Sapiens International Corporation NV (SPNS) 2005 Q2 法說會逐字稿

Ladies and gentlemen, good morning. And welcome to the Sapiens quarterly conference call. [OPERATOR INSTRUCTIONS] Later we will conduct a Q&A session. Today's call is being recorded. Hosting today's conference call is Sapiens's President and CEO, Yitzhak Sharir. Yitzhak is joined by Elior Brin, 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 & Exchange Commission. I'd now like it turn over the call to Yitzhak Sharir. Please go ahead.

Thank you. Though we report a slight decline in our revenues, this quarter represents a significant improvement in reducing our losses. We continue the effort of turning the Company around with the hope to continue the improvements going forward. We will come back later with more details. And in the meanwhile, I'd like to turn the call over to Elior, who will review the financial results for the second quarter of 2005. Elior, please.

Thank you Yitzhak. For the second quarter of 2005, the Company posted revenues of 9.6 million, compared with 10.1 million for the first quarter of 2005. Decline in revenue relates mostly to our additional line of business. Where long term projects have been successfully implemented and as a result, we face reduced revenues there. Gross profit increased to 3.8 million from 3.5 million. And gross profit margin increased 40% from 35 - - sorry increased to 40% from 35% in the previous quarter. We reduced our operating costs to 1.3 million from 2.3 million in the first quarter, an improvement of 43%.

As we predicted last quarter, we significantly reduced our operating loss. This was achieved as a result of the restructuring and worldwide cost reduction process we underwent in the first quarter of the year. This also helped us to achieve positive operational cash flow in the quarter. Net loss for the second quarter was reduced to 1.7 million compared with 2.6 million in the first quarter, an improvement of 35%. That concludes the financial review. Back to you.

Thank you Elior. As I've indicated, I'm not very happy with the decline in our revenues. But we should all be encouraged by the fact that we have improved our financial results and demonstrated the early signs of successful penetration into the insurance marketplace. In reviewing the operations, we are very proud about the contract signed with Texas Farm Bureau in the U.S. for a gradual full implementation of INSIGHT for Property & Casualty. Being selected by this new customer is a strong sign of confidence that already supports our selling efforts.

Our pipeline in the U.S. is strong and we hope to be able to win additional new contracts in the near future. In the UK, we have recently announced two contracts with long-time customers, outsourcing the maintenance and enhancements of their mission critical systems. We are working together with the other European subsidiaries in France and Germany on several nonEuropean contracts. We hope to be able to announce the successful closure of new and significant business. In Israel, we continue the efforts of delivering the signed contracts in the insurance Life & Pension space while participating in several major bids for both pension and property funds.

We believe that Sapiens INSIGHT for Life & Pension is currently the best and potentially only available solution in Israel to support all regulatory requirements as mandated by the Basel(ph) Committee Accord. In addition to the activities in the countries where we are present, we have expanded our selling efforts into new selected territories. And are currently active in advanced bids in two such countries. We're very encouraged by the growth in revenues from insurance customers, the strategic focus of our business and the strengthening and overall improvement in our pipeline. To me, the growth in insurance revenue is the most important achievement of this quarter. We continue to believe that this focus will become the growth engine for our business in the future.

Despite the given constraints and operational pressures, we continue to invest in and make significant progress with our insurance INSIGHT solutions. The richness and functionality, the unique agility, enabling very fast adherence to any change requirements. The growing recognition of industry analysts and more than anything, the new insurance customers joining; make the so much desired turnaround achievable. We must understand, however, that the turnaround is still resources and time-consuming. And we are, therefore, expected to be patient and supportive of this outstanding effort.

I take this opportunity to thank my colleagues employees, our worldwide customers and our shareholders for their continuous support. I also take this opportunity for a special thank to Formula, our major shareholder, for its recently announce equity investment in the Company. At this point, we would be pleased to take your questions

[OPERATOR INSTRUCTIONS] There are no questions at this time. I'd like to remind the participants that a replay of this call is scheduled to begin two hours after the conference. In the U.S. and Canada, please call 1-866-276-1485. Actually now I see that there are questions. One moment, please. We will take a question from [Elieza Cohen]. Please go ahead sir.

Yes. Could you please tell us how would be the next quarter, please, and how will it look like three months from now?

As we have done throughout recent years, we are trying to avoid forecasting predictions going forward. The visibility of what we do is sometimes is not certain. And I, therefore, with your permission, would prefer to continue and do and work as hard as we can in order to improve. But at this point wouldn't have a prediction of how the results would look the next quarter and how it would look in two months from now.

Would it be easier if I spoke of a year from now instead of one quarter?

In certain aspects it would but it doesn't change the substance. We would prefer to avoid at this point forecasting. And as I said, continue to adhere to the working plan.

Thank you. We will now move on to [Nisan Ben Ibhraim of Ramco]. Please go ahead, sir.

Hello, actually, it's actually [Yanir Fa] from Ramco speaking. I was happy to read in the comments you gave that positive operational approach cash flow this quarter. Since Sapiens had net loss of $1.7 million, I was wondering what made the positive cash flow possible? Thank you.

What we have is indicated is operating - - positive operating cash flow. The - - total new cash flow was negative this time.

Okay.

Does that answer your question?

Yes. Thank you.

There are no further questions at this time. I would like to remind the participants that a replay of this call is scheduled to begin two hours after the conference. In the U.S. and Canada, please call 1-866-276-1485. And international callers please call 972-3925-5944. Mr. Sharir, would you like to make your concluding statements?

Just thank you very much to the participants and we're looking forward to better quarters to come. Thank you very much

Thank you.