OR YEHUDA, Israel, Nov. 19, 2019 (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 nine month-period and third quarter ended September 30, 2019.
Financial Highlights for the Third Quarter Ended September 30, 2019
- Consolidated revenues for the third quarter increased by 23.9% to $449.0 million, with growth recorded across Formula’s entire investment portfolio. Revenues for the third quarter ended September 30, 2018 amounted to $362.4 million.
- Consolidated operating income for the third quarter increased by 39.4% to $37.0 million, with growth recorded across Formula’s entire investment portfolio. Consolidated operating income for the third quarter ended September 30, 2018 amounted to $26.6 million.
- Consolidated net income attributable to Formula’s shareholders for the third quarter was $9.8 million, or $0.63 per fully diluted share, compared to $6.8 million, or $0.45 per fully diluted share, in the same period last year, reflecting an increase of 43.9%.
Financial Highlights for the Nine Month-Period Ended September 30, 2019
- Consolidated revenues for the nine-month period ended September 30, 2019 increased by 14.0% to $1,252.9 million, with growth recorded across Formula’s entire investment portfolio. Revenues for the nine-month period ended September 30, 2018 amounted to $1,099.3 million.
- Consolidated operating income for the nine-month period ended September 30, 2019 increased by 31.5% to $101.4 million, with growth recorded across Formula’s entire investment portfolio. Consolidated operating income for the nine-month period ended September 30, 2018 amounted to $77.1 million.
- Consolidated net income attributable to Formula’s shareholders for the nine-month period ended September 30, 2019 was $28.8 million, or $1.80 per fully diluted share, compared to $21.6 million, or $1.44 per fully diluted share, in the same period last year, reflecting an increase of 33.3%.
- As of September 30, 2019 Formula held 48.88%, 48.01%, 45.37%, 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 and cash equivalents, bank deposits and investments in marketable securities totaled approximately $367.3 million as of September 30, 2019, compared to $295.3 million as of December 31, 2018.
- Total equity as of September 30, 2019 was $872.1 million (representing 43.6% of the total balance sheet), compared to $805.4 million (representing 48.4% of the total balance sheet) as of December 31, 2018.
Declaration of Dividend for the Second Half of 2019
Based on the Company’s results, the Company’s board of directors declared a cash dividend in the amount of NIS 1.60 per share (approximately 46 cents per share) and in the aggregate amount of approximately NIS 24.5 million (approximately $7 million).
The dividend is payable on January 8th, 2020 to all of the Company’s shareholders of record at the close of trading on the NASDAQ Global Select Market (or the Tel-Aviv Stock Exchange, as appropriate) on December 24th, 2019.
In accordance with Israeli tax law, the dividend is subject to withholding at source at the rate of 30% (if the recipient of the dividend is at the time of distribution or was at any time during the preceding 12-month period the holder of 10% or more of the Company's share capital) or 25% (for all other dividend recipients) of the dividend amount payable to each shareholder of record, subject to applicable exemptions.
The dividend will be paid in New Israeli Shekel with respect to the ordinary shares of Formula Systems traded on the Tel Aviv Stock Exchange, and in US dollar with respect to the American Depositary Receipts of Formula Systems traded on the NASDAQ Global Select Market based on the NIS/US dollar exchange rate immediately prior to the distribution date.
Debentures Covenants
As of September 30, 2019, Formula was in compliance with all of its financial covenants under the debentures issued by Formula and under a loan granted by a financial institution, based on achieving the following in its consolidated financial results:
Covenant 1
- Target equity attributable to Formula’s shareholders (excluding non-controlling interests): above $215 million.
- Actual equity attributable to Formula’s shareholders is equal to $415.7 million.
Covenant 2
- Target ratio of net financial indebtedness to net capitalization (in each case, as defined under the indenture for the Formula’s Series A and C Secured Debentures): below 65%.
- Actual ratio of net financial indebtedness to net capitalization is equal to 12%.
Covenant 3
- Target ratio of net financial indebtedness to EBITDA (based on the accumulated calculation for the four recent quarters): below 5.
- Actual ratio of net financial indebtedness to EBITDA (based on the accumulated calculation for the four recent quarters) is equal to 0.59.
