• Formula Systems Reports Second Quarter and First Half 2022 Financial Results: Net Income for the Second Quarter Reached $32.9 Million

    Источник: Nasdaq GlobeNewswire / 17 авг 2022 05:18:17   America/Chicago

    OR YEHUDA, Israel, Aug. 17, 2022 (GLOBE NEWSWIRE) -- Formula Systems (1985) Ltd. (Nasdaq and TASE: FORTY), a global information technology group 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 second quarter and six month-period ended June 30, 2022.

    Financial Highlights for the Second Quarter Ended June 30, 2022

    • Consolidated revenues for the second quarter ended June 30, 2022 increased by 9.6% to $644.6 million, compared to $587.9 million in the second quarter of the previous year.
    • Consolidated operating income for the second quarter ended June 30, 2022 increased by 97.0% to $99.5 million, compared to $50.5 million in the second quarter of the previous year. Operating income for the second quarter of 2022 included a capital gain realized from the disposition of a Matrix IT subsidiary in an amount of $44.2 million. Excluding such impact, consolidated operating income for the second quarter ended June 30, 2022, increased by 9.5% compared to the second quarter of the previous year.
    • Consolidated net income attributable to Formula’s shareholders for the second quarter ended June 30, 2022 increased by 147% to $32.9 million, or $2.12 per fully diluted share, compared to $13.3 million, or $0.86 per fully diluted share, in the second quarter of the previous year. Net income for the second quarter of 2022 was positively impacted by approximately $17.1 million of income realized from the disposition of a subsidiary of Matrix IT Ltd. Excluding such impact, consolidated net income attributable to Formula’s shareholders for the second quarter ended June 30, 2022 increased by 18.9% year over year compared to the second quarter of the previous year.

    Financial Highlights for the Six Month-Period Ended June 30, 2022

    • Consolidated revenues for the first half ended June 30, 2022 increased by 12.2% to $1.3 billion, compared to $1.16 billion in the first half of the previous year.
    • Consolidated operating income for the first half ended June 30, 2022 increased by 62.2% to $158.9 million, compared to $98.0 million in the first half of the previous year. Operating income for the first half of 2022 included a capital gain realized from the disposition of a Matrix IT subsidiary in an amount of $44.2 million. Excluding such impact, consolidated operating income for the first half ended June 30, 2022, increased by 17.1% compared to the first half of the previous year.
    • Consolidated net income attributable to Formula’s shareholders for the first half ended June 30, 2022 increased by 90.9% to $49.2 million, or $3.18 per fully diluted share, compared to $25.8 million, or $1.66 per fully diluted share, in the first half of the previous year. Net income for the first half of 2022 was positively impacted by approximately $17.1 million of income realized from the disposition of a subsidiary of Matrix IT Ltd. Excluding such impact, consolidated net income attributable to Formula’s shareholders for the first half ended June 30, 2022 increased by 24.6% year over year compared to the first half of the previous year.
    • As of June 30, 2022, Formula held 48.7%, 43.9%, 46.3%, 100%, 50%, 90.1%, 80% and 100% 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., Insync Staffing Solutions, Inc., Ofek Aerial Photography Ltd. and ZAP Group Ltd., respectively.
    • Consolidated cash and cash equivalents, short-term bank deposits and investments in marketable securities totaled approximately $451.5 million as of June 30, 2022, compared to $512.5 million as of December 31, 2021.
    • Total equity as of June 30, 2022 was $1.16 billion (representing 44.5% of the total consolidated statements of financial position), compared to $1.18 billion (representing 42.9% of the total consolidated statements of financial position) as of December 31, 2021.

    Debentures Covenants

    As of June 30, 2022, Formula was in compliance with all of its financial covenants under the debenture series issued by it, based on the following achievements:

    Covenant 1

    • Target equity attributable to Formula’s shareholders (excluding non-controlling interests): above $215 million.
    • Actual equity attributable to Formula’s shareholders as of June 30 was equal to $540.7 million.

    Covenant 2

    • Target ratio of net financial indebtedness to net capitalization (in each case, as defined under the indenture for Formula’s Series A and C Secured Debentures): below 65%.
    • Actual ratio of net financial indebtedness to net capitalization, as of June 30, 2022, was equal to 8.6%.

    Covenant 3

    • Target ratio of net financial indebtedness to EBITDA (based on the accumulated calculation for the four most recent quarters): below 5.
    • Actual ratio of net financial indebtedness to EBITDA (based on the accumulated calculation for the four most recent quarters and excluding a capital gain of $44.2 million realized from the disposition of a Matrix IT subsidiary), as of June 30, 2022, was equal to 0.25.

