[Introduction and Forward-Looking Statements](index=4&type=section&id=INTRODUCTION) [Company Overview](index=4&type=section&id=INTRODUCTION) Magic Software Enterprises Ltd. provides global software services, IT outsourcing, and low-code application platforms to clients in 50 countries - The company operates in four main areas: (i) software and IT outsourcing services, (ii) application development and business process integration platforms, (iii) vertical software solutions, and (iv) cloud-based digital transformation services[15](index=15&type=chunk) - Key proprietary platforms include Magic xpa (low-code application platform), AppBuilder (mainframe-grade application platform), and Magic xpi (application integration platform)[20](index=20&type=chunk) - The company offers specialized vertical solutions such as Clicks™ for healthcare, Hermes for air cargo, HR Pulse for human capital management, and FactoryEye for smart manufacturing[18](index=18&type=chunk)[23](index=23&type=chunk) - As of the report date, the company has approximately **3,787** employees and serves customers in about **50** countries through a network of partners and direct operations[19](index=19&type=chunk) [Cautionary Note Regarding Forward-Looking Statements](index=7&type=section&id=Cautionary%20Note%20Regarding%20Forward-Looking%20Statements) This report contains forward-looking statements subject to risks from M&A integration, sales cycles, competition, cybersecurity, Israeli operations, and the Matrix IT merger - The forward-looking statements are based on current beliefs and expectations and are subject to risks that could cause material differences in actual results[30](index=30&type=chunk) - Key risks highlighted include M&A integration, lengthy development and sales cycles, competition, managing operational changes, cybersecurity breaches, risks related to operating in Israel, and the proposed merger with Matrix IT[33](index=33&type=chunk) [Key Information](index=10&type=section&id=ITEM%203.%20KEY%20INFORMATION) [Risk Factors](index=10&type=section&id=D.%20Risk%20Factors) The company faces significant business, investment, and operational risks, including M&A integration, market competition, cybersecurity, and geopolitical instability in Israel [Risks Related to Business and Industry](index=14&type=section&id=Risks%20Related%20to%20Our%20Business%20and%20Our%20Industry) The company faces business and industry risks from M&A integration, product dependency, lengthy sales cycles, macroeconomic factors, intense competition, and cybersecurity threats - The M&A growth strategy carries significant integration risks, including combining different cultures, IT systems, and retaining key employees and customers. The company completed several acquisitions in 2023 and 2024, including Theoris Group Inc[50](index=50&type=chunk)[51](index=51&type=chunk)[53](index=53&type=chunk) - A significant portion of revenue comes from a limited number of core product families (e.g., Magic xpa, Magic xpi, Clicks, Hermes), making the company vulnerable to decreased demand for these products[57](index=57&type=chunk)[58](index=58&type=chunk) - The company's two largest clients accounted for **13.2%** of revenues in 2024, down from **16.8%** in 2023. This decrease was partly due to a major client suspending significant services in late 2023[84](index=84&type=chunk)[337](index=337&type=chunk)[338](index=338&type=chunk) - A material weakness in internal control over financial reporting was identified as of December 31, 2024. Documentation supporting certain revenue cycle controls for U.S. entities was not comprehensively retained, limiting management's ability to evidence control performance[147](index=147&type=chunk)[148](index=148&type=chunk) - The company faces intense competition from multinational IT providers, offshore firms, consulting firms, and specialized service providers. Some competitors have greater financial and marketing resources[88](index=88&type=chunk)[89](index=89&type=chunk) [Risks Related to an Investment in Our Ordinary Shares](index=38&type=section&id=Risks%20Related%20to%20an%20Investment%20in%20Our%20Ordinary%20Shares) Investment risks include share price volatility from dual listing, controlling shareholder influence, and potential adverse U.S. tax consequences (PFIC/CFC) - The company's Ordinary Shares are traded on both the NASDAQ Global Select Market (in USD) and the Tel Aviv Stock Exchange (in NIS), which may result in price variations[152](index=152&type=chunk) - As of April 1, 2025, Formula Systems (1985) Ltd. beneficially owns approximately **46.71%** of outstanding Ordinary Shares, giving it controlling influence over matters requiring shareholder approval[156](index=156&type=chunk) - U.S. shareholders may suffer adverse tax consequences if the company is classified as a Passive Foreign Investment Company (PFIC) or a Controlled Foreign Corporation (CFC). The company believes it was not a PFIC for the 2024 taxable year but cannot provide assurance for future years[159](index=159&type=chunk)[160](index=160&type=chunk) [Risks Related to Our Location in Israel](index=42&type=section&id=Risks%20Related%20to%20Our%20Location%20in%20Israel) Operations in Israel expose the company to political, economic, and military instability, including the ongoing conflict and potential employee call-ups - The company is exposed to political, economic, and military instability in Israel, where its headquarters and significant R&D facilities are located[167](index=167&type=chunk)[168](index=168&type=chunk) - The war with Hamas that began on October 7, 2023, and hostilities with Hezbollah have led to the call-up of over **350,000** IDF reservists, including approximately **250** of the company's Israeli employees, which could disrupt operations[169](index=169&type=chunk)[170](index=170&type=chunk)[178](index=178&type=chunk) - Provisions of Israeli law, such as those regulating mergers and tender offers, may delay, prevent, or complicate an acquisition of the company, potentially depressing the share price[181](index=181&type=chunk) [Risks Related to our Proposed Merger with Matrix IT](index=44&type=section&id=Risks%20Related%20to%20our%20Proposed%20Merger%20with%20Matrix%20IT) The proposed merger with Matrix IT carries risks of unrealized benefits, integration challenges, and failure to obtain regulatory or shareholder approvals - On March 11, 2025, the company entered into a non-binding MOU for a reverse triangular merger with Matrix I.T Ltd., which is also controlled by Formula Systems[183](index=183&type=chunk) - Key risks include the failure to realize anticipated benefits, the possibility of not reaching a definitive agreement, and disruptions from the complex integration process[184](index=184&type=chunk)[186](index=186&type=chunk) - The merger is contingent on regulatory approvals and approval by a special majority of minority shareholders of both companies, which may delay or prevent the merger[187](index=187&type=chunk)[189](index=189&type=chunk) [Information on the Company](index=46&type=section&id=ITEM%204.%20INFORMATION%20ON%20THE%20COMPANY) [History and Development](index=46&type=section&id=A.%20History%20and%20Development%20of%20the%20Company) Founded in 1983, the company has grown through acquisitions, with capital expenditures of $1.5 million in 2024 primarily for IT and office improvements - The company was organized in Israel on February 10, 1983, and its shares are listed on the NASDAQ Global Select Market (MGIC) and the Tel Aviv Stock Exchange[190](index=190&type=chunk) - Recent acquisitions include Theoris Group Inc. in April 2024 for **$13.1 million**, K.M.T. in June 2023 for up to **$16.2 million**, and The Goodkind Group in August 2022 for **$11.6 million**[191](index=191&type=chunk)[195](index=195&type=chunk)[196](index=196&type=chunk) Capital Expenditures | Year | Capital Expenditures (in millions) | | :--- | :--- | | 2022 | $4.4 | | 2023 | $1.6 | | 2024 | $1.5 | [Business Overview](index=47&type=section&id=B.%20Business%20Overview) Magic Software offers low-code platforms, vertical software, and IT professional services, focusing on customer expansion, technology trends, and strategic acquisitions - The company's software technology platforms, such as Magic xpa and Magic xpi, are low-code and designed to help organizations build and integrate business applications quickly[202](index=202&type=chunk)[204](index=204&type=chunk) - Key vertical software packages include Clicks™ for healthcare, Hermes Cargo for air cargo management, and HR Pulse for human capital management[209](index=209&type=chunk) - The company has strong partnerships with major cloud providers, achieving AWS Generative AI Competency in December 2024 and being named Google Cloud EMEA Partner of the Year for Israel in 2025[215](index=215&type=chunk)[216](index=216&type=chunk) - The company's growth strategy includes expanding sales to existing customers, capitalizing on new technology trends, attracting new customers with new offerings, and acquiring complementary businesses[280](index=280&type=chunk) - The company competes in the low-code and integration platform markets against players like Microsoft, Salesforce, OutSystems, IBM, and MuleSoft, based on factors like platform features, ease of use, and total cost of ownership[307](index=307&type=chunk)[308](index=308&type=chunk) [Organizational Structure](index=73&type=section&id=C.%20Organizational%20Structure) Magic Software Enterprises Ltd. operates globally through a network of wholly-owned and majority-owned subsidiaries across the US, Israel, Europe, and Asia - The company operates through a complex structure of subsidiaries across the US, Israel, Europe, and Asia[320](index=320&type=chunk)[321](index=321&type=chunk) - Notable subsidiaries include Coretech Consulting Group LLC (**100%**, Delaware), CommIT Technology Solutions Ltd (**76.07%**, Israel), and Hermes Logistics Technologies Limited (**100%**, UK)[320](index=320&type=chunk)[321](index=321&type=chunk) [Property, Plants and Equipment](index=74&type=section&id=D.%20Property,%20Plants%20and%20Equipment) The company's headquarters and subsidiary offices are leased globally, with total annual rent of $3.5 million in 2024 - The main headquarters is a leased facility in Or Yehuda, Israel, with the lease expiring in June 2033[322](index=322&type=chunk) - Aggregate annual rent for all leased facilities, including subsidiary offices in the US, Europe, and Asia, was **$3.5 million** in 2024[323](index=323&type=chunk) [Operating and Financial Review and Prospects](index=75&type=section&id=ITEM%205.%20OPERATING%20AND%20FINANCIAL%20REVIEW%20AND%20PROSPECTS) [Operating Results](index=75&type=section&id=A.