Le Lézard
Classified in: Science and technology, Business
Subjects: ERN, CCA

Sapiens Reports Fourth Quarter and Full Year 2019 Financial Results


HOLON, Israel, Feb. 24, 2020 /PRNewswire/ -- Sapiens International Corporation, (NASDAQ: SPNS) (TASE: SPNS), a leading global provider of software solutions for the insurance industry, 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, 2019.

Sapiens logo

Summary Results for Fourth Quarter 2019 (USD in millions, except per share data)


GAAP

% Change

Non-GAAP

% Change


Q4-2019

Q4-2018


Q4-2019

Q4-2018


Revenue

$86.7

$73.3

18.3%

$86.7

$73.4

18.1%

Gross Profit

$34.9

$27.9

25.3%

$38.4

$31.3

22.6%

Gross Margin

40.3%

38.0%

230 bps

44.3%

42.7%

160 bps

Operating Income

$10.2

$6.6

55.3%

$14.3

$10.8

32.2%

Operating Margin

11.8%

9.0%

280 bps

16.5%

14.8%

170 bps

Net income (*)

$6.8

$3.8

82.1%

$10.6

$7.8

34.8%

Diluted EPS

$0.13

$0.07

85.7%

$0.21

$0.16

31.3%

 

Summary Results for Full Year 2019 (USD in millions, except per share data)


GAAP

% Change

Non-GAAP

% Change


2019

2018


2019

2018


Revenue

$325.7

$289.7

12.4%

$325.7

$290.3

12.2%

Gross Profit

$129.5

$109.6

18.2%

$143.0

$122.9

16.3%

Gross Margin

39.8%

37.8%

200 bps

43.9%

42.4%

150 bps

Operating Income

$37.9

$23.0

64.5%

$52.2

$39.6

32.0%

Operating Margin

11.6%

7.9%

370 bps

16.0%

13.6%

240 bps

Net income (*)

$26.2

$13.8

90.4%

$38.9

$28.1

38.6%

Diluted EPS

$0.52

$0.28

85.7%

$0.77

$0.56

37.5%


     (*) Attributable to Sapiens' shareholders

 

"Sapiens finished 2019 on a very strong note with fourth quarter non-GAAP revenue reaching a record high of $86.7 million and non-GAAP operating margin improving by 170 basis points to 16.5%. For the full year, we advanced our business globally, growing revenue by 12.2% to $325.7 million, the high end of the annual guidance range, fueled by prior acquisitions that delivered increased market penetration with new products, particularly on the digital front. We grew our core business in both P&C, with double digit growth, and saw expansion in our L&A business towards the end of the year. Increased revenue, combined with significant operating leverage from our offshore operations, improved Sapiens 2019 non-GAAP operating margins by 240 basis points to 16.0%. This was a strong year of execution on many fronts, and I want to congratulate the Sapiens global team for their outstanding work in 2019," stated Roni Al-Dor. president and CEO, Sapiens.

"The Sapiens global team delivered one of our most successful years to date with 34 new logos for 2019." continued Mr. Al-Dor. Mr. Al-Dor concluded: "We are building a unified global platform of innovative digital insurance solutions and advancing our competitive position as a one-stop-shop for insurance software with enhanced products and services. The pipeline for 2020 is very robust and we see further opportunities to increase operating efficiencies and improve margins. We are introducing 2020 guidance for revenue in a range of $377 million to $383 million, and operating margin in a range of 16.0% to 16.5%."

Quarterly Results Conference Call

Management will host a conference call and webcast today, February 24, 2020 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- 9180609; UK: 0-800-917-5108

The live webcast of the call can be viewed on Sapiens' website at: https://www.sapiens.com/investor-relations/ir-events-presentations/

If you are unable to join live, a replay of the call will be accessible until March 4, 2020, as follows:

North America: 1-888-295-2634; International: +972-3-925-5901

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, Adjusted EBITDA and Adjusted Free Cash-Flow.

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 capitalized software development and other intangible assets, capitalization of software development, stock-based compensation,  restructuring and cost reduction costs, tax adjustments related to non-GAAP adjustments, and acquisition-related costs, which pertain to charges on behalf of M&A agreements related to future performance targets and retention criteria as determined upon acquisition date of the respective acquired company, as well as third-party services, such as, tax, accounting and legal rendered until the acquisition date.

