Or Yehuda, Israel, November 18, 2024 – Magic Software Enterprises Ltd. (NASDAQ and TASE: MGIC) (“the Company”), a global provider of IT consulting services and end-to-end integration and application development platforms solutions, announced today its financial results for the third quarter and first nine months period ended September 30, 2024.
Summary Results for the Third Quarter 2024 (USD in millions, except per share data)
Financial Highlights for the Third Quarter Ended September 30, 2024
- Revenues for the third quarter of 2024 increased by 10.4% to $143.0 million, compared to $129.5 million in the same period of the previous year. Compared to the fourth quarter of 2023, the first and the second quarters of 2024, revenues for the third quarter increased by 13.9%, 9.4%, and 4.9%, respectively.
- Operating income for the third quarter of 2024 increased by 13.1% to $15.1 million, compared to $13.3 million in the same period of the previous year.
- Non-GAAP operating income for the third quarter of 2024 increased by 7.2% to $18.5 million, compared to $17.2 million in the same period of the previous year.
- Net income attributable to Magic Software’s shareholders for the third quarter of 2024 increased by 18% to $8.4 million, or $0.17 per fully diluted share, compared to $7.1 million, or $0.15 per fully diluted share, in the same period of the previous year.
- Non-GAAP net income attributable to Magic Software’s shareholders for the third quarter of 2024 increased by 6.9% to $11.1 million, or $0.23 per fully diluted share, compared to $10.4 million, or $0.21 per fully diluted share, in the same period of the previous year.
Summary Results for the First Nine-Months Period Ended September 30, 2024 (USD in millions, except per share data)
Financial Highlights for the First Nine-Months Period Ended September 30, 2024
- Revenues for the first nine months of 2024 increased by 0.1% to $409.9 million compared to $409.5 million in the same period of the previous year. As described in the pre-announcement of our third quarter results on November 8, 2023, in the third quarter of 2023, we experienced a substantial and unexpected decline in demand for our professional services from several of our important U.S.-based blue-chip customers which, without any advance notification, decided to immediately suspend significant parts of their active time-and-materials-based projects. This reduced demand had a negative impact on our revenues for the first nine-months ended September 30, 2024 compared to the same period of the previous year of approximately $44.3 million.
- Operating income for the first nine months of 2024 increased by 0.9% to $44.5 million compared to $44.1 million in the same period of the previous year.
- Non-GAAP operating income for the first nine months of 2024 increased by 1.3% to $54.8 million compared to $54.1 million in the same period of the previous year.
- Net income attributable to Magic Software’s shareholders for the first nine months of 2024 decreased by 8.0% to $26.3 million, or $0.53 per fully diluted share, compared to $28.5 million, or $0.58 per fully diluted share, in the same period last year. The decrease in net income attributable to Magic Software’s shareholders was primarily attributable to the increase in interest expenses resulting from the increase in our overall financial debt position and negative impact of foreign currency exchange rates fluctuation recorded with respect to monetary assets and liabilities denominated in foreign currency.
- Non-GAAP net income attributable to Magic Software’s shareholders for the first nine months of 2024 decreased by 7.3% to $34.1 million, or $0.69 per fully diluted share, compared to $36.8 million, or $0.75 per fully diluted share, in the same period last year. The decrease in non-GAAP net income attributable to Magic Software’s shareholders was primarily attributable to the increase in interest expenses resulting from the increase in our overall financial debt position and negative impact of foreign currency exchange rates fluctuation recorded with respect to monetary assets and liabilities denominated in foreign currency.
- Cash flow from operating activities for the first nine months of 2024 amounted to $49.1 million compared to $65.5 million in the same period last year.
- As of September 30, 2024, Magic’s cash, cash equivalents and short and long-term bank deposits amounted to $99.7 million.
- We are revising our annual revenue guidance for 2024 increasing the lower range of our revenue guidance from $540 million to $544 million reflecting our continued solid momentum for the remaining part of the year and positive outlook. Our full year revenues guidance for 2024 is $544 million to $550 million.
Declaration of Dividend for the First Half of 2024
- In accordance with its dividend distribution policy, the Company’s board of directors declared a semi-annual cash dividend in an amount of 23.6 cents per share and in an aggregate amount of approximately $11.6 million, reflecting approximately 65% of its distributable profits for the first half of 2024.
