Unassociated Document


 


Exhibit 10.1







 


PRESS RELEASE







Magic Software Reports Record-Breaking Performance with $3.5 Million Net Profit, an Increase of 84% Year over Year







Company Reports Excellent Results for Second Quarter of 2011 with Double-Digit Growth







Or Yehuda, Israel, August 3, 2011 – Magic Software Enterprises Ltd. (NASDAQ: MGIC), a global provider of mobile and cloud-enabled application and business integration platforms, today announced its financial results for the second quarter of 2011.







Financial Highlights for the Second Quarter and Six-Month Periods Ended June 30, 2011


 



	
·

	
Second-quarter revenues increased 27% to $27.4 million compared to $21.5 million in the same period last year.







 



	
·

	
Operating income for the second quarter increased 62% to $3.4 million, compared to $2.1 million in the same period last year.







 



	
·

	
Net income for the second quarter increased 84% to $3.5 million compared to $1.9 million in the same period last year.







 



	
·

	
Revenues for the first half of 2011 increased 28% to $52.9 million compared to $41.2million in the same period last year.







 



	
·

	
Operating income for the first half of 2011 increased 71% to $6.5 million compared to $3.8 million in the same period last year.







 



	
·

	
Net income for the first half of 2011 increased 76% to $6.7 million compared to $3.8 million in the same period last year.







 



	
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Operating cash flow for the first half totaled $9 million.







 



	
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Total cash and cash equivalents, short-term bank deposits and short-term investments in marketable securities as of June 30, 2011 amounted to $47.4 million.












Results


 


For the second quarter ended June 30, 2011, total revenues were $27.4 million, with net income of $3.5 million, or $0.1 per fully diluted share. This compares with revenues of $21.5 million and net income of $1.9 million, or $0.06 per fully diluted share, for the same period last year.


 


Operating income for the second quarter ended June 30, 2011, was $3.4 million, or $0.09 per fully diluted share. This compares to operating income of $2.1 million, or $0.06 per fully diluted share, for the same period a year ago.


 




  





  











  






 


For the six month period ended June 30, 2011, total revenues were $52.9 million, with net income of $6.7 million, or $0.18 per fully diluted share. This compares with revenues of $41.2 million and net income of $3.8 million, or $0.12 per fully diluted share, for the same period last year.


 


Operating income for the six month period ended June 30, 2011, was $6.5 million, or $0.18 per fully diluted share. This compares to operating income of $3.8 million, or $0.12 per fully diluted share, for the same period a year ago.







Comments of Management


 


Commenting on the results, Guy Bernstein, Chief Executive Officer of Magic Software, said: “These record-breaking results demonstrate that Magic Software is continuing its impressive forward momentum. For an unprecedented seventh consecutive quarter, we have achieved double-digit overall growth, and we achieved continued growth in revenues and profits in all our regional centers of activity.”


 


“Moving forward, we have plans to increase growth by expanding our global presence through additional M&A activities and increased penetration of new products both to our current huge customer base and to new customers. Our new mobile offering is attracting a great deal of positive interest throughout the industry. This and other enhancements to our product portfolio, including the major new release of the uniPaaS 2.0 application platform and our new cloud offering, will provide new and exciting opportunities for our company and greater added value for our customers,” concluded Mr. Bernstein.







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 and













	
  

	
·

	
Equity-based compensation expense












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.







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


 




  





  











  






 


About Magic Software


 


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


 


For more information, visit www.magicsoftware.com


 


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.


 


Magic is the trademark of Magic Software Enterprises Ltd.







Press contact:







Tania Amar


Magic Software Enterprises


Tel: +972 (0)3 538 9300


Email: tania@magicsoftware.com









  





  











  








 



MAGIC SOFTWARE ENTERPRISES LTD.


