investor presentation - insurance software solutions | sapiens · highly regulated industry with...

1 www.sapiens.com

www.sapiens.com

Investor Presentation

May 2016

Roni Al-Dor, CEORoni Giladi, CFOYaffa Cohen-Ifrah, CMO

Q1 2016 Results

2 www.sapiens.com2 www.sapiens.com

Certain statements made in this presentation may be constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities and Exchange Act of 1934 and the United States Private Securities Litigation Reform Act of 1995. Words such as "will," "expects," "believes" and similar expressions are used to identify these forward-looking statements (although not all forward-looking statements include such words). These forward-looking statements, which may include, without limitation, projections regarding our future performance and financial condition, are made on the basis of management’s current views and assumptions with respect to future events. Any forward-looking statement is not a guarantee of future performance and actual results could differ materially from those contained in the forward-looking statement.

These statements speak only as of the date they were made, and we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. We operate in a changing environment. New risks emerge from time to time and it is not possible for us to predict all risks that may affect us. For more information regarding these risks and uncertainties as well as certain additional risks that we face, you should refer to the Risk Factors detailed in Item 3 of Part III of our Annual Report on Form 20-F for the year ended December 31, 2015 and subsequent reports and registration statements filed from time to time with the Securities and Exchange Commission.

Safe Harbor Statement


Who is Sapiens?

Global Footprint

Revenue Growth

NA: 34%UK: 24%Israel: 16%Europe: 15%APAC: 11%

� Leading global provider of software solutions across the insurance industry

� Growing presence in the financial services sector

� DNA of technology platform & insurance domain expertise

114

98

135157

179

2011 2012 2013 2014 2015Non-GAAP revenue (USD M); See appendix for Non-GAAP reconciliation1 Revenue of $98.1M in 2011 pro-forma for the FIS and IDIT acquisitions

1

190 Customers

1,700 Employees

4 www.sapiens.com

Sapiens Evolution

Today: Modernize

Vertical Pivot

� Next-generation insurance & technology portfolio

� Expanding to financial services

Early days: � Horizontal platforms

� Customization for select verticals

� Rules management

� Vertical-specific solutions for insurance market


Our OfferingsProvide core software solutions for insurance and financial services companies:

Core software policy administration solutions

Innovative platform for business decisionsTechnology

BasedSolutions

Insurance Software

Application development platforms

� ~80% of the business

� Run mission-critical insurance operations

� Provide functionality to support the full life-cycle of insurance carriers

� ~20% of the business

� Includes a disruptive business decision engine

ReinsuranceProperty & CasualtyRetirementLife & Annuities

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The Market

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The Insurance Markets

WealthLiabilityCatastrophe PropertyMotor Voice

Life, Annuity, Retirement

Annuities Retirement

� Highly regulated industry with accelerating regulatory changes

� Competitive markets with little product differentiation

� Increased globalization

� Legacy IT transition challenges

Enterprises are seeking modular, next-gen solutions to ease the transition and transform the consumer experience

Property, Casualty, ReinsuranceInjuries Life


The Insurance Industry

Source: Market size data per Celent. April 2016

Big Market

Potential

$5,200,000,000,000 gross written premium (GWP)

11,000 insurance companies globally

IT-relatedInvestment

3%-4% of GWP invested in IT

$185B in 2016 Life - $99B; P&C - $86B

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The Insurance IT Opportunity is Large and Growing

Highly Attractive Growing Market NEW

Global IT Spending 2016-2017 expected to increase by 6%

External Software and IT Services Spending 2016-2017 - expected to grow by 7%

Sapiens Total Addressable Market

$30B

Source: Market size data per Celent. April 2016

Market Trend

Source: Gartner Verticals Forecast world wide By Insurance, April 2016 and company analysis

10 www.sapiens.com

Today’s Market Challenges & Trends

Need to cope with frequently changing regulations

Shift of power and distribution model towards end-customers, omni-channel distribution

Quick time-to-market capabilities

Digitalization, IoT and wearable, mobile, analytics & Big Data, cloud & SaaS, new external market entrants

