Exhibit 10.1


  





PRESS
RELEASE


 


Magic Reports
Second Quarter 2014 Results with Revenues Increasing 17% Year over Year to $40.6 Million, and Non-GAAP Operating Income Increasing
28% Year over Year to $6.0 Million


 


Revenues for
the first half of 2014 increased 20% year over year to $81.6 million; Non-GAAP operating
income for the first half increased 25% to $12.4 million


 


Or Yehuda,
Israel, August 11, 2014 – 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 six months and second quarter ended June 30, 2014.


 


Financial
Highlights for the Second Quarter Ended June 30, 2014


 


		·	Revenues
                                         for the second quarter increased 17% year over year to $40.6 million from $34.8 million
                                         in the same period last year.



 


		·	Operating
                                         income for the second quarter increased 26% to $5.1 million, compared to $4.1 million
                                         in the same period last year; Non-GAAP operating income for the second quarter increased
                                         28% to $6.0 million, compared to $4.7 million in the same period last year.



 


		·	Net
                                         income for the second quarter increased 11% to $3.9 million (or $0.09 per fully
                                         diluted share) compared to $3.5 million (or $0.09 per fully diluted share) in the
                                         same period last year; Non-GAAP net income for the second quarter increased 24% to $4.7 million,
                                         compared to $3.8 million in the same period last year.



 


Financial
Highlights for the Six-Month Period Ended June 30, 2014


 


		·	Revenues
                                         for the first half of 2014 increased 20% to $81.6 million compared to $68.2 million
                                         in the same period last year.



 


		·	Operating
                                         income for the first half of 2014 increased 27% to $11.1 million compared to $8.7 million
                                         in the same period last year; Non-GAAP operating income for the first half of 2014 increased
                                         25% to $12.4 million compared to $9.9 million in the same period last year.
                                         



 


		·	Net
                                         income for the first half of 2014 increased 19% to $8.3 million (or $0.20 per fully
                                         diluted share) compared to $7.0 million (or $0.19 per fully diluted share) in the
                                         same period last year. Non-GAAP net income for the first half of 2014 increased 20% to
                                         $9.7 million compared to $8.0 million in the same period last year. 



 


		·	Operating
                                         cash flow for the first half of 2014 totaled approximately $12 million.



 


		·	Total
                                         net cash, cash equivalents and short-term investments as of June 30, 2014, amounted
                                         to $92.8 million.



 






    	 



    	 



    

 


Comments
of Management


 


Guy Bernstein,
Chief Executive Officer of Magic Software Enterprises, said, “I am very pleased to report that Magic maintained double-digit
growth momentum through the second quarter and first half of 2014 with strong performance in sales and profitability across our
products and professional services. We are further encouraged by the favorable reception for our latest enterprise mobility releases,
offering user-experience enhancements and a component-based mobile accelerator framework."


 


“Our
business visibility coupled with our well-diversified portfolio and global reach gives us the confidence to reassert our commitment
to our previously announced revenue guidance of $161 million to $165 million for the full-year 2014,” added Bernstein.


  


Conference
Call Details


 


Magic’s
Management will host an interactive conference today, August 11, at 10:00am Eastern Time (7:00am 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.


 


NORTH AMERICA:
1.888.668.9141


 


UK: 0 800 917
5108


 


ISRAEL: 03.918.0650


 


INTERNATIONAL:
+972.3.918.0650


 


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.



 






    	 



    	 



    




 


Summary
of Non-GAAP Financial Information


 


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





 





	 	 	Three months ended	 	 	Six months ended	 
	 	 	June 30,	 	 	June 30,	 
	 	 	2014	 	 	2013	 	 	2014	 	 	2013	 
	 	 	Unaudited	 	 	Unaudited	 
	Non-GAAP	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Revenues	 	$	40,633	 	 	$	34,756	 	 	$	81,582	 	 	$	68,170	 
	Gross profit	 	 	16,740	 	 	 	14,900	 	 	 	34,457	 	 	 	29,446	 
	Operating income	 	 	6,023	 	 	 	4,690	 	 	 	12,431	 	 	 	9,921	 
	Net income attributable to Magic Software shareholders	 	 	4,715	 	 	 	3,792	 	 	 	9,677	 	 	 	8,032	 
	Basic earnings per share	 	 	0.11	 	 	 	0.10	 	 	 	0.23	 	 	 	0.22	 
	Diluted earnings per share	 	 	0.11	 	 	 	0.10	 	 	 	0.23	 	 	 	0.22	 








  


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:


 


Tania
Amar, VP Global Marketing


Magic Software
Enterprises


Tel: +972 (0)3
538 9300


tania@magicsoftware.com


  




    	 



    	 



    

 





MAGIC SOFTWARE ENTERPRISES LTD. AND ITS SUBSIDIARIES


CONDENSED CONSOLIDATED STATEMENTS OF INCOME


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





 





