• Formula Systems Reports Third Quarter 2021 Financial Results

    Источник: Nasdaq GlobeNewswire / 18 ноя 2021 06:31:30   America/New_York

    Or Yehuda, Israel, Nov. 18, 2021 (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 third quarter and nine-month period ended September 30, 2021.

    Financial Highlights for the Third Quarter Ended September 30, 2021

     Consolidated revenues for the third quarter ended September 30, 2021 increased by 20.3% to $586.3 million, with growth recorded across Formula’s entire investment portfolio, compared to $487.3 million in the same period last year.
       
     Consolidated operating income for the third quarter ended September 30, 2021 increased by 11.2% to $50.5 million, with growth recorded across Formula’s entire investment portfolio, compared to $45.4 million in the same period last year.
       
     Consolidated net income attributable to Formula’s shareholders for the third quarter ended September 30, 2021 increased by 5.2% to $13.3 million, or $0.85 per fully diluted share, compared to $12.6 million, or $0.82 per fully diluted share, in the same period last year.

    Financial Highlights for the First Nine-Month Period Ended September 30, 2021

     Consolidated revenues for the first nine-months of 2021 increased by 25.6% to $1.75 billion, with growth recorded across Formula’s entire investment portfolio. Revenues for the first nine-months of 2020 amounted to $1.39 billion.
       
     Consolidated operating income for the first nine-months of 2021 increased by 18.9% to $148.4 million, with growth recorded across Formula’s entire investment portfolio. Consolidated operating income for the first nine-months of 2020 amounted to $124.9 million.
       
     Consolidated net income attributable to Formula’s shareholders for the first nine months of 2021 was $39.0 million, or $2.51 per fully diluted share, compared to $34.9 million, or $2.25 per fully diluted share, in the same period last year, reflecting an increase of 11.9% year over year.
       
     As of September 30, 2021, Formula held 48.9%, 43.8%, 45.5%, 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 $495.1 million as of September 30, 2021, compared to $533.2 million as of December 31, 2020.
       
     Total equity as of September 30, 2021 was $1.14 million (representing 43.4% of the total consolidated balance sheet), compared to $1.11 billion (representing 44.0% of the total consolidated balance sheet) as of December 31, 2020.

    Debentures Covenants

    As of September 30, 2021, Formula was in compliance with all of its financial covenants under the debenture series issued by Formula, 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 is equal to $519.7 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 is equal to 10.5%.

    Covenant 3

     Target ratio of net financial indebtedness to EBITDA (based on the accumulated calculation for the four recent quarters): below 5.
     ●
    Actual ratio of net financial indebtedness to EBITDA (based on the accumulated calculation for the four recent quarters) is equal to 0.43.

    Comments of Management

    Commenting on the results, Guy Bernstein, CEO of Formula Systems, said: “We are very pleased to continue our strong momentum recorded across our entire investment portfolio reaching all-time third quarter highs across all of our key indices (revenues, gross profit, operating income, EBITDA and net income). Our strong third quarter financial results recorded across all our key financial indices despite the negative impact of the holidays of the Jewish month of Tishrei (which this year entirely coincided with the third quarter as opposed to being spread over the third and fourth quarters in the previous year - thus reducing our time and material available billable hours in our operations in Israel by approximately 7%) reflect the strengths of our investment portfolio business models. We continue our efforts across our entire portfolio to adhere to our core values of innovation, professionalism, agility and transparency which allow us to continue our growth and protect our leading position.”

    “Matrix reported its best third quarter in history with record-breaking results recorded across all its key financial indices with 97% of the growth deriving from organic growth. We are pleased with Matrix’s continued recognition as a market leader in the implementation of fastest-growing technologies, such as cloud, cyber, digital, data, DevOps and AI, which enable the company to create significant value for its customers in managing, streamlining, accelerating and making their businesses thrive. There is a strong demand in Israel for software services in digital, cloud, cyber, data, and core operating systems—areas where Matrix significantly increased its strength during the COVID-19 period, and which are at the center of the IT market demand.”

