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Formula Systems Reports Record-Breaking Revenues of $311 Million for the First Quarter with 19% Year Over Year Growth
[May 18, 2017]

Formula Systems Reports Record-Breaking Revenues of $311 Million for the First Quarter with 19% Year Over Year Growth


OR YEHUDA, Israel, May 18, 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 first quarter ended March 31, 2017, in accordance with International Financial Reporting Standards (IFRS).

Financial Highlights for the First Quarter Ended March 31, 2017

  • In January 2017, Formula acquired all of the share capital of Michpal Micro Computers (1983) Ltd., an Israeli privately-held company that develops, sells and supports a proprietary on-premise payroll software solution and complementary modules for processing traditional payroll stubs to Israeli enterprises and payroll service providers. The Michpal payroll software solution is recognized throughout Israel, with approximately 8,000 customers, most of which are long-term customers.

    As part of its payroll software solution Michpal allows the preparation of employee pay statements, supporting journals, summaries, and management reports and supports monthly and year-end regulatory and legislative payroll tax statements and other forms such as payroll social and income taxes, to its clients and their employees. Formula paid a purchase price of $22.1 million
  • Consolidated Revenues for the first quarter increased by 19% to a record-breaking $310.9 million, compared to $262.2 million in the same period last year.
  • Consolidated operating income for the first quarter, decreased by 25% to $16.2 million, compared to $21.5 million in the same period last year. The decrease in operating income is attributable to Sapiens' operating income decreasing from $ 6.4 million in the first quarter of 2016 to an operating loss of ($1.6) million due to the halt of a software development project with a significant customer of Sapiens and the integration of StoneRiver, Sapiens recent acquisition. In the second quarter, Sapiens will continue restructuring steps to address these developments and remain on track in the second half of 2017. Excluding the negative impact of Sapiens results, Formula operating income increased 17% year over year.  
  • Consolidated net income attributable to Formula's shareholders for the first quarter was $0.2 million, or $0.01 per fully diluted share, compared to $4.1 million, or $0.27 per fully diluted share, in the same period last year. The decrease in net income attributable to Formula's shareholders is primarily attributable to a decrease in Sapiens net income from $5.0 million in the first quarter of 2016 to a loss of ($2.2) million (as detailed above) and to devaluation of long term liabilities to banks and others denominated in New Israeli Shekels following the erosion of the US dollar against the new Israeli shekel amounting to $3.5 million.   
  • As of March 31, 2017, Formula held 50.0%, 48.8%, 47.2%, 100% 50% and 90% of the outstanding ordinary shares of Matrix IT, Sapiens International Corporation N.V, Magic Software Enterprises Ltd., Michpal Micro Computers (1983) Ltd., TSG IT Advanced Systems, and Insync Staffing Solutions, respectively.
  • Consolidated cash, short-term and long-term investments in marketable securities and bank deposits totaled approximately $211.1 million as of March 31, 2017. 
  • Total consolidated equity as of March 31, 2017, was $741.9 million (representing 51% of the total balance sheet).
  • As of March 31, 2017, 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 pleased to report another quarter of double-digit revenue growth across our entire portfolio. While our top-line growth was strong, our profitability was impacted mostly by certain aspects of Sapiens' business activities. Sapiens revenues reached $56.5 million for the quarter, driven by a mix of organic growth and its recent StoneRiver acquisition. Sapiens operational profitability was affected by the loss of a significant customer and the integration of StoneRiver activities. Sapiens is taking steps to address and overcome these developments and has declared that it is on track to return to double-digit operating margins in the second half of 2017. Sapiens is maintaining its recently revised 2017 full-year revenue guidance of $265-$275 million. Matrix achieved another quarter of double-digit revenue growth, showing continued growth across all financial indicators. Matrix's consistent growth in revenues and profitability is a result of both organic growth and ongoing acquisitions. Magic had a strong start to the year with $61 million in Q1 revenues, reflecting 36% growth year over year, and record-breaking non-GAAP operating income for the quarter of $8.4 million, reflecting 26% year over year growth. Magic showed positive results across all financial metrics due to continued solid demand for its products and professional services. We are very excited about the opportunities provided by our Michpal acquisition, which enables us entry to the Israeli payroll market. The highly regulated market means that employers need to find advanced solutions to keep up with new requirements. Formula's Group capabilities allow us to create even more advanced software and services to serve the needs of this market."

