Attached files
| file | filename |
|---|---|
| 8-K - NESS TECHNOLOGIES INC | v209752_8k.htm |
Press
Release
Ness
Technologies Announces Fourth Quarter
and Full
Year 2010 Financial Results
Ness
delivers record quarterly revenues, up 16% year-over-year,
with
the highest operating margin and net margin in nine quarters
Hackensack, NJ – February 2, 2011 –
Ness Technologies, Inc. (NASDAQ: NSTC and TASE: NSTC), a global provider
of IT services and solutions, announced today its financial results for the
quarter and full year ended December 31, 2010.
Fourth
Quarter and Full Year 2010 Highlights:
|
|
·
|
Quarterly
revenues were a record $157.4 million, up 16% year-over-year; and full
year revenues were $571.8 million, up 12%
year-over-year.
|
|
|
·
|
Quarterly
operating income was $7.3 million, compared to a loss of $11.3 million in
the fourth quarter of 2009; and full year operating income was $16.4
million, up from $0.3 million in
2009.
|
On a
non-GAAP basis (1),
quarterly operating income was $10.1 million, up 87% year-over-year; and full
year operating income was $27.7 million, up 11% year-over-year. On a GAAP and
non-GAAP basis, quarterly operating income and operating margin improved
sequentially, reaching the highest levels in nine quarters.
|
|
·
|
Quarterly
net income from continuing operations was $5.3 million, compared to a loss
of $17.4 million in the fourth quarter of 2009; and full year net income
from continuing operations was $8.4 million, compared to a loss of $10.0
million in 2009.
|
On a
non-GAAP basis, quarterly net income from continuing operations was $6.7
million, up 109% year-over-year; and full year net income from continuing
operations was $17.9 million, up 5% year-over-year. On a GAAP and non-GAAP
basis, quarterly net income and net margin from continuing operations improved
sequentially, reaching the highest levels in nine quarters.
|
·
|
Quarterly
diluted net earnings per share from continuing operations were $0.14,
compared to a loss of $0.45 in the fourth quarter of 2009; and full year
diluted net earnings per share from continuing operations were $0.22,
compared to a loss of $0.26 in
2009.
|
On a
non-GAAP basis, quarterly diluted net earnings per share from continuing
operations were $0.17, up from $0.08 in the fourth quarter of 2009; and full
year diluted net earnings per share from continuing operations were $0.46, up
from $0.44 in 2009.
|
(1)
|
See
“Use of Non-GAAP Financial Information” below for more information
regarding the company’s use of non-GAAP financial
measures.
|
|
|
·
|
In
Central and Eastern Europe, operating margin continued to recover, hitting
the highest level in eight
quarters.
|
|
|
·
|
Operating
cash flows from continuing operations for the quarter and the full year
were $16.7 million and $9.3 million,
respectively.
|
|
|
·
|
Cash,
cash equivalents and short-term bank deposits were $41.5 million as of
December 31, 2010.
|
|
|
·
|
Backlog
from continuing operations as of December 31, 2010 was $635 million, up 1%
year-over-year.
|
|
|
·
|
Headcount
for continuing operations was approximately 7,710 as of December 31,
2010.
|
“We had a
good fourth quarter and I am particularly proud of the operating margin
expansion we delivered; this steady progress is a direct result of our strategy
to focus on differentiation, global offerings and higher-margin revenue
streams,” said Sachi Gerlitz, president and chief executive officer of Ness
Technologies. “As we continue our long-term priority to maximize margin
expansion in 2011, we feel that we are on a solidly upward trajectory with a
good outlook for the coming year.”
|
|
·
|
Results
by operating segment:
|
|
§
|
The
company’s Software
Product Engineering segment, which provides outsourced software
product research and development services to companies that build or rely
on software to generate revenues, continued to perform well in the fourth
quarter, with a strong quarterly operating margin and good year-over-year
revenue growth.
|
|
|
§
|
The
company’s System
Integration and Application Development segment showed significant
year-over-year revenue growth and operating margin improvement, with very
good performance in Israel and continued improvement in Central and
Eastern Europe.
