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FORMULA SYS (1985) LTD ADR
Symbol U : FORTY
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Formula Systems Reports Fourth Quarter and Full Year Results for 2012

2013-03-14 07:48 ET - News Release

Fourth Quarter Revenues Increased by 26% Year-Over-Year to $198.3 Million; Non-GAAP Net Income for the Fourth Quarter Increased 83% to $10.0 Million

OR YEHUDA, Israel, March 14, 2013 /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 fourth quarter and full year of 2012.

Financial Highlights for the Year Ended December 31, 2012

  • Revenues for the year ended December 31, 2012, increased 16% to $744.7 million compared to $640.6 million in the year ended December 31, 2011.
  • Operating income for the year ended December 31, 2012, increased 15% to $57.0 million compared to $49.5 million in the year ended December 31, 2011. Non-GAAP operating income for the year ended December 31, 2012, increased 29% to $72.8 million compared to $56.4 million in the year ended December 31, 2011.
  • Net income for the year ended December 31, 2012, increased 40% to $24.0 million, or $1.72 per fully diluted share, compared to $17.2 million, or $1.3 per fully diluted share, in the year ended December 31, 2011, excluding income of $25.8 million recorded in the year ended December 31, 2011 in connection with the acquisition by Sapiens International Corporation N.V. of IDIT I.D.I Technologies Ltd and FIS Software Ltd. Non-GAAP net income for the year ended December 31, 2012, increased 49% to $32.0 million compared to $21.6 million in the year ended December 31, 2011, excluding $25.8 million recorded in the year ended December 31, 2011 in connection with the foregoing acquisition by Sapiens.
  • Consolidated cash and short term and long term investments in marketable securities totaled approximately $126.4 million as of December 31, 2012.
  • Total equity on December 31, 2012 was $468.5 million (representing 53% of the total balance sheet.)

Financial Highlights for the Fourth Quarter Ended December 31, 2012

  • Revenues for the fourth quarter ended December 31, 2012, increased 26% to $198.3 million compared to $157.3 million in the same period of 2011.
  • Operating income for the fourth quarter ended December 31, 2012, increased 42% to $15.1 million, compared to $10.7 million in the same period of 2011. Non-GAAP operating income for the fourth quarter ended December 31, 2012, increased 55% to $20.3 million, compared to $13.1 million in the same period of 2011;
  • Net income for the fourth quarter ended December 31, 2012, increased 82% to $7.5 million, or $0.53 per fully diluted share, compared to $4.1 million, or $0.30 per fully diluted share, in the same period of 2011. Non-GAAP net income for the fourth quarter ended December 31, 2012, increased 83% to $10.0 million compared to $5.5 million in the same period of 2011.

Comments of Management

Commenting on the results, Guy Bernstein, CEO of Formula Systems, said, "We are very pleased with our 2012 fourth quarter and full year results, during which all of our businesses grew in both their top and bottom lines accompanied with strong cash flow from their ongoing operations. Looking at 2012, Sapiens launched its newest product suit and its new innovative Decision management solution designated to top tier financial institutions, continued closing new deals with tier one customers in its target markets in North America, UK, Europe and APAC and finished the year scoring record high revenue and profit. Magic, with its powerful and versatile enterprise-grade application development and integration solutions continued to further enhance its offering by strengthening its relationships with partners and vendors in the enterprise mobility and enterprise software ecosystems, like Samsung, SAP, Salesforce.com, Oracle JDE,IBM and Microsoft SharePoint. Matrix, despite the challenging economic climate and increased pressure on margins, showed growth from both new and existing customers, continuing the expansion of its offerings in fields such as information security, fraud risk and fraud prevention solutions, allowing it to extend its services to customers outside of Israel."

"Looking forward, We believe that we are well positioned to continue our growth track in 2013" concluded Bernstein.

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 Formula's 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         Year ended
                                                       December 31,          December 31,
                                               ---------------------   -------------------
                                                   2012         2011       2012       2011
                                               ---------    --------   --------   --------
                                                       Unaudited        Unaudited
                                               ---------------------   --------
    Revenues                                    198,267      157,329    744,731    640,617
    Cost of revenues                            149,858      123,739    564,803    492,886
                                               ---------    --------   --------   --------
    Gross profit                                 48,409       33,590    179,928    147,731
    Research and development costs, net           3,416          488     12,349      5,148
    Selling, general and
    administrative expenses                      29,869       22,400    110,758     93,340
    Other income (expenses), net                     12          (24)       174        207
                                               ---------    --------   --------   --------
    Operating income                             15,136       10,678     56,995     49,450

    Financial expenses, net                      (1,841)      (1,541)    (6,672)    (6,500)
                                               ---------    --------   --------   --------
    Income before taxes on income                13,295        9,137     50,323     42,950
    Taxes on income (tax benefit)                 1,413          (89)     6,583      5,689
                                               ---------    --------   --------   --------
    Income after taxes                           11,882        9,226     43,740     37,261
    Equity in gains of
    affiliated companies, net                        25          424      3,744     25,870
                                               ---------    --------   --------   --------
    Net income                                   11,907        9,650     47,484     63,131
    Change in redeemable
    non controlling interests                    (3,689)           -       (898)         -
    Net income attributable to non-controlling
    interests                                     8,110        5,534     24,352     20,169
                                               ---------    --------   --------   --------
    Net income attributable to
    Formula's shareholders                        7,486        4,116     24,030     42,962

    Earnings per share (basic)                     0.55         0.31       1.78       3.17
    Earnings per share (diluted)                   0.53         0.30       1.72       3.11

