AI assistant
Formula Systems (1985) Ltd. Investor Presentation 2024
6794_rns_2024-11-21_56d7b917-5003-4cf2-b3ea-895bcf8073d8.pdf
Investor Presentation
Open in viewerOpens in your device viewer
Formula Systems
Investor Presentation
November 2024
Forward Looking Statements
- Certain matters discussed in this presentation, that are incorporated herein by reference are forward-looking statements within the meaning of Section 27A of the U.S. Securities Act of 1933, Section 21E of the U.S. Securities Exchange Act of 1934, as amended, 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: 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 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; risks related to the insurance industry in which our clients operate; risks associated with our global sales and operations, such as changes in regulatory requirements, wide-spread viruses and epidemics like the recent novel coronavirus pandemic, or fluctuations in currency exchange rates; and risks related to our principal location in Israel and our status as a an Israeli company.
- 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 see the risks listed under the heading "Risk Factors" in our most recent Annual Report on Form 20-F for the year ended December 31, 2023, filed with the U.S. Securities and Exchange Commission on May 15, 2024, 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 after the date of this presentation, to conform these statements to actual results or to changes in our expectations.
Formula Systems – Overview
Focus: IT solutions and software services for key sectors
Israel's largest IT & Software Services Holding Group
A member of Asseco Poland S.A (6 th largest IT services company in CE) (1)
Over 20,000 highly experienced IT experts
Presence in ~40 countries, a long list of references from blue chip companies from all over the world
Listed on the NASDAQ and Tel Aviv Stock
Exchange. Also listed: Matrix IT(2) , Sapiens(3) International ,Magic Software(4) and TSG IT Advanced Systems(5)
1) Listed on the Warsaw Stock Exchange (WSE) 2) Listed on the TASE (TA-90) 3) Listed on the TASE (TA-35) and Nasdaq
4) Listed on the TASE (TA-35) and Nasdaq 5) Listed on the TASE (TA-Tech)
Formula Systems – Our Portfolio
4 Publicly Traded Investees
Formula Systems – Shareholders (as of 30.9.24)
Formula Systems – Management
Our strength lies in people – highly skilled and experienced entrepreneurs and managers
Tammy Koll, CTO Formula Joined in March 2023
Nevo Brenner, CFO Matrix Joined in 2022
Moti Gutman, CEO Matrix
Joined in 2001
Guy Bernstein, CEO Formula & Magic Software Joined in 1997
Asaf Bernstein, CFO Formula & Magic Software Joined in 2008
Sapiens Joined in 2005
Roni Giladi, CFO Sapiens Joined in 2007
Formula Systems Group leaders
-
- Strong financial orientation Conservative in nature Veteran and experienced managements Personal share interests
- - We supervise all the businesses with "Hands-On" involvement in every none ordinary change in the business
Formula Systems – Our Way
We acquire, build, manage and strengthen IT and software businesses enabling them to be clear leaders within their focused industries
Formula Systems – Our strategy focuses on building long-term value
Strong track record of growth organically and through M&A
- Our mission is to improve the quality of life by providing solutions for people and technologies for business
- According to the vision:
- Formula Systems wants to be reliable and fast, with the best products and services to support customers around the world in achieving their goals
- We have been building an international group of technology entities. Our structure allows us to take advantage of local entrepreneurship and market knowledge, while the company's affiliation with the group increases its execution capabilities and credibility among demanding clients
Formula Systems – M&A Strategy
- Majority of our M&A's are coming from within the business We know the business, the owners the management and its DNA
