Magic Software Enterprises Ltd. revenue surged on 14.5% and EBITDA Margin decreased slightly on 0.92 pp from 15.6% to 14.6%
03/09/2020 • About Magic Software Enterprises Ltd. (
$MGIC) • By InTwits
Magic Software Enterprises Ltd. reported 2019 financial results today. Here are the key drivers of the company's long term financial model:
- Magic Software Enterprises Ltd. is a growth stock: 2019 revenue growth was 14.5%, 5 year revenue CAGR was 14.7% at 2019 ROIC 10.4%
- Magic Software Enterprises Ltd. has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.9%. At the same time it's in pair with industry average of 7.8%
- CAPEX is quite volatile: $1m in 2019, $5m in 2018, $5m in 2017, $5m in 2016, $5m in 2015
- The company has business model with average profitability: ROIC is 10.4%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue jumped on 14.5%. Revenue growth showed acceleration in 19Q4 - it increased 25.9% YoY. Revenue growth was financed by EBITDA margin decline. EBITDA Margin decreased slightly on 0.92 pp from 15.6% to 14.6% in 2019. EBITDA Margin followed a declining trend at -0.70 pp per annum in 2015-2019.
Gross Margin showed almost no change in 2019. Gross Margin stuck to a declining trend at -1.1 pp per annum in 2015-2019. SG&A as a % of Revenue showed almost no change in 2019. SG&A as a % of Revenue stuck to a declining trend at -0.69 pp per annum in 2015-2019.
Net Income margin decreased slightly on 0.77 pp from 7.0% to 6.2% in 2019.
Investments (CAPEX, working capital and M&A)
In 2019 Magic Software Enterprises Ltd. had CAPEX/Revenue of 0.42%. The company's CAPEX/Revenue decreased on 2.1 pp from 2.5% in 2016 to 0.42% in 2019. It's average level of CAPEX/Revenue for the last three years was 1.3%. CAPEX as a % of Revenue declined at -0.57 pp per annum in the last 5 years.
Return on investment
The company operates at low ROIC (10.4%) and ROE (8.2%). ROIC showed almost no change in 2019. ROE decreased slightly on 0.51 pp from 8.8% to 8.2% in 2019.
Leverage (Debt)
Company's Net Debt / EBITDA is -0.9x and Debt / EBITDA is 0.8x. Debt jumped on 33.9% while cash decreased on 6.0%.
Magic Software Enterprises Ltd. has no short term refinancing risk: cash is higher than short term debt (750.7%).
Valuation and dividends
The company's trades at EV/EBITDA 6.1x and P/E 16.5x.
The company paid 74.0% of Net Income as dividends in 2019.
Management team
The company has 0.70% shares owned by insiders.
At the end of financial year the company had 2,642 employees. Average revenue per employee in 2019 was
$123,251.
Financial and operational results
FY ended 12/31/2019
Magic Software Enterprises Ltd. ($MGIC) key annual financial indicators| mln. $ | 2015 | 2016 | 2017 | 2018 | 2019 | 2019/2018 |
|---|
P&L
|
|---|
| Revenue | 176.0 | 201.6 | 258.1 | 284.4 | 325.6 | 14.5% |
| Gross Profit | 62.8 | 68.3 | 83.0 | 88.8 | 102.1 | 15.0% |
