Thursday March 2, 2:30 pm Eastern Time
Magic Software Enterprises Reports Record Fourth Quarter 1999 Results
Results Attributed to Successful Implementation of the Company's Acquisition and Applications Strategies
OR YEHUDA, Israel - Magic Software
Enterprises, Ltd. (Nasdaq: MGIC - news) Thursday reported record results for
the fourth quarter. The Company attributed these results to the
success of its new applications and acquisition strategies, as well as
the increased demand for its products and services.
FOURTH QUARTER AND 1999 RESULTS
For the fourth quarter ended Dec. 31, 1999, Magic reported record
revenues of $18.6 million, the highest sales ever recorded by the
Company in a single quarter. This figure represents a 50% increase
over the $12.4 million reported for the comparable quarter of 1998,
and a 14% increase over the $16.4 million posted in the third quarter
of 1999. Net earnings for the fourth quarter 1999 were at a record
high of $3.8 million ($0.14 income per share) compared with the $1.2
million ($0.06 income per share) posted for the same period one year
ago.
"The growth in fourth quarter revenues is the result of
increasing sales of software licenses and professional services mainly
due to our new applications direction," said Jack Dunietz, chief
executive officer of Magic.
Software sales during the fourth quarter were $10.9 million
compared with $6.5 million recorded in the same period of 1998.
Consulting and training revenue during the period was up 38% over the
same quarter last year. Maintenance and support revenue for the fourth
quarter increased more than 19% compared with the same period in 1998.
For the year ended Dec. 31, 1999, Magic reported record revenue
of $64.0 million, compared with the $38.8 million recorded in the
previous year. In addition, the Company reported net income for the
year of $10.9 million ($0.43) compared with the $6.5 million net loss
($0.38 loss per share) posted for 1998.
ACCOMPLISHMENTS
Management Changes
In the fourth quarter, Magic also announced the appointment of
Israel Teiblum as president of the Company. Teiblum takes over the
president's role from Dunietz, who was appointed co-chairman of Magic
and who remains chief executive officer of the Company. In addition to
functioning as president, Teiblum will continue in the role of chief
financial officer of Magic.
Acquisitions
During the quarter, Magic continued its strategy of acquiring key
distributors and Magic solution partners with the potential to
increase the Company's geographic presence and add to its capabilities
as a solutions provider. Chief among those acquisitions was the
purchase of Canada's Open Sesame Systems (OSS), which has been merged
with Magic's California-based U.S. subsidiary to enable Magic to more
effectively deliver its e-commerce and other enterprise-level business
solutions to a larger North American audience. Another U.S.
acquisition was New Mexico-based Access Data, a leader in providing
Web-based law enforcement solutions.
During the quarter, Magic also acquired a majority interest in
Magic (Onyx) Software Enterprise Hungary Ltd. (Magic Hungary). In
addition, the Company acquired the remaining 20% of Magic Software
Japan, Magic's exclusive distributor in that country for the previous
10 years.
Linux
Regarding Magic's involvement with Linux, in October the Company
announced a developer partnership agreement with Red Hat Inc.
(Nasdaq: RHAT - news) to include release of Magic's Enterprise Server v.8.3
on Red Hat Linux 6.1, Red Hat's latest CD.
The Company also announced that it would be introducing its
award-winning development environment for the Linux platform early in
2000. Magic's Enterprise Edition v.8 development environment for
Linux, which enables developers to build e-commerce and other
enterprise-level solutions directly on the platform, debuted last
month at the LinuxWorld Expo in New York City to a crowd of
approximately 15,000 convention-goers and at an introductory price of
$299.
AS/400
On the AS/400 front, the Company announced that IBM would be
showcasing Magic's development technology and e-business solution,
Magic eMerchant, in IBM's support centers in both Germany and Italy.
This arrangement extends the already close working relationship
enjoyed by both companies as members of the "AS/400 eBusiness
Committee for EMEA." EMEA is a working group established to allow its
members to combine other members' products with their own when selling
to their respective customer bases.
ECommerce
The quarter also saw the launch of several e-commerce sites built
using Magic eMerchant. NoRegrets, an Australian retailer of intimate
apparel and accessories launched their virtual store,
www.noregrets.com.au, in less than four months and in time to meet
Christmas demand. The Magic eMerchant-powered site, which integrates
seamlessly with the NoRegrets back-end systems, provides an easy and
convenient way for customers to make purchases, while also enabling
the Company to grow its business through franchises.