- We focus in the areas of software solutions and services to strengthen our existing business or create the core for the establishment of new group
- We focus on mature and stable business based on long engagement cycles and "sticky" recurring revenue models
- We aim to buy more than 50% of equity to maintain control
- Any acquisition must be a "good financial deal"
- We provide added value to our investees: strategic insights, operational support, global relationships and synergies
- We prefer keeping founders and management after the acquisition. We believe in autonomy for managements by a decentralized business model, while maintaining high-level involvement
We Invest in the areas of global information technology, software consulting services, computer-based business solutions and proprietary software products
Formula Systems – Conservative financial cash management, Stable and sustainable cash flow
Dividend receipts
(1) Subsidiaries dividend policy: 75% of net income (Sapiens: 40% of non-GAAP net income). (2) Includes distribution of profit from realization of investment at Matrix (3) Excludes dividend declared by Magic on 18.11.24 (\$0.236 per share) of which \$5.4 million due to Formula on 8.1.2025 (4) Excludes dividend declared by Matrix on 14.11.24 (NIS0.76 per share) of which NIS 23.3 million (~\$6.2 million) due to Formula on 6.1.2025
Formula Systems – Consolidated Cash and Debt Breakdown 30-9-2024
Cash and Debt Breakdown
- \$511 million consolidated cash and short-term bank deposits as of September 30, 2024
- \$513 million consolidated financial debt as of September 30, 2024
- \$295 million positive consolidated operating cash flow in 2023
Fair Value Composition (November 20, 2024)
(*) Book Value as of September 30,2024 \$749 Million
| Book Value |
Quoted prices in active markets |
||
|---|---|---|---|
| 30-Sep-24 | November 20 2024 , |
||
| Matrix IT |
157 756 , |
660 214 , |
|
| Sapiens | 260 361 , |
656 804 , |
|
| Magic Software |
134 822 , |
252 155 , |
|
| TSG | 22 278 , |
41 884 , |
|
| Total Traded |
575 217 , |
1 611 057 , , |
(1) |
| Michpal | 49 232 , |
49 232 , |
|
| ZAP | 586 55 , |
586 55 , |
|
| Other | 27 323 , |
27 323 , |
|
| Private Total |
132 141 , |
132 141 , |
(2) |
| Portfolio Total |
707 358 , |
1 743 198 , , |
|
| Financial assets |
18 461 , |
19 164 , |
(1) |
| Dividend receivable |
296 7 , |
296 7 , |
|
| Other Assets |
414 15 , |
414 15 , |
(3) |
| Total Assets (without cash) |
748 529 , |
1 785 072 , , |
|
| Gross Debt |
157 147 , |
157 147 , |
(3) |
| Cash | 68 707 , |
68 707 , |
(3) |
| Debt Net |
88 440 , |
88 440 , |
|
| Net Assets |
660 089 , |
1 696 632 , , |
|
| . of (1 000) Num shares , |
15 333 , |
15 333 , |
|
| Equity per share |
\$43 | \$111 | (4) |
| FORTY Share price as of 20 2024 11 |
\$82 | \$82 | (1) |
| LTV | 82% 11 |
4 95% |
(1) Quoted prices from TASE as of November 20, 2024, based on USD/NIS exchange rate 3.739.
(2) Privately held subsidiaries are conservatively presented at book value as of September 30, 2024
(3) Presented as of September 30, 2024
(4) Based on outstanding ordinary shares as of November 20, 2024:15,332,667
Formula Systems – Financial Debt Composition Stand Alone
BOND SERIES C (2.29%)
NIS 412,263,900 Par-Value
- Maalot S&P ilAA-
- Moody's Aa3.il
- Secured by shares
- Average duration as of November 2024 – 1.19
- Last Pmt. December 2026
BOND SERIES D (5.68%) NIS 150,000,000 Par-Value
- Maalot S&P ilAA-
- Moody's Aa3.il
- Secured by shares
- Average duration as of November 2024– 5.53
- Last Pmt. December 2034
Financial Highlights
Formula at a Glance – Annual Consolidated Revenues
(1) On a constant currency basis (2022 vs 2023)
Formula at a Glance – Annual Consolidated ADJ EBITDA(*)
* Excludes IFRS16 impact
DSCR and Financial Leverage, Consolidated
* Excludes IFRS16 impact
Formula Systems Group
Main Pillars
Matrix IT Largest and leading IT company in Israel in the last decade
- For 18 consecutive years, Matrix has been leading the information technology market, carrying out the most advanced computing projects in Israel, with the latest technologies for the leading customers in the market.
