Formula Systems (1985) Ltd. — Investor Presentation 2024

Sep 8, 2024

Formula Systems

Investor Presentation

September 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)

Presence in ~40 countries, a long list of references from blue chip companies from all over the world

Aviv Stock Exchange. Also listed: Matrix IT(2) , Sapiens(3) International and Magic Software(4)

(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-90) and Nasdaq

Formula Systems – Our Portfolio

4 Publicly Traded Investees

Formula Systems – Shareholders

• Asseco 26%
• Management 12%
• Significant Financial Institutions Holders 33%

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

Roni Al-Dor, CEO Sapiens Joined in 2005

Roni Giladi, CFO Sapiens Joined in 2007

Formula Systems Group leaders

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• Strong financial orientation Conservative in nature Veteran and experienced managements Personal share interests
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• 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 Sapiens on 15.8.24 (\$0.29 per share) of which \$7.1 million due to Formula on 12.9.2024 (4) Excludes dividend declared by Matrix on 11.8.24 (NIS0.82 per share) of which NIS25.1 million (~\$6.7 million) due to Formula on 1.10.2024

Magic Software, 64, 20%

Sapiens, 63, 20%

Formula Systems – Consolidated Cash and Debt Breakdown 30-6-2024

• \$473 million consolidated cash and short-term bank deposits as of June 30, 2024
• \$473 million consolidated financial debt as of June 30, 2024
• \$295 million positive consolidated operating cash flow in 2023

Fair Value Composition (September 3, 2024)

	Book Value	Quoted prices in active markets
	June 30, 2024	September 3, 2024
Matrix IT	154,760	596,001
Sapiens	255,813	860,168
Magic Software	129,932	243,610
TSG	17,171	37,342
Total Traded	557,676	1,737,120	(1)
Michpal	50,386	50,386
ZAP	53,576	53,576
Other	20,530	20,530
Total Private	124,492	124,492	(2)
Total Portfolio	682,168	1,861,612
Financial assets	20,772	20,310	(1)
Dividend receivable	11,277	11,277
Other Assets	14,753	14,753	(3)
Total Assets (without cash)	728,970	1,907,952
Gross Debt	115,472	115,472	(3)
Cash	30,524	30,524	(3)
Net Debt	84,948	84,948
Net Assets	644,022	1,776,664
Num. of shares (1,000)	15,333	15,333
Equity per share	\$42	\$116	(4)
FORTY Share price as of 3.9.2024	\$77	\$77	(1)
LTV	11.65%	4.45%

(1) Quoted prices from TASE as of September 3, 2024, based on exchange rate :3.72.

(2) Privately held subsidiaries are conservatively presented at book value as of June 30, 2024

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(3) Presented as of June 30, 2024

(4) Based on outstanding ordinary shares as of September 3, 2024:15,332,667

Formula Systems – Financial Debt Composition Stand Alone

Gross Debt As of June 30, 2024

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 September 2024 – 1.4
• Last Pmt. December 2026

Financial Highlights

Formula at a Glance – Annual Consolidated Revenues

(1) On a constant currency basis (2022 vs 2023), (2) On a constant currency basis (H1-24 vs H1-23)

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.
• 11,200 Employees (as of 31.12.2023): 10,311 Israel ; 636 United States ;253 Europe.
• Global Presence (2023) : 89% Israel; 11% North America & Europe.
• Attractive dividend distribution policy Up to 75% of the annual net income attributable to shareholders (paid on a quarterly basis).
• Leading credit rating in the IT industry, Aa3 rating 15 years in a row

Matrix IT Ltd. (TASE: MTRX)	2021	2022	2023	23Vs22	H1 2023	H1 2024	H124VsH123
NIS Million
Revenues	4,360	4,673	5,232	12.0%	2,578	2,786	8.1%
Gross profit	630	672	764	13.7%	374	409	9.4%
Gross margin	14.5%	14.4%	14.6%		14.5%	14.7%
Operating income	329	(1) 350	393	12.2%	199	222	11.5%
Operating margin	7.6%	7.5%	7.5%		7.7%	8.0%
Net income attributable Matrix IT's shareholders to	195	(1) 213	227	6.7%	119	138	15.7%
Cash flow from operating activities	219	387	496	28.1%	46	94	103.6%

(1) Excludes capital gain realized from the disposition of a Matrix IT subsidiary

20 (2) Excludes dividend declared by Matrix on 11.8.24, NIS 0.82 per share, or NIS 52.1 million on the aggregate, due on 1.10.2024

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).
• Leading credit rating in the IT industry, ilAA-/Stable rating

Sapiens International Corporation (NASDAQ & TASE: SPNS) N.V.	2021	2022	2023	23Vs22	H1 2023	H1 2024	H124VsH123
USD Million
Revenues	461	475	515	8.4%	253	271	7.1%
Gross profit	188	200	220	9.7%	108	118	9.3%
Gross margin	40.7%	42.2%	42.7%		42.6%	43.4%
Operating income	57.5	66.5	78.9	18.6%	38.5	42.4	10.1%
Operating margin	12.5%	14.0%	15.3%		15.2%	15.6%
Net income attributable Sapiens' shareholders to	47	53	62	18.7%	30	36	21.5%
Cash operating activities flow from	81	44	79	81.4%	37	27	(27%)

(1) Excludes dividend declared by Sapiens on 15.8.24, \$0.29 per share, or \$16.2 million on the aggregate, due on 12.9.2024

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.
• 3,628 Employees (as of 31.12.2023): 774 Israel ; 593 North America ; 2,424 Asia Pacific (mainly India) and 1,209 Europe.
• Global Presence (2023) : 40% Israel; 47% North America; 13% 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)

Magic Software Enterprises Ltd.(NASDAQ & TASE: MGIC)	2021	2022	2023	23Vs22	H1 2023	H1 2024	H124VsH123
USD Million
Revenues	480	567	535	(6%)	280	267	(5%)
Gross profit	133	155	153	(2%)	79	76	(5%)
Gross margin	27.7%	27.4%	28.6%		28.3%	28.3%
Operating income	52	62	57		31	29	(4%)
Operating margin	10.9%	10.9%	10.7%		11.0%	11.0%
Net income attributable Magic Software's shareholders to	30	40	37	(8%)	21	18	(17%)
Cash flow from operating activities	44	57	69	22%	43	41	(3%)

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 1.9.2024	42.71%	80%	91%	100%	100%	100%

(1) Based on 2023 annual financial statements

Thank You

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