Investor
Presentation
Roni Al-Dor, CEO
Roni Giladi, CFO
Yaffa Cohen-Ifrah, VP Corporate Marketing
January 2015
Needham Growth Conference, NYC
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www.sapiens.com
www.sapiens.com
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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www.sapiens.com
Who is Sapiens?
Founded
1982
IPO
1992
2013
1,000
Customers
130+
Global Footprint
N. America: 33%
UK: 21%
Europe: 37%
APAC: 9%
Revenue Growth
2012: 16%
2013: 19%
2014 YTD: 17%
Early Days
Pivot 1
Pivot 2
1982-2000
2001-2008
2009+
Application
development platform
Tailor-made solutions
3
Employees
www.sapiens.com
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:
Core software policy
administration solutions
For insurance &
financial services customers, globally
Insurance
Software
Life, Pension Retirement
&
Annuities
Technology
Based
Solutions
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www.sapiens.com
Innovative
platform for
business decisions
Investment
Banks
Property
&
Casualty
Retail
Banks
Reinsurance
Mortgage
Banks
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
6
$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
www.sapiens.com
The Market
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www.sapiens.com
Insurance is Everywhere
Property, Casualty, Reinsurance
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Life, Annuity, Retirement
Liability
Wealth
Catastrophes
Annuities
Retirement
Voice
Motor
Pets
Injuries
Life
Marine
Excess
Property
Pension
Medical
www.sapiens.com
The Insurance Industry
Big Market
Potential
IT related
Investment
$4,200,000,000,000
gross written premium (GWP)
11,000
insurance companies globally
$153B
Source: Market size data per Celent. March 2013
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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
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www.sapiens.com
Struggle with
Heavy Regulations
•
•
•
•
•
Solvency II
Dodd-Frank
Basel
Schedule F
MISMO
BUT…
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Still based on Legacy systems
The Insurance IT Opportunity is Large and Growing
Trends
Total 2014 IT related
investment are estimated at
$153B, of which external software
and services spend are $59.9 B
growing at mid-single digits
2014
Of which, Sapiens’ Total
Addressable Market
is estimated at $25 billion
Growth of TAM
driven by shifts from:
• Legacy to modern solutions
• Internal to external spending
Source: Market size data per Celent. March 2013
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www.sapiens.com
Highly
Attractive
Growing
Market
NEW
Market Transformation in The Next Decade
ERP
Banking
Insurance
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Sapiens Today
Current Sapiens Portfolio
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Life, Annuities Pension
and Retirement
Property & Casualty
and Reinsurance
Decision
Technology
www.sapiens.com
Leadership in L&A Insurance Solutions
TECHNOLOGY AND FUNCTIONALITY 2013
EMEA
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, 11/2013
XCelent Awards - North American Policy Administration Systems 2013 Life, Annuities, and Health 11/2013
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www.sapiens.com
Nov. 2013
Leadership in P&C Insurance Solutions
TECHNOLOGY AND FUNCTIONALITY 2013
EMEA
Leader
Overall Execution Assessment
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Challenger
Guidewire
PolicyCenter
8
Sapiens IDIT
GraphTalk A.I.A.
7
TCS
BaNCS
6
5
Xuber for
Insurers
4
3
Innovation Group
Insurer Policy
6
7
8
Overall Technology Assessment Score (1–10)
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.
www.sapiens.com
Accenture Duck
Creek Policy
Administration
eBao Tech
GeneralSystem Suite
“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.”
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Follower
9
Jan. 2014
Innovation of Technology Based Solutions
Analytics and Decision
Management
Business Process Management
Data Management
Informal design and development methods
1970
Source: Gartner
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www.sapiens.com
1980
1990
2000
2010
2020
2030
From Dispersed Business Logic…
Regulation
s
Business
Strategy
Market
Condition
Competitio
n
Customer
Requireme
nts
•
•
•
•
•
•
•
Credit
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www.sapiens.com
ERP
CRM
Loans
Mortgage
Vague
Obscure
Unverified
Incomplete
Variable
Uncontrolled
Unsustainable
To a Single Point of Truth …
Regulation
s
Business
Strategy
Market
Condition
Competition
Customer
Requirements
Centralized Decision Logic
Automated
Code
Generation
Credit
ERP
CRM
Loans
•
•
•
•
•
•
•
•
Unambiguous
Visible
Traceable
Complete
Consistent
Governed
Reusable
Technology
agnostic
Mortgage
Decision management disciplines & systems seek to provide centralized, structured
decision design and automated deployment to manage all aspects of business operations
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www.sapiens.com
Blue-Chip Global Customer-Base
North America
UK
Europe
APAC
Bulgaria
2013 Revenue Contribution
33%
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www.sapiens.com
21%
37%
9%
Why Sapiens?
