Sapiens International Corporation NV (SPNS) 2014 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Sapiens International Corporation fourth quarter and full-year 2014 results conference call.

All participants are present in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions). As a reminder, this conference is being recorded February 25, 2015.

It is now my pleasure to introduce your host, Mrs. Yaffa Cohen-Ifrah, Sapiens Vice-President of Corporate Marketing and Communications. Thank you. Mrs. Cohen, you may now begin.

Thank you and good day everyone. Our quarterly earning release was issued before the market opened this morning and it has been posted on the Company's website at www.sapiens.com.

Representing the Company on the call today are Roni Al-Dor, President and CEO; and Roni Giladi, our CFO.

Before we start, I would like to remind everyone that this conference call may contain projections or other forward-looking statements and the Safe Harbor provision in the press release issued today also apply to the content of the call.

Sapiens expressly disclaims any obligation to update or revise any of these forward-looking statements whether because of future events, new information, a change in its view or expectations or otherwise.

Also, during the course of today's call, we will refer to non-GAAP financial measures which we believe provides a clear view into the operational state of the business. A reconciliation schedule showing GAAP versus non-GAAP results was provided in our press release issued before the market opened this morning.

A replay of the call will be available after the call on our Investor Relations section of the Company's website or via webcast link which appears in the earning release that we published today.

With that out of the way, I will turn the call over to Roni Al-Dor, President and CFO of Sapiens. Roni?

Thank you Yaffa and good morning everyone. Thank you for joining the call on which we will provide the business update and discuss our fourth-quarter and full-year 2014 financial results.

In 2014, we clearly demonstrate the fundamental strength in our business model and our leadership position in software industry by delivering strong double-digit revenue growth.

We continue to extend our operating margin by investing both in our product and sale organization in order to reinforce foundation of our business for future performance.

All in all, it was a great year for Sapiens and I firmly believe the future is even brighter.

Our revenue growth, which was almost completely organic, came from all areas of our business widespread across geographics and from both new and existing customers.

The demand for our products and services remained strong throughout the year across all regions. We signed new contract, including Assurant and (inaudible) in our life and annuity line of businesses.

West Bend Mutual Insurance (inaudible), South Africa's largest independent insurance group, signed for our reinsurance solution. And two new top-tier financial institutions selected DECISION as their central application for managing organizational business logic and rules.

With these contract wins, we have increased our portfolio of our customer to more than 130 at the year end. Each new contract represents a multi-million dollar long-term agreement for our solution and services. We are excited to partner with this premier customer along with other we signed in 2014.

These new contract wins were made possible by coupling our insurance in the fixed (inaudible) with the state-of-the-art software and services solution, we propose to meet our customer needs.

Over the past few years, we have invested significantly in our technology to fuel our growth. That in essence has been well received by the industry and today we are selling mature, innovative and industry-leading technology. I am very proud of our progress we have made.

To maintain and extend our technological lead, we continue to make updates and product enhancements. During 2014, we have rolled a new version of each of our product.

First, our ALIS retirement services platform, our comprehensive record keeping solution for employment sponsor defined contribution retirement plan was launched in Q2 and is general available. After three years of development, one of our first customer of our retirement solution has gone live and is now in production.

The modular design of our solution is well accepted in the market to address both full blown replacement or a phased approach.

Second, we completed the technological transformation of our ALIS product and launched ALIS 6.5, is our next generation software suite. Our first customer Wesleyan has gone live and is in production with ALIS 6.5.

With IDIT, we released our last version 12.1 which is designed to increase the productivity of property and casualty insurer. With this latest release, end user experience and advanced ergonomic and more intuitive interfaces that will help insurer achieve greater efficiency across their organizations.

With our reinsurance solution, we introduced a major functional upgrade, the General Ledger Accounts module. This module feature comprehensive management of accounting aspect including P&L and balance sheet figures. Our continuous investment in innovative enhancement to our insurance product demonstrate our commitment to our customer and the insurance base.

For DECISION, we are now launching a new release that will include the new critical capability to support decision flow of any process. This capability was built in response to market demand. We also integrated KPIs, early stage consulting practice and together this make our offering comprehensive business decision management solution.

We made a significant investment in our product line to strengthen our competitive position and capitalize on market opportunities. Ongoing investment is necessary in technological industry, both to stay ahead of our competition and to feed our current revenue model.

