Magic Reports First Quarter 2014 Results with Revenues Increasing 23% Year over Year to $40.9 Million, and Net Income Increasin

  Magic Reports First Quarter 2014 Results with Revenues Increasing 23% Year
 over Year to $40.9 Million, and Net Income Increasing 28% Year over Year to
                                 $4.5 Million

Non-GAAP operating income increased 23% year over year to $6.4 million

PR Newswire

OR YEHUDA, Israel, May 7, 2014

OR YEHUDA, Israel, May 7, 2014 /PRNewswire/ --Magic Software Enterprises Ltd.
(NASDAQ and TASE: MGIC), a global provider ofmobileand
cloud-enabledapplication andbusiness integration platforms, announced today
its financial results for the quarter ended March31, 2014.

Financial Highlights for the First Quarter Ended March31, 2014

  oRevenues for the first quarter increased 23% year over year to $40.9
    million from $33.4 million in the same period last year.
  oOperating income for the first quarter increased 28% to $6.0 million,
    compared to $4.6 million in the same period last year; Non-GAAP operating
    income for the first quarter increased 23% to $6.4 million, compared to
    $5.2 million in the same period last year.
  oNet income for the first quarter increased 28% to $4.5 million compared to
    $3.5 million in the same period last year; Non-GAAP net income for the
    first quarter increased 17% to $5.0 million, compared to $4.2 million in
    the same period last year.
  oOperating cash flow for the quarter amounted to $4.5 million.
  oDuring the first quarter, we successfully raised net proceeds of
    approximately $54.7 million in a public offering. As of March 31, 2014 our
    total cash, cash equivalents and short-term investments amounted to $87.9
    million.

Comments of Management

Guy Bernstein, Chief Executive Officer of Magic Software Enterprises, said, "I
am very pleased to report another excellent quarter with strong performance
across our products and professional services in all regions. Our revenue
streams are growing in line with Magic's strategic development goals."

"This strong start to 2014 along with the additionalcapital from our recent
public offering puts us on track to continue to create and deliver long-term
shareholder value. We are confident in our growth strategy and are
establishing revenue guidance in the range of $161million to $165million for
the full-year 2014," added Bernstein.

Conference Call Details

Magic's Management will host an interactive conference today, May 7, at
10:00am Eastern Time (7:00am Pacific Time, 17:00 Israel Time). On the call,
management will review and discuss the results, and will also be available to
answer investors' questions.

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: 1.888.407.2553

UK: 0 800 917 5108

ISRAEL: 03 918 0610

INTERNATIONAL: +972 3 918 0610

For those unable to listen to the live call, a replay of the call will be
available for three months from the day after the call under the investor
relations section of Magic's website.

Non-GAAP Financial Measures

This release includes non-GAAP operating income, net income, basic and diluted
earnings per share and other non-GAAP financial measures. These non-GAAP
measures exclude the following items:

  oAmortization of purchased intangible assets;
  oIn-process research and development capitalization and amortization;
  oEquity-based compensation expense;
  oChange in valuation of contingent consideration; and
  oThe related tax effects of the above items.

Summary of Non-GAAP Financial Information

U.S. Dollars in thousands, except per share amounts

                                                       Three months ended
                                                       March 31,
                                                       2014      2013
                                                       Unaudited
Non-GAAP
Revenues                                               $ 40,949  $ 33,414
Gross profit                                           23,260    18,875
Operating income                                       6,408     5,231
Net income attributable to Magic Software shareholders 4,962     4,240
Basic earnings per share                               0.13      0.12
Diluted earnings per share                             0.12      0.11

Magic Software's management believes that the presentation of non-GAAP
measures provides useful information to investors and management regarding
financial and business trends relating to the Company'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.

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 Software believes that non-GAAP
financial measures have limitations in that they do not reflect all of the
amounts associated with Magic Software's results of operations as determined
in accordance with GAAP and that these measures should only be used to
evaluate Magic Software's results of operations in conjunction with the
corresponding GAAP measures.

Please refer to the Reconciliation of Selected Financial Metrics from GAAP to
Non-GAAP tables below.

About Magic Software Enterprises

Magic Software Enterprises Ltd. (NASDAQ and TASE: MGIC) is a global provider
of mobile and cloud-enabled application and business integration platforms.

