Sapiens International Corporation NV (SPNS) 2005 Q1 法說會逐字稿

Good morning, everyone, and welcome to the Sapiens quarterly conference call. At this time all participants are in a listen only mode. Later we'll conduct a question and answer session. At that time if you have a question you will need to press the star followed by the one on your pushbutton phone. Today's call is being recorded. Hosting today's conference call is Sapiens President and CEO, Yitzhak Sharir. Yitzhak is joined by Elior Brin, Sapiens' new 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 would now like to turn the call over to Yitzhak Sharir. Please go ahead.

Thank you very much. As we had projected at the end of 2004, the first quarter of 2005 represents low revenues on one side and a one-time expense of restructuring costs. I will come back to describe in more detail the business and operational aspects but first I would like to welcome Mr. Elior Brin [ph], Sapiens' new Chief Financial Officer, replacing Yuval Hadari. Mr. Brin has served in the past as Chief Financial Officer of publicly traded companies such as VCON Telecommunications, Ltd., NICE Systems Ltd. and B.V.R. Technologies Ltd. Let me use this opportunity and thank Yuval Hadari, who had served Sapiens for the last 4 years and wish him success in his future career. I would now like to turn the call over to Elior, who will review the financial results for the first quarter of 2005.

Thank you, Yitzhak. For the first quarter of 2005 the Company posted revenues of $10.1 million compared with 12 million in the fourth quarter of 2004. Gross profit was 3.5 million with gross profit margin of 34.6% compared with 36.4% in the fourth quarter of 2004. The Company reported an operating loss of 2.3 million compared with an operating loss of 0.8 million in the fourth quarter of 2004. Net loss for the quarter was $2.6 million compared with a net loss of 1.7 million in the fourth quarter of 2004.

In the first quarter of 2005 we have recorded a one-time restructuring expense of 0.76 million, which increased the operational loss for the quarter. A major part of the expense is related to cost reductions worldwide through layoffs of employees and scaling down of various activities. In the coming quarters the outcome of the restructuring should have positive effects on the operational expenses. The reduction in the gross profit margin was mainly due to the change in the product revenue mix with increase in long-term project that is [indiscernible]. That concludes the financial review.

Thank you, Elior. As we had projected as I said before, at the end of 2004 for the first quarter represents low revenues as a result of the long sales cycle in the insurance industry and seasonally low first quarter revenues. In addition to that we recorded a one-time expense of close to $800,000 relating to previously announced restructuring costs. We continue to make progress globally in our selling efforts to the insurance industry. Our pipeline is expanding into various territories and we are finally seeing early signs of penetration as we gain access to new customers in the industry.

In the US we have launched Sapiens INSIGHT for Reinsurance and already are successfully generating promising leads in that domain. This effort comes in addition to our existing efforts selling our comprehensive platform for policy administration, the Sapiens INSIGHT for Property and Casualty.

In the UK we are focusing on the Life and Pensions market and are making progress in our BPO bids. BPO stands for Business Process Outsourcing. In France, Germany and Switzerland we are in discussions with potential customers in the Life and Pension space and have promising leads for the future. In Israel we continue our deployment of the various projects with a successful delivery of a Life and Pension implementation at Menora that went successfully in production. A contract with Mokeffet [ph] Pensions Fund and a new contract with Maritime [ph] Pensions Fund, all of which plan for delivery in large during 2005.

Upon introduction Sapiens INSIGHT will govern more than 70% of the Israeli Pensions market. Our insurance INSIGHT Solutions continue to gain worldwide market recognition. INSIGHT has been praised by the analysts of the industry for its innovation and has been categorized as a leading solution for the insurance industry both for Life and Pensions and Property and Casualty. In addition we continue to develop our core rule based eMerge technology bringing to our customers full cross platform portability and reduced cost of ownership. In doing that we extend our high level service to our installed customer base expanding our line of S&P [ph] offering for multi-year outsourcing of maintenance and enhancements, a few of which have been recently signed and will be announced shortly. We continue to believe in our financial projections and our plans to return to operational profitability in the coming quarters as a result of growing revenues coupled with reduced expenses. I would like to take the opportunity and express my personal gratitude and appreciation to our customers, shareholders, investors and employees for their continuous confidence and support in spite of the short-term complexity. At this point we would be pleased to take your questions.

[Operator Instructions] Our first question comes from Nesem Bahaim [ph] of Ramco [ph]. Please go ahead, sir.

This is actually Yaneef [ph] speaking. My question is what was the cash flow for the first quarter? Is it in line with the net loss?

Again, in big numbers the operational cash flow is better than the profit and loss. The over all I think is close to -- Elior, if you want to specify numbers?

Operating, the cash out was $1.5 million for the quarter.

Okay, thank you.

[Operator Instructions] There are no further questions at this time. I'd like to remind participants that a replay of this call is scheduled to begin 2 hours after the conference. In the US and Canada please call 1 866 276-1485. International callers 9 723 9255 944. Mr. Sharir, would you like to make your concluding statement?

Just thank everybody for their participation. Thank you very much and see you next quarter.

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