Q3 2021 Sapiens International Corporation NV Earnings Call
Thank you.
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Okay.
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Ladies and gentlemen, thank you for standing by and welcome to the Sapiens International Corporation third quarter 2021 results Conference call.
At this time all participants are in a listen only mode.
Brief 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 November 3rd 2021.
It is now my pleasure to introduce your host.
The stuff in the Golden Sapiens, VP and head of Investor Relations.
Thank you Ms. Gordon you may now begin.
Thank you and good day, everyone. Our Q3 2021 earnings 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, we're presenting sapiens are one is adult president and CEO wanted to get at the CFO and Alex Zuckerman, Chief product and strategy Officer is also present.
Before we start I would 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.
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.
The link is available in the earnings release, we published today.
I will turn the call over to one of the president and CEO of sapiens warning.
Thank you Debbie and welcome everyone to our review of sapiens sales quarter of 2021 results in Q3 sapiens delivered strong year over year.
Revenue growth of 21%, reaching a new record high of $118.4 million operating margin reached 17, 7% compared to 18.2% last year.
On a dollar basis.
Operating profit increased by over $3 million to white gold of $21 million up from 17.9 million last year.
These solid results, while the direct outcome of successfully executing our strategy and our commitment to achieving consistent growth and improving operating margin.
The transformation of insurers from legacy systems to modern and cloud solutions is a key growth driver for sapiens.
Our global footprint, both product offering business model and commitment to customer success, clearly differentiated sapiens in the insurance software industry.
Q3 results demonstrate the success of our strategy and the viability of our business stable profitable and with high level of visibility.
Our leading software solution, so the evolving technology needs of the insurance industry and caused a large and growing global market.
We set target addressable market of $40 billion.
Of insurance software solution and services of course, P&C and life and annuity lots of Bdcs sapiens market opportunity is large.
We're well positioned to achieve continued success for several reasons first sapiens has a global footprint support by our proven track record, we saw well 600 customer in more than 30 countries.
We have teams on the ground that understand the local regulations culture and languages in the countries.
Which we all operate.
Many existing and potential customers, including tier one multinational carriers appreciate our advantage.
Second our excellent offering.
We continuously invest in our research and development to give our customers a wide range of offerings.
Dustin services deployment options and delivery models.
Our product leadership position is recognized time and time again, not only by customers, but also by industry analyst.
Most recently <unk> was the only company to be recognized as the leader in two different Gartner magic quadrants for the European market from both non life insurance platform and life insurance policy administration system.
In a diversified market like Oh, well.
Multiple vendor operate in specific market and segment. This is it tour differentiate door and the clear Testament of the quality of our offering.
And finally, our team is world class, we have over 4000 professionals they choose to work at sapiens to build and support our business.
The tebo customer with the highest standup and retained the leadership position of our offerings.
We continue to reinforce our already strong global presence across all tiers, both in P&C and life and annuities by winning new customers and entering two new geographics.
While expanding by Upselling and cross selling to existing customers, while focusing on advancing our product offerings. Our goal is to continue to offer our customers and innovating.
They vest and flexible solution to provide our clients with the best experience, while empowering them to gain a significant competitive advantage.
Across multiple regions, we enable our customers to transform their business with modern cloud architecture out of the box functionality and local local capabilities and our business model ensures that we are fully accountable for the success of our customer projects.
Turning now to our performance by region.
Starting with North America.
Cost with P&C, we continue the pause of investing in our products and enhancing our delivery capabilities to address growing demand in the region.
Our recently announced selection of our claims management platform by Tokio Marine Highland demonstrate the confidence of customer have to sapiens Tokio Marine a longtime customer for policy and billing recently select sapiens claimed ball cloud solution to accelerate its claims transformation.
Sapiens will enable tokio marine to work effectively and seamlessly with the brokers and the agents.
Insurance, we also continued to gain momentum in Q3, we add a new tier one customer a high caliber well known global carrier and the leader in this space. That's alecto reinsurance solution physician insurance is another reinsurance when we announce physician selected saipem.
