SPNS - Earnings call 3 2023 | Sapiens International Corporation N.V.

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Operator

Welcome to Sapiens International Corporation's 2023 Third Quarter Financial Results Call. [Operator Instructions]It is now my pleasure to introduce your host, Yaffa Cohen-Ifrah, Chief Marketing Officer and Head of Investor Relations. Thank you, Yaffa.

You may now begin.

Yaffa Cohen-Ifrah

Thank you, operator. you results conference for welcome our to to quarter third XXXX. want to call SAPN's review I With me on the call today are Mr. and Roni President CEO; Al-Dor, Mr. and Roni CFO; Giladi, Mr. Zukerman, Alex Officer. Strategy Chief

to results, Following of we answer any will the questions. the be summary available

content results Before release website call of that A the this of obligation after conference Relations turn is Sapiens. change to Sapiens we apply we today's statements, update issued be will or other to these expressly statements. today provided any events, before financial call been everyone section I CEO to provisions harbor of a the release President Roni published this the non-GAAP forward-looking or today. this The and will the projections earnings also start, safe opened like of contain in because remind revise the would forward-looking information, expectations the any on our in Investor future or via in of refer market I disclaim call, Al-Dor, non-GAAP the of available of will website GAAP in replay over the release to we to On which whether call. may has press or issued the our available views call Roni? or to press call new otherwise. A link, reconciliation morning. the company's measures. its

Roni Al-Dor

highlighting that fact. and I another XXXX quarter XXXX, Good joining to today has earnings start morning, us Quarter Sapiens' calls. for and Sapiens some strong demonstrate everyone, Third delivered for points thank in this key want you

we delivered with this to that growth align set In have with quarter we margins. quarters in we deliver remain each revenue committed the First X and of earlier suspending foremost, XXXX, year. results expectations

million, up quarter of The Revenue to increased margin. XX.X%. quarter further $XXX.X marked margin Operating third XXXX in in quarter the third year-over-year. another was by us, this yet our totaled quarter to for strong improvement operating X.X%

In We North And we to increased we are our momentum. strong team sales in regions. have our XXXX. in seeing and about our maintained excited investment our and key performance, have America, continued are momentum contributed Europe, in success

Sapiens Let's America, the or through third traction selected solution engaging win services ability American recent directing serve customers. with where a offers proven new and are Sapiens Sapiens' their in a new announced in start and them timely and CoreSuite XXXX. North Sapiens to respectively, gaining State enhancing broad Suite Accident intuitive with application serious America. Sapiens customer for is processing, Carolina Fund, quarter, based Sapiens our Digital guaranteed user and SaaS of the part SAS Sapiens better delivery during Compensation South schedule its a increased provide products quality enabling insurance Sapiens and selected workflow military for year-over-year. illustration implement a deliver families to Aid of we and for Workers second where is entities, through AAFMAA experience also workers' consisting for strength non-profit in system state is In Comp we and compensation assisted more will Worker's for platform. quarter North implementing agency with detail Intelligence financial Forces, governmental intelligence North completion Sapiens automation more for automation. who is that members. category the to customer gaining our solution, in veterans One as environment, on is modernization a that acquisition, Armed for Association and existing who sale logos America Mutual by XX.X% initiatives. selected Revenue example with provider expansion digital and legacy This

life Europe, be Pension. Its to partner wealth in and along towards growth are one lead key transformation continued territory pension momentum experience change the selected quarters. recently efficiency enhancement a previous across gain and Sapiens' and Sapiens enhancing where Life we and saw platform offerings. focused increased end-to-end top for Life, continued in The Moving for states digital year-over-year, group efforts for insurance. products to critical chose behavior. we the CoreSuite region individual in in for continue providing Sapiens rapid sales ecosystem growth. life, experience its to system in region are by insurance, Europe customer the Nordics proven XX.X% insurance revenue the Aktia to for third experienced digital an quarter, it ground. customer for for and the its integration was via Finland's complex of In Sapiens Aktia elevating cloud product new EMEA.

