Exhibit 10.1


 


PRESS RELEASE


 


Magic Reports Third Quarter 2015 Results with Record-Breaking
Revenues of $45.3 Million, an Increase of 13% Year over Year


 


Non-GAAP net income for
the third quarter increased 14% to $5.7 million, or $0.13 per fully diluted share


 


Or Yehuda, Israel, November 11, 2015
– Magic Software Enterprises Ltd. (NASDAQ and TASE: MGIC), a global provider
of mobile and cloud-enabled application and business integration platforms,
announced today its financial results for the third quarter and first nine months of 2015.


 


Financial Highlights for the Third Quarter
Ended September 30, 2015


 


		·	Revenues for the third quarter increased 13% year over year to a record-breaking $45.3 million,
compared to $40.2 million in the same period last year. Revenues were negatively impacted by the devaluation of the New Israeli
Shekel, Euro and Japanese Yen against the U.S Dollar by 9%, 16% and 15%, respectively. On a constant currency basis, excluding
the negative impact from the erosion of foreign exchange rates, revenues for the third quarter would have reflected an increase
of 19% year over year to a record-breaking result of $47.8 million.



 


		·	Non-GAAP operating income for the third quarter increased 3% to $6.6 million, compared to
$6.4 million in the same period last year. On a constant currency basis, excluding the negative impact from the erosion of
foreign exchange rates (mainly resulting from the devaluation of the Euro and Japanese Yen versus the U.S Dollar), non-GAAP operating
income would have reflected an increase of 10% year over year to $7.1 million. Operating income decreased 5% to $5.3 million,
compared to $5.6 million in the same period last year.



 


		·	Non-GAAP net income for the third quarter increased 14% to $5.7 million,
or $0.13 per fully diluted share, compared to $5.0 million, or $0.11 per fully diluted share in the same period last year.
On a constant currency basis, excluding the negative impact from the erosion of foreign exchange rates (including the devaluation
of cash balances denominated mainly in New Israeli Shekels, Euros, and Japanese Yen against the US Dollar), non-GAAP net income
would have reflected an increase of 23% year over year to $6.2 million, or $0.14 per fully diluted share. Net income for the
third quarter amounted to $4.2 million (or $0.09 per fully diluted share), compared to $4.2 million (or $0.10 per fully diluted
share) in the same period last year.



  




     


     


    

 


Financial Highlights for the Nine-Month
Period Ended September 30, 2015


 


		·	Revenues for the first nine months of 2015 increased 5% to a record of $128.2 million compared
to $121.8 million in the same period last year. Revenues were negatively impacted by the devaluation of the New Israeli Shekel,
Euro and Japanese Yen against the U.S Dollar by 10%, 18% and 15%, respectively. On a constant currency basis, excluding the negative
impact from the erosion of foreign exchange rates, revenues for the first nine months would have reflected an increase of 12% year
over year to a record of $135.9 million.



 


		·	Non-GAAP operating income for the first nine months of 2015 increased 5% to $19.8 million
compared to $18.9 million in the same period last year. On a constant currency basis, excluding the negative impact from the
erosion of foreign exchange rates (mainly resulting from the devaluation of the Euro and Japanese Yen versus the U.S Dollar), non-GAAP
operating income would have reflected an increase of 13% year over year to $21.4 million. Operating income for the first nine
months of 2015 decreased 1% to $16.5 million compared to $16.7 million in the same period last year.



 


		·	Non-GAAP net income for the first nine months of 2015 increased 9% to $16.1 million (or $0.36
per fully diluted share) compared to $14.7 million (or $0.34 per fully diluted share) in the same period last year. On a constant
currency basis, excluding the negative impact from the erosion of foreign exchange rates (including the devaluation of cash balances
denominated mainly in New Israeli Shekels, Euros, and Japanese Yen against the US Dollar amounting to $0.9 million), non-GAAP
net income would have reflected an increase of 26% year over year to $18.6 million (or $0.42 per fully diluted share). Net
income for the first nine months of 2015 decreased 1% to $12.5 million (or $0.28 per fully diluted share), compared to $12.6 million
(or $0.29 per fully diluted share) in the same period last year.



