Magic Software Continues to Report Record Revenues, Operating Profits and Net Income; Net Income Increases by 284% as Compared to Q1 1999.Business Editors and Technology Writers OR YEHUDA Or Yehuda (אור יהודה) is a city in the Tel Aviv District in Israel. According to the Israel Central Bureau of Statistics (CBS), at the end of 2004 the city had a total population of 30,100. , Israel--(BUSINESS WIRE)--May 3, 2000 Magic Software Enterprises, Ltd. (Nasdaq:MGIC MGIC Mortgage Guaranty Insurance Company MGIC Montana Geographic Information Council ), a leading provider of enterprise-level e-commerce e-commerce, commerce conducted over the Internet, most often via the World Wide Web. E-commerce can apply to purchases made through the Web or to business-to-business activities such as inventory transfers. , customer service management and other business solutions, reported record sales and earnings today for the first quarter of 2000, exceeding analysts' expectations. This is the sixth quarter in a row the Company has delivered record sales performance, and the seventh consecutive quarter Magic has posted record net earnings. The Company attributed these results to growing worldwide acceptance of its e-commerce solutions, an improving market for software development tools, and increased penetration of the North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. market. First Quarter Results Total revenues for the first quarter 2000 were $21.7 million as compared to $13.6 million for the comparable period in 1999, a 58.8% increase over last year and a 16.2% increase over revenues posted in the fourth quarter of 1999. Net income for the quarter rose to $4.0 million ($0.14 earnings per share) from the $1.4 million ($0.06 earnings per share) posted for the corresponding period of 1999. Software license sales, which includes the Magic core technology and applications, for the period increased by $5.4 million (or 71.4%) compared to the same quarter last year, and represented 60.2% of total revenues. Application license sales accounted for 25.5% of total software sales, an increase of 95.5% over the fourth quarter of 1999. Sales of the core technology during the quarter increased by 5.3% over the final quarter of last year and by 27.7% over the corresponding period in 1999. Maintenance and support revenues, representing 13.2% of total revenues for the quarter, also continued to increase, up 44.1% when compared to the same period last year. The revenue growth reflects an improvement in support services support services Psychology Non-health care-related ancillary services–eg, transportation, financial aid, support groups, homemaker services, respite services, and other services and a consequent con·se·quent adj. 1. a. Following as a natural effect, result, or conclusion: tried to prevent an oil spill and the consequent damage to wildlife. b. increase in customer satisfaction due to the Company's own use of its Web-based customer relations management solution, Magic eService(TM). Consulting and training revenues were up 7.3% compared to the fourth quarter of 1999, representing 26.6% of revenues. This increase is consistent with the growth in the Company's applications sales and the greater demand for professional services (job) professional services - A department of a supplier providing consultancy and programming manpower for the supplier's products. to assist end-users with implementation and customization of those applications. Operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. increased to 24% of revenue, compared to 14% of revenue in the same period last year. Net income increased to 19% of revenue, compared to 10% of revenue in the same period last year. The increases are due to the Company's increased sales of software licenses In computing, software that is copyrighted and licensed under a software license is done under a variety of licensing schemes. For end-users there are proprietary licenses and there are free software licenses, and there are proprietary Within these schemes are further classifications. from the Magic core technology and applications. First Quarter Developments Secondary During the first quarter, Magic successfully completed a secondary offering of 4,277,000 of its ordinary shares of stock, 3,500,000 shares of which were offered by Magic and 777,000 of which were offered by Formula Group. Priced at $25.00 per share, total net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). to Magic from the offering, after deducting underwriting fees Underwriting fee The portion of the gross underwriting spread that compensates the securities firms that underwrite a public offering for their services. and expenses, was $80.6 million. Analyst Coverage Four investment houses began coverage of Magic during the first quarter. They include Merrill Lynch Merrill Lynch & Co., Inc. (NYSE: MER TYO: 8675 ), through its subsidiaries and affiliates, provides capital markets services, investment banking and advisory services, wealth management, asset management, insurance, banking and related products and services on a global basis. , Salomon Smith Barney Smith Barney is a division of Citigroup Global Capital Markets Inc., a global, full-service financial firm, that