Magic Software Enterprises Ltd (MGIC) 2018 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by.

Welcome to Magic Software Enterprises Ltd.

2018 Fourth Quarter and Full Year Financial Results Conference Call.

(Operator Instructions) With us online today are Magic's CEO, Mr. Guy Bernstein; Magic's CFO, Mr. Asaf Berenstin; Magic's VP of Technology and Innovation, Mr. Yuval Lavi; and Magic's VP, M&A and General Counsel, Mr. Amit Birk.

I would now like to turn the conference over to Mr. Amit Birk of Magic Software.

Please go ahead.

Thank you, and good day, everyone.

Our quarterly earnings release was issued before the market open this morning, and it has been posted on the company's website at www.magicsoftware.com.

Before we start, I would like to remind everyone that this conference call may contain projections or other forward-looking statements.

The safe harbor provision provided in the press release issued today also applies to the content of this call.

Magic expressly disclaims any obligation to update or revise any of these forward-looking statements, whether because of future events, new information, a change in its views or expectations or otherwise.

Also during the course of today's call, we'll refer to non-GAAP financial measures.

A reconciliation schedule showing GAAP versus non-GAAP results has been provided in the press release issued before the market open this morning.

A replay of this call will be available after the call on our Investor Relations section of the company's website.

I will now turn the conference over to Mr. Guy Bernstein, CEO of Magic Software.

Please go ahead.

Good morning, everyone, and thank you for joining us today to report our fourth quarter and full year 2018 financial results.

I'm very pleased with the result of our fourth quarter and the year, as a whole, as we continue to experience consistent year-over-year growth and an increased level of profits.

We are pleased that we exceeded our full year revenue guidance, delivering 9-year consecutive all-time high annual revenue of $284 million, which reflects a 10% year-over-year growth, consistent with the increase in our non-GAAP operating income of 12% to $39.5 million for the year.

We had a very productive fourth quarter with revenue reaching $72.3 million, reflecting 9% year-over-year growth; and operating profit increasing 15% to $10 million.

Asaf will provide more details on our financial results in his prepared remarks.

The strength of our performance in the quarter and throughout the year was broad-based with all of our major regions and markets producing solid organic growth as evidenced by the trust given to us by more than 250 new logos who joined during the year.

We continue to strengthen our competitive advantages with the development of products and solutions while gaining new customers and expanding our business with existing customers, allowing us to build on our strong foundation and achieve ongoing growth.

So overall, I'm very pleased with our strong finish to 2018 and closing out the year with another quarter of improved growth achieved by maintaining our focus and executing on our key objectives.

Now I'd like to turn the call over to Asaf, our Chief Financial Officer, to discuss the financial results in more detail.

Asaf?

Thank you, Guy, and good morning, everyone.

I will begin my commentary with a review of the fourth quarter and full year results, after which I will provide some commentary on the balance sheet and end with our 2019 annual guidance which we introduced in our press release earlier today.

Our fourth quarter revenues totaled $72.3 million compared to $66.2 million for the fourth quarter last year, reflecting 9% year-over-year growth, mainly driven by our organic expansion.

Looking at the geographical breakdown of the year.

Revenue in North America totaled $137.1 million, representing 48% of our total revenues, increased by 11.3% compared to last year.

Revenue in Israel totaled $103.12 million, representing 37% of our total revenues, increased 12.8% compared to last year.

Revenues in Europe totaled $28.3 million for the year, representing 10% of our total revenues, increased 6.7% compared to last year.

Revenues from the rest of the world declined from $16.5 million to $16.2 million compared to last year, mainly due to a termination of a project initiated in Africa last year for deploying a proprietary billing system.

Turning now to profitability.

Our non-GAAP gross profit for the fourth quarter of 2018 was $23.4 million, up approximately 4% compared to $22.6 million in the fourth quarter of last year.

Our non-GAAP gross margin decreased to 32.4% compared to 34.1% in the fourth quarter of last year.

On an annual basis, our non-GAAP gross profit for 2018 amounted to $94.4 million, up approximately 6% compared to $89 million in 2017.

Non-GAAP gross margin decreased to 33.2% compared to 34.5% in 2017 as a whole.

The continued decrease in our gross margin compared to the respective period, respectively, results mainly from the shift in our revenue mix from software towards professional services.

