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 August 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: August 4, 2020 By:  /s/ Roni Giladi
    Roni Giladi
    Chief Financial Officer

 

 

2

 

 

Exhibit 99.1

 

 

Sapiens Reports Second Quarter 2020 Financial Results

 

Holon, Israel, August 4, 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 second quarter ended June 30, 2020.

 

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

 

   GAAP         Non-GAAP     
   June 30,
2020
   June 30,
2019
   % Change     June 30,
2020
   June 30,
2019
   % Change 
Revenue  $93.1   $79.5    17.0%    $93.1   $79.5    17.0%
Gross Profit  $38.3   $31.5    21.6%    $41.9   $34.8    20.4%
Gross Margin   41.1%   39.6%   150 bps      45.0%   43.8%   120 bps
Operating Income  $12.4   $9.5    31.2%    $16.8   $12.6    33.4%
Operating Margin   13.3%   11.9%   140 bps      18.0%   15.8%   220 bps
Net Income (*)  $9.3   $6.8    35.9%    $13.3   $9.5    39.8%
Diluted EPS  $0.18   $0.14    28.6%    $0.26   $0.19    36.8%

 

(*) Attributable to Sapiens’ shareholders.

 

“Our second quarter growth was driven by North America and Europe and reached a rate of 17.0%. Non-GAAP Operating income grew 33.4%, lifting operating margin by 220 basis points to a record 18.0%, primarily due to cost saving steps we implemented as COVID-19 appeared,” said Roni Al-Dor, Sapiens president and CEO.

 

“Our outlook for 2020 has improved despite COVID-19. We continue to sign new business and increase our revenue from existing customers with upselling opportunities. “In addition the recent Delphi acquisition enhances our position as a leading solutions provider in the MPL market in North America As such, we are raising our 2020 revenue guidance range,” concluded Roni Al-Dor. “Our revised 2020 revenue range is now $376 million to $381 million, as compared to our prior range of $368 million to $377 million. The Delphi business acquisition which we completed at the end of July is currently in loss position, partially offsetting our operational improvement in 2020. That being said we are increasing our guidance to 16.5% to 16.9% from prior range of 16.0% to 16.5%.”

 

 

 

 

Quarterly Results Conference Call

 

Management will host a conference call and webcast on August 4, 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): + 1-888-668-9141; International: +972-3-918-0609; 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 August 13, 2020, as follows:

 

North America: +1-877-456-0009; International: +972-3-9255901

 

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.

 

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.

 

  2 

 

 

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 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.

 

  3 

 

 

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 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.

 

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 500 organizations globally, Sapiens has a proven ability to satisfy customers’ core, data and digital requirements. For more information: www.sapiens.com

 

Forward Looking Statements

 

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, 2019, 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

 

  4 

 

 

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
June 30
   Six months ended
June 30
 
   2020   2019   2020   2019 
   (unaudited)   (unaudited)   (unaudited)   (unaudited) 
                 
Revenue   93,063    79,529    183,597    156,316 
Cost of revenue   54,804    48,075    109,074    95,055 
                     
Gross profit   38,259    31,454    74,523    61,261 
                     
Operating expenses:                    
Research and development, net   9,328    8,923    19,854    17,700 
Selling, marketing, general and administrative   16,528    13,077    31,988    26,030 
Total operating expenses   25,856    22,000    51,842    43,730 
                     
Operating income   12,403    9,454    22,681    17,531 
                     
Financial and other expenses, net   63    434    1,550    1,488 
Taxes on income   3,010    2,154    4,911    4,001 
                     
Net income   9,330    6,866    16,220    12,042 
                     
Attributable to non-controlling interest   33    26    103    47 
                     
Net income attributable to Sapiens' shareholders   9,297    6,840    16,117    11,995 
                     
Basic earnings per share   0.19    0.14    0.32    0.24 
                     
Diluted earnings per share   0.18    0.14    0.32    0.24 
                     
Weighted average number of shares outstanding used to compute basic earnings per share (in thousands)   50,297    50,002    50,236    49,994 
                     
Weighted average number of shares outstanding used to compute diluted earnings per share (in thousands)   51,173    50,530    51,128    50,430 

 

  5 

 

 

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
June 30
   Six months ended
June 30
 
   2020   2019   2020   2019 
   (unaudited)   (unaudited)   (unaudited)   (unaudited) 
                 
Revenue   93,063    79,529    183,597    156,316 
Cost of revenue   51,163    44,735    101,906    88,418 
                     
Gross profit   41,900    34,794    81,691    67,898 
                    
Operating expenses:                    
Research and development, net   10,579    10,493    22,542    20,662 
Selling, marketing, general and administrative   14,538    11,720    27,752    22,905 
Total operating expenses   25,117    22,213    50,294    43,567 
                     