    Number of shares used in
    computing earnings per share (basic)         13,596       13,563     13,596     13,514
                                               =========    ========   ========   ========
    Number of shares used in
    computing earnings per share (diluted)       13,853       13,674     13,790     13,669
                                               =========    ========   ========   ========


    FORMULA SYSTEMS (1985) LTD.
    RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION
    U.S. dollars in thousands (except per share data)
                                                   Three months ended      Year ended
                                                      December 31,        December 31,
                                              ---------------------   -------------------
                                                 2012          2011     2012         2011
                                              ---------    --------   -------    --------
                                                      Unaudited              Unaudited
                                              ---------------------   -------------------

    GAAP operating income                      15,136        10,678   56,995       49,450
    Amortization of capitalized software
    and other intangible assets                 6,429         2,686   19,539       10,713
    Capitalization of software development     (2,444)       (1,376)  (8,433)      (8,299)
    Stock-based compensation                    1,206         1,140    4,680        4,551
                                              ---------    --------   -------    --------
    Total adjustments to GAAP                   5,191         2,450   15,786        6,965
                                              ---------    --------   -------    --------
    Non-GAAP operating income                  20,327        13,128   72,781       56,415
                                              ---------    --------   -------    --------

    GAAP net income attributable to
    Formula's shareholders                      7,486         4,116   24,030       42,962
    Amortization of capitalized software
    and other intangible assets                 6,429         2,686   19,539       10,713
    Capitalization of software development     (2,444)       (1,376)  (8,433)      (8,299)
    Stock-based compensation                    1,206         1,140    4,680        4,551
    Non-controlling interest in
    amortization intangible assets             (1,875)         (823)  (5,759)      (1,878)
    Taxes on the above items                     (786)         (283)  (2,043)        (680)
                                              ---------    --------   -------    --------
    Total adjustments to GAAP                   2,530         1,344    7,984        4,407
                                              ---------    --------   -------    --------
    Non-GAAP net income attributable
    to Formula's shareholders                  10,016         5,460   32,014       47,369
                                              =========    ========  ========    ========

    Non-GAAP earnings per share (basic)          0.55          0.40     2.38         3.51
                                              =========    ========  ========    ========
    Weighted average number of shares used in
    computing earnings per share (basic)       13,596        13,530   13,596       13,514
                                              ---------    --------   -------    --------

    Non-GAAP earnings per share (diluted)        0.53          0.40     2.31         3.47
                                              =========    ========  ========    ========
    Weighted average number of shares used in
    computing earnings per share (diluted)     13,853        13,674   13,790       13,669
                                              ---------    --------   -------    --------


                       FORMULA SYSTEMS (1985) LTD.
                       CONSOLIDATED CONDENSED BALANCE SHEETS
                       U.S. dollars in thousands

                                                           December 31, December 31,
                                                          ------------  -----------
                                                              2012          2011
                                                          ------------  -----------
                                                           (Unaudited)
                                                          ------------
    ASSETS
    CURRENT ASSETS:
                       Cash and cash equivalents              111,238       88,172
                       Marketable securities                   14,866       14,347
                       Short-term deposits                          -        5,170
                       Trade receivables                      201,886      163,219
                       Other accounts receivable               41,012       36,085
                                                          ------------  -----------
    Total current assets                                      369,002      306,993
                                                          ------------  -----------

    LONG-TERM INVESTMENTS:
                       Marketable securities                      331        2,746
                       Deferred Taxes                          13,618       11,630
                       Investments in affiliated companies      3,022       77,107
                       Prepaid expenses and other
                       accounts receivable                      5,406        3,885
                                                          ------------  -----------
    Total long-term investments                                22,377       95,368
                                                          ------------  -----------

    SEVERANCE PAY FUND                                         66,799       49,507
                                                          ------------  -----------

    PROPERTY, PLANTS AND EQUIPMENT, NET                        21,459       19,165
                                                          ------------  -----------

    NET INTANGIBLE ASSETS AND GOODWILL                        401,404      200,104
                                                          ------------  -----------
                                                          ------------  -----------
    TOTAL ASSETS                                              881,041      671,137
                                                          ============  ===========

    CURRENT LIABILITIES:
                       Liabilities to banks                    23,607       16,642
                       Debentures                              15,735       31,472
                       Trade payables                          51,943       40,344
                       Deferred revenues                       33,998       24,001
                       Other accounts payable                  97,848       70,204
                                                          ------------  -----------
    Total current liabilities                                 223,131      182,663
                                                          ------------  -----------

    LONG-TERM LIABILITIES:
                       Liabilities to banks and others         64,587       34,459
                       Debentures                                 121       15,246
                       Deferred revenue                         1,346        2,094
                       Other long-term payables                19,243        9,697
                       Accrued severance pay                   81,832       63,321
                                                          ------------  -----------
    Total long-term liabilities                               167,129      124,817
                                                          ------------  -----------

    REDEEMABLE NON-CONTROLING INTEREST                         22,283       11,469
                                                          ------------  -----------

    EQUITY
                       Formula shareholders' equity           245,052      218,668
                       Non-controlling interests              223,446      133,520
                                                          ------------  -----------
    Total equity                                              468,498      352,188

                                                          ------------  -----------
    TOTAL LIABILITIES AND EQUITY                              881,041      671,137
                                                          ============  ===========


Press Contact:
Formula Systems (1985) Ltd.
+972-3-5389487
ir@formula.co.il

SOURCE Formula Systems

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