Document and Entity Information
Document and Entity Information | 12 Months Ended |
Dec. 31, 2018shares | |
Document and Entity Information [Abstract] | |
Entity Registrant Name | MAGIC SOFTWARE ENTERPRISES LTD |
Entity Central Index Key | 0000876779 |
Trading Symbol | MGIC |
Amendment Flag | false |
Current Fiscal Year End Date | --12-31 |
Document Type | 20-F |
Document Period End Date | Dec. 31, 2018 |
Document Fiscal Year Focus | 2018 |
Document Fiscal Period Focus | FY |
Entity Well-known Seasoned Issuer | No |
Entity Voluntary Filers | No |
Entity Current Reporting Status | Yes |
Entity Filer Category | Accelerated Filer |
Entity Emerging Growth Company | false |
Entity Shell Company | false |
Entity Ex Transition Period | false |
Entity Common Stock, Shares Outstanding | 48,861,038 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
CURRENT ASSETS: | ||
Cash and cash equivalents | $ 87,126 | $ 76,076 |
Short-term bank deposits | 16,881 | 732 |
Marketable securities (Note 4) | 9,913 | 14,138 |
Trade receivables (net of allowance for doubtful accounts of $ 3,852 and $ 2,992 at December 31, 2017 and 2018, respectively) | 90,274 | 82,051 |
Other accounts receivable and prepaid expenses (Note 6) | 7,029 | 8,643 |
Total current assets | 211,223 | 181,640 |
LONG-TERM RECEIVABLES: | ||
Severance pay fund | 3,284 | 3,226 |
Deferred tax asset (Note 13) | 1,858 | 2,990 |
Other long-term receivables | 6,363 | 2,015 |
Total long-term receivables | 11,505 | 8,231 |
PROPERTY AND EQUIPMENT, NET (Note 7) | 3,072 | 3,468 |
INTANGIBLE ASSETS, NET (Note 8) | 41,479 | 51,011 |
GOODWILL (Note 9) | 95,006 | 98,189 |
Total assets | 362,285 | 342,539 |
CURRENT LIABILITIES: | ||
Short term debt (Note 10) | 8,661 | 9,771 |
Trade payables | 14,036 | 12,185 |
Accrued expenses and other accounts payable (Note 11) | 24,458 | 27,789 |
Liabilities due to acquisition activities | 910 | 3,906 |
Deferred revenues and customer advances | 4,857 | 5,586 |
Total current liabilities | 52,922 | 59,237 |
LONG TERM LIABILITIES: | ||
Long term debt (Note 12) | 19,388 | 27,814 |
Long term liabilities due to acquisition activities (Note 3) | 94 | 581 |
Deferred tax liability (Note 13) | 10,343 | 11,331 |
Accrued severance pay | 3,934 | 4,174 |
Total noncurrent liabilities | 33,759 | 43,900 |
COMMITMENTS AND CONTINGENCIES (Note 16) | ||
REDEEMABLE NON-CONTROLLING INTEREST (Note 2) | 27,235 | 25,839 |
EQUITY (Note 14): | ||
Ordinary shares of NIS 0.1 par value - Authorized: 50,000,000 shares at December 31, 2017 and 2018; Issued and Outstanding: 44,488,578 and 48,861,038 shares at December 31, 2017 and 2018, respectively | 1,159 | 1,040 |
Additional paid-in capital | 218,400 | 183,445 |
Accumulated other comprehensive income (loss) | (6,125) | 83 |
Retained earnings | 30,522 | 25,713 |
Total equity attributable to Magic Software Enterprises shareholders | 243,956 | 210,281 |
Non-controlling interests | 4,413 | 3,282 |
Total equity | 248,369 | 213,563 |
Total liabilities, redeemable non-controlling interest and equity | $ 362,285 | $ 342,539 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Statement of Financial Position [Abstract] | ||
Trade receivables net of allowance for doubtful accounts | $ 2,992 | $ 3,852 |
Ordinary stock, par value (in NIS) | $ 0.1 | $ 0.1 |
Ordinary stock, shares authorized | 50,000,000 | 50,000,000 |
Ordinary stock, shares issued | 48,861,038 | 44,488,578 |
Ordinary stock, shares outstanding | 48,861,038 | 44,488,578 |
Consolidated Statements of Inco
Consolidated Statements of Income - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Revenues (Note 18-19): | |||
Software | $ 25,454 | $ 21,644 | $ 19,626 |
Maintenance and technical support | 30,951 | 30,386 | 25,885 |
Consulting services | 227,970 | 206,110 | 156,135 |
Total revenues | 284,375 | 258,140 | 201,646 |
Cost of revenues: | |||
Software | 9,960 | 9,564 | 8,674 |
Maintenance and technical support | 4,120 | 3,888 | 2,952 |
Consulting services | 181,477 | 161,709 | 121,756 |
Total cost of revenues | 195,557 | 175,161 | 133,382 |
Gross profit | 88,818 | 82,979 | 68,264 |
Operating costs and expenses: | |||
Research and development, net (Note 20a) | 5,696 | 6,942 | 5,839 |
Selling and marketing | 27,197 | 27,244 | 23,776 |
General and administrative | 24,227 | 22,837 | 17,562 |
Total operating costs and expenses | 57,120 | 57,023 | 47,177 |
Operating income | 31,698 | 25,956 | 21,087 |
Financial income (expense), net (Note 20b) | 149 | (1,711) | (430) |
Income before taxes on income | 31,847 | 24,245 | 20,657 |
Taxes on income (Note 13) | 7,071 | 6,331 | 3,949 |
Net income | 24,776 | 17,914 | 16,708 |
Net income attributable to redeemable non-controlling interests | 3,383 | 1,536 | 2,258 |
Net income attributable to non-controlling interests | 1,510 | 936 | 281 |
Net income attributable to Magic Software Enterprises shareholders | $ 19,883 | $ 15,442 | $ 14,169 |
Net earnings per share attributable to Magic Software Enterprises' shareholders (Note 2, 17): | |||
Basic and Diluted earnings per share | $ 0.39 | $ 0.35 | $ 0.27 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Statement of Comprehensive Income [Abstract] | |||
Net income | $ 24,776 | $ 17,914 | $ 16,708 |
Other comprehensive income (loss), net of tax | |||
Foreign currency translation adjustments, net | (8,217) | 10,134 | (1,006) |
Unrealized losses from available-for-sale securities | (36) | (4) | (11) |
(Gain) loss reclassified into earnings from marketable securities | (94) | 16 | |
Total other comprehensive (loss), net of tax | (8,253) | 10,036 | (1,001) |
Total comprehensive income | 16,523 | 27,950 | 15,707 |
Comprehensive income attributable to redeemable non-controlling interests | 1,649 | 4,007 | 4,211 |
Comprehensive income attributable to non-controlling interests | 1,200 | 990 | 322 |
Comprehensive income attributable to Magic Software Enterprises' shareholders | $ 13,674 | $ 22,953 | $ 11,174 |
Statements of Changes in Shareh
Statements of Changes in Shareholders' Equity - USD ($) $ in Thousands | Share capital | Additional paid-in capital | Accumulated other comprehensive income (loss) | Retained earnings | Non- controlling interests | Total |
Beginning balance at Dec. 31, 2015 | $ 1,035 | $ 180,989 | $ (6,695) | $ 15,679 | $ 2,098 | $ 193,106 |
Beginning balance, Shares at Dec. 31, 2015 | 44,335,220 | |||||
Exercise of stock options | $ 1 | 40 | 41 | |||
Exercise of stock options, Shares | 20,550 | |||||
Stock-based compensation | 103 | 49 | 152 | |||
Increase in value of put options of redeemable non-controlling interests | (2,262) | (2,262) | ||||
Exercise of stock options in a subsidiary | 1,012 | (1,304) | (292) | |||
Acquisition of non-controlling interests (Note 3) | 641 | (644) | (3) | |||
Dividend | (7,761) | (98) | (7,859) | |||
Other comprehensive income (loss) | (733) | 41 | (692) | |||
Net income | 14,169 | 281 | 14,450 | |||
Ending balance at Dec. 31, 2016 | $ 1,036 | 182,785 | (7,428) | 19,825 | 423 | 196,641 |
Ending balance, Shares at Dec. 31, 2016 | 44,355,770 | |||||
Exercise of stock options | $ 4 | 582 | 586 | |||
Exercise of stock options, Shares | 132,808 | |||||
Stock-based compensation | 78 | 78 | ||||
Redeemable non-controlling interests reclassification to non-controlling interests | 2,440 | 2,440 | ||||
Dividend | (9,554) | (571) | (10,125) | |||
Other comprehensive income (loss) | 7,511 | 54 | 7,565 | |||
Net income | 15,442 | 936 | 16,378 | |||
Ending balance at Dec. 31, 2017 | $ 1,040 | 183,445 | 83 | 25,713 | 3,282 | 213,563 |
Ending balance, Shares at Dec. 31, 2017 | 44,488,578 | |||||
Issue of share capital, net of issuance costs of $ 400 | $ 117 | 34,452 | 34,569 | |||
Issue of share capital, Shares | 4,268,293 | |||||
Exercise of stock options | $ 2 | 309 | 311 | |||
Exercise of stock options, Shares | 104,167 | |||||
Stock-based compensation | 194 | 194 | ||||
Increase in value of put options of redeemable non-controlling interests | (1,726) | (1,726) | ||||
Dividend | (13,348) | (69) | (13,417) | |||
Other comprehensive income (loss) | (6,208) | (310) | (6,518) | |||
Net income | 19,883 | 1,510 | 21,393 | |||
Ending balance at Dec. 31, 2018 | $ 1,159 | $ 218,400 | $ (6,125) | $ 30,522 | $ 4,413 | $ 248,369 |
Ending balance, Shares at Dec. 31, 2018 | 48,861,038 |
Statements of Changes in Shar_2
Statements of Changes in Shareholders' Equity (Parenthetical) $ in Thousands | 12 Months Ended |
Dec. 31, 2018USD ($) | |
Statement of Stockholders' Equity [Abstract] | |
Net of issuance cost | $ 400 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Cash flows from operating activities: | |||
Net income | $ 24,776 | $ 17,914 | $ 16,708 |
Adjustments to reconcile net income to net cash provided by operating activities: | |||
Depreciation and amortization | 12,564 | 13,611 | 11,608 |
Stock-based compensation | 194 | 78 | 152 |
Amortization of marketable securities premium and accretion of discount | 189 | 218 | 257 |
Loss (gains) reclassified into earnings from marketable securities | (94) | 16 | |
Increase in trade receivables, net | (11,367) | (15,752) | (2,571) |
Increase in other long term and short term accounts receivable and prepaid expenses | (4,364) | (1,773) | (56) |
Increase in trade payables | 2,203 | 3,604 | 1,426 |
Change in exchange rate of loans | (2,099) | 3,200 | |
Increase in accrued expenses and other accounts payable | 1,802 | 4,435 | 1,553 |
Increase (decrease) in deferred revenues | (374) | 1,175 | (180) |
Change in deferred taxes, net | 526 | (1,108) | (958) |
Net cash provided by operating activities | 24,050 | 25,508 | 27,955 |
Cash flows from investing activities: | |||
Capitalized software development costs | (3,666) | (3,771) | (4,224) |
Purchase of property and equipment | (863) | (1,400) | (799) |
Cash paid in conjunction with acquisitions, net of acquired cash | (1,218) | (1,787) | (29,657) |
Proceeds from maturity and sale of marketable securities | 4,000 | 4,225 | 2,643 |
Proceeds from short-term bank deposits | 8,467 | ||
Investment in long-term bank deposits | (932) | ||
Investment in marketable securities and short-term bank deposits | (16,875) | (5,766) | (9,401) |
Short term loan to a related-party | 1,183 | (1,183) | |
Change in loans to employees and other deposits, net | (49) | ||
Net cash used in investing activities | (19,554) | (7,316) | (34,203) |
Cash flows from financing activities: | |||
Proceeds from exercise of options by employees | 311 | 586 | 41 |
Issuance of ordinary shares, net | 34,569 | ||
Dividend paid | (13,543) | (9,359) | (7,761) |
Dividend paid to non-controlling interests | (69) | (571) | (456) |
Dividend paid to redeemable non-controlling interests | (2,671) | (5,312) | (1,574) |
Short-term credit, net | (437) | 936 | |
Purchase of non-controlling interest | (352) | ||
Cash paid in conjunction with acquisitions, net of acquired cash | (3,126) | (5,103) | (1,779) |
Long term loan received | 26 | 8,535 | 31,356 |
Repayment of long-term loans | (6,634) | (8,190) | |
Net cash provided by (used in) financing activities | 8,426 | (19,414) | 20,411 |
Effect of exchange rate changes on cash and cash equivalents | (1,872) | 1,984 | (1,037) |
Increase in cash and cash equivalents | 11,050 | 762 | 13,126 |
Cash and cash equivalents at the beginning of the year | 76,076 | 75,314 | 62,188 |
Cash and cash equivalents at end of the year | 87,126 | 76,076 | 75,314 |
Non-cash activities: | |||
Deferred acquisition payment | 652 | 2,035 | |
Contingent acquisition consideration | 4,771 | ||
Dividend declared and not yet paid | 195 | ||
Dividend declared and not yet paid to redeemable non-controlling interests | 692 | 1,579 | |
Cash paid during the year for: | |||
Income taxes | 5,419 | 5,373 | 4,510 |
Interest | $ 312 | $ 572 | $ 358 |
General
General | 12 Months Ended |
Dec. 31, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
GENERAL | NOTE 1:- GENERAL MAGIC SOFTWARE ENTERPRISES LTD., an Israeli company ("the Group" or "the Company"), is a global provider of: (i) proprietary application development and business process integration platforms that accelerate the planning, development, deployment and integration of on-premise, mobile and cloud business applications ("the Magic Technology"); (ii) selected packaged vertical software solutions; and (iii) a vendor of software services and IT outsourcing software services. Magic Technology enables enterprises to accelerate the process of delivering business solutions that meet current and future needs and allow customers to dramatically improve their business performance and return on investment. To complement its software products and to increase its traction with customers, the Group also offers a complete portfolio of software services in the areas of infrastructure design and delivery, application development, technology planning and implementation services, communications services and solutions, and supplemental IT professional outsourcing services. The Company reports its results on the basis of two reportable business segments: software services (which include proprietary and non-proprietary software solutions, maintenance and support and related services) and IT professional services (see Note 18 for further details). The principal markets of the Group are the United States, Israel, Europe and Japan (see Note 18). For information about the Company's holdings in subsidiaries and affiliates, see Appendix A to the consolidated financial statements. |
Significant Accounting Policies
Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2018 | |
Accounting Policies [Abstract] | |
SIGNIFICANT ACCOUNTING POLICIES | NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES The consolidated financial statements have been prepared in accordance with United States Generally Accepted Accounting Principles ("U.S. GAAP"), applied on a consistent basis, as follows, unless otherwise stated: Use of estimates The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions. The Company's management believes that the estimates, judgments and assumptions used are reasonable based upon information available at the time they are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Financial statements in United States dollars A substantial portion of the revenues and expenses of the Company and of certain subsidiaries is generated in U.S. dollars ("dollar"). The Company's management believes that the dollar is the currency of the primary economic environment in which the Company and certain subsidiaries operate. Thus, the functional and reporting currency of the Company and certain subsidiaries is the dollar. Accordingly, monetary accounts maintained in currencies other than the dollar are remeasured into dollars in accordance with the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 830, "Foreign Currency Matters". All transaction gains and losses of the remeasurement of monetary balance sheet items are reflected in the statements of income as financial income or expenses, as appropriate. Monetary accounts and transactions maintained in dollars are presented at their original amounts. For those foreign subsidiaries whose functional currency is not the dollar, all balance sheet amounts have been translated using the exchange rates in effect at each balance sheet date. Statement of income amounts have been translated using the average exchange rate prevailing during each year. Such translation adjustments are reported as a component of accumulated other comprehensive income (loss) in equity. Principles of consolidation The consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries. Intercompany balances and transactions, including profit from intercompany sales not yet realized outside the Group, have been eliminated upon consolidation. Changes in the Company's ownership interest in a subsidiary with no change of control are treated as equity transactions, with any difference between the amount of consideration paid and the change in the carrying amount of the non-controlling interest, recognized in equity. Non-controlling interests of subsidiaries represent the non-controlling shareholders' share of the total comprehensive income (loss) of the subsidiaries and fair value of the net assets upon the acquisition of the subsidiaries. The non-controlling interests are presented in equity separately from the equity attributable to the equity holders of the Company. Redeemable non-controlling interests are classified as mezzanine equity, separate from permanent equity, on the consolidated balance sheets and measured at each reporting period at the higher of their redemption amount or the non-controlling interest book value, in accordance with the requirements of ASC 810 "Consolidation" and ASC 480-10-S99-3A, "Distinguishing Liabilities from Equity". The following table provides a reconciliation of the redeemable non-controlling interests for the year ended December 31, 2018: January 1, 2018 $ 25,839 Net income attributable to redeemable non-controlling interest 3,383 Increase in value of put options of redeemable non-controlling interests 1,726 Dividend declared to redeemable non-controlling interest (1,979 ) Foreign currency translation adjustments (1,734 ) December 31, 2018 $ 27,235 Out of the closing balance, an amount of $ 25,778 become exercisable during 2019. Cash and cash equivalents Cash and cash equivalents are short-term highly liquid investments that are readily convertible to cash with original maturities of three months or less, at acquisition. Cash and cash equivalents include amounts held primarily in NIS, dollar, Euro, Japanese Yen and British Pound. Short-term deposits and restricted deposits Short-term deposits include deposits with original maturities of more than three months and less than one year. Such deposits are presented at cost (including accrued interest) which approximates their fair value. Restricted deposits are used to secure certain of the Group's ongoing projects and are classified under other long-term receivables. Marketable securities The Company accounts for all its investments in marketable securities in accordance with ASC No. 320, "Investments – Debt and Equity Securities". The Company classifies all of its marketable securities as available for sale and held for trading. Available for sale securities are carried at fair value, with the unrealized gains and losses, net of tax, reported in "accumulated other comprehensive income (loss)" in equity. Realized gains and losses on sale of investments are included in "financial expense (income), net" and are derived using the specific identification method for determining the cost of securities. The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization together with interest on securities is included in "financial expense (income), net". The Company recognizes an impairment charge when a decline in the fair value of its investments in debt securities below the cost basis of such securities is judged to be other-than-temporary. Factors considered in making such a determination include the duration and severity of the impairment, the reason for the decline in value, the potential recovery period and the Company's intent to sell, including whether it is more likely than not that the Company will be required to sell the investment before recovery of cost basis. For securities that are deemed other-than-temporarily impaired, the amount of impairment is recognized in "net gain (impairment net of gains) on sale of marketable securities previously impaired" in the statements of income and is limited to the amount related to credit losses, while impairment related to other factors is recognized in other comprehensive income. The Company classifies its marketable debt securities as either short-term or long-term based on each instrument's underlying contractual maturity date and the entity's expectations of sales and redemptions in the following year. Held for trading securities are measured at fair value through profit or loss. Property and equipment, net Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated by the straight-line method over the estimated useful lives of the assets, at the following annual rates: Years Computers and peripheral equipment 3 - 5 Office furniture and equipment 7 - 15 (mainly 7) Motor vehicles 7 Software 3 – 5 (mainly 5) Leasehold improvements are amortized using the straight-line method over the term of the lease (including option terms that are deemed to be reasonably assured) or the estimated useful life of the improvements, whichever is shorter. Business combinations The Company accounts for business combinations under ASC 805, "Business Combinations". ASC 805 requires recognition of assets acquired, liabilities assumed, contingent consideration, non-controlling interest and redeemable non-controlling interest in the acquiree at the acquisition date, to be measured at their fair values as of that date. As required by ASC 820, "Fair Value Measurements and Disclosures" the Company applies assumptions, judgments and estimates that marketplace participants would consider in determining the fair value of assets acquired, liabilities assumed, non-controlling interest and redeemable non-controlling interest in the acquiree at the acquisition date. Any excess of the fair value of net assets acquired over purchase price and any subsequent changes in estimated contingencies are to be recorded in earnings. Acquisition related costs are expensed to the statements of income in the period incurred. The cumulative impact of measurement period adjustments, including the impact to prior periods, is recognized in the reporting period in which the adjustment is identified. During the years ended December 31, 2016, 2017 and 2018 the Company recorded $ 665, $ 300 and $ (38), with respect to changes in the fair value of contingent consideration liability, respectively. Research and development costs Research and development costs incurred in the process of software development before establishment of technological feasibility are charged to expenses as incurred. Costs incurred subsequent to the establishment of technological feasibility are capitalized according to the principles set forth in ASC 985-20, "Costs of Software to be Sold, Leased or Marketed". The Company and its subsidiaries establish technological feasibility upon completion of a detailed program design or working model. ASC 985-20-35 requires that a product be amortized when the product is available for general release to customers. The Company considers a product to be available for general release to customers when the Company completes its internal validation of the product that is necessary to establish that the product meets its design specifications including functions, features, and technical performance requirements. Internal validation includes the completion of coding, documentation and testing that ensure bugs are reduced to a minimum. The internal validation of the product takes place a few weeks before the product is made available to the market. In certain instances, the Company enters into a short pre-release stage, during which the product is made available to a selected number of customers as a beta program for their own review and familiarization. Subsequently, the release is made generally available to customers from the Company's download area. Once a product is considered available for general release to customers, the capitalization of costs ceases and amortization of such costs to "cost of sales" begins. Capitalized software costs are amortized on a product by product basis by the straight-line method over the estimated useful life of the software product (approximately 5 years, due to their high rates of acceptance, the continued reliance on these products by existing customers, and the demand for such products from prospective customers, all of which validate the Company's expectations) which provides greater amortization expense compared to the revenue-curve method. The Company assesses the recoverability of these intangible assets on a regular basis by assessing the net realizable value of these intangible assets based on the estimated future gross revenues from each product reduced by the estimated future costs of completing and disposing of it, including the estimated costs of performing maintenance and customer support over its remaining economical useful life using internally generated projections of future revenues generated by the products, cost of completion of products and cost of delivery to customers over its remaining economical useful life. During