Operating income for the third quarter increased 13.6% year over year to a third quarter record-braking result of $17.1 million; Non-GAAP operating income for the third quarter increased by 8.1% year over year to a third quarter record-breaking $19.9 million
OR YEHUDA, Israel, Nov. 18, 2025 (GLOBE NEWSWIRE) -- Magic Software Enterprises Ltd. (NASDAQ and TASE: MGIC) ("the Company"), a global provider of IT consulting services and end-to-end integration and application development platforms solutions, announced today its financial results for the third quarter and first nine months ended September 30, 2025.
Summary Results for the Third quarter 2025 (USD in
millions, except per share data)
----------------------------------------------------------------------------------
GAAP Non-GAAP
---------------------- ----------------------
Q3 2025 Q3 2024 % Change Q3 2025 Q3 2024 % Change
---------- ---------- ---------- ---------- ---------- ----------
Revenues $161.7 $143.0 13.1% $161.7 $143.0 13.1%
Gross
profit $ 44.2 $ 39.7 11.4% $ 45.5 $ 41.0 10.8%
Gross (50) (60)
margin 27.3% 27.8% bps 28.1% 28.7% bps
Operating
income $ 17.1 $ 15.1 13.6% $ 19.9 $ 18.5 8.1%
Operating (60)
margin 10.6% 10.5% 10 bps 12.3% 12.9% bps
Net income
(*) $ 9.9 $ 8.4 17.0% $ 12.3 $ 11.1 10.2%
Diluted
EPS $ 0.20 $ 0.17 17.6% $ 0.25 $ 0.23 8.7%
(*) Attributable to Magic Software's shareholders.
Financial Highlights for the Third Months Ended September 30, 2025
-- Revenues for the third quarter of 2025 increased by 13.1% to a
record-breaking $161.7 million, compared to $143.0 million in the same
period of the previous year. Revenues from our Israeli operations totaled
$75.6 million, an increase of 16.8% compared to $64.7 million in the same
period last year, overcoming a decrease of approximately 3.9% in working
hours compared to the same period of the previous year.Revenues from our
North American operations totaled $67.1 million, an increase of 13.2%
compared to $59.3 million in the same period last year.
-- Operating income for the third quarter of 2025 increased by 13.6% to a
record-breaking $17.1 million, with 86% organic, compared to $15.1
million in the same period of the previous year.
-- Non-GAAP operating income for the third quarter of 2025 increased by 8.1%
to a record-breaking $19.9 million, compared to $18.5 million in the same
period of the previous year.
-- Net income attributable to Magic Software's shareholders for the third
quarter of 2025 increased by 17.0% to $9.9 million, or $0.20 per fully
diluted share, compared to $8.4 million, or $0.17 per fully diluted share,
in the same period of the previous year.
-- Non-GAAP net income attributable to Magic Software's shareholders for the
third quarter of 2025 increased by 10.2% to $12.3 million, or $0.25 per
fully diluted share, compared to $11.1 million, or $0.23 per fully
diluted share, in the same period of the previous year.
Summary Results for the Nine Months of 2025 (USD in
millions, except per share data)
----------------------------------------------------------------------------------
GAAP Non-GAAP
---------------------- ----------------------
Nine months ended Nine months ended
September 30, September 30,
---------------------- ----------------------
2025 2024 % Change 2025 2024 % Change
---------- ----------
Revenues $460.6 $409.9 12.4% $460.6 $409.9 12.4%
Gross
Profit $127.2 $115.2 10.4% $131.0 $119.4 9.7%
Gross (50) (70)
Margin 27.6% 28.1% bps 28.4% 29.1% bps
Operating
Income $ 48.5 $ 44.5 8.9% $ 57.0 $ 54.8 4.0%
Operating (40) (100)
Margin 10.5% 10.9% bps 12.4% 13.4% bps
Net Income
(*) $ 29.3 $ 26.3 11.4% $ 37.2 $ 34.1 9.1%
Diluted
EPS $ 0.60 $ 0.53 13.2% $ 0.76 $ 0.69 9.1%
(*) Attributable to Magic Software's shareholders.
