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1 www.sapiens.com
www.sapiens.com
Investor Presentation
February 2016
Roni Al-Dor, CEORoni Giladi, CFOYaffa Cohen-Ifrah, CMO
Q4 and Full Year 2015 Results
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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, 2014 and subsequent reports and registration statements filed from time to time with the Securities and Exchange Commission.
Safe Harbor Statement
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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
135
157
179
2011 2012 2013 2014 2015
Non-GAAP revenue (M USD); See appendix for Non-GAAP reconciliation1 Revenue of $98.1mm in 2011 pro-forma for the FIS and IDIT acquisitions
1
190 Customers
1,600 Employees
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Our Evolution
Horizontal platforms
Customization for select verticals
Rules management
Vertical specific solutions for insurance market
Next-generation insurance & technology portfolio
Expanding to financial services
1
Early Days
2
Vertical Pivot
3
Modernize
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Our Offerings
Provide core software solutions for insurance and financial services companies:
Core software policy administration solutions
Innovative platform for business decisionsTechnology
Based Solutions
Insurance Software
Application development platforms
~80% of the business
Run mission critical operations of insurance industry
Provide functionality to support the full life-cycle of insurance carriers
~20% of the business
Includes a disruptive business decision engine
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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, Reinsurance
Injuries Life
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The Insurance Industry
Source: Market size data per Celent. April 2015
Big Market
Potential
$4,300,000,000,000 gross written premium (GWP)
11,000 insurance companies globally
IT relatedInvestment
3%-4% of GWP invested in IT
$182B in 2016 Life - $101B; P&C - $80B
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The Insurance IT Opportunity is Large and Growing
Highly Attractive Growing Market
NEW
Global IT Spending 2015-2016
expected to increase by 4%
External Software and IT Services spending
2015-2016 expected to grow by 5%
Sapiens Total Addressable Market
$25B
Source: Market size data per Celent. March 2015
Market Trend
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Technology is the differentiation as insurance companies transform for the future
Key Industry Trends
Business challenges…
Regulation
Increased competition
Millennial customers and new distribution channels
…Not supported by current Technology
20+ year old technology
Inflexible systems do not support change
Increased maintenance cost
Implications for insurance companies
• Prolonged time to market
• Growth challenges
• Difficulty entering new markets
• Poor consumer experience
• Shrinking profits
Sapiens Today
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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 customer’s 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 2015
EMEA 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 BeattieOvum Decision Matrix – P&C Policy Administration Platform Europe, 10/2013. Bubble size represents market impact.
EMEA
3
4
5
6
7
8
9
6 7 8 9
Ove
rall
Exec
uti
on
Ass
essm
ent
Overall Technology Assessment Score (1–10)
Leader Challenger Follower
GuidewirePolicyCenter
Sapiens IDIT
Accenture DuckCreek PolicyAdministration
eBao TechGeneralSystem Suite
Innovation GroupInsurer Policy
GraphTalk A.I.A.
Xuber forInsurers
TCSBaNCS
“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 2015 Breath of Functionality
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Underwriter
Workbench
Focus on Insurance Core Systems
AgentPortal
BI Repository
Document Management & Workflow/BPM
RatingEngine
CRMCustomer
Portal
Core Claims System
Reinsurance Management
Billing
Core Policy Admin System General
Ledger
Document Creation
UniqueComp.
