EX-99.1 2 v423584_ex99-1.htm EXHIBIT 99.1

 

Exhibit 99.1

 

 

Sapiens Reports Double-Digit Revenue Growth and Improved Profitability

 

58.1% Year-Over-Year Increase in Non-GAAP Quarterly Operating Profit 

Increasing 2015 Full Year Operating Margin Guidance

 

Holon, Israel, November 4, 2015 – Sapiens International Corporation, (NASDAQ and TASE: SPNS), a leading global provider of software solutions for the insurance industry, with an emerging focus on the broader financial services sector, and a member of the Formula Group (NASDAQ: FORTY and TASE: FORT), today announced its financial results for the third quarter ended September 30, 2015.

 

Third Quarter Highlights:

 

·Non-GAAP revenue of $46.1 million, up 14.2% compared to $40.4 million in the third quarter of 2014. Excluding the impact of foreign currency exchange rates, revenue growth was above 20%.

 

·Non-GAAP operating profit increased by 58.1% and totaled $7.0 million or 15.1% operating margin, compared to $4.4 million, or 10.9% operating margin, in the third quarter of 2014.

 

·Non-GAAP net income attributable to Sapiens’ shareholders totaled $5.8 million or $0.12 per diluted share increase of 42.4% compared to $4.1 million or $0.08 per diluted share in the third quarter last year.

 

·Cash, cash equivalents and securities investments as of September 30, 2015 was $84.8 million, the company has no debt.

 

·The Company reiterated full-year 2015 revenue guidance. Management expects revenues to be in a range of $176-$180 million.

 

·The company is increasing operating margin guidance to be in a range of 14.5% - 15%.

 

Year-to-Date Financial Highlights:

 

·Non-GAAP revenue increased by 12.9% to $130.6 million from $115.7 million in the same period of 2014.

 

·Non-GAAP operating profit was $19.2 million, or 14.7% operating margin, compared to $12.1 million, or 10.4% operating margin, in the first nine months of 2014, an increase of 59.2%.

 

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·Non-GAAP net income attributable to Sapiens’ shareholders reached $15.8 million, compared to $11.1 million in the year ago period, an increase of 42.6%.

 

“We are pleased to report another strong quarter,” said Roni Al-Dor, President and CEO of Sapiens. “Solid growth and performance across all of our offerings, and from all geographies, enabled us to deliver another quarter of double-digit revenue growth. We are seeing the benefits of our business model as our operating margins expanded as a result of fundamental improvements in our base business which have led to a more efficient cost structure. Meanwhile, we continued to improve our position in the market, the investments we have made in product innovation are proving to be instrumental in winning new and expanding footprint in existing clients. The demand for our products and services remain strong, and we are confident in our outlook for the remainder of the year.”

 

Quarterly Results Conference Call

 

Sapiens management will host its earnings conference call today, November 4 at 9:30 a.m. Eastern Time (4:30 p.m. in Israel) to review and discuss Sapiens’ results. Please call the following numbers (at least 10 minutes before the scheduled time) to participate:

 

North America (toll-free): + 1- 888-668-9141; International: + 972-3-918-0609; UK: 0-800-917-5108

 

The live webcast of the call can be viewed on Sapiens’ website at http://www.sapiens.com/investors/presentations-and-webcast/

 

If you are unable to join live, a replay of the call will be accessible until November 14, 2015, as follows:

 

North America: 1-888-295-2634; International: + 972-3-925-5904

 

A recorded version of the webcast will also be available via the Sapiens website, for three months at the same location.

 

Non-GAAP Financial Measures

 

This press release contains the following non-GAAP financial measures: Non-GAAP revenue, Non-GAAP gross profit, Non-GAAP operating income, Non-GAAP net income attributed to Sapiens shareholders, Non-GAAP basic and diluted earnings per share.

 

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Sapiens believes that these non-GAAP measures of financial results provide useful information to management and investors regarding certain financial and business trends relating to Sapiens' financial condition and results of operations. The Company's management uses these non-GAAP measures to compare the Company's performance to that of prior periods for trend analyses, for purposes of determining executive and senior management incentive compensation and for budgeting and planning purposes. These measures are 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 non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing the Company's financial measures with other software companies, many of which present similar non-GAAP financial measures to investors.

 

Management of the Company does not consider these non-GAAP measures in isolation or as an alternative to financial measures determined in accordance with GAAP. The principal limitation of these non-GAAP financial measures is that they exclude significant expenses and income that are required by GAAP to be recorded in the Company's financial statements. In addition, they are subject to inherent limitations as they reflect the exercise of judgment by management about which expenses and income are excluded or included in determining these non-GAAP financial measures. In order to compensate for these limitations, management presents non-GAAP financial measures in connection with GAAP results. Sapiens urges investors to review the reconciliation of its non-GAAP financial measures to the comparable GAAP financial measures, 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.

