Sapiens Reports Fourth Quarter 2024 Financial Results
ROCHELLE PARK, N.J., Feb. 18, 2025 /PRNewswire/ -- Sapiens International Corporation, (NASDAQ: SPNS) (TASE: SPNS), a leading global provider of software solutions for the insurance industry, today announced its financial results for the fourth quarter ended December 31, 2024.
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Summary
Results for Fourth
Quarter 2024 (USD in millions, except per share data)
GAAP Non-GAAP
Q4 2024 Q4 2023 % Change Q4 2024 Q4 2023 % Change
Revenue $134.3 $130.9 2.6 % $134.3 $130.9 2.6 %
Gross Profit $60.1 $55.9 7.5 % $62.7 $59.4 5.6 %
Gross Margin 44.8 % 42.8 % 200 bps 46.7 % 45.4 % 130 bps
Operating Income $21.7 $20.1 8.0 % $24.5 $24.2 1.3 %
Operating Margin 16.2 % 15.4 % 80 bps 18.2 % 18.4 % -20 bps
Net Income (*) $17.9 $17.0 5.3 % $20.7 $20.1 3.1 %
Diluted EPS $0.32 $0.30 6.7 % $0.37 $0.36 2.8 %
Summary Results for Full Year end 2024 (USD in millions, except per share data)
GAAP % Change Non-GAAP % Change
2024 2023 2024 2023
Revenue $542.4 $514.6 5.4 % $542.4 $514.8 5.4 %
Gross Profit $238.1 $219.6 8.4 % $248.9 $233.0 6.8 %
Gross Margin 43.9 % 42.7 % 120 bps 45.9 % 45.3 % 60 bps
Operating Income $85.8 $78.9 8.9 % $98.7 $94.1 4.8 %
Operating Margin 15.8 % 15.3 % 50 bps 18.2 % 18.3 % -10 bps
Net income (*) $72.2 $62.4 15.6 % $83.3 $75.0 11.0 %
Diluted EPS $1.29 $1.12 15.2 % $1.48 $1.35 9.6 %
(*) Attributable to Sapiens' shareholders
Roni Al-Dor, President and CEO of Sapiens, stated, "In the fourth quarter we achieved $134 million in revenue, a 2.6% year over year increase. This quarter showcased solid execution across our key regions and ongoing growth of our core Life business. For the full year 2024, we delivered a 5.4% increase in revenue, reflecting the signing of deals with new and existing customers. North America led our global performance with a 6.3% year-over-year revenue increase. By leveraging our Microsoft cloud strategy and scalable SaaS platform, we are accelerating our clients' migration to the cloud."
"Our continued investment in a future-proof, modular, open insurance platform-integrating core capabilities with advanced data analytics and AI-is set to drive further growth. We are well positioned to deepen relationships with existing customers, capture additional market share, and strengthen growth across all regions."
"We are introducing 2025 guidance for non-GAAP revenue in a range of $553 million to $558 million, and non-GAAP operating profit in a range of $98 million to $102 million with operating margin of 18% at the midpoint. On a constant currency basis, our growth rate would be 3.4%, and our operating margin would be 18.7% at the mid-point."
Quarterly Results Conference Call
Management will host a conference call and webcast today, February 18, 2025, 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): 1-888-642-5032
International: 972-3-9180644
UK: 0-800-917-5108
The live webcast of the call can be viewed on Sapiens' website at: veidan.activetrail.biz/sapiensq4-2024. A replay of the call will be available one business day following the completion of the event at the same link for 90 days.
Non-GAAP Financial Measures
This press release contains the following non-GAAP financial measures: non-GAAP revenue, ARR, non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating income, non-GAAP operating margin, non-GAAP net income attributed to Sapiens shareholders, non-GAAP basic and diluted earnings per share, Adjusted EBITDA and Adjusted Free Cash-Flow.
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: Valuation adjustment on acquired deferred revenue, amortization of capitalized software development and other intangible assets, capitalization of software development, stock-based compensation, compensation related to acquisition and acquisition-related costs, restructuring and cost reduction costs, and tax adjustments related to 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 Annual Recurring Revenue ("ARR") as the annualized value of our revenue from customer subscriptions, term licenses, maintenance, application maintenance, and cloud solutions, which may not be the same as the timing and amount of revenue recognized. The ARR run rate is equal to the product of (i) the sum of these revenues in our most recently completed fiscal quarter, multiplied by (ii) four.
