EX-99.1 CHARTER 2 ea026609401ex99-1_magic.htm MAGIC SOFTWARE REPORTS THIRD QUARTER AND NINE MONTHS 2025 FINANCIAL RESULTS

Exhibit 99.1

 

PRESS RELEASE

 

Magic Software Reports Third quarter 2025 Financial Results with Record-Braking Revenues of $161.7$ million – a 13.1% Year Over Year Increase.

 

Operating income for the third quarter increased 13.6% year over year to a third quarter record-braking result of $17.1 million; Non-GAAP operating income for the third quarter increased by 8.1% year over year to a third quarter record-breaking $19.9 million

 

Or Yehuda, Israel, November 18, 2025 – Magic Software Enterprises Ltd. (NASDAQ and TASE: MGIC) (“the Company”), a global provider of IT consulting services and end-to-end integration and application development platforms solutions, announced today its financial results for the third quarter and first nine months ended September 30, 2025.

 

Summary Results for the Third quarter 2025 (USD in millions, except per share data)

 

   GAAP       Non-GAAP     
   Q3 2025   Q3 2024   % Change   Q3 2025   Q3 2024   % Change 
Revenues  $161.7   $143.0    13.1%  $161.7   $143.0    13.1%
Gross profit  $44.2   $39.7    11.4%  $45.5   $41.0    10.8%
Gross margin   27.3%   27.8%   (50) bps    28.1%   28.7%   (60) bps 
Operating income  $17.1   $15.1    13.6%  $19.9   $18.5    8.1%
Operating margin   10.6%   10.5%   10 bps    12.3%   12.9%   (60) bps 
Net income (*)  $9.9   $8.4    17.0%  $12.3   $11.1    10.2%
Diluted EPS  $0.20   $0.17    17.6%  $0.25   $0.23    8.7%

 

(*)Attributable to Magic Software’s shareholders.

 

Financial Highlights for the Third Months Ended September 30, 2025

 

●Revenues for the third quarter of 2025 increased by 13.1% to a record-breaking $161.7 million, compared to $143.0 million in the same period of the previous year. Revenues from our Israeli operations totaled $75.6 million, an increase of 16.8% compared to $64.7 million in the same period last year, overcoming a decrease of approximately 3.9% in working hours compared to the same period of the previous year. Revenues from our North American operations totaled $67.1 million, an increase of 13.2% compared to $59.3 million in the same period last year.

 

●Operating income for the third quarter of 2025 increased by 13.6% to a record-breaking $17.1 million, with 86% organic, compared to $15.1 million in the same period of the previous year.

 

●Non-GAAP operating income for the third quarter of 2025 increased by 8.1% to a record-breaking $19.9 million, compared to $18.5 million in the same period of the previous year.

  

  ● Net income attributable to Magic Software’s shareholders for the third quarter of 2025 increased by 17.0% to $9.9 million, or $0.20 per fully diluted share, compared to $8.4 million, or $0.17 per fully diluted share, in the same period of the previous year.

 

●Non-GAAP net income attributable to Magic Software’s shareholders for the third quarter of 2025 increased by 10.2% to $12.3 million, or $0.25 per fully diluted share, compared to $11.1 million, or $0.23 per fully diluted share, in the same period of the previous year.

 

 

 

 

Summary Results for the Nine Months of 2025 (USD in millions, except per share data)

 

   GAAP       Non-GAAP     
   Nine months ended
September 30,		       Nine months ended
September 30,		     
   2025   2024   % Change   2025   2024   % Change 
Revenues  $460.6   $409.9    12.4%  $460.6   $409.9    12.4%
Gross Profit  $127.2   $115.2    10.4%  $131.0   $119.4    9.7%
Gross Margin   27.6%   28.1%   (50) bps    28.4%   29.1%   (70) bps 
Operating Income  $48.5   $44.5    8.9%  $57.0   $54.8    4.0%
Operating Margin   10.5%   10.9%   (40) bps    12.4%   13.4%   (100) bps 
Net Income (*)  $29.3   $26.3    11.4%  $37.2   $34.1    9.1%
Diluted EPS  $0.60   $0.53    13.2%  $0.76   $0.69    9.1%

 

(*)Attributable to Magic Software’s shareholders.