| SG&A | 36.5 | 41.3 | 50.1 | 51.4 | 60.2 | 17.1% |
| EBITDA | 31.3 | 32.7 | 39.6 | 44.3 | 47.7 | 7.7% |
| EBIT | | | | | 33.7 | |
| Net Income | 16.2 | 11.9 | 15.4 | 19.9 | 20.3 | 1.9% |
| Stock Based Compensation | | | | | 0.1 | |
Balance Sheet
|
|---|
| Cash | 62.2 | 75.3 | 76.1 | 87.1 | 81.9 | -6.0% |
| Accounts Receivable | | | | | 96.7 | |
| Accounts Payable | | | | | 11.0 | |
| Short Term Debt | 0.0 | 5.6 | 9.8 | 8.7 | 10.9 | 26.0% |
| Long Term Debt | 3.3 | 29.8 | 27.8 | 19.4 | 26.7 | 37.5% |
Cash flow
|
|---|
| Capex | 5.0 | 5.0 | 5.2 | 4.5 | 1.4 | -69.6% |
| Dividends | | | | | 15.0 | |
Ratios
|
|---|
| Revenue growth | 7.1% | 14.6% | 28.0% | 10.2% | 14.5% | |
| EBITDA growth | 6.6% | 4.4% | 21.0% | 11.9% | 7.7% | |
|
|---|
| Gross Margin | 35.7% | 33.9% | 32.1% | 31.2% | 31.4% | 0.1% |
| EBITDA Margin | 17.8% | 16.2% | 15.3% | 15.6% | 14.6% | -0.9% |
| EBIT Margin | | | | | 10.3% |
| SG&A, % of revenue | 20.7% | 20.5% | 19.4% | 18.1% | 18.5% | 0.4% |
| SBC, % of revenue | | | | | 0.0% |
| Net Income Margin | 9.2% | 5.9% | 6.0% | 7.0% | 6.2% | -0.8% |
| CAPEX, % of revenue | 2.8% | 2.5% | 2.0% | 1.6% | 0.4% | -1.2% |
|
|---|
| ROIC | 10.6% | 8.9% | 9.4% | 10.6% | 10.4% | -0.2% |
| ROE | 8.6% | 6.1% | 7.6% | 8.8% | 8.2% | -0.5% |
| Net Debt/EBITDA | -1.9x | -1.2x | -1.0x | -1.3x | -0.9x | 0.4x |
People
|
|---|
| Insider ownership | | | | | 0.7% | |
| Employees | | | | | 2,642 | |
| Revenue/Employee, th. $ | | | | | 123 | |
Magic Software Enterprises Ltd. ($MGIC) key quoterly financial indicators
| mln. $ | 19Q1 | 19Q2 | 19Q3 | 19Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 72 | 77 | 86 | 91 | | 3.3% | 9.7% | 19.2% | 25.9% |
| EBITDA | 11 | 11 | 12 | 13 | | 2.5% | -1.5% | 10.5% | 13.0% |
| Net Income | 5 | 5 | 5 | 5 | | 9.2% | -12.6% | -0.9% | 10.1% |
Balance Sheet
|
|---|
| Cash | 89 | 97 | 77 | 82 | | 22.4% | 24.0% | -27.9% | -5.9% |
| Short Term Debt | 12 | 12 | 11 | 11 | | 18.4% | 28.8% | 23.9% | 27.0% |
| Long Term Debt | 27 | 27 | 27 | 27 | | 0.1% | 5.9% | 7.1% | 39.3% |
Ratios
|
|---|
| Gross Margin | 31.0% | 32.0% | 32.0% | 31.0% | | -2.3% | 0.7% | 2.2% | 0.4% |
| EBITDA Margin | 15.3% | 14.3% | 14.0% | 14.3% | | -0.1% | -1.6% | -1.1% | -1.6% |
| Net Income Margin | 6.9% | 6.5% | 5.8% | 5.5% | | 0.4% | -1.7% | -1.2% | -0.8% |
Peers in Application Software
Below we provide Magic Software Enterprises Ltd. benchmarking against other companies in Application Software industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| nFusz Inc ($FUSZ) | | | | 433.3% | |
| CloudCommerce Inc ($CLWD) | -38.1% | 247.6% | 40.9% | 301.1% | |
| Seven Stars Cloud Group, Inc. ($SSC) | 134.7% | 663.8% | 310.3% | 161.7% | |
| Aurora Mobile Limited ($JG) | | | 304.9% | 150.8% | |
| Intelligent Systems Corporation ($INS) | 14.2% | 71.0% | 12.2% | 119.0% | |
| |
|---|
| Median (152 companies) | 13.9% | 14.3% | 14.8% | 15.2% | 9.3% |