 

In addition, the Company adjusted revenues and expenses, recorded under US GAAP, of pre-acquisition date in respect of acquired business from its ultimate parent company. As this transaction is between companies under common control, under US GAAP, it was accounted for under the pooling of interest method. For non-GAAP measurement purposes, the Company excludes the pre-acquisition date revenues and expenses.

 

Reconciliation tables of the most comparable GAAP financial measures to the non-GAAP financial measures used in this press release are included with the financial tables of this release.

 

The Company defines Adjusted EBITDA as net Profit, adjusted for stock-based compensation expense, depreciation and amortization, capitalized internal-use software development costs, amortization of internal-use software development costs interest expense, compensation expenses related to acquisition, pre-acquisition revenues and expenses accounted under pooling of interest method, provision for income taxes and other income (expenses). These amounts are often excluded by other companies to help investors understand the operational performance of their business. The Company uses Adjusted EBITDA as a measurement of its operating performance because it assists in comparing the operating performance on a consistent basis by removing the impact of certain non-cash and non-operating items. Adjusted EBITDA reflect an additional way of viewing aspects of the operations that the Company believes, when viewed with the GAAP results and the accompanying reconciliations to corresponding GAAP financial measures provide a more complete understanding of factors and trends affecting its business.

 

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About Sapiens

 

Sapiens International Corporation (NASDAQ and TASE: SPNS) is a leading global provider of software solutions for the insurance industry, with an emerging focus on the broader financial services sector. We offer core, end-to-end solutions to the global general insurance, property and casualty, life, pension and annuities, and retirement markets, as well as business decision management software. We have a track record of over 30 years in delivering superior software solutions to more than 170 financial services organizations. The Sapiens team of approximately 1,500 professionals operates through our fully-owned subsidiaries in North America, the United Kingdom, EMEA and Asia Pacific. For more information: www.sapiens.com.

 

Forward Looking Statement

 

Some of the statements in this press release may constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities and Exchange Act of 1934 and the United States Private Securities Litigation Reform Act of 1995. Words such as "will," "expects," "believes" and similar expressions are used to identify these forward-looking statements (although not all forward-looking statements include such words). These forward-looking statements, which may include, without limitation, projections regarding our future performance and financial condition, are made on the basis of management's current views and assumptions with respect to future events. Any forward-looking statement is not a guarantee of future performance and actual results could differ materially from those contained in the forward-looking statement.

 

These statements speak only as of the date they were made, and we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. We operate in a changing environment. New risks emerge from time to time and it is not possible for us to predict all risks that may affect us. For more information regarding these risks and uncertainties, as well as certain additional risks that we face, please refer to the Risk Factors detailed in Item 3 of Part III of our Annual Report on Form 20-F for the year ended December 31, 2014, and subsequent reports and registration statements filed from time to time with the Securities and Exchange Commission.

 

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Investors and Media Contact:

 

Yaffa Cohen-Ifrah

 

Chief Marketing Officer and Head of Corporate Communications

Sapiens International

US Mobile: +1 201-250-9414

Mobile: +972 54-9099039

Email: yaffa.cohen-ifrah@sapiens.com

 

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Summary of Non-GAAP financial Information
U.S. dollars in thousands (except per share amounts)

 

   Three months ended   Nine months ended 
   September 30,   September 30, 
   2015   2014   2015   2014 
   (unaudited)   (unaudited)   (unaudited)   (unaudited) 
                                 
Revenues   46,139    100%   40,398    100%   130,589    100%   115,677    100%
Gross Profit   20,711    44.9%   16,392    40.6%   56,957    43.6%   46,715    40.4%
Operating profit   6,962    15.1%   4,403    10.9%   19,191    14.7%   12,056    10.4%
Net income to shareholders   5,816    12.6%   4,084    10.1%   15,773    12.1%   11,060    9.6%
Adjusted EBITDA   7,493    16.2%   4,796    11.9%   20,571    15.8%   13,233    11.4%
                                         
Basic earnings per share   0.12         0.09         0.33         0.24      
Diluted earnings per share   0.12         0.08         0.32         0.23      

 

 

Adjusted EBITDA Calculation
U.S. dollars in thousands

 

   Three months ended   Nine months ended 
   September 30,   September 30 , 
   2015   2014   2015   2014 
                 
