EX-99.1 2 tv488052_ex99-1.htm EXHIBIT 99.1

 

Exhibit 99.1

 

Sapiens Logo notag.jpg

 

 

Sapiens Reports Fourth Quarter and Full Year 2017 Financial Results

 

 

HOLON, Israel, March 8, 2018 /PRNewswire/ -- Sapiens International Corporation, (NASDAQ: SPNS) (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 fourth quarter and full year ended December 31, 2017.

 

Fourth Quarter 2017 Highlights:

 

·Revenue increases 25.4% to $71.6 million. Non-GAAP revenue increased 26.9% from the same period in the prior year to $72.4 million.
·Operating income totaled $1.1 million, down 79.8% compared to last year. Non-GAAP operating income totaled $9.1 million, up 20.9% compared to the same period in the prior year.
·Operating margin of 1.6%, compared to 9.8% last year. Non-GAAP operating margin of 12.5%, compared to 13.1% last year.
·Net income attributable to Sapiens’ shareholders totaled $3.2 million. Non-GAAP net income attributable to Sapiens’ shareholders totaled $6.1 million, compared to $6.0 in the same period last year.
·Diluted earnings per share of $0.07 per diluted share. Non-GAAP diluted earnings per share of $0.12 per diluted share, flat compared to the same period in the prior year.

 

Full Year 2017 Highlights:

 

·Revenue increases 24.5% to $269.2 million. Non-GAAP revenue increased 25.8% from the same period in the prior year to $272.0 million.
·Operating income totaled $1.0 million, down 96.0% from the same period in the prior year. Non-GAAP operating profit totaled $23.1 million, a decrease of 22.0% from last year.
·Operating margin of 0.4%, compared to 11.5% in the same period in the prior year. Non-GAAP operating margin of 8.5%, compared to 13.7% last year.
·Net income attributable to Sapiens’ shareholders totaled $0.4 million. Non-GAAP net income attributable to Sapiens’ shareholders totaled $15.5 million, a decrease of 35.8% from the same period in the prior year.
·Diluted earnings per share of $0.01 per diluted share. Non-GAAP diluted earnings per share of $0.31 per diluted share.

 

1  

 

 

"We made progress in 2017 executing to our long-term strategy of becoming a leading global provider of insurance software solutions and services. We invested in acquisitions to gain rapid entrance into the US market where we acquired products and solutions, clients, personnel and resources, and strong brands in focused geographies and market segments, as well as R&D to improve our competitive advantages through internal development of products and solutions," said Roni Al-Dor, president and CEO, Sapiens. "From a growth and profitability perspective 2017 was a mixed year. We reported full year Non-GAAP revenue of $272 million, near the top of our revised 2017 guidance range, a year-over-year increase of 25.8%, primarily due to the acquisition of StoneRiver. However, we did not fully meet our 2017 expectations for profitability, with adjusted non-GAAP operating margin for the year of 8.5%".

 

Al-Dor concluded: “Sapiens is reiterating prior guidance for 2018 full-year revenues in the range of $280-$285 million (on a non-GAAP basis), an increase of approximately 3% to 5%. Growth is anticipated to be below prior year levels due to the elimination of certain non-core revenue, extension of the rollout time-line for a large client, certain projects that came through an acquisition that will not renew, and the loss of some revenue due to product duplication between StoneRiver and Adaptik. We are also maintaining expectations for adjusted operating margin a range of 12% to 13% (on a non-GAAP basis), based on integration, restructuring benefits, and maximizing our acquired talent.”

 

Quarterly Results Conference Call

 

Management will host a conference call and webcast today, March 8 at 9:00 a.m. Eastern Time (4:00 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 March 18, 2017, as follows:

North America: 1-888-782-4291; International: +972-3-925-5918

 

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

 

2  

 

 

 

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, and 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.

 

Non-GAAP financial measures consist of GAAP financial measures adjusted to exclude: Valuation adjustment on acquired deferred revenue, amortization of intangible assets, capitalization of software development, stock-based compensation, compensation related to acquisition, acquisition-related costs, restructuring and cost reduction costs, loss on sales of Marketable Securities and tax adjustment regarding non-GAAP adjustments, as well as the impact of one-time adjustment to our deferred taxes as a result of the U.S. Tax Cuts and Job act 2017.

 

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.

 

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.

