- Published: 03 November 2010
- Written by Editor
Magic Software Triples Operating Profits for Third Quarter of 2010
Magic Software Enterprises Ltd. (Nasdaq: MGIC), a global provider of application platforms and business and process integration solutions, today announced its financial results for the third quarter ended September 30, 2010. All dollar amounts are quoted in US Dollars.
Financial Highlights for the Third Quarter and Nine-Month periods ended September 30, 2010
-- Third quarter revenues increased 66% year-over-year from $13.5 million to $22.4 million , and 4% from the second quarter of 2010;
-- Operating income for the third quarter tripled to $2.5 million compared to $0.8 million in the same period last year;
-- Operating and net income for the nine-month period of 2010 more than doubled to $6.3 million, compared to $2.5 million and $2.7 million respectively in the same period last year;
-- Operating cash flow for the first nine-months of 2010 increased 106% to
$8.9 million compared to $ $4.3 million in the same period last year.
Results
For the third quarter ended September 30, 2010, total revenues were $22.4 million, with net income of $2.5 million, or $0.08 per fully diluted share. This compares with revenues of $13.5 million and net income of $0.9 million, or $0.03 per fully diluted share, for the same period last year.
Operating income was $2.5 million, or $0.08 per fully diluted share, for the third quarter of 2010. This compares to operating income of $0.8 million, or $0.03 per fully diluted share, for the same period a year ago.
For the nine-month period ended September 30, 2010, total revenues were $63.6 million, with net income of $6.3 million, or $0.19 per fully diluted share. This compares with revenues of $40.9 million and net income of $2.7 million, or $0.08 per fully diluted share, for the same period last year.
Operating income was $6.3 million, or $0.19 per fully diluted share, for the nine-month period of 2010. This compares to operating income of $2.5 million, or $0.08 per fully diluted share, for the same period a year ago.
Total cash, cash equivalents and short-term investments net of short term bank credit as of September 30, 2010 was $25.7 million.
Management Commentary
Commenting on the results, Guy Bernstein, acting chief executive officer of Magic Software, said: "I am very pleased to report robust growth and continued improvement in all our operations for the third quarter. This has been driven by greater demand for our professional services and improved license sales of our uniPaaS RIA application platform among enterprises and independent software vendors worldwide."
Summary of the Quarter
-- New customers and license sales for uniPaaS and iBOLT, particularly in
Japan, Netherlands and U.S. have increased;
-- The number of new partners continued to increase. New partners signed
on in the quarter include: Pallas Athena in Netherlands, Admiral
Technology, Nexus 451, Forza Consulting and SMB Group in UK, and
Relational SA In Greece.
-- The Company's Japanese branch reports improved revenues and
profitability, which was attributed to migration projects to our
flagship uniPaaS RIA application platform.
-- The Company executed global customer events in Hungary and Germany and
for the first time in Poland.
Non-GAAP Financial Measures
This release includes non-GAAP operating income, net income, basic and diluted earnings per share and other non-GAAP financial measures. These non-GAAP measures exclude the following items:
-- Amortization of purchased intangible assets;
-- In-process research and development capitalization and amortization and;
-- Equity-based compensation expense.
Magic Software's management believes that the presentation of non-GAAP measures provide useful information to investors and management regarding financial and business trends relating to the Company'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.
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 Software believes that non-GAAP financial measures have limitations in that they do not reflect all of the amounts associated with Magic Software's results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate Magic Software'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.
About Magic Software
Magic Software Enterprises Ltd. (Nasdaq: MGIC) is a global provider of on-premise and cloud-enabled application platform solutions - including full client, rich internet applications (RIA), mobile or Software-as-a-Service (SaaS) modes - and business and process integration solutions. Magic Software has 13 offices worldwide and a presence in over 50 countries with a global network of ISVs, system integrators, value-added distributors and resellers, as well as consulting 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 AG, salesforce.com, IBM and Oracle. For more information visit about Magic Software and its products and services, visit www.magicsoftware.com, and for more about our industry-related news, business issues and trends, read the Magic Software Blog.
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.
Magic is the trademark of Magic Software Enterprises Ltd. All other trademarks are the trademarks of their respective owners.
Company Contact:
Tania Amar, VP Marketing
Magic Software Enterprises Ltd.
Tel. +972 (0)3 538 9300
This email address is being protected from spambots. You need JavaScript enabled to view it.
MAGIC SOFTWARE ENTERPRISES LTD.
