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Sapiens to Announce Second Quarter 2019 Financial Results on August 5, 2019.

ENPNewswire-August 6, 2019--Sapiens to Announce Second Quarter 2019 Financial Results on August 5, 2019

(C)2019 ENPublishing - http://www.enpublishing.co.uk

Release date- 05082019 - SAPIENS TO ANNOUNCE SECOND QUARTER 2019 FINANCIAL RESULTS ON AUGUST 5, 2019.

Sapiens International Corporation (NASDAQ and TASE: SPNS), a leading global provider of software solutions for the insurance industry, announced today that it will report its financial results for the second quarter that ended on June 30, 2019 on Monday, August 5, 2019.

Summary Results for Second Quarter 2019 (USD in millions, except per share data)

GAAP

% Change Non-GAAP % Change

June 30, 2019 June 30, 2018 June 30, 2019 June 30, 2018

Revenue $79.5 $72.2 10.2% $79.5 $72.5 9.6%

Gross Profit $31.5 $26.9 17.1% $34.8 $30.4 14.3%

Gross Margin 39.6% 37.2% 240 bps 43.8% 42.0% 180 bps

Operating Income $9.5 $4.9 91.8% $12.6 $9.6 31.4%

Operating Margin 11.9% 6.8% 510 bps 15.8% 13.2% 260 bps

Net income (*) $6.8 $2.0 239.6% $9.5 $6.4 49.5%

Diluted EPS $0.14 $0.04 236% $0.19 $0.13 45.4%

(*) Attributable to Sapiens' shareholders

'Sapiens priorities for 2019 are growth and margin expansion. In the second quarter we delivered on both of these goals. Top line non-GAAP revenue increased 9.6% and non-GAAP operating margin improved 260 basis points. Growth and profitability in the quarter tie directly to executing on our key objectives to win new customers, cross sell to existing customers, leverage our offshore capabilities, and scale revenue over our efficient cost structure. Our improving margins support our build-out of sales and customer support teams and our investment in our offshore capabilities, particularly in India. As we head into the second half of the year, our sustained performance gives us confidence that our strategy is working, and we are dedicated to further improving shareholder value through long-term, sustainable growth.' said Roni Al-Dor, president and CEO, Sapiens.

'Looking out to the remainder of 2019, I'm encouraged by our pipeline of business and anticipate annual growth of over 10%. We are forecasting non-GAAP revenue in a range of $318 - $323 million, however we now expect revenues to be on the higher end of this range' concluded Roni Al-Dor. 'The increase in revenue and the leverage from improved economies of scale allows us to increase the guidance for non-GAAP operating margin in a range of 15.6% - 15.8%, compared to our previous guidance of 15.2% - 15.6%'

Quarterly Results Conference Call

Management will host a conference call and webcast on August 5, 2019 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): + 1-888-668-9141; International: +972-3- 9180610; 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/

If you are unable to join live, a replay of the call will be accessible until August 13, 2019, as follows:

North America: 1-877-456-0009; International: +972-3-925-5921

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, 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, restructuring and cost reduction costs, tax adjustments related to non-GAAP adjustments, and acquisition-related costs, which pertain to charges on behalf of M&A agreements related to future performance targets and retention criteria as determined upon acquisition date of the respective acquired company, as well as third-party services, such as, tax, accounting and legal rendered until the acquisition date.

Management of the Company does not consider these non-GAAP measures in isolation, or as an alternative to financial measures determined in accordance with GAAP. The principal limitation of these non-GAAP financial measures is that they exclude significant expenses and income that are required by GAAP to be recorded in the Company's financial statements. In addition, they are subject to inherent limitations, as they reflect the exercise of judgment by management about which expenses and income are excluded or included in determining these non-GAAP financial measures.

To compensate for these limitations, management presents non-GAAP financial measures in connection with GAAP results. Sapiens urges investors to review the reconciliation of its non-GAAP financial measures to the comparable GAAP financial measures, which it includes in press releases announcing quarterly financial results, including this press release, and not to rely on any single financial measure to evaluate the Company's business.

