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www.sapiens.com 1 www.sapiens.com
Roni Al-Dor, CEO Roni Giladi, CFO Yaffa Cohen-Ifrah, VP Corporate Marketing & Communications Investors Presentation, September 2014
www.sapiens.com 2
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.
www.sapiens.com 3
• Core software policy administration solutions
• For insurance & financial services customers, globally
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
Who is Sapiens?
Key Statistics
Historical Perspectives
1982-2000 2001-2008 2009+
Application development
platform
Tailor-made solutions
Focus on insurance
market
Next-generation insurance &
technology portfolio
Expand to financial services
What Do We Do?
Provide core software solutions for insurance and financial services companies
Insurance Software
• Innovative platform for business decisions
P&C L&P Retirement
Technology-Based Solutions
Early Days Pivot 1 Pivot 2
Investment Banks
Retail Banks
Mortgage Banks
Other
www.sapiens.com 4
Our Vision
To become
a leading provider of innovative
software solutions for the
global Financial Services market,
with focus on Insurance
www.sapiens.com 5
Investment Highlights
$25bn addressable market undergoing transformative modernization
Strong financial profile with multiple growth drivers and good visibility
Proven management team
Innovative products with proven leading functionality and technology
Full suite of core solutions for L&P, retirement, and P&C markets
Blue chip customer base across a broad geographic footprint
www.sapiens.com 6 www.sapiens.com
The Market
www.sapiens.com 7
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
www.sapiens.com 8
Insurance and Financial Markets are Evolving Rapidly
• Improve end-customer experience through
innovative initiatives
• Mobile, social media etc.
• Support customers’ growth & operations:
• Reduce time to market of new
products
• Expansion into new geographies
• Cost reduction & improved operations
Market Drivers
Insurance and financial services providers need to balance rapidly changing customer requirements and an evolving regulatory framework
Evolving Regulatory Framework
• Solvency II
• Basel
• Dodd-Frank
• Schedule F
• MISMORegulatory compliance
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But still based on Legacy systems
www.sapiens.com 10
• Total 2014 external software and services estimated spend: $59.9 billion growing at mid-single digits
• Of which, Sapiens’ TAM is estimated at $25 billion
• Growth of TAM driven by shifts from: • Legacy to modern solutions • Internal to external spending
The Insurance IT Opportunity is Large and Growing
Highly Attractive Growing Market
Source: Market size data per Celent. New/Legacy graphic for illustrative purposes.
Legacy New
2014E Insurance External Software and Services Spend: $59.9 billion
Trends
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Market Transformation in the next Decade
ERP
Banking
Insurance
www.sapiens.com 12 www.sapiens.com
Sapiens Today
www.sapiens.com 13
Current Sapiens Portfolio
Life, Annuities Pension &
Retirement
Property &
Casualty
Decision Management
Technology
www.sapiens.com 14
Leadership in Insurance Solutions
EMEA North America
Sapiens ALIS is a market leader and should be considered for most short-lists.
Ovum Jan, 2013
ALIS continues to be one of the leading products in the region…
among the best that Celent have seen.” Celent, Nov 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
www.sapiens.com 15
Leadership in Insurance Solutions
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.
EMEA
3
4
5
6
7
8
9
6 7 8 9O
vera
ll Ex
ecu
tio
n A
sses
smen
t Overall Technology Assessment Score (1–10)
Leader Challenger Follower
Guidewire PolicyCenter
Sapiens IDIT
Accenture Duck Creek Policy
Administration
eBao Tech GeneralSystem
Suite
Innovation Group Insurer Policy
GraphTalk A.I.A.
Xuber for Insurers
TCS BaNCS
“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.
