Formula Systems Reports Record-Breaking Revenues of $373

Or Yehuda, Israel, May 23, 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 first quarter ended March 31, 2018, in accordance with International Financial Reporting Standards (IFRS).

Financial Highlights for the First Quarter Ended March 31, 2018

Consolidated revenues for the first quarter increased by 20.1% to a record-breaking $373.4 million, compared to $310.9 million in the same period last year.
Consolidated operating income for the first quarter, increased by 59% to $25.8 million, compared to $16.2 million in the same period last year.
Consolidated net income attributable to Formula’s shareholders for the first quarter was $7.2 million, or $0.48 per fully diluted share, compared to $0.5 million, or $0.04 per fully diluted share, in the same period last year.
As of March 31, 2018, Formula held 49.18%, 48.12%, 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 $269.0 million as of March 31, 2018.
Total consolidated equity as of March 31, 2018, was $782.3 million (representing 48.9% of the total balance sheet).
As of March 31, 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 a record-breaking quarter with double-digit growth across all our key financial indicators.

"In the first quarter of 2018, Matrix achieved significant growth across all its key financial indicators, including revenues, gross profit, operating income and net profit. Matrix reports these increases, in spite of the competition in the sector in which Matrix operates the frequent changes and the challenges in recruiting technology experts. Matrix reported record-breaking revenues of NIS 777.7 million in the first quarter of 2018, reflecting an increase of 11.6% year over year. Operating income increased to NIS 52.1 million, reflecting an increase of 7.2% year over year and net income attributable to Matrix shareholders soared to NIS3 4.2 million, reflecting an increase of 21.9% year over year."

“Matrix has zeroed in on the U.S. market as its next strategic market and is currently in the process of merging a number of U.S. companies that it has acquired over the past two years. At the same time, Matrix continues to acquire companies and activities in Israel to expand its value propositions to its customers in the areas of analytics and big data, cyber, cloud computing, digital and mobile, regulation and compliance, training and deployment. Matrix continues to be recognized as a leading company in Israel, including being ranked among the top 50 companies and the first among all the software services companies in Israel.”

“Magic continued the forward momentum of the very strong 2017 and reported record-breaking results for the first quarter of 2018 powered by the continued high demand for its products and professional services across all of its regions and markets. Magic’s fiscal year 2018 is off to an excellent start with revenues at an all-time high of $69.7 million, operating income of $7.6 million and non-GAAP operating income¹ of $9.7 million, up 15%, 19% and 16% respectively year over year, driven almost exclusively by organic growth."

“In keeping with its successful strategic direction, Magic remains focused on expanding its customer base as it continues to evolve its portfolio with powerful and innovative technologies in the fields of software application development, mobile, cloud, big data, and especially in integration, which I believe will account for the majority of an organization’s digital transformation efforts."

“The results of the first quarter of 2018 reflect that Sapiens is back on track with the execution of its long-term strategy to be a leading global provider of insurance software solutions and services. Now that Sapiens has completed the integration of its recent acquisitions including Stone River, Adaptik and KnowledgePrice, it is able to realize deal synergies while maximizing its acquired talent. The first quarter non-GAAP² operating margin was 12.5% and Sapiens remains on track to improve operating margins throughout 2018 and reiterate the 2018 non-GAAP operating margin guidance of 12% to 13% with revenue in the range of $280-$285 million (on a non-GAAP basis)."

“Lastly, since its launch in January 2018, we are pleased with the positive adoption rate of Michpal’s new product and new service line – "Michpal Pension" and "Michpal PensionPlus” – by its existing customer base. This new business line is the first step in our business strategy to expand Michpal’s offerings.”

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.

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¹ Non-GAAP measures as detailed in Magic Software Enterprises’ press release from May 16, 2018

² Non-GAAP measures as detailed in Sapiens’ press release from May 7, 2018

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,
	2018			2017
	Unaudited
Revenues		373,375			310,878
Cost of revenues		290,035			244,549

Gross profit		83,340			66,329
Research and development costs, net		10,946			7,811
Selling, general and administrative expenses		46,580			42,280
Operating income		25,814			16,238

Financial income (expenses), net		(1,971	)		(7,027	)(*)

Income before taxes on income		23,843			9,211	*()**
Taxes on income		6,118			2,933

Income after taxes		17,725			6,278	*()**
Equity in gains (losses) of affiliated companies, net		70			212

Net income		17,795			6,490	*()**
Net income attributable to redeemable non-controlling interests		1,529			607	(*)
Net income attributable to non-controlling interests		9,027			5,338	(*)

Net income attributable to Formula's shareholders		7,239			545	*()**

Earnings per share (basic)		0.49			0.04	(*)
Earnings per share (diluted)		0.48			0.04	(*)

Number of shares used in computing earnings per share (basic)		14,730,032			14,303,051
Number of shares used in computing earnings per share (diluted)		15,558,711			14,707,786

*) Adjustment to comparative data

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

	March 31,		December 31,
	2018		2017
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		251,621		245,936
Marketable securities		14,043		14,138
Short-term deposits		3,352		735
Trade receivables		374,457		385,778
Other accounts receivable and prepaid expenses		49,834		44,915
Inventories		2,977		3,299
Total current assets		696,284		694,801

LONG-TERM ASSETS:
Deferred Taxes		14,944		15,878
Prepaid expenses and other accounts receivables		21,707		16,581
Total long-Term assets		36,651		32,459

INVESTMENTS IN COMPANIES ACCOUNTED
FOR AT EQUITY METHOD		25,393		25,315

PROPERTY, PLANTS AND EQUIPMENT, NET		29,741		29,807

NET INTANGIBLE ASSETS AND GOODWILL		810,825		781,255

TOTAL ASSETS		1,598,894		1,563,637

CURRENT LIABILITIES:
Liabilities to banks and others		77,704		70,819
Debentures		54,576		4,826
Trade payables		87,103		95,339
Deferred revenue and customer advances		68,375		58,905
Employees and payroll accrual		104,501		111,707
Other accounts payable		48,790		53,145
Liabilities in respect of business combinations		3,947		6,811
Redeemable non-controlling interests		33,686		31,395
Total current liabilities		478,682		432,947

LONG-TERM LIABILITIES:
Liabilities to banks and others		116,253		135,616
Other long term liabilities		6,476		7,244
Debentures, net of current maturities		127,756		133,739
Deferred taxes		38,578		36,605
Deferred revenues		8,816		9,340
Liabilities in respect of business combinations		9,209		4,711
Redeemable non-controlling interests		21,793		21,481
Employee benefit liabilities		8,992		9,032
Total long-term liabilities		337,873		357,768

EQUITY
Equity attributable to Formula Systems (1985) shareholders’		365,919		359,202
Non-controlling interests		416,420		413,720
Total equity		782,339		772,922

TOTAL LIABILITIES AND EQUITY		1,598,894		1,563,637

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

	March 31,		December 31,
	2018		2017
	(Unaudited)

Debentures		103,371		59,503

Other financial liabilities		25,471		38,911

Formula shareholders' equity		365,919		359,202

Cash, cash equivalents and short-term marketable securities		55,398		14,842

Fair market value of equity holdings in publicly traded subsidiaries		723,950		835,400

Formula Systems Reports Record-Breaking Revenues of $373 Million for the First Quarter of 2018 with 20% Year over Year Growth

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