Operating income for the third quarter increased 9% year over year to $12.0 million; Non-GAAP operating income for the third quarter increased 14% year over year to a record-breaking $16.2 million
Or Yehuda, Israel, November 15, 2021 – Magic Software Enterprises Ltd. (NASDAQ and TASE: MGIC), a global provider of IT consulting services and end-to-end integration and application development platforms solutions, announced today its financial results for the third quarter and nine months ended September 30, 2021.
Summary Results for Third Quarter 2021 (USD in millions, except per share data)
|(*)||Attributable to Magic Software’s shareholders.|
Financial Highlights for the Third Quarter Ended September 30, 2021
● Revenues for the third quarter of 2021 increased 27.4% to $120.9 million compared to $94.9 million in the same period last year.
● Operating income for the third quarter of 2021 increased 9.2% to $12.0 million compared to $11.0 million in the same period last year. The holidays of the Jewish month of Tishrei, which this year have entirely coincided with the third quarter (as opposed to spreading over the third and fourth quarters in the previous year) reduced T&M billable hours in our operations in Israel by approximately 7%, thus reducing our operating margin in the third quarter of 2021 by 1.1% (110 bps).
● Non-GAAP operating income for the third quarter of 2021 increased 14.0% to $16.2 million compared to $14.2 million in the same period last year. The Holidays of the Jewish month of Tishrei, which this year have entirely coincided with the third quarter (as opposed to spreading over the third and fourth quarters in the previous year) reduced T&M billable hours in our operations in Israel by approximately 7%, thus reducing our operating margin in the third quarter of 2021 by 1.1% (110 bps).
● Net income attributable to Magic Software’s shareholders for the third quarter of 2021 increased 5.8% to $7.5 million, or $0.15 per fully diluted share, compared to $7.1 million, or $0.14 per fully diluted share in the same period last year.
● Non-GAAP net income attributable to Magic Software’s shareholders for the third quarter of 2021 increased 24.5% to $11.8 million, or $0.24 per fully diluted share, compared to $9.5 million, or $0.19 per fully diluted share, in the same period last year.
Summary Results for Nine-month Period Ended September 30, 2021 (USD in millions, except per share data)
Summary Results for Nine-month Period Ended September 30, 2021 (USD in millions, except per share data)
Financial Highlights for the First Nine-Month Period Ended September 30, 2021
● Revenues for the first nine months of 2021 increased 30.3% to $347.3 million compared to $266.6 million in the same period last year.
● Operating income for the first nine months of 2021 increased 24.7% to $37.0 million compared to $29.6 million in the same period last year.
● Non-GAAP operating income for the first nine months of 2021 increased 25.9% to $47.1 million compared to $37.4 million in the same period last year.
● Net income attributable to Magic’s shareholders for the first nine months of 2021 increased 22.2% to $22.8 million, or $0.46 per fully diluted share, compared to $18.7 million, or $0.38 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 2021 increased 23.9% to $33.4 million, or $0.68 per fully diluted share, compared to $26.9 million, or $0.55 per fully diluted share, in the same period last year.
● Cash flow from operating activities for the first nine months of 2021 amounted to $34.2 million compared to $41.3 million in the same period last year.
● Magic Software has increased its 2021 revenue guidance for the full year of 2021 to between $470 million to $475 million on a constant currency basis, reflecting annual growth of 26.6% to 28.0%, as compared to its prior range of $450 million to $460 million.
Guy Bernstein, Chief Executive Officer of Magic Software, said: “I am very pleased to report another record quarter which further adds to our strong 2021 momentum and allows us to enter into the fourth quarter with increased confidence.
During the first nine months of 2021 we reported double digit growth and all-time highs across all of our key indices (revenues, gross profit, operating income, EBITDA and net income) demonstrating our continued focus on the execution of our growth strategy as our customers increasingly engage us as a preferred partner for implementing fastest-growing technologies, such as digital, cloud, data and AI, creating significant value in managing, streamlining, accelerating and making their businesses thrive.”
Conference Call Details
Magic Software’s management will host a conference call on Monday, November 15, at 10:00 am Eastern Daylight Time (7:00 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 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: +1-888-642-5032
ALL OTHERS: +972-3-918-0609
For those unable to join the live call, a replay of the call will be available under 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 in connection 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;
● Equity-based compensation expenses;
● Costs related to acquisition of new businesses;
● The related tax, non-controlling interests and redeemable non-controlling interest’s 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; and
● 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” 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, 2020 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