Magic Reports Another Year of Record-Breaking Revenue and Operating Results

Annual revenues for 2015 reached a record-breaking $176 million; Non‑GAAP operating income for the year reached a record-breaking $27.2 million

17 Feb, 2016, 04:50 ET from Magic Software Enterprises Ltd

OR YEHUDA, Israel, Feb. 17, 2016 /PRNewswire/ -- Magic 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 fourth quarter and full year ended December 31, 2015.

Financial Highlights for the Fourth Quarter, 2015

  • Revenues for the fourth quarter increased 13% year over year to a record-breaking $47.9 million compared to $42.5 million in the same period last year. Revenues were negatively impacted by the devaluation of the Euro and Japanese Yen against the U.S. Dollar by 13% and 6% respectively. On a constant currency basis, excluding the negative impact from the erosion of foreign exchange rates, revenues for the fourth quarter would have reflected an increase of 15% year over year to a record-breaking $49.1 million.
  • Non-GAAP operating income for the fourth quarter increased 5% to $7.4 million, compared to $7.0 million in the same period last year. On a constant currency basis, excluding the negative impact from the erosion of foreign exchange rates (mainly resulting from the devaluation of the Euro and Japanese Yen versus the U.S. Dollar), non-GAAP operating income would have reflected an increase of 12% year over year to $7.9 million. Operating income increased 22% to $5.0 million, compared to $4.1 million in the same period last year.
  • Non-GAAP net income decreased 2% to $5.6 million or $0.13 per fully diluted share, compared to $5.7 million or $0.13 per fully diluted share, in the same period last year. On a constant currency basis, excluding the negative impact from the erosion of foreign exchange rates (including the devaluation of cash balances denominated mainly in New Israeli Shekels, Euros, and Japanese Yen against the U.S. Dollar), non-GAAP net income would have reflected an increase of 7% year over year to $6.1 million or $0.14 per fully diluted share. Net income for the fourth quarter amounted to $3.7 million or $0.08 per fully diluted share, compared to $2.9 million or $0.07 per fully diluted share, in the same period last year. 

Financial Highlights for the Full Year Ended December 31, 2015

  • Revenues for the twelve-month period of 2015 increased 7% to a record $176.0 million, compared to $164.3 million in the same period last year. Revenues were negatively impacted by the devaluation of the New Israeli Shekel, Euro and Japanese Yen against the U.S. Dollar by 9%, 17% and 13%, respectively. On a constant currency basis, excluding the negative impact from the erosion of foreign exchange rates, revenues for the twelve-month period of 2015 would have reflected an increase of 13% year over year to a record $185.0 million.
  • Non-GAAP operating income for 2015 increased 5% to $27.2 million, compared to $25.9 million in the same period last year. On a constant currency basis, excluding the negative impact from the erosion of foreign exchange rates (mainly resulting from the devaluation of the Euro and Japanese Yen versus the U.S. Dollar), non-GAAP operating income would have reflected an increase of 13% year over year to $29.2 million. Operating income for the twelve-month period of 2015 increased 3% to $21.4 million compared to $20.7 million in the same period last year. 
  • Non-GAAP net income for the twelve-month period of 2015 increased 6% to $21.7 million or $0.49 per fully diluted share, compared to $20.5 million or $0.47 per fully diluted share in the same period last year. On a constant currency basis, excluding the negative impact from the erosion of foreign exchange rates (including the devaluation of cash balances denominated mainly in New Israeli Shekels, Euros, and Japanese Yen against the U.S. Dollar amounting to $0.9 million), non-GAAP net income would have reflected an increase of 21% year over year to $24.7 million or $0.56 per fully diluted share. Net income for the twelve-month period of 2015 increased 4% to $16.2 million or $0.36 per fully diluted share, compared to $15.5 million or $0.36 per fully diluted share in the same period last year.
  • Total cash, cash equivalents and short-term investments as of December 31, 2015, amounted to $77 million.
  • Operating cash flow for the year ended December 31, 2015 totaled $18.0 million.