the years ended December 31, 2016, 2017 and 2018, no such unrecoverable amounts were identified. Research and development costs incurred in the process of developing product enhancements are generally charged to expenses as incurred. Long-Lived Assets The Company's long-lived, non-current assets are comprised mainly of goodwill, identifiable intangible assets and property, plants and equipment. Impairment of long-lived assets and intangible assets subject to amortization The Company's long-lived assets are reviewed for impairment in accordance with ASC 360, "Property, Plant and Equipment" whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. As required by ASC 820, "Fair Value Measurements and Disclosures" the Company applies assumptions, judgments and estimates that marketplace participants would consider in determining the fair value of long-lived assets (or asset groups). Intangible assets with finite lives are amortized over their economic useful life using a method of amortization that reflects the pattern in which the economic benefits of the intangible assets are consumed or otherwise used up. Acquired technology and non-compete agreements were amortized on a straight line basis and customer relationships and backlog were amortized on an accelerated method basis over a period between 1 - 15 years based on the intangible assets identified. During the years ended December 31, 2016, 2017 and 2018, no impairment losses have been identified. Goodwill Goodwill represents the excess of the purchase price in a business combination over the fair value of the net tangible and intangible assets acquired. Under ASC 350, "Intangibles - Goodwill and Other", goodwill is subject to an annual impairment test or more frequently if impairment indicators are present. Goodwill impairment is deemed to exist if the net book value of a reporting unit exceeds its estimated fair value. As of December 31, 2018, the Company operates in four reporting units within its operating segments. Goodwill reflects the excess of the consideration paid or transferred plus the fair value of contingent consideration and any non-controlling interest in the acquiree at the acquisition date over the fair values of the identifiable net assets acquired. ASC 350 allows an entity to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. If the qualitative assessment does not result in a more likely than not indication of impairment, no further impairment testing is required. If it does result in a more likely than not indication of impairment, the two-step impairment test is performed. Alternatively, ASC 350 permits an entity to bypass the qualitative assessment for any reporting unit and proceed directly to performing the first step of the goodwill impairment test. The provisions of ASC 350 require that the quantitative two-step impairment test will be performed on goodwill at the level of the reporting units. In the first step, or "Step one", the Company compares the fair value of each reporting unit to its carrying value. If the fair value exceeds the carrying value of the net assets, goodwill is considered not impaired, and the Company is not required to perform further testing. If the carrying value of the net assets exceeds the fair value, then the Company must perform the second step, or "Step two", of the impairment test in order to determine the implied fair value of goodwill. To determine the fair value used in Step one, the Company uses discounted cash flows. If and when the Company is required to perform a Step two analysis, determining the fair value of its net assets and its off-balance sheet intangibles, then the Company would be required to make judgments that involve the use of significant estimates and assumptions. The Company determines the fair value of each reporting unit by using the income approach, which utilizes a discounted cash flow model, as it believes that this approach best approximates the reporting unit's fair value. Judgments and assumptions related to revenue, operating income, future short-term and long-term growth rates, weighted average cost of capital, interest, capital expenditures, cash flows, and market conditions are inherent in developing the discounted cash flow model. The Company considers historical rates and current market conditions when determining the discount and growth rates to use in its analyses. If these estimates or their related assumptions change in the future, the Company may be required to record impairment charges for its goodwill. The Company performed an annual impairment test as of December 31, of each of 2016, 2017 and 2018 and did not identify any impairment losses (see Note 9). Revenue recognition Effective as of January 1, 2018, The Company implements the provisions of Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers ("ASC 606") using the modified retrospective method. no cumulative effect adjustment as of the date of the adoption was required. Prior years information has not been restated and continues to be reported under the old accounting standard 605, "Revenue Recognition" (ASC 605). See Note 19 for further disclosures required under ASC 606. Revenues are recognized when control of the promised goods or services are transferred to the customers, in an amount that reflects the consideration that the company expects to receive in exchange for those goods or services. The Company determines revenue recognition through the following steps: ● identification of the contract with a customer; ● identification of the performance obligations in the contract; ● determination of the transaction price; ● allocation of the transaction price to the performance obligations in the contract; and ● recognition of revenue when, or as, the Company satisfies a performance obligation. The Company enters into contracts that can include various combinations of products, software and professional services, as detailed below, which are generally capable as being distinct from each other and accounted for as separate performance obligations. The Company derives its revenues from licensing the rights to use its software (proprietary and non-proprietary), provision of related professional services, maintenance and technical support as well as from other software and IT professional services (either fixed price or based on time and materials). The Company sell its products primarily through direct sales force and indirectly through distributors and value added resellers. Under ASC 606, an entity recognizes revenue when or as it satisfies a performance obligation by transferring software license or software related services to the customer, either at a point in time or over time. The company recognizes its revenues from software sales at a point in time upon delivery of its software license. The software license is considered a distinct performance obligation, as the customer can benefit from the software on its own. Revenues from contracts that involve significant customization to customer-specific specifications are performance obligations the Company generally accounts for as performance obligations satisfied over time. The underlying deliverable is owned and controlled by the customer, and does not create an asset with an alternative use to the Company. The Company recognizes revenue of such contracts over time using cost inputs, which recognize revenue and gross profit as work is performed based on a ratio between actual costs incurred compared to the total estimated costs for the contract, to measure progress toward completion of its performance obligations, which is similar to the method prior to the adoption of ASC 606. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are first determined, in the amount of the estimated loss for the entire contract. During the years ended December 31, 2016, 2017 and 2018, no material estimated losses were identified. In addition, the Company provides professional services that do not involve significant customization to customer-specific specifications. For contracts that do not involve significant customization to customer-specific specifications (typically staffing or consulting services) revenue is recognized as the services are performed, either on a straight-line basis or based on the hours of services that were provided to the customer, in accordance with the terms of the contracts. The Company's revenues from post contract support are derived from annual maintenance contracts providing for unspecified upgrades for new versions and enhancements on a when-and-if-available basis for an annual fee. The right for an unspecified upgrade for new versions and enhancements on a when-and-if-available basis do not specify the features, functionality and release date of future product enhancements for the customer to know what will be made available and the general timeframe in which it will be delivered. The Company considers the post contract support performance obligation as a distinct performance obligation that is satisfied over time, and recognized on a straight-line basis over the contractual period. Revenue from professional services both related to software and IT professional services businesses consists of either fixed price or Time and Materials (T&M), and are considered performance obligations that are satisfied over time, and revenues are recognized as the services are provided. The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis. Standalone selling prices of software licenses are estimated using the residual approach, due to the lack of selling software licenses on a standalone basis, or the fact the Company sells the license to different customers for a broad range of amounts. Standalone selling prices of services are determined by considering several external and internal factors including, but not limited to, transactions where the specific performance obligation is sold separately. The Company generally does not grant a right of return to its customers. When a right of return exists, the Company defers revenue until the right of return expires, at which time revenue is recognized provided that all other revenue recognition criteria are met. Deferred revenues include unearned amounts received under maintenance and support (mainly) and amounts received from customers for which revenues have not yet been recognized. Revenue from third-party sales is recorded at a gross or net amount according to certain indicators. The application of these indicators for gross and net reporting of revenue depends on the relative facts and circumstances of each sale. The Company pays commissions to sales and marketing and certain management personnel based on their attainment of certain predetermined sales or profit goals. When sales commissions are considered incremental costs of obtaining a contract with a customer they are deferred and amortized on a systematic basis that is consistent with the transfer to the customer of the performance obligations to which the asset relates. The Company expenses sales commissions as they are incurred when the amortization period would have been less than one year. In addition, generally, sales commission which are paid upon contract renewal are commensurate with the initial commissions as the renewal amounts are substantially identical to the initial commission costs. During the year ended December 31, 2018, no costs have been capitalized. The Company does not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the customer and the transfer of the promised goods or services to the customer will be one year or less. Accrued severance pay and retirement plans The Company's and its Israeli subsidiaries' obligation for severance pay with respect to their Israeli employees (for the period for which the employees were not included under Section 14 of the Severance Pay Law, 1963) is calculated pursuant to the Israeli Severance Pay Law based on the most recent salary of the employees multiplied by the number of years of employment as of the balance sheet date, and are presented on an undiscounted basis (referred to as the "Shut Down Method"). Employees are entitled to one month's salary for each year of employment or a portion thereof. The Company's obligation for all of its Israeli employees is fully provided for by monthly deposits with insurance policies and severance pay funds and by an accrual. The carrying value of deposited funds includes profits (losses) accumulated up to the balance sheet date. The deposited funds may be withdrawn only upon the fulfillment of the obligations pursuant to the Israeli Severance Pay Law or labor agreements and are recorded as an asset in the Company's consolidated balance sheet. The Company and its Israeli subsidiaries' agreements with most of their Israeli employees are in accordance with Section 14 of the Severance Pay Law -1963, mandating that upon termination of such employees' employment; all the amounts accrued in their insurance policies shall be released to them instead of severance compensation. Upon release of deposited amounts to the employee, no additional liability exists between the parties regarding the matter of severance pay and no additional payments are payable by the Company or its subsidiaries to the employee. Further, the related obligation and amounts deposited on behalf of such obligation are not stated on the balance sheet, as the Company and its subsidiaries are legally released from their obligations to employees once the deposit amounts have been paid. The Group has a number of savings plans in the United States that qualify under Section 401(k) of the Internal Revenue Code. U.S. employees may contribute up to 100% of their pretax or post-tax salary, but not more than statutory limits. Matching contributions are discretionary and if made, are up to 3% of the participants annual contributions. When contributions are granted, they are invested in proportion to each participant's voluntary contributions in the investment options provided under the plan. Severance expenses for the years ended December 31, 2016, 2017 and 2018 amounted to approximately $ 2,248, $ 3,748 and $ 4,052, respectively. Advertising expenses Advertising expenses are charged to selling and marketing expenses, as incurred. Advertising expenses for the years ended December 31, 2016, 2017 and 2018 amounted to $ 423, $ 384 and $ 304, respectively. Income taxes The Company accounts for income taxes in accordance with ASC 740, "Income Taxes". ASC 740 prescribes the use of the "asset and liability" method whereby deferred tax asset and liability account balances are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company provides a valuation allowance, if necessary, to reduce deferred tax assets to their estimated realizable value. Deferred tax assets and liabilities are classified as non-current. The Company utilizes a two-step approach for recognizing and measuring uncertain tax positions accounted for in accordance with an amendment of ASC 740 "Income Taxes." Under the first step the Company evaluates a tax position taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that, based on its technical merits, the tax position will be sustained on audit, including resolution of any related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement with the tax authorities. The Company accrued interest and penalties related to unrecognized tax benefits in its provisions for income taxes. Basic and diluted net earnings per share Basic net earnings per share are computed based on the weighted average number of Ordinary shares outstanding during each year. Diluted net earnings per share are computed based on the weighted average number of Ordinary shares outstanding during each year, plus dilutive potential ordinary shares considered outstanding during the year, in accordance with ASC 260, "Earnings Per Share." A portion of the outstanding stock options have been excluded from the calculation of the diluted earnings per share because such securities are anti-dilutive. The total weighted average number of Ordinary shares related to the outstanding options excluded from the calculations of diluted earnings per share was 21,998 and 2,093 for the years ended December 31, 2016 and 2017, respectively. As of December 31, 2018, there were no outstanding options excluded from the calculations of diluted earnings per share. The Company changed its accounting policy regarding the presentation of the adjustment to the net income attributable to Magic Software Enterprises' shareholders as a result of the accretion of redeemable non-controlling interest. According to the new accounting policy, the Company presents the accretion amount in the calculation of the earnings per share in the notes of the financial statements, compared to the previous presentation on the face of the consolidated statements of income, since Company's management believes that reflecting the effects of the accretion as an adjustment to income available to Magic Software Enterprises' shareholders in the earnings per share note is a more appropriate presentation. The change in the accounting policy was retrospectively effected Stock-based compensation The Company accounts for stock-based compensation in accordance with ASC 718, "Compensation - Stock Compensation" which requires the measurement and recognition of compensation expense based on estimated fair values for all share-based payment awards made. ASC 718 requires companies to estimate the fair value of equity-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as an expense over the requisite service periods in the Company's consolidated statement of income. The Company recognizes compensation expenses for the value of its awards, which have graded vesting based on the accelerated method over the requisite service period of each of the awards, net of estimated forfeitures. The Company uses the Binomial option-pricing model ("the Binomial model") to estimate the fair value for any options granted. The Binomial model takes into account variables such as volatility, dividend yield rate, and risk-free interest rate and also allows for the use of dynamic assumptions and considers the contractual term of the option, the probability that the option will be exercised prior to the end of its contractual life, and the probability of termination or retirement of the option holder in computing the value of the option. The fair value of each option granted using the Binomial model, was estimated on the date of grant with the following assumptions: expected volatility was based upon actual historical stock price movements and was calculated as of the grant dates for different periods, since the Binomial model can be used for different expected volatilities for different periods. The risk-free interest rate was based on the yield from U.S. Treasury zero-coupon bonds with an equivalent term to the contractual term of the options. The expected term of options granted was derived from the output of the option valuation model and represented the period of time that options granted were expected to be outstanding. Estimated forfeitures were based on actual historical pre-vesting forfeitures. Since dividend payments are applied to reduce the exercise price of the option, the effect of the dividend protection was reflected by using an expected dividend assumption of zero. For awards with performance conditions, compensation cost is recognized over the requisite service period if it is 'probable' that the performance conditions will be satisfied. No grants were made to employees or directors in 2016 and 2017. During the years ended December 31, 2016, 2017 and 2018, the Company recognized stock-based compensation expense related to employee stock options in the amount of $ 152, $ 78 and $ 194, respectively, as follows: Year ended December 31, 2016 2017 2018 Cost of revenue $ 15 $ |
Business Combination, Significa
Business Combination, Significant Transaction and Sale of Business | 12 Months Ended |
Dec. 31, 2018 | |
Business Combinations [Abstract] | |
BUSINESS COMBINATION, SIGNIFICANT TRANSACTION AND SALE OF BUSINESS | NOTE 3:- BUSINESS COMBINATION, SIGNIFICANT TRANSACTION AND SALE OF BUSINESS a. On April 14, 2015, the Company acquired a 70% interest in Comblack IT Ltd. ("Comblack"), an Israeli-based company that specializes in software professional and outsourced management services mainly for mainframes and complex large-scale environments, for a total consideration of $1,821, of which $ 1,523 was paid upon closing and $ 298 which was payable contingent upon the acquired business meeting certain operational targets in 2015. The Company and the seller hold mutual Call and Put options respectively for the remaining 30% interest in Comblack. As a result of the Put option, the Company recorded redeemable non-controlling interest in the amount of $ 989. Acquisition related costs were immaterial. The acquisition was accounted for by the purchase method. The results of operations were included in the consolidated financial statements of the Company commencing April 1, 2015. The following table summarizes the estimated fair values of the assets acquired and liabilities at the date of acquisition: Net assets, excluding cash acquired $ (405 ) Redeemable non-controlling interest (989 ) Intangible assets 1,249 Goodwill 1,966 Total assets acquired net of acquired cash $ 1,821 In March 2016, the Company paid the seller the remaining contingent payments for meeting 2015 operational targets. As of December 31, 2018, the Comblack redeemable non-controlling interest amounted to $ 7,245. b. On June 30, 2015, the Company acquired a 70% interest in Infinigy Solutions LLC ("Infinigy"), a U.S.-based services company focused on expanding the development and implementation of technical solutions throughout the telecommunications industry with offices across the U.S., providing nationwide coverage and support for wireless engineering, deployment services, surveying, environmental service and project management, for a total consideration of $ 6,527, of which $ 5,600 was paid upon closing and $ 927 was payable contingent upon the acquired business meeting certain operational targets in 2016 and 2017. The Company and the seller hold mutual Call and Put options respectively for the remaining 30% interest in Infinigy. As a result of the Put option, the Company recorded redeemable non-controlling interest in the amount of $ 3,590. Acquisition related costs were immaterial. The acquisition was accounted for by the purchase method. The results of operations were included in the consolidated financial statements of the Company commencing July 1, 2015. The following table summarizes the estimated fair values of the assets acquired and liabilities at the date of acquisition: Net assets, excluding cash acquired $ 1,182 Redeemable Non-controlling interest (3,590 ) Intangible assets 3,675 Goodwill 5,260 Total assets acquired net of acquired cash $ 6,527 In July 2016, the Company paid the seller $ 534 with respect to the acquired business meeting certain of its 2016 operational targets. In 2017, the acquired business did not meet its operational targets and therefore as of December 31, 2017, the seller is not entitled to any additional contingent payments. As of December 31, 2018, the Infinigy redeemable non-controlling interest amounted to $ 3,886. c. On July 11, 2016, the Company acquired a 60% interest in Roshtov Software Industries Ltd ("Roshtov"), an Israeli-based software company that is a market leader in Israel in patient record information systems, for a total cash consideration of $ 20,550, which was paid upon closing. The purchaser and the seller hold mutual Call and Put options respectively for the remaining 40% interest in Roshtov. As a result of the Put option, the Company recorded redeemable non-controlling interest in the amount of $ 14,012. Acquisition related costs were immaterial. The acquisition was accounted for by the purchase method. The results of operations were included in the consolidated financial statements of the Company commencing July 2016. The following table summarizes the estimated fair values of the assets acquired and liabilities at the date of acquisition: Net assets, excluding cash acquired $ 15 Redeemable Non-controlling interest (14,012 ) Intangible assets 22,439 Deferred tax liability (5,610 ) Goodwill 17,718 Total assets acquired net of acquired cash $ 20,550 As of December 31, 2018, Roshtov redeemable non-controlling interest amount to $ 14,408. d. On October 31, 2016, the Company acquired a 100% interest in Shavit Software (2009) Ltd., an Israeli-based company that specializes in software professional and outsourced management services, for a total consideration of $ 6,836, of which $ 4,699 was paid upon closing, $ 2,137 (measured based on present value) was allocated to a deferred payment and contingent payment upon the acquired business meeting certain operational targets in 2017. The Company's management believes the acquisition will broaden its professional service offering to its existing and new customers in Israel. Acquisition related costs were immaterial. The acquisition was accounted for by the purchase method. The results of operations were included in the consolidated financial statements of the Company commencing November 1, 2016. The following table summarizes the estimated fair values of the assets acquired and liabilities at the date of acquisition: Net assets, excluding cash acquired $ 533 Intangible assets 3,489 Deferred tax liability (871 ) Goodwill 3,685 Total assets acquired net of acquired cash $ 6,836 During the years ended December 31, 2017 and 2018, the Company paid the seller $ 924 and $ 2,535, respectively with respect to deferred payment and contingent payment. e. During the years ended December 31, 2017 and 2018, the Company acquired additional activities whose influence on the financial statements of the Company was immaterial, for a total consideration of $ 1,050 and $ 588, respectively. The following table summarizes the provisional estimated fair values of the assets acquired and liabilities at the date of acquisitions: December 31, 2017 2018 Net assets, excluding cash acquired $ (1,822 ) $ 306 Intangible assets 1,149 23 Goodwill 1,723 259 Total assets acquired net of acquired cash $ 1,050 $ 588 |
