Formula Systems Reports Fourth Quarter and Full Year Results for 2015

15 Mar, 2016, 05:25 ET from Formula Systems (1985) Ltd.

OR YEHUDA, Israel, March 15, 2016 /PRNewswire/ -- Formula Systems (1985) Ltd. (NASDAQ: FORTY), a global information technology company engaged primarily, 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, 2015.

Financial Highlights for the Fourth Quarter of 2015

  • Revenues for the fourth quarter ended December 31, 2015 increased 27.1% to $205.9 million, compared to $162.0 million in the same period last year. The increase of $43.9 million in revenues for the fourth quarter resulted primarily from an increase of approximately $48.7 million due to the consolidation of the results of operations of Sapiens (which were not consolidated during 2014), offset mainly by the negative impact of the devaluation of the New Israeli Shekel, Euro and British Pound against the U.S. Dollar by 1%, 12% and 4%, respectively, amounting to $3.8 million.  
  • Operating income for the fourth quarter ended December 31, 2015 increased 54.2% to $15.1 million compared to $9.8 million in the same period last year. Operating income for the fourth quarter increased by $6.4 million due to the consolidation of the results of operations of Sapiens, offset by $0.1 million due to the negative impact of the devaluation of the New Israeli Shekel and $0.9 million increase in amortization of intangible assets.
  • Net income for the fourth quarter ended December 31, 2015 was $4.3 million, or $0.29 per fully diluted share, compared to $8.8 million, or $0.60 per fully diluted share, in the same period last year. Net income for the fourth quarter showed a year over year decrease mainly due to the gain recognized in the same period last year in the amount of $4.2 million in relation to Formula's gaining control over Sapiens and the related re-measurement of the Company's investment in Sapiens shares to fair value and increase of $0.4 million recorded in financial expenses due to the issuance of two series of debentures by Formula in September 2015.

Financial Highlights for the Year Ended December 31, 2015

  • Revenues for the year ended December 31, 2015 increased 25.5% to $798.8 million, compared to $636.4 million in 2014. The increase of $162.4 million in revenues for the year resulted primarily from an increase of approximately $185.6 million due to the consolidation of the results of operations of Sapiens, offset, in part, by $27.3 million that was included in 2014 due to the partial consolidation of Magic's results of operations in the first quarter of 2014, and which were not consolidated in 2015. Revenues for the period were also negatively impacted by the devaluation of the New Israeli Shekel, Euro and British Pound against the U.S. Dollar by 8%, 17% and 7%, respectively, amounting to $66.9 million.
  • Operating income for the year ended December 31, 2015 increased 55.6% to $54.5 million compared to $35.0 million in 2014. Operating income for the year increased by $19.8 million due to the consolidation of the results of operations of Sapiens, offset, in part, by $4.0 million that were consolidated in 2014 due to the partial consolidation of Magic's results of operations in the first quarter of 2014. Operating income for 2015 was also negatively impacted by the devaluation of the New Israeli Shekel against the U.S. Dollar, amounting to $3.3 million.
  • Net income for the year ended December 31, 2015 was $19.3 million, or $1.31 per fully diluted share, compared to $80.8 million, or $5.59 per fully diluted share, in 2014. Net income for 2014 was positively impacted by a net gain of $67.2 million recorded in relation to Magic Software's March 2014 public offering pursuant to which Formula's holdings in Magic were reduced below 50%, which in turn resulted in Formula's investment in Magic being accounted from March 2014 under the equity method of accounting and the related re-measurement to fair value of Formula's investment in Magic.
  • Consolidated cash and short-term deposits and short-term and long-term investments in marketable securities totaled approximately $237.6 million as of December 31, 2015.
  • Total equity as of December 31, 2015 was $671.3 million (representing 55% of the total balance sheet).
  • As of December 31, 2015, Formula was in compliance with all of its financial covenants.

 

FORMULA SYSTEMS (1985) LTD.

