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BluePhoenix Solutions Reports Third Quarter 2012 Results

  BluePhoenix Solutions Reports Third Quarter 2012 Results

  Q3 Results Show Better Net Income, Much Less Debt, Increased EPS and Lower
                                  Cash Burn

Business Wire

HERZLIYA, Israel -- November 07, 2012

BluePhoenix Solutions (NASDAQ: BPHX), the leader in value-driven legacy
modernization, today announced financial results for the third quarter of
2012. The turnaround efforts are showing results with revenues holding steady
while debt was reduced and burn rate was brought under control.

Net Income on a non-GAAP basis for Q3 improved 85% and while the number still
shows a loss of $182 K BPHX is closely approaching breakeven. Additional
achievements in Q3 include the significant reduction in total financial debt
which dropped from $7.9 M to just $556 K. Earnings per share improved 89% in
the third quarter with a non-GAAP loss of $(0.02) per diluted share, compared
to net loss of $(0.18) per diluted share in the previous quarter. Net cash
burn is down 78% in Q3 to only $314 K compared to $1,416 million in Q2.

Matt Bell, CEO of BluePhoenix said, “We are making great progress on our plan
to restructure the company, strengthen the balance sheet, and sell off less
profitable and non-strategic businesses. Our timing appears good as the market
for our core business is picking up because companies postponed projects over
the last few years. A lack of knowledge in running legacy systems, higher
licensing prices, and a move toward cloud technology are also fueling our
demand.”

BluePhoenix will go over the following numbers during their quarterly
conference call today at 4:30PM Eastern US time. The call can be accessed by
dialing 1-888-668-9141 within the United States, or via +972-3-9180610 if
calling internationally, approximately five minutes prior to its scheduled
commencement. A live Veidan Broadcasting and a replay can be accessed through
a link that will be available via the BluePhoenix website.

                                                      
Non-GAAP Results (in thousands US$)  Q3 2012  Q2 2012  Q3/2011 **
Sales                                 3,978     4,237     6,539
Operating profit (loss)               (89)      (791)     376
Net (Loss) Income                     (182)     (1,171)   111
Earnings (Loss) per share, diluted*   (0.02)    (0.18)    0.02
                                                          
GAAP Results (in thousands US$)      Q3 2012  Q2 2012  Q3 2011
Sales                                 3,978     4,237     6,539
Operating profit (loss)               (748)     (1,301)   (3,248)
Net loss                              (3,686)   (4,108)   (3,206)
Loss per share, diluted*              (0.46)    (0.62)    (0.51)
                                                          

Notes:

* On December 28, 2011 the company performed a one-for-four reverse split of
its outstanding shares.

** Presented after reclassification of Liacom Ltd. as discontinued operation.

At present, following the completion of the sale of AppBuilder business, an
amount of $2 million is held in escrow accounts to secure certain company
obligations under the sale agreement.

Non-GAAP financial measures

The release includes non-GAAP diluted earnings per share and other non-GAAP
financial measures, including non-GAAP operating income and 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;
  *Revaluation of derivatives and discount amortization;
  *Gain on sales of subsidiaries and Appbuilder;
  *Net loss from discontinued operation.

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 Ltd. (NASDAQ: BPHX) is the leading provider of legacy IT
modernization conversion 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. 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. BluePhoenix has 9 offices in
the USA, UK, Italy, Romania, Russia, 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 effects of the global economic and financial
trends; 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; 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,
                             2012           2011*        2012        2011*
                             Unaudited                   Unaudited
                                                                     
Revenues                     $3,978         $6,539       $11,815     $20,736
                                                                     
Cost of revenues             2,234          4,413        8,532       15,690
Gross profit                 1,744          2,126        3,283       5,046
                                                                     
Research and development     340            1,066        1,255       3,422
costs
                                                                     
Selling, general and         2,253          4,308        7,637       12,097
administrative expenses
                                                                     
Gain on sales of
subsidiaries and             (101)          -            (346)       -
Appbuilder
                                                                     
                                                                  
Total operating expenses     2,492          5,374        8,546       15,519
                                                                     
Operating loss               (748)          (3,248)      (5,263)     (10,473)
                                                                     
