Magic Software Reports Second Quarter and First Half 2025 Financial Results

OR YEHUDA, Israel, Aug. 13, 2025 (GLOBE NEWSWIRE) -- Magic Software Enterprises Ltd. (NASDAQ and TASE: MGIC) (“the Company”), a global provider of IT consulting services and end-to-end integration and application development platforms solutions, announced today its financial results for the second quarter and first half ended June 30, 2025. Summary Results for the Second Quarter 2025 (USD in millions, except per share data) GAAP Non-GAAP Q2 2025Q2 2024% Change Q2 2025Q2 2024% Change Revenues$151.6 $136.3 11.3% $151.6 $136.3 11.3% Gross profit$42.4 $38.8 9.1% $43.6 $40.1 8.7% Gross margin 27.9% 28.5% (60) bps 28.7% 29.4% (70) bps Operating income$15.6 $15.0 4.0% $18.6 $18.2 1.9% Operating margin 10.3% 11.0% (70) bps 12.2% 13.4% (120) bps Net income (*)$9.9 $9.0 9.8% $12.7 $11.7 8.7% Diluted EPS$0.20 $0.18 11.1% $0.26 $0.24 8.3% (*) Attributable to Magic Software’s shareholders. Financial Highlights for the Second Quarter Ended June 30, 2025 Revenues for the second quarter of 2025 increased by 11.3% to $151.6 million, compared to $136.3 million in the same period of the previous year.Operating income for the second quarter of 2025 increased by 4.0% to $15.6 million, compared to $15.0 million in the same period of the previous year.Non-GAAP operating income for the second quarter of 2025 increased by 1.9% to $18.6 million, compared to $18.2 million in the same period of the previous year.Net income attributable to Magic Software’s shareholders for the second quarter of 2025 increased by 9.8% to $9.9 million, or $0.20 per fully diluted share, compared to $9.0 million, or $0.18 per fully diluted share, in the same period of the previous year.Non-GAAP net income attributable to Magic Software’s shareholders for the second quarter of 2025 increased by 8.7% to $12.7 million, or $0.26 per fully diluted share, compared to $11.7 million, or $0.24 per fully diluted share, in the same period of the previous year. Summary Results for the First Half of 2025 (USD in millions, except per share data) GAAP Non-GAAP H1 2025H1 2024% Change H1 2025H1 2024% Change Revenues$299.0 $267.0 12.0% $299.0 $267.0 12.0% Gross Profit$83.0 $75.5 9.9% $85.5 $78.4 9.1% Gross Margin 27.8% 28.3% (50) bps 28.6% 29.4% (80) bps Operating Income$31.4 $29.5 6.5% $37.1 $36.4 1.9% Operating Margin 10.5% 11.0% (50) bps 12.4% 13.6% (120) bps Net Income (*)$19.4 $17.8 8.8% $24.9 $23.0 8.5% Diluted EPS$0.40 $0.36 11.1% $0.51 $0.47 8.5% (*) Attributable to Magic Software’s shareholders. Financial Highlights for the First Half Ended June 30, 2025 Revenues for the first half period ended June 30, 2025 increased by 12.0% to $299.0 million compared to $267.0 million in the same period of the previous year.Operating income for the first half ended June 30, 2025 increased by 6.5% to $31.4 million compared to $29.5 million in the same period of the previous year.Non-GAAP operating income for the first half ended June 30, 2025, increased by 1.9% to $37.1 million compared to $36.4 million in the same period of the previous year.Net income attributable to Magic Software’s shareholders for the first half period ended June 30, 2025 increased by 8.8% to $19.4 million, or $0.40 per fully diluted share, compared to $17.8 million, or $0.36 per fully diluted share, in the same period last year.Non-GAAP net income attributable to Magic Software’s shareholders for the first half period ended June 30, 2025 increased by 8.5% to $24.9 million, or $0.51 per fully diluted share, compared to $23.0 million, or $0.47 per fully diluted share, in the same period last year.Cash flow from operating activities for the first half period ended June 30, 2025 amounted to $21.2 million compared to $41.4 million in the same period last year.As of June 30, 2025, Magic’s cash, cash equivalents and short-term bank deposits amounted to $90.0 million.Magic hereby revises its full-year 2025 revenue guidance, increasing the previous estimate of $593 million to $603 million to a revised range of $600 million to $610 million, (based on current currency exchange rates). This updated guidance reflects our sustained operational momentum and favorable outlook for the second half of the fiscal year, representing an anticipated annual revenue growth rate of approximately 8.6% to 10.4% as compared to the prior fiscal year. Declaration of Dividend for the First Half of 2025 In accordance with its dividend distribution policy, the Company’s board of directors declared a semi-annual cash dividend in an amount of 29.6 cents per share and in an aggregate amount of approximately $14.5 million, reflecting approximately 75% of its distributable profits for the first half 2025. The dividend is payable on October 22, 2025, to all of