Company Presentation

Roni Al-Dor, CEO
Roni Giladi, CFO
Yaffa Cohen-Ifrah, VP Corporate Marketing & Communications
Investors Presentation, September 2014
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Safe Harbor Statement
Certain statements made in this presentation may be 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, you should 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, 2013 and subsequent reports and registration statements filed from
time to time with the Securities and Exchange Commission.
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Who is Sapiens?
Provide core software solutions for insurance and financial services companies
What Do We Do?
Key Statistics
Founded / IPO:
1982 / 1992 / 2013
Employees:
900+
Customers:
130+
Global Footprint:
EMEA 58% / N. America 33% /
APAC 9% of 2013 Revenue
Revenue:
$135.4mm in 2013; expect
~15% growth in 2014
• Core software policy administration solutions
Historical Perspectives
Early Days
Pivot 1
Pivot 2
1982-2000
2001-2008
2009+
Application
development
platform
Focus on
insurance
market
Next-generation
insurance &
technology portfolio
Tailor-made
solutions
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Insurance Software
Expand to financial
services
• For insurance & financial services customers, globally
L&P
Retirement
P&C
Technology-Based Solutions
• Innovative platform for business decisions
Investment
Banks
Retail
Banks
Mortgage
Banks
Other
Our Vision
To become
a leading provider of innovative
software solutions for the
global Financial Services market,
with focus on Insurance
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Investment Highlights
$25bn addressable market undergoing transformative modernization
Full suite of core solutions for L&P, retirement, and P&C markets
Innovative products with proven leading functionality and technology
Blue chip customer base across a broad geographic footprint
Strong financial profile with multiple growth drivers and good visibility
Proven management team
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The Market
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The Insurance Industry
Big Market ― $4,200,000,000,000
gross written premium (GWP)
Potential ― > 11,000
insurance companies globally
Investment in IT ― $153B
Source: Market size data per Celent. March 2013
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Insurance and Financial Markets are Evolving Rapidly
Insurance and financial services providers need to balance rapidly changing
customer requirements and an evolving regulatory framework
Market Drivers
•
Improve end-customer experience through
innovative initiatives
•
•
Mobile, social media etc.
•
Solvency II
•
Basel
•
Dodd-Frank
•
Schedule F
•
MISMORegulatory compliance
Support customers’ growth & operations:
•
Reduce time to market of new
products
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Evolving Regulatory Framework
•
Expansion into new geographies
•
Cost reduction & improved operations
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But still based on Legacy systems
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The Insurance IT Opportunity is Large and Growing
2014E Insurance External Software and
Services Spend: $59.9 billion
Trends
• Total 2014 external software
and services estimated spend:
$59.9 billion growing at midsingle digits
Legacy
New
• Of which, Sapiens’ TAM is
estimated at $25 billion
• Growth of TAM driven by shifts
from:
•
•
Legacy to modern solutions
Internal to external spending
Highly Attractive Growing Market
Source: Market size data per Celent. New/Legacy graphic for illustrative purposes.
