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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the month of March 2024
Commission File Number 0-19415
MAGIC SOFTWARE ENTERPRISES LTD.
(Translation of Registrant’s name into English)
Terminal Center, 1 Yahadut Canada Street, Or-Yehuda, Israel 6037501
(Address of Principal Executive Office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F ☒ Form 40-F ☐
CONTENTS
Quarterly Results of Operations
On March 13, 2024, Magic Software Enterprises Ltd. (the “Company”, “we” or “us”) announced our financial results for the fourth quarter and full year ended December 31, 2023. A copy of our press release announcing our results is furnished as Exhibit 99.1 to this Report of Foreign Private Issuer on Form 6-K (this “Form 6-K”) and is incorporated herein by reference.
The GAAP financial statements appended to this Form 6-K in Exhibit 99.1 are hereby incorporated by reference in our Registration Statements on Form S-8 (SEC File No.’s 333-113552, 333-132221 and 333-149553).
| Exhibit No. | Title of Exhibit | |
| 99.1 | Magic Software Reports Fourth Quarter and Full Year 2023 Financial Results |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| MAGIC SOFTWARE ENTERPRISES LTD. | ||
| By: | /s/ Asaf Berenstin | |
| Name: | Asaf Berenstin | |
| Title: | Chief Financial Officer | |
Dated: March 13, 2024
2
Exhibit 99.1
PRESS RELEASE
Magic Software Reports Fourth Quarter and Full Year 2023 Financial Results
Or Yehuda, Israel, March 13, 2024 – 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 fourth quarter and full year ended December 31, 2023.
Summary Results for the Fourth Quarter 2023 (USD in millions, except per share data)
| GAAP | Non-GAAP | |||||||||||||||||||||||
| Q4 2023 | Q4 2022 | % Change | Q4 2023 | Q4 2022 | % Change | |||||||||||||||||||
| Revenues | $ | 125.5 | $ | 147.1 | (14.7 | )% | $ | 125.5 | $ | 147.1 | (14.7 | )% | ||||||||||||
| Gross profit | $ | 37.0 | $ | 41.8 | (11.6 | )% | $ | 38.6 | $ | 43.2 | (10.5 | )% | ||||||||||||
| Gross margin | 29.4 | % | 28.4 | % | 100 bps | 30.8 | % | 29.3 | % | 150 bps | ||||||||||||||
| Operating income | $ | 13.0 | $ | 14.2 | (8.4 | )% | $ | 17.7 | $ | 18.7 | (5.7 | )% | ||||||||||||
| Operating margin | 10.3 | % | 9.6 | % | 70 bps | 14.1 | % | 12.7 | % | 140 bps | ||||||||||||||
| Net income (*) | $ | 8.5 | $ | 9.6 | (11.2 | )% | $ | 11.6 | $ | 13.4 | (13.1 | )% | ||||||||||||
| Diluted EPS | $ | 0.17 | $ | 0.19 | (10.5 | )% | $ | 0.24 | $ | 0.27 | (11.1 | )% | ||||||||||||
| (*) | Attributable to Magic Software’s shareholders. |
Financial Highlights for the Fourth Quarter Ended December 31, 2023
| ● | Revenues for the fourth quarter of 2023 decreased by 14.7% to $125.5 million, compared to $147.1 million in the same period of the previous year. On a constant currency basis (calculated based on average currency exchange rates for the three months ended December 31, 2022), revenues for the fourth quarter of 2023 would have decreased by 11.2% to $130.6 million. As described in the pre-announcement of our third quarter results on November 8, 2023, as of the third quarter of 2023, we experienced a substantial and unexpected decline in demand for our professional services from several of our important U.S.-based blue-chip customers which, without any advance notification, decided to immediately suspend significant parts of their active time-and-materials-based projects resulting in a decrease of close to approximately 600 of our U.S. specialists compared to the respective quarter. This reduced demand had a negative impact on our third and fourth quarter revenues of approximately $16.0 million and $24.8 million, respectively compared to the same periods last year. |