Comments of Management
Commenting on the results, Guy Bernstein, CEO of Formula Systems, said, “We are very pleased to report our results for the third quarter of 2019, demonstrating the continued strong momentum recorded across our entire investment portfolio.”
“Matrix delivered it best ever third quarter, with double-digit growth across all key indices (revenues, gross profit, operating income, net income and EBITDA) across both quarter and period, validating once again its proven strategy of organic growth combined with M&A activity. We are proud to witness that Matrix is consistently being awarded as a market leader in its fields and operations and maintaining its dominance over the Israeli market as being the largest technology execution, management and infrastructure project company.”
“Sapiens’ results for the third quarter of 2019 demonstrate that its pursue after key objectives such as top-line growth, margin expansion, leverage offshore capabilities and improved economies of scale served as fundamentals for its growth and margin expansion achievements (revenues increased by 12.8% and non-GAAP operating margin improved by 240 basis points compared to the same period last year). Encouraged by its pipeline of business and anticipated growth for the remaining of 2019, Sapiens increased its revenue guidance for the full year of 2019 to a range of $323 - $325 million, from a previous guidance of revenues on the higher end of $318-$323 million. The increase in revenue and the leverage from improved economies of scale allowed Sapiens to also increase the guidance for its full-year, non-GAAP operating margin in the range of 15.8% - 16.0%.”
“Magic Software continued its momentum from the beginning of 2019, reporting an all-time best quarterly results with revenues of $86 million and operational profit of $12 million (on a non-GAAP basis), reflecting a double-digit growth of 19% and 18% year over year, in revenues and Non-GAAP operating income, respectively. This growth derives from Magic’s ability to leverage its continued long engagement cycles with its customers, along with its M&A activity which included this quarter the acquisition of NetEffects inc., a US based company, specializes in IT staffing and recruiting. This acquisition supports Magic continuing efforts to maintain and upgrade its strong market position as a preferred one-stop-shop software services vendor.”
“TSG IT Advanced Systems Ltd. had a strong revenue growth of 25% during the nine-month period of 2019, compared to the same period in previous year and 36% in the third quarter of 2019 compared to the same period last year. Such growth is mainly driven from command & control activities of the company, the Israeli market as well as from overseas.”
“We announced today that Michpal completed its second acquisition in less than twelve months’ of Unique Software Industries Ltd. for consideration of approximately NIS 49 million and up to NIS 12 million which are subject to defined performance goals. Unique is a software development and services company, providing integrated solutions in the field of payroll for more than 30 years, including pay-stubs, pension services management, education funds management, and software solutions for managing employee attendance. We believe that Unique’s activities are synergetic and complementary to Formula’s operations in the field of payroll, to which we have entered less them 36 months ago. I believe that this acquisition will allow us to expand our operations in these fields together with the broadening of Unique’s operations by capitalizing on Formula’s assets and transactional capabilities.”
“Lastly, the solid growth accompanied by our record breaking results recorded across all of our key financial indices and across our entire investment portfolio, allow us to declare a cash dividend to our shareholders for the second half of 2019 in a total amount of approximately $7 million, on top of the $8.0 million we already distributed for the first half of 2019 while maintaining confidence in our ability to continue executing on our M&A strategy.”
Stand-Alone Financial Measures
This press release presents, further below, certain stand-alone financial measures to reflect Formula’s stand-alone financial position in reference to its assets and liabilities as the parent company of the group. These financial measures are prepared consistent with the accounting principles applied in the consolidated financial statements of the group. Such measures include investments in subsidiaries and a jointly controlled entity measured at cost adjusted by Formula's share in the investees' accumulated undistributed earnings and other comprehensive income or loss.
Formula believes that these financial measures provide useful information to management and investors regarding Formula’s stand-alone financial position. Formula’s management uses these measures to compare the Company's performance to that of prior periods for trend analyses. These measures are also used in financial reports prepared for management and in quarterly financial reports presented to the Company's board of directors. The Company believes that the use of these stand-alone financial measures provides an additional tool for investors to use in evaluating Formula’s financial position.
