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 2018

 

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): ☐

 

 

 

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.  (Registrant)
Date: November 7, 2018	By:	/s/ Roni Giladi
		Roni Giladi
		Chief Financial Officer

 

 

Exhibit Index

 

Exhibit No.		Title of Exhibit
99.1		Sapiens Reports Third Quarter 2018 Financial Results

  

Exhibit 99.1

 

 

Sapiens Reports Third Quarter 2018 Financial Results

 

EPS Increased by 67% and 15% on GAAP and non-GAAP basis, respectively

 

North America business increased by 12%

 

Holon, Israel, November 7, 2018 – Sapiens International Corporation, (NASDAQ and TASE: SPNS), a leading global provider of software solutions for the insurance industry, and a member of the Formula Group (NASDAQ: FORTY and TASE: FORT), today announced its financial results for the third quarter ended September 30, 2018.

 

Third Quarter 2018 Summary (comparisons are to the third quarter of 2017: amounts are in thousands, except per share amounts):

 

GAAP		Non-GAAP
Revenue totaled $73.2 million an increase of 1.7% compared to $72.0 million.		Revenue totaled $73.2 million, a decrease of 0.8% compared to $73.9 million.
Operating income totaled $6.8 million an increase of 51.7% compared to $ 4.5 million.		Operating income totaled $10.3 million an increase of 12.4% as compared to $9.1 million.
Operating margin of 9.3% compared to 6.2%.		Operating margin of 14.0% compared to 12.4%.
Net income attributable to Sapiens’ shareholders totaled $5.2 million an increase of 76.0% compared to $2.9 million.		Net income attributable to Sapiens’ shareholders increased 20.0% to $7.5 million compared to $6.3 million.
EPS of $ 0.1 per diluted share compared to $0.06.		EPS of $ 0.15 per diluted share compared to $0.13.

  

“In the third quarter, we expanded our P&C business in the US and EMEA markets by leveraging our solutions and customers relationships, while continuing to improve our operational performance. As a result, we delivered solid performance in the quarter, with a 160 basis point increase in non-GAAP operating margin year-over-year. We grew our North America business by 12%, and we have recently announced several important wins and go-lives in this key market,” stated Roni Al-Dor, president and CEO, Sapiens.

 

 

“We are increasing customer touch points globally through our client summits in the U.S. and EMEA, where we showcase our product capabilities and our outstanding teams. In addition, to maintain momentum with our clients, we are building a new global customer success operation that will be tasked with customers management as well as sales responsibilities, including cross selling and upselling, and increasing our 400 customers awareness of the entire Sapiens’ platforms,” continued Mr. Al-Dor.

 

“In order to extend our competitive advantage and further grow our business, we are partnering with InsurTech and fintech start-up to complement our core offering while enabling our customers to improve their platforms and provide the highest level of service to their clients.”

 

Mr. Al-Dor concluded: “Based on the strength of our year-to-date results and our outlook for the fourth quarter, we are maintaining our guidance to 2018 full year non-GAAP revenues of $285 to $290 million, which we now expect to be on the higher end and we are increasing our non-GAAP operating margins in the range of 13.3% to 13.5% compared to our previous guidance of 13.0% - 13.2%.”

 

Quarterly Results Conference Call

 

Management will host a conference call and webcast on November 7, 2018 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): + 1-888-668-9141; International: +972-3-918-0609; UK: 0-800-917-5108

 

The live webcast of the call can be viewed on Sapiens’ website at: http://www.sapiens.com/investors/presentations-and-webcast/

 

If you are unable to join live, a replay of the call will be accessible until November 14, 2018, as follows: North America: 1-888-295-2634; International: +972-3-925-5918

 

A recorded version of the webcast will also be available via the Sapiens website, for three months at the same location.

 

 

Non-GAAP Financial Measures

 

This press release contains the following non-GAAP financial measures: non-GAAP revenue, non-GAAP gross profit, non-GAAP operating income, non-GAAP net income attributed to Sapiens shareholders, and non-GAAP basic and diluted earnings per share.