- The dividend is payable on January 8, 2025, to all of the Company’s shareholders of record at the close of trading on the NASDAQ Global Select Market on December 23, 2024.
- In accordance with Israeli tax law, the dividend is subject to withholding tax at source at the rate of 30% (if the recipient of the dividend is at the time of distribution or was at any time during the preceding 12-month period the holder of 10% or more of the Company’s share capital) or 25% (for all other dividend recipients) of the dividend amount payable to each shareholder of record, subject to applicable exemptions.
- The dividend will be paid in US dollars on the ordinary shares of Magic Software Enterprises that are traded both on the Tel Aviv Stock Exchange and the NASDAQ Global Select Market.
Guy Bernstein, Chief Executive Officer of Magic Software, said: „We are pleased to report another strong quarter of growth and resilience, with a 10.4% year-over-year increase in revenues, reaching $143 million. This performance reflects the continued success of our strategic focus on delivering value to our customers through innovative digital and cloud transformation solutions. While we are navigating a dynamic macroeconomic environment, our diversified portfolio and strong client relationships have enabled us to achieve consistent growth and improve operational efficiency. Looking ahead, we are confident in our ability to continue building on this momentum as we further invest in our business and enhance our capabilities to meet the evolving needs of our customers worldwide.”
Conference Call Details
Magic Software’s management will host a conference call on Monday, November 18, 2024, at 09:30 am Eastern Daylight Time (16:30 Israel Daylight Time) to review and discuss Magic Software’s results.
To participate, please call one of the following teleconferencing numbers. Please begin placing your calls at least 5 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: +1-866-652-8972
UK: 0-800-917-9141
ISRAEL: 03-918-0650
ALL OTHERS: +972-3-918-0650
For those unable to join the live call, a replay of the call will be available in the Investor Relations section of Magic Software’s website, www.magicsoftware.com.
Non-GAAP Financial Measures
This press release contains the following non-GAAP financial measures: non-GAAP gross profit, non-GAAP operating income, non-GAAP net income attributable to Magic Software’s shareholders and non-GAAP basic and diluted earnings per share.
Magic Software believes that these non-GAAP measures of financial results provide useful information to management and investors regarding certain financial and business trends relating to Magic Software’s financial condition and results of operations. Magic Software’s management uses these non-GAAP measures to compare the Company’s performance to that of prior periods for trend analyses, for purposes of determining executive and senior management incentive compensation and for budgeting and planning purposes. These measures are used in financial reports prepared for management and in quarterly financial reports presented to the Company’s board of directors. The Company believes that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing the Company’s financial measures with other software companies, many of which present similar non-GAAP financial measures to investors.
Management of the Company does not consider these non-GAAP measures in isolation or as an alternative to financial measures determined in accordance with GAAP. The principal limitation of these non-GAAP financial measures is that they exclude significant expenses and income that are required by GAAP to be recorded in the Company’s financial statements. In addition, they are subject to inherent limitations as they reflect the exercise of judgment by management about which expenses and income are excluded or included in determining these non-GAAP financial measures. In order to compensate for these limitations, management presents non-GAAP financial measures together with GAAP results. Magic Software urges investors to review the reconciliation of its non-GAAP financial measures to the comparable GAAP financial measures, which it includes in press releases announcing quarterly financial results, including this press release, and not to rely on any single financial measure to evaluate the Company’s business.
Non-GAAP measures used in this press release are included in the financial tables of this release. These non-GAAP measures exclude the following items:
- Amortization of purchased intangible assets and other related costs;
- In-process research and development capitalization and amortization;
- Cost of share-based payment;
- Costs related to acquisition of new businesses;
- The related tax, non-controlling interests’ effects of the above items;
- Change in valuation of contingent consideration related to acquisitions;
- Change in deferred tax assets on carry forward tax losses.
Reconciliation of the most comparable GAAP financial measures to the non-GAAP financial measures used in this press release are included in the financial tables of this release.
About Magic Software Enterprises
Magic Software Enterprises Ltd. (NASDAQ and TASE: MGIC) is a global provider of end-to-end integration and application development platforms solutions and IT consulting services.
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,” “look forward”, “expect,” “believe,” “guidance” 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 based on 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, 2023, which filed on May 13, 2024, and subsequent reports and filings made 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:
Ronen Platkevitz
Magic Software Enterprises
[email protected]