 

3  

 

 

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 valuation adjustment on acquired deferred revenue, stock-based compensation expense, depreciation and amortization, capitalized of software development costs, compensation expenses related to acquisition, acquisition-related costs, restructuring and cost reduction costs, financial expense (income), 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 reflects 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 a growing presence in the financial services sector. We offer integrated core software solutions and business services, and a full digital suite for the property and casualty/general insurance; life, pension and annuities; and reinsurance markets. Sapiens also services the workers’ compensation and financial and compliance markets.

 

Our portfolio includes policy administration, billing and claims; underwriting, illustration and electronic application; reinsurance and decision management software. Sapiens’ digital platform features customer and agent portals, and a business intelligence platform. With a 30-year track record of delivering to more than 400 organizations, Sapiens’ team of over 2,500 operates through our fully-owned subsidiaries in North America, the United Kingdom, EMEA and Asia Pacific. For more information: www.sapiens.com.

 

4  

 

 

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, 2016, and subsequent reports and registration statements filed from time to time with the Securities and Exchange Commission.

 

5  

 

 

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   Year ended 
   December 31,   December 31, 
   2017   2016   2017   2016 
   (unaudited)   (unaudited)   (unaudited)   (unaudited) 
                 
 Revenue   71,600    57,113    269,194    216,190 
 Cost of revenue   45,776    34,648    175,678    130,402 
                     
 Gross profit   25,824    22,465    93,516    85,788 
                     
 Operating expenses:                    
 Research and development, net   8,427    5,087    31,955    16,488 
 Selling, marketing, general and administrative   16,265    11,787    60,559    44,460 
 Total operating expenses   24,692    16,874    92,514    60,948 
                     
 Operating income    1,132    5,591    1,002    24,840 
                     
 Financial expense (income), net   1,000    98    3,010    (533)
 Taxes and other expenses, net   (3,301)   1,383    (2,564)   5,772 
                     
                     
 Net income   3,433    4,110    556    19,601 
 Attributed to non-controlling interest   (157)   (9)   (189)   (43)
 Attributed to redeemable non-controlling interest   43    7    43    (134)
 Adjustment to redeemable non-controlling interest   350    301    350    442 
 Net income attributable to Sapiens' shareholders   3,197    3,811    352    19,336 
                     
 Basic earnings per share   0.07    0.08    0.01    0.40 
                     
 Diluted earnings per share   0.07    0.08    0.01    0.40 
                     
                     
Weighted average number of shares outstanding used to compute basic earnings per share (in thousands)   49,325    49,021    49,170    48,947 
                     
Weighted average number of shares outstanding used to compute diluted earnings per share (in thousands)   50,032    49,935    49,926    49,780 

 

6  

 

 

SAPIENS INTERNATIONAL CORPORATION N.V. AND ITS SUBSIDIARIES

 

CONDENSED CONSOLIDATED NON-GAAP STATEMENTS OF INCOME

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

 

   Three months ended   Year ended 
   December 31,   December 31, 
   2017   2016   2017   2016 
   (unaudited)   (unaudited)   (unaudited)   (unaudited) 
                 
 Revenue   72,448    57,113    272,003    216,190 
 Cost of revenue   42,931    33,263    165,336    124,423 
                     
 Gross profit   29,517    23,850    106,667    91,767 
                     
 Operating expenses:                    
 Research and development, net   9,663    6,178    37,522    22,033 
 Selling, marketing, general and administrative   10,795    10,179    46,032    40,119 
 Total operating expenses   20,458    16,357    83,554    62,152 
                     
 Operating income    9,059    7,493    23,113    29,615 
                     
 Financial expense (income), net   1,000    (9)   2,780    (640)
 Taxes and other expenses   2,033    1,533    4,940    6,179 
                     
                     
 Net income    6,026    5,969    15,393    24,076 
                     
 Attributable to non-controlling interest   115    (11)   147    123 
                     
 Net income attributable to Sapiens' shareholders   6,141    5,958    15,540    24,199 
                     
                     
 Basic earnings per share   0.12    0.12    0.32    0.49 
                     
 Diluted earnings per share   0.12    0.12    0.31    0.49 
                     
                     
Weighted average number of shares outstanding used to compute basic earnings per share (in thousands)   49,325    49,021    49,170    48,947 
                     
Weighted average number of shares outstanding used to compute diluted earnings per share (in thousands)   50,032    49,935    49,926    49,780 

 

