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, 2020.
Financial Highlights for the First Quarter Ended March
31, 2020
- Revenues for the first quarter
ended March 31, 2020 increased 19% to $85.2 million compared
to $71.8 million in the same period last year.
- Operating income for the first
quarter ended March 31, 2020 increased 4% to $8.7 million compared
to $8.4 million in the same period last year.
- Non-GAAP operating income for the
first quarter ended March 31, 2020 increased 9% to
$11.0 million compared to $10.1 million in the same
period last year.
- Net income attributable to Magic's
shareholders for the first quarter ended March 31, 2020 increased
9% to $5.9 million, or $0.12 per fully diluted share, compared
to $5.4 million, or $0.11 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, 2020
increased 41% to $9.4 million, or $0.19 per fully diluted
share, compared to $6.7 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, 2020
amounted to $13.1 million compared to
$10.7 million in the same period last year.
- As of March 31, 2020, Magic’s
net cash, cash equivalents, short and long-term bank deposits and
marketable securities, offset by financial liabilities, amounted to
$89.3 million.
- Due to the COVID-19 pandemic which
may cause delays in closing of new deals Magic is slightly
revising its fiscal year 2020 guidance issued in February for full
year revenues to the range of $350 million to
$360 million on a constant currency basis, reflecting annual
growth of 7.5% to 10.6%, as compared to its prior range of $360
million to $370 million, overall decreasing the midpoint of its
guidance by 2.7%.
Declaration of Dividend Distribution for the Second Half
of 2019
In accordance with its dividend distribution policy and as a
testimony to our continued confidence in our business and our
ability to continue generating positive cashflow, the Company’s
board of directors declared a semi-annual cash dividend in the
amount of $0.08 per share and in the aggregate amount of
approximately $3.9 million, which in the aggregate with the
amount distributed with respect to the first half of 2019, of $7.6
million reflect approximately 56% of Magic Software net income
attributable to its shareholders for the year 2019.
The dividend is payable on June 25, 2020 to all of the Company’s
shareholders of record at the close of the NASDAQ Global Select
Market on June 9, 2020.
In accordance with Israeli tax law, the dividend is subject to
withholding tax at source at the rate of 30% (if the recipient of
the dividend is at the time of distribution or was at any time
during the preceding 12-month period the holder of 10% or more of
the Company’s share capital) or 25% (for all other dividend
recipients) of the dividend amount payable to each shareholder of
record, subject to applicable exemptions.
The dividend will be paid in US dollars on the ordinary shares
of Magic Software Enterprises that are traded both on the Tel Aviv
Stock Exchange and the NASDAQ Global Select Market.
Guy Bernstein, Chief Executive Officer of Magic Software
Enterprises, said: “Magic’s first-quarter performance reflects our
continued focus on supporting our existing customers and closing of
new deals. With COVID-19 global pandemic hitting the world by
surprise since early March 2020, we took all the necessary steps to
insure our employees are kept safe and productive, while
controlling our expenses to properly address the new financial and
market challenges.
In addition, as part of our continued efforts to improve our
financial position and as a testimony of our confidence in our
existing operations, during the first quarter we increased our
equity interest in Roshtov Software Industries Ltd., by 20.05%,
from 60% to 80.05%, and in Comblack IT Ltd., by 10.2%, from 70% to
80.2%. I am confident that the steps we have taken will ensure that
Magic will emerge stronger and well positioned for continued growth
when global economy recovers.”
Conference Call Details
Magic’s management will host a conference call on Tuesday, May
26, 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: 0-800-917-5108
ISRAEL: 03-918-0650
ALL OTHERS: +972-3-918-0650
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;
- Costs relates to acquisition of new businesses
- 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 based on 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, 2019 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:
Asaf Berenstin | Chief Financial Officer Magic Software
Enterprises ir@magicsoftware.com
MAGIC SOFTWARE ENTERPRISES LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS U.S.
