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 November 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: November 11, 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 Third Quarter 2024 Financial Results

 

Rochelle Park, NJ, November 11, 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 third quarter ended September 30, 2024.

 

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

 

		GAAP												Non-GAAP
		Q3 2024				Q3 2023				% Change				Q3 2024				Q3 2023				% Change
Revenue		$	137.0			$	130.7				4.8	%		$	137.0			$	130.8				4.8	%
Gross Profit		$	60.3			$	56.0				7.8	%		$	62.8			$	59.3				6.0	%
Gross Margin			44.0	%			42.8	%			120	bps			45.8	%			45.3	%			50	bps
Operating Income		$	21.7			$	20.3				7.3	%		$	25.1			$	24.1				4.3	%
Operating Margin			15.9	%			15.5	%			40	bps			18.3	%			18.4	%			-10	bps
Net Income (*)		$	18.3			$	15.9				15.5	%		$	21.1			$	19.1				10.5	%
Diluted EPS		$	0.33			$	0.28				17.9	%		$	0.37			$	0.34				8.8	%

 

(*)

Attributable to Sapiens’ shareholders

 

Roni Al-Dor, President and CEO of Sapiens, stated, "This quarter showcased solid performance in our key regions. We are pleased to report that revenue reached $137 million this quarter, reflecting a 4.8% increase over the same period last year. Revenue growth was driven by 7.1% growth in our European region, 1.7% growth in North America and 6.6% growth in ROW regions. This quarter's non-GAAP operating profit totaled $25 million, representing 18.3% of total revenue.”  

 

Mr. Al-Dor continued, “Revenue fell short of our targets in the third quarter, and the challenges we encountered are expected to impact revenue in the fourth quarter. Today, we are revising our 2024 non-GAAP revenue guidance to a range of $541 million to $546 million, down from the previous range of $550 million to $555 million - a 1.6% reduction at the midpoint. However, we expect our non-GAAP operating margin to be within our guidance range at 18.2%.  Looking into 2025, we anticipate a low single-digit revenue growth.”  

 

Quarterly Results Conference Call

 

Management will host a conference call and webcast on November 11, 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) 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   Yaffa Cohen-Ifrah Chief Marketing Officer and Head of Investor Relations, Sapiens Yaffa.cohen-ifrah@sapiens.com +1 917-533-4782

Investor Contacts   Brett Maas Managing Partner, Hayden IR +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 and therein 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; the global macroeconomic environment, including headwinds caused by inflation, relatively high interest rates, potentially unfavorable currency exchange rate movements, and uncertain economic conditions, and their impact on our revenues, profitability and cash flows; 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 coronavirus epidemic,  and 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 Annual Report on Form 20-F for the year ended December 31, 2023, to be filed in the near future, 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								Nine months ended
		September 30,								September 30,
		2024				2023				2024				2023
		(unaudited)				(unaudited)				(unaudited)				(unaudited)
Revenue			137,025				130,705				408,074				383,725
Cost of revenue			76,729				74,753				230,114				220,080
Gross profit			60,296				55,952				177,960				163,645
Operating expenses:
Research and development, net			16,449				16,028				49,779				47,391
Selling, marketing, general and administrative			22,101				19,659				64,030				57,475
Total operating expenses			38,550				35,687				113,809				104,866
Operating income			21,746				20,265				64,151				58,779
Financial and other (income) expenses, net			(913	)			551				(3,114	)			2,310
Taxes on income			4,324				3,710				12,812				10,627
Net income			18,335				16,004				54,453				45,842
Attributable to non-controlling interest			-				132				141				371
Net income attributable to Sapiens' shareholders			18,335				15,872				54,312				45,471
Basic earnings per share			0.33				0.29				0.97				0.82
Diluted earnings per share			0.33				0.28				0.97				0.82
Weighted average number of shares outstanding used to compute basic earnings per share (in thousands)			55,854				55,397				55,799				55,251
Weighted average number of shares outstanding used to compute diluted earnings per share (in thousands)			56,308				55,813				56,151				55,657

 

  

