OR YEHUDA, Israel, Nov. 19, 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 third
quarter ended September 30, 2017, in accordance with
International Financial Reporting Standards (IFRS).
Financial Highlights for the Third Quarter Ended September 30, 2017
- Consolidated revenues for the third quarter increased by 22.3%
to a record-breaking $348.6 million, compared to $285.1 million in the same period last year.
- Consolidated operating income for the third quarter, decreased
by 4.3% to $22.5 million,
compared to $23.5 million in the
same period last year. The decrease in operating income is
attributable to Sapiens' operating income decreasing from
$6.8 million in the third
quarter of 2016 to $3.2 million in
the third quarter of 2017 (when measured in accordance with IFRS)
due to amortization of intangible assets following the acquisition
of StoneRiver earlier this year and the implementation of a
restructuring and cost reduction plan following the halt of a
software development project with a significant customer of
Sapiens. The restructuring and cost reduction plan included:
de-emphasis of non-core activities in APAC and efficiency measures
post the halted development project and the integration of
StoneRiver. The cost savings primarily included headcount
reductions as well as other cost saving measures. Sapiens expects
restructuring and cost reduction expenses of up to $5 million for the full year 2017. Excluding the
negative impact of Sapiens' results, Formula's operating income
increased 15.8% year over year.
- Consolidated net income attributable to Formula's shareholders
for the third quarter was $5.4 million, or $0.36 per fully diluted share, compared to
$5.7 million, or $0. 38 per fully diluted share, in the same
period last year. The decrease in net income attributable to
Formula's shareholders is mainly attributable to a decrease in
Sapiens' net income from $5.5 million in the third quarter of 2016 to
$1.6 million in the third quarter of
2017 (as detailed above) offset by devaluation of long term
liabilities to banks and others denominated in New Israeli Shekels,
following the erosion of the New Israeli Shekel against the US
dollar amounting to $0.4 million
compared to an appreciation of long term liabilities to banks and
others denominated in New Israeli Shekels amounting to $1.2 million recorded in the same period last
year. Excluding the negative impact of Sapiens' results and the
positive impact of the devaluation of Formula's long term
liabilities to banks and others denominated in New Israeli Shekels,
Formula net income increased by approximately 2% year over
year.
Financial Highlights for Nine-Month Period Ended September 30, 2017
- Consolidated revenues for the nine-month period ended
September 30, 2017 increased 22.6% to
$988.6 million, compared to
$806.3 million in the same
period last year.
- Consolidated operating income for the nine-month period ended
September 30, 2017 decreased 18.3% to
$53.6 million, compared to
$65.6 million in the same period
last year. The decrease in operating income is attributable to
Sapiens' operating income decreasing from $19.5 million recorded in the nine-month
period ending September 30, 2016 to
an operating loss of $0.2 million
recorded in the nine-month period ending September 30, 2017 (when measured in accordance
with IFRS) due to the integration of StoneRiver and the
implementation of a restructuring and cost reduction plan (as
detailed above). Excluding the negative impact of Sapiens' results,
Formula operating income for the nine-month period ended
September 30, 2017 increased
approximately 16.7% year over year.
- Consolidated net income attributable to Formula's shareholders
for the nine-month period ended September
30, 2017 was $5.6 million, or $0.37 per fully diluted share, compared to
$16.5 million, or $1.10 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 $15.8 million in
the nine-month period ended September 30,
2016 to a loss of $2.9 million
in the nine-month period ended September 30,
2017 (as detailed above) and to an appreciation 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 $5.5 million
compared to $1.9 million recorded in
the same period last year. Excluding the negative impact of
Sapiens' results and the appreciation of Formula's long term
liabilities to banks and others denominated in New Israeli Shekels,
Formula net income increased by 17.5% year over
year.
- As of September 30, 2017, Formula
held 49.5%, 48.7%, 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 investments in marketable
securities and bank deposits totaled approximately $248.7 million as of September
30, 2017.
