EX-99.1 2 v452343_ex99-1.htm EXHIBIT 99.1

 

Exhibit 99.1

 

 

Sapiens Reports Q3 2016 Financial Results 

 

Double-Digit Growth Across All Geographies

 

HOLON, Israel - Nov. 7, 2016 - Sapiens International Corporation, (NASDAQ and TASE: SPNS), a leading global provider of software solutions for the insurance industry, with a growing presence in the 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, 2016.

 

Third Quarter Highlights:

 

·GAAP Revenue of $56.5 million, up 20.1% compared to $47.0 million in the third quarter of 2015.

 

·Non-GAAP revenue of $56.5 million, up 22.4% compared to $46.1 million in the third quarter of 2015.

 

·GAAP Operating profit increased by 15.1% and totaled $6.6 million (11.7% operating margin), compared to $5.7 million (12.2% operating margin) in the third quarter of 2015.

 

·Non-GAAP operating profit totaled $7.3 million (13.0% operating margin), compared to $7.0 million (15.1% operating margin) in the third quarter of 2015.

 

·GAAP Net income attributable to Sapiens' shareholders totaled $5.3 million or $0.11 per diluted share, an increase of 13.1% compared to $4.7 million or $0.09 per diluted share in the third quarter last year.

 

·Non-GAAP net income attributable to Sapiens' shareholders totaled $6.0 million or $0.12 per diluted share, an increase of 3.2% compared to $5.8 million or $0.12 per diluted share in the third quarter last year.

 

·Cash, cash equivalents and securities investments as of September 30, 2016 were $96.7 million and the company has no debt.

 

"We saw strong double-digit growth and improved performance across all of our offerings and across all of our territories, driven by strong demand from existing customers and from ramping sales from new customers. As in recent quarters, the demand for our products and services remained strong," said Roni Al-Dor, President and CEO of Sapiens. "I remain very encouraged by our geographic expansion, our organic growth with both new and existing customers and the potential for ongoing M&A opportunities to enhance our growth and profitability."

 

Mr. Al-Dor continued. "On the deal front, we had a very busy third quarter. We expanded our strategic relationship with the Medical Protection Society (MPS) with a new multi-million dollar agreement to lead the complex implementation of the MPS' membership system. In addition, Menora Mivtachim Insurance in Israel selected Sapiens IDIT suite in a new agreement valued at over $10 million. In another multi-million Euro agreement, LB Group selected the Sapiens IDIT P&C suite as its new policy administration solution, and last Generali Nederland, one of the largest European insurance providers, selected the Sapiens solution to manage its life portfolios."

 

1

 

"In addition to our various customer wins and engagements, during the third quarter we announced the upcoming launch of several new products and capabilities. By the first quarter of 2017, Sapiens ALIS policy administration solution will be expanded to include support for Group Life, and will support the whole range of hybrid group, worksite and individual life solutions on a single platform. Also, Sapiens launched a consumer and agent PORTAL for Life and P&C insurers. The Sapiens PORTAL along with Sapiens INTELLIGENCE will enable our customers to provide both consumers and agents a complete digital experience."

 

Mr. Al-Dor concluded: "Our business plan remains intact and attainable. We maintain our guidance for 2016 full year revenues of $211 to $215 million, or annual growth of 18%-20%, and we continue to expect full-year 2016 non-GAAP operating margins in the range of 13.5% - 14.0%, reflecting previously announced increased short-term investments in delivery, R&D, sales and marketing."

 

Quarterly Results Conference Call

 

Management will host a conference call and webcast on November 7 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): + 1-888-281-1167; International: +972-3-918-0685; UK: 0-800-917-9141

 

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 21, 2016, as follows: North America: 1-888-269-0005; International: +972-3-925-5929

 

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.

 

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.

 

2

 

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.

 

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 200 financial services organizations. The Sapiens team of approximately 1,900 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.

 

3

 

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, 2015, and subsequent reports and registration statements filed from time to time with the Securities and Exchange Commission.

