SPNS Sapiens International Corporation NV

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 6-K

 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 OF

THE SECURITIES EXCHANGE ACT OF 1934

 

For the month of August 2024

 

Commission File Number 000-20181

 

SAPIENS INTERNATIONAL CORPORATION N.V.

(Translation of Registrants name into English)

 

Azrieli Center

26 Harokmim St.

Holon, 5885800 Israel

(Address of Principal Executive Office)

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

 

Form 20-F ☒      Form 40-F ☐

 

 

 

CONTENTS

 

Exhibit No.		Title of Exhibit
99.1		Press Release

 

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	Sapiens International Corporation N.V.
Date: August 1, 2024	By:	/s/ Roni Giladi
		Name:	Roni Giladi
		Title:	Chief Financial Officer

 

 

Exhibit Index

 

The following exhibit is furnished as part of this Form 6-K:

 

Exhibit		Description
99.1		Press Release

 

 

3

 

Exhibit 99.1

 

 

Sapiens Reports Second Quarter 2024 Financial Results

 

Rochelle Park, NJ, August 1, 2024 – Sapiens International Corporation, (NASDAQ and TASE: SPNS), a leading global provider of software solutions for the insurance industry, today announced its financial results for the second quarter ended June 30, 2024.

 

Summary Results for Second Quarter 2024 (USD in millions, except per share data)

 

		GAAP												Non-GAAP
		Q2 2024				Q2 2023				% Change				Q2 2024				Q2 2023				% Change
Revenue		$	136.8			$	128.3				6.6	%		$	136.8			$	128.4				6.6	%
Gross Profit		$	60.1			$	54.7				10.0	%		$	62.5			$	58.0				7.7	%
Gross Margin			43.9	%			42.6	%			130 bps				45.7	%			45.2	%			50 bps
Operating Income		$	21.9			$	19.6				11.5	%		$	24.8			$	23.4				6.1	%
Operating Margin			16.0	%			15.3	%			70 bps				18.2	%			18.2	%			0 bps
Net Income (*)		$	18.6			$	15.4				20.9	%		$	21.0			$	18.6				13.1	%
Diluted EPS		$	0.33			$	0.28				17.9	%		$	0.37			$	0.33				12.1	%

 

(*)	Attributable to Sapiens’ shareholders

 

Roni Al-Dor, President and CEO of Sapiens, stated, “We are pleased to report that revenue reached $137 million this quarter, reflecting a 6.6% increase over the same period last year. This quarter demonstrated our strong execution capabilities, particularly with robust growth in North America and Europe. This quarter’s non-GAAP operating profit totaled $25 million, representing 18.2% of total revenue. Additionally, net income this quarter grew by 13%, and EPS per diluted share was $0.37 this quarter of 2024, up 12.1% from the second quarter of 2023”.

 

“We reiterate our 2024 guidance for non-GAAP revenues in a range of $550 million to $555 million and for non-GAAP operating margin in a range of 18.1%-18.5%,” concluded Mr. Al-Dor.

 

Quarterly Results Conference Call

 

Management will host a conference call and webcast on August 1, 2024, 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: https://veidan.activetrail.biz/sapiensq2-2024. 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) empowers the financial sector, with a focus on insurance, to transform and become digital, innovative, and agile. With more than 40 years of industry expertise, Sapiens’ cloud-based SaaS insurance platform offers pre-integrated, low-code capabilities across core, data and digital domains to accelerate our customers’ digital transformation. Serving over 600 customers in more than 30 countries, Sapiens offers insurers across property and casualty, workers’ compensation, and life insurance markets the most comprehensive set of solutions, from core to complementary, including Reinsurance, Financial & Compliance, Data & Analytics, Digital, and Decision Management. For more information visit www.sapiens.com or follow us on LinkedIn.

 

Investor and Media Contact		Investor Contacts
Yaffa Cohen-Ifrah		Brett Maas
Chief Marketing Officer and Head of		Managing Partner, Hayden IR
Investor Relations, Sapiens		+1 646-536-7331
Yaffa.cohen-ifrah@sapiens.com		Brett.Maas@HaydenIR.com
+1 917-533-4782
		Kimberly Rogers
		Managing Director, Hayden IR
		+1 541-904-5075
		kim@HaydenIR.com

 

 

Forward Looking Statements

 