And to transform its reinsurance process and move to the cloud we sell insurance platform.
Our life business continued to gain momentum across all the life solution portfolio and new customer Golden Globe, a 1 billion kids, serving 21 countries of course, the English and Dutch Caribbean selected sapiens until I think ball and sapiens intelligence to accelerate its underwriting.
<unk> processes and achieve automation of 90, 95% of its cases sapiens together with Citi and Shoretel partner adult will enable golden globe to a leveraged sapiens best parties, new data sources and the AI to support accelerated underwritings.
Of course with life and annuity North America enjoy growing traction we continue to grow our pipeline and we completed the blueprint process pre project analysis, we said prospective customer decision is getting momentum with insurers and is providing a unique value proposition and growing.
<unk> use cases, and recent example is Berkshire Hathaway gold insurance companies. They select sapiens decision no code automation platform to support the golf business.
And their decision processes empowering them to make a big change on policy terms on the Walker competition phone as the job market improves we see we see new opportunity in August. Please just two weeks ago, we attend the national Walker's compensation and disability confluence.
In Las Vegas, It was grateful of the team to meet customer and prospect in person after last year's virtually and different events I would like to Eli Boyd now how maintaining an ongoing dialogue with our customers help us remain close to market trends, while also T D.
Future business opportunity.
In September we held our annual Executive Council.
C level executive from our leading customer meet virtually to collaborate and share best boxes and discuss industry trends. During the first week of October we are attending Shoretel connect conference in Las Vegas.
<unk> largest event in this space. This was the first major non virtual event this year.
Thousands of participants from global insurance carriers.
She had pent present, a keynote speech on digital insurance hosted and private event with small than hundred insurers and partners. Finally last week, we held the sapiens 2021, North America Summit, a three day virtual event more than 800 attending.
Approximately two hours it organization participate in these and we provide the gateway for productive collaboration between sapiens customer and employee where exchange idea discuss market trends and explore innovative propositions in North America. The build out of our leadership team continue I'm just Jeremy.
Yodle leadership, we are in now.
I think our senior team of highly accomplished experienced professionals in all areas in the open market sapiens has expanded its presence in the region a direct outcome of our successful land and expand strategy and M&A investment.
Our leadership position is it your lead deal by Gartner.
Which I mentioned earlier is clearly unique and the big advantage for sapiens in the European market our momentum in this region is growing we see insurer transforming their businesses to become more digital.
Let me share a few examples of recent customer wins in your longtime customer dentists' Provident, a leading provider of income protection insurance for dental professionals in the UK and Ireland, extending the relationship with sapiens, they select sapiens to leverage market trend.
And accelerate digital transformation sapiens digital suite, we refresh dentist digital customer and agent portal together, we sell of course suite and customer connect in Norway and Sweden.
Leading life and pension providers also expanded its relationship with us by adding sapiens digital suite already implemented call suites and.
In German base HDI global specialty Selecta will indeed suite solution for a multi country deployment to modernize its called business using our cloud of detection with out of the box functionality.
Our business in the rest of the World, which include APAC and South Africa is a smaller and growing market in Asia, We announced the expansion of our relationship with Delek, The Asia, a leading digital of automobile and traveling shorts in Singapore, and Thailand, We said digital co upgrade to it.
Existing sapiens platform the upgrade enable integration with external system and support the cloud strategy direct Asia, Johns, Thailand, based BK, I, which I discussed last quarter. We have also expand our presence in South Africa, We recently announced that upside.
One of the country's leading financial institutions select sapiens transformation partner.
Oh industry experience.
Walking with upside to migrate it system and data to the cloud and ensure a seamless integration into its blood banking ecosystem to sum up we are clearly achieving tremendous success in both landing new business with customer and geographics as well as expanding.
Our relationship with existing customer with wholesale opportunities.
Q3 results demonstrate.