- Total consolidated equity as of September 30, 2017, was $754.3 million (representing 50% of the
total balance sheet).
- As of September 30, 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
"Formula's third quarter results show solid improvement as
evidenced by the group's strong revenue growth" said Guy Bernstein, CEO of Formula.
"Matrix crossed the quarterly revenue mark of $200 million for the first time, and achieved
growth across all financial indicators. Matrix reported
record-breaking revenues of $203.7
million and $576.4 million in
the third quarter and in the first nine months of 2017, reflecting
an increase of 13.2% and 12.4% year over year, respectively.
Matrix's financial strength, its position in the market and its
thousands of experts with the experience and knowledge at its
disposal, enable Matrix to provide its customers with innovative
technologies and solutions that address the challenges of the
market.
Sapiens' third quarter results demonstrate another quarter of
double-digit revenue growth and incremental progress. Sapiens
reported record-breaking revenues of $72
million reflecting a year over year increase of 28%, with
non-GAAP operating margin improving from 4.7% in the previous
quarter to 12.5%. This solid improvement is primarily a result of
the successful integration of StoneRiver (Sapiens' recent
acquisition) and the implementation of cost-saving measures enacted
following the halt of the development project that Sapiens reported
in the first quarter. Sapiens is maintaining its guidance for 2017
full year revenues of $265 to $275
million (on a non-GAAP basis), which is expected to be on
the higher end. Sapiens is also maintaining its expectations for
full-year operating profit margin between 9-10% (on a non-GAAP
basis), which is expected to be on the lower end.
Magic continued its double-digit growth momentum through the
third quarter and first nine months of 2017 with strong performance
in sales and revenues across its products and professional
services. It enjoyed revenues of $66
million and non-GAAP operating income of $9.1 million for the third quarter, up 21% and
17% respectively year over year, driven primarily by organic
growth. Due to better visibility, Magic narrowed its revenue
guidance to between $250 million and $255
million for the full-year 2017, up from their prior guidance
of between $245 million and $255
million. Magic's ever-growing portfolio, including Magic xpc
iPaaS Platform, its most recent release, provides both the
solutions and services needed by enterprises to succeed in today's
digital marketplace.
TSG (held jointly by Formula and Israel Aerospace Industries
("IAI")) together with IAI, were declared winners of Israel's Ministry of Defense (IMOD) tender as
part of the "IDF Network" program for leading the transfer of the
IDF's computers infrastructure (currently operating in dozens of
locations) to centralized, advanced data centers and will
consolidate dozens of computer centers, currently scattered across
the country, and establish modern computer centers. Six leading
Israeli and international technology groups competed in the tender.
The scope of the project is estimated at hundreds of millions of
shekels over the next decade. This win is the largest technological
tender in the history of the IDF and the IMOD.
We are excited about Michpal's market opportunity following the
release of a new product and a new service line - "Michpal Pension"
and "Michpal PensionPlus". These solutions enable all employers to
digitally report their employees' pension fund payments to their
respective pension funds as required by law (all employers who
employ more than 21 employees required to digitally report their
pension fund payments from February 1,
2018 ; employers with no more than 20 employees will be
required from February 1, 2019)".
