Magic Software Announces Second Quarter Results
Company Reports Growth in Profits and a Significant Increase in License Sales
Monday August 11, 7:04 am ET
IRVINE, Calif.--(BUSINESS WIRE)--Aug. 11, 2003-- Magic Software Enterprises (Nasdaq:MGIC - News), a leading provider of state-of-the-art integration and development technology, today reported its results for the quarter ended June 30, 2003.
Second Quarter Results
Net profit for the second quarter of 2003 was $752,000 (or $0.03 per share) compared with a net loss of $371,000 (or ($0.01) per share) recorded in the second quarter of 2002 and a net profit of $272,000 (or $0.01 per share) in the first quarter of 2003. This represents the highest quarterly net profit in the last eleven quarters.
Total revenues for the second quarter ended June 30, 2003 were $15.30 million, an increase from $15.13 million posted in the previous quarter and a decrease from $15.67 million in the comparable quarter of 2002.
Software license revenues have reached $4.53 million in the reported quarter, a 9% increase from sales of $4.14 million in the second quarter of 2002 and an 11% increase from $4.08 million at the first quarter of 2003. This represents the highest quarterly license revenues in the last seven quarters.
Application sales were $1.66 million for the reported quarter, compared with $1.66 million in the first quarter of 2003 and $1.87 million in the second quarter of 2002. Revenues from consulting and other services at $6.44 million, decreased from $6.80 million in the first quarter of 2003 and $6.98 million for the second quarter of 2002. Maintenance and support revenues reached $2.67 million in the second quarter of 2003, compared with $2.58 million in the first quarter of 2003, and $2.67 million in the same period of 2002.
In the second quarter of 2003, Europe accounted for 40% of total revenues, while North America and Asia/Pacific accounted for 32% and 28% of total revenues, respectively.
"We are pleased with the results that we have achieved in the second quarter, especially the increase in net profits," said Menachem Hasfari, chief executive officer of Magic Software Enterprises. "Despite challenging IT environments everywhere, our momentum from the first quarter of the year continues and we've once again delivered strong results.
"Our newly released version 9.4 of eDeveloper has received an excellent response from our customer base and from the market in general and Magic's license sales have reached the highest quarterly revenue level in the last seven quarters.
"We are also pleased with the warm reception our new iBOLT Integration Suite has received both from leading industry analysts as well as existing and potential customers," Hasfari continued. "In the short time since we have released the iBOLT product family, we have closed our first deals both with end users and a growing list of partners. We have been invited to submit numerous RFPs (Requests for Proposals) and have a solid pipeline of prospects. Nobody can predict what's in store for the IT industry, but we are more confident than ever in our strategic move into the area of Business Integration and Process Management."
Accomplishments
The following highlights were announced or occurred since Magic Software Enterprises' last earnings statement:
- New Partnerships
During the quarter Magic Software and iWay Software closed a partnership agreement to provide intelligent, prepackaged adapters for the iBOLT Integration Suite. With this agreement, Magic Software has expanded its ability to deliver comprehensive cost-effective business integration solutions to its customers.
In addition, Magic Software and Pervasive Software signed a strategic alliance agreement to develop and market a bundled toolkit worldwide. The Pervasive.SQL(TM) V8 database engine has been integrated and is now being shipped with eDeveloper v9.4. eDeveloper customers are now able to purchase the bundled toolkit, support and maintenance directly from Magic Software.
During the quarter, the Company also announced the North American launch of its Premier Partner program for eDeveloper and iBOLT. This program is designed to provide Magic's premier customers with extremely cost-effective development and deployment licenses and flexible pricing programs.
- New Deals
Among the significant new deals closed or announced during the quarter were:
- Sklar Peppler, the leading Canadian furniture manufacturer, who launched a retailer extranet developed with eDeveloper for the iSeries;
- Siemens, for a government customer relation management project in South Africa to handle citizen interactions with government officials;
- Viacom Outdoor, the UK's leading transport media sales company, who have chosen eDeveloper as the standard development and integration environment to be used for upgrading their business and media production systems;
- Marsh Insurance, for the German branch of the world's leading risk and insurance services firm, for a web based sales and customer management solution developed by Magic Solution Partner BSV;
- Tibbett & Britten, a UK based international logistics service provider working on behalf of major retailers and multi-national manufacturers, who are using eDeveloper for a number of application development projects in the group;
- Clalit National Health Services, the largest health organization in Israel providing medical services for more than 3.7 million people, to modernize existing systems;
- Hungarian Police, to modernize an application that operates at 160 police stations nationwide and supports the processing and criminal investigation activity of the stations;
- Western Dental Centers, a group with over 450 licensed dentists and orthodontists in more than 140 offices throughout California and Arizona, to provide corporate wide automation of dental services; and
- Complot Automation, the largest local government software house in Israel, for a licensing, maintenance and support agreement for upgrading local government systems.
