Magic Software Enterprises Ltd. (MGIC)

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Magic Software Enterprises, Ltd. (MGIC)

Q4 2008 Earnings Call

February 18, 2009 10:00 am ET


Guy Bernstein – Active Chairman

Hadas Gazit-Kaiser – Chief Financial Officer


Steven Silk – C. Silk & Sons

Charles Silk – C. Silk & Sons



Welcome to Magic Software’s Fourth Quarter and Full Year 2008 Financial Results Conference Call, and thank you all for holding. All participants are present in a listen-only mode. Following management’s formal presentation, instructions will be given for the question and answer session. As a reminder, this conference is being recorded today February 18, 2009. Earlier today Magic Software issued its financial results for the fourth quarter and full year of 2008. I trust that most of you have seen by now a copy of the press release, but, if you have not, you may view it on the Investor Relations section of Magic Software’s website at

On the call today, are Guy Bernstein, Chairman and Hadas Gazit-Kaiser, Chief Financial Officer of Magic Software. Before we start, I’d like to refer you to our Safe Harbor statement. Specifically, I advise you that some of the information, we are providing during the conference call may contain forward-looking informations with respect to plans, projections, or future performance of the company. The occurrence of which involve several risk and uncertainties, including but are not limited to the company’s ability to successfully execute its growth plan, ability to recognize revenue in future periods as anticipated, the unpredictability of the IT market, product and market acceptance risks, ability to complete development of new product, the impact of competitive pricing and offerings, fluctuation in quarterly and annual results of operations, commercialization and technological difficulties risk related to our operation in Israel and other risks detailed in Company’s Annual Report on the Form 20-F and other filings with the Securities and Exchange Commission. Magic Software undertakes no obligation to publicly release any revisions of these forward looking-statements to reflect events or circumstances after the date hereof or to reflect their current unanticipated events. With that, I would like to turn the call to Mr Guy Bernstein, Chairman.Guy?

Guy Bernstein

Thank you (Shera). Good morning and afternoon everyone. And thank you for joining us today. I’m pleased to report that 2008 was a good year for Magic Software. We continued to show an increase in sales and profit despite the economic climate. From a financial point of view, our revenues were up 6% to $62 million, compared with $58 million in 2007 from these sales, we delivered net income of $4.5 million for the year, which is up more than 300% compared to $1.1 million from continuing operations in 2007.

During the next few minutes, I would like to give you more details on our activities and the trend we see in our marketplace. Then, I will pass the call over to Hadas Gazit, our newly appointed CFO, and finally open the line for your questions.

One of the most important efforts during the year was the successful introduction of our newly branded core technology uniPaaS. Our existing customers and partners welcome the new application platform with a lot of excitement and real commitment. We also gained the industry recognition with excellent analyst feedbacks on uniPaaS as world-class application platform that gives customers the powerful choice 100% flexibility regarding the mixing and matching of client server and Rich Internet Application Technologies and deployment of applications.

And we have also obtained some new customers for uniPaaS. As a result of course, we achieved significant growth in licenses sales. As to our integration suite iBOLT, we have increased our penetration of high-end enterprise customers in both JD Edwards as well as the SAP market. At the level of the SAP R/3 offering. We also have a growing number of iBOLT projects that are aimed at integrating SAP with, where our solution is probably the best in the industry.

In summary, we are pleased with the momentum that we have developed so far and confident regarding our future potential. Today’s market realities obviously make it hard to predict to the immediate future, still we have right products for markets in it of solutions. Our channels are expanding and we have a strong customer base.

We will continue to work in the year ahead to take full advantage of these strong assets and a favorable market positioning. With that, I will stop and turn the call over to Hadas to go with the financials, then we will both be available for your questions. Hadas?

Hadas Gazit-Kaiser

Thank you, Guy. I will be referring only to the results according to U.S. GAAP. In the press release, we’ve also included that non-GAAP results, which we believe offer additional insight in to our business.

I will start with the results for the year. Total revenues where $62 million, a 6% increase compared to $58.4 million in 2007. One of our significant achievements during 2008 was the increase in our license revenue.

License revenue grew around 20% to $17.9 million, compared to $15 million in 2007. This is inline with our business calls to achieve the healthy mix of sales, maximizing our profit while generating strong maintenance and support lines. With regard to profitability, our operating income reached $4.3 million, a 231% increase, compared to 1.3 million in 2007.

This is significant improvement was – this significant improvement was translated to the bottom-line with $4.5 million in net income compared to $1.1 million in the previous year. The improvement in profitability is mainly because the increase in license sales, as well as significant improvement in the efficiency in all our branches throughout the world.

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