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Thursday February 14, 11:01 am Eastern Time
Magic Software Enterprises Announces Fourth Quarter and Full Year 2001 Results
OR YEHUDA, ISRAEL--(BUSINESS WIRE)--Feb. 14, 2002--Magic Software Enterprises (Nasdaq: MGIC - news), a leading provider of state-of-the-art application development technology and business solutions, today announced results for the fourth quarter 2001.
Fourth Quarter Results
Total revenues for the fourth quarter ended Dec. 31, 2001, were $17.4 million as compared with $23.1 million recorded by Magic for the comparable quarter of 2000 and $18.9 million posted for the third quarter of 2001.
Pro forma net loss for the fourth quarter (which excludes amortization of goodwill and intangibles, restructuring and non-recurring expenses, impairment expenses and capital loss) was $3.8 million or ($0.13) per share compared with a pro forma net loss of $1.8 million or ($0.06) per share recorded for the comparable quarter of 2000 and a pro forma net loss of $1.1 million or ($0.04) per share posted in the third quarter of 2001.
Net loss (US GAAP) for the fourth quarter of 2001 was $27.8 million or ($0.94) per share compared with net loss of $6.2 million or ($0.21) per share recorded for the fourth quarter of 2000. The loss included restructuring charges of $2.9 million and impairment charges of $20.1 million. A significant portion of the loss was attributed to restructuring, discontinued operations and other one-time charges, and impairment of goodwill.
Software tool sales for the quarter, at $4.3 million, decreased from $4.9 million in software tool sales posted in the third quarter of 2001 and $5.6 million for the fourth quarter of 2000. Application sales were $3.1 million for the fourth quarter as compared with $3.2 million for the third quarter of this year and $4.2 million for the fourth quarter of 2000.
Revenues from consulting and other services, at $7.7 million, decreased from $8.1 million in the third quarter of 2001, and $10.4 million for the fourth quarter of 2000. Revenues from maintenance and support, at $2.4 million, decreased from $2.7 million in the third quarter of 2001, and $3.0 million in the same period of 2000. The decrease in consultancy and other services was due primarily to the slowdown in IT spending in the United States.
In the fourth quarter of 2001, Europe accounted for 39%, North America accounted for 32%, Asia accounted for 20% and Israel accounted for 9% of the company's revenues.
"Our fourth quarter results illustrate both the challenges that technology companies encountered with the slowing of IT spending, as well as the steps that we took to overcome these obstacles moving forward," said Menachem Hasfari, chief executive officer of Magic Software Enterprises.
"During the reported quarter, we significantly downsized our head office operations, eliminating and combining managerial positions and we reduced administrative overhead throughout the company. We increased the effectiveness of our professional services organization by reducing the head count of non-billable personnel and increasing overall utilization. We have also implemented an aggressive expense reduction program geared toward returning Magic Software to profitability in 2002. We emerged from a difficult year much leaner and better prepared to respond to emerging market opportunities, and ready to return to profitability in 2002."
"To achieve this return to profitability," added Hasfari, "in 2002 we will focus on growing our development community and base of solution partners around Magic eDeveloper(TM), our core technology, which generates our highest profit margins. We will continue to increase the effectiveness of our professional services organization to realize better margins from the projects that we are implementing around the world. We will also continue to build and improve the efficiency of our channel organization."
Fiscal Year 2001 Results
For the year ended Dec. 31, 2001, Magic reported total revenues of $76.6 million as compared with $90.3 million in the previous year. Pro forma net loss for 2001 (which excludes amortization of goodwill and intangibles, restructuring costs and non-recurring expenses, impairment expenses and capital loss) was $9.6 million or ($0.32) per share compared with pro forma net income of $7.3 million or $0.25 per share posted in 2000. Net loss for 2001 was $42.8 million, or ($1.45) per share, as compared with net income of $0.9 million or $0.03 per share in 2000.
Application sales for the year ending Dec. 31, 2001 were $11.2 million as compared with $14.4 million for 2000, while consultancy and other services in 2001 were $35.3 million as compared with $37.6 million recorded in 2000.
In 2001, Europe accounted for 33%, North America accounted for 38%, Asia accounted for 22% and Israel accounted for 7% of the company's revenues.
Accomplishments
The following highlights were announced or occurred since Magic Software Enterprises' last earnings statement:
Expanded and Enhanced Product Line
During the fourth quarter of 2001, Magic released Magic eDeveloper v9.2, which enables developers to create and deploy Web Services as a stand-alone service or in conjunction with J2EE application servers. This release provides companies the ability to extend the lives and increase the value of legacy applications, while helping to reduce the cost and complexity of integrating ERP, CRM and custom applications. Magic eDeveloper v9.2 supports the standards necessary to develop and deploy Web Services. These include Simple Object Access Protocol (SOAP) and Web Services Description Language (WSDL). Applications developed with Magic eDeveloper interact and integrate with advanced J2EE application servers, such as IBM WebSphere. Magic eDeveloper v9.2 enables these applications to also be deployed as Web Services.
