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Sapiens(SPNS) - 2025 Q1 - Quarterly Report

Sapiens Q1 2025 Financial Results Financial Highlights Sapiens reported modest revenue growth and stronger profitability in Q1 2025, driven by strategic acquisitions Q1 2025 Financial Performance Summary (GAAP vs. Non-GAAP) | Metric | Q1 2025 (GAAP) | Q1 2024 (GAAP) | % Change | Q1 2025 (Non-GAAP) | Q1 2024 (Non-GAAP) | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | $136.1M | $134.2M | 1.4% | $136.1M | $134.2M | 1.4% | | Gross Profit | $60.7M | $57.6M | 5.4% | $63.0M | $60.9M | 3.5% | | Gross Margin | 44.6% | 42.9% | +170 bps | 46.3% | 45.4% | +90 bps | | Operating Income | $21.2M | $20.5M | 3.3% | $24.6M | $24.3M | 1.2% | | Operating Margin | 15.6% | 15.3% | +30 bps | 18.0% | 18.1% | -10 bps | | Net Income | $17.9M | $17.4M | 3.3% | $20.7M | $20.4M | 1.3% | | Diluted EPS | $0.32 | $0.31 | 3.2% | $0.37 | $0.36 | 2.8% | - The company completed two strategic acquisitions, Candela and AdvantageGo, which significantly expand its global footprint and solution offerings in both the Life and Property & Casualty (P&C) insurance sectors5 - Management noted continued strong demand for its AI-driven insurance platforms and high customer adoption of its SaaS model5 2025 Business Outlook The company raised its 2025 revenue guidance due to acquisitions but lowered its operating profit outlook Updated Full-Year 2025 Guidance | Metric | Previous Guidance | Updated Guidance | | :--- | :--- | :--- | | Non-GAAP Revenue | $553M - $558M | $574M - $578M | | Non-GAAP Operating Profit | $98M - $102M | $94M - $96M | | Non-GAAP Operating Margin (Midpoint) | N/A | 16.5% | - The downward revision in operating profit guidance is attributed to losses from the AdvantageGo acquisition and integration costs, with a total negative impact of about $5 million at the midpoint5 Non-GAAP Financial Measures The company uses non-GAAP metrics, excluding certain items, to provide a clearer view of core operational performance - Sapiens believes non-GAAP measures provide useful information to management and investors for analyzing financial and business trends8 - Adjustments to GAAP figures to arrive at non-GAAP measures include the exclusion of: amortization of capitalized software and other intangibles, capitalization of software development, stock-based compensation, and acquisition-related costs9 - Annual Recurring Revenue (ARR) is defined as the annualized value of revenue from customer subscriptions, term licenses, maintenance, application maintenance, and cloud solutions, calculated by multiplying the most recent quarter's revenue from these sources by four13 Financial Statements This section presents the unaudited condensed consolidated statements of income, balance sheet, and cash flow Condensed Consolidated Statement of Income Q1 2025 vs Q1 2024 Income Statement (in thousands USD) | Line Item | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Revenue | 136,105 | 134,249 | | Gross Profit | 60,660 | 57,560 | | Operating Income | 21,196 | 20,522 | | Net Income Attributable to Sapiens' Shareholders | 17,936 | 17,360 | | Diluted EPS | $0.32 | $0.31 | Condensed Consolidated Balance Sheet - Total assets increased to $714.0 million as of March 31, 2025, from $691.7 million at December 31, 2024, primarily due to a rise in Goodwill and intangible assets from $302.5 million to $329.8 million32 - Total current liabilities rose to $194.9 million from $149.6 million, largely driven by an increase in 'Accrued expenses and other liabilities'32 - Cash and cash equivalents decreased to $143.4 million from $163.7 million at the end of 202432 Consolidated Statement of Cash Flow - Net cash provided by operating activities was $25.4 million for Q1 2025, an increase from $18.5 million in Q1 202433 - Net cash used in investing activities was $28.7 million, which included $16.3 million for business acquisitions33 - Net cash used in financing activities was $19.8 million, primarily for the repayment of the Series B debenture33 Reconciliation of GAAP to Non-GAAP Results & Supplemental Information This section reconciles GAAP to non-GAAP results and provides supplemental data on revenue and key performance indicators Non-GAAP Revenue Breakdown by Service Type (Q1 2025 vs Q1 2024) | Revenue Type | Q1 2025 ($M) | % of Total | Q1 2024 ($M) | % of Total | | :--- | :--- | :--- | :--- | :--- | | Software products and re-occurring services | 108.1 | 79.4% | 94.2 | 70.2% | | Pre-production implementation services | 28.0 | 20.6% | 40.0 | 29.8% | | Total Revenues | 136.1 | 100% | 134.2 | 100% | Non-GAAP Revenue by Geography (Q1 2025 vs Q1 2024) | Region | Q1 2025 ($M) | Q1 2024 ($M) | | :--- | :--- | :--- | | North America | 56.9 | 55.2 | | Europe | 67.5 | 68.7 | | Rest of the World | 11.8 | 10.4 | - Annual Recurring Revenue (ARR) grew 11.8% year-over-year, reaching $187.4 million in Q1 2025 compared to $167.6 million in Q1 202425 - Adjusted Free Cash Flow for Q1 2025 was $23.0 million, a significant increase from $17.1 million in Q1 202430 Debentures Covenants The company confirmed compliance with all financial covenants for its Series B Debentures as of March 31, 2025 - The company was in compliance with all three financial covenants for its Series B Debentures as of March 31, 202534 Covenant Compliance Status | Covenant | Target | Actual | | :--- | :--- | :--- | | Shareholders' Equity | > $120M | $460.6M | | Net Financial Indebtedness to Net Capitalization Ratio | < 65% | (67.66)% | | Net Financial Indebtedness to EBITDA Ratio | < 5.5 | (1.80) |