As you may recall, earlier in this year we restructured, refocused and realigned our sales organization to place our insurance focus expert under a single business Group and position them to expand our penetration in the insurance vertical market.

We have enhanced our sales team to include supporting resource for marketing product support, business consulting and professional services. This enhanced Group is focused on new sales. We believe this structure along with the expanded sales organization position Sapiens to manage large number of opportunities than we could previously do and increase our win rate.

In addition, during 2014 we have increased our marketing effort in order to enhance the Sapiens brand. We participated in 13 leading industry event in the US and Europe and also two client events in US, one for our life and annuity customer and one for DECISION customers. We also hosted our first retirement services industry event which was well attended.

We have updated our digital brand presence with launch of new website and enhanced presence in digital media. We have also extended our leadership with the insurance industry analysts.

The combination of this industry-leading solution and investment we made in our sales and marketing teams enable us to increase our market penetration and drive top-line growth. This investment has helped us win several new customers and successfully deploy new systems.

These recent wins are now beginning to go live and these customers will serve as important and valuable reference supporting future wins.

When we look at our customer base, we can distinguish between those that have just selected Sapiens and are in the project of [great] production phases and those that have gone live and are in production.

Over 130 customers are using Sapiens solution in production as the closed system to run their business. For many years now, we have worked closely with this customer to help them maintain their system to maximize efficiency. We support them in introduction of new capabilities or expansion to additional line of business.

During 2014, we have enhanced our delivery capabilities and have also started to engage offshore facility. During this year, more than 10 customers have gone live in mobile system to production which means our solution is being used as their core operational system where they actually run their business. That's what makes a go-live such a major event for both Sapiens and customers. It is a major demonstration of Sapiens' ability to deliver and of the customers' ability to adapt and roll out a new technologic across the organization. This is the point where this customer embrace the long-term partnership with Sapiens as its partner on the road to continue business improvement.

Today, we have the most comprehensive offering in our Company's history with a wide range of solution and strong delivery in scale-up services. This will enable us effectively cross-sell within our existing customer base. To further enhance our product offering, during quarter-three 2014 we've acquired KPI, the owner of the DECISION model patent and will take Decision Management Consulting firm. With this acquisition, Sapiens now offer end-to-end enterprise solution for decision management that is unmatched in the industry and elevates our position as a leading innovator in decision management space. With the integration now complete, we are well positioned to execute our sales plan for 2015.

Looking ahead, the acquisition of additional products and capabilities that will complement our existing portfolio of offerings, increase our customer base and accelerate our growth remain an important aspect of our growth strategy.

During the past six months, we have increased our effort to find potential targets for acquisition. We have valued potential target again a set of performance in our criteria. To date most opportunities are being rejected to valuation premiums that are much higher than what we believe it is right price to pay. We remain prime and ready to execute a deal if and when we find a right one. With no gaps in our portfolio and continued organic growth, we will not be rushed into doing a deal that does not make business and financial value for the long-term prospect of our business.

In addition to our investment, we have made some managerial changes during the year and brought additional talent to our management team. Today we believe we have the management capacity and knowledge to support our future growth. It has been multi-year journey to get us where we are today. We began by increasing our R&D spending in 2014 to boost our technological lead and enhance our portfolio of offering. With the right solution in hand, we further enhanced our sales and marketing organization in 2014 to introduce this product and expand geographically. The results are evident with our double-digit top line growth and expanding operating margin.

Looking into 2015, we intend to continue investing in our software product for insurance market enhancing our offerings with the requirement functionality and business support as well as performing technological upgrades. This investment will ensure our forefront position in the insurance market maintaining superior product that contains in-debt business functionality and compatibility with market requirement as well as state-of-the-art infrastructure.

Having a wide portfolio of insurance software solution, Sapiens is currently planning on implementing an analytic or PI component, providing support for the entire insurance product suite. Focusing on widening our market reach and reacting to current business trend, we are looking in to build a fast software service operational model for part of our insurance software product.

The first model in the insurance industry is in its early stage of adoption. We believe this will further bond our customer partnership for long term. We are also aiming to further enhance our presence in our current territories while remained focused on US and Western Europe markets. The fact that we have meaningfully enhanced our local presence in our key territories enable us to be close to the customers to make sure the long-term relations. We are enjoying now benefit of this investment with our presence in these key territories and mature. And today we have over 300 employees across US and Europe.

