GlobeNewswire
Operating income for the year increased 21% year over year to $40.6 million; Non-GAAP operating income for the year increased 20% year over year to $52.6 millionOr Yehuda, Israel, March 08, 2021 (GLOBE NEWSWIRE) -- Magic Software Enterprises Ltd. (NASDAQ and TASE: MGIC), a global provider of end-to-end integration and application development platform solutions and IT consulting services, announced today its financial results for the fourth quarter and full year ended December 31, 2020. Financial Highlights for the Fourth Quarter Ended December 31, 2020 Revenues for the fourth quarter increased 15% to a record-breaking $104.6 million compared to $90.9 million in the same period last year.Operating income for the fourth quarter increased 26% to $11.0 million compared to $8.7 million in the same period last year.Non-GAAP operating income for the fourth quarter increased 33% to $15.3 million compared to $11.4 million in the same period last year.Net income attributable to Magic’s shareholders for the fourth quarter increased 27% to $6.5 million, or income of $0.11 per fully diluted share, compared to $5.1 million, or loss of $0.03 per fully diluted share in the same period last year. Earnings per share for the fourth quarter of 2020 and 2019 were negatively impacted by accretion charges of $1.3 million and $6.4 million, respectively, with respect to change in the value of outstanding put options of redeemable non-controlling interests. The Company classifies redeemable non-controlling interests as mezzanine equity, separate from permanent equity on the consolidated balance sheets and measures it at each reporting period at the higher of its redemption amount or the non-controlling interest book value. The changes in the redemption value measured on each reporting period is reported as part of the retained earnings and allocated to earnings for the purpose of calculating the company’s net income attributable to Magic’s shareholders per share. Excluding the negative impact of the amount charged with respect to the value of outstanding put options of redeemable non-controlling interests, earnings per share for the fourth quarter was $0.13 per fully diluted share compared to $0.10 per fully diluted share in the same period last year. Non-GAAP net income attributable to Magic’s shareholders for the fourth quarter increased 63% to $10.3 million, or $0.21 per fully diluted share, compared to $6.3 million, or $0.13 per fully diluted share, in the same period last year. Financial Highlights for The Year Ended December 31, 2020 Revenues for the year increased 14% to $371.2 million compared to $325.6 million last year.Operating income for the year increased 21% to $40.6 million compared to $33.7 million last year.Non-GAAP operating income for the year increased 20% to $52.6 million compared to $43.9 million in the same period last year.Net income attributable to Magic’s shareholders for the year increased 24% to $25.2 million, or $0.49 per fully diluted share, compared to $20.3 million, or $0.26 per fully diluted share in the same period last year. Earnings per share for the year ended December 31, 2020 and 2019, were negatively impacted by accretion charges of $1.3 million and $7.4 million, respectively, with respect to the value of outstanding put options of redeemable non-controlling interests. Excluding the negative impact of the amount charged with respect to the value of outstanding put options of redeemable non-controlling interests, earnings per share for the year ended December 31, 2020 was $0.51 per fully diluted share compared to $0.41 per fully diluted share in the same period last year. Non-GAAP net income attributable to Magic’s shareholders for the year increased 32% to $37.2 million, or $0.76 per fully diluted share, compared to $28.2 million, or $0.58 per fully diluted share, in the same period last year.Cash flow from operating activities for the year ended December 31, 2020 amounted to $52.3 million compared to $45.9 million in the same period last year.As of December 31, 2020, Magic’s net cash, cash equivalents, short and long-term bank deposits and marketable securities amounted to $92.0 million.Magic is providing revenue guidance for 2021 of between $420 million to $430 million, reflecting annual growth of 13% to 16%. Declaration of Cash Dividend for the Second Half of 2020 In accordance with its dividend distribution policy, the Company’s board of directors declared a semi-annual cash dividend for the second half of 2020 in the amount of $0.21 per share and in the aggregate amount of approximately $10.2 million, which together with the dividend distributed for the first half of 2020, reflects 75% of the Company’s net income attributable to Magic’s shareholders for the year.The dividend is payable on April 7, 2021 to all of the Company’s shareholders of record at the close of the NASDAQ Global Select Market on March 25, 2021.