OR YEHUDA, Israel, May 21, 2025 (GLOBE NEWSWIRE) -- Magic Software Enterprises Ltd. (NASDAQ and TASE: MGIC) ("the Company"), a global provider of IT consulting services and end-to-end integration and application development platforms solutions, announced today its financial results for the first quarter ended March 31, 2025.
Summary Results for the First Quarter 2025 (USD in millions, except per share data)
GAAP Non-GAAP
-------------------- --------------------
Q1 2025 Q1 2024 % Change Q1 2025 Q1 2024 % Change
--------- --------- -------- --------- --------- ---------
Revenues $ 147.3 $ 130.7 12.7% $ 147.3 $ 130.7 12.7%
Gross
profit $ 40.6 $ 36.7 10.7% $ 41.9 $ 38.3 9.5%
Gross
margin 27.6% 28.1% (50) bps 28.5% 29.3% (80) bps
Operating
income $ 15.7 $ 14.4 9.1% $ 18.5 $ 18.1 1.9%
Operating
margin 10.7% 11.0% (30) bps 12.6% 13.9% (130) bps
Net income
(*) $ 9.5 $ 8.8 7.7% $ 12.2 $ 11.3 8.3%
Diluted EPS $ 0.19 $ 0.18 5.6% $ 0.25 $ 0.23 8.7%
(*) Attributable to Magic Software's shareholders.
Financial Highlights for the first Quarter Ended March 31, 2025
-- Revenues for the first quarter of 2025 increased by 12.7% to
$147.3 million, compared to $130.7 million in the same period of the
previous year.
-- Operating income for the first quarter of 2025 increased by 9.1% to $15.7
million, compared to $14.4 million in the same period of the previous
year.
-- Non-GAAP operating income for the first quarter of 2025 increased by 1.9%
to $18.5 million, compared to $18.1 million in the same period of the
previous year.
-- Net income attributable to Magic Software's shareholders for the first
quarter of 2025 increased by 7.7% to $9.5 million, or $0.19 per fully
diluted share, compared to $8.8 million, or $0.18 per fully diluted share,
in the same period of the previous year.
-- Non-GAAP net income attributable to Magic Software's shareholders for the
first quarter of 2025 increased by 8.3% to $12.2 million, or $0.25 per
fully diluted share, compared to $11.3 million, or $0.23 per fully
diluted share, in the same period of the previous year.
-- Cash flow from operating activities for the first quarter ended March 31,
2025, amounted to $14.9 million compared to $27.7 million in the same
period last year. Cash flow from operating activities for the last twelve
months amounted to $62.1 million.
-- As of March 31, 2025, Magic's cash, cash equivalents and short and
long-term bank deposits amounted to $105.0 million.
-- Magic is reiterating its 2025 annual revenue guidance of between $593
million and $603 million (based on current currency exchange rates)
reflecting an annual growth of 7.3% to 9.1% compared to prior year.
Guy Bernstein, Chief Executive Officer of Magic Software, said: "We commenced 2025 with strong momentum, successfully advancing our strategic growth initiatives and executing agreements with both new and existing customers. Our financial performance reflects continued expansion in the Israeli market, alongside early indications of recovery in the United States. Demand for our innovative digital, artificial intelligence and cloud transformation solutions remains robust, along with continued strong demand for our services in the defense sector, underscoring the effectiveness of our strategic direction and the dedication of our team in delivering measurable results. Given the strength of our current sales pipeline and improving market conditions in the U.S., we remain confident in our ability to generate sustainable long-term value for both our customers and shareholders."
Conference Call Details
Magic Software's management will host a conference call on Wednesday, May 21, 2025, at 10:00 am Eastern 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: +1-888-281-1167
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 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; -- Cost of share-based payment; -- Costs related to acquisition of new businesses; -- The related tax, non-controlling interests' effects of the above items; -- Change in valuation of contingent consideration related to acquisitions; -- 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, 2024, which filed on May 14, 2025, and subsequent reports and filings made from time to time with the Securities and Exchange Commission.