 

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 intangible assets, capitalization of software development, stock-based compensation, compensation related to acquisition and acquisition-related costs, restructuring and cost reduction costs, loss on sales of Marketable Securities and tax adjustment regarding non-GAAP adjustments, as well as the impact of one-time adjustment to our deferred taxes as a result of the U.S. Tax Cuts and Job act 2017.

 

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 for valuation adjustment on acquired deferred revenue, stock-based compensation expense, depreciation and amortization, capitalized 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 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.

 

About Sapiens

 

Sapiens International Corporation is a leading global provider of software solutions for the insurance industry, with a 30-year track record of delivering to more than 400 organizations. The company offers software platforms, solutions and services, including a full digital suite, to satisfy the needs of property and casualty/general insurers, and life, pension and annuity providers. Sapiens also services the reinsurance, workers’ compensation, financial and compliance, and decision management markets.

 

The company’s portfolio includes policy administration, billing and claims, underwriting, illustration and electronic application. The digital suite features customer and agent portals, and a business intelligence platform. For more information: www.sapiens.com.

 

Forward Looking Statement

 

Some of the statements in this press release may 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, please 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, 2017, and subsequent reports and registration statements filed from time to time with the Securities and Exchange Commission.

 

Investors and Media Contact
Yaffa Cohen-Ifrah

Chief Marketing Officer and Head of Corporate Communications

Sapiens International

U.S. Mobile: +1 201-250-9414

Mobile: +972 54-9099039

Email: [email protected]

 

 

SAPIENS INTERNATIONAL CORPORATION N.V. AND ITS SUBSIDIARIES

 

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

U.S. dollars in thousands (except per share amounts)

 

		Three months ended								Nine months ended
		September 30,								September 30,
		2018				2017				2018				2017
		(unaudited)				(unaudited)				(unaudited)				(unaudited)
Revenue			73,237				72,011				216,396				197,594
Cost of revenue			45,438				46,774				134,710				129,902
Gross profit			27,799				25,237				81,686				67,692
Operating expenses:
Research and development, net			8,350				8,381				26,130				23,528
Selling, marketing, general and administrative			12,635				12,363				39,117				44,294
Total operating expenses			20,985				20,744				65,247				67,822
Operating income (loss)			6,814				4,493				16,439				(130	)
Financial expense, net			974				863				3,128				2,010
Taxes and other expenses, net			629				679				3,143				737
Net income (loss)			5,211				2,951				10,168				(2,877	)
Attributable to non-controlling interest			28				6				135				(32	)
Net income (loss) attributable to Sapiens' shareholders			5,183				2,945				10,033				(2,845	)
Basic earnings per share			0.1				0.06				0.2				(0.06	)
Diluted earnings per share			0.1				0.06				0.2				(0.06	)
Weighted average number of shares outstanding used to compute basic earnings per share (in thousands)			49,826				49,182				49,795				49,118
Weighted average number of shares outstanding used to compute diluted earnings per share (in thousands)			50,143				49,859				50,070				49,118

 

  

SAPIENS INTERNATIONAL CORPORATION N.V. AND ITS SUBSIDIARIES

 

CONDENSED CONSOLIDATED NON-GAAP STATEMENTS OF INCOME

U.S. dollars in thousands (except per share amounts)

 

		Three months ended								Nine months ended
		September 30,								September 30,
		2018				2017				2018				2017
		(unaudited)				(unaudited)				(unaudited)				(unaudited)
Revenue			73,237				73,854				216,864				199,555
Cost of revenue			42,334				43,563				125,240				122,405
Gross profit			30,903				30,291				91,624				77,150
Operating expenses:
Research and development, net			9,658				9,797				29,908				27,859
Selling, marketing, general and administrative			10,972				11,355				33,005				35,237
Total operating expenses			20,630				21,152				62,913				63,096
Operating income			10,273				9,139				28,711				14,054
Financial expense, net			974				863				3,128				1,780
Taxes and other expenses			1,723				1,982				5,211				2,907
Net income			7,576				6,294				20,372				9,367
Attributable to non-controlling interest			28				6				135				(32	)
Net income attributable to Sapiens' shareholders			7,548				6,288				20,237				9,399
Basic earnings per share			0.15				0.13				0.41				0.19
Diluted earnings per share			0.15				0.13				0.40				0.19
Weighted average number of shares outstanding used to compute basic earnings per share (in thousands)			49,826				49,182				40,795				49,118
Weighted average number of shares outstanding used to compute diluted earnings per share (in thousands)			50,143				49,859				50,070				49,891