Reducing cost of ownership across IT operation

Fierce competition between insurance carriers -need to differentiate

Compliance

Channels & Distribution

Cost & Efficiency

Competition

Growth

Technology & Business Model

Sapiens Today

12 www.sapiens.com

Current Sapiens Portfolio

Life, Annuities, Pension and Retirement

Property & Casualty and Reinsurance

Decision Technology

13 www.sapiens.com

Our Value Proposition

Award-winning packaged solutions

End-to-end SolutionsLeading Technology Robust Domain Expertise

� Comprehensive platform for automating back-end core across policy, billing and claims

� Customizable to meet customers’ IT and business demands

� Modular yet integrated

� Digital-ready

� One-stop-shop approach reduces risk on major re-platforming initiatives

� Unique combination of technology and services

� Ongoing maintenance and enhancement as business needs change

� Robust insurance industry expertise

� Team comprised of L&A and P&C industry experts

� Building solutions with customers & solving their business problems

� Enhancing solutions as industry evolves

Decades of proven project delivery Consultative approach

Large global and expanding footprint

Retirement ReinsuranceLife, Pensions & Annuities

Property & Casualty

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Nov. 2015

Leadership in L&A Insurance Solutions

Breath of Functionality 2015EMEA North America

XCelent Awards - EMEA Policy Administration Systems for Life, Annuities, Pension and Health, 12/2015

“The ALIS system has a very good user interface. It is simple for the user and flows well... The ALIS system has a graphical policy timeline that is unique and useful for a customer service representative working with a client. Sapiens is releasing new portals, which Celent reviewed, that are among the best we have seen “Going forward, we expect the Sapiens ALIS system to make most evaluation short lists and Sapiens to expand its already rich customer base in the EMEA region.”

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Feb. 2016

Leadership in P&C Insurance Solutions

Celent research, EMEA Policy Administration Systems, General Insurance, Property & Casualty February 2016, Craig BeattieCelent research– APAC Policy Administration Platform Property & Casualty, 04/2016, KyongSun Kong

EMEA

“Sapiens IDIT continues to offer a strong digital policy administration system for insurers globally, with strong experience across Europe…customers commented that Sapiens is responsive, committed, and constructive, and can provide creative solutions.”

Technology 2015Technology and Breath of Functionality 2015APAC

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Focus on Insurance Core Systems

Agent

Portal

BI Repository

CRMCustomer Portal

Core Claims System

Reinsurance Management

Billing

Core Policy Admin System

General Ledger

Document Creation

UniqueComp.

Distribution Management

BI Reporting

Disbursement

Sapiens’ offering

No offering currently

AgentPortal

UnderwriterWorkbench

RatingEngine

Document Management & Workflow/BPM

Constant Evolution and Expansion of the Sapiens Proposition


One-Stop-Shop Across Products and Services

Sapiens Retirement

Sapiens P&C

Sapiens L&A

Sapiens Reinsurance

Hosting

Product Upgrades

Training Support Services

Migration

TestingConsulting

Project Implementation

Benefits to Customer� Successful implementations� Opportunity to enhance product

functionality� Single point of contact� Ease of future enhancements and

maintenance

Benefits to Sapiens� Strategic importance to customers� Deeper level of customer

entrenchment� Feedback mechanism to enhance

product � Opportunities to cross-sell current

and future products and solutions


CRM LoansERPCredit

Sapiens DECISION

Mortgage

Automated Code

Generation

Centralized Decision Logic

Business Strategy

Market ConditionRegulation

s

Customer RequirementsCompetition

Manages business logic across organizations, for large organizations that operate in highly-regulated and complex decision-making environments, cutting time, cost and risk

http://www.thedecisionmodel.com/

http://www.thedecisionmodel.com/

19 www.sapiens.com

Blue-Chip Global Customer-BaseNorth America UK Europe APAC

34% 24% 31% 11%

Bulgaria

http://www.polisdirect.nl/

http://www.polisdirect.nl/

http://www.eurolife.com.cy/

http://www.eurolife.com.cy/

Growth Strategy

21 www.sapiens.com

Optimize Delivery Operations

Our Growth Strategy: Land and Expand

Mergers &Acquisitions

Grow with Existing Customers

Win New Customers

MaintainProduct Leadership

Leverage our Global PresenceHo

wSt

rate

gy


Acquisitions – What Are We Looking For?