They continue accomplishment of SAPIEN strategy across the industry and around the globe.
Insurance is transforming the way they do business from how they launch new product and proposition to expanding their distribution and engagement channels and evaluating their he's can capital this trend fuel the need for our product and services is insurance in bulk.
On the transformation journeys acceptance is high performing global team of professionals excellent product development capabilities and multiple competitive advantage to address the market trends and support our growth strategy.
As a global player that is serving customers in more than 30 countries in both P&C and life and annuity and the insurance software industry sapiens is uniquely position to play a critical role in the growing disruptive insurance up to now.
Now I would like to turn the call to want to get a D. I will see fall below.
Tony.
Thank you Audrey.
I will begin my commentary with a review of the third quarter of 2021 non-GAAP results.
All comparison are you.
Over to you versus Q3 of 2020, unless otherwise stated.
I will follow up with the comments on the balance sheet and cash flow and we wrap up with an update of our outlook for 2021.
Revenue in the third quarter of 2021 increased to a record of $118 4 million up 29% from the third quarter of 2020.
Organic growth this quarter was 10, 1%.
Our revenue in North America was $49 million compared to $50 million in Q3 of last year.
On a sequential basis, North America revenue was up from $46 million to $8 million in Q2.
Revenue in Europe reached $59 7 million up from $42 4 million in Q3 of last year.
This solid growth was mainly organic and complemented by M&A, the organic growth, which exceeded 20% came from both P&C and life.
No no no gun and growth represented the contribution from the tier acquisition.
Our revenue from rest of frog, South Africa, and APAC continued to grow steadily.
Revenue in Q3 of 2021 from this region reached a record of $9 8 million.
Up 456 million dollar plus deals.
And mostly by P&C.
Profits.
Our gross profit was $53 4 million $9 $2 million higher than Q3 of 2020.
Gross margin this quarter was 45.1% similar to the same quarter of last year.
Moving to operating expenses, we remain committed to investing in our product and the expanding of our sales and marketing efforts.
Operating expenses totaled $32 4 million, 23% higher than Q3 of last year. The increase in operating expenses was due to adding head count in R&D and SG&A and the impact of the Tia and Delphi acquisitions.
Operating profit this quarter increased to a record high of $21 million they.
Demonstrating a continuous and steady strength.
Operating margin reached 17, 7% compared to 18 point to flash deal.
As a reminder, the 2020 results benefited from COVID-19 related cost reductions. The Q3 operating margin of 17, 7% was 50 basis points higher than 17, 2% in previous quarter Q2 of 2021.
Interest income in Q3 of 2021 was opened in $1 million compared.
Compare to interest expenses.
$1 million in Q3 of 2020, you in Q3 of 2021, we cared interest expenses of <unk> 9 million on outstanding Debenture, which will continue until the beginning of 2026.
These interest expenses were offset by interest income of currency related hedging transaction.
Net income attributable to <unk> shareholder for the quarter was $17 million or 23, 5% higher than $13 7 million in Q3 of 2020 EPS.
EPS for the third quarter of 2021 was 31 cents per diluted share up from 27 cents in Q3 of 2020.
This 15% increase in EPS was achieved along with an 8% increase in the average diluted share count compared to the corresponding periods turning to our balance sheet.
September 30th 2021, we had cash and cash equivalents and short term deposits totaling $184 7 million.
Adjusted free cash flow in Q3 was 11 9 million compared to $14 5 million in Q3 of 2020.
Over the last nine months, our adjusted free cash flow was $46 3 million, representing 97% of our net income we'd like to turn now to our guidance for 2021.
Revenue.
We are reiterating our revenue guidance for the year, we did angel falling to $61 million to $466 million.
On the profitability side in.
In Q3, we continued to make progress with expanding our offshore employee base.
Immediately in India as part of our business model, we continue to focus on our profitability, although the global increase in labor costs.
