investor presentation... investor presentation may 10, 2015 roni al-dor, ceo roni giladi, cfo yaffa...
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1 www.sapiens.com
www.sapiens.com
Investor Presentation
May 10, 2015
Roni Al-Dor, CEORoni Giladi, CFOYaffa Cohen-Ifrah, CMO
Oppenheimer 16th Annual Conference
2 www.sapiens.com
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
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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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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: [email protected] | 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