BPO Management Services Announces Financial Results for First Quarter 2009

Revenue Increases 41% in First Quarter 2009

Healthaxis Integration Proceeds According to Plan

ANAHEIM, Calif., May 18 /PRNewswire-FirstCall/ -- BPO Management Services,
Inc., (OTC Bulletin Board: HAXS), a full-service healthcare and business
process outsourcing company focused on serving the middle-market, today
announced its financial results for the first quarter 2009, ended March 31,
2009. The results reflect the merger of BPO Management Services and
Healthaxis, Inc., which was completed on December 30, 2008.

Operational Highlights

-- The Company increased total revenue by 41.2% to $10.3 million,
inclusive
of the new contribution of $3.6 million from its merger with
Healthaxis,
compared to $7.3 million for the first quarter last year, a period
which
included no contribution from Healthaxis.
-- The sequential revenue growth of 45% compared to the fourth quarter of
last year exceeded the Company's guidance of 35% sequential growth,
largely due to improved performance from its Healthcare segment.
-- As revenue grows and ongoing Company integration activities take hold,
BPOMS continues to drive down SG&A as a percentage of revenue.
SG&A expenses for the first quarter of 2009 were 35.5% of total
revenue, as compared to 59.5% for the first quarter last year. This is
an important trend that is expected to continue based on the
Company's strategy to grow its top line, while integrating
consolidated Company SG&A. Management believes that this trend
demonstrates BPOMS operating leverage as incremental revenue drives
increasingly higher margins going forward.
-- The Company has increased its recurring revenue content to
approximately
80% and continues to drive towards its goal of 90%-plus of revenues
derived from recurring revenue contracts.
-- The Company continues to accelerate business integration activities as
a
result of its recent merger with Healthaxis. As part of this important
effort the Company recently announced that John Carradine, former CEO
of
Healthaxis, has been promoted to Chief Operating Officer of BPOMS,
where
he will oversee all Company operations as well direct the ongoing
integration/cost reduction activity. In addition, the Company has
promoted Ron Herbert, former CFO of Healthaxis, to Chief Financial
Officer of BPOMS, in conjunction with its efforts to consolidate all
financial and related back-office functions into its Dallas operation
to
reduce costs and enhance Company financial management. As an important
part of this consolidation effort the Company has taken action on
approximately $2 million in annualized cost reductions that will be
implemented by the end of the second quarter. Management believes that
this ongoing consolidation activity, in conjunction with continued
top-line growth will drive profitability in the coming quarters.

-- The Company continues to experience positive sales traction with
several
significant opportunities moving forward towards a successful close.
In
addition, as expected, the Company also renewed several existing
customer contracts during this quarter, including a five year renewal
through the end of 2015 of one of the largest Healthcare Division
customers.

Patrick Dolan, chief executive officer of BPOMS, said, "BPOMS remains
strategically aligned with the ongoing cost-reduction trend for middle market
enterprises. In addition to improving overall business results we are actively
pursuing several strategic alternatives in order to strengthen our balance
sheet and provide the necessary working capital to fully accelerate our growth
as we continue to drive towards critical mass. Our pipeline remains robust,
and our unique ability to reduce the cost of ownership, improve operational
efficiencies and enhance the quality of our customer's technology investment
continues to resonate within the marketplace."

"We have now successfully built a scalable, robust BPO delivery platform
providing key vertical solutions in healthcare, financial services and
information technology," Mr. Dolan continued. "Most importantly, these
solutions are anchored by industry recognized IP, and delivered under
recurring revenue contracts from a high availability, on-demand Tier 1
infrastructure with considerable excess capacity, in conjunction with a
multi-shore delivery capability. As we continue to grow our business, we
expect that this capability will drive increasingly better operating margins
for both our customers and ourselves."

First Quarter 2009 Financial Results
For the first quarter, total revenue increased 41.2% to $10.3 million from
$7.3 million for the same period last year. The change was due to inclusion of
the Healthcare business segment, which was acquired through the Healthaxis,
Inc. merger on December 30, 2008, offset by a small decrease in our base
business primarily the result of the reduction in value of the Canadian dollar
relative to the U.S. dollar and the strategic shift in our HRO business
towards a Software as a Service ('SaaS') model as compared to a traditional
one-time license approach. In fact, without the decline in the Canadian dollar
our base business would have shown a net improvement. Total operating expenses
for the quarter were $11.6 million, an increase of 29.5% compared to total
operating expenses of $8.9 million during the first quarter last year.
Included in the operating expenses was a $3.1 million increase in cost of
services and $339,000 increase for depreciation and amortization, primarily
related to the merger with Healthaxis offset by the decrease in stock-based
compensation expense, which became fully vested and completely expensed as of
December 31, 2008, a result of the reverse merger with Healthaxis on December
30, 2008. The loss from operations for the quarter decreased to $1.3 from $1.7
million in the prior-year first quarter despite an increase in depreciation
and amortization expense of $339,000. The net loss for the quarter was $1.5
million compared to a net loss of $1.7 million in the first quarter last year.

Mr. Dolan continued, "As of March 31, 2009, approximately 80% of our revenues
were derived from recurring revenue contracts and we continue to focus on
building out our backlog of future business to be delivered in the years to
come. Management remains confident that as we continue our ongoing
integration/cost reduction efforts, in conjunction with growing our recurring
revenue base that we are well-positioned to accelerate growth and achieve
positive cash flow from operations in fairly short order."

As of March 31, 2009, BPOMS' balance sheet showed $1.7 million in cash
compared to $2.8 million at December 31, 2008. In order to strengthen its
balance sheet, the Company is considering raising capital by issuing its
securities and/or debt or by way of a strategic merger.