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)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
|
|
|
Nine months
ended
|
|
|
|
|
September
30,
|
|
|
September
30,
|
|
|
|
|
2017
|
|
2016
|
|
|
2017
|
|
2016
|
|
|
|
|
Unaudited
|
|
|
Unaudited
|
|
|
|
Revenues
|
348,629
|
|
285,080
|
|
|
988,600
|
|
806,307
|
|
|
|
Cost of
revenues
|
271,434
|
|
217,170
|
|
|
772,588
|
|
615,881
|
|
|
|
Gross
profit
|
77,195
|
|
67,910
|
|
|
216,012
|
|
190,426
|
|
|
|
Research and
development costs, net
|
10,076
|
|
5,717
|
|
|
29,459
|
|
15,447
|
|
|
|
Selling, general and
administrative expenses
|
44,628
|
|
38,701
|
|
|
132,948
|
|
109,401
|
|
|
|
Operating
income
|
22,491
|
|
23,492
|
|
|
53,605
|
|
65,578
|
|
|
|
Financial expenses,
net
|
(4,044)
|
|
(4,224)
|
(*)
|
|
(18,950)
|
|
(9,258)
|
(*)
|
|
Income before
taxes on income
|
18,447
|
|
19,268
|
(*)
|
|
34,655
|
|
56,320
|
(*)
|
|
Taxes on
income
|
5,504
|
|
4,883
|
|
|
11,834
|
|
15,400
|
|
|
|
Income after
taxes
|
12,943
|
|
14,385
|
(*)
|
|
22,821
|
|
40,920
|
(*)
|
|
Equity in gains of
affiliated companies, net
|
107
|
|
599
|
|
|
517
|
|
791
|
|
|
|
Net
income
|
13,050
|
|
14,984
|
(*)
|
|
23,338
|
|
41,711
|
(*)
|
|
Net income
attributable to redeemable non-controlling interests
|
772
|
|
706
|
(*)
|
|
1,644
|
|
1,343
|
(*)
|
|
Net income
attributable to non-controlling interests
|
6,882
|
|
8,618
|
(*)
|
|
16,080
|
|
23,921
|
(*)
|
|
Net income
attributable to Formula's shareholders
|
5,396
|
|
5,660
|
(*)
|
|
5,614
|
|
16,447
|
(*)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share
(basic)
|
0.38
|
|
0.40
|
|
|
0.39
|
|
1.16
|
|
|
|
Earnings per share
(diluted)
|
0.36
|
|
0.38
|
|
|
0.37
|
|
1.10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of shares used
in computing earnings per share (basic)
|
14,374,579
|
|
14,231,627
|
|
|
14,338,590
|
|
14,195,915
|
|
|
|
Number of shares used
in computing earnings per share (diluted)
|
15,539,781
|
|
15,514,378
|
|
|
14,697,459
|
|
15,494,645
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(*) Immaterial
adjustment of comparative data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FORMULA SYSTEMS
(1985) LTD.
|
|
|
|
|
|
|
|
|
CONSOLIDATED
STATEMENTS OF FINANCIAL POSITION
|
|
|
|
|
|
U.S. dollars in
thousands
|
|
|
|
|
|
|
|
|
|
|
|
September
30,
|
|
|
|
December
31,
|
|
|
|
|
2017
|
|
|
|
2016
|
|
|
|
|
(Unaudited)
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
CURRENT
ASSETS:
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
|
234,400
|
|
|
|
238,161
|
|
Marketable
securities
|
|
|
14,311
|
|
|
|
37,516
|
|
Short-term
deposits
|
|
|
38
|
|
|
|
13
|
|
Trade
receivables
|
|
|
359,037
|
|
|
|
308,338
|
|
Other accounts
receivable
|
|
|
48,231
|
|
|
|
45,678
|
|
Inventories
|
|
|
5,120
|
|
|
|
3,953
|
Total current
assets
|
|
|
661,137
|
|
|
|
633,659
|
|
|
|
|
|
|
|
|
|
LONG-TERM
ASSETS:
|
|
|
|
|
|
|
|
|
Marketable
securities
|
|
|
-
|
|
|
|
17,228
|
|
Deferred
taxes
|
|
|
16,199
|
|
|
|
15,227
|
|
Prepaid expenses and
other assets
|
|
|
16,102
|
|
|
|
14,390
|
Total long-term
assets
|
|
|
32,301
|
|
|
|
46,845
|
|
|
|
|
|