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.

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 and 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, and reconciles Non-GAAP Operating Income to Adjusted EBITDA, adjusted for amortization and capitalization of capitalized software and amortization other intangible assets, stock-based compensation and acquisition-related costs, and valuation adjustment on acquired deferred revenues. The Company uses Adjusted EBITDA, 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.

The Company uses Adjusted Free Cash-Flow as a measurement of its operating performance, and reconciles cash-flow from operating activities to Adjusted Free Cash-Flow while reducing the amounts for capitalization of software development costs and capital expenditures, and adds back payments related to investment in new campus in India, cash payments made for former acquisitions in respect of  future performance targets and retention criteria as determined upon acquisition date of the respective acquired company, and were included in the cash-flow from operating activities. We believe that Adjusted Free Cash-Flow is useful in evaluating our business, because Adjusted Free Cash-Flow reflects the cash surplus available to fund the expansion of our business.

About Sapiens 

Sapiens International Corporation empowers insurers to succeed in an evolving industry. The company offers digital software platforms, solutions and services for the property and casualty, life, pension and annuity, reinsurance, financial and compliance, workers' compensation and financial markets. With more than 35 years of experience delivering to over 450 organizations globally, Sapiens has a proven ability to satisfy customers' core, data and digital requirements. 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, 2018, 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
U.S. Mobile: +1 201-250-9414
Mobile: +972 54-9099039
Email: [email protected]

 

 


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,




2019


2018


2019


2018




 (unaudited)


 (unaudited)


 (unaudited)


 (unaudited)











 Revenue


86,715


73,311


325,674


289,707

 Cost of revenue


51,782


45,428


196,153


180,138











 Gross profit


34,933


27,883


129,521


109,569











 Operating expenses:










 Research and development, net


10,233


8,284


37,378


34,414


 Selling, marketing, general and administrative


14,477


13,016


54,274


52,133

 Total operating expenses


24,710


21,300


91,652


86,547











 Operating income


10,223


6,583


37,869


23,022











 Financial and other expenses, net


1,019


829


2,768


3,957

 Taxes on income 


2,260


1,922


8,610


5,065





















 Net income


6,944


3,832


26,491


14,000











 Attributable to non-controlling interest


110


80


244


215











 Net income attributable to Sapiens' shareholders


6,834


3,752


26,247


13,785





















 Basic earnings per share


0.14


0.08


0.53


0.28











 Diluted earnings per share


0.13


0.07


0.52


0.28




















Weighted average number of shares outstanding used to
compute basic earnings per share (in thousands)


50,109


49,920


50,031


49,827










Weighted average number of shares outstanding used to
compute diluted earnings per share (in thousands)


51,009


50,210


50,653


50,106










 

 


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,




2019


2018


2019


2018




 (unaudited)


 (unaudited)


 (unaudited)


 (unaudited)











 Revenue


86,715


73,433


325,674


290,297

 Cost of revenue


48,313


42,113


182,662


167,353











 Gross profit


38,402


31,320


143,012


122,944











 Operating expenses:










 Research and development, net


11,395


9,666


43,043


39,574


 Selling, marketing, general and administrative


12,662


10,805


47,763


43,810

 Total operating expenses


24,057


20,471


90,806


83,384











 Operating income


14,345


10,849


52,206


39,560











 Financial and other expenses, net


1,019


829


2,768


3,957

 Taxes on income


2,663


2,114


10,298


7,325





















 Net income


10,663


7,906


39,140


28,278











 Attributable to non-controlling interest


110


80


244


215











 Net income attributable to Sapiens' shareholders


10,553


7,826


38,896


28,063





















 Basic earnings per share


0.21


0.16


0.78


0.56











 Diluted earnings per share


0.21


0.16


0.77


0.56




















Weighted average number of shares outstanding used to
compute basic earnings per share (in thousands)


50,109


49,920


50,031


49,827










Weighted average number of shares outstanding used to
compute diluted earnings per share (in thousands)


51,009


50,210


50,653


50,106

 

 

     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,



2019


2018


2019


2018



(unaudited)


