Q4 2023 Sapiens International Corp NV Earnings Call
Operator: Project Manager, Bihar, Srinider Thind, Sterling Auty, Avishai Kantor, Bhavan Suri, Kevin Kumar, Jackson Ader, Tavy Rosner, Chris Reimer, Sapiens International Corporation NV Thank you for watching. Ladies and gentlemen, thank you for standing by. The conference will begin shortly.
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Ladies and gentlemen, thank you for standing by welcome to the Sapiens International Corporation's 2023 fourth quarter and full year financial results Conference call Sapiens issued a press release before the market opened this morning.
Operator: Welcome to Sapiens International Corporation's 2023 fourth quarter and full year financial results conference. Sapiens issued a press release before the market opened this morning, and it has been posted on the company's website at www.sapiens.com. All participants are presently in a listen-only mode.
It has been posted on the company's website at Www Dot sapiens dotcom.
All participants are presently in a listen only mode. Following management's formal presentation instructions will be given for the question and answer session.
Operator: Following management's formal presentation, instructions will be given for the question and answer session. I would now like to hand the call to Ms. Yapa Cohen, Sapiens' Chief Marketing Officer and Head of Investor Relations. Yapa, would you like to begin?
I would now like to hand, the call to Ms. Yap I'll call it say.
<unk>, Chief marketing officer, and head of Investor Relations Yap would you like to be yet.
Yapa Cohen: Thank you, Operator. I would like to welcome all of you to the Sapiens Conference Call to review our fourth quarter and full year results for 2023. With me on the call today are Mr. Ronny Alzor, President and CEO, Mr. Ronny Girardit, 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 applies to the content of the call.
Thank you operator, I would like to welcome all of you to Sapiens conference call to review, our fourth quarter and full year results for 2023.
On the call today are Mr. Roni Al Dor, President and CEO, Mr. Wang CFO and Mr. Alex Zuckerman Chief strategy Officer.
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.
Safe Harbor provision in the press release issued today also apply to the contents of the call.
Sapiens expressly disclaims any obligations to update or revise any of these forward looking statements, whether because of future events, new information or changes in its view or expectations or otherwise.
Yapa Cohen: Sapiens expressly disclaims any obligations to update or revise any of these forward-looking statements, whether because of future events, new information, a change in its view or expectations, or otherwise. On today's call, we will refer to non-debt financial measures. A reconciliation of gap-to-non-gap 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 want to turn the call over to Roni Aldor, President and CEO of Sapiens. Okay, Roni?
On today's call, we will refer to non-GAAP financial measures.
A reconciliation of GAAP to non-GAAP results.
Provided you know press release issued before the market opened this morning.
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 earnings release, we published today.
I want to turn the call over to one year ago, President and CEO safety warning.
Thank you.
Tavy Rosner: Thank you, Rafa. Thank you for joining us today. 2023 was the year in which Sapiens successfully executed our growth strategy across both our regions and our product categories. I'm happy to report that in the fourth quarter of 2023, Sapiens again delivered strong growth and resilience. Let's dive into the details.
Thank you for joining us today.
2023 was it.
Second successfully execute our gold stocks of course, most all regions and all product categories.
I'm happy to report that in fourth quarter of 2023 shipping again to leave the.
Golf and resilience.
Let's dive into the details.
Tavy Rosner: I will start with highlights from 2023 and then review the fourth quarter performance. In 2023, revenue increased by 8.4% and operating profit was by 12.8%. Our growth was distributed across the regions we serve. On a regional basis, Europe was an impressive 10.5%, and North America achieved growth of 7.4%.
I'll start with highlights from 'twenty to 'twenty, three and then give you the fourth quarter performance.
In 2023 revenue increased by 8.4% and operating ball feet was by 12.8%.
Gulfport recently did because the region we see.
It's just not a basis Europe was impressive 10.5% North America Cheez. It also 7.4%.
All anyone open that imagine was at a bus 18, 3%.
Tavy Rosner: Our annual operating margin was a robust 18.3%, reflecting our continuous commitment to operational efficiency and prudent financial management. I would like to emphasize several notable business achievements in 2023 that will serve a strong foundation for our objective in 2024. First, as promised, our North America business has experienced robust growth, and we are well positioned to sustain this growth in 2024. We have expanded our North America sales and marketing team, reinforcing our presence and capabilities in this important market. This investment will ensure that we are equipped to continue to grow in this key region. Second, we successfully introduced the global customer care engagement model, which is playing a pivotal role in enhancing our customer relationships and creating stronger connections with our clients.
Our continuous commitment to operational efficiency and prudent financial management.
I would like to emphasize that they're all notable achievement from 'twenty to 'twenty three that we'll sell a strong foundation for objective in 2024.
Sure as told me is all North America business has experienced robust growth.
And we are well position to sustain these goals in 2024.
We extend our North America sales and marketing team reinforcing our presence and capabilities in this important market.
This investment will ensure that we are equipped to continue to grow in this key region.
Second we successfully introduced the global customer care engagement model, which is playing compete with them, all and enhancing our customer relationships and creating stronger connection we sell reclined.
Tavy Rosner: Furthermore, we achieved a significant increase in both new and cross-sales, showcasing our ability not only to retain existing clients but also to attract new ones. Third, we made significant progress in extending our market share by signing about 30 new deals with both new and existing customers across Core, Data, Digital, and Cloud in PNC, Workers' Comp, Life, and Reinsurance. This expansion is testament to our commitment to growth and increasing recognition of our value proposition in the insurance market. In addition, in 2023, we completed multiple successful Go Lights globally.
Furthermore, we achieved significant increases in both new and cross sells showcasing our ability.
Not only to retain existing clients, but also to a truck new ones.
Third we made significant progress in expanding our market share by signing about 13 year old deals with both new and existing customers of course, KOL data digital and cloud in P&C walk us for life and the insurance.
This expansion is testament to our commitment to growth and kissing recognition of our value proposition and reinsurance markets.
In addition in 2023, we completed multiple successful go lives globally.
Lastly, we have recently started collaboration with system integrators to extend our reach and accelerated growth.
Tavy Rosner: Lastly, we have recently started collaboration with C2ME Integrators to expand our reach and accelerate growth. To manage this new channel, we have hired a senior executive to develop our strategy and oversee the SI relationship. Our plan is to work with SIs mostly in upper tiers and specific regions. We are currently in the process of selecting our preferred SI partners and are committed to this approach. As an example, in 2023... We partner with the leading S.I. in one of the largest worker compensation deals in North America. We believe working with S.I.
Manage this channel we have hired a senior executive choose to develop a strategy and oversee the it's a relationship.
Our plan is to work with its.
Mostly in up it appears in specific regions.
We are currently in the process of selecting I hope we felt its eyes and are committed to the support.
As an example in 'twenty to 'twenty three.
We felt though we said, leaving aside and one of the large Walter competition deals in North America. We believe walking it says I will have a mid to long term impact. These achievements I just saw a readiness to tackle the challenges and opportunities in 2024.