GAAP operating profit   5,726    3,799    17,554    10,356 
                     
Non GAAP adjustments:                    
Amortization of capitalized software   1,202    1,226    3,552    3,732 
Amortization of other intangible assets   585    547    1,714    1,665 
Capitalization of software development   (1,526)   (1,451)   (4,391)   (4,538)
Compensation related to acquisition   148    -    219    - 
Stock-based compensation   346    282    914    841 
Adjustments of pre-acquisition revenue and expenses accounted under pooling of interest method   481    -    (371)   - 
                     
Non GAAP operating profit   6,962    4,403    19,191    12,056 
                     
Depreciation   531    393    1,380    1,177 
                     
Adjusted EBITDA   7,493    4,796    20,571    13,233 

 

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Non-GAAP revenues by category
U.S. dollars in thousands

 

   Three months ended
September 30, 2015		   Nine months ended
 September 30, 2015		 
   Revenues   Percentage   Revenues   Percentage 
     
License   3,608    7.8%   9,480    7.3%
Services and Maintenance   42,531    92.2%   121,109    92.7%
Total   46,139    100.0%   130,589    100.0%

  

 

Non-GAAP revenues by geographic breakdown
U.S. dollars in thousands

 

  

Three months ended

September 30, 2015

  

Nine months ended

September 30, 2015

 
   Revenues   Percentage   Revenues   Percentage 
     
North America   16,571    35.9%   44,565    34.1%
Europe   24,084    52.2%   70,980    54.4%
APAC   5,484    11.9%   15,044    11.5%
Total   46,139    100%   130,589    100%

 

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SAPIENS INTERNATIONAL CORPORATION N.V. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

U.S. dollars in thousands (except per share amounts)

 

   Three months ended   Nine months ended 
   September 30,   September 30, 
   2015*   2014   2015*   2014 
   (unaudited)   (unaudited)   (unaudited)   (unaudited) 
                 
Revenue   47,035    40,398    136,962    115,677 
Cost of revenue   27,944    25,460    82,559    73,364 
                     
Gross profit   19,091    14,938    54,403    42,313 
                     
Operating Expenses:                    
Research and development, net   2,482    2,856    7,488    8,600 
Selling, marketing, general and administrative   10,883    8,283    29,361    23,357 
Total operating expenses   13,365    11,139    36,849    31,957 
                     
Operating income   5,726    3,799    17,554    10,356 
                     
Financial income, net   (105)   (93)   239    (150)
Taxes on income   1,127    80    3,021    542 
                     
Net income   4,704    3,812    14,294    9,964 
                     
Attributable to non-controlling interest   15    100    150    125 
                     
Net income attributable to Sapiens' shareholders   4,689    3,712    14,144    9,839 
                     
Basic earnings per share   0.10    0.08    0.30    0.21 
                     
Diluted earnings per share   0.09    0.08    0.29    0.20 
                     
Weighted average number of shares outstanding used to compute basic earnings per share (in thousands)   48,128    47,607    47,869    46,841 
                     
Weighted average number of shares outstanding used to compute diluted earnings per share (in thousands)   49,484    49,006    49,254    48,235 

 

 

* Including consolidation of Insseco commencing December 31, 2014.

 

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SAPIENS INTERNATIONAL CORPORATION N.V. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP RESULTS

U.S. dollars in thousands (except per share amounts)

 

   Three months ended   Nine months ended 
   September 30,   September 30, 
   2015*   2014   2015*   2014 
GAAP revenue   47,035    40,398    136,962    115,677 
Adjustments of pre-acquisition revenue accounted under pooling of interest method   (896)   -    (6,373)   - 
Non-GAAP revenue   46,139    40,398    130,589    115,677 
                     
GAAP gross profit   19,091    14,938    54,403    42,313 
Revenue adjustment   (896)   -    (6,373)   - 
Amortization of capitalized software   1,202    1,226    3,552    3,732 
Amortization of other intangible assets   234    228    643    670 
Adjustments of pre-acquisition cost of revenue accounted under pooling of interest method   1,080    -    4,732    - 
Non-GAAP gross profit   20,711    16,392    56,957    46,715 
                     
GAAP operating income   5,726    3,799    17,554    10,356 
Gross profit adjustments   1,620    1,454    2,554    4,402 
Capitalization of software development   (1,526)   (1,451)   (4,391)   (4,538)
Amortization of other intangible assets   351    319    1,071    995 
Compensation related to acquisition   148    -    219    - 
Stock-based compensation   346    282    914    841 
Adjustments of pre-acquisition operating expenses accounted under pooling of interest method   297    -    1,270    - 
Non-GAAP operating income   6,962    4,403    19,191    12,056 
                     
