Notable News to Watch: Formula Systems (1985) Ltd. (NASDAQ: FORTY) reports earnings results for the first quarter

Formula Systems (1985) Ltd. (NASDAQ: FORTY) changed 0.00% to recent value of $51.26. The stock transacted 0 shares during most recent day however it has an average volume of 0.39K shares. It spotted trading -4.15% off 52-week high price. On the other end, the stock has been noted 54.63% away from the low price over the last 52-weeks.

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, declared its results for the first quarter ended March 31, 2019.

Financial Highlights for the First Quarter Ended March 31, 2019

Consolidated revenues for the first quarter increased by 4.8% to $391.4 million, with growth recorded across Formula’s entire investment portfolio. Revenues for the first quarter ended March 31, 2018 amounted to $373.4 million. On a constant currency basis, excluding the negative impact from the erosion of foreign exchange rates, revenues for the first quarter would have reflected an increase of 8% year over year to a record-breaking $403 million.

Consolidated operating income for the first quarter increased by 22.8% to $31.7 million, with growth recorded across Formula’s entire investment portfolio. Consolidated operating income for the first quarter ended March 31, 2018 amounted to $25.8 million.

Consolidated net income attributable to Formula’s shareholders for the first quarter was $10.0 million, or $0.58 per fully diluted share, compared to $7.2 million, or $0.48 per fully diluted share, in the same period last year, reflecting an increase of 38.6%.

As of March 31, 2019 Formula held 48.88%, 48.06%, 45.16%, 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, respectively.

Consolidated cash and cash equivalents, bank deposits and investments in marketable securities totaled approximately $297.5 million as of March 31, 2019, compared to $295.3 million as of December 31, 2018.

Total equity as of March 31, 2019 was $846.3 million (representing 43.9% of the total balance sheet), compared to $805.4 million (representing 48.4% of the total balance sheet) as of December 31, 2018.

On March 31, 2019, Formula reported the completion of an institutional public offering of series C debentures (the “Offering”). Formula Series C debentures are secured by liens over shares of Formula’s subsidiaries that are held by Formula (with an LTV of not more than 60%). The New Debentures were listed for trading on the Tel-Aviv Stock Exchange. The Company issued a total amount of NIS 300 million par-value ($82.6 million) of the New Debentures in the Offering, bearing interest at a fixed annual rate of 2.29%, paid out on a semi-annual basis, at a price per debenture unit (each unit comprised of NIS 1,000 par value of debentures) of NIS 1,000. The principal amount of the Series C Debentures will be payable by Formula in seven annual installments from December 1, 2020 through December 1, 2026, the first five of which will each constitute 11% of the principal, and the final two of which will each constitute 22.5% of the principal.

As a result of conversions that were effected prior to the maturity of Formula Series B Convertible Debentures in March 2019, holders of Series B Convertible Debentures converted an aggregate principal par value amount of NIS 80.5 million (of which NIS 0.2 million were converted in 2018) into 545,485 ordinary shares (of which 1,556 ordinary shares were issued in 2018), constituting 3.57% of Formula’s issued and outstanding share capital (following those conversions). The remaining outstanding Series B Convertible Debentures matured on March 26, 2019, and the remaining outstanding principal of NIS 44.5 million (or $11.4 million) and interest on those debentures of $1.1 million were paid on that date.

As of March 31, 2019 Formula was in compliance with all of its financial covenants under the debentures issued by Formula and under a loan granted by a financial institution, based on achieving the following in its consolidated financial results:

 FORTY has a gross margin of 22.30% and an operating margin of 7.30% while its profit margin remained 2.20% for the last 12 months. Its earnings per share (EPS) expected to touch remained 365.20% for this year .

 The company has 15.52M of outstanding shares and 8.87M shares were floated in the market. According to the most recent quarter its current ratio was 1.5 that represents company’s ability to meet its current financial obligations. The price moved ahead of 7.87% from the mean of 20 days, 22.92% from mean of 50 days SMA and performed 29.03% from mean of 200 days price. Company’s performance for the week was 5.28%, 30.43% for month and YTD performance remained 43.83%.

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