Sapiens International Corporation NV (SPNS) 2003 Q2 法說會逐字稿

Welcome to the Sapiens second-quarter 2003 results conference call. All participants are at the present in a listen-only mode. Following management's formal presentation instructions will be given for the question-and-answer session. As a reminder this conference is being recorded Tuesday, August 5, 2003. Hosting today's conference call is Sapien's President and CEO Yitzhak Sharir and Executive Yuval Hadari, Sapien's Chief Financial Officer. I would like to say that except for historical information the matters discussed today include forward-looking statements that may involve a number of risks and uncertainties. Actual results may differ significantly due to a number of factors and risks which are detailed in the Company's most recent annual report and other filings with the Securities and Exchange Commission. I would now like to turn the call over to Yitzhak Sharir.

Thank you for joining. Quarter two showed overall important improvement in comparison with quarter one, including material decrease in our operational loss of $200,000 for the quarter. We are starting to see the fruits of our insurance strategy and I'm excited by the very positive feedback and increased interest in our insurance offerings from our prospective clients. I'm also encouraged by the positive indicators of recovery that I received from the insurance industry in general. It appears that insurance companies have already gone through their cost-cutting phase and are now looking to invest in order to gain market share and grow in line with their strategies. We are confident in our ability to drive customer profitability in the global insurance marketplace through (indiscernible) leadership and the proven delivery methodology of our innovative solutions.

Formula Systems recently acquired the majority interest and became the controlling shareholders in Sapiens International. I am proud to be part of the Formula group of companies. This vote of confidence from Israel's leading software group will allow us to extend our innovative solutions and better serve our customer base. We are committed to continuing our efforts to return to profitability, and we expect the third and fourth quarters to reflect a continued improvement in our financial results.

I would like now to turn the call over to Yuval Hadari our Chief Financial Officer, who will review the financial results for quarter two 2003, and I will then discuss our business operations and review our progress going forward.

Our financial results for the second quarter show overall improvement compared to the first quarter of 2003. Revenues increased 10 percent, 10.7 percent from $12.1 million to $13.4 million (technical difficulty) percent from $4.7 million to $6 million and the gross profit margin improved 16.5 percent from 38.8 percent to 44.8 percent. At the same time the company's operating loss declined 91 percent from $2.2 million to $0.2 million and the net loss dropped 80 percent from $2 million to $0.4 million.

Comparing this quarter's results with the same quarter of last year, revenues were $13.4 million, down from $16.3 million in the same period in 2002. Gross profit was $6 million versus 7.6 million dollars in the same period of last year. The gross profit margin was 44.8 percent while in the second quarter of 2002 it was 46.6 percent. The company (indiscernible) an operating loss of $0.2 million compared with an operating profit of $0.6 million in the same period last year. The net loss for the quarter was $0.4 million compared with a net profit of $0.1 million in the second quarter of 2002.

For the six months ended June 30, 2003, revenues were $35.4 million compared with $32.4 million in the same period of last year. Gross profit was $10.6 million while in the comparable period last year it totaled $14.5 million. The gross profit margin was 41.7 percent for the first six months of 2003 versus 44.8 percent in the same period in 2002. The operating loss for the first six months of 2003 was $2.4 million compared with operating income of $1 million in the first six months of 2002. The net loss for the period was $2.4 million dollars compared with a net income of $0.3 million in the first six months of 2002. That concludes the financial review. Back to you.

I would like to again emphasize the improvements over quarter one of this year and to thank all of our employees for the outstanding effort. In today's conference call, I have decided to share with you our significant progress in making inroads into the insurance industry and elaborate on our offerings. As I mentioned already we are encouraged by the positive indicators that I received from the insurance industry. In a study that we have recently conducted, amongst 180 American-based insurance executives on key technology issues, 44 percent of the respondents identified the top drivers of their initiatives as the following inefficiencies connected with aging systems and processes, the top IT initiatives were noted as policy administrative being one, system upgrades and consolidating and rationalizing of systems and platforms in an effort to control costs and gain market share in line with their strategies.

Our improved visibility and name recognition in this space has exposed us already to on one side, numerous quality leads from insurance companies with whom we are in advanced business negotiations and contracts phase. In addition, BPO's, business process outsourcing providers and potential partners such as IBM, Accenture and DBS.

Our new line of products for the insurance industry named Sapiens INSIGHT solution suite is gaining momentum. We were recently awarded a second multimillion dollar policy administration project from OneBeacon Insurance to extend the insurers market reach for property and casualty personal lines of their business.

In addition, Policy INSIGHT has recently been selected by IBM as the solution of choice for the property and casualty insurance market. This demonstrates IBM's continued confidence in our solutions and create an excellent opportunity for us to deliver competitive advantage to IBM's global insurance customer base.

Following an extensive business development efforts and market techniques, we have further extended our offerings in the INSIGHT family to include new solutions such as distribution channel management system for life insurance products coupled with sophisticated point-of-sale functionality. The other one is an automatic decision-making medical underwriting system that improves the consistency and turnaround time in underwriting reducing significantly the underwriting handling cost. Both of these solutions were taken already to market and were exceptionally well-received.

The increased interest in our INSIGHT solutions suite primarily from the U.S., Canadian, Israeli and European prospective customers is an evidence for the market's need for such robust, flexible suite of solutions. The health insurance companies that control costs and modernize their systems.

I would like to take now the opportunity and follow-up with you on the reverse stock split that we have carried out recently. Following a notification from the NASDAQ about a potential delisting of our stock we took a series of actions culminating in a 1 for 5 reversed stock split. As a result we were recently notified by the NASDAQ stock market that Sapiens has met all of the conditions required by the listing qualifications panel and that our common stock will continue to be traded on the NASDAQ national market.

I would like also to expand on the interest in Sapiens as acquired by the Formula Systems. In March 2001 Formula System invested $10 million, received an option to invest an additional $10 million into the Company in return for convertible redeemable preferred shares. In October 2002 Formula has accelerated it's option and invested an additional $10 million and during the first half of this year Formula purchased another portion of Sapiens common stock giving it a majority shareholder position. We are proud of being part of the Formula group and see their majority interest as a strong vote of confidence in our strategy that will allow us to extend our innovative solutions, to better serve our customers in large, specifically in the insurance marketplace.

In summary we are committed to continuing our efforts to return to profitability. We expect the third and fourth quarters to reflect continued improvement in our results. I thank you, and at this point I would like to conclude my presentation and open the question and answer session. Operator?

(CALLER INSTRUCTIONS) There are no questions at this time. I would like to remind participants the replay of this call is scheduled to begin two hours after the conference. In the U.S. and Canada please call 41-866-500-4964. In Israel please call 03-925-5936. Internationally call 972-3925-5936. Would you like to make your concluding statement?

Just to thank everybody for their participation.

This concludes Sapiens second-quarter 2003 results conference call. You may go ahead and disconnect.

Thank you.

(CONFERENCE CALL CONCLUDED)