www.sapiens.com 16
Innovation of Technology Based Solutions
1980 1970 2010 2000 1990 2020
Business Process Management
Analytics and Decision Management
2030
Informal design and development methods
Data Management Data
Analytics
Process
Source: Gartner
www.sapiens.com 17
Blue-Chip Global Customer-Base
North America UK Europe APAC
Bulgaria
2013 Revenue Contribution
33% 21% 37% 9%
Growth Strategy
www.sapiens.com 19
Sapiens Strategy: ‘ONE STOP SHOP’
Project &
Delivery
Product
Added Services
Support
www.sapiens.com 20
Our Strategic Direction
Decision
L&A
P&C
Investments in our Growth Engines
Strengthen our Geographic Presence
Europe
APAC
UK US
www.sapiens.com 21
Proven Management Team
Roni Al-Dor President & CEO
Ronald Karam President, NA insurance
Gary Sherne Managing Director Property & Casualty
Rami Doron Managing Director, DECISION
Roni Giladi CFO
Osnat Segev-Harel Corporate Development
2005
2007
2007
2009
2007
2014
Irit Nusel Managing Director Life Insurance
Raj Ghuman Regional Manager UK & Nordics
2013
1995
Joined Joined Prior Experience Prior Experience
Henry Ainouze Regional Manager Benelux/France
2011
Yaffa Cohen-Ifrah VP Corp Marketing & Communications
2014
Steve Rooney EVP Global Sales DECISION
2014
*
*
*
Manabu Okada Regional Manager Japan
1998
Wayne Te Paa Regional Manager APAC
2014 *
*
Anat Belluco VP Global HR
2013 * * Joined in the last 12 months
www.sapiens.com 22
Opportunities for Growth
Pursue strategic acquisitions 5
Enhance portfolio through innovative technologies 4
Growth into new markets 3
Acquire new customers 2
Expand with existing clients 1
www.sapiens.com 23 www.sapiens.com
Financials
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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 4.0
Non-GAAP
Attractive Financial Profile
Consistent Operational Profitability(3)
Quarterly Operating Profit ($mm)
45.7 52.2 70.3
114.2 135.4
156.0
45.7 52.2
98.1 114.2
135.4
154-158
2009 2010 2011 2012 2013 2014
Impressive Annual Revenue Growth Strong Annual Cash Flow
Total Revenue ($mm) Operating Cash Flow ($mm)
1 Revenues of $98.1mm in 2011 pro-forma for the FIS and IDIT acquisitions. 2 Non-GAAP revenues. 2014 guidance per Sapiens press releases dated February 26, 2014. 3 Non-GAAP operating profit excludes stock-based compensation, amortization of intangibles, capitalization and amortization of software, and valuation adjustment on deferred revenue.
(1)
(2)
13.5 12
8.4
18.8 17.3
2009 2010 2011 2012 2013
www.sapiens.com 25
31%
38%
20%
11%
2012
27%
35%
27%
11%
2011
33%
41%
17%
9%
2013
US
Europe
IL
APAC
Annual Revenue by Geography
25.9 34.2
26.7
11.2
35.6 42.8
23.3
12.5
44.2
56.1
22.9
12.2
0
20
40
60
NA EU IL APAC
2011
2012
2013
2011:Pro forma (Non-GAAP USD Millions)
Consistent Revenue Growth in NA and EU
www.sapiens.com 26
Attractive Revenue Model …
Revenue ($mm)
Illustrative $5mm initial contract
2.0 2.0
0.5 0.5
Year 1 Year 2
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
Typical life of product engagement: 10–15 years 2-3x initial contract values
Stickiness Contractual
Pre Production Ongoing Post-Production
High
Go
-Liv
e
$2.5 $2.5
$1.1 $1.1 $1.1 $1.1
License Maintenance Services
Product Retirement L&A P&C Reinsurance DECISION
Deal Size $10-15m $7-10m $4-$6m $1-$1.5m $1-$4m
www.sapiens.com 27
… With Significant Visibility R
eve
nu
e
Time
20% New Customers
Layered revenue streams create significant visibility
Year 2
Year 3
Year 4
80% Existing Customers
Year 1
Year 5
www.sapiens.com 28
H1 2014 – Gross Profit and Margin
• Implementation of new L&P release
• Development of new product for retirement services
• Delivery staff recruitment to support the significant revenue growth
$27.1 $30.3
$0.0
$15.0
$30.0
2013 2014
Gross Profit
41.9%
40.3%
36%
41%
2013 2014
Gross Margin
(Non-GAAP USD Millions)
www.sapiens.com 29
Improved Gross Margins – Key Initiatives
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
$
Time
Products
Improve Delivery Margins • Repeatable business from the same product
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
Typical Gross Margin of Engagement
Gross
Margin
Pre Delivery Ongoing Post-Delivery
Go
-Liv
e
www.sapiens.com 30
