9th Nov 2007 07:01
Emblaze Ltd09 November 2007 Magic Software Reports Record Revenues for Q3 2007 Or Yehuda, Israel, November 09, 2007 -- Magic Software Enterprises Ltd. (NASDAQ:MGIC), a member of the Emblaze/Formula Group (LSE: BLZ), (NASDAQ: FORTY) and(TASE: FORT) and a leading provider of business integration and developmenttechnology, today announced its financial results for the third quarter andnine-month period ending September 30, 2007, as well as the appointment of GuyBernstein as its chairman of the board. Results for the Third QuarterRevenues for the third quarter of 2007 reached a record $17.6 million, anincrease of 5% compared with $16.8 in the second quarter of 2007, and 17%compared with $15.1 million in the third quarter of 2006. On a U.S. GAAP (Generally Accepted Accounting Principles) basis, operatingincome for the third quarter was $1.1 million, up 10% compared with $1.0 fromthe second quarter of 2007, and a significant improvement compared to the $3.6million operating loss recorded in the third quarter of 2006. GAAP net profitfor the period was $0.8 million, or $0.02 per share compared to $0.8 million, or$0.03 per share, in the second quarter of 2007, and a net loss of $3.5 million,or $0.11 per share, in the third quarter of 2006. GAAP results include amortization expense as well as non-cash charges taken forthe capitalization of intangible assets and stock-based compensation. Excluding these expenses, non-GAAP operating income for the third quarter was$1.3 million, up 44% compared with $0.9 million in the second quarter of 2007.Operating loss for the third quarter of 2006 was $3.0 million. Non-GAAP netincome for the period was $0.9 million, or $0.03 per share, an increase of 29%compared with $0.7 million, or $0.02 per share, in the second quarter of 2007.Non-GAAP net loss for the third quarter of 2006 was $2.9 million, or $0.09 pershare. Reconciliation between GAAP and Non-GAAP results is summarized in the following table. For a complete reconciliation, please refer to the tables appended to this release. (In millions of U.S. dollars, except per share data)U.S. GAAP basis Q3 2007 Q2 2007 Q3 2006Revenues $17.6 $16.8 $ 15.6Operating income (loss) $ 1.1 $ 1.0 $ (3.6)Net income (loss) $ 0.8 $ 0.8 $ (3.5)Basic EPS (loss) $0.02 $0.03 $(0.11) Non GAAP Q3 2007 Q2 2007 Q3 2006Revenues $17.6 $16.8 $ 15.6Operating income (loss) $ 1.3 $ 0.9 $ (3.0)Net income (loss) $ 0.9 $ 0.7 $ (2.9)Basic EPS (loss) $ 0.02 $0.02 $(0.09) Results for the Nine-Month PeriodRevenues for the first nine months of 2007 were $50.8 million, a 12% increasecompared to $45.5 million in the first nine months of 2006. On a U.S. GAAP basis, operating income for the nine-month period reached $3.2million compared to an operating loss of $5.2 million in the first nine monthsof 2006. Net profit for the period on a GAAP basis was $2.6 million, or $0.08per share, compared to a net loss of $5.0 million, or $0.16 per share, recordedin the first nine months of 2006. On a non-GAAP basis, operating income for the first nine months of 2007 was $3.3million, compared to a non-GAAP operating loss of $4.9 million in the ninemonths of 2006. Net income on a non-GAAP basis for the nine-month period was$2.8 million, or $0.09 per share, compared to non-GAAP net loss of $4.7 million,or $0.15 per share, for the first nine months of 2006. Comments of ManagementCommenting on the results, Eitan Naor, President and CEO of Magic Software, said"Having reported record revenues for the third quarter together with fourquarters of consecutive growth, we are ready to focus our attention on improvingthe Company's execution and profitability. We have recently strengthened ourmanagement team in line with our plan for building a stronger organization in2008." Mr. Naor continued, "During the reporting period, we continued to improve ourexecution, with the following achievements standing out as highlights: • We achieved significant