Q2 2021 Sapiens International Corporation NV Earnings Call
Good day.
Good day.
We will be weighted.
[music].
Welcome to the Sapiens International Corporation 2021 second quarter 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 desktop Golden Sapiens VP head of Investor Relations you May now begin thank.
Thank you and good day, everyone. Our Q2.2021earnings release was issued before the market opened this morning and was posted on the company's website at Www Dot sapiens Dot com.
Here with me today, representing sapiens are 1 adult president and CEO, who will discuss Q2 highlights market trends product strategy and sapiens areas of focus on 2021.
I wanted to get a V CFO, who will discuss Q2 financials and our outlook for the remainder of 2021.
And Alex Zuckerman, Chief product and strategy Officer is also joining us today.
Before we start I would like to remind everyone that this conference call may contain projections or other forward looking statements. These safe Harbor provisions in the press release issued today also apply to the content of the call.
Sapiens 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 non-GAAP financial measures a reconciliation schedule showing 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 turn the call over to on the other Doe President and CEO of sapiens Roni. Thank you, Doug and welcome everyone to Al If you of sapiens second quarter 2021results in quarter, 2 sapiens day leaves a strong revenue growth of 24%, reaching a record high of 100.
And $50 million.
Operating margin reached 17.2.
2 per cent compared to 18 last year and operating profit increased to 20 million up from 17 million last year.
ZIP into the global leader in the evolving insurance software industry we.
We believe our business small data and our highly diversified solution portfolio enable us to come true and meaningful show of course opportunities in a total addressable market estimated at $40 billion.
We have a unique position throughout our global presence in nearly 30 countries plus where there's multiple insurance industry segment.
B and C, which include walk ins compensation and life and annuity.
We serve customers of all it is mainly the higher ones.
Our go to market strategy provides clear advantage to sapiens and bring unique value to our customers because their entire lifecycle.
First we all feel our global customer base. The most comprehensive set of insurance sales still solutions from causes them to complementary solutions, such as reinsurance and financial compliance as well as data analytics digital and decision management second we invest heavily in order to mange.
And our product leadership, leveraging insights from our customers and the market.
In recent years, our products have been with recognized by top industry analyst.
The leaders in their space.
Most recently sapiens 1.3 important industry awards.
2 from <unk> recognize our P&C claims solution as a leader in our large customer base in email.
And 1 from Novartis are recognized sapiens has a dominate provider of illustration solution for life health and annuity insurers.
These recognitions follow a long list of awards from our product portfolio.
Third we are committing to establishing long term value per relationship we sell 600 plus customers.
Oh boy offering global presence and leading position allow us to add new customers and to grow our wallet share with additional software and services opportunity over the lifetime of the engagement or as we call it lend and expand our land and expand strategy low sapiens.
And our customers to benefit from cross sell and upsell opportunities.
Our strong global presence is supported by Al M&a's as we land New Legion, and then leverage the synergies, bringing new offering to the market via local teams and by expanding our penetration with existing customers.
Last but not least operating in a dynamic and growing market, we constantly evolve our vision to further enhance our leadership position.
Package, our Coe and data analytics digital indecision component into coherent cloud define digital insurance platform.
Integrated low code the insurance in the Bulks provides our customers the most compelling offering enabling them to choose between deploying our end to end solution or any combination of its component to meet their evolving needs.
Going on now to our Q2 results.
Our strong performance Q2 is proof of our compelling land and expand growth strategy I'm pleased to share that we have achieved even if growth on.
And then overall basis across both our P&C and life and annuities businesses.
I will now review our performance by key regions in North America, we are making progress as we execute our plan since the last results call. In early May we've continued to build and reinforce north America's senior leadership team, we still highest offer a higher caliber professionals, but they can get.
Strong C skill set of delivery operation and business development to help us to execute our strategy in the U S.
When looking at the performance of our various offering in this region and of course with P&C, we continued to enhance our delivery capabilities to address the growth demand in this region and we are already seeing improvement as the dominant leader in reinsurance, we continue to gain momentum and add new <unk>.
