EX-99.1 2 ea156024ex99-1_sapiensinter.htm PRESS RELEASE

Exhibit 99.1

 

 

Sapiens Reports Fourth Quarter and Full Year 2021 Financial Results

 

February 23, 2022 – Sapiens International Corporation, (NASDAQ and TASE: SPNS), a leading global provider of software solutions for the insurance industry, today announced its financial results for the fourth quarter and full year ended December 31, 2021.

 

Summary Results for Fourth Quarter 2021 (USD in millions, except per share data)

 

   GAAP         Non-GAAP     
   Q4 2021   Q4 2020   % Change     Q4 2021   Q4 2020   % Change 
Revenue  $119.2   $101.7    17.3%    $119.9   $102.9    16.4%
Gross Profit  $48.7   $41.4    17.6%    $53.9   $47.0    14.6%
Gross Margin   40.8%   40.7%   10 bps      45.0%   45.7%   (70) bps 
Operating Income  $15.7   $10.2    53.9%    $21.6   $18.7    15.7%
Operating Margin   13.2%   10.1%   310 bps      18.0%   18.1%   (10) bps 
Net Income (*)  $13.7   $8.3    64.3%    $17.7   $14.5    22.3%
Diluted EPS  $0.25   $0.15    66.7%    $0.32   $0.27    18.5%

 

Summary Results for Full Year 2021 (USD in millions, except per share data)

 

   GAAP         Non-GAAP     
   2021   2020   % Change     2021   2020   % Change 
Revenue  $461.0   $382.9    20.4%    $463.6   $384.5    20.6%
Gross Profit  $187.8   $156.0    20.4%    $208.3   $172.9    20.4%
Gross Margin   40.7%   40.7%   -      44.9%   45.0%   (10) bps 
Operating Income  $57.5   $45.0    27.7%    $81.4   $67.9    19.8%
Operating Margin   12.5%   11.8%   70 bps      17.6%   17.7%   (10) bps 
Net Income (*)  $47.2   $33.8    39.7%    $65.5   $52.0    26.1%
Diluted EPS  $0.85   $0.65    30.8%    $1.18   $1.00    18.0%

 

(*)Attributable to Sapiens’ shareholders

 

“Sapiens finished the year strong, with fourth quarter non-GAAP revenue growing 16.4% to $119.9 million and non-GAAP operating profit margin of 18.0%, reflecting our ability to maintain profitability despite the cost increases that our industry and many sectors are facing,” stated Roni Al-Dor, President and CEO of Sapiens. “Europe was the leading growth region for Sapiens in 2021 with revenue growth organically and with M&A of 38.5% year-over-year. We signed multiple new logos across various segments and experienced a substantial increase in average European deal size. In North America region we delivered mixed results in ’21, Life, DECISION, and Reinsurance continued growing steadily, building a solid pipeline for ’22. We are pursuing new opportunities and developing a growing pipeline positioning Sapiens to deliver improved total growth in North America by the second half of ‘22.”

 

 

 

“Today, the majority of our new wins are delivered on the cloud,” continued Mr. Al-Dor. “We have recently announced a new Chief Technology and Information Officer, Ilan Buganim, who brings vast technology experience from his numerous leadership positions. Ilan will lead our cloud journey and is responsible for developing a coherent view across all of our product offering. Sapiens’ emphasis on product innovation continues to earn industry analysts’ awards and recognition from the market.”

 

“We are introducing 2022 guidance for non-GAAP revenue in a range of $495 million to $500 million, and non-GAAP operating margin in a range of 17.0% to 17.3%,” which on constant currency base represent organic growth of 9.1% and profitability level of 18.2% at the mid- point range of our guidance concluded Mr. Al-Dor.

 

Quarterly Results Conference Call

 

Management will host a conference call and webcast today, February 23, 2022 at 9:30 am. Eastern Time (4:30 pm. 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): + 1-888-642-5032; International: +972-3-918-0609; 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. A replay of the call will be available one business day following the completion of the event, at the same link for 90 days.

 

Non-GAAP Financial Measures

 

This press release contains the following non-GAAP financial measures: non-GAAP revenue, non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating income, non-GAAP operating margin, 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, compensation related to acquisition and acquisition-related costs, restructuring and cost reduction costs, and tax adjustments related to 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.

 

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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, 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. The Company adds back 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, which 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 (NASDAQ and TASE: SPNS) empowers the financial sector, with a focus on insurance, to transform and become digital, innovative and agile. Backed by more than 35 years of industry expertise, Sapiens offers a complete insurance platform, with pre-integrated, low-code solutions and a cloud-first approach that accelerates customers’ digital transformation. Serving over 600 customers in 30 countries, Sapiens offers insurers across property and casualty, workers compensation and life markets the most comprehensive set of solutions, from core to complementary, including Reinsurance, Financial & Compliance, Data & Analytics, Digital, and Decision Management.  For more information visit www.sapiens.com or follow us on LinkedIn.

