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 November 2020

FORMULA SYSTEMS (1985) LTD.

(Translation of registrant’s name into English)

Terminal Center, 1 Yahadut Canada Street, Or-Yehuda, Israel 6037501

(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 be signed on its behalf by the undersigned, thereunto duly authorized.

(Registrant)

By:	/s/ Asaf Berenstin
	Asaf Berenstin - CFO
	dated: November 18, 2020

Exhibit Index

Exhibit No.		Description
99.1		Formula Systems Reports Third Quarter Financial Results

Exhibit 99.1

PRESS RELEASE

Formula Systems Reports Third Quarter 2020 Financial Results

Operating income for the third quarter increased by 23% year-over-year to a record breaking $45.4 million. Net income attributable to Formula’s Shareholders for the third quarter increased by 29% year-over-year to a record breaking $12.6 million.

Or Yehuda, Israel, November 18, 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 third quarter and nine months-period ended September 30, 2020.

Financial Highlights for the Third Quarter Ended September 30, 2020

●

Consolidated revenues for the third quarter increased by 8.5% to $487.3 million. Revenues for the third quarter ended September 30, 2019 amounted to $449.0 million.

●

Consolidated operating income for the third quarter increased by 22.5% to a record breaking $45.4 million, with growth recorded across Formula’s entire investment portfolio. Consolidated operating income for the third quarter ended September 30, 2019 amounted to $37.0 million.

●

Consolidated net income attributable to Formula’s shareholders for the third quarter increased by 29.4% to a record breaking $12.6 million, or $0.82 per fully diluted share, compared to $9.8 million, or $0.63 per fully diluted share, for the third quarter ended September 30, 2019.

Financial Highlights for the Nine-Months Period Ended September 30, 2020

●

Consolidated revenues for the nine-month period ended September 30, 2020 increased by 11.0% to $1,390.7 million, with growth recorded across Formula’s entire investment portfolio. Revenues for the nine-month period ended September 30, 2019 amounted to $1,252.9 million.

●

Consolidated operating income for the nine-month period ended September 30, 2020 increased by 23.1% to $124.9 million, with growth recorded across Formula’s entire investment portfolio. Consolidated operating income for the nine-month period ended September 30, 2019 amounted to $101.4 million.

●

Consolidated net income attributable to Formula’s shareholders for the nine-month period ended September 30, 2020 was $34.9 million, or $2.25 per fully diluted share, compared to $28.8 million, or $1.80 per fully diluted share, in the same period last year, reflecting an increase of 21.0% year over year.

●

As of September 30, 2020 Formula held 49.0%, 47.4%, 45.5%, 100%, 50%, 90.09% and 80% 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., Insync Staffing Solutions, Inc., and Ofek Aerial Photography Ltd., respectively.

●

Consolidated cash and cash equivalents, bank deposits and investments in marketable securities totalled approximately $435.8 million as of September 30, 2020, compared to $405.2 million as of December 31, 2019.

●

Total equity as of September 30, 2020 was $938.4 million (representing 42.3% of the total consolidated balance sheet), compared to $896.3 million (representing 42.9% of the total consolidated balance sheet) as of December 31, 2019.

Debentures Covenants

As of September 30, 2020, Formula was in compliance with all of its financial covenants under the debenture series issued by Formula, based on the following achievements:

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 $444.6 million.

Covenant 2

●

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

●

Actual ratio of net financial indebtedness to net capitalization is equal to 11.0%.

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 0.46.

Comments of Management

Commenting on the results, Guy Bernstein, CEO of Formula Systems, said, “We are very pleased to witness the delivery of strong execution during the third quarter across our entire portfolio companies, on all financial fronts and across key business sectors, geographies and product lines. Such achievements are particularly exceptional in light of the impacts of the COVID-19 pandemic and the lockdown and restrictions imposed in Israel and across the globe. Fueled by outstanding strategic performance and extent software and solutions for digital transformation, Formula Group continues to successfully face the ongoing global crisis, recording for the nine month period double digit growth across all its key financial indices: revenues; operating income and net income.”

“Matrix successfully managed to improve and show record results across all its key indices (revenues, net and operating income, gross profit, EBITDA and cash flow), overcoming a challenging period in Israel and across the globe. Matrix’s position as Israel’s largest technology, application and infrastructure services company, its extent solutions offering in the fields of digital transformation, supply chain and logistics, cloud and hardware infrastructure, AI and cyber, and its footprint in the healthcare, security, transportation and finance sectors, well position Matrix through the continuous global crisis, and set the ground for the day after the crisis ends”.

“In Spite of the COVID-19 global pandemic, Sapiens delivered strong execution across all of its key geographies and product lines and managed to increase third quarter revenues by 18.2% year over year to an all-time high of $97.6 million. Non-GAAP operating margin increased to a record braking of 18.2%, an increase of 180 basis points year over year. We are extremely proud in Sapiens receiving global acknowledgement by winning three different awards/recognitions for excellence by the analysts and research community, Gartner Magic Quadrant for policy administration and insurance platform for both its Life and P&C solutions and the Excellent award by Celent in the Life New Business and Underwriting report. Despite the COVID-19 pandemic, Sapiens’ outlook continues to improve as a result of signing new deals, increasing revenues from existing customers, and completing the acquisition of Delphi, positioning the company as a leader of the MPL market in North America.

“Magic delivered a double-digit record-breaking growth in both revenues (11%) and operating income (30%) as a result of an increased demand, from existing and new customers. Magic’s outlook for 2020 improved in spite of the COVID-19 pandemic, resulting in Magic raising its guidance from between $350 million and $360 million to between $358 million and $365 million. We are committed to continue with Magic proven strategy to enhance its portfolio as a one-stop-shop for digital transformation, both organically and through acquisitions.”