Comments of Management

Guy Bernstein, Chief Executive Officer of Magic Software Enterprises, said, "I'm very pleased to report our sixth consecutive year of record-breaking revenues and operating results. We achieved these excellent results despite the significant impact of the erosion of foreign currency exchange rates on our top and bottom line. We were able to exceed our guidance thanks to the strength of our portfolio and our global customer base."

"Magic's software solutions and services are becoming increasingly relevant during 2016 as businesses accelerate their digital transformation initiatives. We continue to invest in our products to enable our customers to innovate and increase competitiveness by mobilizing and optimizing business processes across backend systems and by modernizing existing business-critical applications. We remain committed to enhancing our portfolio with strategic acquisitions and are on track for another year of profitable solid growth," added Bernstein.

Magic is providing the following guidance for its 2016 fiscal year:

Revenues between $191 million to $195 million for the full-year 2016, on a constant currency basis.

Conference Call Details

Magic's Management will host an interactive conference today, February 17, at 10:00 am Eastern Standard Time (7:00 am Pacific Standard Time, 17:00 Israel Standard Time). On the call, management will 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.

  • From North America: +1-888-407-2553
  • From UK: 0-800-917-5108
  • From Israel: 03-918-0610 
  • All others: +972-3-918-0610 

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 and other related costs;
  • In-process research and development capitalization and amortization;
  • Equity-based compensation expense;
  • Change in valuation of contingent consideration;
  • Litigation costs
  • The related tax effects of the above items

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 the Company's results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate the Company's results of operations in conjunction with the corresponding GAAP measures.

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.

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, 2014 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.











Summary of Non-GAAP Financial Information

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























Three months ended 


Twelve months ended 




December 31,


December 31,




2015


2014


2015


2014




Unaudited


Unaudited












Revenues


$ 47,856


$ 42,518


$176,030


$164,304


Gross profit


18,828


18,190


68,327


68,898


Operating income


7,373


7,023


27,172


25,881


Net income attributable to 










Magic Software shareholders


5,633


5,737


21,742


20,454












Basic earnings per share


0.13


0.13


0.49


0.47


Diluted earnings per share


0.13


0.13


0.49


0.47












Summary of Pro-Forma Non-GAAP Financial Information on Constant Currency Base

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













Three months ended 


Twelve months ended 




December 31,


December 31,




2015


2014


2015


2014




Unaudited


Unaudited












Revenues


$ 49,095


$ 42,518


$184,973


$164,304


Gross profit


19,733


18,190


73,408


68,898


Operating income


7,878


7,023


29,238


25,881


Net income attributable to 










Magic Software shareholders


6,138


5,737


24,717


20,454












Basic earnings per share


0.14


0.13


0.56


0.47


Diluted earnings per share


0.14


0.13


0.56


0.47


 

 

 

MAGIC SOFTWARE ENTERPRISES LTD. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

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





























Three months ended 


Twelve months ended 



December 31,


December 31,



2015


2014


2015


2014



Unaudited


Unaudited




Revenues

$       47,856


$    42,518


$     176,030


$   164,304


Cost of Revenues

30,955


25,467


113,221


99,727


Gross profit 

16,901


17,051


62,809


64,577


Research and development, net

1,163


1,226


4,888


4,750


Selling, marketing and general and









administrative expenses

10,765


11,751


36,487


39,101


Total operating costs and expenses

11,928


12,977


41,375


43,851


Operating income 

4,973


4,074


21,434


20,726


Financial expenses, net

(96)


(840)


(685)


(1,786)


Other income, net

-


-


8


(67)


Income before taxes on income

4,877


3,234


20,757


18,873


Taxes on income

1,150


171


3,681


2,307


Net income

$        3,727


$      3,063


$       17,076


$    16,566


Change in redeemable non-controlling interests

9


(106)


(639)


(425)


Net income attributable to non-controlling interests 

(58)


(21)


(239)


(621)


Net income attributable to Magic's shareholders 

$        3,678


$      2,936


$       16,198


$    15,520











Net earnings per share









Basic 

$          0.08


$        0.07


$          0.37


$        0.36


Diluted

$          0.08


$        0.07


$          0.36


$        0.36











Weighted average number of shares used in 









computing net earnings per share


















        Basic

44,295


44,172


44,248


43,288





.






