Magic Reports Strong Performance in the Second Quarter of 2012 with 39% Growth in Non-GAAP Operating Income Year Over Year Company Reports Solid Cash Position with $13 Million Operating Cash Flow for the First Half of 2012 and $44 Million in Total Net Cash as of June 30, 2012

OR YEHUDA, Israel, August 8, 2012 /PRNewswire/ --

Magic Software Enterprises Ltd. (NASDAQ: MGIC), a global provider of software platforms for enterprise mobility, cloud applications, and business integration, announced today its financial results for the first half of 2012.

Financial Highlights for the Six-Month Period Ended June 30, 2012

  • Revenues for the first half of 2012 increased 10% to $58.1 million compared to $52.9 million in the same period last year.
  • Operating income for the first half of 2012 increased 23% to $8.0 million compared to $6.5 million in the same period last year; Non-GAAP operating income for the first half of 2012 increased 50% to $9.0 million compared to $6.0 million in the same period last year.
  • Net income for the first half of 2012 increased 17% to $7.8 million compared to $6.7 million in the same period last year; Non-GAAP net income for the first half of 2012 increased 41% to $8.6 million compared to $6.1 million in the same period last year.
  • Operating cash flow for the first half of 2012 totaled $13 million.
  • Total net cash, cash equivalents and short-term investments as of June 30, 2012, amounted to $43.7 million.

Financial Highlights for the Second Quarter Ended June 30, 2012

  • Second quarter revenues increased 2% to $28 million compared to $27.4 million in the same period last year.
  • Operating income for the second quarter increased 12% to $3.8 million, compared to $3.4 million in the same period last year; Non-GAAP operating income for the second quarter increased 39% to $4.3 million, compared to $3.1 million in the same period last year.
  • Net income for the second quarter increased 2% to $3.6 million compared to $3.5 million in the same period last year. Non-GAAP net income for the second quarter increased 24% to $4.1 million compared to $3.3 million in the same period last year. Net income for the second quarter of 2012 was affected by $0.3 million of expenses related to the devaluation of the Euro versus the US dollar.

Results

  • For the six-month period ended June 30, 2012, total revenues were $58.1 million, with net income of $7.8 million, or $0.21 per fully diluted share. This compares with revenues of $52.9 million and net income of $6.7 million, or $0.18 per fully diluted share, for the same period last year.
  • For the second quarter ended June 30, 2012, total revenues were $28.0 million, with net income of $3.6 million, or $0.1 per fully diluted share. This compares with revenues of $27.4 million and net income of $3.5 million, or $0.1 per fully diluted share for the same period last year.

Comments of Management

Commenting on the results, Guy Bernstein, Chief Executive Officer of Magic Software Enterprises, said: "The first half of 2012 was a very successful period for Magic, with strong performance across the board. We recently extended our mobile offering to include support for the iOS and Android mobile platforms for smartphones and tablets, enhancing the flexibility and future-readiness of our productive and scalable solution for enterprise mobility."

"Our expectations for stronger demand during the second half of 2012, combined with our continued strong cash position, provide us with a positive outlook towards further growth in 2012," concluded Mr. Bernstein.

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 and
  • Related tax effect

Magic'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 believes that non-GAAP financial measures have limitations in that they do not reflect all of the amounts associated with Magic's results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate Magic'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 (NASDAQ: MGIC) empowers customers and partners around the globe with smarter technology that provides a multichannel user experience of enterprise logic and data.

For more information, visit http://www.magicsoftware.com.

Except for any historical information contained herein, matters discussed in this press release might include forward-looking statements that involve a number of risks and uncertainties. Regarding any financial statements, actual results might 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 locally and abroad, release and sales of new products by strategic resellers and customers, and other risk factors detailed in Magic's most recent annual report and other filings with the Securities and Exchange Commission. These forward-looking statements are made only as of the date hereof, and the Company undertakes no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise.

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.

    MAGIC SOFTWARE ENTERPRISES LTD.
    CONSOLIDATED STATEMENTS OF INCOME
    U.S. dollars in thousands (except per share data)
 
                                                Three Months Ended     Six Months Ended
                                                     June 30,              June 30,
                                             --------------------- ---------------------
                                                2012         2011     2012         2011
                                             ---------   --------- ---------   ---------
                                                     Unaudited             Unaudited
                                             --------------------- ---------------------
    Revenues                                  28,030       27,380   58,072       52,868
    Cost of Revenues                          16,101       16,318   33,018       31,474
                                             ---------   --------- ---------   ---------
    Gross profit                              11,929       11,062   25,054       21,394
                                             ---------   --------- ---------   ---------
    Research and development, net                336          454    1,242          820
    Selling, marketing and general and
    administrative expenses                    7,790        7,205   15,784       14,040
    Total operating costs and expenses         8,126        7,659   17,026       14,860
                                             ---------   --------- ---------   ---------
    Operating income                           3,803        3,403    8,028        6,534
                                             ---------   --------- ---------   ---------
    Financial income (expenses) , net           (234)         149     (198)         251
    Other income, net                             67           62       67           73
                                             ---------   --------- ---------   ---------
    Income before taxes on income              3,636        3,614    7,897        6,858
    Taxes on income                               23            -       67           43
                                             ---------   --------- ---------   ---------
    Net income                                 3,613        3,614    7,830        6,815
    Net income attributable to 
    non-controlling interests                     (9)         (67)     (15)        (155)
                                             ---------   --------- ---------   ---------
    Net income attributable to 
    Magic Shareholders                         3,604        3,547    7,815        6,660
 