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Market Transformation in the next Decade
ERP
Banking
Insurance
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Sapiens Today
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Current Sapiens Portfolio
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Life,
Annuities
Pension &
Retirement
Property
&
Casualty
Decision
Management
Technology
Leadership in Insurance Solutions
EMEA
ALIS continues to be one of the
leading products in the region…
among the best that Celent
have seen.”
Celent, Nov 2013
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North America
Sapiens ALIS is a market leader and
should be considered for most
short-lists.
Ovum Jan, 2013
Source: XCelent Awards – EMEA Policy Administration Systems for Life, Annuities, Pension and Health, 11/2013.
Xcelent Awards - North American Policy Administration Systems 2013 Life, Annuities, and Health 11/2013
Leadership in Insurance Solutions
EMEA
Leader
Overall Execution Assessment
9
Challenger
Follower
Guidewire
PolicyCenter
8
GraphTalk A.I.A.
Sapiens IDIT
7
TCS
BaNCS
Accenture Duck
Creek Policy
Administration
6
5
Xuber for
Insurers
Innovation Group
Insurer Policy
4
3
eBao Tech
GeneralSystem
Suite
6
7
8
9
Overall Technology Assessment Score (1–10)
“Sapiens continues to offer a solution with great functionality and very strong
technology in the EMEA region,….Sapiens IDIT continues to excel as a leading
solution in both functionality and technology.”
Celent, Jan 2014.
Source: Celent research, EMEA Policy Administration Systems, General Insurance, Property&Casualty, January 2014, Craig Beattie
Ovum Decision Matrix – P&C Policy Administration Platform Europe, 10/2013. Bubble size represents market impact.
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Innovation of Technology Based Solutions
Analytics and Decision
Management
Analytics
Business Process
Management
Process
Data Management
Data
Informal design and development methods
1970
1980
Source: Gartner
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1990
2000
2010
2020
2030
Blue-Chip Global Customer-Base
North America
UK
Europe
APAC
Bulgaria
2013 Revenue Contribution
33%
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21%
37%
9%
Growth Strategy
Sapiens Strategy: ‘ONE STOP SHOP’
Added Services
Support
Project &
Delivery
Product
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Our Strategic Direction
Investments in our
Growth Engines
Strengthen our
Geographic Presence
P&C
US
L&A
Decision
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UK
Europe
APAC
Proven Management Team
Joined
Prior Experience
Joined
2005
Ronald Karam
President,
NA insurance
2007
Roni Giladi
CFO
2007
Steve Rooney
EVP Global Sales
DECISION
2014
Rami Doron
Managing Director,
DECISION
2007
Raj Ghuman
Regional Manager
UK & Nordics
1995
Gary Sherne
Managing Director
Property & Casualty
2014
Henry Ainouze
Regional Manager
Benelux/France
2011
*
Irit Nusel
Managing Director
Life Insurance
2013
Manabu Okada
Regional Manager
Japan
1998
*
Yaffa Cohen-Ifrah
VP Corp Marketing &
Communications
2014
Wayne Te Paa
Regional Manager
APAC
2014
Osnat Segev-Harel
Corporate
Development
2009
Roni Al-Dor
President & CEO
*
*
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Anat Belluco
VP Global HR
2013
www.sapiens.com * Joined in the last 12 months
*
*
Prior Experience
Opportunities for Growth
5
4
3
2
1
22
Pursue strategic acquisitions
Enhance portfolio through innovative technologies
Growth into new markets
Acquire new customers
Expand with existing clients
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Financials