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 twelve-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: “I am pleased to report that Magic delivered a strong finish to the year, with record breaking revenues of $104.6 million for the fourth quarter, reflecting 15% increase from the same period last year and exceeding the 100 million-dollar-mark for the first time. The company’s results of operations for the year demonstrate our ability to manage our business during uncertain times introduced by the COVID-19 global pandemic while emerging from it much stronger. As we well managed to execute on our strategy while ensuring our employees’ safety and productivity, controlling our expenses, and improving our financial position.” “For the full year of 2020, Magic’s revenues increased 14% year over year to $371 million and non-GAAP operating income increased 20% year over year to $53 million. Focusing on growth strategy, offering diversity and an even stronger balance sheet, Magic continues to be well positioned for future success and growth.” Conference Call Details Magic’s management will host a conference call on Monday, March 8, 2020 at 11:00 am Eastern Daylight Time (5:00 p.m. 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: +1-888-668-9141 UK: 0-800-917-5108 ISRAEL: 03-918-0609 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’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;The related tax, non-controlling interests and redeemable non-controlling interest effects of the above items;Change in valuation of contingent consideration related to acquisitions; andAcquisition-related costs; 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. Press Contact: Noam Amir Magic Software Enterprises ir@magicsoftware.com MAGIC SOFTWARE ENTERPRISES LTD.CONDENSED CONSOLIDATED STATEMENTS OF INCOMEU.S. Dollars in thousands (except per share data) Three months ended Year ended December 31, December 31, 2020 2019 2020 2019 Unaudited Unaudited Revenues $104,573 $90,927 $371,194 $325,630 Cost of revenues 73,688 63,059 261,602 223,501 Gross profit 30,885 27,868 109,592 102,129 Research and development, net 2,310 1,962 8,789 8,239 Selling, marketing and general and administrative expenses 16,520 17,176 59,127 59,983 Increase in valuation of contingent consideration related to acquisitions 1,088 - 1,088 255 Total operating costs and expenses 19,918 19,138 69,004 68,477 Operating income 10,967 8,730 40,588 33,652 Financial expenses, net 1,312 352 917 1,180 Increase in valuation of contingent consideration related to acquisitions 666 - 2,268 - Income before taxes on income 8,989 8,378 37,403 32,472 Taxes on income 1,178 1,977 7,286 6,874 Net income $7,811 $6,401 $30,117 $25,598 Net income attributable to non-controlling interests and redeemable non-controlling interests (1,300) (1,280) (4,931) (5,332)Net income attributable to Magic’s shareholders $6,511 $5,121 $25,186 $20,266 Net earnings (loss) per share attributable to Magic’s shareholders : Net Income attributable to Magic Shareholder’s 6,511 5,121 25,186 20,266 Accretion of redeemable non-controlling interests (1,317) (6,441) (1,317) (7,441)Net Income (loss) attributable to Magic Shareholder’s after accretion of redeemable non-controlling interests $5,194 $(1,320) $23,869 $12,825 Weighted average number of shares used in computing net earnings per share Basic 49,035 48,921 49,029 48,896 Diluted 49,053 49,021 49,048 48,994 Basic and diluted earnings (loss) per share attributable to Magic’s shareholders $0.11 $(0.03) $0.49 $0.26 Net earnings per share attributable to Magic’s shareholders : excluding accretion of redeemable non-controlling interest Basic $0.13 $0.11 $0.51 $0.41 Diluted $0.13 $0.10 $0.51 $0.41 SUMMARY OF NON-GAAP FINANCIAL INFORMATIONU.S. Dollars in thousands (except per share data) Three months ended Year ended December 31, December 31, 2020 2019 2020 2019 Unaudited Unaudited Revenues $104,573 100% $90,927 100% $371,194 100% $325,630 100%Gross profit 32,498 31.1% 29,394 32.3% 116,059 31.3% 107,886 33.1%Operating income 15,254 14.6% 11,437 12.6% 52,629 14.2% 43,945 13.5%Net income attributable to Magic’s shareholders 10,311 9.9% 6,331 7.0% 37,240 10.0% 28,153 8.6% Basic earnings per share $0.21 $0.13 $0.76 $0.58 Diluted earnings per share $0.21 $0.13 $0.76 $0.58 MAGIC SOFTWARE ENTERPRISES LTD.RECONCILIATION OF GAAP AND NON-GAAP RESULTSU.S. Dollars in thousands (except per share data) Three months ended Year ended December 31, December 31, 2020 2019 2020 2019 Unaudited Unaudited GAAP gross profit $30,885 $27,868 $109,592 $102,129 Amortization of capitalized software and acquired technology 1,345 1,293 5,310 4,972 Amortization of other intangible assets 268 233 1,157 785 Non-GAAP gross profit $32,498 $29,394 $116,059 $107,886 GAAP operating income $10,967 $8,730 $40,588 $33,652 Gross profit adjustments 1,613 1,526 6,467 5,757 Amortization of other intangible assets 1,973 2,129 6,308 6,988 Change in valuation of contingent consideration related to acquisitions 1,088 - 1,088 255 