Dollars in thousands
|
March 31, |
|
December 31, |
|
2020 |
|
2019 |
|
Unaudited |
|
|
ASSETS |
|
|
|
CURRENT ASSETS: |
|
|
|
Cash
and cash equivalents |
$ 76,636 |
|
$ 81,915 |
Short-term bank deposits |
7,026 |
|
6,996 |
Marketable securities |
3,387 |
|
6,600 |
Trade
receivables, net |
94,088 |
|
96,694 |
Other
accounts receivable and prepaid expenses |
12,439 |
|
12,845 |
Total current assets |
193,576 |
|
205,050 |
|
|
|
|
LONG-TERM RECEIVABLES: |
|
|
|
Severance pay fund |
3,929 |
|
4,013 |
Deferred tax assets |
2,555 |
|
2,188 |
Operating lease right-of-use assets |
14,057 |
|
14,956 |
Other
long-term receivables |
2,664 |
|
3,594 |
Other
long-term deposits |
2,285 |
|
2,285 |
Total long-term receivables |
25,490 |
|
27,036 |
|
|
|
|
PROPERTY AND EQUIPMENT, NET |
3,854 |
|
3,649 |
INTANGIBLE ASSETS AND GOODWILL, NET |
164,427 |
|
168,871 |
|
|
|
|
TOTAL ASSETS |
$ 387,347 |
|
$ 404,606 |
|
|
|
|
LIABILITIES AND EQUITY |
|
|
|
|
|
|
|
CURRENT LIABILITIES: |
|
|
|
Short-term debt |
$ 4,941 |
|
$ 7,079 |
Trade
payables |
11,027 |
|
10,990 |
Accrued expenses and other accounts payable |
32,018 |
|
32,619 |
Current maturities of operating lease liabilities |
3,591 |
|
3,833 |
Liabilities due to acquisition activities |
3,375 |
|
3,638 |
Deferred revenues and customer advances |
8,588 |
|
8,724 |
Total current liabilities |
63,540 |
|
66,883 |
|
|
|
|
NON-CURRENT LIABILITIES: |
|
|
|
Long-term debt |
14,959 |
|
15,540 |
Deferred tax liability |
11,093 |
|
11,069 |
Long-term operating lease liabilities |
10,461 |
|
11,119 |
Long-term liabilities due to acquisition activities |
8,904 |
|
8,613 |
Accrued severance pay |
4,965 |
|
4,770 |
Total non-current
liabilities |
50,382 |
|
51,111 |
|
|
|
|
REDEEMABLE
NON-CONTROLLING INTERESTS |
11,859 |
|
21,915 |
|
|
|
|
EQUITY: |
|
|
|
Magic
Software Enterprises equity |
244,216 |
|
247,838 |
Non-controlling interests |
17,350 |
|
16,859 |
Total equity |
261,566 |
|
264,697 |
|
|
|
|
TOTAL LIABILITIES, REDEEMABLE NON-CONTROLLING INTERESTS AND
EQUITY |
$ 387,347 |
|
$ 404,606 |
MAGIC SOFTWARE ENTERPRISES
LTD.CONDENSED CONSOLIDATED STATEMENTS OF
INCOMEU.S. Dollars in thousands (except per share
data)
|
|
Three months
ended |
|
|
March 31, |
|
|
2020 |
|
2019 |
|
|
Unaudited |
Revenues |
|
$ 85,208 |
|
$ 71,800 |
Cost of
Revenues |
|
60,016 |
|
49,508 |
Gross profit |
|
25,192 |
|
22,292 |
Research and
development, net |
|
2,174 |
|
1,546 |
Selling,
marketing and general and |
|
|
|
|
administrative expenses |
|
14,272 |
|
12,358 |
Total operating costs and expenses |
|
16,446 |
|
13,904 |
Operating income |
|
8,746 |
|
8,388 |
Financial
income (expenses), net |
|
517 |
|
(240) |
Income before taxes on income |
|
9,263 |
|
8,148 |
Taxes on
income |
|
1,988 |
|
1,620 |
Net
income |
|
$ 7,275 |
|
$ 6,528 |
Net income
attributable to redeemable non-controlling interests |
|
(324) |
|
(882) |
Net income
attributable to non-controlling interests |
|
(1,098) |
|
(293) |
Net
income attributable to Magic's shareholders |
|
$ 5,853 |
|
$ 5,353 |
|
|
|
|
|
Net earnings
per share attributable to Magic's shareholders : |
|
|
|
|
Basic |
|
$ 0.12 |
|
$ 0.11 |
Diluted |
|
$ 0.12 |
|
$ 0.11 |
|
|
|
|
|
Weighted
average number of shares used in computing net earnings per
share |
|
|
|
|
Basic |
|
48,958 |
|
48,876 |
Diluted |
|
49,046 |
|
48,979 |
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, |
|
|
|
|
|
2020 |
|
2019 |
|
|
|
|
|
Unaudited |
|
|
|
|
|
|
|
|
GAAP gross profit |
|
|
|
$ 25,192 |
|
$ 22,292 |
Amortization of capitalized software and acquired technology |
