Ness Technologies, (NSTCC)

Q2 2010 Earnings Call

May 28, 2010 08:30 am ET


Drew Wright - Senior Vice President Financial Operations and Investor Relations

Sachi Gerlitz - President and CEO

Ofer Segev - Executive Vice President and CFO


[Vhi Shah] – Cowen & Company

James Friedman – Susquehanna Financial Group

Matt McCormick – BGB Securities

Stephen [Gordaro] – Oppenheimer & Co.



Good morning, my name is Lindsay and I will be your conference operator today. At this time I’d like to welcome everyone to the Ness Technologies Second Quarter Earnings Conference C all. All lines have been placed on mute to prevent any background noise. After the speakers remarks there will be a question and answer session. (Operator Instructions).

Thank you, I will now turn the conference over to Drew Wright senior Vice President of Financial Operations and Investor Relations. Please go ahead.

Drew Wright

Thank you, Lindsay. Good morning everybody and welcome to the Ness Technologies second quarter 2010 earnings call. In today’s call we will review our results for the quarter ended June 30 th 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. Forwarding-looking statements are often preceded by words such as beliefs, expects, may, anticipates, plans, intends, assumes, will or similar expressions.

Forward-looking statements are based on management’s current expectations and beliefs about future events, as of the date of this conference call and involves certain risks and uncertainties. As with any projection or forecast they are they are inherently susceptible to uncertainty and changes in circumstances and Ness’s actual results could differ material from those anticipated in its 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’s annual report on form 10-K filed with the Securities and Exchange Commission on March 15 th 2010.

Ness is under no obligation and expressly declines 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 2 hours after the call is over at

Also available on our investor relations website, are today’s press release and a copy of the related 8-K filing.

Today’s call will be lead by Sachi Gerlitz, President and CEO; and Ofer Segev, Executive Vice President and CFO. Sachi over to you.

Sachi Gerlitz

Good day everyone, thanks for joining us on the call. As you know we started the New Year well in Q1. I’m pleased to say if we continue this momentum nicely in Q2, growing revenue 10% year-over-year and 5% sequentially and extending operating margins sequentially.

We grew revenues in each segment as well as overall. We continue with wins and booking in the quarter not yet fully normal rate, but in line with continual gradual improvement of the economy.

Included were two new [negadin’s] in the public and utilities sector in Central and Eastern Europe , a large defense deal and a number of medium sized deals in the U.S., and in Israel.

The business environment in which we operate in Israel is feeling pretty good, in the U.S., it’s continuing to recover steadily and in the CEE region it is just starting to slowly hitch up after very long and deeper sessions.

We are seeing resumption of buying in many sectors with some fixed resulting from economic news and political changes. Our integration of Gilon Business Insight, the business intelligence provider whose acquisition we announced in Q1is going well following the deal during the quarter.

We are identifying numerous potentials synergies with our other business unit and are working hard to trap them. We are continuing to focus on maximizing organization efficiency even while resuming growth. Ofer, would you review the Q2 numbers please.

Ofer Segev

Thanks Sachi, hello everyone. As usual I’ll be discussing both GAAP and non-GAAP numbers. The reason we disclose non-GAAP numbers is to help you understand the underlying performance of Ness. Then on P&L metrics exclude one-time gains one-time expenses in recurring non-cash items.

Today’s earnings press release contains a non-GAAP reconciliation table that details the items excluded from out non-GAAP results for the current and comparable period.

Revenues for the second quarter were strong $140 million up 10% year-over-year and 5% sequentially.

European currencies accounts for about 25% of our revenues and the weakening of these currencies against the dollar during Q2 reduced our reported dollar revenue by about $3 million.

Backlog at the end of the quarter was $658 million up 3% year-over-year and 2% sequentially in costs and currency. In dollar terms backlog increased 1% year-over-year and declined 1% sequentially due to the weakening of the European currencies is non-dollar backlog was re-measured into dollars.

Backlog for the rolling 12 months was 51% of total backlog at June 30 a little below our historical norm of 55% to 60%. And recent bookings were [indiscernible] [006:06].

Quarterly revenues like customer geographic region where Israel 37%, North America 35%, Europe 27% and the rest of the world 1%.

Gross profit was $37.4 million for the quarter of 26.8% of revenue essentially flat 27.1% in the second quarter of ’09.

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