7 Aug 2008 12:03
Momentum Building for Magic Software: Record Revenues of $16 Million and Net Income of $1.7 Million for Q2 2008 -- Recent Changes Lead To Record Results; Magic Positioned with New Technologies to Regain Dominance -- Ra'anana, Israel, 07 August 2008 - Emblaze Ltd announces that MagicSoftware Enterprises Ltd. , a member of the Emblaze / FormulaGroup , and a leading provider of applicationplatform and business and process integration solutions, today announced recordfinancial results and significant strategic progress for the quarter ended June30, 2008
Financial Results for the Second Quarter
Magic's revenues for the second quarter of 2008 reached a record of $16.0 million compared to $14.3 million in the same period of 2007, an increase of 12%. Gross margin for the second quarter rose to 58% from 52% in the same period of 2007, reflecting the increase in higher-margin license sales.
Magic's operating income for the second quarter of 2008 was $1.6 millioncompared to $0.4 million in the same period of 2007 on a U.S. GAAP (GenerallyAccepted Accounting Principles) basis. Net income for the second quarter of2008 totaled $1.7 million, or $0.05 per share. This compared to net income of$0.8 million, or $0.03 per share, for the same period of 2007, which included acontribution of $0.5 million, or $0.02 per share, from discontinued operations.
GAAP results include amortization expenses as well as non-cash charges taken in respect of the capitalization of intangible assets and stock-based compensation. Excluding these expenses, non-GAAP net income for the second quarter was $1.5 million, or $0.05 per share, compared to $0.7 million, or $0.02 per share, in the comparable period of 2007, which included a contribution of $0.5 million, or $0.02 per share, from discontinued operations.
In accordance with U.S. GAAP, the results of Magic's divested subsidiary, Advanced Answers On Demand (AAOD), which was sold in the fourth quarter of 2007, were recorded as discontinued operations in the comparison quarter of 2007. As such, the period's operating results exclude AAOD's contribution.
Results for the Six-Month Period
Magic's revenues for the six month period ended June 30, 2008 were $31.1 million, up from $28.1 million in the comparable period of 2007, an increase of 11%.
Magic's operating income for the six-month period ended June 30, 2008 was $1.5million compared to operating income of $0.9 million in the same period of 2007on a U.S. GAAP basis. Net income for the six month period ended June 30, 2008on a GAAP basis was $1.7 million, or $0.05 per share, compared to net income of$1.8 million, or $0.06 per share, in the same period of 2007, which included a$1.1 million contribution, or $0.03 per share from discontinued operations.On a non-GAAP basis, operating income for the six months period ended June 30,2008 was $1.5 million, compared to a non-GAAP operating income of $0.8 millionin the same period of 2007. Net income on a non-GAAP basis for the six-monthperiod ended June 30, 2008 was $1.7 million, or $0.05 per share, compared tonon-GAAP net income of $1.7 million, or $0.06 per share, in the comparableperiod of 2007, which included a contribution of $1.1 million, or $0.03 pershare, from discontinued operations.
At the end of the quarter, Magic's cash and cash equivalents (including cash, short term bank deposits and marketable securities) totaled $34.0 million compared to $32.2 million at the end of the first quarter of 2008.
Comments of Management
Commenting on the results, Guy Bernstein, Active Chairman of Magic SoftwareEnterprises, said, "The second quarter had record financial results andsignificant strategic momentum for Magic. Magic's performance is the outcome ofthe changes that we have put into place during the past several months.Furthermore, for the first time in many years, we are launching a technologythat has a significant competitive edge. I believe that Magic has the potentialto regain our status as a dominant player in the application platform andintegration markets."
uniPaaS Launch and Analyst Recognition
In May, Magic introduced uniPaaS, the next generation of its eDeveloper solution. uniPaaS features the industry's broadest choice of deployment modes - on-premises/on-demand; software/SaaS; full client/web; global/local or any other form. It also offers full compatibility with eDeveloper V10.
After the introduction, two leading independent IT industry analyst firmsinvited Magic for a briefing on uniPaaS and its potential to enable a paradigmshift in the development and deployment process of web-based applications. Inaddition, Gartner Inc. listed Magic Software as one of two SEAP-only(SaaS-Enabled Application Platform) vendors in their recent report on "TheImpact of SaaS on Application Servers and Platforms" (Gartner Inc., Yefim V.Natis, Kelly Rush; July 2, 2008).
