Sapiens International Corporation NV (SPNS) 2017 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Sapiens International Corporation Second Quarter 2017 Results Conference Call. (Operator Instructions) As a reminder, this conference is being recorded, August 7, 2017. It is now my pleasure to introduce your host, Mrs. Yaffa Cohen-Ifrah, Sapien's CMO and Head of Corporate Communications. Thank you. Mrs. Cohen, you may now begin.

Thank you, and good day, everyone. Our quarterly earnings 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 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 applies 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 views or expectations or otherwise.

Also, during the course of today's call, we will refer to certain non-GAAP financial measures. A reconciliation schedule showing GAAP versus non-GAAP results have been provided in our press release issued before the market opened this morning.

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

I will turn the call over to Roni Al-Dor, President and CEO of Sapiens. Roni?

Thank you, Yaffa, and good morning, everyone. Thank you for joining the call today. Sapiens reported its second quarter results with double-digit revenue growth driven by mix of organic growth and M&A from our recent acquisition of StoneRiver, Inc.

We witnessed growth across the U.S., U.K., rest of Europe and South Africa. We remain very excited with StoneRiver acquisition, and we have made solid steps in combining our 2 organizations. Today, we have fully merged each StoneRiver division with its peer division at Sapiens.

We also merged all our U.S. P&C activity into one group. We have integrated the sales and marketing organization into one, while adding account managers to grow our business with existing clients. As of now, all corporate function and back office operation are fully integrated.

The StoneRiver acquisition was strategic for us. It significantly expanded our presence and scale, both in North America insurance market and globally. It helped us to grow our customer base, and it added complementary and core solution to our portfolio.

Today, Sapiens is positioned as the leading innovating software solution provider offering end-to-end solution to the global insurance industry, while creating greater value for our customers and shareholders. I would like to emphasize that one of our key assets today is the 400 customers that we support in services.

Our long-term relationship with our combined customer base will give us a great opportunity to leverage and cross-sell our extended suite of solution and components to address these customers' needs and requirements. I would like to note that while this process has just begun, we're already seeing our clients' interest in expanding their system and capabilities with our newly expanded offering.

Turning to the quarter, we reported revenue of $69.2 million, up 30.4% over the second quarter of 2016 and reflecting a full quarter contribution from StoneRiver. On the deal front, as we mentioned previously, we have already gained a new customer with our StoneRiver offering. The Catholic Order of Foresters has selected StoneRiver's LifeApply, electronic application and signature; and LifeSuite, cash flow and automated underwriting software solution.

In addition, as previously announced, during the quarter, we were selected by a leading Nordic insurer for modernization project worth over $30 million. The new significant customer selected a wide range of Sapiens solution to modernize its environment including the Sapiens' P&C solution, IDIT insurance suite of policy, claims and billing; the Sapiens Reinsurance suite of product; and Sapiens INTELLIGENCE and Sapiens PORTAL components of the Sapiens Digital Suite.

Further, the insurance processing environment will be managed via Sapiens' hosted services, leveraging Microsoft Azure cloud environment. Beyond our new business, EuroLife, a leading life insurance company based in Cyprus, specialized in life, accident and health insurance, went live with Sapiens ALIS to replace the company's legacy environment and support all of its line of businesses. Also we are now in production with StoneRiver's CompSuite Policy system with a specialty program manager in the Southeast U.S.

This customer selected CompSuite to support its rating and policy insurance for their Professional Employer Organization, PEO, a program that specializes in workers' comp. Implementation took just 6 weeks from kick off to production with specialty program manager processing policies in 47 states in the StoneRiver hosted environment.

On the product front, after the end of the quarter, we announced that we enhanced our life insurance offering with general availability of Sapiens ALIS 7, suite for life, investment, health and annuity providers worldwide. The new ALIS suite enables insurer to onboard and administrate individual, group and employee benefit business, and support multiple line of businesses for life, investment and saving, annuity and medical products.

From a single unified platform, the new version also features full pre-integrated to Sapiens Digital Suite, including agent and customer portals, data warehouse and Sapiens' advanced analytics solution.

Also after the end of the quarter, we announced that we intend to leverage Microsoft's 2 new data centers for its cloud-based services in South Africa. We believe the Sapiens partnership with Microsoft Azure together with our robust presence in South Africa and our innovation technology will enable local insurance to benefit from end-to-end cloud-based solutions.

South Africa is a region with a great growth potential for us. I would like to remind you that during the first quarter, we announced that Alexander Forbes, the pan-African financial services group, selected Sapiens for our full portfolio, including Sapiens ALIS, Sapiens IDIT, Sapiens Reinsurance together with the Sapiens PORTAL and Sapiens INTELLIGENCE and Sapiens DECISION to manage its business process.

Sapiens will also serve as a primary implementation partner under a single delivery organization. This representative of the increased interest we see in our implementation services from both current customer and prospects.

In addition, as part of our end-to-end strategy, we expand our services offering to customer and prospect beyond just core system implementation services. Our professional services offering now include program management, business transformation, training and self-sufficient condition, testing services, complete data migration, business and technology consulting services and a broad range of managed and hosting services.

Our offering are based on our strong industry expertise. Our insurance practice team is a global team with local specialization capabilities in all of our main territories, the U.K., U.S., Nordic, South Africa and Asia. Our strong implementation expertise enable us to expand our knowledge and improve with very new project to successfully deliver a complex program. This combined with our strong product technology are enabled for successfully delivery and long-term partnership with customers.