 

Financial Highlights for the Nine Months Ended September 30, 2025

 

  ● Revenues for the nine-months period ended September 30, 2025 increased by 12.4% to a record breaking $460.6 million compared to $409.9 million in the same period of the previous year. Revenues from our Israeli operations for the nine-month period ended September 30, 2025 totaled $214.8 million, an increase of 18.1% compared to $181.9 million in the same period last year. Revenues from our North American operations totaled $187.2 million, an increase of 9.8% compared to $170.5 million in the same period last year.
     
  ● Operating income for the nine-months ended September 30, 2025 increased by 8.9% to a record breaking $48.5 million compared to $44.5 million in the same period of the previous year.

 

  ● Non-GAAP operating income for the nine-months ended September 30, 2025 increased by 4.0% to a record breaking $57.0 million compared to $54.8 million in the same period of the previous year.

  

  ● Net income attributable to Magic Software’s shareholders for the nine-month period ended September 30, 2025, increased by 11.4% to $29.3 million, or $0.60 per fully diluted share, compared to $26.3 million, or $0.53 per fully diluted share, in the same period last year.

 

  ● Non-GAAP net income attributable to Magic Software’s shareholders for the nine-months period ended September 30, 2025, increased by 9.1% to $37.2 million, or $0.76 per fully diluted share, compared to $34.1 million, or $0.69 per fully diluted share, in the same period last year.

 

  ● Cash flow from operating activities for the nine-months period ended September 30, 2025 amounted to $40.6 million compared to $49.1 million in the same period last year.
     
  ● As of September 30, 2025, Magic’s cash, cash equivalents and short-term bank deposits amounted to $103.3 million.
     
  ●

Magic hereby revises its full-year 2025 revenue guidance, increasing the previous estimate of $600 million to $610 million to a revised range of $610 million to $620 million, (based on current currency exchange rates). This updated guidance reflects our sustained operational momentum and favorable outlook for the fourth quarter of 2025, representing an anticipated annual revenue growth rate of approximately 10.4% to 12.2% as compared to the prior fiscal year.

 

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Declaration of Dividend for the Third Quarter of 2025

 

In accordance with its dividend distribution policy, the Company’s board of directors declared a quarterly cash dividend in an amount of 15.1 cents per share and in an aggregate amount of approximately $7.4 million, reflecting approximately 75% of its distributable profits for period.

 

The dividend is payable on December 30, 2025, to all of the Company’s shareholders of record at the close of trading on the NASDAQ Global Select Market on December 15, 2025.

 

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, said: “Magic Software delivered a record breaking third quarter and nine-months period performance. We achieved all-time highs in revenues, gross profit and operating income, while continuing to strengthen our operational foundations and expand our strategic footprint in key markets, including the United States, where momentum remains robust. Our results of operations demonstrate our strong position in the IT market along with the sustained demand for our digital, AI-driven and cloud transformation solutions, combined with disciplined execution across the organization. With the recently announced definitive agreement and plan of Merger signed with Matrix I.T., we are entering an exciting new phase in Magic’s evolution. This combination brings together two highly complementary companies, enhancing our scale, market reach and technological depth. We believe the merged organization will be even better positioned to capture the growing global demand for innovative digital and data-driven solutions. As we progress toward shareholder approval, we remain focused on delivering consistent performance and creating long-term value for our customers, employees and shareholders.

 

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 Software’s shareholders and non-GAAP basic and diluted earnings per share.

 

Magic Software 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 Software’s financial condition and results of operations. Magic Software’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 together with GAAP results. Magic Software 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.

 

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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;

 

  ● Cost of share-based payment;

 

  ● Costs related to acquisition of new businesses;

 

  ● The related tax, non-controlling interests’ effects of the above items;

 

  ● Change in valuation of contingent consideration related to acquisitions;

 

  ● Change in deferred tax assets on carry forward tax losses.

 

Reconciliation 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 end-to-end integration and application development platforms solutions and IT consulting services.