CONSOLIDATED STATEMENTS OF INCOME
U.S. dollars in thousands (except per share data)
Three months Nine months
ended ended
September 30, September 30,
------------- -------------
2010 2009 2010 2009
---- ---- ---- ----
Unaudited Unaudited
--------- ---------
Revenues 22,372 13,504 63,551 40,869
Cost of Revenues 13,191 6,625 37,104 19,805
------ ----- ------ ------
Gross profit 9,181 6,879 26,447 21,064
----- ----- ------ ------
Research and development,
net 526 358 1,566 957
Selling, marketing and
general and
administrative expenses 6,151 5,709 18,555 17,600
Total operating costs and
expenses 6,677 6,067 20,121 18,557
----- ----- ------ ------
Operating income 2,504 812 6,326 2,507
----- --- ----- -----
Financial income
(expenses), net 32 154 (284) 140
Other income (expenses),
net 68 (63) 148 223
--- --- --- ---
Income before taxes on
income 2,604 903 6,190 2,870
Taxes on income 66 1 (102) 167
--- --- ---- ---
Net income 2,538 902 6,292 2,703
Net earnings per share
attributable to
Magic Software:
Basic 0.08 0.03 0.20 0.08
Diluted 0.08 0.03 0.19 0.08
Weighted average number
of shares used in
computing net earnings
per share
Basic 32,056 31,894 31,993 31,894
====== ====== ====== ======
Diluted 32,596 32,169 32,485 32,038
====== ====== ====== ======
MAGIC SOFTWARE ENTERPRISES LTD.
RECONCILIATION BETWEEN GAAP AND NON-GAAP
STATEMENTS OF INCOME FOR COMPARATIVE PURPOSES
Three months ended Nine months ended
September 30, September 30,
------------- -------------
2010 2009 2010 2009
---- ---- ---- ----
Unaudited Unaudited
--------- ---------
GAAP operating income 2,504 812 6,326 2,507
Amortization of
capitalized software
and other intangible
assets 759 950 2,716 2,700
Capitalization of
software development (783) (771) (2,350) (2,356)
Stock-based
compensation 106 64 165 189
--- --- --- ---
Total adjustments to
GAAP 82 243 531 533
Non-GAAP operating
income 2,586 1,055 6,857 3,040
----- ----- ----- -----
GAAP net income 2,538 902 6,292 2,703
Total adjustments to
GAAP as above 82 243 531 533
Non-GAAP net income 2,620 1,145 6,823 3,236
===== ===== ===== =====
Non-GAAP basic net
earnings per share 0.08 0.04 0.21 0.10
==== ==== ==== ====
Weighted average
number of shares
used in
computing basic net
earnings per share 32,056 31,894 31,993 31,894
------ ------ ------ ------
Non-GAAP diluted net
earnings per share 0.08 0.04 0.21 0.10
==== ==== ==== ====
Weighted average
number of shares
used in
computing diluted net
earnings per share 32,647 32,276 32,533 32,115
------ ------ ------ ------
MAGIC SOFTWARE ENTERPRISES LTD.
CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands
September 30, December 31,
-------------- ------------
2010 2009
---- ----
(Unaudited)
-----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents 22,071 24,350
Short-term bank deposits 477 13,838
Available-for-sale marketable
securities 3,480 3,680
Trade receivables, net 16,987 12,004
Other accounts receivable and prepaid
expenses 3,060 3,869
Current assets of discontinued operation - 27
--- ---
Total current Assets 46,075 57,768
-------------------- ------ ------
LONG-TERM RECEIVABLES:
Severance pay fund 319 404
Other Long-term receivables 1,405 749
----- ---
Total other long-term receivables 1,724 1,153
---------------------------------
PROPERTY AND EQUIPMENT, NET 1,800 1,762
IDENTIFIABLE INTANGIBLE ASSETS AND
GOODWILL, NET 37,121 26,868
------ ------
TOTAL ASSETS 86,720 87,551
====== ======
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Short-term credit and current
maturities of long term loans 341 43
Trade payables 2,368 2,662
Accrued expenses and other accounts
payable 12,439 25,159
Deferred revenues 3,654 1,569
Current liabilities of discontinued
operation - 314
--- ---
Total current liabilities 18,802 29,747
------------------------- ------ ------
NON CURRENT LIABILITIES:
Long-term loans 3 10
Liability due to acquisition activities 2,965 -
Accrued severance pay 531 606
--- ---
Total non-current Liabilities 3,499 616
----------------------------- ----- ---
EQUITY 64,419 57,188
------ ------
TOTAL LIABILITIES AND EQUITY 86,720 87,551
====== ======