%20Operating%20Results) In 2024, revenues grew 3.3% to $552.5 million, driven by IT services in Israel and Europe, despite a North American client project suspension Consolidated Statement of Operations Data (% of Total Revenues) | | 2023 | 2024 | | :--- | :--- | :--- | | Total revenues | 100.0% | 100.0% | | Gross profit | 28.6% | 28.6% | | Operating income | 10.7% | 11.1% | | Net income attributable to Magic's shareholders | 6.9% | 6.7% | Revenues by Segment (in millions) | Segment | 2023 | 2024 | % Change | | :--- | :--- | :--- | :--- | | Software Services | $92.9 | $94.9 | +2.1% | | IT Professional Services | $442.2 | $457.6 | +3.5% | | **Total Revenues** | **$535.1** | **$552.5** | **+3.3%** | Revenues by Geography (in millions) | Geography | 2023 | 2024 | % Change | | :--- | :--- | :--- | :--- | | United States | $250.8 | $229.1 | -8.6% | | Israel | $214.1 | $244.5 | +14.2% | | Europe | $55.2 | $62.4 | +13.0% | | Japan | $10.8 | $12.7 | +17.6% | | Other | $4.1 | $3.8 | -7.3% | | **Total** | **$535.1** | **$552.5** | **+3.3%** | - The revenue increase in 2024 was driven by strong demand for professional services in Israel and Europe, offsetting a decline in North America after a major client suspended projects in Q3 2023[361](index=361&type=chunk) - Net financial expenses increased from **$4.6 million** in 2023 to **$6.2 million** in 2024, primarily due to a **$2.5 million** decrease in interest income from deposits[370](index=370&type=chunk)[371](index=371&type=chunk) [Liquidity and Capital Resources](index=84&type=section&id=B.%20Liquidity%20and%20Capital%20Resources) As of December 31, 2024, the company had $114.6 million in liquidity, $59.3 million in debt, and generated $74.8 million in operating cash flow Key Liquidity Figures (as of Dec 31, 2024) | Metric | Amount (in millions) | | :--- | :--- | | Cash, cash equivalents, and marketable securities | $114.6 | | Net working capital | $105.9 | | Long-term debt | $36.1 | | Total debt (short & long-term) | $59.3 | Cash Flow Summary (Year ended Dec 31) | Cash Flow Activity | 2023 (in millions) | 2024 (in millions) | | :--- | :--- | :--- | | Net cash provided by operating activities | $69.0 | $74.8 | | Net cash used in investing activities | ($27.6) | ($22.6) | | Net cash used in financing activities | ($17.3) | ($45.1) | - The company has several loans with financial covenants, including maintaining equity above **$150 million** and specific debt-to-EBITDA ratios. As of December 31, 2024, the company was in compliance with all covenants[380](index=380&type=chunk)[381](index=381&type=chunk)[881](index=881&type=chunk) - The company maintains a dividend policy to distribute up to **75%** of its annual net income. In 2024, it paid **$10 million** in dividends and declared an additional **$11.6 million** to be paid in January 2025[393](index=393&type=chunk)[916](index=916&type=chunk) [Research and Development](index=86&type=section&id=C.%20Research%20and%20Development) R&D investment increased to $16.8 million in 2024, with 224 employees primarily in Israel and India, focusing on product enhancement and new applications R&D Investment | Year | R&D Investment (in millions) | | :--- | :--- | | 2022 | $13.2 | | 2023 | $13.5 | | 2024 | $16.8 | - As of December 31, 2024, the R&D team consisted of **224** employees, with **98** in Israel, **99** in India, **21** in Russia, and **5** in Japan[395](index=395&type=chunk) [Critical Accounting Policies and Estimations](index=87&type=section&id=E.%20Critical%20Accounting%20Policies%20and%20Estimations.) Financial statements under IFRS require estimates for long-term contracts, revenue recognition, business combinations, capitalized software, and put options - A critical accounting estimate involves the percentage of completion for long-term fixed-price contracts, which is based on the ratio of actual costs incurred to total estimated costs[400](index=400&type=chunk)[759](index=759&type=chunk) - Revenue from software licenses without significant implementation is recognized at the point of delivery. Revenue from long-term contracts with significant customization is recognized over time using the percentage of completion method[405](index=405&type=chunk)[408](index=408&type=chunk)[771](index=771&type=chunk) - Business combinations are accounted for using the acquisition method. Goodwill is tested for impairment annually on December 31, and no impairment was identified for 2022, 2023, or 2024[428](index=428&type=chunk)[433](index=433&type=chunk)[435](index=435&type=chunk) - Software development costs are capitalized upon establishing technological feasibility and are amortized on a straight-line basis over an estimated useful life of **3-5** years once the product is available for sale[418](index=418&type=chunk)[420](index=420&type=chunk)[421](index=421&type=chunk) - Put options granted to non-controlling interests are classified as a financial liability, measured at the present value of the exercise price, with changes recognized in equity[426](index=426&type=chunk)[813](index=813&type=chunk) [Directors, Senior Management and Employees](index=96&type=section&id=ITEM%206.%20DIRECTORS,%20SENIOR%20MANAGEMENT%20AND%20EMPLOYEES) [Directors and Senior Management](index=96&type=section&id=A.