Financial Highlights for the Nine Months Ended September 30, 2025
-- Revenues for the nine-months period ended September 30, 2025 increased by
12.4% to a record breaking $460.6 million compared to $409.9 million in
the same period of the previous year. Revenues from our Israeli
operations for the nine-month period ended September 30, 2025 totaled
$214.8 million, an increase of 18.1% compared to $181.9 million in the
same period last year. Revenues from our North American operations
totaled $187.2 million, an increase of 9.8% compared to $170.5 million in
the same period last year.
-- Operating income for the nine-months ended September 30, 2025 increased
by 8.9% to a record breaking $48.5 million compared to $44.5 million in
the same period of the previous year.
-- Non-GAAP operating income for the nine-months ended September 30, 2025
increased by 4.0% to a record breaking $57.0 million compared to $54.8
million in the same period of the previous year.
-- Net income attributable to Magic Software's shareholders for the
nine-month period ended September 30, 2025, increased by 11.4% to $29.3
million, or $0.60 per fully diluted share, compared to $26.3 million, or
$0.53 per fully diluted share, in the same period last year.
-- Non-GAAP net income attributable to Magic Software's shareholders for the
nine-months period ended September 30, 2025, increased by 9.1% to $37.2
million, or $0.76 per fully diluted share, compared to $34.1 million, or
$0.69 per fully diluted share, in the same period last year.
-- Cash flow from operating activities for the nine-months period ended
September 30, 2025 amounted to $40.6 million compared to $49.1 million in
the same period last year.
-- As of September 30, 2025, Magic's cash, cash equivalents and short-term
bank deposits amounted to $103.3 million.
-- Magic hereby revises its full-year 2025 revenue guidance, increasing the
previous estimate of $600 million to $610 million to a revised range of
$610 million to $620 million, (based on current currency exchange rates).
This updated guidance reflects our sustained operational momentum and
favorable outlook for the fourth quarter of 2025, representing an
anticipated annual revenue growth rate of approximately 10.4% to 12.2% as
compared to the prior fiscal year.
Declaration of Dividend for the Third Quarter of 2025
In accordance with its dividend distribution policy, the Company's board of directors declared a quarterly cash dividend in an amount of 15.1 cents per share and in an aggregate amount of approximately $7.4 million, reflecting approximately 75% of its distributable profits for period.
The dividend is payable on December 30, 2025, to all of the Company's shareholders of record at the close of trading on the NASDAQ Global Select Market on December 15, 2025.
In accordance with Israeli tax law, the dividend is subject to withholding tax at source at the rate of 30% (if the recipient of the dividend is at the time of distribution or was at any time during the preceding 12-month period the holder of 10% or more of the Company's share capital) or 25% (for all other dividend recipients) of the dividend amount payable to each shareholder of record, subject to applicable exemptions.
The dividend will be paid in US dollars on the ordinary shares of Magic Software Enterprises that are traded both on the Tel Aviv Stock Exchange and the NASDAQ Global Select Market.
Guy Bernstein, Chief Executive Officer of Magic Software, said: "Magic Software delivered a record breaking third quarter and nine-months period performance. We achieved all-time highs in revenues, gross profit and operating income, while continuing to strengthen our operational foundations and expand our strategic footprint in key markets, including the United States, where momentum remains robust. Our results of operations demonstrate our strong position in the IT market along with the sustained demand for our digital, AI-driven and cloud transformation solutions, combined with disciplined execution across the organization. With the recently announced definitive agreement and plan of Merger signed with Matrix I.T., we are entering an exciting new phase in Magic's evolution. This combination brings together two highly complementary companies, enhancing our scale, market reach and technological depth. We believe the merged organization will be even better positioned to capture the growing global demand for innovative digital and data-driven solutions. As we progress toward shareholder approval, we remain focused on delivering consistent performance and creating long-term value for our customers, employees and shareholders.
Non-GAAP Financial Measures
This press release contains the following non-GAAP financial measures: non-GAAP gross profit, non-GAAP operating income, non-GAAP net income attributable to Magic Software's shareholders and non-GAAP basic and diluted earnings per share.
