Sapiens Reports Double-Digit Revenue Growth and Improved Profitability

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

Increasing 2015 Full Year Operating Margin Guidance

Nov 04, 2015, 05:11 ET from Sapiens International Corporation

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

Third Quarter Highlights:

  • Non-GAAP revenue of $46.1 million, up 14.2% compared to $40.4 million in the third quarter of 2014. Excluding the impact of foreign currency exchange rates, revenue growth was above 20%.
  • Non-GAAP operating profit increased by 58.1% and totaled $7.0 million or 15.1% operating margin, compared to $4.4 million, or 10.9% operating margin, in the third quarter of 2014.
  • Non-GAAP net income attributable to Sapiens' shareholders totaled $5.8 million or $0.12 per diluted share increase of 42.4% compared to $4.1 million or $0.08 per diluted share in the third quarter last year.
  • Cash, cash equivalents and securities investments as of September 30, 2015 was $84.8 million, the company has no debt.
  • The Company reiterated full-year 2015 revenue guidance. Management expects revenues to be in a range of $176-$180 million.
  • The company is increasing operating margin guidance to be in a range of 14.5% - 15%.

Year-to-Date Financial Highlights:

  • Non-GAAP revenue increased by 12.9% to $130.6 million from $115.7 million in the same period of 2014.
  • Non-GAAP operating profit was $19.2 million, or 14.7% operating margin, compared to $12.1 million, or 10.4% operating margin, in the first nine months of 2014, an increase of 59.2%.
  • Non-GAAP net income attributable to Sapiens' shareholders reached $15.8 million, compared to $11.1 million in the year ago period, an increase of 42.6%.

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

Quarterly Results Conference Call

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

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

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

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

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

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

Non-GAAP Financial Measures

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

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

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

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

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

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

About Sapiens

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

Forward Looking Statement

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

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

Summary of Non-GAAP financial Information

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



Three months ended


Nine months ended


September 30,


September 30,


2015


2014


2015


2014


(unaudited)


(unaudited)


(unaudited)


(unaudited)













Revenues

46,139

100%


40,398

100%


130,589

100%


115,677

100%

Gross Profit

20,711

44.9%


16,392

40.6%


56,957

43.6%


46,715

40.4%

Operating profit

6,962

15.1%


4,403

10.9%


19,191

14.7%


12,056

10.4%

Net income to shareholders

5,816

12.6%


4,084

10.1%


15,773

12.1%


11,060

9.6%

Adjusted EBITDA

7,493

16.2%


4,796

11.9%


20,571

15.8%


13,233

11.4%













Basic earnings per share

0.12



0.09



0.33



0.24


Diluted earnings per share

0.12



0.08



0.32



0.23



Adjusted EBITDA Calculation

U.S. dollars in thousands



Three months ended


Nine months ended



 September 30,


 September 30 ,



2015


2014


2015


2014










GAAP operating profit


5,726


3,799


17,554


10,356










Non GAAP adjustments:









Amortization of capitalized software


1,202


1,226


3,552


3,732

Amortization of other intangible assets


585


547


1,714


1,665

Capitalization of software development


(1,526)


(1,451)


(4,391)


(4,538)

Compensation related to acquisition


148


-


219


-

Stock-based compensation


346


282


914


841

Adjustments of pre-acquisition revenue and expenses accounted under pooling of interest method


481


-


(371)


-










Non GAAP operating profit


6,962


4,403


19,191


12,056










Depreciation


531


393


1,380


1,177










Adjusted EBITDA


7,493


4,796


20,571


13,233


Non-GAAP revenues by category

U.S. dollars in thousands






Three months ended
September 30, 2015


Nine months ended
 September 30, 2015


Revenues

Percentage


Revenues

Percentage



License

3,608

7.8%


9,480

7.3%

Services and Maintenance

42,531

92.2%


121,109

92.7%

Total

46,139

100.0%


130,589

100.0%

 

 


Non-GAAP revenues by geographic breakdown

U.S. dollars in thousands



Three months ended

September 30, 2015


Nine months ended

 September 30, 2015


Revenues

Percentage


Revenues

Percentage



North America

16,571

35.9%


44,565

34.1%

Europe

24,084

52.2%


70,980

54.4%

APAC

5,484

11.9%


15,044

11.5%

Total

46,139

100%


130,589

100%

 

 

SAPIENS INTERNATIONAL CORPORATION N.V. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

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




  Three months ended


  Nine months ended




 September 30,


 September 30,




2015*


2014


2015*


2014




 (unaudited)


 (unaudited)


 (unaudited)


 (unaudited)











 Revenue


47,035


40,398


136,962


115,677

 Cost of revenue


27,944


25,460


82,559


73,364











 Gross profit


19,091


14,938


54,403


42,313











 Operating Expenses:










 Research and development, net


2,482


2,856


7,488


8,600


 Selling, marketing, general and administrative


10,883


8,283


29,361


23,357

 Total operating expenses


13,365


11,139


36,849


31,957











 Operating income


5,726


3,799


17,554


10,356











 Financial income, net


(105)


(93)


239


(150)

 Taxes on income 


1,127


80


3,021


542





















 Net income


4,704


3,812


14,294


9,964











 Attributable to non-controlling interest


15


100


150


125











 Net income attributable to Sapiens' shareholders


4,689


3,712


14,144


9,839





















 Basic earnings per share


0.10


0.08


0.30


0.21











 Diluted earnings per share


0.09


0.08


0.29


0.20










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


48,128


47,607


47,869


46,841










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


49,484


49,006


49,254


48,235

* Including consolidation of Insseco commencing December 31, 2014.




