Operating income for the year increased 6% year over year to $33.6 million; Non-GAAP operating income for the year increased 11% year over year to $43.9 million
Or Yehuda, Israel, March 9, 2020 - Magic Software Enterprises Ltd. (NASDAQ and TASE: MGIC), a global provider of end-to-end integration and application development platforms solutions and IT consulting services, announced today its financial results for the fourth quarter and full year ended December 31, 2019.
Financial Highlights for the Fourth Quarter Ended December 31, 2019
Revenues for the fourth quarter increased 26% to $90.9 million compared to $72.3 million in the same period last year.
Operating income for the fourth quarter increased 3% to $8.7 million compared to $8.4 million in the same period last year.
Non-GAAP operating income for the fourth quarter increased 14% to $11.4 million compared to $10.0 million in the same period last year.
Net income attributable to Magic's shareholders for the fourth quarter increased by 13% to $5.1 million, or loss of $0.03 per fully diluted share, compared to $4.5 million, or $0.06 per fully diluted share in the same period last year. Earnings per share for the fourth quarter of 2019 and 2018 were negatively impacted by accretion charges of $6.4 million and $1.5 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 in the amount of charge with respect to the value of outstanding put options of redeemable non-controlling interests, earnings per share for the fourth quarter was $0.10 per fully diluted share compared to $0.09 per fully diluted share in the same period last year.
Non-GAAP net income attributable to Magic's shareholders for the fourth quarter increased 10% to $6.3 million, or $0.13 per fully diluted share, compared to $5.7 million, or $0.12 per fully diluted share, in the same period last year.
Financial Highlights for the year Ended December 31, 2019
Revenues for the year increased 15% to $325.6 million compared to $284.4 million in the same period last year.
Operating income for the year increased 6% to $33.7 million compared to $31.7 million in the same period last year.
Non-GAAP operating income for the year increased 10% to $28.2 million compared to $25.7 million in the same period last year.
Net income attributable to Magic's shareholders for the year increased by 2% to $20.3 million, or $0.26 per fully diluted share, compared to $19.9 million, or $0.39 per fully diluted share in the same period last year. Earnings per share for the year was negatively impacted by an accretion of a $7.5 million charge relating to the value of outstanding put options of redeemable non-controlling interests. The earnings per share for the year ended December 31, 2018 was negatively impacted by an accretion of a $1.7 million charge in the value of outstanding put options of redeemable non-controlling interests.
Excluding the negative impact in the value of outstanding put options of redeemable non-controlling interests, earnings per share for the year was $0.41 per fully diluted share compared to $0.43 per fully diluted share in the same period last year.
Non-GAAP net income attributable to Magic's shareholders for the year increased 10% to $28.2 million, or $0.58 per fully diluted share, compared to $25.7 million, or $0.55 per fully diluted share, in the same period last year. Earnings per share for the year were negatively impacted by $0.04 per fully diluted share compared to the same period last year as a consequence of the Company's private placement of 4.3 million shares in the third quarter of 2018 to Israeli institutional investors.
Cash flow from operating activities for the year amounted to $45.9 million compared to $24.0 million in the same period last year.
As of December 31, 2019, Magic's net cash, cash equivalents,short and long-term bank deposits and marketable securities, offset by short and long-term financial liabilitiesamounted to $97.8 million.
Magic is providing revenue guidance for 2020 of between $360 million to $370 million, reflecting annual growth of 10.6% to 13.6%; such guidance may be affected by the potential impact of the Coronavirus on the Company and its customers
Guy Bernstein, Chief Executive Officer of Magic Software Enterprises, said:
'Magic finished 2019 on a very strong note with fourth quarter revenue reaching a record high of $90.9 million, and non-GAAP operating income of $11.4 million. For the full year, it was a strong year of execution on many fronts as we advanced our business globally, growing revenue by 14.5% year over year to $325.6 million above the high end of the annual guidance range, stated Guy Bernstein'. CEO, Magic.
Conference Call Details
Magic's management will host a conference call on Monday, March 9, 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
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; and
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, 2018 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.
Noam AmirMagic Software Enterprises