Management of the Company does not consider these stand-alone measures in isolation or as an alternative to financial measures determined in accordance with GAAP. Formula urges investors to review the consolidated financial statements which it includes in press releases announcing quarterly financial results, including this press release, and not to rely on any single financial measure to evaluate the Company's business or financial position.
About Formula
Formula Systems, whose ordinary shares are traded on the Tel-Aviv Stock Exchange and ADSs are traded on the NASDAQ Global Select Market, is 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.
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) | |||||||||
| Nine months ended | Three months ended | ||||||||
| September 30, | September 30, | ||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||
| Unaudited | |||||||||
| Revenues | 1,252,910 | 1,099,288 | 448,984 | 362,430 | |||||
| Cost of revenues | 970,842 | 854,856 | 347,727 | 282,240 | |||||
| Gross profit | 282,068 | 244,432 | 101,257 | 80,190 | |||||
| Research and development costs, net | 34,251 | 31,339 | 11,961 | 9,891 | |||||
| Selling, marketing and general and administrative expenses | 146,402 | 135,954 | 52,276 | 43,732 | |||||
| Operating income | 101,415 | 77,139 | 37,020 | 26,567 | |||||
| Financial expenses, net | 12,505 | 7,366 | 5,177 | 4,112 | |||||
| Income before taxes on income | 88,910 | 69,773 | 31,843 | 22,455 | |||||
| Taxes on income | 20,475 | 16,020 | (*) | 7,455 | 4,297 | (*) | |||
| Income after taxes | 68,435 | 53,753 | (*) | 24,388 | 18,158 | (*) | |||
| Share of profit (loss) of companies accounted for at equity, net | 1,515 | (66) | 429 | (3) | |||||
| Net income | 69,950 | 53,687 | (*) | 24,817 | 18,155 | (*) | |||
| Net income attributable to non-controlling interests | 41,114 | 32,057 | (*) | 15,060 | 11,375 | (*) | |||
| Net income attributable to Formula Systems' shareholders | 28,836 | 21,630 | 9,757 | 6,780 | |||||
| Earnings per share (basic) | 1.90 | 1.47 | 0.64 | 0.46 | |||||
| Earnings per share (diluted) | 1.80 | 1.44 | 0.63 | 0.45 | |||||
| Number of shares used in computing earnings per share (basic) | 15,158,811 | 14,730,920 | 15,280,517 | 14,731,862 | |||||
| Number of shares used in computing earnings per share (diluted) | 15,356,988 | 15,565,098 | 15,290,015 | 15,574,171 | |||||
| (*) Immaterial adjustment to comparative data | |||||||||
| FORMULA SYSTEMS (1985) LTD. | ||||
| CONSOLIDATED STATEMENTS OF FINANCIAL POSITION | ||||
| U.S. dollars in thousands | ||||
| September 30, | December 31, | |||
| 2019 | 2018 | |||
| (Unaudited) | ||||
| ASSETS | ||||
| CURRENT ASSETS: | ||||
| Cash and cash equivalents | 348,377 | 268,492 | ||
| Short-term deposits | 11,262 | 16,881 | ||
| Marketable securities | 7,677 | 9,913 | ||
| Trade receivables | 470,455 | 441,468 | ||
| Other accounts receivable and prepaid expenses | 58,208 | 40,397 | ||
| Inventories | 7,485 | 3,882 | ||
| Total current assets | 903,464 | 781,033 | ||
| LONG-TERM ASSETS: | ||||
| Deferred taxes | 16,243 | 14,214 | ||
| Other long-term accounts receivable and prepaid expenses | 25,331 | 23,121 | ||
| Total long-term assets | 41,574 | 37,335 | ||
| INVESTMENTS IN COMPANIES ACCOUNTED | ||||
| FOR AT EQUITY METHOD | 27,362 | 25,710 | ||
| PROPERTY, PLANTS AND EQUIPMENT, NET | 40,573 | 29,182 | ||