Customer Base

Geographic Expansion

Complementary Solutions

23 www.sapiens.com

6 Acquisitions in 5 Years

New Customers56New Geographies3New Products2Off-Shore Operations2Complementary Solution1New Patent1

24 www.sapiens.com

Proven Management Team

Roni Al-DorPresident & CEO

2005

Raj GhumanRegional ManagerUK & Nordics

1995

Ronald KaramPresident, NA insurance

2007

Henry AinouzeRegional Manager Europe

2011

Wayne Te Paa Regional ManagerANZ

2014

Roni Giladi CFO

2007

Rami DoronManaging DirectorDECISION

2007

2016

Irit NuselManaging DirectorLife, Pension and Retirement

2013

Yaffa Cohen-IfrahCMO and Head of Corporate Communications

2014

Anat BellucoVP Global HR

2013 Ashok Bhavnani Regional ManagerAsia Pacific

2015

Mike McCurley VP Sales Insurance Sector North America

Liana GelikasManaging Director Property & Casualty

2016Norman TutnauerChief Business Officer

Regional team

Osnat Segev-HarelHead of Corporate Development

2009

Executive team

2016

Tal SharonRegional ManagerIsrael

2001

Financials


Revenue – Continue our Growth

1 Revenues of $98.1 M in 2011 pro-forma for the FIS and IDIT acquisitions

98.1

70.3

135.4

157.5

179.3

2011 2012 2013 2014 2015

(1)

Non-GAAP Revenues (USD millions)

113.9

27 www.sapiens.com

Annual Revenue by Geography

25.9

21.9

12.3

26.7

11.2

35.6

20.622.4 23.6

12.3

44.2

30.0

24.923.0

12.4

49.6

35.0

28.4 28.8

15.7

61.3

42.6

26.528.3

20.5

NA UK EU Israel APAC2011 2012 2013 2014 2015

Non-GAAP Revenues (USD millions)

Focus on NA and Europe

28 www.sapiens.com

Year 3 Year 4 Year 5 Year 6-10

Illustrative $5M initial contract$2.5 $2.5

$1.1 $1.1 $1.1 $1.1Revenue($mm)

Contractual High

Attractive Revenue Model

Retirement L& P&C Reinsurance DECISION

Typical life of product engagement: 10–15 years

Ongoing Post-ProductionPre-Production

Year 1 Year 2

$7 - $10m$10 - $15m $4 - $6m $1 - $1.5m $1 - $4m

Go-

Live

InitialDeal Size

Stage

Stickiness

29 www.sapiens.com

With Significant VisibilityCustomer stickiness and layered revenue streams create significant visibility

Reve

nue

15-20% New Customers

80-85%Existing Customers

YEAR 1

YEAR 2

YEAR 3

YEAR 4

YEAR 5

30 www.sapiens.com

Q1 – Continue Our Revenue GrowthNon-GAAP Revenues (USD millions)

41.0

49.6

0

0.02

0.04

0.06

0.08

0.1

0.12

0.14

0.0

10.0

20.0

30.0

40.0

50.0

2015 2016

See appendix for Non-GAAP reconciliation.

31 www.sapiens.com

Consistent Gross & Operational Profit Growth

Non-GAAP Operating Profit (USD millions)

Operating Profit & MarginNon-GAAP Gross Profit (USD millions)

Gross Profit & Margin

$5.8$7.3

14.1% 14.8%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

Q1 2015 Q1 2016See appendix for Non-GAAP reconciliation.

