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 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

(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   Sapiens Reports Third Quarter 2020 Financial Results

 

1

 

 

SIGNATURES

 

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.
   
  By:  /s/ Roni Giladi
  Name:  Roni Giladi
  Title: Chief Financial Officer

 

Dated: November 5, 2020

 

2 

 

 

EXHIBIT INDEX

 

The following exhibits are furnished as part of this Form 6-K:

 

Exhibit No.   Title of Exhibit
99.1   Sapiens Reports Third Quarter 2020 Financial Results

 

 

 

 

3

 

 

Exhibit 99.1

 

 

 

Sapiens Reports Third Quarter 2020 Financial Results

 

Holon, Israel, November 5, 2020Sapiens 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, 2020.

 

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

 

   GAAP         Non-GAAP     
   September 30, 2020   September 30, 2019   % Change     September 30, 2020   September 30, 2019   % Change 
Revenue  $97.6   $82.6    18.2%    $98.0   $82.6    18.5%
Gross Profit  $40.1   $33.3    20.3%    $44.2   $36.7    20.4%
Gross Margin   41.0%   40.3%   70 bps      45.1%   44.4%   70 bps 
Operating Income  $12.1   $10.1    19.6%    $17.9   $13.5    32.0%
Operating Margin   12.4%   12.2%   20 bps      18.2%   16.4%   180 bps 
Net Income (*)  $9.3   $7.4    25.9%    $13.7   $10.4    32.0%
Diluted EPS  $0.18   $0.15    20.0%    $0.27   $0.21    28.6%

 

(*) Attributable to Sapiens’ shareholders.

  

“Sapiens delivered strong execution across key geographies and product lines to grow third quarter non-GAAP revenue by 18.5%, fueled by outstanding strategic performance in Europe and North America and leveraging existing customer relationships to upsell products and services. Non-GAAP Operating margin increased to a record of 18.2%, an increase of 180 basis points year-over-year.” said Roni Al-Dor, Sapiens president and CEO.

  

Lately our products received excellent recognition from the analysts and research community across both Life and P&C, and in North America and Europe:

 

In Europe, we have been recognized as Leaders in the 2 Gartner Magic Quadrant for policy administration and insurance platform for both our Life and P&C solutions

 

In North America, we have received the Excellent award by Celent in the Life New Business and Underwriting report

 

“Our outlook for 2020 has improved despite COVID-19. We continue to sign new business and increase our revenue from existing customers. In addition, the 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 non-GAAP revenue range is now $381 million to $383 million, as compared to our prior range of $376 million to $381 million., we are also increasing the range of our non-GAAP operating margin for 2020 to 17.6% to 17.7% from prior range of 16.5% to 16.9%.”

 

 

 

 

Quarterly Results Conference Call

 

Management will host a conference call and webcast on November 5, 20202 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 November 14, 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.

 

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 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 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   Nine months ended 
   September 30   September 30 
   2020   2019   2020   2019 
   (unaudited)   (unaudited)   (unaudited)   (unaudited) 
                 
Revenue   97,645    82,643    281,242    238,959 
Cost of revenue   57,567    49,316    166,641    144,371 
                     
Gross profit   40,078    33,327    114,601    94,588 
                     
Operating expenses:                    
Research and development, net   10,375    9,445    30,229    27,145 
Selling, marketing, general and administrative   17,606    13,767    49,594    39,797 
Total operating expenses   27,981    23,212    79,823    66,942 
                     
Operating income   12,097    10,115    34,778    27,646 
                     
Financial and other expenses, net   1,042    261    2,593    1,749 
Taxes on income   1,520    2,349    6,430    6,350 
                     
Net income   9,535    7,505    25,755    19,547 
                     
Attributable to non-controlling interest   196    87    299    134 
                     
Net income attributable to Sapiens’ shareholders   9,339    7,418    25,456    19,413 
                     
Basic earnings per share   0.19    0.15    0.51    0.39 
                     
Diluted earnings per share   0.18    0.15    0.50    0.38 
                     
Weighted average number of shares outstanding used to compute basic earnings per share (in thousands)   50,625    50,027    50,367    50,005 
                     
Weighted average number of shares outstanding used to compute diluted earnings per share (in thousands)   51,581    50,742    51,280    50,534 

 

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   Nine months ended 
   September 30   September 30 
   2020   2019   2020   2019 
   (unaudited)   (unaudited)   (unaudited)   (unaudited) 
                 
Revenue   97,968    82,643    281,565    238,959 
Cost of revenue   53,762    45,931    155,668    134,349 
                     
