Ness Technologies Inc. Q1 2010 Earnings Call Transcript

Ness Technologies Inc. Q1 2010 Earnings Call Transcript
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Ness Technologies Inc. (NSTC)

Q1 2010 Earnings Call

April 28, 2010 8:30 AM ET

Executives

Drew Wright – Senior Vice President, Investor Relations

Sachi Gerlitz – President and CEO

Ofer Segev – Executive Vice President and CFO

Analysts

Moshe Katri – Cowen & Company

Manish Hemrajani – Oppenheimer

James Friedman – Susquehanna Financial Group

Presentation

Operator

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Good morning. My name is Beth, and I will be your conference operator today. At this time, I would like to welcome everyone to the Ness Technologies First Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks there will be a question-and-answer session. (Operator Instructions)

Thank you. Mr. Drew Wright, Senior Vice President, Investor Relations. You may begin your conference.

Drew Wright

Thank you, Beth. Good morning. And welcome to the Ness Technologies first quarter 2010 earnings call. In our call today, we'll review the results for the quarter ended March 31, 2010.

First, I'll read the Safe Harbor statement. Except for historical matters discussed herein, the matters discussed on today's conference call include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are often preceded by words such as believes, expects, may, anticipates, plans, intends, assumes, will or similar expressions.

Forward-looking statements are based on management's current expectations and beliefs about current -- about future events as of the date of this conference call, and involve certain risks and uncertainties.

As with any projection or forecast, they are inherently susceptible to uncertainty and changes in circumstances, and Ness's 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 recent results or those projected in forward-looking statements are 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.

The audio from today's call is being webcast live on the Internet. A replay of the call will be available online at the Ness Technologies website about two hours after the call is over at investor.ness.com. Also available on the Ness Investor Relations website are today's press release and the related 8-K filing.

Our call today will be led by Sachi Gerlitz, President and CEO; and Ofer Segev, Executive Vice President and CFO. Sachi, would you please start us off.

Sachi Gerlitz

Thank you, Drew. Good day, everyone. Thanks for joining us on the call. We started the new year on a good fortune, as we continued the positive momentum we established last quarter. We saw solid booking growth and return to a year-over-year revenue growth at the corporate level and in our segment.

We won many significant bill in the past three months, number in each of our major geographies, including several large strategic deal in Central and Eastern Europe and in Israel.

The economy has turned the corner in the U.S. and in Israel. In the CEE region, it appears that the defense has stopped, which is encouraging. We recently announced the acquisition of Gilon Business Insight, the largest provider of business intelligence services in Israel, service strengthening our position as a leading provider of enterprise solution. The acquisition is expected to close in May.

As we saw in our earnings press release this morning, we’re in the process of selling our software distribution operation in Europe and our APAC system integration operations. This is in accordance with strategy to enhance margin expansion by focusing on our core higher margin service offering in our core geographic region.

These efforts are supportive by shutting of smaller and non-strategic operations and projects. The acquisition and divestiture are -- we announced with better align with our growth strategy and support our plan for 2010.

Ofer, would you please take us through the numbers.

Ofer Segev

Thanks Sachi. Hello, everyone. First, let me remind you and to help understand the underlying performance of Ness. We disclose non-GAAP P&L metrics that exclude one-time gains, one-time expenses, and recurring non-cash items.

Today's earnings press release contains a non-GAAP reconciliation table that details these calculations. The items excluded from our non-GAAP results are identified in the press release for both the current and comparable periods.

Please also note that we have reclassified two operations as discontinued operations. First, our Asia Pacific system integration business, which we have signed an agreement to sell, and second, our software distribution business in Europe, which we are in the process of selling, because it’s no longer strategic to our long-term business goal. Both were reclassified as discontinued operations and we have reclassified prior periods results accordingly. Our discussion today is based strictly on continued operation.

Let’s look at revenue. For the first quarter were $133 million, up 6% year-over-year. Backlog at the end of the quarter was $663 million, up 4% year-over-year, and up 6% sequentially. We are very encouraged by the continued growth in our backlog.

Our book-to-bill ratio for Q1, including our recent large multi-year booking was $1.25, exceeding our projection. Backlog for the rolling 12-month was [52%] of total backlog at March 31st, slightly below our normal range of 55% to 60%, as a consequence of our recent multi-year bookings.

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