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Since the relaunch of the coast with life and annuity North America at the beginning of the year, we see increased interest and our pipeline is gone.
Our modular proposition for on do I think I need illustration system.
Continued to gain momentum is at present by recent new customer wins, such as been ever in Canada, and <unk> life in the U S.
This newly combined offering of course with life and annuity and module a component is unique differentiator in the market.
And as such our investment and focused business strategy in the last few years is gaining market traction.
We have also recently announced the latest release of our decision management solution, including an ensign models.
Cloud architecture, and new you argue with this new vision decision filter empowers business user.
To efficiently manage their organization business logic.
There is a growing interest in decision in the insurance space as a tier 1 and 2 insurers embrace our solution as part of their digital transformation.
On the walk is competition font.
As the employment market in the U S easily covering the pipeline is growing again.
We recently completed for example, a major upgrade at the second largest Walker competition provided a new Ace, Ohio Bureau of Workers' compensation is sapiens customers.
'twenty twins.
We are now planning to merge all events in North America, our annual virtual customer summit in late October where we expect more than 700 attendees.
We are also planning a face to face events in mid September we sell executive Council. The team of C level executives from our leading customers. This event present, great opportunities for customers to collaborate exchange best practice and engage with sapiens.
On our mutual day election discussion, how sapiens can help its customers enhance their business performance and aligned with industry innovations.
We are confident that our strong and highly experienced local leadership in North America will continue to make progress as we focus on the successful completion of balance transformation project and winning new businesses. Indeed.
In the European market sapiens maintain and continue enhance its strong leadership position and we delivered yet another outstanding quarter Momo.
Momentum is strong.
Revenue increase and the pipeline is robust, which is a direct outcome of our successful land and expand strategy.
Across Europe, we have been winning new businesses and have successfully completed new transformation projects, including with tier 1 carriers, we have significantly expanded our strong presence in Europe as we land new regions.
Our penetration into the larger market of E Bay area, which includes Spain, and Portugal, and the DUC region, which include Germany, Austria, and Switzerland is starting to build fruits were closing more deals expanding our businesses with new customer that John So low the acquisition and the pipeline is strong.
On.
In the Nordic region, which includes Norway, Denmark, Sweden, Finland, and Iceland, our 5 his proven track record book.
Boosted by the acquisition of <unk> in late 2020 is clearly establish sapiens position as the market leader in the region.
Our leading market position as a result in many new customers in both life and annuity and P&C.
As well as cross selling and Upselling in this region.
Over the last few months, we have reinforced our position in our European hub the U K.
And develop our local professional management teams. In addition, we recently partners with Munich here, 1 of the world's leading provider of reinsurance primary insurance and insurance related risk solution as part of these partnerships sapiens will also did go all cloud.
Low code called solution for smaller kids initially targeting the U K and then the Nordics looking at the rest of the World, which includes APAC and South Africa, a smaller but rapidly growing market for sapiens, we delivered tremendous growth in the second quarter.
We have go Oh customer based in Thailand, which is also supported by a growing pipeline in the region.
An important win we announced last week was sapiens selection for 1 of the largest digital contents formations in APAC by a leading non life, Thailand based insurer.
The insurance 30 years old legacy coal will be transform towards the implementation of our <unk> suites reinsurance Master sapiens intelligence and digital suites API layer.
In mid May we held our first virtual summit for our European and rest of the world existing and prospective customer.
We had significant attendance of 450 attendance from insurance.
Cost 30 countries.
The main themes discuss with the vision of the future of insurance.
In cloud and artificial intelligence and machine learning supported for the insurers.
In both Europe and rest of the World, we have achieved strong win rates and a higher number of potential deals in the blueprint phases.
Anil stated before signing an agreement as well as much larger pipeline. This is irrelevant for both P&C and life and annuity I would now like to provide you with an update of India as.
As you May know the magnitude of COVID-19 pandemic in India has gone down dramatically since it speaking ethylene true may in.
Natalie May sapiens initiate a share assistant ball gum to Hell.
<unk> support for the safety and health of our employees in India. For example, we provide funding to help cover the cost of COVID-19 testing and medication and assist them in emergency support services like ambulance and oxygen.