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   Year ended 
   December 31,   December 31, 
   2017   2016   2017   2016 
GAAP revenue   71,600    57,113    269,194    216,190 
Valuation adjustment on acquired deferred revenue   848    -    2,809    - 
Non-GAAP revenue   72,448    57,113    272,003    216,190 
                     
                     
GAAP gross profit   25,824    22,465    93,516    85,788 
Revenue adjustment   848    -    2,809    - 
Amortization of capitalized software   1,270    1,092    4,824    4,929 
Amortization of other intangible assets   1,575    293    5,518    1,050 
Non-GAAP gross profit   29,517    23,850    106,667    91,767 
                     
                     
GAAP operating income (loss)   1,132    5,591    1,002    24,840 
Gross profit adjustments   3,693    1,385    13,151    5,979 
Capitalization of software development   (1,236)   (1,091)   (5,567)   (5,545)
Amortization of other intangible assets   489    300    1,725    1,207 
Stock-based compensation   655    522    2,035    1,955 
Compensation related to acquisition and acquisition-related costs   144    786    2,685    1,179 
Restructuring and cost reduction plan   4,182    -    8,082    - 
Non-GAAP operating income   9,059    7,493    23,113    29,615 
                     
                     
 GAAP net income (loss) attributable to Sapiens' shareholders   3,197    3,811    352    19,336 
 Operating income (loss) adjustments   7,927    1,902    22,111    4,775 
 Adjustment to redeemable non-controlling interest   350    302    350    443 
 Loss on sales of Marketable Securities   -    -    230    - 
 Tax and Other *   (5,333)   (57)   (7,503)   (355)
 Non-GAAP net income attributable to Sapiens' shareholders   6,141    5,958    15,540    24,199 

 

*Includes $3.8M US tax Cuts and Job Act Effect in 2017

 

8  

 

 

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

 

   Three months ended   Twelve months ended 
   December 31,   December 31, 
   2017   2016   2017   2016 
   (unaudited)   (unaudited)   (unaudited)   (unaudited) 
                                 
Revenues   72,448    100%   57,113    100%   272,003    100%   216,190    100%
Gross profit   29,517    40.7%   23,850    41.8%   106,667    39.2%   91,767    42.4%
Operating profit   9,059    12.5%   7,493    13.1%   23,113    8.5%   29,615    13.7%
Net income to shareholders   6,141    8.5%   5,958    10.4%   15,540    5.7%   24,199    11.2%
Adjusted EBITDA   10,076    13.9%   8,298    14.5%   26,935    9.9%   32,450    15.0%
                                         
Basic earnings per share   0.12         0.12         0.32         0.49      
Diluted earnings per share   0.12         0.12         0.31         0.49      

 

Non-GAAP Revenues by Geographic Breakdown
U.S. dollars in thousands

 

   Q4 2017   Q3 2017   Q2 2017   Q1 2017   Q4 2016 
                     
North America   31,580    32,780    28,544    19,465    21,107 
Europe & South Africa   37,051    35,324    36,711    32,489    28,292 
APAC   3,817    5,750    3,912    4,580    7,714 
                          
Total   72,448    73,854    69,167    56,534    57,113 

 

9  

 

 

Adjusted EBITDA Calculation
U.S. dollars in thousands

 

   Three months ended   Year ended 
   December 31,   December 31, 
   2017   2016   2017   2016 
                 
GAAP operating profit (loss)   1,132    5,591    1,002    24,840 
                     
Non-GAAP adjustments:                    
Amortization of capitalized software   1,270    1,092    4,824    4,929 
Amortization of other intangible assets   2,064    593    7,243    2,257 
Capitalization of software development   (1,236)   (1,091)   (5,567)   (5,545)
Stock-based compensation   655    522    2,035    1,955 
Compensation related to acquisition and acquisition-related costs   144    786    2,685    1,179 
Restructuring and cost reduction plan   4,182    -    8,082    - 
Valuation adjustment on acquired deferred revenue   848    -    2,809    - 
                     
Non-GAAP operating profit   9,059    7,493    23,113    29,615 
                     
Depreciation   1,017    805    3,822    2,835 
                     
Adjusted EBITDA   10,076    8,298    26,935    32,450 

 

10  

 

 

SAPIENS INTERNATIONAL CORPORATION N.V. AND ITS SUBSIDIARIES

 

CONDENSED CONSOLIDATED BALANCE SHEETS

U.S. Dollars in thousands

   December 31,   December 31, 
   2017   2016 
   (unaudited)   (unaudited) 
         
