BluePhoenix Solutions Reports Third Quarter Results

http://www.businesswire.com/news/home/20091112005391/en

Q3/09 Revenues of $18.7 million, Non-GAAP EPS of $0.05

HERZLIYA, Israel--(Business Wire)--
BluePhoenix Solutions (NASDAQ:BPHX), the leader in value-driven legacy
modernization, today announced financial results for the second quarter.
Revenues for the third quarter of 2009 were $18.7 million, a decrease of 2% from
$19.1 million in the previous quarter and 15% from $22.0 million in the third
quarter of 2008.

Operating income on a non-GAAP basis for the third quarter of 2009 was $1.5
million, compared to $1.3 million in the previous quarter and compared to a net
loss of $170 thousand for the third quarter of 2008.

Net income on a non-GAAP basis for the third quarter of 2009 was $1.0 million,
or $0.05 per diluted share, compared to $1.2 million or $0.06 per diluted share
in the previous quarter, and compared to a net loss of $1.4 million or ($0.06)
per share for the third quarter of 2008.

On a GAAP basis for the third quarter of 2009, the net loss was $2.7 million or
$(0.13) per share, compared to a net loss of $1.9 million or $(0.09) per share
in the previous quarter, and compared to a net loss of $6.8 million or ($0.32)
per share in the third quarter of 2008. (Please refer to the accompanying
financial table for reconciliation of GAAP financial information to non-GAAP).

"In the third quarter we started to see signs of stabilization of the business
and achieved our operational and financial targets for the quarter," commented
Yaron Tchwella, CEO of BluePhoenix Solutions. "A growing backlog and pipeline
gives us increased confidence that the business is back on the right track and
we expect that we will resume growth going forward."

Non-GAAP Results (in thousands US$) Q3/2009 Q2/2009 Q3/2008
Sales 18,688 19,050 22,029
Operating profit (loss) 1,498 1,326 (170)
Net Income (loss) 1,012 1,193 (1,354)
Earnings per share, diluted $0.05 $0.06 ($0.06)

GAAP Results (in thousands US$) Q3/2009 Q2/2009 Q3/2008
Sales 18,688 19,050 22,029
Operating (loss) (1,761) (1,649) (5,206)
Net (loss) from continued operations (2,679) (1,911) (6,248)
Net (loss) (2,679) (1,911) (6,839)
Earnings per share, diluted ($0.13) ($0.09) ($0.32)

Non-GAAP financial measures

The release includes non-GAAP diluted earnings per share and other non-GAAP
financial measures, non-GAAP cost of revenues, non-GAAP research and
development, non-GAAP selling, general and administrative, non-GAAP operating
income, non-GAAP net income and non-GAAP net income (loss) per share. These
non-GAAP measures exclude the following items:

* Amortization of purchased intangible assets;
* Equity-based compensation expense
* Expenses related to cost saving planand one time charges
* Non-cash derivatives expenses

The presentation of these non-GAAP financial measures should be considered in
addition to BluePhoenix' GAAP results and is not intended to be considered in
isolation or as a substitute for the financial information prepared and
presented in accordance with GAAP. BluePhoenix' management believes that these
non-GAAP financial measures provide meaningful supplemental information
regarding its performance by excluding certain charges, gains and tax effects
that may not be indicative of BluePhoenix' core business operating results.
BluePhoenix believes that both management and investors benefit from referring
to these non-GAAP financial measures in assessing BluePhoenix' performance.
These non-GAAP financial measures also facilitate comparisons to BluePhoenix'
historical performance and its competitors' operating results. BluePhoenix
includes these non-GAAP financial measures because management believes they are
useful to investors in allowing for greater transparency with respect to
supplemental information used by management in its financial and operational
decision-making. Non-GAAP measures are reconciled to comparable GAAP measures in
the table entitled "Reconciliation of GAAP to Non-GAAP."

Conference Call

A conference call discussing BluePhoenix` results for the third quarter of 2009,
will take place today, November 12, 2009 at 8:30 a.m. (ET). Investors are
invited to join the Company`s teleconference by calling (877) 941-4775 or
international +1-480-629-9761 at 8:25 a.m. This call is being web cast by ViaVid
Broadcasting and can be accessed at BluePhoenix`s website at
http://www.bphx.com.

About BluePhoenix Solutions

BluePhoenix Solutions (NASDAQ:BPHX) is the leading provider of value-driven
legacy IT modernization solutions. The BluePhoenix portfolio includes a
comprehensive suite of tools and services from global IT asset assessment and
impact analysis to automated database and application migration, rehosting, and
renewal. Leveraging over 20 years of best-practice domain expertise, BluePhoenix
works closely with its customers to ascertain which assets should be migrated,
redeveloped, or wrapped for reuse as services or business processes, to protect
and increase the value of their business applications and legacy systems with
minimized risk and downtime.