Currently only a few of our employee in India are impacted.
We are as you on steady cotton in India as planned and the majority of our content in Q2 was in India, our largest offshore location.
Before turning the call to want to get a D. I would like to provide some more highlights on our product strategy day.
The main pillars of our product strategy include.
Number 1 continuance and then spend of our collateral position with an emphasis on our major offerings. We offer our main product in a cloud first approach.
And we have partnered with both AWS and Azure as our preferred cloud providers over the last 18 months. The vast majority of sapiens transformation projects with cloud based deployments.
Portion of which included our managed services in order to operate the cloud infrastructure.
Our solution helps business users to leverage our low code no code tools and their rapid configuration approach. This offers our customers smooth and fast deployment as well as solution flexibility as an example top deals insurers and financial services curve.
Benefit from decision, our cloud native offering as the underlying platform to effectively manage their business is rules and logic leveraging the low code no code approach provides greater efficiency and empowers business users.
Number 2 our digital engagement proposition is designed to serve both carriers that aim to modernize their operation with sapiens core and digital solution as well does.
Interested in a rapid digital enhancement without having to replace their core solutions.
Number 3 they tend on analytics, we have recently launched substantial enhancement to provide a complete analytic solution to our customers. It spans from data warehouse and reporting tool real time analytics to set of machine learning analytics for various insurer.
Use cases.
Finally, the sapiens partner hub I will ensure that collaboration program is a key value proposition that we bring to our clients.
Our open API architecture enables us to pray integrated solution from various in <unk> into the sapiens pole position to enable our clients to enjoy even richer portfolios.
To summarize our second quarter results demonstrate the success of sapiens strategy.
As we continue to expand our global market presence and provide the insurers of all tiers the book.
<unk> product and services portfolio, and the market, allowing them to benefit from our insurance in the book supports.
Our engagement and significant opportunity it caused the markets and the regions. We operating in demonstrates that we are leveraging our expanded presence and know which product portfolio to further increase market share.
We play an important role in our customers' entire lifecycle upgrades and transformation journeys, which is key to sapiens continued per phones and growth.
Now I would like to turn the call to <unk>, our CFO Roni.
Thank you Ronnie.
I will begin my commentary with a review of the second quarter non-GAAP results.
All comparison on the Eve of video versus Q2 of 2020, unless otherwise stated.
I will follow up with comments on the balance sheet and cash flow I'll wrap up with an update of our 2021 outlook.
Revenue in the second quarter of 2021 increased to a record of $115 million.
23, 6% from the second quarter of 2020.
12% of the growth was driven by organic growth.
Our revenue in North America reached $46.8 million.
Slightly higher than Q2 of last year.
On a sequential basis, we achieved 4.5% growth.
To Echo Ron's comments, we continue to make progress as we execute our plan and are seeing improvement in this region.
We expect to continuous strength of growth in North America on a sequential basis throughout the year.
Revenue in Europe reached a new record high of $59.7 million.
Up a remarkable 45, 5%.
Driven by a combination of a very strong organic growth and in addition by M&A as we successfully execute tuck ins land and expand strategy.
Our revenue from rest of fraud, South Africa, and APAC continue on its path of growth revenue.
In Q2 reached $8.6 million.
57, 7% higher than last year.
Gross profits on.
Our gross profit has risen to $51.7 million almost $10 million higher than Q2 of 2020.
Our gross margin this quarter was 45% similar to last year.
Moving on to our operating expenses, our investment in research and development this quarter increased by 43, 9% to.
$215.2 million up from $10.6 million.
Sales and marketing and G&A reached $16.7 million compared to $14.5 million in the corresponding period of last year.
Operating profit this quarter increased to $19.8 million.
A 17, 9% increase and a $3 million, Ohio than the $16.8 million in Q2 of 2020.
Operating margin reached $17, 2% higher than our guidance.
We attribute the higher than anticipated operating margin in Q2, primarily due to a faster recovery from the COVID-19 outbreak in India as well as the progress we have made to our delivery capability and cost with Brinci in day rates.
Interest expenses in Q2 of 2021 on debenture was <unk> 9 million.
