Formula Systems Reports Third Quarter Results for 2012
Third Quarter Revenues Increased by 13% Year-Over-Year to Reach $182.0 Million; Non-GAAP Operating Income Increased 19% Year-Over-Year to Reach $17.6 Million
OR YEHUDA, Israel, November 13, 2012 /PRNewswire/ --
Formula Systems (1985) Ltd. (NASDAQ: FORTY) a leading provider of software consulting services, computer-based business solutions, and proprietary software products, today announced its results for the third quarter of 2012.
Financial Highlights for the Nine-Month Period Ended September 30, 2012
- Revenues for the nine-month period ended September 30, 2012, increased 13% to $546.5 million compared to $483.3 million in the same period last year.
- Operating income for the nine-month period ended September 30, 2012, increased 8% to $41.9 million compared to $38.8 million in the same period last year. Non-GAAP operating income for the nine-month period ended September 30, 2012, increased 21% to $52.5 million compared to $43.3 million in the same period last year.
- Net income for the nine-month period ended September 30, 2012, increased 27% to $16.5 million, or $1.18 per fully diluted share, compared to $13.0 million, or $0.94 per fully diluted share, in the same period last year, excluding income of $25.8 million recorded in the nine-months period ended September 30, 2011 in connection with the acquisition by Sapiens International Corporation N.V. of IDIT I.D.I Technologies Ltd and FIS Software Ltd on August 21, 2011. Non-GAAP net income for the nine-month period ended September 30, 2012, increased 42% to $22.8 million compared to $16.1 million in the same period last year excluding $25.8 million recorded in the nine-months period ended September 30, 2011 in connection with the foregoing acquisition by Sapiens.
- Consolidated cash and short term and long term investments in marketable securities totaled approximately $130.0 million, as of September 30, 2012.
- Total equity on September 30, 2012 was $455.3 million, representing 55% of the total balance sheet.
Financial Highlights for the Third Quarter Ended September 30, 2012
- Revenues for the third quarter ended September 30, 2012, increased 13% to $182.0 million compared to $161.5 million in the same period last year. Revenues for the third quarter of 2012 were negatively affected mainly by the devaluation of the U.S. dollar versus the New Israeli Shekel and the Euro in the amount of approximately $16.0 million in comparison to the same period last year.
- Operating income for the third quarter ended September 30, 2012, increased 8% to $14.0 million, compared to $13.0 million in the same period last year. Operating income for the third quarter of 2012 was negatively affected by the devaluation of the U.S. dollar versus the New Israeli Shekel in the amount of approximately $1.2 million in comparison to the same period last year. Non-GAAP operating income for the third quarter ended September 30, 2012, increased 19% to $17.6 million, compared to $14.8 million in the same period last year;
- Net income for the third quarter ended September 30, 2012, increased 23% to $4.7 million, or $0.33 per fully diluted share, compared to $3.8 million, or $0.28 per fully diluted share, in the same period last year, excluding $25.8 million recorded in the third quarter ended September 30, 2011 in connection with the foregoing acquisition by Sapiens. Net income for the third quarter of 2012 was negatively affected mainly by the devaluation of the U.S. Dollar versus the New Israeli Shekel and the Euro in the amount of approximately $0.5 million in comparison to the same period last year. Non-GAAP net income for the third quarter ended September 30, 2012, increased 39% to $6.9 million compared to $5.0 million in the same period last year, excluding $25.8 million recorded in the third quarter ended September 30, 2011 in connection with the foregoing acquisition by Sapiens.
Comments of Management
Commenting on the results, Guy Bernstein, CEO of Formula Systems, said, "We are pleased with our third quarter results, during which our businesses grew both their top and bottom lines. Despite the challenging economic climate and increased pressure on margins, Matrix showed growth from both new and existing customers, continuing the expansion of its offerings. Sapiens and Magic both enjoyed pickup in their top and bottom lines with Magic adopting a dividend policy, according to which, each year it will distribute a dividend of up to 50% of its annual distributable profits. During October, Magic distributed approximately $3.7 million (or $0.10 per share) equal to 50% of its first half income of 2012."
Non-GAAP Financial Measures
This release includes non-GAAP operating income, net income, basic and diluted earnings per share and other non-GAAP financial measures. These non-GAAP measures exclude the following items:
- Amortization of intangible assets derived from acquisitions
- Research and development capitalization and related amortization
- Share-based compensation and
- Related tax effect
Formula's management believes that the purpose of such adjustments is to give an indication of Formula's performance exclusive of non-cash charges and other items that are considered by management to be outside of our core operating results.
This non-GAAP financial measures are not in accordance with, or an alternative for, generally accepted accounting principles and may be different from non-GAAP financial measures used by other companies. In addition, these non-GAAP financial measures are not based on any comprehensive set of accounting rules or principles. Formula believes that non-GAAP financial measures have limitations in that they do not reflect all of the amounts associated with Formula's results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate Formula's results of operations in conjunction with the corresponding GAAP measures. Please refer to the Reconciliation of Selected Financial Metrics from GAAP to Non-GAAP tables below.
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 http://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.
