Magic Software Enterprises Ltd. (NASDAQ and TASE:
MGIC), a global provider of end-to-end integration and
application development platforms solutions and IT consulting
services, announced today its financial results for the first
quarter ended March 31, 2019.
Financial Highlights for the First
Quarter Ended March 31, 2019
- Revenues for the first quarter ended March 31, 2019 increased
3% to $71.8 million compared to $69.7 million in the same
period last year.
- Operating income for the first quarter ended March 31, 2019
increased 11% to $8.4 million compared to $7.6 million in the
same period last year.
- Non-GAAP operating income for the first quarter ended March 31,
2019 increased 4% to $10.1 million compared to
$9.7 million in the same period last year.
- Net income attributable to Magic's shareholders for the first
quarter ended March 31, 2019 increased 17% to $5.4 million, or
$0.11 per fully diluted share, compared to $4.6 million, or
$0.10 per fully diluted share in the same period last year.
- Non-GAAP net income attributable to Magic's shareholders for
the first quarter ended March 31, 2019 increased 8% to
$6.7 million, or $0.14 per fully diluted share, compared to
$6.2 million, or $0.14 per fully diluted share, in the same
period last year.
- Cash flow from operating activities
for the first quarter ended March 31, 2019
amounted to $10.7 million compared to $7.3 million
in the same period last year.
- As of March 31, 2019, Magic’s net cash, cash equivalents,
short and long-term bank deposits and marketable securities, offset
by financial liabilities, amounted to $80.9 million.
- Magic is reiterating its fiscal year 2019 guidance issued in
February for full year revenues of between $313 million to
$319 million on a constant currency basis, reflecting annual
growth of 10% to 12%.
Guy Bernstein, Chief Executive Officer of Magic Software
Enterprises, said:
“We are pleased to report that Magic had a
strong start to 2019, which demonstrates our continued impressive
momentum from previous year into 2019.”
“In keeping with our successful strategy, market
positioning and constant enrichment of our product offering with
new, powerful and innovative technologies, we are thrilled to
welcome PowWow’s SmartUX™, a leading low-code development platform
for mobilizing and modernizing enterprise apps. SmartUX™ has a
strong technology and paradigm synergy to Magic’s Low Code existing
solutions, and by bringing them together Magic is able to offer to
new and existing clients stronger solutions and services that are
well-tuned for today’s high demand for digital transformation in
the workplace.”
“We expect that our strong start, coupled with
our constant efforts to enhance our portfolio, both organically and
through acquisitions, will best serve our customers’ needs for
modern, efficient and effective operations.”
Conference Call Details
Magic’s management will host a conference call
on Thursday, May 16, at 10:00 am Eastern Daylight Time (7:00 am
Pacific Daylight Time, 17:00 Israel Daylight Time) to review and
discuss Magic’s results.
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: +1-888-668-9141UK: 0-800-917-5108ISRAEL:
03-918-0609ALL OTHERS: +972-3-918-0609
For those unable to join the live call, a replay of the call
will be available under the Investor Relations section of Magic’s
website, www.magicsoftware.com.
Non-GAAP Financial Measures
This press release contains the following non-GAAP financial
measures: Non-GAAP gross profit, Non-GAAP operating income,
Non-GAAP net income attributable to Magic’s shareholders and
Non-GAAP basic and diluted earnings per share.
Magic believes that these non-GAAP measures of financial results
provide useful information to management and investors regarding
certain financial and business trends relating to Magic's financial
condition and results of operations. Magic's management uses these
non-GAAP measures to compare the Company's performance to that of
prior periods for trend analyses, for purposes of determining
executive and senior management incentive compensation and for
budgeting and planning purposes. These measures are used in
financial reports prepared for management and in quarterly
financial reports presented to the Company's board of directors.
The Company believes that the use of these non-GAAP financial
measures provides an additional tool for investors to use in
evaluating ongoing operating results and trends and in comparing
the Company's financial measures with other software companies,
many of which present similar non-GAAP financial measures to
investors.
Management of the Company does not consider these non-GAAP
measures in isolation or as an alternative to financial measures
determined in accordance with GAAP. The principal limitation of
these non-GAAP financial measures is that they exclude significant
expenses and income that are required by GAAP to be recorded in the
Company's financial statements. In addition, they are subject to
inherent limitations as they reflect the exercise of judgment by
management about which expenses and income are excluded or included
in determining these non-GAAP financial measures. In order to
compensate for these limitations, management presents non-GAAP
financial measures in connection with GAAP results. Magic urges
investors to review the reconciliation of its non-GAAP financial
measures to the comparable GAAP financial measures, which it
includes in press releases announcing quarterly financial results,
including this press release, and not to rely on any single
financial measure to evaluate the Company's business.