Operating income   16,783    12,581    31,397    24,331 
                     
Financial and other expenses, net   63    434    1,550    1,488 
Taxes on income   3,347    2,580    5,992    4,865 
                     
Net income   13,373    9,567    23,855    17,978 
                     
Attributable to non-controlling interest   33    26    103    47 
                     
Net income attributable to Sapiens' shareholders   13,340    9,541    23,752    17,931 
                     
Basic earnings per share   0.27    0.19    0.47    0.36 
                     
Diluted earnings per share   0.26    0.19    0.46    0.36 
                     
Weighted average number of shares outstanding used to compute basic earnings per share (in thousands)   50,297    50,002    50,236    49,994 
                     
Weighted average number of shares outstanding used to compute diluted earnings per share (in thousands)   51,173    50,530    51,128    50,430 

 

  6 

 

 

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   Six months ended 
   June 30,   June 30, 
   2020   2019   2020   2019 
   (unaudited)   (unaudited)   (unaudited)   (unaudited) 
                 
GAAP gross profit   38,259    31,454    74,523    61,261 
                     
Amortization of capitalized software   1,531    1,390    3,027    2,731 
Amortization of other intangible assets   2,110    1,950    4,141    3,906 
Non-GAAP gross profit   41,900    34,794    81,691    67,898 
                     
GAAP operating income   12,403    9,454    22,681    17,531 
Gross profit adjustments   3,641    3,340    7,168    6,637 
Capitalization of software development   (1,251)   (1,570)   (2,688)   (2,962)
Amortization of other intangible assets   698    540    1,287    1,075 
Stock-based compensation   764    288    1,386    741 
Acquisition-related costs *)   528    529    1,563    1,309 
Non-GAAP operating income   16,783    12,581    31,397    24,331 
                     
GAAP net income attributable to Sapiens' shareholders   9,297    6,840    16,117    11,995 
Operating income adjustments   4,380    3,127    8,716    6,800 
Taxes on income   (337)   (426)   (1,081)   (864)
Non-GAAP net income attributable to Sapiens' shareholders   13,340    9,541    23,752    17,931 

 

(*)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.

 

  7 

 

 

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

 

   Q2 2020  Q1 2020  Q4 2019  Q3 2019  Q2 2019
                
Revenues   93,063    90,534    86,715    82,643    79,529 
Gross profit   41,900    39,791    38,402    36,712    34,794 
Operating income   16,783    14,614    14,345    13,530    12,581 
Net income to Sapiens’ shareholders   13,340    10,412    10,553    10,412    9,541 
Adjusted EBITDA   17,854    15,724    15,271    14,523    13,358 
                          
Basic earnings per share   0.27    0.21    0.21    0.21    0.19 
Diluted earnings per share   0.26    0.20    0.21    0.21    0.19 

 

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

 

   Q2 2020  Q1 2020  Q4 2019  Q3 2019  Q2 2019
                
North America   46,610    44,567    41,787    44,413    39,216 
Europe   41,030    40,232    37,504    30,273    33,881 
Rest of the world   5,423    5,735    7,424    7,957    6,432 
                          
Total   93,063    90,534    86,715    82,643    79,529 

 

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

 

   Q2 2020  Q1 2020  Q4 2019  Q3 2019  Q2 2019
                
Cash-flow from operating activities   14,761    5,759    21,429    18,671    15,507 
Increase in capitalized software development costs   (1,251)   (1,437)   (1,162)   (1,541)   (1,570)
Capital expenditures   (393)   (552)   (2,456)   (973)   (1,079)
Capital expenditures related to new campus in India   -    -    -    (6,325)   - 
Free cash-flow   13,117    3,770    17,811    9,832    12,858 
                          
Capital expenditures related to new campus in India   -    -    -    6,325    - 
Cash payments attributed to acquisition-related costs(*) (**)   1,562    737    200    100    1,692 
                          
Adjusted free cash-flow   14,679    4,507    18,011    16,257    14,550 

 

(*)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.