	 	 	Three months ended	 	 	Six months ended	 
	 	 	June 30,	 	 	June 30,	 
	 	 	2014	 	 	2013	 	 	2014	 	 	2013	 
	 	 	Unaudited	 	 	Unaudited	 
	Revenues	 	$	40,633	 	 	$	34,756	 	 	$	81,582	 	 	$	68,170	 
	Cost of Revenues	 	 	24,965	 	 	 	20,965	 	 	 	49,272	 	 	 	40,855	 
	Gross profit	 	 	15,668	 	 	 	13,791	 	 	 	32,310	 	 	 	27,315	 
	Research and development, net	 	 	1,220	 	 	 	919	 	 	 	2,400	 	 	 	1,802	 
	Selling, marketing and general and administrative expenses	 	 	9,321	 	 	 	8,805	 	 	 	18,830	 	 	 	16,805	 
	Total operating costs and expenses	 	 	10,541	 	 	 	9,724	 	 	 	21,230	 	 	 	18,607	 
	Operating income	 	 	5,127	 	 	 	4,067	 	 	 	11,080	 	 	 	8,708	 
	Financial expenses, net	 	 	321	 	 	 	122	 	 	 	460	 	 	 	520	 
	Income before taxes on income	 	 	4,806	 	 	 	3,945	 	 	 	10,620	 	 	 	8,188	 
	Taxes on income	 	 	646	 	 	 	282	 	 	 	1,612	 	 	 	777	 
	Net income	 	$	4,160	 	 	$	3,663	 	 	$	9,008	 	 	$	7,411	 
	Net income attributable to non-controlling interests	 	 	(308	)	 	 	(182	)	 	 	(661	)	 	 	(410	)
	Net income attributable to Magic Software's Shareholders	 	$	3,852	 	 	$	3,481	 	 	$	8,347	 	 	$	7,001	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Net earnings per share attributable to Magic Software's shareholders:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Basic	 	$	0.09	 	 	$	0.10	 	 	$	0.20	 	 	$	0.19	 
	Diluted	 	$	0.09	 	 	$	0.09	 	 	$	0.20	 	 	$	0.19	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Weighted average number of shares used in	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	     computing net earnings per share attributable to	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	     Magic Software's shareholders:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	        Basic	 	 	44,158	 	 	 	36,722	 	 	 	42,407	 	 	 	36,691	 
	 	 	 	 	 	 	 	.	 	 	 	 	 	 	 	 	 
	        Diluted	 	 	44,470	 	 	 	37,243	 	 	 	42,563	 	 	 	37,165	 














 




    	 



    	 



    

  


MAGIC SOFTWARE ENTERPRISES LTD. AND ITS SUBSIDIARIES


RECONCILIATION OF GAAP AND NON-GAAP RESULTS


STATEMENTS OF INCOME FOR COMPARATIVE PURPOSES


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








  


	 	 	Three months ended	 	 	Six months ended	 
	 	 	June 30,	 	 	June 30,	 
	 	 	2014	 	 	2013	 	 	2014		 	2013	 
	 	 	Unaudited	 	 	Unaudited	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	GAAP gross profit	 	$	15,668	 	 	$	13,791	 	 	$	32,310	 	 	$	27,315	 
	Amortization of capitalized software	 	 	992	 	 	 	1,037	 	 	 	1,992	 	 	 	2,010	 
	Amortization of other intangible assets	 	 	73	 	 	 	70	 	 	 	147	 	 	 	115	 
	Stock-based compensation	 	 	7	 	 	 	2	 	 	 	8	 	 	 	6	 
	Non-GAAP gross profit	 	$	16,740	 	 	$	14,900	 	 	$	34,457	 	 	$	29,446	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	GAAP operating income	 	$	5,127	 	 	$	4,067	 	 	$	11,080	 	 	$	8,708	 
	Gross profit adjustments	 	 	1,072	 	 	 	1,109	 	 	 	2,147	 	 	 	2,131	 
	Amortization of other intangible assets	 	 	857	 	 	 	714	 	 	 	1,693	 	 	 	1,403	 
	Capitalization of software development	 	 	(1,142	)	 	 	(1,290	)	 	 	(2,241	)	 	 	(2,500	)
	Change in valuation of contingent consideration	 	 	-	 	 	 	-	 	 	 	(400	)	 	 	-	 
	Stock-based compensation	 	 	109	 	 	 	90	 	 	 	152	 	 	 	179	 
	Non-GAAP operating income	 	$	6,023	 	 	$	4,690	 	 	$	12,431	 	 	$	9,921	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	GAAP net income attributable to Magic Software's shareholders	 	$	3,852	 	 	$	3,481	 	 	$	8,347	 	 	$	7,001	 
	Operating income adjustments	 	 	896	 	 	 	623	 	 	 	1,351	 	 	 	1,213	 
	Unwinding of discount in connection with liabilities due to acquisitions	 	 	-	 	 	 	8	 	 	 	-	 	 	 	215	 
	Amortization expenses attributed to redeemable non-controlling interests	 	 	(37	)	 	 	(30	)	 	 	(74	)	 	 	(60	)
	Deferred taxes on the above items	 	 	4	 	 	 	(290	)	 	 	53	 	 	 	(337	)
	Non-GAAP net income attributable to Magic Software's shareholders	 	$	4,715	 	 	$	3,792	 	 	$	9,677	 	 	$	8,032	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Non-GAAP basic net earnings per share	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	   attributable to Magic Software shareholders	 	 	0.11	 	 	 	0.10	 	 	 	0.23	 	 	 	0.22	 
	Weighted average number of shares used in	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	   computing basic net earnings per share	 	 	44,158	 	 	 	36,722	 	 	 	42,407	 	 	 	36,691	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Non-GAAP diluted net earnings per share	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	   attributable to Magic Software shareholders	 	 	0.11	 	 	 	0.10	 	 	 	0.23	 	 	 	0.22	 
	Weighted average number of shares used in	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	   computing diluted net earnings per share	 	 	44,502	 	 	 	37,293	 	 	 	42,579	 	 	 	37,221	 











