May 4, 2008
Knobias Clip Report (05-02-2008)
By admin
Submitted By Knobias ClipReport
BPHX: Reports Strong Pipeline Following Record Pilot Deals & Mainframe Trend
Trading on BluePhoenix Solutions Ltd. (NASDAQ NM: BPHX) was up 11.042% following this morning’s earning’s call in which the company reported Q1 revenues of $24.04M, up 31.87% from last year and beating consensus by 1.74%. Q1 EPS was $.05. Adjusted Q1 EPS was $.21, up 50.00% from last year and matching consensus. Also driving the stock was news that analyst firm Collins Stewart had upgraded BPHX to a $20 target price, citing its growth and robust pipeline.
Though backlog continues to grow at an impressive rate, the company’s challenge remains on the service side, as headcount does not seem to be in proportion with growth due to hiring costs. However, organic growth is expected to increase from $80M last year to $100-$107M this year from TIS, a company it acquired to get mainframe access in India, which originally acted as a subcontractor to the company in a major deal it booked and shared revenues with.
During today’s conference call, the company reported a current backlog of $109M, which refers to a period of 12-18 months, up from last quarter’s $105M, and $85M from the quarter a year ago. Q1 was also a record high for pilots in the pipeline, as it did eight pilots for customers in Europe and in the U.S. that could add seven figures and up. Said CEO Arik Kilman, “We’re seeing a big move in this industry, especially with growth from potential partners, and we’ll announce some of them in the next three months.”
The company normally has many pilots in its pipeline, but what makes these new pilots different is the magnitude of the dollar value. Said Kilman, “We’re now we’re taking big pilots, and the reason is tied to the current macro environment where companies are trying to cut costs by moving away from their mainframe and central computer. New pilots to .Net will be able to perform as well as their original mainframe, so this trend leads to a much higher level of pilots than what we had last year or in Q1.”
As a result of a previous acquisition, the company has also expanded its partnership with Microsoft, as solution providers continue to move their applications to the .NET platform. Said Kilman, “We’re seeing lots of interest with solution providers who are interested in expanding their applications to .NET platform in order to sell more solutions to customers who have .NET, which is much larger target audiance. We’re on of the few company’s in the market succeeding in taking customers from their mainframes to .NeT, so the with expansions to .Net, coupled with increased market trends of companies downsizing mainframes to .NET, Microsoft has become significantly more interested in the prospects of working with us. This involves joint marketing at a different level, and more of their people are involved in sales cycles for technical assistance. Our confidentiality agreement, however, prevents us from getting too much into the details.”
Despite weakness in the financial sector, the company reports seeing no slowdown in services. This quarters financial breakdown shows 65% of total revenues came from financial institutions, and its exposure to U.S.-based investment services accounted for approximately 7% of revenue. By segment, Software was 5%, services 82%, and maintenance was 13%. Software represented a big decline from past quarters in total revenue, but the company stated that it has changed the way it will be recognized by focusing on higher margin business. “We cannot separate software and services, so definitions will change materially.”
Materially affected by 2 cents a share in Q1 was the company’s 2008 outlook, which it gave last August when the dollar was worth 4.3 sheckels. By December, it fell to 3.85, and currently holds at 3.45. Said Kilman, “The rate was higher during guidance, so unless the dollar strengthens, we’ll continue to see an impact on results throughout the year. Based on current Dollar/Shekel exchange rates, we expect revenues to grow and to be in the range of $101M-$107M, with profitability of $1.00-$1.05 earnings per share on a non-GAAP basis.”
Visit 1800blogger to see all of our industry leading blogs.
Topics: Uncategorized |
Comments
« Knobias Clip Report (5-1-2008) | Home | Market Scan for Small Cap Stocks on May 2, 2008 »
