Sapiens Reports Third Quarter 2019 Financial Results

Loading...
Loading...

HOLON, Israel, Nov. 4, 2019 /PRNewswire/ -- Sapiens International Corporation, SPNS SPNS, a leading global provider of software solutions for the insurance industry, and a member of the Formula Group FORTY FORT, today announced its financial results for the third quarter ended September 30, 2019.

 

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



GAAP

% Change

Non-GAAP

% Change


Q3-2019

Q3-2018


Q3-2019

Q3-2018


Revenue

$82.6

$73.2

12.8%

$82.6

$73.2

12.8%

Gross Profit

$33.3

$27.8

19.9%

$36.7

$30.9

18.8%

Gross Margin

40.3%

38.0%

230 bps

44.4%

42.2%

220 bps

Operating Income

$10.1

$6.8

48.4%

$13.5

$10.3

31.7%

Operating Margin

12.2%

9.3%

290 bps

16.4%

14.0%

240 bps

Net income (*)

$7.4

$5.2

43.1%

$10.4

$7.5

37.9%

Diluted EPS

$0.15

$0.10

50%

$0.21

$0.15

40%


(*) Attributable to Sapiens' shareholders

 

 

"The third quarter demonstrated continued execution of Sapiens' 2019 priorities: top-line growth and margin expansion. Non-GAAP revenue increased 12.8%, primarily due to continued expansion in our property & casualty (P&C) divisions, and initial growth in our life & annuity (L&A) division," said Roni Al-Dor, president and CEO, Sapiens.

"A global focus on Sapiens' key objectives to leverage our offshore capabilities, along with improved economies of scale, drove a non-GAAP operating margin improvement of 240 basis points. The increase in operating income has fueled continued expansion of Sapiens' product, sales and delivery teams, all of which are key to building next year's pipeline and supporting our capacity to deliver current projects. Sapiens is confident we have built a platform that can support long term top-line growth, with the infrastructure to cost-effectively support our long-term profitability." 

Continued Al-Dor: "I'm encouraged by our pipeline of business and anticipated growth for the remainder of 2019. Following the acquisition of Calculo, we are increasing our full-year, non-GAAP revenue to a range of $323 - $325 million, from a previous guidance of revenues on the higher end of $318-$323 million. The increase in revenue and the leverage from improved economies of scale allow Sapiens to increase the guidance for full-year, non-GAAP operating margin in the range of 15.8%-16.0%, compared to our previous guidance of 15.6%-15.8%." 

Quarterly Results Conference Call

Management will host a conference call and webcast on November 4, 2019 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): + 1-888-407-2553; International: +972-3- 9180644; UK: 0-800-917-9141

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 November 14, 2019, 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

Loading...
Loading...

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.

 

 

 

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




2019


2018


2019


2018




 (unaudited)


 (unaudited)


 (unaudited)


 (unaudited)











 Revenue


82,643


73,237


238,959


216,396

 Cost of revenue


49,316


45,438


144,371


134,710











 Gross profit


33,327


27,799


94,588


81,686











 Operating expenses:










 Research and development, net


9,445


8,350


27,145


26,130


 Selling, marketing, general and administrative


13,767


12,635


39,797


39,117

 Total operating expenses


23,212


20,985


66,942


65,247











 Operating income


10,115


6,814


27,646


16,439











 Financial expense, net


261


974


1,749


3,128

 Taxes and other expenses, net


2,349


629


6,350


3,143





















 Net income


7,505


5,211


19,547


10,168











 Attributable to non-controlling interest


87


28


134


135











 Net income attributable to Sapiens' shareholders


7,418


5,183


19,413


10,033





















 Basic earnings per share


0.15


0.10


0.39


0.20











 Diluted earnings per share


0.15


0.10


0.38


0.20




















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


50,027


49,826


50,005


49,795










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


50,742


50,143


50,534


50,070

 

 

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


  Nine months ended




September 30


 September 30




2019


2018


2019


2018




 (unaudited)


 (unaudited)


 (unaudited)


 (unaudited)











 Revenue


82,643


73,237


238,959


216,864

 Cost of revenue


45,931


42,334


134,349


125,240











 Gross profit


36,712


30,903


104,610


91,624











 Operating expenses:










