Revenues for the Fourth quarter of 2013 increased by 6% to Record Revenues of $209.5 million and Record Operating Income of $18.2 Million, an Increase of 20% Year Over Year

Or Yehuda, Israel, March 13 , 2014 – Formula Systems (1985) Ltd. (NASDAQ: FORTY) 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, today announced its results for the fourth quarter and full year ended December 31, 2013.

Financial Highlights for the Fourth Quarter of 2013

• On November 19, 2013 Sapiens International Corporation N.V., until then a majority-owned  subsidiary of Formula, raised net proceeds of $37.8 million in a follow-on public offering, pursuant to which Formula's holdings in Sapiens were reduced below 50%. Formula's investment in Sapiens following the offering was accounted under the equity method of accounting. The gain recognized in 2013 in relation of the Company’s deconsolidation of Sapiens and related re-measurement to fair value of Sapiens amounted to $57.1 million and is presented in the income statement as equity in gains of affiliated companies, net. On December 31, 2013, Formula’s interest in Sapiens’ outstanding common shares was approximately 48.6%.
• Revenues for the Fourth quarter of 2013 increased by 6% to $209.5 million compared to $198.3 million in the same period last year. Following the deconsolidation of Sapiens' results as of November 19, 2013, revenues for the fourth quarter of 2013 excluded approximately $18.1 million of revenues recorded by Sapiens.  
• Operating income for the fourth quarter of 2013, increased by 20% to $18.2 million, compared to $15.1 million in the same period last year; Non-GAAP operating income for the fourth quarter of 2013, increased by 6% to $20.8 million, compared to $19.6 million in the same period last year.  Following the deconsolidation of Sapiens' results as of November 19, 2013, operating income for the fourth quarter of 2013 excluded approximately $1.7 million recorded in Sapiens and Non-GAAP operating income for the fourth quarter of 2013 excluded $1.9 million recorded by Sapiens.
• Net income attributable to Formula’s shareholders for the fourth quarter ended December 31, 2013 increased 736% to $62.6 million (or $4.38 per fully diluted share) compared to $7.5 million (or $0.53 per fully diluted share) in the same period last year. Non-GAAP net income attributable to Formula’s shareholders for the fourth quarter ended December 31, 2013, increased 564% to $64.1 million compared to $9.7 million in the same period last year.

Financial Highlights for the year Ended December 31, 2013

• Revenues for the year ended December 31, 2013, increased 7% to $796.7 million compared to $744.7 million in 2012.
• Operating income for the year ended December 31, 2013, increased 8% to $61.5 million compared to $57.0 million in 2012; Non-GAAP operating income for the year ended December 31, 2013 totaled approximately $72.8 million compared to $73.1 million in 2012.
• Net income attributable to Formula’s shareholders for the year ended December 31, 2013, increased 220% to $76.9 million (or $5.38 per fully diluted share) compared to $24.0 million (or $1.72 per fully diluted share) in 2012; Non-GAAP net income attributable to Formula’s shareholders for the year ended December 31, 2013, increased 161% to $83.9 million compared to $32.2 million in 2012.
• Formula’s consolidated cash and short-term and long-term investments in marketable securities totaled approximately $101.3 million, as of December 31, 2013.
• Total equity as of December 31, 2013 was $482.9 million, representing 55% of the total balance sheet.

Comments of Management

Commenting on the results, Guy Bernstein, CEO of Formula Systems, said, “We are pleased with our record financial performance in 2013 across our entire portfolio and are confident about their future growth prospects. Sapiens ended 2013 with record top line results and double-digit revenue growth over 2012. Building on its technology leadership and organic growth, Sapiens has continued improving its competitive position and increased its sales pipeline across all its product lines. Magic continues to produce record results and shows strong performance across all of its products and professional services demonstrating increasing customer demand for its software and services. Matrix, Israel’s leading IT service provider, boasted a strong ending to the year, increasing its profitability despite a slight decrease in revenues compared to last year. Matrix remains financially strong, while maintaining strong cash flow from its operations and has realigned itself to take advantage of growing trends such as cloud services” 

“In addition, in efforts to drive further growth, both Sapiens and Magic recently completed follow-on public offerings of common stock with net proceeds of $37.8 million and $54.7 million respectively. The success of these offerings demonstrates the market’s confidence in their existing markets, operations and growth strategy” concluded Bernstein.

Non-GAAP Financial Measures

This release includes non-GAAP operating income, net income, basic and diluted earnings per share and other non-GAAP financial measures. These non-GAAP measures exclude the following items:

• Amortization of intangible assets derived from acquisitions;
• Research and development capitalization and related amortization;
• Share-based compensation;
• Unwinding of discount in connection with liabilities due to acquisitions; and
• Change in valuation of contingent consideration;
• Related tax effect of the above items.

Formula’s management believes that the purpose of such adjustments is to give an indication of Formula’s performance exclusive of non-cash charges and other items that are considered by management to be outside of Formula's core operating results.

These non-GAAP financial measures are not in accordance with, or an alternative for, generally accepted accounting principles and may be different from non-GAAP financial measures used by other companies. In addition, these non-GAAP financial measures are not based on any comprehensive set of accounting rules or principles. Formula believes that non-GAAP financial measures have limitations in that they do not reflect all of the amounts associated with Formula’s results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate Formula’s results of operations in conjunction with the corresponding GAAP measures. Please refer to the Reconciliation of Selected Financial Metrics from GAAP to Non-GAAP tables below.

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

[email protected]