The breakdown of our revenue mix for the fourth quarter of 2018 and for the year was approximately 28% related to our software solutions and 72% related to our professional services compared to 30% related to our software solutions and 70% related to our professional services in 2017 as a whole.

Looking at the entire year, our revenues related to software solutions amounted to $80.1 million, reflecting approximately 40% year-over-year growth; and our revenues related to professional services amounted to $204.3 million, reflecting approximately 13% year-over-year growth.

Moving to operational costs.

R&D expenses on a non-GAAP basis in the fourth quarter of 2018 totaled $2.3 million compared to $2.6 million in the same quarter of last year.

R&D expenses for the year totaled $9.4 million compared to $10.7 million in 2017.

The decrease in R&D expenses is due to a shift of development projects to our offshore site in India and St.

Petersburg and to a cost-reduction program we implemented in one of our vertical application software solution units.

Our non-GAAP operating income for the fourth quarter increased 15% to $10 million compared to $8.7 million in the same period last year.

This reflects an operating margin of 13.9% for this quarter compared to 13.1% in the fourth quarter of 2017 and compared to 13.8% in the third quarter of 2018.

Our annual non-GAAP operating income increased 12% to $39.5 million compared to $35.1 million in 2017.

This reflects an operating margin of 13.9% compared to 13.6% in 2017 as a whole.

Our non-GAAP tax expense for this quarter totaled to $2.1 million compared to a tax expense of $1.9 million in the fourth quarter of 2017.

Looking at the year, our non-GAAP tax expenses totaled to $7.5 million, representing an effective tax rate of approximately 19% compared to a tax expense of $7.1 million in 2017, reflecting an effective tax rate of 21%.

The main reason for the decrease in our tax rate is due to U.S. corporate tax reform, which reduces our blended tax rate.

We expect our 2019 tax rate would be slightly higher in the range of 20% to 22%.

Our non-GAAP net income for the fourth quarter increased 21% to $5.8 million or $0.12 per fully diluted share compared to $4.8 million or $0.11 per fully diluted share in the same period last year.

The increase in our net income is consistent with the increase in our revenues and operating profit.

Our EPS for the quarter was negatively impacted by an amount of $0.01 per fully diluted share, resulting from the issuance of 4.3 million shares at a price of $8.2 per share in private placement for net proceeds of approximately $35.5 million to certain Israeli institutional investors and to Formula Systems, our controlling shareholder, during the third quarter of 2018.

Turning now to the balance sheet.

As of December 31, 2018, we had cash and cash equivalents, short- and long-term bank deposits and marketable securities of $115.6 million compared to approximately $90.9 million at the end of 2017.

Our strong cash position and improved profitability enabled us to maintain our dividend policy and to declare a cash dividend in the amount of $0.15 per share and in the aggregate amount of approximately $7.3 million for the second half of 2018, reflecting 75% of our annual net income attributable to the Magic shareholders.

Together with the dividend distributed from the first half of 2018, we distributed an annual total of $0.305 per share related to our 2018 earnings and in the aggregate amount of approximately $14.9 million, which reflects a total dividend yield of approximately 3.3%.

Our total financial debt as of December 31, 2018, amounted to $28 million compared to $37.6 million by the end of 2017.

During the year, we paid an amount of $7.1 million.

The remaining of our debt will be paid over the next 5 years.

Total trade receivable as of December 31 was $90.3 million compared to $82.1 million in 2017, reflecting no change in our DSO, which approximately is 90 days.

The increase in trade receivable is in line with a 10% growth reported in our revenues year-over-year.

From a cash flow perspective, we generated $3.8 million from operating activities in the fourth quarter compared to $2.4 million in the same period last year, and $24.1 million for the year compared to $25.5 million in 2017.

Lastly, turning to our 2019 guidance.

We expect 2019 full year revenue to be in the range of $313 million to $319 million on a constant currency basis, reflecting an annual growth rate of 10% to 12%, maintaining our double-digit growth reported over the last year.

With that, I will turn the call back to Guy for closing comments.

Thank you, Asaf.

In summary, we are pleased once again to report record-breaking results based on organic growth, reflecting the solid demand for our software solutions and professional services, which serve to help our customers on their digital transformation journey.

We continue working towards building closer client relationships, investing in those relationships and building strong foundation for growth, and we expect our strong financial position, coupled with the investments we made over the past few years, to promote and grow our market and continue our momentum into 2019.