BluePhoenix provides modernization solutions to companies from diverse
industries and vertical markets such as automotive, banking and financial
services, insurance, manufacturing, and retail. Among its prestigious customers
are: Aflac, Capita Group, CareFirst, Citigroup, Danish Commerce and Companies
Agency, Desjardins, Los Angeles County Employees Retirement Association,
Rabobank, Rural Servicios Informaticos, SDC Udvikling, TEMENOS, Toyota, and
Volvofinans. BluePhoenix has 14 offices in the USA, UK, Denmark, Germany, Italy,
The Netherlands, Romania, Russia, Cyprus, South Korea, Australia, and Israel.

Cautionary Statement Regarding Forward-Looking Statements

Certain statements contained in this release may be deemed forward-looking
statements within the meaning of the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995 and other Federal Securities laws. You
can identify these and other forward-looking statements by the use of words such
as "may," "will," "plans," "believes," "estimates," "expects", "predicts",
"intends," the negative of such terms, or other comparable terminology. Because
such statements deal with future events, plans, projections, or future
performance of the Company, they are subject to various risks and uncertainties
that could cause actual results to differ materially from the Company`s current
expectations. These risks and uncertainties include but are not limited to: the
ability to successfully defend claims brought against the Company; the effects
of the global economic and financial crisis; market demand for the Company`s
products; successful implementation of the Company`s products; changes in the
competitive landscape, including new competitors or the impact of competitive
pricing and products; the ability to manage the Company`s growth; the ability to
recruit and retain additional software personnel; the ability to develop new
business lines; and such other risks and uncertainties as identified in
BluePhoenix` most recent Annual Report on Form 20-F and other reports filed by
it with the SEC. Except as otherwise required by law, BluePhoenix undertakes no
obligation to publicly release any revisions to these forward-looking statements
to reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.

This press release is also available at www.bphx.com. All names and trademarks
are their owners` property.

BluePhoenix Solutions Ltd.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)

Three months ended Nine months ended
September 30, September 30,
2009 2008 2009 2008
Unaudited Unaudited

Revenues $18,688 $22,029 $58,239 $69,093

Cost of revenues 10,309 12,375 31,849 33,997
Gross profit 8,379 9,654 26,390 35,096

Research and development costs, net 2,476 4,498 8,708 14,100

Selling, general and administrative expenses 7,664 10,362 21,663 25,182

Total operating expenses 10,140 14,860 30,371 39,282

Operating loss (1,761 ) (5,206 ) (3,981 ) (4,186 )

Financial expenses, net (803 ) (1,042 ) (1,997 ) (1,038 )

Other income - - - 273

Loss before taxes (2,564 ) (6,248 ) (5,978 ) (4,951 )

Taxes on income (benefit) (99 ) - 11 (330 )

Net loss from continued operation (2,465 ) (6,248 ) (5,989 ) (4,621 )

Net loss from discontinued operation - 449 - 9,021
Net loss (2,465 ) (6,697 ) (5,989 ) (13,642 )

Net income attributable to noncontrolling interests 214 142 441 255

Net loss attributable to BluePhoenix ($2,679 ) ($6,839 ) ($6,430 ) ($13,897 )

Net loss per share:
Basic ($0.13 ) ($0.32 ) ($0.31 ) ($0.66 )
Diluted ($0.13 ) ($0.32 ) ($0.31 ) ($0.66 )

Shares used in per share calculation:
Basic 21,118 21,368 20,965 21,183

Diluted 21,118 21,368 20,965 21,183

UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP RESULTS
(In thousands, except per share data)

Three months ended Nine months ended
September 30, September 30,
2009 2008 2009 2008
Unaudited Unaudited

GAAP Gross Profit $8,379 $9,654 $26,390 $35,096

Amortization of intangible assets 1,862 2,160 6,071 6,473
Expenses related to cost saving plan - - 202 -
Non-GAAP gross profit $10,241 $11,814 $32,663 $41,569

GAAP operating loss ($1,761 ) ($5,206 ) ($3,981 ) ($4,186 )

Amortization of intangible assets 1,862 2,160 6,071 6,473
Stock-based compensations 496 537 1,604 2,146
Expenses related to cost saving planand one time charges 901 2,339 1,746 2,339
Non-GAAP operating income (loss) $1,498 ($170 ) $5,440 $6,772