| ● | Operating income for the fourth quarter of 2023 decreased by 8.4% to $13.0 million, compared to $14.2 million in the same period of the previous year. On a constant currency basis, (calculated based on average currency exchange rates for the three months ended December 31, 2022), operating income for the fourth quarter of 2023 would have decreased by 4.7% to $13.5 million. |
| ● | Non-GAAP operating income for the fourth quarter of 2023 decreased by 5.8% to $17.7 million, compared to $18.7 million in the same period of the previous year. On a constant currency basis (calculated based on average currency exchange rates for the three months ended December 31, 2022), non-GAAP operating income for the fourth quarter of 2023 would have decreased by 2.8% to $18.2 million. |
| ● | Net income attributable to Magic Software’s shareholders for the fourth quarter of 2023 decreased by 11.2% to $8.5 million, or $0.17 per fully diluted share, compared to $9.6 million, or $0.19 per fully diluted share, in the same period of the previous year. The decrease in our net income attributable to Magic Software’s shareholders was primarily attributable to the decrease in our operating profit and increase in interest expenses resulting from the increase of bank interest rates and increase in overall financial debt. |
| ● | Non-GAAP net income attributable to Magic Software’s shareholders for the fourth quarter of 2023 decreased by 13.1% to $11.6 million, or $0.24 per fully diluted share, compared to $13.4 million, or $0.27 per fully diluted share, in the same period of the previous year. |
Summary Results for the Year Ended December 31, 2023 (USD in millions, except per share data)
| GAAP | Non-GAAP | |||||||||||||||||||||||
| 12M 2023 | 12M 2022 | % Change | 12M 2023 | 12M 2022 | % Change | |||||||||||||||||||
| Revenues | $ | 535.1 | $ | 566.8 | (5.6 | )% | $ | 535.1 | $ | 566.8 | (5.6 | )% | ||||||||||||
| Gross Profit | $ | 153.0 | $ | 155.4 | (1.5 | )% | $ | 158.4 | $ | 160.8 | (1.4 | )% | ||||||||||||
| Gross Margin | 28.6 | % | 27.4 | % | 120 bps | 29.6 | % | 28.4 | % | 120 bps | ||||||||||||||
| Operating Income | $ | 57.1 | $ | 61.8 | (7.5 | )% | $ | 71.8 | $ | 74.5 | (3.7 | )% | ||||||||||||
| Operating Margin | 10.7 | % | 10.9 | % | (20) bps | 13.4 | % | 13.1 | % | 30 bps | ||||||||||||||
| Net Income (*) | $ | 37.0 | $ | 40.5 | (8.5 | )% | $ | 48.4 | $ | 51.7 | (6.5 | )% | ||||||||||||
| Diluted EPS | $ | 0.75 | $ | 0.82 | (8.5 | )% | $ | 0.99 | $ | 1.05 | (5.7 | )% | ||||||||||||
| (*) | Attributable to Magic Software’s shareholders. |
Financial Highlights for the Year Ended December 31, 2023
| ● | Revenues for the year decreased by 5.6% to $535.1 million compared to $566.8 million last year. On a constant currency basis (calculated based on the average currency exchange rates during the twelve months period ended December 31, 2022), revenues for the year would have decreased by 1.6% to $557.9 million. As described in the pre-announcement of our third quarter results on November 8, 2023, as of the third quarter of 2023, as of the third quarter of 2023, we experienced a substantial and unexpected decline in demand for our professional services from several of our important U.S.-based blue-chip customers which, without any advance notification, decided to immediately suspend significant parts of their active time-and-materials-based projects resulting in a decrease of close to 600 of our U.S. specialists compared to the respective period. This reduced demand had a negative impact on 2023 revenues of approximately $40.8 million compared to the same period last year. |
| ● | Operating income for the year decreased by 7.5% to $57.1 million compared to $61.8 million last year. On a constant currency basis (calculated based on the average currency exchange rates during the twelve months period ended December 31, 2022), operating income for the year would have decreased by 3.1% to $59.9 million. Operating income for the year ended December 31, 2023, included $3.8 million recorded with respect to cost of share-based payment to employees compared to $2.1 million recorded last year. |