%20Directors%20and%20Senior%20Management) Leadership includes CEO Guy Bernstein and CFO Asaf Berenstin, with a board featuring external directors overseeing audit and compensation committees - Guy Bernstein serves as the Chief Executive Officer and a Director. He is also the CEO of the parent company, Formula Systems[459](index=459&type=chunk) - Asaf Berenstin is the Chief Financial Officer and also serves as CFO of Formula Systems[466](index=466&type=chunk) - The board includes two external directors, Sagi Schliesser and Ron Ettlinger, as required by Israeli law[456](index=456&type=chunk)[457](index=457&type=chunk) [Compensation](index=100&type=section&id=B.%20Compensation) Total compensation for directors and executive officers was approximately $7.4 million in 2024, with specific details for the five most highly compensated officers Aggregate Compensation for Directors and Executive Officers (2024) | Category | Amount | | :--- | :--- | | Salaries, fees, commissions, stock-based compensation and bonuses | $7,132,876 | | Pension, retirement and similar benefits | $239,309 | | **Total** | **$7,372,185** | Compensation of 5 Most Highly Compensated Officers (2024) | Name and Position | Salary | Bonus | Equity Based Compensation | All Other Compensation | Total | | :--- | :--- | :--- | :--- | :--- | :--- | | Yakov Tsaroya, CEO of Coretech | $400,000 | $1,100,376 | $ - | $9,000 | $1,509,376 | | Arik Faingold, President, Integration Solutions | $425,741 | $236,939 | $438,059 | $ - | $1,100,739 | | Idan Faingold, CEO of CommIT | $294,150 | $236,939 | $438,059 | $101,624 | $1,070,739 | | Eli Schwartz, CEO of Comblack I.T. | $421,656 | $247,299 | $ - | $ - | $668,955 | | Arik Kilman, Chairman, Software Group | $ - | $602,772 | $ - | $ - | $602,772 | - Outside and independent directors received an annual fee of **$20,883** and a per-meeting attendance fee of **$777** in 2024[487](index=487&type=chunk) [Board Practices](index=102&type=section&id=C.%20Board%20Practices) The board of five directors, including external members, adheres to Israeli law and NASDAQ rules for committees and related party transaction approvals - The board of directors is currently composed of **five** members. Israeli law requires at least two external directors[489](index=489&type=chunk)[493](index=493&type=chunk) - The Audit Committee and Compensation Committee are composed of independent and external directors, in compliance with both SEC/NASDAQ and Israeli regulations[504](index=504&type=chunk)[505](index=505&type=chunk)[507](index=507&type=chunk) - Transactions with controlling shareholders or in which an office holder has a personal interest are subject to stringent approval processes under the Israeli Companies Law, requiring committee, board, and sometimes special shareholder majority approval[513](index=513&type=chunk)[514](index=514&type=chunk) - The company has provisions for exculpation, indemnification, and insurance for its directors and officers to the fullest extent permitted by Israeli law, with coverage up to **$60 million**[521](index=521&type=chunk)[530](index=530&type=chunk) [Employees](index=112&type=section&id=D.%20Employees) As of December 31, 2024, the company had 3,787 employees, primarily in North America and Israel, with most in technical support and consulting roles Employees by Geographic Location | Region | 2022 | 2023 | 2024 | | :--- | :--- | :--- | :--- | | Israel | 1,415 | 1,554 | 1,654 | | North America | 1,965 | 1,321 | 1,387 | | Europe | 557 | 516 | 514 | | Asia | 216 | 226 | 223 | | South Africa | 8 | 11 | 10 | | **Total** | **4,161** | **3,628** | **3,787** | Employees by Activity | Activity | 2022 | 2023 | 2024 | | :--- | :--- | :--- | :--- | | Technical support and consulting | 3,513 | 3,001 | 3,166 | | Research and development | 257 | 256 | 224 | | Marketing and sales | 231 | 202 | 217 | | Operations and administrations | 160 | 169 | 181 | | **Total** | **4,161** | **3,628** | **3,787** | [Share Ownership](index=113&type=section&id=E.%20Share%20Ownership) CEO Guy Bernstein holds 150,000 shares, and the 2007 Incentive Compensation Plan has 952,500 shares available for future grants to employees and directors - As of May 1, 2025, CEO Guy Bernstein beneficially owned **150,000** Ordinary Shares[535](index=535&type=chunk) - The 2007 Incentive Compensation Plan allows for the grant of options, restricted shares, and other awards. The plan was extended until August 2027, and as of Dec 31, 2024, **952,500** shares were available for future grants[536](index=536&type=chunk)[539](index=539&type=chunk)[540](index=540&type=chunk) [Major Shareholders and Related Party Transactions](index=115&type=section&id=ITEM%207.%20MAJOR%20SHAREHOLDERS%20AND%20RELATED%20PARTY%20TRANSACTIONS) [Major Shareholders](index=115&type=section&id=A.%20Major%20Shareholders) Formula Systems (1985) Ltd. is the controlling shareholder with 46.71% ownership, alongside other major institutional shareholders Major Shareholders (as of Dec 31, 2024) | Shareholder | Percentage of Ownership | | :--- | :--- | | Formula Systems (1985) Ltd. | 46.71% | | Harel Insurance | 11.52% | | Clal Insurance Enterprises Holdings Ltd. | 6.97% | - Formula Systems is the controlling shareholder with **46.71%** ownership as of April 1, 2025. Formula Systems is, in turn, controlled by Asseco Poland S.A[548](index=548&type=chunk) [Related Party Transactions](index=116&type=section&id=B.