Finally, with our strong balance sheet we are well positioned to pursue the right acquisition to improve our profitability, extend our industry leadership position and accelerate our growth. We continue to seek such opportunity. Our leading solution and our strong balance sheet enable us to meet this challenge and we are excited to build on our leadership position through select value-added acquisition.

I would now like to turn the call over to Roni Giladi to discuss the financials. Roni?

Thank you Roni and good morning everyone. The fourth quarter of 2014 was another strong quarter for Sapiens. We achieved a new high of quarterly revenue of $41.8 million and we conclude the year with a non-GAAP operating margin approaching 11.9%, the fourth quarter in a row of sequential improvement in our operating margin. I would now like to go over our quarterly results in detail.

Revenue in the fourth quarter was another record setting $41.8 million, up 15.4% from the fourth quarter of 2013. Our revenue for the quarter by type breakdown is as follows. License revenue totaled $2.4 million or 5.8% of total revenue during the quarter compared to $4.3 million or 11.9% of total revenue in the fourth quarter of last year.

Services revenue, which include maintenance revenue, grew to $39.3 million or 94.2% of total revenue during the quarter, up from $31.9 million in the fourth quarter of last year. This mix was a bit more weighted to services than we expected and we anticipate the mix shifting a bit more to license revenue in 2015. The size and quality of our current pipeline coupled with our sales investment in key market like the USA and Europe support our confidence in the expected recalibration of our mix in 2015.

As always, our business model focus is license sales and services around our product. This model enable us to be close to our customer for a very long term. The long-term stickiness of the relation with our customer allow us to present a solid high confidence and visible financial plan. As we extend our revenue from existing customer, we must increase the services revenue.

Let me now turn to the geographic breakdown of our revenue. In North America, revenue for the fourth quarter totaled $13.6 million or 32.5% of total revenue. In Europe, which includes our Israeli sales, revenue totaled $23.1 million or 55.3% of total revenue. Revenue in APAC totaled $5.1 million this quarter or 12.2% of total revenue.

Today, almost 88% of our revenue are coming from growth markets in North America and Europe which yield revenue growth across all segments of our businesses and across all geographic regions. Our Q4 revenue was impacted by the erosion of foreign currency exchange rate versus the USA dollar. If we eliminate the negative impact of exchange rate in the fourth quarter compared to the average exchange rate of the first nine months of 2014, our revenue will be higher by approximately $2 million representing 21% of growth compared to Q4 of 2013. We will discuss the impact of currency on a full-year basis when we discuss our guidance later on.

With that said, I would like to turn to profitability analysis. Our non-GAAP gross profit for the fourth quarter of 2014 was $17.5 million, up $2.6 million compared to the fourth quarter of last year.

Gross margin was 41.8%, up from 41% for the fourth quarter of last year. We managed to expand our gross margin as we moved through the year. Our overall operating expenses increased this quarter in total $11.5 million compared to $10.2 million of last year, increase of $1.3 million or 12.9%. The increase in operating expenses was mainly due to increase in sales and G&A expenses while our R&D expenses remained at the same level.

Our non-GAAP operating income for the fourth quarter of 2014 increased by 31.9% to $5 million from $3.8 million in the fourth quarter of last year. Non-GAAP operating margin this quarter was 11.9% of total revenue compared to 10.4% of last year. As we exit 2014, we are at the lower end of our expected range for 2015. I will discuss our full-2015 guidance shortly.

Our adjusted EBITDA this quarter totaled $5.4 million, an increase of 26.9% compared to $4.2 million in the fourth quarter of last year and reflect 12.8% of total revenue for the quarter, up from 11.7% for the fourth quarter of last year. We calculate adjusted EBITDA in a conservative way adjusting it also for capitalized internal use of the development cost. Please see our [PL] for detailed explanation.

Our tax benefit this quarter was $3,000 compared to tax expenses of $625,000 in the fourth quarter of 2013. The main reason for the low tax rate was reflecting today the tax benefit of one of our division carry-forwarded losses from previous years, which can be materialized in the near future. In addition, we are starting to benefit from additional tax incentive in our Israeli tax regime for one of other division. This tax benefit was offset by our ongoing global tax expenses. We expect our consolidated blended tax rate for 2015 to be in the range of 15% to 17%.

Non-GAAP net income for the fourth quarter of 2014 was $4.9 million or 46.1% increase compared to $3.4 million in the fourth quarter of last year. EPS for the quarter was $0.10 per diluted share compared to $0.07 per diluted share in the fourth quarter of last year, an increase of 35%.

