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MGIC Magic Software Enterprises

Filed: 10 May 21, 6:08am

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 6-K

 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 OF

THE SECURITIES EXCHANGE ACT OF 1934

 

For the month of May 2021

Commission File Number 0-19415

 

MAGIC SOFTWARE ENTERPRISES LTD.

(Translation of Registrant’s name into English)

 

Terminal Center, 1 Yahadut Canada Street, Or-Yehuda, Israel 6037501

(Address of Principal Executive Office)

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

 

Form 20-F ☒            Form 40-F ☐

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐

  

 

 

 

 

 

CONTENTS

 

Exhibit No.

 

Title of Exhibit

99.1

 

Magic Software Reports First Quarter 2021 Financial Results

  

1

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

  

 

MAGIC SOFTWARE ENTERPRISES LTD.

 

 

 

By: 

/s/ Asaf Berenstin

 

Name: 

Asaf Berenstin

 

Title:

Chief Financial Officer

 

Dated: May 10, 2021

 

 

2

 


Exhibit 99.1

 

PRESS RELEASE

 

Magic Software Reports First Quarter 2021 Financial Results

 

Or Yehuda, Israel, May 10, 2021 – Magic Software Enterprises Ltd. (NASDAQ and TASE: MGIC), a global provider of end-to-end integration and application development platforms solutions and IT consulting services, announced today its financial results for the first quarter ended March 31, 2021.

 

Summary Results for First Quarter 2021 (USD in millions, except per share data)

 

 

 

GAAP

 

 

 

 

 

Non-GAAP

 

 

 

 

 

 

Q1 2021

 

 

Q1 2020

 

 

% Change

 

 

Q1 2021

 

 

Q1 2020

 

 

% Change

 

Revenue

 

$

107.3

 

 

$

85.2

 

 

 

25.9

%

 

$

107.3

 

 

$

85.2

 

 

 

25.9

%

Gross Profit

 

$

30.2

 

 

$

25.2

 

 

 

19.8

%

 

$

31.7

 

 

$

26.7

 

 

 

18.6

%

Gross Margin

 

 

28.1

%

 

 

29.6

%

 

 

(150

)bps

 

 

29.6

%

 

 

31.4

%

 

 

(180

)bps

Operating Income

 

$

12.2

 

 

$

8.7

 

 

 

39.6

%

 

$

15.0

 

 

$

11.0

 

 

 

36.6

%

Operating Margin

 

 

11.4

%

 

 

10.3

%

 

 

110

bps

 

 

14.0

%

 

 

12.9

%

 

 

110

bps

Net Income (*)

 

$

7.5

 

 

$

5.9

 

 

 

28.9

%

 

$

10.3

 

 

$

9.4

 

 

 

9.5

%

Diluted EPS

 

$

0.15

 

 

$

0.12

 

 

 

25.0

%

 

$

0.21

 

 

$

0.19

 

 

 

10.5

%

 

 

(*)

Attributable to Magic Software’s shareholders.

 

Financial Highlights for the First Quarter Ended March 31, 2021

 

 

Revenues for the first quarter ended March 31, 2021 increased 25.9% to $107.3 million compared to $85.2 million in the same period last year.

 

 

Operating income for the first quarter ended March 31, 2021 increased 39.6% to $12.2 million compared to $8.7 million in the same period last year.

 

 

Non-GAAP operating income for the first quarter ended March 31, 2021 increased 36.6% to $15.0 million compared to $11.0 million in the same period last year.

 

 

Net income attributable to Magic’s shareholders for the first quarter ended March 31, 2021 increased 28.9% to $7.5 million, or $0.15 per fully diluted share, compared to $5.9 million, or $0.12 per fully diluted share in the same period last year.

 

 

Non-GAAP net income attributable to Magic’s shareholders for the first quarter ended March 31, 2021 increased 9.5% to $10.3 million, or $0.21 per fully diluted share, compared to $9.4 million, or $0.19 per fully diluted share, in the same period last year.

 

 

Cash flow from operating activities for the first quarter ended March 31, 2021 amounted to $15.9 million compared to $13.1 million in the same period last year.

 

 

As of March 31, 2021, Magic’s net cash, cash equivalents, short and long-term bank deposits and marketable securities amounted to $100.8 million.