    Comments of Management

    Commenting on the results, Guy Bernstein, CEO of Formula Systems, said: “I am proud that the momentum we saw coming out of 2021 has continued throughout the first half of 2022, reflected in all-time high first half financial results across all our key financial indices. We continue to demonstrate strong results in 2022, delivering solid growth in revenue, reaching $644.6 million in revenues for the second quarter, with a record-breaking net income for the second quarter of $15.9 million that reflected 18.9% year over year growth, excluding the impact of the disposition of Infinity Labs Ltd, a subsidiary of Matrix IT Ltd. These outstanding results stand as a testament to our strong fundamentals and our pivotal role in influencing our customers’ growth strategies across all the areas in which we operate. Our broad investment portfolio allows us to carefully mitigate the current risks in the IT market, which are mainly the challenging macro-economic environment, as well as the fierce competition over talented IT workforce. We continue our efforts across our entire group to adhere to our core values of innovation, professionalism, agility and transparency, which allow us to continue to create significant value for our customers in managing, streamlining, accelerating and contributing to their growth. We continue to invest organically and inorganically in our service lines and are excited about the innovative capabilities we are building to drive continued long term profitable growth and shareholder value.”

    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

    Forward Looking Statements

    Certain matters discussed in this press release that are incorporated herein and therein by reference are forward-looking statements within the meaning of Section 27A of the Securities Act, Section 21E of the Exchange Act and the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995, that are based on our beliefs, assumptions and expectations, as well as information currently available to us. Such forward-looking statements may be identified by the use of the words “anticipate,” “believe,” “estimate,” “expect,” “may,” “will,” “plan” and similar expressions. Such statements reflect our current views with respect to future events and are subject to certain risks and uncertainties. There are important factors that could cause our actual results, levels of activity, performance or achievements to differ materially from the results, levels of activity, performance or achievements expressed or implied by the forward-looking statements, including, but not limited to: adverse macro-economic trends, including inflation, rising interest rates and supply chain delays, triggered in part by the COVID-19 (coronavirus) pandemic, which trends may last for a significant period and materially adversely affect our results of operations; the degree of our success in our plans to leverage our global footprint to grow our sales; the degree of our success in integrating the companies that we have acquired through the implementation of our M&A growth strategy; the lengthy development cycles for our solutions, which may frustrate our ability to realize revenues and/or profits from our potential new solutions; our lengthy and complex sales cycles, which do not always result in the realization of revenues; the degree of our success in retaining our existing customers or competing effectively for greater market share; difficulties in successfully planning and managing changes in the size of our operations; the frequency of the long-term, large, complex projects that we perform that involve complex estimates of project costs and profit margins, which sometimes change mid-stream; the challenges and potential liability that heightened privacy laws and regulations pose to our business; occasional disputes with clients, which may adversely impact our results of operations and our reputation; various intellectual property issues related to our business; potential unanticipated product vulnerabilities or cybersecurity breaches of our or our customers’ systems; risks related to the insurance industry in which our clients operate; risks associated with our global sales and operations, such as changes in regulatory requirements, adverse consequences of international conflicts such as Russia’s invasion of the Ukraine, or fluctuations in currency exchange rates; and risks related to our principal location in Israel.

    While we believe such forward-looking statements are based on reasonable assumptions, should one or more of the underlying assumptions prove incorrect, or these risks or uncertainties materialize, our actual results may differ materially from those expressed or implied by the forward-looking statements. Please read the risks discussed under the heading “Item 3.D Risk Factors” in our most recent Annual Report on Form 20-F, filed with the U.S. Securities and Exchange Commission on May 16, 2022, in order to review conditions that we believe could cause actual results to differ materially from those contemplated by the forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that future results, levels of activity, performance and events and circumstances reflected in the forward-looking statements will be achieved or will occur. Except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason, or to conform those statements to actual results or to changes in our expectations.

            
    FORMULA SYSTEMS (1985) LTD.
    CONSOLIDATED CONDENSED STATEMENTS OF PROFIT OR LOSS
    U.S. dollars in thousands (except per share data)
            
     Three months ended Six months ended
     June 30, June 30,
     2022 2021 2022 2021
     Unaudited Unaudited
    Revenues 644,594 587,875 1,302,162 1,160,518
    Cost of revenues495,783 446,934 998,325 894,019
    Gross profit 148,811 140,941 303,837 266,499
    Research and development costs, net17,848 16,321 35,198 32,325
    Selling, marketing and general and administrative expenses75,636 74,086 153,913 136,186
    Capital gain from realization of a Matrix IT's subsidiary44,208 - 44,208 -
    Operating income 99,535 50,534 158,934 97,988
    Financial expenses, net3,716 5,940 8,399 11,043
    Income before taxes on income 95,819 44,594 150,535 86,945
    Taxes on income21,421 10,844 32,923 20,193
    Income after taxes74,398 33,750 117,612 66,752
    Share of profit of companies accounted for at equity, net380 431 613 661
    Net income 74,778 34,181 118,225 67,413
    Net income attributable to non-controlling interests41,835 20,846 69,048 41,659
    Net income attributable to Formula Systems' shareholders 32,943 13,335 49,177 25,754
            