Q2 and H1- P&L Highlights - Non GAAP
H1 Q2
2013 2014 2013 2014
64.6 75.3 33.1 38.6 Revenue
27.1 30.3 13.6 15.7 Gross Profit
41.9% 40.2% 41.1% 40.6%
6.7 7.7 3.3 4.0 Operational Profit
10.4% 10.2% 10.0% 10.4%
6.6 7.0 3.2 3.6 Net Income
10.2% 9.3% 9.7% 9.3%
7.2 8.4 3.6 4.4 Adjusted EBITDA
0.16 0.14 0.08 0.07 Diluted EPS
41,107 48,362 41,399 48,759 Weighted Average no. of shares
Outstanding shares*: 47,474 (in USD Million except per share amount)
* as of June 30st, 2014
www.sapiens.com 31
Financial Highlights
~15.2% organic growth in 2014
Operationally profitable since Q4 2006
Cashflow positive since 2007
Balanced Financial
Profile
Diversified revenue base:
4 continents
Multiple product lines
Over 130 customers
Risk diversification
Long engagement cycle with repeat revenues
Existing clients account for 80% of revenues
Multiple growth engines
Highly Attractive
Revenue Model
~$79.8 m cash and securities investments on balance sheet as of
end-of-June 2014
No financial debt
Well Capitalized
Gross Margins
Flexibility
Gross margins leverage
Revenue mix
Post delivery margin
www.sapiens.com 32 www.sapiens.com
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
www.sapiens.com 33 www.sapiens.com
Appendix
www.sapiens.com 34
Key Balance Sheet Highlights
(in USD Million)
December 31, 2013 June 30, 2014
70.3 45.4 Cash and cash equivalents
0 34.4 Marketable securities
23.7 25.6 Account Receivable
9.9 11.0 Deferred Revenue
0 0 Debt
170.4 179.2 Total Equity
www.sapiens.com 35
Strong Free Cash Flow
(in USD Million)
For the Six months ended June
2013 2014
9.1 11.9 Net cash provided by operating activities
(2.5) (3.1) Net cash used for capitalization of R&D
(1.5) (0.7) Net cash used for investing activities
- (34.8) Purchase of marketable securities
(4.5) 1.3 Net cash provided by (used for) financing activities
(0.4) 0.5 Effect of exchange rate changes on cash
0.2 (24.9) Increase (decrease) in cash
29.0 70.3 Cash at beginning of year
29.2 45.4 Cash at end of period
www.sapiens.com 36
Non-GAAP Reconciliation
(in USD Thousands except per share amount)
Three months ended
Six months ended
June 30,
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
Amortization of capitalized software
1,459
1,138
2,506
2,262
Amortization of other intangible assets
218
220
442
437
Non-GAAP gross profit
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
Capitalization of software development
(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
Operating income adjustments
618
482
1,096
1,257
Other
(122)
29
(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
Shares used in computing US NON GAAP basic earnings per share (in thousands)
47,177
39,120
46,797
38,945
Shares used in computing US NON GAAP diluted earnings per share (in thousands)
48,759
41,399
48,362
41,107
37 www.sapiens.com
Consolidated Balance Sheet June 30, December 31,
2014 2013
(unaudited) (unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents 45,374 70,313
Trade receivables, net 25,644 23,669
Other receivables and prepaid expenses 3,512 4,126
Deferred Taxes 1,862 2,420
Total current assets 76,392 100,528
LONG-TERM ASSETS:
Marketable Securities 34,377 -
Property and equipment, net 5,664 5,263
Severance pay fund 12,131 11,228
Other intangible assets, net 29,751 30,014
Other long-term assets 3,093 2,957
Goodwill 72,922 72,438
Total long-term assets 157,938 121,900
TOTAL ASSETS 234,330 222,428
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Trade payables 4,592 6,517
Accrued expenses and other liabilities 24,585 21,248
Deferred revenue 11,024 9,928
Total current liabilities 40,201 37,693
LONG-TERM LIABILITIES:
Other long-term liabilities 1,269 1,712
Accrued severance pay 13,686 12,615
Total long-term liabilities 14,955 14,327
EQUITY 179,174 170,408
TOTAL LIABILITIES AND EQUITY 234,330 222,428
www.sapiens.com 38
Q2 2014 – Gross Profit and Margin
• Implementation of new L&P release
• Development of new product for retirement services
• Delivery staff recruitment to support the significant revenue growth
$13.6
$15.7
$3.0
$5.0
$7.0
$9.0
$11.0
$13.0
$15.0
2013 2014
Gross Profit
41.1% 40.6%
30%
2013 2014
Gross Margin
(Non-GAAP USD Millions)