Company Reports Increased Profit and Cash Despite Economic Slowdown

OR YEHUDA, Israel, Aug. 4, 2009 (GLOBE NEWSWIRE) -- Magic Software Enterprises Ltd. (www.magicsoftware.com) (Nasdaq:MGIC), a provider of application platforms and business and process integration solutions, today announced its financial results for the second quarter ended June 30, 2009. All references to $ are to U.S. Dollars.

Financial Highlights

 * Operating income in the second quarter increased to $1.0 million
   compared to $0.7 million in the first quarter of 2009.

 * Operating income for the first half of 2009 grew to $1.7 million,
   up from $1.5 million in the first half of 2008, representing a 16%
   increase.

 * Net income for the second quarter rose to $1.1 million, up from
   $0.7 million in the first quarter of 2009.

 * Net income for the first half of 2009 was $1.8 million, up from
   $1.7 million in the first half of 2008.

 * In comparison to last year, the company reported a reduction in
   revenues mainly due to a slowdown in the Japanese and U.S. markets.

 * Total cash, cash equivalents and short-term investments as of
   June 30, 2009 increased to $37 million compared to $33 million at
   December 31, 2008.

 * Cash flow from operations for the first half of 2009 amounted to
   $4.7 million.

Comments of Management

Guy Bernstein, Chairman of Magic Software, commented on the results: "While the outcome of the recession has affected our revenues, particularly in our Japanese and U.S. markets, we succeeded in compensating with improved operational efficiency and shortened sales cycle. These measures have allowed us to present an increase in our profitability and cash balances. We are now starting to see signs of improvement in our U.S. business, and we believe that these will translate into additional sales in the near future."

Summary of the Quarter

 * The company won a significant number of new customers, many of
   which are in the U.S.

 * The uniPaaS application platform continues to be adopted by
   worldwide customers, including the Norfolk and Norwich University
   NHS Trust in the UK.

 * Despite the severe recession in Japan, the company is now
   implementing more than 50 uniPaaS RIA projects with Japanese
   customers and has won four new Japanese partners.

 * The company is growing its presence in Eastern Europe with the win
   of new partners and customers such as DSB of the Czech Republic
   and AlphaSoft of Romania.

 * Existing application platform partners worldwide are increasingly
   migrating to uniPaaS to prepare for the new opportunities
   presented by RIA and SaaS.

 * The iBOLT business and process integration suite has new
   connectors and adaptors for HL7 (healthcare), Lotus Notes, and the
   Data Replicator for Salesforce.com. The expanded iBOLT range
   facilitated project wins in a number of countries including
   Austria, the U.S., and the Netherlands.

 * The company's uniPaaS and iBOLT solutions attracted significant
   media attention in the quarter from specialist IT media
   publications including AjaxWorld, SDTimes, MicroScope, CRN,
   SaaSDirectory, CloudAve,  IT Knowledge Exchange, SoftwareCEO,
   ZDNet, ComputerWorldUK, BTQ,  CBR, businesscloud9, computing.co.uk,
   SOAWorld. For a full listing of our media coverage read here.

 * Magic Software is listed by Gartner as a provider of
   SaaS/Cloud-Enabled Application Platforms and of Composite
   Applications. ['Hype Cycle for Application Development 2009', 22nd
   July 2009, ID G00168168].

 * Magic Software is listed by Gartner as one of 13 strategic partners
   and long-term providers of application infrastructure, ['A Summary
   of Magic Quadrants for Application Infrastructure', 3rd March 2009,
   ID G00165017].

Non-GAAP Financial Measures

This release includes non-GAAP operating income, net income, basic and diluted earnings per share and other non-GAAP financial measures. These non-GAAP measures exclude the following items:

 - Amortization of purchased intangible assets;

 - In-process research and development capitalization and
   amortization and;

 - Equity-based compensation expense.

Magic Software's management believes that the presentation of non-GAAP measures provide useful information to investors and management regarding financial and business trends relating to the Company's financial condition and results of operations as well as the net amount of cash generated by its business operations after taking into account capital spending required to maintain or expand the business.

These non-GAAP financial measures are not in accordance with, or an alternative for, generally accepted accounting principles and may be different from non-GAAP financial measures used by other companies. In addition, these non-GAAP financial measures are not based on any comprehensive set of accounting rules or principles.