Certain matters discussed in this press release 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, and 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, which we filled with the SEC on March 31, 2022, 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								Six months ended
		June 30,								June 30,
		2024				2023				2024				2023
		(unaudited)				(unaudited)				(unaudited)				(unaudited)
Revenue			136,800				128,299				271,049				253,020
Cost of revenue			76,696				73,635				153,385				145,327
Gross profit			60,104				54,664				117,664				107,693
Operating expenses:
Research and development, net			16,809				15,746				33,330				31,363
Selling, marketing, general and administrative			21,412				19,297				41,929				37,816
Total operating expenses			38,221				35,043				75,259				69,179
Operating income			21,883				19,621				42,405				38,514
Financial and other expenses (income), net			(1,109	)			562				(2,201	)			1,759
Taxes on income			4,375				3,587				8,488				6,917
Net income			18,617				15,472				36,118				29,838
Attributable to non-controlling interest			-				69				141				239
Net income attributable to Sapiens’ shareholders			18,617				15,403				35,977				29,599
Basic earnings per share			0.33				0.28				0.65				0.54
Diluted earnings per share			0.33				0.28				0.64				0.53
Weighted average number of shares outstanding used to compute basic earnings per share (in thousands)			55,797				55,196				55,771				55,176
Weighted average number of shares outstanding used to compute diluted earnings per share (in thousands)			56,163				55,582				56,072				55,576

 

 

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								Six months ended
		June 30,								June 30,
		2024				2023				2024				2023
		(unaudited)				(unaudited)				(unaudited)				(unaudited)
GAAP revenue			136,800				128,299				271,049				253,020
Valuation adjustment on acquired deferred revenue			-				55				-				110
Non-GAAP revenue			136,800				128,354				271,049				253,130
GAAP gross profit			60,104				54,664				117,664				107,693
Revenue adjustment			-				55				-				110
Amortization of capitalized software			1,569				1,425				3,114				2,856
Amortization of other intangible assets			808				1,848				2,587				3,696
Non-GAAP gross profit			62,481				57,992				123,365				114,355
GAAP operating income			21,883				19,621				42,405				38,514
Gross profit adjustments			2,377				3,328				5,701				6,662
Capitalization of software development			(1,823	)			(1,679	)			(3,540	)			(3,337	)
Amortization of other intangible assets			1,223				1,084				2,456				2,160
Stock-based compensation			811				1,059				1,583				1,922
Acquisition-related costs *)			365				4				494				10
Non-GAAP operating income			24,836				23,417				49,099				45,931
GAAP net income attributable to Sapiens’ shareholders			18,617				15,403				35,977				29,599
Operating income adjustments			2,953				3,796				6,694				7,417
Taxes on income			(529	)			(589	)			(1,209	)			(1,153	)
Non-GAAP net income attributable to Sapiens’ shareholders			21,041				18,610				41,462				35,863

 

(*)	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								Six months ended
		June 30,								June 30,
		2024				2023				2024				2023
GAAP operating profit			21,883				19,621				42,405				38,514
Non-GAAP adjustments:
Valuation adjustment on acquired deferred revenue			-				55				-				110
Amortization of capitalized software			1,569				1,425				3,114				2,856
Amortization of other intangible assets			2,031				2,932				5,043				5,856
Capitalization of software development			(1,823	)			(1,679	)			(3,540	)			(3,337	)
Stock-based compensation			811				1,059				1,583				1,922
Compensation related to acquisition and acquisition-related costs			365				4				494				10
Non-GAAP operating profit			24,836				23,417				49,099				45,931
Depreciation			1,095				976				2,192				2,031
Adjusted EBITDA			25,931				24,393				51,291				47,962

 

Summary of NON-GAAP Financial Information
U.S. dollars in thousands (except per share amounts)

 

		Q2 2024				Q1 2024				Q4 2023				Q3 2023				Q2 2023
Revenues			136,800				134,249				130,914				130,760				128,354
Gross profit			62,481				60,884				59,370				59,260				57,992
Operating income			24,836				24,263				24,152				24,058				23,417
Adjusted EBITDA			25,931				25,360				25,267				24,777				24,393
Net income to Sapiens’ shareholders			21,041				20,421				20,081				19,080				18,610
Diluted earnings per share			0.37				0.36				0.36				0.34				0.33

 

Annual Recurring Revenue (“ARR”)

U.S. dollars in thousands 

 

Three months ended June 30,
2024				2023
	168,593				150,417

 

 

Non-GAAP Revenues by Geographic Breakdown
U.S. dollars in thousands

 

		Q2 2024				Q1 2024				Q4 2023				Q3 2023				Q2 2023
North America			57,918				55,158				54,882				54,848				52,116
Europe			66,072				68,727				65,239				64,662				62,960
Rest of the World			12,810				10,364				10,793				11,250				13,278
Total			136,800				134,249				130,914				130,760				128,354

 

Non-GAAP Revenue breakdown

U.S. dollars in thousands

 

		Three months ended								Six months ended
		June 30,								June 30,
		2024				2023				2024				2023
Software products and re-occurring post-production services (*)			98,044				82,559				192,285				164,401
Pre-production implementation services (**)			38,756				45,795				78,764				88,729
Total Revenues			136,800				128,354				271,049				253,130

 

		Three months ended								Six months ended
		June 30,								June 30,
		2024				2023				2024				2023
Software products and re-occurring post-production services (*)			52,237				42,437				102,577				87,286
Pre-production implementation services (**)			10,244				15,555				20,788				27,069
Total Gross profit			62,481				57,992				123,365				114,355