About BPO Management Services, Inc.
BPO Management Services (BPOMS) is a healthcare and business process
outsourcing (BPO) service provider that offers a diversified range of
on-demand services, including claims processing, human resources, information
technology, and enterprise content management, to support the back-office
business functions of the middle-market on an outsourced basis. BPOMS supports
middle-market businesses new to the BPO market, established businesses that
already outsource, and businesses seeking to maximize return-on-investment
from their in-house workforce. For more information, please visit
http://www.bpoms.com.

Forward-Looking Statements
Certain statements in this press release that are not historical facts are
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such statements may be identified by the use of
words such as "anticipate," "believe," "expect," "future," "may," "will,"
"would," "should," "plan," "projected," "intend," and similar expressions.
Such forward-looking statements, involve known and unknown risks,
uncertainties and other factors that may cause the actual results, performance
or achievements of BPO Management Services, Inc. (the "Company") to be
materially different from those expressed or implied by such forward-looking
statements. The Company's future operating results are dependent upon many
factors, including but not limited to: (i) the Company's ability to obtain
sufficient capital or a strategic business arrangement to fund its current
operational or expansion plans; (ii) the Company's ability to build and
maintain the management and human resources and infrastructure necessary to
support the anticipated growth of its business; (iii) competitive factors and
developments beyond the Company's control; and (iv) other risk factors
discussed in the Company's periodic filings with the Securities and Exchange
Commission, which are available for review at http://www.sec.gov under "Search
for Company Filings."

Company Contact:
BPO Management Services, Inc.
Patrick Dolan, Chairman & CEO
patrick.dolan@bpoms.com

Investor contact:
Hayden IR
Brett Maas, 646-536-7331
brett@haydenir.com

Tables to Follow

BPO MANAGEMENT SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2009 AND DECEMBER 31, 2008
(UNAUDITED)

2009 2008
ASSETS
Current assets:
Cash and cash equivalents $1,725,513 $2,784,155
Accounts receivable, net of allowance for
doubtful accounts of $371,279 and
$530,050, respectively 6,428,279 7,425,805
Inventory 233,125 181,968
Prepaid expenses and other current assets 1,174,593 1,304,910
Total current assets 9,561,510 11,696,838

Equipment, net 8,404,691 7,735,777
Goodwill 4,796,850 4,856,171
Intangible assets, net 5,204,646 5,500,829
Other assets 979,139 959,391
$28,946,836 $30,749,006
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of lines of credit and
long-term debt, net of discount of
$2,675 and $2,733, respectively $4,110,964 $3,662,876
Current portion of capital lease obligations 496,234 394,765
Accounts payable 5,947,561 5,583,598
Accrued expenses 3,357,071 3,428,573
Accrued interest-related party 20,587 -
Accrued dividend payable 1,369,331 1,369,331
Accrued dividend payable-related party 651,281 651,281
Amount due former shareholders of
acquired companies 400,000 1,000,000
Deferred revenues 2,857,340 2,957,139
Related party notes payable 830,246 930,246
Income taxes payable 162,873 155,073
Other current liabilities 353,214 380,362
Total current liabilities 20,556,702 20,513,244

Lines of credit and long-term debt, net of
current portion and net of discount of
$446 and $1,139, respectively 2,110 399,256
Capital lease obligations, net of current portion 811,479 690,278
Other long-term liabilities 843,415 862,520
Total liabilities 22,213,706 22,465,298

Commitments and contingencies

Stockholders' equity
Convertible preferred stock, Series B,
par value $1.00; authorized 21,105,000
shares; 21,103,955 shares issued and
outstanding 21,103,955 21,103,955
Common stock, par value $0.10; authorized
1,900,000,000 shares; 15,165,586 shares
issued and outstanding 1,516,559 1,516,559
Additional paid-in capital 14,687,206 14,687,206
Accumulated deficit (30,182,000) (28,706,729)
Accumulated other comprehensive income,
foreign currency translation adjustments (392,590) (317,283)
Total stockholders' equity 6,733,130 8,283,708
$28,946,836 $30,749,006

See accompanying notes to condensed consolidated financial statements.

BPO MANAGEMENT SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008
(UNAUDITED)

2009 2008

Revenues:
Enterprise content management $3,606,526 $4,024,352
IT outsourcing 2,750,533 2,877,624
Healthcare 3,622,428 -
Human resource outsourcing 303,186 380,609

Total revenues 10,282,673 7,282,585

Operating expenses:
Cost of services provided 6,696,857 3,543,352
Selling, general and administrative 3,624,767 4,333,817
Research and development 141,931 69,702
Depreciation and amortization 1,123,877 784,429
Share-based compensation - 207,092

Total operating expenses 11,587,432 8,938,392

Loss from operations (1,304,759) (1,655,807)

Interest expense:
Related parties 20,587 26,852
Other, net 142,125 44,961

Total interest expense 162,712 71,813

Net loss before income tax expense (1,467,471) (1,727,620)

Income tax expense 7,800 -

Net loss (1,475,271) (1,727,620)

Foreign currency translation loss (75,307) (197,004)

Comprehensive loss $(1,550,578) $(1,924,624)

Basic and diluted net loss per share $(0.10) $(0.14)

Basic and diluted weighted average common
shares outstanding 15,165,586 12,247,121

See accompanying notes to condensed consolidated financial statements.

SOURCE BPO Management Services, Inc.

Patrick Dolan, Chairman & CEO of BPO Management Services, Inc.,
patrick.dolan@bpoms.com; or Investor contact, Brett Maas of Hayden IR,
+1-646-536-7331, brett@haydenir.com, for BPO Management Services, Inc.