Marketable Securities
Marketable Securities | 12 Months Ended |
Dec. 31, 2018 | |
Investments, Debt and Equity Securities [Abstract] | |
MARKETABLE SECURITIES | NOTE 4:- MARKETABLE SECURITIES The Group invests in marketable debt securities, which were classified at fair value through profit or loss and as available-for-sale securities. The following is a summary of marketable securities: a. Composition: December 31, 2017 2018 Fair value through profit or loss (1) $ 1,209 $ 1,156 Available-for-sale 12,929 8,757 $ 14,138 $ 9,913 (1) The Group recognized trading gains in the amount of $ 53 during the year ended December 31, 2018. b. The following is a summary of marketable securities which are classified as available-for-sale: December 31, 2017 2018 Amortized Unrealized losses Unrealized Market value Amortized Unrealized losses Unrealized Market value Available-for-sale: Corporate bonds $ 12,987 $ (58 ) $ - $ 12,929 $ 8,851 $ (94 ) $ - $ 8,757 Marketable securities with contractual maturities within one year and from one to three years are as follows: Amortized Unrealized Market cost Gains Losses value Due within one year $ 3,326 $ - $ (21 ) $ 3,305 Due after one year through three years $ 5,525 $ - $ (73 ) $ 5,452 Total $ 8,851 $ - $ (94 ) $ 8,757 As of December 31, 2017 and 2018, management believes the impairments are not other than temporary and therefore the impairment losses were recorded in accumulated other comprehensive income (loss). The following is the change in the other comprehensive income of available-for-sale securities during 2017: Other Other comprehensive income from available-for-sale securities as of January 1, 2017 $ 40 Gains reclassified into earnings from marketable securities (94 ) Unrealized losses from available-for-sale securities (4 ) Other comprehensive loss from available-for-sale securities as of December 31, 2017 $ (58 ) The following is the change in the other comprehensive income of available-for-sale securities during 2018: Other Other comprehensive loss from available-for-sale securities as of January 1, 2018 $ (58 ) Unrealized losses from available-for-sale securities (36 ) Other comprehensive loss from available-for-sale securities as of December 31, 2018 $ (94 ) |
Fair Value Measurements
Fair Value Measurements | 12 Months Ended |
Dec. 31, 2018 | |
Fair Value Disclosures [Abstract] | |
FAIR VALUE MEASUREMENTS | NOTE 5:- FAIR VALUE MEASUREMENTS In accordance with ASC 820, the Company measures its investment in marketable securities and foreign currency derivative contracts at fair value. Generally equity funds are classified within Level 1, this is because these assets are valued using quoted prices in active markets. Foreign currency derivative contracts, certain corporate bonds and convertible bonds are classified within Level 2 as the valuation inputs are based on quoted prices and market observable data of similar instruments. Contingent consideration is classified within Level 3. The Company values the Level 3 contingent consideration using discounted cash flow of the expected future payments, whose inputs include interest rate. The Company's financial assets and liabilities measured at fair value on a recurring basis, consisted of the following types of instruments: December 31, 2017 Fair value measurements using input type Level 1 Level 2 Level 3 Total Assets: Corporate bonds $ - $ 12,929 $ - $ 12,929 Convertible bonds - 1,209 - 1,209 Total financial assets $ - $ 14,138 $ - $ 14,138 Liabilities: Contingent consideration $ - $ - $ 1,333 $ 1,333 Total financials liabilities $ - $ - $ 1,333 $ 1,333 December 31, 2018 Fair value measurements using input type Level 1 Level 2 Level 3 Total Assets: Corporate bonds $ - $ 8,757 $ - $ 8,757 Convertible bonds - 1,156 - 1,156 Total financial assets $ - $ 9,913 $ - $ 9,913 Liabilities: Contingent consideration $ - $ - $ 414 $ 414 Total financials liabilities $ - $ - $ 414 $ 414 Fair value measurements using significant unobservable inputs (Level 3): December 31, 2017 2018 Opening balance $ 3,088 $ 1,333 Increase in contingent consideration due to acquisitions - 124 Payment of contingent consideration (2,109 ) (974 ) Increase in fair value of contingent consideration 1,587 210 Decrease in fair value of contingent consideration (1,287 ) (248 ) Decrease in liability against other receivables (118 ) - Amortization of interest and exchange rate 172 (31 ) Closing balance $ 1,333 $ 414 |
Other Accounts Receivable and P
Other Accounts Receivable and Prepaid Expenses | 12 Months Ended |
Dec. 31, 2018 | |
Receivables [Abstract] | |
OTHER ACCOUNTS RECEIVABLE AND PREPAID EXPENSES | NOTE 6:- OTHER ACCOUNTS RECEIVABLE AND PREPAID EXPENSES December 31, 2017 2018 Prepaid expenses $ 2,659 $ 3,712 Government authorities 4,900 2,053 Related parties 314 303 Other 770 961 $ 8,643 $ 7,029 |
Property and Equipment
Property and Equipment | 12 Months Ended |
Dec. 31, 2018 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY AND EQUIPMENT | NOTE 7:- PROPERTY AND EQUIPMENT December 31, 2017 2018 Cost: Leasehold improvements $ 918 $ 981 Computers and peripheral equipment 14,842 15,221 Office furniture and equipment 3,778 3,774 Motor vehicles 1,237 1,217 Software 3,094 3,084 23,869 24,277 Accumulated depreciation: Leasehold improvements 429 470 Computers and peripheral equipment 14,194 14,528 Office furniture and equipment 2,471 2,699 Motor vehicles 447 564 Software 2,860 2,944 20,401 21,205 Depreciated cost $ 3,468 $ 3,072 Depreciation expenses amounted to $ 893, $ 1,046 and $ 1,175 for the years ended December 31, 2016, 2017 and 2018, respectively. |
Intangible Assets
Intangible Assets | 12 Months Ended |
Dec. 31, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
INTANGIBLE ASSETS | NOTE 8:- INTANGIBLE ASSETS a. Intangible assets: December 31, 2017 2018 Original amounts: Capitalized software costs $ 75,126 $ 78,793 Customer relationships 56,296 54,850 Backlog and non-compete agreement 2,712 2,712 Acquired technology 13,087 12,722 147,221 149,077 Accumulated amortization: Capitalized software costs 61,834 66,123 Customer relationships 27,967 33,578 Backlog and non-compete agreement 2,486 2,674 Acquired technology 3,923 5,223 96,210 107,598 Intangible assets, net $ 51,011 $ 41,479 b. Amortization expenses amounted to $ 10,715, $ 12,565 and $ 11,389 for the years ended December 31, 2016, 2017 and 2018, respectively. c. The estimated future amortization expense of intangible assets as of December 31, 2018 is as follows: 2019 $ 10,323 2020 8,572 2021 7,057 2022 4,749 2023 3,546 2024 and thereafter 7,232 $ 41,479 |
Goodwill
Goodwill | 12 Months Ended |
Dec. 31, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
GOODWILL | NOTE 9:- GOODWILL Changes in the carrying amount of goodwill for the years ended December 31, 2017 and 2018 according to the Company's reportable segments are as follows (see also Note 18): IT Software Total As of January 1, 2017 $ 43,874 $ 47,128 $ 91,002 Business combination 1,723 - 1,723 Measurement period adjustments 614 28 642 Foreign currency translation adjustments 2,192 2,630 4,822 As of December 31, 2017 $ 48,403 $ 49,786 $ 98,189 Business combination - 277 277 Measurement period adjustments (18 ) - (18 ) Foreign currency translation adjustments (1,694 ) (1,748 ) (3,442 ) As of December 31, 2018 $ 46,691 $ 48,315 $ 95,006 The Company performed an annual impairment tests as of December 31, of each of 2016, 2017 and 2018 and did not identify any impairment losses (see Note 2). |
Short Term Debt
Short Term Debt | 12 Months Ended |
Dec. 31, 2018 | |
Debt Disclosure [Abstract] | |
SHORT TERM DEBT | NOTE 10:- SHORT TERM DEBT Interest Linkage rate December 31, basis % 2017 2018 Short-term credit from banks USD U.S Prime -0.2 $ 2,125 $ 2,362 Short-term credit from banks NIS 2.0 618 - Short-term loans from banks NIS 1.6-2.0 259 - Current maturities of long-term loans from financial institution NIS 2.6-3.0 6,769 6,299 $ 9,771 $ 8,661 |
Accrued Expenses and Other Acco
Accrued Expenses and Other Accounts Payable | 12 Months Ended |
Dec. 31, 2018 | |
Payables and Accruals [Abstract] | |
ACCRUED EXPENSES AND OTHER ACCOUNTS PAYABLE | NOTE 11:- ACCRUED EXPENSES AND OTHER ACCOUNTS PAYABLE December 31, 2017 2018 Employees and payroll accruals $ 15,203 $ 16,242 Accrued expenses 6,234 6,219 Government authorities 4,738 1,426 Other 1,614 571 $ 27,789 $ 24,458 |
Long Term Debt
Long Term Debt | 12 Months Ended |
Dec. 31, 2018 | |
Debt Disclosure [Abstract] | |
LONG TERM DEBT | NOTE 12:- LONG TERM DEBT Linkage Interest December 31, basis rate 2017 2018 % Loan from banks and other (1) NIS 2.6-5 $ 34,447 $ 25,572 Other long term debt 136 115 $ 34,583 $ 25,687 Current maturities NIS (6,769 ) (6,299 ) $ 27,814 $ 19,388 (1) On November 2016, the Company obtained a loan in the amount of $ 31,356 linked to the New Israel Shekel from an Israeli financial institution. The principal amount of the loan is payable in seven equal annual installments with the final payment due on November 2, 2023 and bears a fixed interest rate of 2.60% per annum, payable in two semi-annual payments. Under the terms of the loan with the Israeli financial institution, the Company has undertaken to maintain the following financial covenants, as they will be expressed in its consolidated financial statements, as described: a. Total equity attributable to Magic Software Enterprises shareholders shall not be lower than $ 100,000 at all times; b. The Company's consolidated cash and cash equivalent and marketable securities available for sales shall not be less than $ 10,000; c. The ratio of the Company's consolidated total financial debts to consolidated total assets will not exceed 50%; d. The ratio of the Company's total financial debts less cash, short-term deposits and short-term marketable securities to the annual EBITDA will not exceed 3.25 to 1; and e. The Company shall not create any pledge on all of its property and assets in favor of any third party without the financial institution's consent. As of December 31, 2018, the Company was in compliance with the financial covenants. |
Taxes on Income
Taxes on Income | 12 Months Ended |
Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
TAXES ON INCOME | NOTE 13:- TAXES ON INCOME a. Israeli taxation: 1. Corporate tax rate in Israel: The Israeli corporate income tax rate was 25% in 2016, 24% in 2017 and 23% in 2018. In December 2016, the Israeli Parliament approved the 2016 Amendment which reduced the corporate income tax rate to 24% (instead of 25%) effective from January 1, 2017 and to 23% effective from January 1, 2018. 2. Tax benefits under the Israeli Law for the Encouragement of Capital Investments, 1959 ("the Law"): Effective January 1, 2011, the Knesset enacted the Law for Economic Policy for 2011 and 2012 (Amended Legislation), and among other things, amended the Law, ("the Amendment"). According to the Amendment, a flat corporate tax rate of 16% was established for exporting industrial enterprises (over 25%). The reduced tax rate will not be program dependent and will apply to the "Preferred Enterprise's" (as such term is defined in the Investment Law) entire "preferred income". The Amendment also prescribes that any dividends distributed to individuals or foreign residents from the preferred enterprise's earnings as above will be subject to tax at a rate of 20%. The Company and one of its Israeli subsidiaries have elected to apply the new incentives regime under the Amendment to their industrial activity in Israel, subject to meeting its requirements, starting in 2011. New Amendment- Preferred Technology Enterprise In December 2016, the Israeli Knesset passed Amendment 73 to the Investment Law which included a number of changes to the Investments Law regimes. Certain changes were scheduled to come into effect beginning January 1, 2017, provided that regulations are promulgated by the Finance Ministry to implement the "Nexus Principles" based on OECD guidelines recently published as part of the Base Erosion and Profit Shifting (BEPS) project. The regulations were approved on May 1, 2017 and accordingly, these changes have come into effect. Applicable benefits under the new regime include: Introduction of a benefit regime for "Preferred Technology Enterprises" granting a 12% tax rate in central Israel – on income deriving from Intellectual Property, subject to a number of conditions being fulfilled, including a minimal amount or ratio of annual R&D expenditure and R&D employees, as well as having at least 25% of annual income derived from exports. A Preferred Technology Enterprise ("PTE") is defined as an enterprise which meets the aforementioned conditions and for which total consolidated revenues of its parent company and all subsidiaries are less than NIS 10 billion. A 12% capital gains tax rate on the sale of a preferred intangible asset to a foreign affiliated enterprise, provided that the asset was initially purchased from a foreign resident at an amount of NIS 200 million or more. A withholding tax rate of 20% for dividends paid from PTE income (with an exemption from such withholding tax applying to dividends paid to an Israeli company). Such rate may be reduced to 4% on dividends paid to a foreign resident company, subject to certain conditions regarding percentage of foreign ownership of the distributing entity. Starting 2017, part of the Company's taxable income in Israel is entitled to a preferred 12% tax rate under Amendment 73 to the Investment Law. 3. The Company's Israeli entities have received final tax assessments for their Israeli tax return filings through the year 2013. 4. Tax benefits under the Law for the Encouragement of Industry (Taxes), 1969: The Company qualifies as an Industrial Company within the meaning of the Law for the Encouragement of Industry (Taxes), 1969 (the "Industrial Encouragement Law"). The Industrial Encouragement Law defines an "Industrial Company" as a company that is resident in Israel and that derives at least 90% of its income in any tax year, other than income from defense loans, capital gains, interest and dividends, from an enterprise whose major activity in a given tax year is industrial production. Under the Industrial Encouragement Law, the Company is entitled to amortization of the cost of purchased know-how and patents over an eight-year period for tax purposes as well as accelerated depreciation rates on equipment and buildings. Eligibility for the benefits under the Industrial Encouragement Law is not subject to receipt of prior approval from any governmental authority. 5. Foreign Exchange Regulations: Under the Foreign Exchange Regulations, the Company and one of its Israeli subsidiaries calculate their tax liability in U.S. dollars according to certain orders. The tax liability, as calculated in U.S. dollars is translated into NIS according to the exchange rate as of December 31 of each year. b. Non-Israeli subsidiaries: Non-Israeli subsidiaries are taxed according to the tax laws in their respective domiciles of residence. If earnings are distributed to Israel in the form of dividends or otherwise, the Company may be subject to additional Israeli income taxes (subject to an adjustment for foreign tax credits) and foreign withholding tax rates. Neither Israeli income taxes, foreign withholding taxes nor deferred income taxes were provided in relation to undistributed earnings of the non-Israeli subsidiaries. This is because the Company intends to permanently reinvest undistributed earnings in the foreign subsidiaries in which those earnings arose. If these earnings were distributed in the form of dividends or otherwise, the Company would be subject to additional Israeli income taxes (subject to an adjustment for foreign tax credits) and non-Israeli withholding taxes. The amount of the Company's cash and cash equivalents that are currently held outside of Israel that would be subject to income taxes if distributed as dividends is $ 12,865. However, a determination of the amount of the unrecognized deferred tax liability for temporary difference related to those undistributed earnings of foreign subsidiaries is not practicable due to the complexity of the structure of our group of subsidiaries for tax purposes and the difficulty of projecting the amount of future tax liability. Tax Reform- United States of America The U.S. Tax Cuts and Jobs Act of 2017 ("TCJA") was approved by the U.S. Congress on December 20, 2017 and signed into law by U.S. President Donald J. Trump on December 22, 2017. This legislation makes complex and significant changes to the U.S. Internal Revenue Code. Such changes include a reduction in the corporate tax rate and limitations on certain corporate deductions and credits, among other changes. The TCJA reduces the U.S. federal corporate income tax rate from 35% to 21% effective January 1, 2018. In addition, the TCJA makes certain changes to the depreciation rules and implements new limits on the deductibility of certain expenses and deduction. The Company's subsidiaries in the United States do not have any foreign subsidiaries and, therefore, the remaining provisions of the TCJA have no material impact on the Company's results of operations. The Company re-measured its U.S. deferred tax assets and liabilities, based on the rates at which they are expected to reverse in the future. The estimated tax benefit recorded related to the re-measurement of the provisional net deferred taxes was approximately $ 428 for the year ended December 31, 2017. In March 2018, FASB issued Accounting Standards Update No. 2018-05, "Income Taxes Topic (740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118" ("ASU 2018-05") to address the application of GAAP in situations when a registrant does not have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the TCJA. The Company completed the accounting treatment related to the tax effects of the TCJA. As a result, the Company recognizes its accounting for changes in the U.S. federal rate and deferred tax impact for the rate change to be complete. c. Net operating loss carryforwards: As of December 31, 2018, three Israeli subsidiaries of the Company had operating loss carryforwards of $ 13,542 (mainly F.T.S Formula Telecom Solutions, Ltd.) which accounts for $ 11,360), which can be carried forward to offset against taxable income in the future for an indefinite period. One of the Company's subsidiaries in England had estimated total available tax loss carryforwards of $ 3,876 as of December 31, 2018, which can be carried forward to offset against future taxable income. d. Income before taxes on income: Year ended December 31, 2016 2017 2018 Domestic $ 15,334 $ 19,442 $ 25,839 Foreign 5,323 4,803 6,008 $ 20,657 $ 24,245 $ 31,847 e. Taxes on income: Taxes on income (tax benefit) consist of the following: Year ended December 31, 2016 2017 2018 Current: Domestic $ 2,919 $ 5,928 $ 5,186 Foreign 1,863 1,511 1,359 4,782 7,439 6,545 Deferred taxes: Domestic (666 ) (1,160 ) 81 Foreign (167 ) 52 445 (833 ) (1,108 ) 526 Taxes on income $ 3,949 $ 6,331 $ 7,071 f. Deferred tax assets and liabilities: Deferred taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company and its subsidiaries deferred tax assets are as follows: December 31, 2017 2018 Net operating loss carryforwards $ 4,355 $ 3,914 Allowances, reserves and intangible assets 1,974 1,361 Deferred tax assets before valuation allowance 6,329 5,275 Less - valuation allowance (3,339 ) (3,417 ) Deferred tax assets, net $ 2,990 $ 1,858 December 31, 2017 2018 Long-term tax assets $ 2,990 $ 1,858 Long-term tax liabilities (11,331 ) (10,343 ) Net deferred tax liabilities $ (8,341 ) $ (8,485 ) Deferred tax liabilities are mainly in respect of certain property and equipment, acquired intangible assets and capitalized software costs. The Company has provided valuation allowances in respect of certain deferred tax assets resulting from operating losses carry forwards and other reserves and allowances due to uncertainty concerning realization of these deferred tax assets. g. Reconciliation of the theoretical tax expense to the actual tax expense: A reconciliation between the theoretical tax expense, assuming all income is taxed at the statutory tax rate applicable to income for an Israeli company (2016, 2017 and 2018 statutory tax rate 25%, 24% and 23%, respectively), and the actual tax expense as reported in the statements of income is as follows: Year ended December 31, 2016 2017 2018 Income before taxes, as reported in the consolidated statements of income $ 20,657 $ 24,245 $ 31,847 Statutory tax rate 25 % 24 % 23 % Theoretical tax expenses on the above amount at the Israeli statutory tax rate $ 5,164 $ 5,819 $ 7,325 Tax adjustment in respect of different tax rates (1,214 ) 268 (826 ) Deferred taxes on losses for which full valuation allowance was provided in the past (455 ) 658 (11 ) Tax-deductible costs, not included in the accounting costs (342 ) (38 ) - Tax benefits in respect of prior years, net 1,262 (488 ) (22 ) Nondeductible expenses (232 ) 70 45 Uncertain tax position and other differences (234 ) 42 560 Income tax $ 3,949 $ 6,331 $ 7,071 h. The Company applies ASC 740, "Income Taxes" with regards to tax uncertainties. During the years ended December 31, 2016, 2017 and 2018 the Company recorded $ 159, $ 300 and $ 1,050 (respectively) of tax expenses as a result of this application. A reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax benefits is as follows: Gross unrecognized tax benefits at January 1, 2016 $ 666 Increase in tax positions taken in prior years 159 Decrease in tax positions taken in prior years - Gross unrecognized tax benefits at December 31, 2016 825 Increase in tax positions taken in prior years 300 Decrease in tax positions taken in prior years - Gross unrecognized tax benefits at December 31, 2017 1,125 Increase in tax positions taken in prior years 1,050 Decrease in tax positions taken in prior years - Gross unrecognized tax benefits at December 31, 2018 $ 2,175 Although the Company believes that it has adequately provided for any reasonably foreseeable outcomes related to tax audits and settlement, there is no assurance that the final tax outcome of its tax audits will not be different from that which is reflected in the Company's income tax provisions. Such differences could have a material effect on the Company's income tax provision, cash flow from operating activities and net income in the period in which such determination is made. |
Equity
Equity | 12 Months Ended |
Dec. 31, 2018 | |
Equity [Abstract] | |
