Sapiens Reports Fourth Quarter 2022 Financial Results
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Summary Results for Fourth Quarter 2022 (USD in millions, except per share data) | ||||||
GAAP | Non-GAAP | |||||
Q4 2022 | Q4 2021 | % Change | Q4 2022 | Q4 2021 | % Change | |
Revenue | 0.2 % | -0.3 % | ||||
Gross Profit | 3.4 % | -0.3 % | ||||
Gross Margin | 42.1 % | 40.8 % | 130 bps | 45.0 % | 45.0 % | 0 bps |
Operating Income | 4.8 % | -2.5 % | ||||
Operating Margin | 13.8 % | 13.2 % | 60 bps | 17.6 % | 18.0 % | -40 bps |
Net Income (*) | -2.2 % | 1.9 % | ||||
Diluted EPS | -4.0 % | 0.0 % |
Summary Results for Full Year end 2022 (USD in millions, except per share data) | ||||||
GAAP | % Change | Non-GAAP | % Change | |||
2022 | 2021 | 2022 | 2021 | |||
Revenue | 3.0 % | 2.4 % | ||||
Gross Profit | 6.6 % | 2.5 % | ||||
Gross Margin | 42.2 % | 40.7 % | 150 bps | 45.0 % | 44.9 % | 10 bps |
Operating Income | 15.7 % | 2.5 % | ||||
Operating Margin | 14.0 % | 12.5 % | 150 bps | 17.6 % | 17.6 % | 0 bps |
Net income (*) | 11.5 % | 2.5 % | ||||
Diluted EPS | 11.8 % | 2.5 % | ||||
(*) Attributable to Sapiens' shareholders |
"Our revenue in 2022 reached
"Operating profit in 2022 reached
"We are introducing 2023 guidance for non-GAAP revenue in a range of
Quarterly Results Conference Call
Management will host a conference call and webcast on
International: 972-3-9180609
The live webcast of the call can be viewed on Sapiens' website at: https://www.sapiens.com/investor-relations/ir-events-presentations. 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, 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 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
Investor and Media Contact
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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
SAPIENS INTERNATIONAL CORPORATION N.V. AND ITS SUBSIDIARIES | |||||||||
CONDENSED CONSOLIDATED STATEMENT OF INCOME | |||||||||
Three months ended | Year ended | ||||||||
| | ||||||||
2022 | 2021 | 2022 | 2021 | ||||||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | ||||||
Revenue | 119,463 | 119,225 | 474,736 | 461,035 | |||||
Cost of revenue | 69,158 | 70,561 | 274,573 | 273,191 | |||||
Gross profit | 50,305 | 48,664 | 200,163 | 187,844 | |||||
Operating expenses: | |||||||||
Research and development, net | 15,251 | 13,891 | 58,656 | 54,013 | |||||
Selling, marketing, general and administrative | 18,573 | 19,041 | 75,016 | 76,343 | |||||
Total operating expenses | 33,824 | 32,932 | 133,672 | 130,356 | |||||
Operating income | 16,481 | 15,732 | 66,491 | 57,488 | |||||
Financial and other expenses (income), net | (1,097) | (311) | 941 | 202 | |||||
Taxes on income | 4,276 | 2,404 | 12,619 | 9,964 | |||||
Net income | 13,302 | 13,639 | 52,931 | 47,322 | |||||
Attributable to non-controlling interest | (65) | (26) | 336 | 151 | |||||
Net income attributable to Sapiens' shareholders | 13,367 | 13,665 | 52,595 | 47,171 | |||||
Basic earnings per share | 0.24 | 0.25 | 0.95 | 0.86 | |||||
Diluted earnings per share | 0.24 | 0.25 | 0.95 | 0.85 | |||||
Weighted average number of shares outstanding | 55,140 | 54,902 | 55,117 | 54,785 | |||||
Weighted average number of shares outstanding | 55,521 | 55,626 | 55,570 | 55,561 |
SAPIENS INTERNATIONAL CORPORATION N.V. AND SUBSIDIARIES | |||||||||
RECONCILIATION OF GAAP TO NON-GAAP RESULTS | |||||||||
Three months ended | Year ended | ||||||||
December 31, | | ||||||||
2022 | 2021 | 2022 | 2021 | ||||||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | ||||||
GAAP revenue | 119,463 | 119,225 | 474,736 | 461,035 | |||||
Valuation adjustment on acquired deferred | 23 | 629 | 92 | 2,519 | |||||
Non-GAAP revenue | 119,486 | 119,854 | 474,828 | 463,554 | |||||
GAAP gross profit | 50,305 | 48,664 | 200,163 | 187,844 | |||||
Revenue adjustment | 23 | 629 | 92 | 2,519 | |||||
Amortization of capitalized software | 1,517 | 2,084 | 5,840 | 7,679 | |||||
Amortization of other intangible assets | 1,929 | 2,556 | 7,375 | 10,253 | |||||