Turning to the full-year result for the 12 months ended December 31, 2014, we improved our financial result in most of our parameters. Total revenue was $157.5 million, up 16.3% compared to $135.4 million in the prior year. Our revenues were in line with our guidance range reaching the high end of our range as we anticipated last quarter.

Total non-GAAP operating profit in the full year was $17 million compared to $14 million in 2013, a growth of 21.1% year over year. Non-GAAP operating margin was 10.8% for the full year compared to 10.4% in 2013. I would like to emphasize the fact that we steadily increased our operating margin throughout 2014 from 10% in Q1 to 10.4% in Q2 to 10.9% in Q3 to 11.9% in the fourth quarter of this year.

Our adjusted EBITDA for 2014 totaled $18.6 million, an increase of 21.5% compared to $15.3 million last year and reflect 11.8% of total 2014 revenue. Non-GAAP net income for the 12 months totaled $16 million, up from $14 million for the full year of 2013.

Turning to our balance sheet, as of December 31, 2014, we had cash, cash equivalent and securities investments of approximately $80.5 million. From the cash flow perspective, we generate $21.6 million in cash from operating activities in 2014, significantly stronger than the $17.3 million in 2013. Our strong cash position and cash flow generation will allow us to pursue and executive our M&A strategy to improve our growth, profitability and EPS and additional other initiatives.

Now, let me turn to 2015 guidance. We are projecting 17% revenue growth on a constant currency basis. Based on the current exchange rate and the negative impact this year has on our revenue, the projected revenue would result in approximately $174 million to $178 million.

As for profitability, we expect further operating margin expansion driven by investments we have made over the last year. Those investments included significant R&D efforts and starting last year, significant increase in our sales investment.

We are committed to continue with our R&D investment going forward and increase our investment in absolute dollar, yet our investment in R&D as a percentage of total revenue will be at lower level. In addition, we are planning to reduce our labor cost by starting to implement off-shore capability. As a matter of fact, at the end of 2014, we started to build a team in Eastern Europe, which is close to our European customer to support our growth in a cost-effective manner.

In addition, this year we are planning to add to this capability off-shore support in other low cost country such as India. We expect that this initiative we will start to have partial results during 2015 and expand in future years. This year we are also providing guidance related to our expected operating margin.

Taking the above into effect, we expect our operating margin to be in the range of approximately 12%-13% for the full year.

At this point, I would like to turn the call back to Roni Al-Dor for closing comments. Roni?

Thank you, Roni. By all accounts, 2014 was a great year for Sapiens. We consistently delivered top line growth while making disciplined investment decision for the long-term hedge of our business without compromising merging improvement.

We are listening to market demand to continually evolve and improve our products in order to expand our customer relation and capture incremental market share. I look forward to providing you with additional updates throughout 2015 as we continue to execute on this strategy.

I would like now to turn the call over to the Operator for Q&A. Operator, please poll for questions.

Thank you. (Operator Instructions).

Bhavan Suri, William Blair.

Nice job on the numbers there and obviously on the margin expansion. I guess my first question, just a touch on the overall product, you talked about sort of chasing some large deals last quarter in retirement services and hoping to close one or two of them in 2015. Any update on that and sort of how the retirement services opportunity, which is a significant opportunity, is progressing?

As we mentioned also in the past, we already complete our investment in this product. We have just updated one of our customers gone live in day one of the component eligibility. We are still talking to potential clients and as we say we believe that we have a good chance to close this this year.

This one maybe for Roni Giladi. You saw gross margins expand nicely in 2014. What drove that expansion? And then I know you are moving some of the customer service to India. But how you think gross margins looks like for 2015 too?

So as we see gross margin expanding in the several quarter, we always mentioned that our gross margin for our product are basically steady except of the life and pension area. And during the year we saw improvement quarter after quarter from this vertical and we continue to see this also in 2015 as we finish our plan going forward.

In terms of the profitability going forward, we implement as we mentioned partial offshore capability in Eastern Europe. This has a small effect in 2014. We hope to increase it in 2015. The India part probably will come to effect in mid-year and potentially it will take us also for future year 2015, 2016 and onwards. That's it.

Okay. And then despite giving gross margin expansion and nice operating margin expansion, the license number was down in Q4. Now obviously DECISION is term licenses historically, if so perpetual. Can you give us like a normalized or some sense of what growth would have been in a normalized fashion or is that too hard to do on a license basis?