And will continue throughout the year.
This was offset by income of hedging transaction, which low interest costs and killed in Q2 of 2021 to <unk> $1 million.
Net income attribute to suck share holders for the quarter was 16 million up 19, 8% from $13.3 million in net income in Q2 of 2020.
<unk> for the second quarter of 2021 was 29 cents per diluted share up from 26%.
From last year.
Turning to our balance sheet as of June 32021, with a cash and cash equivalents and short term deposits totaling $176 million.
This is after a record cash dividend of $20 million debt, we paid in may which represent a distribution rate of essentially 40 per cent of the 2020 on while non-GAAP net income.
This dividend policy distributions reflect up in solid performance and our confidence in our continued growth and free cash flow generation quarter over quarter as.
Advancing to adjusted free cash flow.
We generated adjusted free cash flow of $23.8 million during the quarter up 62, 2% compared to $14.7 million in Q2 of 2020.
Over the last 6 months, our adjusted free cash flow was 111% of on.
Net income.
Testament to our robust operating model.
We'd like to turn now to our guidance for 2021, starting with the summary of key points you know from Erika we've achieved a sequential growth a trend expected to continue.
In Europe, and the rest before we had performed accelerated growth.
We are winning new deals and they are immaterial strong pipeline ahead of us.
On the operating profit side, we are back on track in India, We increase though head count, adding about 10% since last quarter.
This will help us to improve on operating margin and support al strong growth.
Given the high growth in Europe, and rest of world and taking into account. The positive trend you know familiar we are increasing our revenue guidance for the second time.
The new revenue guidance is in the range of $461 million to $466 million.
We are also increasing operating margin guidance to a range of $17 to 17, 5%.
On the M&A front, we continue to explore M&A opportunities and we will act upon them as we have in the past.
I would like to summarize that Penske financial metrics.
Al.
Okay here over the last 10 years was 17%.
With the majority being organic growth.
This year, we anticipate mid points revenue growth of more than 20 per cent.
2 on average on revenue from existing customer is in the range of 85% to 90%.
Is the evidence for the stickiness of our business.
Hi.
We successfully expand our geographical reach every few years penetrating new regions.
She is currently present in about 30 countries worldwide.
Full.
While we focus on growth. We also achieved improved profitability in parallel which today is north of 17%.
5.
We generate strong cash flow attributes to our strong performance and returning capital to investors by paying dividends on a yearly basis.
I will now turn the call back to only adult Bonnie.
Thank you only with sapiens are taking an active role in shaping the evolving insurance software industry.
Taking into account, a global and diversified footprint focused growth strategy and increasing market demand.
<unk> is well positioned for further success in growth I would also like to share with you that sapiens has published its 2020, environmental social and governance ESG report last week I believe that the integration of sustainability in our business strategy demonstrate.
Our resilience in a strong presence and I'm proud to be part of an industry that assist and support businesses and people in need.
Now I would like to close our prepared remarks and open the call for questions. Please.
Thank you ladies and gentlemen at this time, we will begin the question and answer session. If you have a question. Please press star 1 if you wish to cancel your request. Please press star 2.
Using speaker equipment kind of lift the handset before pressing the numbers. Please ask your questions on a loud and clear voice questions. I'll report on the order. They are received please stand by while we poll for your questions.
Our first question is from my on Tandon Needham. Please go ahead.
So ronny and Ronnie and dafna on the strong quarter.
I wanted to start obviously, you've had tremendous success with your.
Your wins across the globe, So maybe al Roni Al Dor I wanted to start with just.
What is really separating sapiens from some of the other players in the market that have similar or maybe a compatible cloud offerings is it really coming down to the product capabilities is it. The fact that the clients like your approach of combining software plus services, but what is really the driver behind your win rates.
These are large opportunities.
Yes I'm on.
Hey, Don series altogether, I think there what we offer today to the market is the product services managed services Global company, a digital altogether the people the long tail on a.
They still have sapiens altogether.
They become I think the investment that we did the NAV all over the world that we have a real presence.
In there in terms of culture full full in many many countries. The offshore capability that we are supporting full from difference from your from the.
