Unassociated Document



Exhibit 10.1


















PRESS RELEASE


 


Magic Software Breaks Performance Records with Q3 Revenue of $30 Million and Net Income of $4 Million, an Increase of 60% Year over Year


 


Company Reports Double-Digit Overall Growth for the Eighth Consecutive Quarter


 


Or Yehuda, Israel, November 2, 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 third quarter of 2011.


 


Financial Highlights for the Third Quarter and Nine-Month Period Ended September 30, 2011


 



	
·

	
Third-quarter revenues increased 34% to $30 million compared to $22.4 million in the same period last year.







 



	
·

	
Operating income for the third quarter increased 60% to $4 million, compared to $2.5 million in the same period last year.







 



	
·

	
Net income for the third quarter increased 60% to $4 million compared to $2.5 million in the same period last year.







 



	
·

	
Revenues for the nine-month period ended September 30, 2011 increased 30% to $82.8 million compared to $63.6 million in the same period last year.







 



	
·

	
Operating income for the nine-month period ended September 30, 2011 increased 67% to $10.5 million compared to $6.3 million in the same period last year.







 



	
·

	
Net income for the nine-month period ended September 30, 2011 increased 70% to $10.7 million compared to $6.3 million in the same period last year.







 



	
·

	
Operating cash flow for the nine-month period ended September 30, 2011 totaled $9 million.







 



	
·

	
Total cash and cash equivalents, short-term bank deposits, and short-term investments in marketable securities as of September 30, 2011 amounted to $46.6 million.







 


Results


 


For the third quarter ended September 30, 2011, total revenues were $30 million, with net income of $4 million, or $0.11 per fully diluted share. This compares with revenues of $22.4 million and net income of $2.5 million, or $0.08 per fully diluted share, for the same period last year.


 


Operating income for the third quarter ended September 30, 2011, was $4 million, or $0.11 per fully diluted share. This compares to operating income of $2.5 million, or $0.08 per fully diluted share, for the same period a year ago.


 


For the nine month-period ended September 30, 2011, total revenues were $82.8 million, with net income of $10.7 million, or $0.29 per fully diluted share. This compares with revenues of $63.6 million and net income of $6.3 million, or $0.19 per fully diluted share, for the same period last year.


 




  





  











  






 


Operating income for the nine-month period ended September 30, 2011, was $10.5 million, or $0.28 per fully diluted share. This compares to operating income of $6.3 million, or $0.19 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 excellent results demonstrate that Magic Software is going from strength to strength, achieving double-digit overall growth for the eighth consecutive quarter, with impressive performance in all our regions.”


 


“Moving forward, we expect to see significant customer adoption of our expanded mobile offering and cloud-based application platform, both of which deliver technologies that are central to many enterprises’ IT strategy. We will also continue to make strategic technology acquisitions, such as the recently announced purchase of BluePhoenix's AppBuilder activity, that will strengthen our position as a global provider of application development platforms,” 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


 


For the latest detailed investor information, visit our new Investor Relations web page.


 


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.


 


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

	 	 	
Nine months ended

	 
	  	 	
September 30,

	 	 	
September 30,

	 
	  	 	
2011

	 	 	
2010

	 	 	
2011

	 	 	
2010

	 
	  	 	
Unaudited

	 	 	
Unaudited

	 
	
Revenues

	 	 	29,977	 	 	 	22,372	 	 	 	82,845	 	 	 	63,551	 
	
Cost of Revenues

	 	 	17,816	 	 	 	13,191	 	 	 	49,290	 	 	 	37,104	 
	
Gross profit

	 	 	12,161	 	 	 	9,181	 	 	 	33,555	 	 	 	26,447	 
	
Research and development, net

	 	 	758	 	 	 	526	 	 	 	1,578	 	 	 	1,566	 
	
Selling, marketing and general and

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
    administrative expenses