 

Media Contact

 

Shay Assaraf
Chief Marketing Officer, Sapiens
Shay.assaraf@sapiens.com

 

Investors Contact

 

Brett Maas
Managing Partner, Hayden IR
+1 646-536-7331
Brett.Maas@HaydenIR.com

 

Kimberly Rogers
Managing Director, Hayden IR
+1 541-904-5075
kim@HaydenIR.com

 

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Forward Looking Statements

 

Certain matters discussed in this press release that are incorporated herein by reference are forward-looking statements within the meaning of Section 27A of the Securities Act, Section 21E of the Exchange Act and the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995, that are based on our beliefs, assumptions and expectations, as well as information currently available to us. Such forward-looking statements may be identified by the use of the words “anticipate,” “believe,” “estimate,” “expect,” “may,” “will,” “plan” and similar expressions. Such statements reflect our current views with respect to future events and are subject to certain risks and uncertainties. There are important factors that could cause our actual results, levels of activity, performance or achievements to differ materially from the results, levels of activity, performance or achievements expressed or implied by the forward-looking statements, including, but not limited to: the degree of our success in our plans to leverage our global footprint to grow our sales; the degree of our success in integrating the companies that we have acquired through the implementation of our M&A growth strategy; the lengthy development cycles for our solutions, which may frustrate our ability to realize revenues and/or profits from our potential new solutions; our lengthy and complex sales cycles, which do not always result in the realization of revenues; the degree of our success in retaining our existing customers or competing effectively for greater market share; difficulties in successfully planning and managing changes in the size of our operations; the frequency of the long-term, large, complex projects that we perform that involve complex estimates of project costs and profit margins, which sometimes change mid-stream; the challenges and potential liability that heightened privacy laws and regulations pose to our business; occasional disputes with clients, which may adversely impact our results of operations and our reputation; various intellectual property issues related to our business; potential unanticipated product vulnerabilities or cybersecurity breaches of our or our customers’ systems; risks related to the insurance industry in which our clients operate; risks associated with our global sales and operations, such as changes in regulatory requirements, wide-spread viruses and epidemics like the recent novel coronavirus pandemic, which adversely affected our results of operations, or fluctuations in currency exchange rates; and risks related to our principal location in Israel and our status as a Cayman Islands company. While we believe such forward-looking statements are based on reasonable assumptions, should one or more of the underlying assumptions prove incorrect, or these risks or uncertainties materialize, our actual results may differ materially from those expressed or implied by the forward-looking statements. Please read the risks discussed under the heading “Risk Factors” in our most recent Annual Report on Form 20-F, in order to review conditions that we believe could cause actual results to differ materially from those contemplated by the forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that future results, levels of activity, performance and events and circumstances reflected in the forward-looking statements will be achieved or will occur. Except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason, to conform these statements to actual results or to changes in our expectations.

 

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SAPIENS INTERNATIONAL CORPORATION N.V. AND ITS SUBSIDIARIES

 

CONDENSED CONSOLIDATED STATEMENT OF INCOME

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

 

   Three months ended   Year ended 
   December 31,   December 31, 
   2021   2020   2021   2020 
   (unaudited)     (unaudited)    (unaudited)   (unaudited) 
                 
Revenue   119,225    101,661    461,035    382,903 
Cost of revenue   70,561    60,288    273,191    226,929 
                     
Gross profit   48,664    41,373    187,844    155,974 
                     
Operating expenses:                    
Research and development, net   13,891    11,129    54,013    41,358 
Selling, marketing, general and administrative   19,041    20,019    76,343    69,613 
Total operating expenses   32,932    31,148    130,356    110,971 
                     
 Operating income   15,732    10,225    57,488    45,003 
                     
Financial and other expenses (income), net   (311)   1,212    202    3,805 
Taxes on income   2,404    611    9,964    7,041 
                     
 Net income   13,639    8,402    47,322    34,157 
                     
Attributable to non-controlling interest   (26)   83    151    382 
                     
Net income attributable to Sapiens’ shareholders   13,665    8,319    47,171    33,775 
                     
Basic earnings per share   0.25    0.16    0.86    0.67 
                     
Diluted earnings per share   0.25    0.15    0.85    0.65 
                     
Weighted average number of shares outstanding used to compute basic earnings per share (in thousands)   54,902    53,715    54,785    51,208 
                     
Weighted average number of shares outstanding used to compute diluted earnings per share (in thousands)   55,626    54,541    55,561    52,159 