The Company defines Adjusted EBITDA as net profit, adjusted to eliminate valuation adjustment on acquired deferred revenue, stock-based compensation expense, depreciation and amortization, capitalization of software development costs, compensation expenses related to acquisition and 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 as well, in order 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. The Company uses Adjusted Free Cash-Flow as a measurement of its operating performance, and reconciles cash-flow from operating activities to Adjusted Free Cash-Flow, while reducing the amounts for capitalization of software development costs and capital expenditures. The Company adds back cash payments made for former acquisitions in respect of future performance targets and retention criteria as determined upon acquisition date of the respective acquired company, which were included in the cash-flow from operating activities. We believe that Adjusted Free Cash-Flow is useful in evaluating our business, because Adjusted Free Cash-Flow reflects the cash surplus available to fund the expansion of our business.
About Sapiens
Sapiens International Corporation (NASDAQ and TASE: SPNS) is a global leader in intelligent insurance software solutions. With Sapiens' robust platform, customer-driven partnerships, and rich ecosystem, insurers are empowered to future-proof their organizations with operational excellence in a rapidly changing marketplace. We help insurers harness the power of AI and advanced automation to support core solutions for property and casualty, workers' compensation, and life insurance, including reinsurance, financial & compliance, data & analytics, digital, and decision management. Sapiens boasts a longtime global presence, serving over 600 customers in more than 30 countries with its innovative SaaS offerings. Recognized by industry experts and selected for the Microsoft Top 100 Partner program, Sapiens is committed to partnering with our customers for their entire transformation journey and is continuously innovating to ensure their success.
Investor and Media Contact Investor Contacts
Yaffa Cohen-Ifrah
Brett Maas
Managing Partner, Hayden
IR
Chief Marketing Officer and Head of Investor Relations, Sapiens +1 646-536-7331
brett@haydenir.com
Yaffa.cohen-ifrah@sapiens.com
Kimberly Rogers
+1 917-533-4782 Managing Director, Hayden
IR
+1 541-904-5075
kim@HaydenIR.com
Forward Looking Statements
Certain matters discussed in this press release that are incorporated herein by reference are forward-looking statements within the meaning of Section 27A of the Securities Act, Section 21E of the Exchange Act and the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995, that are based on our beliefs, assumptions and expectations, as well as information currently available to us. Such forward-looking statements may be identified by the use of the words "anticipate," "believe," "estimate," "expect," "may," "will," "plan" and similar expressions. Such statements reflect our current views with respect to future events and are subject to certain risks and uncertainties. There are important factors that could cause our actual results, levels of activity, performance or achievements to differ materially from the results, levels of activity, performance or achievements expressed or implied by the forward-looking statements, including, but not limited to: the degree of our success in our plans to leverage our global footprint to grow our sales? the degree of our success in integrating the companies that we have acquired through the implementation of our M&A growth strategy? the lengthy development cycles for our solutions, which may frustrate our ability to realize revenues and/or profits from our potential new solutions? our lengthy and complex sales cycles, which do not always result in the realization of revenues? the degree of our success in retaining our existing customers or competing effectively for greater market share? difficulties in successfully planning and managing changes in the size of our operations? the frequency of the long-term, large, complex projects that we perform that involve complex estimates of project costs and profit margins, which sometimes change mid-stream? the challenges and potential liability that heightened privacy laws and regulations pose to our business? occasional disputes with clients, which may adversely impact our results of operations and our reputation? various intellectual property issues related to our business? potential unanticipated product vulnerabilities or cybersecurity breaches of our or our customers' systems? risks related to the insurance industry in which our clients operate? risks associated with our global sales and operations, such as changes in regulatory requirements, wide-spread viruses and epidemics like the recent novel coronavirus pandemic, which adversely affected our results of operations, or fluctuations in currency exchange rates? and risks related to our principal location in Israel and our status as a Cayman Islands company. While we believe such forward-looking statements are based on reasonable assumptions, should one or more of the underlying assumptions prove incorrect, or these risks or uncertainties materialize, our actual results may differ materially from those expressed or implied by the forward-looking statements. Please read the risks discussed under the heading "Risk Factors" in our most recent Annual Report on Form 20-F, in order to review conditions that we believe could cause actual results to differ materially from those contemplated by the forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that future results, levels of activity, performance and events and circumstances reflected in the forward-looking statements will be achieved or will occur. Except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason, to conform these statements to actual results or to changes in our expectations.
