22nd May 2008 11:41
Magic Software Reports Financial Results for Q1 2008 Sharp Rise in Cash & Equivalents to $32 million; 9% Revenue Growth with Continued Strong Gross Margin
Ra'anana, Israel, 22 May 2008 - Emblaze Ltd announces that Magic Software Enterprises Ltd. , a member of the Emblaze / Formula Group , and a leading provider of business integration, application development and deployment tools, today announced financial results for the first quarter ended March 31, 2008.
Results for the First Quarter
* Revenues for the first quarter increased by 9% to $US15.1 million compared with $US13.8 million in the first quarter of 2007. Gross margin for the quarter rose to 55% from 51% in the first quarter of 2007. * On the basis of U.S. GAAP, net profit for the quarter totaled $US52,000, or $US0.0 per share. This compared with a net profit of $US1.0 million, or $US0.03 per share, for the first quarter of 2007, which included a $US0.5 million contribution from discontinued operations. * GAAP results include amortization expense as well as non-cash charges taken for the capitalization of intangible assets and stock-based compensation. Excluding these expenses, non-GAAP net profit for the quarter was $US0.3 million, or $US0.01 per share compared to $Us0.6 million, or $0.03 per share, in the first quarter of 2007. * As of the end of the quarter, Magic's net cash equivalents (including cash, short term bank deposits and marketable securities) totaled $US32.2million compared to $US16.4 million at the end of the fourth quarter of 2007. The increase reflected the contribution of approximately $US4 million from Magic's operations, with the remainder derived from the payment received in respect of Magic's sale of its wholly-owned subsidiary, Advanced Answers On Demand (AAOD) in the fourth quarter of 2007. In accordance with U.S. GAAP, AAOD's results have been recorded as discontinued operations in the first quarter of 2007, with operating results excluding AAOD's contribution.
Comments of Management
Commenting on the results, Guy Bernstein, Active Chairman of Magic Software Enterprises, said, "Our first quarter results represent a solid beginning for 2008. Our divestment of AAOD in the fourth quarter has strengthened our cash position significantly while allowing us to increase our focus on core activities.
On the product development front, we have just announced our exciting Rich Internet Application Platform, a comprehensive platform designed to accelerate the development of complex, advanced-functionality client/server and rich internet applications. We have also been active in the Software-as-a-Service (SaaS) field, a market niche that has entered a rapid growth phase. We officially entered this market a few weeks ago at Dreamforce Europe when we launched a special edition of our flagship iBOLT business integration solution for Salesforce.com users, a significant market on its own."
Highlights of the First Quarter
* Announcement of the application development roadmap for Magic's next-generation eDeveloper composite application platform. * Introduction of iBOLT for Salesforce.com, Magic's first offering for the Software-as-a-Service (SaaS) market. Introduced at Dreamforce Europe 2008 conference.
Non-GAAP Financial Measures
This release includes non-GAAP basic and diluted earnings per share and other non-GAAP financial measures, including cost of service, research and development, selling, general and administrative, operating income, income taxes and 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 provide useful information to investors and management regarding financial and business trends relating to Magic's financial condition and results of operations as well as the net amount of cash generated by its business operations after taking into account capital spending required to maintain or expand the business.
For its internal budgeting process and in monitoring the results of the business, Magic's management uses financial statements that do not include amortization of purchased intangible assets, in-process research and development capitalization and equity-based compensation expense. Magic's management also uses the foregoing non-GAAP financial measures, in addition to the corresponding GAAP measures, in reviewing Magic's financial results.
These non-GAAP financial measures are not in accordance with, or an alternative for, generally accepted accounting principles and may be different from non-GAAP financial measures used by other companies. In addition, these non-GAAP financial measures are not based on any comprehensive set of accounting rules or principles. Magic believes that non-GAAP financial measures have limitations in that they do not reflect all of the amounts associated with Magic's results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate Magic's results of operations in conjunction with the corresponding GAAP measures.
Please refer to the Reconciliation of Selected Financial Metrics from GAAP toNon-GAAP tables below.Enquiries:Emblaze Hadas Gazit, Hagit Gal + 972 9 7699302/ 339 About Magic Software
Magic Software Enterprises Ltd. is a leading provider of business integration, application development and deployment tools. Magic Software has a presence in over 50 countries as well as a global network of ISV's, system integrators, value-added distributors and resellers, and OEM partners. The company's award-winning code-free solutions give partners and customers the power to leverage existing IT resources, enhance business agility and focus on core business priorities. Magic Software's technological approach, product roadmap and corporate strategy are recognized by leading industry analysts. Magic Software has partnerships with global IT leaders including SAP, salesforce.com, IBM and Oracle. For more information about Magic Software Enterprises and its products and services, visit www.magicsoftware.com.
Magic Software is a subsidiary of Formula Systems in the Emblaze Group of companies.
