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Monday November 12, 4:03 pm Eastern Time
Magic Software Enterprises Announces Third Quarter 2001 Results
Sees Slight Improvement in Software Tool and Application Sales
OR YEHUDA, ISRAEL -(BUSINESS WIRE)--Nov. 12, 2001 -- Magic Software Enterprises (Nasdaq:MGIC - news), a leading provider of state-of-the-art application development technology and business solutions, announced today results for the third quarter ended Sept. 30, 2001.
Despite the continuing economic slowdown, the company recorded a slight improvement in software tool and application sales over the previous quarter.
Third Quarter Results
Total revenues for the third quarter 2001 were $18.94 million as compared with the $25.46 million reported for the comparable period in 2000 and the $20.19 million posted for the second quarter of 2001.
Pro forma net loss for the third quarter (which excludes amortization of goodwill and intangibles, and any non-recurring expenses) was $1.11 million or $0.04 loss per share compared with the $1.9 million pro forma net loss or $0.07 loss per share posted in the second quarter of 2001 and the $2.25 million pro forma net income or $0.06 earnings per share recorded for the same period a year ago.
Actual (or GAAP) net loss for the third quarter of 2001 was $2.58 million or $0.09 loss per share compared with the $1.16 million net income or $0.04 earnings per share recorded one year ago.
Software tool sales for the quarter, at $4.93 million, were up slightly from the $4.58 million in software tool sales posted in the second quarter of 2001. Application sales also were slightly improved, totaling $3.21 million for the quarter as compared with $3.07 million for the second quarter of this year. The decrease in consultancy and other services was due primarily to the drop in revenues from CoreTech Consulting Group Inc., which is being adversely affected by the general slowdown in the U.S. consulting business.
For the third quarter 2001, Europe and North America both contributed 36% to sales respectively, while Asia contributed 23% and Israel 5%.
"Recently, we have been facing significant changes in the software market, with customers and prospects postponing decisions on software purchases due to the continuing global uncertainty over business and the economy," said Menachem Hasfari, chief executive officer of Magic. "At the same time, however, we have seen companies remain committed to investing in those cost-effective technologies like Magic that promise high returns on investment, broad functionality and ease of integration.
"Given the current state of the economy, I believe our results demonstrate continuing enthusiasm for the quality, value and performance of our offerings. And we remain confident that our strategy for supplying companies with key technology, business solutions and services positions us well for higher levels of growth once the economy recovers."
Third Quarter Developments
During the quarter, Magic continued to strengthen its relationship with IBM, to introduce additional state-of-the-art solutions, and to grow its list of international customers.
Recognition
In August, it was announced that both Magic eDeveloper(TM) (Magic's application development environment) and Magic eMerchant(TM) (the company's e-business solution) had received IBM's ServerProven® certification following a rigorous testing and evaluation process. Only those products that are validated by IBM to install quickly, start up easily and run reliably on IBM servers are awarded this certification, designed by IBM to help its customers easily identify complete solutions for their business-critical e-business needs.
New Products
Also in August, Magic Americas announced introduction of Magic CRM(TM), a highly affordable customer relationship management solution that enables mid-sized companies a single integrated view of their customers. While most CRM approaches today require companies to assemble CRM solutions in pieces, Magic CRM offers all of the key components of business management (marketing campaign management, sales opportunity management, complete customer service management and accounting/ERP integration) in a single module that can be acquired inexpensively and implemented quickly.
New Deals
Among the significant new deals closed during the quarter were:
- Menzies World Cargo (U.K.), the cargo handling and transport business arm of Menzies Aviation Group, to deliver a comprehensive air cargo management and tracking system;
- SAPA Group (France), the international industrial group that develops, manufactures and markets value-added aluminum and aluminum extrusions, to develop an ERP and e-business solution to integrate workflow between the organization's sales subsidiaries and plants;
- EXMA CPI (France), a major supplier of steel tubing, to develop a Web-enabled ERP system; and
- The Bank of Hapoalim (Israel), Israel's largest bank, to add several new modules to an existing Magic-based solution.
In addition, Magic subsidiary Access Data Corp., whose Sleuth(c) public safety records management solution is used by more than 400 small- to medium-sized public safety agencies throughout the United States, recently was awarded business from the following agencies:
- The Russell police in Kansas;
- The Kerrville police in Texas;
- The Sheridan and Scottsbluff police in Colorado;
- The Benson police in Arizona;
- The Acoma Pueblo police in New Mexico;
- The University of Central Arkansas police;
- The Kansas State University police; and
- The Dillon, Silverthorne, Frisco, Breckenridge, and Blue River police in Colorado to share a single database system for criminal tracking.
Answers on Demand, Magic's North American subsidiary that markets and supports proprietary integrated software solutions designed specifically for the long-term care industry, also signed deals during the quarter with a new facility in the Dallas area.
