Form 6-K SAPIENS INTERNATIONAL For: May 03

 

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 May 2022

 

Commission File Number 000-20181

 

SAPIENS INTERNATIONAL CORPORATION N.V.

(Translation of Registrant’s 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 ☐

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐

 

 

 

CONTENTS

 

Results of Operations- Quarter Ended March 31, 2022

 

On May 3, 2022, Sapiens International Corporation N.V. (“Sapiens”, the “Company”, “we” or “us”) announced our results of operations for the quarter ended March 31, 2022.  A copy of the press release announcing those results is furnished as Exhibit 99.1 to this Report of Foreign Private Issuer on Form 6-K (this “Form 6-K”) and is incorporated herein by reference. 

 

Sapiens will be holding a conference call on May 3, 2022 to discuss our quarterly results; a link to the webcast for that conference call, as well as a copy of the slide presentation with additional information related to our quarterly results, are available at the “Investors” section of Sapiens’ website, at https://www.sapiens.com/investor-relations/ir-events-presentations/. The foregoing materials, and Sapiens’ website generally, are not a part of this Form 6-K.

 

Declaration of Dividend

 

On May 3, 2022, Sapiens announced the distribution of a dividend of $0.47 per share, or $25.9 million in total. The dividend is in line with our policy of distributing up to 40% of our annual non-GAAP net income to our shareholders, and will be paid on May 25, 2022 to Sapiens’ shareholders of record as of May 17, 2022. The announcement of the dividend is included in the foregoing press release annexed as Exhibit 99.1 hereto that is incorporated by reference herein.

 

Incorporation by Reference

 

The contents of this Form 6-K, excluding the contents of Exhibit 99.1 hereto, are hereby incorporated by reference in the Company’s registration statements on Form S-8 (SEC file numbers 333-177834, 333-213817 and 333-260325, filed by the Company with the Securities and Exchange Commission on November 9, 2011, September 27, 2016 and October 18, 2021, respectively) and Form F-3 (SEC file number 333-232599, filed by the Company with the Securities and Exchange Commission on July 11, 2019) and shall be a part thereof from the date on which this Form 6-K is furnished, to the extent not superseded by documents or reports subsequently filed or furnished.

 

 

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: May 3, 2022	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 dated May 3, 2022 announcing (i) the results of operations of Sapiens International Corporation N.V. (Sapiens) for the quarter ended March 31, 2022, and (ii) a dividend declaration by Sapiens

 

 

3

 

 

Exhibit 99.1 

 

 

 

Sapiens Reports First Quarter 2022 Financial Results

 

May 3, 2022 – 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 first quarter ended March 31, 2022.

 

Summary Results for First Quarter 2022 (USD in millions, except per share data)

 

		GAAP												Non-GAAP
		Q1 2022				Q1 2021				% Change				Q1 2022				Q1 2021				% Change
Revenue		$	117.7			$	109.6				7.4	%		$	117.7			$	110.2				6.8	%
Gross Profit		$	49.4			$	44.3				11.7	%		$	52.9			$	49.2				7.5	%
Gross Margin			42.0	%			40.4	%			160 bps				45.0	%			44.7	%			30 bps
Operating Income		$	16.5			$	12.4				33.8	%		$	20.8			$	19.0				9.3	%
Operating Margin			14.1	%			11.3	%			280 bps				17.6	%			17.2	%			40 bps
Net Income (*)		$	13.9			$	9.8				41.6	%		$	17.3			$	14.9				16.0	%
Diluted EPS		$	0.25			$	0.18				38.9	%		$	0.31			$	0.27				14.8	%

 

(*) Attributable to Sapiens’ shareholders

 

“Sapiens started 2022 with solid results in our first quarter that showed non-GAAP revenue of $117.7 million and non-GAAP operating profit margin of 17.6%. This is a reflection of our ability to keep growing while improving profitability.,” stated Roni Al-Dor, President and CEO of Sapiens.

 

“Europe and APAC continue to experience growth with new exciting prospects and customers. In North America, we see a positive improvement. We continue to invest in our products, which is reflected in our market brand and pipeline.,” continued Mr. Al-Dor.

 

Sapiens reiterated today its revenue guidance of $495 million to $500 million for 2022, along with an increase in its profit margin from a range of 17.0% to 17.3% to a range of 17.4% to 17.6%.

“Furthermore, Sapiens remains committed to returning value to shareholders,” stated Al-Dor.

