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Formula Systems Reports Third Quarter Results for 2012

Tuesday, November 13, 2012 6:56 AM


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
ir@formula.co.il

SOURCE Formula Systems

(Source: PR Newswire )
(Source: Quotemedia)

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