Financial Highlights for the Second Quarter Ended June 30, 2023
- Consolidated revenues for the second quarter ended
June 30, 2023 increased by approximately 2.9% to a second-quarter record-breaking$655 .4 million, compared to$636.9 million in the same period last year. On a constant currency basis (calculated based on average currency exchange rates for the three months endedJune 30, 2022 ), consolidated revenues for the second quarter of 2023 would have increased by approximately 9.1% to$695.0 million . - Consolidated operating income for the second quarter ended
June 30, 2023 amounted to$60.0 million compared to$99.5 million in the same period last year. Operating income for the second quarter of 2022 included a capital gain realized from the disposition of a Matrix IT subsidiary in the amount of$44.2 million . Excluding such impact, consolidated operating income for the second quarter endedJune 30 , 2023, increased by 8.4% compared to the second quarter of the previous year. On a constant currency basis (calculated based on average currency exchange rates for the three months endedJune 30, 2022 ), the consolidated operating income for the second quarter of 2023 would have increased by approximately 13.5% to$62.8 million , compared to the same period last year (excluding the above-mentioned capital gain of$44.2 million recorded in 2022). - Consolidated net income attributable to Formula’s shareholders for the second quarter ended
June 30, 2023 amounted to$17 .0 million, or$1.11 per fully diluted share, compared to$32 .9 million, or$2.12 per fully diluted share, in the same period last year. Net income for the second quarter of 2022 was positively impacted by approximately$17.1 million of income realized from the disposition of a subsidiary of Matrix IT Ltd. Excluding such impact, consolidated net income attributable to Formula’s shareholders for the second quarter endedJune 30 , 2023 increased by 7.3% year over year compared to the second quarter of the previous year.
Net income in the period was negatively impacted by the increase in interest expenses resulting from the increase in variable interest rates. Financial expenses net, increased by approximately 51.0% to$5.6 million , compared to$3.7 million in the same period last year.
Financial Highlights for the Six Month-Period Ended
- Consolidated revenues for the first half ended
June 30 , 2023 increased by 3.0% to a first-half record-breaking$1.33 billion , compared to$1.29 billion in the first half of the previous year. On a constant currency basis (calculated based on average currency exchange rates for the first half endedJune 30, 2022 ), consolidated revenues for the first half 2023 would have increased by approximately 10.1% to$1.42 billion . - Consolidated operating income for the first half ended
June 30 , 2023 amounted to$120.8 million , compared to $158.9 million in the first half of the previous year. Operating income for the first half of 2022 included a capital gain realized from the disposition of a Matrix IT subsidiary in the amount of$44.2 million . Excluding such impact, consolidated operating income for the first half endedJune 30 , 2023, increased by 5.3% compared to the first half of the previous year. On a constant currency basis (calculated based on average currency exchange rates for the first half endedJune 30, 2022 ), the consolidated operating income for the first half of 2023 would have increased by approximately 11.1% to$127.5 million , compared to the same period last year (excluding the above-mentioned capital gain of$44.2 million recorded in 2022). - Consolidated net income attributable to Formula’s shareholders for the first half ended
June 30 , 2023 amounted to$32 .7 million, or$2.11 per fully diluted share, compared to $49.2 million, or $3.18 per fully diluted share, in the first half of the previous year. Net income for the first half of 2022 was positively impacted by approximately$17.1 million of income realized from the disposition of a subsidiary of Matrix IT Ltd. Excluding such impact, consolidated net income attributable to Formula’s shareholders for the first half endedJune 30 , 2023 increased by 1.9% year over year compared to the first half of the previous year.
Net income in the six-month period was negatively impacted by the increase in interest expenses resulting from the increase in variable interest rates. Financial expenses net, increased by approximately 51.2% to$12.7 million , compared to$8.4 million in the same period last year. - As of
June 30, 2023 , Formula held 48.2%, 44.0%, 46.3%, 100%, 50%, 90.1%, 80%, 100% and 100% 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. ,Insync Staffing Solutions, Inc. ,Ofek Aerial Photography Ltd. ,ZAP Group Ltd. , and Shamrad Electronic (1997) Ltd., respectively. - Consolidated cash and cash equivalents, short-term bank deposits and short-term investments totaled approximately
$477 .5 million as ofJune 30, 2023 , compared to$569 .1 million as ofDecember 31, 2022 . - Total equity as of
June 30, 2023 , was$1 .23 billion (representing 45.0% of the total consolidated statements of financial position), compared to$1.18 billion (representing 42.1% of the total consolidated statements of financial position) as ofDecember 31, 2022 .
Debentures Covenants
As of
Covenant 1
- Target equity attributable to Formula’s shareholders (excluding non-controlling interests): above
$215 million . - Actual equity attributable to Formula’s shareholders as of
June 30, 2023 was$576.1 million .
Covenant 2
- Target ratio of net financial indebtedness to net capitalization (in each case, as defined under the indenture for Formula’s Series A and C Secured Debentures): below 65%.
