BluePhoenix Solutions Reports Second Quarter Results

BluePhoenix Solutions (NASDAQ: BPHX), the leader in value-driven legacy modernization, today announced financial results for the second quarter of 2011. Revenues for the second quarter of 2011 were $ 9.9 million compared to $ 10.0 million in the previous quarter, and compared to $ 16.2 million in the second quarter of 2010.

Net income on a non-GAAP basis for the second quarter of 2011 was $1.1 million or $0.04 per diluted share, compared to $0.4 million or $0.02 per diluted share in the previous quarter, and compared to $0.1 million or $0.01 per diluted share in the second quarter of 2010.

On a GAAP basis for the second quarter of 2011 the net loss was $(3.7) million or ($0.15) per diluted share, compared to net loss of $(4.2) million or ($0.18) per diluted share in the previous quarter, and compared to net loss of $(1.1) million or ($0.05) per share for the second quarter of 2010.

“During the second quarter of 2011 we continued to reduce our expenses in order to reach a positive cashflow from operation. We are committed to achieve this goal in the beginning of 2012 while returning to growth,” Commented Arik Kilman, CEO of BluePhoenix. “Going forward, we intend to focus mainly on our Legacy Modernization, COBOL to Java and Knowledge Management products.”

Non-GAAP Results (in thousands US$)
     

Q2/2011
     

Q1/2011
     

Q2/2010
Sales 9,914 10,003 16,167
Operating profit 1,271 842 1,317
Net Income 1,082 380 126
Earnings per share, diluted $ 0.04 $ 0.02 $ 0.01
 
GAAP Results (in thousands US$) Q2/2011 Q1/2011 Q2/2010

Sales
9,914 10,003 16,167
Operating profit (loss) (3,521 ) (3,977 ) (1,315 )
Net Income (loss) (3,650 ) (4,242 ) (1,058 )
Earnings per share, diluted ($0.15 ) ($0.18 ) ($0.05 )

The Company has incurred negative cash flows from operations during 2010 and the second quarter of 2011. The Company is working to enhance the Company’s cash resources. However, there is no assurance that continued negative cash flow from operations will not create a material adverse effect on the Company’s future financial condition and results of operations.

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. These non-GAAP measures exclude the following items:
  • Amortization of intangible assets;
  • Stock-based compensation;
  • Onetime expenses related to cost saving plan and one time charges; and
  • Revaluation of warrants and discount amortization.

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 and gains 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."

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 10 offices in the USA, UK, Denmark, Italy, Romania, Russia, Cyprus, 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 Six months ended
June 30, June 30,
2011   2010 2011   2010
Unaudited Unaudited
 
Revenues $ 9,914 $ 16,167 $ 19,917 $ 33,515
 
Cost of revenues   8,362     9,216     17,037     19,429  
Gross profit 1,552 6,951 2,880 14,086
 
Research and development costs 1,205 1,430 2,356 4,058
 
Selling, general and administrative expenses 3,868 6,836 8,022 13,322
 
       
Total operating expenses 5,073 8,266 10,378 17,380
 
Operating loss (3,521 ) (1,315 ) (7,498 ) (3,294 )
 
Financial expenses (income), net 120 (561 ) 312 (216 )
       
Loss before taxes (3,641 ) (754 ) (7,810 ) (3,078 )
 
Income taxes (benefit) (85 ) 146 53 (77 )
       
Net loss (3,556 ) (900 ) (7,863 ) (3,001 )
 
Net result attributable to non controlling interests 94 158 29 240
       
Loss attributed to BluePhoenix shareholders   ($3,650 )   ($1,058 )   ($7,892 )   ($3,241 )
 
Loss per share:
Basic and diluted ($0.15 ) ($0.05 ) ($0.33 ) ($0.14 )
 
Shares used in per share calculation:
Basic and diluted   24,455     23,496     24,254     23,433  
 
 
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP RESULTS
(In thousands, except per share data)
       
Three months ended Six months ended
June 30, June 30,
2011 2010 2011 2010
Unaudited Unaudited
 
GAAP Gross Profit $ 1,552 $ 6,951 $ 2,880 $ 14,086
 
Amortization of intangible assets 1,037 1,709 2,064 3,724
Expenses related to cost saving plan and one time charges   1,684     233     3,323     344  
Non-GAAP gross profit $ 4,273   $ 8,893   $ 8,267   $ 18,154  
 
 
GAAP operating loss ($3,521 ) ($1,315 ) ($7,498 ) ($3,294 )
 
