Formula Systems Reports Record-Breaking Revenues of $367 Million for the Fourth Quarter with 21% Year Over Year Growth
Formula Systems Reports Record-Breaking Revenues of $367 Million for the Fourth Quarter with 21% Year Over Year Growth
Revenues for the year increased 22% year over year to a record breaking $1.4 billion
OR YEHUDA, Israel, March 15, 2018 /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 full year ended December 31, 2017, in accordance with International Financial Reporting Standards (IFRS).
Financial Highlights for the Fourth Quarter Ended December 31, 2017
-- Consolidated revenues for the fourth quarter increased by 21.2% to a
record-breaking $366.5 million, compared to $302.3 million in the same
period last year.
-- Consolidated operating income for the fourth quarter, decreased by 14.4%
to $19.6 million, compared to $22.9 million in the same period last
year. The decrease in operating income is attributable to the decrease
in Sapiens' operating income from $5.4 million in the fourth quarter of
2016 to $1.3 million in the fourth quarter of 2017 (when measured in
accordance with IFRS) due to the implementation of a restructuring and
cost reduction plan following mainly the halt of a software development
project with a significant customer of Sapiens and extension of the
rollout time-line for a large customer. The restructuring and cost
reduction plan included: de-emphasis of non-core activities in APAC and
efficiency measures following the halted development project, the
integration of StoneRiver and the extension of the rollout time-line for
a large customer. The cost savings primarily included headcount
reductions as well as other cost saving measures. Sapiens' restructuring
and cost reduction expenses amounted to $4.2 million for the quarter and
$8.1 million for the full year 2017. Excluding the consolidation of
Sapiens' results, Formula's operating income for the quarter increased
by 4.4% year over year.
-- Consolidated net income attributable to Formula's shareholders for the
fourth quarter was $5.1 million, or $0.34 per fully diluted share,
compared to $6.0 million, or $0.40 per fully diluted share, in the same
period last year. The decrease in net income attributable to Formula's
shareholders is mainly attributable to 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 $1.0 million compared to a devaluation of long term
liabilities to banks and others denominated in New Israeli Shekels
amounting to $1.1 million recorded in the same period last year.
Excluding the negative impact of the devaluation of Formula's long term
liabilities to banks and others denominated in New Israeli Shekels,
Formula's net income increased by approximately 25% year over year.
Financial Highlights for the Full Year Ended December 31, 2017
-- Consolidated revenues for the year ended December 31, 2017 increased by
22.2% to $1,355.1 million, compared to $1,108.6 million in the same
period last year.
-- Consolidated operating income for the year ended December 31, 2017
decreased by 17.3% to $73.7 million, compared to $73.2 million in the
same period last year. The decrease in operating income is attributable
to the decrease in Sapiens' operating income from $24.8 million recorded
in the year ended December 31, 2016 to an operating income of $1.1
million recorded in the year ended December 31, 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 consolidation of Sapiens' results, Formula's
operating income for the year ended December 31, 2017 increased by
approximately 13.3% year over year.
-- Consolidated net income attributable to Formula's shareholders for the
year ended December 31, 2017 was $10.7 million, or $0.71 per fully
diluted share, compared to $22.4 million, or $1.49 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 $19.8 million in the year ended
December 31, 2016 to $0.7 million in the year ended December 31, 2017
(when measured in accordance with IFRS), 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 $6.5 million compared to $0.8 million
recorded in the same period last year. Excluding the consolidation of
Sapiens' results and the appreciation of Formula's long term liabilities
to banks and others denominated in New Israeli Shekels, Formula's net
income increased by 24.2% year over year.
-- As of December 31, 2017, Formula held 49.5%, 48.14%, 47.12%, 100%, 50%
and 90% 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 LLC, respectively.
-- Consolidated cash, short-term investments in marketable securities and
bank deposits totaled to approximately $260.8 million as of December 31,
2017.
-- Total consolidated equity as of December 31, 2017, was $772.9 million
(representing 50% of the total balance sheet).
