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Formula Systems Reports the Results of the Second Quarter and First Half of 2018 with Double-Digit Growth in All Major Financial Indicators

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Formula's revenues for the first half increased 15% year over year to $736.9 million and operating income for the first half increased 63% year over year to $50.6 million

Or Yehuda, Israel, Aug. 16, 2018 (GLOBE NEWSWIRE) -- Formula Systems (1985) Ltd. (NASDAQ:FORTY), a global information technology holding company engaged, through its subsidiaries and affiliates, in providing software consulting services and computer-based business solutions and developing proprietary software products, today announced its results for the second quarter and first half ended June 30, 2018, in accordance with International Financial Reporting Standards (IFRS).

Financial Highlights for the Second Quarter Ended June 30, 2018

  • Consolidated revenues for the second quarter increased by 10.4% to $363.5 million, compared to $329.1 million in the same period last year.
  • Consolidated operating income for the second quarter increased by 66.5% to $24.8 million, compared to $14.9 million in the same period last year.  
  • Consolidated net income attributable to Formula's shareholders for the second quarter was $7.6 million, or $0.51 per fully diluted share, compared to $0.3 million, or $0.01 per fully diluted share, in the same period last year.   

Financial Highlights for the Six-Month Period Ended June 30, 2018

  • Consolidated revenues for the first half of 2018 increased by 15.1% to $736.9 million, compared to $640.0 million in the same period last year.
  • Consolidated operating income for the first half of 2018 increased by 62.6% to $50.6 million, compared to $31.1 million in the same period last year.  
  • Consolidated net income attributable to Formula's shareholders for the first half of 2018 was $14.9 million, or $0.99 per fully diluted share, compared to $0.8 million, or $0.06 per fully diluted share, in the same period last year.   
  • As of June 30, 2018, Formula held 49.18%, 48.25%, 47.12%, 100%, 50% and 90.09% of the outstanding ordinary shares of Matrix IT Ltd., Sapiens International Corporation N.V, Magic Software Enterprises Ltd., Michpal Micro Computers (1983) Ltd., TSG IT Advanced Systems Ltd. and Insync Staffing Solutions, Inc., respectively.
  • Consolidated cash, short-term investments in marketable securities and bank deposits totaled to approximately $251.8 million as of June 30, 2018. 
  • Total consolidated equity as of June 30, 2018, was $772.9 million (representing 49.3% of the total balance sheet).
  • As of June 30, 2018, Formula was in compliance with all of its financial covenants under the debentures issued by Formula and under loans granted from other financial institutions.

Comments of Management

Commenting on the results, Guy Bernstein, CEO of Formula Systems, said, "We are very pleased to report significant growth in all major financial indices across our entire portfolio.

"In the second quarter and first half of 2018, Matrix achieved double-digit growth across all its key financial indicators. Matrix reported revenues of NIS 762.2 million in the second quarter of 2018, operating income of NIS 50.1 million, and net income attributable to Matrix shareholders of NIS 32.7 million, reflecting an increase of 14%, 22.1% and 43.3% respectively, year over year.

"The increase in Matrix's revenues can be credited to the strategic deals that it won over the past year, including establishing a credit database for the Bank of Israel, significant deals in the field of cyber and other successful business initiatives. In the US, Matrix is beginning to reap the benefits of its acquisitions and continues to see the US market as a strategic market for its continued growth.

"Matrix also continued to focus on high-profit activities and on developing new models in the field of employee training and placement well as in the integration and infrastructure solutions sector, which continues to expand and enjoy increased demand.

"Sapiens' improved margins and profitability in the second quarter and first half of 2018 reflect its success in making significant strides to getting back on track, including cost-cutting programs and the effective leveraging of its global assets. In the second quarter, Sapiens' revenues totaled $72.2 million up 4.5% compared to last year, its operating margin improved to 6.8% and its non-GAAP1 operating margin was 13.2% up from (4.3%) and 4.7% respectively, year over year.

"Sapiens updated its guidance and forecasts that its non-GAAP revenues will be in the range of $285 to $290 million up from $280 to 285 million and the non-GAAP full year operating margins will be in the range of 13.0% and 13.2% up from 12.0% to 13.0%.

"Sapiens continues to advance towards its key objectives of expanding its P&C business in EMEA and North America while improving profitability. Sapiens' enhanced digital insurance offering along with its proven products and personnel are winning new business, particularly with its P&C platforms, and is expanding its business with new and existing clients and building its pipeline for future growth. This quarter's results demonstrate Sapiens' ability to expand market leadership, particularly in the areas with the greatest client demand in the insurance market: digitalization, data analytics, and legacy transformation.

"Magic's record-breaking financial results for the second quarter and first half of 2018 demonstrate that Magic is continuing its impressive forward momentum across all of its markets and regions, confirming that its strategic business initiatives are paying off. The results for the second quarter were at all-time highs with revenues of $70.2 million, operating income of $8.0 million and non-GAAP2 operating income of $9.8 million, up 7%, 26% and 9% respectively, year over year, driven exclusively by organic growth.

"TSG is expanding its partnerships to execute additional strategic projects in Israel and around the world.

"Lastly, we are excited by Michpal's continuing growth, with revenues for the first half of 2018 increasing by more than 25% year over year, mainly as a result of the successful January 2018 official launch of its new product and new service line – "Michpal Pension" and "Michpal PensionPlus". Over 1,500 existing Michpal customers have already adopted this new business line, which is the first step in our business strategy to expand Michpal's offerings. We expect that Michpal's strong financial position, coupled with its activities towards promoting and growing its business organically and through M&As, will continue the company's momentum through 2018 and beyond."




