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Ness Technologies Announces Fourth Quarter and Full Year 2009 Financial Results
  • USA - English
  • USA - English

11% Sequential Quarterly Revenue Growth With All-Time Record Operating Cash Flows; Ness Expands Scope of Previously Announced Q4 Restructuring of Selected Operations; Company Poised for Growth in 2010


News provided by

Ness Technologies Inc

Feb 03, 2010, 07:05 ET

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HACKENSACK, New Jersey, February 3 /PRNewswire-FirstCall/ -- Ness Technologies, Inc. (NASDAQ: NSTC and TASE: NSTC), a global provider of IT services and solutions, today announced financial results for the quarter and full year ended December 31, 2009.

    Fourth Quarter and Full Year 2009 Highlights:

    - The company delivered sequential revenue growth in all segments,
      supported by sequential bookings growth.

    - The company significantly expanded the scope of its previously
      announced fourth quarter restructuring activities, recording a charge
      for restructuring, severance and related project costs of $17.5 million
      compared to its previously stated expectations of $7 to $9 million, as
      it reorganized, reduced, sold or closed selected smaller operations
      that were unprofitable or that it determined were not strategic to its
      planned future operations and growth; and it also wrote off a deferred
      tax asset of $4.1 million.

    - Results are not comparable to previously provided guidance, as they
      exclude $7 million of 2009 revenues and $0.02 of 2009 diluted net
      earnings per share, which were reclassified as discontinued operations
      following the sale of the company's operations in the Netherlands.

    - On a GAAP basis:

      - Quarterly revenues were $145.9 million, up 11% sequentially and down
        13% year-over-year; and full year revenues were $547.4 million, down
        17%, about one third of which was due to foreign exchange
        re-measurement effects on non-dollar revenues.

      - Quarterly operating loss was $16.5 million, compared to income of
        $5.3 million in the fourth quarter of 2008; and full year operating
        loss was $9.4 million, compared to income of $49.2 million in 2008.

      - Quarterly net loss from continuing operations was $23.4 million,
        compared to income of $4.2 million in the fourth quarter of 2008;
        and full year net loss from continuing operations was $20.4 million,
        compared to income of $34.9 million in 2008.

      - Quarterly diluted net loss per share from continuing operations was
        $0.61, compared to earnings of $0.11 in the fourth quarter of 2008;
        and full year 2009 diluted net loss per share was $0.53, compared to
        earnings of $0.88 in 2008.

    - On a non-GAAP basis [1]:

      - Quarterly operating income from continuing operations was $5.7
        million, up 15% sequentially and down 52% year-over-year; while full
        year operating income was $21.8 million, down 56% year-over-year.

      - Quarterly net income from continuing operations was $3.4 million,
        up 7% sequentially and down 63% year-over-year; while full year net
        income was $13.6 million, down 63% year-over-year.

      - Quarterly diluted net earnings per share from continuing operations
        were $0.09, compared to $0.23 in the fourth quarter of 2008; while
        full year diluted earnings per share were $0.35, compared to $0.93
        in 2008.

    - Operating cash flows for the quarter and the full year were all-time
      records of $25.8 million and $60.2 million, respectively.

    - Cash, cash equivalents and short-term bank deposits reached $71.9
      million as of December 31, 2009, up $13.2 million from December 31,
      2008.

    - Backlog as of December 31, 2009 was $650 million, up 1% sequentially in
      constant currencies, net of discontinued operations, and down 12%
      year-over-year.

    - Headcount was approximately 7,835 as of December 31, 2009.

"2009 was not an easy year for Ness, but we emerged from it strengthened in several important ways," said Sachi Gerlitz, president and chief executive officer of Ness Technologies. "First, we delivered sequentially higher revenues in all operating segments in the quarter, indicating that we are back on a growth path. Second, excluding the cost of the restructuring, we showed sequential improvement in operating margins in all segments. And third, we are better prepared for 2010, having undertaken an important restructuring effort in the fourth quarter in which we dealt with several unprofitable or non-strategic delivery operations - thereby removing a drag on our performance. Our optimism for 2010 is supported by our improved book-to-bill ratio and by our resumption of backlog growth."