Amortization of intangible assets 1,037 1,709 2,064 3,724
Expenses related to cost saving plan and one time charges 3,491 517 6,905 856
Stock-based compensation   264     406     642     975  
Non-GAAP operating income $ 1,271   $ 1,317   $ 2,113   $ 2,261  
 
 
GAAP Net loss attributable to BluePhoenix ($3,650 ) ($1,058 ) ($7,892 ) ($3,241 )
 
Amortization of intangible assets 1,037 1,709 2,064 3,724
Expenses related to cost saving plan and one time charges 3,491 517 6,905 856
Stock-based compensation 264 406 642 975
Revaluation of warrants and discount amortization (60 ) (1,448 ) (257 ) (2,017 )
       
Non-GAAP Net income attributable to BluePhoenix $ 1,082   $ 126   $ 1,462   $ 297  
 
 
Shares used in diluted earnings per share calculation 24,721 23,611 24,521 23,555
 
Non - GAAP Diluted Earnings per share $ 0.04   $ 0.01   $ 0.06   $ 0.01  
 
 
BluePhoenix Solutions Ltd.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
           
June 30, December 31,
2011 2010*
Unaudited        
ASSETS
 
Current Assets:
 
Cash and cash equivalents $ 8,114 $ 12,295
Trade accounts receivable, net 11,481 16,583
Other current assets 2,708 2,337
   
Total Current Assets 22,303 31,215
 
Non-Current Assets:
 
Long term receivables 458 445
Property and equipment, net 1,234 1,396
Goodwill 36,969 36,969
Intangible assets and other, net 6,910 8,974
   
Total Non-Current Assets   45,571   47,784
 
   
TOTAL ASSETS $ 67,874 $ 78,999
 
LIABILITIES AND EQUITY
 
Current Liabilities:
 
Short-term bank credit $ 8,832 $ 14,363
Trade accounts payable 4,185 5,129
Deferred revenues 3,442 4,472
Other current liabilities 5,920 6,604
   
Total Current Liabilities 22,379 30,568
 
Non-Current Liabilities
 
Accrued severance pay, net 728 1,284
Loans from banks and others 4,628 266
Derivative liabilities - Warrants 434 839
   
Total Non-Current Liabilities   5,790   2,389
 
 
Total Equity   39,705   46,042
   
TOTAL LIABILITIES AND EQUITY $ 67,874 $ 78,999
 
*Derived from audited financial statements
 
     
BluePhoenix Solutions Ltd.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 
Three months ended Six months ended
June 30, June 30,
2011   2010 2011   2010
Unaudited Unaudited
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($3,556 ) ($900 ) ($7,863 ) ($3,001 )
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 1,187 1,905 2,367 4,126
Decrease in accrued severance pay, net (227 ) (85 ) (556 ) (415 )
Stock–based compensation 264 406 642 975
Deferred income taxes, net - (150 ) - (150 )
Long term receivable 7 - 13 -
Change in fair value of warrants (208 ) (1,448 ) (405 ) (2,018 )
Change in accrued interest 148 - 148 -
Changes in operating assets and liabilities:
Reclassification adjustment to income on marketable securities - - - 21
Decrease in trade receivables 1,452 642 5,091 710
Decrease (increase) in other current assets (168 ) (95 ) (371 ) 177
Increase (decrease) in trade payables (1,046 ) 309 (944 ) (1,363 )
Increase (decrease) in other current liabilities and deferred revenues (754 ) (814 ) (564 ) (1,335 )
       
Net cash used in operating activities (2,901 ) (230 ) (2,442 ) (2,273 )
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (38 ) (145 ) (141 ) (255 )
Proceeds from sale of marketable securities - 4 - 52
Additional consideration of previously acquired subsidiaries and activities - (134 ) (1,163 ) (1,925 )
Investment in newly-consolidated activity - - - (702 )
       
Net cash used in investing activities (38 ) (275 ) (1,304 ) (2,830 )
 
CASH FLOWS FROM FINANCING ACTIVITIES:
Receipt (repayment) short term bank credit, net (2,333 ) 1,982 (4,868 ) 4,982
Issuance of shares and loan 5,000 - 5,000 -

Receipt of long term loans
- 1,000 - 1,000
Repayment of long-term loans (426 ) (500 ) (426 ) (3,750 )
Dividend paid to noncontrolling interest (141 ) (90 ) (141 ) (90 )
       
Net cash used in financing activities 2,100 2,392 (435 ) 2,142
       
TOTAL NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (839 ) 1,887 (4,181 ) (2,961 )
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD   8,953       17,480     12,295       22,328  
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 8,114     $ 19,367   $ 8,114     $ 19,367  
 

Copyright Business Wire 2010

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