Operating income for the second quarter increased by 16% year over year to a record second quarter result of $14.7 million; Non-GAAP operating income for the second quarter increased by 10% year over year to a record second quarter result of $17.6 million

OR YEHUDA, Israel, Aug. 11, 2022 (GLOBE NEWSWIRE) -- 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 second quarter ended June 30, 2022.

Summary Results for the Second Quarter 2022 (USD in millions, except per share data)

(*) Attributable to Magic Software’s shareholders.

Financial Highlights for the Second Quarter Ended June 30, 2022

• Revenues for the second quarter of 2022 increased by 15.0% to a record second quarter result of $137.0 million, compared to $119.2 million in the same period of the previous year. On a constant currency basis, revenues for the second quarter of 2022 increased by 17.4% compared to the same period of the previous year, with 89% of the growth organic.
  

• Operating income for the second quarter of 2022 increased by 16.1% to a record second quarter result of $14.7 million, compared to $12.7 million in the same period of the previous year.
  

• Non-GAAP operating income for the second quarter of 2022 increased by 10.3% to a record second quarter of $17.6 million, compared to $15.9 million in the same period of the previous year. On a constant currency basis, Non-GAAP operating income for the second quarter of 2022 increased by 14.5% compared to the same period of the previous year, with 67% of the growth organic.
  

• Net income attributable to Magic Software’s shareholders for the second quarter of 2022 increased by 21.9% to $9.5 million, or $0.16 per fully diluted share, compared to $7.8 million, or $0.16 per fully diluted share, in the same period of the previous year.
  

• Non-GAAP net income attributable to Magic Software’s shareholders for the second quarter of 2022 increased by 2.8% to $11.6 million, or $0.24 per fully diluted share, compared to $11.3 million, or $0.23 per fully diluted share, in the same period of the previous year.

Summary Results for First Half 2022 (USD in millions, except per share data)

Financial Highlights for the First Half Ended June 30, 2022

• Revenues for the first half ended June 30, 2022 increased by 21.7% to $275.7 million compared to $226.5 million in the same period last year. On a constant currency basis, revenues for the first half period ended June 30, 2022, increased by 22.8% compared to the same period of the previous year, with 78% of the growth organic.
  
  

• Operating income for the first half ended June 30, 2022 increased by 23.2% to $30.7 million compared to $24.9 million in the same period last year.
  

• Non-GAAP operating income for the first half ended June 30, 2022, increased by 18.0% to $36.5 million compared to $30.9 million in the same period last year.
  

• Net income attributable to Magic Software’s shareholders for the first half ended June 30, 2022 increased by 24.7% to $19.1 million, or $0.36 per fully diluted share, compared to $15.3 million, or $0.31 per fully diluted share, in the same period last year.
  

• Non-GAAP net income attributable to Magic Software’s shareholders for the first half ended June 30, 2022 increased by 13.7% to $24.6 million, or $0.50 per fully diluted share, compared to $21.6 million, or $0.44 per fully diluted share, in the same period last year.
  

• Cash flow from operating activities for the first half ended June 30, 2022 amounted to $15.7 million compared to $28.0 million in the same period last year. Cash flow from operating activities excluding the impact of payments of deferred and contingent consideration related to acquisitions amounted to $19.4 million for the first half ended June 30, 2022.
  

• As of June 30, 2022, Magic’s net cash, cash equivalents, short and long-term bank deposits and marketable securities amounted to $93.9 million.
  

• Magic Software has increased its 2022 annual revenue guidance for the second time this year to a range of $545 to $555 million, up from its prior range of $540 to $550 million, which now reflects an annual growth of 13.5% to 14.5%.

Declaration of Dividend for the First Half of 2022

• In accordance with its dividend distribution policy, the Company’s board of directors declared a semi-annual cash dividend in an amount of 29.0 cents per share and in an aggregate amount of approximately $14.3 million, reflecting approximately 75% of its distributable profits for the first half of 2022.
  

• The dividend is payable on September 13, 2022, to all of the Company’s shareholders of record at the close of trading on the NASDAQ Global Select Market on August 30, 2022.
  

• 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 12-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, said: “ I am very proud that the momentum we saw coming out of 2021 has continued throughout the first half of 2022 as the growing need of enterprises and organizations worldwide to leverage digital technologies and cloud-based platforms is creating high demand for our innovative software solutions and services which together with the outstanding execution by our teams led to another quarter of strong performance recorded across our business. We continue to invest organically and inorganically in our service lines and are excited about the innovative capabilities we are building to drive continued long term profitable growth and shareholder value.”

“Today’s dividend distribution announcement marks Magic Software’s 10^th year anniversary of its semi-annual dividend distribution policy, adopted on September 5^th, 2012. During these past 10 years Magic Software has distributed a cumulative amount of over $132 million to its shareholders.”

Conference Call Details

Magic Software’s management will host a conference call on Thursday, August 11, 2022 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 5 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: +1-888-744-5399

UK: 0-800-917-5108

ISRAEL: 03-918-0650

ALL OTHERS: +972-3-918-0650

For those unable to join the live call, a replay of the call will be available in 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 together 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,” “guidance” 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, 2021, which filed on May 12, 2022, 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:
Asaf Berenstin | Chief Financial Officer
Magic Software Enterprises
ir@magicsoftware.com