investor presentation... investor presentation may 10, 2015 roni al-dor, ceo roni giladi, cfo yaffa...

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www.sapiens.com

Investor Presentation

May 10, 2015

Roni Al-Dor, CEORoni Giladi, CFOYaffa Cohen-Ifrah, CMO

Oppenheimer 16th Annual Conference

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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, 2014 and subsequent reports and registration statements filed from time to time with the Securities and Exchange Commission.

Safe Harbor Statement

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Who is Sapiens?

Application development platform

Tailor-made solutions

Focus on insurance market

Next-generation insurance & technology portfolio

Expand to financial services

Early Days1982-2000

Pivot 12001-2008

Pivot 22009+

Founded Employees Global Footprint

IPO Customers Revenue Growth

1982

19922013

1,000

130+2012: 16%

2013: 19%

2014 : 16%

NA: 32%UK: 22%Europe: 18%Israel: 18%APAC: 10%

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What Do We Do?

Provide core software solutions for insurance and financial services companies:

Core software policy administration solutions

Innovative platform for business decisions

For insurance & financial services customers, globally

Retail Banks

Investment Banks

MortgageBanks

TechnologyBased

Solutions

Insurance Software

ReinsuranceProperty&

Casualty

RetirementLife, Pension &

Annuities

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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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The Market

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Insurance is Everywhere

Property, Casualty, Reinsurance

Wealth

Pets

Liability Catastrophes

ExcessMarine Property

MotorVoice

Life, Annuity, Retirement

Annuities Retirement

Injuries Life

Pension Medical

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The Insurance Industry

Source: Market size data per Celent. March 2014

Big Market

Potential

$4,200,000,000,000 gross written premium (GWP)

11,000 insurance companies globally

IT relatedInvestment

$170B in 2015 Life - $90B; P&C - $80B

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Trends

The Insurance IT Opportunity is Large and Growing

Global IT Spending

Expected to increase by 9%

$162.1B => $176.7B2014 2016

External Software and IT spending Expected to increase by 13% $65B => $73B

2014 2016

Insurance companies shift IT budget from internal to external vendors

Highly Attractive Growing Market

NEW

Source: Market size data per Celent. March 2014

Sapiens Today

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Current Sapiens Portfolio

Life, Annuities Pension and Retirement

Property & Casualty and Reinsurance

Decision Technology

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Nov. 2013

Leadership in L&A Insurance Solutions

TECHNOLOGY AND FUNCTIONALITY 2013

North America

“ALIS continues to be one of the leading products in the region… The product has one of the most elegant and intuitive user interfaces on the market, with features such as context sensitive menu structures and ‘hover-over’ information pop-ups... The graphical renditions for illustrations and other visual representations… are also among the best that Celent have seen.”

XCelent Awards - EMEA Policy Administration Systems for Life, Annuities, Pension and Health, 11/2013XCelent Awards - North American Policy Administration Systems 2013 Life, Annuities, and Health 11/2013

EMEA

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Jan. 2014

Leadership in P&C Insurance Solutions

Celent research, EMEA Policy Administration Systems, General Insurance, Property & Casualty, January 2014, Craig BeattieOvum Decision Matrix – P&C Policy Administration Platform Europe, 10/2013. Bubble size represents market impact.

3

4

5

6

7

8

9

6 7 8 9

Ove

rall

Exec

uti

on

Ass

essm

ent

Overall Technology Assessment Score (1–10)

Leader Challenger Follower

GuidewirePolicyCenter

Sapiens IDIT

Accenture DuckCreek PolicyAdministration

eBao TechGeneralSystem Suite

Innovation GroupInsurer Policy

GraphTalk A.I.A.

Xuber forInsurers

TCSBaNCS

“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.”

TECHNOLOGY AND FUNCTIONALITY 2013

EMEA

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Insurance Core Systems

BI Reporting BI Repository

Document Management & Workflow/BPMDistribution

Management

UnderwriterWorkbench

RatingEngine

CRMCustomer

Portal

Core Claims System

Reinsurance Management

Billing

Core Policy Admin System

General Ledger

Document Creation

UniqueComp.

