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Magic Reports Second Quarter 2013 Results with Revenues of $34.8 Million, an Increase of 24% Year over Year and Non-GAAP Operating Income of $4.7 Million

August 7, 2013

Revenues for the first half increased 17% year over year to $68.2 million; Non-GAAP operating income for the first half increased 10% to $9.9 million

OR YEHUDA, Israel, Aug. 7, 2013 /PRNewswire/ — Magic Software Enterprises Ltd. (NASDAQ and TASE: MGIC), a global provider of mobile and cloud-enabled application and business integration platforms, announced today its financial results for the six months and quarter ended June 30, 2013.

Financial Highlights for the Second Quarter Ended June 30, 2013

  • Revenues for the second quarter increased 24% year over year to $34.8 million from $28.0 million.
  • Non-GAAP operating income for the second quarter increased 8% to $4.7 million, compared to $4.3 million in the same period last year. Operating income increased 7% to $4.1 million, compared to $3.8 million in the same period last year.
  • Non-GAAP net income for the second quarter decreased 7% to $3.8 million, compared to $4.1 million in the same period last year. Net income decreased 3% to $3.5 million (or $0.09 per fully diluted share) compared to $3.6 million (or $0.10 per fully diluted share) in the same period last year. The decrease in net income was mainly attributable to an increase in tax expenses recorded for the second quarter.

Financial Highlights for the Six-Month Period Ended June 30, 2013

  • Revenues for the first half of 2013 increased 17% to $68.2 million compared to $58.1 million in the same period last year.
  • Non-GAAP operating income for the first half of 2013 increased 10% to $9.9 million compared to $9.0 million in the same period last year; Operating income for the first half of 2013 increased 8% to $8.7 million compared to $8.0 million in the same period last year.
  • Non-GAAP net income for the first half of 2013 decreased 7% to $8.0 million compared to $8.6 million in the same period last year. Net income for the first half of 2013 decreased 10% to $7.0 million (or $0.19 per fully diluted share) compared to $7.8 million (or $0.21 per fully diluted share) in the same period last year. The decrease in net income was mainly attributable to tax expenses recorded with respect to utilization of deferred tax assets. In accordance with U.S. generally accepted accounting principles, the Company records deferred tax expenses on utilization of carry-forward tax losses.
  • Operating cash flow for the first half of 2013 totaled approximately $11 million.
  • Total net cash, cash equivalents and short-term investments as of June 30, 2013, amounted to $39.3 million.

Comments of Management

Guy Bernstein, Chief Executive Officer of Magic Software Enterprises, said, “I am very pleased to report that Magic maintained double-digit growth momentum through the first half of 2013 with strong performance across our products and professional services in all regions. We continue to win new and repeat business and expand our professional service activities, and are happy with the steady improvements in our European and Japanese markets.”

“By helping our customers transition to enterprise mobility and maximize revenues, competitiveness and operational efficiencies through integration of their enterprise systems, Magic is well-positioned to increase the value for our shareholders today and in the future,” added Bernstein.

Non-GAAP Financial Measures

This release includes non-GAAP operating income, net income, basic and diluted earnings per share and other non-GAAP financial measures. These non-GAAP measures exclude the following items:

  • Amortization of purchased intangible assets;
  • In-process research and development capitalization and amortization;
  • Equity-based compensation expense;
  • Unwinding of discounts in connection with liabilities due to acquisitions; and
  • Related tax effects of the above items.

Magic Software’s management believes that the presentation of non-GAAP measures provides useful information to investors and management regarding financial and business trends relating to the Company’s financial condition and results of operations as well as the net amount of cash generated by its business operations after taking into account capital spending required to maintain or expand the business.

These non-GAAP financial measures are not in accordance with, or an alternative for, generally accepted accounting principles and may be different from non-GAAP financial measures used by other companies. In addition, these non-GAAP financial measures are not based on any comprehensive set of accounting rules or principles. Magic Software believes that non-GAAP financial measures have limitations in that they do not reflect all of the amounts associated with Magic Software’s results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate Magic Software’s results of operations in conjunction with the corresponding GAAP measures.