India and so on so I'd say altogether.
Yeah. So I think the investment pay back and I think and so the general answer so it's not a 1 on feet. All we call. It. It's a case by case, we are still there.
They all day RFP, we are going we are completing a debt.
When the day teases pretty pretty good and we.
We have excellent reference site.
Don't have any.
The vendor that we know that <unk> 600 customers worldwide and many many many still Lee and good day to.
If I click on the delivery, so I think altogether, its a giving us the and I think that the next thing that I would like to share.
There is as you know we are we all doing very well also on the life business as well as P&C and digital and we see more and more customers are looking for where the combined net solution we call. It insurance in the books, so it including the life the P&C reinsurance digital analytics.
And I think we are the only REIT based on our knowledge. We are the only supplier that can be engaged all of these plus they wanted to shake approach.
So this is the this is unique for us.
That's very helpful color on and then just as my follow up Ronnie could you talk a little bit more about the land and expand what is the penetration today in terms of your products within your client base and if you look at some of your more mature clients, where our day to day. So what is sort of the runway for you to expand the product.
Positioning within your customer base, so maybe just a little bit more sort of detailed around the land and expand initiative. Thank you.
Hi, Mike. This is the only G. So we have 6 on its customary today, we are winning about 25 to 30, even more new logos.
Here and what we're seeing with new logos that we're winning is that the most of the winning is with several product at school product and additional digital decision reinsurance component then next to it. So this is about the ability to do cross sell and of course the services.
With the existing customer base, we established CSC customer success team that are doing cross sell we see positive trend, although the opportunity with this customer is significant and still ahead of us. So we have been able to sell component to close solution with existing customer but.
Ability to sell right now digital is very strong and we are pushing into this.
Great. It simply recently recently I may add that we are being a willing we announce ability to sell it causes them to cross this day and we started with customer that implement core system P&C and later on move to life and annuities. We still also global player that start with 1 country in.
Go to the other so this is allowing us to expand with existing customers.
Thank you so much.
Thank you.
The next question is from ashamed Sri right care, how Citibank. Please go ahead.
Right.
Thank you hi.
Hi, Roni and Roni G.
Good quarter here.
I have a couple of.
Not America question.
1 is with regards to just.
Maybe a status update in the process of finding.
S Si partners in.
And in North America, where do you stand on that.
And.
Also in terms of just improving.
Anybody.
North America what actions.
Do you still plan to make what remains to be done.
Hi.
This is roni al Dor first of all as we mentioned last time, we hire a Jamie to manage day, all North America. After he joined US a few.
Few people are 1 to manage the entire P&C business in there in North America and also in that there's a few people that are helping on day to manage the project there and day..1 of them is also to manage the 12 pass on the life. So in terms of management, we all day.
Doing all this is not just Jeremy is building.
Continue to build the song gave with the current day stuff and also new debt is 1 in terms of the ESI question.
As we mentioned we are the our business model is wanting to share, but we are still open to walk we say, it's a case by case in a specific situation.
We mentioned a few times for example on day life in North America on the core system. We are we are coming back to North America, we saw like system and we decided also to partner with our Si. So we are we have some August it's still a scene on the work and they also on there.
P&C from the higher theater and also from decision management. So we are building are you can see more and more in the future right. Now we are mainly a engage with them signing that agreement as people start to learn it takes time, it's not overnight and again just not to confuse.
As a gay after we can do all of this it can be continued to be small part of our business at least full day next 6 to 12 months.
Understood understood.
Then.
<unk>.
Sticking with the delivery side of course, it's good to see the progress made on NDA to see some of the.
Unfortunate pandemic related.
Issues begin to be behind you, but as you think of raw data.
Did you have any.
Does.
<unk>.
The pandemic and what do you have to go to <unk>.
<unk> you.
Consider perhaps more diversification in terms of where the lower costs getting where it comes from beyond India.
You know.
How are you thinking about debt.
A shortfall in terms of overall sapiens is more than 4000, so India, it's not more than a 1 sales of sapiens. So we are not doing all the delivery from India, We still live.