%20Related%20Party%20Transactions) In 2024, the company conducted $3.6 million in sales and $5.4 million in purchases with affiliates of its controlling shareholder - In 2024, the company sold **$3.6 million** of services to and purchased **$5.4 million** of goods/services from affiliated companies of its controlling shareholder, Formula Systems[515](index=515&type=chunk) [Financial Information](index=117&type=section&id=ITEM%208.%20FINANCIAL%20INFORMATION) [Consolidated Statements and Other Financial Information](index=117&type=section&id=A.%20Consolidated%20Statements%20and%20Other%20Financial%20Information) The company faces ordinary course legal proceedings and maintains a dividend policy to distribute up to 75% of annual net income - The company is subject to ordinary course legal proceedings which are not expected to materially affect its financial position[556](index=556&type=chunk) - The company has a dividend policy to distribute up to **75%** of its annual net income, subject to Board discretion and legal requirements[557](index=557&type=chunk) [Significant Changes](index=117&type=section&id=B.%20Significant%20Changes) Post-year-end, the company announced a non-binding merger MOU with Matrix IT and increased its ownership in subsidiary CommIT for NIS 50.4 million - On March 11, 2025, the company entered into a non-binding MOU for a reverse triangular merger with Matrix I.T Ltd. Post-merger, Magic shareholders would hold **31.125%** of the combined company, and Magic would become a private, wholly-owned subsidiary of Matrix[559](index=559&type=chunk)[562](index=562&type=chunk) - The merger is subject to several conditions, including due diligence, obtaining fairness opinions, definitive agreement execution, and regulatory and shareholder approvals (including a special majority of minority shareholders)[563](index=563&type=chunk)[564](index=564&type=chunk) - In April 2025, the company acquired additional shares in its subsidiary CommIT, increasing its ownership from **68.15%** to approximately **79.32%** for a consideration of approximately **NIS 50.4 million**[565](index=565&type=chunk) [Additional Information](index=119&type=section&id=ITEM%2010.%20ADDITIONAL%20INFORMATION) [Taxation](index=120&type=section&id=E.%20Taxation) The company is subject to Israeli corporate tax, benefiting from reduced rates, and monitors OECD Pillar Two rules, with U.S. Holders facing PFIC/CFC risks - The general corporate tax rate in Israel is **23%**. However, the company benefits from reduced rates under the Law for the Encouragement of Capital Investments, with parts of its income taxed at preferred rates as low as **6%** under the Special Preferred Technology Enterprise (SPTE) regime[585](index=585&type=chunk)[600](index=600&type=chunk)[602](index=602&type=chunk) - For non-Israeli resident shareholders, gains from selling shares are generally exempt from Israeli capital gains tax, provided the shares are publicly traded and the gains are not from a permanent establishment in Israel. Dividends are subject to withholding tax, typically **20-30%**, but may be reduced by applicable tax treaties[610](index=610&type=chunk)[615](index=615&type=chunk) - For U.S. Holders, there is a risk that the company could be classified as a Passive Foreign Investment Company (PFIC), which would result in adverse U.S. federal income tax consequences. The company believes it was not a PFIC in 2024 but cannot guarantee future status[633](index=633&type=chunk)[634](index=634&type=chunk) - The company is part of the Asseco Group, which exceeds the **€750 million** revenue threshold for the OECD's Pillar Two global minimum tax rules. These rules, imposing a **15%** minimum tax on a jurisdictional basis, will become effective in Israel on January 1, 2026, and are being monitored for their potential impact[646](index=646&type=chunk)[647](index=647&type=chunk) [Quantitative and Qualitative Disclosures about Market Risks](index=133&type=section&id=ITEM%2011.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISKS) The company is exposed to foreign currency and interest rate risks, primarily from NIS, Euro, and JPY fluctuations, mitigated by hedging strategies - The company's primary market risks are foreign currency exchange risk and interest rate risk[653](index=653&type=chunk) - A significant portion of sales and expenses are denominated in currencies other than the U.S. dollar, primarily the New Israeli Shekel (NIS), Euro, and Japanese Yen, creating exposure to currency fluctuations[656](index=656&type=chunk) - A **10%** increase in the value of the NIS against the USD in 2024 would have increased revenues by **$27.2 million**, while a **10%** decrease would have reduced revenues by **$22.3 million**[658](index=658&type=chunk) [Controls and Procedures](index=135&type=section&id=ITEM%2015.