investor presentation - sapiens · core software policy administration solutions ... tcs bancs...

1 www.sapiens.com

www.sapiens.com

Investor Presentation

November 2015

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

Q3 2015 Results

2 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, 2014 and subsequent reports and registration statements filed from time to time with the Securities and Exchange Commission.

Safe Harbor Statement

3 www.sapiens.com

Who is Sapiens?

Founded Employees Global Footprint

IPO Customers Revenue Growth

1982

19922013

1,500+

1702012: 16%

2013: 19%

2014 : 16%

NA: 32%UK: 22%Europe: 18%Israel: 18%APAC: 10%

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What Do We Do?

Provide core software solutions for insurance and financial services companies:

Core software policy administration solutions

Innovative platform for business decisions

For insurance customers globally

Retail Banks

Investment Banks

MortgageBanks

TechnologyBased

Solutions

Insurance Software

ReinsuranceProperty&

Casualty

RetirementLife, Pension &

Annuities

Application development platforms

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Our Vision

To become a leading provider of innovative software solutions for the global Financial Services market, with focus on Insurance

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The Market

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Insurance is Everywhere

Property, Casualty, Reinsurance

Wealth

Pets

Liability Catastrophes

ExcessMarine Property

MotorVoice

Life, Annuity, Retirement

Annuities Retirement

Injuries Life

Pension Medical

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The Insurance Industry

Source: Market size data per Celent. March 2015

Big Market

Potential

$4,200,000,000,000 gross written premium (GWP)

11,000 insurance companies globally

IT relatedInvestment

3%-4% of GWP invested in IT

$175B in 2015 Life - $97B; P&C - $78B

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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 Enabler for Growth

Insurers in Desperate Need of Growth

New customers and new distribution

channels

Regulation

Increased competition

Maintenance cost

Growth drivers

Cost

New lines of business

Speed to market

Geographic expansion

Consolidation

Efficiency

Operational cost

Sapiens Today

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Current Sapiens Portfolio

Life, Annuities Pension and Retirement

Property & Casualty and Reinsurance

Decision Technology

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Nov. 2013

Leadership in L&A Insurance Solutions

FUNCTIONALITY 2013

North America

“ALIS continues to be one of the leading products in the region… The product has one of the most elegant and intuitive user interfaces on the market, with features such as context sensitive menu structures and ‘hover-over’ information pop-ups... The graphical renditions for illustrations and other visual representations… are also among the best that Celent have seen.”

XCelent Awards - EMEA Policy Administration Systems for Life, Annuities, Pension and Health, 11/2013XCelent Awards - North American Policy Administration Systems 2013 Life, Annuities, and Health 11/2013

EMEA

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Jan. 2014

Leadership in P&C Insurance Solutions

Celent research, EMEA Policy Administration Systems, General Insurance, Property & Casualty, January 2014, Craig BeattieOvum Decision Matrix – P&C Policy Administration Platform Europe, 10/2013. Bubble size represents market impact.

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 continues to offer a solution with great functionality and very strong technology in the EMEA region,….Sapiens IDIT continues to excel as a leading solution in both functionality and technology.”

TECHNOLOGY AND FUNCTIONALITY 2013

EMEA

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Insurance Core Systems

BI Reporting BI Repository

Document Management & Workflow/BPMDistribution

Management

UnderwriterWorkbench

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

AgentPortal

Sapiens’s System

Not Playing currently

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Sapiens Strategy: ‘ONE STOP SHOP’

Product

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SERV

ICES

Training Migration

Product UpgradesProject

Implementation

Consulting Hosting

Support Services

Testing

Sapiens OfferingsP

RO

DU

CTS

Sapiens ALIS Sapiens

Retirement

Sapiens IDIT

Sapiens Reinsurance

Sapiens DECISION

Sapiens eMerge

Sapiens TOPAZ

Sapiens Closed Books

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From Dispersed Business Logic…

Business Strategy

Market ConditionRegulation

s

Customer RequirementsCompetition

CRM Loans MortgageERPCredit

• Vague• Obscure• Unverified• Incomplete• Variable• Uncontrolled• Unsustainable

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CRM LoansERPCredit

To a Single Point of Truth …

Mortgage

Decision management disciplines and systems seek to provide centralized, structured decision design and automated deployment to manage all aspects of business operations

Automated Code

Generation

Centralized Decision Logic

Business Strategy

Market ConditionRegulation

s

Customer RequirementsCompetition

• Unambiguous

• Visible

• Traceable

• Complete

• Consistent

• Governed

• Reusable

• Technology agnostic

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Blue-Chip Global Customer-Base

North America UK Europe APAC

2014 Annual Revenue Contribution

32% 22% 36% 10%

Bulgaria

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Proven Management Team

Roni Al-DorPresident & CEO

2005

Steve RooneyEVP Global Sales DECISION

2014

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

Gary SherneManaging Director Property & Casualty

2014

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

Growth Strategy

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Our Strategic Direction

Investments in our Growth Engines

Strengthen our Geographic Presence

US UK Europe APAC

P&C

L&A

Decision

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Opportunities for Growth

Acquire New Customers

Growth Drivers

Expand with Existing Customers

Mergers & Acquisitions

Core

Products

Complementary

Solutions

New

Geographies

Additional

Services

(LOB, Regulation, Workflow)

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Ground Rules For Acquisitions

Geographic Expansion

Complementary Solutions

Off-shore Capabilities

Customer Base

Profitable

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6 Mergers in 5 Years

New Customers56New Geographies3New Products2Off-Shore Operations2Complementary Solution1New Patent1

