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Monday August 13, 9:05 am Eastern Time
Magic Software Enterprises Announces Second Quarter 2001 Results
Shows Slight Improvement in Quarterly Revenues
OR YEHUDA, Israel--(BUSINESS WIRE)--August 13, 2001 -Magic Software Enterprises, Ltd. (Nasdaq:MGIC - news), a leading provider of state-of-the-art application development technology and business solutions, announced today results for the second quarter ended June 30, 2001. In addition to posting a slight increase in revenues for the quarter, Magic also managed to reduce its EBITDA loss from $2.4 million in the first quarter of 2001 to $0.8 million in the second quarter.
Second Quarter Results
Total revenues for the second quarter 2001 were $20.2 million as compared to $20.1 million for the comparable period in 2000, a slight increase over last year and over the $20.0 million recorded for the first quarter of 2001. Almost 40% of second quarter revenues came from Magic's North American operations, which include Magic Software Enterprises, Inc., CoreTech Consulting Group, Inc., Answers on Demand and Access Data.
Pro forma net loss for the second quarter (which excludes amortization of goodwill and intangibles, and any non-recurring expenses) was $1.9 million or $0.07 loss per share, compared with the $2.7 million pro forma net income or $0.06 earnings per share posted for the same period a year ago.
Actual (or GAAP) net loss for the second quarter of 2001 was $3.0 million or $0.10 loss per share, compared with the $1.9 million net income or $0.06 earnings per share recorded one year ago.
"Magic's second quarter results met our overall expectations. In spite of a tough market situation, we managed to slightly increase our revenues, acquired several new customers, and continued to receive recognition for our products worldwide," said Menachem Hasfari, chief executive officer of Magic. "However, we also were not immune to some of the problems that affected many of our competitors.
"We saw ongoing weakness in the software arena, which continues to be plagued by unusually long decision-making cycles. And we saw diminished demand for CRM (Customer Relationship Management) solutions. We expect these factors will continue to work against us in the second half of this year.
"However, we continue to work aggressively to contain costs, and recently reduced our worldwide work force by approximately five percent in response to current market conditions. As a result, we expect to see improved results moving forward, and continue to believe that we are well positioned to benefit from an eventual economic upturn and improvement in industry demand."
Second Quarter Developments
During the quarter, Magic continued to receive recognition for its products and to grow its customer list with major companies worldwide.
- Recognition
In April, it was announced that Magic eService(TM), the Company's Web-based customer management solution, had received a Product of the Year 2000 Award from Customer Inter@ction Solutions magazine. The award was the result of an extensive product review conducted by the publication to determine those products whose "technological evolution and applications refinements" set them apart from other competitive offerings in the market.
- New Deals
Among the several significant new deals closed during the quarter were:
- BBDO InterOne, a member of the BBDO worldwide network of
agencies, to use Magic eService to provide BBDO InterOne and
its customers totally Web-enabled service centers.
- adidas-Salomon Canada, Salomon AG's Canadian subsidiary, to
provide the company the tools and training to enable it to
build its own custom business-to-business site for the IBM
iSeries platform.
- Scotland's Inverclyde Council, to develop a number of
strategic systems based upon a range of legacy platforms,
including the AS/400.
- Koninklijke Nederlandse Gymnastiek Unie, the Dutch
association of gymnastics, to create a Web-based solution
that will enable members, clubs, districts and third parties,
such as journalists and the general public, to exchange
information.
- K.K. Prime Systems, a major Japanese software house, to
create a combined customer relationship management and
e-commerce solution employing both Magic eMerchant(TM) and
Magic eService.
Other new contracts to implement Magic eService were signed with Kalamazoo Germany, a car dealership management system organization; Compartner Systems (Germany), a software house; and Airtrade (Netherlands), an airline ticket management firm.
Magic eContact(TM) deals included two French outsourcing firms specializing in customer care and services, as well as outbound/inbound telemarketing campaigns: B2S and Komerezo.