 

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,” “guidance” 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, 2024, which filed on May 14, 2025, 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:

 

Ronen Platkevitz

Magic Software Enterprises

ir@magicsoftware.com

 

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MAGIC SOFTWARE ENTERPRISES LTD.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
U.S. Dollars in thousands (except per share data)

 

   Three months ended   Nine months ended 
   September 30,   September 30, 
   2025   2024   2025   2024 
   Unaudited   Unaudited 
Revenues  $161,656   $142,968   $460,634   $409,938 
Cost of Revenues   117,449    103,287    333,422    294,715 
Gross profit   44,207    39,681    127,212    115,223 
Research and development, net   3,172    3,033    9,844    8,673 
Selling, marketing and general and  administrative expenses   23,920    21,577    68,866    62,013 
Total operating expenses   27,092    24,610    78,710    70,686 
Operating income   17,115    15,071    48,502    44,537 
Financial expenses, net   (1,698)   (1,364)   (3,488)   (4,243)
Income before taxes on income   15,417    13,707    45,014    40,294 
Taxes on income   3,464    3,273    9,700    9,042 
Net income  $11,953   $10,434   $35,314   $31,252 
Share of loss of companies accounted for at equity, net   -    (119)   (292)   (268)
Net income attributable to non-controlling interests   (2,090)   (1,884)   (5,763)   (4,723)
Net income attributable to Magic’s shareholders  $9,863   $8,431   $29,259   $26,261 
                     
Weighted average number of shares used in computing net earnings per share                    
                     
Basic   49,099    49,099    49,099    49,099 
                     
Diluted   49,099    49,099    49,099    49,099 
                    
Basic and diluted earnings per share attributable to Magic’s shareholders  $0.20   $0.17   $0.60   $0.53 

 

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MAGIC SOFTWARE ENTERPRISES LTD.
RECONCILIATION OF GAAP AND NON-GAAP RESULTS
U.S. Dollars in thousands (except per share data)

 

   Three months ended   Nine months ended 
   September 30,   September 30, 
   2025   2024   2025   2024 
   Unaudited   Unaudited 
                 
GAAP gross profit      $44,207   $39,681   $127,212   $115,223 
Amortization of capitalized software and acquired technology   908    1,031    2,771    3,265 
Amortization of other intangible assets     341    311    990    935 
Non-GAAP gross profit    $45,456   $41,023   $130,973   $119,423 
                     
GAAP operating income    $17,115   $15,071   $48,502   $44,537 
Gross profit adjustments     1,249    1,342    3,761    4,200 
Amortization of other intangible assets     2,059    1,994    6,027    5,591 
Increase in valuation of contingent consideration related to acquisitions         -    221    -    648 
Capitalization of software development     (707)   (724)   (1,693)   (2,207)
Costs related to acquisitions     177    32    324    334 
Cost of share-based payment     53    521    90    1,716 
Non-GAAP operating income    $19,946   $18,457   $57,011   $54,819 
                     
GAAP net income attributable to Magic’s shareholders  $9,863   $8,431   $29,259   $26,261 
Operating income adjustments     2,831    3,386    8,509    10,282 
Amortization expenses attributed to non-controlling interests  and redeemable non-controlling interests         (304)   (466)   (823)   (1,314)
Changes in unsettled fair value of contingent consideration related to acquisitions          38    66    577    232 
Deferred taxes on the above items     (159)   (286)   (325)   (1,351)
Non-GAAP net income attributable to Magic’s shareholders  $12,269   $11,131   $37,197   $34,110 
                     
Non-GAAP basic and diluted net earnings per share  $0.25   $0.23   $0.76   $0.69 
Weighted average number of shares used in computing basic net earnings per share      49,099    49,099    49,099    49,099 
Weighted average number of shares used in computing diluted net earnings per share      49,099    49,099    49,099    49,099 

 

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Summary of Non-GAAP Financial Information
 U.S. Dollars in thousands (except per share data)

 

   Three months ended   Nine months ended 
   September 30,   September 30, 
   2025   2024   2025   2024 
   Unaudited   Unaudited   Unaudited   Unaudited 
                                 
Revenues  $161,656    100%  $142,968    100%  $460,634    100%  $409,938    100%
Gross profit   45,456    28.1%   41,023    28.7%   130,973    28.4%   119,423    29.1%
Operating income   19,946    12.3%   18,457    12.9%   57,011    12.4%   54,819    13.4%
Net income attributable to Magic’s shareholders   12,269    7.6%   11,131    7.8%   37,197    8.1%   34,110    8.3%
Basic and diluted earnings per share  $0.25        $0.23        $0.76        $0.69      

 

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MAGIC SOFTWARE ENTERPRISES LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
U.S. Dollars in thousands

 