core and Africa. Pension of is of customer bank's a solution. to its its to launch products South CoreSuite administration third quarter, In requirements Africa, bank, a its use and Sapiens Sapiens Sapien Life of and Adopting position. Moving use Life expanded Life for part the expanded The lead satisfied CoreSuite South the complete CoreSuite long-standing of for tier-X and Pension Sapiens policy launch in group the Pension to robust base. for new to improved strategy customer and for

into bank, Casualty. live African for CoreSuite relationship In went Namibia, addition, its the Sapiens territories, expanded in Sapiens Tier-X new which with and Property South with

relationship for short-term non-life for its CoreSuite for growth Africa. with comprehensive win relationship and used products with Life, product We cycle expansion our system annuity by will the its already there, offering holistic and including P&C, how Life solutions the innovative driver cycle bring management dynamic can in Sapiens' business portfolio, with provide product Life be in business committed holistic support South exemplifies This chosen on was entire successful Worker bank core their customers further our compete businesses. and insurance functionality in applications, digital to to the platform IDITSuite life bank our customers our through started and Setting Sapiens and solutions the operating its take product product a Sapiens product Shifting well life implementation and we region. to Sapiens. South remain the core to its in Namibia, to any data its quarter. and life Pension that our As that for for based on Africa, in experience for positive our IDITSuite existing those IDITSuite short-term segments, P&C and to capability effectively in clients. All evolving Compensation Digital third decision again meet top performed the of needs and the core platforms.

EMEA. Ceded North and the line for for analyst was endorsements supports America. Customer Global in industry for Celent Functionality we Sapiens from Report. category are and CoreSuite Pension Celent America was Life in EMEA Summit, was Annuity I and growth from expectation product region was Comp, ever This hosted Life discuss Summit the in of this our Sapiens XXX Awards our Life, critical P&C, take critical of want over October Reinsurance all importance This our solution. to to quarter, named the Decision, named Life third awards and as America Solution We Luminary Breadth Celent and region. our platform Customer and in this Summit for Sapiens year's a platform Financial as Pension Luminary XXXX platforms Policy with receiving CoreSuite in which Compliance. was and by moment in event Workers XXXX, North luminary Arizona. including named North Solutions verticals, our attendees CoreSuite companies, the of Administration ReinsuranceMaster a of the In Tucson, a XCelent us. Pension, XXX long-time new largest for business customer and Solution On

we Celent, addition, Datos, industry hosted more. In and expert an from Microsoft

Sapiens. proud of XX partners further sponsoring are to trust leaders our the to that We partnerships empowered the the our Microsoft industry sponsor confidence We value also were attended and and with have the underlining the strength they customers. and supported customers Summit, event. the have our was bring by other gold our in XX

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to customers critical and period most strong successfully. partnership our Our business strong leadership run functionality their enable

the for will in learning address AI OpenAI growing in Decision the first of Sapiens demand machine launch automation the conference, AI, a technology driven and situation services. Decision and AI integration. the Israel. few take want I the Model to portfolio, integrated Model, moments we to AI Azure enhance by Sapiens' speed in Solution, decision During announced Decision AI-Generative market Microsoft address products management

is into company terrorism terror babies, Hamas, Israel Israel. was and in and were that On Israel by Civillians, X, you children attacked As attack all under October people. the a know, organization. war. elderly attack people the global X,XXX throws Sapiens This XXX founded killed were in kidnapped. headquarter a

who have people who the across lost from global globe. ones. a Sapiens are are those thoughts mature Our the the love members all with and suffering organization situation with and operations team is

global countries, States, Europe, Israel. centers support includes development India United the and and Our including operations XX in

these operation centers among have we global a Additionally, well-established continuity centers. business program with

various established organized customers in across are prepared execution we times. these our compete. conclusion, and continue We in our employees our well challenging we categories effectively in regions of strategies are In during to which supporting confident product and

dedication, of deliver results confidence to for our commitment shareholders. Our win a customers excellent long-term execution high level, fuels record factor success. and in our our teams This

performance. over would like to more I our CFO on it turn financial detail provide to to Now

Roni Giladi

results. are Thank up in currency wrap $XXX.X constant quarter quarter On basis, guidance of X.X%. will XXXX. I sheet with third XXXX our non-GAAP a and begin on for our you, XXXX otherwise balance increased X.X% year-over-year growth to XXXX. our the comparisons Revenue review All compared I XXXX of quarter unless was Roni. stated. of flow rate third up and of organic the QX comments QX from the the with to third versus XXXX million, with cash will follow a