Tavy Rosner: will have a mid- to long-term impact. This achievement underscores our readiness to tackle the challenges and opportunities in 2024. Now, let's delve into our original performance, starting with North America.
Now, let's delve into our regional performance, starting with North America.
Tavy Rosner: As I mentioned earlier, our North America sales, marketing, customer success, sales support, and product marketing team were expanded with the express goal of financing and supporting sales growth. These expansions align with the demand we have experienced in North America. We are particularly excited about the momentum we have experienced in the life segment in North America and are committed to capitalizing on this gross opportunity. We closed new deals in the Latin annuity business for both core and components, a significant step up from prior years. PNC and workers' compensation continue to be verticals in North America, where we are adding new customers.
As I mentioned, Italy, Oh, no. So America sales marketing customer success sales support and product marketing team.
Were expanded with VIX, but its goal of enhancing and supporting sales growth. These expansions a lines with the demand we have experienced in North America.
We are particularly excited about the momentum we experience in the life segment in North America and are committed to capitalize on these sports opportunity.
We closed new deals in the life and annuity for both school and component a significant step up from prior years.
You can see in workers compensation continues to be that because he knows America wherever we are adding new customers.
Tavy Rosner: In 2023, we will sign new PNC customers and new workers' comp deals. Our proven track record of successful implementation and ongoing support were also a key factor in winning this deal. Reinsurance remained an active segment in North America for 2023, and Sapiens signed new customers on the platform. We are winning in reinsurance with our award-winning solution enabling insurers to automate and manage end-to-end programs with sufficiency and control through seamless integration. In the EMEA and APAC regions, we sign PNC deals across all of our products and new deals for our Cosmic Life platform.
2023 we saw an European customer and he'll walk us from these.
Our proven track record in successful implementation and ongoing support we have also Keith talked all winning these deals.
And then she wants to remain and execute segment in North America for 2023, incipient Sun new customers on the platform. Yeah. We named in reinsurance we saw our award winning solution, enabling insurers to automate and manage end to end all gum with sufficiency and.
Tall towards seamless integration.
In EMEA and APAC region, we signed PNC deal is because all of our products and you'll deal is for grocery class platform.
Tavy Rosner: Our pipeline and backlog coming into 2024 are strong because all of our product lines, including P&C and life and pension, deliver in the SAS model. This positions us favorably to maintain momentum, secure new deals, and expand our presence in this market. Our commitment to growth in North America, EMEA, and APAC is underscored by increasing the size of our teams in these regions, including additional headcounts across sales, marketing, and product marketing. Furthermore, we anticipate continued momentum and growth in cross-selling opportunities within our existing accounts across all regions throughout 2024. Additionally, our traditional territories, Inimia and Apex, are showing significant growth potential, particularly in the Latin pension and PNC space.
Our pipeline and backlog coming into 2024.
Across all of our product lines, including P&C and life and pension de lever in such small then these position us favorably to maintain momentum secure their deals and expand our presence in these markets.
Our commitment to growth in North America, EMEA and APAC is underscored by increasing the size of our teams in these regions, including additional headcount across sales marketing and product marketing.
So there's more we anticipate continued momentum and growth in cross selling opportunity.
In our existing accounts across all of the June 12 2024.
Recently.
Traditional territories in EMEA, and APAC are showing significant growth potential, particularly in the life and pension in P&C space. This growth is a direct result of the investment we have made over the past two to three years.
Tavy Rosner: This growth is a direct result of the investment we have made over the past two to three years, strengthening our foothold in this market. As mentioned in the previous call, we believe that the APAC region, which has experienced growth and has shown our successful land and expense strategy, will be an additional growth catalyst for Sapiens in the near future. We are building a pipeline in this region and are excited about the progress we have made with current implementations. Now, turning to the third quarter. Our overall revenue growth in Q4 was impressive at 9.6%, and our Q4 operating margin was 18.4%. I want to highlight two successful goal lines in the fourth quarter.
So that didn't Ding our foothold in these markets.
As mentioned in the previous call, we believe that the APAC region, which is expense goes and as shown our successful land and expand strategy will be additional growth catalyst for sapiens in the near future.
We are building a pipeline in this region and are excited about the progress we have made discounting limitations.
Now turning to the fourth quarter.
Growth in Q4 was impressive.
At nine 6% in Q4 operating margin was 18.4%.
I want to highlight two successful go lives in the fourth quarter.
Tavy Rosner: First, in the Nordic region, the leading Norwegian insurance company, YenCD, or GPF, went live with Sapiens CoreSuite for life and pension and Sapiens Cloud Services for their individual savings. It is very exciting. GPF is the first Nordic customer to go live with CoreSuite, which will expand the insurer's digital capability and boost its leading market position.
As in the Nordic region, but he didn't Norwegian insurance company, you had said the old U P. S went live with sapiens core suite for life and pension and sapiens cloud services for their individual savings, which is very exciting G. P is the first multi customer.
Go lives with school suite, which will expand the insurers digital capability boost its leading market position.
Second a leading European automotive blend went live with sapiens deep suite incipient cloud toward the companies since doesn't T and wall at the insurance lines of business, except in solution. It plays the company existing C stands for policy portfolio management and claim.
Tavy Rosner: Second, a leading European automotive brand went live with Sapiens' EDITH suite and Sapiens Cloud for the company's sales guarantee and warranty insurance lines of business. Sapiens Solutions replaced the company's existing system for policy portfolio management and claims management. Phase one of the implementation for automotive warranty took just over a year, with the second phase of product warranty implementation planned for 2024.
Management.
So as long as the implementation for automotive warranty took just over the year with the second phase for the quality implementation plans for 2024.
Tavy Rosner: And lastly, in the fourth quarter, we were engaged by Saskatchewan Workers' Compensation Board to transform its core workers' compensation system. Saskatchewan WCB selected Sapiens Core Suite for Workers' Compensation, Digital Suite, and Intelligence to transform its legacy core system with a modern, integrated platform for efficient service delivery. In summary, our original performance in EMEA and North America and strong momentum in the fourth quarter as we exited 2023 have positioned us well for continued growth and success in 2024. We remain dedicated to delivering value to our customers and shareholders. Looking ahead to 2024, I want to share some key initiatives that will guide our strategic direction. Chris.
Lastly, in the fourth quarter, we will engage by Saskatchewan walkers competition bold to turn so it's co workers compensation system. So Scotch on Wcbs selected sapiens co suite for all his compensation digital suite.
Diligence to transform its legacy core system used to modern integrated platform for efficient service delivery.
In summary, our religion or performance in EMEA, and North America, and strong momentum in the fourth quarter.
We exited 2023.
Position us well for continued growth and success in 2024, we remain dedicated to delivering value to our customers and shareholders.
Looking ahead to 2024.
I want to share some key initiatives that will guide our strategic direction.
So we continue our transition to sauce with all of our product we sell when we bolt shaped into insurance platform.