Based on my knowledge more than 800, DD U S. Well, we have the same numbers in Israel with many many people in Poland in there no in the litter in Latvia, and so our delivery is not just coming from India in al.
Order to reduce the costs, we shifted to India and also we are very happy with them. So the concept of competence center in different Saturday on right. Now we are also considering another area in Europe. So were so weak. So that's a we don't plan to do anything in terms of progress.
On delivery in the in North America, we will definitely see progress we are we've made there.
Some decision in terms of slowing down a little bit the new business make sure that we stabilize the client base that we have we see a definitely improvement as I mentioned, we also bought the more people we are helping from all over the world. So we are we believe in the near future we will.
We'll continue and start to get a new client win.
Okay. Thank you.
With top and bottom lines going up again congratulations.
Thank you.
Our next question is from Jackson Ader of Jpmorgan. Please go ahead.
Great. Thanks for taking my questions.
First 1 is on the R&D growth that we saw in the quarter and then I guess expectations for technology.
Technology and development costs.
And a year or 2.
Could you give us just a sense maybe rank ordering some of the projects that you're investing in at the moment.
How that's going.
That particular line item going forward.
Yes. This is the only G a waiver on day $15 million.
On the spend.
And I can say that we increase the investment on the digital side and in heads are low.
Now the development on the core system solution that we have life and P&C, we increased the R&D stuff a mainly in the offshore side. So so the head count went up and you do not see significant impact on the dollar value. We will continue to maintain the same level of R&D.
In terms of dollar value slightly higher but the percentage is they is the same throughout the year.
Just to mention debt because of our business model.
And these are funded by our customer and therefore, it is not only the R&D that we see in the line item R&D, but also from the delivery perspective, because every project every implementation with we are doing we enhancing our product. This is the funded R&D that we have because of our model.
Okay great.
Helpful, especially the thinking about it from from the customers funding a portion of that.
And then the.
Follow up is a little bit more.
On a strategic.
So ronny when you think about acquiring your way into new regions.
You spoke about Iberia, or Germany, Austria, Switzerland.
Does that.
Just the cross sell between regions become a little bit more difficult. If you acquire your way into regions rather than organically.
Moving into new regions.
Yes, no. It's advisors here just to make sure I understand your question.
The main reason tool to acquire all of this company to accelerate our growth in the region.
Because there we.
We did it for ways for example by Ourself in the Nordic and then now we see the fruits, but it took us a long time to get where we are now.
As we start to get the first client and then second and third in full but now we acquired Tia and now we have a few others zone.
Pipeline.
We want to be because we are we believe it on our product and our delivery capability. The excellent brand recognition from the analyst everything is positive, but still to enter to dos.
All of these German company and the Bay area and it's take it will take time. So the reason that we acquire all of this company to accelerate the penetration to the region and I can share with shall we say, we just say if you just remember we did the it just last year 1 in February the second Julien day is.
So we really see the fruits of all of this investment.
Just to Echo this from financial perspective, what we see in the quarter is north of 20% organic growth. This is coming from our product.
On the European side from life and P&C in the region that were present, including the new on the Bay area market and the dark region.
So we are coming with all the core system solution with the component and basically we did reference with the people on the ground, we haven't been able to do this day.
<unk>.
Alright, great. Thank you.
The next question is from surrender standard of Jefferies. Please go ahead.
Thank you.
The first question I have is on the large win in Asia Pac with non life insurance company. So any color you can provide there.
In the past it seems that Asia Pac generally there's not been a regional focus but it seems like there is a large wave which is kind of opportunistic or has there been a subtle change in strategy there.
Hi.
That's definitely not opportunistically we.
Uh huh.
For many many years our business in the Asia Pac and when we also in the past we acquired our distributor.
In Asia Pac that's become now the big cost with business as you all are just totally manual so when we acquired it at like 10 years ago. The index at that time was the name that sort of represent a detail.
In this Asia Pac and then we acquired them and we all day excellent experience on the life and non life because all of those people also.
At that time supporting our competitors on the life. So we have a lot of a lot of knowledge in debt in the region.