| OPERATING LEASE RIGHT-OF-USE ASSETS | 107,534 | - | ||
| NET INTANGIBLE ASSETS AND GOODWILL | 881,454 | 790,901 | ||
| TOTAL ASSETS | 2,001,961 | 1,664,161 | ||
| CURRENT LIABILITIES: | ||||
| Loans and credit from banks and others | 170,254 | 71,180 | ||
| Debentures | 21,647 | 55,822 | ||
| Current maturities of operating lease liabilities | 34,144 | - | ||
| Trade payables | 105,750 | 118,786 | ||
| Deferred revenues | 91,094 | 59,509 | ||
| Other accounts payable | 180,897 | 168,873 | ||
| Dividend payable | - | 5,015 | ||
| Liabilities in respect of business combinations | 9,330 | 5,602 | ||
| Put options of non-controlling interests | 43,368 | 40,926 | ||
| Total current liabilities | 656,484 | 525,713 | ||
| LONG-TERM LIABILITIES: | ||||
| Loans and credit from banks and others | 111,779 | 139,527 | ||
| Debentures | 183,949 | 114,902 | ||
| Long term operating lease liabilities | 78,745 | - | ||
| Other long-term liabilities | 6,409 | 8,734 | ||
| Deferred taxes | 34,581 | 34,800 | ||
| Deferred revenues | 5,305 | 4,906 | ||
| Liabilities in respect of business combinations | 15,327 | 5,625 | ||
| Put options of non-controlling interests | 26,093 | 15,673 | ||
| Employees benefit liabilities | 11,212 | 8,884 | ||
| Total long-term liabilities | 473,400 | 333,051 | ||
| EQUITY | ||||
| Equity attributable to Formula Systems' shareholders | 415,732 | 367,630 | ||
| Non-controlling interests | 456,345 | 437,767 | ||
| Total equity | 872,077 | 805,397 | ||
| TOTAL LIABILITIES AND EQUITY | 2,001,961 | 1,664,161 | ||
| FORMULA SYSTEMS (1985) LTD. | ||||
| STAND-ALONE STATEMENTS OF FINANCIAL POSITION | ||||
| U.S. dollars in thousands | ||||
| September 30, | December 31, | |||
| 2019 | 2018 | |||
| (Unaudited) | ||||
| ASSETS | ||||
| CURRENT ASSETS: | ||||
| Cash and cash equivalents | 93,938 | 31,411 | ||
| Other accounts receivable and prepaid expenses | 2,884 | 8,106 | ||
| Total current assets | 96,822 | 39,517 | ||
| INVESTMENTS IN SUBSIDIARIES AND A JOINTLY | ||||
| CONTROLLED ENTITY (*) | ||||
| Matrix IT Ltd. | 122,441 | 114,133 | ||
| Sapiens International Corporation N.V. | 174,075 | 169,867 | ||
| Magic Software Enterprises Ltd. | 110,867 | 108,829 | ||
| Other | 58,917 | 54,316 | ||
| Total Investments in subsidiaries and a jointly controlled entity | 466,300 | 447,145 | ||
| OTHER LONG TERM RECEIVABLES | 2,733 | 2,733 | ||
| PROPERTY, PLANTS AND EQUIPMENT, NET | 3 | 3 | ||
| TOTAL ASSETS | 565,858 | 489,398 | ||
| CURRENT LIABILITIES: | ||||
| Loans from banks and others | 12,856 | 12,422 | ||
| Debentures | 11,167 | 44,589 | ||
| Trade payables | 74 | 182 | ||
| Other accounts payable | 883 | 1,442 | ||
| Dividends payable | - | 5,015 | ||
| Total current liabilities | 24,980 | 63,650 | ||
| LONG-TERM LIABILITIES: | ||||
| Loans from banks and others | - | 11,793 | ||
| Debentures | 125,146 | 46,325 | ||
| Total long-term liabilities | 125,146 | 58,118 | ||
| EQUITY | 415,732 | 367,630 | ||
| TOTAL LIABILITIES AND EQUITY | 565,858 | 489,398 | ||
| (*) The investments' carrying amounts are measured consistent with the accounting principles applied in the | ||||
| consolidated financial statements of the group and representing the investments’ cost adjusted by Formula's | ||||
| share in the investees' accumulated undistributed earnings and other comprehensive income or loss. | ||||