Sapiens International Corp NV

Welcome to Sapiens Corporation's 2023 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, 2023. It is now my pleasure to introduce your host, Yaffa Cohen-Efrach, Chief Marketing Officer and Head of Investor Relations. Thank you. Yaffa, you may now begin.

Thank you, Operator. I would like to welcome all of you to SAPIEN's conference call to review our first quarter results for 2023. With me on the call today are Mr. Rony Aldor, President and CEO, Mr. Rony Giladi, CFO, and Mr. Alex Zuckerman, Chief Strategy Officer. Following the summary of the results, we will all be available to answer any questions. Before we start, I would like to remind everyone that this conference call may contain projections or other forward-looking statements. The safe harbor provision in the press release issued today also apply to the content of the call. Sapiens expressly disclaim any obligation to update or revise any of the forward-looking statements, whether because of future events, new information, a change in its view or expectations, or otherwise. On today's call, we will refer to the non-GAAP financial measure. A reconciliation of GAAP to non-GAAP results has been provided in our press release issue 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 earning release we published to date. I will turn the call over to Rony Aldor, President and CEO of Sapiens. Rony?

Thank you, Jaffa, and thank you to everyone who has joined us today. I want to welcome you to our earning call. Sapiens has a solid first quarter with a 6% year-over-year increase in revenue to $124.8 million. Our hard work of dedication has paid off as we also deliver a higher operating profit of $22.5 million, resulting in an operating margin of 18%. We are excited to continue this positive momentum throughout the year and achieve continued success. Our customer-centric model, implemented globally, has consistently driven growth and profitability while generating cash flow. Sapiens has an established track record of growth, profitability, and high cash generation. North America is returning to growth. I'm happy to share that our hard work and extensive groundwork in North America are paying off, thanks to the dedication of our team and my oversight. We're excited 2022 with improvement, and the good news is that the momentum is continue into 2023. We are exciting to see that what we can achieve this year with this positive energy and drive. In North America, Sapiens serving the life and annuities market and the PNC market, which include workers' compensation and reinsurance solutions. Since the beginning of 2023, we have signed new PNC deals across all of our PNC products. Core PNC, workers' compensations, and reinsurance markets. Our specialization in offering differentiated PNC products that target niche market with high growth potential sets Sapiens apart in North America market. As a result, we are making excellent progress in building our pipeline and developing new opportunities of all of our PNC products. Our success in workers' compensation is driven by our leading core suite for workers' compensation solution, which 8Navarica recently recognized as an established player for property and casualty policy administration system in North America. Our product is designed exclusively for our workers' compensation line of business. This gives us domain expertise and an excellent referenceable client base. Since the beginning of the year, we have signed new workers' compensation deals and are progressing with additional deals. After two years of slowdown in the space, mainly due to COVID, the workers' compensation market represents a significant opportunity for sapiens in North America and Canada this year and in the coming years. Our core suite for PNC products has been a bright spot for us in North America. thanks to our significant investments over the past two years. During this time, we strengthen our foundation, enhance our cloud offering, and provide stability for our existing customers. After a brief pause, we resume our outreach and pipeline building efforts, which have led to new success and widespread product selection. In fact, we signed a new CoreSuite for P&C deal in the first quarter and are progressing with our additional deal, underscoring the strength and appeal of our product. Our North America life and annuity business continues building momentum in CoreSuite and business application offering for life. We secured another CoreSuite deal in the first quarter, demonstrating the continued demand for our products. While we are not disclosing specific detail about this particular win, we are excited to have re-established our position in this live market. Additionally, we are seeing strong traction in our business application for life with new deals signed and existing customers upgrading to the latest version of our software. Following our recent re-architecture effort, this is a proof to the quality and the value of our product, and we are committed to continue to innovate and improve our offering to meet the market's evolving need. We have achieved a high win rate in life, reflecting the quality and the value of our product and services. Since the beginning of the year, we have grown our North America sales and marketing and customer success team to support our future growth. As we continue to refine our sales and marketing plans and leverage our industry expertise, we are confident that we will further improve our closure rate in this market. With a dedicated team and a customer-centric approach, we are committed to delivering exceptional solutions and exceeding our client expectations. Switching to Europe, this market remains our highest growth region. Several positive dynamics contribute to the first quarter high single-digit growth with experience in the region. First, we see increased demand for system replacement in life and pension. Organizations are coming back to the market looking for core system replacement, and as a result, we have a lot of activity in the life and pensions. Second, we also see increasing demand for P&C, and digital solution in the market. And the third element contribute to grow in Europe is the increasing