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1 www.sapiens.com
www.sapiens.com
Investor Presentation
August 2016
Q2 2016 Results
Roni Al-Dor, CEORoni Giladi, CFOYaffa Cohen-Ifrah, CMO
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
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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 (USD M); See appendix for Non-GAAP reconciliation1 Revenue of $98.1M in 2011 pro-forma for the FIS and IDIT acquisitions
1
200 Customers
1,800 Employees
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. .
Sapiens Evolution
Horizontal platforms
Customization for select verticals
Rules management
1
Early Days
Focus on maintaining top line with higher profitability
3
Turnaround
2 4
Vertical specific solutions for insurance market
Vertical Pivot
Next-generation insurance and technology portfolio
Expanding to financial services
Modernize
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Our OfferingProvide core software solutions for insurance and financial services companies:
Innovative platform for business decisions
Core software policy administration solutions
Technology based
solutions
Insurance software
Application development
platforms
• Run mission-critical insurance operations
• Provide functionality to support the full life-cycle of insurance carriers
• Includes a disruptive business decision engine
Retirement
Life and annuities
DECISION eMerge
78%
P&C
22%
Revenue contribution
Revenue contribution
L&A
P&C
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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 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
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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
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Diverse and Unique Product Portfolio …
Comprehensive solutions, supporting personal,
commercial and specialty lines
ALIS RetirementClosed Books
IDIT Reinsurance
InsuranceSolutions
P&C
Enterprise-scale platform to centrally author, store and manage all organizational business logic
Comprehensive software solutions for the management of life, pension,
annuity and retirement
L&P
TechnologySolutions
DecisioneMerge
TOPAZ Stingray
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Our Value Proposition
Award-winning packaged solutions
End-to-end solutionsLeading technology
Decades of proven project delivery Consultative approach
Large global and expanding footprint
Retirement ReinsuranceLife, Pensions and Annuities
Property and Casualty
Domain expertise
Closed Books
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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 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 2015
APAC
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… Supported by integrated services
Sapiens Retirement
Sapiens P&C
Sapiens L&A
Sapiens Reinsurance
Sapiens DECISION
Hosting
Product Upgrades
Training Support Services
Migration
TestingConsulting
Project Implementation
Sapiens product portfolio
• Run mission-critical insurance operations
• Provide functionality to support the full life-cycle of insurance carriers
Integrated product services• Provide project implementation and
maintenance services• Also, offer migration and training
services on an on-going basis
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Blue-Chip Global Customer-BaseNorth America UK Europe APAC
34% 24% 31% 11%
Bulgaria
34%Revenue contribution (2015)
24% 31%11%
Growth Strategy
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Land and Expand
Mergers&
Acquisitions
Grow with Existing
Customers
WinNew
Customers
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Customer Base
Geographic Expansion
Complementary Solutions
Growth Supported by Focused M&A Strategy
3 core products
2 off-shore operations
76 new customers
1 patent
Completed 7 M&A NEXT STEP
INSECO
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Proven Management TeamExecutive Team
Roni Al-DorPresident & CEO
2005 Roni GiladiCFO
2007
2013Irit NuselManaging DirectorLife, Pension and Retirement
2014Yaffa Cohen-IfrahCMO and Head of Corporate Communications
2016Norman TutnauerHead of Global Sales
2007Rami DoronManaging Director,DECISION
2016Liana GelikasManaging Director Property & Casualty
2013Anat Belluco FeinkuchenVP Global HR
Ronald KaramPresident, NA insurance
2007
1995Raj GhumanRegional ManagerUK & Nordics
2015Ashok Bhavnani Regional ManagerAsia Pacific
Regional Team
Tal SharonRegional ManagerIsrael
2001 Osnat Segev-HarelHead of Corporate Development
2009
Mike McCurley VP Sales Insurance Sector North America
2016
Henry AinouzeRegional Manager Europe
2014Wayne Te Paa Regional ManagerANZ
2011
Financials
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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)
114.2
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Annual Revenue by Geography
25.9
21.9
12.3
26.7
11.2
35.5
26.6
22.4 23.6
12.5
44.2
31.1
24.923.0
12.2
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)
Focus on NA and Europe
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Year 3 Year 4 Year 5 Year 6-10
Illustrative $5M initial contract
Revenue($mm)
Contractual High
Attractive Revenue Model
Retirement L&A P&C Closed Books Reinsurance
Typical life of product engagement: 10–15 years
Ongoing Post-ProductionPre-Production
Year 1 Year 2
$7 - $10m$10 - $15m $4 - $6m $3 - $5m $1 - $1.5m
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%New Customers
≈85% Existing Customers
YEAR 1
YEAR 2
YEAR 3
YEAR 4
YEAR 5
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Q2- Consistent Revenue & Operating Profit Growth
Non-GAAP Operating Profit (USD millions)
Operating Profit & MarginNon-GAAP Revenue (USD millions)
Revenues
$6.4$7.4
14.8%14.0%
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
Q2 2015 Q2 2016See appendix for Non-GAAP reconciliation.
$43.4
$53.0
0
0.02
0.04
0.06
0.08
0.1
0.12
0.14
$10.0
$20.0
$30.0
$40.0
$50.0
Q2 2015 Q2 2016
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Strong Cash Flow Generation
$100.0M Cash
$0M Debt
Annual Non-GAAP Operating Cash Flow ($ M)
Dividend Payment of $9.8m in 2016, $7.2m in 2015 and $6m in 2013
15.311.9
21.6
15.5
2012 2013 2014 2015
Non-GAAP operating cash flow include the cost of capitalized software development
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2016Guidance
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14.8%
13.5%
0
2
4
6
8
10
12
14
2015 2016Guidance
14.0%
Operational Margin Target
Revenue and Operational Margin Guidance
179.3
211.0
215.0
2015 2016Guidance
Revenue Guidance
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Investment Highlights
Massive market
Technology leader
One-stop-shop
Top-tier customers
Proven management
High growth
Diversified revenue
Highly attractive revenue model
Margins expansion
Well capitalized
Business Financials
‹#›www.sapiens.com
Contact:
Yaffa Cohen-Ifrah, Chief Marketing Officer & Head of Corporate Communications
U.S. Mobile: +1-201-250-9414 | Phone: +972-3-7902032E-Mail: [email protected] | Website: www.sapiens.com
Thank You
Appendix
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Q2 and H1 – Non-GAAPFirst HalfQ2
2015201620152016
84.5102.643.453.0Revenue
36.244.318.622.7Gross Profit
42.9%43.2%42.7%42.9 %
12.214.86.47.4Operational Profit
14.5%14.4%14.8%14.0%
10.012.25.26.3Net Income
11.8%11.9%12.0%11.8%
13.116.06.98.1Adjusted EBITDA**
0.200.250.110.13Diluted EPS
49,09849,65649,21349,759Diluted Weighted Average Number of Shares
Outstanding Shares: 48,985)as of June 30th , 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)
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Non-GAAP EBITDA to Adj. EBITDA Reconciliation
Three months ended June 30
20152016
6,0296,407GAAP operating profit
1,1351,256Amortization of capitalized software
608495Amortization of other intangible assets
(1,553)(1,396)Capitalization of software development
71182Compensation related to acquisition and acquisition related cost
290482Stock-based compensation
(139)-
Adjustments of pre-acquisition revenues and expenses accounted under pooling of interest method
6,4417,426Non-GAAP operating profit
14.8%14.0%
459656Depreciation
6,9008,082Adjusted EBITDA1
15.9%15.2%
(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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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