the Company’s shareholders of record at the close of trading on the NASDAQ Global Select Market on October 6, 2025. In accordance with Israeli tax law, the dividend is subject to withholding tax at source at the rate of 30% (if the recipient of the dividend is at the time of distribution or was at any time during the preceding 12-month period the holder of 10% or more of the Company’s share capital) or 25% (for all other dividend recipients) of the dividend amount payable to each shareholder of record, subject to applicable exemptions. The dividend will be paid in US dollars on the ordinary shares of Magic Software Enterprises that are traded both on the Tel Aviv Stock Exchange and the NASDAQ Global Select Market. Guy Bernstein, Chief Executive Officer of Magic Software, said: “As we conclude the first half of fiscal 2025, Magic Software delivers yet another quarter of robust performance, underscoring our business resilience. We achieved consistent growth across key financial metrics, revenues, gross profit, operating income, EBITDA, and net income, while sustaining solid cash flow and surpassing an annualized revenue run-rate of USD 600 million. Demand for our innovative digital, artificial intelligence and cloud transformation solutions remains robust, along with continued strong demand for our services in the defense sector, underscoring the effectiveness of our strategic direction and the dedication of our team in delivering measurable results. In the United States, our first half results reflected approximately 9% year over year revenue growth, driven by agreements executed in late 2024 and in early 2025. These initiatives, alongside expanding activity with existing customers, position us well for additional U.S. growth through the remainder of the year. In March, we announced the signing of a memorandum of understanding to enter into negotiations for the contemplated merger of Magic into Matrix I.T., a transformational landmark in Magic’s evolution. The process is progressing toward requisite approvals, and we anticipate presenting the transaction for shareholder endorsement in the fourth quarter of 2025. We remain confident in the strength of our execution, the continuing demand for our solutions, and our ability to generate sustainable long-term value for our shareholders and customers. Conference Call Details Magic Software’s management will host a conference call on Wednesday, August 13, 2025, at 10:30 am Eastern Daylight Time (17:30 Israel Daylight Time) to review and discuss Magic Software’s results. To participate, please call one of the following teleconferencing numbers. Please begin placing your calls at least 5 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: +1-888-281-1167 UK: 0-800-917-4613 ISRAEL: 03-918-0650 ALL OTHERS: +972-3-918-0650 For those unable to join the live call, a replay of the call will be available in the Investor Relations section of Magic Software’s website, www.magicsoftware.com. Non-GAAP Financial Measures This press release contains the following non-GAAP financial measures: non-GAAP gross profit, non-GAAP operating income, non-GAAP net income attributable to Magic Software’s shareholders and non-GAAP basic and diluted earnings per share. Magic Software believes that these non-GAAP measures of financial results provide useful information to management and investors regarding certain financial and business trends relating to Magic Software’s financial condition and results of operations. Magic Software’s management uses these non-GAAP measures to compare the Company’s performance to that of prior periods for trend analyses, for purposes of determining executive and senior management incentive compensation and for budgeting and planning purposes. These measures are used in financial reports prepared for management and in quarterly financial reports presented to the Company’s board of directors. The Company believes that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing the Company’s financial measures with other software companies, many of which present similar non-GAAP financial measures to investors. Management of the Company does not consider these non-GAAP measures in isolation or as an alternative to financial measures determined in accordance with GAAP. The principal limitation of these non-GAAP financial measures is that they exclude significant expenses and income that are required by GAAP to be recorded in the Company’s financial statements. In addition, they are subject to inherent limitations as they reflect the exercise of judgment by management about which expenses and income are excluded or included in determining these non-GAAP financial measures. In order to compensate for these limitations, management presents non-GAAP financial