Distribution Management

BI Reporting BI Repository

Disbursement

AgentPortal

Sapiens’s System

Not Playing

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From Dispersed Business Logic…

Business Strategy

Market ConditionRegulation

s

Customer Requireme

ntsCompetitio

n

CRM Loans MortgageERPCredit

• Vague• Obscure• Unverified• Incomplete• Variable• Uncontrolled• Unsustainable

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CRM LoansERPCredit

To a Single Point of Truth …

Mortgage

Decision management disciplines & systems seek to provide centralized, structured decision design and automated deployment to manage all aspects of business operations

Automated Code

Generation

Centralized Decision Logic

Business Strategy

Market ConditionRegulation

s

Customer RequirementsCompetition

• Unambiguous

• Visible

• Traceable

• Complete

• Consistent

• Governed

• Reusable

• Technology agnostic

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Sapiens Strategy: ‘ONE STOP SHOP’

Product

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SERV

ICES

Training Migration

Product UpgradesProject

Implementation

Consulting Hosting

Support Services

Testing

Sapiens OfferingsP

RO

DU

CTS

Sapiens ALIS

Sapiens Retirement

Sapiens IDIT

Sapiens Reinsurance

Sapiens DECISION

Sapiens eMerge

Sapiens TOPAZ

Sapiens Closed Books

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Blue-Chip Global Customer-Base

North America UK Europe APAC

2014 Annual Revenue Contribution

32% 22% 36% 10%

Bulgaria

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Proven Management Team

Roni Al-DorPresident & CEO

2005

Steve RooneyEVP Global Sales DECISION

2014

Raj GhumanRegional ManagerUK & Nordics

1995

Ronald KaramPresident, NA insurance

2007

Henry AinouzeRegional Manager Benelux/France

2011

Wayne Te Paa Regional ManagerANZ

2014

Roni Giladi CFO

2007

Rami DoronManaging Director,DECISION

2007

Gary SherneManaging Director Property & Casualty

2014

Irit NuselManaging DirectorLife Insurance

2013

Yaffa Cohen-IfrahCMO and Head of Corporate Communications

2014

Anat BellucoVP Global HR

2013 Tal SharonRegional ManagerIsrael

2001

Ashok Bhavnani Regional ManagerAsia Pacific

2015

Growth Strategy

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Our Strategic Direction

Investments in our Growth Engines

Strengthen our Geographic Presence

US UK Europe APAC

P&C

L&A

Decision

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4

5

1

Opportunities for Growth

Pursue strategic acquisitions

Acquire new customers

Enhance portfolio through innovative technologies

Expand into new markets

Grow with existing clients

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Sapiens M&A Strategy

Customer base

Geographic expansion

Complimentary Solutions

Off-shore capabilities

Enhanced delivery capabilities 180 insurance and technology professionals

Insurance presence in Asia Pacific Servicing 18 insurers in both P&C and L&P markets

Complimentary Insurance Products Business intelligence (BI) and insurance portal

Acquisition of IBEXI Solutions

Ground Rules for Acquisitions

Profitable

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2015 Main Objectives

Growth

Profitability

Continue revenue growth

Improve operating margins

M&A Complementary solutionsand customer base

Financials

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Revenue – Continue our Growth

1 Revenues of $98.1mm in 2011 pro-forma for the FIS and IDIT acquisitions2 Non-GAAP revenues. 2015 guidance per Sapiens press releases dated February 25, 2015

70.3

52.2

98.1

113.9

135.4

157.5

174-178

2010 2011 2012 2013 2014 2015Guidance

(1)

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Currency Impact on Revenue

157.5

174-178

185

20142015

Guidance2014 Revenue Split

Currency Percentage

$ 35%

£ 19%

€ 19%

₪ 18%

¥ 7%

Other 2%

1 Non-GAAP revenues. 2015 guidance per Sapiens press releases dated February 25, 2015

1

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Annual Revenue by Geography

Consistent Revenue Growth in NA and EU

(Non-GAAP USD Millions) 2011:Pro forma

25.921.9

12.3

26.7

11.2

35.6

20.6 22.4 23.6

12.3

44.2

30.0

24.9 23.0

12.4

49.6

35.0

28.4 28.8

15.7

NA UK EU IL APAC

2011201220132014

32%

22%18%

18%

10%

USUKEuropeILAPAC

27%

22%13%

27%

11%

2011

$98.1mm $157.5mm

2014

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3.4 3.3 3.6 3.8 3.7 4.04.4

5.05.8

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

Consistent Operational Profit GrowthQuarterly Non-GAAP Operating Profit ($mm)

Non-GAAP operating profit excludes stock-based compensation, amortization of intangibles, capitalization and amortization of software, and valuation adjustment on deferred revenue.