Recent Partner and Customer Highlights
* Salesforce.com: Magic announced its partnership with Salesforce.com at its
May Dreamforce EMEA event in London. At the event, Magic initiated
discussions with key partners in the Salesforce.com ecosystem, including
Blat-Lapidot, which has since implemented iBOLT business and process integration solution in three of its projects. * SAP: awarded Magic Software its 2008 SAP Business One Global Solution Partner Award for Leadership in Innovation. * New EraSolutions: upgraded its license with Magic and became also a value-added reseller.
* The Magic User Community: in three recent conventions (in Japan, the US,
and the UK), the Magic User Community gave enthusiastic receptions to the
new uniPaaS product. Attendance at Magic Software Japan's annual customer
event broke all previous records, reaching over 650 participants.
* STS Group, a leading ISV in the GRC and Archiving market, delivers an iBOLT
enhanced legal records retention solution to the Banque Populaire group.
* VKF Renzel Group, a German retailer, used Magic Software to create a
custom-built ERP system.
Non-GAAP Financial Measures
This release includes non-GAAP basic and diluted earnings per share and other non-GAAP financial measures, including cost of service, research and development, selling, general and administrative, operating income, income taxes and net income. These non-GAAP measures exclude the following items:
* Amortization of purchased intangible assets; * In-process research and development capitalization and; * Equity-based compensation expense. Magic's management believes that the presentation of non-GAAP measures provideuseful information to investors and management regarding financial and businesstrends relating to Magic's financial condition and results of operations aswell as the net amount of cash generated by its business operations aftertaking into account capital spending required to maintain or expand thebusiness.These non-GAAP financial measures are not in accordance with, or an alternativefor, generally accepted accounting principles and may be different fromnon-GAAP financial measures used by other companies. In addition, thesenon-GAAP financial measures are not based on any comprehensive set ofaccounting rules or principles. Magic believes that non-GAAP financial measureshave limitations in that they do not reflect all of the amounts associated withMagic's results of operations as determined in accordance with GAAP and thatthese measures should only be used to evaluate Magic's results of operations inconjunction with the corresponding GAAP measures.
Please refer to the Reconciliation of Selected Financial Metrics from GAAP to Non-GAAP tables below.
About Magic SoftwareMagic Software Enterprises Ltd. is a leading provider ofmultiple-mode application platform solutions - including Full Client, RichInternet Applications (RIA) or Software-as-a-Service (SaaS) modes - andbusiness and process integration solutions. Magic Software has offices in 10countries and a presence in over 50, as well as a global network of ISV's,system integrators, value-added distributors and resellers, and consulting andOEM partners. Magic's award-winning code-free solutions give partners andcustomers the power to leverage existing IT resources, enhance business agilityand focus on core business priorities. Magic Software's technological approach,product roadmap and corporate strategy are recognized by leading industryanalysts. Magic Software has partnerships with global IT leaders including SAPAG, salesforce.com, IBM and Oracle. For more information about Magic SoftwareEnterprises and its products and services, visit www.magicsoftware.com.
Magic Software is a subsidiary of Formula Systems in the Emblaze Group of companies.
Except for the historical information contained herein, the matters discussedin this news release include forward-looking statements that may involve anumber of risks and uncertainties. Actual results may vary significantly basedupon a number of factors including, but not limited to, risks in product andtechnology development, market acceptance of new products and continuingproduct conditions, both here and abroad, release and sales of new products bystrategic resellers and customers, and other risk factors detailed in Magic'smost recent annual report and other filings with the Securities and ExchangeCommissionAbout Emblaze
Emblaze Ltd is a group of technology companies addressing both growth and innovation activities thus combining the stability of "bread and butter" mature technology enterprises with "high-risk / high-reward" investments in innovation.