 


		·	Total cash, cash equivalents and short-term investments as of September 30, 2015, amounted
to $80.9 million.



 


Comments of Management


 


Guy Bernstein, Chief Executive Officer
of Magic Software Enterprises, said, “We are pleased to report record-breaking quarterly revenues of $45.3 million.
We are continuing to see solid demand for our software and professional services from all regions, demonstrating the relevance
of our enterprise mobility, cloud integration and Big Data solutions as companies move forward with digital transformations.”


 


“Our focus on operational discipline while enriching our
offerings and enlarging our customer base has enabled us to maintain non-GAAP operating margins of over 15% despite foreign currency
devaluations and a changing revenue mix. We are maintaining our revenue guidance of $166 million to $173 million for
the full-year 2015, reflecting a 7% to 11% growth rate on a constant currency basis.”


 


 


Conference Call Details


 


Magic’s Management will host an interactive
conference today, November 11, at 10:00 am Eastern Time (7:00 am Pacific Time, 17:00 Israel Time). On the call, management will
review and discuss the results, and will also be available to answer investors’ questions.


 


To participate, please call one of the
following teleconferencing numbers. Please begin placing your calls at least 10 minutes before the conference call commences. If
you are unable to connect using the toll-free numbers, call the international dial-in number.


  




     


     


    

 


		·	From North America: +1-888-668-9141



 


		·	From UK: 0-800-917-5108



 


		·	From Israel: 03-918-0609



 


		·	All others: +972-3-918-0609



 


For those unable to listen to the live
call, a replay of the call will be available for three months from the day after the call under the investor relations section
of Magic’s website.


  


Non-GAAP Financial Measures


 


This release includes non-GAAP operating
income, net income, basic and diluted earnings per share and other non-GAAP financial measures. These non-GAAP measures exclude
the following items:


 


		·	Amortization
of purchased intangible assets;



 


		·	In-process
research and development capitalization and amortization;



 


		·	Equity-based
compensation expense;



 


		·	Change
in valuation of contingent consideration; and



 


		·	The
related tax effects of the above items.



 


Magic Software’s management believes
that the presentation of non-GAAP measures provides useful information to investors and management regarding financial and business
trends relating to the Company’s financial condition and results of operations as well as the net amount of cash generated
by its business operations after taking into account capital spending required to maintain or expand the business.


 


These non-GAAP financial measures are not
in accordance with, or an alternative for, generally accepted accounting principles and may be different from non-GAAP financial
measures used by other companies. In addition, these non-GAAP financial measures are not based on any comprehensive set of accounting
rules or principles. Magic Software believes that non-GAAP financial measures have limitations in that they do not reflect all
of the amounts associated with Magic Software’s results of operations as determined in accordance with GAAP and that these
measures should only be used to evaluate Magic Software’s results of operations in conjunction with the corresponding GAAP
measures.


 


Please refer to the Reconciliation of Selected
Financial Metrics from GAAP to Non-GAAP tables below.


  


About Magic Software Enterprises


 


Magic Software Enterprises Ltd. (NASDAQ
and TASE: MGIC) is a global provider of mobile and cloud-enabled application and business integration platforms.


 


For more information, visit www.magicsoftware.com.


  




     


     


    

  





 


Forward Looking Statements


 


Some of the statements in this press release
may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, Section
21E of the Securities and Exchange Act of 1934 and the United States Private Securities Litigation Reform Act of 1995. Words such
as "will," "expects," "believes" and similar expressions are used to identify these forward-looking
statements (although not all forward-looking statements include such words). These forward-looking statements, which may include,
without limitation, projections regarding our future performance and financial condition, are made on the basis of management’s
current views and assumptions with respect to future events. Any forward-looking statement is not a guarantee of future performance
and actual results could differ materially from those contained in the forward-looking statement. These statements speak only as
of the date they were made, and we undertake no obligation to update or revise any forward-looking statements, whether as a result
of new information, future events or otherwise. We operate in a changing environment. New risks emerge from time to time and it
is not possible for us to predict all risks that may affect us. For more information regarding these risks and uncertainties as
well as certain additional risks that we face, you should refer to the Risk Factors detailed in our Annual Report on Form 20-F
for the year ended December 31, 2013 and subsequent reports and registration statements filed from time to time with the Securities
and Exchange Commission.