2013 2014 2015

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-2.41% -2.84% -3.46%

-14.02%

-2.70%

1.91%

7.76%

14.29%

15.90%

13.19%13.29%

10.38% 10.80%

12%-13%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015Guidance

Operational Margin – Historical Perspective Non-GAAP Operating Margin

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Operational Margin Target

10.4%

10.8%

12%-13%

2013 2014 2015Guidance

10%10.4%

10.9%

11.9%

14.1%

Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015

Non-GAAP Operating Margin

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Product Profitability

DECISION Division

Efficiency and Cost Savings

Scale

• Move from loss to break-even

• Offshore capabilities

• Efficiency of scale

• Sell more of what we have • Product maturity

Operational Margin – Key Drivers

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12.0

8.4

18.8

17.3

21.5

2010 2011 2012 2013 2014

Strong Cash Position

$87M Cash

$0 Debt

Operating Cash Flow ($mm)

Dividend Sapiens declared cash dividend of $0.15 per share,

approximately $7.2 million in the aggregate Dividend to be distributed on June 1, 2015, subject to

shareholders’ prior approval,

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Financial Highlights

• 2011-2015E CAGR, 15.7% organic growth • Cash flow positive

Diversified revenue base:• 4 continents• Multiple product lines• Over 130 customers

• Long engagement cycle with repeatable revenues• Existing clients account for 80% of revenues• Multiple growth engines

• Offshore• Scale

• ~$87 mm cash and securities investments • No financial debt

Strong Financial Profile

Risk Diversification

Highly Attractive Revenue Model

Operational Margins Expansion

Well Capitalized

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THANK YOU

Contact:

Yaffa Cohen-Ifrah, Chief Marketing Officer & Head of Corporate Communications

US Mobile: +1-201-250-9414 | Phone: +972-3-7902032e-Mail: IR.sapiens@sapiens.com | Website www.sapiens.com

Appendix

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Q1 Highlights - Non GAAP

Q1

20142015

36.641.0Revenue

14.617.7Gross Profit

40.0%43.1%

3.65.8Operational Profit

10.0%14.1%

3.44.7Net Income

9.2%11.5%

4.06.2Adjusted EBITDA*

0.070.10Diluted EPS

48,49348,894Diluted Weighted Average Number of Shares

(in USD Million except per share amount)Outstanding Shares: 47,842)as of March 31st , 2014(

* The Company defines Adjusted EBITDA as net Profit, adjusted for stock-based compensation expense, depreciation and amortization, capitalized internal-use software development costs, Amortization of internal-use software development costs interest expense, provision for income taxes and other income (expenses).

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Non-GAAP Reconciliation Q1

(in USD Thousands except per share amount)

Three months ended

03/31/201403/31/2015

$ 36,628$ 41,014GAAP/Non-GAAP revenue

$ 13,377$ 16,269GAAP gross profit

1,0471,215Amortization of capitalized software

224194Amortization of other intangible assets

$ 14,648$ 17,678Non-GAAP gross profit

$ 3,174$ 5,086GAAP operating income

1,2711,409Gross profit adjustments

(1,401)(1,312)Capitalization of software development

337327Amortization of other intangible assets

271278Stock-based compensation

$ 3,652$ 5,788Non-GAAP operating income

$3,022$4,159GAAP net income attributable to Sapiens' shareholders

478702Operating income adjustments

(125)(134)Other

$ 3,375$ 4,727Non-GAAP net income attributable to Sapiens' shareholders

$ 0.07$ 0.10Non-GAAP basic earnings per share

$ 0.07$ 0.10Non-GAAP diluted earnings per share

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Key Balance Sheet Highlights

(in USD Million)

December 31, 2014March 31, 2015

47.453.9Cash and cash equivalents

33.133.1Marketable securities

28.524.6Account Receivable

9.310.0Deferred Revenue

00Debt

176.2178.9Total Equity

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Strong Free Cash Flow

(in USD Million)

March 31st

20142015

6.011.9Net cash provided by operating activities

(1.4)(1.3)Net cash used for capitalization of R&D

(0.6)(2.7)Net cash used for investing activities

0.60.2Net cash provided by financing activities

0.1(1.6)Effect of exchange rate changes on cash

4.76.5Increase in cash

70.347.4Cash at beginning of period

75.053.9Cash at end of period

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0.9 0.9 0.9 0.9

0.2 0.2 0.2 0.2

Year 3 Year 4 Year 5 Year 6-10

Illustrative $5mm initial contract

$2.5 $2.5

$1.1 $1.1 $1.1 $1.1

License MaintenanceServices

Rev

en

ue

($

mm

)

Contractual High

Stic

kin

ess

Attractive Revenue Model …

RETIREMENT L&A P&C REINSURANCE DECISION

Typical life of product engagement: 10–15 years 2-3x initial contract values

Ongoing Post-ProductionPre-Production

2.0 2.0

0.5 0.5

Year 1 Year 2

$7 - $10m$10 - $15m $4 - $6m $1 - $1.5m $1 - $4m

Go

-Liv

e

Init

ial

De

al S

ize

Stag

e

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… With Significant Visibility

Layered revenue streams create significant visibility

Rev

en

ue

20% New Customers

80% Existing Customers

YEAR 1

YEAR 2

YEAR 3

YEAR 4

YEAR 5