Refer to the Reconciliation of Selected Financial Metrics from GAAP to Non-GAAP tables below.

About Magic Software Enterprises

Magic Software Enterprises Ltd. (NASDAQ and TASE: MGIC) is a global provider of mobile and cloud-enabled application and business integration platforms.

For more information, visit www.magicsoftware.com.

Press Contact:
Tania Amar, VP Global Marketing
Magic Software Enterprises
Tel: +972 (0)3 538 9300
tania@magicsoftware.com

Except for the historical information contained herein, the matters discussed in this news release include forward-looking statements that may involve a number of risks and uncertainties. Actual results may vary significantly based upon a number of factors including, but not limited to, risks in product and technology development, market acceptance of new products and continuing product conditions, both here and abroad, release and sales of new products by strategic resellers and customers, and other risk factors detailed in the Company’s most recent annual report and other filings with the Securities and Exchange Commission. These forward-looking statements are made only as of the date hereof, and the Company undertakes no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise.

Magic is a registered trademark of Magic Software Enterprises Ltd. All other product and company names mentioned herein are for identification purposes only and are the property of, and might be trademarks of, their respective owners.


    MAGIC SOFTWARE ENTERPRISES LTD.

    CONSOLIDATED STATEMENTS OF INCOME

    U.S. dollars in thousands (except
     per share data)

                                            Three months      Six months
                                                ended            ended

                                              June 30,         June 30,
                                              --------         --------

                                            2013       2012    2013       2012
                                            ----       ----    ----       ----

                                              Unaudited        Unaudited
                                              ---------        ---------

    Revenues                              34,756     28,030  68,170     58,072

    Cost of Revenues                      20,965     16,101  40,855     33,018
                                          ------     ------  ------     ------

    Gross profit                          13,791     11,929  27,315     25,054
                                          ------     ------  ------     ------

    Research and
     development, net                        919        336   1,802      1,242

    Selling, marketing and general and

        administrative
         expenses                          8,805      7,790  16,805     15,784

    Total operating
     costs and
     expenses                              9,724      8,126  18,607     17,026
                                           -----      -----  ------     ------

    Operating income                       4,067      3,803   8,708      8,028
                                           -----      -----   -----      -----

    Financial
     expenses, net                           122        234     520        198

    Other income, net                          -         67       -         67
                                             ---        ---     ---        ---

    Income before
     taxes on income                       3,945      3,636   8,188      7,897

    Taxes on income                          282         23     777         67

    Net income                             3,663      3,613   7,411      7,830

    Change in
     redeemable non-
     controlling
     interests                              (122)         -    (142)         -

    Net income
     attributable to
     non-controlling
     interests                               (60)        (9)   (268)       (15)
                                             ---        ---    ----        ---

    Net income
     attributable to
     Magic's
     shareholders                          3,481      3,604   7,001      7,815

    Net earnings per share

    Basic                                   0.10       0.10    0.19       0.21

    Diluted                                 0.09       0.10    0.19       0.21

    Weighted average number of shares
     used in

         computing net earnings per share

            Basic                         36,722     36,503  36,691     36,458
                                          ======     ======  ======     ======

                                                  .

            Diluted                       37,243     37,170  37,165     37,170
                                          ======     ======  ======     ======

    MAGIC SOFTWARE ENTERPRISES LTD.

