Magic Software Enterprises Ltd. (NASDAQ:MGIC) Q4 2024 Earnings Conference Call March 12, 2025 11:00 AM ET Company Participants Asaf Berenstin - Chief Financial Officer Guy Bernstein - Chief Executive Officer Yuval Lavi - Chief Technology Officer Conference Call Participants Maggie Nolan - William Blair Operator Ladies and gentlemen, thank you for standing by. Welcome to the Magic Software Enterprises 2024 Fourth Quarter and Full Year Financial Results Conference Call. Magic's fourth quarter 2024 earnings re ...

Core Insights - Magic Software Enterprises Ltd. reported strong financial results for Q4 and the full year 2024, highlighting growth in revenues and net income, alongside a strategic merger with Matrix I.T [1][13]. Financial Highlights for Q4 2024 - Revenues increased by 13.6% to $142.6 million compared to $125.5 million in Q4 2023 [2][8]. - Gross profit rose by 13.5% to $42.0 million, with a gross margin of 29.4% [2][8]. - Operating income surged by 28.6% to $16.7 million, resulting in an operating margin of 11.7% [2][8]. - Net income attributable to shareholders increased by 25.2% to $10.6 million, translating to a diluted EPS of $0.22 [2][8]. Financial Highlights for Full Year 2024 - Total revenues for the year grew by 3.3% to $552.5 million from $535.1 million in 2023 [6][7]. - Gross profit for the year was $157.2 million, with a gross margin of 28.4% [6][14]. - Operating income increased by 7.2% to $61.2 million, with an operating margin of 11.1% [6][14]. - Net income attributable to shareholders slightly decreased by 0.4% to $36.9 million, maintaining a diluted EPS of $0.75 [6][14]. Dividend Declaration - The board declared a semi-annual cash dividend of $0.327 per share, totaling approximately $16.1 million, reflecting about 75% of distributable profits for the year [9][10]. Strategic Developments - The company announced a Memorandum of Understanding for a merger with Matrix I.T, which is expected to create a combined entity valued at approximately $2.1 billion [13][15]. - The merger aims to enhance capabilities and drive innovation, positioning the new entity among the largest publicly traded IT services companies in the U.S. and Europe [13][15]. 2025 Revenue Guidance - Magic Software provided revenue guidance for 2025, projecting between $593 million and $603 million, indicating an annual growth of 7.3% to 9.1% compared to the previous year [14].

Core Viewpoint - Magic Software Enterprises Ltd. has signed a Memorandum of Understanding (MOU) for a proposed merger with Matrix I.T Ltd., which will result in Matrix acquiring the entire share capital of Magic, making it a wholly-owned subsidiary [2][14]. Company Overview - Magic Software Enterprises Ltd. is a global provider of IT consulting services and application development platforms, while Matrix I.T Ltd. is a leading public Israeli IT services company [2][23]. - The combined entity is expected to have an aggregate market value of $2.1 billion (approximately 7.7 billion ILS) and operate in around 50 countries, serving approximately 6,000 active clients with over 15,000 employees [4][6]. Merger Structure and Consideration - The merger will be executed as a reverse triangular merger, with Magic's shareholders receiving Matrix's ordinary shares based on a valuation exchange ratio of 31.125% for Magic and 68.875% for Matrix [14][12]. - The merger consideration will be based on the relative valuations of both companies, and the transaction is expected to be accounted for using the pooling of interest method, avoiding the recognition of original goodwill [14][10]. Strategic Rationale - The merger is seen as a strategic opportunity to enhance market position, expand capabilities, and create operational synergies [5][10]. - Key benefits include enhanced scale, geographic complementarity, and an expanded product and service portfolio, allowing for cross-selling opportunities [5][13]. Financial Profile - The combined entity is projected to generate revenues of $2.1 billion, with a gross profit of approximately $382 million and a net income attributable to non-controlling interests of about $110.6 million [6][4]. - The merger is expected to strengthen the financial profile and growth potential of the combined company, enabling it to invest in innovation and strategic growth initiatives [10][13]. Regulatory and Approval Process - The completion of the merger is subject to negotiations, due diligence, and the signing of a definitive agreement, along with obtaining necessary regulatory approvals [16][20]. - The merger will require the approval of the general meetings of both companies, as well as compliance with Israeli law regarding minority shareholders [20][16].

