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 2020

 

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

 

Exhibit No.   Title of Exhibit
99.1   Press Release

 

1

 

 

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: May 14, 2020 By:  /s/ Roni Giladi
    Roni Giladi
    Chief Financial Officer

 

 

2

 

 

Exhibit 99.1

 

 

Sapiens Reports First Quarter 2020 Financial Results

and Announces a Cash Dividend of $0.14 Per Share

 

Holon, Israel, May 14, 2020 – 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 first quarter ended March 31, 2020.

 

Summary Results for First Quarter 2020 (USD in millions, except per share data)

 

   GAAP       Non-GAAP     
   March 31,
2020
   March 31,
2019
   % Change   March 31,
2020
   March 31,
2019
   % Change 
Revenue  $90.5   $76.8    17.9%  $90.5   $76.8    17.9%
Gross Profit  $36.3   $29.8    21.7%  $39.8   $33.1    20.2%
Gross Margin   40.1%   38.8%   130 bps    44.0%   43.1%   90 bps 
Operating Income  $10.3   $8.1    27.3%  $14.6   $11.8    24.4%
Operating Margin   11.4%   10.5%   90 bps    16.1%   15.3%   80 bps 
Net income (*)  $6.8   $5.2    32.3%  $10.4   $8.4    24.1%
Diluted EPS  $0.13   $0.10    30%  $0.20   $0.17    17.6%

 

(*)Attributable to Sapiens’ shareholders

 

“Sapiens’ first-quarter performance reflects our continued focus on supporting our existing customers and closing new business,” said Roni Al-Dor, president and CEO, Sapiens. “On a non-GAAP basis, we reported 17.9% revenue growth and increased operating margins by 80 basis points to 16.1%, with both P&C and L&A contributing to growth in the quarter."

 

“In March, we responded to the COVID-19 global outbreak per country, controlling expenses where appropriate, while maintaining productivity. I'm incredibly proud of my teams' accomplishments in this unique and challenging environment, and impressed by our customers’ rapid shift to remote work, while they remained committed to their customers and their own digital transformation projects. As a result, Sapiens maintained momentum through the quarter,” said Al-Dor.

 

Continued Al-Dor: “Across all our product lines, we see a growing demand for managed services, which is a testament to our delivery model – it allows carriers to focus on running their business. The current business disruption highlights the need for legacy insurance companies to migrate their platforms and increase their relevancy with more digital solutions. Our recent acquisition in Germany, sum.cumo, expands our digital offerings, helping us become even more competitive. While there continues to be uncertainty resulting from COVID-19, we remain focused on executing our long-term strategy. I am confident that as the global economy recovers, Sapiens will emerge stronger and well- positioned for continued growth.”

 

“Strong demand for our digital products, combined with high recurring revenue and a solid balance sheet, position us for success in this challenging environment. We’ve taken appropriate actions to provide the necessary flexibility for revenue growth and operating efficiency within the current circumstances. While our business remains strong, due to macro events there could be delays in closing new deals, which could slightly impact our revenue. Therefore, we are slightly revising our annual revenue guidance for 2020 to the range of $368 million to $377 million, as compared to our prior range of $377 million to $383 million. Overall, we changed the mid-point of the revenue guidance by 2.0%. Sapiens’ guidance for annual operating margin remains unchanged at 16.0% to 16.5%,” said Al-Dor.

 

“Furthermore, Sapiens remains committed to returning value to shareholders,” concluded Al-Dor. “Despite the condition in the market, we announce a dividend of $0.14 per share – approximately $7 million – reflecting our continued confidence in our business and Sapiens’ ability to generate cash.”

 

1

 

 

The dividend will be paid on June 10, 2020 to Sapiens Shareholders of record as of May 27, 2020.

 

The prospective dividend is subject to withholding tax at source, under the Israeli Tax law, at the rate of 25% of the dividend amount payable to each shareholders of record.

 

Quarterly Results Conference Call

 

Management will host a conference call and webcast on May 14, 2020 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): + 1-888-407-2553; International: +972-3-918-0610; UK: 0-800-917-9141

 

The live webcast of the call can be viewed on Sapiens’ website at: https://www.sapiens.com/investor-relations/ir-events-presentations/

 

If you are unable to join live, a replay of the call will be accessible until May 23, 2020, as follows:

 

North America: 1-888-326-9310; International: +972-3-925-5925

 

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, non-GAAP basic and diluted earnings per share, Adjusted EBITDA and Adjusted Free Cash-Flow.

 

2

 

 

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,  restructuring and cost reduction costs, tax adjustments related to non-GAAP adjustments, and acquisition-related costs, which pertain to charges on behalf of M&A agreements related to future performance targets and retention criteria as determined upon acquisition date of the respective acquired company, as well as third-party services, such as, tax, accounting and legal rendered until the acquisition date.

 

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.

 

3

 

 

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 stock-based compensation expense, depreciation and amortization, capitalized of software development costs, compensation expenses related to acquisition and acquisition-related costs, financial and other expenses, and provision for income taxes. These amounts are often excluded by other companies to help investors understand the operational performance of their business.