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								Nine months ended
		September 30,								September 30,
		2024				2023				2024				2023
		(unaudited)				(unaudited)				(unaudited)				(unaudited)
GAAP revenue			137,025				130,705				408,074				383,725
Valuation adjustment on acquired deferred revenue			-				55				-				165
Non-GAAP revenue			137,025				130,760				408,074				383,890
GAAP gross profit			60,296				55,952				177,960				163,645
Revenue adjustment			-				55				-				165
Amortization of capitalized software			1,470				1,418				4,584				4,274
Amortization of other intangible assets			1,043				1,835				3,630				5,531
Non-GAAP gross profit			62,809				59,260				186,174				173,615
GAAP operating income			21,746				20,265				64,151				58,779
Gross profit adjustments			2,513				3,308				8,214				9,970
Capitalization of software development			(1,834	)			(1,638	)			(5,374	)			(4,975	)
Amortization of other intangible assets			1,276				1,074				3,732				3,234
Stock-based compensation			646				1,038				2,229				2,960
Acquisition-related costs *)			754				11				1,248				21
Non-GAAP operating income			25,101				24,058				74,200				69,989
GAAP net income attributable to Sapiens' shareholders			18,335				15,872				54,312				45,471
Operating income adjustments			3,355				3,793				10,049				11,210
Taxes on income			(599	)			(585	)			(1,808	)			(1,738	)
Non-GAAP net income attributable to Sapiens' shareholders			21,091				19,080				62,553				54,943

 

(*)

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								Nine months ended
		September 30,								September 30,
		2024				2023				2024				2023
GAAP operating profit			21,746				20,265				64,151				58,779
Non-GAAP adjustments:
Valuation adjustment on acquired deferred revenue			-				55				-				165
Amortization of capitalized software			1,470				1,418				4,584				4,274
Amortization of other intangible assets			2,319				2,909				7,362				8,765
Capitalization of software development			(1,834	)			(1,638	)			(5,374	)			(4,975	)
Stock-based compensation			646				1,038				2,229				2,960
Compensation related to acquisition and acquisition-related costs			754				11				1,248				21
Non-GAAP operating profit			25,101				24,058				74,200				69,989
Depreciation			1,288				719				3,480				2,750
Adjusted EBITDA			26,389				24,777				77,680				72,739

 

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

 

		Q3 2024				Q2 2024				Q1 2024				Q4 2023				Q3 2023
Revenues			137,025				136,800				134,249				130,914				130,760
Gross profit			62,809				62,481				60,884				59,370				59,260
Operating income			25,101				24,836				24,263				24,152				24,058
Adjusted EBITDA			26,389				25,931				25,360				25,267				24,777
Net income to Sapiens' shareholders			21,091				21,041				20,421				20,081				19,080
Diluted earnings per share			0.37				0.37				0.36				0.36				0.34

 

Annual Recurring Revenue (“ARR”)

U.S. dollars in thousands 

 

		Three months ended
		September 30,
		2024				2023
Annual Recurring Revenue			173,414				157,589

 

  

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

 

		Q3 2024				Q2 2024				Q1 2024				Q4 2023				Q3 2023
North America			55,755				57,918				55,158				54,882				54,848
Europe			69,281				66,072				68,727				65,239				64,662
Rest of the World			11,989				12,810				10,364				10,793				11,250
Total			137,025				136,800				134,249				130,914				130,760

 

Non-GAAP Revenue breakdown

 

U.S. dollars in thousands

 

		Three months ended								Nine months ended
		September 30,								September 30,
		2024				2023				2024				2023
Software products and re-occurring post-production services (*)			100,707				87,356				292,992				251,757
Pre-production implementation services (**)			36,318				43,404				115,082				132,133
Total Revenues			137,025				130,760				408,074				383,890

 

		Three months ended								Nine months ended
		September 30,								September 30,
		2024				2023				2024				2023
Software products and re-occurring post-production services (*)			53,809				46,053				156,386				133,339
Pre-production implementation services (**)			9,000				13,207				29,788				40,276
Total Gross profit			62,809				59,260				186,174				173,615

 

		Three months ended								Nine months ended
		September 30,								September 30,
		2024				2023				2024				2023
Software products and re-occurring post-production services (*)			53.4	%			52.7	%			53.4	%			53.0	%
Pre-production implementation services (**)			24.8	%			30.4	%			25.9	%			30.5	%
Gross Margin			45.8	%			45.3	%			45.6	%			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

 

