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Magic Software Reports Record Results for Q4 and Full Year 2010

Israel Feb. 2, 2011 Magic Software Enterprises Ltd. application platforms business and process integration December 31, 2010

Financial Highlights for the Fourth Quarter

  • $25.0 million $14.5 million
  • $3.0 million $1.8 million $2.0 million
  • $3.1 million $1.5 million $2.0 million

December 31, 2010

  • December 31, 2010 $11.7 million $4.5 million
  • $88.6 million $55.4 million
  • $9.3 million $4.3 million $2.0 million
  • $9.4 million $6.2 million

Results

December 31, 2010 $25.0 million $3.1 million $0.09 $14.5 million $1.5 million $0.05 $2.0 million $0.06

$3.0 million $0.09 $1.8 million $0.05 $2.0 million $0.06

December 31, 2010 $88.6 million $9.4 million $0.29 $55.4 million $4.2 million $0.13 $2.0 million $0.06

$9.3 million $0.29 December 31, 2010 $4.3 million $0.13 $2.0 million

December 31, 2010 $46.5 million

Comments of Management

Guy Bernstein

"Our strong financial position, coupled with our 2010 activities in promoting and growing new markets, will continue the Company’s momentum into 2011, where we see opportunity to expand both organically and through acquisitions. We stand ready to meet an increase in demand for our products, especially in the rapidly evolving arenas of mobile and cloud computing solutions," concluded Mr. Bernstein.

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 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

www.magicsoftware.com

Except for the historical information contained herein, the matters discussed in this news release include forward-looking statements 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, the integration of newly acquired IT services assets and other risk factors detailed in the Company’s most recent annual report and other filings with the Securities and Exchange Commission.

Magic is the trademark of Magic Software Enterprises Ltd. All other trademarks are the trademarks of their respective owners.

Company Contact:
Tania Amar
Magic Software
Tel. +972 (0)3 538 9284
Email: [email protected]

MAGIC SOFTW ARE ENTERPRISES LTD.  

CONSOLIDATED STATEMENTS OF INCOME

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

Three months ended

Year ended

December 31,

December 31,

2010

2009

2010

2009

Unaudited

Unaudited

Revenues

25,027

14,481

88,578

55,350

Cost of Revenues

14,344

6,459

51,448

26,264

Gross profit

10,683

8,022

37,130

29,086

Research and development, net

506

353

2,072

1,310

Selling, marketing and general and

   administrative expenses

7,165

5,918

25,720

23,518

Total operating costs and expenses

7,671

6,271

27,792

24,828

Operating income

3,012

1,751

9,338

4,258

Other Income from sale of office building

1,972

1,972

Operating income including other income

3,012

3,723

9,338

6,230

Financial income (expenses), net

60

98

(224)

238

Other income (expenses), net

11

(181)

159

42

Income before taxes on income

3,083

3,640

9,273

6,510

Taxes on income

167

(102)

334

Net income

3,083

3,473

9,375

6,176

Net earnings per share attributable to

  Magic Software:

Basic

0.10

0.11

0.29

0.19

Diluted

0.09

0.11

0.29

0.19

Weighted average number of shares used in

    computing net earnings per share

       Basic

32,578

31,915

32,139

31,899

       Diluted

33,470

32,314

32,731

32,107

MAGIC SOFTWARE ENTERPRISES LTD.  

RECONCILIATION BETWEEN GAAP AND NON-GAAP

STATEMENTS OF INCOME FOR COMPARATIVE PURPOSES

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

Three months ended

Year ended

December 31,

December 31,

2010

2009

2010

2009

Unaudited

Unaudited

GAAP operating income

3,012

1,751

9,338

4,258

Amortization of capitalized software and

other intangible assets

1,224

950

3,940

3,650

Capitalization of software development

(1,245)

(772)

(3,595)

(3,128)

Stock-based compensation

135

(59)

300

130

Total adjustments to GAAP

114

119

645

652

Non-GAAP operating income

3,126

1,870

9,983

4,910

GAAP net income

3,083

3,473

9,375

6,176

Total adjustments to GAAP as above

114

119

645

652

Non-GAAP net income

3,197

3,592

10,020

6,828

Non-GAAP basic net earnings per share

0.10

0.11

0.31

0.21

Weighted average number of shares used in

  computing basic net earnings per share

32,578

31,915

32,139

31,899

Non-GAAP diluted net earnings per share

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