CONSOLIDATED STATEMENTS OF INCOME


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


 


 




	  	 	
Three months ended

	 	 	
Six months ended

	 
	  	 	
June 30,

	 	 	
June 30,

	 
	  	 	
2011

	 	 	
2010

	 	 	
2011

	 	 	
2010

	 
	  	 	
Unaudited

	 	 	
Unaudited

	 
	
Revenues

	 	 	27,380	 	 	 	21,468	 	 	 	52,868	 	 	 	41,179	 
	
Cost of Revenues

	 	 	16,318	 	 	 	12,666	 	 	 	31,474	 	 	 	23,913	 
	
Gross profit

	 	 	11,062	 	 	 	8,802	 	 	 	21,394	 	 	 	17,266	 
	
Research and development, net

	 	 	454	 	 	 	409	 	 	 	820	 	 	 	1,040	 
	
 
Selling, marketing and general and administrative expenses



	 	 	7,205	 	 	 	6,325	 	 	 	14,040	 	 	 	12,404	 
	
Total operating costs and expenses

	 	 	7,659	 	 	 	6,734	 	 	 	14,860	 	 	 	13,444	 
	
Operating income

	 	 	3,403	 	 	 	2,068	 	 	 	6,534	 	 	 	3,822	 
	
Financial income (expenses), net

	 	 	149	 	 	 	(429	)	 	 	251	 	 	 	(316	)
	
Other income, net

	 	 	62	 	 	 	19	 	 	 	73	 	 	 	80	 
	
Income before taxes on income

	 	 	3,614	 	 	 	1,658	 	 	 	6,858	 	 	 	3,586	 
	
Taxes on income

	 	 	-	 	 	 	(246	)	 	 	43	 	 	 	(168	)
	
Net income

	 	 	3,614	 	 	 	1,904	 	 	 	6,815	 	 	 	3,754	 
	
Net income attributable to non-controlling interests

	 	 	(67	)	 	 	-	 	 	 	(155	)	 	 	-	 
	
Net income attributable to Magic Shareholders

	 	 	3,547	 	 	 	1,904	 	 	 	6,660	 	 	 	3,754	 
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
 
Net earnings per share attributable to Magic :



	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Basic

	 	 	0.10	 	 	 	0.06	 	 	 	0.18	 	 	 	0.12	 
	
Diluted

	 	 	0.10	 	 	 	0.06	 	 	 	0.18	 	 	 	0.12	 
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Weighted average number of shares used in computing net earnings per share attributable to Magic:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
        Basic

	 	 	36,299	 	 	 	31,982	 	 	 	36,192	 	 	 	31,982	 
	
        Diluted

	 	 	37,144	 	 	 	32,507	 	 	 	37,109	 	 	 	32,429	 









 




  





  











  






 



MAGIC SOFTWARE ENTERPRISES LTD.


RECONCILIATION BETWEEN GAAP AND NON-GAAP


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,

	 
	  	 	
2011

	 	 	
2010

	 	 	
2011

	 	 	
2010

	 
	  	 	
Unaudited

	 	 	
Unaudited

	 
	  	 	 	 	 	 	 	 	 	 	 	 	 
	
GAAP operating income

	 	 	3,403	 	 	 	2,068	 	 	 	6,534	 	 	 	3,822	 
	
 
Amortization of capitalozed software and other intangible assets



	 	 	880	 	 	 	1,007	 	 	 	1,763	 	 	 	1,957	 
	
Capitalization of software development

	 	 	(1,304	)	 	 	(856	)	 	 	(2,593	)	 	 	(1,567	)
	
Stock-based compensation

	 	 	144	 	 	 	23	 	 	 	308	 	 	 	59	 
	
Total adjustments to GAAP

	 	 	(280	)	 	 	174	 	 	 	(522	)	 	 	449	 
	
Non-GAAP operating income

	 	 	3,123	 	 	 	2,242	 	 	 	6,012	 	 	 	4,271	 
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
 
GAAP net income Net income attributable to Magic Shareholders



	 	 	3,547	 	 	 	1,904	 	 	 	6,660	 	 	 	3,754	 
	
Total adjustments to GAAP as above

	 	 	(280	)	 	 	174	 	 	 	(522	)	 	 	449	 
	
Non-GAAP net income

	 	 	3,267	 	 	 	2,078	 	 	 	6,138	 	 	 	4,203	 
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
 