 

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

 

 

4

 

 

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,

 
    2016    2015*   2016    2015*
     (unaudited)       (unaudited )      (unaudited)      (unaudited)  
Revenue   56,480    47,035    159,077    136,962 
Cost of revenue   34,366    27,944    95,754    82,559 
                     
Gross profit   22,114    19,091    63,323    54,403 
                     
Operating Expenses:                    
 Research and development, net   4,147    2,482    11,401    7,488 
 Selling, marketing, general and administrative   11,376    10,883    32,673    29,361 
Total operating expenses   15,523    13,365    44,074    36,849 
                     
Operating income   6,591    5,726    19,249    17,554 
                     
Financial expense (income), net   (225)   (105)   (631)   239 
Taxes and other expenses, net   1,463    1,127    4,389    3,021 
                    
Net income   5,353    4,704    15,491    14,294 
                     
Attributable to non-controlling interest   48    15    (34)   150 
                    
Net income attributable to Sapiens' shareholders   5,305    4,689    15,525    14,144 
                     
Basic earnings per share**   0.11    0.10    0.32    0.30 
                     
Diluted earnings per share**   0.11    0.09    

0.32

    0.29 
                     
                     
Weighted average number of shares outstanding used to compute basic earnings per share (in thousands)   49,002    48,128    48,922    47,869 
                     
Weighted average number of shares outstanding used to compute diluted earnings per share (in thousands)   49,849    49,484    49,722    49,254 

 

*Including consolidation of Insseco, commencing December 31, 2014.
**Net income used for earning per share was adjusted to reflect the effect of redeemable non-controlling interest.

 

 

5

 

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,

  2016   2015   2016   2015
  (unaudited)   (unaudited)   (unaudited)   (unaudited)
Revenues 56,480 100%   46,139 100%   159,077 100%   130,589 100%
Gross Profit 23,617 41.8%   20,711 44.9%   67,917 42.7%   56,957 43.6%
Operating profit 7,348 13.0%   6,962 15.1%   22,122 13.9%   19,191 14.7%
Net income to shareholders 6,004 10.6%   5,816 12.6%   18,241 11.5%   15,773 12.1%
Adjusted EBITDA 8,115 14.4%   7,493 16.2%   24,152 15.2%   20,571 15.8%
                       
Basic earnings per share 0.12     0.12     0.37     0.33  
Diluted earnings per share 0.12     0.12     0.37     0.32

 

 

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

 
    Q3 2016    Q2 2016    Q1 2016    Q4 2015    Q3 2015 
North America   19,706    17,601    16,041    16,767    16,571 
Europe   28,675    26,124    28,421    26,439    24,084 
APAC   8,099    9,305    5,105    5,468    5,484 
Total   56,480    53,030    49,567    48,674    46,139 

 

6

 

Adjusted EBITDA Calculation

U.S. dollars in thousands

 

   Three months ended   Nine months ended 
   September 30,   September 30, 
   2016   2015   2016   2015 
                 
GAAP operating profit   6,591    5,726    19,249    17,554 
                     
Non GAAP adjustments:                    
Amortization of capitalized software   1,172    1,202    3,837    3,552 
Amortization of other intangible assets   658    585    1,664    1,714 
Capitalization of software development   (1,674)   (1,526)   (4,454)   (4,391)
Stock-based compensation   493    346    1,433    914 
Compensation related to acquisition and acquisition related costs   108    148    393    219 
Adjustments of pre-acquisition revenues and expenses accounted under pooling of interest method   -    481    -    (371)
                     
Non GAAP operating profit   7,348    6,962    22,122    19,191 
                     
Depreciation   767    531    2,030    1,380 
                     
Adjusted EBITDA   8,115    7,493    24,152    20,571 

 

 

7

 

 

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, 
   2016   2015   2016   2015 
GAAP revenue   56,480    47,035    159,077    136,962 
Adjustments of pre-acquisition revenue accounted under pooling of interest method   -    (896)   -    (6,373)
Non-GAAP revenue   56,480    46,139    159,077    130,589 
                     
GAAP gross profit   22,114    19,091    63,323    54,403 
Revenue adjustment   -    (896)   -    (6,373)
Amortization of capitalized software   1,172    1,202    3,837    3,552 
Amortization of other intangible assets   331    234    757    643 
Adjustments of pre-acquisition cost of revenue accounted under pooling of interest method   -    1,080    -    4,732 
Non-GAAP gross profit   23,617    20,711    67,917    56,957 
                     
GAAP operating income   6,591    5,726    19,249    17,554 
Gross profit adjustments   1,503    1,620    4,594    2,554 
Capitalization of software development   (1,674)   (1,526)   (4,454)   (4,391)
Amortization of other intangible assets   327    351    907    1,071 
Stock-based compensation   493    346    1,433    914 
Compensation related to acquisition and acquisition related costs   108    148    393    219 
Adjustments of pre-acquisition operating expenses accounted under pooling of interest method   -    297    -    1,270 
Non-GAAP operating income   7,348    6,962    22,122    19,191 
                     
