Earnings Release • Feb 28, 2018
Earnings Release
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Washington, D.C. 20549 ______________________
For the month of February 2018
(Name of Registrant)
5 HaPlada Street, Or-Yehuda, Israel 60218 (Address of Principal Executive Office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F _ Form 40-F
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):
Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82- ________
This report on Form 6-K of MAGIC SOFTWARE ENTERPRISES Ltd. consists of the following documents, which are attached hereto and incorporated by reference herein:
1. Magic Delivers Record-Breaking Revenues of \$258 Million for 2017 with 28% Year over Year Growth
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
MAGIC SOFTWARE ENTERPRISES LTD. (Registrant)
By /s/ Amit Birk Amit Birk VP, General Counsel
Date: February 28, 2018
Exhibit 1.1 Magic Delivers Record-Breaking Revenues of \$258 Million for 2017 with 28% Year Over Year Growth
Or Yehuda, Israel, February 28, 2018 – Magic Software Enterprises Ltd. (NASDAQ and TASE: MGIC), a global provider of end-to-end integration and application development solutions and IT consulting services, announced today its financial results for the fourth quarter and full year ended December 31, 2017.
Guy Bernstein, Chief Executive Officer of Magic Software Enterprises, said: "We are pleased to report that 2017 was Magic Software's most successful year ever with exceptional year-over-year revenue growth, powered by strong demand across our entire portfolio and throughout all of our regions.
"Our robust portfolio continues to provide state-of-the-art services and products for our customers in the areas of integration, software application development, mobile, big data and cloud. As a result, we continue to be recognized throughout the industry for our quality and innovation.
"We expect that our strong financial position, coupled with our 2017 activities in promoting and growing our markets, will continue the company's momentum into 2018," added Bernstein.
Magic's management will host a conference call on Wednesday, February 28, at 10:00 am Eastern Standard Time (7:00 am Pacific Standard Time, 17:00 Israel Standard 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.
UK: 0-800-917-5108 ISRAEL: 03-918-0644 ALL OTHERS: +972-3-918-0644
For those unable to join the live call, a replay of the call will be available for at least three months, under the Investor Relations section of Magic's website, www.magicsoftware.com.
This press release contains the following non-GAAP financial measures: Non-GAAP gross profit, Non-GAAP operating income, Non-GAAP net income attributed 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:
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.
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.
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," "expects," "believes" 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 on the basis of 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, 2016 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.
[1] When a founder (minority shareholder) of an acquired operation is granted a put option to sell part or all of their remaining share interests during a certain period, the non-controlling interests are classified as redeemable non-controlling interests. Magic remeasures and accordingly adjusts the fair value of its redeemable non-controlling interests at the end of each reporting period based on the estimated present value of the consideration to be transferred upon the exercise of the put option.
Press Contact: Debbie Sarig, PR & Content Manager Magic Software Enterprises [email protected]
U.S. Dollars in thousands (except per share amounts)
| Three months ended December 31, |
Twelve months ended December 31, |
|||||||
|---|---|---|---|---|---|---|---|---|
| 2017 2016 |
2017 | 2016 | ||||||
| Unaudited | Unaudited | |||||||
| Revenues | \$ | 66,089 | \$ | 55,141 | \$ | 257,990 | \$ | 201,646 |
| Cost of Revenues | 45,055 | 37,278 | 175,161 | 133,382 | ||||
| Gross profit | 21,034 | 17,863 | 82,829 | 68,264 | ||||
| Research and development, net | 1,750 | 1,793 | 6,942 | 5,839 | ||||
| Selling, marketing and general and | ||||||||
| administrative expenses | 12,823 | 11,033 | 49,587 | 40,839 | ||||