 

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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, 
   2021   2020   2021   2020 
   (unaudited)   (unaudited)   (unaudited)   (unaudited) 
                 
GAAP revenue   119,225    101,661    461,035    382,903 
Valuation adjustment on acquired deferred revenue   629    1,275    2,519    1,598 
Non-GAAP revenue   119,854    102,936    463,554    384,501 
                     
GAAP gross profit   48,664    41,373    187,844    155,974 
Revenue adjustment   629    1,275    2,519    1,598 
Amortization of capitalized software   2,084    1,931    7,679    6,558 
Amortization of other intangible assets   2,556    2,465    10,253    8,811 
Non-GAAP gross profit   53,933    47,044    208,295    172,941 
                     
GAAP operating income   15,732    10,225    57,488    45,003 
Gross profit adjustments   5,269    5,671    20,451    16,967 
Capitalization of software development   (2,256)   (1,604)   (7,911)   (5,798)
Amortization of other intangible assets   1,311    1,204    5,377    3,316 
Stock-based compensation   1,274    1,240    4,801    3,987 
Acquisition-related costs (*)   260    1,930    1,198    4,447 
Non-GAAP operating income   21,590    18,666    81,404    67,922 
                     
GAAP net income attributable to Sapiens’ shareholders   13,665    8,319    47,171    33,775 
Operating income adjustments   5,858    8,441    23,916    22,919 
Tax effect on NON-GAAP adjustment   (1,842)   (2,299)   (5,550)   (4,735)
Non-GAAP net income attributable to Sapiens’ shareholders   17,681    14,461    

65,537

    51,959 
                     
Diluted earnings per share   0.32    0.27    1.18    1.00 
                     
Weighted average number of shares
outstanding used to compute diluted earnings
per share (in thousands)		   55,626    54,541    55,561    52,159 

 

(*)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.

 

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Adjusted EBITDA Calculation
U.S. dollars in thousands

 

   Three months ended   Year ended 
   December 31,   December 31, 
   2021   2020   2021   2020 
                 
GAAP operating profit   15,732    10,225    57,488    45,003 
                     
Non-GAAP adjustments:                    
Valuation adjustment on acquired deferred revenue   629    1,275    2,519    1,598 
Amortization of capitalized software   2,084    1,931    7,679    6,558 
Amortization of other intangible assets   3,867    3,669    15,630    12,127 
Capitalization of software development   (2,256)   (1,604)   (7,911)   (5,798)
Stock-based compensation   1,274    1,240    4,801    3,987 
Compensation related to acquisition and acquisition-related costs   260    1,930    1,198    4,447 
                     
Non-GAAP operating profit   21,590    18,666    81,404    67,922 
                     
Depreciation   1,989    1,366    5,360    4,698 
                     
Adjusted EBITDA   23,579    20,032    86,764    72,620 

 

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

 

   Q4 2021   Q3 2021   Q2 2021   Q1 2021   Q4 2020 
                     
Revenues   119,854    118,442    115,036    110,222    102,936 
Gross profit   53,933    53,413    51,720    49,229    47,044 
Operating income   21,590    21,019    19,795    19,000    18,666 
Adjusted EBITDA   23,579    22,144    20,920    20,120    20,032 
Net income to Sapiens’ shareholders   17,681    16,976    15,975    14,908    14,461 
                          
Diluted earnings per share   0.32    0.31    0.29    0.27    0.27 

 

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

 

   Q4 2021   Q3 2021   Q2 2021   Q1 2021   Q4 2020 
                     
North America   48,872    48,952    46,767    44,754    47,303 
Europe   62,416    59,707    59,718    57,642    49,225 
Rest of the World   8,566    9,783    8,551    7,826    6,408 
                          
Total   119,854    118,442    115,036    110,222    102,936 

 

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

 

   Q4 2021   Q3 2021   Q2 2021   Q1 2021   Q4 2020 
                     
Cash-flow from operating activities   27,386    14,556    26,845    11,755    21,030 
Increase in capitalized software development costs   (2,256)   (2,064)   (1,959)   (1,632)   (1,604)
Capital expenditures   (801)   (1,082)   (1,082)   (821)   (725)
Free cash-flow   24,329    11,410    23,804    9,302    18,701 
                          
Cash payments attributed to acquisition-related costs(*) (**)   407    477    -    1,280    2,363 
                          
Adjusted free cash-flow   24,736    11,887    23,804    10,582    21,064 

 

(*)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.


