Magic Software Reports Financial Results for Q1 2008
Sharp Rise in Cash & Equivalents to $32 million; 9% Revenue Growth with
Continued Strong Gross Margin
Ra'anana, Israel, 22 May 2008 - Emblaze Ltd (LSE:BLZ) announces that Magic
Software Enterprises Ltd. (NASDAQ: MGIC), a member of the Emblaze / Formula
Group (NASDAQ: FORTY and TASE: FORT), and a leading provider of business
integration, application development and deployment tools, today announced
financial results for the first quarter ended March 31, 2008.
Results for the First Quarter
* Revenues for the first quarter increased by 9% to $US15.1 million compared
with $US13.8 million in the first quarter of 2007. Gross margin for the
quarter rose to 55% from 51% in the first quarter of 2007.
* On the basis of U.S. GAAP, net profit for the quarter totaled $US52,000, or
$US0.0 per share. This compared with a net profit of $US1.0 million, or
$US0.03 per share, for the first quarter of 2007, which included a $US0.5
million contribution from discontinued operations.
* GAAP results include amortization expense as well as non-cash charges taken
for the capitalization of intangible assets and stock-based compensation.
Excluding these expenses, non-GAAP net profit for the quarter was $US0.3
million, or $US0.01 per share compared to $Us0.6 million, or $0.03 per
share, in the first quarter of 2007.
* As of the end of the quarter, Magic's net cash equivalents (including cash,
short term bank deposits and marketable securities) totaled $US32.2million
compared to $US16.4 million at the end of the fourth quarter of 2007. The
increase reflected the contribution of approximately $US4 million from
Magic's operations, with the remainder derived from the payment received in
respect of Magic's sale of its wholly-owned subsidiary, Advanced Answers On
Demand (AAOD) in the fourth quarter of 2007. In accordance with U.S. GAAP,
AAOD's results have been recorded as discontinued operations in the first
quarter of 2007, with operating results excluding AAOD's contribution.
Comments of Management
Commenting on the results, Guy Bernstein, Active Chairman of Magic Software
Enterprises, said, "Our first quarter results represent a solid beginning for
2008. Our divestment of AAOD in the fourth quarter has strengthened our cash
position significantly while allowing us to increase our focus on core
activities.
On the product development front, we have just announced our exciting Rich
Internet Application Platform, a comprehensive platform designed to accelerate
the development of complex, advanced-functionality client/server and rich
internet applications. We have also been active in the Software-as-a-Service
(SaaS) field, a market niche that has entered a rapid growth phase. We
officially entered this market a few weeks ago at Dreamforce Europe when we
launched a special edition of our flagship iBOLT business integration solution
for Salesforce.com users, a significant market on its own."
Highlights of the First Quarter
* Announcement of the application development roadmap for Magic's
next-generation eDeveloper composite application platform.
* Introduction of iBOLT for Salesforce.com, Magic's first offering for the
Software-as-a-Service (SaaS) market. Introduced at Dreamforce Europe 2008
conference.
Non-GAAP Financial Measures
This release includes non-GAAP basic and diluted earnings per share and other
non-GAAP financial measures, including cost of service, research and
development, selling, general and administrative, operating income, income
taxes and net income. These non-GAAP measures exclude the following items:
* Amortization of purchased intangible assets;
* In-process research and development capitalization and;
* Equity-based compensation expense.
Magic's management believes that the presentation of non-GAAP measures provide
useful information to investors and management regarding financial and business
trends relating to Magic'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.
For its internal budgeting process and in monitoring the results of the
business, Magic's management uses financial statements that do not include
amortization of purchased intangible assets, in-process research and
development capitalization and equity-based compensation expense. Magic's
management also uses the foregoing non-GAAP financial measures, in addition to
the corresponding GAAP measures, in reviewing Magic's financial results.
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 believes that non-GAAP financial measures
have limitations in that they do not reflect all of the amounts associated with
Magic's results of operations as determined in accordance with GAAP and that
these measures should only be used to evaluate Magic'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.
Enquiries:
Emblaze
Hadas Gazit, Hagit Gal + 972 9 7699302/ 339
About Magic Software
Magic Software Enterprises Ltd. (NASDAQ: MGIC) is a leading provider of
business integration, application development and deployment tools. Magic
Software has a presence in over 50 countries as well as a global network of
ISV's, system integrators, value-added distributors and resellers, and OEM
partners. The company's award-winning code-free solutions give partners and
customers the power to leverage existing IT resources, enhance business agility
and focus on core business priorities. Magic Software's technological approach,
product roadmap and corporate strategy are recognized by leading industry
analysts. Magic Software has partnerships with global IT leaders including SAP,
salesforce.com, IBM and Oracle. For more information about Magic Software
Enterprises and its products and services, visit www.magicsoftware.com.
Magic Software is a subsidiary of Formula Systems in the Emblaze Group of
companies.
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.
About Emblaze
Emblaze Ltd is a group of technology companies addressing both growth and
innovation activities thus combining the stability of "bread and butter" mature
technology enterprises with "high-risk / high-reward" investments in
innovation.