 


Magic is a registered trademark of Magic
Software Enterprises Ltd. All other product and company names mentioned herein are for identification purposes only and are the
property of, and might be trademarks of, their respective owners.


 


Press Contact:


 


Stephanie Myara, PR Manager


Magic Software Enterprises


Tel: +972 (0)3 538 9352


smyara@magicsoftware.com


 




     


     


    

 


Summary of Non-GAAP Financial Information


 


U.S. Dollars in thousands, except per share
amounts


  


	 	 	Three months ended	 	 	Nine months ended	 
	 	 	September 30,	 	 	September 30,	 
	 	 	2015	 	 	2014	 	 	2015	 	 	2014	 
	 	 	Unaudited	 	 	Unaudited	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Revenues	 	$	45,333	 	 	$	40,204	 	 	$	128,174	 	 	$	121,786	 
	Gross profit	 	 	16,687	 	 	 	16,251	 	 	 	49,499	 	 	 	50,708	 
	Operating income	 	 	6,626	 	 	 	6,427	 	 	 	19,799	 	 	 	18,858	 
	Net income attributable to	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Magic Software shareholders	 	 	5,749	 	 	 	5,040	 	 	 	16,109	 	 	 	14,717	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Basic earnings per share	 	 	0.13	 	 	 	0.11	 	 	 	0.36	 	 	 	0.34	 
	Diluted earnings per share	 	 	0.13	 	 	 	0.11	 	 	 	0.36	 	 	 	0.34	 



 


Summary of Pro-Forma Non-GAAP Financial
Information on a Constant Currency Basis


 


	 	 	Three months ended	 	 	Nine months ended	 
	 	 	September 30,	 	 	September 30,	 
	 	 	2015	 	 	2014	 	 	2015	 	 	2014	 
	 	 	Unaudited	 	 	Unaudited	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Revenues	 	$	47,848	 	 	$	40,204	 	 	$	135,878	 	 	$	121,786	 
	Gross profit	 	 	18,117	 	 	 	16,251	 	 	 	53,676	 	 	 	50,708	 
	Operating income	 	 	7,095	 	 	 	6,427	 	 	 	21,360	 	 	 	18,858	 
	Net income attributable to	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Magic Software shareholders	 	 	6,218	 	 	 	5,040	 	 	 	18,579	 	 	 	14,717	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Basic earnings per share	 	 	0.14	 	 	 	0.11	 	 	 	0.42	 	 	 	0.34	 
	Diluted earnings per share	 	 	0.14	 	 	 	0.11	 	 	 	0.42	 	 	 	0.34	 



 




     


     


    

 


MAGIC SOFTWARE ENTERPRISES LTD. AND ITS SUBSIDIARIES


CONDENSED CONSOLIDATED STATEMENTS OF INCOME


U.S. dollars in thousands (except per share data)


 