 

 

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,
		2018				2017				2018				2017
		(unaudited)				(unaudited)				(unaudited)				(unaudited)
GAAP revenue			73,237				72,011				216,396				197,594
Valuation adjustment on acquired deferred revenue			-				1,843				468				1,961
Non-GAAP revenue			73,237				73,854				216,864				199,555
GAAP gross profit			27,799				25,237				81,686				67,692
Valuation adjustment on acquired deferred revenue			-				1,843				468				1,961
Amortization of capitalized software			1,205				1,298				3,612				3,554
Amortization of other intangible assets			1,899				1,913				5,858				3,943
Non-GAAP gross profit			30,903				30,291				91,624				77,150
GAAP operating income (loss)			6,814				4,493				16,439				(130	)
Gross profit adjustments			3,104				5,054				9,938				9,458
Capitalization of software development			(1,308	)			(1,416	)			(3,778	)			(4,331	)
Amortization of other intangible assets			739				285				2,367				1,236
Stock-based compensation			384				469				1,470				1,380
Compensation related to acquisition and acquisition-related costs			540				254				2,275				2,541
Restructuring and cost reduction plan			-				-				-				3,900
Non-GAAP operating income			10,273				9,139				28,711				14,054
GAAP net income (loss) attributable to Sapiens' shareholders			5,183				2,945				10,033				(2,845	)
Operating income adjustments			3,459				4,646				12,272				14,184
Loss on sales of Marketable Securities			-				-				-				230
Tax and other			(1,094	)			(1,303	)			(2,068	)			(2,170	)
Non-GAAP net income attributable to Sapiens' shareholders			7,548				6,288				20,237				9,399

 

  

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

 

		Three months ended																Nine months ended
		September 30,																September 30,
		2018								2017								2018								2017
		(unaudited)								(unaudited)								(unaudited)								(unaudited)
Revenues			73,237				100	%			73,854				100	%			216,864				100	%			199,555				100	%
Gross profit			30,903				42.2	%			30,291				41.0	%			91,624				42.2	%			77,150				38.7	%
Operating profit			10,273				14.0	%			9,139				12.4	%			28,711				13.2	%			14,054				7.0	%
Net income to shareholders			7,548				10.3	%			6,288				8.5	%			20,237				9.3	%			9,399				4.7	%
Adjusted EBITDA			11,236				15.3	%			10,100				13.7	%			31,566				14.6	%			16,859				8.4	%
Basic earnings per share			0.15								0.13								0.41								0.19
Diluted earnings per share			0.15								0.13								0.40								0.19

 

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

 

		Q3 2018				Q2 2018				Q1 2018				Q4 2017				Q3 2017
North America			36,734				34,606				31,035				31,580				32,780
Europe			30,611				32,518				34,479				29,789				28,984
Asia Pacific			3,480				3,305				3,439				3,817				5,750
South Africa			2,412				2,113				2,132				7,262				6,340
Total			73,237				72,542				71,085				72,448				73,854

 

  

Adjusted EBITDA Calculation
U.S. dollars in thousands

 