    Earnings per share (basic)                  0.10         0.10     0.21         0.18
                                             =========   ========= =========   =========
 
    Earnings per share (diluted)                0.10         0.10     0.21         0.18
                                             =========   ========= =========   =========
 
    Number of shares used in computing 
    earnings per share (basic)                36,503       36,299   36,458       36,192
                                             =========   ========= =========   =========
 
    Number of shares used in computing 
    earnings per share (diluted)              37,170       37,144   37,170       37,109
                                             =========   ========= =========   =========



   
    MAGIC SOFTWARE ENTERPRISES LTD.     
    RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION     
    U.S. dollars in thousands (except per share data)     
                                               Three Months Ended       Six Months Ended
                                                    June 30,                June 30,
                                             ---------------------   ---------------------
                                               2012          2011      2012          2011
                                             ----------   --------   ----------   --------
                                                   Unaudited               Unaudited
                                             ---------------------   ---------------------
 
    GAAP operating income                     3,803         3,403     8,028         6,534
    Amortization of capitalized software 
    and other intangible assets               1,471           880     2,893         1,763
    Capitalization of software development   (1,091)       (1,304)   (2,213)       (2,593)
    Stock-based compensation                    143           144       297           308
                                             ----------   --------   ----------   --------
    Total adjustments to GAAP                   523          (280)      977          (522)
                                             ----------   --------   ----------   --------
    Non-GAAP operating income                 4,326         3,123     9,005         6,012
                                             ----------   --------   ----------   --------
 
    GAAP net income                           3,604         3,547     7,815         6,660
    Amortization of capitalized software 
    and other intangible assets               1,471           880     2,893         1,763
    Capitalization of software development   (1,091)       (1,304)   (2,213)       (2,593)
    Stock-based compensation                    143           144       297           308
    Taxes on the above items                    (63)            -      (157)            -
                                             ----------   --------   ----------   --------
    Total adjustments to GAAP                   460          (280)      820          (522)
                                             ----------   --------   ----------   --------
    Non-GAAP net income                       4,064         3,267     8,635         6,138
                                             ==========   ========   ==========   ========
 
    Non-GAAP earnings per share (basic)        0.11          0.09      0.24          0.17
                                             ==========   ========   ==========   ========
    Weighted average number of shares used in
    computing earnings per share (basic)     36,503        36,299    36,458        36,192
                                             ----------   --------   ----------   --------
 
    Non-GAAP earnings per share (diluted)      0.11          0.09      0.23          0.17
                                             ==========   ========   ==========   ========
    Weighted average number of shares used in
    computing earnings per share (diluted)   37,286        37,247    37,293        37,210
                                             ----------   --------   ----------   --------


    MAGIC SOFTWARE ENTERPRISES LTD.
    CONSOLIDATED BALANCE SHEETS
    U.S. dollars in thousands
                                                    June 30,    December 31,
                                                  ----------------------------
                                                      2012          2011
                                                  ------------  --------------
                                                    Unaudited
                                                  ------------  
    ASSETS
    CURRENT ASSETS:
    Cash and cash equivalents                           42,400        28,711
    Short-term bank deposits                               397         2,170
    Available-for-sale marketable securities               878         1,241
    Trade receivables, net                              23,685        24,946
    Other accounts receivable and prepaid expenses       5,563         6,401
                                                  ------------  --------------
    Total current Assets                                72,923        63,469
                                                  ------------  --------------
 
    LONG-TERM RECEIVABLES:
    Severance pay fund                                     360           351
    Other Long-term receivables                          3,572         3,824
                                                  ------------  --------------
    Total other long-term receivables                    3,932         4,175
 
    PROPERTY AND EQUIPMENT, NET                          1,908         2,029
    IDENTIFIABLE INTANGIBLE ASSETS AND
    GOODWILL, NET                                       65,672        66,512
                                                  ------------  --------------
 
    TOTAL ASSETS                                       144,435       136,185
                                                  ============  ==============
 
    LIABILITIES AND EQUITY
 
    CURRENT LIABILITIES:
    Short-term credit and current maturities
    of long term loans                                       -             4
    Trade payables                                       3,894         3,545
    Accrued expenses and other accounts payable         13,416        16,797
    Deferred tax liability                               2,368         2,359
    Deferred revenues                                    9,421         5,092
                                                  ------------  --------------
    Total current liabilities                           29,099        27,797
                                                  ------------  --------------
 
    NON CURRENT LIABILITIES:
    Long-term loans                                         25             9
    Deferred tax Liabilities                               720           296
    Liability due to acquisition activities                  -         1,350
    Accrued severance pay                                1,083         1,087
                                                  ------------  --------------
    Total non-current Liabilities                        1,828         2,742
                                                  ------------  --------------
 
    EQUITY:
    Magic Shareholders' equity                         113,003       105,156
    Non-controlling interests                              505           490
                                                  ------------  --------------
    Total equity                                       113,508       105,646
 
    TOTAL LIABILITIES AND EQUITY                       144,435       136,185
                                                  ============  ==============
 


Press Contact:
Tania Amar | VP Global Marketing
Magic Software Enterprises
tania@magicsoftware.com

SOURCE Magic Software Enterprises Ltd



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