Magic Reports Second Quarter 2014 Results with Revenues Increasing 17% Year over Year to $40.6 Million, and Non-GAAP Operating

 Magic Reports Second Quarter 2014 Results with Revenues Increasing 17% Year
over Year to $40.6 Million, and Non-GAAP Operating Income Increasing 28% Year
                          over Year to $6.0 Million

Revenues for the first half of 2014 increased 20% year over year to $81.6
million; Non-GAAP operating income for the first half increased 25% to $12.4
million

PR Newswire

OR YEHUDA, Israel, Aug. 11, 2014

OR YEHUDA, Israel, Aug. 11, 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 six months and second quarter ended June30,
2014.

Financial Highlights for the Second Quarter Ended June30, 2014

  oRevenues for the second quarter increased 17% year over year to
    $40.6million from $34.8million in the same period last year.
  oOperating income for the second quarter increased 26% to $5.1million,
    compared to $4.1million in the same period last year; Non-GAAP operating
    income for the second quarter increased 28% to $6.0million, compared to
    $4.7million in the same period last year.
  oNet income for the second quarter increased 11% to $3.9million (or $0.09
    per fully diluted share) compared to $3.5million (or $0.09 per fully
    diluted share) in the same period last year; Non-GAAP net income for the
    second quarter increased 24% to $4.7million, compared to $3.8million in
    the same period last year.

Financial Highlights for the Six-Month Period Ended June30, 2014

  oRevenues for the first half of 2014 increased 20% to $81.6million
    compared to $68.2million in the same period last year.
  oOperating income for the first half of 2014 increased 27% to $11.1million
    compared to $8.7million in the same period last year; Non-GAAP operating
    income for the first half of 2014 increased 25% to $12.4million compared
    to $9.9million in the same period last year.
  oNet income for the first half of 2014 increased 19% to $8.3million (or
    $0.20 per fully diluted share) compared to $7.0million (or $0.19 per
    fully diluted share) in the same period last year. Non-GAAP net income for
    the first half of 2014 increased 20% to $9.7million compared to
    $8.0million in the same period last year.
  oOperating cash flow for the first half of 2014 totaled approximately
    $12million.
  oTotal net cash, cash equivalents and short-term investments as of June30,
    2014, amounted to $92.8million.

Comments of Management

Guy Bernstein, Chief Executive Officer of Magic Software Enterprises, said, "I
am very pleased to report that Magic maintained double-digit growth momentum
through the second quarter and first half of 2014 with strong performance in
sales and profitability across our products and professional services. We are
further encouraged by the favorable reception for our latest enterprise
mobility releases, offering user-experience enhancements and a component-based
mobile accelerator framework."

"Our business visibility coupled with our well-diversified portfolio and
global reach gives us the confidence to reassert our commitment to our
previously announced revenue guidance of $161million to $165million for the
full-year 2014," added Bernstein.

Conference Call Details

Magic's Management will host an interactive conference today, August 11, 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: 1.888.668.9141

UK: 0 800 917 5108

ISRAEL: 03.918.0650

INTERNATIONAL: +972.3.918.0650

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  Six months ended
                                       June 30,             June 30,
                                       2014       2013      2014      2013
                                       Unaudited            Unaudited
Non-GAAP
Revenues                               $ 40,633   $ 34,756  $ 81,582  $ 68,170
Gross profit                           16,740     14,900    34,457    29,446
Operating income                       6,023      4,690     12,431    9,921
Net income attributable to Magic       4,715      3,792     9,677     8,032
Software shareholders
Basic earnings per share               0.11       0.10      0.23      0.22
Diluted earnings per share             0.11       0.10      0.23      0.22

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      Six months ended
                              June 30,                 June 30,
                              2014         2013        2014         2013
                              Unaudited                Unaudited
Revenues                      $ 40,633    $ 34,756   $ 81,582    $ 68,170
Cost of Revenues              24,965       20,965      49,272       40,855
Gross profit                 15,668       13,791      32,310       27,315
Research and development,     1,220        919         2,400        1,802
net
Selling, marketing and
general and
 administrative expenses   9,321        8,805       18,830       16,805
Total operating costs and     10,541       9,724       21,230       18,607
expenses
Operating income             5,127        4,067       11,080       8,708
Financial expenses, net       321          122         460          520
Income before taxes on        4,806        3,945       10,620       8,188
income
Taxes on income               646          282         1,612        777
Net income                    $  4,160   $  3,663   $  9,008   $  7,411
Net income attributable to    (308)        (182)       (661)        (410)
non-controlling interests
Net income attributable to
Magic Software's              $  3,852   $  3,481   $  8,347   $  7,001
Shareholders
Net earnings per share
attributable to
 Magic Software's
shareholders:
Basic                        $   0.09  $   0.10  $   0.20  $   0.19
Diluted                       $   0.09  $   0.09  $   0.20  $   0.19
Weighted average number of
shares used in
 computing net earnings
per share attributable to
 Magic Software's
shareholders:
 Basic                 44,158       36,722      42,407       36,691
                                           .
 Diluted               44,470       37,243      42,563       37,165