measures together with GAAP results. Magic Software urges investors to review the reconciliation of its non-GAAP financial measures to the comparable GAAP financial measures, which it includes in press releases announcing quarterly financial results, including this press release, and not to rely on any single financial measure to evaluate the Company’s business. Non-GAAP measures used in this press release are included in the financial tables of this release. These non-GAAP measures exclude the following items: Amortization of purchased intangible assets and other related costs;In-process research and development capitalization and amortization;Cost of share-based payment;Costs related to acquisition of new businesses;The related tax, non-controlling interests’ effects of the above items;Change in valuation of contingent consideration related to acquisitions;Change in deferred tax assets on carry forward tax losses. Reconciliation of the most comparable GAAP financial measures to the non-GAAP financial measures used in this press release are included in the financial tables of this release. About Magic Software Enterprises Magic Software Enterprises Ltd. (NASDAQ and TASE: MGIC) is a global provider of end-to-end integration and application development platforms solutions and IT consulting services. 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,” “look forward”, “expect,” “believe,” “guidance” 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 based on 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, 2024, which filed on May 14, 2025, and subsequent reports and filings made 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: Ronen PlatkevitzMagic Software Enterprisesir@magicsoftware.com MAGIC SOFTWARE ENTERPRISES LTD. CONDENSED CONSOLIDATED STATEMENTS OF INCOME U.S. Dollars in thousands (except per share data) Three months ended Six months ended June 30, June 30, 2025 2024 2025 2024 Unaudited Unaudited Revenues$151,642 $136,250 $298,978 $266,970 Cost of Revenues 109,268 97,407 215,973 191,428 Gross profit 42,374 38,843 83,005 75,542 Research and development, net 3,425 2,847 6,672 5,640 Selling, marketing and general and administrative expenses 23,305 20,956 44,946 40,436 Total operating expenses 26,730 23,803 51,618 46,076 Operating income 15,644 15,040 31,387 29,466 Financial expenses, net (725) (1,235) (1,790) (2,879) Income before taxes on income 14,919 13,805 29,597 26,587 Taxes on income 3,324 3,040 6,236 5,769 Net income$ 11,595 $ 10,765 $ 23,361 $ 20,818 Share of profit of companies accounted for at equity, net (166) (85) (292) (149) Net income attributable to non-controlling interests (1,511) (1,647) (3,673) (2,839) Net income attributable to Magic's shareholders $ 9,918 $ 9,033 $ 19,396 $ 17,830 22.28% 22.02% 21.07% 21.70% Weighted average number of shares used in computing net earnings per share Basic 49,099 49,099 49,099 49,099 Diluted 49,099 49,099 49,099 49,099 Basic and diluted earnings per share attributable to Magic's shareholders$0.20 $0.18 $0.40 $0.36 MAGIC SOFTWARE ENTERPRISES LTD. RECONCILIATION OF GAAP AND NON-GAAP RESULTS U.S. Dollars in thousands (except per share data) Three months ended Six months ended June 30, June 30, 2025 2024 2025 2024 Unaudited Unaudited GAAP gross profit$ 42,374 $ 38,843 $ 83,005 $ 75,542 Amortization of capitalized software and acquired technology 879 1,127 1,863 2,234 Amortization of other intangible assets 326 121 649 624 Non-GAAP gross profit$ 43,579 $ 40,091 $ 85,517 $ 78,400 GAAP operating income$ 15,644 $ 15,040 $ 31,387 $ 29,466 Gross profit adjustments 1,205 1,248 2,512 2,858 Amortization of other intangible assets 1,991 2,083 3,968 3,597 Increase (decrease) in valuation of contingent consideration related to acquisitions - 121 - 427 Capitalization of software development (490) (735) (986) (1,483)Costs related to acquisitions 121 158 147 302 Cost of share-based payment 102 304 37 1,195 Non-GAAP operating income$ 18,573 $ 18,219 $ 37,065 $ 36,362 GAAP net income attributable to Magic's shareholders$ 9,918 $ 9,033 $ 19,396 $ 17,830 Operating income adjustments 2,929 3,179 5,678 6,896 Amortization expenses attributed to non-controlling interests and redeemable non-controlling interests (295) (396) (519) (848)Changes in unsettled fair value of contingent consideration related to acquisitions 34 52 539 166 Deferred taxes on the above items 130 (166) (166) (1,065)Non-GAAP net income attributable to Magic's shareholders$ 12,716 $ 11,702 $ 24,928 $ 22,979 Non-GAAP basic and diluted net earnings per share$0.26 $0.24 $0.51 $0.47 Weighted average number of shares used in computing basic net earnings per share 49,099 49,099 49,099 49,099 Weighted average number of shares used in computing diluted net earnings per share 49,099 49,099 49,099 