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Formula Systems Reports First Quarter 2025 Financial Results

1. Revenues increased 8.1%, reaching $754.7 million, a record high. 2. Net income rose 12.6% to $19.3 million, also a record. 3. Operating income improved by 12.7% to $70.5 million year-over-year. 4. A dividend of approximately $0.44 per share was declared. 5. Company holds significant shares in various subsidiaries, indicating strong market position.

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Why Bullish?

Record revenues and net income suggest strong business fundamentals; similar past performances have led to price increases.

How important is it?

Strong financial results and dividend declaration are critical and can impact stock demand positively.

Why Short Term?

The positive quarterly results are likely to influence immediate investor sentiment and stock movement.

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MTRXSPNSMGIC
Revenues for the first quarter increased by 8.1% year over year, reaching a first quarter all-time high of $754.7 million. Net Income for the first quarter increased by 12.6% year over year, reaching a first quarter all-time high of $19.3 Million. May 22, 2025 09:47 ET  | Source: Formula Systems (1985) Ltd. OR YEHUDA, Israel, May 22, 2025 (GLOBE NEWSWIRE) -- Formula Systems (1985) Ltd. (Nasdaq and TASE: FORTY) (“Formula” or the “Company”), a global information technology group engaged, through its subsidiaries and affiliates, in providing software consulting services and computer-based business solutions and developing proprietary software products, today announced its first quarter ended March 31, 2025 results of operations. Financial Highlights for the First Quarter Ended March 31, 2025 Revenues for the first quarter ended March 31, 2025 increased by 8.1% year over year, reaching a first quarter all-time high of $754.7 million, compared to $698.4 million in the same period last year.Operating income for the first quarter ended March 31, 2025 increased by 12.7% year over year, reaching a first quarter all-time high of $70.5 million, compared to $62.6 million in the same period last year.Net income attributable to Formula’s shareholders for the first quarter ended March 31, 2025 increased by 12.6% year over year, reaching a first quarter all-time high of $19.3 million, or $1.23 per fully diluted share, compared to $17.2 million, or $1.10 per fully diluted share, in the same period last year.As of March 31, 2025, Formula held 48.14%, 43.50%, 46.71%, 100%, 42.34%, 90.1%, 80%, 100%, 100% and 51% of the outstanding ordinary shares of Matrix IT Ltd., Sapiens International Corporation N.V., Magic Software Enterprises Ltd., Michpal Technologies Ltd., TSG IT Advanced Systems Ltd., Insync Staffing Solutions, Inc., Ofek Aerial Photography Ltd., ZAP Group Ltd., Shamrad Electronic (1997) Ltd., and Hashahar Telecom And Electricity Ltd., respectively.Consolidated cash and cash equivalents and short-term bank deposits totaled approximately $526.8 million as of March 31, 2025, compared to $$563.2 million as of December 31, 2024.Total equity as of March 31, 2025, was $1.38 billion (representing 45.2% of the total consolidated statements of financial position), compared to $1.39 billion (representing 46.1% of the total consolidated statements of financial position) as of December 31, 2024. Declaration of Dividend for the First Quarter of 2025 Based on the Company’s results, the Company’s board of directors approved the distribution of a cash dividend in an amount of NIS 1.57 per share (approximately $0.44 per share) and in an aggregate amount of approximately NIS 24.1 million (approximately $6.8 million).The dividend is payable on July 22, 2025, to all of the Company’s shareholders of record at the close of trading on the Nasdaq Global Select Market (or the Tel-Aviv Stock Exchange, as appropriate) on July 7, 2025. The dividend will be paid in New Israeli Shekels with respect to the Company's ordinary shares traded on the Tel Aviv Stock Exchange and American Depositary Receipts traded on the Nasdaq Global Select Market. In accordance with Israeli tax law, the dividend is subject to withholding tax at source at the rate of 30% (if the recipient of the dividend is at the time of distribution or was at any time during the preceding 12-month period the holder of 10% or more of the Company's share capital) or 25% (for all other dividend recipients) of the dividend amount payable to each shareholder of record, subject to applicable exemptions. Debentures Covenants As of March 31, 2025, Formula was in compliance with all of its financial covenants under the debenture series issued by it, based on the following achievements: Covenant 1 Target equity attributable to Formula’s shareholders (excluding non-controlling interests): above $325 million.Actual equity attributable to Formula’s shareholders as of March 31, 2025 was $681.0 million. Covenant 2 Target ratio of net financial indebtedness to net capitalization (in each case, as defined under the indenture for Formula’s Series C and D Secured Debentures): below 65%.Actual ratio of net financial indebtedness to net capitalization, as of March 31, 2025 was (4.72%). 