provides brokerage, investment banking and asset management services to corporations, governments and individuals around the world. , Warburg Dillon Read Investment bank created by the 1997 merger of S.G. Warburg & Co. and Dillon, Read & Co. Subsequently renamed UBS Warburg and now part of UBS AG, where the Warburg name was eventually dropped. and CIBC World Markets CIBC World Markets is the investment banking division of the Canadian Imperial Bank of Commerce. It helps governments, large companies, and other large institutions obtain capital and credit and is a primary dealer in U.S. Treasury securities. , all of which rated Magic as a "Buy." Rankings In addition to receiving high marks from the analysts, Magic also received the highest level of certification from IBM (International Business Machines Corporation, Armonk, NY, www.ibm.com) The world's largest computer company. IBM's product lines include the S/390 mainframes (zSeries), AS/400 midrange business systems (iSeries), RS/6000 workstations and servers (pSeries), Intel-based servers (xSeries) for its e-business applications. IBM uses the rankings internally to distinguish those vendors whose products are best suited for IBM's AS/400 platform and deserve special consideration for joint marketing with IBM. New Products In the first quarter, Magic introduced two new products. The first, introduced at the LinuxWorld Expo in New York City New York City: see New York, city. New York City City (pop., 2000: 8,008,278), southeastern New York, at the mouth of the Hudson River. The largest city in the U.S. during February, was the Magic Enterprise Edition v.8 development environment for Linux. Using Magic's core technology for Linux, developers now can build e-commerce and other enterprise-level business solutions directly on this rapidly growing operating platform. At the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the Commerce Expo, held in Boston in March, Magic introduced Magic eService(TM), the first of four modules comprising its customer relationship management (CRM (Customer Relationship Management) An integrated information system that is used to plan, schedule and control the presales and postsales activities in an organization. ) suite of products. Recognition In Italy, Bonfiglioli's Mosaico eMerchant application received the Software Development Best Practice 2000 award at the Trade Show Softech 2000, held March 8th in Milan. The Bonfiglioli Group, a worldwide leader in producing engines for power transmission, is using the business-to-business e-commerce solution developed by Magic to web-enable their supply chain and allow customers to configure See configuration. (software) configure - A program by Richard Stallman to discover properties of the current platform and to set up make to compile and install gcc. Cygnus configure was a similar system developed by K. their requirements online. New Partners During the quarter, Magic recruited new partners worldwide to market, sell and implement the Company's award-winning e-commerce solution, Magic eMerchant(TM). These new partners include Second Foundation, PYA Solutions, Evron Computer Systems Corp., Orlan, Karigan & Associates Ltd., Sky Technologies, and Streamline Information Systems Ltd. in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. , and Fujitsu LSI LSI: see integrated circuit. (Large Scale Integration) Between 3,000 and 100,000 transistors on a chip. See SSI, MSI, VLSI and ULSI. Technologies, Toshiba Engineering, Inc., Agrex Inc., Nav Assist Corporation and Sumisho 4S in Japan. In addition, PriceWaterhouseCoopers Consulting, Inc. will be the primary consulting partner for Magic eMerchant business in Japan. New Deals North America recorded several new Magic eMerchant deals during the quarter, including DakSoft, the IT arm of Blackhills Corporation, and EDS (Electronic Data Systems, Plano, TX, www.eds.com) Founded in 1962 by H. Ross Perot (independent candidate for the President of the U.S. in 1992), EDS is the largest outsourcing and data processing services organization in the country. , for creation of a Linux shopping mall (eLinux.com). Other new deals in North American included Pizza Hut in Canada; and Matsushita Avionics, which owns 80 percent of the inflight entertainment industry, for a document tracking system built using Magic for Linux. Other new e-commerce and CRM deals worldwide included VNU VNU Volontaires des Nations Unies (French) VNU Verenigde Nederlandse Uitgeversbedrijven (Dutch) VNU Virtual Network User Business Publications and KPD KPD Knoxville Police Department KPD Kommunistiche Partei Deutschlands (Communist Party of Germany) KPD Kokomo Police Department KPD King of Prussia, Pennsylvania (Airport Code) KPD Key Pre-Distribution Groep BV (the Netherlands); MT&T S.p.A. and Bofrost Italia S.p.A. (Italy); Compass and Aria aria (är`ēə), elaborate and often lengthy solo song with instrumental accompaniment. In the 16th cent. it was a melody improvised over a strophic bass line, and a distinction was made between instrumental, vocal, and dance arias. Dental International (France). Toyo Information Systems UK Limited (United Kingdom); Goetze Limited (India); and Castilo (Germany). Conference Call Magic will host a conference