Tavy Rosner: Continue our transition to SAS with all our products with our Evolve Sapiens insurance platform. Sapiens Insurance Platform is an end-to-end integrated business-led SaaS platform with advanced technology and data capabilities. The Sapiens Insurance Platform unifies our core insurance capabilities, our digital engagement solution, our advanced data capabilities, and our ecosystem partners into a coherent, fully integrated, yet modular platform focused on our customer business needs, harnessing the power of our ML and AI capabilities, our decision management tools, and our new generative AI capabilities to provide an innovative data-driven operation. The Sapiens Insurance Platform's operating value lies in technology standardization across all products, using a common tech The platform value proposition for our customers and prospects is aimed at enhancing efficiency, driving growth, and fostering innovation.
Sapiens insurance platform included.
And end to end integrated business led such platform, we said that technology and data capabilities.
Sapiens insurance platform Unifies, Oh call insurance capabilities or digital engagement solution, our advanced capabilities and now ecosystem partners into careers and fully integrated yet modular platform focused on our customer and business needs.
I think the power of our M N and the AI capabilities, our decision management tools and now will yield generative AI capabilities to provide innovative data driven operation.
Sapiens reinsurance platform operating value license technology standardization across all product using a common tech sick and he was the ability of components at corso various proposition.
The platform value proposition for our customers and Postbank is aimed at enhancing efficiency driving growth.
And fostering innovation sapiens plans to continue leading we sell a SaaS based offering across all of our markets and all our own product.
Tavy Rosner: Sapiens plans to continue leading with our SaaS-based offering across all our markets and all our products. The new deals we are signing now are based on our SaaS model, which aligns with our core strategy going forward. In parallel, we are engaging with our existing customer base across our solution to initiate a SaaS transition program for customers currently on-prem. Second, explain in North America where we have made significant investments and sustain our growth in Europe, where we have a strong footprint by leveraging existing localization and references to acquire a new customer. In addition, we focus on cross-selling to existing customers to take advantage of our wide range of products Sapiens offers.
The new deals we are signing now based on our <unk> model, which aligns we sell coal started going forward in parallel we are engaging we sell existing customer base of course, our solution to initiate SaaS transition pulled them for customer currently on Prem.
Second expanding North America, where we have made significant investments and sustain our growth in New York.
We have a strong footprint by leveraging existing localization and that's the lens to acquire a new customer.
In addition, focusing on cross selling to existing customers to take advantage of a wide range of product sapiens ulcers.
Roni Giladi: In conclusion, we are excited about the opportunity that lies ahead in 2024. Our strong performance in 2023 and strategic initiatives position us well for continued growth and success. Now, I would like to turn the call over to Roni Giladi, ROC for Roni.
In conclusion.
We are excited about the opportunities that lie ahead in 2024.
Our strong performance in 2023.
So digital initiatives.
This year in the us well for continued growth and success.
Now I would like to turn the call to only get a D O CFO warning.
Roni Giladi: Thank you, Rony. I will begin my commentary by reviewing the fourth quarter and full year 2023 non-GAAP results, followed by a comment on the balance sheet and cash flow. I will wrap up with our guidance for 2024. Revenue in the fourth quarter of 2023 was $130.9 million, an increase of 9.6% compared to $119.5 million in the fourth quarter of 2022 and slightly higher than the previous quarter. On a constant currency basis, our revenue grew by 7.5%. The Avenue Meets.
Thank you Ronnie.
I'll begin my commentary by reviewing the fourth quarter and full year 2023 non-GAAP results.
Fuller.
Comment on the balance sheet, the industrial I will wrap up we felt guidance for 2024.
Revenue in the fourth quarter of 2023 was 139 million an increase of nine 6% compared to $119 5 million in the fourth quarter of 2022.
Slightly higher than the previous quarter.
On a constant currency basis, our revenue grew by seven 5%.
The revenue mix.
Roni Giladi: Revenue from recurrent software products and reoccurring post-production services totaled $19.4 million, compared to $77.7 million in the same quarter of last year. A $12.7 million increase, or 16.3% growth, from Q4 of 2022. This recurrent software product and reoccurring post-production revenue represented 69.1% of our total revenue in the fourth quarter, compared to 65% in Q4 of last year. We are extremely pleased by the overall growth and the growth rate of this recurrent source of products and reoccurring post-production revenue. Yo Gaffey, there you go.
Revenue for them, regardless of the product and relocating postproduction services totaled $19 4 million compared.
Compared to 77 7 million in the third quarter of last year.
At $12 $7 million in June of 16, 3% growth for Q4 of 2022.
Used to be carrying social product and relocating postproduction revenue represented 69, 1% of our total revenue in the fourth quarter.
Compare to 65% in Q4 of last year.
We're extremely pleased by the overall growth and the growth rate of recurring software products and reoccurring postproduction live in.
Geographic breakdown.
Roni Giladi: Revenue in North America was $54.9 million, compared to $50.8 million in the year-ago quarter, and an increase of 8% and $4.1 million. Revenue in Europe was $65.2 million, a year-over-year increase of 14.7%, compared to $56.9 million. On a constant currency basis, revenue in Europe grew by 10.3%.
And then your North America was $54 9 million compared to 58 million go along in the year ago quarter.
And in case of 8% and $4 1 million of Golar.
Revenue in Europe was $65 2 million dollar a year over year increase of 14, 7% compared to $56 9 million below.
On a constant currency basis revenue in Europe grew by 10, 3%.
Roni Giladi: Revenue in the rest of the world, which includes South Africa and APAC, was $10.8 million, a decline of 8.3% compared to the prior year quarter due to customer phase 1 go live in April. Profitability. Operating profit and margin in the fourth quarter of 2023 were $24.2 million and 18.4% of total revenue, respectively, compared with $21.1 million and 17.6% in Q4 of 2022. We extended our profitability by improving our gross margin by 40 basis points and reducing our operational expenses by 40 basis points also. Although in terms of dollars, operational expenses increased.
Revenue in rest of World, which includes South Africa, and APAC was $10 8 million a decline of eight 3% compared to prior year quarter.
Due to customers' phase one go live in April.
Profitability.
Operating profit and margin in the fourth quarter of 2023 were $24 2 million rollout and 18, 4% of total revenue respectively.
Compared with $21 1 million and 17, 6% in Q4 2022.
We extended our profitability by improving our gross margin by 40 basis points.
And then have you seen though operational expenses margin by 40 basis points also.
Well in terms of dollars operational expenses.
We've presented.
Roni Giladi: This resulted in an 80 basis point improvement in our operating margins. We are confident that we can continue to both grow our business and further improve our gross margin. During the quarter, we had net financial income of $4.6 million, coming mainly from interest income, which was partially offset by interest expenses of $4.5 million related to our debenture.
And 80 basis point improvement in our operating margin.
We are confident that we can continue to both grow our business and further improve our gross margin.
During the quarter, we had net financial income of <unk> 6 million coming mainly from interest income, which was partially offset by interest expenses of <unk> 5 million related to ours with NGL.
Net income attributable to southern shareholders for the fourth quarter of 2023 was $21 million up.