 

 

Magic Software increases its 2021 revenue guidance to a range of $425 to $435 million from its prior range of $420 to $430 million, reflecting annual growth of 13.5% to 17.2%.

 

1

 

 

Guy Bernstein, Chief Executive Officer of Magic Software Enterprises, said: “Our Solid execution in the first quarter delivered 26% revenue growth, and our non-GAAP operating margin increased to 14.0% from 12.9% in the same period last year. Our revenue growth in the first quarter validates our strategy of building a broad business portfolio, which provides the foundation for our continued solid performance and growth. With a strategic focus, increasing global market demand for digital transformations and the steps we have taken over the past year to streamline our business activity, Magic Software is well positioned for continued strong financial performance.”

 

Conference Call Details

 

Magic’s management will host a conference call on Monday, May 10, at 10:00 am Eastern Daylight Time (7:00 am Pacific Daylight Time, 17:00 Israel Daylight Time) to review and discuss Magic’s results.

 

To participate, please call one of the following teleconferencing numbers. Please begin placing your calls at least 10 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: +1-888-668-9141

 

UK: 0-800-917-5108

 

ISRAEL: 03-918-0609

 

ALL OTHERS: +972-3-918-0609

 

For those unable to join the live call, a replay of the call will be available under the Investor Relations section of Magic’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’s shareholders and Non-GAAP basic and diluted earnings per share.

 

Magic 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’s financial condition and results of operations. Magic’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 in connection with GAAP results. Magic 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 relates to acquisition of new businesses

 

 

 


 

The related tax, non-controlling interests and redeemable non-controlling interests effects of the above items;

 

2

 

 

 

Change in valuation of contingent consideration related to acquisitions;

 

 

 


 

Change in value of put options of redeemable non-controlling interests;

 

 

 


 

Change in deferred tax assets on carry forward tax losses;

 

Reconciliation tables 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” 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, 2020 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

 

3

 

 

MAGIC SOFTWARE ENTERPRISES LTD.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

U.S. Dollars in thousands (except per share data)

 

 

 

Three months ended

 

 

 

March 31,

 

 

 

2021

 

 

2020

 

 

 

Unaudited

 

Revenues

 

$

107,298

 

 

$

85,208

 

Cost of revenues

 

 

77,109

 

 

 

60,016

 

Gross profit

 

 

30,189

 

 

 

25,192

 

Research and development, net

 

 

2,196

 

 

 

2,174

 

Selling, marketing and general and administrative expenses

 

 

15,785

 

 

 

14,272

 

Total operating costs and expenses

 

 

17,981

 

 

 

16,446

 

Operating income

 

 

12,208

 

 

 

8,746

 

Financial expenses (income), net

 

 

1,146

 

 

 

(517

)

Income before taxes on income

 

 

11,062

 

 

 

9,263

 

Taxes on income

 

 

2,270

 

 

 

1,988

 

Net income

 

$

8,792

 

 

$

7,275

 

Net income attributable to redeemable non-controlling interests

 

 

(731

)

 

 

(324

)

Net income attributable to non-controlling interests

 

 

(518

)

 

 

(1,098

)

Net income attributable to Magic’s shareholders

 

$

7,543

 

 

$

5,853

 

 

 

 

 

 

 

 

 

 

Net earnings per share attributable to Magic’s shareholders :

 

 

 

 

 

 

 

 

Basic

 

$

0.15

 

 

$

0.12

 

Diluted

 

$

0.15

 

 

$

0.12

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares used in computing net earnings per share

 

 

 

 

 

 

 

 

Basic

 

 

49,035

 

 

 

48,958

 

Diluted

 

 

49,082

 

 

 

49,046

 

 

4

 

 

Summary of Non-GAAP Financial Information

U.S. Dollars in thousands (except per share data)

 

 

 

Three months ended

 

 

 

March 31,

 

 

 

2021

 

 

2020

 

 

 

Unaudited

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

107,298

 

 

 

100

%

 

$

85,208

 

 

 

100

%

Gross profit

 

 

31,713

 

 

 

29.6

%

 

 

26,748

 

 

 

31.4

%

Operating income

 

 

14,984

 

 

 

14.0

%

 

 

10,971

 

 

 

12.9

%

Net income attributable to Magic’s shareholders

 

 

10,268

 

 

 

9.6

%

 

 

9,377

 

 

 

11.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

 

$

0.21

 

 

 

 

 

 

$

0.19

 

 

 

 

 

Diluted earnings per share

 

$

0.21

 

 

 

 

 

 

$

0.19

 

 

 

 

 

 

5

 

 

MAGIC SOFTWARE ENTERPRISES LTD.