Reconciliation tables of the most comparable GAAP financial measures to the non-GAAP financial measures used in this press release are included with the financial tables of this release.

The Company defines Adjusted EBITDA as net profit, adjusted for 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, and reconciles Non-GAAP Operating Income to Adjusted EBITDA, adjusted for amortization and capitalization of capitalized software and amortization other intangible assets, stock-based compensation and acquisition-related costs, and valuation adjustment on acquired deferred revenues. The Company uses Adjusted EBITDA, 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, and 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, and 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 empowers insurers to succeed in an evolving industry. The company offers digital software platforms, solutions and services for the property and casualty, life, pension and annuity, reinsurance, financial and compliance, workers' compensation and financial markets. With more than 35 years of experience delivering to over 450 organizations globally, Sapiens has a proven ability to satisfy customers' core, data and digital requirements. 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, 2018, and subsequent reports and registration statements filed from time to time with the Securities and Exchange Commission.

Investors and Media Contact

Yaffa Cohen-Ifrah

Chief Marketing Officer and Head of Corporate Communications

Sapiens International

U.S. Mobile: +1 201-250-9414

Mobile: +972 54-9099039

Email: yaffa.cohen-ifrah@sapiens.com

SAPIENS INTERNATIONAL CORPORATION N.V. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

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

Three months ended Six months ended

June 30 June 30

2019 2018 2019 2018

(unaudited) (unaudited) (unaudited) (unaudited)

Revenue 79,529 72,164 156,316 143,159

Cost of revenue 48,075 45,305 95,055 89,272

Gross profit 31,454 26,859 61,261 53,887

Operating expenses:

Research and development, net 8,923 8,633 17,700 17,780

Selling, marketing, general and administrative 13,077 13,298 26,030 26,482

Total operating expenses 22,000 21,931 43,730 44,262

Operating income 9,454 4,928 17,531 9,625

Financial expense, net 434 1,316 1,488 2,154

Taxes and other expenses, net 2,154 1,483 4,001 2,514

Net income 6,866 2,129 12,042 4,957

Attributable to non-controlling interest 26 115 47 107

Net income attributable to Sapiens' shareholders 6,840 2,014 11,995 4,850

Basic earnings per share 0.14 0.04 0.24 0.10

Diluted earnings per share 0.14 0.04 0.24 0.10

Weighted average number of shares outstanding used to compute basic earnings per share (in thousands) 50,002 49,785 49,994 49,779

Weighted average number of shares outstanding used to compute diluted earnings per share (in thousands) 50,530 49,998 50,430 50,033

SAPIENS INTERNATIONAL CORPORATION N.V. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED NON-GAAP STATEMENTS OF INCOME

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

Three months ended Six months ended

June 30 June 30

2019 2018 2019 2018

(unaudited) (unaudited) (unaudited) (unaudited)

Revenue 79,529 72,542 156,316 143,627

Cost of revenue 44,735 42,105 88,418 82,906

Gross profit 34,794 30,437 67,898 60,721

Operating expenses:

Research and development, net 10,493 9,926 20,662 20,250

Selling, marketing, general and administrative 11,720 10,936 22,905 22,033

Total operating expenses 22,213 20,862 43,567 42,283

Operating income 12,581 9,575 24,331 18,438

Financial expense, net 434 1,316 1,488 2,154

Taxes and other expenses 2,580 1,762 4,865 3,488

Net income 9,567 6,497 17,978 12,796

Attributable to non-controlling interest 26 115 47 107

Net income attributable to Sapiens' shareholders 9,541 6,382 17,931 12,689

Basic earnings per share 0.19 0.13 0.36 0.25

Diluted earnings per share 0.19 0.13 0.36 0.25

Weighted average number of shares outstanding used to compute basic earnings per share (in thousands) 50,002 49,785 49,994 49,779