 

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 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 payments related to investment in the new campus in India, 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.

 

4

 

 

About Sapiens

 

Sapiens International Corporation empowers insurers to succeed in an evolving industry. The company offers digital software platforms, solutions and services for the property and casualty, life, pension and annuity, reinsurance, financial and compliance, workers’ compensation and financial markets. With more than 35 years of experience delivering to over 450 organizations globally, Sapiens has a proven ability to satisfy customers’ core, data and digital requirements. 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, 2018, and subsequent reports and registration statements filed from time to time with the Securities and Exchange Commission.

 

Investors and Media Contact

 

Brett Mass

Managing Partner

Hayden IR

Phone: +1 646-536-7331

Email: Brett.Masss@HaydenIR.com

 

5

 

 

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 
   March 31, 
   2020   2019 
   (unaudited)   (unaudited) 
         
Revenue    90,534    76,787 
Cost of revenue    54,270    46,980 
           
Gross profit    36,264    29,807 
           
Operating expenses:           
Research and development, net    10,526    8,777 
Selling, marketing, general and administrative    15,460    12,953 
Total operating expenses    25,986    21,730 
           
Operating income    10,278    8,077 
           
Financial and other expenses, net    1,487    1,054 
Taxes on income    1,901    1,847 
           
Net income    6,890    5,176 
           
Attributed to non-controlling interest    70    21 
           
Net income attributable to Sapiens’ shareholders    6,820    5,155 
           
Basic earnings per share    0.14    0.10 
           
Diluted earnings per share    0.13    0.10 
           
Weighted average number of shares outstanding used to compute basic earnings per share (in thousands)    50,175    49,986 
           
Weighted average number of shares outstanding used to compute diluted earnings per share (in thousands)    51,083    50,329 

 

 

6

 

 

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 
   March 31, 
   2020   2019 
   (unaudited)   (unaudited) 
         
Revenue   90,534    76,787 
Cost of revenue   50,743    43,683 
           
Gross profit   39,791    33,104 
           
Operating expenses:          
Research and development, net   11,963    10,169 
Selling, marketing, general and administrative   13,214    11,185 
Total operating expenses   25,177    21,354 
           
Operating income   14,614    11,750 
           
Financial and other expenses, net   1,487    1,054 
Taxes on income   2,645    2,285 
           
Net income   10,482    8,411 
           
Attributable to non-controlling interest   70    21 
           
Net income attributable to Sapiens’ shareholders   10,412    8,390 
           
Basic earnings per share   0.21    0.17 
           
Diluted earnings per share   0.20    0.17 
           
Weighted average number of shares outstanding used to compute basic earnings per share (in thousands)   50,175    49,986 
           
Weighted average number of shares outstanding used to compute diluted earnings per share (in thousands)   51,083    50,329 

 

7

 

 

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, 
   2020   2019 
   (unaudited)   (unaudited) 
         
GAAP gross profit   36,264    29,807 
Amortization of capitalized software   1,496    1,341 
Amortization of other intangible assets   2,031    1,956 
Non-GAAP gross profit   39,791    33,104 
           
GAAP operating income   10,278    8,077 
Gross profit adjustments   3,527    3,297 
Capitalization of software development   (1,437)   (1,392)
Amortization of other intangible assets   589    535 
Stock-based compensation   622    453 
Acquisition-related costs *)   1,035    780 
Non-GAAP operating income   14,614    11,750 
           
GAAP net income attributable to Sapiens’ shareholders   6,820    5,155 
Operating income adjustments   4,336    3,673 
Taxes on income   (744)   (438)
Non-GAAP net income attributable to Sapiens’   shareholders   10,412    8,390 

 

(*)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.

 

8

 

 

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

 

   Q1 2020   Q4 2019   Q3 2019   Q2 2019   Q1 2019 
                     
Revenues   90,534    86,715    82,643    79,529    76,787 
Gross profit   39,791    38,402    36,712    34,794    33,104 
Operating income   14,614    14,345    13,530    12,581    11,750 
Net income to Sapiens’ shareholders   10,412    10,553    10,412    9,541    8,390 
Adjusted EBITDA   15,724    15,271    14,523    13,358    12,524 
                          
Basic earnings per share   0.21    0.21    0.21    0.19    0.17 
Diluted earnings per share   0.20    0.21    0.21    0.19    0.17 

 

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

 

   Q1 2020   Q4 2019   Q3 2019   Q2 2019   Q1 2019 
                     
North America   44,567    41,787    44,413    39,216    38,149 
Europe   40,232    37,504    30,273    33,881    32,193 
Rest of the world   5,735    7,424    7,957    6,432    6,445 
                          
Total   90,534    86,715    82,643    79,529    76,787 

 

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

 

   Q1 2020   Q4 2019   Q3 2019   Q2 2019   Q1 2019 
                     
Cash-flow from operating activities   5,759    21,429    18,671    15,507    10,550 
Increase in capitalized software development costs   (1,437)   (1,162)   (1,541)   (1,570)   (1,392)
Capital expenditures   (552)   (2,456)   (973)   (1,079)   (641)
Capital expenditures related to new campus in India   -    -    (6,325)   -    - 
Free cash-flow   3,770    17,811    9,832    12,858    8,517 
                          
Capital expenditures related to new campus in India   -    -    6,325    -    - 
Cash payments attributed to acquisition-related costs(*) (**)   737    200    100    1,692    1,608 
                          
Adjusted free cash-flow   4,507    18,011    16,257    14,550    10,125 

 

(*)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.


