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FORM 6-K


SECURITIES AND EXCHANGE COMMISSION

WASHINGTON D.C. 20549



Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16

of the Securities Exchange Act of 1934


For the month of November 2018


FORMULA SYSTEMS (1985) LTD.

 (Translation of registrant’s name into English)


5 HaPlada Street, Or-Yehuda, Israel

(Address of principal executive offices)


Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F


Form 20-F x Form 40-F o


Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934


Yes o No x


If "Yes" is marked indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-


Attached to Registrant's Form 6-K for the month of November 2018 and incorporated by reference herein is the Registrant's immediate report dated November 20, 2018.


SIGNATURE


Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to signed on its behalf by the undersigned, thereunto duly authorized.



(Registrant)


By:/s/ Guy Bernstein

Guy Bernstein CEO

dated: November 20, 2018






PRESS RELEASE

Formula Systems Reports the Results of the Third Quarter of 2018 with 22% increase in Net Income Year over Year

Formula’s revenues for the nine-month period increased by 11% year over year to $1.1 billion. Operating income for the nine-month period increased by 44% year over year to $77.1 million

Or Yehuda, Israel, November 20, 2018 – Formula Systems (1985) Ltd. (NASDAQ: FORTY), a global information technology holding company engaged, 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 third quarter and nine month period ended September 30, 2018, in accordance with International Financial Reporting Standards (IFRS).


Financial Highlights for the Third Quarter Ended September 30, 2018

Consolidated revenues for the third quarter increased by 4.0% to $362.4 million, compared to $348.6 million in the same period last year.

Consolidated operating income for the third quarter increased by 18.1% to $26.6 million, compared to $22.5 million in the same period last year.   

Consolidated net income attributable to Formula’s shareholders for the third quarter was $6.8 million, or $0.45 per fully diluted share, compared to $5.5 million, or $0.37 per fully diluted share, in the same period last year, reflecting an increase of 22.5%.    


Financial Highlights for the Nine-Month Period Ended September 30, 2018

Consolidated revenues for the nine-month period ended September 30, 2018 increased by 11.2% to $1.1 billion, compared to $988.6 million in the same period last year.

Consolidated operating income for the nine-month period ended September 30, 2018 increased by 43.9% to $77.1 million, compared to $53.6 million in the same period last year.   

Consolidated net income attributable to Formula’s shareholders for the nine-month period ended September 30, 2018 was $21.6 million, or $1.44 per fully diluted share, compared to $6.3 million, or $0.42 per fully diluted share, in the same period last year, reflecting an increase of 241%.

As of September 30, 2018, Formula held 49.18%, 48.16%, 45.21%, 100%, 50% and 90.09% of the outstanding ordinary shares of Matrix IT Ltd., Sapiens International Corporation N.V, Magic Software Enterprises Ltd., Michpal Micro Computers (1983) Ltd., TSG IT Advanced Systems Ltd. and Insync Staffing Solutions, Inc., respectively.

Consolidated cash, short-term investments in marketable securities and short-term and long-term bank deposits totaled approximately $285.2 million as of September 30, 2018, compared to $260.8 million as of December 31, 2017.   

Total consolidated equity as of September 30, 2018, was $806.0 million (representing 49.2% of the total balance sheet), compared to $772.9 million (representing 49.4% of the total balance sheet) as of December 31, 2017.

As of September 30, 2018, Formula was in compliance with all of its financial covenants under the debentures issued by Formula and under loans granted by other financial institutions.


Comments of Management


Commenting on the results, Guy Bernstein, CEO of Formula Systems, said, “We are very pleased to report on continued growth momentum for the first nine months of 2018 in all major financial indices across our portfolio and look forward to ending the year with even more positive results.”

