BluePhoenix Solutions (NASDAQ:BPHX), the leader in value-driven legacy modernization, today announced financial results for the first quarter. Revenues for the first quarter of 2010 were $17.3 million compared to $19.5 million in the previous quarter, and compared to $20.5 million in the first quarter of 2009.

Net income on a non-GAAP basis for the first quarter of 2010 was $0.2 million or $0.01 per diluted share, compared to $1.3 million or $0.06 per diluted share in the previous quarter, and compared to $1.4 million dollar or $0.07 per diluted share in the first quarter of 2009.

On a GAAP basis for the first quarter of 2010 the net loss was $2.2 million or ($0.09) per share, compared to net a loss of $9.1 million or ($0.40) per share in the previous quarter, and compared to a net loss of $1.8 million or ($0.09) per share for the first quarter of 2009. (Please refer to the accompanying financial table for reconciliation of GAAP financial information to non-GAAP).

“While we are disappointed with the financial results of the first quarter, we have started implementing a plan that will lead us to sustainable profitable growth,” commented Arik Kilman, CEO of BluePhoenix. “This plan includes:

- Selling certain non-core, less profitable consulting businesses while maintaining the focus on higher margin legacy and knowledge modernization

- Increase emphasis on cash flow from operations through continued expense controls as well as improving contractual terms

- Focus on relationships with strategic technology and system integration partners which will result in increased backlog and revenues.”

Non-GAAP Results (in thousands US$)
 

Q1/2010
 

Q4/2009
 

Q1/2009
Sales 17,348 19,539 20,500
Operating income 944 1,733 2,614
Net Income 170 1,293 1,371
Earnings per share, diluted $ 0.01 $ 0.06 $ 0.07
 

GAAP Results (in thousands US$)
Q1/2010 Q4/2009 Q1/2009
Sales 17,348 19,539 20,500
Operating income (loss) (1,979 ) (10,622)* (573 )
Net Income (loss) (2,183 ) (9,140)* (1,840 )
Earnings per share, diluted ($0.09 ) ($0.40)* ($0.09 )
 

* Including $5,670 for impairment of goodwill

Non-GAAP financial measures

The release includes non-GAAP diluted earnings per share and other non-GAAP financial measures, non-GAAP gross profit, non-GAAP operating income, non-GAAP net income and non-GAAP diluted earnings per share. These non-GAAP measures exclude the following items:
  • Amortization of purchased intangible assets;
  • Stock-based compensation
  • One time expenses related to cost saving plan and one time charges
  • Goodwill impairment
  • Revaluation of warrants and issuance costs

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. 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 "Unaudited Reconciliation of GAAP to Non-GAAP."

Conference Call

A conference call discussing BluePhoenix’ results for the first quarter of 2010, will take place today, May 26, 2010, at 8:30 a.m. (ET). Investors are invited to join the Company’s teleconference by calling 877-941-4154 from within the United States or international +1-480-629-9751 at 8:25 a.m. The call will be webcast live by AT&T Broadcasting and can be accessed through the BluePhoenix website ( http://www.bphx.com). Recordings of the call will be made available for download via the BluePhoenix website.

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 13 offices in the USA, UK, Denmark, Germany, Italy, The Netherlands, Romania, Russia, Cyprus, 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 failure 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 failure of the Company to successfully integrate acquired assets or entities under M&A transactions pursued by the Company into the Company’s business as anticipated; the failure to achieve the anticipated synergies from such acquisitions; the incurrence of unexpected liabilities relating to the mergers and acquisitions pursued by the Company from time to time; 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’s 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
March 31,
2010   2009
Unaudited
 
Revenues $ 17,348 $ 20,500
 
Cost of revenues   10,213     10,961  
Gross profit 7,135 9,539
 
Research and development costs 2,628 3,582
 
Selling, general and administrative expenses   6,486     6,530  
 
Total operating expenses 9,114 10,112
 
Operating loss (1,979 ) (573 )
 
Financial expenses, net   345     1,145  
 
Loss before taxes (2,324 ) (1,718 )
 
Taxes on income (benefit)   (223 )  

31

 
 
Net loss (2,101 ) (1,749 )
 
Net income attributable to noncontrolling interests   82     91  
 
Net loss attributable to BluePhoenix   ($2,183 )   ($1,840 )
 
