Formula Systems (1985) Ltd. — Investor Presentation 2019

Mar 13, 2019

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON D.C. 20549

FORM 6-K

Report of Foreign Private Issuer Pursuant to Rule 13a-16 or 15d-16 of the Securities Exchange Act of 1934

For the month of March 2019

Commission File Number: 000-29442

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 Form 40-F

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

CONTENTS

Investor Presentation Related to Potential New Israeli Debenture Series

On March 13, 2019, Formula Systems (1985) Ltd. ("Formula") published with the Tel Aviv Stock Exchange (the "TASE") and the Israel Securities Authority (the "ISA") an investor presentation that it will be using in connection with its marketing efforts for Formula's new series of secured debentures—Series C Debentures— that may potentially be issued by Formula in Israel. A copy of the investor presentation is appended as Exhibit 99.1 to this Report of Foreign Private Issuer on Form 6-K (a "Form 6-K").

A description of the potential offering of the Series C Debentures in Israel was contained in Formula's Form 6- K that it furnished to the U.S. Securities and Exchange Commission on March 11, 2019, which description is incorporated by reference herein.

No U.S. Offering

This Report of Foreign Private Issuer on Form 6-K (including the investor presentation appended as Exhibit 99.1 hereto) is not an offer of securities for sale in the United States. Any securities— including the Series C Debentures to be potentially offered— may not be offered or sold in the United States absent registration under the U.S. Securities Act of 1933, as amended (the "Securities Act") or an exemption from the registration requirements thereunder. Any offering of securities pursuant to the shelf prospectus and any supplemental shelf offering report that may be published by Formula in Israel will be made only in Israel to residents of Israel, will not be registered under the Securities Act and will not be offered or sold in the United States or to U.S. persons (as defined in Regulation S under the Securities Act), except pursuant to an applicable exemption from registration under the Securities Act.

SIGNATURES

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

Date: March 13, 2019 By:/s/ Asaf Berenstin

FORMULA SYSTEMS (1985) LTD.

Name: Asaf Berenstin Title: Chief Financial Officer

Exhibit
No.	Description
99.1	Investor presentation for potential Israeli offering of new series of secured debentures of Formula Systems
	(1985) Ltd. (no offering to U.S. investors)

Exhibit Index

March 2019

Safe Harbor Statement

• Certain statements and other information included in this presentation may constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 (the "Securities Act"), Section 21E of the Securities Exchange Act of 1934 and the United States Private Securities Litigation Reform Act of 1995. Words such as "will," "expects," "believes" and similar expressions are sometimes used to identify these forward-looking statements (although not all forward-looking statements include such words). These forward-looking statements, which may include, without limitation, projections regarding our future performance and financial condition, are made on the basis of management's current views and assumptions with respect to future events. Any forward-looking statement is not a guarantee of future performance and actual results could differ materially from those reflected in the forward-looking statement.
• The statements and information in the presentation speak only as of the date they are being made, and we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. We operate in a changing environment. New risks emerge from time to time and it is not possible for us to predict all risks that may affect us. For more information regarding these risks and uncertainties as well as certain additional risks that we face, you should refer to the Risk Factors detailed in Item 3.D of our Annual Report on Form 20-F for the year ended December 31, 2016 and subsequent reports and registration statements filed or furnished by our company from time to time with the U.S. Securities and Exchange Commission.
• This presentation has been provided for informational purposes only and does not constitute an offer to sell, or a solicitation of an offer to buy, any securities. The offering of any securities that may be made by our company in the aftermath of this presentation will be made in Israel only and not to U.S. persons (as defined in Rule 902(k) under the Securities Act), in an overseas directed offering (as defined in Rule 903(b)(i)(ii) under the Securities Act), and will be intended to be exempt from registration under the Securities Act pursuant to the exemption provided by Regulation S thereunder. The sale of any such securities will not be registered under the Securities Act, and any such securities may not be offered or sold in the United States and/or to U.S. persons without registration under the Securities Act or an applicable exemption from the registration requirements of the Securities Act.