|
|
|
§
|
As
previously announced, the company no longer reports a separate Software Distribution
segment, as its European software distribution operations were
reclassified as discontinued operations and its Israeli software
distribution operations were reclassified to its System Integration and
Application Development segment, effective as of January 1,
2010.
|
“We are
pleased by the major recovery we implemented in 2010, as seen in our strong
fourth quarter numbers, which speak for themselves,” said Ofer Segev, executive
vice president and chief financial officer. “We will continue to focus on
excelling in our operations, driving to increase the bottom line, generate good
operating cash flows and maintain our strong liquidity.”
Business
Outlook
The
company expects top line growth and operating margin expansion in 2011 with a
trend of sequentially increasing quarterly revenues and operating margin, except
for the second quarter, which is expected to be similar to the first quarter,
especially in operating income, due to the seasonal effect of the lower number
of working days during the quarter in Israel, one of our largest employee
locations.
|
Ness
Technologies Fourth Quarter and Full Year 2010
|
Page
2 of 11
|
Ness is
establishing full year 2011 guidance for revenues from continuing operations in
the range of $595 million to $605 million and diluted net earnings per share
from continuing operations in the range shown in the reconciliation table
below:
|
Full year diluted net
earnings per share ($)
|
||||||||
|
Low
|
High
|
|||||||
|
GAAP
basis from continuing operations
|
$ | 0.42 | $ | 0.48 | ||||
|
Stock-based
compensation; amortization of intangible assets; retention expenses
related to prior acquisitions; net of taxes
|
0.15 | 0.15 | ||||||
|
Non-GAAP
basis from continuing operations
|
$ | 0.57 | $ | 0.63 | ||||
The
company’s 2011 GAAP guidance excludes future stock-based compensation grants;
and the company’s GAAP and non-GAAP guidance further assumes that outstanding
diluted shares will average approximately 39 million in 2011 and relevant
foreign currency exchange rates at their average levels in January
2011.
For the
reasons set forth elsewhere in this release, Ness’ management believes that
non-GAAP financial guidance provides the best comparative basis for investors to
understand and assess the company’s on-going operations and prospects for the
future.
Goodwill
Impairment Test
At the
end of each calendar year, the company is required to perform an impairment test
on its goodwill. The 2010 test is under way, and the company expects it will be
completed before the filing of its Annual Report on Form 10-K. If the company
determines any portion of goodwill is impaired, it would recognize a non-cash
charge that would impact GAAP earnings and earnings per share for the quarter
and year ended December 31, 2010, which would be reported in the company’s
Annual Report on Form 10-K. Such a charge would not impact the non-GAAP
financial information presented in this press release.
Conference
Call Details
Sachi
Gerlitz, president and chief executive officer of Ness Technologies, and Ofer
Segev, executive vice president and chief financial officer, will conduct a
conference call to discuss the fourth quarter and full year 2010 results. The
call, which will be simultaneously webcast, will begin at 8:30 AM Eastern Time /
5:30 AM Pacific Time / 3:30 PM Israel Time on Wednesday, February 2,
2011.
To access
the Ness Technologies fourth quarter and full year 2010 earnings conference
call, participants should dial one of the following numbers
|
North
America
|
1-800-399-0427
|
|
Israel
|
1-80-924-5917
|
|
All
other locations
|
+1-973-200-3375
|
|
Ness
Technologies Fourth Quarter and Full Year 2010
|
Page 3
of 11
|
and
provide the password “NESS” to the operator. A live
audio webcast of the conference call will be available on the investor relations
page of the Ness Technologies corporate web site at http://investor.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 and TASE: NSTC) is a global provider of IT and
business services and solutions with specialized expertise in software product
engineering; and system integration, application development, consulting and
software distribution. Ness delivers its portfolio of solutions and services
using a global delivery model combining offshore, near-shore and local teams.
With about 7,700 employees, Ness has operations in North America, Europe, Israel
and India, has customers in over 20 countries, and partners with numerous
software and hardware vendors worldwide. For more information about Ness, visit
www.ness.com.
