Revenues for the first quarter of 2023 increased by approximately 3% to a record-breaking first quarter result of $142.4 million, compared to $138.7 million in the same period of the previous year
OR YEHUDA, Israel, May 18, 2023 (GLOBE NEWSWIRE) — 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 first quarter ended March 31, 2023.
Financial Highlights for the First Quarter Ended March 31, 2023
- Revenues for the first quarter of 2023 increased by 2.7% to a record-breaking first quarter result of $142.4 million, compared to $138.7 million in the same period of the previous year. On a constant currency basis (calculated based on average currency exchange rates for the three months ended March 31, 2022), revenues for the first quarter of 2023 would have increased by 8% to a record breaking $149.8 million, with 50.3% of such revenues resulting from organic growth.
- Operating income for the first quarter of 2023 decreased by 4.8% to $15.3 million, compared to $16.1 million in the same period of the previous year. On constant currency basis, (calculated based on average currency exchange rates for the three months ended March 31, 2022), operating income for the first quarter of 2023 would have increased by 2.5% to a record breaking first quarter result of $16.5 million. Operating income for the first quarter of 2023 included $0.6 million recorded with respect to cost of share-based payment to employees compared to $0.1 million recorded in the same period of the previous year.
- Non-GAAP operating income for the first quarter of 2023 decreased by 3.4% to $18.5 million, compared to $19.1 million in the same period of the previous year. On a constant currency basis (calculated based on average currency exchange rates for the three months ended March 31, 2022), non-GAAP operating income for the first quarter of 2023 would have increased by 2.6% to a first quarter record-breaking $19.6 million.
- Net income attributable to Magic Software’s shareholders for the first quarter of 2023 increase by 4.0% to $10.1 million, or $0.20 per fully diluted share, compared to $9.7 million, or $0.20 per fully diluted share, in the same period of the previous year.
- Non-GAAP net income attributable to Magic Software’s shareholders for the first quarter of 2023 decreased by 1.2% to $12.9 million, or $0.26 per fully diluted share, compared to $13.0 million, or $0.26 per fully diluted share, in the same period of the previous year.
- Magic is reiterating 2023 annual revenue guidance of between $585 million and $593 million, reflecting annual growth of 3.2% to 4.6% (based on current currency exchange rates).
Guy Bernstein, Chief Executive Officer of Magic Software, said: “Magic delivered a solid first quarter, with revenues increasing year-over-year by 3% (8% on a constant currency basis)” stated Guy Berenstein, CEO of Magic. “We continue to lead complex and strategic projects that are critical for our clients across multiple sectors while remaining cautious on the macro-economic environment. As we move forward, we remain committed to executing our strategy, leveraging our strengths, and delivering sustainable growth and value for our shareholders.”
Conference Call Details
Magic Software’s management will host a conference call on Thursday, May 18, 2023, at 10:00 am Eastern Daylight Time (5:00 am Pacific Daylight Time, 17:00 Israel Daylight Time) to review and discuss Magic Software’s results.
To participate, please call one of the following teleconferencing numbers. Please begin placing your calls at least 5 minutes before the conference call commences. If you are unable to connect using the toll-free numbers, call the international dial-in number.
NORTH AMERICA: +1-866-652-8972
ALL OTHERS: +972-3-918-0650
For those unable to join the live call, a replay of the call will be available in the Investor Relations section of Magic Software’s website, www.magicsoftware.com.
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.
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;
- Equity-based compensation expenses;
- Costs related to acquisition of new businesses;
- The related tax, non-controlling interests and redeemable non-controlling interest’s effects of the above items;
- Change in valuation of contingent consideration related to acquisitions;
- Change in value of put options of redeemable non-controlling interests; and
- 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, 2022, which filed on May 11, 2023, 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.
Asaf Berenstin | Chief Financial Officer
Magic Software Enterprises