Exhibit 10.1


 


 


 





PRESS
RELEASE


 


Magic
Reports First Quarter 2014 Results with Revenues Increasing 23% Year over Year to $40.9 Million, and Net Income Increasing
28% Year over Year to $4.5 Million


 





Non-GAAP
operating income increased 23% year over year to $6.4 million


 


Or
Yehuda, Israel, May 7, 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 quarter ended March 31, 2014.


 


Financial
Highlights for the First Quarter Ended March 31, 2014


 


		•	Revenues
                                         for the first quarter increased 23% year over year to $40.9 million from $33.4 million
                                         in the same period last year.



 


		•	Operating
                                         income for the first quarter increased 28% to $6.0 million, compared to $4.6 million
                                         in the same period last year; Non-GAAP operating income for the first quarter increased
                                         23% to $6.4 million, compared to $5.2 million in the same period last year.



 


		•	Net
                                         income for the first quarter increased 28% to $4.5 million compared to $3.5 million
                                         in the same period last year; Non-GAAP net income for the first quarter increased 17%
                                         to $5.0 million, compared to $4.2 million in the same period last year.



 


		•	Operating cash flow for the quarter amounted to $4.5 million.



 


		•	During
                                         the first quarter, we successfully raised net proceeds of approximately $54.7 million
                                         in a public offering. As of March 31, 2014 our total cash, cash equivalents and
                                         short-term investments amounted to $87.9 million.



 


Comments
of Management


 


Guy
Bernstein, Chief Executive Officer of Magic Software Enterprises, said, “I am very
pleased to report another excellent quarter with strong performance across our products and professional services in all regions.
Our revenue streams are growing in line with Magic’s strategic development goals."


 


“This
strong start to 2014 along with the additional capital from our recent public offering puts us on track to continue
to create and deliver long-term shareholder value. We are confident in our growth strategy and are establishing revenue guidance
in the range 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, May 7, 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: 1.888.407.2553


 


UK:
0 800 917 5108


 


ISRAEL:
03 918 0610


 


INTERNATIONAL:
+972 3 918 0610


 


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	 
	 	 	March 31,	 
	 	 	2014	 	 	2013	 
	 	 	Unaudited	 
	Non-GAAP	 	 	 	 	 	 		 
	Revenues	 	$	40,949	 	 	$	33,414	 
	Gross profit	 	 	23,260	 	 	 	18,875	 
	Operating income	 	 	6,408	 	 	 	5,231	 
	Net income attributable
    to Magic Software shareholders	 	 	4,962	 	 	 	4,240	 
	Basic earnings per share	 	 	0.13	 	 	 	0.12	 
	Diluted earnings per share	 	 	0.12	 	 	 	0.11	 










 






    	 



    	 



    

 





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	 
	 	 	March 31,	 
	 	 	2014	 	 	2013	 
	 	 	Unaudited	 
	Revenues	 	$	40,949	 	 	$	33,414	 
	Cost of Revenues	 	 	24,307	 	 	 	19,890	 
	Gross profit	 	 	16,642	 	 	 	13,524	 
	Research and development, net	 	 	1,180	 	 	 	883	 
	Selling, marketing and general and	 	 	 	 	 	 	 	 
	    administrative expenses	 	 	9,509	 	 	 	8,000	 
	Total operating costs and expenses	 	 	10,689	 	 	 	8,883	 
	Operating income	 	 	5,953	 	 	 	4,641	 
	Financial expenses, net	 	 	(139	)	 	 	(398	)
	Income before taxes on income	 	 	5,814	 	 	 	4,243	 
	Taxes on income	 	 	966	 	 	 	495	 
	Net income	 	$	4,848	 	 	$	3,748	 
	Net income attributable to non-controlling interests	 	 	(353	)	 	 	(228	)
	Net income attributable to Magic Software's Shareholders	 	$	4,495	 	 	$	3,520	 
	Net earnings per share attributable to	 	 	 	 	 	 	 	 
	   Magic Software's shareholders:	 	 	 	 	 	 	 	 
	Basic	 	$	0.11	 	 	$	0.10	 
	Diluted	 	$	0.11	 	 	$	0.10	 
	Weighted average number of shares used in	 	 	 	 	 	 	 	 
	     computing net earnings per share attributable to	 	 	 	 	 	 	 	 
	     Magic Software's shareholders:	 	 	 	 	 	 	 	 
	        Basic	 	 	39,505	 	 	 	36,594	 
	        Diluted	 	 	39,858	 	 	 	37,096	 








 


 






    	 



    	 



    

 





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	 
	 	 	March
    31,	 
	 	 	2014	 	 	2013	 
	 	 	Unaudited	 
	GAAP
    gross profit	 	$	16,642	 	 	$	13,524	 
	Amortization of capitalized
    software	 	 	954	 	 	 	973	 
	Amortization of other
    intangible assets	 	 	46	 	 	 	45	 
	Stock-based compensation	 	 	1	 	 	 	4	 
	Non-GAAP
    gross profit	 	$	17,643	 	 	$	14,546	 
	 	 	 	 	 	 	 	 	 