 Research and development, net


10,986


9,658


31,648


29,908


 Selling, marketing, general and administrative


12,196


10,972


35,101


33,005

 Total operating expenses


23,182


20,630


66,749


62,913











 Operating income


13,530


10,273


37,861


28,711











 Financial expense, net


261


974


1,749


3,128

 Taxes and other expenses


2,770


1,723


7,635


5,211





















 Net income


10,499


7,576


28,477


20,372











 Attributable to non-controlling interest


87


28


134


135











 Net income attributable to Sapiens' shareholders


10,412


7,548


28,343


20,237





















 Basic earnings per share


0.21


0.15


0.57


0.41











 Diluted earnings per share


0.21


0.15


0.56


0.40




















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


50,027


49,826


50,005


49,795










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


50,742


50,143


50,534


50,070


 

 

 

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



2019


2018


2019


2018



(unaudited)


(unaudited)


(unaudited)


(unaudited)










GAAP revenue


82,643


73,237


238,959


216,396

Valuation adjustment on acquired deferred revenue


-


-


-


468

Non-GAAP revenue


82,643


73,237


238,959


216,864



















GAAP gross profit


33,327


27,799


94,588


81,686

Valuation adjustment on acquired deferred revenue


-


-


-


468

Amortization of capitalized software


1,438


1,205


4,169


3,612

Amortization of other intangible assets


1,947


1,899


5,853


5,858

Non-GAAP gross profit


36,712


30,903


104,610


91,624










GAAP operating income


10,115


6,814


27,646


16,439

Gross profit adjustments


3,385


3,104


10,022


9,938

Capitalization of software development


(1,541)


(1,308)


(4,503)


(3,778)

Amortization of other intangible assets


539


739


1,614


2,367

Stock-based compensation


382


384


1,123


1,470

Acquisition-related costs *)


650


540


1,959


2,275

Non-GAAP operating income


13,530


10,273


37,861


28,711










  GAAP net income attributable to Sapiens' shareholders


7,418


5,183


19,413


10,033

  Operating income adjustments


3,415


3,459


10,215


12,272

  Tax and other


(421)


(1,094)


(1,285)


(2,068)

  Non-GAAP net income attributable to Sapiens' shareholders


10,412


7,548


28,343


20,237


(*) 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)



Q3 2019


Q2 2019


Q1 2019


Q4 2018


Q3 2018











Revenues

82,643


79,529


76,787


73,433


73,237

Gross profit

36,712


34,794


33,104


31,320


30,903

Operating income

13,530


12,581


11,750


10,849


10,273

Net income to Sapiens' shareholders

10,412


9,541


8,390


7,826


7,548

Adjusted EBITDA

14,523


13,358


12,524


11,797


11,236











Basic earnings per share

0.21


0.19


0.17


0.16


0.15

Diluted earnings per share

0.21


0.19


0.17


0.16


0.15

 

 

 

Non-GAAP Revenues by Geographic Breakdown

U.S. dollars in thousands



Q3 2019


Q2 2019


Q1 2019


Q4 2018


Q3 2018











North America

44,413


39,216


38,149


34,974


36,734

Europe

30,273


33,881


32,193


30,850


30,611

Asia Pacific

4,087


3,515


3,670


3,140


3,480

South Africa

3,870


2,917


2,775


4,469


2,412











Total

82,643


79,529


76,787


73,433


73,237

 

 

 

Adjusted Free Cash-Flow

U.S. dollars in thousands



Q3 2019


Q2 2019


Q1 2019


Q4 2018


Q3 2018











Cash-flow from operating activities

18,671


15,507


10,550


11,509


6,370

Increase in capitalized software development costs

(1,541)


(1,570)


(1,392)


(1,382)


(1,308)

Capital expenditures

(973)


(1,079)


(641)


(204)


(831)

Capital expenditures related to new campus in India

(6,325)


-


-


-


-

Free cash-flow

9,832


12,858


8,517


9,923


4,231











Capital expenditures related to new campus in India

6,325


-


-


-


-

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

100


1,692


1,608


790


-











Adjusted free cash-flow

16,257


14,550


10,125


10,713


4,231


(*) 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


  Nine months ended



September 30


 September 30



2019


2018


2019


2018










GAAP operating profit


10,115


6,814


27,646


16,439










Non-GAAP adjustments:









Amortization of capitalized software


1,438


1,205


4,169


3,612

Amortization of other intangible assets


2,486


2,638


7,467


8,225

Capitalization of software development


(1,541)


(1,308)


(4,503)