    - Results by operating segment:

      - The company's Software Product Engineering segment, which provides
        outsourced software product research and development services to
        companies who build or rely on software to generate revenues,
        continued to perform well in the fourth quarter, with solid
        operating margins on revenues that are beginning to ramp up again.

      - The company's System Integration and Application Development segment
        showed sequential improvement in revenues and non-GAAP operating
        margins, as bookings increased and the pipeline grew. On a GAAP
        basis, segment results were affected by the restructuring charges.

      - The company's Software Distribution segment, which resells
        third-party enterprise software licenses, was expected to perform
        well in its seasonally strong fourth quarter. Although revenues and
        non-GAAP operating margins increased sequentially, the results were
        below expectations as large license deals in this economically
        sensitive segme nt continued to be deferred. The company took action
        in the fourth quarter to adjust fixed costs, and, as a result,
        incurred restructuring charges in this segment as well.

"We continued to deliver excellent operating cash flows, despite the tough economic climate, thanks to strong customer relationships and effective collections efforts," said Ofer Segev, executive vice president and chief financial officer. "The strength of our balance sheet and cash flows allowed us to reduce our short-term debt, bringing our net debt to essentially zero. With the restructuring largely behind us, our strong balance sheet positions us well for growth going forward."

Business Outlook

The company believes the overall economic outlook is improving, though some uncertainties remain. Ness expects top line growth and margin expansion in 2010, with a trend of sequentially increasing quarterly revenues and operating margins, except for the third quarter, which is expected to be similar to the second quarter due to the effect of holiday and vacation seasonality.

Ness is establishing full year 2010 guidance for revenues in the range of $575 million to $585 million and diluted net earnings per share in the range shown in the reconciliation table below:

                                                       Full year diluted net
                                                       earnings per share ($)

                                                               Low   High

    GAAP basis..............................................$ 0.21 $ 0.25
    Stock-based compensation; amortization of intangible
    assets; earn-out related to prior-year acquisition........0.22   0.22

    Non-GAAP basis..........................................$.0.43 $ 0.47

The company's 2010 GAAP guidance excludes any future acquisitions or stock-based compensation grants; and the company's GAAP and non-GAAP guidance further assumes that outstanding diluted shares will average approximately 39.5 million in 2010 and that foreign currency exchange rates will remain at their average levels for January 2010.

For the reasons set forth elsewhere in this release, Ness' management believes that non-GAAP earnings per share 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 2009 test is under way, and the company expects it will be completed by mid-March. 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, 2009. 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 2009 results. The call, which will be simultaneously webcast, will begin at 8:30 AM Eastern Time / 5:30 AM Pacific Time on Wednesday, February 3, 2010.

To access the Ness Technologies fourth quarter and full year 2009 earnings conference call, participants in North America should dial 1-800-399-0427 and international participants should dial +1-973-200-3375. 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; system integration, application development and 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 7,800 employees, Ness maintains operations in 18 countries, and partners with numerous software and hardware vendors worldwide. For more information about Ness Technologies, visit http://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) a gain related to the sale of the company's Israeli SAP sales and distribution operations in the third quarter of 2008, net of related expenses and other charges, net of taxes; (c) a write-down of the company's Israeli severance pay fund assets in the fourth quarter of 2008, net of taxes; (d) an insurance settlement in the first quarter of 2009 related to a 2007 arbitration expense, net of related expenses, net of taxes; (e) severance expenses in the first quarter of 2009, net of taxes; (f) an earn-out in the fourth quarter of 2009 related to a prior-year acquisition; and (g) a charge in the fourth quarter of 2009 for restructuring, severance and related project costs, 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 uses these non-GAAP measures also 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.

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 16, 2009. 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.