    “Sapiens reported all time high revenues of approximately $118 million, 21% higher than in the same period last year, and a strong Non-GAAP operating margin of 17.7% compared to 17.2% in the second quarter of 2021. The results demonstrate how well Sapiens is executing its proven “Land and Expand” strategy, which enables it to grow in the highly regulated and regionally diverse global insurance markets and validate its operating leverage. This unique value proposition enables insurers to benefit from Sapiens’ pre-integrated, cloud-first, low-code “insurance-in-a-box” approach across the majority of its products, empowering them to choose between deploying Sapiens end-to-end solution, or any combination of its components, to meet their evolving needs. Sapiens reiterated its full year 2021 revenue guidance, of $461 to $466 million and increased its operating margin guidance to a range of 17.4% to 17.5% from its prior range of 17.2% to 17.5%.”

    “Magic Software reported another record quarter which further adds to its strong 2021 momentum. During the first nine months of 2021, Magic Software reported double digit growth and all-time highs across all of its key indices (revenues, gross profit, operating income, EBITDA and net income), which demonstrates the important role that Magic Software plays in its customers’ lifecycles and transformative journeys, as well as the success of its strategy to build a broad business portfolio that creates value for its customers in managing, streamlining, accelerating and maximizing their businesses. Magic increased its 2021 revenue guidance for the full year of 2021 for the third time this year to a range of $470 to $475 million from its prior range of $450 to $460 million.”

    “Michpal Group continues to realize synergies and monetize on its business model with its revenues for the first nine months of 2021 growing by 27% compared to the same period last year to ILS 74 million (approximately $22.9 million) with 73% accounted to organic growth.”

    “Lastly, Zap Group, a leading group of consumer sites in Israel and a well-reputable brand in the Israeli market, offering a wide range of solutions in the field of advertising, website promotion and targeted mailing, was consolidated since April 5, 2021. During these past months we’ve been focusing together with Zap’s management on the integration of Zap Group and on building a long-term strategy plan to accelerate its growth including the formation of potential business partnerships in order to expand Zap Group’s products and services offerings as well as reaching new customers. We will remain focused on the successful integration of Zap Group and continue to carefully explore additional M&As opportunities.”

    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: the COVID-19 (coronavirus) pandemic, which may last longer than expected 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, wide-spread viruses and epidemics like the recent novel coronavirus outbreak, 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 “Risk Factors” in our most recent Annual Report on Form 20-F, 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, to conform these 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  Nine months ended 
      September 30,  September 30, 
      2021  2020  2021  2020 
      Unaudited  Unaudited 
    Revenues  586,257   487,344   1,746,775   1,390,678 
    Cost of revenues  444,617   370,952   1,338,636   1,068,221 
    Gross profit  141,640   116,392   408,139   322,457 
    Research and development costs, net  16,796   13,337   49,121   38,384 
    Selling, marketing and general and administrative expenses  74,390   57,691   210,576   159,199 
    Operating income  50,454   45,364   148,442   124,874 
    Financial expenses, net  5,580   5,891   16,623   16,162 
    Income before taxes on income  44,874   39,473   131,819   108,712 
    Taxes on income  9,821   8,088   30,014   24,514 
    Income after taxes  35,053   31,385   101,805   84,198 
    Share of profit (loss) of companies accounted for at equity, net  (308)  (12)  353   335 
    Net income  34,745   31,373   102,158   84,533 
    Net income attributable to non-controlling interests  21,452   18,743   63,111   49,650 
    Net income attributable to Formula Systems’ shareholders  13,293   12,630   39,047   34,883 
                     
    Earnings per share (basic)  0.87   0.83   2.55   2.28 
    Earnings per share (diluted)  0.85   0.82   2.51   2.25 
                     
    Number of shares used in computing earnings per share (basic)  15,289,267   15,286,350   15,289,267   15,285,517 
    Number of shares used in computing earnings per share (diluted)  15,396,849   15,293,113   15,366,211   15,292,498 