 

  8 

 

 

Adjusted EBITDA Calculation
U.S. dollars in thousands

 

   Three months ended  Six months ended
   June 30  June 30
   2020  2019  2020  2019
             
GAAP operating profit   12,403    9,454    22,681    17,531 
                     
Non-GAAP adjustments:                    
Amortization of capitalized software   1,531    1,390    3,027    2,731 
Amortization of other intangible assets   2,808    2,490    5,428    4,981 
Capitalization of software development   (1,251)   (1,570)   (2,688)   (2,962)
Stock-based compensation   764    288    1,386    741 
Compensation related to acquisition and acquisition-related costs   528    529    1,563    1,310 
                     
Non-GAAP operating profit   16,783    12,581    31,397    24,332 
                     
Depreciation   1,071    777    2,182    1,550 
                     
Adjusted EBITDA   17,854    13,358    33,579    25,882 

 

  9 

 

 

SAPIENS INTERNATIONAL CORPORATION N.V. AND ITS SUBSIDIARIES

 

CONDENSED CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands

 

   June 30,  December 31,
   2020  2019
   (unaudited)  (unaudited)
       
ASSETS      
       
CURRENT ASSETS      
Cash and cash equivalents   127,978    66,295 
Trade receivables, net and unbilled receivables   62,969    50,221 
Investment in restricted deposit   -    22,890 
Other receivables and prepaid expenses   9,041    7,817 
           
Total current assets   199,988    147,223 
           
LONG-TERM ASSETS          
Property and equipment, net   16,486    16,601 
Severance pay fund   5,839    5,106 
Goodwill and intangible assets, net   248,733    228,691 
Operating lease right-of-use assets   50,231    49,539 
Other long-term assets   6,017    5,261 
           
Total long-term assets   327,306    305,198 
           
TOTAL ASSETS   527,294    452,421 
           
LIABILITIES AND EQUITY          
           
CURRENT LIABILITIES          
Trade payables   5,738    5,107 
Current maturities of Series B Debentures   19,796    9,898 
           
Accrued expenses and other liabilities   64,443    60,574 
Current maturities of operating lease liabilities   9,073    8,312 
Deferred revenue   25,061    21,021 
Total current liabilities   124,111    104,912 
           
LONG-TERM LIABILITIES          
Series B Debentures, net of current maturities   98,434    58,850 
Deferred tax liabilities   7,235    5,082 
Other long-term liabilities   8,312    8,321 
Long-term operating lease liabilities   44,319    43,394 
Accrued severance pay   7,367    6,364 
           
Total long-term liabilities   165,667    122,011 
           
           
REDEEMABLE NON-CONTROLLING INTEREST   458    - 
           
EQUITY   237,058    225,498 
           
TOTAL LIABILITIES AND EQUITY   527,294    452,421 

 

  10 

 

 

SAPIENS INTERNATIONAL CORPORATION N.V. AND ITS SUBSIDIARIES

 

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

 

  

For the six months ended

June 30,

   2020  2019
   (unaudited)  (unaudited)
Cash flows from operating activities:      
Net income   16,220    12,042 
Reconciliation of net income to net cash provided by operating activities:          
Depreciation and amortization   10,637    9,262 
Accretion of discount on Series B Debentures   77    84 
Capital gain from sale of property and equipment   -    (129)
Stock-based compensation related to options issued to employees   1,386    741 
           
Net changes in operating assets and liabilities, net of amount acquired:          
Trade receivables, net and unbilled receivables   (11,554)   712 
Deferred tax assets, net   (1,146)   (1,435)
Other operating assets   3,286    (356)
Trade payables   (275)   190 
Other operating liabilities   (2,187)   152 
Deferred revenues   4,008    4,760 
Accrued severance pay, net   68    34 
           
Net cash provided by operating activities   20,520    26,057 
           
Cash flows from investing activities:          
Purchase of property and equipment   (945)   (1,720)
Investment in deposit   (379)   (1,119)
Proceeds from restricted deposit used for completed acquisition   22,890    - 
Payments for business acquisitions, net of cash acquired   (22,483)   821 
Capitalized software development costs   (2,688)   (2,962)
           
Net cash used in investing activities   (3,605)   (4,980)
           
Cash flows from financing activities:          
Proceeds from employee stock options exercised   2,334    78 
Distribution of dividend   (6,632)   - 
Repayment of Series B Debenture   (9,898)   (9,898)
Issuance of Series B Debentures, net of issuance expenses of $863   60,155    - 
Receipt of short-term loan   20,000    - 
Repayment of loan   (20,000)   (4)
Payment of contingent considerations   (538)   (120)
Dividend to non-controlling interest   -    (66)
           
Net cash provided by (used in) financing activities   45,421    (10,010)
           
Effect of exchange rate changes on cash and cash equivalents   (652)   1,587 
           
Increase in cash and cash equivalents   61,684    12,654 
Cash and cash equivalents at the beginning of period   66,295    64,628 
           
Cash and cash equivalents at the end of period   127,979    77,282 

 

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Debentures Covenants

 

As of June 30, 2020, 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 minority interest): above $120 million.

 

Actual shareholders’ equity equal to $237 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 (3.4)%.

 

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 (0.1).

  

 

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