                   NESS TECHNOLOGIES, INC. AND ITS SUBSIDIARIES
                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                   U.S. dollars in thousands (except per share data)

                                    Three months ended            Year ended
                                       December 31,              December 31,
                                        2008   2009            2008      2009
                                 (Unaudited)  (Unaudited)         (Unaudited)


    Revenues....................... $168,605  $145,907     $657,384  $547,352
    Cost of revenues................ 120,604   116,009      470,009   410,794
    Gross profit......................48,001    29,898      187,375   136,558

    Selling and marketing.............15,184    14,781       55,806    49,323
    General and administrative........27,498    31,652      100,706   101,750
    Gain from sale of Israeli
    SAP sales and distribution
    operations, net.....                   -         -     (18,366)         -
    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..........42,682    46,433      138,146   145,929

    Operating income (loss)............5,319   (16,535)      49,229   (9,371)
    Financial expenses, net...........(2,026)     (884)      (5,745)  (3,404)
    Other expenses, net..................  -         -         (392)       -
    Income (loss) before taxes on
    income.............................3,293   (17,419)      43,092  (12,775)

    Taxes on income (tax benefit). .... (894)    6,024        8,147    7,633
    Net income (loss) from continuing
    operations....................... $4,187  $(23,443)     $34,945 $(20,408)

    Income (loss) from discontinued
    operations (1)...................... 141    (1,560)         514   (1,183)
    Net income (loss)................ $4,328  $(25,003)     $35,459 $(21,591)

    Basic net earnings (loss) per
    share from continuing operations.  $0.11    $(0.61)       $0.89   $(0.53)
    Diluted net earnings (loss) per
    share from continuing operations.  $0.11    $(0.61)       $0.88   $(0.53)

    Basic net earnings (loss) per
    share............................. $0.11    $(0.65)       $0.90   $(0.56)
    Diluted net earnings (loss) per
    share............................. $0.11    $(0.65)       $0.89   $(0.56)

    Weighted average number of
    shares (in thousands) used in
    computing basic net earnings
    (loss) per share..................39,429     38,436      39,321   38,598
    Weighted average number of
    shares (in thousands) used in
    computing diluted net earnings
    (loss) per share..................39,543     38,838      39,674   39,100

(1) Includes write-off of goodwill associated with discontinued operations in the three months ended December 31, 2009.

                    NESS TECHNOLOGIES, INC. AND ITS SUBSIDIARIES
                     CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                             U.S. dollars in thousands

                                   Three months ended            Year ended
                                         December 31,          December 31,
                                     2008        2009        2008      2009
    Segment Data (1) (2):         (Unaudited) (Unaudited)         (Unaudited)

    Revenues from continuing
    operations:
    Software Product Engineering  $26,111     $26,248     $97,471  $102,523
    System Integration and
    Application Development.......128,273     110,521     500,295   413,328
    Software Distribution......... 14,221       9,138      59,618    31,501
    ________________________________________________________________________

                                 $168,605    $145,907    $657,384  $547,352
    ________________________________________________________________________

    Operating income (loss)
    from continuing operations:
    Software Product Engineering.  $3,915      $3,569     $10,358   $15,388

    System Integration and
    Application Development.........2,807     (9,951)      31,142    (3,585)
    Software
    Distribution....................3,105     (4,411)      21,422    (3,483)
    Unallocated
    Expenses.......................(4,508)    (5,742)     (13,693)  (17,691)
    ________________________________________________________________________

                                   $5,319   $(16,535)     $49,229   $(9,371)
    ________________________________________________________________________

    Geographic Data (2):

    Revenues from continuing
    operations:

    Israel....................... $53,529    $45,254      228,865  $174,800

    Europe.........................64,259     49,435      222,300   174,767
    North
    America........................44,653     44,676      178,113   172,814
    Asia and the Far
    East............................6,164      6,542       28,106    24,971
    ________________________________________________________________________

                                 $168,605   $145,907     $657,384  $547,352
    ________________________________________________________________________

(1) Effective October 1, 2008, the company reorganized its reportable segments to correspond to its three primary service lines. Prior period segment data has been reclassified to reflect the current organization of the segments.