 

9

 

 

Adjusted EBITDA Calculation
U.S. dollars in thousands

 

   Three months ended 
   March 31, 
   2020   2019 
   (unaudited)   (unaudited) 
         
GAAP operating income   10,278    8,077 
           
Non-GAAP adjustments:          
Amortization of capitalized software   1,496    1,341 
Amortization of other intangible assets   2,620    2,491 
Capitalization of software development   (1,437)   (1,392)
Stock-based compensation   622    453 
Compensation related to acquisition and acquisition-related costs   1,035    780 
           
Non-GAAP operating income   14,614    11,750 
           
Depreciation   1,110    773 
           
Adjusted EBITDA   15,724    12,523 

 

10

 

 

SAPIENS INTERNATIONAL CORPORATION N.V. AND ITS SUBSIDIARIES

 

CONDENSED CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands

 

   March 31,   December 31, 
   2020   2019 
   (unaudited)   (unaudited) 
         
ASSETS        
         
CURRENT ASSETS        
Cash and cash equivalents   79,557    66,295 
Trade receivables, net and unbilled receivables   59,958    50,221 
Investment in restricted deposit   -    22,890 
Other receivables and prepaid expenses   8,105    7,817 
           
Total current assets   147,620    147,223 
           
LONG-TERM ASSETS          
Property and equipment, net   16,657    16,601 
Severance pay fund   4,949    5,106 
Goodwill and intangible assets, net   246,676    228,691 
Operating lease right-of-use assets   45,872    49,539 
Other long-term assets   6,549    5,261 
           
Total long-term assets   320,703    305,198 
           
TOTAL ASSETS   468,323    452,421 
           
LIABILITIES AND EQUITY          
           
CURRENT LIABILITIES          
Trade payables   5,650    5,107 
Current maturities of Series B Debentures   9,898    9,898 
Short-term bank loan   20,000    - 
Accrued expenses and other liabilities   62,886    60,574 
Current maturities of operating lease liabilities   7,920    8,312 
Deferred revenue   22,797    21,021 
           
Total current liabilities   129,151    104,912 
           
LONG-TERM LIABILITIES          
Series B Debentures, net of current maturities   48,985    58,850 
Deferred tax liabilities   7,094    5,082 
Other long-term liabilities   7,975    8,321 
Long-term operating lease liabilities   40,945    43,394 
Accrued severance pay   6,319    6,364 
           
Total long-term liabilities   111,318    122,011 
           
EQUITY   227,854    225,498 
           
TOTAL LIABILITIES AND EQUITY   468,323    452,421 

 

11

 

 

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, 
   2020   2019 
   (unaudited)   (unaudited) 
Cash flows from operating activities:        
Net income   6,890    5,176 
Reconciliation of net income to net cash provided by operating
activities:
          
Depreciation and amortization   5,226    4,605 
Accretion of discount on Series B Debentures   33    39 
Stock-based compensation related to options issued to employees   622    453 
           
Net changes in operating assets and liabilities, net of amount acquired:          
Trade receivables, net and unbilled receivables   (9,009)   (4,194)
Deferred tax assets, net   (1,257)   (855)
Other operating assets   2,260    328 
Trade payables   (52)   (426)
Other operating liabilities   (759)   1,247 
Deferred revenues   1,655    4,167 
Accrued severance pay, net   150    10 
           
Net cash provided by operating activities   5,759    10,550 
           
Cash flows from investing activities:          
Purchase of property and equipment   (552)   (641)
Investment in deposit   (665)   (1,106)
Proceeds from restricted deposit used for completed acquisition   22,890    - 
Payments for business acquisitions, net of cash acquired   (22,061)   - 
Capitalized software development costs   (1,437)   (1,392)
           
Net cash used in investing activities   (1,825)   (3,139)
           
Cash flows from financing activities:          
Proceeds from employee stock options exercised   600    17 
Repayment of Series B Debenture   (9,898)   (9,898)
Receipt of short-term loan   20,000    - 
Repayment of loan   -    (2)
Payment of contingent considerations   (538)   (58)
Dividend to non-controlling interest   -    (66)
           
Net cash used in financing activities   10,164    (10,007)
           
Effect of exchange rate changes on cash and cash equivalents   (836)   1,352 
           
Increase (decrease) in cash and cash equivalents   13,262    (1,244)
Cash and cash equivalents at the beginning of period   66,295    64,628 
           
Cash and cash equivalents at the end of period   79,557    63,384 

 

12

 

 

Debentures Covenants

 

As of March 31, 20120, 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 $226 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 (0.08)%.

 

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 (0.003).

 

 

13