Formula Systems Reports Fourth Quarter and Full Year Results for 2015

OR YEHUDA, Israel, March 15, 2016 /PRNewswire/ -- Formula Systems (1985) Ltd. (NASDAQ: FORTY), a global information technology company engaged primarily, 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 fourth quarter and full year ended December 31, 2015.

Financial Highlights for the Fourth Quarter of 2015

• Revenues for the fourth quarter ended December 31, 2015 increased 27.1% to $205.9 million, compared to $162.0 million in the same period last year. The increase of $43.9 million in revenues for the fourth quarter resulted primarily from an increase of approximately $48.7 million due to the consolidation of the results of operations of Sapiens (which were not consolidated during 2014), offset mainly by the negative impact of the devaluation of the New Israeli Shekel, Euro and British Pound against the U.S. Dollar by 1%, 12% and 4%, respectively, amounting to $3.8 million.  
• Operating income for the fourth quarter ended December 31, 2015 increased 54.2% to $15.1 million compared to $9.8 million in the same period last year. Operating income for the fourth quarter increased by $6.4 million due to the consolidation of the results of operations of Sapiens, offset by $0.1 million due to the negative impact of the devaluation of the New Israeli Shekel and $0.9 million increase in amortization of intangible assets.
• Net income for the fourth quarter ended December 31, 2015 was $4.3 million, or $0.29 per fully diluted share, compared to $8.8 million, or $0.60 per fully diluted share, in the same period last year. Net income for the fourth quarter showed a year over year decrease mainly due to the gain recognized in the same period last year in the amount of $4.2 million in relation to Formula's gaining control over Sapiens and the related re-measurement of the Company's investment in Sapiens shares to fair value and increase of $0.4 million recorded in financial expenses due to the issuance of two series of debentures by Formula in September 2015.

Financial Highlights for the Year Ended December 31, 2015

• Revenues for the year ended December 31, 2015 increased 25.5% to $798.8 million, compared to $636.4 million in 2014. The increase of $162.4 million in revenues for the year resulted primarily from an increase of approximately $185.6 million due to the consolidation of the results of operations of Sapiens, offset, in part, by $27.3 million that was included in 2014 due to the partial consolidation of Magic's results of operations in the first quarter of 2014, and which were not consolidated in 2015. Revenues for the period were also negatively impacted by the devaluation of the New Israeli Shekel, Euro and British Pound against the U.S. Dollar by 8%, 17% and 7%, respectively, amounting to $66.9 million.
• Operating income for the year ended December 31, 2015 increased 55.6% to $54.5 million compared to $35.0 million in 2014. Operating income for the year increased by $19.8 million due to the consolidation of the results of operations of Sapiens, offset, in part, by $4.0 million that were consolidated in 2014 due to the partial consolidation of Magic's results of operations in the first quarter of 2014. Operating income for 2015 was also negatively impacted by the devaluation of the New Israeli Shekel against the U.S. Dollar, amounting to $3.3 million.
• Net income for the year ended December 31, 2015 was $19.3 million, or $1.31 per fully diluted share, compared to $80.8 million, or $5.59 per fully diluted share, in 2014. Net income for 2014 was positively impacted by a net gain of $67.2 million recorded in relation to Magic Software's March 2014 public offering pursuant to which Formula's holdings in Magic were reduced below 50%, which in turn resulted in Formula's investment in Magic being accounted from March 2014 under the equity method of accounting and the related re-measurement to fair value of Formula's investment in Magic.
• Consolidated cash and short-term deposits and short-term and long-term investments in marketable securities totaled approximately $237.6 million as of December 31, 2015.
• Total equity as of December 31, 2015 was $671.3 million (representing 55% of the total balance sheet).
• As of December 31, 2015, Formula was in compliance with all of its financial covenants.

Comments of Management

Commenting on the results, Guy Bernstein, CEO of Formula Systems, said, "We are very pleased to report another quarter and full year of outstanding results across our entire portfolio. Sapiens has again delivered record-breaking revenues of $185.6 million and improved its profitability by 57% to $26.5 million (on a Non-GAAP basis). Sapiens is expanding its market leadership and is on-track to continue its record of top line double-digit growth in 2016 with its award-winning products and solid cash position with no debt. Sapiens is expecting 2016 full year revenues of between $207 and $211 million and Non-GAAP operating margins in the range of 15.0%-15.5%. Matrix reported record-breaking results across all its key indicators (when measured in local currency) - revenue, gross margin, operating income and net income, and is well-positioned to accelerate its profitable growth in 2016. As Israel's leading IT service provider for eight consecutive years, Matrix continues to broaden its offerings by focusing on high-margin services, including digital, mobile, cloud computing, BI and analytics, along with expanding its footprint in the US market exemplified by 40% year over year growth in revenues in 2015. Magic's annual revenues reached a record-breaking result of $176 million, exceeding expectations, and its Non-GAAP operating income for the year reached a record-breaking result of $27.2 million. Magic's software solutions and services are becoming increasingly relevant as businesses accelerate their digital transformation initiatives. Magic is continuing to invest in its products to enable customers to innovate and increase competitiveness by mobilizing and optimizing business processes and modernizing existing business-critical applications. We are very excited about 2016, in which we will establish a new fourth leg to our portfolio in the form of our recently announced acquisition, together with Israel Aerospace Industries, of TSG –the military arm of Ness Technologies, engaged in the fields of command and control systems, intelligence, homeland security and Cyber security."

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 www.formulasystems.com.

Press Contact:

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

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.

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SOURCE Formula Systems (1985) Ltd.