49,099 Summary of Non-GAAP Financial Information U.S. Dollars in thousands (except per share data) Three months ended Six months ended June 30, June 30, 2025 2024 2025 2024 Unaudited Unaudited Unaudited Unaudited Revenues$151,642 100% $136,250 100% $298,978 100% $266,970 100% Gross profit 43,579 28.7% 40,091 29.4% 85,517 28.6% 78,400 29.4% Operating income 18,573 12.2% 18,219 13.4% 37,065 12.4% 36,362 13.6% Net income attributable to Magic's shareholders 12,716 8.4% 11,702 8.6% 24,928 8.3% 22,979 8.6% Basic and diluted earnings per share$0.26 $0.24 $0.51 $0.47 MAGIC SOFTWARE ENTERPRISES LTD. CONDENSED CONSOLIDATED BALANCE SHEETS U.S. Dollars in thousands June 30, December 31, 2025 2024 Unaudited ASSETS CURRENT ASSETS: Cash and cash equivalents$89,957 $112,779 Short-term bank deposits - 51 Trade receivables, net 152,939 139,816 Other accounts receivable and prepaid expenses 22,856 23,553 Total current assets 265,752 276,199 LONG-TERM ASSETS: Deferred tax assets 5,735 4,895 Right-of-use assets 25,490 24,707 Other long-term receivables and Investments in companies accounted for at equity 10,179 9,261 Property and equipment, net 8,303 7,467 Intangible assets and goodwill, net 226,193 217,802 Total long term assets 275,900 264,132 TOTAL ASSETS$541,652 $540,331 LIABILITIES AND EQUITY CURRENT LIABILITIES: Short-term debt$28,531 $23,187 Trade payables 25,358 28,753 Dividend payable to Magic Software shareholders - 11,587 Accrued expenses and other accounts payable 55,973 58,209 Current maturities of lease liabilities 4,537 4,818 Liability in respect of business combinations 4,249 2,654 Put options for non-controlling interests 22,846 20,066 Deferred revenues and customer advances 23,802 21,031 Total current liabilities 165,296 170,305 LONG TERM LIABILITIES: Long-term debt 41,573 36,107 Deferred tax liability 7,847 7,848 Long-term lease liabilities 23,326 22,040 Long-term liability in respect of business combinations - 1,781 Employee benefit liabilities 1,313 1,181 Total long term liabilities 74,059 68,957 EQUITY: Magic Software Enterprises shareholders' equity 278,837 277,190 Non-controlling interests 23,460 23,879 Total equity 302,297 301,069 TOTAL LIABILITIES AND EQUITY$541,652 $540,331 MAGIC SOFTWARE ENTERPRISES LTD. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS U.S. Dollars in thousands Six months ended June 30, 2025 2024 Unaudited Unaudited Cash flows from operating activities: Net income$ 23,180 $ 20,669 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 10,996 10,106 Cost of share-based payment 37 1,195 Change in deferred taxes, net (1,429) (1,559) Capital gain on sale of fixed assets 19 - Change in value of financial assets measured at fair value through profit or loss 67 - Effect of exchange rate on of cash and cash equivalents held in currencies other than the functional currency (1,318) 389 Changes in value of short-term and long-term loans from banks and others and deposits, net (591) (1,089) Working capital adjustments: Trade receivables (3,980) 100 Other current and long-term accounts receivable 1,368 (2,071) Trade payables (4,961) 1,941 Accrued expenses and other accounts payable (3,505) 3,794 Deferred revenues 1,300 7,904 Net cash provided by operating activities 21,183 41,379 Cash flows from investing activities: Capitalized software development costs (987) (1,483) Purchase of property and equipment (827) (618) Cash paid in conjunction with deferred payments and contingent liabilities related to business combinations (3,614) (10,248) Payments for business acquisitions, net of cash acquired (1,828) (7,238) Proceeds from sale of property and equipment 47 - Proceeds from sale (purchase) of financial assets, net (532) 968 Change in short-term and long-term deposits 44 521 Investment in a company accounted for at equity - (123) Net cash used in investing activities (7,697) (18,221) Cash flows from financing activities: Proceeds from sale of non-controlling interest - 174 Dividend paid to Magic’s shareholders (27,645) - Dividend paid to non-controlling interests (5,232) (2,210) Repayment of lease liabilities (3,109) (2,956) Purchase of non-controlling interest (13,853) (314) Receipt of short-term and long-term loans from banks and others 26,376 10,707 Repayment of short-term and long-term loans (18,624) (25,018) Net cash (used in) provided by financing activities (42,087) (19,617) Effect of exchange rate changes on cash and cash equivalents 5,779 (1,842) Increase (decrease) in cash and cash equivalents (22,822) 1,699 Cash and cash equivalents at the beginning of the period 112,779 105,943 Cash and cash equivalents at end of the period$ 89,957 $ 107,642

Magic Software Reports Second Quarter and First Half 2025 Financial Results

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