Sapiens International Corp NV

Welcome to Sapiens International Corporation's 2024 Third 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. 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 want to welcome you to Sapiens Conference Call. to review our third quarter results for 2024. With me on the call today are Mr. Rony Aldor, President and CEO, Mr. Rony Giladi, CFO, and Mr. Alec Zuckerman, Chief Strategy Officer. Following the summary of the results, we will 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. Tapings expressly disclaim 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 of gap to non-gap result has been provided in our press release, which was 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's website or via the website link, which is available in the earning release we published today. I will now turn the call over to Rony Ardol, President and CEO of Sapiens. Rony?

Good morning, everyone, and thank you for joining us today for SAPIEN's third quarter 2024 earning call. Our revenue in third quarter was $137 million, a 4.8% increase compared to last year. This quarter continues to showcase solid execution across all of our key regions. Let's start with North America, where we secure new business wins during the quarter. I want to highlight a few. Continental General chose the cloud-based Sapiens insurance platform for lifetime annuity to improve its capabilities and modernize its platform to future insurance products. These improvements will enhance its ability to scale in new markets and streamline implementation of its long-term care insurers specialty while expanding third-party administrator, TPA, services through its affiliate. Another win in the life space was the leading Canadian life and health insurance carrier, which selected the cloud-based Sapiens insurance platform to enhance its operational performance boost efficiency, elevate the client and advisor experience, and drive its digital transformation and growth in the life and health market. Rockford Mutual Insurance Company selected a cloud-based Sapiens Reinsurance Pro to automate its reinsurance management process, improve efficiencies and profitability, and mitigate costly claims leakage. Sapiens automated solution eliminates complexities within treaties by balancing the appropriate coverage with the rising coverage costs, enabling Rockford Mutual to track, build, recover reinsurance and capture valuable data. And lastly, Society Insurance chose Sapiens to automate and transform its reinsurance processes. our cloud-based reinsurance system met society's need for an automated, out-of-the-box solution. Society can now manage its entire reinsurance program to centralize data in a consolidated repository that quickly runs queries and access reports. Sapiens stood out for its broad range of capabilities in reinsurance, accounting, and cash management compliance with auditing and statority requirements. Let me highlight few successful North America goal lives and upgrades with existing customer in quarter three. In July, Pan American Life Insurance Group, PELIG, successfully went live with Sapiens Illustration Pro SaaS solution on the Microsoft Azure Cloud. A long time Sapiens customer, Pellig wanted to transform its current system to second digital web-based solution to integrate across multiple platforms. Illustration Pro will enable Pellig to consolidate illustrations on a single platform, ensuring fast time to market, robust new comparisons, client management, and self-sufficient feature will allow them to manage multiple products launches more efficiency while improving the agent experience with scalable, flexible solution. Worker compensation is a market where Sapiens is building a momentum in North America and remains a substantial growth opportunity for Sapiens in the year ahead. In the third quarter, we completed the worker compensation customer upgrade with our latest functionally reach CoSuite for Worker Compensation version. Also, our North America team continues progressing on three major worker compensation projects, which we expected to go live in 2025. The win this quarter reinforced the value and the trust that insurance plays in Sapiens to innovate and drive business transformation. and we are always working to ensure we can deliver the most value to the market. In CoreSuite property and casualty, several North American projects went live this quarter, and we are working on several customer upgrades. We also launched our latest version of Sapiens CoreSuite for property and casualty for North America insurance market. The new release delivers insurers many functionality and performance improvement and enhanced security features. The release introduced an integrated AI-based open platform to strengthen the second insurance platform digital layer and expanding its core business capabilities. Ensure it remains future-proof. We have improved the consistency of our data to help the insurance overcome the challenges of data migration and ensure their data is consistent and AI ready. Moving to system integrator, Sapiens is making progress in collaboration with system integrators, which has resulted in promising opportunity in our pipeline that would have been otherwise unattainable. These partnerships have unlocked new avenues for growth and development demonstrating the strategic value and the potential of our SIs in expanding our market reach. We are excited about the opportunity and beneficial outcome this relationship could deliver. Before we move to the rest of the world, I want to share some highlights from our annual North America Customer Summit. In September, we held our Customer Summit in Austin, Texas. Austin is the world live music capital, was the perfect backdrop for an event focused in innovation, collaboration, and transformative solution in the insurance industry. The teams of our summit, Compose Your Future, expressed Sapiens' mission to lead the future of insurance technology. This year, we hosted 545 participants from 135 insurance companies and partners organization. Interest leaders like Microsoft, Deloitte, Celent, and Datos contribute value perspective. We also had 22 partners companies present. The summit provide tremendous value with the opportunity to develop deeper customer relationships, meet prospects, and generate leads. With our partners, companies, and our customers, we identify emerging market trends and gain valuable insight into our customer needs and concern. From this event, we create foundation for growth and success and reinforce our commitment