EQUITY | NOTE 14:- EQUITY a. The Ordinary shares of the Company are listed on the NASDAQ Global Select Market in the United States and are traded on the Tel-Aviv Stock Exchange in Israel. b. Stock Option Plans: Under the Company’s 2007 Stock Option Plan, as amended (“the 2007 Plan”), options may be granted to employees, officers, directors and consultants of the Company and its subsidiaries. Pursuant to the original 2007 Stock Option Plan, the Company reserved 1,500,000 Ordinary shares for issuance. In 2012, the Company increased the number of Ordinary shares reserved for issuance under the 2007 Plan by additional 1,000,000 Ordinary shares. On December 31, 2015 the Company’s Board of Directors increased the amount of Ordinary shares reserved for issuance under the 2007 Plan by additional 250,000 Ordinary shares and extended the 2007 Plan by 10 years whereas it will expire on August 1, 2027. As of December 31, 2018, an aggregate of 962,500 Ordinary shares of the Company are available for future grants under the 2007 Plan. Each option granted under the 2007 Plan is exercisable for a period of ten years from the date of the grant of the option The exercise price for each option is determined by the Board of Directors and set forth in the Company’s award agreement. Unless determined otherwise by the Board of Directors, the option exercise price shall be equal to or higher than the share market price at the grant date. The options generally vest over 3-4 years. Any option that is forfeited or canceled before expiration becomes available for future grants under the 2007 Plan. A summary of employee option activity under the 2007 Plan as of December 31, 2018 and changes during the year ended December 31, 2018 are as follows: Number of options Weighted Weighted Aggregate Outstanding at January 1, 2018 309,309 $ 4.38 3.97 $ 1,237 Granted 37,500 $ - Exercised (104,167 ) $ 2.99 Forfeited (21,875 ) $ 6.89 Outstanding at December 31, 2018 220,767 $ 3.83 3.81 $ 1,684 Exercisable at December 31, 2018 190,767 $ 4.43 2.92 $ 1,456 The aggregate intrinsic value in the table above represents the total intrinsic value that would have been received by the option holders had all option holders exercised their options on December 31, 2018. This amount is changed based on the market value of the Company’s Ordinary shares. Total intrinsic value of options exercised during the years ended December 31, 2016, 2017 and 2018 was $ 112, $ 502 and $ 617, respectively. As of December 31, 2018, there was no unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Plans. The options outstanding as of December 31, 2018, have been separated into ranges of exercise price categories, as follows: Exercise price Options Weighted Weighted Options Weighted average exercise price of exercisable options In $ 0-1 30,000 9.49 $ - - $ - 2.01-3 66,000 1.26 $ 2.32 66,000 $ 2.32 3.01-4 73,517 2.77 $ 4.00 73,517 $ 4.00 5.01-6 6,250 4.61 $ 6.00 6,250 $ 6.00 8.01-9 45,000 5.35 $ 8.01 45,000 $ 8.01 220,767 3.81 $ 3.83 190,767 $ 4.43 c. Accumulated other comprehensive income (loss): December 31, 2016 2017 2018 Accumulated realized and unrealized gain (loss) on available-for-sale securities, net $ 40 $ (58 ) $ (94 ) Accumulated foreign currency translation adjustments (7,494 ) 115 (6,057 ) Accumulated unrealized gain on derivative instruments, net 26 26 26 Total other comprehensive income (loss) $ (7,428 ) $ 83 $ (6,125 ) d. On September 4, 2012, the Company’s Board of Directors adopted a dividend distribution policy, subject to any applicable law. According to this policy, each year the Company will distribute a dividend of up to 50% of its annual distributable profits. It is possible that the Board of Directors will decide, subject to the conditions stated above, to declare additional dividend distributions. The Company’s Board of Directors may at its discretion and at any time, change, the rate of dividend distributions and/or not to distribute a dividend, whether as a result of a one-time decision or a change in policy, all at its discretion. In respect to the policy mentioned above, from September 10, 2012 through September 4, 2014 the Company declared accumulated cash dividend distributions of $ 0.525 per share ($ 20,111 in the aggregate). On February 5, 2015, the Company declared a dividend distribution of $ 0.081 per share ($ 3,582 in the aggregate) which was paid on March 11, 2015. On August 12, 2015, the Company declared a dividend distribution of $ 0.095 per share ($ 4,204 in the aggregate) which was paid on September 10, 2015. On February 21, 2016, the Company declared a dividend distribution of $ 0.09 per share ($ 3,991 in the aggregate) which was paid on March 17, 2016. On August 14, 2016, the Company declared a dividend distribution of $ 0.085 per share ($ 3,770 in the aggregate) which was paid on September 22, 2016. On February 22, 2017, the Company declared a dividend distribution of $ 0.085 per share ($ 3,775 in the aggregate) which was paid on April 5, 2017. On August 9, 2017, the Company’s Board of Directors decided to amend the dividend distribution policy announced in 2012. According to the Company’s amended policy, each year the Company will distribute a dividend of up to 75% of its annual distributable profits. The Company’s Board of Directors may at its discretion and at any time, change, whether as a result of a one-time decision or a change in policy, the rate of dividend distributions and/or decide not to distribute a dividend, all at its discretion. On August 13, 2017, the Company declared a dividend distribution of $ 0.13 per share ($ 5,779 in the aggregate) which was paid on September 13, 2017. On February 28, 2018, the Company declared a dividend distribution of $ 0.13 per share ($ 5,785 in the aggregate) which was paid on March 26, 2018. On August 8, 2018, the Company declared a dividend distribution of $ 0.155 per share ($ 7,563 in the aggregate) which was paid on September 5, 2018. Subsequent to the balance sheet date, on March 4, 2019, the Company declared a dividend distribution of $ 0.15 per share ($ 7,334 in the aggregate) which was paid on March 27, 2019 (Note 21). e. On July 12, 2018, the Company issued 4,268,293 ordinary shares at a price of $8.2 per share and in a total amount of $34,569 net of issuance expenses. The shares were issued to Israeli institutional investors and to our controlling shareholder, Formula Systems (1985) Ltd. |
Related Parties Transactions
Related Parties Transactions | 12 Months Ended |
Dec. 31, 2018 | |
Related Party Transactions [Abstract] | |
RELATED PARTIES TRANSACTIONS | NOTE 15:- RELATED PARTIES TRANSACTIONS Agreements with controlling shareholder and its affiliates: The Company has in effect agreements with affiliated companies pursuant to which the Company has rendered services amounting to approximately $ 3,950, $ 2,511 and $ 2,535, in aggregate for the years ended December 31, 2016, 2017 and 2018, respectively and acquired services amounting to approximately $ 102, $ 165 and $ 309 for the years ended December 31, 2016, 2017 and 2018, respectively. As of December 31, 2017 and 2018, the Company had trade and other receivables balances due to its related parties in amount of approximately $ 931 and $ 601, respectively. In addition, as of December 31, 2017 and 2018, the Company had trade payables balances due from its related parties in amount of approximately $ 64 and $ 106, respectively. |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | NOTE 16:- COMMITMENTS AND CONTINGENCIES a. Lease commitments: Certain of the motor vehicles, facilities and equipment of the Company and its subsidiaries are rented under long-term operating lease agreements. Future minimum lease commitments under non-cancelable operating leases as of December 31, 2018, are as follows: 2019 $ 2,224 2020 1,698 2021 977 2022 and thereafter 1,336 $ 6,235 Rent expenses for the years ended December 31, 2016, 2017 and 2018 were approximately $ 2,204, $ 2,729 and $ 2,843, respectively. The Company and its subsidiaries currently occupy approximately 170,363 square feet of space based on a lease agreement as of December 31, 2018. The remaining terms of the outstanding leases range from six months to five years. As of December 31, 2018, the aggregated amount of lease commitment in all locations mentioned above is approximately $ 6,235. b. Guarantees and Collaterals: As of December 31, 2018, the Company has provided performance bank guarantees in the amount of $453 as security for the performance of various contracts with customers. As of December 31, 2018, the Company has restricted bank deposits of $ 408 in favor of the issuing banks. c. From time to time, the Company and/or its subsidiaries are subject to legal, administrative and regulatory proceedings, claims, demands and investigations in the ordinary course of business, including claims with respect to intellectual property, contracts, employment and other matters. The Company accrues a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Significant judgment is required in both the determination of probability and the determination as to whether a loss is reasonably estimable. These accruals are reviewed and adjusted to reflect the impact of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular matter. Lawsuits have been brought against the Company in the ordinary course of business. The Company intends to defend itself vigorously against those lawsuits. d. In September 2016, an Israeli software company, that was previously involved in an arbitration proceeding with us in 2015 and won damages from us for $2.4 million, filed a lawsuit seeking damages of NIS 34,106 against the Company and one its subsidiaries. This lawsuit was filed as part of an arbitration proceeding.. In the lawsuit, the software company claimed that warning letters that the Company sent to its clients in Israel and abroad, warning those clients against the possibility that the conversion procedure offered by the software company may amount to an infringement of the Company’s copyrights (the “Warning Letters”), as well as other alleged actions, have caused the software company damages resulting from loss of potential business. The lawsuit is based on rulings given in the 2015 arbitration proceeding in which it was allegedly ruled that the Warning Letters constituted a breach of a non-disclosure agreement (NDA) signed between the parties. The Company rejects the claims by the Israeli software company and moved to dismiss the lawsuit entirely. At this point, all the relevant motions have been filed and all witnesses deposed. The Company is unable to make a reasonably reliable estimate of its chances of successfully defending this lawsuit. In February 2018, Comm-IT Ltd., a subsidiary of the Company commenced an action against a customer for payment of an overdue amount in the Supreme Court of the State of New York, New York County. In April 2018, the customer filed an answer in the action that included counterclaims asserting causes of action for breach of contract, fraud, and trespass to chattel. In May 2018, Comm-IT filed a reply to the counterclaims. The parties have agreed to participate in a mediation before a neutral mediator in March 2019. While it appears that the allegations against Comm-IT probably do not have merit, it is difficult to predict at this point whether Comm-IT’s liability is remote or probable. |
Net Earnings Per Share
Net Earnings Per Share | 12 Months Ended |
Dec. 31, 2018 | |
Earnings Per Share [Abstract] | |
NET EARNINGS PER SHARE | NOTE 17:- NET EARNINGS PER SHARE The following table sets forth the computation of basic and diluted net earnings per share: Year ended December 31, 2016 2017 2018 Net income attributable to Magic shareholders $ 14,169 $ 15,442 $ 19,883 Accretion of redeemable non-controlling interests $ (2,262 ) $ - $ (1,726 ) Net income attributable to Magic shareholders after accretion of redeemable non-controlling interests $ 11,907 $ 15,442 $ 18,157 Weighted average Ordinary shares outstanding: Denominator for basic net earnings per share 44,347,083 44,435,671 46,665,042 Effect of dilutive securities 168,953 161,548 131,648 Denominator for diluted net earnings per share 44,516,036 44,597,219 46,796,690 Basic and Diluted earnings per share $ 0.27 $ 0.35 $ 0.39 |
Segment Geographical Informatio
Segment Geographical Information and Major Customers | 12 Months Ended |
Dec. 31, 2018 | |
Segment Reporting [Abstract] | |
SEGMENT GEOGRAPHICAL INFORMATION AND MAJOR CUSTOMERS | NOTE 18:- SEGMENT GEOGRAPHICAL INFORMATION AND MAJOR CUSTOMERS a. The Company reports its results on the basis of two reportable business segments: software services (which include proprietary and none proprietary software technology) and IT professional services. The Company evaluates segment performance based on revenues and operating income of each segment. The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies. This data is presented in accordance with ASC 280, “Segment Reporting.” Headquarters’ general and administrative costs have not been allocated between the different segments. Software services The Company develops markets, sells and supports a proprietary and none proprietary application platform, software applications, business and process integration solutions and related services. IT professional services The Company offers advanced and flexible IT services in the areas of infrastructure design and delivery, application development, technology planning and implementation services, communications services and solutions, as well as supplemental outsourcing services. There are no significant transactions between the two segments. b. The following is information about reported segment results of operation: Software services IT professional services Unallocated expense Total 2016 Total revenues $ 70,834 $ 130,812 $ - $ 201,646 Expenses 58,847 118,414 3,298 180,559 Segment operating income (loss) $ 11,987 $ 12,398 $ (3,298 ) $ 21,087 Depreciation and amortization $ 7,531 $ 3,769 $ 308 $ 11,608 Software services IT professional services Unallocated expense Total 2017 Total revenues $ 77,100 $ 181,040 $ - $ 258,140 Expenses 63,649 164,558 3,977 232,184 Segment operating income (loss) $ 13,451 $ 16,482 $ (3,977 ) $ 25,956 Depreciation and amortization $ 9,242 $ 4,100 $ 269 $ 13,611 2018 Total revenues $ 81,332 $ 203,043 $ - $ 284,375 Expenses 63,902 183,985 4,790 252,677 Segment operating income (loss) $ 17,430 $ 19,058 $ (4,790 ) $ 31,698 Depreciation and amortization $ 8,727 $ 3,611 $ 226 $ 12,564 c. The Company’s business is divided into the following geographic areas: United States, Israel, Europe, Japan and other regions. Total revenues are attributed to geographic areas based on the location of the customers. The following table presents total revenues classified according to geographical destination for the years ended December 31, 2016, 2017 and 2018: Year ended December 31, 2016 2017 2018 United States $ 100,470 $ 123,113 $ 137,066 Israel 58,079 91,917 103,850 Europe 23,642 26,635 28,257 Japan 11,226 9,253 9,797 Other 8,229 7,222 5,405 $ 201,646 $ 258,140 $ 284,375 d. The Company’s long-lived assets are located as follows: December 31, 2017 2018 Israel $ 111,217 $ 100,206 United States 32,223 30,222 Japan 5,008 5,082 Other 2,931 2,800 Europe 1,289 1,247 $ 152,668 $ 139,557 e. The Company does not allocate its assets to its reportable segments; accordingly, asset information by reportable segments is not presented. f. In 2016, 2017 and 2018, the Company had one major customer, included in the IT professional services segment, which accounted for 9%, 13% and 13% of the group revenues, respectively. |
Revenue Recognition
Revenue Recognition | 12 Months Ended |
Dec. 31, 2018 | |
Revenue Recognition | |
REVENUE RECOGNITION | NOTE 19:- REVENUE RECOGNITION The Company adopted ASC 606 on January 1, 2018 for all open contracts at the date of initial application, and applied the standard using modified retrospective approach, with the cumulative effect of applying ASC 606 recognized as an adjustment to the opening retained earnings balance. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported under the accounting standards in effect for the prior period. The following table includes estimated revenue expected to be recognized in future periods related to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period and are part of a contract that has an original expected duration of more than one year: 2019 2020 2021 and thereafter Software license and related revenues and consulting services $ 5,281 $ 5,183 $ 969 The following table includes the impact of the adoption of ASC 606 on the Company’s financial statements. There was no material impact on other line items of statements of income and balance sheets: Year ended December 31, 2018 As reported Balance without adoption ASC 606 Effect of change higher/ (lower) (U.S. dollars in thousands) Revenue $ 284,375 $ 282,263 $ 2,112 Taxes on income 7,071 6,809 262 Net income 24,776 22,926 1,850 Net income attributable to Magic Software Enterprises’ shareholders $ 19,883 $ 18,033 $ 1,850 Basic and diluted earnings per share 0.39 0.35 0.04 December 31, 2018 As reported Balance without adopting ASC 606 Effect of change higher/(lower) (U.S. dollars in thousands) Trade receivables (net of allowance for doubtful accounts) $ 90,274 $ 87,853 $ 2,421 Other accounts receivable and prepaid expenses 7,029 8,984 (1,955 ) Other long-term receivables 6,363 4,717 1,646 Accrued expenses and other accounts payable 24,458 24,196 262 Total equity attributable to Magic Software Enterprises’ shareholders $ 243,956 $ 242,106 $ 1,850 The most significant impact of the new standard relates to term-license arrangements. Under ASC 605, the Company recognized both the term-license and post contract support revenues ratably over the contract period whereas under the new revenue standard term-license revenues are considered as a separate performance obligation and recognized upon delivery and the associated post contract support revenues are recognized over the contract period. There was no material impact on other line items of consolidated statements of income, consolidated balance sheets and no impact on the Company’s cash from or used in operating, financing, or investing activities in consolidated cash flows statements. For disaggregation of revenue, refer to note 18. Contract balances: The following table provides information about trade receivables, contract assets (unbilled receivables) and contract liabilities (deferred revenues) from contracts with customers (in thousands): December 31, 2017 2018 Trade receivables (net of allowance for doubtful accounts) $ 82,051 $ 90,274 Deferred revenues $ 5,586 $ 4,857 Trade receivable are recorded when the right to consideration becomes unconditional, and an invoice is issued to the customer. Unbilled receivables related to the Company’s contractual right to consideration for services performed and not yet invoiced. Billing terms and conditions generally vary by contract type. Amounts are billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals (e.g., monthly or quarterly) or upon achievement of contractual milestones. Deferred revenues represent contract liabilities, and include unearned amounts received under contracts with customers and not yet recognized as revenues. During the year ended December 31, 2018, the Company recognized $5,586 that was included in deferred revenues (short-term contract liability) balance at January 1, 2018. |
Selected Statements of Income D
Selected Statements of Income Data | 12 Months Ended |
Dec. 31, 2018 | |
Selected Statements of Income Data [Abstract] | |
SELECTED STATEMENTS OF INCOME DATA | NOTE 20:- SELECTED STATEMENTS OF INCOME DATA a. Research and development costs, net: Year ended December 31, 2016 2017 2018 Total costs $ 10,063 $ 10,713 $ 9,362 Less - capitalized software costs (4,224 ) (3,771 ) (3,666 ) Research and development, net $ 5,839 $ 6,942 $ 5,696 b. Financial income (expenses), net: Bank charges and interest from loans offset by interest from short term deposits $ (199 ) $ (1,124 ) $ (986 ) Interest expenses related to liabilities in connection with acquisitions (257 ) (62 ) (4 ) Interest income from marketable securities, net of amortization of premium on marketable securities 240 284 284 Gain (loss) arising from foreign currency translation and other (214 ) (809 ) 855 Financial income (expenses), net $ (430 ) $ (1,711 ) $ 149 |
Subsequent Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2018 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | NOTE 21:- SUBSEQUENT EVENTS On March 4, 2019, the Company declared a dividend distribution of $ 0.15 per share ($ 7,334 in the aggregate) which was paid on March 27, 2019. The dividend distribution relates to the Company’s earnings in the second half of 2018. |
Significant Accounting Polici_2
Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2018 | |
Accounting Policies [Abstract] | |
Use of estimates | Use of estimates The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions. The Company's management believes that the estimates, judgments and assumptions used are reasonable based upon information available at the time they are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. |
Financial statements in United States dollars | Financial statements in United States dollars A substantial portion of the revenues and expenses of the Company and of certain subsidiaries is generated in U.S. dollars ("dollar"). The Company's management believes that the dollar is the currency of the primary economic environment in which the Company and certain subsidiaries operate. Thus, the functional and reporting currency of the Company and certain subsidiaries is the dollar. Accordingly, monetary accounts maintained in currencies other than the dollar are remeasured into dollars in accordance with the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 830, "Foreign Currency Matters". All transaction gains and losses of the remeasurement of monetary balance sheet items are reflected in the statements of income as financial income or expenses, as appropriate. Monetary accounts and transactions maintained in dollars are presented at their original amounts. For those foreign subsidiaries whose functional currency is not the dollar, all balance sheet amounts have been translated using the exchange rates in effect at each balance sheet date. Statement of income amounts have been translated using the average exchange rate prevailing during each year. Such translation adjustments are reported as a component of accumulated other comprehensive income (loss) in equity. |
Principles of consolidation | Principles of consolidation The consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries. Intercompany balances and transactions, including profit from intercompany sales not yet realized outside the Group, have been eliminated upon consolidation. Changes in the Company’s ownership interest in a subsidiary with no change of control are treated as equity transactions, with any difference between the amount of consideration paid and the change in the carrying amount of the non-controlling interest, recognized in equity. Non-controlling interests of subsidiaries represent the non-controlling shareholders’ share of the total comprehensive income (loss) of the subsidiaries and fair value of the net assets upon the acquisition of the subsidiaries. The non-controlling interests are presented in equity separately from the equity attributable to the equity holders of the Company. Redeemable non-controlling interests are classified as mezzanine equity, separate from permanent equity, on the consolidated balance sheets and measured at each reporting period at the higher of their redemption amount or the non-controlling interest book value, in accordance with the requirements of ASC 810 “Consolidation” and ASC 480-10-S99-3A, “Distinguishing Liabilities from Equity”. The following table provides a reconciliation of the redeemable non-controlling interests for the year ended December 31, 2018: January 1, 2018 $ 25,839 Net income attributable to redeemable non-controlling interest 3,383 Increase in value of put options of redeemable non-controlling interests 1,726 Dividend declared to redeemable non-controlling interest (1,979 ) Foreign currency translation adjustments (1,734 ) December 31, 2018 $ 27,235 Out of the closing balance, an amount of $ 25,778 become exercisable during 2019. |
Cash and cash equivalents | Cash and cash equivalents Cash and cash equivalents are short-term highly liquid investments that are readily convertible to cash with original maturities of three months or less, at acquisition. Cash and cash equivalents include amounts held primarily in NIS, dollar, Euro, Japanese Yen and British Pound. |