Roni Giladi: Net income attributed to Sapiens shareholders for the fourth quarter of 2023 was $20.1 million, up 11.4% from $18 million in Q4 of 2022. Earnings per diluted share was $0.36 for the fourth quarter of 2023, up 12.5% from $0.32 in the fourth quarter of 2022.
11, 4% from $80 million in Q4 of 2022.
Earnings per diluted share was <unk> 36 cents for the fourth quarter of 2023.
Up to eight 5% from 32 cents of the fourth quarter was group out in 'twenty two.
Roni Giladi: Turning now to our full year result for the 12 months ended December 31st, 2023. 2023 revenue increased to $514.8 million, up 8.4% compared to $474.8 million in 2022 and in line with the higher range of our guidance. North America revenue represented 41% of total revenue, and European revenue represented 50% of total revenue.
Turning now to our full year results for the 12 months ended December 31 2023.
2023 of revenue increased to $514 8 million up eight 4% compared to $474 8 million in 2022.
And in line with Ohio range of our guidance.
North America revenue represented 41% of total revenue in European revenue represented 50% of total revenue.
On a constant currency basis.
Roni Giladi: On a constant currency basis, our annual revenue increased by 8.1% in 2023. In 2023, revenue growth came mainly from 9.8% revenue growth in Europe on a constant currency basis and 7.4% growth in North America.
And in case by eight 1% in 2023.
In 2023 Avenue growth came mainly from nine 8%.
Revenue growth in Europe on a constant currency basis.
Seven 4% growth, we more familiar car.
Roni Giladi: And I would like to remind you that in 2022, we grow 4.3% in North America and the rest of the world grows by just under 2%. For the revenue mix in 2023, revenue from recurrence of the product and reoccurring post-production services will total $342 million compared to $300 million in 2022, a $42 million increase or 14% growth. This year, we will start to report our annualized recurring revenue, or ARR numbers. We provide the overall results quarterly. Our RR revenue includes subscription, term license, maintenance, application maintenance, and cloud solutions. Their run rate is the sum of this revenue as per the last quarter ended, multiplied by 4. Our ARR for Q4 of 2023 totaled $164.8 million, reflecting 13.5% growth from Q4 of 2022. I will only highlight the following.
And now we'd like to remind you that in 2022, we grew four 3% for America.
And the rest of world, which grew by just under 2%.
So the revenue mix in 2023.
He knew from weekends of the product and relocate and postproduction services built out.
342 million compared to $300 million in 2022.
42 million boiler increase or 14%.
This deal we will start to report the annualized recurring revenue or air out of the numbers.
We will provide that all results quarterly.
Our revenue includes subscription license maintenance application maintenance and cloud solution.
Our run rate some of this revenue is still the last quarter ended multiplied by four.
000 for Q4, 2023 totaled $164 8 million.
Reflecting 13.5% golf from Q4 of 2022.
I wanted to highlight the following.
Roni Giladi: Gross profit increased in 2023 by 30 basis points. Operating Margin increased to 18.3%, an increase of 70 basis points. Earnings per diluted share was $1.35 compared to $1.21 in 2022.
Poultry it in June 2033 by 30 basis points.
Operating margin increased to 18, 3% increase.
In case of 70 basis points.
Earnings per diluted share.
One ball out 35% compared to $1 21 in 2022.
M E beta increased 11, 7% to 19%.
Roni Giladi: NEB increased 11.7% to 19%. Turning to our balance sheets, as of December 31st, 2023, we had cash-in-cash equivalent and short-term deposits totaling $202 million and debt of $60 million, which is scheduled to be paid in three equal payments, of which the first one was paid on January 1st, 2024. Turning to our Adjusted Free Cash Loans. In June 2023, we generated a justice-free cash flow of $70.6 million compared to $36.1 million in 2022. Our adjusted free cash flow in 2023 was 94.1%, or for a non-gap net income, compared to 53.7% in 2022, which achieved strong cash flow in Q4 and the full year, demonstrating our ability to convert net profit to free cash flow. And finally, in terms of M&A, we acquired a small company at the end of 2023 to strengthen our presence in the Nordic region. The transaction aligns with our commitment to better serve our clients in this key market. The impact of the acquisition is immaterial to 2023 and 2024 results.
Turning to our balance sheet as of December 31st 2023, we had cash and cash equivalents and short term deposits totaling.
202 million and debt of 60 million rollout.
Which is scheduled to be paid in three equal payments of which the first one was paid in January 1st 2024.
Turning to our.
Adjusted free cash flow.
<unk> 2023, we generated adjusted free cash flow of $76 million compared to $36 $1 million in 2022.
Our adjusted free cash flow in 2023 was 94, 1% of our non-GAAP net income.
Compare to 53, 7% in 2022.
We achieved strong cash flow in Q4, and the full year.
Demonstrating our ability to convert net profit to free cash flow.
And finally in terms of M&A wake, rather small company at the end of 2023 to strengthen our presence in the Nordic region.
The transaction aligns with our commitment to better serve our clients in this key market.
The impact of the acquisition is immaterial to 2023 and 2020 full results.
Roni Giladi: Today we are introducing the following guidance for 2024. Revenue Non-GAAP revenue in the range of $550 million to $555 million represents growth of 7.3% at the midpoint. This growth anticipates high single-digit organic growth in North America and in Europe and low single-digit growth in the rest of the world. Operating Margin. Non-GAP operating margin is expected to be in the range of 18.1% to 18.5%, representing a stable operating margin at the midpoint compared to 2023 operating margin of 18.3%.
Today, we are introducing the following guidance for 2020 for.
Revenue.
non-GAAP revenue in the range of 550 million to 555 million to allow their present growth of seven 3% at the midpoint.
These Gulf anticipate high single digit organic growth in North America, and in Europe, and low single digit growth in the rest of world.
Operating margin.
non-GAAP operating margin is expected to be in the range of 18, 1% to 18, 5%.
Presenting his favorite operating margin at the midpoint compared to 2023 operating margin of 18, 3%.
I want to explain the rationale behind our guidance as previously mentioned, we began offering subscription a year ago.
Roni Giladi: I want to explain the rationale behind our guidance. As previously mentioned, we began offering subscriptions a year ago, primarily in North America and for specific product lines.
There are many in North America and for specific product lines.
Roni Giladi: This year, we plan to expand and offer our subscription for new deals for all products globally. Additionally, we intend to transition our current customers to a subscription-based model in the coming years. The continued transition to SAS for a new deal will result in one. Convert Part of Revenue from Post-Production Services to Subscription Revenue, too, a shift of revenue that is currently part of pre-production revenue, which is non-recurring, into subscription revenue, which is recurring and will be recognized over a longer period.
This year, we plan to expand and oilfield our subscription form your view for all products globally.
We intend to transition all current customers to a subscription based model in the upcoming years.
The continued transition to SaaS for a new deal will result in one <unk>.
Part of revenue for both production services to subscription revenue.
Two shifts.
Shift of revenue that are currently part of preproduction revenue, which are normally getting into subscription revenue, which are recurring and we'd be recognized all the elongated periods.
The financial impact will be a reduction in our total revenue in the short term.