"In the first nine months of 2018, Matrix achieved solid growth across all its key financial indices, reporting revenues of NIS 2.3 billion (or $646 million), operating income of NIS 152.3 million (or $42.8 million) and net profit of NIS 100.2 million (or $28.2 million), in each case in the first nine months of 2018, reflecting increases of 10%, 7.3% and 15.8%, respectively, year over year. Matrix’s quarterly operating income reached NIS 50.1 million (or $13.8 million) in the third quarter, compared to NIS 52.3 million (or $14.7 million) in the same period last year, reflecting a decrease of 4.1% year over year mainly resulting from the Holidays of the Jewish month of Tishrei, which this year have entirely coincided with the third quarter (as opposed to being divided between the third and fourth quarters in the previous year).”

“Matrix continues its growth and employee recruitment momentum, as a result of winning new projects, including mega-projects, entering new fields, and accomplishing strategic mergers and acquisitions in Israel and in the US in synergetic areas of activity.”

“I am very pleased that Matrix's operations in the US show impressive growth in revenues and profitability, with about 13% of the revenues and 26% of the operating income for the third quarter coming from the US market.”

“In the third quarter, Sapiens’ revenues totaled $73.2 million, up 1.7% compared to last year, and its operating income increased by 51.7% year over year to $6.8 million, with operating margin of 9.3% compared to 6.2% in the same period last year. In non-GAAP1  terms, Sapiens’ operating margin was 14.0% during the third quarter, up from 12.4% year over year. These results reflect Sapiens’ significant strides to getting back on track, with new customer wins, enhancing new product development and effectively leveraging its global assets.”

“Sapiens expanded its P&C business in the EMEA and North American markets, while continuing to improve its operational performance. As a result, in the third quarter, Sapiens achieved a 160-basis point increase in non-GAAP operating margin year-over-year and grew its North America business by 12%.”

“To extend its competitive edge, Sapiens is partnering with InsurTech and FinTech start-ups to complement its core offering.”

“Magic’s record-breaking financial results for the third quarter and first nine months of 2018 reflect the solid demand for its software solutions and professional services, which serve to help its customers on their digital transformation journey. The third quarter revenues were $72.1 million, operating income was $7.7 million and non-GAAP2 operating income was $10.0 million, up 10%, 9% and 10% respectively, year over year, driven exclusively by organic growth.

“Magic closed during the third quarter of 2018 a private placement of $35 million (including $9.2 million invested by Formula), a strong testament of its investors’ continued confidence in the company. Magic intends to utilize such funds to continue growing organically and through mergers and acquisition.”

“Lastly, during November 2018 Michpal expanded its business through the acquisition of an 80% share interest in Effective Solutions Ltd, an Israeli company that provides consulting services in the fields of operational cost savings and procurement, as well as salary control and monitoring. The two companies have launched a new service called ‘Michpal YEDA’, which allows clients to consult with team of experienced professionals, including employment attorneys and HR experts, with respect to payroll, labor, pensions, social security and employee income tax matters”.

“The acquisition of Effective Solutions and the launch of Michpal YEDA are important steps in the execution of our growth strategy to expand Michpal’s market share by offering clients comprehensive and holistic solutions in the payroll software and services market encompassing payroll, labor laws, employee income taxes, pensions and provident funds – all under one rooftop.”


Stand-Alone Financial Measures

This press release presents, further below, certain stand-alone financial measures to reflect Formula’s stand-alone financial position in reference to its assets and liabilities as the parent company of the group. These financial measures are prepared consistent with the accounting principles applied in the consolidated financial statements of the group. Such measures include investments in subsidiaries and affiliated company measured at cost adjusted by Formula's share in the investees' accumulated undistributed earnings and other comprehensive income or loss.

Formula believes that these financial measures provide useful information to management and investors regarding Formula’s stand-alone financial position. Formula’s management uses these measures to compare the Company's performance to that of prior periods for trend analyses. These measures are also used in financial reports prepared for management and in quarterly financial reports presented to the Company's board of directors. The Company believes that the use of these stand-alone financial measures provides an additional tool for investors to use in evaluating Formula’s financial position.

Management of the Company does not consider these stand-alone measures in isolation or as an alternative to financial measures determined in accordance with GAAP. Formula urges investors to review the consolidated financial statements which it includes in press releases announcing quarterly financial results, including this press release, and not to rely on any single financial measure to evaluate the Company's business or financial position.

