Exhibit 99.1
PRESS RELEASE
Ness Technologies Announces
Record Second Quarter 2006 Financial Results
Net Income Rises 49% Year-over-Year on a 24% Increase in Revenues
Hackensack, NJ — July 26, 2006 — Ness Technologies, Inc. (NASDAQ: NSTC), a global provider of IT services and solutions, today announced financial results for the second quarter ended June 30, 2006.
Second Quarter 2006 Highlights:
· Fully diluted net earnings per share were $0.16, compared to $0.11 in Q2 of 2005.
· Net income reached $6.0 million, up 49% year-over-year.
· Operating income at $7.5 million, up 52% year-over-year.
· Revenues reached a record $116.6 million, up 24% year-over-year.
· Backlog increased to a record $532 million, up 27% year-over-year.
· Global workforce increased to 7,160.
“We had a strong second quarter, with record revenues and the highest operating margin and net income we’ve ever recorded for the second quarter, which is our slowest quarter of the year due to seasonality factors,” said Raviv Zoller, President and Chief Executive Officer of Ness Technologies. “Our Indian offshore and Eastern European operations as well as our Technologies and Systems Group all continued to perform well, with growing revenues and continually improving profitability. The integration of our 2005 acquisitions was completed successfully, and the integration of our first quarter acquisition of Innova is progressing according to schedule, although we still have not extracted all the potential benefits. We remain optimistic in our outlook, given the strong demand environment and our proven strategic business model.”
Ness’ second quarter 2006 revenues totaled $116.6 million, an increase of $22.4 million or 24%, setting a new quarterly record and driven by both organic and non-organic growth, compared to $94.2 million in the second quarter of 2005.
Second quarter 2006 operating income rose to $7.5 million, an increase of $2.6 million or 52%, compared to $4.9 million in the second quarter of 2005. The corresponding margin growth was 120 basis points.
Second quarter 2006 net income increased to $6.0 million, an increase of $2.0 million or 49%, compared to $4.0 million in the second quarter of 2005. Diluted net earnings per share for the second quarter of 2006 were $0.16 compared to $0.11 in the second quarter of 2005.
Backlog as of June 30, 2006 increased to $532 million, up 27% compared to $418 million as of June 30, 2005.
“We continued to gain operating leverage during the second quarter, as our percentage of billable employees increased to 88.0%,” stated Ytzhak Edelman, Chief Financial Officer and deputy to the President and CEO, Ness Technologies. “We remain focused on further increasing our operating and net margin, managing our debt-to-equity ratio and controlling our financial expenses.”
Guidance
For the third quarter 2006 Ness expects to generate revenues in the range of $119 million to $125 million and diluted net earnings per share in the range of $0.20 to $0.22.
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 President and CEO, Ytzhak Edelman, will conduct a conference call to discuss the second quarter 2006 results, which will be simultaneously webcast at 9:00 A.M. Eastern Time / 6:00 A.M. Pacific Time on Wednesday, July 26, 2006.
To access the Ness Technologies second 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 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 7,000 employees, Ness maintains operations in 15 countries across North America, Europe and Asia, and more than 100 alliances and
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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
June 30, | | Six months ended
June 30, | |
| | 2005 | | 2006 | | 2005 | | 2006 | |
| | (unaudited) | | (unaudited) | |
Statement of Operations Data: | | | | | | | | | |
Revenues | | $ | 94,218 | | $ | 116,614 | | $ | 182,623 | | $ | 223,656 | |
Cost of revenues | | 68,033 | | 83,734 | | 130,526 | | 159,403 | |
Provision for losses on uncompleted contracts, net | | 13 | | 246 | | 98 | | 294 | |
Gross profit | | 26,172 | | 32,634 | | 51,999 | | 63,959 | |
| | | | | | | | | |
Selling and marketing | | 7,002 | | 8,733 | | 14,033 | | 17,224 | |
General and administrative | | 14,253 | | 16,426 | | 27,194 | | 31,356 | |
Total operating expenses | | 21,255 | | 25,159 | | 41,227 | | 48,580 | |
| | | | | | | | | |