Roni Giladi: The financial impact will be a reduction in our total revenue in the short term, one to two years, and an increase in our current revenue and ARR in the mid to long term. We expect the impact of our annual growth rate due to the debt change to be around 1% a headwind to revenue. Therefore, our growth rate... would have been approximately 8.3% at the midpoint had we not made the shift to subscription-regarding revenue. Operating profits. Over the past few years, we have successfully managed to increase our revenue while improving our profit and margin. However, this year, we have made a strategic decision to continue our transition to SaaS and increase our sales and marketing investments to further accelerate growth into 2025 and beyond.
One to two years.
And then James you not only get into revenue and they are all in the mid to long term.
We expect the impact of our annual growth rate due to the change to be around 1% headwind to revenue.
Therefore, our growth rate.
It's been approximately eight 3% at the midpoint had we not made the shift to subscription recurring revenue.
Operating profit, although the past few years, we have successfully managed to increase the revenue while improving our profit and margin. However, we feel we've made a strategic decision to continue open position to SaaS and increase our sense of marketing investment.
To further accelerate growth into 2025 and beyond.
Despite these supposed to give you the steps we aim to maintain our operating margin while simultaneously engaging our operating profit.
Roni Giladi: Despite these strategic steps, we aim to maintain our operating margin while simultaneously increasing our operating profit. The impact of the transition into SAS and increased investment will be partially offset by increasing our offshore ratio, operational efficiency, and reduction in GINA expenses. We believe this strategic decision will better serve the company's long-term growth and improve our recurring revenue and shift more revenue to ARR. I will now turn the call back to Roni and Bill. Roni?
The impact of the transition into SaaS and T's investment will be partially offset by in case, even though offshore ratio operational efficiency and reduction in G&A expenses.
We believe this strategic decision, we better serve the company long term growth and improve are we talking another venue and shift more revenue the way at all.
I will now turn the call back to one year ago Oni.
Thank you Lonnie 'twenty two 'twenty three once a year of growth and profitability highlighted by accelerating growth in North America and continued growth in Europe, and the rest of the world.
Tavy Rosner: Thank you, Roni. 2023 was a year of growth and profitability, highlighted by accelerating growth in North America and continued growth in Europe and the rest of the world. We delivered revenue growth for the year, surpassing the half-a-billion-dollar mark and achieving a healthy increase in our operating profit of almost 12.8% to achieve an operating profit margin of 18.3%, demonstrating our ability to profitability scale our business. Looking out over the remainder of 2024, our priorities are one, to transition all of our products to the SAS delivery model with Sapiens insurance platform, and second, leverage our investment to drive performance in all our key regions I would now like to close our prepared remarks and open the call for questions. Operator, we are ready to open the call for Q&A. 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. If you are using speaker equipment, kindly lift the handset before pressing the number.
We delivered revenue growth for the year, so passing the house.
The billion dollar Mark and has seen increase in our operating profit of almost 12.8% to achieve an operating profit margin of 19, 3%.
Demonstrating our ability to profitability scale our business.
Looking out over the remainder of 2024 I'll play all of it is one to transition all of our products to SaaS delivery model recipients insurance platform and second leverage our investments to drive performance in all.
Our key regions North America, EMEA and the rest of the World I would now like to close our prepared remarks and open the call for question.
Operator, we are ready to open the call for Q&A.
Thank you ladies and gentlemen at this time, we will begin the question and answer session. You will have a question. Please press star one if you wish to cancel your request. Please press star two.
The speaker equipment kind of with the handset before pressing the numbers. Please.
Please ask your question in a loud and clear voice no questions will be pulled in the order. They are a seat. Please stand by while we poll for your questions.
Operator: Please ask your question in a loud and clear voice. Your questions will be answered in the order they are received. Please stand by while we answer your question.
The first question is from their run backer of William Blair. Please go ahead.
Hey, gentlemen, a really nice job here, maybe starting with.
Dylan Becker: The first question is from Dylan Becker of William Blair. Please go ahead. Hey, gentlemen, really nice job here. Maybe starting with Ronnie A., or maybe even Alex. You guys have talked about kind of this fast transition, the focus on data and integration, and I'm wondering to what extent that is coming up? 8N real, www.ncbi.nlm.nih.gov given some of the compound, Leggett, helps fuel its overall.
Ronnie a or maybe even Alex do you ever talked about kind of SaaS transition the focus on data and integrate it and integrated system.
I'm wondering to what extent is that.
I mean up in conversations with data in real time, decisioning kind of causing a shift in how carriers think about their risk exposure and their risk management, given kind of some of the compounding complexity.
Siloed systems that they are operating in today, how that kind of helped fuel. This overall conversion of momentum youre, saying.
And this is a this is Alex speaking so so definitely this is actually giving us a strong a strong push into zero hawk hospitals due to the issues that legacy systems as we want the growth of data management and close it.
Alex: This is Alex speaking. This is actually giving us a strong push in the view of our customers. Due to the issues that legacy systems have with antiquated data management and closed systems, we see here a proposition that we are coming to the market with the platform proposition that enables seamless integration of the core processing capabilities with data and analytics, providing not only a retroactive analysis of what happened in the business but actually the ability to take decisions and manage the company's workflow based on data. We use here also our decision tool, which is a tool that's sold to the market but is also now used inside our platform to increase automation and manage the data properly.
Closed systems.
We see here a proposition that we're coming to the market as the platform proposition that enables seamless integration of the call processing capabilities to data and analytics, providing not only a retroactive analysis of what happened in the business, but that's really our ability to take decisions and manage the company workflow based on.
Data and we usually also our decision tools that is and.
That's all good the market, but also allow us inside our platform to cruise automation.
And to manage the data properly and this brings us the ability to run a much more data driven personalization.
Rony: This brings us the ability to run a much more data-driven proposition, which definitely resonates with the market. Uh, maybe Ronnie A for you, we're encouraging kind of to hear about headcount investment here and how that's fueled by the broad base and the demand from you guys. I wonder how to think about kind of the balance. GoToMarketCapacity.com, You called out a higher level of doubling down on that partner ecosystem, but I was wondering how you think about the... Thank you. Thank you. Accelerate that shift towards a more product. Hi Dylan, this is Rony.
<unk>, which is definitely a it resonates with the market.
Got it okay.
Maybe Ronnie a for you or encouraging to hear about the head count investment here.
And how that fueled by the broad based kind of demand you guys are seeing.
I wonder how to think about the balance between investing in the go to market capacity and kind of the immediate implementation support as well as you called out a higher.
And kind of doubling down on that partner ecosystem, but wondering how you think about the balance between the two and how they can maybe accelerate that shift towards a more product oriented revenue base.
Okay I get it this is all me.
Rony: So a few questions that you asked me, I tried to answer them. One about the product versus services and all the system integration. In fact, for the last many years, we have been shifting R&D to India so we can do a good ratio between offshore and onshore. We have built a very strong organization that allows us to develop more things with less, and that allows us to shift things from pure R&D to a marketing organization. In terms of the SI, as I mentioned on the call, we are taking the SI very seriously, but it's still not a majority part of our revenue. And also, based on the decision that we made, we don't see a huge overlap between what we plan to bring and what the SI.
