Sapiens International Corp NV

Welcome to Sapiens International Corporation's 2022 First Quarter Financial Results Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. For operator assistance during the conference, please press star zero. As a reminder, this conference is being recorded May 3, 2022. It is now my pleasure to introduce your host, Tali Kaplan-Pulgat, Director of Corporate Marketing. Thank you, Tali. You may now begin.

thank you and good day everyone sapiens first quarter 2022 earnings release was issued before the market opened this morning and has been posted on the company's website at www.sapiens.com representing sapiens on the call today are roni aldor president ceo and roni giladi chief financial officer before we start i'd like to remind everyone that this conference call may contain projections or other forward-looking statements The safe harbor provisions in the press release issued today also apply to the content of the call. SAPIEN expressly disclaims any obligation to update or revise any of these forward-looking statements, whether because of future events, new information, a change in its views or expectations, or otherwise. On today's call, we will refer to the non-GAAP financial measures. A reconciliation schedule shows GAAP versus non-GAAP results has been provided in our press release issued before the market opened this morning. A replay of this call will be available after the call on our investor relations section of the company website or via the website link, which is available in the earnings release we published today. I will now turn the call over to Roni Aldor, President and Chief Executive Officer of Sapiens. Roni?

Thank you, Tali. I would like to welcome everyone to our call today to review Sapiens' first quarter 2022 financial results. Sapiens has delivered a good start to 2022. With first quarter revenue increased by 7% year over year to $118 million, in line with the guidance we gave on our last earning calls. Operating profit increased to $20.8 million for an operating margin of 17.6%. We maintain profitability on pair with full year 2021, despite increased employee costs. The Global Sapiens team has successfully delivered on multiple fronts in quarter one, with notable wins in all geographics, efficient delivery, and continued investment in the innovation, capabilities, and expansion of our offering. Our global customer-centric model continue to achieve consistent growth and profitability and generating cash. Sapient's success is built upon three key elements. The first key element is our commitment to innovation and product excellence, reflecting our meaningful R&D strategy. This drives the continuous improvement and enhancement of our offering, which is being recognized by the analyst community and by our customers. Second is our land and expense strategy, which we successfully execute to allow us to grow with new and existing clients and penetrate new markets. The third element is our roles as a trusted partner, where we support our customers on long-term engagement model in their digital transformation and the ongoing continuous evolution of their business, These key elements are tightly coupled and provide us with several levels of growth, evolving with our customers' need and advancing thanks to our innate drive for excellence and success. Europe continues to deliver growth for Sapiens. On the heels of our outstanding performance in 2021, Europe continues and is as expected to continue to be an exciting region for us in 2022. We have successfully expanded our European presence by combining organic growth with our past acquisitions that are now fully integrated. Using influential customer reference and local presence that we gain organic and throughout our acquisitions to build a robust pipeline for our P&C and life and pension in European market, which includes several key regions. We see excellent progress and maturity of this pipeline, particularly in the Spanish-speaking Iberia region, the German-speaking Dutch region, the Nordic region, as well as UK and Ireland, and few other countries in Central Europe. And such progress demonstrates today the fruits of our investment over the last few years. In this region, we have accelerated our business ramp-up with the local customer base and strong local team. Today, We are well positioned as a market leader, and this will allow us to continue and harvest market share in these regions. One great example is our progress in the German market in PNC. We have established a strong presence and successful leverage the cultural knowledge, reference sets, and regulatory expertise we acquire to rapidly grow our business in the German market. As a result, we see increased pipeline in the region at several stages. We recently announced two new PNC wins in Europe that I would like to highlight. One is Builder Insurance Holdings, a leading multinational provider for PNC insurance and reinsurance services with headquarters in Luxembourg. They chose Sapiens to transform their legacy system in multiple countries with our end-to-end core solution. We were selected as their partner not only for our leading core solution, industry knowledge and expertise, but also because we can accompany them on the entire journey across multiple markets. Builder Insurance operates in Germany, Belgium, Luxembourg, Norway, and UK, and Sapiens' global footprint and industry expertise in this region make us a valuable partner and able to support this type of multinational digital transformation journeys. Another key win in Europe is a leading multinational insurance company in Portugal, both in the life and non-life, that selected Sapiens to implement our reinsurance solution. This solution will enable the insurer to better manage its global diversified insurance product sales network of reinsurance business for life and non-life sectors. A significant competitive advantage in Europe is our ability to offer global carriers a single solution that can be implemented across multiple regions. These complex multi-region deals with Tier 1 insurers will be valuable reference as we expand our leadership position in Europe. In the UK, we invest in our products and partners' ecosystem to expand our offering and address the specific needs of Floyd's and London Market Business. We partner with Albany Group to integrate its code-free connect with Sapiens Core System and provide end-to-end performance, regulatory and operational control of supply chains. We also partner with WCL, a solution provider that delivers B2B gateway to manage connectivity and data exchange for Lloyds of London Bureau services. Together with Sapiens core digital insurance platform, WCL Bureau messaging integration will open the distribution to Lloyds syndicates for Sapiens global 600 insurance customer base that can leverage for expansion in the dynamic UK market. On the life and annuity front, industry analysts salient awarded Sapiens Core Suite for Life, the 2021 excellent award in EMEA in the breadth of functionality category and recognize it as a luminary solution excelling in both advanced technology and breadth of functionality. This recognition by CELENT illustrate SAPIEN's depth of impact, breadth of knowledge, and keen understanding of the life and pension insurance industry. This marked the second