Gross profit   44,206    36,712    125,897    104,610 
                     
Operating expenses:                    
Research and development, net   11,881    10,986    34,423    31,648 
Selling, marketing, general and administrative   14,466    12,196    42,218    35,101 
Total operating expenses   26,347    23,182    76,641    66,749 
                     
Operating income   17,859    13,530    49,256    37,861 
                     
Financial and other expenses, net   1,042    261    2,593    1,749 
Taxes on income   2,875    2,770    8,866    7,635 
                     
Net income   13,942    10,499    37,797    28,477 
                     
Attributable to non-controlling interest   196    87    299    134 
                     
Net income attributable to Sapiens’ shareholders   13,746    10,412    37,498    28,343 
                     
Basic earnings per share   0.27    0.21    0.74    0.57 
                     
Diluted earnings per share   0.27    0.21    0.73    0.56 
                     
Weighted average number of shares outstanding used to compute basic earnings per share (in thousands)   50,625    50,027    50,367    50,005 
                     
Weighted average number of shares outstanding used to compute diluted earnings per share (in thousands)   51,581    50,742    51,280    50,534 

 

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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, 
   2020   2019   2020   2019 
   (unaudited)   (unaudited)   (unaudited)   (unaudited) 
                 
GAAP revenue   97,645    82,643    281,242    238,959 
Valuation adjustment on acquired deferred revenue   323    -    323    - 
Non-GAAP revenue   97,968    82,643    281,565    238,959 
                     
GAAP gross profit   40,078    33,327    114,601    94,588 
Revenue adjustment   323    -    323    - 
Amortization of capitalized software   1,600    1,438    4,627    4,169 
Amortization of other intangible assets   2,205    1,947    6,346    5,853 
Non-GAAP gross profit   44,206    36,712    125,897    104,610 
                     
GAAP operating income   12,097    10,115    34,778    27,646 
Gross profit adjustments   4,128    3,385    11,296    10,022 
Capitalization of software development   (1,506)   (1,541)   (4,194)   (4,503)
Amortization of other intangible assets   825    539    2,112    1,614 
Stock-based compensation   1,361    382    2,747    1,123 
Acquisition-related costs *)   954    650    2,517    1,959 
Non-GAAP operating income   17,859    13,530    49,256    37,861 
                     
GAAP net income attributable to Sapiens’ shareholders   9,339    7,418    25,456    19,413 
Operating income adjustments   5,762    3,415    14,478    10,215 
Taxes on income   (1,355)   (421)   (2,436)   (1,285)
Non-GAAP net income attributable to Sapiens’ shareholders   13,746    10,412    37,498    28,343 

 

(*)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)

 

   Q3 2020   Q2 2020   Q1 2020   Q4 2019   Q3 2019 
                     
Revenues   97,968    93,063    90,534    86,715    82,643 
Gross profit   44,206    41,900    39,791    38,402    36,712 
Operating income   17,859    16,783    14,614    14,345    13,530 
Net income to Sapiens’ shareholders   13,746    13,340    10,412    10,553    10,412 
Adjusted EBITDA   19,010    17,854    15,724    15,271    14,523 
                          
Basic earnings per share   0.27    0.27    0.21    0.21    0.21 
Diluted earnings per share   0.27    0.26    0.20    0.21    0.21 

 

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

 

   Q3 2020   Q2 2020   Q1 2020   Q4 2019   Q3 2019 
                     
North America   49,979    46,610    44,567    41,787    44,413 
Europe   42,394    41,030    40,232    37,504    30,273 
Rest of the world   5,595    5,423    5,735    7,424    7,957 
                          
Total   97,968    93,063    90,534    86,715    82,643 

 

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

 

   Q3 2020   Q2 2020   Q1 2020   Q4 2019   Q3 2019 
                     
Cash-flow from operating activities   16,705    14,761    5,759    21,429    18,671 
Increase in capitalized software development costs   (1,506)   (1,251)   (1,437)   (1,162)   (1,541)
Capital expenditures   (963)   (393)   (552)   (2,456)   (973)
Capital expenditures related to new campus in India   -    -    -    -    (6,325)
Free cash-flow   14,236    13,117    3,770    17,811    9,832 
                          
Capital expenditures related to new campus in India   -    -    -    -    6,325 
Cash payments attributed to acquisition-related costs(*) (**)   242    1,562    737    200    100 
                          
Adjusted free cash-flow   14,478    14,679    4,507    18,011    16,257 

 

(*)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.