So a few questions that you asked I tried to answer them and one about the <unk>.
Productivity services.
System integration.
In September for the last many years, we are shifting a RMB two.
<unk> to India. So we can do a good ratio between offshore and onshore and then we will build a very strong organization that allow us to develop more thing with less and that's a L. O us to shift the thing for a man from pure R&D too.
Since our marketing organization in terms of the SRU.
We are as I mentioned on the call that we are there.
Very serious their site, but it's still not the majority part of all our revenue and then we also based on the decisions that we made we don't see huge overlap between what we plan to bring in what they're saying.
And then and we believe that so maybe we can lose few percent of the revenue, but we can get more business, so where we don't see some dramatically changed on the ratio and the service is Bob.
Rony: And we believe that maybe we can lose a few percent of the revenue, but we can get more business. So we don't see any dramatic change on the ratio on the services part. Okay, that makes a ton of sense. And then lastly, maybe touching on Ronnie G. So appreciate the AR disclosure and nice growth here as well as on the post-production side. I wonder what's the right way of thinking about this ongoing.
Got it okay that makes sense and last one maybe.
Touching on Ronnie G. So appreciate the a our disclosure a nice growth here as well as kind of an approach postproduction side wonder what's the right way of thinking about kind of this ongoing mix shift towards the <unk> segment and it sounds like it's kind of picked up.
Rony Giladi: Toward, you're right, both of these verticals, the ARR and the product and post-production services, will grow faster than the company grows. This is because, as we see in the implementation piece, all the time, we are increasing the layers of this revenue stream. I can say that in the ARR piece, we are also going to shift some of the revenue which is in post-production to the ARR, revenue that includes, for example, that we categorize the services, for example, upgrade or implement application maintenance, and over time, with the new deals, we'll be part of the subscription and increase our ARR. So overall, both of these categories will grow faster than the company grows going forward. The next question is from Kevin Kumar of Goldman Sachs. Please go ahead.
And given that these kind of are the areas driving a lot more of the growth versus that kind of lower margin services.
Yeah Ivy Lynne.
So first you're right both of these 3000 day on all.
And Oh, that's an impulse production services will grow faster than the company's loss.
D CS and we see the implementation piece all the time, we are in season to layers of decent revenue stream.
I can say that in any of our piece. We also grew.
Going to shift some of the revenue which is in the post production today at all.
And they renewed that include for example that we categorize as services for example.
Oh, you mean, the application maintenance and overtime with the new DC will be part of the subscription any diesel.
So I'll go along both of these categories will grow faster than the company well going forward.
Got it.
You hit it.
The next question is from Kevin Kumar with Goldman Sachs. Please go ahead.
Hi, Thanks for taking my question.
Kevin Kumar: Hi, thanks for taking my call. I wanted to ask about the progress towards the cloud. I can tell you how many customers migrated. 3, Nithya Nairayanandam.
I wanted to ask about the progress towards a cloud it sounds like that.
Recently, our focus here.
I can find many customers migrating to cloud.
23, and more strategically how do you think about kind of incentivizing customers, who maybe on long term rates.
Rami: Thank you. Thank you. Thank you. That kind of makes a jump in.
Can you kind of make the jump in transmission over the clock.
We are and.
Rami: We have been for a long time; we've shifted, we built our cloud services organization, and we shifted the majority of our product to the cloud. I think what we are now coming with is the main message; that's our proposition. So, if in the past there was more flexibility, people could choose one or the other. At this moment, based on all the investment and the maturity of our product, we are coming to the market with such a proposition that means that the software and part of the maintenance and all the cloud services are coming as one package. And we are just in a very, very specific case, proven by me, by myself, that we can allow to do something different. But it's a journey that should take time, but for the new business, this is our main message. Got it. And maybe one on...
We have full a longtime we shifted we built out our cloud data services organization and we shift the majority of our products to the product to the cloud.
I think what we are now coming we say main message that that's all they proposition.
So he said the policy towards the more flexibility people can choose one or the other at this moment based on all the investment and the maturity of the product.
Coming to the Wildcats within a tough proposition. That's me, that's the Softgel and part of the maintenance and the or the cloud services is coming is the one package and then we are just seeing very very specific case the approval by me by my says that.
Can allowed to do something different but it's a it's a journey that you'd say it takes time, but for the new business. This is our main message.
Got it and maybe one on.
Rami: I'm kind of dissecting the growth on a new logo ad. Hi, how are we bragging boys? Where did that go, Anda? How are you thinking about... Subs by www.zeoranger.co.uk. We can, Ronnie G can answer also, but we in Sapiens have a huge client base, but we also believe that we must need to continue to bring new business. So, Sapiens, for many, many years, we are not a type of company saying, okay, we sold to this customer, let the majority of our work move them to the cloud. We are definitely putting a lot of effort into bringing new business in parallel to shift to the cloud. So, it's definitely not our main focus just to move to the cloud.
Hum back something to grow.
Between kind of new logo adds this year versus kind of cross selling and expand changed.
Ballgame.
And I guess, how are you thinking about that.
Me personally expansion in 24, thank you.
Okay.
We can I'm wondering if you can answer also but we.
We didn't sit there and say.
We have a huge client base.
There's a we also believe that we need to continue to bring new business. So as <unk> said many many years say we are not type of company are saying, Okay. We sold to this customer.
The majority of our work to move them to the cloud.
Oh definitely putting a lot of effort to bring a new business in parallel to shift to the cloud. So he said definitely not all of our main focus is just to move to the cloud at this moment, we are continuing to invest time and as I mentioned, we increased investment in our in our strategy and product marketing and marketing.
Rami: At this moment, we are continuing the investment, and as I mentioned, we increased the investment in our strategy for product marketing, in marketing, sales, and NCC. So, overall, we increased the investment, and we are looking for both incremental and constant growth. Kevin, maybe I will add one more sentence.
<unk> sells NCC. So overall when you take the investment and we are looking for both a plus implemented there being maybe I will let Dave one more sentence in terms of new logo give or take we all at the same time, but the numbers are.
Rami: In terms of the new logo, give or take, we are at the same time, but the number of deals or products that we sold to the same customer is bigger than last year. And also, from the cross-opportunity point of view, this is a significant improvement from 2022. The number of cross-opportunity, additional products to existing customers also grew. We are right now very close to almost 30 new deals in 2023. Together, the new logo and Coastal Opportunity. Thank you. The next question is from Mayank Tandon of Needham and Company. Please go ahead.
These are products that you started the same customer is bigger than last year and also from cost of both unique D. C is a significant improvement from 2022.
Those who also multimedia additional products to existing customer also will we are right now very close to almost 30 new deals in 2023.
We get the new logo and closer to both here in Dubuque.
That's helpful. Thanks for taking my questions.
Thank you.
The next question is from my young <unk> Tandon of Needham and company. Please go ahead.
