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Tuesday February 25, 9:18 am ET
Magic Software Enterprises Announces Fourth Quarter and Full Year 2002 Results
OR YEHUDA, Israel--(BUSINESS WIRE)--Feb. 25, 2003-- 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 fourth quarter 2002 and year ended Dec. 31, 2002.
Fourth Quarter Results
Total revenues for the fourth quarter ended Dec. 31, 2002 were $13.76 million as compared with $17.42 million for the comparable quarter of 2001 and $13.82 million posted for the third quarter of 2002.
Net loss for the fourth quarter of 2002 was $3.29 million (or $0.11 cents per share) compared with net loss of $27.78 million (or $0.94 cents per share) for the fourth quarter of 2001. Excluding restructuring costs, impairment and amortization expenses, net loss in the reported quarter reached $2.17 million, compared with $3.75 million in the comparable 2001 quarter.
Software tool sales for the quarter, at $3.58 million, increased from $3.45 million in the third quarter of 2002 and decreased from $4.31 million for the fourth quarter of 2001. Application sales were $1.25 million for the fourth quarter as compared with $1.92 million for the third quarter of this year and $3.07 million for the fourth quarter of 2001.
Revenues from consulting and other services, at $6.17 million, increased from $5.69 million in the third quarter of 2002, and decreased from $7.66 million for the fourth quarter of 2001. Revenues from maintenance and support, at $2.77 million, were identical to the revenues recorded in the third quarter of 2002, and increased from $2.38 million in the same period of 2001.
In the fourth quarter of 2002, Europe accounted for 31% of the Company's total revenues, North America for 40%, Asia for 24% and Israel accounted for 5%.
Fiscal Year 2002 Results
For the year ended Dec. 31, 2002, Magic reported total revenues of $60.00 million as compared with $76.56 million in the previous year. Net loss for 2002 was $5.66 million, (or $0.19 cents per share), as compared with a net loss of $42.79 million (or $1.45 dollars per share) in 2001. Excluding restructuring costs, impairment and amortization expenses, net loss in 2002 was $4.54 million, as compared with $11.79 million in 2001.
Application sales for the year ending Dec. 31, 2002 were $7.36 million as compared with $11.21 million for 2001, while consultancy and other services in 2002 were $26.63 million as compared with $35.28 million in 2001.
In 2002, Europe accounted for 33% of Company revenues, North America for 37%, Asia for 24% and Israel accounted for 6%.
"We have emerged stronger than ever from one of the most difficult years in the history of the computing industry," said Menachem Hasfari, chief executive officer of Magic Software Enterprises. "Magic Software is well positioned with eDeveloper and the recently announced iBOLT Integration suite to face the challenges that 2003 has in store for us.
"The current market trends are pointing to the beginning of a recovery in exactly the areas where Magic Software has traditionally played well, application development and enterprise integration."
A recent IDC survey highlighted the increasing importance of integration projects in organizations. Not only are integration projects currently deemed extremely critical by more than 25% of the study respondents, but this percentage nearly doubles when one considers the anticipated importance of these projects in the coming two years. In addition, more than 80% of the respondents also indicated that integration is either mandatory for addressing mission-critical activities or is a key enabler for meeting business-critical needs.
In order to meet changing requirements, organizations require an integration solution that can rapidly build new composite applications from existing and legacy applications and components, existing business processes, data sources and integration connections.
Hasfari continued, "The iBOLT Integration suite is perfectly suited to meet these market requirements and provide one of the key drivers in the solution development effort, the inherent application development core technology that provides iBOLT its powerful business process engine."
Accomplishments
The following highlights were announced or occurred since Magic Software Enterprises' last earnings statement:
Corporate Roadmap and Three-point Strategy
During the quarter, the Company unveiled its strategic roadmap for the affordable iBOLT Integration Suite. The Company revealed its corporate roadmap and three-point strategy for entering the Enterprise Application Integration (EAI) market with the delivery of its new iBOLT Integration Platform to mid-sized organizations around the globe.
Evolving from the company's years of expertise in application development and integration, and business process automation, Magic Software's three-point strategy promises to deliver innovative new products based on its existing core development technology eDeveloper and the iBOLT family of products. As part of this strategy, Magic Software will make available high-level business analysts and technology architects through expanded partnerships and leverage a proven global support system to provide customers with expert services and support.
Product Development and Enhancements
The Company is preparing to shortly release the next version of its core technology, eDeveloper V9.4. This version contains significant enhancements in the areas of application and component development and deployment, security and integration with full support for the J2EE and .NET architectures, COM, XML and Web services.