		Q3 2024				Q2 2024				Q1 2024				Q4 2023				Q3 2023
Cash-flow from operating activities			13,083				8,545				18,488				38,646				3,988
Increase in capitalized software development costs			(1,834	)			(1,823	)			(1,717	)			(1,543	)			(1,638	)
Capital expenditures			(1,125	)			(666	)			(466	)			(421	)			(696	)
Free cash-flow			10,124				6,056				16,305				36,682				1,654
Cash payments attributed to acquisition-related costs(*) (**)			124				134				751				221				-
Adjusted free cash-flow			10,248				6,190				17,056				36,903				1,654

 

(*)

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

 

		September 30,				December 31,
		2024				2023
		(unaudited)				(unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents			146,152				126,716
Short-term bank deposit			39,800				75,400
Trade receivables, net and unbilled receivables			109,670				90,273
Other receivables and prepaid expenses			25,769				22,514
Total current assets			321,391				314,903
LONG-TERM ASSETS
Property and equipment, net			11,431				12,661
Severance pay fund			3,446				3,605
Goodwill and intangible assets, net			310,533				317,352
Operating lease right-of-use assets			20,502				23,557
Other long-term assets			15,993				17,546
Total long-term assets			361,905				374,721
TOTAL ASSETS			683,296				689,624
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Trade payables			8,224				6,291
Current maturities of Series B Debentures			19,796				19,796
Accrued expenses and other liabilities			80,610				77,873
Current maturities of operating lease liabilities			5,861				6,623
Deferred revenue			32,810				38,541
Total current liabilities			147,301				149,124
LONG-TERM LIABILITIES
Series B Debentures, net of current maturities			19,778				39,543
Deferred tax liabilities			7,938				10,820
Other long-term liabilities			11,399				11,538
Long-term operating lease liabilities			17,532				21,084
Accrued severance pay			8,039				7,568
Total long-term liabilities			64,686				90,553
EQUITY			471,309				449,947
TOTAL LIABILITIES AND EQUITY			683,296				689,624

 

  

SAPIENS INTERNATIONAL CORPORATION N.V. AND ITS SUBSIDIARIES

 

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

 

		For the nine months ended September 30,
		2024				2023
		(unaudited)				(unaudited)
Cash flows from operating activities:
Net income			54,453				45,842
Reconciliation of net income to net cash provided by operating activities:
Depreciation			3,480				2,750
Amortization of capitalized software and other intangible assets			11,946				13,039
Accretion of discount on Series B Debentures			32				47
Capital loss from sale of property and equipment			13				83
Stock-based compensation related to options issued to employees			2,229				2,960
Net changes in operating assets and liabilities, net of amount acquired:
Increase in trade receivables, net and unbilled receivables			(20,640	)			(8,698	)
Decrease in deferred tax liabilities, net			(2,280	)			(1,410	)
Increase in other operating assets			(908	)			(4,107	)
Increase (decrease) in trade payables			1,989				(616	)
Decrease in other operating liabilities			(5,154	)			(10,110	)
Increase (decrease) in deferred revenues			(5,684	)			363
Increase in accrued severance pay, net			640				636
Net cash provided by operating activities			40,116				40,779
Cash flows from investing activities:
Purchase of property and equipment			(2,306	)			(2,145	)
Proceeds from (investment in) deposits			36,360				(55,379	)
Proceeds from sale of property and equipment			49				40
Payments for business acquisitions, net of cash acquired			(375	)			-
Capitalized software development costs			(5,374	)			(4,975	)
Acquisition of intellectual property			-				(177	)
Net cash provided by (used in) investing activities			28,354				(62,636	)
Cash flows from financing activities:
Proceeds from employee stock options exercised			98				4,755
Distribution of dividend			(29,789	)			(28,144	)
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			(53,618	)			(43,232	)
Effect of exchange rate changes on cash and cash equivalents			4,584				1,865
Increase (decrease) in cash and cash equivalents			19,436				(63,224	)
Cash and cash equivalents at the beginning of period			126,716				160,285
Cash and cash equivalents at the end of period			146,152				97,061

 

  

Debentures Covenants

 

As of September 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 $471.3 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 (44.90)%.

 

Covenant 3

 

§

Target ratio of net financial indebtedness to EBITDA (accumulated calculation for the four last quarters) is below 5.5.

 

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Actual ratio of net financial indebtedness to EBITDA (accumulated calculation for the four last quarters) is equal to (1.42).

 

 

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