Short-term deposits and restricted deposits | Short-term deposits and restricted deposits Short-term deposits include deposits with original maturities of more than three months and less than one year. Such deposits are presented at cost (including accrued interest) which approximates their fair value. Restricted deposits are used to secure certain of the Group's ongoing projects and are classified under other long-term receivables. |
Marketable securities | Marketable securities The Company accounts for all its investments in marketable securities in accordance with ASC No. 320, “Investments – Debt and Equity Securities”. The Company classifies all of its marketable securities as available for sale and held for trading. Available for sale securities are carried at fair value, with the unrealized gains and losses, net of tax, reported in “accumulated other comprehensive income (loss)” in equity. Realized gains and losses on sale of investments are included in “financial expense (income), net” and are derived using the specific identification method for determining the cost of securities. The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization together with interest on securities is included in “financial expense (income), net”. The Company recognizes an impairment charge when a decline in the fair value of its investments in debt securities below the cost basis of such securities is judged to be other-than-temporary. Factors considered in making such a determination include the duration and severity of the impairment, the reason for the decline in value, the potential recovery period and the Company’s intent to sell, including whether it is more likely than not that the Company will be required to sell the investment before recovery of cost basis. For securities that are deemed other-than-temporarily impaired, the amount of impairment is recognized in “net gain (impairment net of gains) on sale of marketable securities previously impaired” in the statements of income and is limited to the amount related to credit losses, while impairment related to other factors is recognized in other comprehensive income. The Company classifies its marketable debt securities as either short-term or long-term based on each instrument’s underlying contractual maturity date and the entity’s expectations of sales and redemptions in the following year. Held for trading securities are measured at fair value through profit or loss. |
Property and equipment, net | Property and equipment, net Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated by the straight-line method over the estimated useful lives of the assets, at the following annual rates: Years Computers and peripheral equipment 3 - 5 Office furniture and equipment 7 - 15 (mainly 7) Motor vehicles 7 Software 3 – 5 (mainly 5) Leasehold improvements are amortized using the straight-line method over the term of the lease (including option terms that are deemed to be reasonably assured) or the estimated useful life of the improvements, whichever is shorter. |
Business combinations | Business combinations The Company accounts for business combinations under ASC 805, "Business Combinations". ASC 805 requires recognition of assets acquired, liabilities assumed, contingent consideration, non-controlling interest and redeemable non-controlling interest in the acquiree at the acquisition date, to be measured at their fair values as of that date. As required by ASC 820, "Fair Value Measurements and Disclosures" the Company applies assumptions, judgments and estimates that marketplace participants would consider in determining the fair value of assets acquired, liabilities assumed, non-controlling interest and redeemable non-controlling interest in the acquiree at the acquisition date. Any excess of the fair value of net assets acquired over purchase price and any subsequent changes in estimated contingencies are to be recorded in earnings. Acquisition related costs are expensed to the statements of income in the period incurred. The cumulative impact of measurement period adjustments, including the impact to prior periods, is recognized in the reporting period in which the adjustment is identified. During the years ended December 31, 2016, 2017 and 2018 the Company recorded $ 665, $ 300 and $ (38), with respect to changes in the fair value of contingent consideration liability, respectively. |
Research and development costs | Research and development costs Research and development costs incurred in the process of software development before establishment of technological feasibility are charged to expenses as incurred. Costs incurred subsequent to the establishment of technological feasibility are capitalized according to the principles set forth in ASC 985-20, "Costs of Software to be Sold, Leased or Marketed". The Company and its subsidiaries establish technological feasibility upon completion of a detailed program design or working model. ASC 985-20-35 requires that a product be amortized when the product is available for general release to customers. The Company considers a product to be available for general release to customers when the Company completes its internal validation of the product that is necessary to establish that the product meets its design specifications including functions, features, and technical performance requirements. Internal validation includes the completion of coding, documentation and testing that ensure bugs are reduced to a minimum. The internal validation of the product takes place a few weeks before the product is made available to the market. In certain instances, the Company enters into a short pre-release stage, during which the product is made available to a selected number of customers as a beta program for their own review and familiarization. Subsequently, the release is made generally available to customers from the Company's download area. Once a product is considered available for general release to customers, the capitalization of costs ceases and amortization of such costs to "cost of sales" begins. Capitalized software costs are amortized on a product by product basis by the straight-line method over the estimated useful life of the software product (approximately 5 years, due to their high rates of acceptance, the continued reliance on these products by existing customers, and the demand for such products from prospective customers, all of which validate the Company's expectations) which provides greater amortization expense compared to the revenue-curve method. The Company assesses the recoverability of these intangible assets on a regular basis by assessing the net realizable value of these intangible assets based on the estimated future gross revenues from each product reduced by the estimated future costs of completing and disposing of it, including the estimated costs of performing maintenance and customer support over its remaining economical useful life using internally generated projections of future revenues generated by the products, cost of completion of products and cost of delivery to customers over its remaining economical useful life. During the years ended December 31, 2016, 2017 and 2018, no such unrecoverable amounts were identified. Research and development costs incurred in the process of developing product enhancements are generally charged to expenses as incurred. |
Long-Lived Assets | Long-Lived Assets The Company's long-lived, non-current assets are comprised mainly of goodwill, identifiable intangible assets and property, plants and equipment. |
Impairment of long-lived assets and intangible assets subject to amortization | Impairment of long-lived assets and intangible assets subject to amortization The Company’s long-lived assets are reviewed for impairment in accordance with ASC 360, “Property, Plant and Equipment” whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. As required by ASC 820, “Fair Value Measurements and Disclosures” the Company applies assumptions, judgments and estimates that marketplace participants would consider in determining the fair value of long-lived assets (or asset groups). Intangible assets with finite lives are amortized over their economic useful life using a method of amortization that reflects the pattern in which the economic benefits of the intangible assets are consumed or otherwise used up. Acquired technology and non-compete agreements were amortized on a straight line basis and customer relationships and backlog were amortized on an accelerated method basis over a period between 1 - 15 years based on the intangible assets identified. During the years ended December 31, 2016, 2017 and 2018, no impairment losses have been identified. |
Goodwill | Goodwill Goodwill represents the excess of the purchase price in a business combination over the fair value of the net tangible and intangible assets acquired. Under ASC 350, "Intangibles - Goodwill and Other", goodwill is subject to an annual impairment test or more frequently if impairment indicators are present. Goodwill impairment is deemed to exist if the net book value of a reporting unit exceeds its estimated fair value. As of December 31, 2018, the Company operates in four reporting units within its operating segments. Goodwill reflects the excess of the consideration paid or transferred plus the fair value of contingent consideration and any non-controlling interest in the acquiree at the acquisition date over the fair values of the identifiable net assets acquired. ASC 350 allows an entity to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. If the qualitative assessment does not result in a more likely than not indication of impairment, no further impairment testing is required. If it does result in a more likely than not indication of impairment, the two-step impairment test is performed. Alternatively, ASC 350 permits an entity to bypass the qualitative assessment for any reporting unit and proceed directly to performing the first step of the goodwill impairment test. The provisions of ASC 350 require that the quantitative two-step impairment test will be performed on goodwill at the level of the reporting units. In the first step, or "Step one", the Company compares the fair value of each reporting unit to its carrying value. If the fair value exceeds the carrying value of the net assets, goodwill is considered not impaired, and the Company is not required to perform further testing. If the carrying value of the net assets exceeds the fair value, then the Company must perform the second step, or "Step two", of the impairment test in order to determine the implied fair value of goodwill. To determine the fair value used in Step one, the Company uses discounted cash flows. If and when the Company is required to perform a Step two analysis, determining the fair value of its net assets and its off-balance sheet intangibles, then the Company would be required to make judgments that involve the use of significant estimates and assumptions. The Company determines the fair value of each reporting unit by using the income approach, which utilizes a discounted cash flow model, as it believes that this approach best approximates the reporting unit's fair value. Judgments and assumptions related to revenue, operating income, future short-term and long-term growth rates, weighted average cost of capital, interest, capital expenditures, cash flows, and market conditions are inherent in developing the discounted cash flow model. The Company considers historical rates and current market conditions when determining the discount and growth rates to use in its analyses. If these estimates or their related assumptions change in the future, the Company may be required to record impairment charges for its goodwill. The Company performed an annual impairment test as of December 31, of each of 2016, 2017 and 2018 and did not identify any impairment losses (see Note 9). |
Revenue recognition | Revenue recognition Effective as of January 1, 2018, The Company implements the provisions of Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers ("ASC 606") using the modified retrospective method. no cumulative effect adjustment as of the date of the adoption was required. Prior years information has not been restated and continues to be reported under the old accounting standard 605, "Revenue Recognition" (ASC 605). See Note 19 for further disclosures required under ASC 606. Revenues are recognized when control of the promised goods or services are transferred to the customers, in an amount that reflects the consideration that the company expects to receive in exchange for those goods or services. The Company determines revenue recognition through the following steps: ● identification of the contract with a customer; ● identification of the performance obligations in the contract; ● determination of the transaction price; ● allocation of the transaction price to the performance obligations in the contract; and ● recognition of revenue when, or as, the Company satisfies a performance obligation. The Company enters into contracts that can include various combinations of products, software and professional services, as detailed below, which are generally capable as being distinct from each other and accounted for as separate performance obligations. The Company derives its revenues from licensing the rights to use its software (proprietary and non-proprietary), provision of related professional services, maintenance and technical support as well as from other software and IT professional services (either fixed price or based on time and materials). The Company sell its products primarily through direct sales force and indirectly through distributors and value added resellers. Under ASC 606, an entity recognizes revenue when or as it satisfies a performance obligation by transferring software license or software related services to the customer, either at a point in time or over time. The company recognizes its revenues from software sales at a point in time upon delivery of its software license. The software license is considered a distinct performance obligation, as the customer can benefit from the software on its own. Revenues from contracts that involve significant customization to customer-specific specifications are performance obligations the Company generally accounts for as performance obligations satisfied over time. The underlying deliverable is owned and controlled by the customer, and does not create an asset with an alternative use to the Company. The Company recognizes revenue of such contracts over time using cost inputs, which recognize revenue and gross profit as work is performed based on a ratio between actual costs incurred compared to the total estimated costs for the contract, to measure progress toward completion of its performance obligations, which is similar to the method prior to the adoption of ASC 606. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are first determined, in the amount of the estimated loss for the entire contract. During the years ended December 31, 2016, 2017 and 2018, no material estimated losses were identified. In addition, the Company provides professional services that do not involve significant customization to customer-specific specifications. For contracts that do not involve significant customization to customer-specific specifications (typically staffing or consulting services) revenue is recognized as the services are performed, either on a straight-line basis or based on the hours of services that were provided to the customer, in accordance with the terms of the contracts. The Company's revenues from post contract support are derived from annual maintenance contracts providing for unspecified upgrades for new versions and enhancements on a when-and-if-available basis for an annual fee. The right for an unspecified upgrade for new versions and enhancements on a when-and-if-available basis do not specify the features, functionality and release date of future product enhancements for the customer to know what will be made available and the general timeframe in which it will be delivered. The Company considers the post contract support performance obligation as a distinct performance obligation that is satisfied over time, and recognized on a straight-line basis over the contractual period. Revenue from professional services both related to software and IT professional services businesses consists of either fixed price or Time and Materials (T&M), and are considered performance obligations that are satisfied over time, and revenues are recognized as the services are provided. The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis. Standalone selling prices of software licenses are estimated using the residual approach, due to the lack of selling software licenses on a standalone basis, or the fact the Company sells the license to different customers for a broad range of amounts. Standalone selling prices of services are determined by considering several external and internal factors including, but not limited to, transactions where the specific performance obligation is sold separately. The Company generally does not grant a right of return to its customers. When a right of return exists, the Company defers revenue until the right of return expires, at which time revenue is recognized provided that all other revenue recognition criteria are met. Deferred revenues include unearned amounts received under maintenance and support (mainly) and amounts received from customers for which revenues have not yet been recognized. Revenue from third-party sales is recorded at a gross or net amount according to certain indicators. The application of these indicators for gross and net reporting of revenue depends on the relative facts and circumstances of each sale. The Company pays commissions to sales and marketing and certain management personnel based on their attainment of certain predetermined sales or profit goals. When sales commissions are considered incremental costs of obtaining a contract with a customer they are deferred and amortized on a systematic basis that is consistent with the transfer to the customer of the performance obligations to which the asset relates. The Company expenses sales commissions as they are incurred when the amortization period would have been less than one year. In addition, generally, sales commission which are paid upon contract renewal are commensurate with the initial commissions as the renewal amounts are substantially identical to the initial commission costs. During the year ended December 31, 2018, no costs have been capitalized. The Company does not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the customer and the transfer of the promised goods or services to the customer will be one year or less. |
Accrued severance pay and retirement plans | Accrued severance pay and retirement plans The Company's and its Israeli subsidiaries' obligation for severance pay with respect to their Israeli employees (for the period for which the employees were not included under Section 14 of the Severance Pay Law, 1963) is calculated pursuant to the Israeli Severance Pay Law based on the most recent salary of the employees multiplied by the number of years of employment as of the balance sheet date, and are presented on an undiscounted basis (referred to as the "Shut Down Method"). Employees are entitled to one month's salary for each year of employment or a portion thereof. The Company's obligation for all of its Israeli employees is fully provided for by monthly deposits with insurance policies and severance pay funds and by an accrual. The carrying value of deposited funds includes profits (losses) accumulated up to the balance sheet date. The deposited funds may be withdrawn only upon the fulfillment of the obligations pursuant to the Israeli Severance Pay Law or labor agreements and are recorded as an asset in the Company's consolidated balance sheet. The Company and its Israeli subsidiaries' agreements with most of their Israeli employees are in accordance with Section 14 of the Severance Pay Law -1963, mandating that upon termination of such employees' employment; all the amounts accrued in their insurance policies shall be released to them instead of severance compensation. Upon release of deposited amounts to the employee, no additional liability exists between the parties regarding the matter of severance pay and no additional payments are payable by the Company or its subsidiaries to the employee. Further, the related obligation and amounts deposited on behalf of such obligation are not stated on the balance sheet, as the Company and its subsidiaries are legally released from their obligations to employees once the deposit amounts have been paid. The Group has a number of savings plans in the United States that qualify under Section 401(k) of the Internal Revenue Code. U.S. employees may contribute up to 100% of their pretax or post-tax salary, but not more than statutory limits. Matching contributions are discretionary and if made, are up to 3% of the participants annual contributions. When contributions are granted, they are invested in proportion to each participant's voluntary contributions in the investment options provided under the plan. Severance expenses for the years ended December 31, 2016, 2017 and 2018 amounted to approximately $ 2,248, $ 3,748 and $ 4,052, respectively. |
Advertising expenses | Advertising expenses Advertising expenses are charged to selling and marketing expenses, as incurred. Advertising expenses for the years ended December 31, 2016, 2017 and 2018 amounted to $ 423, $ 384 and $ 304, respectively. |
Income taxes | Income taxes The Company accounts for income taxes in accordance with ASC 740, "Income Taxes". ASC 740 prescribes the use of the "asset and liability" method whereby deferred tax asset and liability account balances are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company provides a valuation allowance, if necessary, to reduce deferred tax assets to their estimated realizable value. Deferred tax assets and liabilities are classified as non-current. The Company utilizes a two-step approach for recognizing and measuring uncertain tax positions accounted for in accordance with an amendment of ASC 740 "Income Taxes." Under the first step the Company evaluates a tax position taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that, based on its technical merits, the tax position will be sustained on audit, including resolution of any related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement with the tax authorities. The Company accrued interest and penalties related to unrecognized tax benefits in its provisions for income taxes. |
Basic and diluted net earnings per share | Basic and diluted net earnings per share Basic net earnings per share are computed based on the weighted average number of Ordinary shares outstanding during each year. Diluted net earnings per share are computed based on the weighted average number of Ordinary shares outstanding during each year, plus dilutive potential ordinary shares considered outstanding during the year, in accordance with ASC 260, "Earnings Per Share." A portion of the outstanding stock options have been excluded from the calculation of the diluted earnings per share because such securities are anti-dilutive. The total weighted average number of Ordinary shares related to the outstanding options excluded from the calculations of diluted earnings per share was 21,998 and 2,093 for the years ended December 31, 2016 and 2017, respectively. As of December 31, 2018, there were no outstanding options excluded from the calculations of diluted earnings per share. The Company changed its accounting policy regarding the presentation of the adjustment to the net income attributable to Magic Software Enterprises' shareholders as a result of the accretion of redeemable non-controlling interest. According to the new accounting policy, the Company presents the accretion amount in the calculation of the earnings per share in the notes of the financial statements, compared to the previous presentation on the face of the consolidated statements of income, since Company's management believes that reflecting the effects of the accretion as an adjustment to income available to Magic Software Enterprises' shareholders in the earnings per share note is a more appropriate presentation. The change in the accounting policy was retrospectively effected |
