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Sapiens Reports Q2 2017 Financial Results
[August 07, 2017]

Sapiens Reports Q2 2017 Financial Results


HOLON, Israel, Aug. 7, 2017 /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 second quarter ended June 30, 2017.

Sapiens International Corporation Logo

Second Quarter Highlights:

  • GAAP revenue of $69.0 million, up 30.2% compared to $53.0 million in the second quarter of 2016.
  • Non-GAAP revenue of $69.2 million, up 30.4% compared to $53.0 million in the second quarter of 2016.
  • GAAP operating loss totaled $3.0 million, compared to operating income of $6.4 million (12.1% operating margin) in the second quarter of 2016. GAAP operating loss for the second quarter of 2017 included $3.9 million in restructuring and cost reduction plan.
  • Non-GAAP operating profit totaled $3.2 million (4.7% operating margin), compared to $7.4 million (14.0% operating margin) in the second quarter of 2016.
  • GAAP net loss attributable to Sapiens' shareholders totaled $3.6 million or $(0.07) per diluted share compared to net income attributable to Sapiens' shareholders of $5.3 million, or $0.11 per diluted share in the second quarter last year.
  • Non-GAAP net income attributable to Sapiens' shareholders totaled $1.9 million or $0.04 per diluted share compared to net income attributable to Sapiens' shareholders of $6.3 million, or $0.13 per diluted share in the second quarter last year.
  • Cash, cash equivalents as of June 30, 2017 were $46.4 million, with total debt of $38.0 million.

"Sapiens delivered another quarter of double-digit revenue growth, driven by a mix of organic growth and our recent acquisition of StoneRiver," said Roni Al-Dor, president and CEO of Sapiens. "We witnessed growth across North America, Europe and South Africa. We reported Non-GAAP operating margin of 4.7% which was higher than our guidance of 3-4%. We believe we are on track for continued improvement in our operational profitability.

Al-Dor continued: "We remain very excited about the StoneRiver acquisition and we have made solid steps in combining our two organizations. To date, each StoneRiver division has been fully merged with its peer division at Sapiens, with all of our U.S. P&C activities now in a single group. The StoneRiver and Sapiens sales departments have been integrated, while adding account managers to grow business with existing clients and our marketing departments has been merged into one.  All corporate functions and back-office operations, including IT, finance, legal, HR and purchasing, are now also fully integrated. Meanwhile, Sapiens is planning to further leverage our offshore capabilities to drive additional efficiencies and reduce costs throughout the company. Overall, our integration efforts are proceeding according to plan at this time and Sapiens management believes we are on track for the second half of 2017."

During the quarter, we implemented restructuring and cost reduction plan in total of $3.9 million dollars. The restructuring and cost reduction plan included: integration of StoneRiver, de-emphasis of non-core activities in APAC and efficiency measures post the halted development project. The cost savings primarily include headcount reductions as well as other cost saving measures. We continue to expect restructuring and cost reduction expenses of up to $5 million for the full year 2017.

Al-Dor concluded: "Sapiens is maintaining our guidance for 2017 full year revenues of $265 to $275 million (on a non-GAAP basis). We are also maintaining expectations for operating profit margin 13.5-14.5% in the second half of the year (in each case, on a non-GAAP basis) and our expectations for full-year operating profit margin between 9-10% (on a non-GAAP basis)."

Quarterly Results Conference Call

Management will host a conference call and webcast on August 7 at 9:30 a.m. Eastern Time (4:30 p.m. in Israel) to review and discuss Sapiens' results.

Please call the following numbers (at least 10 minutes before the scheduled time) to participate:

North America (toll-free): + 1-888-407-2553; International: +972-3-918-0685; 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 August 17, 2017, as follows:

North America: 1-866-500-4953; International: +972-3-925-5947.

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, 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: amortization of intangible assets, capitalization of software development, stock-based compensation, compensation related to acquisition, acquisition-related costs, restructuring and cost reduction plan, loss on sales of Marketable Securities and tax adjustment regarding non-GAAP adjustments.

