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Magic Reports Second Quarter 2014 Results with Revenues Increasing 17% Year over Year to $40.6 Million, and Non-GAAP Operating Income Increasing 28% Year over Year to $6.0 Million

Revenues for the first half of 2014 increased 20% year over year to $81.6 million; Non-GAAP operating income for the first half increased 25% to $12.4 million

OR YEHUDA, Israel, Aug. 11, 2014 /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 second quarter ended June 30, 2014.

Financial Highlights for the Second Quarter Ended June 30, 2014

  • Revenues for the second quarter increased 17% year over year to $40.6 million from $34.8 million in the same period last year.
  • Operating income for the second quarter increased 26% to $5.1 million, compared to $4.1 million in the same period last year; Non-GAAP operating income for the second quarter increased 28% to $6.0 million, compared to $4.7 million in the same period last year.
  • Net income for the second quarter increased 11% to $3.9 million (or $0.09 per fully diluted share) compared to $3.5 million (or $0.09 per fully diluted share) in the same period last year; Non-GAAP net income for the second quarter increased 24% to $4.7 million, compared to $3.8 million in the same period last year.

Financial Highlights for the Six-Month Period Ended June 30, 2014

  • Revenues for the first half of 2014 increased 20% to $81.6 million compared to $68.2 million in the same period last year.
  • Operating income for the first half of 2014 increased 27% to $11.1 million compared to $8.7 million in the same period last year; Non-GAAP operating income for the first half of 2014 increased 25% to $12.4 million compared to $9.9 million in the same period last year.
  • Net income for the first half of 2014 increased 19% to $8.3 million (or $0.20 per fully diluted share) compared to $7.0 million (or $0.19 per fully diluted share) in the same period last year. Non-GAAP net income for the first half of 2014 increased 20% to $9.7 million compared to $8.0 million in the same period last year.
  • Operating cash flow for the first half of 2014 totaled approximately $12 million.
  • Total net cash, cash equivalents and short-term investments as of June 30, 2014, amounted to $92.8 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 second quarter and first half of 2014 with strong performance in sales and profitability across our products and professional services. We are further encouraged by the favorable reception for our latest enterprise mobility releases, offering user-experience enhancements and a component-based mobile accelerator framework."

"Our business visibility coupled with our well-diversified portfolio and global reach gives us the confidence to reassert our commitment to our previously announced revenue guidance of $161 million to $165 million for the full-year 2014," added Bernstein.

Conference Call Details

Magic's Management will host an interactive conference today, August 11, at 10:00am Eastern Time (7:00am Pacific Time, 17:00 Israel Time). On the call, management will review and discuss the results, and will also be available to answer investors' questions.

To participate, please call one of the following teleconferencing numbers. Please begin placing your calls at least 10 minutes before the conference call commences. If you are unable to connect using the toll-free numbers, call the international dial-in number.

NORTH AMERICA: 1.888.668.9141

UK: 0 800 917 5108

ISRAEL: 03.918.0650

INTERNATIONAL: +972.3.918.0650

For those unable to listen to the live call, a replay of the call will be available for three months from the day after the call under the investor relations section of Magic's website.

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;
  • Change in valuation of contingent consideration; and
  • The related tax effects of the above items.

Summary of Non-GAAP Financial Information

U.S. Dollars in thousands, except per share amounts














Three months ended 


Six months ended 





June 30,


June 30,





2014


2013


2014


2013





Unaudited


Unaudited

Non-GAAP











Revenues




$ 40,633


$ 34,756


$ 81,582


$ 68,170

Gross profit




16,740


14,900


34,457


29,446

Operating income




6,023


4,690


12,431


9,921

Net income attributable to Magic Software shareholders

4,715


3,792


9,677


8,032

Basic earnings per share




0.11


0.10


0.23


0.22

Diluted earnings per share




0.11


0.10


0.23


0.22

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.

Please 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.

Forward Looking Statements

Some of the statements in this press release may constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities and Exchange Act of 1934 and the United States Private Securities Litigation Reform Act of 1995. Words such as "will," "expects," "believes" and similar expressions are used to identify these forward-looking statements (although not all forward-looking statements include such words). These forward-looking statements, which may include, without limitation, projections regarding our future performance and financial condition, are made on the basis of management's current views and assumptions with respect to future events. Any forward-looking statement is not a guarantee of future performance and actual results could differ materially from those contained in the forward-looking statement. These statements speak only as of the date they were made, and we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. We operate in a changing environment. New risks emerge from time to time and it is not possible for us to predict all risks that may affect us. For more information regarding these risks and uncertainties as well as certain additional risks that we face, you should refer to the Risk Factors detailed in our Annual Report on Form 20-F for the year ended December 31, 2013 and subsequent reports and registration statements filed from time to time with the Securities and Exchange Commission.

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.