Magic Software (NASDAQ: MGIC ) has seen its share price rise about 30% since the start of 2024 to just under $13/share today. This might imply that prospective investors missed their opportunity, but I’m not so sure that’sAnalyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (ot ...

Core Insights - MGIC specializes in insuring low downpayment mortgages, defined as those with downpayments of less than 20% [1] - The primary risk of default is typically borne by Fannie Mae or Freddie Mac, who are the insured parties in these transactions [1] Company Overview - MGIC operates in the mortgage insurance sector, focusing on mitigating risks associated with low downpayment mortgages [1] - The company plays a crucial role in the housing finance system by providing insurance that allows borrowers to secure loans with lower initial payments [1] Industry Context - The mortgage insurance industry is significantly influenced by the policies and performance of government-sponsored enterprises like Fannie Mae and Freddie Mac, which take on the primary default risk [1] - The demand for low downpayment mortgages is likely to remain strong, given ongoing trends in housing affordability and access to homeownership [1]

Core Viewpoint - MGIC Investment Corporation (MTG) reported strong fourth-quarter 2024 results, with operating net income per share of 72 cents, exceeding estimates and showing a year-over-year increase of 10.2% [1][2]. Financial Performance - Total operating revenues reached $303.1 million, a 6.4% increase year over year, although it fell short of consensus estimates by 1.1% [2]. - Insurance in force rose by 0.6% year over year to $295.4 billion, surpassing the Zacks Consensus Estimate of $294 billion [3]. - Net premiums written increased by 5.9% year over year to $232.1 million, exceeding the estimate of $231.1 million [3]. - Net investment income grew by 6.1% year over year to $61.3 million, though it was below both the estimate of $66.9 million and the Zacks Consensus Estimate of $65 million [4]. - New insurance written surged by 45.9% year over year to $15.9 billion [4]. - Total losses and expenses increased by 23.3% year over year to $66.7 million [4]. Operational Metrics - The loss ratio for the quarter was 3.6%, compared to negative 4.2% in the fourth quarter of 2023 [5]. - The underwriting expense ratio improved by 380 basis points year over year to 20.8 [5]. - Persistency, the percentage of insurance remaining in force from one year prior, decreased to 84.8% from 86.1% in the previous year [4]. Capital Management - The company repurchased 7.8 million shares for $193.3 million in the fourth quarter and paid $200 million in dividends to the holding company [7]. - An additional 3.5 million shares were repurchased in January for $85.5 million [7]. - A dividend of 13 cents per share was declared to be paid on March 5, 2025, to shareholders of record as of February 18, 2025 [8]. Financial Position - Book value per share increased by 11.9% year over year to $20.82 as of December 31, 2024 [6]. - Shareholder equity rose to $5.3 billion, up 4.3% from the end of 2023 [6]. - PMIERs Available Assets totaled $6 billion, exceeding the Minimum Required Assets by $2.5 billion as of September 30, 2024 [6]. - Total assets increased by 2.1% year over year to $6.7 billion, while debt rose slightly to $644 million [6].

Fourth Quarter 2024 Net Income of $184.7 million or $0.72 per Diluted ShareFourth Quarter 2024 Adjusted Net Operating Income (Non-GAAP) of $184.5 million or $0.72 per Diluted ShareFull Year 2024 Net Income of $763.0 million or $2.89 per Diluted ShareFull Year 2024 Adjusted Net Operating Income (Non-GAAP) of $768.5 million or $2.91 per Diluted ShareMILWAUKEE, Feb. 3, 2025 /PRNewswire/ -- MGIC Investment Corporation (NYSE: MTG) today reported operating and financial results for the fourth quarter of 2024.Tim ...