	GAAP
    operating income	 	$	5,953	 	 	$	4,641	 
	Gross profit adjustments	 	 	1,001	 	 	 	1,022	 
	Amortization of other
    intangible assets	 	 	910	 	 	 	689	 
	Capitalization of software
    development	 	 	(1,099	)	 	 	(1,210	)
	Change in valuation
    of contingent consideration	 	 	(400	)	 	 	-	 
	Stock-based compensation	 	 	43	 	 	 	89	 
	Non-GAAP
    operating income	 	$	6,408	 	 	$	5,231	 
	 	 	 	 	 	 	 	 	 
	GAAP
    net income attributable to Magic Software's shareholders	 	$	4,495	 	 	$	3,520	 
	Operating income adjustments	 	 	455	 	 	 	590	 
	Unwinding of discount
    in connection with liabilities due to acquisitions	 	 	-	 	 	 	207	 
	Amortization expenses
    attributed to redeemable non-controlling interests	 	 	(37	)	 	 	(30	)
	Deferred
    taxes on the above items	 	 	49	 	 	 	(47	)
	 	 	 	 	 	 	 	 	 
	Non-GAAP
    net income attributable to Magic Software's shareholders	 	$	4,962	 	 	$	4,240	 
	Non-GAAP basic net
    earnings per share	 	 	 	 	 	 	 	 
	   attributable
    to Magic Software shareholders	 	 	0.13	 	 	 	0.12	 
	Weighted average number of shares used
    in	 	 	 	 	 	 	 	 
	   computing
    basic net earnings per share	 	 	39,505	 	 	 	36,594	 
	 	 	 	 	 	 	 	 	 
	Non-GAAP diluted net
    earnings per share	 	 	 	 	 	 	 	 
	   attributable
    to Magic Software shareholders	 	 	0.12	 	 	 	0.11	 
	Weighted average number of shares used
    in	 	 	 	 	 	 	 	 
	   computing
    diluted net earnings per share	 	 	39,897	 	 	 	37,148	 








 


 


 






    	 



    	 



    




 





MAGIC
SOFTWARE ENTERPRISES LTD. AND ITS SUBSIDIARIES


CONDENSED
CONSOLIDATED BALANCE SHEETS


U.S.
dollars in thousands      




 


	 	 	 	 	 	 	 
	 	 	March 31,	 	 	December 31,	 
	 	 	2014	 	 	2013	 
	 	 	Unaudited	 	 	 	 
	       ASSETS	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	CURRENT ASSETS:	 	 	 	 	 	 	 	 
	     Cash and cash equivalents	 	$	87,419	 	 	$	35,134	 
	     Available-for-sale marketable securities	 	 	439	 	 	 	854	 
	     Trade receivables, net	 	 	37,357	 	 	 	31,976	 
	     Other accounts receivable and prepaid expenses	 	 	5,737	 	 	 	5,209	 
	Total current assets	 	 	130,952	 	 	 	73,173	 
	 	 	 	 	 	 	 	 	 
	LONG-TERM RECEIVABLES:	 	 	 	 	 	 	 	 
	    Severance pay fund	 	 	415	 	 	 	403	 
	    Other long-term receivables	 	 	3,888	 	 	 	3,792	 
	Total long-term receivables	 	 	4,303	 	 	 	4,195	 
	 	 	 	 	 	 	 	 	 
	PROPERTY AND EQUIPMENT, NET	 	 	1,989	 	 	 	1,773	 
	INTANGIBLE ASSETS AND GOODWILL, NET	 	 	87,467	 	 	 	87,862	 
	 	 	 	 	 	 	 	 	 
	TOTAL ASSETS	 	$	224,711	 	 	$	167,003	 
	 	 	 	 	 	 	 	 	 
	       LIABILITIES AND EQUITY	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	CURRENT LIABILITIES:	 	 	 	 	 	 	 	 
	     Short-term debt	 	$	1,055	 	 	$	1,055	 
	     Trade payables	 	 	4,574	 	 	 	4,149	 
	     Accrued expenses and other accounts payable	 	 	16,140	 	 	 	16,937	 
	     Deferred tax liability	 	 	1,979	 	 	 	2,567	 
	     Deferred revenues	 	 	8,245	 	 	 	3,294	 
	Total current liabilities	 	 	31,993	 	 	 	28,002	 
	 	 	 	 	 	 	 	 	 
	NON-CURRENT LIABILITIES:	 	 	 	 	 	 	 	 
	     Long-term debt	 	 	2,037	 	 	 	2,274	 
	     Long-term deferred tax liabilty	 	 	2,106	 	 	 	2,204	 
	     Liabilities due to acquisition activities	 	 	539	 	 	 	1,396	 
	     Accrued severance pay	 	 	1,336	 	 	 	1,275	 
	Total non-current liabilities	 	 	6,018	 	 	 	7,149	 
	 	 	 	 	 	 	 	 	 
	REDEEMABLE NON-CONTROLLING INTEREST	 	 	2,848	 	 	 	2,721	 
	 	 	 	 	 	 	 	 	 
	SHAREHOLDERS' EQUITY:	 	 	 	 	 	 	 	 
	   Magic Software Shareholders' equity	 	 	182,675	 	 	 	128,144	 
	   Non-controlling interests	 	 	1,177	 	 	 	987	 
	Total shareholders' equity	 	 	183,852	 	 	 	129,131	 
	 	 	 	 	 	 	 	 	 
	TOTAL LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST AND EQUITY	 	$	224,711	 	 	$	167,003