Non-GAAP measures used in this press release are included in the
financial tables of this release. These non-GAAP measures exclude
the following items:
- Amortization of purchased intangible assets and other related
costs;
- In-process research and development capitalization and
amortization;
- Equity-based compensation expenses;
- The related tax, non-controlling interests and redeemable
non-controlling interests effects of the above items;
- Change in valuation of contingent consideration related to
acquisitions;
- Change in value of put options of redeemable non-controlling
interests;
- Change in deferred tax assets on carry forward tax losses;
Reconciliation tables of the most comparable GAAP financial
measures to the non-GAAP financial measures used in this press
release are included in the financial tables of this release.
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," “look
forward”, "expect," "believe" 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, 2018 and subsequent reports and filings made
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:
Amit Birk | VP M&A and General Counsel Magic Software
Enterprises ir@magicsoftware.com
MAGIC SOFTWARE ENTERPRISES
LTD.CONDENSED CONSOLIDATED STATEMENTS OF
INCOMEU.S. Dollars in thousands (except per share
data)
|
|
Three months
ended |
|
|
|
March 31, |
|
|
|
2019 |
|
|
2018 |
|
|
|
Unaudited |
|
Revenues |
|
$ |
71,800 |
|
|
$ |
69,726 |
|
Cost of Revenues |
|
|
49,508 |
|
|
|
46,512 |
|
Gross profit |
|
|
22,292 |
|
|
|
23,214 |
|
Research and
development, net |
|
|
1,546 |
|
|
|
1,521 |
|
Selling,
marketing and general and |
|
|
|
|
|
|
|
|
administrative expenses |
|
|
12,358 |
|
|
|
14,127 |
|
Total operating costs and expenses |
|
|
13,904 |
|
|
|
15,648 |
|
Operating income |
|
|
8,388 |
|
|
|
7,566 |
|
Financial
income (expenses), net |
|
|
(240 |
) |
|
|
198 |
|
Income before taxes on income |
|
|
8,148 |
|
|
|
7,764 |
|
Taxes on
income |
|
|
1,620 |
|
|
|
1,976 |
|
Net
income |
|
$ |
6,528 |
|
|
$ |
5,788 |
|
Net income
attributable to redeemable non-controlling interests |
|
|
(882 |
) |
|
|
(733 |
) |
Net income
attributable to non-controlling interests |
|
|
(293 |
) |
|
|
(476 |
) |
Net
income attributable to Magic's shareholders |
|
$ |
5,353 |
|
|
$ |
4,579 |
|
|
|
|
|
|
|
|
|
|
Net earnings
per share attributable to Magic's shareholders : |
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.11 |
|
|
$ |
0.10 |
|
Diluted |
|
$ |
0.11 |
|
|
$ |
0.10 |
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares used in |
|
|
|
|
|
|
|
|
computing net earnings per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
48,876 |
|
|
|
44,489 |
|
|
|
|
|
|
|
|
|
|
Diluted |
|
|
48,979 |
|
|
|
44,635 |
|
Summary of Non-GAAP Financial InformationU.S.
Dollars in thousands (except per share data)
|
|
Three months
ended |
|
|
|
March 31, |
|
|
|
2019 |
|
|
2018 |
|
|
|
Unaudited |
|
|
Unaudited |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
71,800 |
|
|
|
100 |
% |
|
$ |
69,726 |
|
|
|
100 |
% |
Gross
profit |
|
|
23,644 |
|
|
|
32.9 |
% |
|
|
24,565 |
|
|
|
35.2 |
% |
Operating income |
|
|
10,062 |
|
|
|
14.0 |
% |
|
|
9,707 |
|
|
|
13.9 |
% |
Net
income attributable to |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Magic's shareholders |
|
|
6,652 |
|
|
|
9.3 |
% |
|
|
6,151 |
|
|
|
8.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share |
|
$ |
0.14 |
|
|
|
|
|
|
$ |
0.14 |
|
|
|
|
|
Diluted earnings per share |
|
$ |
0.14 |
|
|
|
|
|
|
$ |
0.14 |
|
|
|
|
|
MAGIC SOFTWARE ENTERPRISES LTD.
RECONCILIATION OF GAAP AND
NON-GAAP RESULTS U.S.
