INVESTORS 

HERZLIYA, Israel — November 30, 2010— 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 dollar 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."