(3,778)

Stock-based compensation


382


384


1,123


1,470

Acquisition-related costs


650


540


1,959


2,275

Valuation adjustment on acquired deferred revenue


-


-


-


468










Non-GAAP operating profit


13,530


10,273


37,861


28,711










Depreciation


993


963


2,544


2,855










Adjusted EBITDA


14,523


11,236


40,405


31,566


 

 

 

SAPIENS INTERNATIONAL CORPORATION N.V. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands





September 30,


December 31,




2019


2018




 (unaudited)


 (unaudited)







 ASSETS












 CURRENT ASSETS






Cash and cash equivalents


73,138


64,628


Trade receivables, net and unbilled receivables


57,237


59,159


Other receivables and prepaid expenses


7,567


6,224








Total current assets


137,942


130,011







 LONG-TERM ASSETS






Property and equipment, net


15,446


8,515


Severance pay fund


5,052


4,699


Goodwill and intangible assets, net


230,935


231,348


Operating lease right-of-use assets


52,747


-


Other long-term assets


5,445


4,292








Total long-term assets


309,625


248,854







 TOTAL ASSETS


447,567


378,865







LIABILITIES AND EQUITY











 CURRENT LIABILITIES






Trade payables


5,506


6,149


Current maturities of Series B Debentures


9,898


9,898


Accrued expenses and other liabilities


54,848


46,999


Current maturities of operating lease liabilities


8,155


-


Deferred revenue


22,691


18,057








Total current liabilities


101,098


81,103







 LONG-TERM LIABILITIES






Series B Debentures, net of current maturities


58,803


68,577


Deferred tax liabilities


9,040


11,681


Other long-term liabilities


8,228


9,398


Long-term operating lease liabilities


47,663


-


Accrued severance pay


6,082


5,622








Total long-term liabilities


129,816


95,278













EQUITY



216,653


202,484







TOTAL LIABILITIES AND EQUITY


447,567


378,865

 

 

 

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,


2019

2018


(unaudited)

(unaudited)

 

Cash flows from operating activities:



Net income

19,547

10,168

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



Depreciation and amortization

14,180

14,694

Accretion of discount on Series B Debentures

124

140

Capital gain from sale of property and equipment

(129)

-

Stock-based compensation related to options issued to employees

1,123

1,462




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



Trade receivables, net and unbilled receivables

3,642

(10,654)

Deferred tax assets

(2,664)

(2,448)

Other operating assets

1,425

(1,233)

Trade payables

(1,534)

1,657

Other operating liabilities

4,562

416

Deferred revenues

4,419

1,937

Severance pay

33

52




Net cash provided by operating activities

44,728

16,191




Cash flows from investing activities:



Purchase of property and equipment

(9,018)

(1,710)

Investment in deposit

(1,119)

-

Payments for business acquisition, net of cash acquired

(1,572)

(18,203)

Proceeds from sale of property and equipment

821

-

Capitalized software development costs

(4,503)

(3,778)




Net cash used in investing activities

(15,391)

(23,691)




Cash flows from financing activities:



Proceeds from employee stock options exercised

435

532

Distribution of dividend

(10,362)

-

Repayment of Series B Debentures

(9,898)

-

Repayment of loan

(4)

(41)

Payment of contingent considerations

(120)

(61)

Dividend to non-controlling interest

(66)

(47)




Net cash provided by financing activities

(20,015)

383




Effect of exchange rate changes on cash and cash equivalents

(812)

(271)




Increase (decrease) in cash and cash equivalents

8,510

(7,388)

Cash and cash equivalents at the beginning of period

64,628

71,467




Cash and cash equivalents at the end of period

73,138

64,079

 

 

 

Debentures Covenants

As of September 30, 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

  • Target shareholders' equity (excluding minority interest): above $120 million.
  • Actual shareholders' equity equal to $215 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 -1.81%.

Covenant 3

  • Target ratio of net financial indebtedness to EBITDA (accumulated calculation for the four last quarters) is below 5.5.
  • Actual ratio of net financial indebtedness to EBITDA (accumulated calculation for the four last quarters) is equal to -0.07.

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

 

SOURCE Sapiens International Corporation

Loading...
Loading...
Date
ticker
name
Actual EPS
EPS Surprise
Actual Rev
Rev Surprise
Posted In: EarningsSmall CapPress ReleasesBanking/Financial Services
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!

Loading...