Conversion Services International Reports Third Quarter Gross Profit Soars 26%

—Third Quarter Operating Expenses Decline More than 35% Year Over Year—

EAST HANOVER, N.J. (November 15, 2007)-- Conversion Services International, Inc. (AMEX: CVN), a premier professional services firm focused on business intelligence and business process optimization solutions to Global 2000 organizations and other businesses, today announced its third quarter and nine month financial results for the period ended September 30, 2007.

FINANCIAL HIGHLIGHTS THIRD QUARTER 2007

• Operating loss declined 70.6% year over year
• Gross profit rose 26.8% year over year
• Operating expenses fell 35.3%
• Gross profit from services climbed  to 29.5% from 19.8% -- an increase of 49%

FINANCIAL HIGHLIGHTS THROUGH SEPTEMBER 2007

• Operating loss declined 28.1%
• Gross profit from services rose to 25.4% from 22.3% -- an increase of 13.9%
• Operating expenses fell 17.7%

Scott Newman, president and CEO of Conversion Services International, stated, “The financial results for the third quarter and nine months to September 30, 2007, show that we are making substantial progress in reducing costs and improving our margins.  In the third quarter, we saw a marked improvement in operating expenses, which fell 35.3%, and better margins have boosted gross profit 26.8%.  Combined, these efforts have reduced our operating loss by over 70% compared with last year’s third quarter.  Overall, our loss from operations, after adjusting out non-cash charges which consist of depreciation, amortization, impairment charges for goodwill and intangible assets, and stock compensation charges, of $329,670 declined by $845,019 from last year’s third quarter loss from operations, as adjusted for the same non-cash charges, of $1,174,689. 

“I think that the case becomes even clearer when we look at consecutive quarters.  The reduction in loss from operations from June 30, 2007 to September 30, 2007 was 56.5%.  Loss from operations, after adjusting out the same non-cash charges, declined by $185,211, or 36.0% from second quarter 2007’s adjusted loss from operations of $514,881.  Also, gross profit was up 11%.  The percentage of gross profit from services, including related party services, grew to 29.5% from 25.1%, a 17.5% increase in the gross profit percentage derived from services.  Clearly, things have not only turned around, but they are accelerating toward bottom-line success.”

“What is most significant is the improved margins we are deriving from newer, bigger clients.  We have hired more sales people to pursue these opportunities, and we expect to grow the sales staff by an additional 20% before year’s end.  In addition, we have refined our service offerings to better address the needs of our clients — holistically focusing on business intelligence and business process optimization — eliminating some of the less lucrative options.  As a result, we generated 30.1% of our third quarter 2007 revenues from business with clients who did not have relationships with us in third quarter 2006.  This enhanced business mix provides our clients with full, end-to-end solutions and is likely to continue to improve into 2008.”

He concluded, “Our business mix will continue to evolve, with an increase expected for business intelligence/data warehousing and for strategic consulting – which naturally includes business process optimization—providing clients with both the business intelligence solutions to make strategic business decisions, as well as the ability to act upon those decisions enhancing competitiveness.  In the nine months ending September 30, 2007, CSI has seen a marked increase in the number of engagements booked over the same time last year, with business including strategy and assessments, as well as repeat business with our highly-qualified technical and project management professionals.  These engagements cover the gamut from financial services and insurance to industrial manufacturing, from retail to business services, and from media and publishing to pharmaceutical and life sciences industries, as well as public sector, energy and utilities organizations, further establishing our recognition and presence in these markets.”

THREE MONTH FINANCIAL RESULTS

Revenues of $5.5 million for the quarter decreased by $0.6 million, or 10.0%, as compared to revenues of $6.1 million for the three months ended September 30, 2006.  Cost of revenue was $4.0 million, or 73.3% of revenue for the three months ended September 30, 2007, representing a decrease of $0.9 million, or 18.6%, as compared to $4.9 million, or 81.1% of revenue for the three months ended September 30, 2006.

Gross profit for third quarter 2007 reached $1.45 million up more than $300,000, or 26.8%, against 2006’s third quarter gross profit of $1.15 million.  Operating expenses in third quarter 2007 dropped $1.1 million, or 35.3%, to $2.05 million compared with operating expenses of $3.17 million in third quarter 2006.  The operating loss shrank to $595,083 in third quarter 2007 from $2.02 million in the same period prior year – a reduction of 70.6%.

For third quarter 2007, the Company reported net loss attributable to common stockholders of $958,426, or $0.01 per fully diluted share.  This represents a 53.9% reduction in net loss attributable to common stockholders compared with third quarter 2006’s $2.08 million, or $0.04 per fully diluted share.

NINE MONTH FINANCIAL RESULTS

For the nine months ended September 30, 2007, revenues decreased 15.5% to $16.5 million, as compared to revenues of $19.5 million for the nine months ended September 30, 2006. Cost of revenue was $12.6 million, or 76.2% of revenue for the nine months ended September 30, 2007, representing a decrease of $2.8 million, or 18.0%, as compared to $15.4 million, or 78.6% of revenue for the nine months ended September 30, 2006.

Gross profit of $3.9 million for the nine months to September 30, 2007, declined from $4.19 million for the same period in the prior year.  Nine month operating expenses fell more than $1.5 million to $7.28 million compared with operating expenses of $8.85 million for the nine months ended September 30, 2006.  The operating loss declined to $3.35 million in the nine months to September 30, 2007 from $4.66 million for the same period in the prior year.

For the first nine months of 2007, the Company reported net loss attributable to common stockholders of $8.0 million, or $0.13 per fully diluted share, compared with a loss attributable to common stockholders of $8.50 million, or $0.17 per fully diluted share, for the first nine months of 2006.

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