 






    	 



    	 



    




  


MAGIC SOFTWARE ENTERPRISES LTD. AND ITS SUBSIDIARIES


CONDENSED CONSOLIDATED BALANCE SHEETS


U.S. dollars in thousands      








 





	 	 	June 30,	 	 	December 31,	 
	 	 	2014	 	 	2013	 
	 	 	Unaudited	 	 	 	 
	       ASSETS	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	CURRENT ASSETS:	 	 	 	 	 	 	 	 
	     Cash and cash equivalents	 	$	92,342	 	 	$	35,134	 
	     Available-for-sale marketable securities	 	 	442	 	 	 	854	 
	     Trade receivables, net	 	 	35,377	 	 	 	31,976	 
	     Other accounts receivable and prepaid expenses	 	 	5,464	 	 	 	5,209	 
	Total current assets	 	 	133,625	 	 	 	73,173	 
	 	 	 	 	 	 	 	 	 
	LONG-TERM RECEIVABLES:	 	 	 	 	 	 	 	 
	    Severance pay fund	 	 	418	 	 	 	403	 
	    Other long-term receivables	 	 	4,102	 	 	 	3,792	 
	Total long-term receivables	 	 	4,520	 	 	 	4,195	 
	 	 	 	 	 	 	 	 	 
	PROPERTY AND EQUIPMENT, NET	 	 	2,095	 	 	 	1,773	 
	INTANGIBLE ASSETS AND GOODWILL, NET	 	 	87,208	 	 	 	87,862	 
	 	 	 	 	 	 	 	 	 
	TOTAL ASSETS	 	$	227,448	 	 	$	167,003	 
	 	 	 	 	 	 	 	 	 
	       LIABILITIES AND EQUITY	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	CURRENT LIABILITIES:	 	 	 	 	 	 	 	 
	     Short-term debt	 	$	1,056	 	 	$	1,055	 
	     Trade payables	 	 	3,827	 	 	 	4,149	 
	     Accrued expenses and other accounts payable	 	 	15,095	 	 	 	16,937	 
	     Deferred tax liability	 	 	1,641	 	 	 	2,567	 
	     Deferred revenues	 	 	8,303	 	 	 	3,294	 
	Total current liabilities	 	 	29,922	 	 	 	28,002	 
	 	 	 	 	 	 	 	 	 
	NON-CURRENT LIABILITIES:	 	 	 	 	 	 	 	 
	     Long-term debt	 	 	1,945	 	 	 	2,274	 
	     Long-term deferred tax liabilty	 	 	2,235	 	 	 	2,204	 
	     Liabilities due to acquisition activities	 	 	779	 	 	 	1,396	 
	     Accrued severance pay	 	 	1,358	 	 	 	1,275	 
	Total
    non-current liabilities	 	 	6,317	 	 	 	7,149	 
	 	 	 	 	 	 	 	 	 
	REDEEMABLE NON-CONTROLLING INTEREST	 	 	3,184	 	 	 	2,721	 
	 	 	 	 	 	 	 	 	 
	SHAREHOLDERS' EQUITY:	 	 	 	 	 	 	 	 
	   Magic Software Shareholders' equity	 	 	186,694	 	 	 	128,144	 
	   Non-controlling interests	 	 	1,331	 	 	 	987	 
	Total shareholders' equity	 	 	188,025	 	 	 	129,131	 
	 	 	 	1331	 	 	 	 	 
	TOTAL LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST AND EQUITY	 	$	227,448	 	 	$	167,003