Magic Software Enterprises (MGIC) Q2 2024 earnings summary

Executive summary

• Q2 2024 revenues were $136.3 million, down 1% year-over-year, but would have increased 0.4% on a constant currency basis and rose 8.5% sequentially from Q4 2023 and 4.2% from Q1 2024.

• H1 2024 revenues fell 4.7% year-over-year to $267.0 million; net income attributable to shareholders dropped 16.7% to $17.8 million.

• Sequential growth in Israel (6.6%) and North America (11.1%) was driven by the Theoris, Inc. acquisition.

• Revenue decline attributed to currency headwinds, reduced demand from major U.S. clients due to their internal budget constraints, and a $16.6 million reduction in demand from key U.S. clients who suspended major projects in Q3 2023.

• Management remains confident in long-term growth and profitability, citing a robust pipeline and continued investment despite macroeconomic and geopolitical challenges.

Financial highlights

• North America Q2 revenue: $58 million, down 16.2% year-over-year, but up 11.1% sequentially.

• Israel Q2 revenue: $58.2 million, up 12.6% year-over-year.

• Q2 2024 GAAP net income attributable to shareholders was $9.0 million (down 20% year-over-year); diluted EPS $0.18 (down 21.7%).

• Q2 non-GAAP net income: $11.7 million ($0.24 per diluted share), down 13.6% year-over-year.

• Cash, cash equivalents, and deposits totaled $108.4 million as of June 30, 2024.

Outlook and guidance

• 2024 full-year revenue guidance reiterated at $540 million–$550 million.

• No macroeconomic improvement assumed in guidance; optimism for U.S. growth if economy improves.

• Management expresses confidence in long-term profitability and value creation, citing a strong customer pipeline.