Financials

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Revenue – Continue our Growth

1 Revenues of $98.1mm in 2011 pro-forma for the FIS and IDIT acquisitions2 Non-GAAP revenues. 2015 guidance per Sapiens press releases dated August 5, 2015

70.3

52.2

98.1

113.9

135.4

157.5

176-180

2010 2011 2012 2013 2014 2015Guidance

(1)

Guidance174-178

* Growth in Constant

Exchange rate 20%

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32%

22%18%

18%

10%

US

UK

Europe

Israel

APAC

27%

22%13%

27%

11%

Annual Revenue by Geography

Consistent Revenue Growth in NA and EU

(Non-GAAP USD Millions) 2011:Pro forma

2011 2014

25.921.9

12.3

26.7

11.2

35.6

20.6 22.4 23.6

12.3

44.2

30.0

24.9 23.0

12.4

49.6

35.0

28.4 28.8

15.7

NA UK EU Israel APAC

2011201220132014

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0.9 0.9 0.9 0.9

0.2 0.2 0.2 0.2

Year 3 Year 4 Year 5 Year 6-10

Illustrative $5mm initial contract

$2.5 $2.5

$1.1 $1.1 $1.1 $1.1

License MaintenanceServices

Revenue($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

2.0 2.0

0.5 0.5

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

Layered revenue streams create significant visibility

Rev

en

ue

20% New Customers

80% Existing Customers

YEAR 1

YEAR 2

YEAR 3

YEAR 4

YEAR 5

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3.4 3.3 3.6 3.8 3.7 4.0 4.45.0

5.86.4 6.7

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

Consistent Operational Profit GrowthQuarterly Non-GAAP Operating Profit ($mm)

Non-GAAP operating profit excludes stock-based compensation, amortization of intangibles, capitalization and amortization of software, and valuation adjustment on deferred revenue.

2013 2014 2015

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Operational Margin – Historical Perspective Non-GAAP Operating Margin

Declining Stable GrowthRevenue

-2.41% -2.84% -3.46%

-14.02%

-2.70%

1.91%

7.76%

14.29%

15.90%

13.19%13.29%

10.38% 10.80%

14%-14.5%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015Guidance

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Operational Margin Target

10.4%10.8%

14.5%-15%

2013 2014 2015Guidance

10%10.4%

10.9%

11.9%

14.1%

14.8%15.1%

Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015

Non-GAAP Operating Margin

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DECISION Division

• Move from loss to break-even

Product Profitability

• Sell more of what we have • Product maturity

Efficiency and Cost Savings

• Offshore capabilities

Scale • Efficiency of scale

Operational Margin – Key Drivers

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Strong Cash Position

$85M Cash

$0 Debt

Operating Cash Flow ($mm)

8.4

18.817.3

21.6

2011 2012 2013 2014

YTD 2015 cash flow $28.6 MDividend Payment of $7.2M on June 2015

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Financial Highlights

• 2011-2015E CAGR, 16.06%• Cash flow positive

Diversified revenue base:• 4 continents• Multiple product lines• Over 170 customers

• Long engagement cycle with repeatable revenues• Existing clients account for 80% of revenues• Multiple growth engines

• Offshore• Scale

• ~$85 mm cash and securities investments • No financial debt

Strong Financial Profile

Risk Diversification

Highly Attractive Revenue Model

Operational Margins Expansion

Well Capitalized

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$25bn addressable market undergoing transformative modernization

Full suite of core solutions for L&P, retirement and P&C markets

Innovative products with proven, leading functionality and technology

Blue chip customer base across a broad geographic footprint

Strong financial profile with multiple growth drivers and good visibility

Proven management team

Investment Highlights

39 www.sapiens.com www.sapiens.com

THANK YOU

Contact:

Yaffa Cohen-Ifrah, Chief Marketing Officer & Head of Corporate Communications

US Mobile: +1-201-250-9414 | Phone: +972-3-7902032e-Mail: IR.sapiens@sapiens.com | Website www.sapiens.com

Appendix

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Q3 and Nine Month - Non GAAPNine monthsQ3

20142015*20142015*

115.7130.640.446.1Revenue

46.757.016.420.7Gross Profit

40.4%43.6%40.6%44.9 %

12.119.24.47.0Operational Profit

10.4%14.7%10.9%15.1%

11.115.84.15.8Net Income

9.6%12.1%10.1%12.6%

13.220.64.87.5Adjusted EBITDA*

0.230.320.080.12Diluted EPS

48,23549,25449,00649,484Diluted Weighted Average Number of Shares

(in USD Million except per share amount)Outstanding Shares: 48,755)as of September 30st , 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.

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Key Balance Sheet Highlights

(in USD Million)

December 31, 2014 *September 30, 2015

47.445.2Cash and cash equivalents

33.139.6Marketable securities

31.832.6Account Receivable

9.39.8Deferred Revenue

00Debt

178.3175.6Total Equity

* December 31, 2014 Balance Sheet was revised to reflect the acquisition of Insseco, in accordance with the pooling of interest method.

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Strong Free Cash Flow

(in USD Million)

September 30th

20142015

16.228.6Net cash provided by operating activities

(4.5)(4.4)Net cash used for capitalization of R&D

(36.5)(12.8)Net cash used for investing activities

1.5(12.0)Net cash provided by (used for) financing activities

(1.9)(1.6)Effect of exchange rate changes on cash

(25.2)(2.2)Increase in cash

70.347.4Cash at beginning of period

45.145.2Cash at end of period