With that, I will now turn the call over to the operator for questions.

(Operator Instructions) Your first question is from Tavy Rosner of Barclays.

This is Chris Reimer on for Tavy.

My first one regarding guidance for the year 2019.

In light of 2018, which came in at the low end of guidance, which was between 10% and 14%.

I'm just wondering if there was anything from this year that was maybe pushed out into 2019.

I can't say that.

I think that we -- for example, if I take one of our largest customers, CVS , which is undergoing a major transaction with Aetna.

So that, I think, is one of the reasons why we didn't manage to, let's say, meet the higher end of our guidance.

We finished some of the projects there, and we believe that we should expect renewal beginning of 2019 and even to get more business out of them.

And I think other than that, I don't think that we have any significant businesses that will shift from 2018 to 2019.

Great.

And then just regarding M&A, you mentioned on the previous earnings call that, hopefully, a deal might be closed at the beginning of 2019.

Could you give any comment as to how that might be progressing or what the outlook might be for the near future?

If I remember, we mentioned at the time that we raised some money in order -- basically to support the deal.

This deal was -- we thought it was canceled.

Now it's back on the table.

Hopefully, we'll have some news in the coming month or 2.

Your next question is from Maggie Nolan of William Blair.

This is Ted Starck-King on for Maggie Nolan.

So during the quarter, you announced that you'd achieved gold status with Microsoft, which means you're no longer -- which means you're eligible for Azure development planning services, sponsored credit and other benefits.

Could you discuss the opportunity, the benefit that, that opens up for your business?

Have you seen any traction as a result?

If not, when do you anticipate to see some additional traction there?

Yes.

We see some movement in the Microsoft ecosystem and partners.

Again, the partnership, the gold partnership with Microsoft is a happy opportunity for us, but we mainly work on the partnership relationship with the Microsoft partner, with the one alliance program that they have, and this is opening a lot of opportunities for us worldwide, especially in the U.S. and Europe.

And we are pushing more and more processes and work and deployment towards the Azure cloud to step up in the level of partnership and to be focused by Microsoft as a partner.

And yes, I cannot say at the moment the transition that we've made to the specific deal, but we do see a lot of action coming on from the market and from the Microsoft partner, as I said.

Very good.

So next question just on guidance, how much do you anticipate from foreign currency on the top line?

Again, how much from foreign…

Yes.

How much...

I don't think that it is material in the -- let's say, in this current level of the fluctuation, let's say, in currencies, we are currently at the level of $3.6 per shekel.

For our, let's say, nominated shekel businesses, this is pretty much the same average that we experienced in 2018 on average.

So that factor, we don't expect any negative or positive impact on the top line or the bottom line for that one.

Understood.

So last question for me.

On the previous call, you mentioned success with low-code application software platforms.

Could you provide an update on your traction with low-code platforms?

How much of your current software revenue is from low-code?

How much do you anticipate?

And how do you anticipate that will impact the competitive environment?

So basically, I would say that we have roughly $80 million of business in terms of turnover coming from our software activity.

Out of that, around 90%, -- 85% to 90% are related to our low-code activity.

I think that the market today is in a very accepted mode back to the low-code model of development for application.

The reason is that the pace that enterprises require to develop new enterprise application is the rapidly growing and generic coding or job hiring professional services to produce more application is something that just doesn’t keep the pace for enterprise demand for new applications.

You can see a testament for that also in the Forrester and the Gartner market analysis, which anticipate this market, this low-code market to grow from a current level of $4 billion in terms of the market size to over $20 billion or $22 billion in the next 5 years, reflecting over 30% CAGR growth on average.

So I think that we are today with our technology and perhaps with potential new acquisitions that we may do in the future is something that we are always looking for, looking to do.

We manage to get the top of this positive reaction in the market.

The next question is from Kevin Dede of H.C. Wainwright.

Asaf, Guy, can you just talk to the debt level?

I know you took on a bunch about 2 years ago.

I thought the thinking was -- the strategic thinking was use it for acquisitions.

And granted you've got, hopefully, you'll have one to talk about the next couple of months.

But I'm just kind of wondering what the overall plan is at this point.

I think I heard Asaf talk about repaying this debt over the next 5 years.

So could you just kind of give me sort of the top-down view of how you're thinking about that?

