Non-GAAP revenue up 30.4% compared to the second quarter of 2016
Holon, Israel, August 7, 2017 – Sapiens International Corporation, (NASDAQ and TASE: SPNS), a leading global provider of software solutions for the insurance industry, with a growing presence in the financial services sector, and a member of the Formula Group (NASDAQ: FORTY and TASE: FORT), today announced its financial results for the second quarter ended June 30, 2017.
Second Quarter Highlights:
- GAAP revenue of $69.0 million, up 30.2% compared to $53.0 million in the second quarter of 2016.
- Non-GAAP revenue of $69.2 million, up 30.4% compared to $53.0 million in the second quarter of 2016.
- GAAP operating loss totaled $3.0 million, compared to operating income of $6.4 million (12.1% operating margin) in the second quarter of 2016. GAAP operating loss for the second quarter of 2017 included $3.9 million in restructuring and cost reduction plan.
- Non-GAAP operating profit totaled $3.2 million (4.7% operating margin), compared to $7.4 million (14.0% operating margin) in the second quarter of 2016.
- GAAP net loss attributable to Sapiens’ shareholders totaled $3.6 million or $(0.07) per diluted share compared to net income attributable to Sapiens’ shareholders of $5.3 million, or $0.11 per diluted share in the second quarter last year.
- Non-GAAP net income attributable to Sapiens’ shareholders totaled $1.9 million or $0.04 per diluted share compared to net income attributable to Sapiens’ shareholders of $6.3 million, or $0.13 per diluted share in the second quarter last year.
- Cash, cash equivalents as of June 30, 2017 were $46.4 million, with total debt of $38.0 million.
“Sapiens delivered another quarter of double-digit revenue growth, driven by a mix of organic growth and our recent acquisition of StoneRiver,” said Roni Al-Dor, president and CEO of Sapiens. “We witnessed growth across North America, Europe and South Africa. We reported Non-GAAP operating margin of 4.7% which was higher than our guidance of 3-4%. We believe we are on track for continued improvement in our operational profitability.
Al-Dor continued: “We remain very excited about the StoneRiver acquisition and we have made solid steps in combining our two organizations. To date, each StoneRiver division has been fully merged with its peer division at Sapiens, with all of our U.S. P&C activities now in a single group. The StoneRiver and Sapiens sales departments have been integrated, while adding account managers to grow business with existing clients and our marketing departments has been merged into one. All corporate functions and back-office operations, including IT, finance, legal, HR and purchasing, are now also fully integrated. Meanwhile, Sapiens is planning to further leverage our offshore capabilities to drive additional efficiencies and reduce costs throughout the company. Overall, our integration efforts are proceeding according to plan at this time and Sapiens management believes we are on track for the second half of 2017."
During the quarter, we implemented restructuring and cost reduction plan in total of $3.9 million dollars. The restructuring and cost reduction plan included: integration of StoneRiver, de-emphasis of non-core activities in APAC and efficiency measures post the halted development project. The cost savings primarily include headcount reductions as well as other cost saving measures. We continue to expect restructuring and cost reduction expenses of up to $5 million for the full year 2017.
Al-Dor concluded: “Sapiens is maintaining our guidance for 2017 full year revenues of $265 to $275 million (on a non-GAAP basis). We are also maintaining expectations for operating profit margin 13.5-14.5% in the second half of the year (in each case, on a non-GAAP basis) and our expectations for full-year operating profit margin between 9-10% (on a non-GAAP basis).”
Quarterly Results Conference Call
Management will host a conference call and webcast on August 7 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): + 1-888-407-2553; International: +972-3-918-0685; UK: 0-800-917-5108.
The live webcast of the call can be viewed on Sapiens’ website at: http://www.sapiens.com/investors/presentations-and-webcast/
If you are unable to join live, a replay of the call will be accessible until August 17, 2017, as follows:
North America: 1-866-500-4953; International: +972-3-925-5947.
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, and non-GAAP basic and diluted earnings per share.
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: amortization of intangible assets, capitalization of software development, stock-based compensation, compensation related to acquisition, acquisition-related costs, restructuring and cost reduction costs, loss on sales of Marketable Securities and tax adjustment regarding non-GAAP adjustments.
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 stock-based compensation expense, depreciation and amortization, capitalized of software development costs, compensation expenses related to acquisition, 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, 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.
Sapiens International Corporation (NASDAQ and TASE: SPNS) is a leading global provider of software solutions for the insurance industry, with an emerging focus on the broader financial services sector. We offer core, end-to-end solutions to the global general insurance, property and casualty, life, pension and annuities, and retirement markets, as well as business decision management software. We have a track record of over 30 years in delivering superior software solutions to more than 400 financial services organizations. The Sapiens team of approximately 2,500 professionals operates through our fully-owned subsidiaries in North America, the United Kingdom, EMEA and Asia Pacific. 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, 2016, and subsequent reports and registration statements filed from time to time with the Securities and Exchange Commission.
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