| ● | Non-GAAP operating income for the year decreased by 3.7% to $71.8 million compared to $74.5 million last year. On a constant currency basis (calculated based on the average currency exchange rates during the twelve months period ended December 31, 2022), non-GAAP operating income for year would have reached $74.5 million, same as last year. |
| ● | Net income attributable to Magic Software’s shareholders for the year decreased by 8.5% to $37.0 million, or $0.75 per fully diluted share, compared to $40.5 million, or $0.82 per fully diluted share, last year. The decrease in our net income attributable to Magic Software’s shareholders was primarily attributable to the decrease in our operating profit and increase in interest expenses resulting from the increase of bank interest rates and increase in overall financial debt |
| ● | Non-GAAP net income attributable to Magic Software’s shareholders for the year decreased by 6.5% to $48.4 million, or $0.99 per fully diluted share, compared to $51.8 million, or $1.05 per fully diluted share, last year. |
| ● | Cash flow from operating activities for the year ended December 31, 2023, amounted to $77.9 million compared to $56.6 million last year. Cash flow from operating activities excluding the impact of payments of deferred and contingent consideration related to acquisitions amounted to $78.0 and $60.5 million for the years ended December 31, 2023, and 2022, respectively. |
| ● | As of December 31, 2023, Magic’s cash, cash equivalents and short and long-term bank deposits amounted to $107.1 million and total financial debt amounted to $81.2 million. |
| ● |
Magic is introducing 2024 annual revenue guidance of between $540 million and $550 million (based on current currency exchange rates). Measured against Magic Software’s annualized 2023 fourth quarter revenue on a go-forward basis, the 2024 annual revenue guidance reflects an annual growth of 7.5% to 9.5%. |
Guy Bernstein, Chief Executive Officer of Magic Software, said: “Despite the slowdown we faced during the second half of the year resulting from the headwind facing by some of our customers in certain sectors in the U.S., we remain positive that the vast majority of our customers will continue to value our unique proposition and resume to engage us to an increasing degree as a preferred partner for innovative digital transformation initiatives. Fueled by a well-diversified investment portfolio, we persistently pursue both organic and inorganic avenues of expansion across our service lines. Embracing innovation as our guiding principle, we eagerly anticipate the fruition of our ongoing efforts in cultivating cutting-edge capabilities that are poised to propel us toward sustained, long-term profitability, thereby delivering enduring value to our esteemed shareholders. We have a well-established track record of growth, profitability, and high cash generation. Across the globe, our dedicated team at Magic is resolutely focused on executing our strategic vision to not only restore but surpass our previous heights, thereby ensuring sustained growth and the continual enhancement of shareholder value.”
Conference Call Details
Magic Software’s management will host a conference call on Wednesday, March 13, 2024, at 11:00 am Eastern Daylight Time (5:00 am Pacific Daylight Time, 17:00 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: +1-866-652-8972
UK: 0-800-917-9141
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, 2022, which filed on May 11, 2023, 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 Platkevitz