Magic Software believes that these non-GAAP measures of financial results provide useful information to management and investors regarding certain financial and business trends relating to Magic Software's financial condition and results of operations. Magic Software's management uses these non-GAAP measures to compare the Company's performance to that of prior periods for trend analyses, for purposes of determining executive and senior management incentive compensation and for budgeting and planning purposes. These measures are used in financial reports prepared for management and in quarterly financial reports presented to the Company's board of directors. The Company believes that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing the Company's financial measures with other software companies, many of which present similar non-GAAP financial measures to investors.
Management of the Company does not consider these non-GAAP measures in isolation or as an alternative to financial measures determined in accordance with GAAP. The principal limitation of these non-GAAP financial measures is that they exclude significant expenses and income that are required by GAAP to be recorded in the Company's financial statements. In addition, they are subject to inherent limitations as they reflect the exercise of judgment by management about which expenses and income are excluded or included in determining these non-GAAP financial measures. In order to compensate for these limitations, management presents non-GAAP financial measures together with GAAP results. Magic Software urges investors to review the reconciliation of its non-GAAP financial measures to the comparable GAAP financial measures, which it includes in press releases announcing quarterly financial results, including this press release, and not to rely on any single financial measure to evaluate the Company's business.
Non-GAAP measures used in this press release are included in the financial tables of this release. These non-GAAP measures exclude the following items:
Amortization of purchased intangible assets and other related costs;
-- In-process research and development capitalization and amortization; -- Cost of share-based payment; -- Costs related to acquisition of new businesses; -- The related tax, non-controlling interests' effects of the above items; -- Change in valuation of contingent consideration related to acquisitions; -- Change in deferred tax assets on carry forward tax losses.
Reconciliation of the most comparable GAAP financial measures to the non-GAAP financial measures used in this press release are included in the financial tables of this release.
About Magic Software Enterprises
Magic Software Enterprises Ltd. (NASDAQ and TASE: MGIC) is a global provider of end-to-end integration and application development platforms solutions and IT consulting services.
For more information, visit www.magicsoftware.com.
Forward Looking Statements
Some of the statements in this press release may constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities and Exchange Act of 1934 and the United States Private Securities Litigation Reform Act of 1995. Words such as "will," "look forward", "expect," "believe," "guidance" and similar expressions are used to identify these forward-looking statements (although not all forward-looking statements include such words). These forward-looking statements, which may include, without limitation, projections regarding our future performance and financial condition, are made based on management's current views and assumptions with respect to future events. Any forward-looking statement is not a guarantee of future performance and actual results could differ materially from those contained in the forward-looking statement. These statements speak only as of the date they were made, and we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. We operate in a changing environment. New risks emerge from time to time and it is not possible for us to predict all risks that may affect us. For more information regarding these risks and uncertainties as well as certain additional risks that we face, you should refer to the Risk Factors detailed in our Annual Report on Form 20-F for the year ended December 31, 2024, which filed on May 14, 2025, and subsequent reports and filings made from time to time with the Securities and Exchange Commission.
Magic$(R)$ 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 Nine months
ended ended
September 30, September 30,
---------------------- ------------------------
2025 2024 2025 2024
Unaudited Unaudited
---------------------- ------------------------
Revenues $ 161,656 $ 142,968 $ 460,634 $ 409,938
Cost of Revenues 117,449 103,287 333,422 294,715
-------- -------- -------- --------
Gross profit 44,207 39,681 127,212 115,223
-------- -------- -------- --------
Research and
development,
net 3,172 3,033 9,844 8,673
Selling,
marketing and
general and
administrative
expenses 23,920 21,577 68,866 62,013
Total operating
expenses 27,092 24,610 78,710 70,686
-------- -------- -------- --------
Operating income 17,115 15,071 48,502 44,537
-------- -------- -------- --------
Financial
expenses, net (1,698) (1,364) (3,488) (4,243)
Income before
taxes on
income 15,417 13,707 45,014 40,294
Taxes on income 3,464 3,273 9,700 9,042
-------- -------- -------- --------
Net income $ 11,953 $ 10,434 $ 35,314 $ 31,252
Share of loss of
companies
accounted for
at equity, net - (119) (292) (268)
Net income
attributable to
non-controlling
interests (2,090) (1,884) (5,763) (4,723)
Net income
attributable to
Magic's
shareholders $ 9,863 $ 8,431 $ 29,259 $ 26,261
Weighted average
number of shares
used in
computing net
earnings per
share
Basic 49,099 49,099 49,099 49,099
======== ======== ======== ========
Diluted 49,099 49,099 49,099 49,099
======== ======== ======== ========
Basic and
diluted
earnings per
share
attributable to
Magic's
shareholders $ 0.20 $ 0.17 $ 0.60 $ 0.53
MAGIC SOFTWARE ENTERPRISES LTD.