About Formula

Formula Systems (1985) Ltd. is a global information technology company engaged, through its subsidiaries and affiliates, in providing software consulting services and computer-based business solutions and developing proprietary software products.

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 PROFIT OR LOSS

 

 

 

U.S. dollars in thousands (except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine months ended

 

Three months ended

 

 

September 30,

 

September 30,

 

 

2018

 

2017

 

2018

 

2017

 

 

Unaudited

 

Unaudited

 

Revenues

1,099,288

 

988,600

 

362,430

 

348,629

 

Cost of revenues

854,856

 

772,588

 

282,240

 

271,434

 

Gross profit

244,432

 

216,012

 

80,190

 

77,195

 

Research and development costs, net

31,339

 

29,459

 

9,891

 

10,076

 

Selling, general and administrative expenses

135,954

 

132,948

 

43,739

 

44,628

 

Operating income

77,139

 

53,605

 

26,560

 

22,491

 

 

 

 

 

 

 

 

 

 

Financial expenses, net

(7,366)

 

(17,040)

(*)

(4,105)

 

(3,605)

(*)

 

 

 

 

 

 

 

 

 

Income before taxes on income

69,773

 

36,565

(*)

22,455

 

18,886

(*)

Taxes on income

16,199

 

11,834

 

4,476

 

5,504

 

 

 

 

 

 

 

 

 

 

Income after taxes

53,574

 

24,731

(*)

17,979

 

13,382

(*)

Equity in gains (losses) of affiliated

        

   companies, net

(66)

 

517

 

(3)

 

107

 

 

 

 

 

 

 

 

 

 

Net income

53,508

 

25,248

(*)

17,976

 

13,489

(*)

Net income attributable to redeemable

        

   non- controlling interests

4,523

 

2,104

(*)

1,412

 

928

(*)

Net income attributable to non-controlling

        

   interests

27,355

 

16,809

(*)

9,784

 

7,025

(*)

Net income attributable to Formula

        

   Systems’ shareholders

21,630

 

6,335

(*)

6,780

 

5,536

(*)

 

 

 

 

 

 

 

 

 

Earnings per share (basic)

1.47

 

0.44

(*)

0.46

 

0.39

(*)

Earnings per share (diluted)

1.44

 

0.42

(*)

0.45

 

0.37

(*)

 

 

 

 

 

 

 

 

 

Number of shares used in computing earnings

        

   per share (basic)

14,730,920

 

14,338,590

 

14,731,862

 

14,374,579

 

Number of shares used in computing earnings

        

   per share (diluted) 

15,565,098

 

14,697,459

 

15,574,171

 

15,539,781

 

         

)*) Adjustment to comparative data

 

 

 

 

 

 

 

 



















FORMULA SYSTEMS (1985) LTD.

 

 

 

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

 

 

U.S. dollars in thousands

 

 

 

 

 

September 30,

 

December 31,

 

 

2018

 

2017

 

 

(Unaudited)

 

 

 ASSETS

 

 

 

CURRENT ASSETS:

 

 

 

 

Cash and cash equivalents

271,764

 

245,936

 

Marketable securities

11,919

 

14,138

 

Short-term deposits

12

 

735

 

Trade receivables

416,587

 

385,778

 

Other accounts receivable and prepaid expenses

48,628

 

44,915

 

Inventories

3,845

 

3,299

Total current assets

752,755

 

694,801

 

 

 

 

 

LONG-TERM ASSETS:

 

 

 

 

Deferred taxes

14,478

 

15,878

 

Prepaid expenses and other accounts receivables

20,528

 

16,581

Total  long-term assets

35,006

 

32,459

 

 

 

 

 

INVESTMENTS IN COMPANIES ACCOUNTED

 

 

 

   FOR AT EQUITY METHOD

25,242

 

25,315

 

 

 

 

 

PROPERTY, PLANTS AND EQUIPMENT, NET

29,733

 

29,807

 

 

 

 

 

NET INTANGIBLE ASSETS AND GOODWILL

795,837

 

781,255

 

 

 

 

 

