FORM 6-K

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON D.C. 20549

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 2020

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 whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934

Yes ☐ No ☒

SIGNATURE

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

(Registrant)

By:	/s/ Asaf Berenstin
	Asaf Berenstin CFO
	dated: March 17, 2020

Exhibit Index

Exhibit No.		Description
99.1		Formula Systems Reports Fourth Quarter and Full Year 2019 Results

Exhibit 99.1

PRESS RELEASE

Formula Systems Reports Fourth Quarter and Full Year 2019 Results

Operating income for the fourth quarter increased 14% year over year to $37.1 million. Net income attributable to Shareholders for the year increased 20% year over year to $38.8 million

Or Yehuda, Israel, March 17, 2020 – 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, today announced its results for the fourth quarter and full year ended December 31, 2019.

Financial Highlights for the Fourth Quarter Ended December 31, 2019

●

Consolidated revenues for the fourth quarter increased by 13.8% to $448.2 million, with growth recorded across Formula’s entire investment portfolio. Revenues for the fourth quarter ended December 31, 2018 amounted to $393.7 million.

●

Consolidated operating income for the fourth quarter increased by 14.2% to $37.1 million, with growth recorded across Formula’s entire investment portfolio. Consolidated operating income for the fourth quarter ended December 31, 2018 amounted to $32.5 million.

●

Consolidated net income attributable to Formula’s shareholders for the fourth quarter was $10.0 million, or $0.64 per fully diluted share, compared to $10.7 million, or $0.71 per fully diluted share, in the same period last year, reflecting a decrease of 7.0%.

Financial Highlights for the Year Ended December 31, 2019

●

Consolidated revenues for the year increased by 13.9% to $1,701.1 million, with growth recorded across Formula’s entire investment portfolio. Revenues for the year ended December 31, 2018 amounted to $1,493.0 million.

●

Consolidated operating income for the year increased by 26.3% to $138.5 million, with growth recorded across Formula’s entire investment portfolio. Consolidated operating income for the year ended December 31, 2018 amounted to $109.6 million.

●

Consolidated net income attributable to Formula’s shareholders for the year was $38.8 million, or $2.44 per fully diluted share, compared to $32.4 million, or $2.14 per fully diluted share, in the same period last year, reflecting an increase of 19.9%.

●

As of December 31, 2019 Formula held 48.88%, 47.91%, 45.34%, 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, Inc., respectively.

●

Consolidated cash and cash equivalents, bank deposits and investments in marketable securities totaled approximately $405.5 million as of December 31, 2019, compared to $295.3 million as of December 31, 2018.

●

Total equity as of December 31, 2019 was $896.3 million (representing 42.9% of the total consolidated balance sheet), compared to $805.4 million (representing 48.4% of the total consolidated balance sheet) as of December 31, 2018.

Debentures Covenants

As of December 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:

Covenant 1

●

Target equity attributable to Formula’s shareholders (excluding non-controlling interests): above $215 million.

●

Actual equity attributable to Formula’s shareholders is equal to $421.6 million.

Covenant 2

●

Target ratio of net financial indebtedness to net capitalization (in each case, as defined under the indenture for the Formula’s Series A and C Secured Debentures): below 65%.

●

Actual ratio of net financial indebtedness to net capitalization is equal to 9%.

Covenant 3

●

Target ratio of net financial indebtedness to EBITDA (based on the accumulated calculation for the four recent quarters): below 5.

●

Actual ratio of net financial indebtedness to EBITDA (based on the accumulated calculation for the four recent quarters) is equal to 0.40.

Comments of Management

Commenting on the results, Guy Bernstein, CEO of Formula Systems, said, “We are publishing our results at a pick of a global crisis never seen before, caused by the Coronavirus. Though I am pleased we concluded 2019 as a record-breaking year across our entire investment portfolio, meeting the goals we set for ourselves, we now place our best efforts across our entire portfolio companies to keep our employees safe and healthy, and to ensure business continuity to our clients, profitability and financial stability, while adapting our work environment in order to comply with governmental instructions and with the needs of our customers to overcome current challenges.”