SAPIENS INTERNATIONAL CORPORATION N.V. AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME
U.S. dollars in thousands (except per share amounts)
Three months ended Year ended
December 31, December 31,
2024 2023 2024 2023
(unaudited) (unaudited) (unaudited) (unaudited)
Revenue 134,305 130,859 542,379 514,584
Cost of revenue 74,158 74,910 304,272 294,990
Gross profit 60,147 55,949 238,107 219,594
Operating expenses:
Research and development, net 16,523 16,084 66,302 63,475
Selling, marketing, general and 21,926 19,776 85,956 77,251
administrative
Total operating expenses 38,449 35,860 152,258 140,726
Operating income 21,698 20,089 85,849 78,868
Financial and other expenses (income), net (864) (560) (3,978) 1,750
Taxes on income 4,695 3,624 17,507 14,251
Net income 17,867 17,025 72,320 62,867
Attributable to non-controlling interest 52 141 423
Net income attributable to Sapiens' 17,867 16,973 72,179 62,444
shareholders
Basic earnings per share 0.32 0.30 1.29 1.13
Diluted earnings per share 0.32 0.30 1.29 1.12
Weighted average number of shares 55,887 55,733 55,821 55,372
outstanding used to compute basic earnings
per share (in thousands)
Weighted average number of shares 56,164 55,910 56,154 55,721
outstanding used to compute diluted earnings
per share (in thousands)
SAPIENS INTERNATIONAL CORPORATION N.V. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP RESULTS
U.S. dollars in thousands (except per share amounts)
Three months ended Year ended
December 31, December 31,
2024 2023 2024 2023
(unaudited) (unaudited) (unaudited) (unaudited)
GAAP revenue 134,305 130,859 542,379 514,584
Valuation adjustment on acquired deferred 55 220
revenue
Non-GAAP revenue 134,305 130,914 542,379 514,804
GAAP gross profit 60,147 55,949 238,107 219,594
Revenue adjustment 55 220
Amortization of capitalized software 1,540 1,501 6,124 5,775
Amortization of other intangible assets 1,005 1,865 4,635 7,396
Non-GAAP gross profit 62,692 59,370 248,866 232,985
GAAP operating income 21,698 20,089 85,849 78,868
Gross profit adjustments 2,545 3,421 10,759 13,391
Capitalization of software development (1,759) (1,543) (7,133) (6,518)
Amortization of other intangible assets 1,211 1,169 4,943 4,403
Stock-based compensation 723 698 2,952 3,658
Acquisition-related costs (*) 50 318 1,298 339
Non-GAAP operating income 24,468 24,152 98,668 94,141
GAAP net income attributable to Sapiens' 17,867 16,973 72,179 62,444
shareholders
Operating income adjustments 2,770 4,063 12,819 15,273
Taxes on income 73 (955) (1,735) (2,693)
Non-GAAP net income attributable to 20,710 20,081 83,263 75,024
Sapiens' shareholders
((*) )Acquisition-related costs pertain to charges on behalf of M&A agreements related to future performance targets and retention criteria, as well as completed or prospective third-party services, such as tax, accounting and legal rendered.