%20CONTROLS%20AND%20PROCEDURES) Management concluded disclosure controls were ineffective due to a material weakness in revenue cycle documentation, leading to an adverse audit opinion - Management concluded that as of December 31, 2024, the company's disclosure controls and procedures were **ineffective**[664](index=664&type=chunk) - A material weakness in internal control over financial reporting was identified: documentation supporting certain internal controls within the U.S. entities' revenue cycle was not comprehensively retained[666](index=666&type=chunk)[721](index=721&type=chunk) - Management has implemented a remediation plan, which includes hiring personnel, upgrading financial systems, and enhancing oversight, to address the material weakness[669](index=669&type=chunk)[670](index=670&type=chunk)[671](index=671&type=chunk) - The independent registered public accounting firm issued an **adverse opinion** on the company's internal control over financial reporting as of December 31, 2024[674](index=674&type=chunk)[715](index=715&type=chunk) [Corporate Governance and Other Matters](index=136&type=section&id=ITEM%2016.%20RESERVED) [Principal Accountant Fees and Services](index=137&type=section&id=ITEM%2016C.%20PRINCIPAL%20ACCOUNTANT%20FEES%20AND%20SERVICES) The company changed auditors in 2024, with fees paid to EY Israel ($126,000) and BDO Israel ($510,075) for audit and other services Auditor Fees (EY Israel) | Service | 2023 | 2024 | | :--- | :--- | :--- | | Audit | $629,000 | $27,000 | | Tax and other | $210,000 | $99,000 | | **Total** | **$839,000** | **$126,000** | Auditor Fees (BDO Israel) | Service | 2024 | | :--- | :--- | | Audit | $510,075 | | **Total** | **$510,075** | [Changes in Registrant's Certifying Accountant](index=138&type=section&id=ITEM%2016F.%20CHANGES%20IN%20REGISTRANT'S%20CERTIFYING%20ACCOUNTANT) Effective July 31, 2024, the company replaced its independent auditor, EY Israel, with BDO Israel, following necessary approvals - The company replaced its auditor EY Israel with BDO Israel, effective July 31, 2024[683](index=683&type=chunk) [Corporate Governance](index=138&type=section&id=ITEM%2016G.%20CORPORATE%20GOVERNANCE) As a foreign private issuer, the company follows Israeli home country governance practices, differing from some NASDAQ rules regarding board independence - The company follows Israeli home country practices in lieu of certain NASDAQ rules, such as not requiring a majority-independent board and not holding regular executive sessions for independent directors[685](index=685&type=chunk)[693](index=693&type=chunk) [Cybersecurity](index=139&type=section&id=ITEM%2016K.%20CYBERSECURITY) The company maintains an ISO-aligned cybersecurity program overseen by the Board, with the CISO managing daily threats, acknowledging system failure risks - The company has a cybersecurity risk management system aligned with industry best practices (e.g., ISO standards) and engages third-party experts for testing and incident management[689](index=689&type=chunk) - The Board of Directors has ultimate oversight of cybersecurity risk, receiving quarterly updates. The Chief Information Security Officer (CISO) is responsible for the daily management and assessment of cyber threats[691](index=691&type=chunk)[692](index=692&type=chunk) - While no prior cybersecurity incidents have materially affected the company, it acknowledges that a failure of IT systems could disrupt business and cause reputational damage[690](index=690&type=chunk) [Financial Statements](index=141&type=section&id=ITEM%2018.%20FINANCIAL%20STATEMENTS) [Consolidated Financial Statements](index=143&type=section&id=Consolidated%20Financial%20Statements) The 2024 consolidated financial statements, prepared under IFRS, include an unqualified audit opinion but an adverse opinion on internal controls Consolidated Financial Position (in thousands) | | Dec 31, 2023 | Dec 31, 2024 | | :--- | :--- | :--- | | **Total Assets** | **$522,406** | **$540,331** | | Total Current Assets | $256,625 | $276,199 | | Total Long-Term Assets | $265,781 | $264,132 | | **Total Liabilities and Equity** | **$522,406** | **$540,331** | | Total Current Liabilities | $141,699 | $170,305 | | Total Long-Term Liabilities | $89,763 | $68,957 | | Total Equity | $290,944 | $301,069 | Consolidated Statement of Profit or Loss (in thousands) | | 2022 | 2023 | 2024 | | :--- | :--- | :--- | :--- | | Total Revenues | $566,792 | $535,052 | $552,520 | | Gross Profit | $155,355 | $152,987 | $157,827 | | Operating Income | $61,762 | $57,108 | $61,237 | | Net Income | $46,279 | $42,502 | $43,291 | | Net Income Attributable to Equity Holders | $40,470 | $37,031 | $36,883 | Consolidated Statement of Cash Flows (in thousands) | Cash Flow Activity | 2022 | 2023 | 2024 | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $56,615 | $68,992 | $74,833 | | Net cash used in investing activities | ($34,458) | ($27,616) | ($22,612) | | Net cash used in financing activities | ($18,276) | ($17,293) | ($45,145) |

Group 1 - MGIC Investment Corporation (NYSE: MTG) shares have increased by 27% over the past year and are close to their 52-week high [1] - The company has no direct exposure to tariffs, which positions it favorably in the current economic environment [1] - Elevated home prices contribute positively to the company's business outlook [1]

MGIC Investment Corporation (MTG) reported first-quarter 2025 operating net income per share of 75 cents, which beat the Zacks Consensus Estimate by 13.6%. Moreover, the bottom line increased 15.4% year over year. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)Shares gained 1.9% in the aftermarket trading session to reflect the outperformance. MGIC Investment recorded total operating revenues of $305 million, which increased 0.7% year over year on higher net investment income and n ...