Basically, when we took this debt 2 years ago, it was to finance -- specifically to finance a transaction that we did for the acquisition of Roshtov.

And we also -- let's say, I also wanted to take the advantage and kind of create ongoing relations with the Israeli financial institutions that -- to open the channels.

So when and if we would need to raise the additional debt, we have some kind of a mechanism or a credit history with the financial institutions.

So we took that certain amount of loan, which was for payments on an equally annualized installment of 7 years.

What you see now in our balance sheet is basically the remaining of that loan, and we continue to, let's say, to keep track on that.

Our EBITDA-to-debt ratio is below -- is around 0.6, 0.5 of our profit, so I think that the company was really levered.

I think we are in a situation that once the M&A may kick back in again, we will be able to facilitate on that bridge.

Okay.

All right.

So the idea, though, is that, as you said on the call, to pay it off completely within that 7-year term over the next 5 years?

Yes.

Okay.

All right.

And then, I mean, I guess...

You need to take into account -- Kevin, you need to take into account that means that Magic has a -- let's say, business model is to grow 50% from organic activity, 50% from M&A.

We are distributing 75% of our net income, which is roughly 50% of our operating cash flow.

So that would mean that for future acquisitions, we will probably -- again once we take off some of our excess cash that is also on the balance sheet, we will need to turn to additional debt to finance those acquisitions.

Right.

I -- sure, Asaf.

I understand.

I also -- obviously, you're able to issue shares, if you need to, as you did in the third quarter.

I'm wondering if you guys could talk a little bit to the 200-plus logos that you've added.

I mean, I've been watching you guys for a bunch of years now.

And typically, you've offered press releases time here and time there, highlighting some of the new deals that you've done.

But I'd say over the past, I don't know, maybe, though, just for the full year of '18, there's been very little news flow regarding some of the new institutions you may have -- or the new deals that you may have won or the new institutions that you've worked with.

And you mentioned CVS, I appreciate that.

I'm just wondering if there's any more detail you can speak to from a customer level on the $80 million in software versus the $204 million in services.

Can you give us some of your largest customers and the growth that you've seen or the growth that you're not seeing vis-à-vis the one in Africa that seems to have disappeared?

So the reason for us not putting more press releases regarding this, and just because in most cases, the size of the deal are rather small compared to the overall revenues.

So all in all, the company is doing north of $300 million.

And we report -- we don't see any point in reporting these.

I don't know one -- usually the deals are, I would say, probably between $100,000 and $200,000, and we have a lot of them.

So in the past, we published some of them.

The market did not respond to that because, in the end, the company built out many, many rather small deals.

And this is the reason why we don't publish that.

All in all, CVS is, by far, the largest customer we mentioned.

We have a few more customers, not a big size, not significant to the business.

But again, we're growing with all of them, but I don't see any point because most of them are banks, insurance companies and they have the usual tactics in the business.

But all in all, the company is doing good.

We continue with the growth.

We continue with improving the profits, so we feel quite good about the overall.

Okay.

I thought -- I understand, Guy.

Just I guess it was just surprising to see from the outside that you haven't tried to be, I hate to say it, but at least trying to let people know, in a promotional way, that you're making progress between each quarterly report.

Kevin, a it's bit -- some of the frustration, I must say -- when you say that this company is delivering like for the past, I think, 9 years, we deliver better results every year, true.

There is -- because we have built out many, many small deals, there is a bit of a problem to provide indicators that will give more light to investors about the progress of the company.

But all in all, when you look at all the history, the record of this company, I'm really proud that we don't miss on this one.

So truly, it's a bit frustrating that I cannot give more indications that people will better understand the report.

Can -- maybe, Guy, it'd be helpful if you could give us an indication of deal size overall and maybe how your relationship with Microsoft or SAP and HANA have influenced that.

It seems, though, -- I mean, given all the years that I've been following you that it's been, for most those years, mostly small deals, mostly customers recurring, coming back and wanting more services and help from you guys.

I'm just wondering if some of the work that you've done in pushing to the cloud has altered the deal size at all.

Have your relationships with these partners helped you to increase the size of deals?

So all in all, the answer is yes.

We do get more business, whether it's from getting leads from Microsoft, or getting more leads from SAP, definitely.

I think by ourselves, we are doing a lot of way better business than what we are getting from the partners.