RECONCILIATION OF GAAP AND NON-GAAP RESULTS
U.S. Dollars in thousands (except per share data)
Three months Nine months
ended ended
September 30, September 30,
2025 2024 2025 2024
Unaudited Unaudited
GAAP gross
profit $ 44,207 $ 39,681 $ 127,212 $ 115,223
Amortization of
capitalized
software and
acquired
technology 908 1,031 2,771 3,265
Amortization of
other
intangible
assets 341 311 990 935
Non-GAAP gross
profit $ 45,456 $ 41,023 $ 130,973 $ 119,423
======= ======= ========= =========
GAAP operating
income $ 17,115 $ 15,071 $ 48,502 $ 44,537
Gross profit
adjustments 1,249 1,342 3,761 4,200
Amortization of
other
intangible
assets 2,059 1,994 6,027 5,591
Increase in
valuation of
contingent
consideration
related to
acquisitions - 221 - 648
Capitalization
of software
development (707) (724) (1,693) (2,207)
Costs related to
acquisitions 177 32 324 334
Cost of
share-based
payment 53 521 90 1,716
Non-GAAP
operating
income $ 19,946 $ 18,457 $ 57,011 $ 54,819
======= ======= ========= =========
GAAP net income
attributable to
Magic's
shareholders $ 9,863 $ 8,431 $ 29,259 $ 26,261
Operating income
adjustments 2,831 3,386 8,509 10,282
Amortization
expenses
attributed to
non-controlling
interests and
redeemable
non-controlling
interests (304) (466) (823) (1,314)
Changes in
unsettled fair
value of
contingent
consideration
related to
acquisitions 38 66 577 232
Deferred taxes
on the above
items (159) (286) (325) (1,351)
Non-GAAP net
income
attributable to
Magic's
shareholders $ 12,269 $ 11,131 $ 37,197 $ 34,110
======= ======= ========= =========
Non-GAAP basic
and diluted net
earnings per
share $ 0.25 $ 0.23 $ 0.76 $ 0.69
Weighted average
number of
shares used in
computing basic
net earnings
per share 49,099 49,099 49,099 49,099
Weighted average
number of
shares used in
computing
diluted net
earnings per
share 49,099 49,099 49,099 49,099
Summary of Non-GAAP Financial Information
U.S. Dollars in thousands (except per share data)
------------------------------------------------------------------------------------------------------
Three months ended Nine months ended
September 30, September 30,
2025 2024 2025 2024
Unaudited Unaudited Unaudited Unaudited
Revenues $ 161,656 100% $ 142,968 100% $ 460,634 100% $ 409,938 100%
Gross profit 45,456 28.1% 41,023 28.7% 130,973 28.4% 119,423 29.1%
Operating
income 19,946 12.3% 18,457 12.9% 57,011 12.4% 54,819 13.4%
Net income
attributable
to
Magic's
shareholders 12,269 7.6% 11,131 7.8% 37,197 8.1% 34,110 8.3%
Basic and
diluted
earnings per
share $ 0.25 $ 0.23 $ 0.76 $ 0.69
MAGIC SOFTWARE ENTERPRISES LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
U.S. Dollars in thousands
September 30, December 31,
2025 2024
Unaudited
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 103,303 $ 112,779
Short-term bank deposits 2 51
Trade receivables, net 160,527 139,816
Other accounts receivable and prepaid
expenses 21,345 23,553
Total current assets 285,177 276,199
------------------------------------------- ----------- ----------
LONG-TERM ASSETS:
Deferred tax assets 5,538 4,895
Right-of-use assets 24,255 24,707
Other long-term receivables and
Investments in companies accounted
for at equity 10,926 9,261
Property and equipment, net 8,213 7,467
Intangible assets and goodwill, net 225,697 217,802
Total long term assets 274,629 264,132
-------------------------------------------
TOTAL ASSETS $ 559,806 $ 540,331
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Short-term debt $ 34,866 $ 23,187
Trade payables 34,594 28,753
Dividend payable to Magic Software
shareholders 14,533 11,587
Accrued expenses and other accounts
payable 59,258 58,209
Current maturities of lease