Software
Delivery
Award-winning, packaged solutions
that meet all key business challenges of
insurance carriers and financial institutions
30+ years of field-proven project
delivery of core insurance system solutions
1,000 employees worldwide, comprised
Global
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www.sapiens.com
mostly of insurance and technology domain
experts who provide a wide array of global
professional services and product
development
Growth
Strategy
Sapiens Strategy: ‘ONE STOP SHOP’
Product
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Our Strategic Direction
Investments
in our Growth
Engines
P&C
L&A
Decision
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www.sapiens.com
Strengthen
our Geographic
Presence
US
UK
Europe
APAC
Proven Management Team
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Roni Al-Dor
President & CEO
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
Irit Nusel
Managing Director
Life Insurance
2013
Henry Ainouze
Regional Manager
Benelux/France
2011
Gary Sherne
Managing Director
Property & Casualty
2014
Wayne Te Paa
Regional Manager
APAC
2014
Yaffa Cohen-Ifrah
VP Corp Marketing &
Communications
2014
Manabu Okada
Regional Manager
Japan
1998
Anat Belluco
VP Global HR
2013
Tal Sharon
Regional Manager
Israel
2001
www.sapiens.com
Opportunities for Growth
5
4
3
27
1
2
Grow with
existing
clients
Acquire new
customers
www.sapiens.com
Expand into
new markets
Enhance
portfolio
through
innovative
technologies
Pursue
strategic
acquisitions
Financials
Attractive Financial Profile
Robust 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)
3.3
3.6
3.8
3.7
4.0
Q2 2013
Q3 2013
Q4 2013
Q1 2014
Q2 2014
Revenues of $98.1mm in 2011 pro-forma for the FIS and IDIT acquisitions.
Non-GAAP revenues. 2014 guidance per Sapiens press releases dated February 26, 2014.
3 Non-GAAP operating profit excludes stock-based compensation, amortization of intangibles, capitalization and amortization of software, and valuation adjustment on deferred revenue.
2
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www.sapiens.com
4.4
Q3 2014
3.4
Q1 2013
2.6
4.0
Q4 2012
Q4 2010
2.1
4.1
Q3 2012
Q3 2010
2.0
3.7
Q2 2012
Q2 2010
1
2.0
3.3
Q1 2012
2.4
Q4 2011
2.0
Q3 2011
2.0
Q2 2011
1.9
Q1 2011
2.1
Q1 2010
1.7
Q4 2009
1.5
Q3 2009
Q1 2009
1.3
Q2 2009
Quarterly Non-GAAP Operating Profit ($mm)
Annual Revenue by Geography
Consistent Revenue Growth in NA and EU
60
56.1
40
44.2
35.6
20
2011
42.8
34.2
2012
26.7
25.9
2013
23.3 22.9
11.2 12.5 12.2
0
NA
EU
IL
2011
APAC
2012
11%
2013
9%
11%
27%
31%
20%
27%
35%
17%
33%
US
Europe
38%
41%
IL
APAC
(Non-GAAP USD Millions) 2011:Pro forma
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www.sapiens.com
Attractive Revenue Model …
Typical life of product engagement: 10–15 years
2-3x initial contract values
Initial
Deal Size Stickiness
Stage
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$2.5
$2.5
0.5
0.5
2.0
2.0
Year 1
Services
Go-Live
Revenue ($mm)
Illustrative $5mm initial contract
Year 2
License
Maintenance
$1.1
0.2
$1.1
0.2
$1.1
0.2
$1.1
0.2
0.9
0.9
0.9
0.9
Year 3
Year 4
Year 5
Year 6-10
Pre-Production
Ongoing Post-Production
Contractual
High
RETIREMENT
L&A
P&C
REINSURANCE
DECISION
$10 - $15m
$7 - $10m
$4 - $6m
$1 - $1.5m
$1 - $4m
www.sapiens.com
… With Significant Visibility
Layered revenue streams create significant visibility
YEAR 5
20%
New
Customers
Revenue
YEAR 4
YEAR 3
YEAR 2
YEAR 1
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www.sapiens.com
80%
Existing
Customers
YTD Gross Profit and Margin
Gross Profit
Gross Margin
50%
$45.0
$46.7
40%
$40.9
41.3%
40.4%
2013
2014
30%
$30.0
20%
$15.0
10%
$0.0
0%
2013
2014
YTD September, Non-GAAP USD Millions
• Implementation of new L&P release
• Development of new product for retirement services
• Delivery staff recruitment to support the significant revenue growth
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www.sapiens.com
Improved Gross Margins – Key Initiatives
Products Maturity