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Attractive Financial Profile
Impressive Annual Revenue Growth
Strong Annual Cash Flow
Total Revenue ($mm)
Operating Cash Flow ($mm)
154-158
18.8
135.4
17.3
114.2
13.5
98.1(1)
45.7
52.2
45.7
52.2
2009
2010
156.0
135.4
114.2
12
8.4
70.3
2011
2012
2013
2014
(2)
2009
2010
2011
2012
2013
Consistent Operational Profitability(3)
Quarterly Operating Profit ($mm)
1.3
1.5
1.7
2.1
1.9
2.0
2.0
2.4
2.0
2.0
2.1
2.6
3.3
3.7
4.1
4.0
3.4
3.3
3.6
3.8
3.7
Non-GAAP
1
Revenues of $98.1mm in 2011 pro-forma for the FIS and IDIT acquisitions.
2 Non-GAAP revenues. 2014 guidance per Sapiens press releases dated February 26, 2014.
3 Non-GAAP operating profit excludes stock-based compensation, amortization of intangibles, capitalization and amortization of software, and valuation adjustment on deferred revenue.
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4.0
Annual Revenue by Geography
60
56.1
44.2
35.6
40
42.8
34.2
26.7 23.3
25.9
2011
22.9
20
2012
11.2 12.5 12.2
2013
0
NA
EU
IL
APAC
Consistent Revenue Growth in NA and EU
2011
2012
9%
11%
11%
27%
27%
31%
20%
33%
17%
US
Europe
IL
35%
)Non-GAAP USD Millions(
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2013
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38%
2011:Pro forma
APAC
41%
Attractive Revenue Model …
Illustrative $5mm initial contract
Services
$2.5
0.5
0.5
2.0
Year 1
2.0
Year 2
Pre Production
Stickiness
Go-Live
Revenue
($mm)
$2.5
Maintenance
$1.1
$1.1
$1.1
$1.1
0.2
0.2
0.2
0.2
0.9
0.9
0.9
0.9
Year 3
Year 4
Year 5
Year 6-10
Ongoing Post-Production
Contractual
High
Typical life of product engagement: 10–15 years
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License
2-3x initial contract values
Product
Retirement
L&A
P&C
Reinsurance
DECISION
Deal Size
$10-15m
$7-10m
$4-$6m
$1-$1.5m
$1-$4m
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… With Significant Visibility
Revenue
Layered revenue streams create significant visibility
Year 5
20% New
Customers
Year 4
Year 3
Year 2
80% Existing
Customers
Year 1
Time
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H1 2014 – Gross Profit and Margin
Gross Profit
$30.0
Gross Margin
$30.3
$27.1
41%
41.9%
40.3%
$15.0
$0.0
36%
2013
2014
2013
2014
• Implementation of new L&P release
• Development of new product for retirement services
• Delivery staff recruitment to support the significant revenue growth
(Non-GAAP USD Millions)
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$
Pre Delivery
Products
Go-Live
Improved Gross Margins – Key Initiatives
Ongoing Post-Delivery
Gross
Margin
Typical Gross Margin of Engagement
Time
Improve Revenue Mix
• Invest in R&D to enhance technology and
•
enrich product functionality, to allow higher
license price
Grow DECISION out of the total mix
Improve Delivery Margins
• Repeatable business from the same product
•
•
•
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line and the same territories
Product maturity allow higher gross margin
Increase recurring revenue (account
management, extended maintenance,
additional services etc,…(
Shift non sophisticated tasks to Offshore
Q2 and H1- P&L Highlights - Non GAAP
Q2
H1
2014
2013
2014
2013
Revenue
38.6
33.1
75.3
64.6
Gross Profit
15.7
13.6
30.3
27.1
40.6%
41.1%
40.2%
41.9%
4.0
3.3
7.7
6.7
10.4%
10.0%
10.2%
10.4%
3.6
3.2
7.0
6.6
9.3%
9.7%
9.3%
10.2%
Adjusted EBITDA
4.4
3.6
8.4
7.2
Diluted EPS
0.07
0.08
0.14
0.16
48,759
41,399
48,362
41,107
Operational Profit
Net Income
Weighted Average no. of shares
Outstanding shares*: 47,474
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* as of June 30st, 2014
(in USD Million except per share amount)
Financial Highlights
Balanced Financial
Profile