Adjusted EBITDA Calculation
U.S. dollars in thousands
Three months ended Year ended
December 31, December 31,
2024 2023 2024 2023
GAAP operating profit 21,698 20,089 85,849 78,868
Non-GAAP adjustments:
---
Valuation adjustment on acquired deferred 55 220
revenue
Amortization of capitalized software 1,540 1,501 6,124 5,775
Amortization of other intangible assets 2,216 3,034 9,578 11,799
Capitalization of software development (1,759) (1,543) (7,133) (6,518)
Stock-based compensation 723 698 2,952 3,658
Compensation related to acquisition and 50 318 1,298 339
acquisition-related costs
Non-GAAP operating profit 24,468 24,152 98,668 94,141
Depreciation 891 1,115 4,371 3,865
Adjusted EBITDA 25,359 25,267 103,039 98,006
Summary of
NON-GAAP
Financial Information
U.S. dollars in thousands (except per share amounts)
Q4 2024 Q3 2024 Q2 2024 Q1 2024 Q4 2023
Revenues 134,305 137,025 136,800 134,249 130,914
Gross profit 62,692 62,809 62,481 60,884 59,370
Operating income 24,468 25,101 24,836 24,263 24,152
Adjusted EBITDA 25,359 26,389 25,931 25,360 25,267
Net income to Sapiens' shareholders 20,710 21,091 21,041 20,421 20,081
Diluted earnings per share 0.37 0.37 0.37 0.36 0.36
Annual Recurring Revenue ("ARR")
U.S. dollars in thousands
Three months ended
December 31,
2024 2023
Annual Recurring Revenue 175,542 164,840
Non-GAAP Revenues by Geographic Breakdown
U.S. dollars in thousands
Q4 2024 Q3 2024 Q2 2024 Q1 2024 Q4 2023
North America 56,753 55,755 57,918 55,158 54,882
Europe 65,903 69,281 66,072 68,727 65,239
Rest of the World 11,649 11,989 12,810 10,364 10,793
Total 134,305 137,025 136,800 134,249 130,914
Non-GAAP Revenue breakdown
U.S. dollars in thousands
Three months ended Year ended
December 31, December 31,
2024 2023 2024 2023
Software products and re-occurring post-production services (*) 97,336 90,399 390,328 342,156
Pre-production implementation services (**) 36,969 40,515 152,051 172,648
Total Revenues 134,305 130,914 542,379 514,804
Three months ended Year ended
December 31, December 31,
2024 2023 2024 2023
Software products and re-occurring post-production services (*) 52,356 48,815 208,742 182,154
Pre-production implementation services (**) 10,336 10,555 40,124 50,831
Total Gross profit 62,692 59,370 248,866 232,985
Three months ended Year ended
December 31, December 31,
2024 2023 2024 2023
Software products and re-occurring post-production services (*) 53.8 % 54.0 % 53.5 % 53.2 %
Pre-production implementation services (**) 28.0 % 26.1 % 26.4 % 29.4 %
Gross Margin 46.7 % 45.4 % 45.9 % 45.3 %
((*) Software products and re-occurring post-production services include mainly subscription, term license, maintenance, application maintenance, cloud solutions and post-production services. This revenue stream is a mix of recurring and re-occurring in nature.
)((**) Pre-production implementation services include mainly implementation services before go-live, which are one-time in nature.)
Adjusted Free Cash-Flow
U.S. dollars in thousands
Q4 2024 Q3 2024 Q2 2024 Q1 2024 Q4 2023
Cash-flow from operating activities 42,109 13,083 8,545 18,488 38,646
Increase in capitalized software development costs (1,759) (1,834) (1,823) (1,717) (1,543)
Capital expenditures (419) (1,125) (666) (466) (421)
Free cash-flow 39,931 10,124 6,056 16,305 36,682
Cash payments attributed to acquisition-related 1,238 124 134 751 221
costs(*) (**)
Adjusted free cash-flow 41,169 10,248 6,190 17,056 36,903
((*) )Included in cash-flow from operating activities
((**)) Acquisition-related payments pertain to charges on behalf of M&A agreements related to future performance targets and retention criteria, as well as completed or prospective third-party services, such as tax, accounting and legal rendered.