(2) All periods have been reclassified to exclude revenues and operating income (loss) from operations discontinued during the three months ended December 31, 2009. Quarterly segment data for prior periods is shown below:

                                           Three months ended
                               March 31,         June 30,       September 30,
    Segment Data:          2008      2009     2008    2009      2008     2009
                             (Unaudited)       (Unaudited)       (Unaudited)
    Revenues from
    continuing
    operations:
    Software Product
    Engineering.....    $20,529  $24,966  $24,739  $25,688   $26,092  $25,621
    System Integration
    and Application
    Development.......  122,815  101,797  124,581  102,520   124,626   98,490
    Software
    Distribution.........14,630    8,043   19,300    7,410    11,467    6,910
    _________________________________________________________________________

                       $157,974 $134,806 $168,620 $135,618  $162,185 $131,021
    _________________________________________________________________________

    Operating income
    (loss) from
    continuing
    operations:
    Software Product
    Engineering.....     $1,201   $4,114    $2,061   $4,096  $3,181   $3,609
    System Integration
    and Application
    Development.......   10,054    2,073     8,230    2,302  10,051    1,991
    Software
    Distribution............967    2,220     4,082     (510) 13,268     (782)
    Unallocated
    Expenses............ (2,246)  (5,156)   (3,316)   (3,893)(3,623)  (2,900)

                         $9,976   $3,251   $11,057    $1,995$22,877   $1,918



                            NESS TECHNOLOGIES, INC. AND ITS SUBSIDIARIES
                           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                      U.S. dollars in thousands

                                                        Year ended
                                                       December 31,
                                                    2008         2009
                                                       (Unaudited)
    Cash flows from operating activities:
    Net income
    (loss).......................................$35,459      $(21,591)
    Adjustments required to reconcile net
    income (loss) to net cash provided by
    operating activities:
    Stock-based compensation-related
    expenses.......................................3,034         4,073
    Currency fluctuation of long-term
    debt..............................................62             -
    Depreciation and
    amortization..................................18,528        20,246
    Arbitration settlement and related
    charges...................................... (9,452)            -
    Loss on sale of property
    and equipment and impairment and
    sale of cost investments...........              262            23
    Gain from sale of Israeli SAP sales
    and distribution operations,net...........   (18,366)            -
    Commissions related to the sale of
    Israeli SAP sales and distribution
    operations.....................                    -        (2,534)
    Excess tax benefits related to exercise of
    options.........................................(296)            -
    Impairment of cost
    investment.......................................304            75
    Decrease (increase) in trade receivables,
    net..........................................(13,048)       43,988
    Decrease in unbilled
    receivables................................... 6,769        12,324
    Increase in other accounts receivable
    and prepaid
    expenses......................................(1,942)       (3,188)
    Increase in
    work-in-progress.................................(84)       (3,286)
    Decrease in long-term prepaid
    expenses.......................................1,793           631
    Deferred income taxes,
    net............................................4,384         2,116
    Decrease in trade
    payables......................................(8,501)       (6,931)
    Increase in advances from customers
    and deferred
    revenues......................................10,601        13,868
    Increase in other long-term
    liabilities....................................1,581           492
    Increase in other accounts payable and
    accrued expenses...............................1,847         3,381
    Increase (decrease) in accrued severance pay,
    net............................................  964        (3,466)
    Net cash provided by operating
    activities................................... 33,899        60,221

    Cash flows from investing activities:
    Net cash paid for acquisition of a
    consolidated subsidiary..................... (29,039)            -
    Proceeds from sale of investment at
    cost.............................................219             -
    Proceeds from sale of Israeli SAP
    sales and distribution operations,
    net........................................   14,863             -
    Additional payments in connection
    with acquisitions of subsidiaries in prior
    periods.................                      (7,627)      (18,526)
    Investment in short-term bank deposits,
    net.......................................... (6,584)      (19,257)
    Proceeds from sale of property and
    equipment....................................... 346           819
    Purchase of property and equipment and
    capitalization of software developed
    for internal use.                            (15,995)      (12,287)
    Net cash used in investing
    activities...................................(43,817)      (49,251)