Use
of Non-GAAP Financial Information
In
addition to reporting financial results in accordance with generally accepted
accounting principles, or GAAP, Ness uses various non-GAAP measures of net
income and earnings per share, including adjustments from results based on GAAP
to exclude (a) non-cash stock-based compensation expenses in accordance with
Financial Accounting Standards Board (FASB) Accounting Standards Codification
Topic 718, “Stock Compensation” (formerly, FASB Statement 123R) and amortization
of intangible assets, net of taxes; (b) earn-out and retention expenses related
to prior acquisitions; (c) an insurance settlement in the first quarter of 2009
related to a 2007 arbitration expense, net of related expenses, net of taxes;
(d) severance expenses in the first quarter of 2009, net of taxes; and (e)
acquisition and integration costs of its Gilon acquisition in the second quarter
of 2010, net of taxes. Ness’ management believes the non-GAAP financial
information provided in this release is useful to investors’ understanding and
assessment of Ness’ on-going core operations and prospects for the future. The
presentation of this non-GAAP financial information is not intended to be
considered in isolation or as a substitute for results prepared in accordance
with GAAP. Management uses both GAAP and non-GAAP information in evaluating and
operating the business internally and as such has determined that it is
important to provide this information to investors.
Ness also
uses these non-GAAP measures in the formulation of its financial guidance. This
requires Ness management to make assumptions regarding certain factors that
could affect future net income and earnings per share, such as the timing and
size of future potential acquisitions (which could result in additional non-cash
amortization of intangibles), the timing and size of future potential
stock-based compensation grants (which could result in additional non-cash
stock-based compensation expense), and the timing and size of any one-time
income or expenses. The company discloses such assumptions in conjunction with
its financial guidance.
|
Ness
Technologies Fourth Quarter and Full Year 2010
|
Page 4
of 11
|
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 on Form 10-K filed with the Securities and Exchange Commission on
March 15, 2010. Ness is under no obligation, and expressly disclaims any
obligation, to update or alter its forward-looking statements, whether as a
result of such changes, new information, subsequent events or
otherwise.
|
Media
Contact:
|
Investor
Relations Contacts:
|
|
|
David
Kanaan
|
Drew
Wright
|
Maya
Lustig
|
|
Intl:
+972-54-425-5307
|
USA:
1-201-488-3262
|
Israel:
+972-3-767-5110
|
|
Email:
media.int@ness.com
|
Email:
investor@ness.com
|
Email:
maya.lustig@ness.com
|
|
Ness
Technologies Fourth Quarter and Full Year 2010
|
Page 5
of 11
|
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,
|
|||||||||||||||
|
2009
|
2010
|
2009
|
2010
|
|||||||||||||
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
||||||||||||||
|
Revenues
|
$ | 135,577 | $ | 157,407 | $ | 511,947 | $ | 571,787 | ||||||||
|
Cost
of revenues
|
109,380 | 111,422 | 386,061 | 412,934 | ||||||||||||
|
Gross
profit
|
26,197 | 45,985 | 125,886 | 158,853 | ||||||||||||
|
Selling
and marketing
|
12,242 | 11,754 | 41,168 | 41,187 | ||||||||||||
|
General
and administrative
|
25,253 | 26,948 | 89,592 | 101,242 | ||||||||||||
|
Insurance
settlement related to 2007 arbitration expense, net of related
expenses
|
— | — | (2,610 | ) | — | |||||||||||
|
Commissions
related to the sale of Israeli SAP sales and distribution
operations
|
— | — | (2,534 | ) | — | |||||||||||
|
Total