Unfortunately, it would be probably easier to get more leads from partners than to go and hunt them by ourselves.

But all in all, the business is growing all the time.

We've seen more deals.

As I mentioned, this is a rather -- based on the size of the company to date, they are not big.

So we can take companies like CVS where we started with close to $2 million a year, a few years ago, and now we are like more than $40 million, which is a great example.

I do expect to get more business from them as soon as they get over with all these merger with Aetna, so we do expect to get more business over there.

And we did the same with other customers that we have, so we are growing all the time.

We invest a lot in customers relationships, and we do see development of the business.

Whether we filed -- published that we closed a deal whatsoever, $250,000 or even $500,000 with specific customers, I don't think it will give any indication to investors.

And this is part of the problem to convey the message.

Yes.

I know we've talked about this a number of times, Guy.

It's equally frustrating for me because, as I look across my coverage universe, I don't think I have other companies that have executed as cleanly as you have despite the -- remember the big wrinkle in '14 and '15 with the Israeli shekel-U.

S. dollar fluctuations.

I mean, you guys have done a great job, you really have.

The Allstate’s difference with AT&T and managed through that.

You've managed through lots of things.

And obviously, technology -- the changes in technology across the board continue to accelerate, which is another difficult problem to manage.

I don't know.

Maybe you can think about it and get back to us more regularly on your interactions with partners and maybe how fast you're seeing leads.

Maybe you need to devote less time on your partners and maybe more time in your own internal development since that seems to be doing better.

We do that all the time.

In the end, we are very numbers oriented, which means that we go after the numbers, whether we can get them from -- through our partners or directly.

The important part for us is to deliver the numbers that we promise.

All right.

So give us a view of the M&A pipeline.

I know you've got one that you think is close.

How else does the market look?

Is it still pretty much as you've always seen it where firms are asking for multiples that you're not comfortable paying?

Do you think maybe it's time to change that perspective and consider looking at paying maybe a little bit more given that to Asaf's point, you're going to try to grow your business 50-50 inorganic, organic?

So I must say that with the transaction I mentioned, I think we are paying a lot more than what we are used to.

It's a technology company.

And therefore, assuming with the close, we will probably pay more than what we pay regularly.

We have at least one more transaction on the table that I think we will close, which is regular prices that we pay, on one hand, and the other hand, I think we get some good management in place.

All in all, we get that -- in any given month, we have quite a few potential acquisitions.

I must say that, for example, in 2018, we checked probably 12 companies, and we closed, what, none.

So it's a bit frustrating because at the end, when bankers present you with a company, it looks very good.

And then when you check it, it's becoming less and less good.

I think the best opportunities that we are getting, we are getting them through the business and not through bankers.

And they are the safest one, meaning we know what we are buying.

We either compete with a guy or we cooperate with a guy, and therefore these are the best transactions that we are getting.

But we are checking all of them.

Okay.

Can you speak a little bit to that?

I mean, granted the service side of the business has been driving your growth, really, for the past couple of years now.

And even though it seems, at least from the outside, that you're trying to stay on the edge of the technology curve.

Can you talk a little bit about technology development, internal resource use and how you might be able to carve a better niche for your technology business versus your service business?

I'll answer about -- even when we talk about the service business, we always try to go into all kind of niches rather than the generic stuff because then the stickiness is much stronger with the customer.

And we don't -- we are not driving to a price competition.

So even in the services side, these are the kind of services we are targeting.

On the technology side, we're trying to improve all the time.

We are bringing more technology to our installed base and of course, to new logos in order to penetrate.

This is the best way to penetrate.

We tend to check even companies on the technology side.

Unfortunately, knowing most people, either they are too young or too expensive, and we don't see the value in that.

Even if we will find something that is expensive, but we really see that value, of course we will go for it.

Okay.

Well, do you think, Guy, do you think that you'll -- do you think you'll mention in a press release when you get these deals done?

Yes.

Okay.

Then would -- do you think Mr. Lavi wouldn't mind commenting on how he's spending his money developing tech?

Again, how?

Just on development.

What's your -- where is your focus on development?

Is it still mostly on cloud?

Yes, on the cloud concept and again doesn't have to be on cloud on premise but the concept of -- again, we're enjoying the, Asaf mentioned, the backwind of the low code.

We see it now in Japan, where we have a big footprint, that the minute that we introduced a new version related to the low code and the Angular development, suddenly every door is being opened to us, and everybody is looking to meet us.