GAAP Net loss attributable to BluePhoenix ($2,679 ) ($6,839 ) ($6,430 ) ($13,897 )

Net loss from discontinued operation - 449 - 9,021
Amortization of intangible assets 1,862 2,160 6,071 6,473
Stock-based compensations 496 537 1,604 2,146
Expenses related to cost saving planand one time charges 901 2,339 1,746 2,339
Non-cash financial and other expenses 432 - 585 -
Non-GAAP Net income (loss) $1,012 ($1,354 ) $3,576 $6,082

Shares used in diluted earnings per share calculation 21,337 21,368 21,045 22,017

Non - GAAP Diluted Earning (loss) per share $0.05 ($0.06 ) $0.17 $0.28

BluePhoenix Solutions Ltd.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)

September 30, December 31,
2009 *2008
Unaudited
ASSETS

Current Assets:

Cash and cash equivalents $23,812 $30,308
Marketable securities 224 423
Trade accounts receivable 26,111 28,232
Other current assets 3,545 3,217

Total Current Assets 53,692 62,180

Non-Current Assets:

Investment in affiliated company 157 157
Property and equipment, net 2,044 2,493
Goodwill 56,753 52,006
Intangible assets and other, net 17,333 23,151

Total Non-Current Assets 76,287 77,807

TOTAL ASSETS $129,979 $139,987

LIABILITIES AND EQUITY

Current Liabilities:

Short-term bank credit $3,757 $1,021
Trade accounts payable 4,974 5,133
Deferred revenues 3,871 5,541
Other current liabilities 11,107 18,125

Total Current Liabilities 23,709 29,820

Non-Current Liabilities

Accrued severance pay, net 1,442 1,797
Loans from banks 13,549 15,048

Total Non-Current Liabilities 14,991 16,845

Total Equity 91,279 93,322

TOTAL LIABILITIES AND EQUITY $129,979 $139,987

* Derived from audited 2008 balance sheet.

BluePhoenix Solutions Ltd.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

Three months ended Nine months ended
September 30, September 30,
2009 2008 2009 2008
Unaudited Unaudited
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($2,465 ) ($6,697 ) ($5,989 ) ($13,642 )
Adjustments to reconcile net loss to net cash provided by operating activities:
Loss from discontinued operation - 449 - 9,021
Depreciation and amortization 2,112 2,500 6,820 7,229
Decrease in accrued severance pay, net (99 ) (128 ) (355 ) (30 )
Stock-based and non cash compensation 496 537 1,604 2,148
Deferred income taxes, net - (278 ) (413 ) (767 )
Marketable securities (8 ) (29 ) 199 (29 )
Realized gain from available for sale Marketable securities 79 - 79 -
Decrease (increase) in trade receivables 1,369 946 2,121 (3,050 )
Decrease (increase) in other current assets (673 ) 668 (118 ) (521 )
Increase (decrease) in trade payables (904 ) 221 (122 ) 953
Increase (decrease) in other current liabilities and deferred revenues 108 1,041 (2,542 ) 565

Net cash provided by (used in) operating activities 15 (770 ) 1,284 1,877

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (98 ) (540 ) (289 ) (1,027 )
Proceeds from sale of property and equipment - 22 - 22
Additional consideration of previously acquired subsidiaries and purchase of activity (1,535 ) (1,509 ) (8,598 ) (7,252 )
Investment in newly-consolidated subsidiaries and purchase of new-activity - (58 ) - (992 )

Net cash used in investing activities (1,633 ) (2,085 ) (8,887 ) (9,249 )

CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term loans (264 ) - (775 ) (75 )
Receipt of long-term loans 2,000 16,000 2,000 16,000
Purchase of treasury shares - - (83 ) (591 )
Issuance of shares (35 ) - (35 ) -
Exercise of employee share options and warrants - - - 2,007

Net cash provided by financing activities 1,701 16,000 1,107 17,341

NET CASH INCREASE (DECREASE) FROM CONTINUED OPERATION 83 13,145 (6,496 ) 9,969
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 23,729 19,395 30,308 22,571
CASH AND CASH EQUIVALENTS AT END OF PERIOD $23,812 $32,540 $23,812 $32,540

CASH FLOWS - DISCONTINUED OPERATION:
Cash flow used in operating activity - (631 ) - (752 )
Cash flow used in investment activity - (19 ) - (64 )
NET CASH USED IN DISCONTINUED OPERATION - (650 ) - (816 )

BluePhoenix Solutions
Varda Sagiv, +972-9-9526110
Vsagiv@BPHX.com

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