Weighted average number of shares outstanding used to compute diluted earnings per share (in thousands) 50,530 49,998 50,430 50,033

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,

2019 2018 2019 2018

(unaudited) (unaudited) (unaudited) (unaudited)

GAAP revenue 79,529 72,164 156,316 143,159

Valuation adjustment on acquired deferred revenue - 378 - 468

Non-GAAP revenue 79,529 72,542 156,316 143,627

GAAP gross profit 31,454 26,859 61,261 53,887

Valuation adjustment on acquired deferred revenue - 378 - 468

Amortization of capitalized software 1,390 1,152 2,731 2,407

Amortization of other intangible assets 1,950 2,048 3,906 3,959

Non-GAAP gross profit 34,794 30,437 67,898 60,721

GAAP operating income 9,454 4,928 17,531 9,625

Gross profit adjustments 3,340 3,578 6,637 6,834

Capitalization of software development (1,570) (1,293) (2,962) (2,470)

Amortization of other intangible assets 540 706 1,075 1,628

Stock-based compensation 288 499 741 1,086

Acquisition-related costs *) 529 1,157 1,309 1,735

Non-GAAP operating income 12,581 9,575 24,331 18,438

GAAP net income attributable to Sapiens' shareholders 6,840 2,014 11,995 4,850

Operating income adjustments 3,127 4,647 6,800 8,813

Tax and other (426) (279) (864) (974)

Non-GAAP net income attributable to Sapiens' shareholders 9,541 6,382 17,931 12,689

(*) 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.

Summary of NON-GAAP Financial Information

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

Q2 2019 Q1 2019 Q4 2018 Q3 2018 Q2 2018

Revenues 79,529 76,787 73,433 73,237 72,542

Gross profit 34,794 33,104 31,320 30,903 30,437

Operating income 12,581 11,750 10,849 10,273 9,575

Net income to Sapiens' shareholders 9,541 8,390 7,826 7,548 6,382

Adjusted EBITDA 13,358 12,524 11,797 11,236 10,385

Basic earnings per share 0.19 0.17 0.16 0.15 0.13

Diluted earnings per share 0.19 0.17 0.16 0.15 0.13

Non-GAAP Revenues by Geographic Breakdown

U.S. dollars in thousands

Q2 2019 Q1 2019 Q4 2018 Q3 2018 Q2 2018

North America 39,216 38,149 34,974 36,734 34,606

Europe 33,881 32,193 30,850 30,611 32,518

Asia Pacific 3,515 3,670 3,140 3,480 3,305

South Africa 2,917 2,775 4,469 2,412 2,113

Total 79,529 76,787 73,433 73,237 72,542

Adjusted Free Cash-Flow

U.S. dollars in thousands

Q2 2019 Q1 2019 Q4 2018 Q3 2018 Q2 2018

Cash-flow from operating activities 15,507 10,550 11,509 6,370 658

Increase in capitalized software

development costs

(1,570) (1,392) (1,382) (1,308) (1,293)

Capital expenditures (1,079) (641) (204) (831) (402)

Free cash-flow 12,858 8,517 9,923 4,231 (1,037)

Cash payments attributed to acquisition-related costs(*) (**) 1,692 1,608 790 - 256

Adjusted free cash-flow 14,550 10,125 10,713 4,231 (781)

(*) 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.

Adjusted EBITDA Calculation

U.S. dollars in thousands

Three months ended Six months ended

June 30 June 30

2019 2018 2019 2018

GAAP operating profit 9,454 4,928 17,531 9,625

Non-GAAP adjustments:

Amortization of capitalized software 1,390 1,152 2,731 2,407

Amortization of other intangible assets 2,490 2,754 4,981 5,587

Capitalization of software development (1,570) (1,293) (2,962) (2,470)