ASSETS        
         
CURRENT ASSETS          
Cash and cash equivalents   71,467    60,908 
Trade receivables, net   53,226    34,684 
Other receivables and prepaid expenses   6,280    6,389 
Marketable securities   -    18,220 
           
Total current assets   130,973    120,201 
           
LONG-TERM ASSETS          
Marketable securities   -    17,228 
Property and equipment, net   10,695    9,807 
Severance pay fund   4,547    4,041 
Goodwill and intangible assets, net   221,403    101,951 
Other long-term assets   3,675    4,623 
Total long-term assets   240,320    137,650 
           
TOTAL ASSETS   371,293    257,851 
           
LIABILITIES AND EQUITY          
           
CURRENT LIABILITIES          
Trade payables   7,044    6,562 
Accrued expenses and other liabilities   46,277    32,049 
Deferred revenue   16,513    9,137 
Total current liabilities   69,834    47,748 
           
LONG-TERM LIABILITIES          
Other long-term liabilities   15,451    9,864 
Debenture   78,281    - 
Accrued severance pay   5,500    4,940 
           
Total long-term liabilities   99,232    14,804 
           
           
REDEEMABLE NON-CONTROLLING INTEREST   1,353    908 
           
EQUITY   200,874    194,391 
           
TOTAL LIABILITIES AND EQUITY   371,293    257,851 

 

11  

 

 

SAPIENS INTERNATIONAL CORPORATION N.V. AND ITS SUBSIDIARIES

 

CONSOLIDATED STATEMENT OF CASH FLOW
U.S. dollars in thousands

  

Year ended

December 31,

 
   2017   2016 
   (unaudited)   (unaudited) 
Cash flows from operating activities:          
Net income (loss)   556    19,601 
Reconciliation of net income (loss) to net cash provided by operating activities:          
Depreciation and amortization   15,871    10,021 
Amortization of premium, accrued interest and loss on sales of marketable securities   509    (516)
Stock-based compensation related to options issued to employees   2,270    1,955 
           
Net changes in operating assets and liabilities, net of amount acquired:          
Trade receivables   (5,253)   (5,435)
Deferred tax assets   (8,840)   1,664 
Other operating assets   3,688    (3,309)
Trade payables   (1,388)   1,101 
Other operating liabilities   118    2,223 
Deferred revenues   1,249    (1,035)
Severance pay   (37)   (231)
           
Net cash provided by operating activities   8,743    26,039 
           
Cash flows from investing activities:          
Purchase of property and equipment   (2,622)   (4,664)
Purchase of marketable securities, net of interest received   -    (9,017)
Proceeds from sales of marketable securities   35,369    13,898 
Payments for business acquisition, net of cash acquired   (103,103)   (4,382)
Capitalized software development costs   (5,567)   (5,545)
Restricted cash   -    1,393 
           
Net cash used in investing activities   (75,923)   (8,317)
           
Cash flows from financing activities:          
Proceeds from employee stock options exercised   1,823    890 
Payment to shareholders in respect of acquisition   -    (1,440)
Loan received net of repayment of loan   -    (9,786)
Issuance of debenture, net   78,173    - 
Repayment of loan   -    (824)
Distribution of dividend   (9,851)   (73)
           
Net cash provided by (used in) financing activities   70,145    (11,233)
           
Effect of exchange rate changes on cash and cash equivalents   7,594    68 
           
Increase in cash and cash equivalents   10,559    6,557 
Cash and cash equivalents at the beginning of period   60,908    54,351 
           
Cash and cash equivalents at the end of period   71,467    60,908 

 

12  

 

 

Debenture Covenants

 

As of December 31, 2017, Sapiens was in compliance with all of its financial covenants under the indenture for the Series B debentures that it issued in September 2017, based on having achieved the following in its consolidated financial results:

 

Covenant 1

 

§Target shareholders' equity (excluding minority interest): above $120 million
§Actual shareholders’ equity equal to $200 million

 

Covenant 2

 

§Target ratio of net financial indebtedness to net capitalization (in each case, as defined under the indenture for the Company's Series B debentures) bellow 65%
§Actual ratio of net financial indebtedness to net capitalization equal to (3.28)%.

 

Investors and Media Contact
Yaffa Cohen-Ifrah

Chief Marketing Officer and Head of Corporate Communications

Sapiens International

U.S. Mobile: +1 201-250-9414

Mobile: +972 54-9099039

Email: yaffa.cohen-ifrah@sapiens.com

 

13