		Three months ended								Nine months ended
		September 30,								September 30,
		2018				2017				2018				2017
GAAP operating profit (loss)			6,814				4,493				16,439				(130	)
Non-GAAP adjustments:
Amortization of capitalized software			1,205				1,298				3,612				3,554
Amortization of other intangible assets			2,638				2,198				8,225				5,179
Capitalization of software development			(1,308	)			(1,416	)			(3,778	)			(4,331	)
Stock-based compensation			384				469				1,470				1,380
Compensation related to acquisition and acquisition-related costs			540				254				2,275				2,541
Restructuring and cost reduction plan			-				-				-				3,900
Valuation adjustment on acquired deferred revenue and long term contract			-				1,843				468				1,961
Non-GAAP operating profit			10,273				9,139				28,711				14,054
Depreciation			963				961				2,855				2,805
Adjusted EBITDA			11,236				10,100				31,566				16,859

  

SAPIENS INTERNATIONAL CORPORATION N.V. AND ITS SUBSIDIARIES

 

CONDENSED CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands

 

		September 30,				December 31,
		2018				2017
		(unaudited)				(unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents			64,079				71,467
Trade receivables, net			63,177				53,226
Other receivables and prepaid expenses			7,637				6,280
Total current assets			134,893				130,973
LONG-TERM ASSETS
Property and equipment, net			9,039				10,695
Severance pay fund			4,197				4,547
Goodwill and intangible assets, net			235,980				223,729
Other long-term assets			4,631				3,675
Total long-term assets			253,847				242,646
TOTAL ASSETS			388,740				373,619
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Trade payables			10,012				7,044
Current maturities of Series B Debentures			9,898				-
Accrued expenses and other liabilities			57,345				46,612
Deferred revenue			18,347				16,513
Total current liabilities			95,602				70,169
LONG-TERM LIABILITIES
Series B Debentures, net of current maturities			68,523				78,281
Deferred tax liabilities			10,895				9,171
Other long-term liabilities			8,089				8,271
Accrued severance pay			5,157				5,500
Total long-term liabilities			92,664				101,223
REDEEMABLE NON-CONTROLLING INTEREST			-				1,353
EQUITY			200,474				200,874
TOTAL LIABILITIES AND EQUITY			388,740				373,619

 

 

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,
		2018				2017
		(unaudited)				(unaudited)
Cash flows from operating activities:
Net income (loss)			10,168				(2,877	)
Reconciliation of net income (loss) to net cash provided by operating activities:
Depreciation and amortization			14,694				11,535
Amortization of premium, accrued interest and loss on sales of marketable securities			-				509
Stock-based compensation related to options issued to employees			1,462				1,349
Net changes in operating assets and liabilities, net of amount acquired:
Trade receivables			(10,654	)			(8,526	)
Deferred tax assets			(2,448	)			(2,366	)
Other operating assets			(1,233	)			(282	)
Trade payables			1,657				(1,245	)
Other operating liabilities			185				574
Deferred revenues			1,937				6,521
Severance pay			52				(63	)
Net cash provided by operating activities			15,820				5,129
Cash flows from investing activities:
Purchase of property and equipment			(1,710	)			(1,687	)
Proceeds from sales of marketable securities			-				35,369
Payments for business acquisition, net of cash acquired			(17,893	)			(97,672	)
Capitalized software development costs			(3,778	)			(4,331	)
Net cash used in investing activities			(23,381	)			(68,321	)
Cash flows from financing activities:
Loan received net of loan repayments			(41	)			-
Dividend to non-controlling interest			(47	)			-
Proceeds from employee stock options exercised			532				438
Issuance of debenture, net			-				78,198
Net cash provided by financing activities			444				78,636
Effect of exchange rate changes on cash and cash equivalents			(271	)			4,141
Increase (decrease) in cash and cash equivalents			(7,388	)			19,585
Cash and cash equivalents at the beginning of period			71,467				60,908
Cash and cash equivalents at the end of period			64,079				80,493

 

  

Debentures Covenants

 

As of September 30, 2018, Sapiens was in compliance with all of its financial covenants under the indenture for the Series B Debentures that it issued in September 2017, based on having achieved the following in its consolidated financial results:

 

Covenant 1

●

Target shareholders' equity (excluding minority interest): above $120 million.

●

Actual shareholders’ equity equal to $198 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) bellow 65%.

●

Actual ratio of net financial indebtedness to net capitalization equal to 6.68%.

 

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 0.34.

  

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