Yes, we see the reduce in the license part during this quarter and even also previous quarter. This is coming to affect with several points. First of all is we get extension additionally to work with our customers or to implement our product. Obviously as we recognize the revenue over the period of time of the implementation, this is delaying some of the service for future until we go live, this is number one.

Second, I think we mentioned also in the past that in the P&C vertical with the lesser-than-expected new deal to come but we have significant improvement in terms of additional revenue from existing customer. This is also reduce the license part on this part and obviously as we continue with the seasonal term-based license, this is also affect the potential license part of the revenue. So this is the reason for the license.

We expect obviously some improvement in this category, all of them. I cannot elaborate about the percentage, but obviously this will have also impact on profitability and gross margin.

Sure, sure. And then you touched on the [SaaS] business a little bit that you might start offering a SaaS solution. Which product would you start and more importantly which module do you think would be the easiest to stand up in the SaaS offering that could then integrate with the rest of the suite that might be on premise?

We see a demand also in the P&C, on the life more in the silo approach. Just to give you an example, we have -- in the life side, we have good offering for income protection. We are the leader in UK in this area. So company that are coming and wants to implement it just this line of business instead of to come and buy from us for the whole solution, they are looking to a SaaS model to reduce their previous call investment and to start to implement it.

So we are start to build not just technologies around the business model and how to finance it. This is a new area that we see a demand. We also see another demand on the closed book, the [run-off] business that we are also in this business and it's also -- we see a demand from customers. So again it's in almost all insurance products.

We don't think that that will be a major eclipse in 2015, but I hope to see one or two client that we can see.

That's great, guys. And then one last one from me. As you look at the marketing spend that you spent this year, do you think that remains level in 2015 or do you think that tappers down along with R&D?

No, as a matter of fact we like to continue to do the investment in the sales and marketing. So we expect that at least the percentages we have right now potentially even further, but at least as percentage as we have today.

Great. That's it from me, guys. Nice job on both top line and margin. And thanks for taking my questions.

Thank you.

Mayank Tandon, Needham.

I wanted to get your thoughts on competition. Obviously as you enhance your product portfolio, you are becoming more of a factor in the market both in North America and Europe. I just wanted to get a sense, have you seen any changes on the competitive side, whether from emerging players or from some of the established players in the market?

In the P&C, we don't see any real change. GuideWell is a strong competitor to us. We see them almost in every case. But we've seen more in East Europe, we see [for that], it's relatively a small company from Bulgaria. So this is not something major change.

What we just started to see recently in the life side, we start to see Oracle. We beat them twice and we don't have enough information to share with you. We know at the past Oracle, both [had been served] and it was very quiet in the last few years. Recently based on the intelligence that we have, they heavily invested in the product and they are going to the market. They are a very strong competition in this time, at least from the price point and also for all the investment that they have.

So this is the only real new competitor we will see, all the rest is the same.

Okay, that's helpful. And then, Roni, I know in the past you've talked about leveraging systems integrator partners. I just wanted to get a sense where you are at with building those relationships to further penetrate the market opportunity. So if you could just give us some update on that front as well, that would be helpful.

Again this is also we have a lot of Russian, also a few Indian companies are coming to us. But again, this is something that we are not really see any benefit for the near future. The other area that we are doing a lot of -- again a lot of discussion right now is around the DECISION product. We are talking with not just system integrator like small (inaudible) company or value-added services that we can combine with them. So we see this is the area that we really invest. All the rest, at least in this point of time in the territory that we are running right now and this is our focus, we don't see a real change at least in 2015.

Okay. And then I guess a question for Roni, the CFO. Roni, I am sorry if I missed this but could you quantify the FX headwind that you saw both in the fourth quarter on the revenue side and in terms of margins and EPS? And then also what is embedded in the expectations for fiscal 2015?

So the effect of the currency exchange on the revenue and profitability for the fourth quarter, I think we mentioned on the revenue side was additional $2 million potential revenue assuming that the average of the first nine months would stay the same.

On the profitability, there is no impact, zero. I would like to elaborate on that, because we do not have a real match between expenses and revenue in each territory. As a matter of fact, we have much more cost in Israel versus the revenue that we have in Israel. So we also gained some decrease in cost in our cost in all the verticals costs R&D and sales. And due to that, the total result after reducing the revenue, the profit stay the same.

