BluePhoenix Solutions Reports FY2005 Second Quarter & Midyear Results.HERZLIA Herzlia: see Herzliya, Israel. , Israel Israel, in the Bible Israel (ĭz`rēəl, ĭz`rāəl) [as understood by Hebrews,=he strives with God], according to the book of Genesis, name given to Jacob as eponymous ancestor of the Hebrews, the chosen people of God. -- BluePhoenix Solutions Ltd. (Nasdaq:BPHX): --First Half 2005 versus First Half 2004: EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become at $4.2 Million vs. $3.5 Million --Current Pipeline and Backlog Backlog The total value of sales orders waiting to be fulfilled. Notes: This figure is used mainly in the manufacturing industry. Increases or decreases in a company's backlog indicate the future direction of sales and earnings. Expected to Generate Strong Orders and Revenues Starting in Second Half of 2005 BluePhoenix Solutions Ltd. (Nasdaq:BPHX), the leader in Enterprise IT Modernization modernization Transformation of a society from a rural and agrarian condition to a secular, urban, and industrial one. It is closely linked with industrialization. As societies modernize, the individual becomes increasingly important, gradually replacing the family, , today reported it results for the second quarter and first six months ending June June: see month. 30, 2005. For the first half of fiscal 2005, BluePhoenix reported sales of $28.5 million, up 1% from $28.3 million in the same period a year ago. First half 2005 EBITDA (earnings before interests, taxes, depreciation and amortization of intangible assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. ) was $4.2 million as compared to $3.5 million in the first six months of 2004. First half adjusted net income -- excluding amortization of intangible assets, depreciation and non-cash financial expenses mainly related to the convertible debentures Convertible Debenture Any type of debenture that can be converted into some other security. Notes: For example, a convertible bond can be converted into stock. -- was $3.7 million, or $0.26 per share, as compared to $3.9 million, or $0.28 per share in the first half of 2004. On a GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). basis, the operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. for the first half of 2005 was $1.5 million as compared to $2.0 million in the first half of 2004. Net income was $0.5 million as compared to $1.9 million respectively. The results of the second quarter and first six months of 2005 were affected by an increased rate of amortization of intangible assets as well as the rapid decrease of the Euro currency versus the US dollar. The Euro currency was devaluated by 9.4% in the first half of 2005 as compared to 3.9% in the first six months of 2004. Second quarter results were, as expected, in the range of the first quarter. Revenues were $14.4 million, a slight increase over $14.2 million in the first quarter of 2005. Second quarter EBITDA rose to $2.2 million, from $2.1 million in the first quarter. Adjusted net income -- excluding amortization of intangible assets, depreciation and non-cash financial expenses mainly related to the convertible debentures -- was $1.9 million, or $0.13 per share, as compared to $1.8 million, or $0.13 per share, in the first quarter this year. On a GAAP basis, operating income for the second quarter of 2005 was $718,000, as compared to $815,000 in the first quarter of 2005. Net income was $186,000, or $0.01 per share, as compared to $309,000 or $0.02 per share, respectively. "As we expected, the 2005 second quarter results were in the same range as the first quarter. We believe that the pipeline generated in the first half of this year will materialize ma·te·ri·al·ize v. ma·te·ri·al·ized, ma·te·ri·al·iz·ing, ma·te·ri·al·iz·es v.tr. 1. To cause to become real or actual: By building the house, we materialized a dream. into orders that will generate revenue growth starting from the second half of this year," said Arik Arik is a given name, and may refer to: In sports:
"We have built our leadership position in the $20 billion IT Modernization market on our proprietary comprehensive suite of mature automated au·to·mate v. au·to·mat·ed, au·to·mat·ing, au·to·mates v.tr. 1. To convert to automatic operation: automate a factory. 2. tools, considered to be unique in their wide range of technological capabilities. Having passed the market and technological barriers, we now expect to clearly see visible improvements in both top and bottom line results. In the second quarter we have further aligned our cost structure for greater efficiencies. As a result of all of these developments, our operating results, as reflected in both revenues and EBITDA, are expected to markedly improve in the second half of this year. We look forward to reporting to you on our progress in the months ahead," concluded Mr. Kilman.