TOTAL  ASSETS

1,638,573

 

1,563,637

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

Liabilities to banks and others

128,485

 

70,819

 

Debentures

54,798

 

4,826

 

Trade payables

95,793

 

95,339

 

Deferred revenue and customer advances

59,212

 

58,905

 

Employees and payroll accrual  

97,756

 

111,707

 

Other accounts payable

60,238

 

53,145

 

Liabilities related to business combinations

5,485

 

6,811

 

Redeemable non-controlling interests

37,660

 

31,395

Total current liabilities

539,427

 

432,947

 

 

 

 

 

LONG-TERM LIABILITIES:

 

 

 

 

Liabilities to banks and others

89,058

 

135,616

 

Other long-term liabilities

7,447

 

7,244

 

Debentures, net of current maturities

116,448

 

133,739

 

Deferred taxes

35,759

 

36,605

 

Deferred revenues

5,328

 

9,340

 

Liabilities related to business combinations

8,439

 

4,711

 

Redeemable non-controlling interests

21,769

 

21,481

 

Employee benefit liabilities

8,885

 

9,032

Total long-term liabilities

293,133

 

357,768

 

 

 

 

 

EQUITY

 

 

 

 

Equity attributable to Formula Systems' shareholders

369,348

 

359,202

 

Non-controlling interests

436,665

 

413,720

Total equity

806,013

 

772,922

 

 

 

 

 

TOTAL LIABILITIES AND EQUITY

1,638,573

 

1,563,637

 

 

 

 

 

FORMULA SYSTEMS (1985) LTD.

 

 

 

STAND-ALONE STATEMENTS OF FINANCIAL POSITION

 

 

U.S. dollars in thousands

 

 

 

 

 

September 30,

 

December 31,

 

 

2018

 

2017

 

 

(Unaudited) 

 ASSETS

 

 

 

CURRENT ASSETS:

 

 

 

 

Cash and cash equivalents

35,550

 

14,842

 

Dividend receivable

4,806

 

-

 

Other accounts receivable and prepaid expenses

636

 

3,733

Total current assets

40,992

 

18,575

 

 

 

 

 

INVESTMENTS IN SUBSIDIARIES AND AFFILIATES (*)

 

 

 

 

Matrix IT Ltd.

114,361

 

115,433

 

Sapiens International Corporation N.V.

169,400

 

172,738

 

Magic Software Enterprises Ltd.

108,780

 

98,898

 

Other

51,527

 

53,408

Total  Investments in subsidiaries and affiliates

444,068

 

440,477

 

 

 

 

 

OTHER LONG TERM RECEIVABLES

2,400

 

2,400

 

 

 

 

 

PROPERTY, PLANTS AND EQUIPMENT, NET

4

 

5

 

 

 

 

 

TOTAL  ASSETS

487,464

 

461,457

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

Liabilities to banks and others

12,499

 

13,413

 

Debentures

44,235

 

4,044

 

Trade payables

73

 

112

 

Employees, payroll accrual and other accounts payable

1,199

 

3,729

Total current liabilities

58,006

 

21,298

 

 

 

 

 

LONG-TERM LIABILITIES:

 

 

 

 

Liabilities to banks and others

12,186

 

25,498

 

Debentures, net of current maturities

47,924

 

55,459

Total long-term liabilities

60,110

 

80,957

 

 

 

 

 

EQUITY

369,348

 

359,202

 

 

 

 

 

TOTAL LIABILITIES AND EQUITY

487,464

 

461,457

 

    

 (*)  Investments' carrying amounts are measured consistent with the accounting principles applied in the

consolidated financial statements of the group and representing investments measured at cost adjusted by Formula's            share in the investees' accumulated undistributed earnings and other comprehensive income or loss.lkjljljlsj

Footnotes

1 These non-GAAP measures are subject to the discussion under “Non-GAAP Financial Measures” in Sapiens’ press release issued on November 7, 2018

2 These non-GAAP measures are subject to the discussion under “Non-GAAP Financial Measures” in Magic Software Enterprises’ press release issued on November 13, 2018