Operating income | | 4,917 | | 7,475 | | 10,772 | | 15,379 | |
Financial expenses, net | | (494 | ) | (577 | ) | (914 | ) | (638 | ) |
Other income, net | | 10 | | 483 | | 4 | | 444 | |
Income before taxes on income | | 4,433 | | 7,381 | | 9,862 | | 15,185 | |
| | | | | | | | | |
Taxes on income | | 423 | | 1,340 | | 1,025 | | 2,808 | |
Equity in net losses of affiliates | | (27 | ) | (90 | ) | (29 | ) | (90 | ) |
Minority interests in losses of a subsidiary | | — | | — | | 101 | | — | |
Net income | | $ | 3,983 | | $ | 5,951 | | $ | 8,909 | | $ | 12,287 | |
| | | | | | | | | |
Basic net earnings per share | | $ | 0.12 | | $ | 0.17 | | $ | 0.26 | | $ | 0.35 | |
Diluted net earnings per share | | $ | 0.11 | | $ | 0.16 | | $ | 0.25 | | $ | 0.34 | |
| | | | | | | | | |
Weighted average number of shares (in thousands) used in computing basic net earnings per share | | 34,541 | | 35,602 | | 34,147 | | 35,239 | |
Weighted average number of shares (in thousands) used in computing diluted net earnings per share | | 35,644 | | 36,718 | | 35,594 | | 36,335 | |
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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
June 30, | | Six months ended
June 30, | |
| | 2005 | | 2006 | | 2005 | | 2006* | |
| | (unaudited) | | (unaudited) | |
Segment Data: | | | | | | | | | |
Revenues: | | | | | | | | | |
Managed Strategic Services (MSS) | | $ | 21,754 | | $ | 22,331 | | $ | 41,377 | | $ | 41,894 | |
Technologies & Systems Group (TSG) | | 11,104 | | 12,671 | | 22,751 | | 27,419 | |
Ness Europe | | 14,048 | | 21,174 | | 21,700 | | 39,613 | |
Ness Israel | | 41,192 | | 44,219 | | 83,870 | | 88,314 | |
Other | | 6,120 | | 16,219 | | 12,925 | | 26,416 | |
| | $ | 94,218 | | $ | 116,614 | | $ | 182,623 | | $ | 223,656 | |
| | | | | | | | | |
Operating Income (Loss): | | | | | | | | | |
Managed Strategic Services (MSS) | | $ | 1,903 | | $ | 3,027 | | $ | 3,352 | | $ | 5,387 | |
Technologies & Systems Group (TSG) | | 1,302 | | 1,331 | | 3,083 | | 3,192 | |
Ness Europe | | 1,684 | | 2,404 | | 2,482 | | 3,917 | |
Ness Israel | | 2,541 | | 1,401 | | 5,759 | | 4,537 | |
Other | | (103 | ) | 1,102 | | (424 | ) | 1,595 | |
Unallocated Expenses | | (2,410 | ) | (1,790 | ) | (3,480 | ) | (3,249 | ) |
| | $ | 4,917 | | $ | 7,475 | | $ | 10,772 | | $ | 15,379 | |
* as adjusted
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NESS TECHNOLOGIES, INC.
AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands
| | December 31, | | June 30, | |
| | 2005 | | 2006 | |
| | | | (unaudited) | |
CURRENT ASSETS: | | | | | |
Cash and cash equivalents | | $ | 33,579 | | $ | 32,821 | |
Short-term bank deposits | | 39,561 | | 24,134 | |
Marketable securities | | 2,651 | | — | |
Trade receivables (net of allowance for doubtful accounts) | | 99,097 | | 109,378 | |
Unbilled receivables | | 28,545 | | 41,812 | |
Other accounts receivable and prepaid expenses | | 13,664 | | 15,501 | |
Inventories and work in progress | | 2,506 | | 599 | |
Total current assets | | 219,603 | | 224,245 | |
| | | | | |
LONG-TERM ASSETS: | | | | | |
Long-term prepaid expenses | | 4,816 | | 6,044 | |
Marketable securities | | 32 | | 126 | |
Deferred income taxes | | 5,271 | | 4,534 | |
Severance pay fund | | 35,845 | | 39,149 | |
Total long-term assets | | 45,964 | | 49,853 | |
| | | | | |
Property and equipment, net | | 21,308 | | 24,781 | |
Other intangible assets, net | | 7,938 | | 10,246 | |
Goodwill | | 159,421 | | 173,403 | |
Total assets | | $ | 454,234 | | $ | 482,528 | |
| | | | | |
CURRENT LIABILITIES: | | | | | |
Short-term bank loans and credit | | $ | 21,011 | | $ | 44,485 | |
Current maturities of long-term debt | | 6,862 | | 6,598 | |
Trade payables | | 35,259 | | 24,221 | |
Advances from customers | | 7,670 | | 10,829 | |
Other accounts payable and accrued expenses | | 82,657 | | 69,820 | |
Total current liabilities | | 153,459 | | 155,953 | |
| | | | | |
LONG-TERM LIABILITIES: | | | | | |
Long-term debt, net of current maturities | | 6,294 | | 4,939 | |
Excess of losses over investment in affiliates | | 257 | | 451 | |
Accrued severance pay | | 39,722 | | 42,909 | |
Total long-term liabilities | | 46,273 | | 48,299 | |
| | | | | |
Total stockholders’ equity | | 254,502 | | 278,276 | |
Total liabilities and stockholders’ equity | | $ | 454,234 | | $ | 482,528 | |
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