Financial expenses, net      2,840          374          5,335       765
                                                                     
Other income                 -              -            (580)       -
                                                                  
Loss before taxes            (3,588)        (3,622)      (10,018)    (11,238)
                                                                     
Taxes on income              28             23           174         78
                                                                  
Net loss from continued      (3,616)        (3,645)      (10,192)    (11,316)
operation
                                                                     
Net loss (profit) from       -              (276)        673         (97)
discontinued operation
Net loss                     (3,616)        (3,369)      (10,865)    (11,219)
                                                                     
Net result attributable
to noncontrolling            70             (163)        175         (121)
interests
                                                                  
Loss attributed to           ($3,686)       ($3,206)     ($11,040)   ($11,098)
BluePhoenix shareholders
                                                                     
Loss per share:
                                                                     
From continued
operation- basic and         ($0.46)        ($0.56)      ($1.48)     ($1.83)
diluted
                                                                     
From discontinued
operation- basic and         $ 0.00         $ 0.05       ($0.10)     $ 0.02
diluted
                                                                     
Attritubed to the            ($0.46)        ($0.51)      ($1.58)     ($1.81)
shareholders
                                                                     
Shares used in per share
calculation:
Basic and diluted **         7,972          6,235        7,006       6,122
                                                                     
* Presented after reclassification of Liacom Ltd. as
discontinued operation.
** On December 28, 2011 the company performed a one-for-four reverse
split of its outstanding shares.
                                                                     


UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP RESULTS
(In thousands, except per share data)
                                                               
                                 Three months ended    Nine months ended
                                 September 30,         September 30,
                                 2012       2011       2012          2011
                                 Unaudited             Unaudited
                                                                     
GAAP Gross Profit                $1,744     $2,126     $3,283        $5,046
                                                                     
Amortization of intangible       317        886        1,265         2,950
assets
Expenses related to cost
saving plan  and one time        -          913        36            4,237
charges
Non-GAAP gross profit            $2,061     $3,925     $4,584        $12,233
                                                                     
                                                                     
GAAP operating loss              ($748)     ($3,248)   ($5,263)      ($10,473)
                                                                     
Amortization of intangible       317        886        1,265         2,950
assets
Expenses related to cost
saving plan  and one time        -          2,433      87            9,337
charges
Stock-based compensation         443        305        1,408         947
Gain on sales of subsidiaries    (101)      -          (346)         -
and Appbuilder
Non-GAAP operating income        ($89)      $376       ($2,849)      $2,761
(loss)
                                                                     
                                                                     
GAAP Net loss attributable to    ($3,686)   ($3,206)   ($11,040)     ($11,098)
BluePhoenix
                                                                     
Amortization of intangible       317        886        1,265         2,950
assets
Expenses related to cost
saving plan  and one time        -          2,433      87            9,337
charges
Stock-based compensation         443        305        1,408         947
Gain on sales of subsidiaries    (101)      -          (346)         -
and Appbuilder
Revaluation of derivatives and   2,845      (31)       4,824         (288)
discount amortization
Net loss from discontinued       -          (276)      673           (97)
operation
                                                                  
Non-GAAP Net income (loss)       ($182)     $111       ($3,129)      $1,751
attributable to BluePhoenix
                                                                     
                                                                     
Shares used in diluted           7,972      6,252      7,006         6,224
earnings per share calculation
                                                                     
Non - GAAP Diluted Earnings      ($0.02)    $0.02      ($0.45)       $0.28
per share
                                                                     

                                                                
BluePhoenix Solutions Ltd.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
                                                                  
                                              September 30,     December 31,
                                                2012              2011*
                                                Unaudited        
ASSETS
                                                                  
Current Assets:
                                                                  
    Cash and cash equivalents                   $1,925            $3,997
    Restricted cash                             79                -
    Trade accounts receivable, net              2,992             7,675
    Other current assets                        642               1,041
                                                                 
Total Current Assets                            5,638             12,713
                                                                  
Non-Current Assets:
                                                                  
    Restricted cash                             -                 3,428
    Property and equipment, net                 648               1,021
    Goodwill                                    12,501            14,238
    Intangible assets and other, net            755               3,000
                                                                 