Reconciliation of As-Adjusted results:
As adjusted operating income H1-2005 H1-2004 Q2-2005 Q1-2005
------------------------------------ -------- -------- ------- -------
US $ Thousands
------------------------------------ ---------------------------------
EBITDA 4,234 3,542 2,175 2,059
Amortization of intangible
assets (2,124) (879) (1,187) (937)
Depreciation (577) (695) (270) (307)
-------- -------- ------- -------
Operating Income (GAAP) 1,533 1,968 718 815
======== ======== ======= =======
------------------------------------ -------- -------- ------- -------
------------------------------------ -------- -------- ------- -------
As adjusted Net profit H1-2005 H1-2004 Q2-2005 Q1-2005
------------------------------------ -------- -------- ------- -------
US $ Thousands
------------------------------------ ---------------------------------
Adjusted Net Profit 3,685 3,884 1,854 1,831
Amortization of intangible
assets (2,124) (879) (1,187) (937)
Depreciation (577) (695) (270) (307)
Non- cash financial expenses, mainly
related to debentures (489) (433) (211) (278)
-------- -------- ------- -------
Net Profit (GAAP) 495 1,877 186 309
------------------------------------ ======== ======== ======= =======
Arik Kilman, BluePhoenix CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. , and Iris Yahal, Chief Financial Officer, will review and discuss the 2005 second quarter results, and will be available to answer investor questions in a conference call on Tuesday Tuesday: see week. , August 9th, 2005, at 11:00 A.M. EST EST electroshock therapy. EST abbr. electroshock therapy /6:00 P.M. Israel time. Interested parties are invited to participate by calling one of the telephone numbers listed below, five to ten minutes prior to the start of the conference call. Callers should reference "BluePhoenix Second Quarter Results" to the AT&T conference call operator. In the US call: 800-553-5275 Outside the US call: +1-612-332-0630 An automated replay of the conference call will be available from August 9th, 02:00 P.M. until August 11th, at 11:59 P.M. (EST). To access the replay please call (USA) 800-475-6701 or (International) +1-320-365-3844, and enter the access code: 790780. About BluePhoenix Solutions BluePhoenix Solutions leads the IT Modernization market by developing unique solutions that enable companies to automate To turn a set of manual steps into an operation that goes by itself. See automation. the process of modernizing and upgrading their mainframe mainframe Digital computer designed for high-speed data processing with heavy use of input/output units such as large-capacity disks and printers. They have been used for such applications as payroll computations, accounting, business transactions, information retrieval, and distributed IT infrastructure, thus quickly and cost-effectively extending the ROI (Return On Investment) The monetary benefits derived from having spent money on developing or revising a system. In the IT world, there are more ways to compute ROI than Carter has liver pills (and for those of you who never heard of that expression, it means a lot). of their existing IT systems. The Company's comprehensive suite of tools and services (including technology for Understanding, Migration, Transformation, and Redevelopment) reduces the cost of renovation and speeds up the renewal process. BluePhoenix has 12 offices throughout the world, including locations in the US, UK, Denmark Denmark (dĕn`märk), Dan. Danmark, officially Kingdom of Denmark, kingdom (2005 est. pop. 5,432,000), 16,629 sq mi (43,069 sq km), N Europe. , Germany Germany (jûr`mənē), Ger. Deutschland, officially Federal Republic of Germany, republic (2005 est. pop. 82,431,000), 137,699 sq mi (356,733 sq km). , Italy Italy (ĭt`əlē), Ital. Italia, officially Italian Republic, republic (2005 est. pop. 58,103,000), 116,303 sq mi (301,225 sq km), S Europe. , The Netherlands Netherlands (nĕth`ərləndz), Du. Nederland or Koninkrijk der Nederlanden, officially Kingdom of the Netherlands, constitutional monarchy (2005 est. pop. 16,407,000), 15,963 sq mi (41,344 sq km), NW Europe. , Israel, and Australia Australia (ôstrāl`yə), smallest continent, between the Indian and Pacific oceans. With the island state of Tasmania to the south, the continent makes up the Commonwealth of Australia, a federal parliamentary state (2005 est. pop. . The company's major shareholder is the Formula Group (Nasdaq:FORTY), an international Information Technology company principally engaged in providing software products, solutions, and services in various vertical markets. For more information, please visit our web site at www.bphx.com . (Tables to Follow) SAFE HARBOR Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. : Certain statements contained in this release may be deemed forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. , with respect to plans, projections, or future performance of the Company, the occurrence of which involves certain risks and uncertainties that could cause actual plans to differ materially from these statements. These risks and uncertainties include but are not limited to: market demand for the Company's tools, successful implementation of the Company's tools, competitive factors, the ability to manage the Company's growth, the ability to recruit RECRUIT. A newly made soldier. and retrain re·train tr. & intr.v. re·trained, re·train·ing, re·trains To train or undergo training again. re·train additional software personnel, and the ability to develop new business lines. All names and trademarks are their owners' property.