operating expenses
|
37,495 | 38,702 | 125,616 | 142,429 | ||||||||||||
|
Operating
income (loss)
|
(11,298 | ) | 7,283 | 270 | 16,424 | |||||||||||
|
Financial
expenses, net
|
(788 | ) | (686 | ) | (2,998 | ) | (1,826 | ) | ||||||||
|
Income
before taxes on income
|
(12,086 | ) | 6,597 | (2,728 | ) | 14,598 | ||||||||||
|
Taxes
on income
|
5,266 | 1,341 | 7,271 | 6,189 | ||||||||||||
|
Net
income (loss) from continuing operations
|
$ | (17,352 | ) | $ | 5,256 | $ | (9,999 | ) | $ | 8,409 | ||||||
|
Net
loss from discontinued operations
|
(38,514 | ) | (1,162 | ) | (42,455 | ) | (8,193 | ) | ||||||||
|
Net
income (loss)
|
$ | (55,866 | ) | $ | 4,094 | $ | (52,454 | ) | $ | 216 | ||||||
|
Basic
net earnings (loss) per share from continuing operations
|
$ | (0.45 | ) | $ | 0.14 | $ | (0.26 | ) | $ | 0.22 | ||||||
|
Diluted
net earnings (loss) per share from continuing operations
|
$ | (0.45 | ) | $ | 0.14 | $ | (0.26 | ) | $ | 0.22 | ||||||
|
Basic
net earnings (loss) per share
|
$ | (1.45 | ) | $ | 0.11 | $ | (1.36 | ) | $ | 0.01 | ||||||
|
Diluted
net earnings (loss) per share
|
$ | (1.45 | ) | $ | 0.11 | $ | (1.36 | ) | $ | 0.01 | ||||||
|
Weighted
average number of shares (in thousands) used in computing basic net
earnings (loss) per share from continuing operations, basic net earnings
(loss) per share, diluted net loss per share from continuing operations
and diluted net loss per share
|
38,436 | 38,053 | 38,598 | 38,128 | ||||||||||||
|
Weighted
average number of shares (in thousands) used in computing diluted net
earnings per share from continuing operations and diluted net earnings per
share
|
38,838 | 38,433 | 39,100 | 38,733 | ||||||||||||
|
Ness
Technologies Fourth Quarter and Full Year 2010
|
Page 6
of 11
|
NESS
TECHNOLOGIES, INC. AND ITS SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
U.S.
dollars in thousands
|
Three
months ended
December
31,
|
Year
ended
December
31,
|
|||||||||||||||
|
2009
|
2010
|
2009
|
2010
|
|||||||||||||
|
Segment Data
(1):
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
|||||||||||||
|
Revenues
from continuing operations:
|
||||||||||||||||
|
Software
Product Engineering
|
$ | 26,248 | $ | 29,530 | $ | 102,523 | $ | 112,866 | ||||||||
|
System
Integration and Application Development
|
109,329 | 127,877 | 409,424 | 458,921 | ||||||||||||
| $ | 135,577 | $ | 157,407 | $ | 511,947 | $ | 571,787 | |||||||||
|
Operating
income (loss) from continuing operations:
|
||||||||||||||||
|
Software
Product Engineering
|
$ | 3,569 | $ | 4,410 | $ | 15,388 | $ | 16,326 | ||||||||
|
System
Integration and Application Development
|
(9,125 | ) | 8,646 | 2,573 | 18,621 | |||||||||||
|
Unallocated
Expenses
|
(5,742 | ) | (5,773 | ) | (17,691 | ) | (18,523 | ) | ||||||||
| $ | (11,298 | ) | $ | 7,283 | $ | 270 | $ | 16,424 | ||||||||
|
Geographic
Data:
|
||||||||||||||||
|
Revenues
from continuing operations:
|
||||||||||||||||
|
Israel
|
$ | 45,254 | $ | 61,583 | $ | 174,800 | $ | 212,263 | ||||||||
|
North
America
|
44,676 | 46,724 | 172,814 | 188,911 | ||||||||||||
|
Europe
|
43,830 | 45,049 | 155,723 | 160,663 | ||||||||||||
|
Asia
and the Far East
|
1,817 | 4,051 | 8,610 | 9,950 | ||||||||||||
| $ | 135,577 | $ | 157,407 | $ | 511,947 | $ | 571,787 | |||||||||
|
(1)
|
The
company no longer reports a separate Software Distribution segment, as its
European software distribution operations were reclassified as
discontinued operations and its Israeli software distribution operations
were reclassified to its System Integration and Application Development
segment, effective as of January 1, 2010. Segment data for prior periods
has been restated to reflect the current organization of the
segments.
