Magic Reports Its Fifth Consecutive Year of Record-Breaking Revenue and Operating Results

Annual revenues for 2014 increased 13% year over year to a record-breaking result of $164.3 million; Non-GAAP operating income for the year increased 14% to a record-breaking result of $25.9 million

30 Jan 2015, Or Yehuda, Israel

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, 2014.
 

Financial Highlights for the Fourth Quarter, 2014

  • Revenues for the fourth quarter increased 3% year over year to $42.5 million from $41.2 million in the corresponding quarter in 2013. Revenues for the quarter were negatively impacted by an approximately $1.5 million devaluation of foreign currencies versus the US Dollar (mainly the Euro and Japanese Yen) and the appreciation of the New Israeli Shekel versus the US Dollar.
  • In August 2009, a software company and one of its owners filed an arbitration proceeding against us and one of our subsidiaries, claiming an alleged breach of a non-disclosure agreement between the parties. The arbitrator determined that both we and our subsidiary breached the non-disclosure agreement. In January 2015 the arbitrator rendered his ruling and determined the damages that we (and one of our subsidiaries) should pay the plaintiffs. Therefore, our financial results of operations for the fourth quarter include a net impact of $1.6 million resulting from the arbitration. We are considering our options following this ruling.
  • Non-GAAP operating income increased 3% to $7.0 million, compared to $6.8 million in the same period last year. Operating income for the fourth quarter excluding the impact of the aforementioned arbitration award increased 3% to $5.6 million, compared to $5.4 million in the same period last year.
  • Non-GAAP net income decreased 6% to $5.6 million, compared to $6.0 million in the same period last year. Net income for the fourth quarter, excluding the aforementioned impact of the arbitration decreased 16% to $4.0 million, compared to $4.7 million in the same period last year. Net income for the quarter was also negatively impacted by approximately $0.7 million due to the devaluation of cash balances denominated mainly in Euros, Japanese Yen and New Israeli Shekels following the devaluation of foreign currencies against the US Dollar.
 

Financial Highlights for the Full Year Ended December 31, 2014

  • Revenues for the year ended December 31, 2014 reached $164.3 million, an increase of 13%, compared to $145.0 million in 2013. 
  • Non-GAAP operating income for 2014 increased 14% to $25.9 million, compared to $22.7 million in 2013. Operating income for the year ended December 31, 2014, excluding the aforementioned impact of the arbitration increased 16% to $22.3 million compared to $19.1 million in the prior year.
  • Non-GAAP net income for 2014 increased 4% to $20.3 million, compared to $19.5 million in 2013. Net income for the year ended December 31, 2014, excluding the aforementioned impact of the arbitration award increased 5% to $16.6 million, compared to $15.9 million in the prior year. Net income for 2014 was also negatively impacted by $1.6 million in financial expenses recorded as a result of unfavorable foreign currency exchange rates.
  • Total cash, cash equivalents and short-term investments as of December 31, 2014, amounted to $84.4 million.
  • Operating cash flow for the year ended December 31, 2014 totaled $12.4 million. 
 

Results

  • For the fourth quarter ended December 31, 2014, total revenues were $42.5 million, with net income of $4.0 million, or $0.09 per fully diluted share excluding the aforementioned impact of the arbitration award. This compares with revenues of $41.2 million and net income of $4.7 million, or $0.13 per fully diluted share for the same period in 2013. Net income for the quarter was also negatively impacted by approximately $0.7 million due to the devaluation of cash balances denominated mainly in Euros, Japanese Yen and New Israeli Shekels following devaluation of foreign currencies against the US Dollar
  • For the fourth quarter of 2014, operating income was $5.6 million, excluding the aforementioned impact of the arbitration. This compares to operating income of $5.4 million for the same period in 2013.
  • For the year ended December 31, 2014, total revenues were $164.3 million, with net income of $16.6 million, or $0.38 per fully diluted share, excluding the aforementioned impact of the arbitration. This compares with revenues of $145.0 million and net income of $15.9 million, or $0.43 per fully diluted share, for the same period in 2013.
  • Operating income for the year ended December 31, 2014 was $22.3 million, excluding the aforementioned impact of the arbitration. This compares to operating income of $19.1 million for the same period in 2013.

 

Comments of Management

Guy Bernstein, Chief Executive Officer of Magic Software Enterprises, said, 

“I’m pleased with our strong growth performance during 2014 with annual revenues coming in at the top end of our revenue guidance. We experienced growth across all our revenue streams, including software and licenses, maintenance and professional services, enabling us to attain and keep operational margins in the range of 16%.” 

“While I’m certainly pleased with these operating results, they could have been better had we not been hit by foreign currency devaluations. However, I’m even more excited by what’s ahead. I believe we are well-positioned to capitalize on opportunities to accelerate our growth both organically and through new business acquisitions that will enable us to help enterprises continue to leverage their business-critical legacy systems as they transition to enterprise mobility and cloud-based operations,” added Bernstein.


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, 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:

Stephanie Myara, PR Manager

Magic Software Enterprises

smyara@magicsoftware.com