Net income for the year increased by 38.6% year over year to a record-breaking result of $40.7 million; non-GAAP net income for the year increased by 13% year over year to a record-breaking result of $52.0 million
OR YEHUDA, Israel, March 09, 2023 (GLOBE NEWSWIRE) — 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 fourth quarter and full year ended December 31, 2022.
Financial Highlights for the Fourth Quarter Ended December 31, 2022
- Revenues for the fourth quarter of 2022 increased by 10.6% to a record-breaking result of $147.1 million, compared to $133.0 million in the same period of the previous year. On a constant currency basis (calculated based on average currency exchange rates for the three months ended December 31, 2021), revenues for the fourth quarter of 2022 would have increased by 16.5% to a record breaking $155.0 million, with 69.6% of such revenues resulting from organic growth.
- Operating income for the fourth quarter of 2022 increased by 2.2% to a fourth quarter record-breaking $14.6 million, compared to $14.3 million in the same period of the previous year. Operating income for the fourth quarter of 2022, was negatively impacted by $1.9 million expense recorded with respect to share based payment to employees.
- Non-GAAP operating income for the fourth quarter of 2022 decreased by 2.9% to $19.2 million, compared to $19.8 million in the same period of the previous year. On a constant currency basis (calculated based on average currency exchange rates for the three months ended December 31, 2021), non-GAAP operating income for the fourth quarter of 2022 would have increased by 3.1% to a record-breaking result of $20.4 million.
- Net income attributable to Magic Software’s shareholders for the fourth quarter of 2022 increased by 54.6% to a fourth quarter record-breaking result of $10.1 million, or $0.20 per fully diluted share, compared to $6.5 million, or $0.13 per fully diluted share, in the same period of the previous year.
- Non-GAAP net income attributable to Magic Software’s shareholders for the fourth quarter of 2022 increased by 9.9% to $13.9 million, or $0.28 per fully diluted share, compared to $12.6 million, or $0.26 per fully diluted share, in the same period of the previous year.
Financial Highlights for the Year Ended December 31, 2022
- Revenues for the year increased by 18.0% to a record-breaking $566.8 million compared to $480.3 million last year. On a constant currency basis (calculated based on the average currency exchange rates during the twelve months period ended December 31, 2021), revenues for the year would have increased by 21.1% to $581.9 million, with 88.7% accounting for organic growth.
- Operating income for the year increased by 19.8% to a record-breaking $61.4 million compared to $51.2 million last year. On a constant currency basis (calculated based on the average currency exchange rates during the twelve months period ended December 31, 2021), operating income for the year would have increased by 25.2% to $64.2 million.
- Non-GAAP operating income for the year increased by 11.0% to a record-breaking $74.1 million compared to $66.8 million last year. On a constant currency basis (calculated based on the average currency exchange rates during the twelve months period ended December 31, 2021), non-GAAP operating income for year would have increased by 15.1% to $76.9 million, with 88.7% of such revenues resulting from organic growth.
- Net income attributable to Magic Software’s shareholders for the year increased by 38.6% to a record-breaking $40.7 million, or $0.79 per fully diluted share, compared to $29.3 million, or $0.60 per fully diluted share, last year.
- Non-GAAP net income attributable to Magic Software’s shareholders for the year increased by 13.0% to a record-breaking $52.0 million, or $1.06 per fully diluted share, compared to $46.0 million, or $0.94 per fully diluted share, last year.
- Cash flow from operating activities for the year, amounted to $49.5 million compared to $37.8 million last year. Cash flow from operating activities excluding the impact of payments of deferred and contingent consideration related to acquisitions amounted to $53.6 and $38.4 million for the years ended December 31, 2022, and 2021, respectively.
- As of December 31, 2022, Magic’s net cash, cash equivalents and short and long-term bank deposits amounted to $87.0 million and total financial debt amounted to $51.1 million.
- Magic is introducing 2023 annual revenue guidance of between $585 million and $593 million, reflecting annual growth of 3.2% to 4.6% (based on current currency exchange rates). Based on 2022 average currency exchange rates Magic’s 2023 annual revenue guidance would have been between $600 million and $608 million, reflecting annual growth of 5.9% to 7.3%.
Declaration of Dividend for the Second Half of 2022
- In accordance with its dividend distribution policy, the Company’s board of directors declared a semi-annual cash dividend in an amount of 30.0 cents per share and in an aggregate amount of approximately $14.7 million, which together with the dividend distributed for the first half of 2022 in an amount of approximately $14.2 million, reflects 71% of the Company’s net income attributable to its shareholders for the year.
- The dividend is payable on April 20, 2023, to all of the Company’s shareholders of record at the close of trading on the NASDAQ Global Select Market on April 10, 2023.
- 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: “I am very proud of our fourth quarter and full year achievements. During the year, we continued to make big strides across multiple fronts of our business, which is reflected by record breaking results as well as double digit growth in all our key financial indices for the year (revenues, gross profit, operating income, and net income). Our strong results demonstrate the growing investment made by enterprises and organizations worldwide to leverage their digital technologies and cloud-based platforms creating high demand for our innovative software solutions and services which together with the outstanding execution by our teams led to another year of strong performance recorded across our business. With our investment portfolio well diversified, we continue to invest organically and inorganically in our service lines and are excited about the innovative capabilities we are building to drive continued long term profitable growth and shareholder value.”
First time adoption of International Financial Reporting Standards for the Company’s consolidated financial statements for the year ended December 31, 2022
We have resolved to voluntarily adopt International Financial Reporting Standards as issued by the International Accounting Standards Board, or IFRS, for the Company’s consolidated financial statements for the year ending December 31, 2022 to be included in our annual report on Form 20-F. We believe that this change will enhance efficiency of our financial reporting, improve the comparability of our financial information across international capital markets as well as standardize our financial information. Accordingly, the Company is preparing financial statements that comply with IFRS applicable as of December 31, 2022, together with the comparative periodic data for the year ended December 31, 2021. An explanation of the principal adjustments made in presenting the Company’s U.S. GAAP financial statements, including the statement of financial position as of January 1, 2021, the Company’s date of transition to IFRS and the financial statements for the year ended December 31, 2021, in order to comply with IFRS, will be provided in our consolidated financial statements to be included in our 2022 annual report on Form 20-F. The transition to IFRS is not expected to have a material impact on the Company’s revenues, net income, or shareholders’ equity. The transition to IFRS will not have an impact on the Company’s revenue guidance for 2023.
Conference Call Details
Magic Software’s management will host a conference call on Thursday, March 9, 2023, at 10:00 am Eastern Daylight Time (7:00 am Pacific Daylight Time, 17:00 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.
<strong”>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;
- Equity-based compensation expenses;
- Costs related to acquisition of new businesses;
- The related tax, non-controlling interests and redeemable non-controlling interest’s effects of the above items;
- Change in valuation of contingent consideration related to acquisitions;
- Change in value of put options of redeemable non-controlling interests; and
- 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, 2021, which we filed on May 12, 2022, 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:
Asaf Berenstin | Chief Financial Officer
Magic Software Enterprises
ir@magicsoftware.com