|
|
Ness
Technologies Fourth Quarter and Full Year 2010
|
Page 7
of 11
|
NESS
TECHNOLOGIES, INC. AND ITS SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S.
dollars in thousands
|
Year
ended
December
31,
|
||||||||
|
2009
|
2010
|
|||||||
|
(Unaudited)
|
||||||||
|
Cash flows from
operating activities:
|
||||||||
|
Net
income (loss)
|
$ | (52,454 | ) | $ | 216 | |||
|
Adjustments
required to reconcile net income (loss) to net cash provided by operating
activities:
|
||||||||
|
Net
loss from discontinued operations
|
42,455 | 8,193 | ||||||
|
Stock-based
compensation
|
4,073 | 3,227 | ||||||
|
Currency
fluctuation of restricted cash and short-term bank
deposits
|
— | (1,067 | ) | |||||
|
Depreciation
and amortization
|
17,838 | 18,097 | ||||||
|
Loss
(gain) on sale of property and equipment
|
(138 | ) | 771 | |||||
|
Decrease
(increase) in trade receivables, net
|
41,683 | (26,867 | ) | |||||
|
Decrease
(increase) in unbilled receivables
|
11,184 | (3,705 | ) | |||||
|
Increase
in other accounts receivable and prepaid expenses
|
(1,110 | ) | (5,110 | ) | ||||
|
Decrease
(increase) in work-in-progress
|
(7,317 | ) | 2,599 | |||||
|
Decrease in
long-term prepaid expenses
|
415 | 125 | ||||||
|
Deferred
income taxes, net
|
1,772 | 1,517 | ||||||
|
Decrease
in trade payables
|
(6,677 | ) | (12 | ) | ||||
|
Increase
(decrease) in advances from customers and deferred
revenues
|
11,942 | (4,374 | ) | |||||
|
Increase
in other accounts payable and accrued expenses
|
2,368 | 14,605 | ||||||
|
Increase
in other long-term liabilities
|
809 | 1,180 | ||||||
|
Decrease
in accrued severance pay, net
|
(3,322 | ) | (120 | ) | ||||
|
Net
cash used in discontinued operations
|
(2,311 | ) | (6,843 | ) | ||||
|
Net
cash provided by operating activities
|
61,210 | 2,432 | ||||||
|
Cash flows from
investing activities:
|
||||||||
|
Consideration
from sale of a consolidated subsidiary
|
— | 1,711 | ||||||
|
Net
cash paid for acquisition of a consolidated subsidiary
|
— | (17,197 | ) | |||||
|
Cash
paid for acquisition of intangible assets
|
— | (513 | ) | |||||
|
Additional
payments in connection with acquisitions of subsidiaries in prior
periods
|
(14,395 | ) | (1,330 | ) | ||||
|
Proceeds
from maturity of (investment in) short-term bank deposits,
net
|
(19,257 | ) | 17,982 | |||||
|
Proceeds
from sale of property and equipment
|
796 | 41 | ||||||
|
Purchase
of property and equipment and capitalization of software developed for
internal use
|
(11,841 | ) | (10,195 | ) | ||||
|
Net
cash used in discontinued operations
|
(1,808 | ) | — | |||||
|
Net
cash used in investing activities
|
(46,505 | ) | (9,501 | ) | ||||
|
Cash flows from
financing activities:
|
||||||||
|
Exercise
of options
|
— | 4 | ||||||
|
Repurchase
of shares
|
(2,299 | ) | (2,169 | ) | ||||
|
Acquired
subsidiary’s dividend to its former shareholder
|
(1,430 | ) | — | |||||
|
Short-term
bank loans and credit, net
|
(15,470 | ) | 12,557 | |||||
|
Proceeds
from long-term debt
|
15,085 | 13,364 | ||||||
|
Principal
payments of long-term debt
|
(12,254 | ) | (21,198 | ) | ||||
|
Net
cash provided by discontinued operations
|
821 | — | ||||||
|
Net
cash provided by (used in) financing activities
|
(15,547 | ) | 2,558 | |||||
|
Effect
of exchange rate changes on cash and cash equivalents
|
(3,525 | ) | (5,734 | ) | ||||
|
Decrease
in cash and cash equivalents
|
(4,367 | ) | (10,245 | ) | ||||
|
Cash
and cash equivalents at the beginning of the period
|
44,585 | 40,218 | ||||||
|
Cash
and cash equivalents at the end of the period
|
$ | 40,218 | $ | 29,973 | ||||
|
Ness
Technologies Fourth Quarter and Full Year 2010
|
Page 8
of 11
|
NESS
TECHNOLOGIES, INC. AND ITS SUBSIDIARIES
CONDENSED
CONSOLIDATED BALANCE SHEETS
U.S.