Capitalization of software development (828) (955) (3,302) (4,083)Acquisition-related costs 441 7 1,207 1,301 Litigation and other acquisition costs - - 273 - Stock-based compensation - - - 75 Non-GAAP operating income $15,254 $11,437 $52,629 $43,945 GAAP net income attributable to Magic’s shareholders $6,511 $5,121 $25,186 $20,266 Operating income adjustments 4,287 2,707 12,041 10,293 Amortization expenses attributed to non-controlling interests and redeemable non-controlling interests (326) (540) (734) (1,268)Changes in unsettled fair value of contingent consideration related to acquisitions 666 - 2,268 - Deferred taxes on the above items (827) (957) (1,521) (1,138)Non-GAAP net income attributable to Magic’s shareholders $10,311 $6,331 $37,240 $28,153 Non-GAAP basic net earnings per share $0.21 $0.13 $0.76 $0.58 Weighted average number of shares used in computing basic net earnings per share 49,035 48,921 49,029 48,896 Non-GAAP diluted net earnings per share $0.21 $0.13 $0.76 $0.58 Weighted average number of shares used in computing diluted net earnings per share 49,053 49,021 49,048 48,990 MAGIC SOFTWARE ENTERPRISES LTD.CONDENSED CONSOLIDATED BALANCE SHEETSU.S. Dollars in thousands December 31, December 31, 2020 2019 Unaudited ASSETS CURRENT ASSETS: Cash and cash equivalents $88,127 $81,915 Short-term bank deposits 289 6,996 Marketable securities 1,238 6,600 Trade receivables, net 111,059 96,694 Other accounts receivable and prepaid expenses 10,513 12,845 Total current assets 211,226 205,050 LONG-TERM RECEIVABLES: Severance pay fund 4,673 4,013 Deferred tax assets 2,334 2,188 Operating lease right-of-use assets 24,509 14,956 Other long-term receivables 3,211 3,594 Other long-term deposits 2,296 2,285 Total long-term receivables 37,023 27,036 PROPERTY AND EQUIPMENT, NET 5,988 3,649 IDENTIFIABLE INTANGIBLE ASSETS AND GOODWILL, NET 189,086 168,871 TOTAL ASSETS $443,323 $404,606 LIABILITIES AND EQUITY CURRENT LIABILITIES: Short-term debt $11,529 $7,079 Trade payables 14,250 10,990 Accrued expenses and other accounts payable 41,846 32,619 Current maturities of operating lease liabilities 3,413 3,833 Liabilities due to acquisition activities 4,998 3,638 Deferred revenues and customer advances 8,793 8,724 Total current liabilities 84,829 66,883 NON-CURRENT LIABILITIES: Long-term debt 13,352 15,540 Deferred tax liability 13,580 11,069 Long-term operating lease liabilities 21,109 11,119 Long-term liabilities due to acquisition activities 10,926 8,613 Accrued severance pay 5,545 4,770 Total non-current liabilities 64,512 51,111 REDEEMABLE NON-CONTROLLING INTERESTS 24,980 21,915 EQUITY: Magic Software Enterprises equity 260,427 247,838 Non-controlling interests 8,575 16,859 Total equity 269,002 264,697 TOTAL LIABILITIES, REDEEMABLE NON-CONTROLLING INTERESTS AND EQUITY $443,323 $404,606 MAGIC SOFTWARE ENTERPRISES LTD.CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWSU.S. Dollars in thousands For the Year ended December 31, 2020 2019 Unaudited Cash flows from operating activities: Net income $30,117 $25,598 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 13,939 14,025 Stock-based compensation - 74 Amortization of marketable securities premium and accretion of discount (70) 117 Decrease (increase) in trade receivables, net (3,939) 6,550 Decrease in other long-term and short-term accounts receivable and prepaid expenses 3,399 9,594 Increase (decrease) in trade payables 1,899 (5,273)Change in exchange rate of loans 1,362 1,895 Increase (decrease) in accrued expenses and other accounts payable 8,175 (7,673)Increase (decrease) in deferred revenues (936) 2,934 Change in deferred taxes, net (1,650) (1,893)Net cash provided by operating activities 52,296 45,948 Cash flows from investing activities: Capitalized software development costs (3,302) (4,143)Purchase of property and equipment (2,772) (1,379)Cash paid in conjunction with acquisitions, net of acquired cash (16,534) (22,603)Proceeds from maturity and sale of marketable securities 5,429 3,356 Proceeds from short-term bank deposits 7,575 10,043 Investment in long-term bank deposits - (714)Net cash used in investing activities (9,604) (15,440) Cash flows from financing activities: Proceeds from exercise of options by employees 256 69 Issuance of ordinary shares, net - 104 Dividend paid (12,503) (14,963)Dividend paid to non-controlling interests (5,109) (457)Dividend paid to redeemable non-controlling interests (4,592) (3,395)Purchase of redeemable non-controlling interest (18,016) (5,592)Short term and long-term loans received 9,686 878 Repayment of short-term and long-term loans (9,369) (13,624)Net cash used in financing activities (39,647) (36,980) Effect of exchange rate changes on cash and cash equivalents 3,167 1,261 Change in cash and cash equivalents 6,212 (5,211)Cash and cash equivalents at the beginning of the period 81,915 87,126 Cash and cash equivalents at end of the period $88,127 $81,915
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