	 	 	Three months ended	 	 	Nine months ended	 
	 	 	September 30,	 	 	September 30,	 
	 	 	2015	 	 	2014	 	 	2015	 	 	2014	 
	 	 	Unaudited	 	 	Unaudited	 
	Revenues	 	$	45,333	 	 	$	40,204	 	 	$	128,174	 	 	$	121,786	 
	Cost of Revenues	 	 	29,846	 	 	 	24,988	 	 	 	82,266	 	 	 	74,260	 
	Gross profit	 	 	15,487	 	 	 	15,216	 	 	 	45,908	 	 	 	47,526	 
	Research and development, net	 	 	1,449	 	 	 	1,124	 	 	 	3,725	 	 	 	3,524	 
	Selling, marketing and general and administrative expenses	 	 	8,746	 	 	 	8,520	 	 	 	25,722	 	 	 	27,350	 
	Total operating costs and expenses	 	 	10,195	 	 	 	9,644	 	 	 	29,447	 	 	 	30,874	 
	Operating income	 	 	5,292	 	 	 	5,572	 	 	 	16,461	 	 	 	16,652	 
	Financial income (expenses), net	 	 	389	 	 	 	(486	)	 	 	(589	)	 	 	(946	)
	Other income (expenses), net	 	 	8	 	 	 	(67	)	 	 	8	 	 	 	(67	)
	Income before taxes on income	 	 	5,689	 	 	 	5,019	 	 	 	15,880	 	 	 	15,639	 
	Taxes on income	 	 	1,201	 	 	 	524	 	 	 	2,531	 	 	 	2,136	 
	Net income	 	$	4,488	 	 	$	4,495	 	 	$	13,349	 	 	$	13,503	 
	Change in redeemable non-controlling interests	 	 	(284	)	 	 	-	 	 	 	(648	)	 	 	-	 
	Net income attributable to non-controlling interests	 	 	(53	)	 	 	(258	)	 	 	(181	)	 	 	(919	)
	Net income attributable to Magic's shareholders	 	$	4,151	 	 	$	4,237	 	 	$	12,520	 	 	$	12,584	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Net earnings per share	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Basic	 	$	0.09	 	 	$	0.10	 	 	$	0.28	 	 	$	0.29	 
	Diluted	 	$	0.09	 	 	$	0.10	 	 	$	0.28	 	 	$	0.29	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Weighted average number of shares used in computing net earnings per share	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Basic	 	 	44,256	 	 	 	44,165	 	 	 	44,232	 	 	 	42,993	 
	 	 	 	 	 	 	 	.	 	 	 	 	 	 	 	 	 
	Diluted	 	 	44,457	 	 	 	44,452	 	 	 	44,451	 	 	 	43,136	 



 


 




     


     


    

 


MAGIC SOFTWARE ENTERPRISES LTD. AND ITS SUBSIDIARIES


RECONCILIATION OF GAAP AND NON-GAAP RESULTS


U.S. dollars in thousands (except per share data)


 


	 	 	Three months ended	 	 	Nine months ended	 
	 	 	September 30,	 	 	September 30,	 
	 	 	2015	 	 	2014	 	 	2015	 	 	2014	 
	 	 	Unaudited	 	 	Unaudited	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	GAAP gross profit	 	$	15,487	 	 	$	15,216	 	 	$	45,908	 	 	$	47,526	 
	Amortization of capitalized software	 	 	1,023	 	 	 	949	 	 	 	3,038	 	 	 	2,941	 
	Amortization of other intangible assets	 	 	171	 	 	 	74	 	 	 	527	 	 	 	221	 
	Stock-based compensation	 	 	6	 	 	 	12	 	 	 	26	 	 	 	20	 
	Non-GAAP gross profit	 	$	16,687	 	 	$	16,251	 	 	$	49,499	 	 	$	50,708	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	GAAP operating income	 	$	5,292	 	 	$	5,572	 	 	$	16,461	 	 	$	16,652	 
	Gross profit adjustments	 	 	1,200	 	 	 	1,035	 	 	 	3,591	 	 	 	3,182	 
	Amortization of other intangible assets	 	 	1,078	 	 	 	948	 	 	 	2,670	 	 	 	2,641	 
	Change in valuation of contingent consideration	 	 	-	 	 	 	(1,341	)	 	 	22	 	 	 	(1,741	)
	Capitalization of software development	 	 	(982	)	 	 	(1,005	)	 	 	(3,054	)	 	 	(3,246	)
	Stock-based compensation	 	 	38	 	 	 	1,218	 	 	 	109	 	 	 	1,370	 
	Non-GAAP operating income	 	$	6,626	 	 	$	6,427	 	 	$	19,799	 	 	$	18,858	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	GAAP net income attributable to Magic's shareholders	 	$	4,151	 	 	$	4,237	 	 	$	12,520	 	 	$	12,584	 
	Operating income adjustments	 	 	1,334	 	 	 	855	 	 	 	3,338	 	 	 	2,206	 
	Amortization expenses attributed to redeemable non-controlling interests	 	 	(41	)	 	 	(198	)	 	 	(119	)	 	 	(272	)
	Deferred taxes on the above items	 	 	305	 	 	 	146	 	 	 	370	 	 	 	199	 
	Non-GAAP net income attributable to Magic's shareholders	 	$	5,749	 	 	$	5,040	 	 	$	16,109	 	 	$	14,717	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Non-GAAP basic net earnings per share	 	 	0.13	 	 	 	0.11	 	 	 	0.36	 	 	 	0.34	 
	Weighted average number of shares used in computing basic net earnings per share	 	 	44,256	 	 	 	44,165	 	 	 	44,232	 	 	 	42,993	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Non-GAAP diluted net earnings per share	 	 	0.13	 	 	 	0.11	 	 	 	0.36	 	 	 	0.34	 
	Weighted average number of shares used in computing diluted net earnings per share	 	 	44,458	 	 	 	44,477	 	 	 	44,461	 	 	 	43,149	 