- Industry Recognition
During this quarter, the Company received significant recognition from two of the leading industry analyst companies.
Gartner Group positioned Magic Software in its recently published Pure-Play Business Process Management (BPM) Magic Quadrant. Earlier this year, Magic Software was also included in Gartner's Magic Quadrant for Business Rules.
In addition, in a recent report by the Giga Group on enterprise application integration and business process management, the Company was recognized as a Pure Play BPM (Business Process Management) player.
The Company also announced that it has joined the fast-growing EAI Industry Consortium (EAIIC), an international non-profit global advocacy group promoting the enterprise application integration industry.
Conference Call
Magic will host a conference call today, August 11, 2003, at 12:00 p.m. EDT 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 888-273-9885
International 651-224-7472
Callers should reference "Magic Software Q2 Earnings Conference Call" with the AT&T Operator.
A replay of the conference call will be available from 3:30 p.m. EDT on August 11, 2003, through 4:59 p.m. EDT on August 25, 2003. Interested parties should call the appropriate number below:
North America 800-475-6701
International 320-365-3844
Callers should reference Access Code No. 693619.
About Magic Software Enterprises
Magic Software Enterprises, a member of the Formula Group
(Nasdaq:FORTY - News) develops, markets and supports software development, deployment and integration 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 17310 Redhill Avenue #270, Irvine, CA 92614-5637, telephone 800/345-6244, 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, 2003 December 31,
(Unaudited) 2002
------------- ------------
Assets
Current assets
Cash and cash equivalents $13,315 $24,785
Accounts receivable
Trade receivables 16,620 13,605
Related parties 292 624
Other receivables and prepaid expenses 4,925 4,113
Inventory 185 175
------------- ------------
Total current assets 35,337 43,302
------------- ------------
Severance pay fund 1,715 1,465
Investments in affiliated companies 108 748
Fixed assets, net 8,178 8,432
Goodwill 20,286 20,721
Other assets, net 10,632 9,854
------------- ------------
Total assets $76,256 $84,522
============= ============
Liabilities
Current liabilities
Short-term bank debt $2,349 $3,464
Trade payables 2,516 2,831
Accrued expenses and other liabilities 17,420 13,703
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Total current liabilities 22,285 19,998
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Long-term loans 371 414
Accrued severance pay 2,129 1,861
Minority interests 1,249 1,228
Shareholders' equity
Share capital 788 788
Capital surplus 103,043 114,760
Treasury stock (5,773) (5,667)
Accumulated deficit (47,836) (48,860)
------------- ------------
Total shareholders' equity $50,222 $61,021
------------- ------------
Total liabilities and shareholders' equity $76,256 $84,522
============= ============
Unaudited Consolidated Statement of Operations
(US Dollars in Thousands)
Three Months ended Six Months ended
June 30, June 30,
2003 2002 2003 2002
Revenues
Software sales $4,525 $4,143 $8,602 $8,114
Applications 1,661 1,874 3,324 4,181
Maintenance 2,666 2,674 5,245 5,346
Consultancy & other services 6,449 6,979 13,256 14,781
Total Revenues $15,301 $15,670 $30,427 $32,422
Cost of Revenues
Software sales $1,128 $730 $1,944 $1,520
Applications 220 479 464 1,049
Maintenance 664 1,069 1,255 2,110
Consultancy & other services 3,867 4,941 8,450 9,878
Total Cost of Revenues $5,879 $7,219 $12,113 $14,557
Gross Profit $9,422 $8,451 $18,314 $17,865
Research & development, net 1,142 1,272 2,147 2,715
Sales, marketing, and general
& administrative expenses 7,125 7,407 14,346 14,725
Depreciation 397 446 809 869
Operating Income (Loss) $758 $(674) $1,012 $(444)
Financial income, net (185) (443) (230) (510)
Income (Loss) before taxes 943 (231) 1,242 66
Taxes on income (95) 77 14 269
Income (loss) before minority
interests 848 (308) 1,228 (203)
Minority interests in
income of subsidiaries 96 63 204 17
Net income (loss) $752 $(371) $1,024 $(220)
Basic Earnings per Share $0.03 $(0.01) $0.03 $(0.01)
Diluted Earnings per Share $0.03 $(0.01) $0.03 $(0.01)
Weighted Avg. Shares Outstanding
(000) 29,474 29,750 29,492 29,747
Diluted Weighted Avg. Shares
Outstanding (000) 30,021 29,750 29,768 29,884
Contact:
Magic Software Enterprises Ltd.
David Leichner, 949/250-1718 ext. 299
davidl@magicsoftware.com
or
Guy Bernstein, +972-3-538-9292
gbernstein@magicsoftware.com
 
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