OR YEHUDA, Israel, March 13, 2024 (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 fourth quarter and full year ended December 31, 2023.
Financial Highlights for the Year Ended December 31, 2023
- Revenues for the year decreased by 5.6% to $535.1 million compared to $566.8 million last year. On a constant currency basis (calculated based on the average currency exchange rates during the twelve months period ended December 31, 2022), revenues for the year would have decreased by 1.6% to $557.9 million. As described in the pre-announcement of our third quarter results on November 8, 2023, as of the third quarter of 2023, as of the third quarter of 2023, we experienced a substantial and unexpected decline in demand for our professional services from several of our important U.S.-based blue-chip customers which, without any advance notification, decided to immediately suspend significant parts of their active time-and-materials-based projects resulting in a decrease of close to 600 of our U.S. specialists compared to the respective period. This reduced demand had a negative impact on 2023 revenues of approximately $40.8 million compared to the same period last year.
- Operating income for the year decreased by 7.5% to $57.1 million compared to $61.8 million last year. On a constant currency basis (calculated based on the average currency exchange rates during the twelve months period ended December 31, 2022), operating income for the year would have decreased by 3.1% to $59.9 million. Operating income for the year ended December 31, 2023, included $3.8 million recorded with respect to cost of share-based payment to employees compared to $2.1 million recorded last year.
- Non-GAAP operating income for the year decreased by 3.7% to $71.8 million compared to $74.5 million last year. On a constant currency basis (calculated based on the average currency exchange rates during the twelve months period ended December 31, 2022), non-GAAP operating income for year would have reached $74.5 million, same as last year.
- Net income attributable to Magic Software’s shareholders for the year decreased by 8.5% to $37.0 million, or $0.75 per fully diluted share, compared to $40.5 million, or $0.82 per fully diluted share, last year. The decrease in our net income attributable to Magic Software’s shareholders was primarily attributable to the decrease in our operating profit and increase in interest expenses resulting from the increase of bank interest rates and increase in overall financial debt.
- Non-GAAP net income attributable to Magic Software’s shareholders for the year decreased by 6.5% to $48.4 million, or $0.99 per fully diluted share, compared to $51.8 million, or $1.05 per fully diluted share, last year.
- Cash flow from operating activities for the year ended December 31, 2023, amounted to $77.9 million compared to $56.6 million last year. Cash flow from operating activities excluding the impact of payments of deferred and contingent consideration related to acquisitions amounted to $78.0 and $60.5 million for the years ended December 31, 2023, and 2022, respectively.
- As of December 31, 2023, Magic’s cash, cash equivalents and short and long-term bank deposits amounted to $107.1 million and total financial debt amounted to $81.2 million.
- Magic is introducing 2024 annual revenue guidance of between $540 million and $550 million (based on current currency exchange rates). Measured against Magic Software’s annualized 2023 fourth quarter revenue on a go-forward basis, the 2024 annual revenue guidance reflects an annual growth of 7.5% to 9.5%.
Guy Bernstein, Chief Executive Officer of Magic Software, said: “Despite the slowdown we faced during the second half of the year resulting from the headwind facing by some of our customers in certain sectors in the U.S., we remain positive that the vast majority of our customers will continue to value our unique proposition and resume to engage us to an increasing degree as a preferred partner for innovative digital transformation initiatives.
Fueled by a well-diversified investment portfolio, we persistently pursue both organic and inorganic avenues of expansion across our service lines. Embracing innovation as our guiding principle, we eagerly anticipate the fruition of our ongoing efforts in cultivating cutting-edge capabilities that are poised to propel us toward sustained, long-term profitability, thereby delivering enduring value to our esteemed shareholders. We have a well-established track record of growth, profitability, and high cash generation. Across the globe, our dedicated team at Magic is resolutely focused on executing our strategic vision to not only restore but surpass our previous heights, thereby ensuring sustained growth and the continual enhancement of shareholder value.”
Conference Call Details
Magic Software’s management will host a conference call on Wednesday, March 13, 2024, at 11:00 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
UK: 0-800-917-9141
ISRAEL: 03-918-0650
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;
- Cost of share-based payment;
- Costs related to acquisition of new businesses;
- The related tax, non-controlling interests’ effects of the above items;
- Change in valuation of contingent consideration related to acquisitions;
- 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.
Press Contact:
Ronen Platkevitz
Magic Software Enterprises
ir@magicsoftware.com