Based on our achievement as of end of Q3 of 2021, we are increasing our annual operating margin from 17, two to 17, 5% to a range of $17 four to 17, 5%.
I will now turn the call back tornado Tony.
Thank you Lonnie sapiens is well positioned in a $40 billion market that provides a macro tailwind is insurance moved from legacy to digital and cloud solutions. We have built a global presence, we said growing footprint.
And says the broadest product offering in the industry with P&C and life and annuities.
England and extend frame work enabled us to consistently deliver scabbed scalable goals to drive improving margins sapiens is well positioned to continue to increase its share in the growing market, it's operating in and to delivering long term shareholder value now.
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.
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The first question is from Bhavan Suri.
Good morning, Ronnie and Ronnie can you guys hear me Okay, yes.
Thank you everyone.
Great.
Congrats it was a solid quarter.
Yes, I'll start off at a high level, maybe this is for a running good idea to start off with.
But you had a good quarter you had some really good wins youre seeing life come back life insurance right.
Come back a little bit and it's a really good win there I guess just given that momentum helped us understand are maintaining full year revenue guidance sort of.
Is that just conservatism on your part or are you seeing something else in the market just help us think through that a little bit.
I have a violator this is only a.
If I need to give a little bit breakdown. If you remember we had to increase our revenue guidance twice in the use of a first in Q1 and then second in Q2, we are reiterating right now our guidance to the same level as we provided the last quarter.
The deal is that we are now takes time, obviously it takes time to close and initiate the revenue from them and we feel comfortable with the revenue and we expect that revenue will increase as we continue throughout the year, but right now the deal that we just signed and announced take them to recognize.
Fair enough fair enough.
And then you know maybe more fundamentally on the business I guess for Roni al Dor for MCU Ironically.
When you look at life the life business.
It feels like that's starting to show some really nice growth year.
You're also trying to innovate and integrate as you're moving into P&C North America.
How are you thinking about the pace of innovation like the investment in R&D and it.
Marketing between life and P&C.
Given you've got sort of you know both pieces seeming to start to do better in Europe, certainly and then obviously the investment in North America P&C help us think through how you're balancing that and how you're thinking about the investment both in innovation and in sales and marketing.
So this is a this is Alex zuckerman.
This strategy of sapiens.
And I'll try to answer your question.
Absolutely we see these growth and they will reflect the investment in the product going into 2022 and our plans to.
Both of these growth and to continue to continue progressing it as mentioned by Ronnie we see a strong growth in Europe, but we also see enhanced pipeline still initial stages, but we are doing a nice progress in North America on the life side and naturally to reflect this we will put a strongly divesting.
In the product to to continue that.
On the P&C, France, I think we will continue in the same pace that we are doing the investment that we did the of course the last day of yield proved itself in the right direction has helped us win the business and in a position of a product is the leading products for sure in Europe is improving substantially in North America and they will.
To continue those investments in the two areas.
Got it.
Got it.
One last one if I might just squeeze it in on decision. It felt like you you brought up.
A couple of wins.
Around the decision offering in it.
Quarter, maybe just give us a quick update on where that business is.
Sort of what verticals are adopting we you know historically, we've had the Fannie Mae is in the financial services, but maybe a quick up your decision would be great. Thank you.
And so it's Alex here again, and so definitely but that's the that's the trend that we see and we also focus on debt and pushed to this direction and it is predominantly starting to leverage.
Their decision into the insurance World, We started as I mentioned in the banking around the mortgage and then private banking, but actually now with the ability to create the right use cases and to use decision in insurance. It definitely resonates with you know the majority of our customers and their ability to go.
Through them to cross sell and upsell and as you can see also from the latest news on the wins. This is decision for insurance. So we developed several use cases around accelerated underwriting around smart management of a of claims and claims automation.
And those use cases that are definitely getting the traction in the insurance space and this is where we have the latest wins with decision.
Yeah Alex.