New Deals
Among the significant new deals closed during the quarter were:
Hungarian Government, as Magic Software announced a framework agreement that enables Magic Software's Hungarian subsidiary to sell up to a million dollars of software and services to governmental institutions;
Pilat Media, a leading provider of solutions for the broadcasting industry, purchased new licenses and upgrades, following recent wins at National Geographic and the Playboy Channel;
TotalFinaElf, a leading European petroleum company for a web development and modernization project;
Dutch Badminton Federation, for the implementation of a solution for member registration, tracking and statistics;
Hungarian Ministry of Education, in support of the school internet program which will integrate around 3,000 schools all over Hungary.
In addition, the Company announced that it has joined the Web Services Interoperability Organization (WS-I), an organization whose mission is to promote Web services interoperability across platforms, applications and programming languages.
Magic Software joins a consortium of vendors and user companies who work together to accelerate the development and deployment of interoperable Web services. The Company brings excellent experience to the consortium in the area of development and integration of Web services.
Conference Call
Magic will host a conference call today, Feb. 25, 2003, at 12 p.m. EST (9 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) 450-0818
International (612) 332-0345
Callers should reference "Magic Software Q4 Earnings Conference Call" with the AT&T Operator.
A replay of the conference call will be available from 3:30 p.m. EST, Feb. 25, 2003, through 4:59 p.m. EST, March 11, 2003. Interested parties should call the appropriate number below:
North America (800) 475-6701
International (320) 365-3844
Callers should reference Access Code No. 675810.
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 17310 Redhill Avenue #270, Irvine, CA 92614-5637, telephone
800/345-6244, 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.
Consolidated Statement of Operations
(US Dollars in Thousands)
Three Months Twelve Months
ended ended
December 31, December 31,
2002 2001 2002 2001
Revenues
Software sales $3,575 $4,314 $15,136 $19,110
Applications 1,253 3,069 7,355 11,212
Maintenance 2,767 2,378 10,882 10,956
Consultancy & other services 6,166 7,656 26,631 35,284
Total revenues $13,761 $17,417 $60,004 $76,562
Cost of revenues
Software sales $1,079 $1,052 $3,318 $4,187
Applications 716 651 2,334 2,399
Maintenance 1,024 1,157 4,100 4,334
Consultancy & other services 4,758 5,728 19,239 25,622
Total cost of revenues $7,577 $8,588 $28,991 $36,542
Gross profit $6,184 $8,829 $31,013 $40,020
Research & development, net 1,322 2,115 5,336 7,547
Sales, Marketing, General
and administrative expenses 6,920 10,446 28,962 40,332
Depreciation 450 456 1,732 1,961
Amortization -- 1,032 -- 4,305
Restructuring costs & non-recurring
expenses 1,123 2,919 1,123 6,613
Impairment expense -- 20,081 -- 20,081
Operating income (loss) $(3,631)$(28,220)$(6,140)$(40,819)
Financial income, net 383 52 958 575
Capital (income) loss -- (20) -- 2,199
Income (loss) before taxes (3,248) (28,148) (5,182) (42,443)
Taxes on income (47) 233 (384) (167)
Income (loss) before minority
Interest (3,295) (27,915) (5,566) 42,610
Minority interests in losses
(income) of subsidiaries 115 134 11 (176)
Equity in losses of affiliate (108) -- (108) --
Net income $(3,288)$(27,781)$(5,663)$(42,786)
Earnings (loss) per share, basic and
diluted $(0.11) $(0.94) $(0.19) $(1.45)
Weighted avg. shares outstanding
(000's), basic and diluted 29,599 29,710 29,690 29,604
-0-
Consolidated Balance Sheets
(US Dollars in Thousands)
December December
31, 31,
2002 2001
Assets
Current assets
Cash and cash equivalents $24,785 $27,900
Accounts receivable
Trade receivables 13,605 18,993
Related parties 624 465
Other receivables and prepaid expenses 4,113 4,134
Inventory 175 401
Total current assets 43,302 51,893
Severance pay fund 1,465 1,400
Long term receivables and investments 748 106
Fixed assets, net 8,432 9,395
Goodwill 20,839 20,757
Other assets, net 9,736 11,061
Total assets $84,522 $94,612
Liabilities
Current liabilities
Short-term bank debt $3,405 $783
Trade payables 2,831 4,508
Accrued expenses and other liabilities 13,690 18,474
Total current liabilities 19,926 $23,765
Long-term loans 486 669
Accrued severance pay 1,861 1,907
Minority interests 1,228 1,378
Shareholders' equity
Share capital 788 787
Capital surplus 114,760 114,727
Treasury stock (5,667) (5,424)
Accumulated deficit (48,860)(43,197)
Total shareholders' equity $61,021 $66,893
Total liabilities and shareholders' equity $84,522 $94,612
Contact:
Magic Software Enterprises Ltd.
David Leichner, 949/250-1718 ext. 299
davidl@magicsoftware.com
 
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