Magic Software Enterprises
ir@magicsoftware.com
MAGIC SOFTWARE ENTERPRISES LTD.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
U.S. Dollars in thousands (except per share data)
| Three months ended | Year ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Unaudited | Unaudited | |||||||||||||||
| Revenues | $ | 125,545 | $ | 147,146 | $ | 535,052 | $ | 566,792 | ||||||||
| Cost of Revenues | 88,585 | 105,325 | 382,065 | 411,437 | ||||||||||||
| Gross profit | 36,960 | 41,821 | 152,987 | 155,355 | ||||||||||||
| Research and development, net | 2,703 | 2,714 | 10,328 | 10,090 | ||||||||||||
| Selling, marketing and general and administrative expenses | 19,449 | 23,684 | 81,513 | 82,330 | ||||||||||||
| Cost of share-based payment | 1,967 | 1,869 | 3,798 | 2,079 | ||||||||||||
| Increase (decrease) in valuation of contingent consideration related to acquisitions | (142 | ) | (623 | ) | 240 | (906 | ) | |||||||||
| Total operating expenses | 23,977 | 27,644 | 95,879 | 93,593 | ||||||||||||
| Operating income | 12,983 | 14,177 | 57,108 | 61,762 | ||||||||||||
| Financial expenses, net | (1,865 | ) | (1,396 | ) | (4,326 | ) | (3,601 | ) | ||||||||
| Decrease (increase) in valuation of consideration related to acquisitions | (34 | ) | 89 | (290 | ) | (744 | ) | |||||||||
| Income before taxes on income | 11,084 | 12,870 | 52,492 | 57,417 | ||||||||||||
| Taxes on income | 1,724 | 1,865 | 9,934 | 11,138 | ||||||||||||
| Net income | $ | 9,360 | $ | 11,005 | $ | 42,558 | $ | 46,279 | ||||||||
| Share of losst of a company accounted for at equity, net | (56 | ) | - | (56 | ) | - | ||||||||||
| Net income attributable to non-controlling interests | (821 | ) | (1,447 | ) | (5,471 | ) | (5,809 | ) | ||||||||
| Net income attributable to Magic's shareholders | $ | 8,483 | $ | 9,558 | $ | 37,031 | $ | 40,470 | ||||||||
| Weighted average number of shares used in computing net earnings per share | ||||||||||||||||
| Basic | 49,099 | 49,096 | 49,096 | 49,089 | ||||||||||||
| Diluted | 49,099 | 49,115 | 49,098 | 49,131 | ||||||||||||
| Basic and diluted earnings per share attributable to Magic's shareholders | $ | 0.17 | $ | 0.19 | $ | 0.75 | $ | 0.82 | ||||||||
MAGIC SOFTWARE ENTERPRISES LTD.
RECONCILIATION OF GAAP AND NON-GAAP RESULTS
U.S. Dollars in thousands (except per share data)
| Three months ended | Year ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Unaudited | Unaudited | |||||||||||||||
| GAAP gross profit | $ | 36,960 | $ | 41,821 | $ | 152,987 | $ | 155,355 | ||||||||
| Amortization of capitalized software and acquired technology | 1,222 | 1,124 | 4,288 | 4,431 | ||||||||||||
| Amortization of other intangible assets | 447 | 229 | 1,173 | 974 | ||||||||||||
| Non-GAAP gross profit | $ | 38,629 | $ | 43,174 | $ | 158,448 | $ | 160,760 | ||||||||
| GAAP operating income | $ | 12,983 | $ | 14,177 | $ | 57,108 | $ | 61,762 | ||||||||
| Gross profit adjustments | 1,669 | 1,353 | 5,461 | 5,405 | ||||||||||||
| Amortization of other intangible assets | 1,888 | 1,731 | 7,988 | 7,889 | ||||||||||||
| Increase (decrease) in valuation of contingent consideration related to acquisitions | (142 | ) | (623 | ) | 240 | (906 | ) | |||||||||
| Capitalization of software development | (842 | ) | (730 | ) | (3,183 | ) | (3,059 | ) | ||||||||
| Costs related to acquisitions | 152 | 959 | 372 | 1,335 | ||||||||||||
| Cost of share-based payment | 1,967 | 1,869 | 3,798 | 2,079 | ||||||||||||
| Non-GAAP operating income | $ | 17,675 | $ | 18,736 | $ | 71,784 | $ | 74,505 | ||||||||
| GAAP net income attributable to Magic's shareholders | $ | 8,483 | $ | 9,559 | $ | 37,031 | $ | 40,470 | ||||||||
| Operating income adjustments | 4,692 | 4,559 | 14,676 | 12,743 | ||||||||||||