    RECONCILIATION BETWEEN GAAP AND NON-GAAP

    STATEMENTS OF INCOME FOR COMPARATIVE PURPOSES

    U.S. dollars in thousands (except per share data)

                                                             Three months ended       Six months
                                                                                           ended

                                                                  June 30,             June 30,
                                                                  --------             --------

                                                                2013           2012    2013        2012
                                                                ----           ----    ----        ----

                                                                  Unaudited            Unaudited
                                                                  ---------            ---------

    GAAP operating income                                      4,067          3,803   8,708       8,028

    Amortization of capitalized software and other             1,821          1,471   3,528       2,893
       intangible assets

    Capitalization of software development                    (1,290)        (1,091) (2,500)     (2,213)

    Stock-based compensation                                      92            143     185         297
                                                                 ---            ---     ---         ---

    Total adjustments to GAAP                                    623            523   1,213         977

    Non-GAAP operating income                                  4,690          4,326   9,921       9,005
                                                               -----          -----   -----       -----

    GAAP net income                                            3,481          3,604   7,001       7,815

    Amortization of capitalized software and other             1,821          1,471   3,528       2,893
       intangible assets

    Capitalization of software development                    (1,290)        (1,091) (2,500)     (2,213)

    Stock-based compensation                                      92            143     185         297

    Unwinding of discount in connection with liabilities due       8              -     215           -
       to acquisitions

    Amortization expenses attributed to redeemable               (30)             -     (60)          -
      non-controlling interests

    Taxes on the above items                                    (290)           (63)   (337)       (157)

    Total adjustments to GAAP                                    311            460   1,031         820

    Non-GAAP net income                                        3,792          4,064   8,032       8,635
                                                               =====          =====   =====       =====

    Non-GAAP basic net earnings per share                       0.10           0.11    0.22        0.24
                                                                ====           ====    ====        ====

    Weighted average number of shares used in

       computing basic net earnings per share                 36,722         36,503  36,691      36,458
                                                              ------         ------  ------      ------

    Non-GAAP diluted net earnings per share                     0.10           0.11    0.22        0.23
                                                                ====           ====    ====        ====

    Weighted average number of shares used in

       computing diluted net earnings per share               37,293         37,286  37,221      37,293
                                                              ------         ------  ------      ------
    MAGIC SOFTWARE ENTERPRISES LTD.

    CONSOLIDATED BALANCE SHEETS

    U.S. dollars in thousands

                                         June 30,        December 31,
                                         --------        ------------

                                                    2013              2012
                                                    ----              ----

                                        Unaudited           Audited
                                        ---------           -------

    ASSETS

    CURRENT ASSETS:

    Cash and cash equivalents                     38,469            37,744

    Available-for-sale marketable
     securities                                      866               890

    Trade receivables, net                        30,048            28,367

    Other accounts receivable and
     prepaid expenses                              5,606             6,696

    Total current assets                          74,989            73,697
    --------------------                          ------            ------

    LONG-TERM RECEIVABLES:

    Severance pay fund                               407               351

    Other long-term receivables                    3,673             2,287
                                                   -----             -----

    Total long-term receivables                    4,080             2,638
    ---------------------------

    PROPERTY AND EQUIPMENT, NET                    1,927             1,898

    IDENTIFIABLE INTANGIBLE ASSETS AND

    GOODWILL, NET                                 80,160            74,721
                                                  ------            ------

    TOTAL ASSETS                                 161,156           152,954
                                                 =======           =======

    LIABILITIES AND EQUITY

    CURRENT LIABILITIES:

    Trade payables                                 4,286             4,722

    Accrued expenses and other accounts
     payable                                      18,100            17,335

    Deferred tax liabilities                       2,774             3,422

    Deferred revenues                              9,040             4,160

    Total current liabilities                     34,200            29,639
    -------------------------                     ------            ------

    NON CURRENT LIABILITIES:

    Long term liabilities                          1,877               750

    Liability due to acquisition
     activities                                    1,331             1,192

    Accrued severance pay                          1,251             1,245
                                                   -----             -----

    Total non-current liabilities                  4,459             3,187
    -----------------------------                  -----             -----

    Redeemable non-controlling interest            2,302             1,931

    EQUITY:

    Magic Shareholders' equity                   119,587           117,786

    Non-controlling interests                        608               411
                                                     ---               ---

    Total equity                                 120,195           118,197
    ------------

    TOTAL LIABILITIES AND EQUITY                 161,156           152,954
                                                 =======           =======

SOURCE Magic Software Enterprises Ltd.


Source: PR Newswire