Core Viewpoint - MGIC Investment Corporation (MTG) is experiencing strong investor confidence, with shares trading near a 52-week high, indicating potential for further price appreciation [1] Price Performance - MTG shares have increased by 23% over the past year, outperforming the industry growth of 11.1% [2] - The Finance sector and S&P 500 composite returned 24.5% and 24.8%, respectively, during the same period [2] Earnings Performance - The company has consistently beaten earnings estimates in the last four quarters, with an average beat of 16.25% [4] Valuation - MGIC Investment shares are trading at a price-to-book multiple of 1.18, which is lower than the industry average of 2.37 [5] - The insurer has a Value Score of B, suggesting it may be wise to take a position before valuation expands [5] Return on Capital - Return on invested capital (ROIC) has been increasing, currently at 11.4%, significantly higher than the industry average of 2.3% [6] Growth Drivers - The company anticipates strong premium writing due to a robust purchase market and potential share gains from the Federal Housing Administration [7] - The insurance-in-force portfolio is expected to grow, supported by new business and increasing annual persistency [8] Claims and Financial Health - MTG has seen a decline in claim filings, which will strengthen its balance sheet and improve its financial profile [9] - The company is enhancing its capital position through capital contributions and reinsurance transactions [10] Future Revenue Estimates - The Zacks Consensus Estimate for MGIC Investment's 2025 revenues indicates a 2.9% increase from the 2024 estimate [11] Conclusion - Improving housing market fundamentals, higher premiums, and outstanding credit quality are expected to drive growth for MGIC Investment [12] - The company recently increased its quarterly dividend by 13%, marking four consecutive years of dividend increases at a compound annual growth rate of 21% [13]

Group 1 - MGIC Investment Corporation plans to release its fourth quarter 2024 financial results on February 3, 2025, after market close [1] - A conference call/webcast is scheduled for February 4, 2025, at 10:00 a.m. Eastern Time to discuss the quarterly results [1] - Individuals can register for the call to receive dial-in information and are encouraged to join at least 10 minutes early [2] Group 2 - MGIC, the principal subsidiary of MGIC Investment Corporation, provides private mortgage insurance to lenders across the United States [3] - The company aims to facilitate homeownership by making low-down-payment mortgages more accessible [3] - MGIC intends to continue releasing important information through its corporate website and encourages investors to enroll for email alerts [4]

Core Viewpoint - MGIC Investment Corporation (MTG) has outperformed the industry, sector, and S&P 500 year-to-date, with a share price increase of 35.3% compared to the industry's 25% growth [1][2]. Company Performance - The company's market capitalization stands at $6.61 billion, with an average trading volume of 0.1 million shares over the last three months. The current stock price is $26.11, slightly below its 52-week high of $26.56 [1]. - MTG has shown solid insurance in force, a decline in loss and claims payments, lower delinquency rates, and better housing market fundamentals, contributing to its stock rally [3]. - The company is trading above its 50-day and 200-day simple moving averages of $25.21 and $22.63, indicating strong upward momentum [4]. Earnings and Growth Projections - MTG has a strong earnings surprise history, beating estimates in the last four quarters with an average surprise of 16.25% [5]. - The Zacks Consensus Estimate for MTG's 2024 earnings per share indicates an 11% year-over-year increase, with revenues projected at $1.22 billion, reflecting a 4.5% improvement [6]. - For 2025, the revenue consensus estimate suggests a 3.5% increase from the 2024 estimates [7]. Financial Metrics - The return on invested capital (ROIC) has been increasing, currently at 11.4%, significantly higher than the industry average of 2.5%, indicating efficient fund utilization [8]. - The company is improving its capital position through capital contributions, reinsurance transactions, and cash management, with a solid balance sheet supported by declining claim filings [11]. Capital Management - As of October 31, 2024, MTG has $578.6 million remaining under a $750 million share repurchase program, reflecting strong mortgage credit performance [12]. - The shares are currently undervalued, trading at a price-to-book multiple of 1.28, compared to the industry average of 2.43 [13].