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,
Restructuring Costs and Non-Recurring Expenses
Three Months ended Nine Months ended
Sept. 30, Sept. 30,
2001 2000 2001 2000
Revenues
Software sales $4,931 $5,050 $14,796 $21,322
Applications 3,206 3,718 8,143 10,252
Maintenance 2,707 2,804 8,578 8,392
Consultancy &
other services 8,097 13,890 27,628 27,205
Total Revenues $18,941 $25,462 $59,145 $67,171
Cost of Revenues
Software sales $1,073 $836 $3,135 $2,761
Applications 644 556 1,748 1,460
Maintenance 1,039 1,047 3,177 3,206
Consultancy &
other services 6,216 8,743 19,894 17,096
Total Cost of
Revenues $8,972 $11,182 $27,954 $24,523
Gross Profit $9,969 $14,280 $31,191 $42,648
Research &
development, net 1,783 1,569 5,432 4,160
Sales, marketing,
and general &
administrative
expenses 9,094 10,846 29,885 29,484
Depreciation 520 384 1,505 1,054
Operating Income $(1,428) $1,481 $(5,631) $7,950
Financial (income)
expenses, net (557) (698) (523) (2,105)
Income (Loss)
before taxes (871) 2,179 (5,108) 10,055
Taxes on income 146 25 401 275
Income (Loss) before
minority interest (1,017) 2,154 (5,509) 9,780
Minority interest
in losses (income)
of Subsidiaries (92) 100 (310) (470)
Equity in earnings
(losses) of affiliate 0 0 0 (57)
Net Income $(1,109) $2,254 $(5,819) $9,253
Basic Earnings
(Loss) per Share $(0.04) $0.06 $(0.20) $0.32
Diluted Earnings
(Loss) per Share $(0.04) $0.06 $(0.19) $0.30
Weighted Avg. Shares
Outstanding (000) 29,640 29,996 29,568 29,055
Diluted Weighted Avg.
Shares Outstanding
(000) 29,857 31,127 30,039 30,441
NOTE: Excludes $1.08 million and $1.09 million of amortization of
goodwill and intangibles for the three months ended Sept. 30, 2001 and
2000, respectively, and restructuring costs and non-recurring expenses
of $0.40 million and impairment expenses of $0 for the three months
ended Sept. 30, 2001. Including the above items, there was a net loss
of $2.58 million or $0.09 loss per share for the three months ended
Sept. 30, 2001. Excludes $3.27 million and $2.17 million of
amortization of goodwill and intangibles for the nine months ended
Sept. 30, 2001 and 2000, respectively, and restructuring costs and
non-recurring expenses of $3.69 million and impairment expenses of
$2.22 million for the nine months ended Sept. 30, 2001. Including the
above items, there was a net loss of $15.01 million or $0.51 loss per
share for the nine months ended Sept. 30, 2001, and net income of
$7.08 million or $0.24 earnings per share for the nine months ended
Sept. 30, 2000.
Unaudited Consolidated Statement of Operations
(U.S. Dollars in Thousands)
Three Months ended Nine Months ended
Sept. 30, Sept. 30,
2001 2000 2001 2000
Revenues
Software sales $4,931 $5,050 $14,796 $21,322
Applications 3,206 3,718 8,143 10,252
Maintenance 2,707 2,804 8,578 8,392
Consultancy &
other services 8,097 13,890 27,628 27,205
Total Revenues $18,941 $25,462 $59,145 $67,171
Cost of Revenues
Software sales $1,073 $836 $3,135 $2,761
Applications 644 556 1,748 1,460
Maintenance 1,039 1,047 3,177 3,206
Consultancy &
other services 6,216 8,743 19,894 17,096
Total Cost of
Revenues $8,972 $11,182 $27,954 $24,523
Gross Profit $9,969 $14,280 $31,191 $42,648
Research &
development, net 1,783 1,569 5,432 4,160
Sales, marketing,
and general &
administrative
expenses 9,094 10,846 29,885 29,484
Depreciation 520 384 1,505 1,054
Amortization 1,076 1,090 3,273 2,172
Restructuring costs
& non-recurring
expenses 394 0 3,694 0
Operating Income
(Loss) $(2,898) $391 $(12,598) $5,778
Financial (income)
expenses, net (557) (698) (523) (2,105)
Impairment expense 0 0 2,219 0
Income (Loss) before
taxes (2,341) 1,089 (14,294) 7,883
Taxes on income 146 25 401 275
Income (Loss) before
minority Interest (2,487) 1,064 (14,695) 7,608
Minority interest
in losses (income)
of subsidiaries (92) 100 (310) (470)
Equity in earnings
(losses) of Affiliate 0 0 0 (57)
Net Income $(2,579) $1,164 $(15,005) $7,081
Basic Earnings
(Loss) per Share $(0.09) $0.04 $(0.51) $0.24
Diluted Earnings
(Loss) per Share $(0.09) $0.04 $(0.50) $0.23
Weighted Avg. Shares
Outstanding (000) 29,640 29,996 29,568 29,055
Diluted Weighted Avg.
Shares Outstanding
(000) 29,857 31,127 30,039 30,441
Consolidated Balance Sheets
(U.S. Dollars in Thousands)
Sept. 30 Dec. 31
2001 (Unaudited) 2000
Assets
Current Assets
Cash and cash equivalents $31,288 $42,627
Accounts receivable :
Trade receivables 21,322 22,904
Related parties 375 278
Other receivables and
prepaid expenses 5,216 5,827
Inventory 393 402
Total Current Assets $58,594 $72,038
Long-term deposit $0 $436
Severance pay fund 1,227 2,042
Investments in affiliated
companies 573 250
Fixed assets, net 9,588 11,050
Other assets, net 49,595 52,179
Total Assets $119,577 $137,995
Liabilities
Current Liabilities
Short-term bank debt $865 $1,462
Trade payables 4,613 5,610
Accrued expenses and other
liabilities 16,126 15,998
Total Current Liabilities $21,604 $23,070
Long-term loans $547 $1,758
Accrued severance pay 1,505 3,511
Minority interests 1,349 251
Shareholders' Equity
Share capital 808 781
Capital surplus 114,604 114,459
Treasury stock (5,424) (5,424)
Retained earnings (deficit) (15,416) (411)
Total Shareholders' Equity $94,572 $109,405
$119,577 $137,995
Contact:
Magic Software Enterprises, Irvine
Katharine Hanley, 949/250-1718 ext. 220
khanley@magicsoftware.com
 
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