Stock-based compensation | Stock-based compensation The Company accounts for stock-based compensation in accordance with ASC 718, "Compensation - Stock Compensation" which requires the measurement and recognition of compensation expense based on estimated fair values for all share-based payment awards made. ASC 718 requires companies to estimate the fair value of equity-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as an expense over the requisite service periods in the Company's consolidated statement of income. The Company recognizes compensation expenses for the value of its awards, which have graded vesting based on the accelerated method over the requisite service period of each of the awards, net of estimated forfeitures. The Company uses the Binomial option-pricing model ("the Binomial model") to estimate the fair value for any options granted. The Binomial model takes into account variables such as volatility, dividend yield rate, and risk-free interest rate and also allows for the use of dynamic assumptions and considers the contractual term of the option, the probability that the option will be exercised prior to the end of its contractual life, and the probability of termination or retirement of the option holder in computing the value of the option. The fair value of each option granted using the Binomial model, was estimated on the date of grant with the following assumptions: expected volatility was based upon actual historical stock price movements and was calculated as of the grant dates for different periods, since the Binomial model can be used for different expected volatilities for different periods. The risk-free interest rate was based on the yield from U.S. Treasury zero-coupon bonds with an equivalent term to the contractual term of the options. The expected term of options granted was derived from the output of the option valuation model and represented the period of time that options granted were expected to be outstanding. Estimated forfeitures were based on actual historical pre-vesting forfeitures. Since dividend payments are applied to reduce the exercise price of the option, the effect of the dividend protection was reflected by using an expected dividend assumption of zero. For awards with performance conditions, compensation cost is recognized over the requisite service period if it is 'probable' that the performance conditions will be satisfied. No grants were made to employees or directors in 2016 and 2017. During the years ended December 31, 2016, 2017 and 2018, the Company recognized stock-based compensation expense related to employee stock options in the amount of $ 152, $ 78 and $ 194, respectively, as follows: Year ended December 31, 2016 2017 2018 Cost of revenue $ 15 $ 7 $ 2 Research and development 17 8 4 Selling and marketing 71 - 4 General and administrative 49 63 184 Total stock-based compensation expense $ 152 $ 78 $ 194 |
Concentrations of credit risk | Concentrations of credit risk Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash and cash equivalents, short-term deposits, restricted cash, marketable securities, trade receivables and foreign currency derivative contracts. The Company's cash and cash equivalents, short-term deposits and restricted cash are invested primarily in bank deposits with major banks worldwide, mainly in the United States and Israel, however, such cash and cash equivalents and short-term deposits in the United States may be in excess of insured limits and are not insured in other jurisdictions. The Company believes that since these deposits may be redeemed upon demand and since such institutions are of high rating they bear low risk. The Company's marketable securities include investments in commercial and government bonds and foreign banks. The Company's marketable securities are considered to be highly liquid and have a high credit standing (also refer to Note 4). In addition, management considered its portfolios in foreign banks to be well-diversified. The Company's trade receivables are derived from sales to customers located primarily in the United States, Israel, Europe and Japan. An allowance for doubtful accounts is determined with respect to those amounts that the Company has determined to be doubtful of collection. The expense related to doubtful accounts for the years ended December 31, 2016, 2017 and 2018 was $ 437, $ 1,164 and $ 1,070, respectively. From time to time the Company enters into foreign exchange forward contracts and option contracts intended to protect against the changes in value of forecasted non-dollar currency cash flows related to salary and related expenses. These derivative instruments are designed to offset the Company's non-dollar currency exposure. |
Fair value measurements | Fair value measurements The Company accounts for certain assets and liabilities at fair value under ASC 820, "Fair Value Measurements and Disclosures". Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. As a basis for considering such assumptions, ASC 820 establishes a three-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value: Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets; Level 2 - Includes other inputs that are directly or indirectly observable in the marketplace, other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets with insufficient volume or infrequent transactions, or other inputs that are observable (model-derived valuations in which significant inputs are observable), or can be derived principally from or corroborated by observable market data; Level 3 - Unobservable inputs which are supported by little or no market activity; The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The Company categorized each of its fair value measurements in one of these three levels of hierarchy. Assets and liabilities measured at fair value on a recurring basis are comprised of marketable securities, foreign currency forward contracts and contingent consideration of acquisitions (see Note 5). The carrying amounts reported in the balance sheet for cash and cash equivalents, short term bank deposits, trade receivables, other accounts receivable, short-term bank credit, trade payables and other accounts payable approximate their fair values due to the short-term maturities of such instruments. |
Comprehensive income (loss) | Comprehensive income (loss) The Company accounts for comprehensive income (loss) in accordance with ASC 220, "Comprehensive Income." This Statement establishes standards for the reporting and display of comprehensive income and its components in a full set of general purpose financial statements. Comprehensive income (loss) generally represents all changes in equity during the period except those resulting from investments by, or distributions to, shareholders. The Company determined that its items of other comprehensive income (loss) relate to gain and loss on foreign currency translation adjustments, unrealized gain and loss on derivative instruments designated as hedges and unrealized gain and loss on available-for-sale marketable securities. |
Recently adopted accounting pronouncement | Recently adopted accounting pronouncement In May 2014, the FASB issued ASU 2014-09 establishing Accounting Standards Codification (ASC) Topic 606, “Revenue from Contracts with Customers” (ASC 606). ASC 606 establishes a comprehensive new revenue recognition model designed to depict the transfer of goods or services to a customer in an amount that reflects the consideration the entity expects to be entitled to receive in exchange for those goods or services and requires significantly enhanced revenue disclosures. The Company adopted the standard effective January 1, 2018 using the modified retrospective method. Results for reporting periods beginning after January 1, 2018, were presented under Topic 606, while prior period amounts were not adjusted and were reported in accordance with the Company’s historic accounting practices, under legacy revenue recognition standards. See Note 19 to the financial statements for further information regarding the initial application of ASC 606. In August 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-15 “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments” (ASU 2016-15). ASU 2016-15 provides specific guidance on eight cash flow classification issues, including debt prepayment, payments of contingent liabilities as part of business combinations, or debt extinguishment costs and distributions received from equity method investees, to reduce diversity in practice. ASU 2016-15 is effective for interim and annual periods beginning after December 15, 2017. The Company adopted this standard during 2018. As a result of the adoption of ASU 2016-15, the Company adjusted the previously reported consolidated statement of cash flows for the years ended December 31, 2017 and 2016 as follows: Year Ended December 31, 2017 As previously reported Adjustments As Adjusted Net cash used in investing activities $ (12,419 ) $ 5,103 $ (7,316 ) Net cash used in financing activities $ (14,311 ) $ (5,103 ) $ (19,414 ) Year Ended December 31, 2016 As previously reported Adjustments As Adjusted Net cash used in investing activities $ (35,982 ) $ 1,779 $ (34,203 ) Net cash provided by financing activities $ 22,190 $ (1,779 ) $ 20,411 In January 2017, FASB issued ASU 2017-01, Business Combinations (Topic 805) Clarifying the Definition of Business. ASU 2017-01 clarifies the definition of a business with the objective of adding standard to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The update to the standard is effective for interim and annual periods beginning after December 15, 2017, and applied prospectively. The Company adopted this standard during 2018, with no material impact on its financial statements. In May 2017, the FASB issued ASU 2017-09, “Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting” (“ASU 2017-09”), which gives direction on which changes to the terms or conditions of share-based payment awards require an entity to apply modification accounting in Accounting Standard Codification (“ASC”) Topic 718. In general, entities will apply the modification accounting guidance if the value, vesting conditions or classification of the award changes. ASU 2017-09 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The Company adopted this standard during 2018, with no material impact on its financial statements. |
Recently issued accounting pronouncements and not yet adopted | Recently issued accounting pronouncements and not yet adopted In February 2016, the FASB issued ASU 2016-02, "Leases" (Topic 842). Topic 842 supersedes the lease requirements in Accounting Standards Codification (ASC) Topic 840, "Leases". Under Topic 842 lessees will be required to recognize for all leases at the commencement date a lease liability; and a right-of-use asset ("ROU"). In July 2018, the FASB issued amendments in ASU 2018-11, which provide another transition method in addition to the existing transition method, by allowing entities to initially apply the new leases standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption, and to not apply the new guidance in the comparative periods they present in the financial statements. The modified retrospective approach does not require applying the new standard to all leases existing at the date of initial application. ASU 2016-02 is effective for annual and interim periods beginning after December 15, 2018. The Company will adopt this standard at January 1, 2019 ("the Transition Date"), using the modified retrospective approach at the beginning of the period of adoption through a cumulative-effect adjustment. The Company also expects to elect certain relief options offered in ASU 2016-02 including the package of practical expedients. Additionally, the Company intends to elect an accounting policy, by class of underlying asset to combine, lease and non-lease components. The Company expects the adoption of the standard will have a material impact on its consolidated balance sheets which will result in the recognition of ROU and lease liabilities of approximately $12,322 at the Transition Date. The most significant impact from recognition of ROU assets and lease liabilities relates to the Company's leased office space. However, the Company does not anticipate that the adoption of this standard will have a material impact on the operating expenses in its consolidated statements of operations since the expense recognition under this new standard will be similar to current practice. In June 2016, the FASB Issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The new standard requires financial assets measured at amortized cost be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The standard will be effective for the Company beginning January 1, 2020, with early adoption permitted. The Company is evaluating the impact of adopting this new accounting guidance on its consolidated financial statements. In January 2017, the FASB issued ASU 2017-04 (ASU 2017-04): Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. ASU 2017-04 eliminates step two of the goodwill impairment test and specifies that goodwill impairment should be measured by comparing the fair value of a reporting unit with its carrying amount. Additionally, the amount of goodwill allocated to each reporting unit with a zero or negative carrying amount of net assets should be disclosed. ASU 2017-04 is effective for annual or interim goodwill impairment tests performed in fiscal years beginning after December 15, 2019, and early adoption is permitted. The Company is evaluating the impact of adopting this new accounting guidance on its consolidated financial statements. |
Significant Accounting Polici_3
Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Accounting Policies [Abstract] | |
Schedule of reconciliation of the redeemable non-controlling interests | January 1, 2018 $ 25,839 Net income attributable to redeemable non-controlling interest 3,383 Increase in value of put options of redeemable non-controlling interests 1,726 Dividend declared to redeemable non-controlling interest (1,979 ) Foreign currency translation adjustments (1,734 ) December 31, 2018 $ 27,235 |
Schedule of property and equipment, net | Years Computers and peripheral equipment 3 - 5 Office furniture and equipment 7 - 15 (mainly 7) Motor vehicles 7 Software 3 – 5 (mainly 5) |
Schedule of stock-based compensation expense related to employee stock options | Year ended December 31, 2016 2017 2018 Cost of revenue $ 15 $ 7 $ 2 Research and development 17 8 4 Selling and marketing 71 - 4 General and administrative 49 63 184 Total stock-based compensation expense $ 152 $ 78 $ 194 |
Schedule of previously reported consolidated statement of cash flows | Year Ended December 31, 2017 As previously reported Adjustments As Adjusted Net cash used in investing activities $ (12,419 ) $ 5,103 $ (7,316 ) Net cash used in financing activities $ (14,311 ) $ (5,103 ) $ (19,414 ) Year Ended December 31, 2016 As previously reported Adjustments As Adjusted Net cash used in investing activities $ (35,982 ) $ 1,779 $ (34,203 ) Net cash provided by financing activities $ 22,190 $ (1,779 ) $ 20,411 |
Business Combination, Signifi_2
Business Combination, Significant Transaction and Sale of Business (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Business Acquisition [Line Items] | |
Summary of estimated fair values of the assets acquired and liabilities | December 31, 2017 2018 Net assets, excluding cash acquired $ (1,822 ) $ 306 Intangible assets 1,149 23 Goodwill 1,723 259 Total assets acquired net of acquired cash $ 1,050 $ 588 |
Comblack IT Ltd. [Member] | |
Business Acquisition [Line Items] | |
Summary of estimated fair values of the assets acquired and liabilities | Net assets, excluding cash acquired $ (405 ) Redeemable non-controlling interest (989 ) Intangible assets 1,249 Goodwill 1,966 Total assets acquired net of acquired cash $ 1,821 |
Infinigy Solutions LLC [Member] | |
Business Acquisition [Line Items] | |
Summary of estimated fair values of the assets acquired and liabilities | Net assets, excluding cash acquired $ 1,182 Redeemable Non-controlling interest (3,590 ) Intangible assets 3,675 Goodwill 5,260 Total assets acquired net of acquired cash $ 6,527 |
Roshtov Software Industries Ltd [Member] | |
Business Acquisition [Line Items] | |
Summary of estimated fair values of the assets acquired and liabilities | Net assets, excluding cash acquired $ 15 Redeemable Non-controlling interest (14,012 ) Intangible assets 22,439 Deferred tax liability (5,610 ) Goodwill 17,718 Total assets acquired net of acquired cash $ 20,550 |
Shavit Software Ltd [Member] | |
Business Acquisition [Line Items] | |
Summary of estimated fair values of the assets acquired and liabilities | Net assets, excluding cash acquired $ 533 Intangible assets 3,489 Deferred tax liability (871 ) Goodwill 3,685 Total assets acquired net of acquired cash $ 6,836 |
Marketable Securities (Tables)
Marketable Securities (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Investments, Debt and Equity Securities [Abstract] | |
Summary of marketable securities | December 31, 2017 2018 Fair value through profit or loss (1) $ 1,209 $ 1,156 Available-for-sale 12,929 8,757 $ 14,138 $ 9,913 (1) The Group recognized trading gains in the amount of $ 53 during the year ended December 31, 2018. |
Summary of marketable securities classified as available-for-sale | December 31, 2017 2018 Amortized Unrealized losses Unrealized Market value Amortized Unrealized losses Unrealized Market value Available-for-sale: Corporate bonds $ 12,987 $ (58 ) $ - $ 12,929 $ 8,851 $ (94 ) $ - $ 8,757 |
Schedule of marketable securities with contractual maturities | Amortized Unrealized gains Market cost Gains Losses value Due within one year $ 3,326 $ - $ (21 ) $ 3,305 Due after one year through three years $ 5,525 $ - $ (73 ) $ 5,452 Total $ 8,851 $ - $ (94 ) $ 8,757 |
Schedule of changes in other comprehensive income of available for sale securities | Other Other comprehensive income from available-for-sale securities as of January 1, 2017 $ 40 Gains reclassified into earnings from marketable securities (94 ) Unrealized losses from available-for-sale securities (4 ) Other comprehensive loss from available-for-sale securities as of December 31, 2017 $ (58 ) Other Other comprehensive loss from available-for-sale securities as of January 1, 2018 $ (58 ) Unrealized losses from available-for-sale securities (36 ) Other comprehensive loss from available-for-sale securities as of December 31, 2018 $ (94 ) |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Fair Value Disclosures [Abstract] | |
Schedule of financial assets measured at fair value on a recurring basis | December 31, 2017 Fair value measurements using input type Level 1 Level 2 Level 3 Total Assets: Corporate bonds $ - $ 12,929 $ - $ 12,929 Convertible bonds - 1,209 - 1,209 Total financial assets $ - $ 14,138 $ - $ 14,138 Liabilities: Contingent consideration $ - $ - $ 1,333 $ 1,333 Total financials liabilities $ - $ - $ 1,333 $ 1,333 December 31, 2018 Fair value measurements using input type Level 1 Level 2 Level 3 Total Assets: Corporate bonds $ - $ 8,757 $ - $ 8,757 Convertible bonds - 1,156 - 1,156 Total financial assets $ - $ 9,913 $ - $ 9,913 Liabilities: Contingent consideration $ - $ - $ 414 $ 414 Total financials liabilities $ - $ - $ 414 $ 414 |
Schedule of fair value measurements using significant unobservable inputs | December 31, 2017 2018 Opening balance $ 3,088 $ 1,333 Increase in contingent consideration due to acquisitions - 124 Payment of contingent consideration (2,109 ) (974 ) Increase in fair value of contingent consideration 1,587 210 Decrease in fair value of contingent consideration (1,287 ) (248 ) Decrease in liability against other receivables (118 ) - Amortization of interest and exchange rate 172 (31 ) Closing balance $ 1,333 $ 414 |
Other Accounts Receivable and_2
Other Accounts Receivable and Prepaid Expenses (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Receivables [Abstract] | |
Schedule of other accounts receivable and prepaid expenses | December 31, 2017 2018 Prepaid expenses $ 2,659 $ 3,712 Government authorities 4,900 2,053 Related parties 314 303 Other 770 961 $ 8,643 $ 7,029 |
Property and Equipment (Tables)
Property and Equipment (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Property, Plant and Equipment [Abstract] | |
Schedule of property and equipment | December 31, 2017 2018 Cost: Leasehold improvements $ 918 $ 981 Computers and peripheral equipment 14,842 15,221 Office furniture and equipment 3,778 3,774 Motor vehicles 1,237 1,217 Software 3,094 3,084 23,869 24,277 Accumulated depreciation: Leasehold improvements 429 470 Computers and peripheral equipment 14,194 14,528 Office furniture and equipment 2,471 2,699 Motor vehicles 447 564 Software 2,860 2,944 20,401 21,205 Depreciated cost $ 3,468 $ 3,072 |
Intangible Assets (Tables)
Intangible Assets (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of intangible assets | December 31, 2017 2018 Original amounts: Capitalized software costs $ 75,126 $ 78,793 Customer relationships 56,296 54,850 Backlog and non-compete agreement 2,712 2,712 Acquired technology 13,087 12,722 147,221 149,077 Accumulated amortization: Capitalized software costs 61,834 66,123 Customer relationships 27,967 33,578 Backlog and non-compete agreement 2,486 2,674 Acquired technology 3,923 5,223 96,210 107,598 Intangible assets, net $ 51,011 $ 41,479 |
Schedule of estimated future amortization expense of intangible assets | 2019 $ 10,323 2020 8,572 2021 7,057 2022 4,749 2023 3,546 2024 and thereafter 7,232 $ 41,479 |
Goodwill (Tables)
Goodwill (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Summary of changes in the carrying amount of goodwill | IT Software Total As of January 1, 2017 $ 43,874 $ 47,128 $ 91,002 Business combination 1,723 - 1,723 Measurement period adjustments 614 28 642 Foreign currency translation adjustments 2,192 2,630 4,822 As of December 31, 2017 $ 48,403 $ 49,786 $ 98,189 Business combination - 277 277 Measurement period adjustments (18 ) - (18 ) Foreign currency translation adjustments (1,694 ) (1,748 ) (3,442 ) As of December 31, 2018 $ 46,691 $ 48,315 $ 95,006 |
Short Term Debt (Tables)
Short Term Debt (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Debt Disclosure [Abstract] | |
Schedule of short term debt | Interest Linkage rate December 31, basis % 2017 2018 Short-term credit from banks USD U.S Prime -0.2 $ 2,125 $ 2,362 Short-term credit from banks NIS 2.0 618 - Short-term loans from banks NIS 1.6-2.0 259 - Current maturities of long-term loans from financial institution NIS 2.6-3.0 6,769 6,299 $ 9,771 $ 8,661 |
Accrued Expenses and Other Ac_2
Accrued Expenses and Other Accounts Payable (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Payables and Accruals [Abstract] | |
Schedule of accrued expenses and other accounts payable | December 31, 2017 2018 Employees and payroll accruals $ 15,203 $ 16,242 Accrued expenses 6,234 6,219 Government authorities 4,738 1,426 Other 1,614 571 $ 27,789 $ 24,458 |
Long Term Debt (Tables)
Long Term Debt (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Debt Disclosure [Abstract] | |
Schedule of long term debt | Linkage Interest December 31, basis rate 2017 2018 % Loan from banks and other (1) NIS 2.6-5 $ 34,447 $ 25,572 Other long term debt 136 115 $ 34,583 $ 25,687 Current maturities NIS (6,769 ) (6,299 ) $ 27,814 $ 19,388 (1) On November 2016, the Company obtained a loan in the amount of $ 31,356 linked to the New Israel Shekel from an Israeli financial institution. The principal amount of the loan is payable in seven equal annual installments with the final payment due on November 2, 2023 and bears a fixed interest rate of 2.60% per annum, payable in two semi-annual payments. |
Taxes on Income (Tables)
Taxes on Income (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
Schedule of income before taxes on income | Year ended December 31, 2016 2017 2018 Domestic $ 15,334 $ 19,442 $ 25,839 Foreign 5,323 4,803 6,008 $ 20,657 $ 24,245 $ 31,847 |
Schedule of taxes on income (tax benefit) | Year ended December 31, 2016 2017 2018 Current: Domestic $ 2,919 $ 5,928 $ 5,186 Foreign 1,863 1,511 1,359 4,782 7,439 6,545 Deferred taxes: Domestic (666 ) (1,160 ) 81 Foreign (167 ) 52 445 (833 ) (1,108 ) 526 Taxes on income $ 3,949 $ 6,331 $ 7,071 |
