Sapiens Reports Fourth Quarter and Full Year 2021 Financial Results

Rhea-AI Summary

Sapiens International Corporation (SPNS) reported strong financial results for Q4 2021, with a 16.4% increase in non-GAAP revenue to $119.9 million and a net income rise of 64.3% to $13.7 million. For the full year, revenue reached $461.0 million, up 20.4% year-over-year, while net income surged 39.7% to $47.2 million. The company highlighted significant growth in Europe, with a 38.5% increase, and introduced 2022 guidance expecting non-GAAP revenue between $495 million and $500 million. A focus on cloud solutions and product innovation was emphasized.

Positive

• Q4 2021 non-GAAP revenue increased by 16.4% to $119.9 million.
• Q4 net income rose 64.3% to $13.7 million.
• Full-year 2021 revenue reached $461.0 million, a 20.4% increase.
• Net income for 2021 grew 39.7% to $47.2 million.
• 2022 guidance for non-GAAP revenue is $495 million to $500 million.

Negative

• Gross margin decreased from 45.7% to 45.0% in Q4 2021.
• Operating margin declined from 18.1% to 18.0% for Q4 2021.

HOLON, Israel, Feb. 23, 2022 /PRNewswire/ -- 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 fourth quarter and full year ended December 31, 2021.

 

Summary Results for Fourth Quarter 2021 (USD in millions, except per share data)
	GAAP			Non-GAAP
	Q4 2021	Q4 2020	% Change	Q4 2021	Q4 2020	% Change
Revenue	$119.2	$101.7	17.3%	$119.9	$102.9	16.4%
Gross Profit	$48.7	$41.4	17.6%	$53.9	$47.0	14.6%
Gross Margin	40.8%	40.7%	10 bps	45.0%	45.7%	(70) bps
Operating Income	$15.7	$10.2	53.9%	$21.6	$18.7	15.7%
Operating Margin	13.2%	10.1%	310 bps	18.0%	18.1%	(10) bps
Net Income (*)	$13.7	$8.3	64.3%	$17.7	$14.5	22.3%
Diluted EPS	$0.25	$0.15	66.7%	$0.32	$0.27	18.5%

 

Summary Results for Full Year 2021 (USD in millions, except per share data)
	GAAP		% Change	Non-GAAP		% Change
	2021	2020		2021	2020
Revenue	$461.0	$382.9	20.4%	$463.6	$384.5	20.6%
Gross Profit	$187.8	$156.0	20.4%	$208.3	$172.9	20.4%
Gross Margin	40.7%	40.7%	-	44.9%	45.0%	(10) bps
Operating Income	$57.5	$45.0	27.7%	$81.4	$67.9	19.8%
Operating Margin	12.5%	11.8%	70 bps	17.6%	17.7%	(10) bps
Net income (*)	$47.2	$33.8	39.7%	$65.5	$52.0	26.1%
Diluted EPS	$0.85	$0.65	30.8%	$1.18	$1.00	18.0%

(*) Attributable to Sapiens' shareholders

"Sapiens finished the year strong, with fourth quarter non-GAAP revenue growing 16.4% to $119.9 million and non-GAAP operating profit margin of 18.0%, reflecting our ability to maintain profitability despite the cost increases that our industry and many sectors are facing," stated Roni Al-Dor, President and CEO of Sapiens. "Europe was the leading growth region for Sapiens in 2021 with revenue growth organically and with M&A of 38.5% year-over-year. We signed multiple new logos across various segments and experienced a substantial increase in average European deal size. In North America region we delivered mixed results in '21, Life, DECISION, and Reinsurance continued growing steadily, building a solid pipeline for '22. We are pursuing new opportunities and developing a growing pipeline positioning Sapiens to deliver improved total growth in North America by the second half of '22." 

"Today, the majority of our new wins are delivered on the cloud," continued Mr. Al-Dor. "We have recently announced a new Chief Technology and Information Officer, Ilan Buganim, who brings vast technology experience from his numerous leadership positions. Ilan will lead our cloud journey and is responsible for developing a coherent view across all of our product offering. Sapiens' emphasis on product innovation continues to earn industry analysts' awards and recognition from the market."

