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Formula Systems Reports Full Year Results for 2016 With Record-Breaking Revenues and Operating Income
[March 16, 2017]

Formula Systems Reports Full Year Results for 2016 With Record-Breaking Revenues and Operating Income

OR YEHUDA, Israel, March 16, 2017 /PRNewswire/ -- 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 fourth quarter and the full year ended December 31, 2016, in accordance with International Financial Reporting Standards (IFRS).

Financial Highlights for the Fourth Quarter of 2016

  • Consolidated Revenues for the fourth quarter ended December 31, 2016, increased by 19.3% to a record-breaking $302.3 million, compared to $253.4 million in the same period last year.
  • Consolidated operating income for the fourth quarter ended December 31, 2016, increased by 9.3% to $22.9 million, compared to $21.0 million in the same period last year.
  • Consolidated net income attributable to Formula's shareholders for the fourth quarter ended December 31, 2016, increased by 3.6% to $5.9 million, or $0.40 per fully diluted share, compared to $5.7 million, or $0.39 per fully diluted share, in the same period last year.
  • As of December 31, 2016, Formula held 50.0%, 48.9%, 47.3% and 50% of the outstanding ordinary shares of Matrix IT, Sapiens International Corporation N.V, Magic Software Enterprises Ltd. and TSG IT Advanced Systems, respectively.

Financial Highlights for the Year Ended December 31, 2016

  • Consolidated revenues for the year ended December 31, 2016, increased by 13.9% to a record-breaking $1.1 billion, compared to $973.2 million for last year.
  • Consolidated operating income for the year ended December 31, 2016, increased by 16.7% to a record-breaking $88.5 million, compared to $75.9 for last year. 
  • Consolidated net income attributable to Formula's shareholders for the year ended December 31, 2016, increased by 13.2% to $22.4 million, or $1.49 per fully diluted share, compared to $19.8 million, or $1.33 per fully diluted share, for last year.
  • Consolidated cash, short-term and long-term investments in marketable securities, and bank deposits totaled approximately $292.9 million as of December 31, 2016. 
  • Total consolidated equity as of December 31, 2016, was $723.8 million (representing 53.3% of the total balance sheet).
  • As of December 31, 2016, Formula was in compliance with all of its financial covenants under the debentures issued by Formula in September 2015 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 another quarter and full year of strong growth and performance across our entire portfolio. Sapiens delivered double-digit growth across all of its offerings and territories, with revenues up 16.5% year over year to a record breaking $216.2 million (on a non-GAAP basis), exceeding its guidance, and non-GAAP operating income reaching a record-breaking $29.6 million for the year. While Sapiens' recently announced acquisition of StoneRiver Inc. significantly expands its presence in North America, the company is also continuing to grow organically, with increased sales of existing solutions, and new offices in Copenhagen and Istanbul. Sapiens is very optimistic about its continued growth, providing 2017 full-year revenue guidance of $270-$280 million, reflecting an annual growth rate of 25%-30%. Matrix had a record-breaking year in 2016, achieving double-digit growth in all major financial indicators, including revenues, operating income and net income. Matrix is continuing its focus on high-growth sectors including cyber, cloud, mobile, Big Data and digital solutions and is confident that it can continue its momentum in 2017. Magic exceeded its revenue guidance, reporting record-breaking 2016 revenues of $202 million, reflecting 15% growth year over year, and record operating cash flow of $28.1 million, an increase of 43% year over year. Magic's high visibility to its business, together with its diversified portfolio, make it very positive about its ability to accelerate growth and ramp up operating profit in 2017. In light of this, Magic provided 2017 full-year revenue guidance in the range of $225-$230 million, reflecting annual growth of 12-14%."

Transition to International Financial Reporting Standards ("IFRS")

In accordance with Formula's May 2016 announcement that it will report its financial results under IFRS as of January 1, 2016 (date of adoption), the Company's Consolidated Statements of Financial Position and Consolidated Statements of Profit or Loss for the fourth quarter and full year ended December 31, 2016 and the comparative periods of 2015 are also reported under IFRS.

The main difference between IFRS and US GAAP reporting, as it applies to the Company, relates to the consolidation of the results of operations of subsidiaries. Under US GAAP, companies are evaluated for consolidation purposes based on voting interests, to determine whether the reporting entity controls and therefore consolidates them. Under US GAAP, the majority voting interest holder of a company (i.e., ownership of more than 50% of the outstanding voting shares of an entity) consolidates the results of that company. Upon transitioning to reporting based on IFRS, the Company consolidated the results of operations of Sapiens International Corporation N.V. and Magic Software Enterprises Ltd. over which it has effective control ("de facto control"), as required under IFRS (even where it is not the majority voting interest holder). "De facto control" exists when the Company's rights in such entities are sufficient to give it the practical ability to direct the relevant activities of such entities even where it does not have more than 50% of the voting power therein. The Company believes that consolidating the results of operations of entities over which it has "de facto control" provides more consistency in accounting treatment and financial reporting over future periods, whether or not the Company's interest in these entities exceeds 50% (but provided that, and for as long as, it has "de facto control" over such entities). The concept of "de facto control" does not exist under US GAAP. The Company believes that this change provides shareholders with information that better reflects the Company's operations through the subsidiaries that it effectively controls. 