Answers on Demand, Inc., Magic's North American subsidiary, which markets and supports proprietary integrated software solutions designed specifically for the long-term care industry, also signed significant deals during the quarter with two multi-site facilities located in Missouri and Kansas.
Conference Call
Magic will host a conference call on Monday, August 13, 2001, at 12:00 noon EST (9:00 a.m. PST), to discuss the Company's second quarter 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: 888/273-9887
Internationally: 612/332-1213
Callers should reference "Magic Software Q2 Earnings Conference Call" with the AT&T Operator.
A replay of the conference call will be available from 12:30 p.m. PST, August 13, 2001, through 11:59 p.m. PST, August 20, 2001. Interested parties should call the appropriate number below:
North America: 800/475-6701
Internationally: 320/365-3844
Callers should reference Access Code No. 596954.
Investors also will have the opportunity to listen to the conference call over the Internet through Vcall, a service of the Investor Broadcast Network, at http://www.vcall.com. To listen to the "live" call, investors should go to the Website at least fifteen minutes early to register, and download and install any necessary audio software. For those who cannot listen to the live Internet broadcast, a replay of the conference call will be available for up to 90 days on the Vcall Website.
About Magic Software Enterprises
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.magicsoftware.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.
Pro Forma Consolidated Statement of Operations (Unaudited)
(U.S. Dollars in Thousands)
Excluding Amortization of Goodwill and Intangibles,
And Restructuring Costs and Non-Recurring Expenses
Three Months ended Six Months ended
June 30, June 30,
2001 2000 2001 2000
Revenues
Software sales $ 4,579 $ 6,565 $ 9,865 $16,273
Applications 3,066 3,207 4,937 6,534
Maintenance 3,106 2,727 5,872 5,588
Consultancy &
other services 9,439 7,559 19,531 13,314
Total Revenues $20,190 $20,058 $40,205 $41,709
Cost of Revenues
Software sales $ 1,023 $ 985 $ 2,062 $ 1,926
Applications 639 479 1,104 904
Maintenance 1,053 1,056 2,138 2,159
Consultancy &
other services 6,088 4,712 13,678 8,353
Total Cost of
Revenues $ 8,803 $ 7,232 $18,982 $13,342
Gross Profit $11,387 $12,826 $21,223 $28,367
Research &
development, net 1,808 1,587 3,649 2,590
Sales, marketing,
and general
& administrative
expenses 10,344 9,855 20,792 18,814
Depreciation 497 386 985 495
Operating Income $(1,262) $ 998 $(4,203) $ 6,468
Financial (income)
expenses, net 4 (1,258) 34 (1,407)
Income (Loss)
before taxes (1,266) 2,256 (4,237) 7,875
Taxes on income 193 149 255 251
Income (Loss)
before minority
interest (1,459) 2,107 (4,492) 7,624
Minority interest
in losses
(income) of
Subsidiaries (483) 606 (218) (570)
Equity in earnings
(losses) of
affiliate 0 (57) 0 (57)
Net Income $(1,942) $2,656 $(4,710) $6,997
Basic Earnings
per Share $ (0.07) $ 0.06 $ (0.16) $ 0.24
Diluted Earnings
per Share $ (0.06) $ 0.06 $ (0.15) $ 0.23
Weighted Avg.
Shares
Outstanding (000) 29,568 29,963 29,533 28,677
Diluted Weighted
Avg. Shares
Outstanding (000) 30,269 31,281 30,390 29,994
NOTE: Excludes $2.2 million and $1.1 million of amortization of
goodwill and intangibles for the six months ended June 30, 2001 and
2000, respectively, and restructuring costs and non-recurring expenses
of $3.3 million and impairment expenses of $2.2 million for the six
months ended June 30, 2001. Including the above items, there was a net
loss of $12.4 million or $0.42 loss per share for the six months ended
June 30, 2001, and net income of $5.9 million or $0.21 earnings per
share for the six months ended June 30, 2000.
