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Sapiens Reports Double-Digit Revenue Growth and Improved Profitability

2015-08-05 03:04 ET - News Release

Raises 2015 Guidance for Full Year Revenue and Operating Margin
61.0% Year-Over-Year Increase in Non-GAAP Quarterly Operating Profit

HOLON, Israel, Aug. 5, 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: FORTY), today announced its financial results for the second quarter ended June 30, 2015.

Sapiens International Corporation Logo

Second Quarter Highlights:

  • Non-GAAP revenue of $43.4 million, up 12.4% compared to $38.7 million in the second quarter of 2014. Excluding the impact of foreign currency exchange rates, revenue growth was 22.3%.
  • Non-GAAP operating profit increase by 61.0% and totaled $6.4 million or 14.8% operating margin, compared to $4.0 million, or 10.4% operating margin, in the second quarter of 2014.
  • Non-GAAP net income attributable to Sapiens' shareholders totaled $5.2 million or $0.11 per diluted share increase of 45.2% compared to $3.6 million, or $0.07 per diluted share in the second quarter last year.
  • Cash, cash equivalents and securities investments as of June 30, 2015 was approximately $89.8 million, the company has no debt.
  • The Company increased full-year 2015 guidance. Management now expects revenues to be in a range of $176-$180 million, and operating margin to be in a range of 14%-14.5%

"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, from all geographies, enabled us to deliver another quarter of double-digit revenue growth. We are seeing the benefits of our business model as operating margins expanded as a result of improvements in our base business that have led to a more efficient cost structure. We believe our first half results and our expectations for the second half of 2015 affirm our growth strategy and provide us with additional clarity to raise our guidance for the full year."

Mr. Al-Dor continued, "The investments we have made in products and sales have strengthened our competitive position and are driving customer wins around the world. We have developed a strong line up of industry leading technology solutions that are clearly resonating with both new and existing customers, resulting in new wins during the quarter. Our recent acquisition of Insseco, which is not reflected in the results of the second quarter, opens a presence for us in Poland and expands the company's solid footprint in Europe. In addition, Sapiens expects to establish a regional delivery and development center in Poland to further support our global operations."

Increased 2015 Outlook

Mr. Al-Dor added, "Based on the strength of our first half results and our outlook for the remainder of the year, we are raising our 2015 full year guidance. Acquisitions and recent contract wins are driving higher top-line growth while higher margin revenues and our on-going pursuit of operational efficiencies are having a positive impact on our operating margins."

  • Full year 2015 revenue in the range of $176-$180 million, up from previous guidance of $174-$178 million, representing growth of approximately 20% over the prior year, on a constant currency basis.
  • Operating margins in the range of 14%-14.5%, up from previous guidance of 12%-13%.

Quarterly Results Conference Call

Sapiens management will host its earnings conference call today, August 5 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): + 1-888-281-1167; International: +972-3-918-0644; 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 12, 2015, as follows

North America: 1-888-295-2634; 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.

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.

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, 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 150 financial services organizations. The Sapiens team of approximately 1,300 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.

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 

 

 

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,


2015


2014


2015


2014


(unaudited)


(unaudited)


(unaudited)


(unaudited)













Revenues

43,436

100%


38,651

100%


84,450

100%


75,279

100%

Gross Profit

18,568

42.7%


15,675

40.6%


36,246

42.9%


30,323

40.3%

Operating profit

6,441

14.8%


4,001

10.4%


12,229

14.5%


7,653

10.2%

Net income to shareholders

5,230

12.0%


3,601

9.3%


9,957

11.8%


6,976

9.3%

Adjusted EBITDA

6,900

15.9%


4,417

11.4%


13,078

15.5%


8,437

11.2%













Basic earnings per share

0.11



0.08



0.21



0.15


Diluted earnings per share

0.11



0.07



0.20



0.14


 

 


Adjusted EBITDA Calculation
U.S. dollars in thousands




Three months ended


Six month ended



 June 30,


 June 30 ,



2015


2014


2015


2014










GAAP operating profit


5,890


3,383


10,976


6,557










Non GAAP adjustments:









Amortization of capitalized software


1,135


1,459


2,350


2,506

Amortization of other intangible assets


608


557


1,129


1,118

Capitalization of software development


(1,553)


(1,686)


(2,865)


(3,087)

Compensation related to acquisition


71


-


71


-

Stock-based compensation


290


288


568


559










Non GAAP operating profit


6,441


4,001


12,229


7,653










Depreciation


459


416


849


784










Adjusted EBITDA


6,900


4,417


13,078


8,437

 

 


Revenues by category
U.S. dollars in thousands



Three months ended
June 30, 2015


Six month ended
 June 30, 2015


Revenues

Percentage


Revenues

Percentage



License

2,615

6.0%


5,872

7.0%

Services and Maintenance

40,821

94.0%


78,578

93.0%

Total

43,436

100.0%


84,450

100.0%



Revenues by geographic breakdown
U.S. dollars in thousands



Three months ended

June 30, 2015


Six months ended

 June 30, 2015


Revenues

Percentage


Revenues

Percentage



North America

14,294

32.9%


27,994

33.1%

Europe

23,743

54.7%


46,896

55.6%

APAC

5,399

12.4%


9,560

11.3%

Total

43,436

100%


84,450

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


  Six months ended




 June 30,


 June 30,




2015


2014


2015


2014




 (unaudited)


 (unaudited)


 (unaudited)


 (unaudited)