| Increase in valuation of contingent consideration related to acquisitions | 280 | 499 | 344 | 499 | ||||
| Total operating costs and expenses | 14,853 | 13,325 | 56,873 | 47,177 | ||||
| Operating income | 6,181 | 4,538 | 25,956 | 21,087 | ||||
| Financial expenses, net | (546) | (531) | (1,711) | (430) | ||||
| Income before taxes on income | 5,635 | 4,007 | 24,245 | 20,657 | ||||
| Taxes on income | 1,364 | 649 | 6,331 | 3,949 | ||||
| Net income | \$ | 4,271 | \$ | 3,358 | \$ | 17,914 | \$ | 16,708 |
| Net loss (income) attributable to redeemable non-controlling interests | 108 | (915) | (1,536) | (2,258) | ||||
| Net income attributable to non-controlling interests | (583) | (55) | (936) | (281) | ||||
| Increase in value of put options of redeemable non-controlling interests | - | (2,262) | - | (2,262) | ||||
| Net income attributable to Magic's shareholders | \$ | 3,796 | \$ | 126 | \$ | 15,442 | \$ | 11,907 |
| Net earnings per share | ||||||||
| Basic | \$ | 0.09 | \$ | - | \$ | 0.35 | \$ | 0.27 |
| Diluted | \$ | 0.09 | \$ | - | \$ | 0.35 | \$ | 0.27 |
| Weighted average number of shares used in | ||||||||
| computing net earnings per share | ||||||||
| Basic | 44,473 | 44,356 | 44,436 | 44,347 | ||||
| Diluted | 44,637 | 44,530 | 44,600 | 44,516 | ||||
U.S. Dollars in thousands (except per share amounts)
| Three months ended December 31, |
Twelve months ended December 31, |
||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 2017 | 2017 | 2016 | |||||||||
| Unaudited | 2016 Unaudited |
Unaudited | Unaudited | ||||||||
| Revenues | \$ 66,089 |
100% \$ | 55,141 | 100% \$ 257,990 | 100% \$ 201,646 | 100% | |||||
| Gross profit | 22,432 | 33.9% | 19,331 | 35.1% | 88,861 | 34.4% | 73,588 | 36.5% | |||
| Operating income | 8,699 | 13.2% | 7,301 | 13.2% | 35,127 | 13.6% | 28,242 | 14.0% | |||
| Net income attributable to Magic's shareholders |
4,759 | 7.2% | 4,309 | 7.8% | 21,464 | 8.3% | 19,646 | 9.7% | |||
| Basic earnings per share | \$ 0.11 |
\$ | 0.10 | \$ 0.48 |
\$ 0.44 |
||||||
| Diluted earnings per share | \$ 0.11 |
\$ | 0.10 | \$ 0.48 |
\$ 0.44 |
Three months ended Twelve months ended December 31, December 31, 2017 2016 2017 2016 Unaudited Unaudited GAAP gross profit \$ 21,034 \$ 17,863 \$ 82,829 \$ 68,264 Amortization of capitalized software and acquired technology 1,255 1,187 5,397 4,464 Amortization of other intangible assets 142 178 628 745 Increase in valuation of contingent consideration related to acquisitions - 100 - 100 Stock-based compensation 1 3 7 15 Non-GAAP gross profit \$ 22,432 \$ 19,331 \$ 88,861 \$ 73,588 GAAP operating income \$ 6,181 \$ 4,538 \$ 25,956 \$ 21,087 Gross profit adjustments 1,398 1,468 6,032 5,324 Amortization of other intangible assets 1,622 1,646 6,497 5,421 Increase in valuation of contingent consideration related to acquisitions 280 499 344 499 Capitalization of software development (819) (867) (3,771) (4,224) Stock-based compensation 37 17 69 135 Non-GAAP operating income \$ 8,699 \$ 7,301 \$ 35,127 \$ 28,242 GAAP net income attributable to Magic's shareholders \$ 3,796 \$ 126 \$ 15,442 \$ 11,907 Operating income adjustments 2,518 2,763 9,171 7,155 Amortization expenses attributed to redeemable non-controlling interests (975) (149) (2,367) (732) Increase in value of put options of redeemable non-controlling interests - 2,262 - 2,262 Increase in valuation of contingent consideration related to acquisitions - 229 - 229 Deferred taxes on the above items (580) (922) (782) (1,175) Non-GAAP net income attributable to Magic's shareholders \$ 4,759 \$ 4,309 \$ 21,464 \$ 19,646 Non-GAAP basic net earnings per share \$ 0.11 \$ 0.10 \$ 0.48 \$ 0.44 Weighted average number of shares used in computing basic net earnings per share 44,473 44,356 44,436 44,347 Non-GAAP diluted net earnings per share \$ 0.11 \$ 0.10 \$ 0.48 \$ 0.44 Weighted average number of shares used in computing diluted net earnings per share 44,638 44,534 44,602 44,519
U.S. Dollars in thousands
| December 31, 2017 |
December 31, | |||
|---|---|---|---|---|
| 2016 | ||||
| Unaudited | ||||
| ASSETS | ||||
| CURRENT ASSETS: | ||||
| Cash and cash equivalents | \$ | 75,896 | \$ | 75,314 |
| Short-term bank deposits | 732 | 2 | ||
| Available-for-sale marketable securities | 14,138 | 12,506 | ||
