Wednesday May 3, 9:09 am
Magic Software Continues to Report Record Revenues, Operating Profits and Net Income
Net Income Increases by 284% as Compared to Q1 1999
OR YEHUDA, Israel - Magic Software
Enterprises, Ltd. (Nasdaq:MGIC - news), a leading provider of
enterprise-level e-commerce, customer service management and other
business solutions, reported record sales and earnings today for the
first quarter of 2000, exceeding analysts' expectations.
This is the sixth quarter in a row the Company has delivered
record sales performance, and the seventh consecutive quarter Magic
has posted record net earnings. The Company attributed these results
to growing worldwide acceptance of its e-commerce solutions, an
improving market for software development tools, and increased
penetration of the North American market.
First Quarter Results
Total revenues for the first quarter 2000 were $21.7 million as
compared to $13.6 million for the comparable period in 1999, a 58.8%
increase over last year and a 16.2% increase over revenues posted in
the fourth quarter of 1999. Net income for the quarter rose to $4.0
million ($0.14 earnings per share) from the $1.4 million ($0.06
earnings per share) posted for the corresponding period of 1999.
Software license sales, which includes the Magic core technology
and applications, for the period increased by $5.4 million (or 71.4%)
compared to the same quarter last year, and represented 60.2% of total
revenues. Application license sales accounted for 25.5% of total
software sales, an increase of 95.5% over the fourth quarter of 1999.
Sales of the core technology during the quarter increased by 5.3% over
the final quarter of last year and by 27.7% over the corresponding
period in 1999.
Maintenance and support revenues, representing 13.2% of total
revenues for the quarter, also continued to increase, up 44.1% when
compared to the same period last year. The revenue growth reflects an
improvement in support services and a consequent increase in customer
satisfaction due to the Company's own use of its Web-based customer
relations management solution, Magic eService(TM).
Consulting and training revenues were up 7.3% compared to the
fourth quarter of 1999, representing 26.6% of revenues. This increase
is consistent with the growth in the Company's applications sales and
the greater demand for professional services to assist end-users with
implementation and customization of those applications.
Operating income increased to 24% of revenue, compared to 14% of
revenue in the same period last year. Net income increased to 19% of
revenue, compared to 10% of revenue in the same period last year. The
increases are due to the Company's increased sales of software
licenses from the Magic core technology and applications.
First Quarter Developments
Secondary
During the first quarter, Magic successfully completed a secondary
offering of 4,277,000 of its ordinary shares of stock, 3,500,000
shares of which were offered by Magic and 777,000 of which were
offered by Formula Group. Priced at $25.00 per share, total net
proceeds to Magic from the offering, after deducting underwriting fees
and expenses, was $80.6 million.
Analyst Coverage
Four investment houses began coverage of Magic during the first
quarter. They include Merrill Lynch, Salomon Smith Barney, Warburg
Dillon Read and CIBC World Markets, all of which rated Magic as a
"Buy."
Rankings
In addition to receiving high marks from the analysts, Magic also
received the highest level of certification from IBM for its
e-business applications. IBM uses the rankings internally to
distinguish those vendors whose products are best suited for IBM's
AS/400 platform and deserve special consideration for joint marketing
with IBM.
New Products
In the first quarter, Magic introduced two new products. The
first, introduced at the LinuxWorld Expo in New York City during
February, was the Magic Enterprise Edition v.8 development environment
for Linux. Using Magic's core technology for Linux, developers now can
build e-commerce and other enterprise-level business solutions
directly on this rapidly growing operating platform.
At the Internet Commerce Expo, held in Boston in March, Magic
introduced Magic eService(TM), the first of four modules comprising
its customer relationship management (CRM) suite of products.
Recognition
In Italy, Bonfiglioli's Mosaico eMerchant application received the
Software Development Best Practice 2000 award at the Trade Show
Softech 2000, held March 8th in Milan. The Bonfiglioli Group, a
worldwide leader in producing engines for power transmission, is using
the business-to-business e-commerce solution developed by Magic to
web-enable their supply chain and allow customers to configure their
requirements online.
New Partners
During the quarter, Magic recruited new partners worldwide to
market, sell and implement the Company's award-winning e-commerce
solution, Magic eMerchant(TM). These new partners include Second
Foundation, PYA Solutions, Evron Computer Systems Corp., Orlan,
Karigan & Associates Ltd., Sky Technologies, and Streamline
Information Systems Ltd. in North America, and Fujitsu LSI
Technologies, Toshiba Engineering, Inc., Agrex Inc., Nav Assist
Corporation and Sumisho 4S in Japan. In addition,
PriceWaterhouseCoopers Consulting, Inc. will be the primary consulting
partner for Magic eMerchant business in Japan.
New Deals
North America recorded several new Magic eMerchant deals during
the quarter, including DakSoft, the IT arm of Blackhills Corporation,
and EDS, for creation of a Linux shopping mall (eLinux.com). Other new
deals in North American included Pizza Hut in Canada; and Matsushita
Avionics, which owns 80 percent of the inflight entertainment
industry, for a document tracking system built using Magic for Linux.