$17.7$21.6

43.1% 43.5%

0.0

5.0

10.0

15.0

20.0

Q1 2015 Q1 2016

32 www.sapiens.com

Strong Cash Flow Generation

$98.5M Cash

$0M Debt

Annual Non-GAAP Operating Cash Flow ($ M)

Declare dividend of $9.8 M to be distributed on June 1, 2016

3.7

15.311.9

15.5

34.4

2011 2012 2013 2014 2015

Non-GAAP operating cash flow include the cost of capitalized software development

33 www.sapiens.com

2016 Guidance

34 www.sapiens.com

Revenue Guidance

179.3

207.0

211.0

20152016

Guidance


Operational Margin Target

14.8% 15.0%

2015 2016Guidance

Non-GAAP Operating Margin

15.5%


Financial Summary• 2011-2015 revenue CAGR of 16% • Investments in sales and marketing to support growth • Increased farming of existing customer base

� Globally diversified across NA, UK, Europe, Israel, APAC� Insurance sub-verticals: P&C, L&A, Retirement� Over 190 customers

� Customer stickiness� 80-85% of revenue from existing customers � Long-term engagement cycle

� Expanding offshore presence� Beneficiary of past R&D investments

� Strong cash flow conversion� $98.5M available cash and marketable securities� Debt-free balance sheet

High growth

Diversified revenue

Highly attractive revenue model

Margins expansion

Well capitalized

37 www.sapiens.com

Key Investment Highlights

Secular shifts, legacy IT and regulatory tailwinds driving insurance industry IT modernization

Leading global provider of solutions across major segments of insurance industry

Long-term, well-established marquee customer base across the globe

Proven management team comprised of industry experts

Distinct combination of high growth, operating leverage and recurring revenue

One-stop-shop provider of technology and services

Massive market

Technology leader

One-stop shop

Top-tier customers

Proven management

Unique financial model

‹#›www.sapiens.com

Contact: Yaffa Cohen-Ifrah, Chief Marketing Officer & Head of Corporate CommunicationsU.S. Mobile: +1-201-250-9414 | Phone: +972-3-7902032E-Mail: [email protected] | Website: www.sapiens.com

Thank You

Appendix

40 www.sapiens.com

Q1 – Non GAAPQ1

20152016

41.049.6Revenue

17.721.6Gross Profit

43.1%43.5 %

5.87.3Operational Profit

14.1%14.8%

4.76.0Net Income

11.5%12.1%

6.28.0Adjusted EBITDA*

0.100.12Diluted EPS

49,09849,560Diluted Weighted Average Number of Shares

Outstanding Shares: 48,929)as of March 31st , 2016(

* The Company defines Adjusted EBITDA as net Profit, adjusted for stock-based compensation expense, depreciation and amortization, capitalized internal-use software development costs, Amortization of internal-use software development costs interest expense, provision for income taxes and other income (expenses).

(in USD million except per share amount)

41 www.sapiens.com

Non-GAAP EBITDA to Adj. EBITDA ReconciliationThree months ended

March 31

20152016

5,7986,251GAAP operating profit

1,2151,409Amortization of capitalized software

521511Amortization of other intangible assets

(1,312)(1,384)Capitalization of software development

-103Compensation related to acquisition

278458Stock-based compensation

(712)-

Adjustments of pre-acquisition revenues and expenses accounted under pooling of interest method

5,7887,348Non-GAAP operating profit

14.1%14.8%

390607Depreciation

6,1787,955Adjusted EBITDA1

15.1%16.0%

(in USD thousands)

Note: In accordance with non-GAAP accounting, 2015 includes consolidation of Insseco commencing with the acquisition date, August 18, 20151 See definition of Adjusted EBITDA in Q4 and Annual- Non GAAP slide

42 www.sapiens.com

Q4 and Annual – Non-GAAPAnnualQ4

20142015*20142015

157.5179.341.848.7Revenue

64.278.517.521.5Gross Profit

40.8%43.8%41.8%44.2 %

17.026.55.07.4Operational Profit

10.8%14.8%11.9%15.1%

16.022.14.96.3Net Income

10.2%12.3%11.8%13.0%

18.628.55.47.9Adjusted EBITDA**

0.330.450.100.13Diluted EPS

48,63749,32749,05749,536Diluted Weighted Average Number of Shares

Outstanding Shares: 48,760)as of December 31st , 2015(

** The Company defines Adjusted EBITDA as net Profit, adjusted for stock-based compensation expense, depreciation and amortization, capitalized internal-use software development costs, amortization of internal-use software development costs interest expense, provision for income taxes and other income (expenses).

* Including consolidation of Insseco commencing on the acquisition date, August 18, 2015.

(in USD Million except per share amount)

investor presentation - insurance software solutions | sapiens · highly regulated industry with...

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