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Magic Delivers Record-Breaking Revenues of $65 Million for the Second Quarter With 38% Year-Over-Year Growth and Raises Guidance on Continued Business Momentum
[August 09, 2017]

Magic Delivers Record-Breaking Revenues of $65 Million for the Second Quarter With 38% Year-Over-Year Growth and Raises Guidance on Continued Business Momentum


OR YEHUDA, Israel, Aug 9, 2017 /PRNewswire/ -- Magic Software Enterprises Ltd. (NASDAQ: MGIC) (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, 2017.

Financial Highlights for the Second Quarter Ended June 30, 2017

  • Revenues for the second quarter increased 38% to $65.5 million compared to $47.4 million in the same period last year.
  • Operating income for the second quarter increased 19% to $6.3 million compared to $5.3 million in the same period last year. Non-GAAP operating income for the second quarter increased 37% to $9.0 million compared to $6.5 million in the same period last year.
  • Net income attributable to Magic's shareholders for the second quarter decreased 12% to $3.6 million, or $0.08 per fully diluted share, compared to $4.1 million, or $0.09 per fully diluted share in the same period last year. Non-GAAP net income attributable to Magic's shareholders for the second quarter increased 11% to $5.7 million, or $0.13 per fully diluted share, compared to $5.2 million, or $0.12 per fully diluted share, in the same period last year.

Financial Highlights for the Six-Month Period Ended June 30, 2017

  • Revenues for the first half of 2017 increased 37% to $126.2 million compared to $92.0 million in the same period last year.
  • Operating income for the first half increased 20% to $12.7 million compared to $10.6 million in the same period last year. Non-GAAP operating income for the first half of 2017 increased 31% to $17.4 million compared to $13.2 million in the same period last year.
  • Net income attributable to Magic's shareholders for the first half remained constant at $7.8 million, or $0.18 per fully diluted share, compared to $7.8 million, or $0.17 per fully diluted share in the same period last year. Non-GAAP net income attributable to Magic's shareholders for the first half increased 15% to $11.5 million, or $0.26 per fully diluted share, compared to $10.0 million, or $0.23 per fully diluted share, in the same period last year.
  • Cash flow from operating activities for the first half of 2017 amounted to $15.1 million compared to $15.6 million in the same period last year.
  • As of June 30, 2017, our net cash, cash equivalents, short-term bank deposits and available-for-sale marketable securities, offset by financial liabilities, amounted to $56.9 million.
  • Magic is raising its guidance for the 2017 fiscal year revenues to between $245 million and $255 million on a constant currency basis, up from prior guidance of $225 to $230 million, reflecting a revised annual growth rate of 22%-26%.

Guy Bernstein, Chief Executive Officer of Magic Software Enterprises, said:

"We are pleased to report another quarter with double-digit growth driven by a mix of organic growth and M&A, which is evidence that our continued efforts to create consistent growth and increased profits are paying off."

"Our strong implementation expertise combined with our product technology enables us to expand our knowledge and successfully deliver complex solutions to our long-term customers."

Conference Call Details

Magic's management will host a conference call today, August 9, 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: +1-888-281-1167
UK: 0-800-917-9141
ISRAEL: 03-918-0644
ALL OTHERS: +972-3-918-0644

For those unable to join the live call, a replay of the call will be available for at least three months, 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 attributed 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;
  • Increase in valuation of contingent consideration related to acquisitions;
  • Increase in value of put options of redeemable non-controlling interests.

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," "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, 2016 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:
Einav Greenboim, IR Representative
Magic Software Enterprises
einavg@magicsoftware.com











MAGIC SOFTWARE ENTERPRISES LTD. AND ITS SUBSIDIARIES







CONDENSED CONSOLIDATED STATEMENTS OF INCOME







U.S. Dollars in thousands (except per share amounts)

































Three months ended 


Six months ended 


June 30,


June 30,


2017


2016


2017


2016


Unaudited


Unaudited

Revenues

$       65,479


$    47,362


$     126,240


$    92,030

Cost of Revenues

44,718


31,150


85,779


60,378

Gross profit 

20,761


16,212


40,461


31,652

Research and development, net

1,907


1,212


3,523


2,475

Selling, marketing and general and








    administrative expenses

12,514


9,677


24,259


18,593

Total operating costs and expenses

14,421


10,889


27,782


21,068

Operating income 

6,340


5,323


12,679


10,584

Financial income (expenses), net

(595)