(unaudited)


(unaudited)


(unaudited)










GAAP revenue


86,715


73,311


325,674


289,707

Valuation adjustment on acquired deferred revenue


-


122


-


590

Non-GAAP revenue


86,715


73,433


325,674


290,297



















GAAP gross profit


34,933


27,883


129,521


109,569

Valuation adjustment on acquired deferred revenue


-


122


-


590

Amortization of capitalized software


1,499


1,247


5,668


4,859

Amortization of other intangible assets


1,970


2,068


7,823


7,926

Non-GAAP gross profit


38,402


31,320


143,012


122,944










GAAP operating income


10,223


6,583


37,869


23,022

Gross profit adjustments


3,469


3,437


13,491


13,375

Capitalization of software development


(1,162)


(1,382)


(5,665)


(5,160)

Amortization of other intangible assets


563


926


2,177


3,293

Stock-based compensation


282


472


1,405


1,942

Acquisition-related costs *)


970


813


2,929


3,088

Non-GAAP operating income


14,345


10,849


52,206


39,560










  GAAP net income attributable to Sapiens'
shareholders


6,834


3,752


26,247


13,785

  Operating income adjustments


4,122


4,266


14,337


16,538

  Tax and other


(403)


(192)


(1,688)


(2,260)

  Non-GAAP net income attributable to Sapiens'
shareholders


10,553


7,826


38,896


28,063











          (*) Acquisition-related costs pertain to charges on behalf of M&A agreements related to future performance targets and 
          retention criteria, as well as third-party services, such as, tax, accounting and legal rendered until the acquisition date.

 

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


Q4 2019


Q3 2019


Q2 2019


Q1 2019


Q4 2018











Revenues

86,715


82,643


79,529


76,787


73,433

Gross profit

38,402


36,712


34,794


33,104


31,320

Operating income

14,345


13,530


12,581


11,750


10,849

Net income to Sapiens' shareholders

10,553


10,412


9,541


8,390


7,826

Adjusted EBITDA

15,271


14,523


13,358


12,524


11,797











Basic earnings per share

0.21


0.21


0.19


0.17


0.16

Diluted earnings per share

0.21


0.21


0.19


0.17


0.16

 

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


Q4 2019


Q3 2019


Q2 2019


Q1 2019


Q4 2018











North America                          

41,787


44,413


39,216


38,149


34,974

Europe

37,504


30,273


33,881


32,193


30,850

Asia Pacific

3,781


4,087


3,515


3,670


3,140

South Africa

3,643


3,870


2,917


2,775


4,469











Total

86,715


82,643


79,529


76,787


73,433

Adjusted Free Cash-Flow
U.S. dollars in thousands


Q4 2019


Q3 2019


Q2 2019


Q1 2019


Q4 2018











Cash-flow from operating activities

21,429


18,671


15,507


10,550


11,509

Increase in capitalized software development costs

(1,162)


(1,541)


(1,570)


(1,392)


(1,382)

Capital expenditures

(2,456)


(973)


(1,079)


(641)


(204)

Capital expenditures related to new campus in India

-


(6,325)


-


-


-

Free cash-flow

17,811


9,832


12,858


8,517


9,923











Capital expenditures related to new campus in India

-


6,325


-


-


-

Cash payments attributed to acquisition-related costs(*)
(**)

200


100


1,692


1,608


790











Adjusted free cash-flow

18,011


16,257


14,550


10,125


10,713


     (*) Included in cash-flow from operating activities


     (**) Acquisition-related payments pertain to payments on behalf of M&A agreements related to future performance targets 
     and retention criteria, as well as third-party services, such as, tax, accounting and legal rendered until the acquisition date.