GAAP net income attributable to Sapiens' shareholders   5,305    4,689    15,525    14,144 
Operating income adjustments   757    1,236    2,873    1,637 
Adjustment to redeemable non-controlling interest   38    (23)   141    73 
Adjustments of pre-acquisition financial and tax expenses accounted under pooling of interest method   -    (116)   -    50 
Other   (96)   30    (298)   (131)
Non-GAAP net income attributable to Sapiens' shareholders   6,004    5,816    18,241    15,773 
                     
Non-GAAP basic earnings per share   0.12    0.12    0.37    0.33 
                    
Non-GAAP diluted earnings per share   0.12    0.12    0.37    0.32 
                     
Weighted average number of shares outstanding used to compute basic earnings per share (in thousands)   49,002    48,128    48,922    47,869 
Weighted average number of shares outstanding used to compute diluted earnings per share (in thousands)   49,849    49,484    49,722    49,254 

  

8

 

SAPIENS INTERNATIONAL CORPORATION N.V. AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

U.S. Dollars in thousands

 

   September 30,   December 31, 
   2016   2015 
   (unaudited)   (unaudited) 
ASSETS        
         
CURRENT ASSETS:          
Cash and cash equivalents   56,228    54,351 
Trade receivables, net   30,300    29,761 
Other receivables and prepaid expenses   8,614    5,455 
Marketable securities   25,128    8,776 
           
 Total current assets   120,270    98,343 
           
LONG-TERM ASSETS:          
Marketable securities   15,333    30,875 
Property and equipment, net   10,150    5,675 
Severance pay fund   4,281    5,551 
Other intangible assets, net   29,550    27,540 
Other long-term assets   4,872    4,252 
Goodwill   75,363    70,035 
           
 Total long-term assets   139,549    143,928 
           
TOTAL ASSETS   259,819    242,271 
           

LIABILITIES AND EQUITY

          
           
CURRENT LIABILITIES:          
 Trade payables   7,262    4,721 
 Accrued expenses and other liabilities   31,828    32,012 
 Deferred revenue   12,792    10,268 
           
 Total current liabilities   51,882    47,001 
           
LONG-TERM LIABILITIES:          
 Other long-term liabilities   8,203    6,414 
 Accrued severance pay   5,222    6,662 
           
 Total long-term liabilities   13,425    13,076 
           
REDEEMABLE NON-CONTROLLING INTEREST   385    385 
           
EQUITY   194,127    181,809 
           
TOTAL LIABILITIES AND EQUITY   259,819    242,271 

  

9

 

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,

 
    2016    2015* 
    (unaudited)    (unaudited) 
Cash flows from operating activities:          
Net income   15,491    14,294 
Reconciliation of net income to net cash provided by operating activities:          
Depreciation and amortization   7,531    7,302 
Amortization of premium and accrued interest on marketable securities   (380)   (313)
Stock-based compensation related to options issued to employees   1,433    913 
           
Net changes in operating assets and liabilities, net of amount acquired:          
Trade receivables   11    (625)
Deferred tax assets   366    541 
Other operating assets   (3,383)   449 
Trade payables   1,231    1,618 
Other operating liabilities   (254)   3,974 
Deferred revenues   2,203    767 
Severance pay   (210)   (288)
           
Net cash provided by operating activities   24,039    28,632 
           
Cash flows from investing activities:          
Purchase of property and equipment   (3,732)   (2,229)
Purchase of marketable securities, net of interest received   (5,605)   (7,220)
Proceeds from sales of marketable securities   5,394    1,015 
Payments for business acquisition, net of cash acquired   (4,861)   (2,934)
Capitalized software development costs   (4,454)   (4,391)
Restricted cash   4    (1,395)
           
Net cash used in investing activities   (13,254)   (17,154)
           
Cash flows from financing activities:          
Proceeds from employee stock options exercised   809    1,557 
Payment to shareholders in respect of acquisition   (1,440)   (6,349)
Distribution of dividend   (9,786)   (7,186)
Repayment of loan   (642)   - 
           
Net cash used in financing activities   (11,059)   (11,978)
           
Effect of exchange rate changes on cash and cash equivalents   2,151    (1,736)
           
Increase in cash and cash equivalents   1,877    (2,236)
Cash and cash equivalents at the beginning of period   54,351    47,400 
           
Cash and cash equivalents at the end of period   56,228    45,164 
 
 *  Including consolidation of Insseco, commencing December 31, 2014.

  

10