1 Non-GAAP measures as detailed in Sapiens' press release from August 7, 2018

2 Non-GAAP measures as detailed in Magic Software Enterprises' press release from August 8, 2018



About Formula

Formula Systems (1985) Ltd. is a global information technology company engaged, through its subsidiaries and affiliates, in providing software consulting services and computer-based business solutions and developing proprietary software products.

For more information, visit www.formulasystems.com.

Press Contact:

Formula Systems (1985) Ltd.
+972-3-5389487
ir@formula.co.il

Except for any historical information contained herein, matters discussed in this press release might include forward-looking statements that involve a number of risks and uncertainties. Regarding any financial statements, actual results might vary significantly based upon a number of factors including, but not limited to, risks in product and technology development, market acceptance of new products and continuing product conditions, both locally and abroad, release and sales of new products by strategic resellers and customers, and other risk factors detailed in Formula's most recent annual report and other filings with the Securities and Exchange Commission. These forward-looking statements are made only as of the date hereof, and the Company undertakes no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise.

 

FORMULA SYSTEMS (1985) LTD.
CONSOLIDATED CONDENSED STATEMENTS OF PROFIT OR LOSS
U.S. dollars in thousands (except per share data)

    Six months ended     Three months ended  
    June 30,     June 30,  
    2018     2017     2018     2017  
    Unaudited     Unaudited  
Revenues     736,858       639,971       363,483       329,093  
Cost of revenues     572,616       501,154       282,581       256,605  
                                 
Gross profit     164,242       138,817       80,902       72,488  
Research and development costs, net     21,448       19,383       10,502       11,572  
Selling, general and administrative expenses     92,215       88,320       45,635       46,040  
Operating income     50,579       31,114       24,765       14,876  
                                 
Financial income (expenses), net     (3,261 )     (13,435 )(*)     (1,290 )     (6,408 )(*)
                                 
Income before taxes on income     47,318       17,679 (*)     23,475       8,468 (*)
Taxes on income     11,723       6,330       5,605       3,397  
                                 
Income after taxes     35,595       11,349 (*)     17,870       5,071 (*)
Equity in gains (losses) of affiliated companies, net     (63 )     410       (133 )     198  
                                 
Net income     35,532       11,759 (*)     17,737       5,269 (*)
Net income attributable to redeemable non-controlling interests     3,111       1,176 (*)     1,582       569 (*)
Net income attributable to non-controlling interests     17,571       9,784 (*)     8,544       4,446 (*)
                                 
Net income attributable to Formula Systems' shareholders     14,850       799 (*)     7,611       254 (*)
                                 
Earnings per share (basic)     1.01       0.06 (*)     0.52       0.02 (*)
Earnings per share (diluted)     0.99       0.06 (*)     0.51       0.01 (*)
                                 
Number of shares used in computing earnings per share (basic)     14,730,449       14,320,595       14,730,865       14,338,451  
Number of shares used in computing earnings per share (diluted)     15,568,811       14,711,056       15,569,517       14,711,079  

 

  *) Adjustment to comparative data

FORMULA SYSTEMS (1985) LTD.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
U.S. dollars in thousands

    June 30,     December 31,  
    2018     2017  
    (Unaudited)        
ASSETS            
CURRENT ASSETS:            
Cash and cash equivalents     238,774       245,936  
Marketable securities     11,919       14,138  
Short-term deposits     1,111       735  
Trade receivables     380,706       385,778  
Other accounts receivable and prepaid expenses     48,576       44,915  
Inventories     3,587       3,299  
Total current assets     684,673       694,801  
                 
LONG-TERM ASSETS:                
Deferred taxes     15,330       15,878  
Prepaid expenses and other accounts receivables     20,121       16,581  
Total long-term assets     35,451       32,459  
                 
INVESTMENTS IN COMPANIES ACCOUNTED FOR AT EQUITY METHOD     25,248       25,315  
                 
PROPERTY, PLANTS AND EQUIPMENT, NET     29,668       29,807  
                 
NET INTANGIBLE ASSETS AND GOODWILL     793,863       781,255  
                 
TOTAL ASSETS     1,568,903       1,563,637  
                 
CURRENT LIABILITIES:                
Liabilities to banks and others     108,948       70,819  
Debentures     53,418       4,826  
Trade payables     77,778       95,339  
Deferred revenue and customer advances     69,490       58,905  
Employees and payroll accrual     100,689       111,707  
Other accounts payable     48,118       53,145  
Liabilities related to business combinations     5,061       6,811  
Redeemable non-controlling interests     36,686       31,395  
Total current liabilities     500,188       432,947  
                 
LONG-TERM LIABILITIES:                
Liabilities to banks and others     92,482       135,616  
Other long-term liabilities     7,315       7,244  
Debentures, net of current maturities     116,154       133,739  
Deferred taxes     34,477       36,605  
Deferred revenues     6,763       9,340  
Liabilities related to business combinations     8,380       4,711  
Redeemable non-controlling interests     21,376       21,481  
Employee benefit liabilities     8,836       9,032  
Total long-term liabilities     295,783       357,768  
                 
EQUITY                
Equity attributable to Formula Systems' shareholders     359,458       359,202  
Non-controlling interests     413,474       413,720  
Total equity     772,932       772,922  
                 
TOTAL LIABILITIES AND EQUITY     1,568,903       1,563,637  

FORMULA SYSTEMS (1985) LTD.
STANDALONE FINANCIAL DATA HIGHLIGHTS
U.S. dollars in thousands

    June 30,     December 31,  
    2018     2017  
    (Unaudited)  
             
Debentures     91,194       59,503  
                 
Other financial liabilities     24,854       38,911  
                 
Formula shareholders' equity     359,458       359,202  
                 
Cash, cash equivalents and short-term marketable securities     38,293       14,842  
                 
Fair market value of equity holdings in publicly traded subsidiaries     732,485       835,400  

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