$XX.X in QX North implemented Our we in growth to our revenue this grew and of region. our or increase million was grow revenue the favorably $XX.X reflects totaled North America and quarter-over-quarter, comparing an XXXX, to increase business X $X.X region. quarters, In line investments of of momentum last region this most initiative America the our in XX.X%. The North across million in due million, of to America reflecting

Our XX.X% QX is $XX.X APAC, and year. Rest totaled which mainly European to of currency includes $XX.X of XXXX. organic in to Africa South XXXX $XX.X million in World, to revenue revenue of in growing. year-to-date, are and growth million the in compared of year-over-year million declined $XX.X increase same temporary in a Overall, million, to all from QX reflecting The revenue On quarter our X.X%. a constant regions Go-live. XX.X% decline the of basis, is last due project compared our Revenue of

Our million and the re-occurring $XX.X from mix of X.X% comparing or X.X% constant million Revenue QX now I World. product mix. million Europe months, a X.X%, to North last and revenue XXXX. services postproduction X XXXX a increase in in $XX.X software of quarter to currency basis America, year, in XXXX, QX move in X.X% Rest totaled ended was growth of year-to-date September on growth will XX.X% recurring of growth to in same compared reflecting from $XX

QX and overall pleased the XX% margin you, QX XXXX. extremely software postproduction will of onetime XXXX services growing in and recurring of to by are of last gross compared represent QX This re-ocurring this implementation which, Gross in compared million, in as our and revenue revenue re-occurring a XX.X% company and We total than $XX.X higher recurring margin. with XX.X% momentum of I product was our our and XX.X% of quarter has stream, QX of year. profit growth year to remind gross last the

third of QX of Our was to to of $XX.X in X.X% expenses the this of $XX.X quarter XXXX. million, gross million of Operating basis compared margin XX.X%. XX.X%, Both quarter XX XX.X%. have grown of compared Operating and position an XXXX. were an support to in higher points sales Operating and increase increased investments to QX effort R&D sales $XX.X product margin this million, globally. our was quarter from profit XXXX XX.X% increase

which of the for compared the XXXX in some and a was of reduced U.S.A. new During by was higher revenue XX.X% the quarter, or the million for compared XX.X% per share shareholders $X.XX investments. in dollar, quarter XX.X% income share, $XX.X in diluted offset compared from of last per diluted to was Israeli quarter Net $X.XX or EBITDA increased Sapiens third QX to $X.XX tailwind XXXX. $XX the QX third the EPS shekel to of an revenue had attributable to increase XXXX. of partly versus of XX.X% $XX.X we to million $XX.X quarter our of year. of million costs by million or

Turning to adjusted free our and balance cash sheet flow.

X XXXX, of cash $XXX short-term $XX tranches which million, and equivalents annual had million XXXX. mature As scheduled cash we total of equal debt deposits and January XX, a totaling until to is in September with

$X.X cash of in an adjusted generated to During $X.X of QX the XXXX. third compared we quarter million of free million XXXX, flow

quarter, a of of $XX.X the first cash third dividend for a per total paid of During X months $X.XX the dividend reflecting million we share, XXXX.

announce our policy, when announced XXXX turn we As now to our XXXX. for like report second to for per we dividend dividend of XXXX. will half would I guidance our XX-F the

million XXXX year of full revenue in range growth year-over-year of million, $XXX which our X.X% at reflects guidance $XXX non-GAAP midpoint. to reiterating are the We the

to increasing are was a we XX.X% of to to guidance range operating range However, XX.X%. XX% another our XX.X% margin non-GAAP quarter. a strong this summarize, To from of

or basis. X.X% constant X.X%, grew a revenue Our on Q&C

of thoughts. operating XX%. our software was I an XX.X% postproduction would you following with by the margin leave and with services revenues, re-occurring closing, grew EBITDA Our and to represent In and XX% XX.X% product like of margin

may First we understand business. in Israel and the Sapiens' implication work potential about foremost, that on ongoing raise concern

that and safe We our kept are ensuring closely employees continuity Israel and business are is intact. continuously Sapiens situation, monitoring the

on However, to concerns, color trajectory. global given XXXX high-level revenue and provide like I the current would some macro situation our

of this QX, provided level the some of our given never it's issues, but our in you, appropriate investors, before us have sense give We to color above-mentioned to visibility.

