EX-10.1 2 v386347_ex10-1.htm EXHIBIT 10.1

 

Exhibit 10.1

  

PRESS RELEASE

 

Magic Reports Second Quarter 2014 Results with Revenues Increasing 17% Year over Year to $40.6 Million, and Non-GAAP Operating Income Increasing 28% Year over Year to $6.0 Million

 

Revenues for the first half of 2014 increased 20% year over year to $81.6 million; Non-GAAP operating income for the first half increased 25% to $12.4 million

 

Or Yehuda, Israel, August 11, 2014Magic Software Enterprises Ltd. (NASDAQ and 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, 2014.

 

Financial Highlights for the Second Quarter Ended June 30, 2014

 

·Revenues for the second quarter increased 17% year over year to $40.6 million from $34.8 million in the same period last year.

 

·Operating income for the second quarter increased 26% to $5.1 million, compared to $4.1 million in the same period last year; Non-GAAP operating income for the second quarter increased 28% to $6.0 million, compared to $4.7 million in the same period last year.

 

·Net income for the second quarter increased 11% to $3.9 million (or $0.09 per fully diluted share) compared to $3.5 million (or $0.09 per fully diluted share) in the same period last year; Non-GAAP net income for the second quarter increased 24% to $4.7 million, compared to $3.8 million in the same period last year.

 

Financial Highlights for the Six-Month Period Ended June 30, 2014

 

·Revenues for the first half of 2014 increased 20% to $81.6 million compared to $68.2 million in the same period last year.

 

·Operating income for the first half of 2014 increased 27% to $11.1 million compared to $8.7 million in the same period last year; Non-GAAP operating income for the first half of 2014 increased 25% to $12.4 million compared to $9.9 million in the same period last year.

 

·Net income for the first half of 2014 increased 19% to $8.3 million (or $0.20 per fully diluted share) compared to $7.0 million (or $0.19 per fully diluted share) in the same period last year. Non-GAAP net income for the first half of 2014 increased 20% to $9.7 million compared to $8.0 million in the same period last year.

 

·Operating cash flow for the first half of 2014 totaled approximately $12 million.

 

·Total net cash, cash equivalents and short-term investments as of June 30, 2014, amounted to $92.8 million.

 

 
 

 

Comments of Management

 

Guy Bernstein, Chief Executive Officer of Magic Software Enterprises, said, “I am very pleased to report that Magic maintained double-digit growth momentum through the second quarter and first half of 2014 with strong performance in sales and profitability across our products and professional services. We are further encouraged by the favorable reception for our latest enterprise mobility releases, offering user-experience enhancements and a component-based mobile accelerator framework."

 

“Our business visibility coupled with our well-diversified portfolio and global reach gives us the confidence to reassert our commitment to our previously announced revenue guidance of $161 million to $165 million for the full-year 2014,” added Bernstein.

  

Conference Call Details

 

Magic’s Management will host an interactive conference today, August 11, at 10:00am Eastern Time (7:00am Pacific Time, 17:00 Israel Time). On the call, management will review and discuss the results, and will also be available to answer investors’ questions.

 

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: 1.888.668.9141

 

UK: 0 800 917 5108

 

ISRAEL: 03.918.0650

 

INTERNATIONAL: +972.3.918.0650

 

For those unable to listen to the live call, a replay of the call will be available for three months from the day after the call under the investor relations section of Magic’s website.

  

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;

 

·Equity-based compensation expense;

 

·Change in valuation of contingent consideration; and

 

·The related tax effects of the above items.

 

 
 

 

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, 
   2014   2013   2014   2013 
   Unaudited   Unaudited 
Non-GAAP                    
Revenues  $40,633   $34,756   $81,582   $68,170 
Gross profit   16,740    14,900    34,457    29,446 
Operating income   6,023    4,690    12,431    9,921 
Net income attributable to Magic Software shareholders   4,715    3,792    9,677    8,032 
Basic earnings per share   0.11    0.10    0.23    0.22 
Diluted earnings per share   0.11    0.10    0.23    0.22 

  

Magic Software’s management believes that the presentation of non-GAAP measures provides 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 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.

 

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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, 2013 and subsequent reports and registration statements filed 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:

 

Tania Amar, VP Global Marketing

Magic Software Enterprises

Tel: +972 (0)3 538 9300

tania@magicsoftware.com

  

 
 

 

MAGIC SOFTWARE ENTERPRISES LTD. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

U.S. dollars in thousands (except per share data)                

 

   Three months ended   Six months ended 
   June 30,   June 30, 
   2014   2013   2014   2013 
   Unaudited   Unaudited 
Revenues  $40,633   $34,756   $81,582   $68,170 
Cost of Revenues   24,965    20,965    49,272    40,855 
Gross profit   15,668    13,791    32,310    27,315 
Research and development, net   1,220    919    2,400    1,802 
Selling, marketing and general and administrative expenses   9,321    8,805    18,830    16,805 
Total operating costs and expenses   10,541    9,724    21,230    18,607 
Operating income   5,127    4,067    11,080    8,708 
Financial expenses, net   321    122    460    520 
Income before taxes on income   4,806    3,945    10,620    8,188 
Taxes on income   646    282    1,612    777 
Net income  $4,160   $3,663   $9,008   $7,411 
Net income attributable to non-controlling interests   (308)   (182)   (661)   (410)
Net income attributable to Magic Software's Shareholders  $3,852   $3,481   $8,347   $7,001 
                     