<unk> had day today, we have business in India, we have business in Australia with corn with we haven't Singapore and we have a we.
We have right now in Thailand.
We all day, we have a business development team sales team on all the delivery is going through 2 hours a day office in India also from cost point.
So this is definitely 1 of the region that we are there.
Invest but for sure a 1 off this sapiens is bus advantage is the diversified between all the regions.
So we are there so.
Again, we are also believe on the land and expand so we started in India and 1 client then on web second client sales declined I think this is the this is as a client.
Believe it can open us a lot of opportunity in Thailand and also another area.
Okay.
That's helpful. And then maybe can you talk about.
<unk>.
Geographically the growth that Youre seeing in Europe at this point on on an organic basis.
Perhaps the sustainability of it what's really driving it.
Given some color but.
If you're growing at 20%.
Plus organically.
How should we think about that longer term the evolution.
All of Europe.
So so I will.
But when you say if you will to then on he can follow me.
So again, we need to just to remind everybody.
<unk> business is a risk averse so.
People would prefer to work with people that serve restaurants on the ground and so on so I think 1 of our big advantage that we are we put a lot of feed on the ground.
And the 1 of the main reasons beside that we are very good products and delivery as a reference.
So if you are doing a good job in 1 area you all build there on the country later, you'll have the local people use the reference.
You have a huge advantage against your competitors. So I think what's going on right now that we are we see that we are the market is happy with what we are bringing the analyst day help us in terms of lease and then the last thing is about life versus P&C.
Sapiens for many many years, we have continued to grow in the P&C and the life. We did huge investment in the last 2 to 3 years also on technology also we complete develop our globe and so altogether, we are seeing a huge growth also on the life. Besides the P&C.
That's helpful and then kind of the last question here.
How do you maybe feel about the M&A market at this point.
Maybe some color on the deal pipeline, perhaps your thoughts on valuation.
And maybe the potential for doing more deals before year end.
Hi, This is oney G part of SAPIEN strategy is organic growth followed by M&A.
M&A to expand on the solution on the component side geographical expansion and also of course are present and customary reference.
We are looking to continue doing M&A as we speak we are looking at opportunities, but I must say that currently valuation on it.
<unk> go in the highly and we are staying conservative who will not go very expensive because we believe in our model.
So we are looking for the right opportunity for us to acquire and then as I mentioned, we are looking and continue although the valuation right now on very high.
Thank you.
The next question is from Bhavan Suri of William Blair. Please go ahead.
Hey, everybody. Thanks for taking my question, Ronnie I wanted to touch a little bit and I know it was asked him on earlier on the North America growth I guess, you bought Jamie on Jamie's brought on some folks, but what sort of gives you the confidence that you'll see that sequential growth start to improve a little bit because that business hasn't grown in North America for a while.
Help us understand on what's in the pipeline on what deals you want some sense on some of the conferences gods and growth resuming in North America P&C.
Hydro 1.
And when we are talking growth is not just on the P&C is overall sapiens just still demand quickly once we have the NAV sapiens North America.
We have a decision management, we have reinsurance few products for the large and the smaller 1 with workers compensation expense.
It's also part of the P&C, but specific solution with financial and compliance.
Have to life, we have life component and we have the life that we are now bringing from Europe to U S. And then we have the P&C.
The overall growth is that it.
What we plan is for from all the product line and not just for the P&C is that we share in the P&C in 1 specific area.
We are we had share delivery challenges right now we are walking on it then we believe in 'twenty..2 we can start to see fruits of all of this investment in terms of and at day, 1 of the reasons that we bought Jamie and all the other people because we did in the last 3 years all the investment in the product and we.
Quite a few company we merged with them, we invest but we are we really need to build a stronger sales organization and this is where the Jimmy is now focus.
The 2 buildings.
To try to do the best answer on the marketing we are Alex who is doing the day strategy side. So altogether, we think that we have a lot to offer to the market and we can improve our blenders and we can see growth.
Gotcha Gotcha and can I ask Alex the question yes.
All of you, but but so when you look at the P&C I might pick on that specifically and you look at tier 1 tier 2 when they are picking up a solution right you could take a big tier 1 carrier they're picking the solution in conjunction with someone who's doing strategy work with like an accenture Deloitte on Mackenzie abate.