Magic also released Magic eMerchant(TM) v2, the next generation of its highly customizable and fully functional e-commerce framework. In addition to offering such features as complete integration with back-end and legacy systems, full customization to specific business logic and processes, personalized pricing, order templates and catalogs, and robust security, Magic eMerchant v2 provides sophisticated product configuration capabilities and a multi-tiered architecture to support multiple business units, stores, outlets and branches -- features that are unique in its price category.
New Deals
Among the significant new deals closed during the quarter were with:
Lekkerland, Europe's leading wholesale, distribution and service group for the convenience market, to deliver an advanced ERP solution;
Nintendo, the acknowledged worldwide leader in the creation of interactive entertainment, to develop an online information and order processing system;
Magister, a leading provider of solutions for the food and healthcare market, to upgrade and enhance their legacy systems as interactive Web applications; and
Cheque Dejeuner, a major provider of services to the restaurant industry in France, to modernize and redevelop all of their existing RPG applications to an integrated Web architecture.
During this quarter, the company also completed implementation of the Flame ERP system for Bet Shemesh Engines (BSE), a major supplier of maintenance, repair and overhaul services, and jet engine parts to Pratt & Whitney, GE Aircraft Engines, Allison, Samsung and several national air forces, including the Israeli Air Force.
Conference Call
Magic will host a conference call today, Feb. 14, 2002, at 1 p.m. EST (10 a.m. PST), to discuss the company's fourth quarter financial results. To participate, interested parties should call the appropriate number listed below five to 10 minutes prior to the start of the call:
North America (800) 450-0788
International (612) 332-0632
Callers should reference "Magic Software Q4 Earnings Conference Call" with the AT&T Operator.
A replay of the conference call will be available from 5:30 p.m. EST, Feb. 14, 2002, through 11:59 p.m. EST, Feb. 28, 2002. Interested parties should call the appropriate number below:
North America (800) 475-6701
International (320) 365-3844
Callers should reference Access Code No. 627770.
About Magic Software Enterprises
Magic Software Enterprises, a member of the Formula Systems group, 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.
Formula Systems is a global information technology company principally engaged, through its subsidiaries and affiliates, in providing software consulting services, developing proprietary software products and providing computer-based business 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
(U.S. Dollars in Thousands)
Excluding Amortization of Goodwill and Intangibles, Restructuring
Costs and Non-Recurring Expenses, Impairment Expenses and Capital Loss
Three Months ended Twelve Months ended
December 31, December 31,
2001 2000 2001 2000
Revenues
Software sales $ 4,314 $5,581 $19,110 $26,904
Applications 3,069 4,164 11,212 14,416
Maintenance 2,378 2,955 10,956 11,347
Consultancy & other
services 7,656 10,385 35,284 37,589
Total revenues $17,417 $23,085 $76,562 $90,256
Cost of revenues
Software sales $ 1,052 $ 873 $ 4,187 $ 3,635
Applications 651 547 2,399 2,007
Maintenance 1,157 994 4,334 4,200
Consultancy & other
services 5,728 6,918 25,622 24,014
Total cost of revenues $ 8,588 $ 9,332 $36,542 $33,856
Gross profit $ 8,829 $13,753 $40,020 $56,400
Research & development, net 2,115 1,788 7,547 5,947
Sales, marketing, and
general & administrative
expenses 10,446 12,939 40,332 42,432
Depreciation 456 558 1,961 1,736
Operating income $(4,188) $(1,532) $(9,820) $6,285
Financial (income), net (52) (304) (575) (2,419)
Income (loss) before taxes (4,136) (1,228) (9,245) 8,704
Taxes on income (233) 247 167 523
Income (loss) before
minority interest (3,903) (1,475) (9,412) 8,181
Minority interest in losses
(income) of subsidiaries 134 (355) (176) (825)
Equity in earnings (losses)
of affiliate 0 0 0 (57)
Net income $(3,769) $(1,830) $(9,588) $7,299
Basic earnings (loss)
per share $ (0.13) $ (0.06) $(0.32) $ 0.25
Diluted earnings (loss)
per share $ (0.13) $ (0.06) $(0.32) $ 0.24
Weighted avg. shares
outstanding (000's) 29,710 29,409 29,604 29,084
Diluted weighted avg.
shares outstanding (000's) 29,994 30,003 30,259 30,232
NOTE: Excludes $1.0 million and $1.2 million of amortization of
goodwill and intangibles, restructuring costs and non-recurring
expenses of $2.9 million and $2.5 million, impairment expenses of
$20.1 million and $0 million and capital loss of $0 million and $0.6
million for the three months ended Dec. 31, 2001 and 2000,
respectively. Including the above items, there was a net loss of $27.8
million or $(0.94) per share and $6.2 million net loss or $(0.21) per
share for the three months ended Dec. 31, 2001 and 2000, respectively.