Dollars in thousands (except per share data)
|
|
Three months
ended |
|
|
|
March 31, |
|
|
|
2019 |
|
|
2018 |
|
|
|
Unaudited |
|
|
|
|
|
|
|
|
GAAP gross profit |
|
$ |
22,292 |
|
|
$ |
23,214 |
|
Amortization
of capitalized software and acquired technology |
|
|
1,215 |
|
|
|
1,220 |
|
Amortization
of other intangible assets |
|
|
137 |
|
|
|
130 |
|
Stock-based
compensation |
|
|
- |
|
|
|
1 |
|
Non-GAAP
gross profit |
|
$ |
23,644 |
|
|
$ |
24,565 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP
operating income |
|
$ |
8,388 |
|
|
$ |
7,566 |
|
Gross profit
adjustments |
|
|
1,352 |
|
|
|
1,351 |
|
Amortization
of other intangible assets |
|
|
1,201 |
|
|
|
1,480 |
|
Increase in
valuation of contingent consideration |
|
|
|
|
|
|
|
|
related to acquisitions |
|
|
- |
|
|
|
104 |
|
Capitalization of software development |
|
|
(954 |
) |
|
|
(798 |
) |
Stock-based
compensation |
|
|
75 |
|
|
|
4 |
|
Non-GAAP
operating income |
|
$ |
10,062 |
|
|
$ |
9,707 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net
income attributable to Magic's shareholders |
|
$ |
5,353 |
|
|
$ |
4,579 |
|
Operating
income adjustments |
|
|
1,674 |
|
|
|
2,141 |
|
Amortization
expenses attributed to non-controlling interests |
|
|
|
|
|
|
|
|
and
redeemable non-controlling interests |
|
|
(308 |
) |
|
|
(383 |
) |
Deferred
taxes on the above items |
|
|
(67 |
) |
|
|
(186 |
) |
Non-GAAP net
income attributable to Magic's shareholders |
|
$ |
6,652 |
|
|
$ |
6,151 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
basic net earnings per share |
|
$ |
0.14 |
|
|
$ |
0.14 |
|
Weighted average number of shares used in |
|
|
|
|
|
|
|
|
computing basic net earnings per share |
|
|
48,876 |
|
|
|
44,489 |
|
|
|
|
|
|
|
|
|
|
Non-GAAP
diluted net earnings per share |
|
$ |
0.14 |
|
|
$ |
0.14 |
|
Weighted average number of shares used in |
|
|
|
|
|
|
|
|
computing diluted net earnings per share |
|
|
48,964 |
|
|
|
44,635 |
|
MAGIC SOFTWARE ENTERPRISES LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
U.S. Dollars in thousands
|
|
March 31, |
|
|
December 31, |
|
|
|
2019 |
|
|
2018 |
|
|
|
Unaudited |
|
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
CURRENT ASSETS: |
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
88,682 |
|
|
$ |
87,126 |
|
Short-term bank deposits |
|
|
9,466 |
|
|
|
16,881 |
|
Marketable securities |
|
|
9,140 |
|
|
|
9,913 |
|
Trade
receivables, net |
|
|
94,132 |
|
|
|
90,274 |
|
Other
accounts receivable and prepaid expenses |
|
|
8,178 |
|
|
|
7,029 |
|
Total current assets |
|
|
209,598 |
|
|
|
211,223 |
|
|
|
|
|
|
|
|
|
|
LONG-TERM RECEIVABLES: |
|
|
|
|
|
|
|
|
Severance pay fund |
|
|
3,349 |
|
|
|
3,284 |
|
Deferred tax assets |
|
|
1,923 |
|
|
|
1,858 |
|
Operating lease right-of-use assets |
|
|
11,453 |
|
|
|
- |
|
Other
long-term receivables |
|
|
6,169 |
|
|
|
6,363 |
|
Total long-term receivables |
|
|
22,894 |
|
|
|
11,505 |
|
|
|
|
|
|
|
|
|
|
PROPERTY AND
EQUIPMENT, NET |
|
|
3,232 |
|
|
|
3,072 |
|
IDENTIFIABLE
INTANGIBLE ASSETS AND |
|
|
|
|
|
|
|
|
GOODWILL, NET |
|
|
151,941 |
|
|
|
136,485 |
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
|
$ |
387,665 |
|
|
$ |
362,285 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES: |
|
|
|
|
|
|
|
|
Short-term debt |
|
$ |
8,809 |
|
|
$ |
8,661 |
|
Trade
payables |
|
|
14,571 |
|
|
|
14,036 |
|
Accrued expenses and other accounts payable |
|
|
23,565 |
|
|
|
24,458 |
|
Current maturities of operating lease liabilities |
|
|
3,534 |
|
|
|
- |
|
Liabilities due to acquisition activities |
|
|
861 |
|
|
|
910 |
|
Deferred revenues and customer advances |
|
|
8,588 |
|
|
|
4,857 |
|
Total current liabilities |
|
|
59,928 |
|
|
|
52,922 |
|
|
|
|
|
|
|
|
|
|
NON-CURRENT LIABILITIES: |
|
|
|
|
|
|
|
|
Long-term debt |
|
|
19,622 |
|
|
|
19,388 |
|
Deferred tax liability |
|
|
10,337 |
|
|
|
10,343 |
|
Long-term operating lease liabilities |
|
|
7,852 |
|
|
|
- |
|
Long-term liabilities due to acquisition activities |
|
|
9,317 |
|
|
|
94 |
|
Accrued severance pay |
|
|
4,304 |
|
|
|
3,934 |
|
Total non-current liabilities |
|
|
51,432 |
|
|
|
33,759 |
|
|
|
|
|
|
|
|
|
|
REDEEMABLE
NON-CONTROLLING INTERESTS |
|
|
27,841 |
|
|
|
27,235 |
|
|
|
|
|
|
|
|
|
|
EQUITY: |
|
|
|
|
|
|
|
|
Magic
Software Enterprises equity |
|
|
243,616 |
|
|
|
243,956 |
|
Non-controlling interests |
|
|
4,848 |
|
|
|
4,413 |
|
Total equity |
|
|
248,464 |
|
|
|
248,369 |
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES, REDEEMABLE NON-CONTROLLING INTERESTS AND
EQUITY |
|
$ |
387,665 |
|
|
$ |
362,285 |
|
MAGIC SOFTWARE ENTERPRISES LTD.