 Revenue


43,436


38,651


84,450


75,279

 Cost of revenue


26,218


24,653


50,963


47,904











 Gross profit


17,218


13,998


33,487


27,375











 Operating Expenses:










 Research and development, net


2,385


2,855


5,006


5,744


 Selling, marketing, general and administrative


8,943


7,760


17,505


15,074

 Total operating expenses


11,328


10,615


22,511


20,818











 Operating income


5,890


3,383


10,976


6,557











 Financial income, net


14


(11)


344


(57)

 Taxes and other expenses, net


1,189


283


1,728


462





















 Net income


4,687


3,111


8,904


6,152











 Attributable to non-controlling interest


(19)


6


39


25











 Net income attributable to Sapiens' shareholders


4,706


3,105


8,865


6,127





















 Basic earnings per share


0.10


0.07


0.19


0.13











 Diluted earnings per share


0.10


0.06


0.18


0.13




















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


47,910


47,177


47,809


46,797










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


49,213


48,759


49,098


48,362

 

 

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,



2015


2014


2015


2014

 Non-GAAP revenue


43,436


38,651


84,450


75,279



















 GAAP gross profit


17,218


13,998


33,487


27,375

 Amortization of capitalized software


1,135


1,459


2,350


2,506

 Amortization of other intangible assets


215


218


409


442

 Non-GAAP gross profit


18,568


15,675


36,246


30,323



















 GAAP operating income


5,890


3,383


10,976


 

6,557

 Gross profit adjustments


1,350


1,677


2,759


2,948

 Capitalization of software development


(1,553)


(1,686)


(2,865)


(3,087)

 Amortization of other intangible assets


393


339


720


 

676

Compensation related to acquisition


 

71


 

-


 

71


 

-

 Stock-based compensation


290


288


 

568


559

 Non-GAAP operating income


6,441


4,001


12,229


7,653



















 GAAP net income attributable to Sapiens' shareholders


4,706


3,105


8,865


 

6,127

 Operating income adjustments


551


618


1,253


1,096

 Other


(27)


(122)


(161)


(247)

 Non-GAAP net income attributable to Sapiens' shareholders


5,230


3,601


9,957


6,976



















 Non-GAAP basic earnings per share 


0.11


0.08


0.21


0.15










 Non-GAAP diluted earnings per share


0.11


0.07


0.20


0.14



















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

47,910


47,177


47,809


46,797









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

49,213


48,759


49,098


48,362

 

 

SAPIENS INTERNATIONAL CORPORATION N.V. AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
U.S. Dollars in thousands





June 30,


December 31,




2015


2014




(unaudited)


 (unaudited)







 ASSETS












 CURRENT ASSETS:






Cash and cash equivalents


51,053


47,400


Trade receivables, net


27,384


28,540


 Other receivables and prepaid expenses


5,849


3,962


 Deferred Taxes


2,240


2,319








 Total current assets


86,526


82,221







 LONG-TERM ASSETS:






Marketable Securities


38,780


33,098


Property and equipment, net


5,293


4,763


Severance pay fund


6,493


10,735


Other intangible assets, net


28,568


27,060


Other long-term assets


2,445


3,248


Goodwill


71,351


67,698








 Total long-term assets


152,930


146,602







 TOTAL ASSETS


239,456


228,823







 

 LIABILITIES AND EQUITY











 CURRENT LIABILITIES:






 Trade payables


4,210


2,952


 Accrued expenses and other liabilities


30,471


25,159


Deferred revenue


10,722


9,272








 Total current liabilities


45,403


37,383







 LONG-TERM LIABILITIES:






 Other long-term liabilities


5,251


3,105


 Accrued severance pay


7,458


11,980








 Total long-term liabilities


12,709


15,085







REDEEMABLE NON-CONTROLLING INTEREST


242


159







 EQUITY



181,102


176,196







 TOTAL LIABILITIES AND EQUITY


239,456


228,823

 

 

SAPIENS INTERNATIONAL CORPORATIONN.V. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOW
U.S. Dollars in thousands



For the six months ended

June 30


2015

2014


(unaudited)

(unaudited)

Cash flows from operating activities:



Net income

8,904

6,152

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



Depreciation  and amortization

4,328

4,408

Amortization of premium and accrued interest on marketable securities

(184)

23

Stock-based compensation related to options issued to employees

568

559

Decrease (increase) in trade receivables

1,975

(1,790)

Deferred tax assets

1,808

85

Decrease in other operating assets

395

299

Increase (decrease)  in trade payables

1,294

(1,994)

Increase in other operating liabilities

1,869

3,053

Increase  in deferred revenues

1,502

1,001

Severance pay

(304)

152




Net cash provided by operating activities

22,155

11,948




Cash flows from investing activities:



Purchase of property and equipment

(1,209)

(1,224)

Purchase of marketable securities

(6,524)

(34,786)

Proceeds from sales of marketable securities

1,015

-

Payments for business acquisition, net of cash acquired

(1,736)

-

Increase in capitalized software development costs

(2,865)

(3,087)

Decrease (increase) in Restricted Cash

(1,712)

541




Net cash used in investing activities

(13,031)

(38,556)




Cash flows from financing activities:



Distribution of dividend

(6,486)

-

Proceeds from employee stock options exercised

501

1,305




Net cash provided by financing activities

(5,985)

1,305




Effect of exchange rate changes on cash and cash equivalents

514

364




Increase in cash and cash equivalents

3,653

(24,939)

Cash and cash equivalents at the beginning of period

47,400

70,313




Cash and cash equivalents at the end of period

51,053

45,374

 

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SOURCE Sapiens International Corporation

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