acceptance of the cloud. European insurers are embracing cloud solutions and we have more customer open to the cloud solutions. I want to highlight our strategic focus in Germany. The German insurance industry is one of the largest in the world. It's a total premium exceeding 220 billion euros annually. This represents a significant growth opportunity for Sapiens, and we are well positioned to capitalize on it by offering our core digital and reinsurance solutions. Since acquiring Tsumkumo in 2020, we have invested significantly in establishing a strong local presence in the German market. Our efforts have focused on expanding our P&C in digital products and increasing our sales and support team in the region. These investments are paying off and we are seeing positive momentum in the market. We see opportunity for edit suite and skip solutions with a top tier German insurance player. In addition, the opportunity to develop this market for additional sapiens products like reinsurance and digital and in the future with the life and annuity solutions. The EMEA region continues growing across property and casualty and life and pension, and our results reflect our consistent progress in these regions. Recognition from the leading industry analysts support our sales team effort and provide excellent reference. In early March, we announced that Sapiens ED Suite for PNC won CELENT 2023 Excellent Award for the Breath of Functionality category in the EMEA region. The product was named as a Luminary solution, the top tier in CELENT technical capability matrix. It's the only non-US-based solution given this award. EDIT Suite is clearly positioned a leading platform in EMEA. The Luminary Classification was also given to Sapiens EDIT Suite in the APAC region. Celent also highlighted two other Sapiens solutions. Sapiens Tier Policy solution was named a functionality and stand out both in EMEA and LATAM region, and Sapiens was named as a notable solution. Switching now to Sapiens cloud and digital progress. Digital is a dynamic domain and we are building our SaaS digital proposition tightly connected yet loosely coupled with Sapiens core solution that's enabling our clients to benefit from the complete Sapiens proposition while maintaining their freedom of choice. In order to achieve success in this segment of our business, we have established several key priorities for 2023. Our top priority is to provide a persona-based package for agents and for customers on top of each one of our core products, Life and PNC. The persona package is high-focused on usability, UX, and also smart features, enhanced by artificial intelligence and machine learning to enable easier work and easier decision-making. We plan to support more out-of-the-box machine learning modules in our portals, offer a dynamic questionnaire solution recipient decision, and integrate with Data Hub as a real-time data consolidation layer. We also plan to offer pre-integration with data enrichment provider, which will help us deliver even more value to our customers. Another key element in our approach is enabling a swift time to market with local tools and the concept of smart components. The smart components introduce out-of-the-book features and components integrated with the core and data platform enable changes and ability to add capabilities to each persona for rapid time to market. It enables groups to create their own repository to share between the implementation across the organization. Sales management is another critical area of focus for us. And we plan to introduce the first phase of our no-code management system. We will also introduce company-level setting in the journey for Composer and offering multiple workspace and easy mapping in an API composition engine. making it easier for our customer to manage their operation and improve efficiency. Finally, we are committed to extending our touchpoints with end users to improve our connection and provide greater value. These include integration with leading platforms such as MS Dynamic, MS Office, Glia, Splice, and more, which will help us provide a more seamless experience for our customers. This was a busy quarter on the marketing and brand awareness front. Sapiens team exhibited in the industry trade show worldwide in Spain, Germany, and the UK and US. We are increasing our investment in Sapiens brand and our solution with digital activities and campaigns. In addition, we are preparing to host our annual international client conference in Barcelona later in May, and our North America Customer Summit in Arizona in October. Looking ahead to the remainder of 2023, our key objectives are first and foremost growing our presence in North America market. This will involve investing in our sales and marketing efforts, building relationship with key partners, and maintaining investment in our innovating solution that meet the evolving needs of our customers. In addition to expanding our presence in North America, we are also focused on deepening our relationship with our existing customers and growing in every territory we operate. We will also look for opportunities to upsell and cross-sell, an essential advantage of our long-term sticky customer relationship. In parallel, we have the solution to address their digitalization and cloud needs. Another key objective is expanding beyond our core offering into digital data and analytics, as we recognize the tremendous growth potential in these areas. Finally, continuing our transition to the cloud will enable us to deliver our solution more quickly and efficiently, provide greater scalability and flexibility for our clients, and enhance our overall competitiveness in the market. By focusing on these key goals, we are confident that we will continue to drive success and growth of our company and deliver exceptional value to our clients. Our continuous investment in product and solution has earned industry recognition, enhancing our standing in the global insurance market. As the CEO of Sapiens, I am proud to lead a team deeply committed to executing our strategic plan and delivering sustainable growth and value for our shareholders. Now I would like to turn the call to Rony Giladi, our CFO.