Magic Software Enterprises Ltd. reports 17.8% Net Income growth in 2020 and 14.0% Revenue growth
03/08/2021 • About Magic Software Enterprises Ltd. (
$MGIC) • By InTwits
Magic Software Enterprises Ltd. reported FY2020 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Magic Software Enterprises Ltd. is a fast growth stock: FY2020 revenue growth was 14.0%, 5 year revenue CAGR was 16.1% at FY2020 ROIC 11.8%
- EBITDA Margin is relatively stable: 14.7% in FY2020 vs. 14.6% in FY2019 vs. 16.2% in FY2016
- Magic Software Enterprises Ltd. has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.5%. At the same time it's a lot of higher than industry average of 7.6%.
- CAPEX is quite volatile: $3m in FY2020, $1m in FY2019, $5m in FY2018, $5m in FY2017, $5m in FY2016
- The company has business model with average profitability: ROIC is 11.8%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
Magic Software Enterprises Ltd.'s Revenue jumped on 14.0%. Revenue growth showed acceleration in FY20Q4 - it increased 14.9% YoY. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased on 3.3 pp from 7.3% to 10.6% in 2020. EBITDA Margin declined at -0.37 pp per annum in FY2016-FY2020.
Gross Margin decreased slightly on 1.8 pp from 31.4% to 29.5% in FY2020. Gross Margin declined at -0.94 pp per annum in the last 5 years. SG&A as a % of Revenue decreased on 2.6 pp from 18.5% to 15.9% in FY2020. SG&A as a % of Revenue followed a declining trend at -1.0 pp per annum in the last 5 years.
Net Income margin showed almost no change in FY2020.
Investments (CAPEX, working capital and M&A)
Magic Software Enterprises Ltd.'s CAPEX/Revenue was 0.75% in FY2020. Magic Software Enterprises Ltd. showed small CAPEX/Revenue decline of 1.3 pp from 2.0% in FY2017 to 0.75% in FY2020. For the last three years the average CAPEX/Revenue was 0.92%. CAPEX as a % of Revenue followed a declining trend at -0.51 pp per annum in the last 5 years.
Return on investment
The company operates at low ROIC (11.8%) and ROE (9.4%). ROIC increased slightly on 1.4 pp from 10.4% to 11.8% in FY2020. ROE increased slightly on 1.2 pp from 8.2% to 9.4% in FY2020. ROIC grew at 0.70 pp per annum in FY2016-FY2020. ROE grew at 0.71 pp per annum in the last 5 years.
Leverage (Debt)
Company's Net Debt / EBITDA is -0.7x and Debt / EBITDA is 0.9x. Debt jumped on 31.5% while cash increased on 7.6%.
Magic Software Enterprises Ltd. has no short term refinancing risk: cash is higher than short term debt (589.8%).
Valuation and dividends
The company's trades at EV/EBITDA 14.6x and P/E 35.0x.
Financial and operational results
Magic Software Enterprises Ltd. ($MGIC) key annual financial indicators| mln. $ | 2016 | 2017 | 2018 | 2019 | 2020 | 2020/2019 |
|---|
P&L
|
|---|
| Revenue | 201.6 | 258.1 | 284.4 | 325.6 | 371.2 | 14.0% |
| Gross Profit | 68.3 | 83.0 | 88.8 | 102.1 | 109.6 | 7.3% |
| SG&A | 41.3 | 50.1 | 51.4 | 60.2 | 59.1 | -1.8% |