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,"
"expects," "believes" 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 on the basis of 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, 2013 and subsequent reports and registration
statements filed 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:
Tania Amar, VP Global Marketing
Magic Software Enterprises
Tel: +972 (0)3 538 9300
tania@magicsoftware.com



MAGIC SOFTWARE ENTERPRISES LTD. AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
U.S. dollars in thousands (except per share data)
                                                       Three months ended
                                                       March 31,
                                                       2014         2013
                                                       Unaudited
Revenues                                               $ 40,949    $ 33,414
Cost of Revenues                                       24,307       19,890
Gross profit                                          16,642       13,524
Research and development, net                          1,180        883
Selling, marketing and general and
 administrative expenses                            9,509        8,000
Total operating costs and expenses                     10,689       8,883
Operating income                                      5,953        4,641
Financial expenses, net                                (139)        (398)
Income before taxes on income                          5,814        4,243
Taxes on income                                        966          495
Net income                                             $  4,848   $  3,748
Net income attributable to non-controlling interests   (353)        (228)
Net income attributable to Magic Software's            $  4,495   $  3,520
Shareholders
Net earnings per share attributable to
 Magic Software's shareholders:
Basic                                                 $   0.11  $   0.10
Diluted                                                $   0.11  $   0.10
Weighted average number of shares used in
 computing net earnings per share attributable
to
 Magic Software's shareholders:
 Basic                                          39,505       36,594
 Diluted                                        39,858       37,096



MAGIC SOFTWARE ENTERPRISES LTD. AND ITS SUBSIDIARIES
RECONCILIATION OF GAAP AND NON-GAAP RESULTS
STATEMENTS OF INCOME FOR COMPARATIVE PURPOSES
U.S. dollars in thousands (except per share data)
                                                          Three months ended
                                                          March 31,
                                                          2014       2013
                                                          Unaudited
GAAP gross profit                                         $ 16,642   $ 13,524
Amortization of capitalized software                      954        973
Amortization of other intangible assets                   46         45
Stock-based compensation                                  1          4
Non-GAAP gross profit                                     $ 17,643   $ 14,546
GAAP operating income                                     $  5,953  $  4,641
Gross profit adjustments                                  1,001      1,022
Amortization of other intangible assets                   910        689
Capitalization of software development                    (1,099)    (1,210)
Change in valuation of contingent consideration           (400)      -
Stock-based compensation                                  43         89
Non-GAAP operating income                                 $  6,408  $  5,231
GAAP net income attributable to Magic Software's          $  4,495  $  3,520
shareholders
Operating income adjustments                              455        590
Unwinding of discount in connection with liabilities due  -          207
to acquisitions
Amortization expenses attributed to redeemable            (37)       (30)
non-controlling interests
Deferred taxes on the above items                         49         (47)
Non-GAAP net income attributable to Magic Software's      $  4,962  $  4,240
shareholders
Non-GAAP basic net earnings per share
 attributable to Magic Software shareholders            0.13       0.12
Weighted average number of shares used in
 computing basic net earnings per share                39,505     36,594
Non-GAAP diluted net earnings per share
 attributable to Magic Software shareholders            0.12       0.11
Weighted average number of shares used in
 computing diluted net earnings per share               39,897     37,148



MAGIC SOFTWARE ENTERPRISES LTD. AND ITS
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands
                                           March 31,         December 31,
                                           2014              2013
                                           Unaudited
 ASSETS
CURRENT ASSETS:
 Cash and cash equivalents             $    87,419   $     35,134
 Available-for-sale marketable         439               854
securities
 Trade receivables, net                37,357            31,976
 Other accounts receivable and prepaid 5,737             5,209
expenses
Total current assets                       130,952           73,173
LONG-TERM RECEIVABLES:
 Severance pay fund                     415               403
 Other long-term receivables            3,888             3,792
Total long-term receivables                4,303             4,195
PROPERTY AND EQUIPMENT, NET               1,989             1,773
INTANGIBLE ASSETS AND GOODWILL, NET        87,467            87,862
TOTAL ASSETS                               $   224,711    $    167,003
 LIABILITIES AND EQUITY
CURRENT LIABILITIES:
 Short-term debt                       $     1,055  $      1,055
 Trade payables                       4,574             4,149
 Accrued expenses and other accounts   16,140            16,937
payable
 Deferred tax liability                1,979             2,567
 Deferred revenues                    8,245             3,294
Total current liabilities                  31,993            28,002
NON-CURRENT LIABILITIES:
 Long-term debt                        2,037             2,274
 Long-term deferred tax liabilty       2,106             2,204
 Liabilities due to acquisition        539               1,396
activities
 Accrued severance pay            1,336             1,275
Total non-current liabilities              6,018             7,149
REDEEMABLE NON-CONTROLLING INTEREST        2,848             2,721
SHAREHOLDERS' EQUITY:
 Magic Software Shareholders' equity     182,675           128,144
 Non-controlling interests               1,177             987
Total shareholders' equity                 183,852           129,131
TOTAL LIABILITIES, REDEEMABLE              $   224,711    $    167,003
NON-CONTROLLING INTEREST AND EQUITY



SOURCE Magic Software Enterprises Ltd.

Website: http://www.magicsoftware.com
 
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