- Thousands of customers across various sectors offering wide variety of services and solutions.
- Consistent organic growth as well as expansion into complementary fields of activity through dozens of successful acquisitions
- Leading Partners: Aws, Microsoft, Google Cloud, IBM, salesforce, cisco, SAP, Red Hat, Dell-EMC, BMC, Oracle, Dynatrace,HP, MongoDB, and more.
- Attractive dividend distribution policy Up to 75% of the annual net income attributable to shareholders (paid on a quarterly basis).
- 11,520 Employees (as of 30.9.2024): 10,682 Israel ; 569 United States ;269 Europe.
- Global Presence (2023) : 89% Israel; 11% North America & Europe.
- Leading credit rating in the IT industry, Aa3 rating 15 years in a row
| Matrix IT Ltd. (TASE:MTRX) | 2021 | 2022 | 2023 | 23Vs22 | 9M23 | 9M24 | 9M23Vs9M24 | (2) | ||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| NIS Millions | ||||||||||||
| Revenues | 4,360 | 4,673 | 5,232 | 12.0% | 3,911 | 4,205 | 7.5% | |||||
| Gross profit | 630 | 672 | 764 | 13.7% | 561 | 614 | 9.5% | |||||
| Gross margin | 14.5% | 14.4% | 14.6% | 14.3% | 14.6% | |||||||
| Operating income | 329 | (1) 350 |
393 | 12.2% | 292 | 330 | 12.9% | |||||
| Operating margin | 7.6% | 7.5% | 7.5% | 7.5% | 7.9% | |||||||
| Net income attributable to Matrix IT's shareholders | 195 | (1) 213 |
227 | 6.7% | 171 | 203 | 18.6% | |||||
| Cash flow from operating activities | 219 | 387 | 496 | 28.1% | 163 | 284 | 74.0% | |||||
(1) Excludes capital gain realized from the disposition of a Matrix IT subsidiary
20 (2) Excludes dividend declared by Matrix on 14.11.24, NIS 0.76 per share, or NIS 48.3 million on the aggregate, due on 6.1.2025
Sapiens
- Leading global provider of software solutions for the insurance industry across Property & Casualty (P&C); Reinsurance; Life, Pension & Annuity (L&A) and Workers' Compensation (WC) markets;
- 38 Countries; + 600 customers (with 66% recurring & re-occurring revenues) offering Robust, configurable insurance platforms with a full suite of services and decades of experience accelerating digital transformation Recognized as a Leader by technology sector analysts.
- Consistent organic growth with a proven track record of global strategic acquisitions to expand technology offering and capabilities and global presence in high growth markets
- 5,000 Employees (as of 31.12.2023): 774 Israel ; 593 North America ; 2,424 Asia Pacific (mainly India) and 1,209 Europe.
- Attractive dividend distribution policy Up to 40% of the annual non-GAAP net income attributable to shareholders (paid on a semi-annual basis).
| Sapiens International Corporation N.V. (NASDAQ & TASE: SPNS) | 2021 | 2022 | 2023 | 23Vs22 | 9M23 | 9M24 | 9M23Vs9M24 |
|---|---|---|---|---|---|---|---|
| USD Millions | |||||||
| Revenues | 461 | 475 | 515 | 8.4% | 384 | 408 | 6.3% |
| Gross profit | 188 | 200 | 220 | 9.7% | 164 | 178 | 8.7% |
| Gross margin | 40.7% | 42.2% | 42.7% | 42.6% | 43.6% | ||
| Operating income | 57.5 | 66.5 | 78.9 | 18.6% | 59 | 64 | 9.1% |
| Operating margin | 12.5% | 14.0% | 15.3% | 15.3% | 15.7% | ||
| Net income attributable to Sapiens's shareholders | 47 | 53 | 62 | 18.7% | 45 | 54 | 19.4% |
| Cash flow from operating activities | 81 | 44 | 79 | 81.4% | 41 | 40 | (1.4)% |
Leading credit rating in the IT industry, ilAA-/Stable rating
Magic Software
- Global provider of IT software services and proprietary application development and business process integration platforms as well as cloud-based services for end-to-end digital transformation.