Other new e-commerce and CRM deals worldwide included VNU Business
Publications and KPD Groep BV (the Netherlands); MT&T S.p.A. and
Bofrost Italia S.p.A. (Italy); Compass and Aria Dental International
(France). Toyo Information Systems UK Limited (United Kingdom); Goetze
Limited (India); and Castilo (Germany).
Conference Call
Magic will host a conference call on Thursday, May 4, at 11:00
a.m. EST (8:00 a.m. PST), to discuss the Company's first quarter
financial results. To participate, interested parties should call the
appropriate number listed below five to ten minutes prior to the start
of the conference call.
North America: 888/222-2994
Internationally: 973/694-6836
Callers should reference "Magic Software Q1 Earnings Conference
Call" with the MCI Worldcom Operator.
Investors also can listen to the conference call over the Internet
through Vcall, a service of the Investor Broadcast Network, at
http://www.vcall.com. In addition, a replay of the conference call
will be available for up to 90 days on the Vcall website.
About Magic Software
Magic Software Enterprises, a member of the Formula Group
(Nasdaq:FORTY - news), develops, markets and supports software development
and deployment technology that enables enterprises to accelerate the
process of building and deploying applications that can be rapidly
customized and integrated with existing systems. Magic technology,
applications and professional services are available through a global
network of subsidiaries, distributors and Magic solutions partners in
approximately 50 countries. The Company's North American subsidiary is
located at 1642 Kaiser Avenue, Irvine, Calif., 92614, telephone
949/250-1718, fax 949/250-7404, http://www.magic-sw.com.
The Formula Group is an international information technology
company principally engaged, through its subsidiaries and affiliates,
in providing software consulting services, developing proprietary
software products and producing computer-based solutions.
Except for the historical information contained herein, the
matters discussed in this news release include forward-looking
statements that may involve a number of risks and uncertainties.
Actual results may vary significantly based upon a number of factors
including, but not limited to, risks in product and technology
development, market acceptance of new products and continuing product
conditions, both here and abroad, release and sales of new products by
strategic resellers and customers, and other risk factors detailed in
the Company's most recent annual report and other filings with the
Securities and Exchange Commission.
Unaudited Consolidated Statement of Operations
(US Dollars in Thousands)
--------------------------------------
Three Months ended March 31,
--------------------------------------
Q1
--------------------------------------
2000 1999
--------------------------------------
Revenues
Software sales $9,708 $7,604
Applications 3,327 0
Maintenance 2,861 1,985
Consulting & other services 5,755 4,042
--------------------------------------
Total Revenues 21,651 13,631
======================================
Cost of Revenues
Software sales 941 796
Applications 425 -
Maintenance 1,103 798
Consulting & other services 3,641 2,600
--------------------------------------
Total Cost of Revenues 6,110 4,194
--------------------------------------
Gross Profit 15,541 9,437
======================================
Research & development, net 1,003 615
Sales, marketing,
general & admin. 8,418 6,481
expenses
Depreciation 498 398
--------------------------------------
Amortization of goodwill 486 84
--------------------------------------
Operating Income 5,136 1,859
======================================
Financial (income)
expenses, net (149) 292
Income before taxes 5,285 1,567
Taxes on income 102 42
Income before minority
interest 5,183 1,525
Minority interest in
income of subsidiaries 1,176 135
Equity in earnings of
affiliate 0 23
--------------------------------------
Net Income $4,007 $1,413
======================================
Basic Earnings per Share $0.15 $0.06
Weighted Avg. Shares
Outstanding 27,294 23,574
Diluted Earnings per Share $0.14 $0.06
Diluted Weighted Avg.
Shares Outstanding 28,707 24,864
Unaudited Balance Sheets
(US Dollars in Thousands)
March 31 December 31
2000 1999
Assets
Current Assets
Cash and cash equivalents $84,888 $8,298
Accounts receivable :
Trade receivables 21,133 16,111
Related parties 172 45
Other receivables and prepaid 7,944 4,958
expenses
Inventory 304 188
--------------------------------
Total Current Assets $114,441 $29,600
--------------------------------
Severance pay fund 1,807 1,507
Investments in affiliated
companies 1,623 376
Fixed assets, net 9,365 8,649
Other assets, net 19,896 16,762
--------------------------------
Total Assets $147,132 $56,894
================================
Liabilities
Current Liabilities
Short-term bank debt 383 628
Trade payables 5,862 4,518
Accrued expenses and other
liabilities 18,446 14,787
--------------------------------
Total Current Liabilities $24,691 $19,933
--------------------------------
Long-term loans 855 295
Accrued severance pay 2,242 1,899
Minority interests 1,110 973
Shareholders' Equity
Share capital 804 712
Capital surplus 114,754 34,413
Retained earnings 2,676 (1,331)
--------------------------------
Total Shareholders' Equity $118,234 $33,794
--------------------------------
$147,132 $56,894
================================
Contact:
Magic Software Enterprises, Ltd.
Katharine Hanley, 949/250-1718 ext. 220
khanley@magic-sw.com
or
Israel Teiblum, +972-3-538-9311 or 9489
iteiblum@magic-sw.com