|
|
|
|
INVESTMENTS IN
COMPANIES ACCOUNTED FOR
|
|
|
|
|
|
|
|
AT
EQUITY METHOD
|
|
|
24,704
|
|
|
|
24,080
|
|
|
|
|
|
|
|
|
|
PROPERTY, PLANTS
AND EQUIPMENT, NET
|
|
|
27,836
|
|
|
|
26,130
|
|
|
|
|
|
|
|
|
|
INTANGIBLE ASSETS,
NET AND GOODWILL
|
|
|
774,224
|
|
|
|
627,605
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
|
1,520,202
|
|
|
|
1,358,319
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
|
|
|
|
|
Liabilities to banks
and other financial institutions
|
|
|
105,637
|
|
|
|
84,760
|
|
Debentures
|
|
|
3,898
|
|
|
|
3,274
|
|
Trade
payables
|
|
|
76,014
|
|
|
|
80,114
|
|
Deferred
revenues
|
|
|
59,651
|
|
|
|
37,030
|
|
Employees and payroll
accruals
|
|
|
99,071
|
|
|
|
90,709
|
|
Other accounts
payable
|
|
|
45,298
|
|
|
|
41,889
|
|
Dividend
payable
|
|
|
5,015
|
|
|
|
7,070
|
|
Liabilities related
to business combinations
|
|
|
4,484
|
|
|
|
8,119
|
|
Redeemable
non-controlling interests
|
|
|
6,105
|
|
|
|
6,073
|
Total current
liabilities
|
|
|
405,173
|
|
|
|
359,038
|
|
|
|
|
|
|
|
|
|
LONG-TERM
LIABILITIES:
|
|
|
|
|
|
|
|
|
Liabilities to banks
and other financial institutions
|
|
|
104,419
|
|
|
|
115,529
|
|
Other long-term
liabilities
|
|
|
10,218
|
|
|
|
9,384
|
|
Debentures, net of
current maturities
|
|
|
132,994
|
|
|
|
55,441
|
|
Deferred
taxes
|
|
|
43,649
|
|
|
|
30,939
|
|
Deferred
revenues
|
|
|
8,452
|
|
|
|
4,697
|
|
Liabilities related
to business combinations
|
|
|
2,650
|
|
|
|
9,611
|
|
Liability in respect
to capital lease
|
|
|
-
|
|
|
|
108
|
|
Employee benefit
liabilities
|
|
|
9,378
|
|
|
|
6,174
|
|
Redeemable
non-controlling interests
|
|
|
48,982
|
|
|
|
43,556
|
Total long-term
liabilities
|
|
|
360,742
|
|
|
|
275,439
|
|
|
|
|
|
|
|
|
|
EQUITY
|
|
|
|
|
|
|
|
|
Formula Systems
(1985) equity
|
|
|
351,037
|
|
|
|
336,387
|
|
Non-controlling
interests
|
|
|
403,250
|
|
|
|
387,455
|
Total
equity
|
|
|
754,287
|
|
|
|
723,842
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES
AND EQUITY
|
|
|
1,520,202
|
|
|
|
1,358,319
|
|
|
|
|
|
|
|
|
|
FORMULA SYSTEMS
(1985) LTD.
|
|
|
|
|
|
|
|
STANDALONE
FINANCIAL DATA HIGHLIGHTS
|
|
|
|
|
|
|
U.S. dollars in
thousands
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September
30,
|
|
December
31,
|
|
|
|
|
|
|
|
2017
|
|
2016
|
|
|
|
|
|
|
|
(Unaudited)
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debentures
|
|
|
|
|
58,552
|
|
58,715
|
|
|
|
|
|
|
|
|
|
|
|
|
Other financial
liabilities
|
|
|
|
37,711
|
|
46,564
|
|
|
|
|
|
|
|
|
|
|
|
|
Formula shareholders'
equity
|
|
|
|
351,037
|
|
336,387
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, cash
equivalents and short-term marketable securities
|
|
|
13,182
|
|
43,537
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair market value of
equity holdings in publicly traded subsidiaries
|
|
818,013
|
|
725,860
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
View original
content:http://www.prnewswire.com/news-releases/formula-systems-reports-record-breaking-revenues-of-349-million-for-the-third-quarter-with-22-year-over-year-growth-300559119.html
SOURCE Formula Systems (1985) Ltd.