~15.2% organic growth in 2014
Operationally profitable since Q4 2006
Cashflow positive since 2007

Diversified revenue base:
 4 continents
 Multiple product lines
 Over 130 customers



Long engagement cycle with repeat revenues
Existing clients account for 80% of revenues
Multiple growth engines

Gross margins leverage
 Revenue mix
 Post delivery margin

~$79.8 m cash and securities investments on balance sheet as of
end-of-June 2014
No financial debt
Risk diversification
Highly Attractive
Revenue Model
Gross Margins
Flexibility
Well Capitalized

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Thank You
Contact:
Roni Giladi, CFO
Yaffa Cohen-Ifrah, VP Corporate Marketing & Communications
Phone: +972-3-7902032
e-Mail: [email protected]
Website www.sapiens.com
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Appendix
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Key Balance Sheet Highlights
June 30, 2014
December 31, 2013
Cash and cash equivalents
45.4
70.3
Marketable securities
34.4
0
Account Receivable
25.6
23.7
Deferred Revenue
11.0
9.9
0
0
179.2
170.4
Debt
Total Equity
(in USD Million)
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Strong Free Cash Flow
For the Six months ended
June
2014
2013
Net cash provided by operating activities
11.9
9.1
Net cash used for capitalization of R&D
(3.1)
(2.5)
Net cash used for investing activities
(0.7)
(1.5)
Purchase of marketable securities
(34.8)
-
Net cash provided by (used for) financing activities
1.3
(4.5)
Effect of exchange rate changes on cash
0.5
(0.4)
(24.9)
0.2
Cash at beginning of year
70.3
29.0
Cash at end of period
45.4
Increase (decrease) in cash
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(in29.2
USD Million)
Non-GAAP Reconciliation
Three months ended
June 30,
Six months ended
June 30,
2014
2013
2014
2013
Non-GAAP revenue
38,651
33,065
75,279
64,572
GAAP gross profit
13,998
12,225
27,375
24,369
1,459
1,138
2,506
2,262
218
220
442
437
15,675
13,583
30,323
27,068
GAAP operating income
3,383
2,862
6,557
5,442
Gross profit adjustments
1,677
1,358
2,948
2,699
(1,686)
(1,430)
(3,087)
(2,538)
Amortization of other intangible assets
339
314
676
642
Stock-based compensation
288
240
559
454
Non-GAAP operating income
4,001
3,344
7,653
6,699
GAAP net income attributable to Sapiens' shareholders
3,105
2,677
6,127
5,310
618
482
1,096
1,257
Other
(122)
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(247)
13
Non-GAAP net income attributable to Sapiens' shareholders
3,601
3,188
6,976
6,580
Non-GAAP basic earnings per share
0.08
0.08
0.15
0.17
Non-GAAP diluted earnings per share
0.07
0.08
0.14
0.16
47,177
39,120
46,797
38,945
48,759
41,399
48,362
41,107
Amortization of capitalized software
Amortization of other intangible assets
Non-GAAP gross profit
Capitalization of software development
Operating income adjustments
Shares used
per share (in
Shares used
per share (in
in computing US NON GAAP basic earnings
thousands)
in computing US NON GAAP diluted earnings
thousands)
(in USD Thousands except per share amount)
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Consolidated Balance Sheet
June 30,
2014
(unaudited)
December 31,
2013
(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
Trade receivables, net
Other receivables and prepaid expenses
Deferred Taxes
45,374
25,644
3,512
1,862
70,313
23,669
4,126
2,420
76,392
100,528
34,377
5,664
12,131
29,751
3,093
72,922
5,263
11,228
30,014
2,957
72,438
157,938
121,900
234,330
222,428
4,592
24,585
11,024
6,517
21,248
9,928
40,201
37,693
1,269
13,686
1,712
12,615
14,955
14,327
EQUITY
179,174
170,408
TOTAL LIABILITIES AND EQUITY
234,330
222,428
Total current assets
LONG-TERM ASSETS:
Marketable Securities
Property and equipment, net
Severance pay fund
Other intangible assets, net
Other long-term assets
Goodwill
Total long-term assets
TOTAL ASSETS
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Trade payables
Accrued expenses and other liabilities
Deferred revenue
Total current liabilities
LONG-TERM LIABILITIES:
Other long-term liabilities
Accrued severance pay
Total long-term liabilities
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Q2 2014 – Gross Profit and Margin
Gross Profit
$15.0
$13.0
$11.0
$9.0
$7.0
$5.0
$3.0
Gross Margin
$15.7
$13.6
41.1%
40.6%
2013
2014
30%
2013
2014
• Implementation of new L&P release
• Development of new product for retirement services
• Delivery staff recruitment to support the significant revenue growth
(Non-GAAP USD Millions)
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