Magic Software Enterprises Ltd. (NASDAQ and TASE: MGIC), a global provider of end-to-end integration and application development solutions and IT consulting services, announced today its financial results for the third quarter and first nine months of 2017.
Financial Highlights for the Third Quarter Ended September 30, 2017
Revenues for the third quarter increased 21% to $65.7 million compared to $54.5 million in the same period last year.
Operating income for the third quarter increased 19% to $7.1 million compared to $6.0 million in the same period last year. Non-GAAP operating income for the third quarter increased 17% to $9.1 million compared to $7.7 million in the same period last year.
- Net income attributable to Magic’s shareholders for the third quarter decreased 5% to $3.8 million, or $0.09 per fully diluted share, compared to $4.0 million, or $0.09 per fully diluted share in the same period last year. Non-GAAP net income attributable to Magic’s shareholders for the third quarter decreased 2% to $5.2 million, or $0.12 per fully diluted share, compared to $5.3 million, or $0.12 per fully diluted share, in the same period last year.
Financial Highlights for the Nine-Month Period Ended September 30, 2017
Revenues for the first nine months of 2017 increased 31% to $191.9 million compared to $146.5 million in the same period last year.
Operating income for the first nine months increased 19% to $19.8 million compared to $16.5 million in the same period last year. Non-GAAP operating income for the first nine months of 2017 increased 26% to $26.4 million compared to $20.9 million in the same period last year.
Net income attributable to Magic’s shareholders for the first nine months of 2017 decreased 1% to $11.6 million, or $0.26 per fully diluted share, compared to $11.8 million, or $0.27 per fully diluted share in the same period last year. Non-GAAP net income attributable to Magic’s shareholders for the first nine months of 2017 increased 9% to $16.7 million, or $0.38 per fully diluted share, compared to $15.3 million, or $0.34 per fully diluted share, in the same period last year.
Cash flow from operating activities for the first nine months of 2017 amounted to $17.8 million.
As of September 30, 2017, our net cash, cash equivalents, short-term bank deposits and available-for-sale marketable securities, offset by financial liabilities, amounted to $46.5 million.
Due to better visibility, the Company is narrowing the expected range of its revenue guidance for 2017. Full year 2017 revenue is expected to be in the range of $250 million to $255 million, up from prior guidance of $245 million to $255 million, reflecting a revised annual growth rate of 24%-26%.
Guy Bernstein, Chief Executive Officer of Magic Software Enterprises, said:
“We are pleased to report another quarter with solid year-over-year growth and profitability powered by strong demand across our entire portfolio.”
“As we continue to invest in our products and services to enable customers to benefit from the latest technologies, we are confident that our ever-evolving portfolio, now including our new Magic xpc iPaaS platform, provides both the solutions and services needed by enterprises to succeed in today’s digital marketplace. As we see our growth trend successfully moving forward, we remain excited about our market opportunity.”
Conference Call Details
Magic’s management will host a conference call on Tuesday, November 14, at 10:00 am Eastern Standard Time (7:00 am Pacific Standard Time, 17:00 Israel Standard Time) to review and discuss Magic’s results.
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.
NORTH AMERICA: +1-888-281-1167
ALL OTHERS: +972-3-918-0644
For those unable to join the live call, a replay of the call will be available for at least three months, under the Investor Relations section of Magic’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 attributed to Magic’s shareholders and Non-GAAP basic and diluted earnings per share.
Magic 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’s financial condition and results of operations. Magic’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 in connection with GAAP results. Magic 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;
- The related tax, non-controlling interests and redeemable non-controlling interests effects of the above items;
- Increase in valuation of contingent consideration related to acquisitions;
- Increase in value of put options of redeemable non-controlling interests.
Reconciliation tables 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.
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, 2016 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.
Shefi Yemini, IR Representative
Magic Software Enterprises