So yes, we are definitely on the focus of low code, which, again, 5 years ago, 10 years ago is considered to be a negative word.

Suddenly, for us, good for us, it's becoming a very positive word in the market.

And we are focusing definitely on the work development and mobile development, either on-premise deployments or clouds deployment.

Your next question is from Ethan Etzioni of Etzioni Portfolio Management.

I wanted to ask, now that an increasing portion of the revenues are coming from software or technology, first, I wanted to ask, in the second half, I see that there's a decline in the gross margin.

So that's a little bit surprising because I would expect the technology to be higher margin.

Can you please explain that?

Yes.

As we discussed on the call, basically the growth that we experienced on the service side of the business, which was around 13%, versus the growth that we saw on the software side of the business, which was around 4% to 5%, causes the -- some of the mix of our activity to decline in margins, gross margin.

In addition, during the last year, CVS, which, again, as we said, accounts for 13% of our revenue, introduced a rebate model, where as we grow the size of business that we generate from them, then we apply a rebate over our revenues, which now reaches a level of around 10%.

If you look a couple of years back, we were at -- 2 to 3 years back, we were at the level of 5%.

Went up last year, we were at the level of 9%.

So the fact that we are growing with the revenues also pushes us to significantly expand our business with the customer, otherwise it takes some from our margins there.

So gross profit in absolute numbers are always growing, but margins declined mainly from the mix.

As Guy also mentioned, we are trying to focus more and more in niche professional service project.

The landscape or the spectrum of our gross profit that we generate from different types of projects, high end and low end, range from 15% on the low-end side of the gross profit to 27% to 30%, on average, on the high-end gross profit.

You know from the Israeli market that the gross profit for system integrators range between 16% and 18%, so we really try.

Despite the fact that 40% of our business is coming from Israel, we still manage to find niche capabilities that we can provide to our customers that still provide us with a higher margin than somebody gets from the Israeli market, for example.

Just to make sure I have the numbers right.

What's the comparison to the $80 million this year?

What was that in '17?

The split in 2017 was 30% out of the $204 million -- $254 million that we sold for software and 70% for professional services.

This year, we are 28% on software, and 82% -- and 72%, I'm sorry, for professional services.

So the professional service side of the business is growing higher than the software side.

Both of them are growing, but professional service is growing higher.

So looking forward at the profitability, so gross margin seems to be a little under pressure.

On the other hand, they seem to keep operating costs at bay.

So overall, some factors...

Yes, I think that for the company, the core, let's say, fulfillment of the business, I think that between something in the range of 31.5% to 32.5%, that will be our current level of the gross margin, on the higher end, let's say, on this range.

GAAP or non-GAAP?

Non-GAAP.

And what was that in GAAP terms?

It will be around 2% less than that.

So 29.5% to 30.5%.

Yes.

Something around that.

All right.

And that's -- and assuming -- and you expect operating costs to stay around the same in the -- going forward?

Yes.

The same, yes.

Percentage-wise, yes.

Right.

So overall, operating margin looks, in '19, should be pretty similar to '18.

Exactly, exactly.

I mean, I think that you can see that over the last, I don't know, 4 or 5 years, you can see that the company pretty much maintained its operating level at around 14% to 15%.

We took a notch down from the 15%, but currently, we are, for the last few years maintaining our 14% operating margin level.

Again, that's non-GAAP, right?

And so GAAP...

Non-GAAP.

The way that we see the business on a non-GAAP basis.

The amortization that we do on intangible assets related to the acquisitions that we are doing or amortization of software development that we do, we exclude that.

All right, all right, I understand.

Okay.

And one last question about the capital raising.

I mean, you're generating free cash flow.

And my question is do you expect a need to come to the market again with a share issuance?

Or do you think...

Not at the moment.

I'm sorry?

We see that a lot of cash and maybe after we deploy, all this would work.

At the moment, there are nothing.

(Operator Instructions) There are no further questions at this time.

Mr. Bernstein, would you like to make your concluding statement?

Yes.

So thank you all for joining us for another good year, and I hope to bring you some more good news in the near future.

Thank you.

Thank you.

This concludes the Magic Software Enterprises Ltd.

Fourth Quarter 2018 Results Conference Call.

Thank you for your participation.

You may go ahead and disconnect.