conservative Israel, Israel. to what reiterate revenue trend To are feel globally XX% worldwide. operation revenue be continue we XXXX. team our Roni stated, generated of We delivering employees global our in position close The are our is outside management the located local and outside Al-Dor a outside prospects. of on organization distributed with We to around employees and operate. vast at Israel, of country customers million each sales estimate $XXX have we comfortable banks customer-facing of of with XX% majority of is world. global and and consensus Sapiens with Sapiens' in work

cash of a $XXX strong dollars. in have significant I in cash over Roni? a We balance that, call with turn Roni. the portion to our million will sheet U.S.A. with With

Roni Al-Dor

great by and Roni. product strong Thank given quarter line. across you, delivered a success We business geographically our

for operator earlier we the remain call questions. will Importantly, deliver to the with that committed set I align we ask expectations this now the results please year. open to

Operator

first Dylan Instructions]The William [Operator is question Blair. Becker from of

Dylan Becker

well. are Sapiens that and safe to families Great the and hear team

today. speak drivers what's talking Roni, the your drive clients, hoping about there I thinking maybe about a in Is there. maybe everyone Is that for and of biggest how driver? bit of talking need skewed and a I on accelerating think the for wondering efficiencies? new I'm the need to prioritizing to little maybe growth resolution customers both, the change. quick to initiatives? for demand context I when wonder spend emphasis but Assuming towards are it's call you're it kind those the

Alex Zukerman

us. their is question. their financial processes bit operational to our are business One to I'll clear this operational major efficiency. we climate several in When customers, needing Yes. with do efficiency, we fully look try answer ensure business at to nonstable that driver a have and drivers and your with

perform solutions, solutions very Now around from direct-to-consumer across core us. provide, with processes, when for their ability to capabilities the the of to us, look their board a in our tools level our users we customers the all solutions. our extend we for and They of digital strong across together all that data driver our our those operational digital all no-code strong the engage extend and a high the bringing ability to engagement at solutions, to automation local activities, platform, efficiency have

an really them this driver to market. where to is configuration, ability by ability type or quickly And capabilities to of order they identify to look Another this quickly for allow insurance is go around a that the the our open business. strong ocean companies and we business to record see systems blue local and niche deploy in the our no-code a time go in after

Dylan Becker

seeing there you're products, the traction, in segment Super helpful. like restructuring, of also nice changed, [Audio has you're I receptivity opening carriers willingness seems incentivize in if area? think at a the spend the momentum but ratios a some and little up Gap] prior all? recovery American it this Now post production nice customer a loss we're and There's how seeing North Is environment. that bit the from to in seeing sales

Roni Al-Dor

bit It I a can difficult hear to answer you. hope your question. little I was

increased our part, and So, just everybody, part the to share dramatically marketing. organization, the manageable with we marketing account the sales

all we X customers see an did and so outstanding than that We interest mentioned, was past, it. repeat I start covering also around data, didn't to the because don't things I to client of in we the stage, in areas. an want So it decision generated It's on. conference. cloud, see the past. more a new are We digital, lot the part just early

have much services. product to So more also offer on we see growing on as Sapiens we also and

Dylan Becker

And last I squeeze one could if That then, Roni, one makes in. sense.

malpractice. comp, workers area a reinsurance product secret Is the Is strength out out around another guess again and areas of to is specialization the there? themes maybe seem a the content? the Anything coming perspective to call So particular common it as commentary. the from line? conference, medical it even what's like there in I of sauce around resonate encouraging it

