BluePhoenix Solutions Reports Third Quarter 2010 Results

BluePhoenix Solutions (NASDAQ: BPHX), today announced financial results for the third quarter of fiscal 2010. Revenues for the third quarter of 2010 were $11.6 million compared to $16.2 million in the previous quarter, and compared to $18.7 million in the third quarter of 2009.

Net income on a non-GAAP basis for the third quarter of 2010 was $0.4 million or $0.02 per diluted share, compared to $0.1 million or $0.01 per diluted share in the previous quarter, and compared to $1.0 million or $0.05 per diluted share in the third quarter of 2009.

On a GAAP basis for the third quarter of 2010 the net loss was $7.0 million or ($0.30) per share, compared to net loss of $1.1 million or ($0.05) per share in the previous quarter, and compared to a net loss of $2.7 million or ($0.13) per share for the third quarter of 2009. (Please refer to the accompanying financial table for reconciliation of GAAP financial information to non-GAAP).

"Revenues in the quarter were below our expectations principally as a result of a large license contract with a system integrator that did not close. As a result of our implementing an aggressive cost cutting plan to bring our expense levels down to the current level of activity we were able to maintain our non-GAAP profitability. We believe these measures will put the Company in a position to maintain sustainable profitability and positive operating cash flow in 2011," commented Arik Kilman, CEO of BluePhoenix.

Non-GAAP Results (in thousands US$)
   

Q3/2010
   

Q2/2010
   

Q3/2009
Sales 11,595 16,167 18,688
Operating income 226 1,317 1,498
Net Income 365 126 1,012
Earnings per share, diluted $ 0.02 $ 0.01 $ 0.05
 

GAAP Results (in thousands US$)

Q3/2010

Q2/2010

Q3/2009
Sales 11,595 16,167 18,688
Operating income (loss) (6,591 ) (1,315 ) (1,761 )
Net Income (loss) (7,019 ) (1,058 ) (2,679 )
Earnings (loss) per share, diluted ($0.30 ) ($0.05 ) ($0.13 )
 

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
  • Expenses related to cost saving plan and other charges
  • 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 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 "Unaudited Reconciliation of GAAP to Non-GAAP Results."

Conference Call

A conference call discussing BluePhoenix’ results for the third quarter of 2010, will take place today, November 30, 2010, at 8:30 a.m. (ET). Investors are invited to join the Company’s teleconference by calling +1-866-860-9642 or international +972-3-918-0685 at 8:25 a.m. This call is being webcast live and can be accessed through the BluePhoenix website ( http://www.bphx.com). A replay of the call will also be available on the BluePhoenix website.

About BluePhoenix Solutions

BluePhoenix Solutions (NASDAQ: BPHX) is a leading provider of IT modernization software and services for enterprises. The BluePhoenix portfolio includes a comprehensive suite of products, tools and services for IT modernization, knowledge management, core banking business intelligence and additional value added IT services. Leveraging over 20 years of best-practice domain expertise, BluePhoenix works closely with its customers to ensure their enterprise computing environment is up to date and optimized for business results.

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 Company’s business; the ability to manage the successfully restructure the Company; the ability to develop new business lines; the ability to meet certain covenants relating to the Company’s debt; 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 Nine months ended
September 30, September 30,
2010 2009 2010 2009
Unaudited Unaudited
 
Revenues $ 11,595 $ 18,688 $ 45,110 $ 58,239
 
Cost of revenues   9,620     10,309     29,049     31,849  
Gross profit 1,975 8,379 16,061 26,390
 
Research and development costs 1,396 2,476 5,454 8,708
 
Selling, general and administrative expenses 7,170 7,664 20,492 21,663
 
       
Total operating expenses 8,566 10,140 25,946 30,371
 
Operating loss (6,591 ) (1,761 ) (9,885 ) (3,981 )
 
Financial expenses, net 605 803 389 1,997
 
       
Loss before taxes (7,196 ) (2,564 ) (10,274 ) (5,978 )
 
Taxes on income (benefit) (214 ) (99 ) (291 ) 11
       
Net loss (6,982 ) (2,465 ) (9,983 ) (5,989 )
 
 
Net income attributable to noncontrolling interests 37 214 277 441
       
Net loss attributable to BluePhoenix   ($7,019 )   ($2,679 )   ($10,260 )   ($6,430 )
 
Net loss per share:
Basic ($0.30 ) ($0.13 ) ($0.44 ) ($0.31 )
Diluted ($0.30 ) ($0.13 ) ($0.44 ) ($0.31 )
 
Shares used in per share calculation:
Basic   23,662     21,118     23,504     20,965  
 
Diluted   23,662     21,118     23,504     20,965  
 
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP RESULTS          
(In thousands, except per share data)
     
Three months ended Nine months ended
September 30, September 30,
2010   2009 2010 2009
Unaudited Unaudited
 