Non-GAAP gross profit | 53,774 | 53,933 | 213,470 | 208,295 | |||||
GAAP operating income | 16,481 | 15,732 | 66,491 | 57,488 | |||||
Gross profit adjustments | 3,469 | 5,269 | 13,307 | 20,451 | |||||
Capitalization of software development | (1,238) | (2,256) | (6,097) | (7,911) | |||||
Amortization of other intangible assets | 1,115 | 1,311 | 4,783 | 5,377 | |||||
Stock-based compensation | 759 | 1,274 | 3,960 | 4,801 | |||||
Acquisition-related costs (*) | 472 | 260 | 1,033 | 1,198 | |||||
Non-GAAP operating income | 21,058 | 21,590 | 83,477 | 81,404 | |||||
GAAP net income attributable to Sapiens' | 13,367 | 13,665 | 52,595 | 47,171 | |||||
Operating income adjustments | 4,577 | 5,858 | 16,986 | 23,916 | |||||
Taxes on income | 78 | (1,842) | (2,411) | (5,550( | |||||
Non-GAAP net income attributable to | 18,022 | 17,681 | 67,170 | 65,537 | |||||
(*) Acquisition-related costs pertain to charges on behalf of M&A agreements related to future performance targets and |
Adjusted EBITDA Calculation | ||||||||
Three months ended | Year ended | |||||||
| | |||||||
2022 | 2021 | 2022 | 2021 | |||||
GAAP operating profit | 16,481 | 15,732 | 66,491 | 57,488 | ||||
Non-GAAP adjustments: | ||||||||
Valuation adjustment on acquired deferred | 23 | 629 | 92 | 2,519 | ||||
Amortization of capitalized software | 1,517 | 2,084 | 5,840 | 7,679 | ||||
Amortization of other intangible assets | 3,044 | 3,867 | 12,158 | 15,630 | ||||
Capitalization of software development | (1,238) | (2,256) | (6,097) | (7,911) | ||||
Stock-based compensation | 759 | 1,274 | 3,960 | 4,801 | ||||
Compensation related to acquisition and acquisition- | 472 | 260 | 1,033 | 1,198 | ||||
Non-GAAP operating profit | 21,058 | 21,590 | 83,477 | 81,404 | ||||
Depreciation | 1,034 | 1,989 | 4,242 | 5,360 | ||||
Adjusted EBITDA | 22,092 | 23,579 | 87,719 | 86,764 | ||||
Summary of NON-GAAP Financial Information | |||||||||
Q4 2022 | Q3 2022 | Q2 2022 | Q1 2022 | Q4 2021 | |||||
Revenues | 119,486 | 119,019 | 118,605 | 117,718 | 119,854 | ||||
Gross profit | 53,774 | 53,546 | 53,207 | 52,943 | 53,933 | ||||
Operating income | 21,058 | 20,902 | 20,747 | 20,770 | 21,590 | ||||
Adjusted EBITDA | 22,092 | 22,036 | 21,681 | 21,910 | 23,579 | ||||
Net income to Sapiens' shareholders | 18,022 | 16,871 | 14,979 | 17,298 | 17,681 | ||||
Diluted earnings per share | 0.32 | 0.30 | 0.27 | 0.31 | 0.32 |
Non-GAAP Revenues by Geographic Breakdown | |||||||||
Q4 2022 | Q3 2022 | Q2 2022 | Q1 2022 | Q4 2021 | |||||
50,801 | 49,555 | 48,154 | 49,009 | 48,872 | |||||
56,910 | 56,887 | 59,868 | 59,267 | 62,416 | |||||
Rest of the World | 11,775 | 12,577 | 10,583 | 9,442 | 8,566 | ||||
Total | 119,486 | 119,019 | 118,605 | 117,718 | 119,854 |
Adjusted Free Cash-Flow | |||||||||
Q4 2022 | Q3 2022 | Q2 2022 | Q1 2022 | Q4 2021 | |||||
Cash-flow from operating activities | 14,430 | 4,405 | 6,615 | 18,330 | 27,386 | ||||
Increase in capitalized software development costs | (1,238) | (1,492) | (1,621) | (1,746) | (2,256) | ||||
Capital expenditures | (400) | (1,047) | (803) | (453) | (801) | ||||
Free cash-flow | 12,792 | 1,866 | 4,191 | 16,131 | 24,329 | ||||
Cash payments attributed to acquisition-related | 1,100 | - | - | - | 407 | ||||
Adjusted free cash-flow | 13,892 | 1,866 | 4,191 | 16,131 | 24,736 | ||||
(*) Included in cash-flow from operating activities |
Reconciliation of Revenue Growth as Reported on GAAP Basis to Revenue Growth on a Constant Currency Basis
Year ended
Revenue growth % | As reported | Currency Impact | Constant Currency Basis | |
4.3 % | - | 4.3 % | ||
(2.7) % | (10.1) % | 7.4 % | ||
Rest of the world | 27.8 % | (1.1) % | 28.9 % | |
Total | 2.4 % | (5.4) % | 7.8 % |
* Constant currency revenue results are calculated by translating current period revenues in local currency into
* Due to the significant impact of the currencies fluctuations this year on our reported revenues, we are providing the above information by region on a constant currency basis for this year. We are not committing at this time to continue providing such information in the future.