 

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Adjusted EBITDA Calculation
U.S. dollars in thousands

 

   Three months ended   Nine months ended 
   September 30   September 30 
   2020   2019   2020   2019 
                 
GAAP operating profit   12,097    10,115    34,778    27,646 
                     
Non-GAAP adjustments:                    
Valuation adjustment on acquired deferred revenue   323    -    323    - 
Amortization of capitalized software   1,600    1,438    4,627    4,169 
Amortization of other intangible assets   3,030    2,486    8,458    7,467 
Capitalization of software development   (1,506)   (1,541)   (4,194)   (4,503)
Stock-based compensation   1,361    382    2,747    1,123 
Compensation related to acquisition and acquisition-related costs   954    650    2,517    1,959 
                     
Non-GAAP operating profit   17,859    13,530    49,256    37,861 
                     
Depreciation   1,151    993    3,332    2,544 
                     
Adjusted EBITDA   19,010    14,523    52,588    40,405 

 

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SAPIENS INTERNATIONAL CORPORATION N.V. AND ITS SUBSIDIARIES

 

CONDENSED CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands

 

   September 30,   December 31, 
   2020   2019 
   (unaudited)   (unaudited) 
         
ASSETS        
         
CURRENT ASSETS        
Cash and cash equivalents   131,667    66,295 
Trade receivables, net and unbilled receivables   63,805    50,221 
Investment in restricted deposit   -    22,890 
Other receivables and prepaid expenses   10,399    7,817 
           
Total current assets   205,871    147,223 
           
LONG-TERM ASSETS          
Property and equipment, net   16,744    16,601 
Severance pay fund   5,377    5,106 
Goodwill and intangible assets, net   266,696    228,691 
Operating lease right-of-use assets   49,300    49,539 
Other long-term assets   6,095    5,261 
           
Total long-term assets   344,212    305,198 
           
TOTAL ASSETS   550,083    452,421 
           
LIABILITIES AND EQUITY          
           
CURRENT LIABILITIES          
Trade payables   5,306    5,107 
Current maturities of Series B Debentures   19,796    9,898 
Accrued expenses and other liabilities   67,465    60,574 
Current maturities of operating lease liabilities   9,558    8,312 
Deferred revenue   26,450    21,021 
           
Total current liabilities   128,575    104,912 
           
LONG-TERM LIABILITIES          
Series B Debentures, net of current maturities   98,681    58,850 
Deferred tax liabilities   6,395    5,082 
Other long-term liabilities   10,847    8,321 
Long-term operating lease liabilities   44,934    43,394 
Accrued severance pay   7,274    6,364 
           
Total long-term liabilities   168,131    122,011 
           
REDEEMABLE NON-CONTROLLING INTEREST   477    - 
           
EQUITY   252,900    225,498 
           
TOTAL LIABILITIES AND EQUITY   550,083    452,421 

 

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SAPIENS INTERNATIONAL CORPORATION N.V. AND ITS SUBSIDIARIES

 

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

 

   For the Nine months ended
June 30,
 
   2020   2019 
   (unaudited)   (unaudited) 
Cash flows from operating activities:        
Net income   25,755    19,547 
Reconciliation of net income to net cash provided by operating activities:          
Depreciation and amortization   16,417    14,180 
Accretion of discount on Series B Debentures   91    124 
Capital gain from sale of property and equipment   4    (129)
Stock-based compensation related to options issued to employees   2,747    1,123 
           
Net changes in operating assets and liabilities, net of amount acquired:          
Trade receivables, net and unbilled receivables   (10,225)   3,642 
Deferred tax assets, net   (391)   (2,664)
Other operating assets   3,653    1,425 
Trade payables   (778)   (1,534)
Other operating liabilities   (294)   4,562 
Deferred revenues   (194)   4,419 
Accrued severance pay, net   440    33 
           
Net cash provided by operating activities   37,225    44,728 
           
Cash flows from investing activities:          
Purchase of property and equipment   (1,908)   (9,018)
Investment in deposit   (379)   (1,119)
Proceeds from sale of property and equipment   12    821 
Proceeds from restricted deposit used for completed acquisition   22,890    - 
Payments for business acquisitions, net of cash acquired   (35,395)   (1,572)
Capitalized software development costs   (4,194)   (4,503)
           
Net cash used in investing activities   (18,974)   (15,391)
           
Cash flows from financing activities:          
Proceeds from employee stock options exercised   4,919    435 
Distribution of dividend   (7,044)   (10,362)
Repayment of Series B Debenture   (9,898)   (9,898)
Issuance of Series B Debentures   60,386    - 
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   47,825    (20,015)
           
Effect of exchange rate changes on cash and cash equivalents   (704)   (812)
           
Increase in cash and cash equivalents   65,372    8,510 
Cash and cash equivalents at the beginning of period   66,295    64,628 
           
Cash and cash equivalents at the end of period   131,667    73,138 

 

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Debentures Covenants

 

As of September 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 $251 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 (5.05)%.

 

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 (0.18).

 

In October 2020, the company completed a capital raise of $100M.

 

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