Typical Gross Margin of Engagement
Time
Go-Live
Gross Margin
$
Pre-Delivery
Ongoing Post-Delivery
Improve Revenue Mix
Improve Delivery Margins
• Invest in R&D to enhance technology and
• Repeatable business from the same product
enrich product functionality, to allow higher
license price
• Grow DECISION out of the total mix
• Start working with system integrators to shift
low service work outside and keep the
premium service to Sapiens
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www.sapiens.com
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
Q3 and YTD Highlights - Non GAAP
YTD
Q3
2014
2013
2014
2013
Revenue
40.4
34.6
115.7
99.2
Gross Profit
16.4
13.9
46.7
40.9
40.6%
40.1%
40.4%
41.3%
4.4
3.6
12.1
10.3
10.9%
10.4%
10.4%
10.4%
4.1
4.1
11.1
10.3
10.1%
11.8%
9.6%
10.3%
Adjusted EBITDA*
4.8
3.8
13.2
11.1
Diluted EPS
0.08
0.10
0.23
0.25
49,006
41,729
48,235
41,297
Operational Profit
Net Income
Diluted Weighted Average
Number of Shares
Outstanding Shares: 47,646
)as of September 30th, 2014(
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www.sapiens.com
(in USD Million except per share amount)
* 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).
Financial Highlights
Balanced Financial
Profile
• 2011-2014E CAGR 16.7% organic growth
• Operationally profitable since Q4 2006
• Cash flow positive since 2007
Risk Diversification
Diversified revenue base:
• 4 continents
• Multiple product lines
• Over 130 customers
Highly Attractive
Revenue Model
• Long engagement cycle with repeat revenues
• Existing clients account for 80% of revenues
• Multiple growth engines
Gross Margins
Flexibility
Gross margins leverage
• Revenue mix
• Post delivery margin
• ~$78.4 m cash and securities investments on balance sheet
Well Capitalized
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www.sapiens.com
as of end-of-September 2014
• No financial debt
THANK YOU
Contact:
Yaffa Cohen-Ifrah, VP Corporate Marketing & Communications
US Mobile: +1-201-250-9414 | Phone: +972-3-7902032
e-Mail: [email protected] | Website www.sapiens.com
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www.sapiens.com
Appendix
Key Balance Sheet Highlights
September 30, 2014
December 31, 2013
Cash and cash equivalents
45.1
70.3
Marketable securities
33.3
0
Account Receivable
26.4
23.7
Deferred Revenue
10.0
9.9
0
0
176.5
170.4
Debt
Total Equity
(in USD Million)
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Strong Free Cash Flow
September 30th
2014
2013
Net cash provided by operating activities
16.2
9.6
Net cash used for capitalization of R&D
(4.5)
(3.9)
Payments for business acquisition , net of cash acquired (KPI)
(2.1)
Net cash used for investing activities
(0.8)
(2.6)
Purchase of marketable securities
(33.6)
-
Net cash provided by (used for) financing activities
1.5
(4.2)
Effect of exchange rate changes on cash
(1.9)
0.2
Increase (decrease) in cash
(25.2)
(0.9)
Cash at beginning of year
70.3
29.0
Cash at end of period
45.1
28.1
(in USD Million)
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Non-GAAP Reconciliation YTD
Nine months ended
09/30/2014
GAAP/Non-GAAP revenue
09/30/2013
$ 115,677
$ 99,185
$ 42,313
$ 36,906
3,732
3,370
670
660
Non-GAAP gross profit
$ 46,715
$ 40,936
GAAP operating income
$ 10,356
$ 8,568
4,402
4,030
Capitalization of software development
(4,538)
(3,936)
Amortization of other intangible assets
995
940
Stock-based compensation
841
699
$ 12,056
$ 10,291
$9,839
$8,183
Operating income adjustments
1,700
1,733
Other
(479)
343
$ 11,060
$ 10,259
Non-GAAP basic earnings per share
$ 0.24
$ 0.26
Non-GAAP diluted earnings per share
$ 0.23
$ 0.25
GAAP gross profit
Amortization of capitalized software
Amortization of other intangible assets
Gross profit adjustments
Non-GAAP operating income
GAAP net income attributable to Sapiens' shareholders
Non-GAAP net income attributable to Sapiens' shareholders
(in USD Thousands except per share amount)
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