Magic Software Reports Record-Breaking Performance with $3.5 Million Net Profit, an Increase of 84% Year over Year

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Magic Software Enterprises Ltd. (NASDAQ: MGIC), a global provider of mobile and 

platform” target=”_blank”>business integration platforms, today announced its financial results for the second quarter of 2011.

Financial Highlights for the Second Quarter and Six-Month Periods Ended June 30, 2011

• Second-quarter revenues increased 27% to $27.4 million compared to $21.5 million in the same period last year.
• Operating income for the second quarter increased 62% to $3.4 million, compared to $2.1 million in the same period last year.
• Net income for the second quarter increased 84% to $3.5 million compared to $1.9 million in the same period last year.
• Revenues for the first half of 2011 increased 28% to $52.9 million compared to $41.2million in the same period last year.
• Operating income for the first half of 2011 increased 71% to $6.5 million compared to $3.8 million in the same period last year.
• Net income for the first half of 2011 increased 76% to $6.7 million compared to $3.8 million in the same period last year.
• Operating cash flow for the first half totaled $9 million.
• Total cash and cash equivalents, short-term bank deposits and short-term investments in marketable securities as of June 30, 2011 amounted to $47.4 million. 

Results

For the second quarter ended June 30, 2011, total revenues were $27.4 million, with net income of $3.5 million, or $0.1 per fully diluted share. This compares with revenues of $21.5 million and net income of $1.9 million, or $0.06 per fully diluted share, for the same period last year.

Operating income for the second quarter ended June 30, 2011, was $3.4 million, or $0.09 per fully diluted share. This compares to operating income of $2.1 million, or $0.06 per fully diluted share, for the same period a year ago.

For the six month period ended June 30, 2011, total revenues were $52.9 million, with net income of $6.7 million, or $0.18 per fully diluted share. This compares with revenues of $41.2 million and net income of $3.8 million, or $0.12 per fully diluted share, for the same period last year.

Operating income for the six month period ended June 30, 2011, was $6.5 million, or $0.18 per fully diluted share. This compares to operating income of $3.8 million, or $0.12 per fully diluted share, for the same period a year ago.
 
Comments of Management

Commenting on the results, Guy Bernstein, Chief Executive Officer of Magic Software, said: “These record-breaking results demonstrate that Magic Software is continuing its impressive forward momentum. For an unprecedented seventh consecutive quarter, we have achieved double-digit overall growth, and we achieved continued growth in revenues and profits in all our regional centers of activity.”

“Moving forward, we have plans to increase growth by expanding our global presence through additional M&A activities and increased penetration of new products both to our current huge customer base and to new customers. Our new mobile offering is attracting a great deal of positive interest throughout the industry. This and other enhancements to our product portfolio, including the major new release of the uniPaaS 2.0 application platform and our new cloud offering, will provide new and exciting opportunities for our company and greater added value for our customers,” 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 and
• Equity-based compensation expense

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 Magic Software’s results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate Magic Software’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