GAAP Gross Profit $ 1,975 $ 8,379 $ 16,061 $ 26,390
 
Amortization of intangible assets 1,690 1,862 5,414 6,071
Expenses related to cost saving plan and one time charges   2,534     -     2,878     202  
Non-GAAP gross profit $ 6,199   $ 10,241   $ 24,353   $ 32,663  
 
 
GAAP operating loss ($6,591 ) ($1,761 ) ($9,885 ) ($3,981 )
 
Amortization of intangible assets 1,690 1,862 5,414 6,071
Expenses related to cost saving plan and one time charges 4,841 * 901 5,697 1,746
Stock-based compensation   286     496     1,261     1,604  
Non-GAAP operating income $ 226   $ 1,498   $ 2,487   $ 5,440  
 
 
GAAP Net loss attributable to BluePhoenix ($7,019 ) ($2,679 ) ($10,260 ) ($6,430 )
 
Amortization of intangible assets 1,690 1,862 5,414 6,071
Expenses related to cost saving plan and one time charges 4,841 * 901 5,697 1,746
Stock-based compensation 286 496 1,261 1,604
Revaluation of warrants and issuance costs 567 432 (1,450 ) 585
       
Non-GAAP Net income attributable to BluePhoenix $ 365   $ 1,012   $ 662   $ 3,576  
 
 
Shares used in diluted earnings per share calculation 23,796 21,337 23,616 21,045
 
Non - GAAP Diluted Earnings per share $ 0.02   $ 0.05   $ 0.03   $ 0.17  
* Includes $930 of bad debt expense
 
BluePhoenix Solutions Ltd.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
 
      September 30,   December 31,
2010 2009*
Unaudited  
ASSETS
Current Assets:
Cash and cash equivalents $ 14,429 $ 22,328
Marketable securities 77 129
Trade accounts receivable 23,023 25,578
Other current assets 2,804 2,873
   
Total Current Assets 40,333 50,908
 
Non-Current Assets:
 
Investment in affiliated company 147 147
Property and equipment, net 1,566 1,890
Goodwill 52,385 51,990
Intangible assets and other, net 12,704 17,619
   
Total Non-Current Assets   66,802   71,646
 
   
TOTAL ASSETS $ 107,135 $ 122,554
 
LIABILITIES AND EQUITY
 
Current Liabilities:
 
Short-term bank credit $ 10,727 $ 2,490
Trade accounts payable 4,261 6,093
Deferred revenues 4,167 4,424
Other current liabilities 5,969 10,263
   
Total Current Liabilities 25,124 23,270
 
Non-Current Liabilities
 
Accrued severance pay, net 1,005 1,309
Loans from banks 6,141 12,887
Derivative liabilities - Warrants 963 2,414
   
Total Non-Current Liabilities   8,109   16,610
 
 
Total Equity   73,902   82,674
   
TOTAL LIABILITIES AND EQUITY $ 107,135 $ 122,554
 
 
* Derived from audited financial statements.
 
BluePhoenix Solutions Ltd.  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Three months ended Nine months ended
September 30,   September 30,  
2010   2009 2010   2009
Unaudited     Unaudited    
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($6,982) ($2,465) ($9,983) ($5,989)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 1,896 2,112 6,022 6,820
Decrease in accrued severance pay, net 111 (99) (304) (355)
Stock–based compensation 286 496 1,261 1,604
Deferred income taxes, net - - (150) (413)
Change in fair value of warrants 567 - (1,451) -
Changes in operating assets and liabilities:
Reclassification adjustment to income on marketable securities 4 71 25 278
Decrease in trade receivables 1,845 1,369 2,555 2,121
Decrease (increase) in other current assets (154) (673) 23 (118)
Increase (decrease) in trade payables (469) (904) (1,832) (122)
Increase (decrease) in other current liabilities and deferred revenues (1,349) 108 (2,684) (2,542)
       
Net cash provided by (used in) operating activities (4,245) 15 (6,518) 1,284
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (29) (98) (284) (289)
Proceeds from sale of marketable securities 12 - 64 -
Additional consideration of previously acquired subsidiaries and activities - (1,535) (1,925) (8,598)
Investment in newly-consolidated activity - - (702) -
       
Net cash used in investing activities (17) (1,633) (2,847) (8,887)
 
CASH FLOWS FROM FINANCING ACTIVITIES:
Short term bank credit, net (676) - 4,306 -
Repayment of long-term loans - (264) (3,750) (775)
Reciept of long term loans - 2,000 1,000 2,000
Purchase of treasury shares - - - (83)
Issuance of shares - (35) - (35)
Dividend paid to noncontrolling interest - - (90) -
       
Net cash provided by (used in) financing activities (676) 1,701 1,466 1,107
       
TOTAL NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (4,938) 83 (7,899) (6,496)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 19,367 23,729 22,328 30,308
CASH AND CASH EQUIVALENTS AT END OF PERIOD $14,429 $23,812 $14,429 $23,812

Copyright Business Wire 2010

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