Alex Zukerman

we market the core here. major we it unique comp, our X where one platforms. of to is this SaaS a product on users each business to across have functional integration the The When exceptional, vectors of look definitely success, strong ecosystem of that workers remarkable in very, solution, the game. a the draw this deployed to our This hyper-strong market capabilities and and is One everything and unique with solutions. the of the and in technology, partners model, worker definitely are very at think I market we a is, we external level There to the comprehensiveness way fit. cloud mature the look it. it's us the that how Together together a is is the compensation brought to So demonstrate the solution. recognize to solution need allows attention comprehensive traction

customers, to the product. help it to I platform together integrated one full in proposition by of a we and our that and serve we to market. also definitely effect solution, together, with their a see level, an fully being all them having core When we And them solutions This the able bring another we a is ability This per points, think the see the driver. here show what at data and to strength is turnkey business deploy grow in look solution. digital capabilities the the end-to-end provide our value, a record in definitely P&C their in ability time. platform is to that's

Operator

Goldman Kumar Kevin Sachs. from of is question next The

Kevin Kumar

general, to ask know that's deals, new and about the about just quarters? modules how And that's you're wanted bit success the and some little how data for the maybe cross-selling attaching customer there? can area a and these focus kind to trending curious just been of base back big I all, you a having into digital process versus you prior in I of talk modules. that's

Alex Zukerman

segments it central look business that Yes. our at savings solutions. solutions we Again, different across solutions data a and both the and core the of digital way the and different our we develops in have spread those that entity

solutions can that see is box, effect on emphasis of the and so in we fully our we projects pre-integrated, what in loosely huge huge So strategy, in our the the business and a usual. and core fully but as that fact data brings choose, we coupled, the a pick and provide out digital of integrated efficiency, customers deployment definitely the which operational both put

our sell are a is deal deal on size impact increasing. core share the not we One, data aspect because typically is of The typical this Now business we do as is in it core the the factors. to of wallet used well. solutions deploy less increasing in both cloud, years or several digital also as the important, typical selling our only before, and another not course, but we with or

is I wallet So first impact share. think

customers provide This to full brings Second with work also effective. deploy and ability this seems rising impact our is attractiveness this value customers a of cross-sell. is solutions to and in various integrated of installation. covering a aspects something solutions And attractive hence the more cost increase lot of business we to the vendor more is also and that the single allows end-to-end our to it us one and because can

Now feel of more now forward. digital are very increasing able to start with usage starting of Roni we U.S. to to be than base. the and this business aggressively maturity as teams high and see and solutions going our we in now them mentioned, are core very, comfortable digital our trend in Europe is go that customer This data also application, cross-sell our data and to executive solutions, and that something and of to we And before. Most level comes the on sales a of both account this back our with do

Kevin Kumar

of ratio, of I could kind in in margin that if kind year? give on kind this update on where how you maybe seeing year? this else much terms Great. profitability maybe is to expansion anything of drive and position that offshore improving of also wanted helping are And you we success can comment an ask the your you're

Roni Giladi

about are So overall. offshore we ratio, XX%

quarter-over-quarter. are We this growing

to obviously in grow but we the profits. There and margin is quarter, on minimal gross percentage, impact continue also operational grow. they This

factor in business. an this So important our is

SG&A This shekels quarter, versus impact this benefit auction is to but in from the coming not us, mainly the we profit in years, we R&D. increase the dollar create improvement few in can Its from next And and next improvements some years. has and in few operating ratio the we by additional we ratio. the percentage coming additional investments several that believe in offset offshore

Operator

next from Barclays. of Chris question The is Reimer

Chris Reimer

Another topic ask, as around compared I wanted growth OpEx. rate looking to investment the are strong regions, the you of the given at how in to costs?

Roni Al-Dor

Can you please repeat the question?

Chris Reimer

Yes. at How investments producing the regions they're so well, results. are across looking -- good they're you growing now that

at So of In you terms how this marketing, of looking sales in of of terms cost are level the thing? kind investment? headcount, in and spending

Roni Al-Dor

Roni try and SG&A will answer quarter-over-quarter and in Obviously, growing that you up. in follow Alex the all constant R&D then dollar I to see time. and the will value

please think R&D, employees having that offshore we in that also So are are adding.

the of growth the the R&D world, that this America based in product So impact allocate company there we the we engine going majority region R&D to on growth focusing not the about of on that investments Western North our significant. have on is employees, dollar in operations. are investment adding in and is and engine. We Europe And even vast though the on X/X we're the significant market company,