156


(822)


237

Income before taxes on income

5,745


5,479


11,857


10,821

Taxes on income

1,584


987


2,834


2,256

Net income

$        4,161


$      4,492


$        9,023


$      8,565

Net income attributable to redeemable non-controlling interests

(414)


(322)


(872)


(637)

Net income attributable to non-controlling interests 

(163)


(82)


(304)


(152)

Net income attributable to Magic's shareholders 

$        3,584


$      4,088


$        7,847


$      7,776









Net earnings per share








Basic 

$          0.08


$        0.09


$          0.18


$        0.17

Diluted

$          0.08


$        0.09


$          0.18


$        0.17









Weighted average number of shares used in 








     computing net earnings per share
















        Basic

44,432


44,344


44,410


44,341




.





        Diluted

44,593


44,511


44,576


44,502


 




















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, 



2017


2016


2017


2016




 Unaudited 


 Unaudited 


 Unaudited 


 Unaudited 





















 Revenues 


$     65,479


100%


$     47,362


100%


$     126,240


100%


$      92,030


100%



 Gross profit 


22,250


34.0%


17,479


36.9%


43,635


34.6%


34,158


37.1%



 Operating income 


8,978


13.7%


6,536


13.8%


17,359


13.8%


13,206


14.3%



 Net income attributable to  



















    Magic's shareholders 


5,749


8.8%


5,178


10.9%


11,478


9.1%


10,005


10.9%






















 Basic earnings per share 


$        0.13




$        0.12




$          0.26




$          0.23





 Diluted earnings per share 


$        0.13




$        0.12




$          0.26




$          0.23
































































 














MAGIC SOFTWARE ENTERPRISES LTD. AND ITS SUBSIDIARIES









RECONCILIATION OF GAAP AND NON-GAAP RESULTS









U.S. Dollars in thousands (except per share amounts)










































Three months ended 


Six months ended 







June 30,


June 30,







2017


2016


2017


2016







Unaudited


Unaudited















GAAP gross profit




$         20,761


$         16,212


$       40,461


$     31,652


Amortization of capitalized software and acquired technology


1,334


1,086


2,835


2,108


Amortization of other intangible assets



153


177


334


389


Stock-based compensation



2


4


5


9


Non-GAAP gross profit



$         22,250


$         17,479


$       43,635


$     34,158




























GAAP operating income



$           6,340


$          5,323


$       12,679


$     10,584


Gross profit adjustments



1,489


1,267


3,174


2,506


Amortization of other intangible assets



1,584


1,101


3,178


2,225


Increase in valuation of contingent consideration related to acquisitions

444


-


444


-


Capitalization of software development



(890)


(1,179)


(2,140)


(2,208)


Stock-based compensation



11


24


24


99


Non-GAAP operating income



$           8,978


$          6,536


$       17,359


$     13,206




























GAAP net income attributable to Magic's shareholders


$           3,584


$          4,088


$         7,847


$       7,776


Operating income adjustments



2,638


1,213


4,680


2,622


Amortization expenses attributed to redeemable non-controlling interests 

(367)


(128)


(765)


(258)


Deferred taxes on the above items



(106)


5


(284)


(135)


Non-GAAP net income attributable to Magic's shareholders


$           5,749


$          5,178


$       11,478


$     10,005




























Non-GAAP basic net earnings per share 



$             0.13


$            0.12


$           0.26


$         0.23


Weighted average number of shares used in











   computing basic net earnings per share 



44,432


44,344


44,410


44,341















Non-GAAP diluted net earnings per share 



$             0.13


$            0.12


$           0.26


$         0.23


Weighted average number of shares used in











   computing diluted net earnings per share



44,595


44,514


44,578


44,504




























 

 






MAGIC SOFTWARE ENTERPRISES LTD. AND ITS SUBSIDIARIES





CONDENSED CONSOLIDATED BALANCE SHEETS





U.S. Dollars in thousands











June 30,


December 31,



2017


2016



Unaudited









ASSETS





CURRENT ASSETS:





    Cash and cash equivalents 

$               87,294


$               75,314


    Short-term bank deposits

-


2


     Available-for-sale marketable securities

12,781


12,506


     Trade receivables, net

74,183


62,047


     Other accounts receivable and prepaid expenses

8,323


8,487


Total current assets

182,581


158,356







LONG-TERM RECEIVABLES:





    Severance pay fund

2,864


2,568


    Long-term deferred tax assets

3,893


3,548


    Other long-term receivables

1,989


1,680


Total long-term receivables

8,746


7,796







PROPERTY AND EQUIPMENT, NET 

3,479


3,065


IDENTIFIABLE INTANGIBLE ASSETS AND 





    GOODWILL, NET

149,773


147,182







TOTAL ASSETS

$             344,579


$             316,399







LIABILITIES AND EQUITY










CURRENT LIABILITIES:





     Short-term debt

$                 9,373


$                 5,645


     Trade payables 

8,631


8,393


     Accrued expenses and other accounts payable  

22,679


20,290


     Liabilities due to acquisition activities

2,279


6,478


     Deferred revenues 

8,487


3,882


Total current liabilities

51,449


44,688







NON-CURRENT LIABILITIES:





     Long-term debt

36,654


29,756


     Long-term deferred tax liability

12,918


12,494


     Liabilities due to acquisition activities

3,460


3,379


     Accrued severance pay     

3,827


3,443


Total non-current liabilities

56,859


49,072







REDEEMABLE NON-CONTROLLING INTERESTS

29,223


25,998







EQUITY:





   Magic Software Enterprises equity

206,548


196,218


   Non-controlling interests

500


423


Total equity

207,048


196,641







TOTAL LIABILITIES, REDEEMABLE NON-CONTROLLING INTERESTS AND EQUITY

$             344,579


$             316,399







 

 






MAGIC SOFTWARE ENTERPRISES LTD. AND ITS SUBSIDIARIES





CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS





U.S. Dollars in thousands






For the Six months ended



June 30,



2017


2016



Unaudited







Cash flows from operating activities:










Net income

$                 9,023


$                 8,565


Adjustments to reconcile net income from operations to





 net cash provided by operating activities:





Depreciation and amortization

6,891


5,205


Stock-based compensation

30


108


Amortization of marketable securities premium and accretion of discount

134


120


Gains reclassified into earnings from marketable securities

(106)


-


Decrease (increase) in trade receivables, net

(8,557)


36


Increase in other long-term and short-term accounts 

(1,376)


(1,987)


Increase (decrease) in trade payables

64


(127)


Change in value of loans and deposits, net

3,143


-


Increase (decrease) in accrued expenses and other accounts payable

1,495


(1,300)


Increase in deferred revenues

4,199


4,572


Change in deferred taxes, net

197


450


Net cash provided by operating activities 

15,137


15,642







Cash flows from investing activities:










Capitalized software development costs

(2,140)


(2,208)


Purchase of property and equipment

(872)


(397)


Cash paid in conjunction with acquisitions, net of acquired cash

(3,808)


(4,436)


Proceeds from maturity of marketable securities

2,225


800


Investment in marketable securities

(2,589)


(1,623)


Proceeds from short-term bank deposits

-


5,404


Repayment of short-term loan to a related-party

1,183


-


Change in loans to employees and other deposits, net

-


(49)


Investment in short-term bank deposit

-


(5,802)


Net cash used in investing activities 

(6,001)


(8,311)







Cash flows from financing activities:










Proceeds from exercise of options by employees

332


16


Dividend paid

(3,697)


(3,991)


Dividend paid to non-controlling interests in subsidiaries

(175)


(225)


Dividend paid to redeemable non-controlling interests in subsidiaries

(1,251)


-


Short-term credit, net

497


1,141


Purchase of non-controlling interest

-


(352)


Receipt of long-term loan from banks, net

6,235


-


Net cash provided by (used in) financing activities 

1,941


(3,411)







Effect of exchange rate changes on cash and cash equivalents 

903


(281)







Increase in cash and cash equivalents

11,980


3,639


Cash and cash equivalents at the beginning of the year

75,314


62,188


Cash and cash equivalents at the end of the period

$               87,294


$               65,827












 

View original content:http://www.prnewswire.com/news-releases/magic-delivers-record-breaking-revenues-of-65-million-for-the-second-quarter-with-38-year-over-year-growth-and-raises-guidance-on-continued-business-momentum-300501846.html

SOURCE Magic Software Enterprises Ltd


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