 

		Three months ended								Six months ended
		June 30,								June 30,
		2024				2023				2024				2023
Software products and re-occurring post-production services (*)			53.3	%			51.4	%			53.3	%			53.1	%
Pre-production implementation services (**)			26.4	%			34.0	%			26.4	%			30.5	%
Gross Margin			45.7	%			45.2	%			45.5	%			45.2	%

 

(*)	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

 

		Q2 2024				Q1 2024				Q4 2023				Q3 2023				Q2 2023
Cash-flow from operating activities			8,545				18,488				38,646				3,988				14,603
Increase in capitalized software development costs			(1,823	)			(1,717	)			(1,543	)			(1,638	)			(1,679	)
Capital expenditures			(666	)			(466	)			(421	)			(696	)			(775	)
Free cash-flow			6,056				16,305				36,682				1,654				12,149
Cash payments attributed to acquisition-related costs(*) (**)			134				751				221				-				-
Adjusted free cash-flow			6,190				17,056				36,903				1,654				12,149

 

(*)	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

 

		June 30,				December 31,
		2024				2023
		(unaudited)				(unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents			122,646				126,716
Short-term bank deposit			63,800				75,400
Trade receivables, net and unbilled receivables			102,101				90,273
Other receivables and prepaid expenses			20,258				22,514
Total current assets			308,805				314,903
LONG-TERM ASSETS
Property and equipment, net			12,065				12,661
Severance pay fund			3,360				3,605
Goodwill and intangible assets, net			307,231				317,352
Operating lease right-of-use assets			20,505				23,557
Other long-term assets			15,571				17,546
Total long-term assets			358,732				374,721
TOTAL ASSETS			667,537				689,624
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Trade payables			11,296				6,291
Current maturities of Series B Debentures			19,796				19,796
Accrued expenses and other liabilities			74,057				77,873
Current maturities of operating lease liabilities			5,705				6,623
Deferred revenue			31,928				38,541
Total current liabilities			142,782				149,124
LONG-TERM LIABILITIES
Series B Debentures, net of current maturities			19,768				39,543
Deferred tax liabilities			8,517				10,820
Other long-term liabilities			11,469				11,538
Long-term operating lease liabilities			17,816				21,084
Accrued severance pay			7,443				7,568
Total long-term liabilities			65,013				90,553
EQUITY			459,742				449,947
TOTAL LIABILITIES AND EQUITY			667,537				689,624

 

 

SAPIENS INTERNATIONAL CORPORATION N.V. AND ITS SUBSIDIARIES

 

CONSOLIDATED STATEMENT OF CASH FLOW
U.S. dollars in thousands

 

		For the six months ended June 30,
		2024				2023
		(unaudited)				(unaudited)
Cash flows from operating activities:
Net income			36,118				29,838
Reconciliation of net income to net cash provided by operating activities:
Depreciation and amortization			10,349				10,743
Accretion of discount on Series B Debentures			22				32
Capital (gain) loss from sale of property and equipment			(9	)			86
Stock-based compensation related to options issued to employees			1,583				1,922
Net changes in operating assets and liabilities, net of amount acquired:
Decrease (increase) in trade receivables, net and unbilled receivables			(12,723	)			2,351
Increase (decrease) in deferred tax liabilities, net			(1,428	)			45
Decrease (increase) in other operating assets			3,445				(390	)
Increase (decrease) in trade payables			4,446				(1,014	)
Decrease in other operating liabilities			(8,354	)			(12,572	)
Increase (decrease) in deferred revenues			(6,587	)			5,284
Increase in accrued severance pay, net			171				466
Net cash provided by operating activities			27,033				36,791
Cash flows from investing activities:
Purchase of property and equipment			(1,146	)			(1,439	)
Proceeds from (investment in) deposits			12,136				(70,002	)
Proceeds from sale of property and equipment			14				30
Payments for business acquisitions, net of cash acquired			(375	)			-
Capitalized software development costs			(3,540	)			(3,337	)
Acquisition of intellectual property			-				(177	)
Net cash provided by (used in) investing activities			7,089				(74,925	)
Cash flows from financing activities:
Proceeds from employee stock options exercised			98				-
Distribution of dividend			(15,635	)			(13,796	)
Repayment of Series B Debenture			(19,796	)			(19,796	)
Acquisition of non-controlling interest			(4,131	)			-
Dividend to non-controlling interest			-				(47	)
Net cash used in financing activities			(39,464	)			(33,639	)
Effect of exchange rate changes on cash and cash equivalents			1,272				905
Decrease in cash and cash equivalents			(4,070	)			(70,868	)
Cash and cash equivalents at the beginning of period			126,716				160,285
Cash and cash equivalents at the end of period			122,646				89,417

 

 

Debentures Covenants

 

As of June 30, 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 $459.7 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 (46.79)%.

 

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 (1.45).

 

 

13

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