    Earnings per share (basic)2.16 0.87 3.24 1.68
    Earnings per share (diluted)2.12 0.86 3.18 1.66
            
    Number of shares used in computing earnings per share (basic)15,295,517 15,289,267 15,293,955 15,289,267
    Number of shares used in computing earnings per share (diluted)15,487,852 15,362,906 15,496,092 15,350,431
            


    FORMULA SYSTEMS (1985) LTD.
    CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
    U.S. dollars in thousands
      June 30, December 31,
      2022 2021
      (Unaudited)  
     ASSETS   
    CURRENT ASSETS:   
     Cash and cash equivalents412,096 485,391
     Short-term deposits38,322 25,924
     Marketable securities1,049 1,142
     Trade receivables, net656,504 696,321
     Other accounts receivable and prepaid expenses70,653 72,118
     Inventories36,744 21,221
    Total current assets1,215,368 1,302,117
         
    LONG-TERM ASSETS:   
     Deferred taxes40,360 46,364
     Other investments, long-term accounts receivable and prepaid expenses30,072 23,676
     Investments in companies accounted for at equity method26,628 28,900
     Property, plants and equipment, net53,096 56,886
     Right-of-use assets97,427 115,833
     Net intangible assets and goodwill1,144,895 1,174,790
    Total long-term assets1,392,478 1,446,449
         
    TOTAL ASSETS2,607,846 2,748,566
         
    CURRENT LIABILITIES:   
     Loans and credit from banks and others223,387 175,696
     Debentures36,402 48,455
     Current maturities of lease liabilities37,798 41,655
     Trade payables183,923 205,835
     Deferred revenues135,373 140,660
     Employees and payroll accrual188,039 207,553
     Other accounts payable59,936 80,411
     Liabilities in respect of business combinations12,138 7,773
     Put options of non-controlling interests43,679 39,558
    Total current liabilities920,675 947,596
         
    LONG-TERM LIABILITIES:   
     Loans from banks and others129,435 157,229
     Debentures171,106 205,035
     Lease liabilities68,939 84,839
     Other long-term liabilities11,293 12,183
     Deferred taxes70,366 78,135
     Deferred revenues13,196 17,757
     Liabilities in respect of business combinations25,668 21,644
     Put options of non-controlling interests25,676 31,720
     Employees benefit liabilities, net10,070 12,641
    Total long-term liabilities525,749 621,183
         
    EQUITY    
     Equity attributable to Formula Systems' shareholders540,672 540,960
     Non-controlling interests620,750 638,827
    Total equity1,161,422 1,179,787
         
    TOTAL LIABILITIES AND EQUITY2,607,846 2,748,566
         


    FORMULA SYSTEMS (1985) LTD.
    STAND-ALONE STATEMENTS OF FINANCIAL POSITION
    U.S. dollars in thousands
       June 30, December 31,
       2022 2021
       (Unaudited)
    ASSETS   
    CURRENT ASSETS:   
      Cash and cash equivalents14,653 14,163
      Dividend receivable2,286 -
      Other accounts receivable and prepaid expenses5,182 4,513
    Total current assets22,121 18,676
          
    LONG-TERM ASSETS:   
      Investment in subsidiaries and a jointly controlled entity (*)   
      Matrix IT Ltd.164,379 154,391
      Sapiens International Corporation N.V.219,464 231,130
      Magic Software Enterprises Ltd.122,131 122,358
      Other157,358 174,481
      Total investment in subsidiaries and a jointly controlled entity663,332 682,360
          
      Long term receivables and other investments2,263 2,547
      Property, plants and equipment, net9 10
    Total long-term assets665,604 684,917
          
    TOTAL ASSETS687,725 703,593
          
    CURRENT LIABILITIES:   
      Loans from banks and others10,000 -
      Debentures15,273 28,654
      Trade payables232 192
      Other accounts payable7,570 5,339
      Put options of non-controlling interests1,082 -
      Liability in respect of a business combination1,022 -
    Total current liabilities35,179 34,185
          
    LONG-TERM LIABILITIES:   
      Debentures111,874 126,049
      Put options of non-controlling interests- 1,249
      Liability in respect of a business combination- 1,150
    Total long-term liabilities111,874 128,448
          
    EQUITY540,672 540,960
          
    TOTAL LIABILITIES AND EQUITY687,725 703,593
          
    (*) 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.

     


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