"We are introducing 2022 guidance for non-GAAP revenue in a range of $495 million to $500 million, and non-GAAP operating margin in a range of 17.0% to 17.3%," which on constant currency base represent organic growth of 9.1% and profitability level of 18.2% at the mid- point range of our guidance concluded Mr. Al-Dor.

Quarterly Results Conference Call

Management will host a conference call and webcast today, February 23, 2022 at 9:30 am. Eastern Time (4:30 pm. 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: +972-3-918-0609; UK: 0-800-917-5108
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 for valuation adjustment on acquired deferred revenue, stock-based compensation expense, depreciation and amortization, capitalized 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 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. Backed by more than 35 years of industry expertise, Sapiens offers a complete insurance platform, with pre-integrated, low-code solutions and a cloud-first approach that accelerates customers' digital transformation. Serving over 600 customers in 30 countries, Sapiens offers insurers across property and casualty, workers compensation and life 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.

Media Contact	Investors Contact
Shay Assaraf	Brett Maas
Chief Marketing Officer, Sapiens	Managing Partner, Hayden IR
Shay.assaraf@sapiens.com	+1 646-536-7331
	Brett.Maas@HaydenIR.com
	Kimberly Rogers
	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,
			2021		2020		2021		2020
			(unaudited)		(unaudited)		(unaudited)		(unaudited)
Revenue			119,225		101,661		461,035		382,903
Cost of revenue			70,561		60,288		273,191		226,929
Gross profit			48,664		41,373		187,844		155,974
Operating expenses:
	Research and development, net		13,891		11,129		54,013		41,358
	Selling, marketing, general and administrative		19,041		20,019		76,343		69,613
Total operating expenses			32,932		31,148		130,356		110,971
Operating income			15,732		10,225		57,488		45,003
Financial and other expenses (income), net			(311)		1,212		202		3,805
Taxes on income			2,404		611		9,964		7,041
Net income			13,639		8,402		47,322		34,157
Attributable to non-controlling interest			(26)		83		151		382
Net income attributable to Sapiens' shareholders			13,665		8,319		47,171		33,775
Basic earnings per share			0.25		0.16		0.86		0.67
Diluted earnings per share			0.25		0.15		0.85		0.65
Weighted average number of shares outstanding used to compute basic earnings per share (in thousands)			54,902		53,715		54,785		51,208
Weighted average number of shares outstanding used to compute diluted earnings per share (in thousands)			55,626		54,541		55,561		52,159

 

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,
		2021		2020		2021		2020
		(unaudited)		(unaudited)		(unaudited)		(unaudited)
GAAP revenue		119,225		101,661		461,035			382,903
Valuation adjustment on acquired deferred revenue		629		1,275		2,519			1,598
Non-GAAP revenue		119,854		102,936		463,554			384,501
GAAP gross profit		48,664		41,373		187,844			155,974
Revenue adjustment		629		1,275		2,519			1,598
Amortization of capitalized software		2,084		1,931		7,679			6,558
Amortization of other intangible assets		2,556		2,465		10,253			8,811
Non-GAAP gross profit		53,933		47,044		208,295			172,941
GAAP operating income		15,732		10,225		57,488			45,003
Gross profit adjustments		5,269		5,671		20,451			16,967
Capitalization of software development		(2,256)		(1,604)		(7,911)			(5,798)
Amortization of other intangible assets		1,311		1,204		5,377			3,316
Stock-based compensation		1,274		1,240		4,801			3,987
Acquisition-related costs (*)		260		1,930		1,198			4,447
Non-GAAP operating income		21,590		18,666		81,404			67,922
GAAP net income attributable to    Sapiens' shareholders		13,665		8,319		47,171			33,775
Operating income adjustments		5,858		8,441		23,916			22,919
Tax effect on NON-GAAP adjustment		(1,842)		(2,299)		(5,550)			(4,735)
Non-GAAP net income attributable to   Sapiens' shareholders		17,681		14,461		65,537			51,959
Diluted earnings per share		0.32		0.27		1.18			1.00
Weighted average number of shares outstanding used to compute diluted earnings per share (in thousands)		55,626		54,541		55,561			52,159

 ^(*) Acquisition-related costs pertain to charges on behalf of M&A agreements related to future performance targets and retention criteria, as well as third-party services, such as tax, accounting and legal rendered until the acquisition date.

