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 ------- -------
SOURCE Magic Software Enterprises Ltd