 

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SAPIENS INTERNATIONAL CORPORATION N.V. AND ITS SUBSIDIARIES

 

CONDENSED CONSOLIDATED BALANCE SHEET

U.S. dollars in thousands

 

   December 31,   December 31, 
   2021   2020 
   (unaudited)   (unaudited) 
         
ASSETS        
         
CURRENT ASSETS        
Cash and cash equivalents   190,243    152,561 
Short-term bank deposit   20,000    30,000 
Trade receivables, net and unbilled receivables   76,261    65,409 
Other receivables and prepaid expenses   13,841    19,388 
Total current assets   300,345    267,358 
           
LONG-TERM ASSETS          
Property and equipment, net   14,458    16,970 
Severance pay fund   5,954    6,582 
Goodwill and intangible assets, net   343,283    363,597 
Operating lease right-of-use assets   43,665    54,390 
Other long-term assets   7,288    5,264 
Total long-term assets   414,648    446,803 
           
TOTAL ASSETS   714,993    714,161 
           
LIABILITIES AND EQUITY          
           
CURRENT LIABILITIES          
Trade payables   5,008    5,389 
Current maturities of Series B Debentures   19,796    19,796 
Accrued expenses and other liabilities   76,450    75,119 
Current maturities of operating lease liabilities   10,827    9,924 
Deferred revenue   39,614    34,548 
Total current liabilities   151,695    144,776 
           
LONG-TERM LIABILITIES          
Series B Debentures, net of current maturities   78,986    98,676 
Deferred tax liabilities   15,360    16,010 
Other long-term liabilities   12,144    12,129 
Long-term operating lease liabilities   38,751    48,773 
Redeemable non-controlling interest   101    517 
Accrued severance pay   9,236    9,586 
Total long-term liabilities   154,578    185,691 
           
EQUITY    408,720    383,694 
           
TOTAL LIABILITIES AND EQUITY   714,993    714,161 

 

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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, 
   2021   2020 
   (unaudited)   (unaudited) 
Cash flows from operating activities:        
Net income   47,322    34,157 
Reconciliation of net income to net cash provided by operating activities:          
Impairment of right of use asset   1,439    351 
Depreciation and amortization   28,669    23,383 
Accretion of discount on Series B Debentures   106    134 
Capital loss from sale of property and equipment   (60)   44 
Stock-based compensation related to options issued to employees   4,801    3,987 
           
Net changes in operating assets and liabilities, net of amount acquired:          
Trade receivables, net and unbilled receivables   (13,937)   (5,168)
Deferred tax liabilities, net   (1,902)   (16)
Other operating assets   17,743    (2,049)
Trade payables   (529)   (1,344)
Other operating liabilities   (8,415)   1,435 
Deferred revenues   4,930    2,992 
Accrued severance pay, net   375    349 
Net cash provided by operating activities   80,542    58,255 
           
Cash flows from investing activities:          
Purchase of property and equipment   (3,786)   (2,633)
Proceeds from (Investment in) deposits   10,031    (30,397)
Proceeds from sale of property and equipment   1,111    12 
Proceeds from restricted deposit used for completed acquisition   -    22,890 
Net cash paid for acquisitions   831    (109,052)
Capitalized software development costs   (7,911)   (5,798)
Acquisition of intellectual property   (151)   (2,810)
Net cash provided by (used in) investing activities   125    (127,788)
           
Cash flows from financing activities:          
Proceeds from employee stock options exercised   2,038    5,050 
Distribution of dividend   (20,255)   (7,044)
Repayment of Series B Debenture   (19,796)   (9,898)
Issuance of Series B Debentures, net of issuance expenses   -    60,346 
Receipt of short-term loan   -    20,000 
Repayment of loan   -    (20,000)
Payment of contingent considerations   (926)   (538)
Acquisition of non-controlling interests   (990)   (147)
Dividend to non-controlling interest   (31)   - 
Proceeds from issuance of ordinary shares, net of issuance expenses   -    108,737 
Net cash provided by (used in) financing activities   (39,960)   156,506 
           
Effect of exchange rate changes on cash and cash equivalents   (3,025)   (707)
           
Increase in cash and cash equivalents   37,682    86,266 
Cash and cash equivalents at the beginning of period   152,561    66,295 
           
Cash and cash equivalents at the end of period   190,243    152,561 

 

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Debentures Covenants

 

As of December 31, 2021, Sapiens was in compliance with all of its financial covenants under the indenture for the Series B Debentures, based on having achieved the following in its consolidated financial results:

 

Covenant 1

 

●Target shareholders’ equity (excluding non-controlling interest): above $120 million.
   
●Actual shareholders’ equity (excluding non-controlling interest) equal to $406.5 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) below 65%.
   
●Actual ratio of net financial indebtedness to net capitalization equal to (36.78)%.

 

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 (1.27).

 

 

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