	 	 	7,396	 	 	 	6,151	 	 	 	21,436	 	 	 	18,555	 
	
Total operating costs and expenses

	 	 	8,154	 	 	 	6,677	 	 	 	23,014	 	 	 	20,121	 
	
Operating income

	 	 	4,007	 	 	 	2,504	 	 	 	10,541	 	 	 	6,326	 
	
Financial income (expenses), net

	 	 	60	 	 	 	32	 	 	 	311	 	 	 	(284	)
	
Other income, net

	 	 	19	 	 	 	68	 	 	 	92	 	 	 	148	 
	
Income before taxes on income

	 	 	4,086	 	 	 	2,604	 	 	 	10,944	 	 	 	6,190	 
	
Taxes on income

	 	 	24	 	 	 	66	 	 	 	67	 	 	 	(102	)
	
Net income

	 	 	4,062	 	 	 	2,538	 	 	 	10,877	 	 	 	6,292	 
	
Net income attributable to non-controlling interests

	 	 	(43	)	 	 	-	 	 	 	(198	)	 	 	-	 
	
Net income attributable to Magic Shareholders

	 	 	4,019	 	 	 	2,538	 	 	 	10,679	 	 	 	6,292	 
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Net earnings per share attributable to

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
   Magic :

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Basic

	 	 	0.11	 	 	 	0.08	 	 	 	0.29	 	 	 	0.20	 
	
Diluted

	 	 	0.11	 	 	 	0.08	 	 	 	0.29	 	 	 	0.19	 
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Weighted average number of shares used in

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
     computing net earnings per share attributable to

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
     Magic:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
        Basic

	 	 	36,339	 	 	 	32,056	 	 	 	36,241	 	 	 	31,993	 
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
        Diluted

	 	 	36,954	 	 	 	32,596	 	 	 	37,058	 	 	 	32,485	 









 


 




  





  











  






 





	
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

	 	 	
Nine months ended

	 
	  	 	
September 30,

	 	 	
September 30,

	 
	  	 	
2011

	 	 	
2010

	 	 	
2011

	 	 	
2010

	 
	  	 	
Unaudited

	 	 	
Unaudited

	 
	  	 	 	 	 	 	 	 	 	 	 	 	 
	
GAAP operating income

	 	 	4,007	 	 	 	2,504	 	 	 	10,541	 	 	 	6,326	 
	
Amortization of capitalized software and

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
    other intangible assets

	 	 	1,066	 	 	 	759	 	 	 	2,829	 	 	 	2,716	 
	
Capitalization of software development

	 	 	(1,253	)	 	 	(783	)	 	 	(3,846	)	 	 	(2,350	)
	
Stock-based compensation

	 	 	139	 	 	 	106	 	 	 	447	 	 	 	165	 
	
Total adjustments to GAAP

	 	 	(48	)	 	 	82	 	 	 	(570	)	 	 	531	 
	
Non-GAAP operating income

	 	 	3,959	 	 	 	2,586	 	 	 	9,971	 	 	 	6,857	 
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
GAAP Net income attributable

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
   to Magic Shareholders

	 	 	4,019	 	 	 	2,538	 	 	 	10,679	 	 	 	6,292	 
	
Total adjustments to GAAP as above

	 	 	(48	)	 	 	82	 	 	 	(570	)	 	 	531	 
	
Non-GAAP net income

	 	 	3,971	 	 	 	2,620	 	 	 	10,109	 	 	 	6,823	 
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Non-GAAP basic net earnings per share

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
   attributable to Magic

	 	 	0.11	 	 	 	0.08	 	 	 	0.28	 	 	 	0.21	 
	
Weighted average number of shares used in

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
   computing basic net earnings per share

	 	 	36,339	 	 	 	32,056	 	 	 	36,241	 	 	 	31,993	 
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Non-GAAP diluted net earnings per share

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
   attributable to Magic

	 	 	0.11	 	 	 	0.08	 	 	 	0.27	 	 	 	0.21	 
	
Weighted average number of shares used in

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
   computing diluted net earnings per share

	 	 	37,046	 	 	 	32,647	 	 	 	37,155	 	 	 	32,533	 









 




  





  











  







 





	
MAGIC SOFTWARE ENTERPRISES LTD.