   September 30,   December 31, 
   2025   2024 
   Unaudited     
         
ASSETS        
CURRENT ASSETS:        
Cash and cash equivalents  $103,303   $112,779 
Short-term bank deposits   2    51 
Trade receivables, net   160,527    139,816 
Other accounts receivable and prepaid expenses   21,345    23,553 
Total current assets   285,177    276,199 
           
LONG-TERM ASSETS:          
Deferred tax assets   5,538    4,895 
Right-of-use assets   24,255    24,707 
Other long-term receivables and Investments in companies accounted for at equity   10,926    9,261 
Property and equipment, net   8,213    7,467 
Intangible assets and goodwill, net   225,697    217,802 
Total long term assets   274,629    264,132 
           
TOTAL ASSETS  $559,806   $540,331 
           
LIABILITIES AND EQUITY          
           
CURRENT LIABILITIES:          
Short-term debt  $34,866   $23,187 
Trade payables   34,594    28,753 
Dividend payable to Magic Software shareholders   14,533    11,587 
Accrued expenses and other accounts payable   59,258    58,209 
Current maturities of lease liabilities   4,239    4,818 
Liability in respect of business combinations   4,318    2,654 
Put options for non-controlling interests   22,837    20,066 
Deferred revenues and customer advances   18,120    21,031 
Total current liabilities   192,765    170,305 
           
LONG TERM LIABILITIES:          
Long-term debt   34,339    36,107 
Deferred tax liability   8,015    7,848 
Long-term lease liabilities   22,441    22,040 
Long-term liability in respect of business combinations   -    1,781 
Employee benefit liabilities   1,419    1,181 
Total long term liabilities   66,214    68,957 
           
EQUITY:          
Magic Software Enterprises shareholders’ equity   276,037    277,190 
Non-controlling interests   24,790    23,879 
Total equity   300,827    301,069 
           
TOTAL LIABILITIES AND EQUITY  $559,806   $540,331 

 

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MAGIC SOFTWARE ENTERPRISES LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. Dollars in thousands

 

   Nine months ended
September 30,		 
   2025   2024 
   Unaudited   Unaudited 
Cash flows from operating activities:        
         
Net income  $35,022   $30,984 
Adjustments to reconcile net income to net cash provided by operating activities:          
Depreciation and amortization   15,910    15,370 
Cost of share-based payment   90    1,270 
Change in deferred taxes, net   (265)   (1,965)
Capital gain on sale of fixed assets   (19)   (26)
Change in value of financial assets measured at fair value through profit or loss   71    - 
Effect of exchange rate on of cash and cash equivalents held in currencies other than the functional currency   (1,499)   81 
Changes in value of short-term and long-term loans from banks and others and deposits, net   (191)   (682)
Working capital adjustments:          
Trade receivables   (9,469)   (8,746)
Other current and long-term accounts receivable   1,578    (24)
Trade payables   3,390    (201)
Accrued expenses and other accounts payable   350    7,292 
Deferred revenues   (4,339)   5,767 
Net cash provided by operating activities   40,629    49,120 
           
Cash flows from investing activities:          
           
Capitalized software development costs   (1,694)   (2,207)
Purchase of property and equipment   (1,320)   (1,000)
Cash paid in conjunction with deferred payments and contingent liabilities related to business combinations   (1,828)   (11,844)
Payments for business acquisitions, net of cash acquired   (3,614)   (7,553)
Proceeds from sale of property and equipment   47    42 
Proceeds from sale (purchase) of financial assets, net   163    1,121 
Change in short-term and long-term deposits   70    (276)
Investment in a company accounted for at equity   -    (198)
Net cash used in investing activities   (8,176)   (21,915)
           
Cash flows from financing activities:          
           
Proceeds from sale of non-controlling interest   -    174 
Dividend paid to Magic’s shareholders   (27,642)   (10,016)
Dividend paid to non-controlling interests   (7,429)   (4,966)
Repayment of lease liabilities   (4,813)   (4,443)
Purchase of non-controlling interest   (13,822)   (314)
Receipt of short-term and long-term loans from banks and others   26,376    12,601 
Repayment of short-term and long-term loans   (20,854)   (26,769)
Net cash (used in) provided by financing activities   (48,184)   (33,733)
           
Effect of exchange rate changes on cash and cash equivalents   6,255    (472)
           
Increase (decrease) in cash and cash equivalents   (9,476)   (7,001)
Cash and cash equivalents at the beginning of the period   112,779    105,943 
Cash and cash equivalents at end of the period  $103,303   $98,942 

 

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