to driving transformative journeys for Sapiens clients. Moving to the rest of the world. We are progressing with customer upgrades and go-live with our EDIT Suite, TIA Suite, Rensurance Master, and Core Suite Live solutions. And we have had several successful go-live this quarter. I want to highlight the Hallard Group RIS go-live in this quarter. Hallard went live with SAPIEN's data and analytics solution, complementing its Core Suite for life and pension. DataSuite will accelerate the complex migration of whole businesses and align its process as the company transformation from its core and legacy system to SAPIEN's core suite for life and pension. This will reduce operational costs and deliver automated, seamless user experience for customers and all our staff. Integrated data suites significantly reduce the complexity of HOLLARD migration process, which require the complicated development of tailored reports and merging them across the legacy and core suite systems. Among its many benefits, data suite empowers HOLLARD to manage its data and reporting need while seamlessly operating its business during the migration. Demand for SAPIEN's product remains solid in EMEA and APAC, particularly for our live platform and PNC platform solution, EDIT and TIER. There is continued demand for SaaS platform across all solution lines and tiers. We are also experiencing growing demand for AI-driven solution. As clients increasingly want to leverage AI to enhance operational efficiency and elevate customer experience. With regulatory agencies starting to issue guidance on AI, Sapiens, with its local presence in key market and deep regulatory knowledge, is positioned to enable our clients to stay ahead of industry trends and meet regulatory requirements. Our digital transformation capabilities tailor for medium to smaller carriers enable crucial digital strategy over legacy strategies. These tiers of insurers can innovate quickly with our digital front-end solution while gradually replacing legacy systems. In the European market, demand for second solution remains robust despite the delay in signing new deals. These delays are primary due to regulatory approval process for SAS-based model, extend contract timeline due to compliance and security reviews, and protected business case approval, factor outside of our control. As a result, the average contracting period here to date has extended. We are confident we will close these deals in the coming quarters. Our strategic partner with Microsoft has been instrumental in driving innovation. Leveraging their cutting edge technology and collaborative in support to enhance our market present and deliver exceptional value to our customers. Before I wrap up, I would like to share our 2024 annual guidance and outlook for 2025. Ronny Gilady will provide the full details But in brief, we are reducing our full-year 2024 revenue guidance. This revision reflects trends that impact our results this quarter and which we expect to persist in the fourth quarter and into 2025. Despite the revenue guidance adjustment, our strong emphasis on expense management enabled us to leave our non-GAAP operating margin guidance unchanged for 2024. Let me provide some context on the external and internal factor influencing revenue. One of the key contributors is our strategic shift to SAS-based model, position us to future sustainable high-margin growth. While we anticipate some impact on 2024 revenue from this transition, the actual impact has been greater. This shift to SaaS has also led to an extended sales cycle, particularly in Europe, where many insurance carriers are new to SaaS and carefully evaluate the benefit before committing. As a result, we are experiencing a slightly longer time to close deals in certain regions as they evaluate the SaaS model advantage. Additionally, our North America course with P&C business is facing headwinds with the sector-specific challenges and increased competition. Let me emphasize that our worker compensation and reinsurance business is progressing as planned. And lastly, the broader microeconomic environment is leading insurance carriers to take more time in making investment decisions and finalizing deals. We expect this factor to continue to influence growth as we enter 2025. With that in mind, we anticipate next year's growth will be a low single digit. I want to reiterate that our commitment to building a robust pipeline and expanding our client base across all key markets remains unwavering. As the business landscape continues to evolve, Sapiens stands determined to execute our strategy to empower insurance carriers with model competitive platform. To further enhance our competitive position in PNC North America market, we are directing invest in few areas. Platform innovation and advanced AI capabilities. We continue to investing in Sapiens intelligent insurance platform for PNC which integrated data suite, digital portals, and core processing to provide cohesive end-to-end advanced business experience and streamlined operation. Building on the success of the approach used with our life and annuity platform a few years back, which has accelerated Sapiens' growth in this market. we are confident in applying a similar strategy to our core P&C solutions. We are also refining our go-to-market strategy and straightening our sales and marketing teams to pursue new opportunities while addressing challenges in the market. We are confident that APN's focus on innovation and client success will drive sustainability growth globally and strengthen our position as a trusted partner in the insurance industry. To drive return to higher growth, we'll focus on accelerating the expansion of our gross product. With a strong establishment customer base, we also see significant cross-sell opportunity for our data, digital, and decision solution, including our AI-driven offering. We will also continue to transition our existing customers to our cloud offerings. Additionally, we will deepen our penetration in the North America market with our live platform, where we hold a leading position and we are gaining momentum, while continuing to reinforce our presence in these key markets. In summary, Q3 2024 marked another quarter of growth and operational progress. We are executing our 2024 priorities, including accelerating the shift to SAS model, which is better positioned us for the long term and delivering solid performance across all of our key regions. Now I would like to turn the call over to our CFO to provide more detail on our financial performance.