Magic Software Enterprises(MGIC) - 2021 Q4 - Annual Report

Financial Performance Overview This section provides an overview of Magic Software's record-breaking Q1 2022 financial results, highlighting significant revenue and income growth, and management's positive outlook and raised full-year guidance Q1 2022 Financial Highlights Magic Software achieved record Q1 2022 financial results, with revenues growing 29.3% to $138.7 million and strong double-digit increases across GAAP and Non-GAAP income metrics Q1 2022 Financial Performance Summary | | GAAP Q1 2022 | GAAP Q1 2021 | % Change | Non-GAAP Q1 2022 | Non-GAAP Q1 2021 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Revenues | $138.7M | $107.3M | 29.3% | $138.7M | $107.3M | 29.3% | | Operating Income | $15.9M | $12.2M | 30.6% | $18.9M | $15.0M | 26.2% | | Net Income | $9.6M | $7.5M | 27.5% | $12.9M | $10.3M | 25.7% | | Diluted EPS | $0.20 | $0.15 | 33.3% | $0.26 | $0.21 | 23.8% | - Revenues for Q1 2022 increased by 29.3% year-over-year to a record $138.7 million[1][3] - GAAP net income attributable to shareholders grew 27.5% to a record $9.6 million, or $0.20 per diluted share[8] - Cash flow from operating activities for Q1 2022 was $11.2 million, compared to $15.9 million in the same period last year[8] Management Commentary and Outlook The CEO attributed the strong Q1 performance to the company's broad business portfolio and healthy market demand for digital transformation services, leading to raised full-year 2022 revenue guidance - Management credits the strong results to a solid execution of their strategy, which involves building a broad business portfolio to meet the healthy demand for digital transformation initiatives[4] - The company increased its 2022 annual revenue guidance to a range of $540 to $550 million, up from the prior range of $535 to $545 million, reflecting an anticipated annual growth of 12.4% to 13.5%[8] Detailed Financial Statements This section presents the condensed consolidated statements of income, balance sheets, and cash flows, detailing the company's financial position and performance for Q1 2022 Condensed Consolidated Statements of Income The company reported Q1 2022 revenues of $138.7 million, with operating income reaching $15.9 million and net income attributable to shareholders at $9.6 million Condensed Consolidated Statements of Income (in thousands USD) | Income Statement (in thousands USD) | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Revenues | $138,705 | $107,298 | | Gross Profit | $37,578 | $30,189 | | Operating Income | $15,942 | $12,208 | | Net Income Attributable to Magic's Shareholders | $9,618 | $7,543 | | Diluted Earnings Per Share | $0.20 | $0.15 | Condensed Consolidated Balance Sheets As of March 31, 2022, total assets increased to $541.2 million, with cash and cash equivalents rising to $110.6 million, while total equity slightly decreased Condensed Consolidated Balance Sheets (in thousands USD) | Balance Sheet (in thousands USD) | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total Current Assets | $273,977 | $246,779 | | Cash and cash equivalents | $110,647 | $88,090 | | Total Assets | $541,156 | $492,045 | | Total Current Liabilities | $138,977 | $108,265 | | Total Liabilities | $239,321 | $185,945 | | Total Equity | $272,707 | $275,668 | | Total Liabilities and Equity | $541,156 | $492,045 | Condensed Consolidated Statement of Cash Flows Net cash provided by operating activities was $11.2 million in Q1 2022, with significant cash generation from financing activities leading to a $22.6 million increase in cash and equivalents Condensed Consolidated Statement of Cash Flows (in thousands USD) | Cash Flows (in thousands USD) | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $11,169 | $15,866 | | Net cash used in investing activities | ($7,361) | ($1,333) | | Net cash provided by (used in) financing activities | $19,494 | ($3,915) | | Increase in cash and cash equivalents | $22,557 | $9,435 | Non-GAAP Financial Measures and Reconciliation This section explains the company's use of non-GAAP financial measures to provide clearer operational insights and reconciles these measures to their GAAP equivalents Explanation of Non-GAAP Measures Magic Software uses non-GAAP financial measures to provide management and investors with a clearer view of its core operational performance and business trends, excluding specific items for better comparability - Management believes non-GAAP measures provide useful information for assessing financial and business trends related to the company's operations[8] - Key exclusions from GAAP figures to arrive at non-GAAP measures include amortization of intangible assets, equity-based compensation, acquisition-related costs, and the related tax effects[15] Reconciliation of GAAP to Non-GAAP Results Non-GAAP operating income for Q1 2022 was $18.9 million, and Non-GAAP net income was $12.9 million, with adjustments primarily for amortization and acquisition-related costs Reconciliation of GAAP to Non-GAAP Results (in thousands USD) | Reconciliation (in thousands USD) | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | GAAP operating income | $15,942 | $12,208 | | Adjustments | $2,968 | $2,776 | | Non-GAAP operating income | $18,910 | $14,984 | | GAAP net income | $9,618 | $7,543 | | Adjustments | $3,290 | $2,725 | | Non-GAAP net income | $12,908 | $10,268 | - The largest adjustments to reconcile GAAP to Non-GAAP operating income in Q1 2022 were amortization of other intangible assets ($2.1 million) and amortization of capitalized software/acquired technology ($1.3 million)[19]