Exhibit 99.1
PRESS RELEASE | 
|
Ness Technologies Announces
Record Third Quarter 2006 Financial Results
Operating Income Rises 33% and Net Income Rises 32%
Year-over-Year on a 22% Increase in Revenues
Hackensack, NJ — November 2, 2006 — Ness Technologies, Inc. (NASDAQ: NSTC), a global provider of IT services and solutions, today announced financial results for the third quarter ended September 30, 2006.
Third Quarter 2006 Highlights:
· Fully diluted net earnings per share were $0.22, compared to $0.17 in Q3 of 2005.
· Net income reached $7.9 million, up 32% year-over-year.
· Operating income at $10.2 million, up 33% year-over-year.
· Revenues reached a record $119.1 million, up 22% year-over-year.
· Backlog increased to a record $548 million, up 25% year-over-year.
· Global workforce increased to 7,240.
“I am very pleased to report that we had a strong third quarter, with record revenues and the highest operating margin and net income we’ve ever recorded,” said Raviv Zoller, President and Chief Executive Officer of Ness Technologies. “We signed strategic deals that should have a positive long-term impact on results. We remain optimistic in our outlook, given the strong demand environment and our proven strategic business model.”
Ness’ third quarter 2006 revenues totaled $119.1 million, an increase of $21.4 million or 22%, setting a new quarterly record and driven by both organic and non-organic growth, compared to $97.7 million in the third quarter of 2005.
Operating income rose to a record $10.2 million, an increase of $2.5 million or 33%, compared to $7.7 million in the third quarter of 2005.
Net income increased to a record $7.9 million, an increase of $1.9 million or 32%, compared to $6.0 million in the third quarter of 2005. Fully diluted earnings per share were $0.22 compared to $0.17 in the third quarter of 2005.
Backlog as of September 30, 2006 increased to $548 million, up 25% compared to $439 million as of September 30, 2005.
“We had strong operating cash flows in the quarter, resulting in an increase in our net cash position of over $9 million,” 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 fourth quarter 2006 Ness expects to generate revenues of at least $132 million. Ness expects fourth quarter diluted net earnings of at least $0.25.
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 third quarter 2006 results, which will be simultaneously webcast at 9:00 A.M. Eastern Time / 6:00 A.M. Pacific Time on Thursday, November 2, 2006.
To access the Ness Technologies third 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. Ness specializes in outsourcing and offshore, systems integration and application development, software and consulting, and quality assurance and training. With 7,200 employees, Ness maintains operations in 14 countries, and partners with over 100 software and hardware vendors worldwide. 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.
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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
September 30, | | Nine months ended
September 30, | |
| | 2005 | | 2006 | | 2005 | | 2006 | |
| | (unaudited) | | (unaudited) | |
Statement of Operations Data: | | | | | | | | | |
Revenues | | $ | 97,719 | | $ | 119,135 | | $ | 280,342 | | $ | 342,791 | |
Cost of revenues | | 69,628 | | 85,095 | | 200,252 | | 244,792 | |
Gross profit | | 28,091 | | 34,040 | | 80,090 | | 97,999 | |
| | | | | | | | | |
Selling and marketing | | 7,081 | | 8,391 | | 21,114 | | 25,615 | |
General and administrative | | 13,344 | | 15,489 | | 40,538 | | 46,845 | |
Total operating expenses | | 20,425 | | 23,880 | | 61,652 | | 72,460 | |
| | | | | | | | | |
Operating income | | 7,666 | | 10,160 | | 18,438 | | 25,539 | |
Financial expenses, net | | (383 | ) | (492 | ) | (1,297 | ) | (1,130 | ) |
Other income (expenses), net | | (14 | ) | (8 | ) | (10 | ) | 436 | |
Income before taxes on income | | 7,269 | | 9,660 | | 17,131 | | 24,845 | |
| | | | | | | | | |
Taxes on income | | 1,252 | | 1,709 | | 2,277 | | 4,517 | |