| Trade receivables, net | 82,141 | 62,047 | ||
| Other accounts receivable and prepaid expenses | 8,643 | 8,487 | ||
| Total current assets | 181,550 | 158,356 | ||
| LONG-TERM RECEIVABLES: | ||||
| Severance pay fund | 3,226 | 2,568 | ||
| Long-term deferred tax assets | 2,990 | 3,548 | ||
| Other long-term receivables | 2,015 | 1,680 | ||
| Total long-term receivables | 8,231 | 7,796 | ||
| PROPERTY AND EQUIPMENT, NET | 3,468 | 3,065 | ||
| IDENTIFIABLE INTANGIBLE ASSETS AND | ||||
| GOODWILL, NET | 149,200 | 147,182 | ||
| TOTAL ASSETS | \$ | 342,449 | \$ | 316,399 |
| LIABILITIES AND EQUITY | ||||
| CURRENT LIABILITIES: | ||||
| Short-term debt | \$ | 9,919 | \$ | 5,645 |
| Trade payables | 12,095 | 8,393 | ||
| Accrued expenses and other accounts payable | 27,874 | 20,290 | ||
| Liabilities due to acquisition activities | 3,696 | 6,478 | ||
| Deferred revenues | 5,586 | 3,882 | ||
| Total current liabilities | 59,170 | 44,688 | ||
| NON-CURRENT LIABILITIES: | ||||
| Long-term debt | 27,791 | 29,756 | ||
| Long-term deferred tax liability | 11,331 | 12,494 | ||
| Liabilities due to acquisition activities | 581 | 3,379 | ||
| Accrued severance pay | 4,174 | 3,443 | ||
| Total non-current liabilities | 43,877 | 49,072 | ||
| REDEEMABLE NON-CONTROLLING INTERESTS | 25,839 | 25,998 | ||
| EQUITY: | ||||
| Magic Software Enterprises equity | 210,281 | 196,218 | ||
| Non-controlling interests | 3,282 | 423 | ||
| Total equity | 213,563 | 196,641 | ||
| TOTAL LIABILITIES, REDEEMABLE NON-CONTROLLING INTERESTS AND EQUITY | \$ | 342,449 | \$ | 316,399 |
| For the Twelve months ended December 31, |
|||||
|---|---|---|---|---|---|
| 2017 | 2016 | ||||
| Unaudited | |||||
| Cash flows from operating activities: | |||||
| Net income | \$ | 17,914 | \$ | 16,708 | |
| Adjustments to reconcile net income from operations to | |||||
| net cash provided by operating activities: | |||||
| Depreciation and amortization | 13,611 | 11,608 | |||
| Stock-based compensation | 78 | 152 | |||
| Amortization of marketable securities premium and accretion of discount | 218 | 257 | |||
| Gains reclassified into earnings from marketable securities | 428 | - | |||
| Increase in trade receivables, net | (15,842) | (2,571) | |||
| Increase in other long-term and short-term accounts receivable and prepaid expenses | (1,773) | (40) | |||
| Increase in trade payables | 3,514 | 1,426 | |||
| Change in value of loans and deposits, net | 3,325 | - | |||
| Increase in accrued expenses and other accounts payable | 4,310 | 1,553 | |||
| Increase (decrease) in deferred revenues | 1,175 | (180) | |||
| Change in deferred taxes, net | (489) | (958) | |||
| Net cash provided by operating activities | 26,469 | 27,955 | |||
| Cash flows from investing activities: | |||||
| Capitalized software development costs | (3,771) | (4,224) | |||
| Purchase of property and equipment | (1,400) | (799) | |||
| Cash paid in conjunction with acquisitions, net of acquired cash | (6,890) | (31,436) | |||
| Proceeds from maturity of marketable securities | 4,225 | 2,643 | |||
| Investment in marketable securities and short-term bank deposits | (5,766) | (9,401) | |||
| Proceeds from short-term bank deposits | - | 8,467 | |||
| Short-term loan to a related-party | 1,183 | (1,183) | |||
| Change in loans to employees and other deposits, net | - | (49) | |||
| Net cash used in investing activities | (12,419) | (35,982) | |||
| Cash flows from financing activities: | |||||
| Proceeds from exercise of options by employees | 585 | 41 | |||
| Dividend paid | (9,360) | (7,761) | |||
| Dividend paid to non-controlling interests in subsidiaries | (536) | (456) | |||
| Dividend paid to redeemable non-controlling interests in subsidiaries | (2,886) | (1,574) | |||
| Purchase of non-controlling interest | - | (352) | |||
| Change in Short-term and long-term loan from banks, net | (2,175) | 32,292 | |||
| Net cash used in financing activities | (14,372) | 22,190 | |||
| Effect of exchange rate changes on cash and cash equivalents | 904 | (1,037) | |||
| Increase (decrease) in cash and cash equivalents | 582 | 13,126 | |||
| Cash and cash equivalents at the beginning of the year | 75,314 | 62,188 | |||
| Cash and cash equivalents at the end of the period | \$ | 75,896 | \$ | 75,314 |
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