| EBITDA | 32.7 | 39.6 | 44.3 | 47.7 | 54.5 | 14.4% |
| EBIT | | | | 33.7 | | |
| Net Income | 11.9 | 15.4 | 19.9 | 20.3 | 23.9 | 17.8% |
| Stock Based Compensation | | | | 0.1 | | |
Balance Sheet
|
|---|
| Cash | 75.3 | 76.1 | 87.1 | 81.9 | 88.1 | 7.6% |
| Accounts Receivable | | | | 96.7 | | |
| Accounts Payable | | | | 11.0 | | |
| Short Term Debt | 5.6 | 9.8 | 8.7 | 10.9 | 14.9 | 36.9% |
| Long Term Debt | 29.8 | 27.8 | 19.4 | 26.7 | 34.5 | 29.3% |
Cash flow
|
|---|
| Capex | 5.0 | 5.2 | 4.5 | 1.4 | 2.8 | 101.0% |
| Dividends | | | | 15.0 | | |
Ratios
|
|---|
| Revenue growth | 14.6% | 28.0% | 10.2% | 14.5% | 14.0% | |
| EBITDA growth | 4.4% | 21.0% | 11.9% | 7.7% | 14.4% | |
|
|---|
| Gross Margin | 33.9% | 32.1% | 31.2% | 31.4% | 29.5% | -1.8% |
| EBITDA Margin | 16.2% | 15.3% | 15.6% | 14.6% | 14.7% | 0.0% |
| EBIT Margin | | | | 10.3% | |
| SG&A, % of revenue | 20.5% | 19.4% | 18.1% | 18.5% | 15.9% | -2.6% |
| SBC, % of revenue | | | | 0.0% | |
| Net Income Margin | 5.9% | 6.0% | 7.0% | 6.2% | 6.4% | 0.2% |
| CAPEX, % of revenue | 2.5% | 2.0% | 1.6% | 0.4% | 0.7% | 0.3% |
|
|---|
| ROIC | 8.9% | 9.4% | 10.6% | 10.4% | 11.8% | 1.4% |
| ROE | 6.1% | 7.6% | 8.8% | 8.2% | 9.4% | 1.2% |
| Net Debt/EBITDA | -1.2x | -1.0x | -1.3x | -0.9x | -0.7x | 0.2x |
People
|
|---|
| Insider ownership | | | | 0.7% | | |
| Employees | | | | 2,642 | | |
| Revenue/Employee, th. $ | | | | 123 | | |
Magic Software Enterprises Ltd. ($MGIC) key quoterly financial indicators
| mln. $ | FY20Q1 | FY20Q2 | FY20Q3 | FY20Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 85 | 87 | 95 | 105 | | 18.3% | 12.4% | 10.3% | 14.9% |
| EBITDA | 12 | 13 | 15 | 15 | | 6.9% | 19.6% | 23.4% | 13.9% |
| Net Income | 6 | 6 | 7 | 5 | | 17.1% | 14.7% | 41.7% | 3.9% |
Balance Sheet
|
|---|
| Cash | 77 | 79 | 79 | 88 | | -13.9% | -18.5% | 3.1% | 7.5% |
| Short Term Debt | 9 | 10 | 14 | 15 | | -28.9% | -19.3% | 24.1% | 35.8% |
| Long Term Debt | 25 | 39 | 38 | 34 | | -5.9% | 44.6% | 41.8% | 27.6% |
Ratios
|
|---|
| Gross Margin | 29.6% | 28.7% | 30.7% | 29.5% | | -1.4% | -3.3% | -1.3% | -1.5% |
| EBITDA Margin | 13.8% | 15.2% | 15.6% | 14.2% | | -1.5% | 0.9% | 1.7% | -0.1% |
| Net Income Margin | 6.9% | 6.6% | 7.5% | 5.0% | | -0.1% | 0.1% | 1.7% | -0.5% |
Peers in Application Software
Below you can find Magic Software Enterprises Ltd. benchmarking vs. other companies in Application Software industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| VirnetX Holding Corp ($VHC) | - | -0.2% | -95.9% | 34.9% | 355,942.4% |
| AudioEye, Inc. ($AEYE) | - | 175.5% | 106.6% | 90.2% | 90.2% |
| Cloudera, Inc. ($CLDR) | - | 57.2% | 42.6% | 28.9% | 65.5% |
| Integrated Ventures Inc ($INTV) | - | - | - | -8.9% | 62.7% |
| Smartsheet Inc. ($SMAR) | - | 64.3% | 66.1% | 59.7% | 52.4% |
| |
|---|
| Median (92 companies) | 12.0% | 14.8% | 15.2% | 19.5% | 14.7% |
|---|
| Magic Software Enterprises Ltd. ($MGIC) | - | 28.0% | 10.2% | 14.5% | 14.0% |