Solid, proven and clear investment strategy in global IT and software companies

Focusing on a controlling interest in Investees

Providing added value to investees - strategic insight, operational support and global relationships

Conservative financial management relying on diverse sources of credit - capital market, financial institutions and banks

We believe that Transparency Pays – High Corporate transparency through public traded investments, clear and detailed reporting (TASE,SEC), IPOs

Mature businesses with strong customer base, significant revenue and profitable operation

Talented and highly motivated management with personal share interest

Strong, stable and sustainable cash-flow

Solid growth potential based on tangible growth engines

Risk Profile

• Formula is dual-listed on TASE (99%) and NASDAQ (1%)
• 42.0%(1) held by over ~5% ISR Financial Institutions Clal (8.6%), Menora (6.9%), Phoenix (6.0%), Meitav(5.6%), Harel (5.2%), Psagot (5.1%) and Yalin (4.6%)
• Subs 3 publicly traded and 3 private
• Formula's management supervises all the businesses with ͞Hands-On͟ involvement in every none ordinary change in the business
• Managements are veteran and experienced in publicly traded companies (youngest member over 10 years with the company)
• Magic and Sapiens are dual-listed on TASE and Nasdaq; both provide annual revenue guidance since 2014 and both are based on strong repreated revenues generated by customers with long engagement cycles. Matrix is traded on TASE.
• Private companies are mature and are based on more than 30 years of business relations with their customers
• All companies are being audited by EY while implementing for many years all requirements such as SOX, internal auditing etc. with clean opinions
• All companies, managements, directors are with strong financial orientations and very conservative in nature

Companies Portfolio

A leading global provider of software solutions for the insurance and financial industry

A provider of proprietary payroll software solution for processing traditional payroll stubs and consulting services

U.S. based full-service provider of staffing solutions

A leading Israeli service Integrator

48.1% 49.2% 45.2%

A global provider of software technology and services for digital transformation

A global provider of C4iSTAR, HLS and cyber solutions

Investment Portfolio

			Book Value Sep 30, 2018	Quoted prices in active markets March 10, 2019
		Matrix	\$114,361	\$371,447
		Sapiens	\$169,400	\$327,997
		Magic	\$108,780	\$189,671
		Total Traded	\$392,541	\$889,115
Private Companies			Book Value Sep 2018	Fair (1) Value
		Michpal	\$21,709	\$21,709
Traded		TSG	\$25,214	\$25,214
		Inysnc	\$4,604	\$ϰ,6Ϭ4
	Portfolio Total Cash Net Debt	Total Private	\$51,ϱϮϳ	\$ϱϭ,ϱϮϳ
			Book Value Sep 2018	Fair Value
		Portfolio	\$444,068	\$ϵϰ0,642
		Other assets	\$6,574	\$6,574 (2)
			\$450,642	\$947,216
		Gross Debt	(\$116,844)	(2) (\$116,844)
			\$ϯϱ,ϱϱϬ	(2) \$ϯϱ,ϱϱϬ
			(\$81,294)	(\$81,294)
		Net Assets	\$369,348	\$865,922
		Equity per share	\$25.04	\$58.71
		LTV	18.04 %	8.6 %

Fair Value Composition (March 2019)

(1) Conservative assumption: Book-Value equal to Fair market Value

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(2) Cash, other receivables, gross debt and outstanding share capital are presented as of Sep 30, 2018

Financial Debt Composition Stand Alone

BOND SERIES A (2.8%) NIS 205,266,450 Par-Value	BOND SERIES B (2.78%) USD 31,871,500 Par-Value
ilAA	ilA+
A1.il Moody's	A1.il Moody's
Secured by shares	\$20.5 millin converted to
Average duration as of	shares (NIS147.5 : 1)
March 2019 – 2.7	Redemption on 26/3/19
Last Pmt. July 2024