CONDENSED CONSOLIDATED STATEMENT OF CASH
FLOWS U.S. Dollars in
thousands
|
|
For the three months ended March 31, |
|
|
|
2019 |
|
|
2018 |
|
|
|
Unaudited |
|
|
Unaudited |
|
|
|
|
|
|
|
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
6,528 |
|
|
$ |
5,788 |
|
Adjustments to reconcile net income to net cash provided |
|
|
|
|
|
|
|
|
by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
2,850 |
|
|
|
3,163 |
|
Stock-based compensation |
|
|
75 |
|
|
|
5 |
|
Amortization of marketable securities premium |
|
|
|
|
|
|
|
|
and accretion of discount |
|
|
71 |
|
|
|
3 |
|
Increase in trade receivables, net |
|
|
(510 |
) |
|
|
(3,622 |
) |
Decrease (increase) in other long-term and short-term |
|
|
|
|
|
|
|
|
accounts receivable and prepaid expenses |
|
|
362 |
|
|
|
(525 |
) |
Increase (decrease) in trade payables |
|
|
(1,039 |
) |
|
|
1,713 |
|
Change in value of loans |
|
|
670 |
|
|
|
(375 |
) |
Decrease in accrued expenses and |
|
|
|
|
|
|
|
|
other accounts payable |
|
|
(1,856 |
) |
|
|
(2,842 |
) |
Increase in deferred revenues |
|
|
3,691 |
|
|
|
4,193 |
|
Change in deferred taxes, net |
|
|
(150 |
) |
|
|
(228 |
) |
Net cash provided by operating activities |
|
|
10,692 |
|
|
|
7,273 |
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capitalized software development costs |
|
|
(954 |
) |
|
|
(798 |
) |
Purchase of property and equipment |
|
|
(277 |
) |
|
|
(257 |
) |
Cash paid in conjunction with acquisitions, net of acquired
cash |
|
|
(6,538 |
) |
|
|
(2,980 |
) |
Proceeds from maturity and sale of marketable securities |
|
|
750 |
|
|
|
- |
|
Investment in marketable securities and short-term bank
deposits |
|
|
- |
|
|
|
(117 |
) |
Proceeds from bank deposits |
|
|
7,100 |
|
|
|
- |
|
Net cash provided by (used in) investing activities |
|
|
81 |
|
|
|
(4,152 |
) |
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from exercise of options by employees |
|
|
(12 |
) |
|
|
2 |
|
Dividend paid |
|
|
(7,335 |
) |
|
|
(5,956 |
) |
Dividend paid to redeemable non-controlling interests |
|
|
(1,027 |
) |
|
|
(706 |
) |
Short-term and long-term loans received |
|
|
8 |
|
|
|
546 |
|
Repayment of short-term and long-term loans |
|
|
(690 |
) |
|
|
(534 |
) |
Net cash used in financing activities |
|
|
(9,056 |
) |
|
|
(6,648 |
) |
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents |
|
|
(161 |
) |
|
|
192 |
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents |
|
|
1,556 |
|
|
|
(3,335 |
) |
Cash and cash equivalents at the beginning of the year |
|
|
87,126 |
|
|
|
76,076 |
|
Cash and cash equivalents at end of the year |
|
$ |
88,682 |
|
|
$ |
72,741 |
|
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