Our Growth arm includes Formula Systems , whichharbors the following subsidiaries: Magic Software Enterprises Ltd. develops, markets and supports composite application developmentand deployment platforms with a service-oriented architecture (SOA), includingapplication integration and business process management (BPM), with existingand legacy systems; Matrix IT Ltd. (TASE: MTRX) is one of Israel's leadingintegration and information technology services companies, active in fourprincipal areas: software solutions and services, software products,infrastructure solutions and hardware products, and training and assimilation.;Sapiens International Corporation N.V. is a provider ofIT solutions that modernize business processes to enable insurance and othercompanies to quickly adapt to changes; and nextSource Inc., designs, developsand implements web-based, high quality, innovative human capital managementsolutions.Our Innovation arm includes Emblaze Mobile, a designer of advanced mobiledevices; EMOZE, a provider of Push Email and synchronisation technology formobile devices; and ZONE-IP (Emblaze V CON), a provider of wirelessvideo communications technologies and conferencing solutions for operators andenterprise markets over IP networks.The Emblaze Group is traded on the London Stock Exchange since 1996.www.Emblaze.com Magic Software Enterprises Ltd Consolidated Statements of Operations (In thousandsof U.S. dollars, except per share data) Three months ended Six months ended June 30, June 30, 2008 2007 2008 2007 (Unaudited) (Unaudited) (Unaudited) (Unaudited) Sales 16,030 14,252 31,100 28,083 Cost of sales 6,784 6,884 13,568 13,650 Gross profit 9,246 7,368 17,532 14,433
Software development costs, 460 572 1,021
1,198net Selling, general and 7,188 6,375 15,049 12,346administrative expenses Total operating expenses 7,648 6,947 16,070 13,544 Operating income 1,598 421 1,462 889
Financial income (expenses), 178 (31) 359
76net
Other income (expenses), net (61) 25 (18)
50 Income before taxes 1,715 415 1,803 1,015 Taxes on income 51 107 75 249 1,664 308 1,728 766 Minority interest 2 2 (2) 2
Equity in loss of affiliates - (30) (8)
(20)
Net income before discontinued 1,666 280 1,718
748operation
Net income from discontinued - 536 -
1,073operation
Net income after discontinued 1,666 816 1,718
1,821operation Basic net earnings per 0.05 0.03 0.05 0.06ordinary share Diluted net earnings per 0.05 0.03 0.05 0.06ordinary share Weighted average number of 31,732 31,420 31,677 31,363ordinary
shares used in computing basic net earnings per ordinary share Weighted average number of 32,047 31,955 31,978 31,973ordinary shares used in computing diluted net earnings per ordinary share Magic Software Enterprises Ltd RECONCILIATION OF GAAP TO NON-GAAP RESULTS (In thousandsof U.S. dollars, except per share data) Three months ended Six months ended June 30, June 30, 2008 2007 2008 2007 (Unaudited) (Unaudited) (Unaudited) (Unaudited) GAAP operating income 1,598 421 1,462 889 Amortization of 512 657 1,050 1,479intangibles Capitalization of (754) (848) (1,610) (1,612)software development Stock-based compensation 89 27 580 61 Total adjustments to GAAP (153) (164) 20 (72) Non-GAAP operating income 1,445 257 1,482 817 GAAP net income before 1,666 280 1,718 748discontinued operation Total adjustments to GAAP (153) (164) 20 (72)as above Non-GAAP net income 1,513 116 1,738 676before discontinued operation GAAP net income 1,666 816 1,718 1,821 Total adjustments to GAAP (153) (164) 20 (72) as above Non-GAAP net income 1,513 652 1,738 1,749 Non-GAAP basic earnings 0.05 0.02 0.05 0.06 per share Weighted average number 31,732 31,420 31,677 31,363 of ordinary shares used in computing basic net earnings per ordinary share Non-GAAP diluted earnings 0.05 0.02 0.05 0.05 per share Weighted average number 32,047 31,955 31,978 31,973 of ordinary shares used in computing diluted net earnings per ordinary share Magic Software Enterprises Ltd Consolidated Balance Sheets (In thousandsof U.S. dollars) June 30, December 31, 2008 2007 (Unaudited) ASSETS Current Assets Cash and cash equivalents 30,363 12,178 Short term bank deposits 2 89 Marketable securities 3,673 4,090 Trade accounts receivable, net 12,379
12,941
Other accounts receivables and prepaid expenses 2,610 2,010
Receivables from a sale of subsidiary -
16,000
Current assets from discontinued operations 35
41 Total Current Assets 49,062 47,349 Non-Current Assets Severance pay fund 2,218 1,925 Long-term lease deposits 420 472
Investment in an affiliated company -
127 Property and equipment, net 5,610 5,758 Goodwill 16,335 15,986 Other intangible assets, net 11,237 10,681 Total Non-Current Assets 35,820 34,949 Total Assets 84,882 82,298 Current Liabilities Short-term credit from banks 141 3,621 Trade payables 2,665 2,999 Deferred revenues 6,722 2,314 Accrued expenses and other accounts payable 8,349
9,169
Current liabilities from discontinued operations 438
503 Total Current Liabilities 18,315 18,606 Non-Current Liabilities Long-term loans 112 132 Accrued severance pay 2,424 2,316 Minority interests 2 - Total Non-Current Liabilities 2,538 2,448 Shareholders' Equity 64,029 61,244 Total Liabilities and Shareholders' Equity 84,882
82,298
vendor