\$117 ⁴⁹%

Million

● Series A ● Series B ● Financial

30%

21%

LOAN FINANCIAL INST. NIS 88,400,000 \$24.7m

	ilA+
	A1.il Moody's
Secured by shares

Average duration 0.58

Last Pmt. January 2020

*Formula is in compliance with all of its financial covenants under the debentures issued by Formula and under loans granted by other financial institutions

Institution

Formula at a glance* YE 2017 / 9M-2018

Established:	Total Cash 9.2018:
1985	\$283.7M
Employees:	Revenue:
~15,000	\$1.4B / \$1.1B
Market Cap (3/2019):	Operating Profit:
NIS2.3B	\$72.9M / \$77.1M
Stand Alone LTV (3/2019):	Net Income Attributable to
~8.6%	Equity holders of the Company : \$10.4M / \$21.6M

REVENUES GROWTH

OPERATING PROFIT

* From 2012 to 2014, data is Based on US GAAP From 2015 onwards, the company reports its financial statements based on IFRS

Based on consolidated financial statements

Matrix at a glance*

Founded: 1989

Traded since 1993: MTRX

Dividend policy of 75 % of net income (ϯ.ϲ% yield)

Formula Systems 49.2%

More than 50% Free Float (TASE-TA90)

OFFERING

Software Solutions and Services (US)

Software Solutions and Services (ISRAEL)

Computer Infrastructure and Integration Solutions

Learning and Integration

Software Product Marketing and Support

OPERATING PROFIT

REVENUES GROWTH

REVENUES BY GEOGRAPHY

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Matrix

• Leading the Israeli IT market by identifying and adapting company's offerings to market trends and demands
• Achieving Global leading positions in:
  • GRC, anti-Fraud and AML market
  • SIEM-SOC and Cyber Security solutions
• Rapid International growth via M&A

FUTURE STRATEGY FINANCIAL HIGHLIGHTS

NIS million	2018	2017	18Vs17	2016	17Vs16
Revenue	3,168.0	2,857.0	11%	2,545.0	12%
Gross Profit	465.1	420.3	11%	392.5	7%
Gross margin	14.7%	14.7%		15.4%
Operating Income	220.6	198.0	11%	187.3	6%
EBITDA	251.3	222.7	13%	212.3	5%
Operating margin	7.9%	7.8%		8.3%
Operating Cash Flow	124.6	180.8	(31%)	114.6	58%

Sapiens at a glance*

STATS

Founded: 1982
Traded since 1992: SPNS
Dividends up to 50 % of
net income no dividend policy
Formula Systems 48.1%

More than 50% Free Float TASE-TA90;NASDAQ New Customers: 95 (2011-2017); Ϯϱ (2018) Foot Print: 36/457 Office/ Customers

GLOBAL PRESENCE

OFFERING

* All figures are in millions of USD

Sapiens

• Customer Base
• Geographic Expansion
• Complementary Solutions
• Increase footprint in the US P&C market via StoneRiver and Adaptic and continue Global P&C double digit growth
• Moving from decline revenue in L&P to stabilization with positive outlook
• Margin expansion

FUTURE STRATEGY FINANCIAL HIGHLIGHTS

USD million	2018	2017	18Vs17	2016	17Vs16
Non GAAP Revenue	290.3	272.0	7%	216.2	26%
Non GAAP Gross Profit	122.9	106.7	15%	91.87	16%
Gross Margin	42.3%	39.2%		42.4%
EBITDA	43.3	26.9	61%	32.5	(17%)
Operating Margin	14.9%	9.9%		15%
Operating Cash Flow	27.7	9.3	198%	26.0	(64%)

Magic at a glance *

STATS

Founded: 1983

Traded since 1991: MGIC

Dividend policy of ϳϱ % of net income (~3.6% yield)

Formula Systems 45.2% More than 50% Free Float TASE-TA90; NASDAQ Foot Print: 24/'000 Office/ Customers Repeated: 80%