Unaudited Consolidated Statement of Operations
(US Dollars in Thousands)
Three Months ended Six Months ended
June 30, June 30,
2001 2000 2001 2000
Revenues
Software sales $ 4,579 $ 6,565 $ 9,865 $16,273
Applications 3,066 3,207 4,937 6,534
Maintenance 3,106 2,727 5,872 5,588
Consultancy &
other services 9,439 7,559 19,531 13,314
Total Revenues $20,190 $20,058 $40,205 $41,709
Cost of Revenues
Software sales $ 1,023 $ 985 $ 2,062 $ 1,926
Applications 639 479 1,104 904
Maintenance 1,053 1,056 2,138 2,159
Consultancy & other
services 6,088 4,712 13,678 8,353
Total Cost of
Revenues $ 8,803 $ 7,232 $18,982 $13,342
Gross Profit $11,387 $12,826 $21,223 $28,367
Research &
development, net 1,808 1,587 3,649 2,590
Sales, marketing,
and general
& administrative
expenses 10,344 9,855 20,792 18,814
Depreciation 497 386 985 495
Amortization 1,076 748 2,197 1,083
Restructuring costs &
non-recurring expenses 0 0 3,300 0
Operating Income (Loss) $(2,338) $ 250 $(9,700) $ 5,385
Financial (income)
expenses, net 4 (1,258) 34 (1,407)
Impairment expense 0 2,219
Income (Loss) before
taxes (2,342) 1,508 (11,953) 6,792
Taxes on income 193 149 255 251
Income (Loss)
before minority
Interest (2,535) 1,360 (12,208) 6,541
Minority interest in
losses (income) of
subsidiaries (483) 606 (218) (570)
Equity in earnings
(losses) of
Affiliate 0 (57) 0 (57)
Net Income $(3,018) $1,908 $(12,426) $5,914
Basic Earnings
per Share $ (0.10) $ 0.06 $ (0.42) $ 0.21
Diluted Earnings
per Share $ (0.10) $ 0.06 $ (0.41) $ 0.20
Weighted Avg. Shares
Outstanding (000) 29,568 29,963 29,533 28,677
Diluted Weighted Avg.
Shares Outstanding
(000) 30,269 31,281 30,390 29,994
Consolidated Balance Sheets
(US Dollars in Thousands)
June 30 December 31
2001 2000
(Unaudited)
Assets
Current Assets
Cash and cash equivalents $ 35,267 $ 42,627
Accounts receivable:
Trade receivables 21,923 22,904
Related parties 392 278
Other receivables and
prepaid expenses 6,286 5,827
Inventory 391 402
Total Current Assets $ 64,259 $ 72,038
Long-term deposit $ 0 $ 436
Severance pay fund 1,469 2,042
Investments in
affiliated companies 471 250
Fixed assets, net 9,632 11,050
Other assets, net 49,084 52,179
Total Assets $124,915 $137,995
Liabilities
Current Liabilities
Short-term bank debt $ 696 $ 1,462
Trade payables 4,793 5,610
Accrued expenses and
other liabilities 18,546 15,998
Total Current Liabilities $ 24,035 $ 23,070
Long-term loans $ 341 $ 1,758
Accrued severance pay 1,898 3,511
Minority interests 1,410 251
Shareholders' Equity
Share capital 806 781
Capital surplus 114,686 114,459
Treasury stock (5,424) (5,424)
Retained earnings (12,837) (411)
Total Shareholders' Equity $ 97,231 $109,405
$124,915 $137,995
Contact:
Magic Software Enterprises, Irvine
Katharine Hanley, 949/250-1718 ext. 220
khanley@magicsoftware.com
or
Magic Software Enterprises, Ltd.
Guy Bernstein, +972-3-538-9292 (Finance)
gbernstein@magicsoftware.com
 
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