SAPIENS INTERNATIONAL CORPORATION N.V. AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
U.S. dollars in thousands
December 31, December 31,
2024 2023
(unaudited) (unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents 163,690 126,716
Short-term bank deposit 52,500 75,400
Trade receivables, net and unbilled
receivables 99,603 90,273
Other receivables and prepaid expenses 19,350 22,514
Total current assets 335,143 314,903
LONG-TERM ASSETS
Property and equipment, net 10,656 12,661
Severance pay fund 3,208 3,605
Goodwill and intangible assets, net 302,472 317,352
Operating lease right-of-use assets 20,746 23,557
Other long-term assets 19,486 17,546
Total long-term assets 356,568 374,721
TOTAL ASSETS 691,711 689,624
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Trade payables 8,414 6,291
Current maturities of Series B
Debentures 19,796 19,796
Accrued expenses and other liabilities 77,390 77,873
Current maturities of operating lease
liabilities 6,440 6,623
Deferred revenue 37,543 38,541
Total current liabilities 149,583 149,124
LONG-TERM LIABILITIES
Series B Debentures, net of current
maturities 19,792 39,543
Deferred tax liabilities 6,899 10,820
Other long-term liabilities 10,331 11,538
Long-term operating lease liabilities 17,719 21,084
Accrued severance pay 7,758 7,568
Total long-term liabilities 62,499 90,553
EQUITY 479,629 449,947
TOTAL LIABILITIES AND EQUITY 691,711 689,624
SAPIENS INTERNATIONAL CORPORATION N.V. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOW
U.S. dollars in thousands
For the twelve months
ended
December 31,
2024 2023
(unaudited) (unaudited)
Cash flows from operating activities:
Net income 72,320 62,867
Reconciliation of net income to net cash provided by operating activities:
Depreciation 4,371 3,865
Amortization of capitalized software and other intangible assets 15,702 17,574
Accretion of discount on Series B Debentures 44 64
Capital loss from sale of property and equipment 19 195
Stock-based compensation related to options issued to employees 2,952 3,658
Net changes in operating assets and liabilities, net of amount acquired:
Decrease (increase) in trade receivables, net and unbilled receivables (12,500) 3,960
Decrease in deferred tax liabilities, net (5,934) (3,003)
Decrease (increase) in other operating assets 5,343 (5,402)
Increase (decrease) in trade payables 2,126 (3,580)
Decrease in other operating liabilities (2,558) (8,948)
Increase (decrease) in deferred revenues (407) 7,266
Increase in accrued severance pay, net 747 909
Net cash provided by operating activities 82,225 79,425
Cash flows from investing activities:
Purchase of property and equipment (2,879) (2,574)
Proceeds from (investments in) deposits 23,592 (55,499)
Proceeds from sale of property and equipment 203 48
Payments for business acquisitions, net of cash acquired (375) (8,060)
Capitalized software development costs (7,133) (6,518)
Acquisition of intellectual property - (177)
Net cash provided by (used in) investing activities 13,408 (72,780)
Cash flows from financing activities:
Proceeds from employee stock options exercised 98 4,809
Distribution of dividend (31,823) (28,144)
Repayment of Series B Debenture (19,796) (19,796)
Acquisition deferred payment (630)
Acquisition of non-controlling interests (4,131) (161)
Dividend to non-controlling interest - (47)
Net cash used in financing activities (56,282) (43,339)
Effect of exchange rate changes on cash and cash equivalents (2,377) 3,125
Increase (decrease) in cash and cash equivalents 36,974 (33,569)
Cash and cash equivalents at the beginning of period 126,716 160,285
Cash and cash equivalents at the end of period 163,690 126,716
Debentures Covenants
As of December 31, 2024, Sapiens was in compliance with all of its financial covenants under the indenture for the Series B Debentures, based on having achieved the following in its consolidated financial results:
Covenant 1
-- Target shareholders' equity (excluding non-controlling interest): above
$120 million.
-- Actual shareholders' equity (excluding non-controlling interest) equal
to $479.6 million.
Covenant 2
-- Target ratio of net financial indebtedness to net capitalization (in
each case, as defined under the indenture for the Company's Series B
Debentures) below 65%.
-- Actual ratio of net financial indebtedness to net capitalization equal
to (57.93)%.
Covenant 3
-- Target ratio of net financial indebtedness to EBITDA (accumulated
calculation for the four last quarters) is below 5.5.
-- Actual ratio of net financial indebtedness to EBITDA (accumulated
calculation for the four last quarters) is equal to (1.71).
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SOURCE Sapiens International Corporation