dollars in thousands
|
December
31,
|
||||||||
|
2009
|
2010
|
|||||||
|
(Unaudited)
|
||||||||
|
CURRENT
ASSETS:
|
||||||||
|
Cash
and cash equivalents
|
$ | 40,218 | $ | 29,973 | ||||
|
Restricted
cash
|
2,470 | 2,578 | ||||||
|
Short-term
bank deposits
|
25,939 | 8,913 | ||||||
|
Trade
receivables, net of allowance for doubtful accounts
|
131,452 | 165,623 | ||||||
|
Unbilled
receivables
|
28,012 | 34,850 | ||||||
|
Other
accounts receivable and prepaid expenses
|
27,832 | 34,081 | ||||||
|
Work
in progress
|
9,690 | 5,613 | ||||||
|
Total
assets attributed to discontinued operations
|
43,212 | 31,626 | ||||||
|
Total
current assets
|
308,825 | 313,257 | ||||||
|
LONG-TERM
ASSETS:
|
||||||||
|
Long-term
prepaid expenses and other assets
|
6,083 | 5,656 | ||||||
|
Unbilled
receivables
|
4,654 | 2,828 | ||||||
|
Deferred
income taxes, net
|
3,608 | 2,186 | ||||||
|
Severance
pay fund
|
53,145 | 59,583 | ||||||
|
Property
and equipment, net
|
35,739 | 35,545 | ||||||
|
Intangible
assets, net
|
10,016 | 9,481 | ||||||
|
Goodwill
|
263,541 | 282,383 | ||||||
|
Total
long-term assets
|
376,786 | 397,662 | ||||||
|
Total
assets
|
$ | 685,611 | $ | 710,919 | ||||
|
CURRENT
LIABILITIES:
|
||||||||
|
Short-term
bank credit
|
$ | 500 | $ | 16,543 | ||||
|
Current
maturities of long-term debt
|
21,332 | 26,160 | ||||||
|
Trade
payables
|
30,914 | 31,682 | ||||||
|
Advances
from customers and deferred revenues
|
40,639 | 36,921 | ||||||
|
Other
accounts payable and accrued expenses
|
99,464 | 120,450 | ||||||
|
Total
liabilities attributed to discontinued operations
|
25,461 | 13,663 | ||||||
|
Total
current liabilities
|
218,310 | 245,419 | ||||||
|
LONG-TERM
LIABILITIES:
|
||||||||
|
Long-term
debt, net of current maturities
|
50,836 | 36,756 | ||||||
|
Other
long-term liabilities
|
6,689 | 7,942 | ||||||
|
Deferred
income taxes
|
2,045 | 2,246 | ||||||
|
Accrued
severance pay
|
56,443 | 63,026 | ||||||
|
Total
long-term liabilities
|
116,013 | 109,970 | ||||||
|
Total
stockholders’ equity
|
351,288 | 355,530 | ||||||
|
Total
liabilities and stockholders’ equity
|
$ | 685,611 | $ | 710,919 | ||||
|
Ness
Technologies Fourth Quarter and Full Year 2010
|
Page 9
of 11
|
NESS
TECHNOLOGIES, INC. AND ITS SUBSIDIARIES
RECONCILIATION
OF SUPPLEMENTAL NON-GAAP FINANCIAL INFORMATION
EXCLUDING
STOCK-BASED COMPENSATION; AMORTIZATION OF INTANGIBLE ASSETS; EARN-OUT AND
RETENTION EXPENSES RELATED TO PRIOR ACQUISITIONS; INSURANCE SETTLEMENT RELATED
TO 2007 ARBITRATION EXPENSE, NET OF RELATED EXPENSES; SEVERANCE EXPENSES;
ACQUISITION AND INTEGRATION COSTS OF GILON ACQUISITION; ALL NET OF
TAXES
U.S.