    Cash flows from financing activities:
    Exercise of
    options........................................4,317             -
    Repurchase of
    shares........................................(2,389)       (2,299)
    Acquired subsidiary's dividend
    to its former shareholder....................(10,048)       (1,430)
    Excess tax benefits related to exercise of
    options......................................... 296             -
    Short-term bank loans and credit,
    net...........................................14,278       (17,480)
    Proceeds from long-term
    debt..........................................25,483        15,085
    Principal payments of long-term
    debt..........................................(3,134)      (12,254)
    Net cash provided by (used in) financing
    activities....................................28,803       (18,378)

    Effect of exchange rate changes on cash
    and cash equivalents.........................(11,323)          100
    Increase (decrease) in cash and cash
    equivalents....................................7,562        (7,308)
    Cash and cash equivalents at the
    beginning of the period.......................43,097        50,659
    Cash and cash equivalents at the
    end of the period............................$50,659       $43,351



          NESS TECHNOLOGIES, INC. AND ITS SUBSIDIARIES
              CONDENSED CONSOLIDATED BALANCE SHEETS
                    U.S. dollars in thousands

                                December   December
                                31, 2008   31, 2009
                                    (Unaudited)
    CURRENT ASSETS:
    Cash and cash
    equivalents..................$50,659    $43,351
    Restricted
    cash...........................2,331      2,613
    Short-term bank
    deposits...................    5,703     25,939
    Trade receivables, net of
    allowance for doubtful
    accounts.................... 200,118    155,175
    Unbilled
    receivables.................  35,585     28,414
    Other accounts receivable
    and prepaid expenses......... 31,344     36,442
    Work in
    progress.......................1,532      5,710
    Total current
    assets.......................327,272    297,644

    LONG-TERM ASSETS:
    Long-term prepaid expenses
    and other
    assets.........................6,806      6,294
    Unbilled
    receivables................... 9,220      4,654
    Deferred income taxes,
    net........................... 8,356      6,174
    Severance pay
    fund..........................46,478     53,145
    Property and equipment,
    net.......................... 36,733     37,196
    Intangible assets,
    net...........................22,073     14,005

    Goodwill.................... 290,055    299,557
    Total long-term
    assets.......................419,721    421,025

    Total
    assets..................... $746,993   $718,669

    CURRENT LIABILITIES:
    Short-term bank
    credit.......................$18,072       $500
    Current maturities of
    long-term debt.................7,089     21,332
    Trade
    payables......................47,072     36,897
    Advances from customers and
    deferred revenues.............33,280     47,023
    Other accounts payable and
    accrued expenses.............124,697    112,312
    Total current
    liabilities..................230,210    218,064

    LONG-TERM LIABILITIES:
    Long-term debt, net of
    current maturities............60,973     50,836
    Other long-term
    liabilities....................6,444      6,689
    Deferred income
    taxes......................... 2,673      3,057
    Accrued severance
    pay...........................55,014     58,035
    Total long-term
    liabilities......            125,104    118,617

    Total stockholders'
    equity.......................391,679    381,988

    Total liabilities and
    stockholders'equity.........$746,993   $718,669



    NESS TECHNOLOGIES, INC. AND ITS SUBSIDIARIES
    RECONCILIATION OF SUPPLEMENTAL NON-GAAP FINANCIAL INFORMATION
    EXCLUDING STOCK-BASED COMPENSATION; AMORTIZATION OF INTANGIBLE ASSETS;
    GAIN FROM SALE OF ISRAELI SAP SALES AND DISTRIBUTION OPERATIONS, NET OF
    RELATED EXPENSES AND OTHER CHARGES; WRITE-DOWN OF ISRAELI SEVERANCE PAY
    FUND ASSETS;INSURANCE SETTLEMENT RELATED TO 2007 ARBITRATION EXPENSE, NET
    OF RELATED EXPENSES; SEVERANCE EXPENSES; EARN-OUT RELATED TO PRIOR-YEAR
    ACQUISITION; RESTRUCTURING AND RELATED PROJECT COSTS; ALL NET OF TAXES