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 March 31, 2025 was (0.16). Comments of Management Commenting on the results, Guy Bernstein, CEO of Formula Systems, said: “Formula Systems group continues to demonstrate strong and consistent performance, making big strides across multiple fronts, as reflected by our first quarter record-breaking results recorded across all key operational financial indices: revenues, gross profit, operating income, net income and EBITDA. These results underscore our commitment to driving sustained growth and operational excellence across all segments of our business. We are pleased with the continued recognition as leaders in our areas of expertise, implementing fast-growing technologies, such as cloud, cyber, digital, data, DevOps, Insure-Tech and AI, which enable us to create significant value for our customers in managing, streamlining, accelerating and making their businesses thrive. We continue to uphold our core values of innovation, professionalism, agility, and transparency across our entire group. These principles enable us to consistently create significant value for our customers, ultimately contributing to their growth”. 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 in the current period 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, whose ordinary shares are traded on the Tel-Aviv Stock Exchange and ADSs are traded on the Nasdaq Global Select Market, is 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. For more information, visit www.formulasystems.com. Press Contact: Formula Systems (1985) Ltd. +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 U.S. Private Securities Litigation Reform Act of 1995, that are based on our beliefs, assumptions and expectations, as well as information currently available to us. Such forward-looking statements may be identified by the use of the words “anticipate,” “believe,” “estimate,” “expect,” “may,” “will,” “plan” and similar expressions. Such statements reflect our current views with respect to future events and are subject to certain risks and uncertainties. There are important factors that could cause our actual results, levels of activity, performance or achievements to differ materially from the results, levels of activity, performance or achievements expressed or implied by the forward-looking statements, including, but not limited to: adverse macro-economic trends and their duration, including inflation, relatively high interest rates, and supply chain delays, which trends may last for a significant period and materially adversely affect our results of operations; the degree of our success in our plans to leverage our global footprint to grow our sales; the degree of our success in integrating the companies that we have acquired through the implementation of our M&A growth strategy; the degree of our success in developing and deploying new technologies for software solutions that address the updated needs of our customers and serve as the basis for our revenues; the lengthy development cycles for our solutions, which may frustrate our ability to realize revenues and/or profits from our potential new solutions; our lengthy and complex sales cycles, which do not always result in the realization of revenues; the degree of our success in retaining our existing customers or competing effectively for greater market share; difficulties in successfully planning and managing changes in the size of our operations; the frequency of the long-term, large, complex projects that we perform that involve complex estimates of project costs and profit margins, which sometimes change mid-stream; the challenges and potential liability that heightened privacy laws and regulations pose to our business; occasional disputes with clients, which may adversely impact our results of operations and our reputation; various intellectual property issues related to our business; potential unanticipated product vulnerabilities or cybersecurity breaches of our or our customers’ systems particularly in the current hybrid office/work-from-home environment; risks related to industries, such as the insurance, healthcare, defense and the telecom, in which certain of our clients operate; risks posed by our global sales and operations, such as changes in regulatory requirements, supply chain disruptions, geopolitical, wide-spread viruses and epidemics or fluctuations in currency exchange rates; and risks related to our and our subsidiaries’ principal location in Israel. 