Schedule of deferred tax assets and liabilities | December 31, 2017 2018 Net operating loss carryforwards $ 4,355 $ 3,914 Allowances, reserves and intangible assets 1,974 1,361 Deferred tax assets before valuation allowance 6,329 5,275 Less - valuation allowance (3,339 ) (3,417 ) Deferred tax assets, net $ 2,990 $ 1,858 |
Schedule of deferred tax liabilities | December 31, 2017 2018 Long-term tax assets $ 2,990 $ 1,858 Long-term tax liabilities (11,331 ) (10,343 ) Net deferred tax liabilities $ (8,341 ) $ (8,485 ) |
Schedule of effective income tax rate reconciliation | Year ended December 31, 2016 2017 2018 Income before taxes, as reported in the consolidated statements of income $ 20,657 $ 24,245 $ 31,847 Statutory tax rate 25 % 24 % 23 % Theoretical tax expenses on the above amount at the Israeli statutory tax rate $ 5,164 $ 5,819 $ 7,325 Tax adjustment in respect of different tax rates (1,214 ) 268 (826 ) Deferred taxes on losses for which full valuation allowance was provided in the past (455 ) 658 (11 ) Tax-deductible costs, not included in the accounting costs (342 ) (38 ) - Tax benefits in respect of prior years, net 1,262 (488 ) (22 ) Nondeductible expenses (232 ) 70 45 Uncertain tax position and other differences (234 ) 42 560 Income tax $ 3,949 $ 6,331 $ 7,071 |
Schedule of unrecognized tax benefits | Gross unrecognized tax benefits at January 1, 2016 $ 666 Increase in tax positions taken in prior years 159 Decrease in tax positions taken in prior years - Gross unrecognized tax benefits at December 31, 2016 825 Increase in tax positions taken in prior years 300 Decrease in tax positions taken in prior years - Gross unrecognized tax benefits at December 31, 2017 1,125 Increase in tax positions taken in prior years 1,050 Decrease in tax positions taken in prior years - Gross unrecognized tax benefits at December 31, 2018 $ 2,175 |
Equity (Tables)
Equity (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Equity [Abstract] | |
Summary of employee option activity under the 2007 Plan | Number of options Weighted Weighted Aggregate Outstanding at January 1, 2018 309,309 $ 4.38 3.97 $ 1,237 Granted 37,500 $ - Exercised (104,167 ) $ 2.99 Forfeited (21,875 ) $ 6.89 Outstanding at December 31, 2018 220,767 $ 3.83 3.81 $ 1,684 Exercisable at December 31, 2018 190,767 $ 4.43 2.92 $ 1,456 |
Schedule of options outstanding | Exercise price Options Weighted Weighted Options Weighted average exercise price of exercisable options In $ 0-1 30,000 9.49 $ - - $ - 2.01-3 66,000 1.26 $ 2.32 66,000 $ 2.32 3.01-4 73,517 2.77 $ 4.00 73,517 $ 4.00 5.01-6 6,250 4.61 $ 6.00 6,250 $ 6.00 8.01-9 45,000 5.35 $ 8.01 45,000 $ 8.01 220,767 3.81 $ 3.83 190,767 $ 4.43 |
Schedule of accumulated other comprehensive income (loss) | December 31, 2016 2017 2018 Accumulated realized and unrealized gain (loss) on available-for-sale securities, net $ 40 $ (58 ) $ (94 ) Accumulated foreign currency translation adjustments (7,494 ) 115 (6,057 ) Accumulated unrealized gain on derivative instruments, net 26 26 26 Total other comprehensive income (loss) $ (7,428 ) $ 83 $ (6,125 ) |
Net Earnings Per Share (Tables)
Net Earnings Per Share (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Earnings Per Share [Abstract] | |
Schedule of computation of basic and diluted net earnings per share | Year ended December 31, 2016 2017 2018 Net income attributable to Magic shareholders $ 14,169 $ 15,442 $ 19,883 Accretion of redeemable non-controlling interests $ (2,262 ) $ - $ (1,726 ) Net income attributable to Magic shareholders after accretion of redeemable non-controlling interests $ 11,907 $ 15,442 $ 18,157 Weighted average Ordinary shares outstanding: Denominator for basic net earnings per share 44,347,083 44,435,671 46,665,042 Effect of dilutive securities 168,953 161,548 131,648 Denominator for diluted net earnings per share 44,516,036 44,597,219 46,796,690 Basic and Diluted earnings per share $ 0.27 $ 0.35 $ 0.39 |
Segment Geographical Informat_2
Segment Geographical Information and Major Customers (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Segment Reporting [Abstract] | |
Schedule of reported segment results of operation | Software services IT professional services Unallocated expense Total 2016 Total revenues $ 70,834 $ 130,812 $ - $ 201,646 Expenses 58,847 118,414 3,298 180,559 Segment operating income (loss) $ 11,987 $ 12,398 $ (3,298 ) $ 21,087 Depreciation and amortization $ 7,531 $ 3,769 $ 308 $ 11,608 Software services IT professional services Unallocated expense Total 2017 Total revenues $ 77,100 $ 181,040 $ - $ 258,140 Expenses 63,649 164,558 3,977 232,184 Segment operating income (loss) $ 13,451 $ 16,482 $ (3,977 ) $ 25,956 Depreciation and amortization $ 9,242 $ 4,100 $ 269 $ 13,611 2018 Total revenues $ 81,332 $ 203,043 $ - $ 284,375 Expenses 63,902 183,985 4,790 252,677 Segment operating income (loss) $ 17,430 $ 19,058 $ (4,790 ) $ 31,698 Depreciation and amortization $ 8,727 $ 3,611 $ 226 $ 12,564 |
Schedule of total revenues classified according to geographical destination | Year ended December 31, 2016 2017 2018 United States $ 100,470 $ 123,113 $ 137,066 Israel 58,079 91,917 103,850 Europe 23,642 26,635 28,257 Japan 11,226 9,253 9,797 Other 8,229 7,222 5,405 $ 201,646 $ 258,140 $ 284,375 |
Schedule of long-lived assets | December 31, 2017 2018 Israel $ 111,217 $ 100,206 United States 32,223 30,222 Japan 5,008 5,082 Other 2,931 2,800 Europe 1,289 1,247 $ 152,668 $ 139,557 |
Selected Statements of Income_2
Selected Statements of Income Data (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Selected Statements of Income Data [Abstract] | |
Schedule of research and development costs, net | Year ended December 31, 2016 2017 2018 Total costs $ 10,063 $ 10,713 $ 9,362 Less - capitalized software costs (4,224 ) (3,771 ) (3,666 ) Research and development, net $ 5,839 $ 6,942 $ 5,696 |
Schedule of financial income (expenses), net | Bank charges and interest from loans offset by interest from short term deposits $ (199 ) $ (1,124 ) $ (986 ) Interest expenses related to liabilities in connection with acquisitions (257 ) (62 ) (4 ) Interest income from marketable securities, net of amortization of premium on marketable securities 240 284 284 Gain (loss) arising from foreign currency translation and other (214 ) (809 ) 855 Financial income (expenses), net $ (430 ) $ (1,711 ) $ 149 |
Significant Accounting Polici_4
Significant Accounting Policies (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Accounting Policies [Abstract] | |||
Redeemable non-controlling interests, Beginning | $ 25,839 | ||
Net income attributable to redeemable non-controlling interest | 3,383 | $ 1,536 | $ 2,258 |
Increase in value of put options of redeemable non-controlling interests | 1,726 | ||
Dividend declared to redeemable non-controlling interest | (1,979) | ||
Foreign currency translation adjustments | (1,734) | ||
Redeemable non-controlling interests, Ending | $ 27,235 | $ 25,839 |
Significant Accounting Polici_5
Significant Accounting Policies (Details 1) | 12 Months Ended |
Dec. 31, 2018 | |
Computers and peripheral equipment [Member] | Minimum [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated useful lives (Years) | 3 years |
Computers and peripheral equipment [Member] | Maximum [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated useful lives (Years) | 5 years |
Office furniture and equipment [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated useful lives | (mainly 7) |
Office furniture and equipment [Member] | Minimum [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated useful lives (Years) | 7 years |
Office furniture and equipment [Member] | Maximum [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated useful lives (Years) | 15 years |
Motor vehicles [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated useful lives (Years) | 7 years |
Software [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated useful lives | (mainly 5) |
Software [Member] | Minimum [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated useful lives (Years) | 3 years |
Software [Member] | Maximum [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated useful lives (Years) | 5 years |
Significant Accounting Polici_6
Significant Accounting Policies (Details 2) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Total stock-based compensation expense | $ 194 | $ 78 | $ 152 |
Cost of revenue [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Total stock-based compensation expense | 2 | 7 | 15 |
Research and development [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Total stock-based compensation expense | 4 | 8 | 17 |
Selling and marketing [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Total stock-based compensation expense | 4 | 71 | |
General and administrative [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Total stock-based compensation expense | $ 184 | $ 63 | $ 49 |
Significant Accounting Polici_7
Significant Accounting Policies (Details 3) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Net cash used in investing activities | $ (19,554) | $ (7,316) | $ (34,203) |
Net cash provided by (used in) financing activities | $ 8,426 | (19,414) | 20,411 |
As previously reported [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Net cash used in investing activities | (12,419) | (35,982) | |
Net cash provided by (used in) financing activities | (14,311) | 22,190 | |
Adjustments [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Net cash used in investing activities | 5,103 | 1,779 | |
Net cash provided by (used in) financing activities | $ (5,103) | $ (1,779) |
Significant Accounting Polici_8
Significant Accounting Policies (Details Textual) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018USD ($)Segments | Dec. 31, 2017USD ($)shares | Dec. 31, 2016USD ($)shares | |
Significant Accounting Policies (Textual) | |||
Changes in fair value of contingent consideration liability | $ (38) | $ 300 | $ 665 |
Employee's contribution percent | 100.00% | ||
Matching contributions, percentage | 3.00% | ||
Severance expenses | $ 4,052 | 3,748 | 2,248 |
Advertising expenses | $ 304 | $ 384 | $ 423 |
Income tax ultimate settlement, percentage | More than 50%. | ||
Ordinary shares excluded from the calculations of diluted earnings per share | shares | 2,093 | 21,998 | |
Number of operating segments | Segments | 4 | ||
Stock-based compensation expense | $ 194 | $ 78 | $ 152 |
Expense related to doubtful accounts | $ 1,070 | 1,164 | 437 |
Short-term deposits maturity, term | Short-term deposits include deposits with original maturities of more than three months and less than one year. | ||
Closing balance, description | Out of the closing balance, an amount of $ 25,778 become exercisable during 2019. | ||
Lease liabilities | $ 12,322 | ||
Net income orattributable to Magic Software Enterprises | $ (1,726) | $ (2,262) | |
Minimum [Member] | |||
Significant Accounting Policies (Textual) | |||
Intangible assets amortization period | 1 year | ||
Maximum [Member] | |||
Significant Accounting Policies (Textual) | |||
Intangible assets amortization period | 15 years |
Business Combination, Signifi_3
Business Combination, Significant Transaction and Sale of Business (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 | Oct. 31, 2016 | Jul. 11, 2016 | Jun. 30, 2015 | Apr. 14, 2015 |
Business Acquisition [Line Items] | ||||||
Net assets, excluding cash acquired | $ 306 | $ (1,822) | ||||
Intangible assets | 23 | 1,149 | ||||
Goodwill | 259 | 1,723 | ||||
Total assets acquired | $ 588 | $ 1,050 | ||||
Shavit Software Ltd [Member] | ||||||
Business Acquisition [Line Items] | ||||||
Net assets, excluding cash acquired | $ 533 | |||||
Intangible assets | 3,489 | |||||
Deferred tax liability | (871) | |||||
Goodwill | 3,685 | |||||
Total assets acquired | $ 6,836 | |||||
Roshtov Software Industries Ltd [Member] | ||||||
Business Acquisition [Line Items] | ||||||
Net assets, excluding cash acquired | $ 15 | |||||
Redeemable Non-controlling interest | (14,012) | |||||
Intangible assets | 22,439 | |||||
Deferred tax liability | (5,610) | |||||
Goodwill | 17,718 | |||||
Total assets acquired | $ 20,550 | |||||
Infinigy Solutions LLC [Member] | ||||||
Business Acquisition [Line Items] | ||||||
Net assets, excluding cash acquired | $ 1,182 | |||||
Redeemable Non-controlling interest | (3,590) | |||||
Intangible assets | 3,675 | |||||
Goodwill | 5,260 | |||||
Total assets acquired | $ 6,527 | |||||
Comblack IT Ltd. [Member] | ||||||
Business Acquisition [Line Items] | ||||||
Net assets, excluding cash acquired | $ (405) | |||||
Redeemable Non-controlling interest | (989) | |||||
Intangible assets | 1,249 | |||||
Goodwill | 1,966 | |||||
Total assets acquired | $ 1,821 |
Business Combination, Signifi_4
Business Combination, Significant Transaction and Sale of Business (Details Textual) - USD ($) $ in Thousands | Jul. 11, 2016 | Apr. 14, 2015 | Oct. 31, 2016 | Jul. 31, 2016 | Jun. 30, 2015 | Dec. 31, 2018 | Dec. 31, 2017 |
Business Combination, Significant Transaction and Sale of Business (Textual) | |||||||
Business combination consideration paid transferred | $ 588 | $ 1,050 | |||||
Roshtov Software Industries Ltd [Member] | |||||||
Business Combination, Significant Transaction and Sale of Business (Textual) | |||||||
Business acquired consideration | $ 20,550 | ||||||
Business acquisition, remaining ownership percentage | 40.00% | ||||||
Ownership interest acquired | 60.00% | ||||||
Redeemable non-controlling interest | $ 14,012 | 14,408 | |||||
Comblack IT Ltd. [Member] | |||||||
Business Combination, Significant Transaction and Sale of Business (Textual) | |||||||
Business combination consideration paid transferred | $ 1,821 | ||||||
Payments upon closing of the business acquisition | 1,523 | ||||||
Contingent payment upon operational targets | $ 298 | ||||||
Business acquisition, remaining ownership percentage | 30.00% | ||||||
Ownership interest acquired | 70.00% | ||||||
Redeemable non-controlling interest | $ 989 | ||||||
Comblack IT Ltd. [Member] | Seller [Member] | |||||||
Business Combination, Significant Transaction and Sale of Business (Textual) | |||||||
Redeemable non-controlling interest | 7,245 | ||||||
Infinigy Solutions LLC [Member] | |||||||
Business Combination, Significant Transaction and Sale of Business (Textual) | |||||||
Business combination consideration paid transferred | $ 6,527 | ||||||
Payments upon closing of the business acquisition | 5,600 | ||||||
Contingent payment upon operational targets | $ 927 | ||||||
Business acquisition, remaining ownership percentage | 30.00% | ||||||
Ownership interest acquired | 70.00% | ||||||
Redeemable non-controlling interest | $ 3,590 | 3,886 | |||||
Infinigy Solutions LLC [Member] | Seller [Member] | |||||||
Business Combination, Significant Transaction and Sale of Business (Textual) | |||||||
Business acquired consideration | $ 534 | ||||||
Shavit Software Ltd [Member] | |||||||
Business Combination, Significant Transaction and Sale of Business (Textual) | |||||||
Business combination consideration paid transferred | $ 6,836 | ||||||
Payments upon closing of the business acquisition | $ 4,699 | ||||||
Ownership interest acquired | 100.00% | ||||||
Business acquisition, deferred payment | $ 2,137 | ||||||
Shavit Software Ltd [Member] | Seller [Member] | |||||||
Business Combination, Significant Transaction and Sale of Business (Textual) | |||||||
Business acquisition, deferred payment | $ 2,535 | $ 924 |
Marketable Securities (Details)
Marketable Securities (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 | |
Investments, Debt and Equity Securities [Abstract] | |||
Fair value through profit or loss | [1] | $ 1,156 | $ 1,209 |
Available-for-sale | 8,757 | 12,929 | |
Marketable securities, Total | $ 9,913 | $ 14,138 | |
[1] | The Group recognized trading gains in the amount of $ 53 during the year ended December 31, 2018. |
Marketable Securities (Details
Marketable Securities (Details 1) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Available-for-sale: | ||
Amortized cost | $ 8,851 | |
Unrealized losses | (94) | |
Unrealized gains | ||
Market value | 8,757 | $ 12,929 |
Corporate bonds [Member] | ||
Available-for-sale: | ||
Amortized cost | 8,851 | 12,987 |
Unrealized losses | (94) | (58) |
Unrealized gains | ||
Market value | $ 8,757 | $ 12,929 |
Marketable Securities (Detail_2
Marketable Securities (Details 2) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Amortized cost | $ 8,851 | |
Unrealized, Gains | ||
Unrealized, Losses | (94) | |
Market value | 8,757 | $ 12,929 |
Marketable Securities Due Within One Year [Member] | ||
Amortized cost | 3,326 | |
Unrealized, Gains | ||
Unrealized, Losses | (21) | |
Market value | 3,305 | |
Marketable Securities Due After One Year Through Three Years [Member] | ||
Amortized cost | 5,525 | |
Unrealized, Gains | ||
Unrealized, Losses | (73) | |
Market value | $ 5,452 |
Marketable Securities (Detail_3
Marketable Securities (Details 3) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Investments, Debt and Equity Securities [Abstract] | |||
Other comprehensive income from available-for-sale securities, Beginning | $ (58) | $ 40 | |
Gains reclassified into earnings from marketable securities | (94) | $ 16 | |
Unrealized losses from available-for-sale securities | (36) | (4) | |
Other comprehensive income/loss from available-for-sale securities, Ending | $ (94) | $ (58) | $ 40 |
Marketable Securities (Detail_4
Marketable Securities (Details Textual) $ in Thousands | 12 Months Ended |
Dec. 31, 2018USD ($) | |
Marketable Securities (Textual) | |
Recognized trading gains, amount | $ 53 |
Fair Value Measurements (Detail
Fair Value Measurements (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Assets: | ||
Corporate bonds | $ 8,757 | $ 12,929 |
Convertible bonds | 1,156 | 1,209 |
Total financial assets | 9,913 | 14,138 |
Liabilities: | ||
Contingent consideration | 414 | 1,333 |
Total financials liabilities | 414 | 1,333 |
Level 1 [Member] | ||
Assets: | ||
Corporate bonds | ||
Convertible bonds | ||
Total financial assets | ||
Liabilities: | ||
Contingent consideration | ||
Total financials liabilities | ||
Level 2 [Member] | ||
Assets: | ||
Corporate bonds | 8,757 | 12,929 |
Convertible bonds | 1,156 | 1,209 |
Total financial assets | 9,913 | 14,138 |
Liabilities: | ||
Contingent consideration | ||
Total financials liabilities | ||
Level 3 [Member] | ||
Assets: | ||
Corporate bonds | ||
Convertible bonds | ||
Total financial assets | ||
Liabilities: | ||
Contingent consideration | 414 | 1,333 |
Total financials liabilities | $ 414 | $ 1,333 |
Fair Value Measurements (Deta_2
Fair Value Measurements (Details 1) - Level 3 [Member] - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Summary of fair value measurements by using significant unobservable inputs | ||
Opening balance | $ 1,333 | $ 3,088 |
Increase in contingent consideration due to acquisitions | 124 | |
Payment of contingent consideration | (974) | (2,109) |
Increase in fair value of contingent consideration | 210 | 1,587 |
Decrease in fair value of contingent consideration | 248 | (1,287) |
Decrease in liability against other receivables | (118) | |
Amortization of interest and exchange rate | (31) | 172 |
Closing balance | $ 414 | $ 1,333 |
Other Accounts Receivable and_3
Other Accounts Receivable and Prepaid Expenses (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Receivables [Abstract] | ||
Prepaid expenses | $ 3,712 | $ 2,659 |
Government authorities | 2,053 | 4,900 |
Related parties | 303 | 314 |
Other | 961 | 770 |
Other accounts receivable and prepaid expenses | $ 7,029 | $ 8,643 |
Property and Equipment (Details
Property and Equipment (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Property, Plant and Equipment [Line Items] | ||
Cost: | $ 24,277 | $ 23,869 |
Accumulated depreciation: | 21,205 | 20,401 |
Depreciated cost | 3,072 | 3,468 |
Leasehold improvements [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Cost: | 981 | 918 |
Accumulated depreciation: | 470 | 429 |
Computers and peripheral equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Cost: | 15,221 | 14,842 |
Accumulated depreciation: | 14,528 | 14,194 |
Office furniture and equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Cost: | 3,774 | 3,778 |
Accumulated depreciation: | 2,699 | 2,471 |
Motor vehicles [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Cost: | 1,217 | 1,237 |
Accumulated depreciation: | 564 | 447 |
Software [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Cost: | 3,084 | 3,094 |
Accumulated depreciation: | $ 2,944 | $ 2,860 |
Property and Equipment (Detai_2
Property and Equipment (Details Textual) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Property and Equipment (Textual) | |||
Depreciation expense | $ 1,175 | $ 1,046 | $ 893 |
Intangible Assets (Details)
Intangible Assets (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Finite-Lived Intangible Assets [Line Items] | ||
Original amounts: | $ 149,077 | $ 147,221 |
Accumulated amortization: | 107,598 | 96,210 |
Intangible assets, net | 41,479 | 51,011 |
Capitalized software costs [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Original amounts: | 78,793 | 75,126 |
Accumulated amortization: | 66,123 | 61,834 |
Customer relationships [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Original amounts: | 54,850 | 56,296 |
Accumulated amortization: | 33,578 | 27,967 |
Backlog and non-compete agreement [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Original amounts: | 2,712 | 2,712 |
Accumulated amortization: | 2,674 | 2,486 |
Acquired technology [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Original amounts: | 12,722 | 13,087 |
Accumulated amortization: | $ 5,223 | $ 3,923 |
Intangible Assets (Details 1)
Intangible Assets (Details 1) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
2019 | $ 10,323 | |
2020 | 8,572 | |
2021 | 7,057 | |
2022 | 4,749 | |
2023 | 3,546 | |
2024 and thereafter | 7,232 | |
Finite-Lived Intangible Assets, Net | $ 41,479 | $ 51,011 |
Intangible Assets (Details Text
Intangible Assets (Details Textual) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Intangible Assets (Textual) | |||
Amortization expenses | $ 11,389 | $ 12,565 | $ 10,715 |
Goodwill (Details)
Goodwill (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Goodwill [Line Items] | ||
Goodwill, Beginning, Balance | $ 98,189 | $ 91,002 |
Business combination | 277 | 1,723 |
Measurement period adjustments | (18) | 642 |
Foreign currency translation adjustments | (3,442) | 4,822 |
Goodwill, Ending, Balance | 95,006 | 98,189 |
IT professional services [Member] | ||
Goodwill [Line Items] | ||
Goodwill, Beginning, Balance | 48,403 | 43,874 |
Business combination | 1,723 | |
Measurement period adjustments | (18) | 614 |
Foreign currency translation adjustments | (1,694) | 2,192 |
Goodwill, Ending, Balance | 46,691 | 48,403 |
Software services [Member] | ||
Goodwill [Line Items] | ||
Goodwill, Beginning, Balance | 49,786 | 47,128 |
Business combination | 277 | |
Measurement period adjustments | 28 | |
Foreign currency translation adjustments | (1,748) | 2,630 |
Goodwill, Ending, Balance | $ 48,315 | $ 49,786 |
Short Term Debt (Details)
Short Term Debt (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2018 | |
Short term debt, Total | $ 9,771 | $ 8,661 |
Short-term loans from banks [Member] | ||
Linkage basis | NIS | |
Short term debt, Total | $ 259 | |
Short-term credit from banks one [Member] | ||
Linkage basis | NIS | |
Interest rate | 2.00% | |
Short term debt, Total | $ 618 | |
Short-term credit from banks [Member] | ||
Linkage basis | USD | |
Interest rate % | U.S Prime -0.2 | |
Short term debt, Total | $ 2,125 | 2,362 |
Minimum [Member] | Short-term loans from banks [Member] | ||
Interest rate | 1.60% | |
Maximum [Member] | Short-term loans from banks [Member] | ||
Interest rate | 2.00% | |
Current maturities of long-term loans from financial institution [Member] | ||
Linkage basis | NIS | |
Short term debt, Total | $ 6,769 | $ 6,299 |
Current maturities of long-term loans from financial institution [Member] | Minimum [Member] | ||
Interest rate | 2.60% | |
Current maturities of long-term loans from financial institution [Member] | Maximum [Member] | ||
Interest rate | 3.00% |
Accrued Expenses and Other Ac_3
Accrued Expenses and Other Accounts Payable (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Payables and Accruals [Abstract] | ||
Employees and payroll accruals | $ 16,242 | $ 15,203 |