cross sales into our customer and partner base. • In the IBM space, we reinforced our partner base via the addition of a significant competitive partner win in the Netherlands. • We performed well in our target ecosystem market. • We expanded our footprint in the JD Edwards community through the addition of new partners and new sales in the US. • We continued to grow our SAP Business One partner base, and signed a significant deal that builds on our combined presence in the SAP and BMC communities." Mr. Naor concluded, "We are now working on two parallel tracks: to improve ourshort-term results and bottom line performance, we are streamlining ouroperational capabilities; at the same time, we are formulating a detailedstrategy for fueling our long-term growth. I look forward to reporting progresson both these fronts in the year ahead." Non-GAAP Financial MeasuresThis release includes non-GAAP basic and diluted earnings per share and othernon-GAAP financial measures, including cost of service, research anddevelopment, selling, general and administrative, operating income, income taxesand net income. These non-GAAP measures exclude the following items:- Amortization of purchased intangible assets;- In-process research and development capitalization and;- Equity-based compensation expense. Magic's management believes that the presentation of non-GAAP measures provideuseful information to investors and management regarding financial and businesstrends relating to the company's financial condition and results of operationsas well as the net amount of cash generated by its business operations aftertaking into account capital spending required to maintain or expand thebusiness. For its internal budgeting process and in monitoring the results of thebusiness, Magic's management uses financial statements that do not includeamortization of purchased intangible assets, in-process research and developmentcapitalization and equity-based compensation expense. Magic's management alsouses the foregoing non-GAAP financial measures, in addition to the correspondingGAAP measures, in reviewing the company's financial results. These non-GAAP financial measures are not in accordance with, or an alternativefor, generally accepted accounting principles and may be different from non-GAAPfinancial measures used by other companies. In addition, these non-GAAPfinancial measures are not based on any comprehensive set of accounting rules orprinciples. Magic believes that non-GAAP financial measures have limitations inthat they do not reflect all of the amounts associated with Magic's results ofoperations as determined in accordance with GAAP and that these measures shouldonly be used to evaluate Magic's results of operations in conjunction with thecorresponding GAAP measures. Please refer to the Reconciliation of Selected Financial Metrics from GAAP toNon-GAAP tables below. 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. Magic Software Enterprises Ltd Consolidated Statements of Operations (In thousands of U.S. dollars, except per share data) Three months ended Nine months ended September 30, September 30, ---------------- ---------------- 2007 2006 2007 2006 -------- -------- --------- -------- (unaudited) (unaudited) (unaudited) (unaudited) -------- -------- --------- --------Sales $ 17,632 $ 15,117 $ 50,804 $ 45,536Cost ofrevenues 7,936 7,312 23,320 21,179 -------- -------- --------- --------Gross profit 9,696 7,805 27,484 24,357Softwaredevelopmentcosts, net 1,140 1,338 3,236 3,114Selling,general andadministrativeexpenses 7,458 7,986 21,087 24,313Restructuringexpenses - 2,125 - 2,125 -------- -------- --------- --------Totaloperatingexpenses 8,598 11,449 24,323 29,552 -------- -------- --------- --------Operatingincome (loss) 1,098 (3,644) 3,161 (5,195)Financialincome(expenses),net (172) 191 (53) 286 -------- -------- --------- --------Income (loss)before taxes 926 (3,453) 3,108 (4,909)Taxes onincome (119) (55) (462) (241) -------- -------- --------- -------- 807 (3,508) 2,646 (5,150)Minorityinterest (7) 26 (5) 94Equity gain(loss) (31) (49) (51) 20 -------- -------- --------- --------Net income(loss) 769 (3,531) 2,590 (5,036) ======== ======== ========= ========Basic netearnings(loss) perordinary share $ 0.02 $ (0.11) $ 0.08 $ (0.16) ======== ======== ========= ========Diluted netearnings(loss) perordinary share $ 0.02 $ (0.11) $ 0.08 $ (0.16) ======== ======== ========= ========Weightedaverage numberof ordinaryshares used incomputingbasic netearnings (loss) per ordinary share 31,486 31,210 31,417 31,150Weighted average number of ordinary shares used in computing diluted net earnings(loss) per ordinary share 31,831 31,210 31,970 31,150 Magic Software Enterprises Ltd RECONCILIATION OF GAAP TO NON-GAAP RESULTS (In thousands of U.S. dollars, except per share data) Three months ended Nine months ended September 30, September 30, ---------------- --------------- 2007 2006 2007 2006 -------- -------- -------- -------- (unaudited) (unaudited) (unaudited) (unaudited) -------- -------- -------- --------GAAP operatingincome (loss) $ 1,098 $ (3,644) $ 3,161 $ (5,195)Amortizationof intangibles 736 1,193 2,292 2,874Capitalizationof softwaredevelopment (698) (516) (2,310) (2,530)Stock-basedcompensation 131 - 186 - -------- -------- -------- --------Totaladjustments toGAAP 169 677 168 344 -------- -------- -------- --------Non-GAAPoperatingincome (loss) $ 1,267 $ (2,967) $ 3,329 $ (4,851) ======== ======== ======== ========GAAP netincome (loss) $ 769 $ (3,531) $ 2,590 $ (5,036)Totaladjustments toGAAP as above 169 677 168 344 -------- -------- -------- --------Non-GAAP netincome (loss) $ 938 $(2,854) $ 2,758 $ (4,692) ======== ======== ======== ========Non-GAAP basicearnings (loss) per share $ 0.03 $ (0.09) $ 0.09 $ (0.15) ======== ======== ======== ========Weightedaverage numberof ordinary shares used incomputing basic net earnings(loss) perordinary share 31,486 31,210 31,417 31,150 ======== ======== ======== ========Non-GAAP diluted earnings(loss) per share $ 0.03 $ (0.09) $ 0.09 $ (0.15) ======== ======== ======== ========Weightedaverage numberof ordinaryshares usedin computingdiluted netearnings (loss) per ordinary share 31,831 31,566 31,970 31,568 ======== ======== ======== ======== Magic Software Enterprises Ltd Consolidated Balance Sheets (In thousands of U.S. dollars) As of As of September 30, December 31, 2007 2006 ------------- ------------ (unaudited) (unaudited) ------------- ------------ASSETSCurrent AssetsCash and cash equivalents $ 12,232 $ 8,162Short term bank deposits 87 69Marketable securities 4,037 4,649Trade accounts receivable 13,429 12,365Other receivables and prepaidexpenses 3,487 2,472Inventory 280 328 ------------- ------------Total Current Assets 33,552 28,045 ------------- ------------ Non-Current AssetsSeverance pay fund 2,215 2,176Long term deposits 567 576Investment in affiliated companies 162 213Fixed assets, net 6,256 6,414Goodwill 21,647 21,624Other assets, net 10,966 10,863 ------------- ------------Total Non-Current Assets 41,813 41,866 ------------- ------------ Total Assets $ 75,365 $ 69,911 ============= ============ LIABILITIES AND SHAREHOLDERS' EQUITYCurrent LiabilitiesShort-term credit from banks $ 4,094 $ 4,514Trade accounts payable 3,237 3,491Accrued expenses and other liabilities 13,880 11,399 ------------- -------------Total Current Liabilities 21,211 19,404 ------------- ------------- Non-Current LiabilitiesLong-term loans 201 233Accrued severance pay 2,555 2,499Minority interests 137 131 ------------- -------------Total Non-Current Liabilities 2,893 2,863 ------------- --------- Shareholders' Equity 51,261 47,644 ------------- ------------- Total Liabilities and Shareholders'Equity $ 75,365 $ 69,911 ============= ============= This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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