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 December 31, 2024, filed with the U.S. Securities and Exchange Commission on May 14, 2025, in order to review conditions that we believe could cause actual results to differ materially from those contemplated by the forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that future results, levels of activity, performance and events and circumstances reflected in the forward-looking statements will be achieved or will occur. Except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason, or to conform those statements to actual results or to changes in our expectations. FORMULA SYSTEMS (1985) LTD.   CONSOLIDATED CONDENSED STATEMENTS OF PROFIT OR LOSSU.S. dollars in thousands (except per share data)     Three months ended March 31, 2025 2024 UnauditedRevenues 754,682 698,401Cost of revenues573,974 534,186Gross profit 180,708 164,215Research and development costs, net21,088 20,217Selling, marketing and general and administrative expenses89,076 81,413Operating income 70,544 62,585Financial expenses, net5,538 5,602Income before taxes on income 65,006 56,983Taxes on income15,452 13,458Income after taxes49,554 43,525Share of profit of companies accounted for at equity, net828 103Net income 50,382 43,628Net income attributable to non-controlling interests31,066 26,469Net income attributable to Formula Systems shareholders 19,316 17,159    Earnings per share (basic)1.26 1.12Earnings per share (diluted)1.23 1.10    Number of shares used in computing earnings per share (basic)15,311,924 15,303,267Number of shares used in computing earnings per share (diluted)15,729,173 15,570,761 FORMULA SYSTEMS (1985) LTD.CONSOLIDATED STATEMENTS OF FINANCIAL POSITIONU.S. dollars in thousands  March 31, December 31,  2025 2024  (Unaudited)   ASSETS   CURRENT ASSETS:    Cash and cash equivalents461,805 507,799 Short-term deposits64,989 55,401 Trade receivables, net831,108 803,235 Prepaid expenses and other accounts receivable96,891 89,882 Inventories27,771 30,728Total current assets1,482,564 1,487,045     NON-CURRENT ASSETS:    Long-term investments and receivables59,229 54,629 Deferred taxes35,627 33,850 Investments in companies accounted for at equity38,572 39,196 Property, plants and equipment, net51,851 51,795 Right-of-use assets151,842 156,225 Intangible assets, net and goodwill1,225,818 1,192,156Total non-current assets1,562,939 1,527,851     Total assets3,045,503 3,014,896     LIABILITIES AND EQUITY   CURRENT LIABILITIES:    Loans from banks and others150,474 141,782 Debentures87,249 86,782 Current maturities of lease liabilities44,581 45,240 Trade payables283,893 296,211 Deferred revenues180,619 173,959 Employees and payroll accrual243,683 234,845 Other accounts payable109,979 98,046 Dividend payable14,227 - Liabilities in respect of business combinations11,505 9,191 Put options of non-controlling interests53,853 52,420Total current liabilities1,180,063 1,138,476     LONG-TERM LIABILITIES:    Loans from banks and others73,153 62,733 Debentures153,840 188,090 Lease liabilities117,645 119,586 Other long-term liabilities12,221 11,708 Deferred taxes45,334 42,894 Deferred revenues25,934 12,522 Liabilities in respect of business combinations6,707 8,751 Put options of non-controlling interests42,908 30,553 Employees benefit liabilities10,443 10,238Total long-term liabilities488,185 487,075     EQUITY     Total equity attributable to Formula Systems (1985) Ltd. shareholders681,020 679,338 Non-controlling interests696,235 710,007Total equity1,377,255 1,389,345     Total liabilities and equity3,045,503 3,014,896 FORMULA SYSTEMS (1985) LTD.STAND-ALONE STATEMENTS OF FINANCIAL POSITIONU.S. dollars in thousands  March 31, December 31,  2025 2024  (Unaudited) ASSETS   CURRENT ASSETS:    Cash and cash equivalents33,361 25,599 Dividend receivable31,086 12,013 Other accounts receivable and prepaid expenses5,540 4,798Total current assets69,987 42,410     NON-CURRENT ASSETS:    Investment in subsidiaries and a jointly controlled entity (*)    Matrix IT Ltd.163,384 162,133 Sapiens International Corporation N.V.257,263 264,349 Magic Software Enterprises Ltd.130,152 133,786 TSG IT Advanced Systems Ltd.19,640 20,453 Michpal Technologies Ltd.73,902 69,127 ZAP Group51,520 55,392 Other48,578 47,722 Total investment in subsidiaries and a jointly controlled entity744,439 752,962      Other investments and Long term receivables20,558 24,860 Property, plants and equipment, net9 10Total non-current assets765,006 777,832     Total assets834,993 820,242     LIABILITIES AND EQUITY   CURRENT LIABILITIES:    Loans from banks and others2,251 2,294 Debentures46,017 45,807 Trade payables268 1,146 Other accounts payable3,763 2,109 Put options of non-controlling interests1,073 1,005 Dividends payable14,227 -Total current liabilities67,599 52,361     LONG-TERM LIABILITIES:    Loans from banks and others2,428 3,047 Debentures83,946 85,496Total long-term liabilities86,374 88,543     EQUITY 681,020 679,338     TOTAL LIABILITIES AND EQUITY834,993 820,242          (*) 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.

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