Robust application development and integration platforms that enable enterprises and ISVs to go digital

NON-GAAP OPERATING PROFIT

* All figures are in millions of USD

ϮϬϭϯ ϮϬϭϰ ϮϬϭϱ ϮϬϭϲ ϮϬϭϳ ϮϬϭϴ

REVENUES GROWTH

ϮϬϭϯ ϮϬϭϰ ϮϬϭϱ ϮϬϭϲ ϮϬϭϳ ϮϬϭϴ

REVENUES BY GEOGRAPHY

Magic

• Improve and Focus on Cross-Selling
• Increase Penetration in our Existing Customer Base with New Technologies
• Acquire New Partners and Customers
• Provide New Solutions to New Ecosystems
• Growth Through Acquisitions

FUTURE STRATEGY FINANCIAL HIGHLIGHTS

USD million	2018	2017	18Vs17	2016	17Vs16
Non GAAP Revenue	284.4	258.1	10%	201.6	28%
Non GAAP Gross Profit	94.4	89.0	6%	73.6	21%
Gross margin	33.2%	34.5%		36.5%
EBITDA	40.7	35.9	13%	28.6	26%
Operating margin	14.3%	13.9%		14.2%
Operating Cash Flow	24.1	25.5	(5%)	28.0	(9%)

TSG at a glance*

Founded: 1999 as Ness-TSG; June 2014- TSG

Formula Systems 50.0% (IAI 50%) – Acquired in May 2016

FUTURE STRATEGY

• Increase revenues :
  • More than 50% overseas
  • 50% Organic and 50% from M&A
• Strategic cooperation with IAI & Formula /Asseco
• Improve Sales & Marketing activities

	Command & Control
	(Data Fusion Systems and Strategic C2 Systems)
	Intelligence (VISINT, Active Defense)
OFFERING

Public Safety & Crisis Management and Cyber (HLS & Cyber)

Telecom Systems

June 2017 - Winners of IMOD's tender for ICT center.

The project considered to be the largest IT tender in the history of the IDF and estimated at hundreds of millions of shekels over the next decade.

● Leverage IAI sales & marketing ● M&A strategy

* All figures are in millions of USD

Michpal

STATS

Over 1m Monthly Pay Slips

Founded in 1983 - Over 30 years of experience

CUSTOMERS
~8,000
EMPLOYEES ~64

FUTURE STRATEGY

• Unified reporting
• Expend services

SHORT STORY:

• Michpal Micro Computers (1983) Ltd., is a developer of payroll software platform.
• The company sells perpetual licenses followed by a maintenance agreement, and developed several modules which are sold to its customers in addition to the standard payroll software for additional fees. In addition, it is currently in a progress stage of developing a cloud based attendance software.
• Strong and loyal customer base, with approximately 8,000 customers (no customer concentration), most of which are very senior (61% are with 10 years and more of seniority).
• Release of a new product and service line – "Michpal Pension" and "Michpal PensionPlus͟ enabling employers to digitally report their employees' pension fund payments to their respective pension funds as required by law (this requirement took effect on January 1, 2017 for employers who eploy more than 100 employees, on January 1, 2018 for employers who employ more than 20 employees and on Jaunuary 1, 2019 for employers who employ more than 10 employees).
• Acquisition in November 2018 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 YEDA͟, 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.

inSync

FUTURE STRATEGY

Cross-selling

SHORT STORY:

InSync is a U.S. based full-service provider of consulting and staffing solutions for IT, engineering and other professional staff (i.e. accounting and finance, administrative, customer service, healthcare, human resources, manufacturing, marketing/sales, and operations).

InSync currently supports more than 50 VMS program customers with employees in over 40 states.

Formula Systems Portfolio Overview

Market Cap: NIS 2.3B (March 2019); Issuer Credit Rating: ilA+/stable (S&P) and A1.il (Midrug)

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