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.
About Emblaze
Emblaze Ltd is a group of technology companies addressing both growth and innovation activities thus combining the stability of "bread and butter" mature technology enterprises with "high-risk / high-reward" investments in innovation.
Our Growth arm includes Formula Systems , which harbors the following subsidiaries: Magic Software Enterprises Ltd. develops, markets and supports composite application development and deployment platforms with a service-oriented architecture (SOA), including application integration and business process management (BPM), with existing and legacy systems; Matrix IT Ltd. (TASE: MTRX) is one of Israel's leading integration and information technology services companies, active in four principal areas: software solutions and services, software products, infrastructure solutions and hardware products, and training and assimilation.; Sapiens International Corporation N.V. is a provider of IT solutions that modernize business processes to enable insurance and other companies to quickly adapt to changes; and nextSource Inc., designs, develops and implements web-based, high quality, innovative human capital management solutions.
Our Innovation arm includes Emblaze Mobile, a designer of advanced mobile devices; EMOZE, a provider of Push Email and synchronisation technology for mobile devices; and ZONE-IP (Emblaze V CON), a provider of wireless video communications technologies and conferencing solutions for operators and enterprise markets over IP networks.
The Emblaze Group is traded on the London Stock Exchange since 1996.www.Emblaze.com Magic Software Enterprises Ltd Consolidated Statements of Operations (In thousandsof U.S. dollars, except per share data) Three months ended March 31, 2008 2007 (unaudited) (unaudited) Sales 15,069 13,831 Cost of sales 6,785 6,766 Gross profit 8,284 7,065 Software development costs, net 560 626 Selling, general and administrative 7,860 5,971expenses Total operating expenses 8,420 6,597 Operating income (loss) (136) 468 Financial income, net 180 106 Other income, net 39 25 Income before taxes 83 599 Taxes on income 23 142 60 457 Equity gain (loss) (8) 10 Net income before discontinued 52 467operation Net income from discontinued operation 0 537 Net income after discontinued 52 1,004operation Basic net earnings per ordinary share 0 0.03 Diluted net earnings per ordinary 0 0.03share Weighted average number of 31,763 31,306 ordinary shares used in computing basic net earnings per ordinary share Weighted average number of 32,001 31,990ordinary shares used in computing diluted net earnings per ordinary share Magic Software Enterprises Ltd RECONCILIATION OF GAAP TO NON-GAAP RESULTS (In thousandsof U.S. dollars, except per share data) Three months ended March 31, 2008 2007 (unaudited) (unaudited) GAAP operating income (loss) (136) 468 Amortization of intangibles 578 822 Capitalization of software (856) (764) development Stock-based compensation 491 34 Total adjustments to GAAP 213 92 Non-GAAP operating income (loss) 77 560 GAAP net income (loss) before 52 468 discontinued operation Total adjustments to GAAP as above 213 92 Non-GAAP net income (loss) before 265 560 discontinued operation GAAP net income (loss) 52 1,004 Total adjustments to GAAP as above 213 92 Non-GAAP 265 1,096 Non-GAAP basic earnings 0.01 0.04per share Weighted average number of 31,763 31,306ordinary shares used in computing basic net earnings per ordinary share Non-GAAP diluted earnings per 0.01 0.03share Weighted average number of 32,001 31,990ordinary shares used in computing diluted net earnings per ordinary share Magic Software Enterprises Ltd Consolidated Balance Sheets (In thousandsof U.S. dollars) As of As of March 31, December 31, 2008 2007 (unaudited) (unaudited) ASSETS Current Assets Cash and cash equivalents 29,139 12,178 Short term bank deposits 102 89 Marketable securities 2,994 4,090 Trade accounts receivable 13,591 12,941 Other receivables and prepaid 2,824 2,010expenses Debtors from a subsidiaries sale 16,000 Current assets of discontinued 35 41operations Total Current Assets 48,685 47,349 Non-Current Assets Severance pay fund 2,093 1,925 Long term deposits 511 472 Investment in affiliated companies 119 127 Fixed assets, net 5,755 5,758 Goodwill 16,514 15,986 Other assets, net 10,995 10,681 Total Non-Current Assets 35,987 34,949 Total Assets 84,672 82,298 Current Liabilities Short-term credit from banks 175 3,621 Trade accounts payable 2,933 2,999 Accrued expenses and other 7,943 9,169liabilities Deferred Revenues 8,096 2,314 Current Liabilities of discontinued 465 503operation Total Current Liabilities 19,612 18,606 Non-Current Liabilities Long-term loans 140 132 Accrued severance pay 2,330 2,316 Minority interests 4 - Total Non-Current Liabilities 2,474 2,448 Shareholders' Equity 62,586 61,244
Total Liabilities and Shareholders' 84,672 82,298 Equity
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