Magic Software Reports Record Results for Q4 and Full Year 2010

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Magic Software Enterprises Ltd. (NASDAQ: MGIC), 

a global provider of application platforms and business and process integration solutions, today announced its financial results for the fourth quarter and full year ended December 31, 2010.
 

Financial Highlights for the Fourth Quarter

• Fourth quarter revenues increased 73% year over year to $25.0 million from $14.5 million;
• Operating income for the fourth quarter reached $3.0 million, compared to $1.8 million in the same period last year (excluding a $2.0 million one-time capital gain from the sale of the Company’s headquarters office building);
• Net income for the fourth quarter reached $3.1 million, compared to $1.5 million in the same period last year (excluding a $2.0 million one-time capital gain from the sale of the Company’s headquarters office building);

Financial Highlights for the Full Year Ended December 31, 2010

• Operating cash flow for the year ended December 31, 2010 more than doubled to $11.7 million compared to $4.5 million in 2009;
• Revenues for the year reached $88.6 million, an increase of 60%, compared to $55.4 million in 2009;
• Operating income for 2010 more than doubled to $9.3 million, compared to $4.3 million in 2009 (excluding a $2.0 million one-time capital gain from the sale of the Company’s headquarters office building);
• Net income for 2010 increased 52% year over year to $9.4 million from $6.2 million;

Results

For the fourth quarter ended December 31, 2010, total revenues were $25.0 million, with net income of $3.1 million, or $0.09 per fully diluted share. This compares with revenues of $14.5 million and net income of $1.5 million, or $0.05 per fully diluted share (excluding a $2.0 million one-time capital gain from the sale of the Company’s headquarters office building or $0.06 per fully diluted share), for the same period last year.

Operating income was $3.0 million, or $0.09 per fully diluted share, for the fourth quarter of 2010. This compares to operating income of $1.8 million, or $0.05 per fully diluted share, for the same period a year ago (excluding a $2.0 million one-time capital gain from the sale of the Company’s headquarters office building or $0.06 per fully diluted share).

For the year ended December 31, 2010, total revenues were $88.6 million, with net income of $9.4 million, or $0.29 per fully diluted share. This compares with revenues of $55.4 million and net income of $4.2 million, or $0.13 per fully diluted share, for the same period last year (excluding a $2.0 million one- time capital gain from the sale of the Company’s headquarters office building or $0.06 per fully diluted share).

Operating income was $9.3 million, or $0.29 per fully diluted share, for the year ended December 31, 2010. This compares to operating income of $4.3 million, or $0.13 per fully diluted share, for the same period a year ago (excluding a $2.0 million one-time capital gain from the sale of the Company’s headquarters office building).

Total cash, cash equivalents and short-term investments as of December 31, 2010 amounted to $46.5 million.

Comments of Management

Commenting on the results, Guy Bernstein, acting chief executive officer of Magic Software, said: “2010 has been a strong year for Magic Software. We demonstrated excellent performance throughout all of our regions and major businesses, resulting in impressive double-digit growth at the top and bottom lines. 
“Our strong financial position, coupled with our 2010 activities in promoting and growing new markets, will continue the Company’s momentum into 2011, where we see opportunity to expand both organically and through acquisitions. We stand ready to meet an increase in demand for our products, especially in the rapidly evolving arenas of mobile and cloud computing solutions,” 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.

Please refer to the Reconciliation of Selected Financial Metrics from GAAP to Non-GAAP tables below.

About Magic Software Enterprises