dollars in thousands (except per share data)
|
Three
months ended
December
31,
|
Year
ended
December
31,
|
|||||||||||||||
|
2009
|
2010
|
2009
|
2010
|
|||||||||||||
|
Statements
of Income Data:
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
||||||||||||
|
GAAP
gross profit
|
$ | 26,197 | $ | 45,985 | $ | 125,886 | $ | 158,853 | ||||||||
|
Stock-based
compensation
|
20 | 56 | 203 | 260 | ||||||||||||
|
Amortization
of intangible assets
|
210 | 152 | 791 | 481 | ||||||||||||
|
Severance
expenses
|
380 | — | 1,346 | — | ||||||||||||
|
Restructuring
and related project costs
|
11,058 | — | 11,058 | — | ||||||||||||
|
Non-GAAP
gross profit
|
$ | 37,865 | $ | 46,193 | $ | 139,284 | $ | 159,594 | ||||||||
|
GAAP
operating income (loss)
|
$ | (11,298 | ) | $ | 7,283 | $ | 270 | $ | 16,424 | |||||||
|
Stock-based
compensation
|
1,454 | 856 | 4,073 | 2,767 | ||||||||||||
|
Amortization
of intangible assets
|
1,893 | 1,645 | 7,118 | 5,936 | ||||||||||||
|
Earn-out
and retention expenses related to prior acquisitions
|
1,032 | 282 | 1,032 | 1,816 | ||||||||||||
|
Insurance
settlement related to 2007 arbitration expense, net of related
expenses
|
— | — | (2,610 | ) | — | |||||||||||
|
Severance
expenses
|
1,301 | — | 3,947 | — | ||||||||||||
|
Restructuring
and related project costs
|
11,009 | — | 11,009 | — | ||||||||||||
|
Acquisition
and integration costs of Gilon acquisition
|
— | — | — | 728 | ||||||||||||
|
Non-GAAP
operating income
|
$ | 5,391 | $ | 10,066 | $ | 24,839 | $ | 27,671 | ||||||||
|
GAAP
operating margin
|
-8.3 | % | 4.6 | % | 0.1 | % | 2.9 | % | ||||||||
|
Non-GAAP
operating margin
|
4.0 | % | 6.4 | % | 4.9 | % | 4.8 | % | ||||||||
|
EBITDA
|
$ | (4,025 | ) | $ | 13,131 | $ | 23,213 | $ | 39,104 | |||||||
|
Insurance
settlement related to 2007 arbitration expense, net of related
expenses
|
— | — | (2,610 | ) | — | |||||||||||
|
Severance
expenses
|
1,301 | — | 3,947 | — | ||||||||||||
|
Restructuring
and related project costs
|
11,009 | — | 11,009 | — | ||||||||||||
|
Acquisition
and integration costs of Gilon acquisition
|
— | — | — | 728 | ||||||||||||
|
Non-GAAP
EBITDA
|
$ | 8,285 | $ | 13,131 | $ | 35,559 | $ | 39,832 | ||||||||
|
EBITDA
margin
|
-3.0 | % | 8.3 | % | 4.5 | % | 6.8 | % | ||||||||
|
Non-GAAP
EBITDA margin
|
6.1 | % | 8.3 | % | 6.9 | % | 7.0 | % | ||||||||
|
GAAP
net income (loss) from continuing operations
|
$ | (17,352 | ) | $ | 5,256 | $ | (9,999 | ) | $ | 8,409 | ||||||
|
Stock-based
compensation; amortization of intangible assets; earn-out and retention
expenses related to prior acquisitions; insurance settlement in respect of
2007 arbitration expense, net of related expenses; severance expenses;
acquisition and integration costs of Gilon acquisition; all net of
taxes
|