Total Non-Current Assets                        13,904            21,687
                                                                  
                                                                 
TOTAL ASSETS                                    $19,542           $34,400
                                                                  
LIABILITIES AND EQUITY
                                                                  
Current Liabilities:
                                                                  
    Short-term bank credit                      $275              $6,983
    Trade accounts payable                      1,418             3,403
    Deferred revenues                           571               739
    Other current liabilities                   1,206             3,272
                                                                 
Total Current Liabilities                       3,470             14,397
                                                                  
Non-Current Liabilities
                                                                  
    Accrued severance pay, net                  425               410
    Loans from banks and others                 281               3,945
    Derivative liabilities - Warrants           326               53
                                                                 
Total Non-Current Liabilities                   1,032             4,408
                                                                  
                                                                  
Total Equity                                    15,040            15,595
                                                                 
TOTAL LIABILITIES AND EQUITY                    $19,542           $34,400
                                                                  
* Presented after reclassification of Liacom Ltd. as
discontinued operation.
                                                                  


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

                                  Three months ended   Nine months ended
                                   September 30,         September 30,
                                   2012      2011*      2012       2011*
                                   Unaudited             Unaudited
CASH FLOWS FROM OPERATING                                         
ACTIVITIES:
Net loss                           ($3,616)   ($3,369)   ($10,865)   ($11,219)
Adjustments to reconcile net
loss to net cash provided by
operating activities:
Depreciation and amortization      358        1,048      1,558       3,415
Decrease in accrued severance      18         (164)      (16)        (720)
pay, net
Stock–based compensation           443        305        1,408       947
Change in fair value of
derivatives and discount           2,845      (31)       4,824       (288)
amortization
Gain on sales of subsidiaries      (101)      -          361         -
and Appbuilder
Loss on sale of property and       -          -          12          -
equipment
Deferred income taxes, net         -          (14)       -           (14)
Long term receivable               -          (33)       -           (20)
Changes in operating assets and
liabilities:
Decrease (increase) in trade       45         (66)       755         5,025
receivables
Decrease (increase) in other       161        37         (691)       (334)
current assets
Decrease in trade payables         (411)      (427)      (1,106)     (1,371)
Decrease in other current
liabilities and deferred           (56)       (1,263)    (249)       (1,828)
revenues
                                                                  
Net cash used in operating         (314)      (3,977)    (4,009)     (6,407)
activities
                                                                     
CASH FLOWS FROM INVESTING
ACTIVITIES:
Restricted cash                    -          -          4,031       -
Purchase of property and           -          (20)       (60)        (161)
equipment
Proceeds from sale of property     9          32         50          32
and equipment
Additional consideration of        -          -          -           (1,163)
previously acquired subsidiaries
Proceeds from sales of             101        -          2,950       -
subsidiaries and Appbuilder
                                                                  
Net cash provided by (used) in     110        12         6,971       (1,292)
investing activities
                                                                     
CASH FLOWS FROM FINANCING
ACTIVITIES:
Short term bank credit and         (117)      (1,186)    (1,601)     (6,054)
convertible notes, net
Issuance of shares and loan        -          -          -           5,000
Exercise of warrants               120        -          120         -
Repayment of long-term loans       (66)       -          (3,553)     (426)
Dividend paid to noncontrolling    -          (76)       -           (217)
interest
                                                                  
Net cash used in financing         (63)       (1,262)    (5,034)     (1,697)
activities
                                                                     
NET CASH DECREASE FROM CONTINUED   (267)      (5,227)    (2,072)     (9,396)
OPERATION
                                                                     
CASH AND CASH EQUIVALENTS AT       2,192     8,114      3,997      12,295
BEGINNING OF PERIOD
                                                                     
CASH AND CASH EQUIVALENTS AT END   $1,925    $2,887     $1,925     $2,899
OF PERIOD
                                                                     
* Presented after
reclassification of Liacom Ltd.
as discontinued operation.
                                                                     

Contact:

BluePhoenix Solutions
Nir Peles, +972-9-9526110
BluePhoenix Solutions
NPeles@bphx.com
 
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