So the impact on operational margin was about 0.5% due to this currency. By the way, we did the same analysis for the future, meaning 2015, and this also is the effect on 2015. In terms of revenue, we mentioned that the potential growth assuming that the average currency rate of 2014 would stay the same, Sapiens will be able to grow at the rate of 17%, but due to this effect we are only reaching a level of guidance of 174 to 178.

Got it. That's very helpful, Roni. I appreciate it. I will jump back in queue if I have any other questions. Thank you.

Tavy Rosner, Barclays.

Thank you for taking my question. First on the guidance, there is quite a large difference between your underlying 17% growth rate and then the number you actually are forecasting. Can you just remind us what's your hedging policy, how can that help to kind of put back coming revenues?

So if we analyze the currency, the operating, talking about yen, euro, pound and shekels, we are basically suffering at the range of about 10%, all of them against the dollar. When we are doing the hedging, we are always hedging on the profitability not on the revenue. So obviously we have impact on the revenue side. This will come into effect in our profitability -- on the revenue, sorry, but on the profitability we are doing the net of revenue and expenses, and we are doing the hedging. Usually we are doing this beginning of the year for the full year and as we continue quarter after quarter, we increase the hedging. We are basically protecting between 70%-80% of our profitability going forward.

Okay. That's helpful. And on your guidance for the operating margin improvement, how much of that is coming from your cost cutting measures, if I could call them that way, and how much is coming from the gross margin improvement?

We do not give a breakdown like this. What I can that about 0.5%, as I mentioned earlier, is coming from the currency exchange. This is on the operational margin. I would say up to 1% is also coming from off-shore capability. You call this cost cutting, but it's even less than 1% during 2015, potentially will be higher going forward. As I mentioned, we only started in Eastern Europe and in India currently or other low cost countries we do not have. We plan to do this only in mid-year.

Great. Thank you guys.

Thank you.

Richard Baldry, Roth Capital.

As you look to move more of the expenses into lower cost areas, do you think there will be some restructuring around that as you move existing positions or is this really about as you continue to grow the overall business, more of our new hiring will come in those lower-cost areas?

No, as a matter of fact, we see the growth in the Company and the potential on this low-cost country is only for the growth. We are going to maintain our current staff and we are planning to do the growth both from our current territories and potentially from the low cost country, but continue with maintaining with our employees.

Now, if you look at the licenses, the mix changed as a percent of total revenue pretty significantly from 2013 to 2014. When we look out to 2015, can you talk about where you'd see that license mix versus services mix in 2015 or maybe it's just a long-term goal for that. And then about the quarter itself in terms of linearity, did any deals push out of 2015 or out of 2014 into 2015 that might have skewed that number for 2014 a little?

We do not provide guidance on the revenue mix, meaning license, services and maintenance. But obviously what we see right now based on the pipeline that we have based on our current estimation, we see this mix going forward. As I mentioned, we expect no deal on the P&C vertical. This is to cut slightly down this year. Potentially DECISION, as it grow, will benefit also in terms of license because it's fluctuating around the license side. And bigger deals, as Roni mentioned, on the retirement services also can influence this.

So the overall trend has increase of what we have right now. In terms of what is the mix, I cannot provide. I think that's it.

And the last, on the M&A front (inaudible), the expectations on evaluations are a little higher. Can you talk is that about competitive bidding the prices up or do you think it's more just the asking prices are elevated, but deals aren't getting done, so they are sort of just waiting for those expectations to soften, but there are still a good pipeline of opportunities? Thanks.

So obviously what we see in this market is private equities play a significant role and with the amount of cash that they have today, they have been able to offer evaluation which we think are significantly higher for what we can offer or what is the real value of the company. We are looking to play conservative and we do not want to play in any rash mode. We want to pay what we think is value to the company, also based on Sapiens. As a Company, we increased the effort to do potential M&A and we are still looking. I can say that our pipeline recently increased, but again we like to play safe on that.

Great, thanks.

(Operator Instructions). There are no further questions at this time. Before I ask Mr. Al-Dor to go ahead with his closing statement, I would like to remind participants that the replay of this call is scheduled to begin in two hours. In the US, please call 1888-782-4291. In Israel, please call 039255904, and internationally please call 97239255904.

Mr. Al-Dor, would you like to make a concluding statement?

Yes, thank you. So thank you everyone for joining our call. We will talk to you again next quarter. Thanks.

Thank you. This concludes the Sapiens International Corporation fourth-quarter 2014 results conference call. Thank you for your participation. You may go ahead and disconnect.