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   Six months ended
                                    June 30,              June 30,
                                    2014       2013       2014       2013
                                    Unaudited             Unaudited
GAAP gross profit                   $ 15,668   $ 13,791   $ 32,310   $ 27,315
Amortization of capitalized         992        1,037      1,992      2,010
software
Amortization of other intangible    73         70         147        115
assets
Stock-based compensation            7          2          8          6
Non-GAAP gross profit               $ 16,740   $ 14,900   $ 34,457   $ 29,446
GAAP operating income               $  5,127  $  4,067  $ 11,080   $  8,708
Gross profit adjustments            1,072      1,109      2,147      2,131
Amortization of other intangible    857        714        1,693      1,403
assets
Capitalization of software          (1,142)    (1,290)    (2,241)    (2,500)
development
Change in valuation of contingent   -          -          (400)      -
consideration
Stock-based compensation            109        90         152        179
Non-GAAP operating income           $  6,023  $  4,690  $ 12,431   $  9,921
GAAP net income attributable to     $  3,852  $  3,481  $  8,347  $  7,001
Magic Software's shareholders
Operating income adjustments        896        623        1,351      1,213
Unwinding of discount in
connection with liabilities due to  -          8          -          215
acquisitions
Amortization expenses attributed
to redeemable non-controlling       (37)       (30)       (74)       (60)
interests
Deferred taxes on the above items   4          (290)      53         (337)
Non-GAAP net income attributable    $  4,715  $  3,792  $  9,677  $  8,032
to Magic Software's shareholders
Non-GAAP basic net earnings per
share
 attributable to Magic Software   0.11       0.10       0.23       0.22
shareholders
Weighted average number of shares
used in
 computing basic net earnings     44,158     36,722     42,407     36,691
per share
Non-GAAP diluted net earnings per
share
 attributable to Magic Software   0.11       0.10       0.23       0.22
shareholders
Weighted average number of shares
used in
 computing diluted net earnings   44,502     37,293     42,579     37,221
per share







MAGIC SOFTWARE ENTERPRISES LTD. AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands
                                           June 30,          December 31,
                                           2014              2013
                                           Unaudited
 ASSETS
CURRENT ASSETS:
 Cash and cash equivalents             $    92,342   $     35,134
 Available-for-sale marketable         442               854
securities
 Trade receivables, net                35,377            31,976
 Other accounts receivable and prepaid 5,464             5,209
expenses
Total current assets                       133,625           73,173
LONG-TERM RECEIVABLES:
 Severance pay fund                     418               403
 Other long-term receivables            4,102             3,792
Total long-term receivables                4,520             4,195
PROPERTY AND EQUIPMENT, NET               2,095             1,773
INTANGIBLE ASSETS AND GOODWILL, NET        87,208            87,862
TOTAL ASSETS                               $   227,448    $    167,003
 LIABILITIES AND EQUITY
CURRENT LIABILITIES:
 Short-term debt                       $     1,056  $      1,055
 Trade payables                       3,827             4,149
 Accrued expenses and other accounts   15,095            16,937
payable
 Deferred tax liability                1,641             2,567
 Deferred revenues                    8,303             3,294
Total current liabilities                  29,922            28,002
NON-CURRENT LIABILITIES:
 Long-term debt                        1,945             2,274
 Long-term deferred tax liabilty       2,235             2,204
 Liabilities due to acquisition        779               1,396
activities
 Accrued severance pay            1,358             1,275
Total non-current liabilities              6,317             7,149
REDEEMABLE NON-CONTROLLING INTEREST        3,184             2,721
SHAREHOLDERS' EQUITY:
 Magic Software Shareholders' equity     186,694           128,144
 Non-controlling interests               1,331             987
Total shareholders' equity                 188,025           129,131
                                           1331
TOTAL LIABILITIES, REDEEMABLE              $   227,448    $    167,003
NON-CONTROLLING INTEREST AND EQUITY







SOURCE Magic Software Enterprises Ltd.

Website: http://www.magicsoftware.com
 
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