Magic$(R)$ 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:
Ronen Platkevitz
Magic Software Enterprises
ir@magicsoftware.com
MAGIC SOFTWARE ENTERPRISES LTD.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
U.S. Dollars in thousands (except per share data)
Three months ended
March 31,
----------------------
2025 2024
------------ --------
Unaudited
----------------------
Revenues $ 147,336 $130,720
Cost of Revenues 106,705 94,021
-------- -------
Gross profit 40,631 36,699
-------- -------
Research and development, net 3,247 2,793
Selling, marketing and general and
administrative expenses 21,641 19,480
Total operating expenses 24,888 22,273
-------- -------
Operating income 15,743 14,426
-------- -------
Financial expenses, net (1,065) (1,644)
Income before taxes on income 14,678 12,782
Taxes on income 2,912 2,729
-------- -------
Net income $ 11,766 $ 10,053
Share of loss of companies accounted for at
equity, net (126) (64)
Net income attributable to non-controlling
interests (2,162) (1,192)
Net income attributable to Magic's shareholders $ 9,478 $ 8,797
Weighted average number of shares used in
computing net earnings per share
Basic 49,099 49,099
======== =======
Diluted 49,099 49,099
======== =======
Basic and diluted earnings per share
attributable to Magic's shareholders 0.19 0.18
MAGIC SOFTWARE ENTERPRISES LTD.
RECONCILIATION OF GAAP AND NON-GAAP RESULTS
U.S. Dollars in thousands (except per share data)
Three months ended
March 31,
----------------------
2025 2024
Unaudited
----------------------
GAAP gross profit $ 40,631 $ 36,699
Amortization of capitalized software and acquired
technology 984 1,107
Amortization of other intangible assets 323 503
Non-GAAP gross profit $ 41,938 $ 38,309
======== =======
GAAP operating income $ 15,743 $ 14,426
Gross profit adjustments 1,307 1,610
Amortization of other intangible assets 1,977 1,514
Increase in valuation of contingent
consideration related to acquisitions - 306
Capitalization of software development (496) (748)
Costs related to acquisitions 26 144
Cost of share-based payment (65) 891
-------
Non-GAAP operating income $ 18,492 $ 18,143
======== =======
GAAP net income attributable to Magic's
shareholders $ 9,478 $ 8,797
Operating income adjustments 2,749 3,717
Expenses attributed to non-controlling interests
and redeemable non-controlling interests (224) (452)
Increase in valuation of consideration related to
acquisitions 505 114
Deferred taxes on the above items (296) (899)
-------
Non-GAAP net income attributable to Magic's
shareholders $ 12,212 $ 11,277
======== =======
Non-GAAP basic and diluted net earnings per share $ 0.25 $ 0.23
======== =======
Weighted average number of shares used in
computing basic net earnings per share 49,099 49,099
------------ -------
Non-GAAP diluted net earnings per share $ 0.25 $ 0.23
======== =======
Weighted average number of shares used in
computing diluted net earnings per share 49,099 49,099
------------ -------
Summary of Non-GAAP Financial Information
U.S. Dollars in thousands (except per share data)
--------------------------------------------------------------------
Three months ended
March 31,
2025 2024
Unaudited Unaudited
Revenues $147,336 100% $130,720 100%
Gross profit 41,938 28.5% 38,309 29.3%
Operating income 18,492 12.6% 18,143 13.9%
Net income attributable to
Magic's shareholders 12,212 8.3% 11,277 8.6%
Basic and diluted earnings
per share $ 0.25 $ 0.23
MAGIC SOFTWARE ENTERPRISES LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
U.S. Dollars in thousands
March 31, December 31,
----------- --------------
2025 2024
----------- --------------
Unaudited
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 104,584 $ 112,779
Short-term bank deposits 431 51
Trade receivables, net 144,102 139,816
Other accounts receivable and prepaid
expenses 21,094 23,553
Total current assets 270,211 276,199
----------------------------------------------- ------- ----------
LONG-TERM ASSETS:
Deferred tax assets 5,300 4,895
Right-of-use assets 23,648 24,707
Other long-term receivables and Investments
in companies accounted for at equity 8,820 9,261