Net earnings per share attributable to Magic Software's shareholders:                    
Basic  $0.09   $0.10   $0.20   $0.19 
Diluted  $0.09   $0.09   $0.20   $0.19 
                     
Weighted average number of shares used in                    
     computing net earnings per share attributable to                    
     Magic Software's shareholders:                    
                     
        Basic   44,158    36,722    42,407    36,691 
         .           
        Diluted   44,470    37,243    42,563    37,165 

 

 
 

  

MAGIC SOFTWARE ENTERPRISES LTD. AND ITS SUBSIDIARIES

RECONCILIATION OF GAAP AND NON-GAAP RESULTS

STATEMENTS OF INCOME FOR COMPARATIVE PURPOSES

U.S. dollars in thousands (except per share data)                

  

   Three months ended   Six months ended 
   June 30,   June 30, 
   2014   2013   2014  2013 
   Unaudited   Unaudited 
                 
GAAP gross profit  $15,668   $13,791   $32,310   $27,315 
Amortization of capitalized software   992    1,037    1,992    2,010 
Amortization of other intangible assets   73    70    147    115 
Stock-based compensation   7    2    8    6 
Non-GAAP gross profit  $16,740   $14,900   $34,457   $29,446 
                     
                     
GAAP operating income  $5,127   $4,067   $11,080   $8,708 
Gross profit adjustments   1,072    1,109    2,147    2,131 
Amortization of other intangible assets   857    714    1,693    1,403 
Capitalization of software development   (1,142)   (1,290)   (2,241)   (2,500)
Change in valuation of contingent consideration   -    -    (400)   - 
Stock-based compensation   109    90    152    179 
Non-GAAP operating income  $6,023   $4,690   $12,431   $9,921 
                     
                     
GAAP net income attributable to Magic Software's shareholders  $3,852   $3,481   $8,347   $7,001 
Operating income adjustments   896    623    1,351    1,213 
Unwinding of discount in connection with liabilities due to acquisitions   -    8    -    215 
Amortization expenses attributed to redeemable non-controlling interests   (37)   (30)   (74)   (60)
Deferred taxes on the above items   4    (290)   53    (337)
Non-GAAP net income attributable to Magic Software's shareholders  $4,715   $3,792   $9,677   $8,032 
                     
                     
Non-GAAP basic net earnings per share                    
   attributable to Magic Software shareholders   0.11    0.10    0.23    0.22 
Weighted average number of shares used in                    
   computing basic net earnings per share   44,158    36,722    42,407    36,691 
                     
Non-GAAP diluted net earnings per share                    
   attributable to Magic Software shareholders   0.11    0.10    0.23    0.22 
Weighted average number of shares used in                    
   computing diluted net earnings per share   44,502    37,293    42,579    37,221 

 

 
 

  

MAGIC SOFTWARE ENTERPRISES LTD. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands      

 

   June 30,   December 31, 
   2014   2013 
   Unaudited     
       ASSETS          
           
CURRENT ASSETS:          
     Cash and cash equivalents  $92,342   $35,134 
     Available-for-sale marketable securities   442    854 
     Trade receivables, net   35,377    31,976 
     Other accounts receivable and prepaid expenses   5,464    5,209 
Total current assets   133,625    73,173 
           
LONG-TERM RECEIVABLES:          
    Severance pay fund   418    403 
    Other long-term receivables   4,102    3,792 
Total long-term receivables   4,520    4,195 
           
PROPERTY AND EQUIPMENT, NET   2,095    1,773 
INTANGIBLE ASSETS AND GOODWILL, NET   87,208    87,862 
           
TOTAL ASSETS  $227,448   $167,003 
           
       LIABILITIES AND EQUITY          
           
CURRENT LIABILITIES:          
     Short-term debt  $1,056   $1,055 
     Trade payables   3,827    4,149 
     Accrued expenses and other accounts payable   15,095    16,937 
     Deferred tax liability   1,641    2,567 
     Deferred revenues   8,303    3,294 
Total current liabilities   29,922    28,002 
           
NON-CURRENT LIABILITIES:          
     Long-term debt   1,945    2,274 
     Long-term deferred tax liabilty   2,235    2,204 
     Liabilities due to acquisition activities   779    1,396 
     Accrued severance pay   1,358    1,275 
Total non-current liabilities   6,317    7,149 
           
REDEEMABLE NON-CONTROLLING INTEREST   3,184    2,721 
           
SHAREHOLDERS' EQUITY:          
   Magic Software Shareholders' equity   186,694    128,144 
   Non-controlling interests   1,331    987 
Total shareholders' equity   188,025    129,131 
    1331      
TOTAL LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST AND EQUITY  $227,448   $167,003