| Expenses attributed to non-controlling interests and redeemable non-controlling interests | (709 | ) | (197 | ) | (1,713 | ) | (641 | ) | ||||||||
| Increase in valuation of consideration related to acquisitions | 34 | (90 | ) | 290 | 744 | |||||||||||
| Deferred taxes on the above items | (899 | ) | (477 | ) | (1,879 | ) | (1,570 | ) | ||||||||
| Non-GAAP net income attributable to Magic's shareholders | $ | 11,601 | $ | 13,354 | $ | 48,405 | $ | 51,746 | ||||||||
| Non-GAAP basic and diluted net earnings per share | $ | 0.24 | $ | 0.27 | $ | 0.99 | $ | 1.05 | ||||||||
| Weighted average number of shares used in computing basic net earnings per share | 49,099 | 49,093 | 49,096 | 49,089 | ||||||||||||
| Weighted average number of shares used in computing diluted net earnings per share | 49,099 | 49,138 | 49,098 | 49,150 | ||||||||||||
Summary of Non-GAAP Financial Information
U.S. Dollars in thousands (except per share data)
| Three months ended | Year ended | |||||||||||||||||||||||||||||||
| December 31, | December 31, | |||||||||||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||||||||
| Unaudited | Unaudited | Unaudited | Unaudited | |||||||||||||||||||||||||||||
| Revenues | $ | 125,545 | 100 | % | $ | 147,146 | 100 | % | $ | 535,052 | 100 | % | $ | 566,792 | 100 | % | ||||||||||||||||
| Gross profit | 38,629 | 30.8 | % | 43,174 | 29.3 | % | 158,448 | 29.6 | % | 160,760 | 28.4 | % | ||||||||||||||||||||
| Operating income | 17,675 | 14.1 | % | 18,736 | 12.7 | % | 71,784 | 13.4 | % | 74,505 | 13.1 | % | ||||||||||||||||||||
| Net income attributable to | ||||||||||||||||||||||||||||||||
| Magic's shareholders | 11,601 | 9.2 | % | 13,354 | 9.1 | % | 48,405 | 9.0 | % | 51,746 | 9.1 | % | ||||||||||||||||||||
| Basic and diluted earnings per share | $ | 0.24 | $ | 0.27 | $ | 0.99 | $ | 1.05 | ||||||||||||||||||||||||
MAGIC SOFTWARE ENTERPRISES LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
U.S. Dollars in thousands
| December 31, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Unaudited | Unaudited | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash and cash equivalents | $ | 106,354 | $ | 83,062 | ||||
| Short-term bank deposits | 751 | 3,904 | ||||||
| Trade receivables, net | 131,409 | 148,480 | ||||||
| Other accounts receivable and prepaid expenses | 18,813 | 13,652 | ||||||
| Total current assets | 257,327 | 249,098 | ||||||
| LONG-TERM ASSETS: | ||||||||
| Deferred tax assets | 8,432 | 3,618 | ||||||
| Right-of-use assets | 25,718 | 27,536 | ||||||
| Other long-term receivables and Investments in companies accounted for at equity | 8,232 | 5,795 | ||||||
| Property and equipment, net | 7,988 | 8,338 | ||||||
| Intangible assets and goodwill, net | 216,723 | 210,756 | ||||||
| Total long term assets | 267,093 | 256,043 | ||||||
| TOTAL ASSETS | $ | 524,420 | $ | 505,141 | ||||
| LIABILITIES AND EQUITY | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Short-term debt | $ | 28,914 | $ | 20,755 | ||||
| Trade payables | 28,415 | 27,598 | ||||||
| Accrued expenses and other accounts payable | 41,492 | 46,842 | ||||||
| Current maturities of lease liabilities | 4,406 | 4,591 | ||||||
| Liability in respect of business combinations | 6,656 | 19,287 | ||||||
| Put options of non-controlling interests | 18,252 | 27,172 | ||||||
| Deferred revenues and customer advances | 13,848 | 9,808 | ||||||
| Total current liabilities | 141,983 | 156,053 | ||||||
| LONG TERM LIABILITIES: | ||||||||
| Long-term debt | 52,294 | 30,412 | ||||||
| Deferred tax liability | 13,313 | 10,686 | ||||||
| Long-term lease liabilities | 23,101 | 24,282 | ||||||
| Long-term liability in respect of business combinations | 1,049 | 5,376 | ||||||
| Put options of non-controlling interests | 620 | 1,120 | ||||||
| Accrued severance pay, net | 1,116 | 901 | ||||||
| Total long term liabilities | 91,493 | 72,777 | ||||||