 


 




     


     


    

 


MAGIC SOFTWARE ENTERPRISES LTD. AND ITS SUBSIDIARIES


CONDENSED CONSOLIDATED BALANCE SHEETS


U.S. dollars in thousands


 


	 	 	September 30,	 	 	December 31,	 
	 	 	2015	 	 	2014	 
	 	 	Unaudited	 	 	 	 
	 	 	 	 	 	 	 
	ASSETS	 	 	 	 	 	 	 	 
	CURRENT ASSETS:	 	 	 	 	 	 	 	 
	Cash and cash equivalents	 	$	67,686	 	 	$	72,515	 
	Short-term bank deposits	 	 	1,377	 	 	 	-	 
	Available-for-sale marketable securities	 	 	11,787	 	 	 	11,915	 
	Trade receivables, net	 	 	48,247	 	 	 	40,358	 
	Other accounts receivable and prepaid expenses	 	 	7,072	 	 	 	3,973	 
	Total current assets	 	 	136,169	 	 	 	128,761	 
	 	 	 	 	 	 	 	 	 
	LONG-TERM RECEIVABLES:	 	 	 	 	 	 	 	 
	Severance pay fund	 	 	1,458	 	 	 	1,426	 
	Deferred taxes and other long-term receivables	 	 	2,422	 	 	 	3,959	 
	Total long-term receivables	 	 	3,880	 	 	 	5,385	 
	 	 	 	 	 	 	 	 	 
	PROPERTY AND EQUIPMENT, NET	 	 	2,182	 	 	 	2,005	 
	IDENTIFIABLE INTANGIBLE ASSETS AND GOODWILL, NET	 	 	98,124	 	 	 	88,033	 
	 	 	 	 	 	 	 	 	 
	TOTAL ASSETS	 	$	240,355	 	 	$	224,184	 
	 	 	 	 	 	 	 	 	 
	LIABILITIES AND EQUITY	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	CURRENT LIABILITIES:	 	 	 	 	 	 	 	 
	Short-term debt	 	$	2,822	 	 	$	2,853	 
	Trade payables	 	 	5,245	 	 	 	3,861	 
	Accrued expenses and other accounts payable	 	 	17,332	 	 	 	15,013	 
	Deferred tax liabilities	 	 	2,119	 	 	 	760	 
	Deferred revenues	 	 	6,282	 	 	 	3,431	 
	Total current liabilities	 	 	33,800	 	 	 	25,918	 
	 	 	 	 	 	 	 	 	 
	NON-CURRENT LIABILITIES:	 	 	 	 	 	 	 	 
	Long-term debt	 	 	3,211	 	 	 	490	 
	Deferred taxes and other long-term liabilities	 	 	3,715	 	 	 	4,086	 
	Liabilities due to acquisition activities	 	 	2,173	 	 	 	474	 
	Accrued severance pay	 	 	2,609	 	 	 	2,562	 
	Total non-current liabilities	 	 	11,708	 	 	 	7,612	 
	 	 	 	 	 	 	 	 	 
	REDEEMABLE NON-CONTROLLING INTEREST	 	 	5,256	 	 	 	2,930	 
	 	 	 	 	 	 	 	 	 
	EQUITY:	 	 	 	 	 	 	 	 
	Magic Software Enterprises equity	 	 	187,614	 	 	 	185,065	 
	Non-controlling interests	 	 	1,977	 	 	 	2,659	 
	Total equity	 	 	189,591	 	 	 	187,724	 
	 	 	 	 	 	 	 	 	 
	TOTAL LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST AND EQUITY	 	$	240,355	 	 	$	224,184