Three months ended Six months ended Year ended
June 30, June 30, December 31,
2005 2004 2005 2004 2004
------- -------- -------- ------- -----------
Unaudited Unaudited
Revenues $14,398 $ 14,171 $ 28,499 $28,310 $ 57,186
Cost of revenues 6,507 5,938 12,579 12,002 24,253
------- -------- -------- ------- -----------
Gross profit 7,891 8,233 15,920 16,308 32,933
Software
development costs,
net 1,827 2,022 3,758 4,061 8,055
Selling, general
and administrative
expenses 5,076 4,894 10,052 9,584 19,981
------- -------- -------- ------- -----------
988 1,317 2,110 2,663 4,897
Depreciation 270 336 577 695 1,407
-------- --------- --------- -------- ------------
Operating income 718 981 1,533 1,968 3,490
Financial expenses,
net (573) (386) (1,231) (559) (882)
Other income, net 76 150 107 383 1,087
-------- --------- --------- -------- ------------
Income before taxes 221 745 409 1,792 3,695
Taxes on income -- -- -- 5 260
------- -------- -------- ------- -----------
221 745 409 1,787 3,435
Minority interest (35) 249 86 408 (73)
Equity in losses of
affiliated
companies -- (177) -- (318) (516)
------- -------- -------- ------- -----------
Net income 186 817 495 1,877 2,846
======= ======== ======== ======= ===========
Basic earnings per
share 0.01 0.06 0.04 0.14 0.21
------- -------- -------- ------- ===========
Diluted earnings
per share 0.01 0.06 0.04 0.14 0.21
======= ======== ======== ======= ===========
Common shares
outstanding 13,557 13,522 13,561 13,516 13,523
======= ======== ======== ======= ===========
Common shares
assuming dilution 14,940 14,672 14,959 14,564 14,679
======= ======== ======== ======= ===========
June 30, December 31,
2005 2004
------------- -----------
Unaudited
--------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 9,684 $ 9,363
Marketable securities 170 177
Accounts receivable:
Trade 16,654 15,814
Other 2,621 2,567
------------- -----------
Total current assets 29,129 27,921
------------- -----------
INVESTMENTS 370 --
------------- -----------
FIXED ASSETS
Cost 11,189 10,614
Less - accumulated depreciation 8,863 7,921
------------- -----------
Total fixed assets 2,326 2,693
------------- -----------
OTHER ASSETS, NET 64,919 60,268
------------- -----------
Total assets $ 96,744 $ 90,882
============= ===========
LIABILITIES AND SHAREHOLDERS'
EQUITY
CURRENT LIABILITIES:
Short-term bank credit $ 8,832 $ 7,214
Accounts payable and accruals:
Trade 3,855 4,382
Deferred revenue 4,871 2,583
Other 6,457 7,385
------------- -----------
Total current liabilities 24,015 21,564
------------- -----------
LONG-TERM LIABILITIES:
Convertible debentures 4,198 5,149
Accrued severance pay, net 1,269 1,160
Provision for losses in
formerly-consolidated
subsidiary 1,971 1,971
Loans from banks and others 10,014 7,537
------------- -----------
Total long-term liabilities 17,452 15,817
------------- -----------
MINORITY INTEREST 4,825 4,870
------------- -----------
SHAREHOLDERS' EQUITY 50,452 48,631
------------- -----------
Total liabilities and
shareholders' equity $ 96,744 $ 90,882
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