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 PROFIT OR LOSS



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










Three months  ended




March 31, 




2017


2016




Unaudited



Revenues 

310,878


262,170



Cost of revenues 

244,549


201,397



Gross profit 

66,329


60,773



Research and development costs, net 

7,811


4,516



Selling, general and administrative expenses 

42,280


34,709















Operating income 

16,238


21,548









Financial expenses, net 

(7,962)


(3,916)

(*)

Income before taxes on income 

8,276


17,632

(*)

Taxes on income 

2,933


5,437









Income after taxes

5,343


12,195

(*)

Equity in gains of affiliated companies, net 

212


-



Net income 

5,555


12,195

(*)

Change in redeemable non-controlling interests

458


315



Net income attributable to non-controlling interests 

4,945


7,789

(*)







Net income attributable to Formula's shareholders 

152


4,091

(*)







Earnings per share (basic)

0.01


0.28



Earnings per share (diluted)

0.01


0.27









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

14,303,051


14,177,747



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

14,707,786


15,479,736















(*) Immaterial adjustment of comparative data







 

 











FORMULA SYSTEMS (1985) LTD.


CONSOLIDATED STATEMENTS OF FINANCIAL POSITION



U.S. dollars in thousands





March 31,




December 31,





2017




2016





(Unaudited)





 ASSETS








CURRENT ASSETS:









Cash and cash equivalents 



193,466




238,161


Marketable securities



17,604




37,516


Short-term deposits 



13




13


Trade receivables 



325,041




308,338


Other accounts receivable 



50,375




45,678


Inventories 



3,072




3,953

Total current assets



589,571




633,659










LONG-TERM ASSETS:









Marketable securities 



-




17,228


Deferred taxes



16,569




15,227


Prepaid expenses and other assets



13,935




14,390

Total long-term assets



30,504




46,845










INVESTMENTS IN COMPANIES ACCOUNTED FOR 








   AT EQUITY METHOD



24,392




24,080










PROPERTY, PLANTS AND EQUIPMENT, NET 



28,203




26,130










INTANGIBLE ASSETS, NET AND GOODWILL



784,016




627,605










Total assets



1,456,686




1,358,319










CURRENT LIABILITIES:









Liabilities to banks and other financial institutions



86,574




84,760


Debentures 



3,687




3,274


Trade payables 



74,109




80,114


Deferred revenues 



54,111




37,030


Employees and payroll accruals  



95,891




90,709


Other accounts payable 



53,389




41,889


Dividend payable 



-




7,070


Liabilities related to business combinations



5,302




8,119


Redeemable non-controlling interests



6,107




6,073

Total current liabilities



379,170




359,038










LONG-TERM LIABILITIES:









Liabilities to banks and other financial institutions



112,239




115,529


Other long-term liabilities



45,044




9,384


Debentures, net of current maturities



57,070




55,441


Deferred taxes



48,217




30,939


Deferred revenues



12,530




4,697


Liabilities related to business combinations 



5,552




9,611


Liability in respect to capital lease



-




108


Employee benefit liabilities



8,564




6,174


Redeemable non-controlling interests



46,362




43,556

Total long-term liabilities



335,578




275,439










EQUITY 









Formula Systems (1985) equity



345,498




336,387


Non-controlling interests



396,440




387,455

Total equity



741,938




723,842










TOTAL LIABILITIES AND EQUITY



1,456,686




1,358,319










  

 

FORMULA SYSTEMS (1985) LTD.

STANDALONE FINANCIAL DATA HIGHLIGHTS

U.S. dollars in thousands

























March 31,


December 31,







2017


2016







(Unaudited)


(Unaudited)




















Debentures





60,757


58,715











Other financial liabilities




36,631


46,564











Formula shareholders' equity




345,498


336,387











Cash, cash equivalents and short-term marketable securities



6,394


43,537











Fair market value of equity holdings in publicly traded subsidiaries 


757,364


725,860










 

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-record-breaking-revenues-of-311-million-for-the-first-quarter-with-19-year-over-year-growth-300459976.html

SOURCE Formula Systems (1985) Ltd


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