time SAPIEN's Core Suite for Life and Pension in EMA was recognized by CELENT after winning the 2019 CELENT Excellence Award. This award also recognized SAPIEN's strong team of deep domain experts, We are proud that these awards validate our product strategy as on-trend and cited due to our continued investment in our platform. With a sharper focus on user experience improvement, the current Sapiens user interface is still ahead of many of its peers. Celent recognizes that Sapiens Core Suite for Life continues to be a primary system within the EMEA marketplace for the insurers. In North America, we see positive and tangible improvements. A highlight in North America is a new business closing in life and annuities, thanks to the investment in our core solution and business application components. One of those deals is Guardian Insurers. We've chosen Sapiens' cloud-native customer acquisition solution, integrating Sapiens illustration and application product for enhancing their digital operation. This is an across-sell following the successful implementation of accelerated underwriting solution by Sapiens. In quarter four of 2021, we were selected to perform a blueprint process with North America carriers for coursework life, which has been successfully completed. We are now in the last stage of discussion with this customer, adding our digital suite to the solution mix. We expect to initiate the project implementation soon. Overall, we see improvement in the pipeline for life and annuity with progress in the funnel moving to contract negotiation, and the opportunities started in the previous quarter are advancing. We are confident that our life and annuity business in North America will grow in 2022 and build a solid pipeline toward 2023. Our North America pipeline for PNC is progressing, with several deals moving to advanced stage in the sales process. In addition, our existing customers are adding additional products and notably deliver as improved with existing projects. We continue to accelerate investment in product and delivery methods, and we plan to grow our PNC core businesses by year-end. Rent insurance continues to grow steadily, building a solid pipeline for 2022 in North America. After years of using Sapiens financial and compliance solution, applied underwriting selects Sapiens to also automate the insurance administration, accounting, analysis, and reporting. The solution allowed them to replace their legacy process and automate complex accounting tasks to eliminate manual process. We are confident with our product for North America and have additional opportunity in late stage in the pipeline. APAC and South Africa region were strong again in Q1. Our increased traction and market recognition sustain our momentum in this region in the first quarter. In South Africa, Sapiens expand our business with the whole of the insurance company with our cloud native low-code digital suite. already a long-term customer for Sapiens, previously deploying our solution for both the life and reinsurance businesses. In addition, another customer and one of South Africa's largest financial institutions select to expand relations with us, following a successful experience with Sapiens Transformation, their P&C core system, to implement Sapiens' life and annuity solution. These are two examples of upselling to our customer base who both chose Sapiens once again for the next phase for the digital transformation. Both APAC and South Africa offer gross potential with high demand for our offering. Sapiens' product offering is progressing with cloud and digital across the board. Sapiens has prioritized innovation and our R&D investment has brought us real gain and competitive advantage. area where we have focused our R&D budget, like our cloud and digital and low-code, no-code offerings. Along with decision platform, our key growth levels that continue to deliver wins. All of the new deals I mentioned this quarter, except one, will deliver on the cloud. One major R&D priority is to continuously enhance the cloud-native capabilities of our product portfolio. We also collaborate with both Microsoft Azure and Amazon Web Services to ensure using innovative and cutting-edge cloud capabilities. Many opportunities, such as Guardian and Holard mentioned above, combine a digital component and a core module for Sapiens to allow our customers to progress in digital journeys. Our product strategy is based on providing a digital insurance platform offering a holistic, pre-integrated, connect rich insurance platform covering core processing, digital experience, and data analytics and decision management that can be deployed in a full or modular manner all in the cloud. One example is embedding decision with our core insurance to enhance the value proposition for PNC insurers. We are also looking to further continue to development of machine learning and predictive analytics use cases. Lastly, we continuously expand our ecosystem to insurtech partners that's increasing the scope of solution we can bring to our customers. Partnering with these innovative insurtech partners bring value to our clients and help us to improve our value proposition to our clients and even enter to new markets, as I shared earlier. Our marketing activities in Q1. It has been such a pleasure to engage with colleagues, industry experts, and customers in person events and host face-to-face meetings with our clients. In the first quarter alone, we attended six events in North America and in Europe. We are exciting to host an intimate and engagement event with selected executives from North America customer base in the upcoming Executive Council being held in Nashville, Tennessee next week. Meeting in person and attending live events is critical to creating deep engagement with prospects and customers and key to build a robust pipeline of prospects. While there may be a related increase in travel expenses, this can be offset by boosts we can get to our business from the large number of meetings we efficiently host with many customers at one industry trade show and marketing event. The marketing team has a full schedule for the remainder of the year, and we look forward to increased exposure it will bring to Sapiens. Looking ahead to reminder of 2022. To summarize our first quarter performance, show how the core elements of our strategy are delivering growth. Due to our ongoing commitment and advanced innovation, our product offering continues to be recognized for its excellent functionality and performance. Europe remains a dynamic market for Sapiens across our life and annuity and PNC businesses. wherever we have a significant runway to take market share. In North America, following our focus investment, we see solid progress in our life and reinsurance businesses growth and are encouraged by the future growing in PNC. APAC in South Africa was another bright spot in the first quarter, and this region showed promise. Sapiens has established a track record of growth, profitability, and high cash generation. Through our strategic M&A and organic growth, we have a high standing in the global insurance market. The Sapiens team worldwide is committed to executing our strategy to deliver growth and improve our shareholder value. Now I would like to turn the call to Rony Giladi, our CFO. Rony.