        Diluted

44,456


44,440


44,452


43,305


MAGIC SOFTWARE ENTERPRISES LTD. AND ITS SUBSIDIARIES






RECONCILIATION OF GAAP AND NON-GAAP RESULTS






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































































Three months ended 


Twelve months ended 







December 31,


December 31,







2015


2014


2015


2014







Unaudited


Unaudited















GAAP gross profit




$         16,901


$         17,051


$       62,809


$     64,577


Amortization of capitalized software



986


981


4,024


3,922


Amortization of other intangible assets



935


148


1,462


369


Stock-based compensation



6


10


32


30


Non-GAAP gross profit



$         18,828


$         18,190


$       68,327


$     68,898




























GAAP operating income



$           4,973


$          4,074


$       21,434


$     20,726


Gross profit adjustments



1,927


1,139


5,518


4,321


Amortization of other intangible assets



1,072


988


3,742


3,629


Change in valuation of contingent consideration



-


131


22


(1,610)


Capitalization of software development



(1,032)


(1,021)


(4,086)


(4,267)


Litigation and other acquisition costs



341


1,553


341


1,553


Stock-based compensation



92


159


201


1,529


Non-GAAP operating income



$           7,373


$          7,023


$       27,172


$     25,881




























GAAP net income attributable to Magic's shareholders


$           3,678


$          2,936


$       16,198


$     15,520


Operating income adjustments



2,400


2,949


5,738


5,155


Amortization expenses attributed to redeemable non-controlling interests 

(262)


123


(381)


(149)


Deferred taxes on the above items



(183)


(271)


187


(72)


Non-GAAP net income attributable to Magic's shareholders


$           5,633


$          5,737


$       21,742


$     20,454




























Non-GAAP basic net earnings per share 



0.13


0.13


0.49


0.47


Weighted average number of shares used in











computing basic net earnings per share 



44,295


44,172


44,248


43,288















Non-GAAP diluted net earnings per share 



0.13


0.13


0.49


0.47


Weighted average number of shares used in











computing diluted net earnings per share



44,456


44,461


44,460


43,334















 

MAGIC SOFTWARE ENTERPRISES LTD. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands







December 31,


December 31,



2015


2014



Unaudited









ASSETS





CURRENT ASSETS:





    Cash and cash equivalents 

$               62,188


$               72,515


    Short-term bank deposits

2,677


-


     Available-for-sale marketable securities

11,819


11,915


     Trade receivables, net

52,483


40,358


     Other accounts receivable and prepaid expenses

7,665


3,973


Total current assets

136,832


128,761







LONG-TERM RECEIVABLES:





    Severance pay fund

1,454


1,426


    Deferred taxes and other long-term receivables

2,490


3,959


Total long-term receivables

3,944


5,385







PROPERTY AND EQUIPMENT, NET 

2,296


2,005


IDENTIFIABLE INTANGIBLE ASSETS AND 





    GOODWILL, NET

96,883


88,033







TOTAL ASSETS

$             239,955


$             224,184







LIABILITIES AND EQUITY










CURRENT LIABILITIES:





     Short-term debt

$                     13


$                 2,853


     Trade payables 

6,032


3,861


     Accrued expenses and other accounts payable  

17,963


15,013


     Deferred tax liabilities

888


760


     Deferred revenues 

4,628


3,431


Total current liabilities

29,524


25,918







NON-CURRENT LIABILITIES:





     Long-term debt

3,257


490


     Deferred taxes and other long-term liabilities

3,973


4,086


     Liabilities due to acquisition activities

1,734


474


     Accrued severance pay     

2,616


2,562


Total non-current liabilities

11,580


7,612







REDEEMABLE NON-CONTROLLING INTEREST

5,745


2,930







EQUITY:





   Magic Software Enterprises equity

191,008


185,065


   Non-controlling interests

2,098


2,659


Total equity

193,106


187,724







TOTAL LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST AND EQUITY

$             239,955


$             224,184







 

Press Contact:

Stephanie Myara, PR Manager
Magic Software Enterprises
smyara@magicsoftware.com

 

SOURCE Magic Software Enterprises Ltd



RELATED LINKS

http://www.magicsoftware.com