Magic Software Enterprises Ltd.: Magic Software Reports Third quarter 2025 Financial Results with Record-Braking Revenues of $161.7$ million - a 13.1% Year Over Year Increase

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 margin		27.3	-		27.8	-	(50) bps				28.1	-		28.7	-	(60) bps
Operating income	-	17.1		-	15.1		13.6	-		-	19.9		-	18.5		8.1	-
Operating margin		10.6	-		10.5	-	10 bps				12.3	-		12.9	-	(60) bps
Net income			(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 ended								Nine months 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