SAPIENS INTERNATIONAL CORPORATION N.V. AND ITS SUBSIDIARIES | |||||
CONDENSED CONSOLIDATED BALANCE SHEET | |||||
2022 | 2021 | ||||
(unaudited) | (unaudited) | ||||
ASSETS | |||||
CURRENT ASSETS | |||||
Cash and cash equivalents | 160,285 | 190,243 | |||
Short-term bank deposit | 20,000 | 20,000 | |||
Trade receivables, net and unbilled receivables | 93,382 | 76,261 | |||
Other receivables and prepaid expenses | 11,640 | 13,841 | |||
Total current assets | 285,307 | 300,345 | |||
LONG-TERM ASSETS | |||||
Property and equipment, net | 12,021 | 14,458 | |||
Severance pay fund | 3,996 | 5,954 | |||
319,661 | 343,283 | ||||
Operating lease right-of-use assets | 33,688 | 43,665 | |||
Other long-term assets | 12,078 | 7,288 | |||
Total long-term assets | 381,444 | 414,648 | |||
TOTAL ASSETS | 666,751 | 714,993 | |||
LIABILITIES AND EQUITY | |||||
CURRENT LIABILITIES | |||||
Trade payables | 9,415 | 5,008 | |||
Current maturities of Series B Debentures | 19,796 | 19,796 | |||
Accrued expenses and other liabilities | 76,962 | 76,450 | |||
Current maturities of operating lease liabilities | 9,063 | 10,827 | |||
Deferred revenue | 30,720 | 39,614 | |||
Total current liabilities | 145,956 | 151,695 | |||
LONG-TERM LIABILITIES | |||||
Series B Debentures, net of current maturities | 59,275 | 78,986 | |||
Deferred tax liabilities | 11,363 | 15,360 | |||
Other long-term liabilities | 11,719 | 12,144 | |||
Long-term operating lease liabilities | 28,432 | 38,751 | |||
Redeemable non-controlling interest | 89 | 101 | |||
Accrued severance pay | 7,063 | 9,236 | |||
Total long-term liabilities | 117,941 | 154,578 | |||
EQUITY | 402,854 | 408,720 | |||
TOTAL LIABILITIES AND EQUITY | 666,751 | 714,993 |
SAPIENS INTERNATIONAL CORPORATION N.V. AND ITS SUBSIDIARIES | |||
CONSOLIDATED STATEMENT OF CASH FLOW | |||
For the Twelve months ended | |||
2022 | 2021 | ||
(unaudited) | (unaudited) | ||
Cash flows from operating activities: | |||
Net income | 52,931 | 47,322 | |
Reconciliation of net income to net cash provided by operating activities: | |||
Impairment of right of use asset | - | 1,439 | |
Depreciation and amortization | 22,240 | 28,669 | |
Accretion of discount on Series B Debentures | 85 | 106 | |
Capital (gain) loss from sale of property and equipment | 26 | (60) | |
Stock-based compensation related to options issued to employees | 3,960 | 4,801 | |
Net changes in operating assets and liabilities, net of amount acquired: | |||
Increase in Trade receivables, net and unbilled receivables | (21,860) | (13,937) | |
Decrease in Deferred tax liabilities, net | (8,541) | (1,902) | |
Decrease in Other operating assets | 7,729 | 17,743 | |
Increase (decrease) in Trade payables | 4,634 | (529) | |
Decrease in Other operating liabilities | (9,764) | (8,415) | |
Increase (decrease) in Deferred revenues | (7,738) | 4,930 | |
Increase in Accrued severance pay, net | 78 | 375 | |
Net cash provided by operating activities | 43,780 | 80,542 | |
Cash flows from investing activities: | |||
Purchase of property and equipment | (2,757) | (3,786) | |
Proceeds from deposits | 26 | 10,031 | |
Proceeds from sale of property and equipment | 54 | 1,111 | |
Proceeds from (payments for) business acquisitions, net of cash acquired | (3,466) | 831 | |
Capitalized software development costs | (6,097) | (7,911) | |
Acquisition of intellectual property | (200) | (151) | |
Net cash provided by (used in) investing activities | (12,440) | 125 | |
Cash flows from financing activities: | |||
Proceeds from employee stock options exercised | - | 2,038 | |
Distribution of dividend | (38,579) | (20,255) | |
Repayment of Series B Debenture | (19,796) | (19,796) | |
Payment of contingent considerations | - | (926) | |
Acquisition of non-controlling interests | - | (990) | |
Dividend to non-controlling interest | - | (31) | |
Net cash used in financing activities | (58,375) | (39,960) | |
Effect of exchange rate changes on cash and cash equivalents | (2,923) | (3,025) | |
Increase (Decrease) in cash and cash equivalents | (29,958) | 37,682 | |
Cash and cash equivalents at the beginning of period | 190,243 | 152,561 | |
Cash and cash equivalents at the end of period | 160,285 | 190,243 |
Debentures Covenants
As of
Covenant 1
- Target shareholders' equity (excluding non-controlling interest): above
.$120 million - Actual shareholders' equity (excluding non-controlling interest) equal to
.$400.5 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 (32.96)%.
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 (1.14).
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