 

“We announced today that the board of directors has approved the distribution of a cash dividend of $0.47 per share, or $25.9 million in total – reflecting our continued confidence in our business and Sapiens’ ability to generate cash.”

 

The dividend is in line with the Company’s policy of distributing up to 40% of its annual non-GAAP net income. The dividend will be paid on May 25, 2022 to Sapiens’ shareholders of record as of May 17, 2022.

 

The dividend is subject to withholding of Israeli tax at source at the rate of 25% of the dividend amount payable to Israeli individual, and non-Israeli, shareholders of record.

 

“Moving forward, we have approved a change to our dividend policy, whereby we will pay out dividends on a semi-annual basis, reflecting our confidence in recurring positive cash flow generation.” concluded Roni Al-Dor, President & CEO of Sapiens.

 

 

Quarterly Results Conference Call

 

Management will host a conference call and webcast today, May 3, 2022 at 9:30 a.m. 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 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) 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   Shay Assaraf Chief Marketing Officer, Sapiens [email protected]

Investors Contact   Brett Maas Managing Partner, Hayden IR +1 646-536-7331 [email protected]   Kimberly Rogers Managing Director, Hayden IR +1 541-904-5075 [email protected]

 

Forward Looking Statements

 

Certain matters discussed in this press release 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, and 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, which we filled with the SEC on March 31, 2022, 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
		March 31,
		2022				2021
		(unaudited)				(unaudited)
Revenue			117,695				109,592
Cost of revenue			68,278				65,336
Gross profit			49,417				44,256
Operating expenses:
Research and development, net			14,150				13,088
Selling, marketing, general and administrative			18,719				18,803
Total operating expenses			32,869				31,891
Operating income			16,548				12,365
Financial and other expenses (income), net			(348	)			515
Taxes on income			2,938				1,948
Net income			13,958				9,902
Attributable to non-controlling interest			32				67
Net income attributable to Sapiens’ shareholders			13,926				9,835
Basic earnings per share			0.25				0.18
Diluted earnings per share			0.25				0.18
Weighted average number of shares outstanding used to compute basic earnings per share (in thousands)			55,093				54,689
Weighted average number of shares outstanding used to compute diluted earnings per share (in thousands)			55,630				55,567

 

 

 

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
		March 31,
		2022				2021
		(unaudited)				(unaudited)
GAAP revenue			117,695				109,592
Valuation adjustment on acquired deferred revenue			23				630
Non-GAAP revenue			117,718				110,222
GAAP gross profit			49,417				44,256
Revenue adjustment			23				630
Amortization of capitalized software			1,471				1,784
Amortization of other intangible assets			2,032				2,559
Non-GAAP gross profit			52,943				49,229
GAAP operating income			16,548				12,365
Gross profit adjustments			3,526				4,973
Capitalization of software development			(1,746	)			(1,632	)
Amortization of other intangible assets			1,244				1,366
Stock-based compensation			931				1,399
Acquisition-related costs (*)			267				529
Non-GAAP operating income			20,770				19,000
GAAP net income attributable to Sapiens’ shareholders			13,926				9,835
Operating income adjustments			4,222				6,635
Tax effect on NON-GAAP adjustment			(850	)			(1,562	)
Non-GAAP net income attributable to Sapiens’ shareholders			17,298				14,908
Diluted earnings per share			0.31				0.27
Weighted average number of shares outstanding used to compute diluted earnings per share (in thousands)			55,630				55,567

 

(*)

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
		March 31,
		2022				2021
GAAP operating profit			16,548				12,365
Non-GAAP adjustments:
Valuation adjustment on acquired deferred revenue			23				630
Amortization of capitalized software			1,471				1,784
Amortization of other intangible assets			3,276				3,925
Capitalization of software development			(1,746	)			(1,632	)
Stock-based compensation			931				1,399
Compensation related to acquisition and acquisition-related costs			267				529
Non-GAAP operating profit			20,770				19,000
Depreciation			1,140				1,120
Adjusted EBITDA			21,910				20,120

 

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

 

		Q1 2022				Q4 2021				Q3 2021				Q2 2021				Q1 2021
Revenues			117,718				119,854				118,442				115,036				110,222
Gross profit			52,943				53,933				53,413				51,720				49,229
Operating income			20,770				21,590				21,019				19,795				19,000
Adjusted EBITDA			21,910				23,579				22,144				20,920				20,120
Net income to Sapiens’ shareholders			17,298				17,681				16,976				15,975				14,908
Diluted earnings per share			0.31				0.32				0.31				0.29				0.27

 

 

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

 