“Matrix concluded the year of 2019 as a record-breaking year across all its financial indices (revenues, gross profit, operating income, net income, EPS, EBITDA and dividend distribution). Matrix also concluded an incredible decade in 2019 through which it has established its position as a market leader in the Israeli IT market growing its revenues by approximately 133% compared to the level at the beginning of the decade along-with increasing its employee headcount from 4,200 employees to more than 10,000 today. In order to maintain its leading position, Matrix intends to continue deepening and expanding its operations in today’s most attractive fields of technology (such as: Cyber, cloud, Internet and mobile data and analytics, ERP, CRM, storage systems, backup and business continuity, solutions aimed at startups, training of next-generation technology professionals, and more), expanding its activities in the fields of strategic and managerial consulting activities, expanding its operations in the health, manufacturing, retail and security sector, maximize potential synergies between the various activities in Matrix and continue its growth in Europe and in the US.”

“Sapiens finished 2019 on a very strong note with revenues for the fourth quarter reaching a record of $86.7 million and non-GAAP operating margin improving by 170 basis points, compared to the same period last year, to 16.5%. Global advancement of Sapiens business fueled by M&A activity, has led to revenue growth of 12.2% to $325.7 million, at the high end of its annual guidance range. In addition, during 2019 Sapiens has grown organically in both P&C and L&A segments, and delivered one of the most successful years to date with 34 new logos. Increased revenue, combined with significant operating leverage from offshore operations, improved Sapiens’ 2019 non-GAAP operating margins by 240 basis points to 16.0%. Sapiens is currently building a unified global platform of innovative digital insurance solutions in order to improve its global competitive position as a one-stop-shop for insurance software.”

“Magic also finished 2019 on a very strong note with fourth quarter revenue reaching a record high of $90.9 million, and non-GAAP operating income of $11.4 million. During 2019 Magic advanced its business executing on many fronts, growing revenue for the full year by 14.5% year over year to $325.6 million, above the high end of its annual guidance range.”

“TSG IT, held jointly with Israel Aerospace Industries Ltd., had a strong revenue growth of 28% during 2019, compared to the same period last year and 35% in the fourth quarter of 2019 compared to the same period last year. Such growth is mainly driven from command & control activities of the company in the Israeli market as well as from overseas.”

“Michpal completed its second acquisition in twelve months’ of Unique Software Industries Ltd. for consideration of approximately NIS 49 million and up to NIS 12 million which are subject to defined performance goals. Unique is a software development and services company, providing integrated solutions in the field of payroll for more than 30 years, including pay-stubs, pension services management, education funds management, and software solutions for managing employee attendance. We believe that Unique’s activities are synergetic and complementary to Formula’s operations in the field of payroll, to which we have entered 3 years ago. I believe that this acquisition will allow us to expand our operations in these fields together with the broadening of Unique’s operations by capitalizing on Formula’s assets and transactional capabilities. During the year Michpal stand-alone grew its revenue and operating income by 9% year over year.”

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 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

Except for any historical information contained herein, matters discussed in this press release might include forward-looking statements that involve a number of risks and uncertainties. Regarding any financial statements, actual results might vary significantly based upon a number of factors including, but not limited to, risks in product and technology development, market acceptance of new products and continuing product conditions, both locally and abroad, release and sales of new products by strategic resellers and customers, and other risk factors detailed in Formula’s most recent annual report and other filings with the Securities and Exchange Commission. These forward-looking statements are made only as of the date hereof, and the Company undertakes no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise. In addition, there is uncertainty about the spread of the COVID19 virus and the impact it will have on the Company’s operations, the demand for Company’s products, global supply chains and economic activity in general. These and other risks and uncertainties are detailed in the Company’s Securities and Exchange Commission filings.

FORMULA SYSTEMS (1985) LTD.

CONSOLIDATED CONDENSED STATEMENTS OF PROFIT OR LOSS
U.S. dollars in thousands (except per share data)

	Year ended December 31,				Three months ended December 31,
	2019		2018		2019		2018
	Unaudited				Unaudited
Revenues		1,701,115		1,492,988		448,205		393,700
Cost of revenues		1,315,066		1,159,676		344,224		304,820
Gross profit		386,049		333,312		103,981		88,880
Research and development costs, net		46,690		41,223		12,439		9,884
Selling, marketing and general and administrative expenses		200,870		182,472		54,468		46,518
Operating income		138,489		109,617		37,074		32,478
Financial expenses, net		18,652		8,290		6,147		924
Income before taxes on income		119,837		101,327		30,927		31,554
Taxes on income		27,201		24,301		6,726		8,281
Income after taxes		92,636		77,026		24,201		23,273
Share of profit (loss) of companies accounted for at equity, net		1,787		369		272		435
Net income		94,423		77,395		24,473		23,708
Net income attributable to non-controlling interests		55,603		45,030		14,489		12,973	^(*)
Net income attributable to Formula Systems’ shareholders		38,820		32,365		9,984		10,735	^(*)