-- As of December 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 very pleased to report our 2017 full year results with another quarter reflecting solid improvement as evidenced by the group's strong revenue growth.
"In 2017, Matrix achieved significant growth across all financial indicators, including revenues, gross profit, operating income, net profit and cash flow from operating activities. Matrix reported record-breaking revenues of NIS766.0 million in the fourth quarter and NIS2.86 billion for the full year of 2017, reflecting an increase of 11.9% and 12.3% year over year, respectively. Net profits soared to NIS39.2 million in the fourth quarter and NIS123.0 million for the full year, reflecting an increase of 40.9% and 15.0% (excluding a one-time capital gain recorded in the fourth quarter of 2016), respectively. Matrix's financial strength, top-notch employees and robust technological infrastructure positions Matrix at the forefront of technology, enabling Matrix to make a significant contribution to the digital transformation process that companies throughout the world are undergoing.
"Magic continued its double-digit growth momentum through the fourth quarter and the full year of 2017 with exceptional year-over-year revenue growth, powered by strong demand across its entire portfolio and throughout all of its regions. Magic enjoyed revenues of an all-time high of $258 million and non-GAAP operating income([1]) of $35.1 million for the year, up 28% and 24% respectively year over year, driven primarily by organic growth. Magic expects its strong financial position, coupled with its 2017 activities in promoting and growing its markets, to continue the company's momentum into 2018 and as a result, has provided a revenue guidance for the full-year 2018 of between $283 million and $293 million, an increase of approximately 10% to 13.6% compared to 2017.
"In 2017, Sapiens made considerable progress in executing its long-term strategy in becoming a leading global provider of insurance software solutions and services. Among these steps were the strategic acquisition of StoneRiver in early 2017 and the recent acquisition of Adaptik, providing Sapiens with competitive, comprehensive insurance platforms to position itself as a leading solution provider in the U.S. insurance market. Despite a mixed year for the company, Sapiens' full year 2017 results demonstrated another year of double-digit growth with revenues of $269 million, reflecting a year over year increase of 24.5%. Sapiens is well positioned to continue its growth trajectory and has provided a revenue guidance for the full-year 2018 in the range of $280-$285 million (on a non-GAAP basis([2])), an increase of approximately 3% to 5% compared to 2017.
"TSG (held jointly by Formula and Israel Aerospace Industries ("IAI")) finished the year with a double digit growth recorded across all major financial indicators: revenues, gross profit and operating income while increasing its efforts in sales and marketing activities to become a top competitor for large-scale defense and homeland security projects. This strategy together with TSG's recent announced win (together with IAI as the prime contractor) of one the largest IT tenders in the history of the IDF and the IMOD, estimated at hundreds of millions of shekels over the next decade, position TSG to continue its growth momentum into 2018.
"We remain 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 (this requirement took effect on February 1, 2018 for employers who employ more than 21 employees and on February 1, 2019 for employers with no more than 20 employees)."
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.
([1]) Non-GAAP measures as detailed in Magic Software Enterprises' press release from February 28, 2018
([2]) Non-GAAP measures as detailed in Sapiens' press release from March 8, 2018
FORMULA SYSTEMS (1985) LTD.