- Thousands of customers across various sectors offering wide variety of services and solutions with 75% recurring & re-occurring revenues.
- Consistent organic growth with a proven track record of global strategic acquisitions to expand technology offering ,service capabilities and global presence.
- 3,832 Employees (as of 30.9.2024): 1,634 Israel ; 1,428 North America ; 239 Asia Pacific (mainly India) and 522 Europe.
- Global Presence (9/24) : 44% Israel; 42% North America; 14% ROW (mainly Europe)
- Experienced in integrating knowledge of local markets, customer relations and innovative solutions
- Attractive dividend distribution policy Up to 75% of the annual net income attributable to shareholders (paid on a semi-annual basis)
| Software Ltd (NASDAQ & MGIC) Magic Enterprises TASE: |
2021 | 2022 | 2023 | 23Vs22 | 9M23 | 9M24 | 9M23Vs9M24 |
|---|---|---|---|---|---|---|---|
| Millions USD |
|||||||
| Revenues | 480 | 567 | 535 | (6)% | 384 | 408 | 3% 6 |
| profit Gross |
133 | 155 | 153 | (2)% | 164 | 178 | 7% 8 |
| margin Gross |
27.7% | 27.4% | 28.6% | 42.6% | 43.6% | ||
| Operating income |
52 | 62 | 57 | 59 | 64 | 9 1% |
|
| Operating margin |
10.9% | 10.9% | 10.7% | 15.3% | 15.7% | ||
| attributable Software's shareholders income Magic Net to |
30 | 40 | 37 | (8)% | 45 | 54 | 19 4% |
| Cash flow from operating activities |
44 | 57 | 69 | 22% | 31 | 40 | 30 7% |
\$ Mill.
(1) Excludes dividend declared by Magic on 18.11.24, \$0.236 per share, or \$11.6 million on the aggregate, due on 8.1.2025
| Description | A global software services Integrator engaged in high end technical solutions for municipal institutions, defense and homeland security agencies |
A leading service provider in Israel in the fields of aerial and satellite mapping, geographic data collection and processing |
a US based vendor provides managed services (VMS/MSP) workforce management programs nationally |
Israel's largest group of consumer websites, provider of advertising solutions and website promotion |
A provider of proprietary payroll software solution for processing traditional payroll stubs and consulting services |
A provider of integration and installation of computer communication infrastructures, announcement and alarm systems and electronic security systems. |
|---|---|---|---|---|---|---|
| Geographical Areas of Activity |
Operates mainly in Israel | Operates mainly in Israel | Operates in North America | Operates in Israel | Operates in Israel | Operates in Israel |
| Products | Command and Control, Communication Systems and ERP solutions for municipal institutions |
Consulting services | Professionals' requirements and staffing |
Websites & advertising | Payroll & book-keeping software solutions |
Infrastructures |
| Revenue (2023) | ~\$80M | ~\$9M | ~\$53M | ~\$45M | ~\$39M | ~\$14M |
| (1) EBITDA |
~\$10.5M | ~\$1.6M | ~\$1.4M | ~\$3.7M | ~\$10.7M | ~\$1.6M |
| Employees (2023) | ~564 | ~90 | ~950 | ~200 | ~300 | ~40 |
| Share Interest 30.9.2024 |
42.71% | 80% | 91% | 100% | 100% | 100% |
(1) Based on 2023 annual financial statements
Thank You
24