Top companies by Gross margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Aware, Inc. ($AWRE) | 90.3% | 94.6% | 92.3% | 89.7% | 92.8% |
| Alteryx, Inc. ($AYX) | 81.3% | 83.4% | 91.0% | 90.6% | 91.1% |
| Autodesk, Inc. ($ADSK) | 85.2% | 83.2% | 85.2% | 88.9% | 90.1% |
| Smith Micro Software, Inc. ($SMSI) | 73.2% | 77.9% | 83.5% | 90.9% | 89.9% |
| Cadence Design Systems, Inc. ($CDNS) | 85.9% | 87.8% | 87.9% | 88.6% | 88.6% |
| |
|---|
| Median (89 companies) | 64.2% | 64.6% | 66.0% | 68.4% | 70.6% |
|---|
| Magic Software Enterprises Ltd. ($MGIC) | 33.9% | 32.1% | 31.2% | 31.4% | 29.5% |
Top companies by EBITDA margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| VirnetX Holding Corp ($VHC) | -1,837.2% | -1,118.0% | -40,379.4% | -23,127.1% | 52.2% |
| j2 Global, Inc. ($JCOM) | 41.7% | 36.5% | 35.7% | 38.6% | 40.5% |
| Intelligent Systems Corporation ($INS) | -5.4% | -12.8% | 33.6% | 43.6% | 40.4% |
| Adobe Inc. ($ADBE) | 31.2% | 34.2% | 35.3% | 35.8% | 39.7% |
| SS&C Technologies Holdings, Inc. ($SSNC) | 34.9% | 37.9% | 27.7% | 38.2% | 38.3% |
| |
|---|
| Median (89 companies) | -5.3% | -4.2% | -3.3% | 2.7% | 6.8% |
|---|
| Magic Software Enterprises Ltd. ($MGIC) | 16.2% | 15.3% | 15.6% | 14.6% | 14.7% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| MicroStrategy Incorporated ($MSTR) | 0.5% | 0.8% | 1.4% | 2.1% | 234.8% |
| Integrated Ventures Inc ($INTV) | - | - | 199.9% | 15.2% | 27.2% |
| Intelligent Systems Corporation ($INS) | 3.8% | 9.7% | 4.3% | 4.9% | 19.2% |
| LivePerson, Inc. ($LPSN) | 5.5% | 7.9% | 8.8% | 16.3% | 11.4% |
| PROS Holdings, Inc. ($PRO) | 4.7% | 0.8% | 0.7% | 2.1% | 11.3% |
| |
|---|
| Median (87 companies) | 3.0% | 2.3% | 2.4% | 3.0% | 2.6% |
|---|
| Magic Software Enterprises Ltd. ($MGIC) | 2.5% | 2.0% | 1.6% | 0.4% | 0.7% |
Top companies by ROIC, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| VirnetX Holding Corp ($VHC) | -210.9% | -256.8% | -416.3% | -247.2% | 137.3% |
| Manhattan Associates, Inc. ($MANH) | 99.3% | 102.5% | 80.9% | 71.7% | 53.4% |
| Citrix Systems, Inc. ($CTXS) | 16.1% | 16.7% | 25.2% | 29.8% | 33.5% |
| Sonic Foundry, Inc. ($SOFO) | -18.1% | -50.6% | -786.4% | - | 31.3% |
| Paycom Software, Inc. ($PAYC) | 75.4% | 51.1% | 47.5% | 47.5% | 28.7% |
| |
|---|
| Median (92 companies) | -9.8% | -11.8% | -10.6% | -4.5% | -2.2% |
|---|
| Magic Software Enterprises Ltd. ($MGIC) | 8.9% | 9.4% | 10.6% | 10.4% | 11.8% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Dropbox, Inc. ($DBX) | - | -3.8x | - | 2.4x | 1,341.0x |
| Avaya Holdings Corp. ($AVYA) | - | - | 7.4x | - | 77.9x |
| Alteryx, Inc. ($AYX) | - | - | 2.5x | 6.1x | 32.2x |
| Five9, Inc. ($FIVN) | -6.7x | -8.6x | 7.3x | 5.3x | 17.6x |
| Synchronoss Technologies, Inc. ($SNCR) | - | - | - | - | 11.6x |
| |
|---|
| Median (53 companies) | -0.9x | -0.8x | -0.6x | 0.4x | 0.3x |
|---|
| Magic Software Enterprises Ltd. ($MGIC) | -1.2x | -1.0x | -1.3x | -0.9x | -0.7x |