Right I mean, Ronnie and I talked about three years. It makes sense with a rules based engine low code No code you do well in that space great. Thanks for taking my questions guys I appreciate it thank.
Thank you.
The next question.
It's from Samhain Streicher of Citibank. Please go ahead.
Yeah.
I had one again ronny.
Okay.
Hey, Hi.
Congratulations on the good clean quarter there.
You know earlier in the year, you guys mentioned a supply challenges.
Thank you the lead.
Yeah.
Is that the.
You know is that behind you now obviously some E D.
Delivery perspective.
Yes.
Why are fighting services professionals continues to be to be added to be tight but.
How how are you feeling could you provide a cause.
And a little bit deeper update.
Yes, Hi, this is roni al Dor, yes.
Yes, what we shared in the beginning of day. It is based on the Covid situation definitely in India.
Now the situation is much better as as you know.
We start to see people start to come to the office also in India, and so I think the all the challenges around the Covid and the resources in India its path.
The challenge that we have right now is you'll see they're all over all I T.
Huge demands full employee and we are we have challenges.
On the attrition area and also to hiring so but this is a general theme that we are facing.
Yeah.
Got it got it.
And.
In terms.
In terms of how budgets.
Project timelines are shaping up as we look forward into 2022.
Could you comment on that should we still you know should we continue should we expect sort of better than.
Sort of a double digit growth rate.
Janet collegiate based on what you're seeing.
And particularly that's willing to look at here.
Website for example.
Frequency of press releases, a customer signing announcements has gone up.
Hi, Ashwin this is Tony.
We see this trend continue we do not see this decreasing at all.
And we will provide guidance for the full year of 2022 in February but we all will be in the same age as we are saying all the time between 8% to 11% we'd like to continue what we have today. So this is the trend and this is what we are working for.
Okay.
This year, we grew about 10% organically and complemented by additional a 10% of M&A. So we'd like to continue the organic growth.
Okay.
The next question is from Jackson Ader of Jpmorgan. Please go ahead.
Great. Thanks, Good morning, guys.
The first question and maybe its best answered by Alex I'm not sure, but I was just curious given that there is so much.
Innovation happening in the cloud in this space from you guys and also competitors just curious.
How much.
Current cloud capabilities matter in customer decisions or weather.
Roadmap.
And it or future product innovation.
Might be taking a little bit of a kind of an outsized role in customer decisions when they end up choosing vendors.
Yeah.
Very good.
Sure.
So when we look at the decision process.
So definitely we see a strong balance between they need to cater for the business today in terms of functional capabilities robustness of the system. It's the ability maintain ability et cetera in between they need to cater for future sometimes the future is coming fast. So some companies that are doing really.
Quick innovation processes and looking for.
The one system that can support it and second to ensure when they take a decision specifically on coal projects, which is a long term decision they want to make sure that they choose a partner that has one strong roadmap going to the future the ability to execute it and the ability to be a pulp mill. So so.
Lately aim points such as cloud capabilities.
Our innovation ecosystem.
Ma'am.
And track record in being able to lead such innovation and executed or are super important.
When we look at that specifically at the cloud capabilities. So definitely we see them over the last let's say 12 to 18 months. The majority of deals that we are.
Participating and winning our cloud based deals where we are deploying our system in the cloud typically also providing our cloud services on top of that and so this is definitely strong strong trend in the industry.
I would say that at the moment, we see a more traction on them on the ability to put it in the cloud and to ensure we maintain the ability and the cloud less on a multi tenant versus single tenant even with more tendency still to look at the single tenant approach because of security because of.
Confidentiality because of the need of insurance carriers to protect their and their data and database.
But definitely as they need to be able to install the system in the cloud preferably with Amazon to Azure is the two leading cloud providers to be able to to run native capabilities on the cloud. This is a this is essential and this is what we are doing on a constant basis.
Yeah.
And.
So my follow up I mean, if I look at gain.
The gross margin line running.
The gross margin expansion I think the last few years has been.
Certainly more robust than the first.