FORMULA SYSTEMS (1985) LTD.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
U.S. dollars in thousands (except per share data)
Three months ended Nine months ended
September 30, September 30,
------------------ ----------------------
2012 2011 2012 2011
------- ------- ------- --------
Unaudited Unaudited
------------------ ----------------------
Revenues 182,035 161,497 546,464 483,288
Cost of revenues 136,592 123,409 414,945 369,147
------- ------- ------- --------
Gross profit 45,443 38,088 131,519 114,141
Research and development costs, net 3,722 1,440 8,933 4,660
Selling, general and administrative expenses 27,776 23,675 80,889 70,940
Other income, net 88 54 162 231
------- ------- ------- --------
Operating income 14,033 13,027 41,859 38,772
Financial expenses, net 1,072 1,813 4,831 4,959
------- ------- ------- --------
Income before taxes on income 12,961 11,214 37,028 33,813
Taxes on income 1,518 1,917 5,170 5,778
------- ------- ------- --------
11,443 9,297 31,858 28,035
Gain derived from deconsolidation of subsidiary,
consolidation of subsidiary and equity in gains
of affiliated companies, net - 25,583 3,719 25,446
------- ------- ------- --------
Net income 11,443 34,880 35,577 53,481
Change in redeemable non
controlling interests 1,448 - 2,791 -
Net income attributable to non-controlling
interests 5,272 5,223 16,242 14,635
------- ------- ------- --------
Net income attributable to
Formula's shareholders 4,723 29,657 16,544 38,846
Earnings per share (basic) 0.34 2.19 1.22 2.88
Earnings per share (diluted) 0.33 2.16 1.18 2.81
Number of shares used in computing earnings per
share (basic) 13,596 13,530 13,596 13,497
======= ======= ======= ========
Number of shares used in computing earnings per
share (diluted) 13,749 13,674 13,769 13,666
======= ======= ======= ========
FORMULA SYSTEMS (1985) LTD.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION
U.S. dollars in thousands (except per share data)
Three months ended Nine months ended
September 30, September 30,
---------------------- ---------------------
2012 2011 2012 2011
Unaudited Unaudited
---------------------- ---------------------
GAAP operating income 14,033 13,027 41,859 38,772
Amortization of capitalized
software and other intangible assets 4,331 2,585 13,110 8,027
Capitalization of software development (1,861) (1,900) (5,989) (6,923)
Stock-based compensation 1,141 1,126 3,474 3,411
------ ------- ------ -------
Total adjustments to GAAP 3,611 1,811 10,595 4,515
------ ------- ------ -------
Non-GAAP operating income 17,644 14,838 52,454 43,287
------ ------- ------ -------
GAAP net income attributable to
Formula's shareholders 4,723 29,657 16,544 38,846
Amortization of capitalized software
and other intangible assets 4,331 2,585 13,110 8,027
Capitalization of software development (1,861) (1,900) (5,989) (6,923)
Stock-based compensation 1,141 1,126 3,474 3,411
Non-controlling interest in
amortization intangible assets (976) (495) (2,972) (1,056)
Taxes on the above items (460) (171) (1,364) (397)
------ ------- ------ -------
Total adjustments to GAAP 2,175 1,145 6,259 3,062
------ ------- ------ -------
Non-GAAP net income attributable to
Formula's shareholders 6,898 30,802 22,803 41,908
====== ======= ====== =======
Non-GAAP earnings per share (basic) 0.47 2.28 1.70 3.11
====== ======= ====== =======
Number of shares used in
computing earnings per share (basic) 13,596 13,530 13,596 13,497
------ ------- ------ -------
Non-GAAP earnings per share (diluted) 0.42 2.25 1.53 3.07
====== ======= ====== =======
Number of shares used in
computing earnings per share (diluted) 14,719 13,674 14,719 13,666
------ ------- ------ -------
FORMULA SYSTEMS (1985) LTD.
CONSOLIDATED CONDENSED BALANCE SHEETS
U.S. dollars in thousands
September 30, December 31,
------------ -----------
2012 2011
------------ -----------
(Unaudited)
------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents 114,732 88,172
Marketable securities 14,296 14,347
Short-term deposits 521 5,170
Trade receivables 171,451 163,219
Other accounts receivable 40,615 36,085
------------ -----------
Total current assets 341,615 306,993
------------ -----------
LONG-TERM INVESTMENTS:
Marketable securities 430 2,746
Deferred Taxes 13,466 11,630
Investments in affiliated companyies 2,859 77,107
Prepaid expenses and other accounts receivable 4,413 3,885
------------ -----------
Total long-Term Investments 21,168 95,368
------------ -----------
SEVERANCE PAY FUND 60,894 49,507
------------ -----------
PROPERTY, PLANTS AND EQUIPMENT, NET 20,061 19,165
------------ -----------
NET INTANGIBLE ASSETS AND GOODWILL 385,356 200,318
------------ -----------
TOTAL ASSETS 829,094 671,351
============ ===========
CURRENT LIABILITIES:
Liabilities to banks 18,994 16,642
Debentures 15,521 31,472
Trade payables 41,847 40,344
Deferred revenues 36,687 23,734
Other accounts payable 79,989 71,103
Dividend payable to non controlling interests 1,773 -
------------ -----------
Total current liabilities 194,811 183,295
------------ -----------
LONG-TERM LIABILITIES:
Liabilities to banks and others 40,658 34,459
Debentures 15,214 15,246
Deferred revenue 1,850 2,094
Other long-term payables 12,046 9,258
Accrued severance pay 77,692 63,321
------------ -----------
Total long-term liabilities 147,460 124,378
------------ -----------
REDEEMABLE NON-CONTROLING INTEREST 31,566 11,469
------------ -----------
EQUITY
Formula shareholders' equity 234,072 218,668
Non-controlling interests 221,185 133,541
------------ -----------
Total equity 455,257 352,209
------------ -----------
TOTAL LIABILITIES AND EQUITY 829,094 671,351
============ ===========
Press Contact:
Formula Systems (1985) Ltd.
+972-3-5389487
[email protected]
SOURCE Formula Systems
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