“Michpal group continues to realize synergies and monetize on its busines model with its revenues also fueled by the acquisition of Unique Software Enterprises Ltd. concluded in November 2019 and Liram Financial Software Ltd., concluded in May 2020, growing by 70% year over year. Michpal Group is well positioned to continue helping its customers to adjust to the ever-changing governmental labor guidelines which are introduced in light of the COVID-19 pandemic.”

“I am pleased to see that the steps we took across all our portfolio companies to endure the COVID-19 pandemic are paying off. We will continue to address the new market challenges and take all necessary steps to emerge stronger and well positioned.”

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 pandemic 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)

	Three months ended					Nine months ended
	September 30,					September 30,
	2020			2019		2020		2019
	Unaudited					Unaudited
Revenues	487,344			448,984		1,390,678		1,252,910
Cost of revenues		370,952			347,727		1,068,221		970,842
Gross profit		116,392			101,257		322,457		282,068
Research and development costs, net		13,337			11,961		38,384		34,251
Selling, marketing and general and administrative expenses		57,691			52,276		159,199		146,402
Operating income		45,364			37,020		124,874		101,415
Financial expenses, net		5,891			5,177		16,162		12,505
Income before taxes on income		39,473			31,843		108,712		88,910
Taxes on income		8,088			7,455		24,514		20,475
Income after taxes		31,385			24,388		84,198		68,435
Share of profit (loss) of companies accounted for at equity, net		(12	)		429		335		1,515
Net income		31,373			24,817		84,533		69,950
Net income attributable to non-controlling interests		18,743			15,060		49,650		41,114
Net income attributable to Formula Systems’ shareholders		12,630			9,757		34,883		28,836

Earnings per share (basic)		0.83			0.64		2.28		1.90
Earnings per share (diluted)		0.82			0.63		2.25		1.80

Number of shares used in computing earnings per share (basic)		15,286,350			15,280,517		15,285,517		15,158,811
Number of shares used in computing earnings per share (diluted)		15,293,113			15,290,015		15,292,498		15,356,988

FORMULA SYSTEMS (1985) LTD.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

U.S. dollars in thousands

	September 30,		December 31,
	2020		2019
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		431,864		368,666
Short-term deposits		2,784		29,886
Marketable securities		1,181		6,600
Trade receivables		476,334		486,007
Other accounts receivable and prepaid expenses		61,685		65,709
Inventories		17,659		8,636
Total current assets		991,507		965,504

LONG-TERM ASSETS:
Deferred taxes		41,369		38,865
Other long-term accounts receivable and prepaid expenses		22,196		22,205
Total long-term assets		63,565		61,070

INVESTMENTS IN COMPANIES ACCOUNTED FOR AT EQUITY METHOD		27,505		26,021

PROPERTY, PLANTS AND EQUIPMENT, NET		57,031		43,059

OPERATING LEASE RIGHT-OF-USE ASSETS		99,728		104,130

NET INTANGIBLE ASSETS AND GOODWILL		977,512		889,473

TOTAL ASSETS		2,216,848		2,089,257

CURRENT LIABILITIES:
Loans and credit from banks and others		115,712		125,297
Debentures		41,294		31,362
Current maturities of operating lease liabilities		32,863		35,673
Trade payables		110,498		125,163
Deferred revenues		103,072		93,512
Other accounts payable		213,665		205,205
Dividend payable		-		7,081
Liabilities in respect of business combinations		12,445		8,431
Put options of non-controlling interests		26,666		39,668
Total current liabilities		656,215		671,392

LONG-TERM LIABILITIES:
Loans and credit from banks and others		189,468		162,062
Debentures		205,802		175,411
Long term operating lease liabilities		74,894		73,686
Other long-term liabilities		11,380		8,311
Deferred taxes		60,626		53,854
Deferred revenues		11,576		6,491
Liabilities in respect of business combinations		13,510		14,895
Put options of non-controlling interests		39,851		15,182
Employees benefit liabilities		15,156		11,639
Total long-term liabilities		622,263		521,531

EQUITY
Equity attributable to Formula Systems’ shareholders		444,594		421,640
Non-controlling interests		493,776		474,694
Total equity		938,370		896,334

TOTAL LIABILITIES AND EQUITY		2,216,848		2,089,257

FORMULA SYSTEMS (1985) LTD.

STAND-ALONE STATEMENTS OF FINANCIAL POSITION

U.S. dollars in thousands

	September 30,		December 31,
	2020		2019
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		53,183		82,725
Other accounts receivable and prepaid expenses		4,283		6,803
Total current assets		57,466		89,528

INVESTMENTS IN SUBSIDIARIES AND A JOINTLY CONTROLLED ENTITY (*)
Matrix IT Ltd.		130,756		125,809
Sapiens International Corporation N.V.		185,015		176,832
Magic Software Enterprises Ltd.		113,415		114,019
Other		86,843		72,322
Total Investments in subsidiaries and a jointly controlled entity		516,029		488,982

OTHER LONG TERM RECEIVABLES		1,595		1,539

PROPERTY, PLANTS AND EQUIPMENT, NET		2		2

TOTAL ASSETS		575,092		580,051

CURRENT LIABILITIES:
Loans from banks and others		-		13,130
Debentures		20,465		20,296
Trade payables		290		69
Other accounts payable		1,743		1,274
Dividends payable		-		7,081
Total current liabilities		22,498		41,850

LONG-TERM LIABILITIES:
Debentures		107,121		116,561
Put options of non-controlling interests		879		-
Total long-term liabilities		108,000		116,561

EQUITY		444,594		421,640

TOTAL LIABILITIES AND EQUITY		575,092		580,051

(*)

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.