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Thursday August 8, 7:01 am Eastern Time
Magic Software Announces Second Quarter Results
OR YEHUDA, Israel--(BUSINESS WIRE)--Aug. 8, 2002--Magic Software
Enterprises Ltd. (Nasdaq:MGIC - News), a leading provider of state-of-the-art
application development technology and business solutions, reported
today second quarter results for the period ended June 30, 2002.
Second Quarter Results
Total revenues for the second quarter ended June 30, 2002 were
$15.67 million, a decrease from $16.75 million posted in the previous
quarter and from $20.19 million in the comparable quarter of 2001.
Gross profit margin in the second quarter of 2002 was 54%, a
decrease from a margin of 56% in the comparable quarter of 2001 and
56% in the previous quarter. Net loss for the second quarter of 2002
was $371,000 (or ($0.01) per share) compared with net loss of $3.02
million (or ($0.10) per share) recorded in the second quarter of 2001
and a net profit of $151,000 (or $0.01 per share) in the previous
quarter.
Software tool sales for the quarter, at $4.14 million, increased
from $3.97 million in software tool sales posted in the first quarter
of 2002 and decreased from $4.58 million in the comparable quarter of
2001. Application sales were $1.87 million for the reported quarter,
compared with $2.31 million in the first quarter of 2002 and $3.07
million in the second quarter of 2001.
Revenues from consulting and other services, at $6.98 million,
decreased from $7.8 million in the first quarter of 2002, and $9.44
million for the second quarter of 2001. Revenues from maintenance and
support were $2.67 million, compared with $2.67 million in the first
quarter of 2002, and $3.11 million in the same period of 2001.
In the second quarter of 2002, North America accounted for 36% of
total revenues, while Europe and Asia/Pacific accounted for 33% and
31% respectively.
"I'm encouraged that even in the most difficult times in the IT
industry that we have seen in many years, Magic Software was able to
increase software tools sales for the quarter as compared to the first
quarter of 2002," said Menachem Hasfari, chief executive officer of
Magic Software Enterprises. "This shows a growing acceptance in the
market for our flagship development environment, Magic eDeveloper.
"We continue to take proactive measures to reduce expenses while
adjusting our levels of spending in line with the economic slowdown,"
Hasfari noted. "Our cash burn remained low during the second quarter
of 2002 and, as a result, during the first six months of this year, we
used $1.25 million net in cash versus $6.59 million net during the six
months ended June 30, 2001.
"While we've suffered a slowdown in the USA during the quarter,
and to a larger extent in our European operations, our achievements in
the Asia-Pacific region have exceeded our expectations," Hasfari
continued. "Looking forward, despite the continuing tough conditions
in the global markets, Magic Software remains fully committed to
technological excellence, increased sales efforts and creation of
shareholder value."
Accomplishments
The following highlights were announced or occurred since Magic
Software Enterprises' last earnings statement:
New Products
During this quarter, Magic Software announced the release of Magic
eContact(TM) V2.5, designed specifically for contact center
outsourcers. This latest version of Magic eContact offers extensive
and comprehensive support for dynamic contact centers and makes it
easier to communicate with customers through enhanced email
integration and web support. It also provides integration with a wider
range of telecommunication equipment for both incoming and outgoing
services.
In addition, Magic has launched a free web-based training
initiative for Magic eDeveloper v9.3. The new web training initiative
provides developers with a free evaluation version of Magic
eDeveloper, a 40-hour web based training course "Fundamentals of Magic
eDeveloper Programming" as well as three months of free technical
support. Developers can access the training at the Magic Software web
site.
New Deals
Among the significant new deals closed during the quarter were:
- Merrill Lynch Bank (Suisse) -MLB(S), a subsidiary of Merrill
Lynch International Bank Ltd (London), one of the world's
leading financial management and advisory companies, who
purchased the Prospero Magic-based banking application from
Magic Solution Partner Sage;
- Discovery Health, the largest insurance company in South
Africa, to rapidly develop new applications and to bridge
existing applications for CRM, document management and content
management;
- Superior Court of California, County of San Francisco (the
Court), administrators of the trial court system in the City
and County of San Francisco, for court management
applications;
- Wabush Mines, a 6 million-ton, open pit iron ore operation in
Canada, for a tracking and inventory application that locates,
tracks and updates iron ore inventory via a link to a
satellite Global Positioning System (GPS);
- Follow up orders from Nintendo, the acknowledged worldwide
leader in the creation of interactive entertainment and
Hoffmann, a leading wholesaler of high quality tools for
craftsmen and industry in Germany and Europe.