Property and equipment, net 8,034 7,467
Intangible assets and goodwill, net 218,097 217,802
------- ----------
Total long term assets 263,899 264,132
-----------------------------------------------
TOTAL ASSETS $ 534,110 $ 540,331
======= ==========
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Short-term debt $ 23,941 $ 23,187
Trade payables 30,060 28,753
Dividend payable to Magic Software
shareholders 16,055 11,587
Accrued expenses and other accounts payable 53,411 58,209
Current maturities of lease liabilities 4,763 4,818
Liability in respect of business combinations 5,944 2,654
Put options for non-controlling interests 20,695 20,066
Deferred revenues and customer advances 23,645 21,031
Total current liabilities 178,514 170,305
----------------------------------------------- ------- ----------
LONG TERM LIABILITIES:
Long-term debt 32,368 36,107
Deferred tax liability 7,936 7,848
Long-term lease liabilities 21,049 22,040
Long-term liability in respect of business
combinations - 1,781
Emolyee benefit liabilities 1,202 1,181
Total long term liabilities 62,555 68,957
----------------------------------------------- ------- ----------
EQUITY:
Magic Software Enterprises shareholders'
equity 269,412 277,190
Non-controlling interests 23,629 23,879
------- ----------
Total equity 293,041 301,069
-----------------------------------------------
TOTAL LIABILITIES AND EQUITY $ 534,110 $ 540,331
======= ==========
MAGIC SOFTWARE ENTERPRISES LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. Dollars in thousands
Three months ended March 31,
--------------------------------
2025 2024
------------------ ------------
Unaudited Unaudited
------------------ ------------
Cash flows from operating activities:
----------------------------------------
Net income $ 11,640 $ 9,989
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization 5,277 4,889
Cost of share-based payment (65) 584
Change in deferred taxes, net (900) (754)
Capital gain on sale of fixed
assets (1) 13
Change in value of financial
assets measured at fair value
through profit or loss (9) -
Effect of exchange rate on of cash
and cash equivalents held in
currencies other than the
functional currency 70 170
Changes in value of short-term and
long-term loans from banks and
others and deposits, net (685) (819)
Working capital adjustments:
----------------------------------------
Trade receivables (4,727) 3,709
Other current and long-term
accounts receivable 2,598 (1,333)
Trade payables 1,408 (983)
Accrued expenses and other
accounts payable (2,426) 3,704
Deferred revenues 2,719 8,508
Net cash (used) provided by operating
activities 14,899 27,677
============== ===========
Cash flows from investing activities:
----------------------------------------
Capitalized software development
costs (496) (748)
Purchase of property and equipment (524) (280)
Cash paid in conjunction with
deferred payments and contingent
liabilities related to business
combinations (3,635) -
Payments for business
acquisitions, net of cash
acquired - (249)
Proceeds from sale of property and
equipment 47 15
Proceeds from sale (purchase) of
financial assets, net 595 (1,000)
Change in short-term and long-term
deposits (649) 997
Net cash used in investing activities (4,662) (1,265)
============== ===========
Cash flows from financing activities:
----------------------------------------
Dividend paid to Magic's
shareholders (11,587)
Dividend paid to non-controlling
interests (3,546) (2,086)
Repayment of lease liabilities (1,553) (1,460)
Purchase of non-controlling
interest - (314)
Receipt of short-term and
long-term loans from banks and
others 9,453 5,006
Repayment of short-term and
long-term loans (11,242) (6,574)
Net cash used in financing activities (18,475) (5,428)
============== ===========
Effect of exchange rate changes on
cash and cash equivalents 43 (1,124)
Increase (decrease) in cash and cash
equivalents (8,195) 19,860
Cash and cash equivalents at the
beginning of the period 112,779 105,943
-------------- -----------
Cash and cash equivalents at end of
the period $ 104,584 $ 125,803
-------------- ---
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