Comparative Information Relating to Subsidiaries and Affiliates

U.S. dollars in thousands 

Matrix

2010

2011

2012

2013

2014

2015

Revenues

407,052

489,426

513,181

534,792

586,618

586,582

Operating Income

31,523

33,240

34,559

38,609

37,844

39,064

Consolidated cash, short-term deposits and short-term and long-term investments in marketable securities as of December 31,

72,636

65,038

55,137

60,632

57,318

64,493

Formula's Percentage of ownership as of December 31,

50.1%

50.0%

50.1%

50.1%

50.2%

50.04%

Magic Software

2010

2011

2012

2013

2014

2015

Revenues

88,578

113,328

126,380

144,958

164,304

176,030

Operating Income

9,338

14,717

16,408

19,127

20,726

21,434

Consolidated cash, short-term deposits and short-term and long-term investments in marketable securities as of December 31,

46,542

32,122

38,634

35,988

84,430

76,684

Formula's Percentage of ownership as of December 31,

51.7%

51.1%

52.3%

51.6%

45.1%

46.40%

Sapiens

2010

2011

2012

2013

2014

2015

Revenues

52,235

69,927

113,909

135,377

157,450

185,636

Operating Income

6,711

5,624

12,045

11,883

14,906

24,350

Consolidated cash, short-term deposits and short-term and long-term investments in marketable securities as of December 31,

16,182

21,460

29,050

70,313

80,498

94,002

Formula's Percentage of ownership as of December 31,

71.6%

47.3%

56.6%

48.6%

50.2%

49.13%

 

Comments of Management

Commenting on the results, Guy Bernstein, CEO of Formula Systems, said, "We are very pleased to report another quarter and full year of outstanding results across our entire portfolio. Sapiens has again delivered record-breaking revenues of $185.6 million and improved its profitability by 57% to $26.5 million (on a Non-GAAP basis). Sapiens is expanding its market leadership and is on-track to continue its record of top line double-digit growth in 2016 with its award-winning products and solid cash position with no debt. Sapiens is expecting 2016 full year revenues of between $207 and $211 million and Non-GAAP operating margins in the range of 15.0%-15.5%. Matrix reported record-breaking results across all its key indicators (when measured in local currency) - revenue, gross margin, operating income and net income, and is well-positioned to accelerate its profitable growth in 2016. As Israel's leading IT service provider for eight consecutive years, Matrix continues to broaden its offerings by focusing on high-margin services, including digital, mobile, cloud computing, BI and analytics, along with expanding its footprint in the US market exemplified by 40% year over year growth in revenues in 2015. Magic's annual revenues reached a record-breaking result of $176 million, exceeding expectations, and its Non-GAAP operating income for the year reached a record-breaking result of $27.2 million. Magic's software solutions and services are becoming increasingly relevant as businesses accelerate their digital transformation initiatives. Magic is continuing to invest in its products to enable customers to innovate and increase competitiveness by mobilizing and optimizing business processes and modernizing existing business-critical applications. We are very excited about 2016, in which we will establish a new fourth leg to our portfolio in the form of our recently announced acquisition, together with Israel Aerospace Industries, of TSG –the military arm of Ness Technologies, engaged in the fields of command and control systems, intelligence, homeland security and Cyber security."

About Formula

Formula Systems (1985) Ltd. is a global information technology company principally engaged, through its subsidiaries and affiliates, in providing software consulting services, developing proprietary software products, and providing computer-based business solutions.