Great. Thanks, Good morning, guys.
Mayank Tandon: Great, thanks. Good morning, guys. I wanted to touch on Outlook for the year; can you guys talk about some of the macro assumptions you have built into the revenue guide and maybe provide any commentary on how we should think about the revenue and margin trajectory throughout the year? If we look at the last two years, the European market was growing... Double digit or close to double digits, macro environment slightly slower than in the past, not significant but slightly, and as we predicted, we are going to grow in the European region in high single digits. In North America, we did turn around.
This is Sam on for Mike Today, I wanted to touch on the outlook for the year could you guys talk about some of the macro assumptions you have built into the revenue guide and maybe provide any commentary on how we should think about the revenue and margin trajectory throughout the year.
We look here in the last.
Two years, a European market was blowing me.
Double digit or close to double digits.
A macro environment slightly slightly slower than in the past not significant but slightly and then you'd probably like I said, we are going to grow in the European region high single digits.
In North America, We did tell me at all if I'm looking back two years, you almost need not vote now last year, we grew 4% in D. C close to eight and we mentioned that we're going to grow next year high single digits.
Roni Giladi: If I'm looking back two years, we almost did not grow over there. Last year we grew 4%, and this year close to 8%. And we mentioned that we are going to grow next year in the high single digits. And in APAC, which includes Asia and South Africa together, we have a nice pipeline also in APAC, and we are going to have a mid-single-digit growth also in the rest-of-the
And in APAC, and which include the APAC and South Africa together.
Have a nice pipeline also in APAC and we are going to have it.
Meet single digit ongoing and has performed with Jim and towards 2024, we mentioned that we're going to grow about seven 3% at the midpoint between 550 to 555.
Roni Giladi: We mentioned that we are going to grow about 7.3% at the midpoint, between 550 and 555. But we also mentioned, because of the transition to SaaS that we continue to do, we started this in 2023, the impact on revenue is about 1%, so overall, we are expecting to grow without this at 8%.
Also mentioned because of the transition to SaaS and that we continue to do and we started this in 2023 the impact on the revenue was about 1%. So homes along do you expect them to grow without these at 8%.
Got it that's helpful actually color on that.
Roni Giladi: That's helpful. And then, just given you guys have been experiencing a couple quarters of stronger growth, are you seeing any changes in terms of competition or win rates across, depending on whether it's Europe, North America, or APEC? Not something dramatically.
And then just given you know you guys have been experiencing a couple of quarters.
Stronger gross are you guys seeing any changes in terms of competition or win rates across Europe, North America or APAC.
Not saying something dramatically.
F N b.
Roni Giladi: We have several products, I think, in the workers' form. We are in a leading position in reinsurance. We have been in a leading position for the last few years. We are much stronger on life, and the competition is not as difficult.
We have a single product thinking they walk us Paul.
Leading position in the reinsurance world leading position in the last few years, we see much stronger on the life and the competition is not as difficult I think the area that we are seeing all the time more competition is it on the P&C and also the difference between that and also.
Roni Giladi: I think the area that we are seeing more competition all the time is around the PMC, and also the difference between North America, there are many players, but in Europe, the majority of North America is Guidewire, and all the rest is more local companies like RGA or Killian and so on, all local in Asia. More competition on the PNC, all the rest is more or less the same, or even Sapiens is in a better position than it was in the past. That's helpful.
America, it's and many players but in Europe is majority of North America, Guidewire and all the rest is more of a local company like a L. G. A R killing them, so oh locality main Asia. So.
More competition on the on the P&C all the rest is all of the.
More even sapiens in better position than it was at the past.
Got it that's helpful. Thanks, guys.
Roni Giladi: Thank you, guys. The next question is from Alexei Gogolev of JPMorgan. Please go ahead. Hello, everyone.
Thank you.
The next question is from Alexia <unk> of Jpmorgan. Please go ahead.
Hello, everyone.
Thank you for the question I was wondering if you could disclose.
Alexei Gogolev: Thank you for the question. I was wondering if you could disclose the number of customers that are on the cloud. I seem to recall that at the end of 2022, you're saying there are about 120 customers on the cloud. Any updates on that number, please? We probably have an additional 20-plus customers on the cloud as of today. We do not have the exact number, but it's probably close to 1,000.
The number of customers that they're on the cloud they seem to recall that at the end of 2022, you were saying there about 120 customers on the cloud.
Any update on that.
Okay.
But I believe that we should not only additional 2020 plus the customer on the cloud.
And what do you do not have the exact number but its probably close to one system.
Rami: Thank you, Rami. And now that you're disclosing ARR, would you be able to say what the share of cloud customers in ARR is? The vast majority of ARR is customers that run the cloud. And I also wanted to ask you about PMT. In North America, I recall that back in 2022, you were saying... that in the contribution of TMT North America, $50 million.
Uh-huh perfect. Thank you Rami and stuff.
Now that Youre disclosing air or would you be able to say what is the share of cloud customers and there are.
Now that Youre disclosing air or would you be able to say what is the share of cloud customers and there are.
The vast majority of the Anr.
Any customer that's on the cloud.
Oh perfect.
I also wanted to.
I ask you about P M T.
In North America.
Back in 2022, you were saying contribution of PMT and North America was about.
Dollars.
Any update on that.
Alexei Gogolev: Any updates on that number or perhaps how it has grown? Can you repeat the question, Alexei? The PNC has... Yeah. Cheryl Piazza.
Or perhaps how it has grown.
Yeah.
Can you repeat the question Alex thing.
The PNC.
Yeah sure of P&L Okay.
Rami: OK. Great. Good. In North America, we have three product lines beside workers' comp. It's also P&C, but we categorize it differently. We have what we call Cost with Life, and we have NPL. It's a company that we acquired. And then we have, I think it's very old.
North America.
It also medical we have there are three product lines decided to walk us problems. It's also P&C, but we categorize in defense, we have what we call course with life and we have a good day N P&L. It's a it's a company that we acquired and then we have a I think they'd say all.
Rami: So all of this is more than what you mentioned in terms of revenue. And so all this business continues to grow. It was a couple of years of slowing down based on many delivery challenges and to complete develop our product suite.
So all of this is the more than what you mentioned in terms of the revenue.
And the and so.
So all these business continue to grow it was a couple of fields of slowing down based on the many delivery challenges and to complete to develop our product suite.
Rami: Just a quick reminder, in the core suite, we acquired Storm River for many years, and then we acquired Adaptic, and then we integrated and built ourselves our digital, sorry, billing system. So to get all of this done, we decided to go back to the market. We signed 22 deals last year, and we hope to see more business this year. Thank you, Alex. Just to clarify, is PNC North America growing faster than overall North America? We are not providing by-products in the region.
Yeah, just a quick reminder, in the core suites, we we acquire their menu. So strongly there and then we had quite a dump seeking than we used to get didn't build all sorts out.
Did you thought they're totally a billing system. So together all of this done we we decided to go back to the market, we signed a 22 days.
Last year, and we hope to see them all business this year.
Thank you Alex so just to clarify.
