EX-99.1 2 v434272_ex99-1.htm EXHIBIT 99.1

Exhibit 99.1

PRESS RELEASE

Formula Systems Reports Fourth Quarter and Full Year Results for 2015

Or Yehuda, Israel, March 15, 2016 – 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.

FORMULA SYSTEMS (1985) LTD.

Comparative Information Relating to Subsidiaries and Affiliates

U.S. dollars in thousands

Matrix		2010				2011				2012				2013				2014				2015
Revenues			407,052				489,426				513,181				534,792				586,618				586,582
Operating Income			31,523				33,240				34,559				38,609				37,844				39,064
Consolidated cash, short-term deposits and short-term and long-term investments in marketable securities as of December 31,			72,636				65,038				55,137				60,632				57,318				64,493
Formula's Percentage of ownership as of December 31,			50.1	%			50.0	%			50.1	%			50.1	%			50.2	%			50.04	%

Magic Software		2010				2011				2012				2013				2014				2015
Revenues			88,578				113,328				126,380				144,958				164,304				176,030
Operating Income			9,338				14,717				16,408				19,127				20,726				21,434
Consolidated cash, short-term deposits and short-term and long-term investments in marketable securities as of December 31,			46,542				32,122				38,634				35,988				84,430				76,684
Formula's Percentage of ownership as of December 31,			51.7	%			51.1	%			52.3	%			51.6	%			45.1	%			46.40	%

Sapiens		2010				2011				2012				2013				2014				2015
Revenues			52,235				69,927				113,909				135,377				157,450				185,636
Operating Income			6,711				5,624				12,045				11,883				14,906				24,350
Consolidated cash, short-term deposits and short-term and long-term investments in marketable securities as of December 31,			16,182				21,460				29,050				70,313				80,498				94,002
Formula's Percentage of ownership as of December 31,			71.6	%			47.3	%			56.6	%			48.6	%			50.2	%			49.13	%

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.

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,
			2015	*			2014				2015	*			2014
			Unaudited								Unaudited
Revenues			205,935				162,048				798,798				636,417
Cost of revenues			159,574				137,015				630,147				530,083
Gross profit			46,361				25,033				168,651				106,334
Research and development costs, net			2,747				-				10,235				787
Selling, general and administrative expenses			28,515				15,240				103,900				70,517
Other income (expenses), net			-				1				(2	)			5
Operating income			15,099				9,794				54,514				35,035
Financial expenses, net			1,673				183				7,852				4,866
Income before taxes on income			13,426				9,611				46,662				30,169
Taxes on income			3,032				2,944				11,870				10,074
Income after taxes			10,394				6,667				34,792				20,095
Equity in gains of affiliated companies, net			377				5,427				5,973				74,590
Net income			10,771				12,094				40,765				94,685
Change in redeemable non-controlling interests			(279	)			(326	)			397				154
Net income attributable to non-controlling interests			6,728				3,610				21,051				13,698
Net income attributable to Formula's shareholders			4,322				8,810				19,317				80,833
Earnings per share (basic)			0.31				0.63				1.38				5.80
Earnings per share (diluted)			0.29				0.60				1.31				5.59
			.				.
Number of shares used in computing earnings per share (basic)			14,124,492				13,981,956				14,070,924				13,929,326
Number of shares used in computing earnings per share (diluted)			15,356,272				14,410,160				14,744,027				14,408,115

* Including consolidation of Insseco by Sapiens commencing December 31, 2014.

FORMULA SYSTEMS (1985) LTD.

CONSOLIDATED CONDENSED BALANCE SHEETS

U.S. dollars in thousands

		December 31,				December 31,
		2015				2014*
		(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents			186,953				107,416
Marketable securities			19,787				15,784
Short-term deposit			11				6,454
Trade receivables			205,489				195,287
Other accounts receivable and prepaid expenses			37,717				31,297
Inventories			4,610				2,259
Total current assets			454,567				358,497
LONG-TERM INVESTMENTS:
Marketable securities			30,875				33,748
Deferred Taxes			16,986				17,901
Prepaid expenses and other accounts receivable			10,418				10,287
Total  Long-Term Investments			58,279				61,936
INVESTMENTS IN AFFILIATED COMPANIES			172,351				169,143
SEVERANCE PAY FUND			60,182				65,322
PROPERTY, PLANTS AND EQUIPMENT, NET			19,805				20,126
NET INTANGIBLE ASSETS AND GOODWILL			452,848				450,100
TOTAL  ASSETS			1,218,032				1,125,124
CURRENT LIABILITIES:
Liabilities to banks and others			59,069				43,190
Debentures			213				-
Trade payables			61,907				52,693
Deferred revenues			35,603				34,556
Other accounts payable			98,951				88,279
Dividend payable			4				7,876
Total current liabilities			255,747				226,594
LONG-TERM LIABILITIES:
Liabilities to banks and others			102,845				108,203
Debentures			58,284				-
Deferred taxes			29,182				32,493
Deferred revenue			4,396				4,838
Other long-term payables			11,798				8,044
Accrued severance pay			74,072				77,975
Total long-term liabilities			280,577				231,553
REDEEMABLE NON-CONTROLING INTEREST			10,414				10,313
EQUITY
Formula shareholders' equity			396,276				389,708
Non-controlling interests			275,018				266,956
Total equity			671,294				656,664
TOTAL LIABILITIES AND EQUITY			1,218,032				1,125,124

* December 31, 2014 Balance Sheet was revised to reflect the acquisition of Insseco by Sapiens, in accordance with the pooling of interest method.

FORMULA SYSTEMS (1985) LTD.

STANDALONE FINANCIAL DATA HIGHLIGHTS

U.S. dollars in thousands

		December 31,
		2015
		(Unaudited)
Debentures			58,497
Other financial liabilities			52,623
Formula shareholders' equity			396,276
Cash, cash equivalents and short term marketable securities			78,436
Fair market value of equity holdings in publicly traded subsidiaries			532,697