| EQUITY: | ||||||||
| Magic Software Enterprises shareholders' equity | 265,981 | 262,927 | ||||||
| Non-controlling interests | 24,963 | 13,384 | ||||||
| Total equity | 290,944 | 276,311 | ||||||
| TOTAL LIABILITIES AND EQUITY | $ | 524,420 | $ | 505,141 | ||||
MAGIC SOFTWARE ENTERPRISES LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. Dollars in thousands
| Year ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Unaudited | Unaudited | |||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | 42,558 | $ | 46,279 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 19,774 | 19,795 | ||||||
| Cost of share-based payment | 3,798 | 2,079 | ||||||
| Change in deferred taxes, net | (3,238 | ) | (3,904 | ) | ||||
| Payments of deferred and contingent consideration related to acquisitions | (43 | ) | (3,919 | ) | ||||
| Capital gain on sale of fixed assets | 19 | - | ||||||
| Amortization of premium and accrued interest on debt instruments at fair value through other comprehensive income | (114 | ) | 76 | |||||
| Effect of exchange rate on of cash and cash equivalents held in currencies other than the functional currency | - | 3,747 | ||||||
| Changes in value of short-term and long-term loans from banks and others and deposits, net | 1,533 | (1,686 | ) | |||||
| Working capital adjustments: | ||||||||
| Trade receivables | 18,119 | (2,569 | ) | |||||
| Other current and long-term accounts receivable | (2,262 | ) | (1,934 | ) | ||||
| Trade payables | 858 | 139 | ||||||
| Accrued expenses and other accounts payable | (7,147 | ) | (975 | ) | ||||
| Deferred revenues | 4,085 | (513 | ) | |||||
| Net cash provided by operating activities | 77,940 | 56,615 | ||||||
| Cash flows from investing activities: | ||||||||
| Capitalized software development costs | (3,183 | ) | (3,059 | ) | ||||
| Purchase of property and equipment | (1,595 | ) | (4,381 | ) | ||||
| Cash paid in conjunction with deferred payments and contingent liabilities related to business combinations | (14,244 | ) | (4,870 | ) | ||||
| Payments for business acquisitions, net of cash acquired | (17,892 | ) | (21,670 | ) | ||||
| Loan extended to related party | (1,341 | ) | (2,250 | ) | ||||
| Proceeds from sale of property and equipment | 31 | - | ||||||
| Purchase of financial assets at fair value through profit or loss | (1,243 | ) | - | |||||
| Redemption of marketable securities | - | 309 | ||||||
| Investment in long-term deposits | (139 | ) | - | |||||
| Acquisition of a company accounted for at equity | (498 | ) | - | |||||
| Purchase of intangible asset | - | (219 | ) | |||||
| Investment in short-term bank deposits | (233 | ) | - | |||||
| Proceeds from short-term bank deposits | 4,482 | 1,682 | ||||||
| Net cash used in investing activities | (35,855 | ) | (34,458 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Exercise of employees’ stock options | - | 1 | ||||||
| Dividend to Magic's shareholders | (30,798 | ) | (24,841 | ) | ||||
| Dividend paid to non-controlling interests | (4,638 | ) | (4,170 | ) | ||||
| Repayment of lease liabilities | (5,690 | ) | (4,792 | ) | ||||
| Purchase of redeemable non-controlling interest | (5,243 | ) | (854 | ) | ||||
| Receipt of short-term and long-term loans from banks and others | 49,465 | 30,703 | ||||||
| Repayment of short-term and long-term loans | (20,994 | ) | (14,323 | ) | ||||
| Net cash used in financing activities | (17,898 | ) | (18,276 | ) | ||||
| Effect of exchange rate changes on cash and cash equivalents | (895 | ) | (8,909 | ) | ||||
| Increase (decrease) in cash and cash equivalents | 23,292 | (5,028 | ) | |||||
| Cash and cash equivalents at the beginning of the period | 83,062 | 88,090 | ||||||
| Cash and cash equivalents at end of the period | $ | 106,354 | $ | 83,062 | ||||
9