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.

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 INCOME



U.S. dollars in thousands (except per share data)













Three months ended


Year ended




December 31,


December 31,




2016


2015


2016


2015




Unaudited


Unaudited



Revenues

302,314


253,375


1,108,621


973,194



Cost of revenues

233,959


189,601


849,840


741,270



Gross profit

68,355


63,774


258,781


231,924



Research and development costs, net

6,881


3,910


22,328


15,123



Selling, general and administrative expenses

38,552


38,895


147,953


140,935




Operating income

22,922


20,969


88,500


75,866



Financial expenses, net

(3,301)


(2,161)


(11,586)


(9,533)



Income before taxes on income

19,621


18,808


76,914


66,333



Taxes on income

5,763


4,517


21,163


15,984



Income after taxes

13,858


14,291


55,751


50,349



Equity in gains of affiliated companies, net

(442)


-


349


5



Net income

13,416


14,291


56,100


50,354



Change in redeemable non-controlling interests

781


(460)


2,571


864



Net income attributable to non-controlling interests

6,690


9,013


31,084


29,661



Net income attributable to Formula's shareholders

5,945


5,738


22,445


19,829











Earnings per share (basic)

0.42


0.40


1.58


1.41



Earnings per share (diluted)

0.40


0.39


1.49


1.33













Number of shares used in computing earnings per share (basic)

14,267,339


14,124,492


14,213,719


14,071,210



Number of shares used in computing earnings per share (diluted)

15,529,192


14,666,577


15,525,261


14,665,365























 











FORMULA SYSTEMS (1985) LTD.


CONSOLIDATED CONDENSED BALANCE SHEETS


U.S. dollars in thousands





December 31,




December 31,





2016




2015





(Unaudited)




(Unaudited)

ASSETS








CURRENT ASSETS:









Cash and cash equivalents 



238,161




249,141


Marketable securities



37,516




31,605


Short-term deposits 



13




2,688


Trade receivables 



308,338




257,631


Other accounts receivable 



46,025




43,112


Inventories 



3,953




4,807

Total current assets



634,006




588,984










LONG-TERM INVESTMENTS:









Marketable securities 



17,228




30,875


Deferred taxes



15,227




16,347


Investments in an affiliated company 



24,080




-


Prepaid expenses and other assets



14,390




11,506

Total long-term investments



70,925




58,728



















PROPERTY, PLANTS AND EQUIPMENT, NET 



26,130




22,003










NET INTANGIBLE ASSETS AND GOODWILL



627,605




545,677










TOTAL  ASSETS



1,358,666




1,215,392










CURRENT LIABILITIES:









Liabilities to banks and others financial institutions



84,760




59,082


Debentures 



3,274




213


Trade payables 



80,114




68,051


Deferred revenues 



37,375




39,694


Employee and payroll accruals  



89,152




76,653


Other accounts payable 



43,785




41,676


Dividend payable to non-controlling interests



7,072




-


Liability related to business combinations



7,909




2,866


Redeemable non-controlling interests



6,073




4,673

Total current liabilities



359,514




292,908










LONG-TERM LIABILITIES:









Liabilities to banks and others financial institutions



115,080




103,808


Other long-term liabilities



12,380




7,811


Debentures



55,441




57,128


Deferred taxes



30,939




22,667


Customer advances 



4,697




4,396


Liability related to business combinations 



6,932




3,434


Liabilities related to capital lease



108




494


Accrued severance pay, net



6,174




3,389


Redeemable non-controlling interests



43,556




14,078

Total long-term liabilities



275,307




217,205










EQUITY 









Formula shareholders' equity



336,390




329,899


Non-controlling interests



387,455




375,380

Total equity



723,845




705,279










TOTAL LIABILITIES AND EQUITY



1,358,666




1,215,392

 














FORMULA SYSTEMS (1985) LTD.










STANDALONE FINANCIAL DATA HIGHLIGHTS









U.S. dollars in thousands




























December 31,










2016


2015










(Unaudited)





























Debentures





58,715


57,341

















Other financial liabilities




46,564


52,623

















Formula shareholders' equity




336,390


329,899

















Cash, cash equivalents and short-term marketable securities



43,537


78,436

















Fair market value of equity holdings in publicly traded subsidiaries 


725,860


532,697



























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

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/formula-systems-reports-full-year-results-for-2016-with-record-breaking-revenues-and-operating-income-300424674.html

SOURCE Formula Systems (1985) Ltd


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