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 INCOME

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

Three months ended

Year ended 

December 31, 

December 31, 

2015*

2014

2015*

2014

Unaudited

Unaudited

Revenues 

205,935

162,048

798,798

636,417

Cost of revenues 

159,574

137,015

630,147

530,083

Gross profit 

46,361

25,033

168,651

106,334

Research and development costs, net 

2,747

-

10,235

787

Selling, general and administrative expenses 

28,515

15,240

103,900

70,517

Other income (expenses), net 

-

1

(2)

5

Operating income 

15,099

9,794

54,514

35,035

Financial expenses, net 

1,673

183

7,852

4,866

Income before taxes on income 

13,426

9,611

46,662

30,169

Taxes on income 

3,032

2,944

11,870

10,074

Income after taxes

10,394

6,667

34,792

20,095

Equity in gains of affiliated companies, net 

377

5,427

5,973

74,590

Net income 

10,771

12,094

40,765

94,685

Change in redeemable non-controlling interests

(279)

(326)

397

154

Net income attributable to non-controlling interests 

6,728

3,610

21,051

13,698

Net income attributable to Formula's shareholders 

4,322

8,810

19,317

80,833

Earnings per share (basic)

0.31

0.63

1.38

5.80

Earnings per share (diluted)

0.29

0.60

1.31

5.59

.

.

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

14,124,492

13,981,956

14,070,924

13,929,326

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

15,356,272

14,410,160

14,744,027

14,408,115

* Including consolidation of Insseco by Sapiens commencing December 31, 2014.

 

 

FORMULA SYSTEMS (1985) LTD.

CONSOLIDATED CONDENSED BALANCE SHEETS

U.S. dollars in thousands

December 31,

December 31,

2015

2014 *

(Unaudited)

ASSETS

CURRENT ASSETS:

   Cash and cash equivalents

186,953

107,416

   Marketable securities

19,787

15,784

   Short-term deposit

11

6,454

   Trade receivables

205,489

195,287

   Other accounts receivable and prepaid expenses

37,717

31,297

   Inventories

4,610

2,259

Total current assets

454,567

358,497

LONG-TERM INVESTMENTS:

   Marketable securities 

30,875

33,748

   Deferred Taxes

16,986

17,901

   Prepaid expenses and other accounts receivable

10,418

10,287

Total  Long-Term Investments

58,279

61,936

INVESTMENTS IN AFFILIATED COMPANIES

172,351

169,143

SEVERANCE PAY FUND 

60,182

65,322

PROPERTY, PLANTS AND EQUIPMENT, NET 

19,805

20,126

NET INTANGIBLE ASSETS AND GOODWILL

452,848

450,100

TOTAL  ASSETS

1,218,032

1,125,124

CURRENT LIABILITIES:

   Liabilities to banks and others 

59,069

43,190

   Debentures 

213

-

   Trade payables 

61,907

52,693

   Deferred revenues 

35,603

34,556

   Other accounts payable 

98,951

88,279

   Dividend payable 

4

7,876

Total current liabilities

255,747

226,594

LONG-TERM LIABILITIES:

   Liabilities to banks and others 

102,845

108,203

   Debentures 

58,284

-

   Deferred taxes

29,182

32,493

   Deferred revenue

4,396

4,838

   Other long-term payables

11,798

8,044

   Accrued severance pay 

74,072

77,975

Total long-term liabilities

280,577

231,553

REDEEMABLE NON-CONTROLING INTEREST

10,414

10,313

EQUITY 

   Formula shareholders' equity

396,276

389,708

   Non-controlling interests

275,018

266,956

Total equity

671,294

656,664

TOTAL LIABILITIES AND EQUITY

1,218,032

1,125,124

* December 31, 2014 Balance Sheet was revised to reflect the acquisition of Insseco by Sapiens,

 in accordance with the pooling of interest method.

 

 

 FORMULA SYSTEMS (1985) LTD.

 STANDALONE FINANCIAL DATA HIGHLIGHTS

 U.S. dollars in thousands

December 31,

2015

(Unaudited)

Debentures

58,497

Other financial liabilities

52,623

Formula shareholders' equity

396,276

Cash, cash equivalents and short term marketable securities

78,436

Fair market value of equity holdings in publicly traded subsidiaries 

532,697

 

SOURCE Formula Systems (1985) Ltd.



RELATED LINKS

http://www.formulasystems.com