Earnings per share (basic)		2.56		2.20		0.65		0.73	^(*)
Earnings per share (diluted)		2.44		2.14		0.64		0.71	^(*)

Number of shares used in computing earnings per share (basic)		15,189,758		14,740,462		15,282,600		14,745,338
Number of shares used in computing earnings per share (diluted)		15,340,867		15,571,838		15,291,360		15,583,133

Immaterial adjustment to comparative data

FORMULA SYSTEMS (1985) LTD.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
U.S. dollars in thousands

	December 31,		December 31,
	2019		2018
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		369,042		268,492
Short-term deposits		29,886		16,881
Marketable securities		6,600		9,913
Trade receivables		485,824		441,468
Other accounts receivable and prepaid expenses		67,273		40,464	^(*)
Inventories		7,156		3,882
Total current assets		965,781		781,100	^(*)

LONG-TERM ASSETS:
Deferred taxes		35,445		14,214
Other long-term accounts receivable and prepaid expenses		21,493		23,121
Total long-term assets		56,938		37,335

INVESTMENTS IN COMPANIES ACCOUNTED FOR AT EQUITY METHOD		26,350		25,710
PROPERTY, PLANTS AND EQUIPMENT, NET		43,059		29,182
OPERATING LEASE RIGHT-OF-USE ASSETS		104,130		-
NET INTANGIBLE ASSETS AND GOODWILL		892,172		790,705	^(*)
TOTAL ASSETS		2,088,430		1,664,032	^(*)

CURRENT LIABILITIES:
Loans and credit from banks and others		125,299		71,180
Debentures		31,362		55,822
Current maturities of operating lease liabilities		35,673		-
Trade payables		125,163		118,786
Deferred revenues		93,512		59,509
Other accounts payable		205,106		168,694	^(*)
Dividend payable		7,081		5,015
Liabilities in respect of business combinations		8,431		5,602
Put options of non-controlling interests		39,668		40,926
Total current liabilities		671,295		525,534	^(*)

LONG-TERM LIABILITIES:
Loans and credit from banks and others		162,058		139,527
Debentures		175,411		114,902
Long term operating lease liabilities		73,686		-
Other long-term liabilities		8,313		8,734
Deferred taxes		50,929		34,800
Deferred revenues		6,491		4,906
Liabilities in respect of business combinations		17,092		5,625
Put options of non-controlling interests		15,182		15,723	^(*)
Employees benefit liabilities		11,639		8,884
Total long-term liabilities		520,801		333,101	^(*)

EQUITY
Equity attributable to Formula Systems’ shareholders		421,640		367,630
Non-controlling interests		474,694		437,767
Total equity		896,334		805,397

TOTAL LIABILITIES AND EQUITY		2,088,430		1,664,032

Immaterial adjustment to comparative data

FORMULA SYSTEMS (1985) LTD.

STAND-ALONE STATEMENTS OF FINANCIAL POSITION
U.S. dollars in thousands

	December 31,		December 31,
	2019		2018
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		82,725		31,411
Other accounts receivable and prepaid expenses		6,803		8,106
Total current assets		89,528		39,517

INVESTMENTS IN SUBSIDIARIES AND A JOINTLY CONTROLLED ENTITY (*)
Matrix IT Ltd.		125,809		114,133
Sapiens International Corporation N.V.		176,832		169,867
Magic Software Enterprises Ltd.		114,019		108,829
Other		72,322		54,316
Total Investments in subsidiaries and a jointly controlled entity		488,982		447,145

OTHER LONG TERM RECEIVABLES		1,539		2,733

PROPERTY, PLANTS AND EQUIPMENT, NET		2		3

TOTAL ASSETS		580,051		489,398

CURRENT LIABILITIES:
Loans from banks and others		13,130		12,422
Debentures		20,296		44,589
Trade payables		69		182
Other accounts payable		1,274		1,442
Dividends payable		7,081		5,015
Total current liabilities		41,850		63,650

LONG-TERM LIABILITIES:
Loans from banks and others		-		11,793
Debentures		116,561		46,325
Total long-term liabilities		116,561		58,118

EQUITY		421,640		367,630

TOTAL LIABILITIES AND EQUITY		580,051		489,398

(*)

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.