Our Growth arm includes Formula Systems (NASDAQ: FORTY and TASE: FORT), which
harbors the following subsidiaries: Magic Software Enterprises Ltd. (NASDAQ &
TASE: MGIC) develops, markets and supports composite application development
and deployment platforms with a service-oriented architecture (SOA), including
application integration and business process management (BPM), with existing
and legacy systems; Matrix IT Ltd. (TASE: MTRX) is one of Israel's leading
integration and information technology services companies, active in four
principal areas: software solutions and services, software products,
infrastructure solutions and hardware products, and training and assimilation.;
Sapiens International Corporation N.V. (NASDAQ & TASE: SPNS) is a provider of
IT solutions that modernize business processes to enable insurance and other
companies to quickly adapt to changes; and nextSource Inc., designs, develops
and implements web-based, high quality, innovative human capital management
solutions.
Our Innovation arm includes Emblaze Mobile, a designer of advanced mobile
devices; EMOZE, a provider of Push Email and synchronisation technology for
mobile devices; and ZONE-IP (LSE: ZIP) (Emblaze V CON), a provider of wireless
video communications technologies and conferencing solutions for operators and
enterprise markets over IP networks.
The Emblaze Group is traded on the London Stock Exchange (LSE: BLZ) since 1996.
www.Emblaze.com
Magic Software Enterprises Ltd
Consolidated Statements of Operations
(In thousandsof U.S. dollars, except per share data)
Three months ended
March 31,
2008 2007
(unaudited) (unaudited)
Sales 15,069 13,831
Cost of sales 6,785 6,766
Gross profit 8,284 7,065
Software development costs, net 560 626
Selling, general and administrative 7,860 5,971
expenses
Total operating expenses 8,420 6,597
Operating income (loss) (136) 468
Financial income, net 180 106
Other income, net 39 25
Income before taxes 83 599
Taxes on income 23 142
60 457
Equity gain (loss) (8) 10
Net income before discontinued 52 467
operation
Net income from discontinued operation 0 537
Net income after discontinued 52 1,004
operation
Basic net earnings per ordinary share 0 0.03
Diluted net earnings per ordinary 0 0.03
share
Weighted average number of 31,763 31,306
ordinary shares used in
computing basic net earnings
per ordinary share
Weighted average number of 32,001 31,990
ordinary shares used in
computing diluted net earnings
per ordinary share
Magic Software Enterprises Ltd
RECONCILIATION OF GAAP TO NON-GAAP RESULTS
(In thousandsof U.S. dollars, except per share data)
Three months ended
March 31,
2008 2007
(unaudited) (unaudited)
GAAP operating income (loss) (136) 468
Amortization of intangibles 578 822
Capitalization of software (856) (764)
development
Stock-based compensation 491 34
Total adjustments to GAAP 213 92
Non-GAAP operating income (loss) 77 560
GAAP net income (loss) before 52 468
discontinued operation
Total adjustments to GAAP as above 213 92
Non-GAAP net income (loss) before 265 560
discontinued operation
GAAP net income (loss) 52 1,004
Total adjustments to GAAP as above 213 92
Non-GAAP 265 1,096
Non-GAAP basic earnings 0.01 0.04
per share
Weighted average number of 31,763 31,306
ordinary shares used in
computing basic net earnings
per ordinary share
Non-GAAP diluted earnings per 0.01 0.03
share
Weighted average number of 32,001 31,990
ordinary shares used in
computing diluted net earnings
per ordinary share
Magic Software Enterprises Ltd
Consolidated Balance Sheets
(In thousandsof U.S. dollars)
As of As of
March 31, December 31,
2008 2007
(unaudited) (unaudited)
ASSETS
Current Assets
Cash and cash equivalents 29,139 12,178
Short term bank deposits 102 89
Marketable securities 2,994 4,090
Trade accounts receivable 13,591 12,941
Other receivables and prepaid 2,824 2,010
expenses
Debtors from a subsidiaries sale 16,000
Current assets of discontinued 35 41
operations
Total Current Assets 48,685 47,349
Non-Current Assets
Severance pay fund 2,093 1,925
Long term deposits 511 472
Investment in affiliated companies 119 127
Fixed assets, net 5,755 5,758
Goodwill 16,514 15,986
Other assets, net 10,995 10,681
Total Non-Current Assets 35,987 34,949
Total Assets 84,672 82,298
Current Liabilities
Short-term credit from banks 175 3,621
Trade accounts payable 2,933 2,999
Accrued expenses and other 7,943 9,169
liabilities
Deferred Revenues 8,096 2,314
Current Liabilities of discontinued 465 503
operation
Total Current Liabilities 19,612 18,606
Non-Current Liabilities
Long-term loans 140 132
Accrued severance pay 2,330 2,316
Minority interests 4 -
Total Non-Current Liabilities 2,474 2,448
Shareholders' Equity 62,586 61,244
Total Liabilities and Shareholders' 84,672 82,298
Equity
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