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Matrix announces the results of the first quarter of 2017 and shows continuing growth in all indicators

10/05/2017

Revenues increased by about 10% and reached approximately NIS 696.6M; operating profit increased by about 10% to approximately NIS 48.6M, and net profit increased by about 5% to approximately NIS 28.25M

Matrix released this morning the results of the first quarter of 2017, showing continuing growth in all main indicators. In the first quarter of 2017, revenues rose to over NIS 696.6M, an increase of about 10% compared with NIS 633.3M in the first quarter of 2016. Likewise, operating profit increased by about 10%, and amounted to approximately NIS 48.5M, compared with NIS 44.2M in the corresponding quarter of last year. Net profit grew by approximately 4.8% to about NIS 28.25M, compared with NIS 27M in the first quarter of 2016.
 
Moti Gutman, Matrix CEO: "Matrix continues its consistent growth in revenues and profitability year after year, based on organic growth and ongoing acquisitions. We are growing in Israel and abroad in demand areas, such as analytics and big data, cyber, cloud computing, digital and mobile, regulation and compliance—areas that are today an important part of our growth strategy. With the acquisition of consulting firms Aviv, Programa, and Minufan, and in conjunction with the existing organizational consulting activity of Matrix, we significantly strengthened our activities in the field of strategic and engineering consulting."
Gutman added: "We are proud of company growth in our core field, software services in Israel and abroad, which currently accounts for 74% of company revenues. In Israel, this activity grew by about 15.7%, and in the US by about 20%. Matrix continues to focus on achieving bottom-line profit and withdrawing from less profitable areas."
"Our leadership, stability, and financial robustness are also clearly identified by rating and research firms. In February 2017, the rating company Midroog confirmed the Aa3.il issuer rating of Matrix, with a stable outlook, for the tenth consecutive year. Last March, the analyst firm STKI ranked Matrix as the leader in the Israeli software services market for the 12th consecutive year. In the STKI report, Matrix was ranked as a Tier 1 company in 36 categories, and in 20 categories it was designated as a leader in areas such as value added services, information security and cyber ​​consulting, big data consulting, infrastructure projects, development projects, ALM and testing, management of Internet content and e-commerce platforms, training, deployment, CRM and XRM, big data, BI and analytics, mobile development, IOT projects, Internet and e-commerce projects, managed services in the field of cyber (SIEM), near-shore and on-shore services, middleware, IT operation tools, and more."
Gutman added: "In the ranking of the best places to work, published this week, BDI Coface ranks Matrix first among the software service companies in Israel. It is the seventh consecutive year that Matrix is ​​ranked first in the index of the most desirable jobs in the software services industry. In a company that employs approximately 8,250 people and relies on the field of software services, human resources are a central and strategic element, and we assign the highest priority to it. We upgraded and improved our recruitment process, and successfully recruited hundreds of new employees. At a time of shortage of personnel in the field of technology, we are working to create a young, flexible, and dynamic work environment, using benefits and training activities. Last week we held a hackathon, the first of its kind, for Matrix employees, to promote innovation and creativity in the company, which produced results beyond expectations. At the end of the month, we will hold the Matrix Night Run event for employees and customers. We are working to adapt the work environments, conditions, and challenges for the  veteran employees of the company as well as for young employees of the Y and Z generations."
Dividend
Matrix continues its policy of quarterly dividend distribution at a rate of up to 75% of net profit. On March 29, 2017, a dividend in the amount of approximately NIS 24.3M was distributed, and today we announced an additional dividend distribution of approximately NIS 21M.
Summary of reports for the three months ending on March 31, 2017 and 2016 (in NIS thousands)
 
For three months ending on
 
 
31.03.17
31.03.16
Difference in %
Turnover
696,667
633,343
10%+
Cost of sales and services
594,623
537,664
 
Gross profit
102,044
95,679
6.7%+
% from sales
14.7%
15.1%
 
 
 
 
 
Sales and marketing expenses
22,066
20,291
 
Management and general expenses
31,394
31,192
 
Operating profit
48,584
44,196
10%+
% from sales
7%
7%
 
 
 
 
 
Net financing costs
8,732
4,797
 
Net financing gains
(355)
(475)
 
The company’s share in the losses of affiliated companies
31
 
 
Profit before taxes
39,466
38,924
 
Taxes on income
11,214
11,952
 
Net profit
28,252
26,972
+4.8%
 
 
 