GAAP net income attributable to Sapiens' shareholders   4,689    3,712    14,144    9,839 
Operating income adjustments   1,236    604    1,637    1,700 
Adjustment to redeemable non-controlling interest   (23)   -    73    - 
Adjustments of pre-acquisition financial and tax expenses accounted under pooling of interest method   (116)   -    50    - 
Other   30    (232)   (131)   (479)
Non-GAAP net income attributable to Sapiens' shareholders   5,816    4,084    15,773    11,060 
                     
Non-GAAP basic earnings per share   0.12    0.09    0.33    0.24 
                     
Non-GAAP diluted earnings per share   0.12    0.08    0.32    0.23 
                     
Weighted average number of shares outstanding used to compute basic earnings per share (in thousands)   48,128    47,607    47,869    46,841 
Weighted average number of shares outstanding used to compute diluted earnings per share (in thousands)   49,484    49,006    49,254    48,235 

  

 

* Including consolidation of Insseco commencing the acquisition date, August 18, 2015.

 

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SAPIENS INTERNATIONAL CORPORATION N.V. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

U.S. Dollars in thousands

 

   September 30,   December 31, 
   2015   2014* 
   (unaudited)   (unaudited) 
         
ASSETS          
           
CURRENT ASSETS:          
Cash and cash equivalents   45,164    47,400 
Trade receivables, net   32,645    31,832 
Other receivables and prepaid expenses   5,375    3,964 
Deferred Taxes   2,132    2,319 
Marketable Securities   3,806    - 
           
Total current assets   89,122    85,515 
           
LONG-TERM ASSETS:          
Marketable Securities   35,821    33,098 
Property and equipment, net   5,749    5,011 
Severance pay fund   6,475    10,735 
Other intangible assets, net   27,475    27,905 
Other long-term assets   3,771    3,248 
Goodwill   69,810    67,698 
           
Total long-term assets   149,101    147,695 
           
TOTAL ASSETS   238,223    233,210 
           
LIABILITIES AND EQUITY          
           
CURRENT LIABILITIES:          
Trade payables   4,780    3,310 
Accrued expenses and other liabilities   34,232    26,951 
Deferred revenue   9,841    9,272 
           
Total current liabilities   48,853    39,533 
           
LONG-TERM LIABILITIES:          
Other long-term liabilities   6,093    3,217 
Accrued severance pay   7,449    12,008 
           
Total long-term liabilities   13,542    15,225 
           
REDEEMABLE NON-CONTROLLING INTEREST   242    159 
           
EQUITY   175,586    178,293 
           
TOTAL LIABILITIES AND EQUITY   238,223    233,210 

 

 

* December 31, 2014 Balance Sheet was revised to reflect the acquisition of Insseco, in accordance with the pooling of interest method.

 

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Sapiens International Corporation N.V. AND ITS SUBSIDIARIES
Consolidated Statement of Cash Flow
U.S. dollars in thousands 

 

  

For the nine months ended

September 30

 
   2015   2014 
   (unaudited)   (unaudited) 
Cash flows from operating activities:          
Net income   14,294    9,964 
           
Reconciliation of net income to net cash provided by operating activities:          
Depreciation  and amortization   7,302    6,574 
Amortization of premium and accrued interest on marketable securities   (313)   (126)
Stock-based compensation related to options issued to employees   913    841 
Increase in trade receivables   (625)   (3,503)
Deferred tax assets   541    54 
Decrease (increase) in other operating assets   449    (492)
Increase (decrease)  in trade payables   1,618    (1,470)
Increase in other operating liabilities   3,974    3,799 
Increase  in deferred revenues   767    435 
Severance pay   (288)   110 
           
Net cash provided by operating activities   28,632    16,186 
           
Cash flows from investing activities:          
Purchase of property and equipment   (2,229)   (1,377)
Purchase of marketable securities   (7,220)   (34,623)
Proceeds from sales of marketable securities   1,015    1,014 
Payments for business acquisition, net of cash acquired   (2,934)   (2,064)
Increase in capitalized software development costs   (4,391)   (4,538)
Decrease (increase) in Restricted Cash   (1,395)   538 
           
Net cash used in investing activities   (17,154)   (41,050)
           
Cash flows from financing activities:          
Distribution of dividend   (7,186)   - 
Proceeds from employee stock options exercised   1,557    1,508 
Payment to shareholders in respect of acquisition   (6,349)   - 
           
Net cash provided by (used in) financing activities   (11,978)   1,508 
           
Effect of exchange rate changes on cash and cash equivalents   (1,736)   (1,832)
           
Decrease in cash and cash equivalents   (2,236)   (25,188)
Cash and cash equivalents at the beginning of period   47,400    70,313 
           
Cash and cash equivalents at the end of period   45,164    45,125 

 

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