               U.S. dollars in thousands (except per share data)

                                    Three months ended          Year ended

                                       December 31,             December 31,
                                    2008       2009          2008        2009
                             (Unaudited) (Unaudited)  (Unaudited) (Unaudited)

    GAAP
    revenues..................  $168,605   $145,907      $657,384    $547,352
    Write-off of trade
    receivables
    resulting from sale of
     Israeli
    SAP sales and
    distribution
    operations......................   -         -          3,155           -
    Non-GAAP
    revenues................... $168,605  $145,907       $660,539    $547,352

    GAAP gross
    profit...................... $48,001   $29,898       $187,375    $136,558
    Stock-based
    compensation......................64        20            273         203
    Amortization of intangible
    assets...........................438       210          1,105         791
    Write-off of trade
    receivables resulting from
    sale of Israeli SAP sales and
    distribution
    operations........................ -         -          3,155           -
    Severance
    expenses...........................-       380              -       1,346
    Restructuring and related
    project
    costs..............................-    11,058              -      11,058
    Non-GAAP gross
    profit.......................$48,503   $41,566       $191,908    $149,956

    GAAP operating income
    (loss)........................$5,319  $(16,535)       $49,229    $(9,371)
    Stock-based
    compensation.....................807     1,454          3,034       4,073
    Amortization of intangible
    assets.........................2,941     2,259          7,263       8,499
    Earn-out related to
    prior-year
    acquisition.................       -     1,032              -       1,032
    Gain from sale of Israeli
    SAP sales and distribution
    operations,
    net...............                 -        -         (18,366)          -
    Costs and expenses resulting
    from sale of Israeli SAP sales
    and distribution
    operations and other
    charges............................-        -           5,631           -
    Write-down of Israeli
    severance pay fund
    assets.........................2,929        -           2,929           -
    Insurance settlement related
    to 2007 arbitration expense,
     net of related
    expenses.......................    -        -               -     (2,610)
    Severance
    expenses...........................-    5,513               -       8,159
    Restructuring and related
    project
    costs..............................-   12,003               -      12,003
    Non-GAAP operating
    income.......................$11,996   $5,726         $49,720     $21,785

    GAAP operating margin
    (loss)..........................3.2%   -11.3%             7.5%      -1.7%
    Non-GAAP operating
    margin..........................7.1%     3.9%             7.5%       4.0%

    GAAP net income (loss) from
    continuing
    operations....................$4,187 $(23,443)         $34,945  $(20,408)
    Stock-based compensation;
    amortization of intangible
    assets; gain from sale of
    Israeli SAP sales and
    distribution operations,
    net of related expenses and
    other charges; insurance
    settlement in respect of
    2007 arbitration expense,
    net of related expenses;
    severance expenses; earn-out
    related to prior-year
    acquisition; restructuring
    and related project costs;
    all net of
    taxes......................... 5,018   26,833           1,773      34,055
    Non-GAAP net income from
    continuing
    operations................... $9,205   $3,390         $36,718     $13,647

    GAAP diluted net earnings
    (loss) per share from
    continuing operations.........$0.11   $(0.61)           $0.88     $(0.53)
    Stock-based compensation;
    amortization of intangible
    assets; gain from sale of
    Israeli SAP sales and
    distribution operations,
    net of related expenses and
    other charges; insurance
    settlement in respect of
    2007 arbitration expense,
    net of related expenses;
    severance expenses;
    earn-out related to
    prior-year
    acquisition; restructuring
    and related project costs;
    all net of
    taxes......................... 0.12      0.70           0.05         0.88
    Non-GAAP diluted net
    earnings per share from
    continuing operations.........$0.23     $0.09          $0.93        $0.35

[1] See "Use of Non-GAAP Financial Information" below for more information regarding the company's use of non-GAAP financial measures.

    Media Contact:

    David Kanaan
    Intl: +972-54-425-5307
    Email: [email protected]

    Investor Relations Contact:
    Drew Wright
    USA: +1-201-488-3262
    Email: [email protected]


SOURCE Ness Technologies Inc

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