- Actual ratio of net financial indebtedness to net capitalization, as of
June 30, 2023 was 9.4%.
Covenant 3
- Target ratio of net financial indebtedness to EBITDA (based on the accumulated calculation for the four most recent quarters): below 5.
- Actual ratio of net financial indebtedness to EBITDA as of
June 30, 2023 , was 0.35.
Comments of Management
Commenting on the results,
“Matrix concluded the first half of 2023 with double-digit growth and record-breaking results recorded across all its key financial indices: revenues, gross profit, operating income, EBITDA and net income attributable to shareholders. Matrix revenues for the first half grew by 10.9% year over year reaching an all-time first-half high of
“Sapiens achieved a strong second quarter, with 8.2% revenue growth and 18.2% operating margin (on a Non-GAAP basis), driven by significant growth in North American and European markets. Sapiens’ Life business is globally successful, fueled by strategic investments in CoreSuite for Life. Sapiens CoreSuite for Life recently won the 2023 Celent XCelent Award in the EMEA region and was recognized as a “Luminary” Policy Administration Solution in EMEA and
“Magic Software delivered a solid second quarter, with revenue reaching
“Michpal continues to monetize on its business model with its revenues for the first half growing organically by 10.3% year over year on a constant currency basis compared to the same period last year, to
“TSG concluded the first half of 2023 with double-digit growth and record-breaking results recorded across its revenues, operating income. TSG revenues for the first half grew by 21.1% year over year reaching an all-time first-half high of
“Lastly,
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 a jointly controlled entity 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
For more information, visit www.formulasystems.com.
Press Contact:
+972-3-5389487
ir@formula.co.il
Forward Looking Statements
Certain matters discussed in this press release that are incorporated herein and therein by reference are forward-looking statements within the meaning of Section 27A of the Securities Act, Section 21E of the Exchange Act and the safe harbor provisions of the
While we believe such forward-looking statements are based on reasonable assumptions, should one or more of the underlying assumptions prove incorrect, or these risks or uncertainties materialize, our actual results may differ materially from those expressed or implied by the forward-looking statements. Please read the risks discussed under the heading “Item 3.D Risk Factors” in our most recent Annual Report on Form 20-F for the year ended
CONSOLIDATED CONDENSED STATEMENTS OF PROFIT OR LOSS | ||||||||||||||||
Three months ended | Six months ended | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Unaudited | Unaudited | |||||||||||||||
Revenues | 655,374 | 636,892 | (*) | 1,325,773 | 1,287,608 | (*) | ||||||||||
Cost of revenues | 494,436 | 487,388 | (*) | 1,002,904 | 982,262 | (*) | ||||||||||
Gross profit | 160,938 | 149,504 | (*) | 322,869 | 305,346 | (*) | ||||||||||
Research and development costs, net | 19,210 | 17,848 | 38,518 | 35,198 | ||||||||||||
Selling, marketing and general and administrative expenses | 81,744 | 76,329 | (*) | 163,573 | 155,422 | (*) | ||||||||||
Capital gain from realization of a Matrix IT's subsidiary | 0 | 44,208 | 0 | 44,208 | ||||||||||||
Operating income | 59,984 | 99,535 | 120,778 | 158,934 | ||||||||||||
Financial expenses, net | (5,612 | ) | (3,716 | ) | (12,696 | ) | (8,399 | ) | ||||||||
Income before taxes on income | 54,372 | 95,819 | 108,082 | 150,535 | ||||||||||||
Taxes on income | 11,380 | 21,421 | 22,870 | 32,923 | ||||||||||||
Income after taxes | 42,992 | 74,398 | 85,212 | 117,612 | ||||||||||||
Share of profit of companies accounted for at equity, net | 174 | 380 | 209 | 613 | ||||||||||||
Net income | 43,166 | 74,778 | 85,421 | 118,225 | ||||||||||||
Net income attributable to non-controlling interests | 26,145 | 41,835 | 52,716 | 69,048 | ||||||||||||
Net income attributable to | 17,021 | 32,943 | 32,705 | 49,177 | ||||||||||||
Earnings per share (basic) | 1.12 | 2.16 | 2.14 | 3.24 | ||||||||||||
Earnings per share (diluted) | 1.11 | 2.12 | 2.11 | 3.18 | ||||||||||||
Number of shares used in computing earnings per share (basic) | 15,301,017 | 15,295,517 | 15,300,642 | 15,293,955 | ||||||||||||