 

 

SAPIENS INTERNATIONAL CORPORATION N.V. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP RESULTS

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



  Three months ended


  Nine months ended



 September 30,


September 30,



2015*


2014


2015*


2014

GAAP revenue


47,035


40,398


136,962


115,677

Adjustments of pre-acquisition revenue accounted under pooling of interest method


(896)


-


(6,373)


-

 Non-GAAP revenue


46,139


40,398


130,589


115,677










 GAAP gross profit


19,091


14,938


54,403


42,313

Revenue adjustment


(896)


-


(6,373)


-

 Amortization of capitalized software


1,202


1,226


3,552


3,732

 Amortization of other intangible assets


234


228


643


670

Adjustments of pre-acquisition cost of revenue accounted under pooling of interest method


1,080


-


4,732


-

 Non-GAAP gross profit


20,711


16,392


56,957


46,715










 GAAP operating income


5,726


3,799


17,554


10,356

 Gross profit adjustments


1,620


1,454


2,554


4,402

 Capitalization of software development


(1,526)


(1,451)


(4,391)


(4,538)

 Amortization of other intangible assets


351


319


1,071


995

Compensation related to acquisition


148


-


219


-

 Stock-based compensation


346


282


914


841

Adjustments of pre-acquisition operating expenses accounted under pooling of interest method


297


-


1,270


-

 Non-GAAP operating income


6,962


4,403


19,191


12,056










 GAAP net income attributable to Sapiens' shareholders


4,689


3,712


14,144


9,839

 Operating income adjustments


1,236


604


1,637


1,700

Adjustment to redeemable non-controlling interest


(23)


-


73


-

Adjustments of pre-acquisition financial and tax expenses accounted under pooling of interest method


(116)


-


50


-

 Other


30


(232)


(131)


(479)

 Non-GAAP net income attributable to Sapiens' shareholders


5,816


4,084


15,773


11,060










 Non-GAAP basic earnings per share 


0.12


0.09


0.33


0.24










 Non-GAAP diluted earnings per share


0.12


0.08


0.32


0.23










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

48,128


47,607


47,869


46,841

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

49,484


49,006


49,254


48,235

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








 

SAPIENS INTERNATIONAL CORPORATION N.V. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

U.S. Dollars in thousands




September 30,


December 31,




2015


2014*




(unaudited)


 (unaudited)







 ASSETS












 CURRENT ASSETS:






Cash and cash equivalents


45,164


47,400


Trade receivables, net


32,645


31,832


 Other receivables and prepaid expenses


5,375


3,964


Deferred Taxes


2,132


2,319


 Marketable Securities


3,806


-








 Total current assets


89,122


85,515







 LONG-TERM ASSETS:






Marketable Securities


35,821


33,098


Property and equipment, net


5,749


5,011


Severance pay fund


6,475


10,735


Other intangible assets, net


27,475


27,905


Other long-term assets


3,771


3,248


Goodwill


69,810


67,698








 Total long-term assets


149,101


147,695







 TOTAL ASSETS


238,223


233,210







 

 LIABILITIES AND EQUITY











 CURRENT LIABILITIES:






 Trade payables


4,780


3,310


 Accrued expenses and other liabilities


34,232


26,951


Deferred revenue


9,841


9,272








 Total current liabilities


48,853


39,533







 LONG-TERM LIABILITIES:






 Other long-term liabilities


6,093


3,217


 Accrued severance pay


7,449


12,008








 Total long-term liabilities


13,542


15,225







REDEEMABLE NON-CONTROLLING INTEREST


242


159







 EQUITY



175,586


178,293







 TOTAL LIABILITIES AND EQUITY


238,223


233,210

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

 

 

Sapiens International Corporation N.V. AND ITS SUBSIDIARIES

Consolidated Statement of Cash Flow

U.S. dollars in thousands


For the nine months ended

September 30


2015

2014


(unaudited)

(unaudited)

Cash flows from operating activities:



Net income

14,294

9,964

Reconciliation of net income to net cash provided by operating activities:



Depreciation  and amortization

7,302

6,574

Amortization of premium and accrued interest on marketable securities

(313)

(126)

Stock-based compensation related to options issued to employees

913

841

Increase in trade receivables

(625)

(3,503)

Deferred tax assets

541

54

Decrease (increase) in other operating assets

449

(492)

Increase (decrease)  in trade payables

1,618

(1,470)

Increase in other operating liabilities

3,974

3,799

Increase  in deferred revenues

767

435

Severance pay

(288)

110




Net cash provided by operating activities

28,632

16,186




Cash flows from investing activities:



Purchase of property and equipment

(2,229)

(1,377)

Purchase of marketable securities

(7,220)

(34,623)

Proceeds from sales of marketable securities

1,015

1,014

Payments for business acquisition, net of cash acquired

(2,934)

(2,064)

Increase in capitalized software development costs

(4,391)

(4,538)

Decrease (increase) in Restricted Cash

(1,395)

538




Net cash used in investing activities

(17,154)

(41,050)




Cash flows from financing activities:



Distribution of dividend

(7,186)

-

Proceeds from employee stock options exercised

1,557

1,508

  Payment to shareholders in respect of acquisition

(6,349)

-




Net cash provided by (used in) financing activities

(11,978)

1,508




Effect of exchange rate changes on cash and cash equivalents

(1,736)

(1,832)




Decrease in cash and cash equivalents

(2,236)

(25,188)

Cash and cash equivalents at the beginning of period

47,400

70,313




Cash and cash equivalents at the end of period

45,164

45,125

 

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

Logo - http://photos.prnewswire.com/prnh/20120508/531104  

 

SOURCE Sapiens International Corporation



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