And.
Obviously, the other guys that play in that space are partnered with them and you aren't and so tell me a little bit you said win rates were good but love to understand sort of in that range kind of how do you get involved in that strategic level conference conversation margin.
It only sort of a tier 2 tier 3 tier 4 placed in the P&C, which is kind of the sweet spot help me think through that dynamic.
Sure.
So so as Roni mentioned also before there are specific segments and areas of the business.
<unk>.
Type of approach, where we see a usage of partnerships with system integrators is really that the right way to penetrate into into these segments and we talked before about specific regions in the world, where we are not operating for example, physically so we like to pilot with MSI to help us overcome this.
Some days, we have now in Latin America with example, and the same logic goes to the higher tier 3 tier 1 in the U S.
Where we feel debt.
That's what we are lacking or what is what will help us to grow into this.
Higher sales of the P&C on the left is the partnership with the system integrators and as already mentioned, we are now in the discussions with them in order to build a day the joint go to market and the agreement to train them on a on the system and then turn it on a go to market, but definitely debt would be our approach.
Due to progress on the Iot and other aspect and that we plan to to start leveraging in order to go up deals in the U S. P&C market specifically is the use of our decision a decision tool as you might know and decision tools that we started on debt.
Banking and we have several tier 1 banks as our customers we started to shift their usage of decision into insurance and this is typically.
In a predictable and getting traction for the highest steel as it really added value solutions for those sales and this is also for us on opening.
Our position into.
Into.
Stepping into those highest deal the third approach of.
Of tackling the highest tier is leveraging our success with reinsurance system on the Iot to be as adult open air and start to establish our contact with deal flow. The success on the reinsurance which is predominantly a tier 1 proposition.
With our acceptance and reinsurance Mossville and this we plan to leverage debt in order to open the door.
They shouldn't sheep and credit craft for sapiens to work with those theaters.
Great. That's very helpful. Thank you guys. Thanks for taking my questions.
Thank you.
The next question is from Chris Reimer of Barclays. Please go ahead.
Oh, Hi, this is Chris on for Cathy actually from from Barclays.
Thank you for taking my questions.
I wanted to ask about the overall pipeline and if you feel that the amount of a R.
Our rfps have been increasing compared to last year.
I. This is the only G. A I think a on the only as low as I've mentioned this I will echo him. We see significant pipeline ahead of us in the European side.
And with that we mentioned some of the.
On a first step of being called blueprint that is before signing that we are witnessing so we really see a strong pipeline in the <unk> side and on the state. We are basically building. These for the future for the next year.
For next year Okay.
And also I know that you did mention debt.
Portion of recurring revenues could you just review that.
I just the number.
Yes.
Happy on say due.
Due to its business model with between 85% to 90% of our business coming from existing customer customer that we have a longtime history relationship we know what they need for the future, while the implement and where theyre looking to implement.
<unk> to grow low to expand day in new territories. So this is coming.
Coming from 85 to 90 per cent of the business give us great visibility and very high stickiness, if I need 2 different thing and you look at this I would say that we have about 35 for flow business is also recurring net revenue an additional 30% which is okay revenue customer that you did.
<unk> signed but continue doing with us quarter over quarter with additional revenue stream.
Interesting okay.
That's just from you. Thank you.
Yeah.
If there are any additional questions. Please press star 1 if you wish to cancel your request. Please press star 2 please stand by while we poll from all our questions.
There are no further questions at this time before I ask Mr. Al Dor to go ahead with his closing statement I would like to remind participants that a replay of this call is scheduled to begin in 2 hours and the U S. Please dial 187745600.
Zero 9 in Israel. Please call 039 to 55900 and internationally. Please call 9.2.
97 to 3.9 to 55900, Mr. Al Dor would you like to make your concluding statement.
Yes. Thank you for all of you joining our call today have a good day.
Thank you. This concludes the sapiens International Corporation second quarter 2021 results Conference call. Thank you for your participation you May go ahead and disconnect.
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The debt.
Peter.
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