Sapiens International Corporation NV (SPNS) 2003 Q4 法說會逐字稿

Welcome to the Sapiens quarterly conference call. (OPERATOR INSTRUCTIONS). Today's call is being recorded. Hosting today's conference call is Sapiens' President and CEO, Yitzhak Sharir. Yitzhak is joined by Yuval Hadari, Sapiens' Chief Financial Officer.

Before turning the call over to Sapiens' management, I would like to state that except for historical information, matters discussed this morning 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. Please go ahead, sir.

Thank you, very much. 2003 was a difficult year, perhaps the most difficult that Sapiens has experienced recently. We did not meet a number of our internal objectives. We underestimated the difficulty of the transition from being a provider of technology to being a provider of business solutions to the insurance industry. However, we have now reported profits for the second consecutive quarter, improved the Company's profitability, reduced significantly our yearly net loss and improved our cash position.

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

Thank you, Yitzhak. Our financial results for the fourth quarter of the year 2003 reflect in large part the difficult prevailing market conditions we faced. Compared to the previous quarter of 2003, the Company reported marginal but continuing improvement in the fourth quarter of 2003. Revenue increased slightly from $13.4 million to $13.5 million, while gross profit increased 4.5 percent from $6.4 million to 6.7 million. The gross profit margin improved 4 percent from 47.7 percent to 49.6 percent. The Company reported operating income of $0.5 million in the fourth quarter of 2003 compared with operating income of 0.3 million in the previous quarter, and net income of $0.15 million compared with net income of $40,000 in the previous quarter.

Compared to the fourth quarter of last year, revenues in the fourth quarter of 2003 decreased by 15.3 percent to $13.5 million from 15.9 million, reflecting the elimination of nonstrategic, low-margin service revenues. Gross profit margin rose to 49.6 percent compared to 42.7 percent in the same period of last year. Operating income amounted to $0.5 million compared with an operating loss of $2.4 million in the same period of last year. The Company reported net income of $0.15 million compared with a net loss of 5.9 million in the same period of last year. As for the year-over-year comparison, total revenues forth 2003 decreased 19.3 percent to $52.3 million from 64.8 million in the year 2002. The Company's gross profit margin increased to 45.3 percent compared with 44.3 percent in 2002, reflecting marginal but continued improvement in the revenue mix, project (ph) delivery and the improved utilization of our professional services, which (ph) (indiscernible). The operating loss decreased to $1.5 million from 1.6 million last year and net loss decreased to $2.2 million from 5.2 million in last year. That concludes the financial review. Back to you, Yitzhak.

The fourth quarter, as indicated, was our second consecutive profitable quarter with an improvement of 65 percent in operating income compared with the previous quarter. Year-over-year, we have succeeded in significantly reducing our net loss by 58 percent, coming to $2.2 million compared with $5.2 million in last year, and this is despite the decline in the Company's revenues. The decline in the revenues stems from several factors. 2002 was a year in which Sapiens carried out upgrades to its technology, and finished projects, such was the Euro conversion activities, which were not repeated or replaced in 2003. The Company also abandoned nonstrategic low-margin lines of businesses, primarily in France and Germany.

At the same time, the Company managed to reduce costs across the board by several means. We carried out the termination of employment of personnel at all levels, and lowered the expense run rate in all areas of the Company. Steps were taken to make the Company more efficient, thus not only reducing costs, but improving delivery of projects (ph) and services. Our cash position and liquidity were improved by the successful offering of about $17 million of convertible debentures in the Israeli market. We are grateful for the confidence in Sapiens, demonstrated by the financial community and the Israeli public.

We came through 2003 more experienced, more knowledgeable and with better defined plans. We look ahead to a year in which we will progress with our strategic plan in servicing the insurance market. We will continue with the current offerings of the Sapiens INSIGHT suite for policy administration and Life Closed books, while launching new solutions in the areas of life and pension, medical underwriting and channel management. We are strengthening our insurance domain expertise and our working relations with strategic partners and associates, primarily IBM. We are establishing an insurance vision board, composed of prominent figures from the industry at the top executive level of world-class insurance companies. This by itself is another great vote of confidence that we are very proud of. At this point, we would be pleased to take questions.

(OPERATOR INSTRUCTIONS). There are no calls at this time. I would like to remind listeners that a replay of this call is scheduled to begin two hours after the conference. In the U.S. and Canada, please call 1-866-500-4964. Internationally, call 9723-9255-938. Mr. Sharir, would you like to make a concluding statement?

To thank, very much, all of our participants. Thank you. Bye.