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 stock-based compensation expense, depreciation and amortization, capitalized of software development costs, compensation expenses related to acquisition, acquisition-related costs, restructuring and cost reduction plan, 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 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 400 financial services organizations. The Sapiens team of approximately 2,500 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, 2016, 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: yaffa.cohen-ifrah@sapiens.com

 

 



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


  Six months ended




 June 30


 June 30




2017


2016


2017


2016




 (unaudited)


 (unaudited)


 (unaudited)


 (unaudited)











 Revenue


69,049


53,030


125,583


102,597

 Cost of revenue


45,740


31,781


83,128


61,388











 Gross profit


23,309


21,249


42,455


41,209











 Operating expenses:










 Research and development, net


8,952


4,001


15,147


7,254


 Selling, marketing, general and administrative


17,343


10,841


31,931


21,297

 Total operating expenses


26,295


14,842


47,078


28,551











 Operating income (loss)


(2,986)


6,407


(4,623)


12,658











 Financial expense (income), net


709


(326)


1,147


(406)

 Taxes and other expenses (income), net


(109)


1,468


58


2,926





















 Net income (loss)


(3,586)


5,265


(5,828)


10,138











 Attributable to non-controlling interest


(8)


(68)


(38)


(82)











 Net income (loss) attributable to Sapiens' shareholders


(3,578)


5,333


(5,790)


10,220





















 Basic earnings per share


(0.07)


0.11


(0.12)


0.21











 Diluted earnings per share


(0.07)


0.11


(0.12)


0.21




















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


49,124


48,948


49,086


48,883










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


49,124


49,759


49,086


49,659



 

 


Summary of Non-GAAP Financial Information

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



Three months ended


Six months ended


June 30


June 30


2017


2016


2017


2016


(unaudited)


(unaudited)


(unaudited)


(unaudited)













Revenues

69,167

100%


53,030

100%


125,701

100%


102,597

100%

Gross profit

26,389

38.2%


22,726

42.9%


46,859

37.6%


44,300

43.2%

Operating profit

3,217

4.7%


7,426

14.0%


4,915

3.9%


14,774

14.4%

Net income to shareholders

1,927

2.8%


6,251

11.8%


3,111

2.5%


12,237

11.9%

Adjusted EBITDA

4,179

6.0%


8,082

15.2%


6,753

5.4%


16,037

15.6%













Basic earnings per share

0.04



0.13



0.06



0.25


Diluted earnings per share

0.04



0.13



0.06



0.25


 

 

Non-GAAP Revenues by Geographic Breakdown

U.S. dollars in thousands



Q2 2017


Q1 2017


Q4 2016


Q3 2016


Q2 2016











North America

28,544


19,465


21,107


19,706


17,601

Europe & South Africa

36,711


32,489


28,292


28,675


26,124

APAC

3,912


4,580


7,714


8,099


9,305











Total

69,167


56,534


57,113


56,480


53,030

 

 

Adjusted EBITDA Calculation

U.S. dollars in thousands




Three months ended


Six months ended



 June 30


 June 30



2017


2016


2017


2016










GAAP operating profit (loss)


(2,986)


6,407


(4,623)


12,658










Non-GAAP adjustments:









Amortization of capitalized software


1,235


1,256


2,256


2,665

Amortization of other intangible assets


1,727


495


2,981


1,006

Capitalization of software development


(1,850)


(1,396)


(2,915)


(2,780)

Stock-based compensation


456


482


911


940

Compensation related to acquisition and
acquisition-related costs


617


182


2,287


285

Restructuring and cost reduction plan


3,900


-


3,900


-

Valuation adjustment on acquired
deferred revenue and long term contract


118


-


118


-










Non-GAAP operating profit


3,217


7,426


4,915


14,774










Depreciation


962


656


1,838


1,263










Adjusted EBITDA


4,179


8,082


6,753


16,037


 

 

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


  Six months ended



 June 30


June 30



2016


2015


2016


2015

GAAP revenue


69,049


53,030


125,583


102,597

Valuation adjustment on acquired deferred revenue and long-term contract


118


-


118


-

Non-GAAP revenue


69,167


53,030


125,701


102,597



















GAAP gross profit


23,309


21,249


42,455


41,209

Revenue adjustment


118


-


118


-

Amortization of capitalized software


1,235


1,256


2,256


2,665

Amortization of other intangible assets


1,727


221


2,030


426

Non-GAAP gross profit


26,389


22,726


46,859


44,300



















GAAP operating income (loss)


(2,986)


6,407


(4,623)


12,658

Gross profit adjustments


3,080


1,477


4,404


3,091

Capitalization of software development


(1,850)


(1,396)


(2,915)


(2,780)