CONSOLIDATED CONDENSED STATEMENTS OF PROFIT OR LOSS
U.S. dollars in thousands (except per share data)
Three months ended Year ended
December 31, December 31,
------------ ------------
2017 2016 2017 2016
---- ---- ---- ----
Unaudited Unaudited
--------- ---------
Revenues 366,539 302,314 1,355,139 1,108,621
Cost of revenues 285,728 233,959 1,058,316 849,840
Gross profit 80,811 68,355 296,823 258,781
Research and development costs, net 10,394 6,881 39,853 22,328
Selling, general and administrative expenses 51,113 38,552 184,061 147,953
Other income (expenses), net 308 - 308 -
--- --- --- ---
Operating income 19,612 22,922 73,217 88,500
Financial expenses, net (3,908) (2,328) (22,858) (11,586)
Income before taxes on income 15,704 20,594 50,359 76,914
Taxes on income 1,537 5,763 13,371 21,163
Income after taxes 14,167 14,831 36,988 55,751
Equity in gains of affiliated companies, net 607 (442) 1,124 349
Net income 14,774 14,389 38,112 56,100
Net income attributable to redeemable non-controlling interests (65) 782 1,579 2,125
Net income attributable to non-controlling interests 9,723 7,609 25,803 31,530
Net income attributable to Formula's shareholders 5,116 5,998 10,730 22,445
Earnings per share (basic) 0.35 0.42 0.74 1.58
Earnings per share (diluted) 0.34 0.40 0.71 1.49
Number of shares used in computing earnings per share (basic) 14,729,199 14,267,339 14,436,763 14,213,719
========== ========== ========== ==========
Number of shares used in computing earnings per share (diluted) 14,731,898 15,529,192 14,731,603 15,525,261
========== ========== ========== ==========
FORMULA SYSTEMS (1985) LTD.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
U.S. dollars in thousands
December 31, December 31,
------------ ------------
2017 2016
---- ----
(Unaudited)
----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents 245,938 238,161
Marketable securities 14,138 37,516
Short-term deposits 745 13
Trade receivables 385,777 308,338
Other accounts receivable 44,610 45,678
Inventories 3,299 3,953
Total current assets 694,507 633,659
-------------------- ------- -------
LONG-TERM ASSETS:
Marketable securities - 17,228
Deferred taxes 15,878 15,227
Prepaid expenses and other assets 16,637 14,390
Total long-term assets 32,515 46,845
---------------------- ------ ------
INVESTMENTS IN COMPANIES
ACCOUNTED FOR
AT EQUITY METHOD 25,261 24,080
------ ------
PROPERTY, PLANTS AND
EQUIPMENT, NET 29,573 26,130
------ ------
INTANGIBLE ASSETS, NET AND
GOODWILL 779,161 627,605
------- -------
Total assets 1,561,017 1,358,319
------------ ========= =========
CURRENT LIABILITIES:
Liabilities to banks and other
financial institutions 70,819 84,760
Debentures 4,827 3,274
Trade payables 95,339 80,114
Deferred revenues 58,905 37,030
Employees and payroll accruals 110,811 90,709
Other accounts payable 55,340 41,889
Dividend payable - 7,070
Liabilities related to business
combinations 4,881 8,119
Redeemable non-controlling
interests 9,072 6,073
Total current liabilities 409,994 359,038
------------------------- ------- -------
LONG-TERM LIABILITIES:
Liabilities to banks and other
financial institutions 135,585 115,529
Other long-term liabilities 6,845 9,384
Debentures, net of current
maturities 133,739 55,441
Deferred taxes 36,240 30,939
Deferred revenues 9,340 4,697
Liabilities related to business
combinations 3,516 9,611
Liability in respect to capital
lease - 108
Employee benefit liabilities 9,032 6,174
Redeemable non-controlling
interests 43,804 43,556
Total long-term liabilities 378,101 275,439
--------------------------- ------- -------
EQUITY
Formula Systems (1985) equity 359,193 336,387
Non-controlling interests 413,729 387,455
Total equity 772,922 723,842
------------
TOTAL LIABILITIES AND
EQUITY 1,561,017 1,358,319
========= =========
FORMULA SYSTEMS (1985) LTD.
STANDALONE FINANCIAL DATA HIGHLIGHTS
U.S. dollars in thousands
December 31, December 31,
------------ ------------
2017 2016
---- ----
(Unaudited)
----------
Debentures 59,503 58,715
Other financial liabilities 38,911 46,564
Formula shareholders' equity 359,193 336,387
Cash, cash equivalents and short-term marketable
securities 14,842 43,537
Fair market value of equity holdings in publicly traded
subsidiaries 835,400 725,860
Press Contact:
Formula Systems (1985) Ltd.
+972-3-5389487
ir@formula.co.il
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SOURCE Formula Systems (1985) Ltd
