Operating income for the third quarter increased by 34% year-over-year to a record-breaking result of $16.1 million; Non-GAAP operating income for the third quarter increased by 14% year-over-year to a third quarter record-breaking result of $18.5 million
OR YEHUDA, Israel, Nov. 14, 2022 (GLOBE NEWSWIRE) — Magic Software Enterprises Ltd. (Nasdaq and TASE: MGIC), 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 ended September 30, 2022.
Financial Highlights for the Third Quarter Ended September 30, 2022
- Revenues for the third quarter of 2022 increased by 19.1% to a record-breaking result of $144.0 million, compared to $120.9 million in the same period of the previous year. On a constant currency basis, revenues for the third quarter of 2022 would have increased by 23% to a record breaking $148.8 million, with 19.1% reflecting organic growth.
- Operating income for the third quarter of 2022 increased by 33.7% to a record-breaking result of $16.1 million, compared to $12.0 million in the same period of the previous year. On a constant currency basis, operating income for the third quarter of 2022 would have increased by 40.6% to $16.9 million, with 37.7% reflecting organic growth.
- Non-GAAP operating income for the third quarter of 2022 increased by 14.4% to a third quarter record-breaking result of $18.5 million, compared to $16.2 million in the same period of the previous year. On a constant currency basis, Non-GAAP operating income for the third quarter of 2022 would have increased by 19.2% to a third quarter record-breaking result of $19.3 million, with 15.4% reflecting organic growth.
- Net income attributable to Magic Software’s shareholders for the third quarter of 2022 increased by 53.3% to a record-breaking result of $11.5 million, or $0.23 per fully diluted share, compared to $7.5 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 2022 increased by 14.9% to $13.5 million, or $0.28 per fully diluted share, compared to $11.8 million, or $0.24 per fully diluted share, in the same period of the previous year.
Financial Highlights for the Nine-Month Period Ended September 30, 2022
- Revenues for the first nine months of 2022 increased by 20.8% to a record-breaking $419.6 million compared to $347.3 million in the same period last year. On a constant currency basis, revenues for the first nine months of 2022 would have increased by 22.9% to $426.9 million, with 21.5% reflecting organic growth.
- Operating income for the first nine months of 2022 increased by 26.6% to a record-breaking $46.8 million compared to $37.0 million in the same period last year. On a constant currency basis, operating income for the first nine months of 2022 would have increased by 30.9% to $48.3 million, with 30% reflecting organic growth.
- Non-GAAP operating income for the first nine months of 2022 increased by 16.8% to a record-breaking $55.0 million compared to $47.1 million in the same period last year. On a constant currency basis, Non-GAAP operating income for the first nine months of 2022 would have increased by 20.1% to $56.5 million, with 18.8% reflecting organic growth.
- Net income attributable to Magic Software’s shareholders for the first nine months of 2022 increased by 34.1% to $30.6 million, or $0.59 per fully diluted share, compared to $22.8 million, or $0.46 per fully diluted share, in the same period last year.
- Non-GAAP net income attributable to Magic Software’s shareholders for the first nine months of 2022 increased by 14.1% to $38.1 million, or $0.77 per fully diluted share, compared to $33.4 million, or $0.68 per fully diluted share, in the same period last year.
- Cash flows from operating activities for the first nine months of 2022 amounted to $37.5 million compared to $34.2 million in the same period last year. Cash flow from operating activities excluding the impact of payments of deferred and contingent consideration related to acquisitions amounting to $41.3 million for the first nine months ended September 30, 2022.
- As of September 30, 2022, Magic Software’s net cash, cash equivalents, short and long-term bank deposits and marketable securities amounted to $88.8 million and total financial debt of $59.1 million.
- Magic Software has increased its 2022 annual revenue guidance for the third time this year to a range of $555 to $565 million, up from its prior range of $550 to $560 million, which now reflects an annual growth of 15.6% to 17.6%.
Guy Bernstein, Chief Executive Officer of Magic Software, said: “I am very proud of our third quarter achievements. During the quarter, 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 (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 quarter 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.”
Conference Call Details
Magic Software’s management will host a conference call on Monday, November 14, 2022 at 10:00 am Eastern Daylight Time (5:00 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.
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