 
Net profit of:
 
 
 
Owners of capital rights in the company
28,064
26,960
 
Minority rights
188
12
 
Net profit
28,252
26,972
+4.8%
 
 
 
 
EBITDA
55,438
49,932
+11%
%
8%
7.9%
 
 
Company revenues
Revenues for the first quarter of 2017 increased by about 10% and reached approximately NIS 696.6M, compared with approximately NIS 633.3M in the first quarter of 2016. The growth in sales is due to an increase in activity and the addition of acquired companies.
Operating Profit
Operating profit in the first quarter of 2017 grew by about 10%, to approximately NIS 48.5M, representing 7% of sales, compared with approximately NIS 44.2M in the corresponding quarter last year, which constituted the same percentage of sales. The increase in operating profit is due mainly to an increase in sales and in gross profit.
Net profit
Net profit in the first quarter of 2017 grew by about 4.8%, to approximately NIS 28.3M, compared with profit of approximately NIS 27M in the corresponding quarter last year. The increase in net profit stems mainly from an increase in operating profit, which was partly offset by an increase in financing expenses.
Profit before interest, taxes, depreciation, and amortization (EBITDA)
EBITDA for the quarter amounted to approximately NIS 55.4M, representing 8% of sales, compared with approximately NIS 49.9M for the corresponding quarter last year, representing about 7.9% of sales.
 
ANALYSIS BY SECTOR
Matrix operates in five activity sectors: software solutions and services and added value in Israel; software solutions and services in the US; marketing and support of software products; integration and IT infrastructure solutions; and training and deployment.
Revenues from the software solutions and services sector in Israel in the quarter amounted to approximately NIS 457.7M, representing about 63% of revenues, compared with approximately NIS 395.6M in the corresponding quarter last year, an increase of about 15.7%. Operating profit amounted to approximately NIS 25M, representing about 5.5% of revenues, compared with approximately NIS 21.3M in the corresponding quarter last year, an increase of about 17.3%. The increase in revenues and operating profit in this sector is a result of an increase in activity and of the first-time inclusion of Aviv reports, the company having been acquired at the end of 2016.
Revenue from the software and services sector in the US increased by about 19.8%, to approximately NIS 81.5M, representing 11.2% of revenues, compared with approximately NIS 68M in the corresponding quarter of the previous year. Operating profit reached approximately NIS 11.9M, compared with approximately NIS 11.8M in the corresponding quarter last year, representing about 17.3% of revenues. The increase in revenues derives mainly from organic growth in activity and from acquisitions, with some erosion in the rate of profit due to the increase in the wages of software engineers.
Revenues for the marketing and deployment of software products sector in the quarter amounted to approximately NIS 30.8M, compared with approximately NIS 43M in the corresponding quarter of the previous year, a decrease of about 28.6%. At the same time, operating income remained at the level of approximately NIS 3.3M, representing about 10.6% of revenues in the sector, similar to the operating profit of the sector in the corresponding quarter last year. The decrease in revenues on the one hand and the stability in profit compared with the corresponding quarter of the previous year are the result of withdrawal from operations with low profit margins.
Total revenues in the integration solutions and IT infrastructure sector for the quarter amounted to NIS 115.7M, representing about 16% of revenues, compared with about approximately NIS 99.4M in the corresponding quarter of the previous year, an increase of about 16.4%. Operating profit in the sector amounted to approximately NIS 4.7M, representing about 4.1% of revenues, compared with NIS 4.2M, an increase of about 11.3%. The increase in revenues and in operating profit stems from an increase in activity, especially in the cloud sector.
The revenues of the training and deployment sector in the quarter reached approximately NIS 40.8M, compared with approximately NIS 39.9M in the corresponding quarter last year. Operating profit amounted to NIS approximately 3.7M, representing about 9% of revenues, compared with approximately NIS 3.5M in the corresponding quarter last year, which constituted a similar percentage of revenues.
Cash flow, cash balances, and financial ratios
Positive cash flow from current activities in the first quarter of 2017 amounted to approximately NIS 75.5M, similar to the corresponding quarter of the previous year. As of March 31, total capital amounted to approximately NIS 623.5M, compared with approximately NIS 609.6M at the end of the first quarter of the previous year. The current ratio is 1.33, compared with 1.3 at the end of the corresponding quarter last year.
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