|---|
| Magic Software Enterprises Ltd. ($MGIC) | | 14.6% | 28.0% | 10.2% | 14.5% |
Top companies by Gross margin, %
| Top 5 | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| Skkynet Cloud Systems Inc ($SKKY) | 97.4% | 98.0% | 97.6% | 96.5% | |
| hopTo Inc ($HPTO) | 87.8% | 95.9% | 98.2% | 95.4% | |
| Aware, Inc. ($AWRE) | 87.2% | 90.3% | 94.6% | 92.3% | |
| Alteryx, Inc. ($AYX) | 80.5% | 81.3% | 83.4% | 91.0% | |
| Aspen Technology, Inc. ($AZPN) | 88.7% | 89.7% | 90.2% | 89.9% | |
| |
|---|
| Median (151 companies) | 63.0% | 64.2% | 64.6% | 66.0% | 52.9% |
|---|
| Magic Software Enterprises Ltd. ($MGIC) | 35.7% | 33.9% | 32.1% | 31.2% | 31.4% |
Top companies by EBITDA margin, %
| Top 5 | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| Aspen Technology, Inc. ($AZPN) | 42.2% | 46.0% | 45.2% | 43.3% | |
| ANSYS, Inc. ($ANSS) | 45.8% | 45.1% | 41.9% | 41.4% | |
| Paycom Software, Inc. ($PAYC) | 19.5% | 35.1% | 34.4% | 35.9% | |
| j2 Global, Inc. ($JCOM) | 40.6% | 41.7% | 36.5% | 35.7% | |
| Adobe Inc. ($ADBE) | 25.9% | 31.2% | 34.2% | 35.3% | |
| |
|---|
| Median (153 companies) | -11.3% | -5.3% | -4.2% | -3.3% | 13.0% |
|---|
| Magic Software Enterprises Ltd. ($MGIC) | 17.8% | 16.2% | 15.3% | 15.6% | 14.6% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| TimefireVR Inc ($TFVR) | 350.5% | 4.3% | | 1,021.9% | |
| MGT Capital Investments Inc ($MGTI) | 36.5% | 221.4% | 129.8% | 344.5% | |
| Integrated Ventures Inc ($INTV) | | | | 199.9% | 15.2% |
| ShotSpotter, Inc. ($SSTI) | 18.3% | 28.9% | 27.1% | 24.3% | |
| Ellie Mae, Inc. ($ELLI) | 20.6% | 16.7% | 21.1% | 19.4% | |
| |
|---|
| Median (154 companies) | 2.7% | 3.0% | 2.3% | 2.4% | 3.3% |
|---|
| Magic Software Enterprises Ltd. ($MGIC) | 2.8% | 2.5% | 2.0% | 1.6% | 0.4% |
Top companies by ROIC, %
| Top 5 | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| InsPro Technologies Corp ($ITCC) | | | | 127.4% | |
| Manhattan Associates, Inc. ($MANH) | 78.7% | 99.3% | 102.5% | 80.9% | |
| Intuit Inc. ($INTU) | 23.7% | 52.1% | 72.6% | 66.8% | |
| Aspen Technology, Inc. ($AZPN) | | | | 58.1% | |
| Paycom Software, Inc. ($PAYC) | 30.5% | 75.4% | 51.1% | 47.5% | |
| |
|---|
| Median (180 companies) | -13.1% | -9.8% | -11.8% | -10.6% | 8.5% |
|---|
| Magic Software Enterprises Ltd. ($MGIC) | 10.6% | 8.9% | 9.4% | 10.6% | 10.4% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| Upland Software, Inc. ($UPLD) | | 16.4x | 115.6x | 16.7x | |
| Nuance Communications, Inc. ($NUAN) | 5.7x | 5.3x | 7.1x | 15.2x | |
| Asure Software Inc ($ASUR) | 4.5x | 3.6x | 9.5x | 14.5x | |
| SS&C Technologies Holdings, Inc. ($SSNC) | 7.3x | 4.6x | 3.1x | 8.5x | |
| Avaya Holdings Corp. ($AVYA) | | | | 7.4x | |
| |
|---|
| Median (69 companies) | -0.8x | -0.9x | -0.8x | -0.6x | 0.7x |
|---|
| Magic Software Enterprises Ltd. ($MGIC) | -1.9x | -1.2x | -1.0x | -1.3x | -0.9x |