Stock-based compensation 288 499 741 1,086

Acquisition-related costs 529 1,157 1,310 1,735

Valuation adjustment on acquired deferred revenue - 378 - 468

Non-GAAP operating profit 12,581 9,575 24,332 18,438

Depreciation 777 810 1,550 1,892

Adjusted EBITDA 13,358 10,385 25,882 20,330

SAPIENS INTERNATIONAL CORPORATION N.V. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands

June 30, December 31,

2019 2018

(unaudited) (unaudited)

ASSETS

CURRENT ASSETS

Cash and cash equivalents 77,282 64,628

Trade receivables, net and unbilled receivables 58,827 59,159

Other receivables and prepaid expenses 7,615 6,224

Total current assets 143,724 130,011

LONG-TERM ASSETS

Property and equipment, net 9,264 8,515

Severance pay fund 4,941 4,699

Goodwill and intangible assets, net 230,069 231,348

Operating lease right-of-use assets 54,106 -

Other long-term assets 4,885 4,292

Total long-term assets 303,265 248,854

TOTAL ASSETS 446,989 378,865

LIABILITIES AND EQUITY

CURRENT LIABILITIES

Trade payables 6,491 6,149

Current maturities of Series B Debentures 9,898 9,898

Accrued expenses and other liabilities 49,390 46,999

Current maturities of operating lease liabilities 8,107 -

Deferred revenue 22,782 18,057

Total current liabilities 96,668 81,103

LONG-TERM LIABILITIES

Series B Debentures, net of current maturities 58,763 68,577

Deferred tax liabilities 9,692 11,681

Other long-term liabilities 7,723 9,398

Long-term operating lease liabilities 48,105 -

Accrued severance pay 5,946 5,622

Total long-term liabilities 130,229 95,278

EQUITY 220,092 202,484

TOTAL LIABILITIES AND EQUITY 446,989 378,865

SAPIENS INTERNATIONAL CORPORATION N.V. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOW

U.S. dollars in thousands

For the six months ended June 30,

2019 2018

(unaudited) (unaudited)

Cash flows from operating activities:

Net income 12,042 4,957

Reconciliation of net income (loss) to net cash provided by operating

activities:

Depreciation and amortization 9,262 9,886

Accretion of discount on Series B Debentures 84 94

Capital gain from sale of property and equipment (129) -

Stock-based compensation related to options issued to employees 741 1,086

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

Trade receivables, net and unbilled receivables 712 (2,416)

Deferred tax assets (1,435) (300)

Other operating assets (356) (886)

Trade payables 190 (4,853)

Other operating liabilities 152 (4,691)

Deferred revenues 4,760 6,888

Severance pay 34 56

Net cash provided by operating activities 26,057 9,821

Cash flows from investing activities:

Purchase of property and equipment (1,720) (879)

Investment in deposit (1,119) -

Payments for business acquisition, net of cash acquired - (18,203)

Proceeds from sale of property and equipment 821 -

Capitalized software development costs (2,962) (2,470)

Net cash used in investing activities (4,980) (21,552)

Cash flows from financing activities:

Proceeds from employee stock options exercised 78 128

Repayment of Series B Debentures (9,898) -

Repayment of loan (4) (27)

Payment of contingent considerations (120) (61)

Dividend to non-controlling interest (66) (47)

Net cash provided by financing activities (10,010) (7)

Effect of exchange rate changes on cash and cash equivalents 1,587 (522)

Increase (decrease) in cash and cash equivalents 12,654 (12,260)

Cash and cash equivalents at the beginning of period 64,628 71,467

Cash and cash equivalents at the end of period 77,282 59,207

Debentures Covenants

As of June 30, 2019, Sapiens was in compliance with all of its financial covenants under the indenture for the Series B Debentures that it issued in September 2017, based on having achieved the following in its consolidated financial results:

Covenant 1

Target shareholders' equity (excluding minority interest): above $120 million.

Actual shareholders' equity equal to $219 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) bellow 65%.

Actual ratio of net financial indebtedness to net capitalization equal to -3.51%.

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 -0.15.

[Editorial queries for this story should be sent to newswire@enpublishing.co.uk]

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