Number of shares used in computing earnings per share (diluted) | 15,480,800 | 15,487,852 | 15,472,436 | 15,496,092 | ||||||||||||
(*) Immaterial adjustments to comparative data.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION | |||||||
2023 | 2022 | ||||||
(Unaudited) | |||||||
ASSETS | |||||||
CURRENT ASSETS: | |||||||
Cash and cash equivalents | 385,997 | 544,342 | |||||
Short-term deposits | 91,475 | 23,976 | |||||
Short-term investments | - | 738 | |||||
Trade receivables, net | 698,141 | 702,727 | |||||
Prepaid expenses and other accounts receivable | 76,382 | 64,535 | |||||
Inventories | 39,374 | 35,181 | |||||
Total current assets | 1,291,369 | 1,371,499 | |||||
NON-CURRENT ASSETS: | |||||||
Long-term investments and receivables | 49,498 | 38,985 | |||||
Deferred taxes | 43,960 | 42,027 | |||||
Investments in companies accounted for at equity | 19,894 | 20,746 | |||||
Property, plants and equipment, net | 53,877 | 54,971 | |||||
Right-of-use assets | 118,215 | 116,840 | |||||
Intangible assets, net and goodwill | 1,149,612 | 1,148,887 | |||||
Total non-current assets | 1,435,056 | 1,422,456 | |||||
Total assets | 2,726,425 | 2,793,955 | |||||
LIABILITIES AND EQUITY | |||||||
CURRENT LIABILITIES: | |||||||
Credit from banks and others | 155,685 | 157,882 | |||||
Debentures | 66,011 | 68,293 | |||||
Current maturities of lease liabilities | 46,192 | 45,497 | |||||
Trade payables | 202,932 | 222,482 | |||||
Deferred revenues | 136,390 | 131,639 | |||||
Employees and payroll accrual | 182,366 | 201,225 | |||||
Other accounts payable | 70,149 | 86,340 | |||||
Liabilities in respect of business combinations | 13,045 | 27,129 | |||||
Put options of non-controlling interests | 51,188 | 60,500 | |||||
Total current liabilities | 923,958 | 1,000,987 | |||||
LONG-TERM LIABILITIES: | |||||||
Loans from banks and others | 118,543 | 115,874 | |||||
Debentures | 265,221 | 305,632 | |||||
Lease liabilities | 79,544 | 78,966 | |||||
Other long-term liabilities | 13,980 | 14,101 | |||||
Deferred taxes | 60,172 | 59,465 | |||||
Deferred revenues | 5,878 | 8,859 | |||||
Liabilities in respect of business combinations | 5,827 | 12,345 | |||||
Put options of non-controlling interests | 15,892 | 11,688 | |||||
Employees benefit liabilities, net | 9,741 | 9,116 | |||||
Total long-term liabilities | 574,798 | 616,046 | |||||
EQUITY | |||||||
Equity attributable to | 576,106 | 551,875 | |||||
Non-controlling interests | 651,563 | 625,047 | |||||
Total equity | 1,227,669 | 1,176,922 | |||||
Total liabilities and equity | 2,726,425 | 2,793,955 | |||||
STAND-ALONE STATEMENTS OF FINANCIAL POSITION | |||||||
2023 | 2022 | ||||||
(Unaudited) | |||||||
ASSETS | |||||||
CURRENT ASSETS: | |||||||
Cash and cash equivalents | 38,126 | 39,363 | |||||
Other accounts receivable and prepaid expenses | 6,966 | 7,326 | |||||
Total current assets | 45,092 | 46,689 | |||||
NON-CURRENT ASSETS: | |||||||
Investment in subsidiaries and a jointly controlled entity (*) | |||||||
Matrix IT Ltd. | 150,197 | 149,701 | |||||
Sapiens International Corporation N.V. | 234,321 | 228,860 | |||||
Magic Software Enterprises Ltd. | 124,805 | 125,058 | |||||
Other | 144,614 | 154,408 | |||||
Total investment in subsidiaries and a jointly controlled entity | 653,937 | 658,027 | |||||
Long term receivables and other investments | 21,715 | 12,870 | |||||
Property, plants and equipment, net | 7 | 8 | |||||
Total non-current assets | 675,659 | 670,905 | |||||
Total assets | 720,751 | 717,594 | |||||
LIABILITIES AND EQUITY | |||||||
CURRENT LIABILITIES: | |||||||
Debentures | 22,128 | 32,999 | |||||
Trade payables | 169 | 125 | |||||
Other accounts payable | 1,315 | 5,596 | |||||
Put options of non-controlling interests | 853 | 848 | |||||
Liability in respect of a business combination | 405 | 426 | |||||
Total current liabilities | 24,870 | 39,994 | |||||
LONG-TERM LIABILITIES: | |||||||
Debentures | 119,546 | 125,484 | |||||
Liability in respect of a business combination | 229 | 241 | |||||
Total long-term liabilities | 119,775 | 125,725 | |||||
EQUITY | 576,106 | 551,875 | |||||
TOTAL LIABILITIES AND EQUITY | 720,751 | 717,594 | |||||
(*) The investments' carrying amounts are measured consistent with the accounting principles applied in the consolidated financial statements of the group and representing the investments’ cost adjusted by Formula's share in the investees' accumulated undistributed earnings and other comprehensive income or loss.
Source:
2023 GlobeNewswire, Inc., source