Adjusted EBITDA Calculation  U.S. dollars in thousands
		Three months ended				Year ended
		December 31,				December 31,
		2021		2020		2021		2020
GAAP operating profit		15,732		10,225		57,488		45,003
Non-GAAP adjustments:
Valuation adjustment on acquired deferred revenue		629		1,275		2,519		1,598
Amortization of capitalized software		2,084		1,931		7,679		6,558
Amortization of other intangible assets		3,867		3,669		15,630		12,127
Capitalization of software development		(2,256)		(1,604)		(7,911)		(5,798)
Stock-based compensation		1,274		1,240		4,801		3,987
Compensation related to acquisition and acquisition-related costs		260		1,930		1,198		4,447
Non-GAAP operating profit		21,590		18,666		81,404		67,922
Depreciation		1,989		1,366		5,360		4,698
Adjusted EBITDA		23,579		20,032		86,764		72,620

 

Summary of NON-GAAP Financial Information  U.S. dollars in thousands (except per share amounts)
	Q4 2021		Q3 2021		Q2 2021		Q1 2021		Q4 2020
Revenues	119,854		118,442		115,036		110,222		102,936
Gross profit	53,933		53,413		51,720		49,229		47,044
Operating income	21,590		21,019		19,795		19,000		18,666
Adjusted EBITDA	23,579		22,144		20,920		20,120		20,032
Net income to Sapiens' shareholders	17,681		16,976		15,975		14,908		14,461
Diluted earnings per share	0.32		0.31		0.29		0.27		0.27

 

Non-GAAP Revenues by Geographic Breakdown  U.S. dollars in thousands
	Q4 2021		Q3 2021		Q2 2021		Q1 2021		Q4 2020
North America	48,872		48,952		46,767		44,754		47,303
Europe	62,416		59,707		59,718		57,642		49,225
Rest of the World	8,566		9,783		8,551		7,826		6,408
Total	119,854		118,442		115,036		110,222		102,936

 

Adjusted Free Cash-Flow U.S. dollars in thousands
	Q4 2021		Q3 2021		Q2 2021		Q1 2021		Q4 2020
Cash-flow from operating activities	27,386		14,556		26,845		11,755		21,030
Increase in capitalized software development costs	(2,256)		(2,064)		(1,959)		(1,632)		(1,604)
Capital expenditures	(801)		(1,082)		(1,082)		(821)		(725)
Free cash-flow	24,329		11,410		23,804		9,302		18,701
Cash payments attributed to acquisition-related costs(*) (**)	407		477		-		1,280		2,363
Adjusted free cash-flow	24,736		11,887		23,804		10,582		21,064

^(*) Included in cash-flow from operating activities
^(**) Acquisition-related payments pertain to payments on behalf of M&A agreements related to future performance targets and retention criteria, as well as third-party services, such as, tax, accounting and legal rendered until the acquisition date.

 

