Magic Software Reports Profit for Second Consecutive Quarter

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Magic Software, a leading provider of state-of-the-art business integration and application development technology, showed a profit for the first quarter of this year, the second consecutive profitable quarter the company has had since its 2006 restructuring plan.

Magic's total revenues were $16.4 million, a 7 percent increase over the first quarter of 2006 and 1 percent above the fourth quarter of the same year. Operating income was $1.1 million versus operating losses of $0.2 million in the first quarter of 2006 and the fourth quarter 2006.

Also in the first quarter of this year, the company reported a positive free cash flow of $3.9 million, the highest level in 17 quarters. Cash and cash equivalents, including short-term marketable securities, reached $16.5 million on March 31, the company said.

Gross profit for the first quarter of 2007 was $8.7 million, compared to $8.9 million in the last quarter of 2006 and $8.5 million in the first quarter of 2006.

Net profit for the first quarter of 2007 amounted to $1 million, compared to a net profit of $0.03 million in the fourth quarter of 2006 and a net loss of $0.2 million reported in the comparable quarter of 2006.

In the first quarter of 2007, North America, Europe, and Japan accounted for 41 percent, 36 percent, and 14 percent of total revenue respectively. The rest of the world accounted for nine percent of total revenue in the first quarter of 2007.

"We are very pleased with the results of the first quarter," said David Assia, chairman and acting CEO of Magic Software Enterprises. "By achieving profitability for a second consecutive quarter, we have proved that Magic is back on the right track."

"Despite the challenges involved in the restructuring we implemented in 2006, we managed to grow our revenues this quarter compared to the first quarter of 2006 and even exceeded our revenues in the fourth quarter of 2006, which is typically our strongest quarter in terms of revenue. The positive cash flow of $3.9 million we're reporting also contributes to our positive outlook towards the future."

Assia said, "In 2006 we announced a major restructuring plan designed to increase the company's profitability by focusing on the marketing and sales of our flagship products. We are also welcoming the arrival of Eitan Naor, our new CEO, and are confident that Eitan's leadership and vision will enable us to achieve our growth and profitability goals." Naor will join the company within the next month.

Magic Software Enterprises Ltd. (NASDAQ: MGIC) is a global provider of mobile, cloud-based and on-premise application, and business integration platforms. For more information visit www.magicsoftware.com.

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