20,574 | 1,464 | 27,079 | 9,487 | ||||||||||||
|
Non-GAAP
net income from continuing operations
|
$ | 3,222 | $ | 6,720 | $ | 17,080 | $ | 17,896 | ||||||||
|
Ness
Technologies Fourth Quarter and Full Year 2010
|
Page 10
of 11
|
NESS
TECHNOLOGIES, INC. AND ITS SUBSIDIARIES
RECONCILIATION
OF SUPPLEMENTAL NON-GAAP FINANCIAL INFORMATION (CONTINUED)
EXCLUDING
STOCK-BASED COMPENSATION; AMORTIZATION OF INTANGIBLE ASSETS; EARN-OUT AND
RETENTION EXPENSES RELATED TO PRIOR ACQUISITIONS; INSURANCE SETTLEMENT RELATED
TO 2007 ARBITRATION EXPENSE, NET OF RELATED EXPENSES; SEVERANCE EXPENSES;
ACQUISITION AND INTEGRATION COSTS OF GILON ACQUISITION; ALL NET OF
TAXES
U.S.
dollars in thousands (except per share data)
|
Three
months ended
December
31,
|
Year
ended
December
31,
|
|||||||||||||||
|
2009
|
2010
|
2009
|
2010
|
|||||||||||||
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
|||||||||||||
|
GAAP
diluted net earnings (loss) per share from continuing
operations
|
$ | (0.45 | ) | $ | 0.14 | $ | (0.26 | ) | $ | 0.22 | ||||||
|
Stock-based
compensation; amortization of intangible assets; earn-out and retention
expenses related to prior acquisitions; insurance settlement in respect of
2007 arbitration expense, net of related expenses; severance expenses;
acquisition and integration costs of Gilon acquisition; all net of
taxes
|
0.53 | 0.04 | 0.70 | 0.24 | ||||||||||||
|
Non-GAAP
diluted net earnings per share from continuing operations
|
$ | 0.08 | $ | 0.17 | $ | 0.44 | $ | 0.46 | ||||||||
|
Segment
Data:
|
||||||||||||||||
|
Software
Product Engineering:
|
||||||||||||||||
|
GAAP
operating income
|
$ | 3,569 | $ | 4,410 | $ | 15,388 | $ | 16,326 | ||||||||
|
Amortization
of intangible assets
|
38 | 37 | 153 | 152 | ||||||||||||
|
Restructuring
and related project costs
|
308 | — | 308 | — | ||||||||||||
|
Non-GAAP
operating income
|
$ | 3,915 | $ | 4,447 | $ | 15,849 | $ | 16,478 | ||||||||
|
System
Integration and Application Development:
|
||||||||||||||||
|
GAAP
operating income (loss)
|
$ | (9,125 | ) | $ | 8,646 | $ | 2,573 | $ | 18,621 | |||||||
|
Amortization
of intangible assets
|
1,855 | 1,608 | 6,965 | 5,784 | ||||||||||||
|
Earn-out
and retention expenses related to prior acquisitions
|
1,032 | 282 | 1,032 | 1,816 | ||||||||||||
|
Insurance
settlement related to 2007 arbitration expense, net of related
expenses
|
— | — | (2,610 | ) | — | |||||||||||
|
Severance
expenses
|
— | — | 1,293 | — | ||||||||||||
|
Restructuring
and related project costs
|
11,870 | — | 11,870 | — | ||||||||||||
|
Acquisition
and integration costs of Gilon acquisition
|
— | — | — | 728 | ||||||||||||
|
Non-GAAP
operating income
|
$ | 5,632 | $ | 10,536 | $ | 21,123 | $ | 26,949 | ||||||||
|
Ness
Technologies Fourth Quarter and Full Year 2010
|
Page 11
of 11
|