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

 

MAGIC SOFTWARE ENTERPRISES LTD. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

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





















Three months ended 


Six months ended 



June 30,


June 30,



2014


2013


2014


2013



Unaudited


Unaudited

Revenues


$  40,633


$  34,756


$  81,582


$  68,170

Cost of Revenues


24,965


20,965


49,272


40,855

Gross profit 


15,668


13,791


32,310


27,315

Research and development, net


1,220


919


2,400


1,802

Selling, marketing and general and









    administrative expenses


9,321


8,805


18,830


16,805

Total operating costs and expenses


10,541


9,724


21,230


18,607

Operating income 


5,127


4,067


11,080


8,708

Financial expenses, net


321


122


460


520

Income before taxes on income


4,806


3,945


10,620


8,188

Taxes on income


646


282


1,612


777

Net income


$    4,160


$   3,663


$    9,008


$   7,411

Net income attributable to non-controlling interests


(308)


(182)


(661)


(410)

Net income attributable to Magic Software's Shareholders


$    3,852


$   3,481


$    8,347


$   7,001










Net earnings per share attributable to 









   Magic Software's shareholders:









Basic 


$      0.09


$     0.10


$      0.20


$     0.19

Diluted


$      0.09


$     0.09


$      0.20


$     0.19










Weighted average number of shares used in 









     computing net earnings per share attributable to 









     Magic Software's shareholders:


















        Basic


44,158


36,722


42,407


36,691





.





        Diluted


44,470


37,243


42,563


37,165










 


























MAGIC SOFTWARE ENTERPRISES LTD. AND ITS SUBSIDIARIES

RECONCILIATION OF GAAP AND NON-GAAP RESULTS

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,






2014


2013


2014


2013






Unaudited


Unaudited













GAAP gross profit


$ 15,668


$ 13,791


$ 32,310


$ 27,315

Amortization of capitalized software


992


1,037


1,992


2,010

Amortization of other intangible assets


73


70


147


115

Stock-based compensation


7


2


8


6

Non-GAAP gross profit


$ 16,740


$ 14,900


$ 34,457


$ 29,446

























GAAP operating income


$   5,127


$   4,067


$ 11,080


$   8,708

Gross profit adjustments


1,072


1,109


2,147


2,131

Amortization of other intangible assets


857


714


1,693


1,403

Capitalization of software development


(1,142)


(1,290)


(2,241)


(2,500)

Change in valuation of contingent consideration


-


-


(400)


-

Stock-based compensation


109


90


152


179

Non-GAAP operating income


$   6,023


$   4,690


$ 12,431


$   9,921

























GAAP net income attributable to Magic Software's shareholders


$   3,852


$   3,481


$   8,347


$   7,001

Operating income adjustments


896


623


1,351


1,213

Unwinding of discount in connection with liabilities due to acquisitions


-


8


-


215

Amortization expenses attributed to redeemable non-controlling interests 


(37)


(30)


(74)


(60)

Deferred taxes on the above items


4


(290)


53


(337)

Non-GAAP net income attributable to Magic Software's shareholders


$   4,715


$   3,792


$   9,677


$   8,032

























Non-GAAP basic net earnings per share 









   attributable to Magic Software shareholders


0.11


0.10


0.23


0.22

Weighted average number of shares used in









   computing basic net earnings per share 


44,158


36,722


42,407


36,691













Non-GAAP diluted net earnings per share 









   attributable to Magic Software shareholders


0.11


0.10


0.23


0.22

Weighted average number of shares used in









   computing diluted net earnings per share


44,502


37,293


42,579


37,221













 

 

 

MAGIC SOFTWARE ENTERPRISES LTD. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands


June 30,


December 31,


2014


2013


Unaudited



       ASSETS








CURRENT ASSETS:




     Cash and cash equivalents

$        92,342


$         35,134

     Available-for-sale marketable securities

442


854

     Trade receivables, net

35,377


31,976

     Other accounts receivable and prepaid expenses

5,464


5,209

Total current assets

133,625


73,173





LONG-TERM RECEIVABLES:




    Severance pay fund

418


403

    Other long-term receivables

4,102


3,792

Total long-term receivables

4,520


4,195





PROPERTY AND EQUIPMENT, NET 

2,095


1,773

INTANGIBLE ASSETS AND GOODWILL, NET

87,208


87,862





TOTAL ASSETS

$      227,448


$       167,003





       LIABILITIES AND EQUITY








CURRENT LIABILITIES:




     Short-term debt

$          1,056


$           1,055

     Trade payables 

3,827


4,149

     Accrued expenses and other accounts payable  

15,095


16,937

     Deferred tax liability

1,641


2,567

     Deferred revenues 

8,303


3,294

Total current liabilities

29,922


28,002





NON-CURRENT LIABILITIES:




     Long-term debt

1,945


2,274

     Long-term deferred tax liabilty

2,235


2,204

     Liabilities due to acquisition activities

779


1,396

     Accrued severance pay     

1,358


1,275

Total non-current liabilities

6,317


7,149





REDEEMABLE NON-CONTROLLING INTEREST

3,184


2,721





SHAREHOLDERS' EQUITY:




   Magic Software Shareholders' equity

186,694


128,144

   Non-controlling interests

1,331


987

Total shareholders' equity

188,025


129,131


1331



TOTAL LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST AND EQUITY

$      227,448


$       167,003





 

 

 

SOURCE Magic Software Enterprises Ltd.

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