	
CONSOLIDATED BALANCE SHEETS


	
U.S. dollars in thousands







 



	  	 	 	 	 	 	 
	  	 	
September 30,

	 	 	
December 31,

	 
	  	 	
2011

	 	 	
2010

	 
	  	 	
(Unaudited)

	 	 	 	 
	  	 	 	 	 	 	 
	
ASSETS

	 	 	 	 	 	 
	
CURRENT ASSETS:

	 	 	 	 	 	 
	
     Cash and cash equivalents

	 	 	35,139	 	 	 	43,661	 
	
     Short-term bank deposits

	 	 	9,800	 	 	 	24	 
	
     Available-for-sale marketable securities

	 	 	1,612	 	 	 	2,857	 
	
     Trade receivables, net

	 	 	21,813	 	 	 	17,801	 
	
     Other accounts receivable and  prepaid expenses

	 	 	3,716	 	 	 	4,029	 
	
Total current assets

	 	 	72,080	 	 	 	68,372	 
	  	 	 	 	 	 	 	 	 
	
LONG-TERM RECEIVABLES:

	 	 	 	 	 	 	 	 
	
    Severance pay fund

	 	 	344	 	 	 	325	 
	
    Other long-term receivables

	 	 	3,587	 	 	 	2,141	 
	
Total other long-term receivables

	 	 	3,931	 	 	 	2,466	 
	  	 	 	 	 	 	 	 	 
	
PROPERTY AND EQUIPMENT, NET

	 	 	2,083	 	 	 	1,827	 
	
IDENTIFIABLE INTANGIBLE ASSETS AND

	 	 	 	 	 	 	 	 
	
    GOODWILL, NET

	 	 	49,571	 	 	 	39,285	 
	
 

	 	 	 	 	 	 	 	 
	
TOTAL ASSETS

	 	 	127,665	 	 	 	111,950	 
	  	 	 	 	 	 	 	 	 
	
LIABILITIES AND EQUITY

	 	 	 	 	 	 	 	 
	  	 	 	 	 	 	 	 	 
	
CURRENT LIABILITIES:

	 	 	 	 	 	 	 	 
	
     Short-term credit and current maturities

	 	 	 	 	 	 	 	 
	
        of long term loans

	 	 	50	 	 	 	9	 
	
     Trade payables

	 	 	3,703	 	 	 	2,994	 
	
     Accrued expenses and other accounts payable

	 	 	15,776	 	 	 	15,028	 
	
     Deferred revenues

	 	 	4,320	 	 	 	1,526	 
	
Total current liabilities

	 	 	23,849	 	 	 	19,557	 
	  	 	 	 	 	 	 	 	 
	
NON-CURRENT LIABILITIES:

	 	 	 	 	 	 	 	 
	
     Long-term loans

	 	 	9	 	 	 	2	 
	
     Liability due to acquisition activities

	 	 	1,338	 	 	 	2,990	 
	
     Accrued severance pay

	 	 	704	 	 	 	536	 
	
Total non-current liabilities

	 	 	2,051	 	 	 	3,528	 
	  	 	 	 	 	 	 	 	 
	
EQUITY

	 	 	 	 	 	 	 	 
	
   Magic Shareholders' equity

	 	 	100,664	 	 	 	88,865	 
	
   Non-controlling interests

	 	 	1,101	 	 	 	-	 
	
Total equity

	 	 	101,765	 	 	 	88,865	 
	  	 	 	 	 	 	 	 	 
	
TOTAL LIABILITIES AND EQUITY

	 	 	127,665	 	 	 	111,950