Net loss per share:
Basic ($0.09 ) ($0.09 )
Diluted ($0.09 ) ($0.09 )
 
Shares used in per share calculation:
Basic   23,368     20,902  
 
Diluted   23,368     20,902  
BluePhoenix Solutions Ltd.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP RESULTS
(In thousands, except per share data)
   
Three months ended
March 31,
  2010     2009  
Unaudited
 
GAAP Gross Profit $ 7,135 $ 9,539
 
Amortization of intangible assets 2,015 2,354
Expenses related to cost saving plan and one time charges   111     202  
Non-GAAP gross profit $ 9,261   $ 12,095  
 
GAAP operating loss ($1,979 ) ($573 )
 
Amortization of intangible assets 2,015 2,354
Expenses related to cost saving plan and one time charges 339 235
Stock-based compensations   569     598  
Non-GAAP operating income $ 944   $ 2,614  
 
GAAP Net loss attributable to BluePhoenix ($2,183 ) ($1,840 )
 
Amortization of intangible assets 2,015 2,354
Expenses related to cost saving plan and one time charges 339 235
Stock-based compensations 569 598
Revaluation of warrants and issuance costs   (570 )   24  
 
Non-GAAP Net profit attributable to BluePhoenix $ 170   $ 1,371  
 
Shares used in diluted earnings per share calculation 23,562 20,902
 
Non - GAAP Diluted Earnings per share $ 0.01   $ 0.07  
BluePhoenix Solutions Ltd.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
     
March 31, December 31,
  2010 2009*
Unaudited  
ASSETS
 
Current Assets:
 
Cash and cash equivalents $ 17,480 $ 22,328
Marketable securities 196 129
Trade accounts receivable 25,511 25,578
Other current assets   2,509   2,873
 
Total Current Assets 45,696 50,908
 
Non-Current Assets:
 
Investment in affiliated company 147 147
Property and equipment, net 1,794 1,890
Goodwill 52,385 51,990
Intangible assets and other, net   16,000   17,619
 
Total Non-Current Assets   70,326   71,646
   
TOTAL ASSETS $ 116,022 $ 122,554
 
LIABILITIES AND EQUITY
 
Current Liabilities:
 
Short-term bank credit $ 5,376 $ 2,490
Trade accounts payable 4,421 6,093
Deferred revenues 4,588 4,424
Other current liabilities   7,858   10,263
 
Total Current Liabilities 22,243 23,270
 
Non-Current Liabilities
 
Accrued severance pay, net 979 1,309
Loans from banks 9,677 12,887
Derivative liabilities - Warrants   1,844   2,414
 
Total Non-Current Liabilities   12,500   16,610
 
Total Equity   81,279   82,674
   
TOTAL LIABILITIES AND EQUITY $ 116,022 $ 122,554
 
* Derived from audited financial statements.
BluePhoenix Solutions Ltd.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
  Three months ended
March 31,
2010   2009  
Unaudited
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($2,101 ) ($1,749 )
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 2,221 2,597
Decrease in accrued severance pay, net (330 ) (289 )
Stock–based compensation 569 598
Change in fair value of warrants (570 ) -
Changes in operating assets and liabilities:
Reclassification adjustment to income on marketable securities 21 (168 )
Decrease in trade receivables 68 2,221
Decrease (increase) in other current assets 272 (72 )
Decrease in trade payables (1,672 ) (110 )
Decrease in other accounts payable   (521 )   (1,801 )
 
Net cash provided by (used in) operating activities (2,043 ) 1,227
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (110 ) (137 )
Proceeds from sale of marketable securities 48 -
Additional consideration of previously acquired subsidiaries and

activities
(1,791 ) (1,422 )
Investment in newly-consolidated activity   (702 )   -  
 
Net cash used in investing activities (2,555 ) (1,559 )
 
CASH FLOWS FROM FINANCING ACTIVITIES:
Short term bank credit, net 3,000 30
Repayment of long-term loans (3,250 ) (258 )
Purchase of treasury shares - (83 )
   
Net cash used in financing activities   (250 )   (311 )
 

TOTAL NET DECREASE IN CASH AND CASH

EQUIVALENTS
(4,848 ) (643 )
CASH AND CASH EQUIVALENTS AT BEGINNING OF

PERIOD
  22,328     30,308  
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 17,480   $ 29,665  

Copyright Business Wire 2010

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