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 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.