|
1,288 |
|
1,215 |
Amortization of other intangible assets |
|
|
268 |
|
137 |
Non-GAAP gross profit |
|
|
$ 26,748 |
|
$ 23,644 |
|
|
|
|
|
|
|
|
GAAP operating income |
|
|
$ 8,746 |
|
$ 8,388 |
Gross profit adjustments |
|
|
1,556 |
|
1,352 |
Amortization of other intangible assets |
|
|
1,240 |
|
1,201 |
Capitalization of software development |
|
|
(844) |
|
(954) |
Costs related to acquisitions |
|
|
273 |
|
- |
Stock-based compensation |
|
|
- |
|
75 |
Non-GAAP operating income |
|
|
$ 10,971 |
|
$ 10,062 |
|
|
|
|
|
|
|
|
GAAP net income attributable to Magic's
shareholders |
|
$ 5,853 |
|
$ 5,353 |
Operating income adjustments |
|
|
2,225 |
|
1,674 |
Expenses attributed to non-controlling interests |
|
|
|
|
|
and redeemable non-controlling interests |
|
|
- |
|
(308) |
Increase in value of put options of redeemable non-controlling
interests |
- |
|
(67) |
Changes in unsettled fair value of contingent consideration |
|
|
|
|
related to acquisitions |
|
|
773 |
|
- |
Deferred taxes on the above items |
|
|
526 |
|
(67) |
Non-GAAP net income attributable to Magic's
shareholders |
|
$ 9,377 |
|
$ 6,652 |
|
|
|
|
|
|
|
|
Non-GAAP basic net earnings per share |
|
|
$ 0.19 |
|
$ 0.14 |
Weighted average number of shares used in computing basic net
earnings per share |
|
|
48,958 |
|
48,876 |
Non-GAAP diluted net earnings per share |
|
|
$ 0.19 |
|
$ 0.14 |
Weighted average number of shares used in computing
diluted net earnings per share |
|
|
49,046 |
|
48,964 |
Summary of Non-GAAP Financial
Information |
U.S. Dollars
in thousands (except per share data) |
|
|
Three months ended March
31, |
|
|
2020 |
|
2019 |
|
|
Unaudited |
|
Unaudited |
|
|
|
|
|
|
|
|
|
Revenues |
|
$ 85,208 |
|
100% |
|
$ 71,800 |
|
100% |
Gross
profit |
|
26,748 |
|
31.4% |
|
23,644 |
|
32.9% |
Operating income |
|
10,971 |
|
12.9% |
|
10,062 |
|
14.0% |
Net
income attributable to |
|
|
|
|
|
|
|
|
Magic's shareholders |
|
9,377 |
|
11.0% |
|
6,652 |
|
9.3% |
|
|
|
|
|
|
|
|
|
Basic
earnings per share |
|
$ 0.19 |
|
|
|
$ 0.14 |
|
|
Diluted earnings per share |
|
$ 0.19 |
|
|
|
$ 0.14 |
|
|
MAGIC SOFTWARE ENTERPRISES LTD.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
U.S. Dollars in thousands
|
For the three months ended March 31, |
|
2020 |
|
2019 |
|
Unaudited |
|
Unaudited |
|
|
|
|
Cash
flows from operating activities: |
|
|
|
|
|
|
|
Net income |
$ 7,275 |
|
$ 6,528 |
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
Depreciation and amortization |
3,011 |
|
2,850 |
Stock-based compensation |
- |
|
75 |
Change in deferred taxes, net |
97 |
|
(150) |
Amortization of marketable securities premium and accretion of
discount |
43 |
|
71 |
Net change in operating assets and liabilities: |
|
|
|
Trade receivables, net |
1,871 |
|
(510) |
Other long-term and short-term accounts receivable and prepaid
expenses |
143 |
|
362 |
Trade payables |
152 |
|
(1,039) |
Exchange rate of loans |
(688) |
|
670 |
Accrued expenses and other accounts payable |
33 |
|
(1,856) |
Deferred revenues |
1,190 |
|
3,691 |
Net cash provided by operating activities |
13,127 |
|
10,692 |
|
|
|
|
Cash
flows from investing activities: |
|
|
|
|
|
|
|
Capitalized software development costs |
(844) |
|
(954) |
Purchase of property and equipment |
(488) |
|
(277) |
Cash paid in conjunction with acquisitions, net of acquired
cash |
(727) |
|
(6,538) |
Proceeds from maturity and sale of marketable securities |
3,159 |
|
750 |
Proceeds from (Investment in) short-term bank deposits |
(30) |
|
7,100 |
Net cash provided by (used in) investing activities |