Nine months of 2021, and I think maybe we would've expected it to be a little bit better given the shifts to continued kind of cloud implementation. So I'm just curious.
What are your expectations, maybe for gross margin expansion going forward what are the levers that you can kind of have left there.
Order to lift that as we as we move into 'twenty two.
Yes, Phil comment on that so if we take out all currency impact on the gross margin, we will see the gross margin.
Growing up by <unk>, 2%, so instead of <unk> 44, 45 points 145, 3%. This should would you say quarter in terms of the impact we see to try and see as the gross margin to go up a one factor is what you mentioned the implementation of the <unk>.
The other fact is offshore but in the same time, we've also what Tony mentioned earlier.
The increase in all global Iqos, so resource cost us much more than in the past.
But overall, we intend to increase gross margin steadily.
At least quarter over quarter.
Alright, great. Thank you.
The next question is from Tavy Rosner of Barclays. Please go ahead.
Hi, good afternoon. Thanks for taking my questions I was wondering more.
Broadly speaking.
Level of competition.
Would you say that the problem crucified since.
Many of the pandemic equally and close more competition going on.
Steve that you're responding to.
We call it would be helpful.
Yes, I will answer.
Yeah.
I think we see a less competition if it let's talk about Europe for a second.
As I say before sapiens has a very positive momentum.
In the Europe.
Market and this is the game because because.
Because our brand because our lease because all that for them because our expansion because the M&A that we do.
The name the adoption.
And then the Nordic.
But I kind of think from the state there is a competitor always guidewire on the P&C. All the rest are all in their life is only the local play.
Player.
So we.
It's very very difficult to solve rifle this smaller vendor in Europe, if they don't have enough.
And customers, meaning they don't have enough money for invest in the pro Doc in digital and so on so our overall competition in Europe is not as strong as in U S and you always see the influence more of the same.
Same level of competition like a Guidewire Duck Creek project controls on the P&C and then also in the life. So its small competitive environment, but again, it's a more or less in the same level.
Okay.
And we have all dogs solvay.
Some product lines to ensure.
That tends to come out for many years, but we all become the market leader again together when he says same thing, but we.
We feel very very comfortable decision is unique so there is no competition again not huge competition in this area. So there is a few area that we are we are purely leading the market.
I appreciate the color.
A couple of months ago, you talked about putting some of your applications available. These.
The system integrator.
If there was any traction or no.
Any early takeaways you had from that.
Yes, we are we are building as we talked we are building and we sold the Spanish saw yeah, Paul Gong.
But each time.
Yes.
Pretty small.
But we see the benefit of it that are again, we are very focusing in the area that we once they had from them.
For example, PNC and for their high LTR to compete with guys that can make all way to penetrate back to U S with our life and so on so I'd say its a very dependable situation, but the answer is yes, we are reinvesting this area.
Great. Thank you Ronnie.
Thank you.
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The next question is from Surinder.
<unk> of Jefferies. Please go ahead.
Thank you.
So I was hoping to get maybe a little bit more color on what you may be seen for four Q trends in terms of revenues can you maybe talk a little bit about your outlook for North America versus Europe.
I look over the past few quarters.
We're seeing sequential growth in North America, which I think you've mentioned is being driven by like Decisioning and so should we expect that trend to continue and then European revenues were generally flat quarter over quarter.
Any color that you can provide there and how we should think about that on a go forward basis.
I saw in there.
Regarding the state do you see the second quarter that we see sequential golf in the state.
What we see right now we see the trend will continue again.
Low moderate but the trend should go up and this is a trend that we see right now in the terms of the European side.
We saw both quarter over quarter, a very very strong one we are going to be in the area by organic growth of north of 20%. This quarter is the same as Q2, but we expect the Gulf will continue.
That's helpful and then in terms of the Asia Pacific region.
You know another strong sequential improvement.
For the large.
Non life insurance win that you had there are we effectively run rate levels at this point or should we expect continued sequential growth there as well.