SAPIENS INTERNATIONAL CORPORATION N.V. AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET U.S. dollars in thousands
			December 31,		December 31,
			2021		2020
			(unaudited)		(unaudited)
ASSETS
CURRENT ASSETS
	Cash and cash equivalents		190,243		152,561
	Short-term bank deposit		20,000		30,000
	Trade receivables, net and unbilled receivables		76,261		65,409
	Other receivables and prepaid expenses		13,841		19,388
	Total current assets		300,345		267,358
LONG-TERM ASSETS
	Property and equipment, net		14,458		16,970
	Severance pay fund		5,954		6,582
	Goodwill and intangible assets, net		343,283		363,597
	Operating lease right-of-use assets		43,665		54,390
	Other long-term assets		7,288		5,264
	Total long-term assets		414,648		446,803
TOTAL ASSETS			714,993		714,161
LIABILITIES AND EQUITY
CURRENT LIABILITIES
	Trade payables		5,008		5,389
	Current maturities of Series B Debentures		19,796		19,796
	Accrued expenses and other liabilities		76,450		75,119
	Current maturities of operating lease liabilities		10,827		9,924
	Deferred revenue		39,614		34,548
	Total current liabilities		151,695		144,776
LONG-TERM LIABILITIES
	Series B Debentures, net of current maturities		78,986		98,676
	Deferred tax liabilities		15,360		16,010
	Other long-term liabilities		12,144		12,129
	Long-term operating lease liabilities		38,751		48,773
	Redeemable non-controlling interest		101		517
	Accrued severance pay		9,236		9,586
	Total long-term liabilities		154,578		185,691
EQUITY			408,720		383,694
TOTAL LIABILITIES AND EQUITY			714,993		714,161

 

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,
	2021		2020
	(unaudited)		(unaudited)
Cash flows from operating activities:
Net income	47,322		34,157
Reconciliation of net income to net cash provided by operating activities:
Impairment of right of use asset	1,439		351
Depreciation and amortization	28,669		23,383
Accretion of discount on Series B Debentures	106		134
Capital loss from sale of property and equipment	(60)		44
Stock-based compensation related to options issued to employees	4,801		3,987
Net changes in operating assets and liabilities, net of amount acquired:
Trade receivables, net and unbilled receivables	(13,937)		(5,168)
Deferred tax liabilities, net	(1,902)		(16)
Other operating assets	17,743		(2,049)
Trade payables	(529)		(1,344)
Other operating liabilities	(8,415)		1,435
Deferred revenues	4,930		2,992
Accrued severance pay, net	375		349
Net cash provided by operating activities	80,542		58,255
Cash flows from investing activities:
Purchase of property and equipment	(3,786)		(2,633)
Proceeds from (Investment in) deposits	10,031		(30,397)
Proceeds from sale of property and equipment	1,111		12
Proceeds from restricted deposit used for completed acquisition	-		22,890
Net cash paid for acquisitions	831		(109,052)
Capitalized software development costs	(7,911)		(5,798)
Acquisition of intellectual property	(151)		(2,810)
Net cash provided by (used in) investing activities	125		(127,788)
Cash flows from financing activities:
Proceeds from employee stock options exercised	2,038		5,050
Distribution of dividend	(20,255)		(7,044)
Repayment of Series B Debenture	(19,796)		(9,898)
Issuance of Series B Debentures, net of issuance expenses	-		60,346
Receipt of short-term loan	-		20,000
Repayment of loan	-		(20,000)
Payment of contingent considerations	(926)		(538)
Acquisition of non-controlling interests	(990)		(147)
Dividend to non-controlling interest	(31)		-
Proceeds from issuance of ordinary shares, net of issuance expenses	-		108,737
Net cash provided by (used in) financing activities	(39,960)		156,506
Effect of exchange rate changes on cash and cash equivalents	(3,025)		(707)
Increase in cash and cash equivalents	37,682		86,266
Cash and cash equivalents at the beginning of period	152,561		66,295
Cash and cash equivalents at the end of period	190,243		152,561

Debentures Covenants

As of December 31, 2021, 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 $406.5 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 (36.78)%.

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 (1.27).

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SOURCE Sapiens International Corporation

FAQ

What were Sapiens' Q4 2021 financial results?

Sapiens reported a 16.4% increase in non-GAAP revenue to $119.9 million and a 64.3% rise in net income to $13.7 million for Q4 2021.

What is Sapiens' revenue guidance for 2022?

Sapiens has provided 2022 guidance for non-GAAP revenue in the range of $495 million to $500 million.

How did Sapiens perform in the full year 2021?

For the full year 2021, Sapiens achieved a revenue of $461.0 million, up 20.4% from 2020, and net income of $47.2 million, growing 39.7%.

What were the main growth areas for Sapiens in 2021?

Europe was the leading growth region for Sapiens in 2021, with a revenue growth of 38.5% year-over-year.