 

Adjusted EBITDA Calculation 
U.S. dollars in thousands



  Three months ended


  Year ended



December 31,


December 31,



2019


2018


2019


2018










GAAP operating profit


10,223


6,583


37,869


23,022










Non-GAAP adjustments:









Amortization of capitalized software


1,499


1,247


5,668


4,859

Amortization of other intangible assets


2,533


2,994


10,000


11,219

Capitalization of software development


(1,162)


(1,382)


(5,665)


(5,160)

Stock-based compensation


282


472


1,405


1,942

Acquisition-related costs


970


813


2,929


3,088

Valuation adjustment on acquired deferred revenue


-


122


-


590










Non-GAAP operating profit


14,345


10,849


52,206


39,560










Depreciation


926


948


3,470


3,784










Adjusted EBITDA


15,271


11,797


55,676


43,344

 

 

SAPIENS INTERNATIONAL CORPORATION N.V. AND ITS SUBSIDIARIES


CONDENSED CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands





December 31,


December 31,




2019


2018




 (unaudited)


 (unaudited)







 ASSETS












 CURRENT ASSETS






Cash and cash equivalents


66,295


64,628


Trade receivables, net and unbilled receivables


50,221


59,159


Investment in deposit


22,890


-


Other receivables and prepaid expenses


7,817


6,224








Total current assets


147,223


130,011







 LONG-TERM ASSETS






Property and equipment, net


16,601


8,515


Severance pay fund


5,106


4,699


Goodwill and intangible assets, net


228,691


231,348


Operating lease right-of-use assets


49,539


-


Other long-term assets


5,261


4,292








Total long-term assets


305,198


248,854







 TOTAL ASSETS


452,421


378,865







LIABILITIES AND EQUITY











 CURRENT LIABILITIES






Trade payables


5,107


6,149


Current maturities of Series B Debentures


9,898


9,898


Accrued expenses and other liabilities


60,574


46,999


Current maturities of operating lease liabilities


8,312


-


Deferred revenue


21,021


18,057








Total current liabilities


104,912


81,103







 LONG-TERM LIABILITIES






Series B Debentures, net of current maturities


58,850


68,577


Deferred tax liabilities


5,082


11,681


Other long-term liabilities


8,321


9,398


Long-term operating lease liabilities


43,394


-


Accrued severance pay


6,364


5,622








Total long-term liabilities


122,011


95,278













EQUITY



225,498


202,484







TOTAL LIABILITIES AND EQUITY


452,421


378,865

 

 

          SAPIENS INTERNATIONAL CORPORATION N.V. AND ITS SUBSIDIARIES


          CONSOLIDATED STATEMENT OF CASH FLOW

          U.S. dollars in thousands



For the twelve months ended
December 31,


2019

2018


(unaudited)

(unaudited)

Cash flows from operating activities:



Net income

26,491

14,000

Reconciliation of net income (loss) to net cash provided by operating activities:



Depreciation and amortization

19,138

19,862

Accretion of discount on Series B Debentures

171

194

Capital gain from sale of property and equipment

(40)

-

Stock-based compensation related to options issued to employees

1,405

1,942




Net changes in operating assets and liabilities, net of amount acquired:



Trade receivables, net and unbilled receivables

10,514

(7,588)

Deferred tax assets

(6,441)

(1,567)

Other operating assets

6,726

509

Trade payables

(1,476)

(1,870)

Other operating liabilities

6,667

(174)

Deferred revenues

2,747

2,349

Severance pay

255

43




Net cash provided by operating activities

66,157

27,700




Cash flows from investing activities:



Purchase of property and equipment

(11,474)

(1,914)

Investment in deposit

(24,009)

-

Payments for business acquisition, net of cash acquired

(1,554)

(18,507)

Proceeds from sale of property and equipment

834

-

Capitalized software development costs

(5,665)

(5,160)




Net cash used in investing activities

(41,868)

(25,581)




Cash flows from financing activities:



Proceeds from employee stock options exercised

780

895

Distribution of dividend

(11,009)

(9,978)

Repayment of Series B Debentures

(9,898)

-

Repayment of loan

(4)

(237)

Payment of contingent considerations

(374)

(61)

Dividend to non-controlling interest

(149)

(47)




Net cash provided by financing activities

(20,654)

(9,428)




Effect of exchange rate changes on cash and cash equivalents

(1,968)

470




Increase (decrease) in cash and cash equivalents

1,667

(6,839)

Cash and cash equivalents at the beginning of period

64,628

71,467




Cash and cash equivalents at the end of period

66,295

64,628

 

Debentures Covenants

As of December 31, 2019, 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

Covenant 2

Covenant 3

 

 

 

SOURCE Sapiens International Corporation


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