On the APAC side than what we see is a by the way a combination of organic growth and M&A impact to some of revenue came from the Delphi acquisition and some revenue came from the acquisition.
But we have the golf, which is enough to 10% organically.
We recently signed a deal on the P&C side, and we expect the theoretical.
Got it so the expectation is is that we're not at run rate revenues, yet just to clarify.
It should go it should go.
Got it.
And then following up on a comment about I think you mentioned.
Well I guess I guess, what I'd like to begin with it sounds like India is fully back to normal at this point is that the right way to think about it or are you still seeing some.
Some modest impact on your margins from delivery capabilities, not fully being to normal levels.
If I need to look at the India side, the what Tony mentioned earlier is that we do not see impact of Covid on delivery.
If I need to look on the open position.
So to us the Covid impact that we talked about in Q1 is right now not exist at all.
If I need to look right now on the open position that we have in the company significant the vast majority of the recruitment is done by in the offshore operation in India Poland.
For example, we'd like to continue we talked about the increase in cost of labor costs about where I can say that we increased our percentage of offshore ratio that allow us to improve margins. So we are going to continue this trend as it is both a customary I'm obviously stuck into the company.
Got it that's helpful. Thank you.
The next question is from one.
Leumi partners. Please go ahead.
Hey, guys good job with this quarter results.
If you look back at the last couple of years, we saw growth increasing Ah now I believe the 20.
Quite a unique one time a record year.
Well, we're supposed to see and that will supposed to see the growth a decrease in the upcoming years.
But if you can maybe help us understand your level of confidence regarding the organic growth rate in the double digit area for the next couple of years, how many years do you see it continuing how confident are you.
Thanks.
I haven't really I will start the.
So maybe on me and Alex will join me.
Hmm.
We are growing organically for the last several good years.
The range of organic growth between 8% to 11%.
We see the deal coming to see the request for a product in Europe, and the item, though slightly increasing in the state also these give us confidence that we'll be able to continue to grow in this level of range.
This year was a unique if about 20%, but it's mainly the additional 10% came from M&A.
I must say that right now, we see bigger pipeline of M&A that fits our let's say request compared to Q2.
But M&A. This objective we do not know if it will happen, yes, or no. So overall organic growth, we see the demand at least from the market.
And we'd like to continue the trend the range of between 8% to 11% above the market demand maybe Alex is here can add addition, maybe.
Maybe before Alex I would like to add that when you ask about organic all of this is exactly what Tony mentioned I would like to if you break down our revenue there it's.
Part of our revenue all they all because all the legacy all because sometimes we are acquiring company and not for growth in order to help us to grow other business. So if you can break down you can see that as part of our business growing by 20% organic or 15% or more than 10.
And part of it not so the overall is exactly what Tony mentioned, but I think full day investor I think it's important to understand that as part of our revenue growing more than 10% and this is the that give us the confidence about though Paul the answer to that though.
So just to complete with one and what he said and to take it from the market perspective, we definitely see the and this is published by different analyst firms that the aim that the demand for IP product services and software in the insurance industry is.
Going to increase a year on year on the over the next five years the percentage of the budget that insurance companies are allocating to <unk> projects is increasing.
Both on the services side and on the software side and that's definitely a.
Definitely we see it as a potential positive impact on the on our.
<unk> to grow.
Okay. Thanks, guys.
Thank you.
Thanks.
There are no further questions at this time.
Before I ask Mr. Al Dor to me to go ahead with his closing statement I would like to remind participants that a replay of this call is scheduled to begin in two hours.
The U S. Please call 18774560009 in.
In Israel. Please call 039 to 55900 and internationally. Please call 972 three.
90 55900.
Mr. Al Dor would you like to make her concluding statement.
Yes.
Thank you all for joining us today have a good day.
Thank you. This concludes the sapiens International Corporation third quarter 2021 results conference call. Thank you for your participation you May go ahead and disconnect.
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