RECONCILIATION OF GAAP AND NON-GAAP RESULTS

U.S. Dollars in thousands (except per share data)

 

 

 

Three months ended

 

 

 

March 31,

 

 

 

2021

 

 

2020

 

 

 

Unaudited

 

GAAP gross profit

 

$

30,189

 

 

$

25,192

 

Amortization of capitalized software and acquired technology

 

 

1,369

 

 

 

1,288

 

Amortization of other intangible assets

 

 

155

 

 

 

268

 

Non-GAAP gross profit

 

$

31,713

 

 

$

26,748

 

 

 

 

 

 

 

 

 

 

GAAP operating income

 

$

12,208

 

 

$

8,746

 

Gross profit adjustments

 

 

1,524

 

 

 

1,556

 

Amortization of other intangible assets

 

 

1,580

 

 

 

1,240

 

Capitalization of software development

 

 

(824

)

 

 

(844

)

Acquisition-related costs

 

 

5

 

 

 

273

 

Stock-based compensation

 

 

491

 

 

 

-

 

Non-GAAP operating income

 

$

14,984

 

 

$

10,971

 

 

 

 

 

 

 

 

 

 

GAAP net income attributable to Magic’s shareholders

 

$

7,543

 

 

$

5,853

 

Operating income adjustments

 

 

2,776

 

 

 

2,225

 

Amortization expenses attributed to non-controlling interests and redeemable non-controlling interests

 

 

(165

)

 

 

-

 

Changes in unsettled fair value of contingent consideration related to acquisitions

 

 

437

 

 

 

773

 

Deferred taxes on the above items

 

 

(323

)

 

 

526

 

Non-GAAP net income attributable to Magic’s shareholders

 

$

10,268

 

 

$

9,377

 

 

 

 

 

 

 

 

 

 

Non-GAAP basic net earnings per share

 

$

0.21

 

 

$

0.19

 

Weighted average number of shares used in computing basic net earnings per share

 

 

49,035

 

 

 

48,958

 

 

 

 

 

 

 

 

 

 

Non-GAAP diluted net earnings per share

 

$

0.21

 

 

$

0.19

 

Weighted average number of shares used in computing diluted net earnings per share

 

 

49,135

 

 

 

49,046

 

 

6

 

 

MAGIC SOFTWARE ENTERPRISES LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS

U.S. Dollars in thousands

 

 

 

March 31,

 

 

December 31,

 

 

 

2021

 

 

2020

 

 

 

Unaudited

 

 

Unaudited

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

Cash and cash equivalents

 

$

97,562

 

 

$

88,127

 

Short-term bank deposits

 

 

289

 

 

 

289

 

Marketable securities

 

 

1,185

 

 

 

1,238

 

Trade receivables, net

 

 

113,867

 

 

 

111,059

 

Other accounts receivable and prepaid expenses

 

 

11,423

 

 

 

10,513

 

Total current assets

 

 

224,326

 

 

 

211,226

 

 

 

 

 

 

 

 

 

 

LONG-TERM RECEIVABLES:

 

 

 

 

 

 

 

 

Severance pay fund

 

 

4,449

 

 

 

4,673

 

Deferred tax assets

 

 

6,048

 

 

 

6,397

 

Operating lease right-of-use assets

 

 

24,059

 

 

 

24,509

 

Other long-term receivables

 

 

2,982

 

 

 

3,211

 

Other long-term deposits

 

 

1,796

 

 

 

2,296

 

Total long-term receivables

 

 

39,334

 

 

 

41,086

 

 

 

 

 

 

 

 

 

 

PROPERTY AND EQUIPMENT, NET

 

 

6,043

 

 

 

5,988

 

IDENTIFIABLE INTANGIBLE ASSETS AND GOODWILL, NET

 

 

185,307

 

 

 

189,086

 

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

$

455,010

 

 

$

447,386

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

Short-term debt

 

$

11,103

 

 

$

11,529

 

Trade payables

 

 

14,855

 

 

 

14,250

 

Accrued expenses and other accounts payable

 

 

55,152

 

 

 

41,846

 