		Q1 2022				Q4 2021				Q3 2021				Q2 2021				Q1 2021
North America			49,009				48,872				48,952				46,767				44,754
Europe			59,267				62,416				59,707				59,718				57,642
Rest of the World			9,442				8,566				9,783				8,551				7,826
Total			117,718				119,854				118,442				115,036				110,222

 

Adjusted Free Cash-Flow
U.S. dollars in thousands

 

		Q1 2022				Q4 2021				Q3 2021				Q2 2021				Q1 2021
Cash-flow from operating activities			18,330				27,386				14,556				26,845				11,755
Increase in capitalized software development costs			(1,746	)			(2,256	)			(2,064	)			(1,959	)			(1,632	)
Capital expenditures			(453	)			(801	)			(1,082	)			(1,082	)			(821	)
Free cash-flow			16,131				24,329				11,410				23,804				9,302
Cash payments attributed to acquisition-related costs(*) (**)			-				407				477				-				1,280
Adjusted free cash-flow			16,131				24,736				11,887				23,804				10,582

 

(*)

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

 

		March 31,				December 31,
		2022				2021
		(unaudited)				(unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents			171,309				190,243
Short-term bank deposit			35,000				20,000
Trade receivables, net and unbilled receivables			82,473				76,261
Other receivables and prepaid expenses			14,354				13,841
Total current assets			303,136				300,345
LONG-TERM ASSETS
Property and equipment, net			13,889				14,458
Severance pay fund			5,802				5,954
Goodwill and intangible assets, net			336,593				343,283
Operating lease right-of-use assets			41,256				43,665
Other long-term assets			7,207				7,288
Total long-term assets			404,747				414,648
TOTAL ASSETS			707,883				714,993
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Trade payables			5,264				5,008
Current maturities of Series B Debentures			19,796				19,796
Accrued expenses and other liabilities			77,101				76,450
Current maturities of operating lease liabilities			10,626				10,827
Deferred revenue			45,272				39,614
Total current liabilities			158,059				151,695
LONG-TERM LIABILITIES
Series B Debentures, net of current maturities			59,208				78,986
Deferred tax liabilities			14,617				15,360
Other long-term liabilities			12,160				12,144
Long-term operating lease liabilities			36,916				38,751
Redeemable non-controlling interest			99				101
Accrued severance pay			9,067				9,236
Total long-term liabilities			132,067				154,578
EQUITY			417,757				408,720
TOTAL LIABILITIES AND EQUITY			707,883				714,993

 

 

SAPIENS INTERNATIONAL CORPORATION N.V. AND ITS SUBSIDIARIES

 

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

		For the three months ended March 31,
		2022				2021
		(unaudited)				(unaudited)
Cash flows from operating activities:
Net income			13,958				9,902
Reconciliation of net income to net cash provided by operating activities:
Depreciation and amortization			5,887				6,829
Accretion of discount on Series B Debentures			18				26
Capital loss from sale of property and equipment			7				5
Stock-based compensation related to options issued to employees			931				1,399
Net changes in operating assets and liabilities, net of amount acquired:
Trade receivables, net and unbilled receivables			(7,357	)			(10,541	)
Deferred tax liabilities, net			(471	)			(1,913	)
Other operating assets			959				6,116
Trade payables			(34	)			609
Other operating liabilities			(1,136	)			(7,774	)
Deferred revenues			5,526				6,995
Accrued severance pay, net			42				102
Net cash provided by operating activities			18,330				11,755
Cash flows from investing activities:
Purchase of property and equipment			(453	)			(821	)
Proceeds from (Investment in) deposits			(15,033	)			-
Proceeds from sale of property and equipment			-				154
Capitalized software development costs			(1,746	)			(1,632	)
Net cash used in investing activities			(17,232	)			(2,299	)
Cash flows from financing activities:
Proceeds from employee stock options exercised			-				413
Repayment of Series B Debenture			(19,796	)			(19,796	)
Payment of contingent considerations			-				(537	)
Dividend to non-controlling interest			-				(31	)
Net cash used in financing activities			(19,796	)			(19,951	)
Effect of exchange rate changes on cash and cash equivalents			(236	)			118
Decrease in cash and cash equivalents			(18,934	)			(10,377	)
Cash and cash equivalents at the beginning of period			190,243				152,561
Cash and cash equivalents at the end of period			171,309				142,184

 

 

Debentures Covenants

 

As of March 31, 2022, 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 $415.6 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 (42.75)%.

 

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 (1.41).

 

 

10

 

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