Amortization of other intangible assets


-


274


951


580

Stock-based compensation


456


482


911


940

Compensation related to acquisition and acquisition-related costs


617


182


2,287


285

Restructuring and cost reduction plan


3,900


-


3,900


-

Non-GAAP operating income


3,217


7,426


4,915


14,774



















 GAAP net income (loss) attributable to Sapiens' shareholders


(3,578)


5,333


(5,790)


10,220

 Operating income (loss) adjustments


6,203


1,019


9,538


2,116

 Adjustment to redeemable non-controlling interest


-


37


-


103

 Loss on sales of Marketable Securities


-


-


230


-

 Other


(698)


(138)


(867)


(202)

 Non-GAAP net income attributable to Sapiens' shareholders


1,927


6,251


3,111


12,237



















 Non-GAAP basic earnings per share 


0.04


0.13


0.06


0.25










 Non-GAAP diluted earnings per share


0.04


0.13


0.06


0.25



















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

49,124


48,948


49,086


48,883

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

49,887


49,759


49,906


49,659

 

 

SAPIENS INTERNATIONAL CORPORATION N.V. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

U.S. Dollars in thousands





June 30,


December 31,




2017


2016




 (unaudited)


 (unaudited)







 ASSETS












 CURRENT ASSETS






Cash and cash equivalents


46,416


60,908


Trade receivables, net


50,026


34,684


Other receivables and prepaid expenses


8,612


6,389


Marketable securities


-


18,220








Total current assets


105,054


120,201







 LONG-TERM ASSETS






Marketable securities


-


17,228


Property and equipment, net


10,435


9,807


Severance pay fund


4,380


4,041


Goodwill and intangible assets, net


224,570


101,951


Other long-term assets


3,270


4,623


Total long-term assets


242,655


137,650







 TOTAL ASSETS


347,709


257,851







LIABILITIES AND EQUITY











 CURRENT LIABILITIES






 Trade payables


7,566


6,562


 Accrued expenses and other liabilities


48,344


32,049


 Deferred revenue


24,297


9,137


Current maturities of long-term loans


8,000


-


Total current liabilities


88,207


47,748







 LONG-TERM LIABILITIES






Other long-term liabilities


23,246


9,864


Long Term Loans


30,000


-


Accrued severance pay


5,398


4,940








Total long-term liabilities


58,644


14,804













REDEEMABLE NON-CONTROLLING INTEREST


908


908







EQUITY



199,950


194,391







TOTAL LIABILITIES AND EQUITY


347,709


257,851

 


 

SAPIENS INTERNATIONAL CORPORATION N.V. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOW

U.S. dollars in thousands



For the six months ended

June 30


2017

2016


(unaudited)

(unaudited)

Cash flows from operating activities:



Net income (loss)

(5,876)

10,138

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



Depreciation and amortization

7,075

4,934

Amortization of premium, accrued interest and loss on sales of
marketable securities

509

(262)

Stock-based compensation related to options issued to employees

911

940




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



Trade receivables

(3,236)

(1,599)

Deferred tax assets

(1,662)

52

Other operating assets

928

(980)

Trade payables

(512)

1,574

Other operating liabilities

1,643

(50)

Deferred revenues

7,241

4,401

Severance pay

30

(10)




Net cash provided by operating activities

7,051

19,138




Cash flows from investing activities:



Purchase of property and equipment

(1,102)

(2,013)

Purchase of marketable securities, net of interest received

-

(2,359)

Proceeds from sales of marketable securities

35,369

2,677

Payments for business acquisition, net of cash acquired

(94,951)

-

Capitalized software development costs

(2,915)

(2,780)




Net cash used in investing activities

(63,599)

(4,475)




Cash flows from financing activities:



Proceeds from employee stock options exercised

385

686

Payment to shareholders in respect of acquisition

-

(1,440)

Loan received net of Repayment of loan

37,974

-

Distribution of dividend

-

(8,809)




Net cash provided by (used in) financing activities

38,359

(9,563)




Effect of exchange rate changes on cash and cash equivalents

3,697

820




Increase (decrease) in cash and cash equivalents

(14,492)

5,920

Cash and cash equivalents at the beginning of period

60,908

54,351




Cash and cash equivalents at the end of period

46,416

60,271

  

View original content:http://www.prnewswire.com/news-releases/sapiens-reports-q2-2017-financial-results-300500197.html

SOURCE Sapiens International Corporation


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