Equity in net losses of affiliates | | — | | (13 | ) | (29 | ) | (103 | ) |
Minority interests in losses of a subsidiary | | — | | — | | 101 | | — | |
Net income | | $ | 6,017 | | $ | 7,938 | | $ | 14,926 | | $ | 20,225 | |
| | | | | | | | | |
Basic net earnings per share | | $ | 0.17 | | $ | 0.22 | | $ | 0.43 | | $ | 0.56 | |
Diluted net earnings per share | | $ | 0.17 | | $ | 0.22 | | $ | 0.42 | | $ | 0.55 | |
| | | | | | | | | |
Weighted average number of shares (in thousands) used in computing basic net earnings per share | | 34,648 | | 35,910 | | 34,314 | | 35,820 | |
Weighted average number of shares (in thousands) used in computing diluted net earnings per share | | 35,499 | | 36,897 | | 35,562 | | 36,776 | |
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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
September 30, | | Nine months ended
September 30, | |
| | 2005 | | 2006 | | 2005 | | 2006 | |
| | (unaudited) | | (unaudited) | |
Segment Data: | | | | | | | | | |
Revenues: | | | | | | | | | |
Managed Strategic Services (MSS) | | $ | 18,998 | | $ | 18,935 | | $ | 60,375 | | $ | 60,829 | |
Technologies & Systems Group (TSG) | | 12,414 | | 14,538 | | 35,165 | | 41,958 | |
Ness Europe | | 14,624 | | 19,285 | | 36,324 | | 58,898 | |
Ness Israel | | 43,700 | | 50,652 | | 127,570 | | 138,966 | |
Other | | 7,983 | | 15,725 | | 20,908 | | 42,140 | |
| | $ | 97,719 | | $ | 119,135 | | $ | 280,342 | | $ | 342,791 | |
| | | | | | | | | |
Operating Income (Loss): | | | | | | | | | |
Managed Strategic Services (MSS) | | $ | 1,770 | | $ | 2,243 | | $ | 5,122 | | $ | 7,630 | |
Technologies & Systems Group (TSG) | | 1,869 | | 2,275 | | 4,952 | | 5,467 | |
Ness Europe | | 1,683 | | 1,493 | | 4,165 | | 5,410 | |
Ness Israel | | 4,065 | | 4,621 | | 9,824 | | 9,158 | |
Other | | 72 | | 870 | | (352 | ) | 2,465 | |
Unallocated Expenses | | (1,793 | ) | (1,342 | ) | (5,273 | ) | (4,591 | ) |
| | $ | 7,666 | | $ | 10,160 | | $ | 18,438 | | $ | 25,539 | |
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NESS TECHNOLOGIES, INC.
AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands
| | December 31, | | September 30, | |
| | 2005 | | 2006 | |
| | | | (unaudited) | |
CURRENT ASSETS: | | | | | |
Cash and cash equivalents | | $ | 33,579 | | $ | 40,186 | |
Short-term bank deposits | | 39,561 | | 4,862 | |
Marketable securities | | 2,651 | | — | |
Trade receivables (net of allowance for doubtful accounts) | | 99,097 | | 103,567 | |
Unbilled receivables | | 21,500 | | 39,459 | |
Other accounts receivable and prepaid expenses | | 13,664 | | 19,627 | |
Inventories and work in progress | | 2,506 | | 720 | |
Total current assets | | 212,558 | | 208,421 | |
| | | | | |
LONG-TERM ASSETS: | | | | | |
Long-term prepaid expenses | | 4,816 | | 6,482 | |
Marketable securities | | 32 | | 118 | |
Trade and unbilled receivables | | 7,045 | | 12,133 | |
Deferred income taxes | | 5,271 | | 3,884 | |
Severance pay fund | | 35,845 | | 41,270 | |
Total long-term assets | | 53,009 | | 63,887 | |
| | | | | |
Property and equipment, net | | 21,308 | | 25,418 | |
Other intangible assets, net | | 7,938 | | 9,028 | |
Goodwill | | 159,421 | | 186,324 | |
Total assets | | $ | 454,234 | | $ | 493,078 | |
| | | | | |
CURRENT LIABILITIES: | | | | | |
Short-term bank loans and credit | | $ | 21,011 | | $ | 25,639 | |
Current maturities of long-term debt | | 6,862 | | 6,387 | |
Trade payables | | 35,259 | | 28,512 | |
Advances from customers | | 7,670 | | 9,078 | |
Other accounts payable and accrued expenses | | 82,657 | | 79,410 | |
Total current liabilities | | 153,459 | | 149,026 | |
| | | | | |
LONG-TERM LIABILITIES: | | | | | |
Long-term debt, net of current maturities | | 6,294 | | 2,697 | |
Excess of losses over investment in affiliates | | 257 | | 480 | |
Accrued severance pay | | 39,722 | | 45,295 | |
Total long-term liabilities | | 46,273 | | 48,472 | |
| | | | | |
Total stockholders’ equity | | 254,502 | | 295,580 | |
Total liabilities and stockholders’ equity | | $ | 454,234 | | $ | 493,078 | |
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