Non-GAAP basic net earnings per share attributable to Magic



	 	 	0.09	 	 	 	0.07	 	 	 	0.17	 	 	 	0.13	 
	
 
Weighted average number of shares used in computing basic net earnings per share



	 	 	36,299	 	 	 	31,982	 	 	 	36,192	 	 	 	31,982	 
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
 
Non-GAAP diluted net earnings per share attributable to Magic



	 	 	0.09	 	 	 	0.06	 	 	 	0.17	 	 	 	0.13	 
	
 
Weighted average number of shares used in computing diluted net earnings per share



	 	 	37,247	 	 	 	32,552	 	 	 	37,210	 	 	 	32,476	 







 




  





  











  






 



MAGIC SOFTWARE ENTERPRISES LTD.


CONSOLIDATED BALANCE SHEETS


U.S. dollars in thousands


 




 




	  	 	
June 30,

	 	 	
December 31,

	 
	  	 	
2011

	 	 	
2010

	 
	  	 	
(Unaudited)

	 	 	 	 
	  	 	 	 	 	 	 
	
ASSETS

	 	 	 	 	 	 
	
CURRENT ASSETS:

	 	 	 	 	 	 
	
Cash and cash equivalents

	 	 	38,938	 	 	 	43,661	 
	
Short-term bank deposits

	 	 	6,218	 	 	 	24	 
	
Available-for-sale marketable securities

	 	 	2,245	 	 	 	2,857	 
	
Trade receivables, net

	 	 	20,738	 	 	 	17,801	 
	
Other accounts receivable and  prepaid expenses

	 	 	3,350	 	 	 	4,029	 
	
Total current assets

	 	 	71,489	 	 	 	68,372	 
	  	 	 	 	 	 	 	 	 
	
LONG-TERM RECEIVABLES:

	 	 	 	 	 	 	 	 
	
Severance pay fund

	 	 	335	 	 	 	325	 
	
Other long-term receivables

	 	 	3,272	 	 	 	2,141	 
	
Total other long-term receivables

	 	 	3,607	 	 	 	2,466	 
	  	 	 	 	 	 	 	 	 
	
PROPERTY AND EQUIPMENT, NET

	 	 	2,024	 	 	 	1,827	 
	
 
IDENTIFIABLE INTANGIBLE ASSETS AND GOODWILL, NET



	 	 	48,998	 	 	 	39,285	 
	
 

	 	 	 	 	 	 	 	 
	
TOTAL ASSETS

	 	 	126,118	 	 	 	111,950	 
	  	 	 	 	 	 	 	 	 
	
LIABILITIES AND EQUITY

	 	 	 	 	 	 	 	 
	  	 	 	 	 	 	 	 	 
	
CURRENT LIABILITIES:

	 	 	 	 	 	 	 	 
	
Short-term credit and current maturities of long term loans

	 	 	31	 	 	 	9	 
	
Trade payables

	 	 	3,609	 	 	 	2,994	 
	
Accrued expenses and other accounts payable

	 	 	15,535	 	 	 	15,028	 
	
Deferred revenues

	 	 	6,790	 	 	 	1,526	 
	
Total current liabilities

	 	 	25,965	 	 	 	19,557	 
	  	 	 	 	 	 	 	 	 
	
NON-CURRENT LIABILITIES:

	 	 	 	 	 	 	 	 
	
Long-term loans

	 	 	10	 	 	 	2	 
	
Liability due to acquisition activities

	 	 	1,326	 	 	 	2,990	 
	
Accrued severance pay

	 	 	699	 	 	 	536	 
	
Total non-current liabilities

	 	 	2,035	 	 	 	3,528	 
	  	 	 	 	 	 	 	 	 
	
EQUITY

	 	 	 	 	 	 	 	 
	
Magic Shareholders' equity

	 	 	97,034	 	 	 	88,865	 
	
Non-controlling interests

	 	 	1,084	 	 	 	-	 
	
Total equity

	 	 	98,118	 	 	 	88,865	 
	  	 	 	 	 	 	 	 	 
	
TOTAL LIABILITIES AND EQUITY

	 	 	126,118	 	 	 	111,950