Magic Software Reports Record 2008 Results: Net Profit Quadruples on Increased Sales

  • Or Yehuda, Israel
  • February 18, 2009

Magic Software Enterprises Ltd. (NASDAQ: MGIC), a leading provider of application platform and business and process integration solutions, today announced its financial results for the fourth quarter and full year ended December 31, 2008.

[Financial Results and Tables for the Fourth Quarter and Full Year 2008]

Financial Results for the Year ended December 31, 2008

  • Net income from continuing operations reached $4.5 million, compared to $1.1 million in 2007, an increase of 309%.
  • Operating income amounted to $4.3 million, an increase of 231% compared to $1.3 million in 2007.
  • Gross margin improved to 56.2% from 53.2% in 2007.
  • Revenues from sales of licenses grew to $17.9 million, an increase of 19% compared to $15.0 million in 2007.
  • Total revenues increased by 6% to $62.0 million, up from $58.4 million in 2007.
  • Total cash and short-term investments as of December 31, 2008 were $32.6 million and shareholders’ equity was $66.8 million.
  • Operational cash flow for the year amounted to $5 million.
  • On a non-GAAP basis, net income from continuing operations increased by 269% to $4.8 million from $1.3 million in 2007.

Financial Results for the Fourth Quarter of 2008

  • Net income from continuing operations totaled $1.1 million compared to $0.3 million for the fourth quarter of 2007, an increase of 267%.
  • Operating income amounted to $1.2 million, a six-fold increase compared to $0.2 million recorded in the same period of 2007.
  • Total revenues were $15.1 million, a decrease of 4% compared to $15.7 million for the fourth quarter of 2007. 
  • Net income from continuing operations on a non-GAAP basis, was $1.2 million compared to net income of $0.4 million recorded in the fourth quarter of 2007. 
  • Net income from discontinued operations for the fourth quarter of 2007 included a $9.3 million one-time capital gain from the sale of the Company’s AAOD subsidiary and contributions from AAOD operations.

Comments of Management

Commenting on the results, Guy Bernstein, Chairman of Magic Software, said: “I am pleased to report that the Company continued to increase its sales and profits throughout 2008 despite the challenging economic climate. We are maintaining our competitive edge by providing our customers with cost-effective solutions and solid support. We are also maintaining tight control over costs and remain focused on the long-term growth of the Company.”

“Our successful introduction of uniPaaS during 2008 and the increasing adoption of iBOLT by the industry place Magic Software in the forefront of the Application Platform industry and we are now considered to be one of the few global strategic providers in this field,” stated Mr. Bernstein. 

Key Trends

  • Significant reduction of the Company’s churn rate. This has been demonstrated by growth in the Company’s license sales and by the renewal and strengthening of existing customers’ interest and commitment. 
  • Industry recognition of the value of Magic Software’s “Power of Choice.”  Numerous partners and customers have expressed appreciation that Magic Software platforms enable them to deploy certain application modules as Client/Server and others as RIA (Rich Internet Applications). 
  • Significant adoption of Service Oriented Architecture. The migration to Service Oriented Architecture is driving the initiation of many new IT projects based on Magic Software products and increasing the scope of existing ones. In parallel, an increasing number of Service Oriented Architecture projects are using both uniPaaS and iBOLT.
  • Growth in the use of iBOLT in the SAP ecosystem, in particular at the Enterprise level. This has been accompanied by increasing sales into the space and the Oracle JD Edwards ecosystem.

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 provide 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.

Conference Call

Magic Software’s management will also host a conference call today at 10:00 AM EST / 5:00 PM in Israel. To participate in the conference call, please call the appropriate number listed below at least five to ten minutes prior to the start of the call:

From the US: 1-888-723-3164
From Canada: 1-866-958-6867
From Israel: 1-800-227-297
All others: +972-3-9180609

Callers should reference the Magic Software Earnings Conference Call.

A replay of the call will be available from 1:00 p.m. EDT on February 19, 2009 through 12:00 p.m. EDT on February 26, 2009. To access the replay, please call:

From the US: 1-888-295-2634
From Canada: 1-866-500-4964
From Israel: 1-800-286-285
All others: +972-3-9255937

An archive of the online broadcast will be available on the investor relations part of Magic Software’s website, from February 19, at:

About Magic Software

Magic Software Enterprises Ltd. (NASDAQ: MGIC) is a leading provider of multiple-mode application platform solutions – including Full Client, Rich Internet Applications (RIA) or Software-as-a-Service (SaaS) modes – and business and process integration solutions.  Magic Software has offices in 10 countries and a presence in over 50, as well as a global network of ISV’s, system integrators, value-added distributors and resellers, and consulting and OEM partners.  The company’s award-winning code-free solutions give partners and customers the power to leverage existing IT resources, enhance business agility and focus on core business priorities.  Magic Software’s technological approach, product roadmap and corporate strategy are recognized by leading industry analysts. Magic Software has partnerships with global IT leaders including SAP AG,, IBM and Oracle.  For more information about Magic Software and its products and services, visit

Magic Software is a subsidiary of Formula Systems in the Emblaze Group of companies.

Except for the historical information contained herein, the matters discussed in this news release include forward-looking statements that may involve a number of risks and uncertainties. Actual results may vary significantly based upon a number of factors including, but not limited to, risks in product and technology development, market acceptance of new products and continuing product conditions, both here and abroad, release and sales of new products by strategic resellers and customers, and other risk factors detailed in the Company’s most recent annual report and other filings with the Securities and Exchange Commission. 

Hadas Gazit-Kaiser, CFO
Magic Software Enterprises Ltd. 
Tel. +972 (0)3 538 9284