Excludes $4.3 million and $3.3 million of amortization of goodwill
and intangibles, restructuring costs and non-recurring expenses of
$6.6 million and $2.5 million, impairment expenses of $20.1 million
and $0 million and capital loss of $2.2 million and $0.6 million for
the 12 months ended Dec. 31, 2001 and 2000 respectively. Including the
above items, there was a net loss of $42.8 million or $(1.45) per
share for the 12 months ended Dec. 31, 2001, and net income of $0.9
million or $0.03 per share for the 12 months ended Dec. 31, 2000.
Consolidated Statement of Operations
(U.S. Dollars in Thousands)
Three Months ended Twelve Months ended
December 31, December 31,
2001 2000 2001 2000
Revenues
Software sales $4,314 $5,581 $19,110 $26,904
Applications 3,069 4,164 11,212 14,416
Maintenance 2,378 2,955 10,956 11,347
Consultancy & other
services 7,656 10,385 35,284 37,589
Total revenues $17,417 $23,085 $76,562 $90,256
Cost of revenues
Software sales $ 1,052 $ 873 $ 4,187 $ 3,635
Applications 651 547 2,399 2,007
Maintenance 1,157 994 4,334 4,200
Consultancy & other
services 5,728 6,918 25,622 24,014
Total cost of revenues $ 8,588 $ 9,332 $36,542 $33,856
Gross profit $ 8,829 $13,753 $40,020 $56,400
Research & development, net 2,115 1,788 7,547 5,947
Sales, marketing, and
general & administrative
expenses 10,446 12,939 40,332 42,432
Depreciation 456 558 1,961 1,736
Amortization 1,032 1,249 4,305 3,290
Restructuring costs &
non-recurring expenses 2,919 2,466 6,613 2,466
Impairment expense 20,081 20,081
Operating income (loss) $(28,220) $(5,247) $(40,819) $ 529
Financial (income), net (52) (304) (575) (2,419)
Capital (loss) gain 20 (613) (2,199) (623)
Income (loss) before taxes (28,148) (5,556) (42,443) 2,325
Taxes on income (233) 247 167 523
Income (loss) before
minority Interest (27,915) (5,803) (42,610) 1,802
Minority interest in losses
(income) of subsidiaries 134 (355) (176) (825)
Equity in earnings (losses)
of Affiliate 0 0 0 (57)
Net income $(27,781) $(6,158) $(42,786) $ 920
Basic earnings (loss)
per share $ (0.94) $ (0.21) $(1.45) $ 0.03
Diluted earnings (loss)
per share $ (0.94) $ (0.21) $(1.45) $ 0.03
Weighted avg. shares
outstanding (000's) 29,710 29,409 29,604 29,084
Diluted weighted avg. shares
outstanding (000's) 29,994 30,003 30,259 30,232
Consolidated Balance Sheets
(U.S. Dollars in Thousands)
December 31, 2001 December 31, 2000
Assets
Current assets
Cash and cash equivalents $27,900 $42,627
Accounts receivable
Trade receivables 18,993 22,904
Related parties 465 278
Other receivables and
prepaid expenses 3,639 5,827
Inventory 401 402
Total current assets 51,398 72,038
Long-term deposit $ 121 $ 436
Severance pay fund 1,400 2,042
Investments in affiliated companies 106 250
Fixed assets, net 9,310 11,050
Other assets, net 31,903 52,179
Total assets $94,238 $137,995
Liabilities
Current liabilities
Short-term bank debt $ 783 $ 1,462
Trade payables 4,508 5,610
Accrued expenses and other
liabilities 18,100 15,998
Total current liabilities $23,391 $23,070
Long-term loans $ 669 $1,758
Accrued severance pay 1,907 3,511
Minority interests 1,378 251
Shareholders' equity
Share capital 787 781
Capital surplus 114,727 114,459
Treasury stock (5,424) (5,424)
Accumulated deficit (43,197) (411)
Total shareholders' equity $66,893 $109,405
$94,238 $137,995
Contact:
Magic Software Enterprises, Irvine
Katharine Hanley, 949/250-1718 ext. 220
khanley@magicsoftware.com
 
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