So this is on the R&D.

doing team and can as this. America, North we increase that SG&A, executives believe we the in Roni in Europe are speak, the On and sales already account and we both we mentioned, as

some increase said of the year. because also in that we costs the the SG&A of this G&A, not we seeing we significant are like are We already in reducing did

a North So have we and in in significant product SG&A a we sell Europe. the America investment and because suite to position the also in product believe good

Chris Reimer

walk you that the Can now how walk in us products? what last what's product digital place And month, announced you pre-integrated And your looks right it have it. potential might right AI of us different? in be how terms versus other now? you Got there the can that through you regarding through just

Alex Zukerman

usage business and X side. stages systems a deployment So reduction impact within within it is this implementation value decision takes for and usual. in new customers, business capabilities manage One, their substantial effort both we projects institutions, where management. it's has with Sapiens. The to harvest a core new as large model the about, and the financial to on the software to logic. generative use XX% there AI opportunities an like reduction as embedded next of it AI we We for work that roll as that around to within financial that capabilities The well the and of this model to integration, sold AI huge is the to business the it we insurance brings tool Sapiens published banks, business and improve will automation internal business core a as decision customer and second us OEM the gen And estimate, a on bring And usages the automation for other direct is The business the tool. tool improve and it plan with of companies machine main as sale work using capabilities the institutions in our for is around of our other look efforts on in decision for platforms in is substantial them at out, the first the business the modeling as them. decision we in brings all management their ability in by the time that. allows the that both using our both operation, as When capture business as as least AI, This it aspects. implementation, very deploy to all seamlessly using rolled businesses we model. and to of onetime both stage at already really customers decision the model usual This natural an the role tool, business a modeler metro build ongoing written of data. a maintenance in person, for and the translate analyst rather a learning using of model amount terms decision type decision to than with improve of in manages ability entity project logic can any to to and the any also or role internal the documentation language the the into well decision management. that it consume management language our to We now capability and that can in

Operator

The Partners. Lapidot of next Omri is from Leumi question

Omri Lapidot

which the partners on you the Congratulations quarter, on cash $X was on comment the the in quarter. a usually results flow, here. weak approximately Can third million operating new

terms in the thing, one the mid-range I change We making is payment conservative or $XXX also sure heard just saw like And Did it the XXXX more consumer side, previous something million? forecast year. something about that? right,

Roni Giladi

first the collection. Regarding in question

the slightly of that We need There Customers time, not lower. for are no expect collection. relationship, QX is customers. continue. issue we is amount our good accrual is with only any to the not this of accounts. There Some do yes,

happen do with to this difference. we in QX, not So expect this we'll and catch up

on change this CapEx point. the So Again, customer also relationship perspective, change in no collection contract not in is the all. with at

company. the right instead we something [Audio Regarding this Sapiens thought because the QX to point to QX is approach the of investor stability in that that situation, of place Gap] because we us, put XXXX, have of in in see

recurring in mentioned we our the XX% in of revenue call, nature. As is about

We customer. have a significant

system them. to our implementing are We

So we to about the continue ability strong grow. to very feel

prospect the into Obviously, done. reflects place Regarding that needs have, existing need number have this this the to potential that additional in revenue. we to we convert we number, be customer an that

up $XXX need be the why in all that continue very comfortable we If feel to to are grow now, with this is will it sure this right continuing as or slightly lower, we we QX, million mentioned make past. in the we this number. to So we but change

Operator

to would This session. like Al-Dor, your you [Operator concluding make question-and-answer Instructions]Mr. statement? the concludes

Roni Al-Dor

Thank Thanks. dedication achieve to delivering continue forward to you. want calls. we of you. you promises your to profitability speaking with our for conclusion, We you this call you to and the joining earnings to In and support today, look emphasize continue Thank for Thank I with Yes. our our all next look growth. our in to in trust forward journey Sapiens. and

Operator

participation. International Corporation XXXX Conference Quarter you concludes Sapiens Call. you. Thank for the Third This Results Thank your

disconnect. ahead go may You and

Sapiens International (SPNS) 8 Nov 232023 Q3 Earnings call transcript