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

Wednesday, February 17, 2016, 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, 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.

 

Press Contact:

Stephanie Myara, PR Manager

Magic Software Enterprises

smyara@magicsoftware.com