1,070 |
|
81 |
|
|
|
|
Cash
flows from financing activities: |
|
|
|
|
|
|
|
Proceeds from exercise of options by employees |
61 |
|
(12) |
Dividend paid |
(55) |
|
(7,335) |
Dividend paid to redeemable non-controlling interests |
(923) |
|
(1,027) |
Purchase of non-controlling interest |
(15,046) |
|
- |
Short-term and long-term loans received |
- |
|
8 |
Repayment of short-term and long-term loans |
(1,971) |
|
(690) |
Net cash used in financing activities |
(17,934) |
|
(9,056) |
|
|
|
|
Effect of exchange rate changes on cash and cash
equivalents |
(1,542) |
|
(161) |
|
|
|
|
Increase (decrease) in cash and cash equivalents |
(5,279) |
|
1,556 |
Cash and cash equivalents at the beginning of the year |
81,915 |
|
87,126 |
Cash and cash equivalents at end of the
period |
$ 76,636 |
|
$ 88,682 |
|
|
March 31, |
|
|
December 31, |
|
|
|
2020 |
|
|
2019 |
|
|
|
Unaudited |
|
|
|
|
ASSETS |
|
|
|
|
|
|
CURRENT ASSETS: |
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
76,636 |
|
|
$ |
81,915 |
|
Short-term bank deposits |
|
|
7,026 |
|
|
|
6,996 |
|
Marketable securities |
|
|
3,387 |
|
|
|
6,600 |
|
Trade
receivables, net |
|
|
94,088 |
|
|
|
96,694 |
|
Other
accounts receivable and prepaid expenses |
|
|
12,439 |
|
|
|
12,845 |
|
Total
current assets |
|
|
193,576 |
|
|
|
205,050 |
|
|
|
|
|
|
|
|
|
|
LONG-TERM
RECEIVABLES: |
|
|
|
|
|
|
|
|
Severance pay fund |
|
|
3,929 |
|
|
|
4,013 |
|
Deferred tax assets |
|
|
2,555 |
|
|
|
2,188 |
|
Operating lease right-of-use assets |
|
|
14,057 |
|
|
|
14,956 |
|
Other
long-term receivables |
|
|
2,664 |
|
|
|
3,594 |
|
Other
long-term deposits |
|
|
2,285 |
|
|
|
2,285 |
|
Total
long-term receivables |
|
|
25,490 |
|
|
|
27,036 |
|
|
|
|
|
|
|
|
|
|
PROPERTY AND EQUIPMENT, NET |
|
|
3,854 |
|
|
|
3,649 |
|
INTANGIBLE ASSETS AND GOODWILL, NET |
|
|
164,427 |
|
|
|
168,871 |
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS |
|
$ |
387,347 |
|
|
$ |
404,606 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES: |
|
|
|
|
|
|
|
|
Short-term debt |
|
$ |
4,941 |
|
|
$ |
7,079 |
|
Trade
payables |
|
|
11,027 |
|
|
|
10,990 |
|
Accrued expenses and other accounts payable |
|
|
32,018 |
|
|
|
32,619 |
|
Current maturities of operating lease liabilities |
|
|
3,591 |
|
|
|
3,833 |
|
Liabilities due to acquisition activities |
|
|
3,375 |
|
|
|
3,638 |
|
Deferred revenues and customer advances |
|
|
8,588 |
|
|
|
8,724 |
|
Total
current liabilities |
|
|
63,540 |
|
|
|
66,883 |
|
|
|
|
|
|
|
|
|
|
NON-CURRENT LIABILITIES: |
|
|
|
|
|
|
|
|
Long-term debt |
|
|
14,959 |
|
|
|
15,540 |
|
Deferred tax liability |
|
|
11,093 |
|
|
|
11,069 |
|
Long-term operating lease liabilities |
|
|
10,461 |
|
|
|
11,119 |
|
Long-term liabilities due to acquisition activities |
|
|
8,904 |
|
|
|
8,613 |
|
Accrued severance pay |
|
|
4,965 |
|
|
|
4,770 |
|
Total
non-current liabilities |
|
|
50,382 |
|
|
|
51,111 |
|
|
|
|
|
|
|
|
|
|
REDEEMABLE
NON-CONTROLLING INTERESTS |
|
|
11,859 |
|
|
|
21,915 |
|
|
|
|
|
|
|
|
|
|
EQUITY: |
|
|
|
|
|
|
|
|
Magic
Software Enterprises equity |
|
|
244,216 |
|
|
|
247,838 |
|
Non-controlling interests |
|
|
17,350 |
|
|
|
16,859 |
|
Total
equity |
|
|
261,566 |
|
|
|
264,697 |
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES, REDEEMABLE NON-CONTROLLING INTERESTS AND
EQUITY |
|
$ |
387,347 |
|
|
$ |
404,606 |
|
Magic Software Enterprises (NASDAQ:MGIC)
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From Apr 2024 to May 2024
Magic Software Enterprises (NASDAQ:MGIC)
Historical Stock Chart
From May 2023 to May 2024