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

      September 30,  December 31, 
      2021  2020 
      (Unaudited)    
    ASSETS      
    CURRENT ASSETS:      
    Cash and cash equivalents  453,283   501,650 
    Short-term deposits  40,614   30,289 
    Marketable securities  1,168   1,238 
    Trade receivables  610,813   519,885 
    Other accounts receivable and prepaid expenses  75,522   83,820 
    Inventories  21,136   23,988 
    Total current assets  1,202,536   1,160,870 
             
    LONG-TERM ASSETS:        
    Deferred taxes  42,119   39,750 
    Other long-term accounts receivable and prepaid expenses  26,732   22,872 
    Total  long-term assets  68,851   62,622 
             
    INVESTMENTS IN COMPANIES ACCOUNTED FOR AT EQUITY METHOD  28,575   28,311 
    PROPERTY, PLANTS AND EQUIPMENT, NET  56,675   59,176 
    RIGHT-OF-USE ASSETS  99,109   114,414 
    NET INTANGIBLE ASSETS AND GOODWILL  1,164,937   1,094,687 
    TOTAL  ASSETS  2,620,683   2,520,080 
             
    CURRENT LIABILITIES:        
    Loans and credit from banks and others  204,005   120,444 
    Debentures  48,785   41,454 
    Current maturities of lease liabilities  31,903   32,065 
    Trade payables  151,506   153,322 
    Deferred revenues  128,211   128,898 
    Other accounts payable  255,412   259,223 
    Liabilities in respect of business combinations  6,348   8,654 
    Put options of non-controlling interests  35,395   35,843 
    Total current liabilities  861,565   779,903 
    LONG-TERM LIABILITIES:        
    Loans and credit from banks and others  158,940   180,316 
    Debentures  216,769   203,070 
    Lease liabilities  77,657   91,188 
    Other long-term liabilities  12,602   12,191 
    Deferred taxes  73,615   68,367 
    Deferred revenues  19,136   16,626 
    Liabilities in respect of business combinations  23,778   16,582 
    Put options of non-controlling interests  25,974   28,175 
    Employees benefit liabilities  13,694   15,119 
    Total long-term liabilities  622,165   631,634 
             
    EQUITY        
    Equity attributable to Formula Systems’ shareholders  519,700   503,201 
    Non-controlling interests  617,253   605,342 
    Total equity  1,136,953   1,108,543 
             
    TOTAL LIABILITIES AND EQUITY  2,620,683   2,520,080 

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

      September 30,  December 31, 
      2021  2020 
      (Unaudited)  (Unaudited) 
    ASSETS      
    CURRENT ASSETS:      
    Cash and cash equivalents  28,602   47,852 
    Other accounts receivable and prepaid expenses  6,552   4,977 
    Total current assets  35,154   52,829 
             
    INVESTMENTS IN SUBSIDIARIES AND A JOINTLY        
    CONTROLLED ENTITY (*)        
    Matrix IT Ltd.  146,699   142,194 
    Sapiens International Corporation N.V.  225,981   227,771 
    Magic Software Enterprises Ltd.  117,450   118,105 
    Other  167,836   90,359 
    Total Investments in subsidiaries and a jointly controlled entity  657,966   578,429 
             
    OTHER LONG TERM RECEIVABLES  2,207   1,707 
             
    PROPERTY, PLANTS AND EQUIPMENT, NET  9   2 
             
    TOTAL  ASSETS  695,336   632,967 
             
    CURRENT LIABILITIES:        
    Debentures  28,158   21,652 
    Trade payables  148   349 
    Other accounts payable  3,982   2,329 
    Total current liabilities  32,288   24,330 
             
    LONG-TERM LIABILITIES:        
    Debentures  137,814   104,394 
    Put options of non-controlling interests  1,116   1,042 
    Liability in respect of a business combination  4,418   - 
    Total long-term liabilities  143,348   105,436 
             
    EQUITY  519,700   503,201 
             
    TOTAL LIABILITIES AND EQUITY  695,336   632,967 


    (*)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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