Core Viewpoint - MGIC Investment Corporation reported strong financial results for the first quarter of 2025, demonstrating continued performance improvement and market leadership despite macroeconomic concerns [2][3]. Financial Performance - Net income for Q1 2025 was $185.5 million, or $0.75 per diluted share, compared to $184.7 million and $0.72 per diluted share in Q4 2024, and $174.1 million and $0.64 per diluted share in Q1 2024 [4]. - Adjusted net operating income for Q1 2025 was $185.2 million, or $0.75 per diluted share, reflecting a slight increase from $184.5 million and $0.72 per diluted share in Q4 2024, and $178.4 million and $0.65 per diluted share in Q1 2024 [4]. - New insurance written (NIW) was $10.2 billion in Q1 2025, down from $15.9 billion in Q4 2024 and up from $9.1 billion in Q1 2024 [4][20]. - Net premiums earned were $243.7 million, slightly up from $241.3 million in Q4 2024 and $242.6 million in Q1 2024 [4]. - The annual persistency rate was 84.7%, a slight decrease from 84.8% in Q4 2024 and 85.7% in Q1 2024 [4]. Capital and Liquidity - As of March 31, 2025, PMIERs available assets were $5.9 billion, with PMIERs excess at $2.6 billion [4]. - The holding company liquidity was reported at $824 million, down from $1,076 million at the end of Q4 2024 [4]. Shareholder Actions - The company repurchased 9.2 million shares for $224.3 million and an additional 2.8 million shares for $65.8 million through April 25, 2025 [7]. - A dividend of $0.13 per common share was declared, payable on May 21, 2025 [7]. Delinquency and Loss Metrics - Primary delinquency inventory stood at 25,438, down from 26,791 in Q4 2024 [4][24]. - The primary IIF delinquency rate was 2.30%, a decrease from 2.40% in Q4 2024 [4][24]. - Losses incurred, net, were $9.6 million, compared to $8.7 million in Q4 2024 and $4.6 million in Q1 2024 [4]. Market Position and Strategy - The company maintains a strong market position with robust capital and liquidity, allowing it to continue executing its business strategies and supporting customers with innovative solutions [2][3].

MILWAUKEE, April 24, 2025 /PRNewswire/ -- MGIC Investment Corporation (NYSE: MTG) announced its board of directors has approved an additional share repurchase program with authorization to purchase up to $750 million of its common stock.The company is authorized to repurchase shares of its common stock from time to time through privately negotiated, open market or other transactions (including through the use of trading plans intended to qualify under Rule 10b5-1 under the Securities Exchange Act of 1934, a ...

Financial Data and Key Metrics Changes - Revenue in Q4 2024 increased to $142.6 million, up approximately 13.6% from Q4 2023, driven by strong demand for cloud and DevOps AI services [22][24] - Full year revenues increased by 3.3% to $552.5 million compared to $535.1 million in 2023 [34] - Non-GAAP net income for Q4 decreased by 0.5% to $11.5 million or $0.24 per fully diluted share compared to $11.6 million or $0.24 per fully diluted share in the same period last year [33] Business Line Data and Key Metrics Changes - Revenues from cloud services increased by 45% year-over-year for the whole year [28] - The revenue mix for Q4 2024 was approximately 17% related to software solutions with a gross margin of approximately 62% and 83% related to professional services with a gross margin of approximately 23.8% [31] - Non-GAAP operating income for Q4 increased by 6.1% to $18.8 million compared to $17.7 million in the same period last year [31] Market Data and Key Metrics Changes - Revenues from North American operations increased by 14.2% from $51.3 million to $58.6 million in Q4 2024 [29] - Revenues from Israeli operations amounted to $62.7 million, up by 15.5% compared to $54.3 million reported in the same period last year [30] - North America accounted for 41% of overall quarterly revenue, while Israeli operations accounted for 44% [29][30] Company Strategy and Development Direction - The merger with Matrix is expected to create a global IT powerhouse, enhancing market position and expanding capabilities [13][18] - The combined entity is projected to generate over $2 billion in annual revenues, with significant growth opportunities in cloud technology and managed services [16][38] - The merger will allow both companies to leverage each other's strengths to expand geographic reach and enhance international client engagement [19][20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving revenue growth in 2025, anticipating revenues between $593 million and $603 million, reflecting an annual growth of 7.3% to 9.1% [38] - The company is focused on maintaining business continuity and driving long-term shareholder value during the merger process [21] - Management highlighted strong demand for cloud services and AI consulting as pivotal for revenue growth [42] Other Important Information - The merger will result in Magic becoming a private company wholly owned by Matrix, with shares delisted from NASDAQ [9][10] - The combined entity will employ over 15,000 professionals and serve a customer base of over 6,000 clients [17] - The company declared a semi-annual cash dividend of $0.327 per share, reflecting 75% of net income attributable to shareholders for the year [37] Q&A Session Summary Question: Drivers behind guidance for 2025 - Management cited improved results, increased backlog, and strong demand in cloud services and defense sector as key drivers for confidence in revenue growth [41][42] Question: Outlook on expenses in a higher growth environment - Management indicated stability in payroll costs, with potential pressure from a recovering Israeli market, while maintaining operational margins [43][44] Question: Long-term growth drivers for the joint company - Management emphasized the existing infrastructure of Magic and Matrix's relationships with major vendors as key growth drivers [47][49] Question: Expectations for AI solutions adoption - Management noted that large corporations are cautiously exploring AI, with plans to transform this into a significant business opportunity [50][52]

Magic Software Enterprises (MGIC) Q4 2024 Earnings Call March 12, 2025 05:38 PM ET Company Participants Asaf Berenstin - Chief Financial OfficerGuy Bernstein - CEO Conference Call Participants Chris Reimer - AnalystMaggie Nolan - Research Analyst - Technology, Media & Communications Operator Ladies and gentlemen, thank you for standing by. Welcome to the Magic Software Enterprises twenty twenty four Fourth Quarter and Full Year Financial Results Conference Call. Magic's fourth quarter twenty twenty four ear ...

