Or Yehuda, Israel, May 26, 2020 – Magic Software Enterprises Ltd. (NASDAQ and TASE: MGIC), a global provider of end-to-end integration and application development platforms solutions and IT consulting services, announced today its financial results for the first quarter ended March 31, 2020.
Financial Highlights for the First Quarter Ended March 31, 2020
Revenues for the first quarter ended March 31, 2020 increased 19% to $85.2 million compared to $71.8 million in the same period last year.
Operating income for the first quarter ended March 31, 2020 increased 4% to $8.7 million compared to $8.4 million in the same period last year.
Non-GAAP operating income for the first quarter ended March 31, 2020 increased 9% to $11.0 million compared to $10.1 million in the same period last year.
Net income attributable to Magic’s shareholders for the first quarter ended March 31, 2020 increased 9% to $5.9 million, or $0.12 per fully diluted share, compared to $5.4 million, or $0.11 per fully diluted share in the same period last year.
Non-GAAP net income attributable to Magic’s shareholders for the first quarter ended March 31, 2020 increased 41% to $9.4 million, or $0.19 per fully diluted share, compared to $6.7 million, or $0.14 per fully diluted share, in the same period last year.
Cash flow from operating activities for the first quarter ended March 31, 2020 amounted to $13.1 million compared to $10.7 million in the same period last year.
As of March 31, 2020, Magic’s net cash, cash equivalents, short and long-term bank deposits and marketable securities, offset by financial liabilities, amounted to $89.3 million.
Due to the COVID-19 pandemic which may cause delays in closing of new deals Magic is slightly revising its fiscal year 2020 guidance issued in February for full year revenues to the range of $350 million to $360 million on a constant currency basis, reflecting annual growth of 7.5% to 10.6%, as compared to its prior range of $360 million to $370 million, overall decreasing the midpoint of its guidance by 2.7%.
Declaration of Dividend Distribution for the Second Half of 2019
In accordance with its dividend distribution policy and as a testimony to our continued confidence in our business and our ability to continue generating positive cashflow, the Company’s board of directors declared a semi-annual cash dividend in the amount of $0.08 per share and in the aggregate amount of approximately $3.9 million, which in the aggregate with the amount distributed with respect to the first half of 2019, of $7.6 million reflect approximately 56% of Magic Software net income attributable to its shareholders for the year 2019.
The dividend is payable on June 25, 2020 to all of the Company’s shareholders of record at the close of the NASDAQ Global Select Market on June 9, 2020.
In accordance with Israeli tax law, the dividend is subject to withholding tax at source at the rate of 30% (if the recipient of the dividend is at the time of distribution or was at any time during the preceding 12-month period the holder of 10% or more of the Company’s share capital) or 25% (for all other dividend recipients) of the dividend amount payable to each shareholder of record, subject to applicable exemptions.
The dividend will be paid in US dollars on the ordinary shares of Magic Software Enterprises that are traded both on the Tel Aviv Stock Exchange and the NASDAQ Global Select Market.
Guy Bernstein, Chief Executive Officer of Magic Software Enterprises, said: “Magic’s first-quarter performance reflects our continued focus on supporting our existing customers and closing of new deals. With COVID-19 global pandemic hitting the world by surprise since early March 2020, we took all the necessary steps to insure our employees are kept safe and productive, while controlling our expenses to properly address the new financial and market challenges.
In addition, as part of our continued efforts to improve our financial position and as a testimony of our confidence in our existing operations, during the first quarter we increased our equity interest in Roshtov Software Industries Ltd., by 20.05%, from 60% to 80.05%, and in Comblack IT Ltd., by 10.2%, from 70% to 80.2%. I am confident that the steps we have taken will ensure that Magic will emerge stronger and well positioned for continued growth when global economy recovers.”
Conference Call Details
Magic’s management will host a conference call on Tuesday, May 26, at 10:00 am Eastern Daylight Time (7:00 am Pacific Daylight Time, 17:00 Israel Daylight 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: +972-3-918-0650
For those unable to join the live call, a replay of the call will be available 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 attributable 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;
Costs relates to acquisition of new businesses
The related tax, non-controlling interests and redeemable non-controlling interests 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;
Change in deferred tax assets on carry forward tax losses;
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.
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,” “look forward”, “expect,” “believe” 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, 2019 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