Distribution Management
BI Reporting BI Repository
Disbursement
Sapiens’s System
Not Playing currently
Opportunity to expand to complementary solutions
AgentPortal
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One-Stop Shop Across Product 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
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Blue-Chip Global Customer-Base
North America UK Europe APAC
Bulgaria
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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
Growth Strategy
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Optimize Delivery Operations
Pillars of our Growth Strategy
Mergers &Acquisitions
Win New Customers
Grow with Existing Customers
MaintainProduct Leadership
Leverage our Global Presence
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Acquisitions - What Are We Looking For
Geographic Expansion
Complementary Solutions
Off-shore Capabilities
Customer Base
Profitable companies
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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 Director,DECISION
2007
2016
Irit NuselManaging DirectorLife, Pension and Retirement
2013
Yaffa Cohen-IfrahCMO and Head of Corporate Communications
2014
Anat BellucoVP Global HR
2013
Tal SharonRegional ManagerIsrael
2001
Ashok Bhavnani Regional ManagerAsia Pacific
2015
Manabu OkadaRegional ManagerJapan
1998
Liana GelikasManaging Director Property & Casualty
2016Norman TutnauerHead of Global Sales
Regional team
Osnat Segev-HarelHead of Corporate Development
2009
Executive team
Financials
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Revenue – Continue our Growth
1 Revenues of $98.1mm in 2011 pro-forma for the FIS and IDIT acquisitions2 2016 guidance per Sapiens press releases dated February 17, 2016
98.1
70.3
135.4
157.5
179.3
2011 2012 2013 2014 2015 2016 E
(1)
Guidance
Non-GAAP Revenues (USD millions)
(2)
207-211
113.9
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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 APAC
2011 2012 2013 2014 2015
Non-GAAP Revenues (USD millions)
Consistent Revenue Growth in NA and UK
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Year 3 Year 4 Year 5 Year 6-10
Illustrative $5mm initial contract
$2.5 $2.5
$1.1 $1.1 $1.1 $1.1Revenue($mm)
Contractual High
Attractive Revenue Model …
RETIREMENT L&A 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
-Liv
e
InitialDeal Size
Stage
Stickiness
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… With Significant Visibility
Customer stickiness and layered revenue streams create significant visibility
Rev
en
ue
15-20% New Customers
80-85%Existing Customers
YEAR 1
YEAR 2
YEAR 3
YEAR 4
YEAR 5
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40.8%
43.8%
2014 2015
Consistent Gross & Operational Profit Growth
Non-GAAP Operating Profit (USD millions)
Operating Profit & Margin
Non-GAAP Gross Profit (USD millions)
Gross Profit & Margin
$17
$27
10.8%
14.8%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
0.0
5.0
10.0
15.0
20.0
25.0
2014 2015
See appendix for Non-GAAP reconciliation
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Operational Margin Target
14.8%15.0% - 15.5%
2015 2016Guidance
10%10.4%
10.9%
11.9%
14.1%14.8%
15.1% 15.1
Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15
Non-GAAP Operating Margin
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Strong Cash Flow Generation
$94M Cash
$0M Debt
Non-GAAP Operating Cash Flow ($mm)
Dividend Payment of $7.2M on June 2015
3.7
15.3
11.9
15.5
34.4
2011 2012 2013 2014 2015
Non-GAAP operating cash flow include the cost of capitalized software development
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Financial Summary
• 2011-2015 revenue CAGR of 16%, NA and UK key drivers• Additional investments in sales and marketing to support our
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: Core software solutions 80-85% of revenue from existing customers Long-term engagement cycle
Expanding offshore presence Beneficiary of past R&D investments
Strong cash flow conversion $94mm available cash and marketable securities Debt free balance sheet
High growth
Diversified revenue
Highly Attractive Revenue Model
Margins Expansion
Well Capitalized
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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 Communications
US Mobile: +1-201-250-9414 | Phone: +972-3-7902032e-Mail: [email protected] | Website www.sapiens.com
Thank You
Appendix
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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 the acquisition date, August 18, 2015.
(in USD Million except per share amount)
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Non-GAAP EBITDA to Adj. EBITDA Reconciliation
Year ended December 31
20142015
$ 14,906$ 24,350GAAP operating profit
$ 4,926$ 4,875Amortization of capitalized software
$ 2,209$ 2,106Amortization of other intangible assets
($ 6,094)($ 6,032)Capitalization of software development
-270Compensation related to acquisition
1,0671,349Stock-based compensation
-(371)
Adjustments of pre-acquisition revenues and expenses accounted under pooling of interest method
$ 17,014$ 26,547Non-GAAP operating profit
10.8%14.8%
$ 1,582$ 1,952Depreciation
$ 18,596$ 28,499Adjusted EBITDA1
11.8%15.9%
(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
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Sapiens Solutions Portfolio
ArchitectureCore
FunctionalityBenefits
Configurable
Integrated but modular
Service-oriented architecture
Digital ready
Policy administration
Underwriting
Customer servicing
Claims processing
Billing
Faster time to market
Phased approach
Ease of integration
Enhanced customer experience
Reduce cost of operations
ReinsuranceProperty&
Casualty
RetirementLife, Pension&
Annuities
Servicing all key segments of the insurance industry
