Sapiens International Corporation NV (SPNS) 2004 Q2 法說會逐字稿

Good morning everyone and welcome to the Sapiens quarterly conference call.

(Operator Instructions)

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'd like to state that except for historical information, the 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'd now like to turn the call over to Yitzhak Sharir.

Hello everybody, and I welcome all participants. Quarter 2, as expected, reflecting the delays we encounter in our penetration into the insurances industry, is still reporting losses, however reduced. We are taking all measures to continue in our successful recovery.

I will come back to describe in more details the business as well as operational aspects, but first I would like to turn the call over to Yuval Hadari, our Chief Financial Officer who will review the financial results for the second quarter, Yuval.

Thank you, Yitzhak.

The company reports for the first quarter of 2004 revenues of $11.8 million, compared to $12.6 million in the first quarter of 2004. Gross profit was $5.2 million compared with $5.7 million in the first quarter of 2004 and gross profit margin was 44% compared with 45.7% in the first quarter of 2004.

The company reported an operating loss of $0.3 million in each of the first and second quarters of 2004 and a net loss of $1.1 million in the second quarter of 2004 compared with a loss of $1.3 million in the previous quarter.

Compared to the second quarter of 2003, revenues in the second quarter of 2004 decreased from $13.4 million to $11.8 million dollars. Gross profit was $5.2 million compared with $6 million in the second quarter of 2003. Gross profit margin was 44% compared with 44.7% in the second quarter of 2003.

The company reported an operating loss of $0.3 million dollars compared with a loss of $0.2 million in the second quarter of 2003. Net loss for the quarter was $1.1 million dollars compared with a loss of $0.4 million in the second quarter of 2003. Operating cash flow in this quarter was strong, positive $1.5 million dollars.

The results, as reported, show several reductions in the quarterly expense run rate, down to $13 million dollars, which will better support our future profitability.

That concludes the financial review, and back to you, Yitzhak.

Thank you, Yuval.

During the last few months, we have adopted a new and adjusted plan with the objectives to return to profitability and to accelerate our penetration to the insurance industry. The results reported today, still reflecting the delays we experience, are part of this plan and, in fact, demonstrate already the early signs of the recovery.

Despite lower revenues, we have effectively succeeded in reducing our losses as a result of cost-cutting measures taken. As indicated, our positive operating cash flow further increased to $1.5 million, reflecting our customer satisfaction and improved collection. We have signed new orders amounting to approximately $12 million, thus keeping our backlog stable.

We are making progress in all of our subsidiaries. In the U.S. we have recently announced a new contract of $4.5 million with a leading insurance company. Our pipeline in the property and casualty sector is expanding and we are now launching to market our modern medical underwriting system, the MediRisk INSIGHT.

In the U.K. we are developing our pipeline in the Life and Pension sector and are in advanced stages with several potential customers. In France, Germany and Switzerland we are in the middle of a campaign launching our Life and Pension INSIGHT, being very encouraged by the market feedback, especially in France.

In general, we have launched a new campaign to support our existing installed customer base with new technologies and improved functionality and capabilities of both the eMerge, our underlying technology, as well our Insurance INSIGHT suite of solutions for the insurance industry. The feedback is strong and we are already encountering new business.

We continue our partnership with IBM while expanding on our partnerships with EDS in the U.K. market and with CSC in the IRF modernization project. We are proud to report of being in the final stage of development in the Menora Life and Pension project, planning to be in production very soon as scheduled.

I am also proud to announce the creation of the new International Advisory Board, having prominent executives from the insurance industry on board reviewing and commenting on our strategy while supporting our penetration efforts.

We continue to push forward with the same passion and belief in our strategy, in our ability to eventually grow the business, turn profitable again and generate satisfactory growth and returns for our shareholders. As indicated in our previous conference, this process takes more than originally planned as a result of longer sales cycle and will continue to require efforts in taking our insurance solutions to market.

We are making progress and continue to believe strongly that our unique product offering and reputation of long standing for accurate and quality delivery will soon lead to orders being signed with new customers. We expect to report further improvements in the third quarter of 2004 and continue to believe that we can return to profitability as soon as fourth quarter of 2004 as a result of both growing the revenues and further cost cutting.

Today's announcement is part of our adjusted plan. I strongly believe that this is only a delay. I continue to be fully committed in leading the company's efforts together with our devoted outstanding employees. We have a much better understanding today of what is required in moving forward in our way back to growth and success.

At this point we will be pleased to take your questions.

(Operator Instructions)

There are no questions at this time.

(Operator Instructions)

Mr. Sharir, would you like to make your concluding statements?

Just to thank the participants and to wish all of us continued success, thank you very much.

Thank you.