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].

Financial Performance - Revenues for Q4 2024 increased by 13.6% to $142.6 million compared to $125.5 million in Q4 2023[2] - Operating income for Q4 2024 rose by 28.6% to $16.7 million, up from $13.0 million in the same period last year[3] - Net income attributable to shareholders for Q4 2024 increased by 25.2% to $10.6 million, or $0.22 per diluted share, compared to $8.5 million, or $0.17 per diluted share, in Q4 2023[3] - For the full year 2024, revenues increased by 3.3% to $552.5 million compared to $535.1 million in 2023[4] - Net income for 2024 was $43,291,000, a 1.86% increase from $42,502,000 in 2023[30] Cash Flow and Assets - Cash flow from operating activities for the year ended December 31, 2024, amounted to $74.7 million, up from $69.0 million in 2023[9] - As of December 31, 2024, Magic's cash, cash equivalents, and short bank deposits amounted to $112.8 million[9] - Total current assets increased to $276,199 thousand in Q4 2024, compared to $256,625 thousand in Q4 2023[29] - Total assets as of December 31, 2024, were $540,331 thousand, up from $522,406 thousand in 2023[29] - Cash and cash equivalents at the end of the period rose to $112,779,000, compared to $105,943,000 at the beginning of the period[30] Dividends and Shareholder Returns - The board declared a semi-annual cash dividend of 32.7 cents per share, totaling approximately $16.1 million for the second half of 2024[6] - Dividend paid to Magic's shareholders was $10,016,000, down from $30,798,000 in 2023[30] Strategic Initiatives - The company announced a strategic merger with Matrix I.T, which is expected to create a combined entity with a market value of $2.1 billion[11] - The combined entity is projected to operate in approximately 50 countries and serve around 6,000 active clients[12] Guidance and Projections - Magic Software is providing 2025 annual revenue guidance of between $593 million and $603 million, reflecting an annual growth of 7.3% to 9.1% compared to the prior year[9] Expenses and Financial Health - Research and development expenses for Q4 2024 were $3,988 thousand, up from $2,703 thousand in Q4 2023, indicating a focus on innovation[26] - Total equity increased to $301,069 thousand in Q4 2024, compared to $290,944 thousand in Q4 2023, reflecting strong financial health[29] - Non-GAAP net income attributable to Magic's shareholders for the year 2024 was $45,650 thousand, down from $48,405 thousand in 2023[27] Other Financial Metrics - Gross profit for Q4 2024 was $43,219 thousand, representing a gross margin of 30.3%, compared to 30.8% in Q4 2023[28] - Operating income for Q4 2024 increased to $18,753 thousand, with an operating margin of 13.2%, up from 14.1% in Q4 2023[28] - Net income attributable to Magic's shareholders for Q4 2024 was $11,540 thousand, accounting for 8.1% of revenues, compared to 9.2% in Q4 2023[28] - Basic and diluted earnings per share for Q4 2024 were $0.24, unchanged from Q4 2023[28] Changes in Cash Flow Activities - Payments for business acquisitions net of cash acquired totaled $12,507,000, a decrease from $14,244,000 in 2023[30] - Net cash used in investing activities decreased to $22,409,000 from $27,616,000 in the previous year[30] - Repayment of long-term loans from banks and others increased to $33,695,000, compared to $20,994,000 in the previous year[30] - Increase in cash and cash equivalents for the period was $6,836,000, down from $22,881,000 in 2023[30] - Trade receivables saw a decrease of $4,339,000, contrasting with an increase of $18,426,000 in the previous year[30] - Deferred revenues increased to $7,609,000, compared to $3,779,000 in 2023[30]

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].