 6,294 | | 5,288 | |
Excess of losses over investment in affiliates | | 257 | | 342 | |
Accrued severance pay | | 39,722 | | 39,658 | |
Total long-term liabilities | | 46,273 | | 45,288 | |
| | | | | |
Total stockholders’ equity | | 254,502 | | 261,195 | |
Total liabilities and stockholders’ equity | | $ | 454,234 | | $ | 461,967 | |
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