liabilities 4,239 4,818
Liability in respect of business
combinations 4,318 2,654
Put options for non-controlling
interests 22,837 20,066
Deferred revenues and customer
advances 18,120 21,031
Total current liabilities 192,765 170,305
------------------------------------------- ----------- ----------
LONG TERM LIABILITIES:
Long-term debt 34,339 36,107
Deferred tax liability 8,015 7,848
Long-term lease liabilities 22,441 22,040
Long-term liability in respect of
business combinations - 1,781
Employee benefit liabilities 1,419 1,181
Total long term liabilities 66,214 68,957
------------------------------------------- ----------- ----------
EQUITY:
Magic Software Enterprises
shareholders' equity 276,037 277,190
Non-controlling interests 24,790 23,879
Total equity 300,827 301,069
-------------------------------------------
TOTAL LIABILITIES AND EQUITY $ 559,806 $ 540,331
MAGIC SOFTWARE ENTERPRISES LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. Dollars in thousands
Nine
months ended
September 30,
2025 2024
Unaudited Unaudited
Cash flows from operating activities:
---------------------------------------------
Net income $ 35,022 $ 30,984
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 15,910 15,370
Cost of share-based payment 90 1,270
Change in deferred taxes, net (265) (1,965)
Capital gain on sale of fixed assets (19) (26)
Change in value of financial assets
measured at fair value through profit
or loss 71 -
Effect of exchange rate on of cash and
cash equivalents held in currencies
other than the functional currency (1,499) 81
Changes in value of short-term and
long-term loans from banks and others
and deposits, net (191) (682)
Working capital adjustments:
---------------------------------------------
Trade receivables (9,469) (8,746)
Other current and long-term accounts
receivable 1,578 (24)
Trade payables 3,390 (201)
Accrued expenses and other accounts
payable 350 7,292
Deferred revenues (4,339) 5,767
Net cash provided by operating activities 40,629 49,120
======== =======
Cash flows from investing activities:
---------------------------------------------
Capitalized software development costs (1,694) (2,207)
Purchase of property and equipment (1,320) (1,000)
Cash paid in conjunction with deferred
payments and contingent liabilities
related to business combinations (1,828) (11,844)
Payments for business acquisitions, net
of cash acquired (3,614) (7,553)
Proceeds from sale of property and
equipment 47 42
Proceeds from sale (purchase) of
financial assets, net 163 1,121
Change in short-term and long-term
deposits 70 (276)
Investment in a company accounted for at
equity - (198)
Net cash used in investing activities (8,176) (21,915)
======== =======
Cash flows from financing activities:
---------------------------------------------
Proceeds from sale of non-controlling
interest - 174
Dividend paid to Magic's shareholders (27,642) (10,016)
Dividend paid to non-controlling
interests (7,429) (4,966)
Repayment of lease liabilities (4,813) (4,443)
Purchase of non-controlling interest (13,822) (314)
Receipt of short-term and long-term
loans from banks and others 26,376 12,601
Repayment of short-term and long-term
loans (20,854) (26,769)
Net cash (used in) provided by financing
activities (48,184) (33,733)
======== =======
Effect of exchange rate changes on cash and
cash equivalents 6,255 (472)
Increase (decrease) in cash and cash
equivalents (9,476) (7,001)
Cash and cash equivalents at the beginning of
the period 112,779 105,943
Cash and cash equivalents at end of the
period $ 103,303 $ 98,942
(END) Dow Jones Newswires
November 18, 2025 08:05 ET (13:05 GMT)
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