PMT in North America growing faster than overall North America.
And level.
We're not providing by product in the region.
Rami: The overall life of the company today is going slightly higher than the P&C, but this is an overall global company. Okay, thank you all. Thank you. The next question is from Chris Reimer of Barclays; please go ahead. Hi, thanks for taking my questions and congratulations on the strong results. Honestly, most of my questions have been answered already, but I did want to ask if you could touch on something related to the 2024 strategy you mentioned. Select an expanded user I was wondering if you could just elaborate a little more on that, how you expect it to play out, and how it may be different from what you've already done. Okay, I will try to answer.
The only thing on the life and the company today is slightly higher than the P&C, but this is the overall mobile company.
Okay. Thank you thank.
Thank you.
Thank you.
The next question is from Chris Reimer of Barclays. Please go ahead.
Hi, Thanks for taking my questions and congratulations on the strong results.
Honestly most of my questions have been answered already but I did want to ask if you could touch on relating to the 2024 strategy you mentioned.
Select and expanded use of anti <unk> I was wondering if you could just elaborate a little more on that how you expect it to play out and how it may be different from what you've already done.
Right.
Okay.
Try to answer them.
Rami: Sapiens business model for many, many years that we are developing our own product, doing the implementation and then doing the cloud services. What we and most of our competitors are doing, the majority of product, in some cases they are doing part of the delivery and they are sharing with the SIE. We made a decision not today, like in the last one or two, but right now we did some, increased the seriousness of this decision, first as I mentioned we hired a dedicated, very senior person, she came from the competitors and helping us to build the SI partnership and she's not alone with somebody else, that's one, we also believe that our product is mature enough to work with SI and right now we are in the selection to see who is the right partner for us because we don't want to work with.
Second visit small data for many many years that we are that we are developing our own product implementation and then those of cloud services.
What we are and the most of our competitors saw doing the majority of product.
In some cases, they are doing part of the delivery and sharing with their site.
We made the decision and not today.
And the last one or two.
But right now we are we did some man.
He is a serious decision there first as I mentioned, we hired dedicated very senior person that.
She came from the competitors and helping us to build a site partnership and we choose not along the way say somebody else.
That's why we also believe that's all product is mature enough to walk we set aside.
And I thought we are in the selection and to see who has the right personal philosophy, because we don't want to work with 20 S. All you want to limited and we are now in definition.
Well to put investment so we don't plan to do it in all territory and not all the products.
Mentioned, we we are there we see that we need from them on the higher tiers.
Rami: And we also believe that in this case, the overlap will not be high because they are doing a lot of consulting and things that Sapiens didn't do in the past. And just to give you some information, in general, when Sapiens is giving offers to clients, like xMillion, the customer also has the work that he's doing by himself; it's almost one-to-one. So the SI can do this part, and we don't see huge overlap on the higher tiers.
And we also believe that in this case the overlap will not be high because that'll bring also lot of consulting and things that sapiens. They didnt do it the past and they just don't give you any information in general when seconds, giving golfer declines like X maybe on the customer also has the work.
He is doing by them since it's almost one to one so that I can do this path and we can don't see huge overlap on the high end deals.
Rami: And then we can go also to territories where Sapiens is not doing any business today, for example, France, and we can consider working with them, and in that case, we're interested in shifting more work for them because we don't have the local people. In the past, Sapiens' decision was to acquire a company, but we don't want to continue to acquire companies in every country in the world, so we decided to work with SRI. Thanks, that's a really great color, thanks for that.
And then we can go also to the to the territory.
Since he's not doing any business today is.
As an example is France and we can consider to work with them and if that's case were interesting to shift more work for them because we don't have the local people.
Sapiens decision was to acquire a company, but we don't want to continue acquiring all.
Countries in the World, So we decided to work with us.
That's really great color thanks for that.
Now if you could just touch on the gross margin expansion given the transition you mentioned key to products.
Uh-huh SaaS offerings.
Rami: Also, if you could just touch on the gross margin expansion given the transition you mentioned to the products, and whether there are SaaS options. Do you expect any change to the gross margin? Yes, so due to the transition that we mentioned, moving to SaaS subscription and shifting from post-production services to subscription, or some high value to the subscription coming from the implementation. Obviously, we are going to see a slight increase in the subscription gross margin, with all that in post-production revenue growth margin going up and 2% of the implementation pre-production revenue going down. Overall, blended, it's about 50 basis points down.
Do you expect any change to the gross margin I think it was previously you noted that it was.
50 to 66 recurring a segment.
Yes, so due to the transition that we mentioned move into stuff subscription.
And shifting some possible directions services to a subscription or some high value to the subscription coming from the implementation of.
Obviously, we are going to see a slight increase in the subscription gross margin.
The lawyer lost margin on the implementation of the one time.
One time, raising the production revenue.
The impact is about <unk>, 2% on the.
Or that can be pulled in post production revenue and gross margin going up and 2% of their implementation and production delays in new drilling down. The overall blended is about 50 basis points down.
Rami: At the same time, we are constantly doing all the time improvement in the company in terms of offshore product maturity, and we are thinking that we'll be able to offset this decrease with the efficiency that we mentioned. Thanks a lot. 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 for more questions.
At the same time, we are doing all the time improvement in the company in terms of offshore product maturity and we are I.
Thinking that we'd be able to offset this decrease with the efficiency that we mentioned.
Got it.
Thanks, a lot that's it for me.
Is there any additional questions. Please press star one if you wish to cancel your request. Please press star two please standby, while we poll for more questions.
There are no further questions at this time before I ask Ms. Cohen to go ahead with her closing statement I would like to remind participants that a replay of this call is scheduled to begin in two hours in the U S. Please call 1888.
Operator: There are no further questions at this time. Before I ask Ms. Cohen to go ahead with her closing statement, I would like to remind participants that a replay of this call is scheduled to begin in two hours. In the U.S., please call 1-888-269-0005. In Israel, please call 03-9255-938. And internationally, please call 9723-9255-938. Ms. Cohen, would you like to go ahead with your closing statement
2690005 in Israel. Please call 039 to 55938 and internationally. Please call 972 399 to 55938, Mrs. Cohen would you like to go ahead with his concluding statement.
Yes. Thank.
Yapa Cohen: Thank you for joining the call today. Please note that Sapiens will participate in the Needham Technology Media and Consumer Conference on May 14 and 15 in New York City. We look forward to speaking with you soon and are always happy to answer any follow-up questions. And thank you again for joining us. Thank you. This concludes the Sapiens International Corporation 4th Quarter 2023 Results Conference Call. Thank you for your participation. You may go ahead and disconnect. Thank you very much.
Thank you for joining the call today. Please know that sapiens will participate in the Needham technology and media and consumer conference on May 14.
15 in New York City.
Look forward to speaking with you soon and are always happy to answer any follow up questions.
And thank you again for joining.
Thank you. This concludes the sapiens International Corporation fourth quarter 2023 results Conference call. Thank you for your participation you May go ahead and disconnect.
Okay.
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Yeah.
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