Conference Call
Magic will host a conference call today, August 8, 2002, at 12:00
p.m. EST (9:00 a.m. PST), to discuss the Company's second quarter
financial results. To participate, interested parties should call the
appropriate number listed below five to ten minutes prior to the start
of the call:
North America (800) 553-5260
International (651) 291-0344
Callers should reference "Magic Software Q2 Earnings Conference
Call" with the AT&T Operator.
A replay of the conference call will be available from 2:45 p.m.
EST, August 8, 2002, through 4:59 p.m. EST, August 28, 2002.
Interested parties should call the appropriate number below:
North America (800) 475-6701
International (320) 365-3844
Callers should reference Access Code No. 647762.
About Magic Software Enterprises
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 North American subsidiary is
located at 1642 Kaiser Avenue, Irvine, Calif., 92614, telephone (949)
250-1718, fax (949) 250-7404, http://www.magicsoftware.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 producing 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
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.
Consolidated Balance Sheets
(US Dollars in Thousands)
June 30, 2002 Dec. 31, 2001
(Unaudited)
Assets
Current assets
Cash and cash equivalents $27,735 $27,900
Accounts receivable
Trade receivables 18,017 18,993
Related parties 366 465
Other receivables and prepaid expenses 5,357 3,760
Inventory 201 401
Total current assets 51,676 51,519
Severance pay fund 1,429 1,400
Investments in affiliated companies 104 106
Fixed assets, net 8,935 9,310
Other assets, net 31,756 31,903
Total assets $93,900 $94,238
Liabilities
Current liabilities
Short-term bank debt $1,868 $783
Trade payables 3,603 4,508
Accrued expenses and other liabilities 17,421 18,100
Total current liabilities 22,892 23,391
Long-term loans 560 669
Accrued severance pay 1,831 1,907
Minority interests 1,339 1,378
Shareholders' equity
Share capital 788 787
Capital surplus 115,401 114,727
Treasury stock (5,494) (5,424)
Accumulated deficit (43,417) (43,197)
Total shareholders' equity 67,278 66,893
Total liabilities and shareholders' equity $93,900 $94,238
Unaudited Consolidated Statement of Operations
(US Dollars in Thousands)
Three Months ended Six Months ended
June 30, June 30,
2002 2001 2002 2001
Revenues
Software sales $4,143 $4,579 $8,114 $9,865
Applications 1,874 3,066 4,181 4,937
Maintenance 2,674 3,106 5,346 5,872
Consultancy & other services 6,979 9,439 14,781 19,531
Total Revenues $15,670 $20,190 $32,422 $40,205
Cost of Revenues
Software sales $730 $1,023 $1,520 $2,062
Applications 479 639 1,049 1,104
Maintenance 1,069 1,053 2,110 2,138
Consultancy & other services 4,941 6,088 9,878 13,678
Total Cost of Revenues $7,219 $8,803 $14,557 $18,982
Gross Profit $8,451 $11,387 $17,865 $21,223
Research & development, net 1,272 1,808 2,715 3,649
Sales, marketing, and general 7,407 10,344 14,725 20,792
& administrative expenses
Depreciation 446 497 869 985
Amortization 1,076 2,197
Restructuring costs & 3,300
non-recurring expenses
Impairment expenses 2,219
Operating Income (Loss) $(674) $(2,338) $(444) $(11,919)
Financial (income) expenses, net (443) 4 (510) 34
Income (Loss) before taxes (231) (2,342) 66 (11,953)
Taxes on income 77 193 269 255
Loss before minority (308) (2,535) (203) (12,208)
Interest
Minority interest in 63 483 17 218
income of subsidiaries
Net Loss $(371) $(3,018) $(220) $(12,426)
Basic Earnings per Share $(0.01) $(0.10) $(0.01) $(0.42)
Diluted Earnings per Share $(0.01) $(0.10) $(0.01) $(0.41)
Weighted Avg. Shares Outstanding 29,750 29,568 29,747 29,533
(000)
Diluted Weighted Avg. Shares 29,750 30,269 29,884 30,390
Outstanding (000)
Contact:
Magic Software Enterprises Ltd.
David Leichner, 949/250-1718 ext. 299
davidl@magicsoftware.com
Guy Bernstein, +972-3-538-9292
gbernstein@magicsoftware.com
 
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