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Tech Stocks In The News: Formula Systems Ltd. (NASDAQ: FORTY)

Formula Systems (1985) Ltd. (NASDAQ: FORTY), a worldwide information technology holding company engaged, through its auxiliaries and associates, in giving software consulting services and computer-based business solutions and increasing proprietary software goods, recently declared its results for the 1st– quarter finished March 31, 2017, in accordance with International Financial Reporting Standards (IFRS).

Financial Highlights for the 1st- Quarter Finished March 31, 2017:

  • In January 2017, Formula attained all of the share capital of Michpal Micro Computers (1983) Ltd., an Israeli privately-held company that expands, sells and supports a proprietary on-premise payroll software solution and complementary modules for processing traditional payroll stubs to Israeli enterprises and payroll service suppliers. The Michpal payroll software solution is recognized throughout Israel, with about 8,000.00 clients, most of which are long-term clients.
  • As part of its payroll software solution Michpal permits the preparation of worker pay statements, supporting journals, summaries, and administration reports and supports monthly and year-end regulatory and legislative payroll tax statements and other forms such as payroll social and income taxes, to its clients and their workers. Formula paid a purchase price of $22.10M
  • Merged Revenues for the 1st- quarter increased by 19.00 percent to a record-breaking $310.90M, contrast to $262.20M in the similar period last year.
  • Merged operating income for the 1st- quarter, condensed by 25.00 percent to $16.20M, contrast to $21.50M in the similar period last year. The decrease in operating income is attributable to Sapiens’ operating income diminishing from $ 6.40M in the 1st- quarter of 2016 to an operating loss of ($1.60)M because of the halt of a software progress project with a noteworthy client of Sapiens and the integration of StoneRiver, Sapiens recent acquisition. In the 2nd– quarter, Sapiens will carry on restructuring steps to address these growths and remain on track in the 2nd– half of 2017. Apart From the negative impact of Sapiens results, Formula operating income lifted 17.00 percent year over year.
  • Merged net income attributable to Formula’s investors for the 1st- quarter was $0.20M, or $0.010 per fully diluted share, contrast to $4.10M, or $0.270 per completely diluted share, in the similar period last year. The reduce in net income attributable to Formula’s investors is mainly attributable to a reduce in Sapiens net income from $5.00M in the 1st- quarter of 2016 to a loss of ($2.20)M (as detailed above) and to devaluation of long term liabilities to banks and others denominated in New Israeli Shekels following the erosion of the US dollar against the new Israeli shekel amounting to $3.50M.
  • As of March 31, 2017, Formula held 50.00 percent, 48.80 percent, 47.20 percent, 100.00 percent 50.00 percent and 90.00 percent of the outstanding ordinary shares of Matrix IT, Sapiens International Corporation N.V, Magic Software Enterprises Ltd., Michpal Micro Computers (1983) Ltd., TSG IT Advanced Systems, and Insync Staffing Solutions, respectively.
  • Merged cash, short-term and long-term investments in marketable securities and bank deposits totaled about $211.10M as of March 31, 2017.
  • Total merged equity as of March 31, 2017, was $741.90M (representing 51.00 percent of the total balance sheet).
  • As of March 31, 2017, Formula was in compliance with all of its financial covenants under the debentures issued by Formula in September 2015 and under loans granted from other financial institutions.

Comments of Administration:

Commenting on the results, Guy Bernstein, CEO of Formula Systems, said, “We are pleased to declare another quarter of double-digit revenue development across our entire portfolio. While our top-line growth was strong, our profitability was influenced mostly by certain aspects of Sapiens’ business activities. Sapiens revenues reached $56.50M for the quarter, driven by a mix of organic development and its recent Stone River acquisition.

Sapiens operational profitability was affected by the loss of a noteworthy client and the integration of Stone River activities. Sapiens is taking steps to address and overcome these growths and has declared that it is on track to return to double-digit operating margins in the 2nd– half of 2017. Sapiens is maintaining its recently revised 2017 complete-year revenue guidance of $265.00-$275.00M. Matrix achieved another quarter of double-digit revenue growth, showing continued growth across all financial pointers. Matrix’s consistent growth in revenues and productivity is a result of both organic development and ongoing acquisitions. Magic had a strong start to the year with $61.00M in Q1 revenues, reflecting 36.00 percent development yoy, and record-breaking non-GAAP operating income for the quarter of $8.40M, reflecting 26.00 percent yoy development. Magic showed positive results across all financial metrics because of continued solid demand for its products and professional services. We are very thrilled about the opportunities offered by our Michpal acquisition, which facilitates us entry to the Israeli payroll market. The highly regulated market means that workers need to find superior solutions to keep up with new requirements. Formula’s Group capabilities allow us to create even more advanced software and services to serve the needs of this market.”

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