call on Thursday, May 4, at 11:00 a.m. EST EST electroshock therapy. EST abbr. electroshock therapy (8:00 a.m. PST PST Paroxysmal supraventricular tachycardia, see there ), to discuss the Company's first quarter financial results. To participate, interested parties should call the appropriate number listed below five to ten minutes prior to the start of the conference call. North America: 888/222-2994 Internationally: 973/694-6836 Callers should reference "Magic Software Q1 Earnings Conference Call" with the MCI (1) (Media Control Interface) A high-level programming interface from Microsoft and IBM for controlling multimedia devices. It provides commands and functions to open, play and close the device. (2) (Microwave Communications Inc. Worldcom Operator. Investors also can listen to the conference call over the Internet through Vcall, a service of the Investor Broadcast Network, at http://www.vcall.com. In addition, a replay of the conference call will be available for up to 90 days on the Vcall website. About Magic Software Magic Software Enterprises, a member of the Formula Group (Nasdaq:FORTY), develops, markets and supports software development and deployment technology that enables enterprises to accelerate the process of building and deploying applications that can be rapidly customized and integrated with existing systems. Magic technology, applications and professional services are available through a global network of subsidiaries, distributors and Magic solutions partners in approximately 50 countries. The Company's North American subsidiary is located at 1642 Kaiser Avenue, Irvine, Calif., 92614, telephone 949/250-1718, fax 949/250-7404, http://www.magic-sw.com. The Formula Group is an international information technology company principally engaged, through its subsidiaries and affiliates, in providing software consulting services Noun 1. consulting service - service provided by a professional advisor (e.g., a lawyer or doctor or CPA etc.) service - work done by one person or group that benefits another; "budget separately for goods and services" , developing proprietary software products and producing computer-based solutions. Except for the historical information contained herein, the matters discussed in this news release include forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. 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.
Unaudited Consolidated Statement of Operations
(US Dollars in Thousands)
--------------------------------------
Three Months ended March 31,
--------------------------------------
Q1
--------------------------------------
2000 1999
--------------------------------------
Revenues
Software sales $9,708 $7,604
Applications 3,327 0
Maintenance 2,861 1,985
Consulting & other services 5,755 4,042
--------------------------------------
Total Revenues 21,651 13,631
======================================
Cost of Revenues
Software sales 941 796
Applications 425 -
Maintenance 1,103 798
Consulting & other services 3,641 2,600
--------------------------------------
Total Cost of Revenues 6,110 4,194
--------------------------------------
Gross Profit 15,541 9,437
======================================
Research & development, net 1,003 615
Sales, marketing,
general & admin. 8,418 6,481
expenses
Depreciation 498 398
--------------------------------------
Amortization of goodwill 486 84
--------------------------------------
Operating Income 5,136 1,859
======================================
Financial (income)
expenses, net (149) 292
Income before taxes 5,285 1,567
Taxes on income 102 42
Income before minority
interest 5,183 1,525
Minority interest in
income of subsidiaries 1,176 135
Equity in earnings of
affiliate 0 23
--------------------------------------
Net Income $4,007 $1,413
======================================
Basic Earnings per Share $0.15 $0.06
Weighted Avg. Shares
Outstanding 27,294 23,574
Diluted Earnings per Share $0.14 $0.06
Diluted Weighted Avg.
Shares Outstanding 28,707 24,864
Unaudited Balance Sheets
(US Dollars in Thousands)
March 31 December 31
2000 1999
Assets
Current Assets
Cash and cash equivalents $84,888 $8,298
Accounts receivable :
Trade receivables 21,133 16,111
Related parties 172 45
Other receivables and prepaid 7,944 4,958
expenses
Inventory 304 188
--------------------------------
Total Current Assets $114,441 $29,600
--------------------------------
Severance pay fund 1,807 1,507
Investments in affiliated
companies 1,623 376
Fixed assets, net 9,365 8,649
Other assets, net 19,896 16,762
--------------------------------
Total Assets $147,132 $56,894
================================
Liabilities
Current Liabilities
Short-term bank debt 383 628
Trade payables 5,862 4,518
Accrued expenses and other
liabilities 18,446 14,787
--------------------------------
Total Current Liabilities $24,691 $19,933
--------------------------------
Long-term loans 855 295
Accrued severance pay 2,242 1,899
Minority interests 1,110 973
Shareholders' Equity
Share capital 804 712
Capital surplus 114,754 34,413
Retained earnings 2,676 (1,331)
--------------------------------
Total Shareholders' Equity $118,234 $33,794
--------------------------------
$147,132 $56,894
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