Current maturities of operating lease liabilities

 

 

3,869

 

 

 

3,413

 

Liabilities due to acquisition activities

 

 

4,925

 

 

 

4,998

 

Deferred revenues and customer advances

 

 

13,667

 

 

 

8,793

 

Total current liabilities

 

 

103,571

 

 

 

84,829

 

 

 

 

 

 

 

 

 

 

NON-CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

Long-term debt

 

 

11,910

 

 

 

13,352

 

Deferred tax liability

 

 

16,876

 

 

 

17,639

 

Long-term operating lease liabilities

 

 

20,201

 

 

 

21,109

 

Long-term liabilities due to acquisition activities

 

 

9,549

 

 

 

10,926

 

Accrued severance pay

 

 

5,299

 

 

 

5,545

 

Total non-current liabilities

 

 

63,835

 

 

 

68,571

 

 

 

 

 

 

 

 

 

 

REDEEMABLE NON-CONTROLLING INTERESTS

 

 

24,805

 

 

 

24,980

 

 

 

 

 

 

 

 

 

 

EQUITY:

 

 

 

 

 

 

 

 

Magic Software Enterprises equity

 

 

254,239

 

 

 

260,431

 

Non-controlling interests

 

 

8,560

 

 

 

8,575

 

Total equity

 

 

262,799

 

 

 

269,006

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES, REDEEMABLE NON-CONTROLLING INTERESTS AND EQUITY

 

$

455,010

 

 

$

447,386

 

 

7

 

 

MAGIC SOFTWARE ENTERPRISES LTD.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

U.S. Dollars in thousands

 

 

 

For the three months ended
March 31,

 

 

 

2021

 

 

2020

 

 

 

Unaudited

 

 

Unaudited

 

 

 

 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

8,792

 

 

$

7,275

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

3,505

 

 

 

3,011

 

Stock-based compensation

 

 

491

 

 

 

-

 

Change in deferred taxes, net

 

 

(290

)

 

 

97

 

Amortization of marketable securities premium and accretion of discount

 

 

54

 

 

 

43

 

Net change in operating assets and liabilities:

 

 

 

 

 

 

 

 

Trade receivables, net

 

 

(5,007

)

 

 

1,871

 

Other long-term and short-term accounts receivable and prepaid expenses

 

 

(319

)

 

 

143

 

Trade payables

 

 

824

 

 

 

152

 

Exchange rate of loans

 

 

(564

)

 

 

(688

)

Accrued expenses and other accounts payable

 

 

3,218

 

 

 

33

 

Deferred revenues

 

 

5,162

 

 

 

1,190

 

Net cash provided by operating activities

 

 

15,866

 

 

 

13,127

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capitalized software development costs

 

 

(823

)

 

 

(844

)

Purchase of property and equipment

 

 

(510

)

 

 

(488

)

Cash paid in conjunction with acquisitions, net of acquired cash

 

 

-

 

 

 

(727

)

Proceeds from maturity and sale of marketable securities

 

 

-

 

 

 

3,159

 

Investment in short-term bank deposits

 

 

-

 

 

 

(30

)

Net cash provided by (used in) investing activities

 

 

(1,333

)

 

 

1,070

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from exercise of options by employees

 

 

-

 

 

 

61

 

Dividend paid

 

 

-

 

 

 

(55

)

Dividend paid to non-controlling interests

 

 

(207

)

 

 

-

 

Dividend paid to redeemable non-controlling interests

 

 

-

 

 

 

(923

)

Purchase of redeemable non-controlling interest

 

 

-

 

 

 

(15,046

)

Payments of deferred and contingent consideration related to acquisitions

 

 

(2,752

)

 

 

-

 

Short-term and long-term loans received

 

 

210

 

 

 

-

 

Repayment of short-term and long-term loans

 

 

(1,166

)

 

 

(1,971

)

Net cash used in financing activities

 

 

(3,915

)

 

 

(17,934

)

 

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

 

(1,183

)

 

 

(1,542

)

 

 

 

 

 

 

 

 

 

Increase (decrease) in cash and cash equivalents

 

 

9,435

 

 

 

(5,279

)

Cash and cash equivalents at the beginning of the period

 

 

88,127

 

 

 

81,915

 

Cash and cash equivalents at end of the period

 

$

97,562

 

 

$

76,636

 

 

8