Accrued expenses | 6,219 | 6,234 |
Government authorities | 1,426 | 4,738 |
Other | 571 | 1,614 |
Accrued expenses and other accounts payable | $ 24,458 | $ 27,789 |
Long Term Debt (Details)
Long Term Debt (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 | |
Debt Instrument [Line Items] | |||
Loan from banks and other (NIS) | [1] | $ 25,572 | $ 34,447 |
Other long term debt | 115 | 136 | |
Long-term Debt, Excluding Current Maturities | 25,687 | 34,583 | |
Current maturities (NIS) | (6,299) | (6,769) | |
Long-term Debt, Total | $ 19,388 | $ 27,814 | |
Long-term Debt [Member] | Minimum [Member] | |||
Debt Instrument [Line Items] | |||
Loans from banks in NIS, Interest rate | [1] | 2.60% | |
Long-term Debt [Member] | Maximum [Member] | |||
Debt Instrument [Line Items] | |||
Loans from banks in NIS, Interest rate | [1] | 5.00% | |
[1] | On November 2016, the Company obtained a loan in the amount of $ 31,356 linked to the New Israel shekel from an Israeli financial institution. The principal amount of the loan is payable in seven equal annual installments with the final payment due on November 2, 2023 and bears a fixed interest rate of 2.60% per annum, payable in two semi-annual payments. |
Long Term Debt (Details Textual
Long Term Debt (Details Textual) - USD ($) $ in Thousands | 1 Months Ended | 12 Months Ended | |
Nov. 30, 2016 | Dec. 31, 2017 | Dec. 31, 2018 | |
Long Term Debt (Textual) | |||
Loan amount | $ 27,814 | $ 19,388 | |
Description of financial covenants | a. Total equity attributable to Magic Software Enterprises shareholders shall not be lower than $ 100,000 at all times; b. The Company’s consolidated cash and cash equivalent and marketable securities available for sales shall not be less than $ 10,000; c. The ratio of the Company’s consolidated total financial debts to consolidated total assets will not exceed 50%; d. The ratio of the Company’s total financial debts less cash, short-term deposits and short-term marketable securities to the annual EBITDA will not exceed 3.25 to 1; and e. The Company shall not create any pledge on all of its property and assets in favor of any third party without the financial institution’s consent. | ||
Long-term Debt [Member] | Israeli institutional corporation [Member] | |||
Long Term Debt (Textual) | |||
Loan amount | $ 31,356 | ||
Final payment due date | Nov. 2, 2023 | ||
Fixed interest rate | 2.60% |
Taxes on Income (Details)
Taxes on Income (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Income Tax Disclosure [Abstract] | |||
Domestic | $ 25,839 | $ 19,442 | $ 15,334 |
Foreign | 6,008 | 4,803 | 5,323 |
Income before taxes on income | $ 31,847 | $ 24,245 | $ 20,657 |
Taxes on Income (Details 1)
Taxes on Income (Details 1) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Current: | |||
Domestic | $ 5,186 | $ 5,928 | $ 2,919 |
Foreign | 1,359 | 1,511 | 1,863 |
Total | 6,545 | 7,439 | 4,782 |
Deferred taxes: | |||
Domestic | 81 | (1,160) | (666) |
Foreign | 445 | 52 | (167) |
Total | 526 | (1,108) | (833) |
Taxes on income | $ 7,071 | $ 6,331 | $ 3,949 |
Taxes on Income (Details 2)
Taxes on Income (Details 2) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Income Tax Disclosure [Abstract] | ||
Net operating loss carryforwards | $ 3,914 | $ 4,355 |
Allowances, reserves and intangible assets | 1,361 | 1,974 |
Deferred tax assets before valuation allowance | 5,275 | 6,329 |
Less - valuation allowance | (3,417) | (3,339) |
Deferred tax assets, net | $ 1,858 | $ 2,990 |
Taxes on Income (Details 3)
Taxes on Income (Details 3) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Income Tax Disclosure [Abstract] | ||
Long-term tax assets | $ 1,858 | $ 2,990 |
Long-term tax liabilities | (10,343) | (11,331) |
Net deferred tax liabilities | $ (8,485) | $ (8,341) |
Taxes on Income (Details 4)
Taxes on Income (Details 4) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Income Tax Disclosure [Abstract] | |||
Income before taxes, as reported in the consolidated statements of income | $ 31,847 | $ 24,245 | $ 20,657 |
Statutory tax rate | 23.00% | 24.00% | 25.00% |
Theoretical tax expenses on the above amount at the Israeli statutory tax rate | $ 7,325 | $ 5,819 | $ 5,164 |
Tax adjustment in respect of different tax rates | (826) | 268 | (1,214) |
Deferred taxes on losses for which full valuation allowance was provided in the past | (11) | 658 | (455) |
Tax-deductible costs, not included in the accounting costs | (38) | (342) | |
Tax benefits in respect of prior years, net | (22) | (488) | 1,262 |
Nondeductible expenses | 45 | 70 | (232) |
Uncertain tax position and other differences | 560 | 42 | (234) |
Income tax | $ 7,071 | $ 6,331 | $ 3,949 |
Taxes on Income (Details 5)
Taxes on Income (Details 5) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Income Tax Disclosure [Abstract] | |||
Gross unrecognized tax benefits, Beginning balance | $ 1,125 | $ 825 | $ 666 |
Increase in tax positions taken in prior years | 1,050 | 300 | 159 |
Decrease in tax positions taken in prior years | |||
Gross unrecognized tax benefits, Ending balance | $ 2,175 | $ 1,125 | $ 825 |
Taxes on Income (Details Textua
Taxes on Income (Details Textual) - USD ($) $ in Thousands | Jan. 01, 2011 | Dec. 31, 2016 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 |
Taxes on Income (Textual) | ||||||
Effective corporate tax rate | 23.00% | 24.00% | 25.00% | |||
Loss carryforwards | $ 13,542 | |||||
Withholding tax rate | 4.00% | |||||
Income tax expense | $ 1,050 | $ 300 | $ 159 | |||
Statutory tax rate | 23.00% | 24.00% | 25.00% | |||
Cash and cash equivalents | $ 75,314 | $ 87,126 | $ 76,076 | $ 75,314 | $ 62,188 | |
Capital gains tax rate, description | A 12% capital gains tax rate on the sale of a preferred intangible asset to a foreign affiliated enterprise, provided that the asset was initially purchased from a foreign resident at an amount of NIS 200 million or more. | |||||
Provision for net deferred taxes | $ 428 | |||||
Tax expenses | 1,050 | $ 300 | $ 159 | |||
England [Member] | ||||||
Taxes on Income (Textual) | ||||||
Loss carryforwards | 3,876 | |||||
Industrial Companies [Member] | ||||||
Taxes on Income (Textual) | ||||||
Tax benefits, description | Law for the Encouragement of Industry (Taxes), 1969 (the "Industrial Encouragement Law"). The Industrial Encouragement Law defines an "Industrial Company" as a company that is resident in Israel and that derives at least 90% of its income in any tax year, other than income from defense loans, capital gains, interest and dividends, from an enterprise whose major activity in a given tax year is industrial production. Under the Industrial Encouragement Law, the Company is entitled to amortization of the cost of purchased know-how and patents over an eight-year period for tax purposes as well as accelerated depreciation rates on equipment and buildings. | |||||
Non Israel Subsidiaries [Member] | ||||||
Taxes on Income (Textual) | ||||||
Cash and cash equivalents | $ 12,062 | |||||
Minimum [Member] | ||||||
Taxes on Income (Textual) | ||||||
Effective corporate tax rate | 21.00% | 23.00% | ||||
Maximum [Member] | ||||||
Taxes on Income (Textual) | ||||||
Effective corporate tax rate | 35.00% | 24.00% | ||||
Tax Amendment [Member] | ||||||
Taxes on Income (Textual) | ||||||
Tax benefits, description | The Company's taxable income in Israel is entitled to a preferred 12% tax rate | |||||
Preferred Technology Enterprise [Member] | ||||||
Taxes on Income (Textual) | ||||||
Withholding tax rate | 20.00% | |||||
Statutory tax rate | 12.00% | 25.00% | ||||
Tax benefits, description | Total consolidated revenues of its parent company and all subsidiaries are less than NIS 10 billion. | |||||
Formula Telecom Solutions Ltd [Member] | ||||||
Taxes on Income (Textual) | ||||||
Loss carryforwards | $ 11,360 | |||||
Economic Policy [Member] | ||||||
Taxes on Income (Textual) | ||||||
Tax benefits, description | According to the Amendment, a flat corporate tax rate of 16% was established for exporting industrial enterprises (over 25%). |
Equity (Details)
Equity (Details) $ / shares in Units, $ in Thousands | 12 Months Ended |
Dec. 31, 2018USD ($)$ / sharesshares | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Number of options, Outstanding | shares | 220,767 |
Number of options, Exercisable | shares | 190,767 |
Weighted average exercise price, Outstanding | $ / shares | $ 3.83 |
Weighted average exercise price, Exercisable | $ / shares | $ 4.43 |
Weighted average remaining contractual term (in years), Outstanding | 3 years 9 months 22 days |
Employee Stock Option [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Number of options, Outstanding | shares | 309,309 |
Number of options, Granted | shares | 37,500 |
Number of options, Exercised | shares | (104,167) |
Number of options, Forfeited | shares | (21,875) |
Number of options, Outstanding | shares | 220,767 |
Number of options, Exercisable | shares | 190,767 |
Weighted average exercise price, Outstanding | $ / shares | $ 4.38 |
Weighted average exercise price, Granted | $ / shares | |
Weighted average exercise price, Exercised | $ / shares | 2.99 |
Weighted average exercise price, Forfeited | $ / shares | 6.89 |
Weighted average exercise price, Outstanding | $ / shares | 3.83 |
Weighted average exercise price, Exercisable | $ / shares | $ 4.43 |
Weighted average remaining contractual term (in years), Outstanding | 3 years 11 months 19 days |
Weighted average remaining contractual term (in years), Outstanding | 3 years 9 months 22 days |
Weighted average remaining contractual term (in years), Exercisable | 2 years 11 months 1 day |
Aggregate intrinsic value, Outstanding | $ | $ 1,237 |
Aggregate intrinsic value, Outstanding | $ | 1,684 |
Aggregate intrinsic value, Exercisable | $ | $ 1,456 |
Equity (Details 1)
Equity (Details 1) | 12 Months Ended |
Dec. 31, 2018$ / sharesshares | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Options outstanding | shares | 220,767 |
Weighted average remaining contractual life (years) | 3 years 9 months 22 days |
Weighted average exercise price | $ / shares | $ 3.83 |
Options exercisable | shares | 190,767 |
Weighted average exercise price of exercisable options | $ / shares | $ 4.43 |
0-1 [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Options outstanding | shares | 30,000 |
Weighted average remaining contractual life (years) | 9 years 5 months 27 days |
Weighted average exercise price | $ / shares | |
Options exercisable | shares | |
Weighted average exercise price of exercisable options | $ / shares | |
2.01-3 [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Options outstanding | shares | 66,000 |
Weighted average remaining contractual life (years) | 1 year 3 months 4 days |
Weighted average exercise price | $ / shares | $ 2.32 |
Options exercisable | shares | 66,000 |
Weighted average exercise price of exercisable options | $ / shares | $ 2.32 |
3.01-4 [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Options outstanding | shares | 73,517 |
Weighted average remaining contractual life (years) | 2 years 9 months 7 days |
Weighted average exercise price | $ / shares | $ 4 |
Options exercisable | shares | 73,517 |
Weighted average exercise price of exercisable options | $ / shares | $ 4 |
5.01-6 [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Options outstanding | shares | 6,250 |
Weighted average remaining contractual life (years) | 4 years 7 months 10 days |
Weighted average exercise price | $ / shares | $ 6 |
Options exercisable | shares | 6,250 |
Weighted average exercise price of exercisable options | $ / shares | $ 6 |
8.01-9 [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Options outstanding | shares | 45,000 |
Weighted average remaining contractual life (years) | 5 years 4 months 6 days |
Weighted average exercise price | $ / shares | $ 8.01 |
Options exercisable | shares | 45,000 |
Weighted average exercise price of exercisable options | $ / shares | $ 8.01 |
Equity (Details 2)
Equity (Details 2) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
Equity [Abstract] | |||
Accumulated realized and unrealized gain (loss) on available-for-sale securities, net | $ (94) | $ (58) | $ 40 |
Accumulated foreign currency translation adjustments | (6,057) | 115 | (7,494) |
Accumulated unrealized gain on derivative instruments, net | 26 | 26 | 26 |
Total other comprehensive income (loss) | $ (6,125) | $ 83 | $ (7,428) |
Equity (Details Textual)
Equity (Details Textual) - USD ($) $ / shares in Units, $ in Thousands | Mar. 04, 2019 | Aug. 08, 2018 | Jul. 12, 2018 | Aug. 13, 2017 | Aug. 09, 2017 | Aug. 14, 2016 | Aug. 12, 2015 | Feb. 05, 2015 | Feb. 28, 2018 | Feb. 22, 2017 | Feb. 21, 2016 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2012 | Sep. 04, 2014 |
Equity (Textual) | |||||||||||||||||
Ordinary shares price of per share | $ 8.2 | ||||||||||||||||
Intrinsic value of options exercised | $ 617 | $ 502 | $ 112 | ||||||||||||||
Unrecognized compensation cost related to non-vested share-based compensation | |||||||||||||||||
Accumulated cash dividend distributions of per share | $ 0.155 | ||||||||||||||||
Aggregate dividend value | $ 7,563 | ||||||||||||||||
Dividend paid date | Sep. 5, 2018 | ||||||||||||||||
Dividend distribution maximum percentage | 75.00% | ||||||||||||||||
Ordinary shares issued | 4,268,293 | ||||||||||||||||
Net of issuance expenses | $ 34,569 | ||||||||||||||||
Subsequent Event [Member] | |||||||||||||||||
Equity (Textual) | |||||||||||||||||
Accumulated cash dividend distributions of per share | $ 0.15 | ||||||||||||||||
Aggregate dividend value | $ 7,334 | ||||||||||||||||
Dividend paid date | Mar. 27, 2019 | ||||||||||||||||
2007 Plan [Member] | |||||||||||||||||
Equity (Textual) | |||||||||||||||||
Reserved ordinary shares for issuance | 1,500,000 | ||||||||||||||||
Additional ordinary shares | 250,000 | 1,000,000 | |||||||||||||||
Aggregate of ordinary shares for future grants | 962,500 | ||||||||||||||||
Expiration period | 10 years | ||||||||||||||||
Expire date | Aug. 1, 2027 | ||||||||||||||||
Exercisable period | 10 years | ||||||||||||||||
2007 Plan [Member] | Minimum [Member] | |||||||||||||||||
Equity (Textual) | |||||||||||||||||
Options vest years | 3 years | ||||||||||||||||
2007 Plan [Member] | Maximum [Member] | |||||||||||||||||
Equity (Textual) | |||||||||||||||||
Options vest years | 4 years | ||||||||||||||||
Board of Directors [Member] | |||||||||||||||||
Equity (Textual) | |||||||||||||||||
Accumulated cash dividend distributions of per share | $ 0.13 | $ 0.085 | $ 0.095 | $ 0.081 | $ 0.13 | $ 0.085 | $ 0.09 | $ 0.525 | |||||||||
Aggregate dividend value | $ 5,779 | $ 3,770 | $ 4,204 | $ 3,582 | $ 5,785 | $ 3,775 | $ 3,991 | $ 20,111 | |||||||||
Dividend paid date | Sep. 13, 2017 | Sep. 22, 2016 | Sep. 10, 2015 | Mar. 11, 2015 | Mar. 26, 2018 | Apr. 5, 2017 | Mar. 17, 2016 |
Related Parties Transactions (D
Related Parties Transactions (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Related Parties Transactions (Textual) | |||
Rendered services amount | $ 2,535 | $ 2,511 | $ 3,950 |
Acquired services and hardware amount | 309 | 165 | $ 102 |
Trade payables balances due to related parties amount | 106 | 64 | |
Trade and other receivables balances due from related parties amount | $ 601 | $ 931 |
Commitments and Contingencies (
Commitments and Contingencies (Details) $ in Thousands | Dec. 31, 2018USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
2019 | $ 2,224 |
2020 | 1,698 |
2021 | 977 |
2022 and thereafter | 1,336 |
Total | $ 6,235 |
Commitments and Contingencies_2
Commitments and Contingencies (Details Textual) $ in Thousands | 1 Months Ended | 12 Months Ended | ||||
Sep. 30, 2016USD ($) | Jan. 31, 2015USD ($) | Aug. 31, 2009USD ($) | Dec. 31, 2018USD ($)Squarefeet | Dec. 31, 2017USD ($) | Dec. 31, 2016USD ($) | |
Commitments and Contingencies (Textual) | ||||||
Rent expenses | $ 2,843 | $ 2,729 | $ 2,204 | |||
Lease agreement maximum penalties amount | $ 48 | |||||
Square feet of space based on lease agreements | Squarefeet | 170,363 | |||||
Aggregated amount of lease commitment | $ 6,235 | |||||
Sought damages in amount | $ 13,400 | |||||
Damages plaintiffs amount | $ 2,400 | |||||
Customer Contracts [Member] | ||||||
Commitments and Contingencies (Textual) | ||||||
Bank guarantees amount | 453 | |||||
Restricted bank deposits | $ 408 | |||||
Lease agreements, description | The remaining term of the outstanding leases range from six months to five years. | |||||
NIS [Member] | ||||||
Commitments and Contingencies (Textual) | ||||||
Sought damages in amount | $ 34,106 | $ 52,000 |
Net Earnings Per Share (Details
Net Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Earnings Per Share [Abstract] | |||
Net income attributable to Magic shareholders | $ 19,883 | $ 15,442 | $ 14,169 |
Accretion of redeemable non-controlling interests | (1,726) | (2,262) | |
Net income attributable to Magic shareholders after accretion of redeemable non-controlling interests | $ 18,157 | $ 15,442 | $ 11,907 |
Weighted average Ordinary shares outstanding: | |||
Denominator for basic net earnings per share | 46,665,042 | 44,435,671 | 44,347,083 |
Effect of dilutive securities | 131,648 | 161,548 | 168,953 |
Denominator for diluted net earnings per share | 46,796,690 | 44,597,219 | 44,516,036 |
Basic and Diluted earnings per share | $ 0.39 | $ 0.35 | $ 0.27 |
Segment Geographical Informat_3
Segment Geographical Information and Major Customers (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Segment Reporting Information [Line Items] | |||
Total revenues | $ 284,375 | $ 258,140 | $ 201,646 |
Expenses | 252,677 | 232,184 | 180,559 |
Segment operating income (loss) | 31,698 | 25,956 | 21,087 |
Depreciation and amortization | 12,564 | 13,611 | 11,608 |
Software Services [Member] | |||
Segment Reporting Information [Line Items] | |||
Total revenues | 81,332 | 77,100 | 70,834 |
Expenses | 63,902 | 63,649 | 58,847 |
Segment operating income (loss) | 17,430 | 13,451 | 11,987 |
Depreciation and amortization | 8,727 | 9,242 | 7,531 |
It Professional Services [Member] | |||
Segment Reporting Information [Line Items] | |||
Total revenues | 203,043 | 181,040 | 130,812 |
Expenses | 183,985 | 164,558 | 118,414 |
Segment operating income (loss) | 19,058 | 16,482 | 12,398 |
Depreciation and amortization | 3,611 | 4,100 | 3,769 |
Unallocated Expenses [Member] | |||
Segment Reporting Information [Line Items] | |||
Total revenues | |||
Expenses | 4,790 | 3,977 | 3,298 |
Segment operating income (loss) | (4,790) | (3,977) | (3,298) |
Depreciation and amortization | $ 226 | $ 269 | $ 308 |
Segment Geographical Informat_4
Segment Geographical Information and Major Customers (Details 1) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Revenue, Major Customer [Line Items] | |||
Total revenues | $ 284,375 | $ 258,140 | $ 201,646 |
United States [Member] | |||
Revenue, Major Customer [Line Items] | |||
Total revenues | 137,066 | 123,113 | 100,470 |
Israel [Member] | |||
Revenue, Major Customer [Line Items] | |||
Total revenues | 103,850 | 91,917 | 58,079 |
Europe [Member] | |||
Revenue, Major Customer [Line Items] | |||
Total revenues | 28,257 | 26,635 | 23,642 |
Japan [Member] | |||
Revenue, Major Customer [Line Items] | |||
Total revenues | 9,797 | 9,253 | 11,226 |
Others [Member] | |||
Revenue, Major Customer [Line Items] | |||
Total revenues | $ 5,405 | $ 7,222 | $ 8,229 |
Segment Geographical Informat_5
Segment Geographical Information and Major Customers (Details 2) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Segment Reporting Information [Line Items] | ||
Long-lived assets | $ 139,557 | $ 152,668 |
Israel [Member] | ||
Segment Reporting Information [Line Items] | ||
Long-lived assets | 100,206 | 111,217 |
United States [Member] | ||
Segment Reporting Information [Line Items] | ||
Long-lived assets | 30,222 | 32,223 |
Japan [Member] | ||
Segment Reporting Information [Line Items] | ||
Long-lived assets | 5,082 | 5,008 |
Others [Member] | ||
Segment Reporting Information [Line Items] | ||
Long-lived assets | 2,800 | 2,931 |
Europe [Member] | ||
Segment Reporting Information [Line Items] | ||
Long-lived assets | $ 1,247 | $ 1,289 |
Segment Geographical Informat_6
Segment Geographical Information and Major Customers (Details Textual) | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Segment Geographical Information and Major Customers (Textual) | |||
Concentration risk, percentage | 13.00% | 13.00% | 9.00% |
Revenue Recognition (Details)
Revenue Recognition (Details) - Software license and related revenues and consulting services [Member] $ in Thousands | 12 Months Ended |
Dec. 31, 2018USD ($) | |
2019 | $ 5,281 |
2020 | 5,183 |
2021 and thereafter | $ 969 |
Revenue Recognition (Details 1)
Revenue Recognition (Details 1) - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Revenue | $ 284,375 | ||
Taxes on income | 7,071 | $ 6,331 | $ 3,949 |
Net income | 24,776 | 17,914 | 16,708 |
Net income attributable to Magic Software Enterprises' shareholders | $ 19,883 | $ 15,442 | $ 14,169 |
Basic and diluted earnings per share | $ 0.39 | $ 0.35 | $ 0.27 |
Trade receivables (net of allowance for doubtful accounts) | $ 90,274 | $ 82,051 | |
Other accounts receivable and prepaid expenses | 7,029 | 8,643 | |
Other long-term receivables | 6,363 | 2,015 | |
Accrued expenses and other accounts payable | 24,458 | 27,789 | |
Total equity attributable to Magic Software Enterprises' shareholders | 243,956 | $ 210,281 | |
Before adoption ASC 606 [Member] | |||
Revenue | 282,263 | ||
Taxes on income | 6,809 | ||
Net income | 22,926 | ||
Net income attributable to Magic Software Enterprises' shareholders | $ 18,033 | ||
Basic and diluted earnings per share | $ 0.35 | ||
Trade receivables (net of allowance for doubtful accounts) | $ 87,853 | ||
Other accounts receivable and prepaid expenses | 8,984 | ||
Other long-term receivables | 4,717 | ||
Accrued expenses and other accounts payable | 24,196 | ||
Total equity attributable to Magic Software Enterprises' shareholders | 242,106 | ||
Effect of change higher/(lower) [Member] | |||
Revenue | 2,112 | ||
Taxes on income | 262 | ||
Net income | 1,850 | ||
Net income attributable to Magic Software Enterprises' shareholders | $ 1,850 | ||
Basic and diluted earnings per share | $ 0.04 | ||
Trade receivables (net of allowance for doubtful accounts) | $ 2,421 | ||
Other accounts receivable and prepaid expenses | (1,955) | ||
Other long-term receivables | 1,646 | ||
Accrued expenses and other accounts payable | 262 | ||
Total equity attributable to Magic Software Enterprises' shareholders | $ 1,850 |
Revenue Recognition (Details 2)
Revenue Recognition (Details 2) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Revenue Recognition | ||
Trade receivables (net of allowance for doubtful accounts) | $ 90,274 | $ 82,051 |
Deferred revenues | $ 4,857 | $ 5,586 |
Revenue Recognition (Details Te
Revenue Recognition (Details Textual) $ in Thousands | Dec. 31, 2018USD ($) |
Revenue Recognition (Textual) | |
Included in deferred revenues | $ 5,586 |
Selected Statements of Income_3
Selected Statements of Income Data (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Selected Statements of Income Data [Abstract] | |||
Total costs | $ 9,362 | $ 10,713 | $ 10,063 |
Less - capitalized software costs | (3,666) | (3,771) | (4,224) |
Research and development, net | $ 5,696 | $ 6,942 | $ 5,839 |
Selected Statements of Income_4
Selected Statements of Income Data (Details 1) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Selected Statements of Income Data [Abstract] | |||
Bank charges and interest from loans offset by interest from short term deposits | $ (986) | $ (1,124) | $ (199) |
Interest expenses related to liabilities in connection with acquisitions | (4) | (62) | (257) |
Interest income from marketable securities, net of amortization of premium on marketable securities | 284 | 284 | 240 |
Gain (loss) arising from foreign currency translation and other | 855 | (809) | (214) |
Financial income (expenses), net | $ (149) | $ 1,711 | $ 430 |
Subsequent Events (Details)
Subsequent Events (Details) - USD ($) $ / shares in Units, $ in Thousands | Mar. 04, 2019 | Aug. 08, 2018 |
Subsequent Events (Textual) | ||
Dividend distribution of per share | $ 0.155 | |
Aggregate dividend value | $ 7,563 | |
Dividend paid date | Sep. 5, 2018 | |
Subsequent Event [Member] | ||
Subsequent Events (Textual) | ||
Dividend distribution of per share | $ 0.15 | |
Aggregate dividend value | $ 7,334 | |
Dividend paid date | Mar. 27, 2019 |