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Magic Software Reports Q4 and Full Year 2009 Results

Annual Net Profits Increased to $6.2 Million Along with Improved Operations

Magic Software, a provider of application platforms and business and process integration solutions, today announced its financial results for the fourth quarter and full year ended December 31, 2009.

Financial Highlights for the Fourth Quarter

  • Revenues were $14.5 million (Q4 2008: $15.1 million; Q3 2009 $13.5 million).
  • Operating income was $1.8 million (Q4 2008: $1.2 million; Q3 2009: $0.8 million).
  • Net income reached $3.5 million, a three-fold increase compared to $1.1 million for the fourth quarter of 2008 and $0.9 million for the third quarter of 2009.
  • Total cash, cash equivalents and short-term investments as at December 31, 2009 amounted to $42 million compared to $33 million as at December 31, 2008.
  • During the fourth quarter the Company declared a cash dividend in the amount of US$0.50 per share and in the aggregate amount of approximately US$16.0 million.

Financial Highlights for the Full Year ended December 31, 2009

  • Operational cash flow for the year amounted to $4.5 million.
  • Revenues reached $55.4 million, compared to $62.0 million in 2008.
  • Operating income was maintained at $4.3 million, despite a relative decline in revenues.
  • Net income reached $6.2 million, an increase of 38% compared to $4.5 million in 2008.
  • Net income for 2009 included a $2.0 million capital gain from the sale of the Company's headquarters building.

Comments of Management

Commenting on the results, Guy Bernstein, Chairman of Magic Software, said: "During a difficult year for global markets, I am pleased to report that we have improved efficiency, maintained our operating profits, and implemented structural, management and operational changes to serve our future growth.

"Towards the tail end of 2009 we began to see greater sales of our uniPaaS and iBOLT platforms. We are continuing to improve our business performance by focusing on greater efficiency and more license sales," concluded Mr. Bernstein.

Summary of the Year and the Quarter

  • Eyal Pfeifel was appointed as the Company's new CTO, in August. Eyal brings with him previous Magic Software experience and 20 years in planning and managing large-scale and innovative technology projects.
  • The Company has seen an increasing number of new customers worldwide.
  • A growing emphasis on projects that use both uniPaaS and iBOLT platforms, particularly in the fields of mobile applications and specific industry verticals.
  • The uniPaaS application platform continues to be adopted worldwide. The Company is now implementing close to 100 uniPaaS RIA projects in Japan alone. Other significant uniPaaS deals include uniPaaS RIA for KLAFS, Europe's leading sauna and spa manufacturer; Bank Leumi, Israel's leading commercial bank, which is migrating 60 of its applications to uniPaaS, and the Norfolk and Norwich University NHS Trust in the UK.
  • Growth in the use of iBOLT in new ecosystems including SAP R/3, Lotus Notes, HL7, Microsoft SharePoint and Microsoft Dynamics CRM.
  • The Company has won a number of significant iBOLT business, including a SaaS/on-premise integration for Clinical Financial Services in the US; a Lotus Notes integration for MintWave in Japan; a Salesforce.com - SAP R/3 integration for AVL in Austria; two SAP R/3 integration deals for KLAFS and Tecan in Germany. The Company also entered into new partnership agreement with Astadia.
  • The Company's uniPaaS and iBOLT solutions gained significant media coverage throughout the year from specialist and general IT media publications including FT.com, San Francisco Business Times, MWD Advisors, BCS, banking technology, Enterprise Systems, FierceBiotec IT, FineExtra, Dr.Dobb's, IT Business and ebizQ. For a full listing of our media coverage read here.
  • Magic Software was included in five Gartner and Forrester industry analyst reports in the last two quarters. Magic Software's uniPaaS was recently added to Gartner's Magic Quadrant for Enterprise Application Servers, (Gartner Report, 24 September 2009, Yefim V. Natis, Massimo Pezzini, Kimihiko Iijima).
  • Hermes Logistics technologies, the company's fully owned subsidiary, signed new customers including Zagreb Airport, Toll Dnata Air Services in Australia and SCSC in Vietnam (in partnership with Loedige Systems).

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:

  • Amortization of purchased intangible assets;
  • In-process research and development capitalization and amortization and;
  • Equity-based compensation expense.

Magic Software's management believes that the presentation of non-GAAP measures provide 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.

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