FOURTH QUARTER DEALS
Finally, demand for Magic's e-commerce and other business
solutions and services continued to grow during the quarter. In a deal
valued at more than $2 million initially, the Company announced that
it would be providing Seabrex, the world's largest fruit shipping
agent, a totally integrated e-business-based trading and tracking
system to support all of its global operations.
ABOUT MAGIC SOFTWARE
Magic Software Enterprises, a member of the Formula Group
(Nasdaq: FORTY - news), develops, markets and supports software development
and deployment technology that enables enterprises to accelerate the
process of building and deploying applications that can be rapidly
customized and integrated with existing systems. Magic technology,
applications and professional services are available through a global
network of subsidiaries, distributors and Magic solutions partners in
approximately 50 countries. The Company's U.S. subsidiary is located
at 1642 Kaiser Avenue, Irvine, Calif., 92614, telephone 949/250-1718,
fax 949/250-7404, http://www.magic-sw.com.
The Formula Group is an international information technology
company principally engaged, through its subsidiaries and affiliates,
in providing software consulting services, developing proprietary
software products and providing computer-based solutions.
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
demand, the impact of competitive products and pricing, changing
economic 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.
Unaudited Consolidated Statement of Operations
(US Dollars in Thousands)
Three Months Ended Year Ended
Dec. 31 Dec. 31
1999 1998 1999 1998
Revenues
Software sales $10,920 $6,542 $37,024 $20,479
Maintenance 2,348 1,968 9,218 6,083
Consultancy & other
services 5,361 3,880 17,750 12,198
Total Revenues 18,629 12,390 63,992 38,760
Cost of Revenues
Software sales 1,089 727 3,972 2,994
Maintenance 880 812 3,450 3,459
Consultancy & other
services 3,283 2,686 11,365 8,893
Total Cost of Revenues 5,252 4,225 18,787 15,346
Gross Profit 13,377 8,165 45,205 23,414
Research & development, net 822 613 2,953 2,797
Sales & marketing, net 6,242 4,377 20,935 16,073
General & administrative
expenses 2,768 1,607 10,241 7,817
Restructuring costs & non-
recurring expenses 0 0 0 2,677
Operating Income (Loss) 3,545 1,568 11,076 (5,950)
Financial (income) expenses,
net (183) 272 (175) 321
Income (Loss) before taxes 3,728 1,296 11,251 (6,271)
Taxes on income (129) 14 2 50
Income (Loss) before
minority interest 3,857 1,282 11,249 (6,321)
Minority interest in losses
(income) of subsidiaries 23 (32) (394) 12
Equity in earnings (losses)
of affiliate (75) (65) 52 (149)
Net Income (Loss) $3,805 $1,185 $10,907 ($6,458)
Income (Loss) per share $0.14 $0.06 $0.43 ($0.38)
Weighted avg. shares
outstanding (000) 27,051 19,959 25,392 17,217
Magic Software Enterprises Ltd. - Unaudited Balance Sheets
(US Dollars in Thousands)
December 31 December 31
1999 1998
Assets
Current Assets
Cash and cash equivalents $8,298 $5,731
Accounts receivable:
Trade receivables 16,111 12,151
Other receivables and prepaid
expenses 5,010 1,861
Inventories 188 (0)
Total Current Assets 29,607 19,743
Severance pay fund 1,507 988
Minority interest
Investments in affiliated companies 3,713 344
Fixed assets, net 8,180 5,108
Other assets, net 13,757 6,823
Total Assets $56,764 $33,006
Liabilities
Current Liabilities
Short-term bank debt $ 628 $ 122
Trade payables 5,525 1,918
Payables - parent and affiliated
companies
Accrued expenses and other liabilities 13,786 12,060
Total Current Liabilities 19,939 14,100
Long-term loans 295 314
Accrued severance pay 1,899 1,445
Minority Interests 917 11
Shareholders' Equity
Share Capital 687 261
Capital Surplus 34,358 29,113
Retained Earnings (1,331) (12,238)
Total Shareholders' Equity 33,714 17,136
$56,764 $33,006
Contact:
Magic Software Enterprises, Irvine
Katharine Hanley, 949/250-1718 (ext. 220)
E-mail: khanley@magic-sw.com
or
Magic Software Enterprises, Ltd.
Israel Teiblum, President and Chief Financial Officer
972-3-538-9292