As previously announced, during the quarter, we continued to be recognized by outside professionals for our industry-leading offerings. StoneRiver was named among this year's top 10 policy administration solution provider, by Insurance CIO Outlook magazine. This is the second consecutive Insurance CIO Outlook, top 10 appearance for StoneRiver having being named top 10 claim processing and management solution provider in 2016.

Further, our own customers are being recognized for their own effort to upgrade their system and process. COUNTRY Financial received the Novarica Research Council Impact Award for the core systems and was recognized for the business impact of its underwriting automation initiatives.

To conclude my portion, following our announcement in April regarding the halt of the software development project with significant customer, we're happy to announce that Sapiens has reached an agreement in which neither party will have any further commitment or to claim to or against the other party with respect to the project.

In addition, under the terms of the agreement, Sapiens retains all rights, title and interest in and to any old intellectual property rights in the software development as part of the project as well as the right to sell and install the platform without any limitation.

So to summarize the second quarter, we posted a solid quarter highlighted by double-digit revenue growth, driven by a mix of organic growth and acquisition of StoneRiver. We won new customers and expanded our business with existing customers across all territories. We believe we are on track for the second half of 2017.

I would like now to turn the call over Sapiens' CFO, Roni Giladi, to discuss our financial results and outlook for the second half of 2017.

Thank you, Roni, and good morning, everyone. Revenue in the second quarter was up 30.4% from the second quarter of 2016, mainly due to M&A from our recent acquisition of StoneRiver and our organic growth. Also please note that our second quarter results reflect a full quarter contribution from StoneRiver.

If we analyze our organic growth this quarter on a constant currency basis, excluding the non-core revenue that we decided to deemphasize in APAC, our organic growth rate this quarter would have been 4%, despite the significant impact of the lost revenue due to the halt of the software development project. Without the impact of the lost revenue due to the halt of the development project, our organic growth rate would be above 15%.

Moving to our geographic breakdown. Our revenue in North America grew and represents 41% of our total revenues, following the StoneRiver acquisition and despite the lost revenue due to the project cancelation. Europe and South Africa grew following their extended soft deal and other deal we signed this year in those territories. APAC revenues declined following our strategic decision to deemphasize non-core revenue in that region, and we will see continuous decrease in the coming quarters.

Moving to gross profit. Gross profit this quarter totaled $26.4 million compared to $22.7 million in Q2 of last year and $20.5 million in Q1 of 2017. Our gross margin this quarter was 38.2%, down from 42.9% in the second quarter of last year and up from 36.2% in the prior quarter. The increase in gross profit dollars versus last year was mainly due to StoneRiver consolidation.

The gross margin decrease this quarter compared to last year was mainly due to additional investments in our offshore capabilities in India and Poland to support future growth. training of the employees we shifted from the halted project to other line of business and the currency exchange rate impact. On a constant exchange rate, gross margin this quarter would have been higher by approximately 200 basis points, reaching 40%.

Moving to operational cost. Our investment in R&D and SG&A grew during the second quarter. R&D expenses in the second quarter of 2017 totaled $10.8 million compared to $5.4 million in the second quarter of 2016 and $7.3 million in the prior quarter. The increase in R&D expenses this quarter compared to the second quarter of 2016 was the result of the full quarter consolidation of StoneRiver and our investments in the development of new capability for Sapiens ALIS.

We completed the elevated investment in ALIS capabilities and launched the new enhanced version 2 weeks ago, and expect to see a reduction in ALIS R&D investment in the coming quarters. SG&A expenses totaled $12.4 million compared to $9.9 million in the second quarter of last year and $11.5 million in the prior quarter. Most of the increase was due to the full quarter consolidation of StoneRiver.

Our operating income totaled $3.2 million or 4.7% operating margin compared to $7.4 million or 14% operating margin in the second quarter of 2016 and $1.7 million or 3% operating margin in the prior quarter. The reduction in operating margin is primarily due to the reason we mentioned above, coming from the reduction in gross margin and the increase in R&D expenses. If we assumed a constant exchange rate during the period, our operating margin would have been approximately 300 basis points higher, reflecting 7.7% compared to 4.7% reported margin.

We improved our operating margin compared to the first quarter and compared to our guidance that was 3% to 4%. We believe we're on track for continuing the improvement in our operational profitability.

I would like to provide some more color on how we plan to reach our margin targets for the second half of 2017. Starting the end of Q1 and during the second quarter, we implemented cost saving and efficiency initiatives that will help us to reach of our operating margin goals, and we saw month after month margin improvement during that period.

On the business level, as Roni Al-Dor said earlier, we have fully merged each StoneRiver business division with its peer division at Sapiens. Following the software development project cancelation, we realigned the organization and reassigned the employees away from the canceled software development project to other growing vertical and also downsized our workforce as necessary.

On the delivery side, we recognized synergies and integration between Sapiens and StoneRiver. And we began the offshore program with Sapiens' capabilities to drive additional efficiencies in StoneRiver.

On the R&D, we are reducing the R&D investments going forward following the completion of the development effort for the ALIS group capabilities. We integrated each of the sales and marketing organization of StoneRiver and Sapiens into one organization. All our corporate function and back-office operation, including IT, finance, legal, HR and purchasing are now fully integrated after cost savings.

We completed the planning of the restructuring and integration plan of Sapiens and StoneRiver. We're now executed major portion of our plan. However, during the second quarter, we did not complete the deemphasize of our non-core activities in APAC. We expect to complete it by the end of the year.

Initially, we anticipated total restructuring costs to be up to $5 million. Please note that in the second quarter, we reported $3.9 million restructuring costs and the remaining balance will be recorded during the second half of the year.

Our adjusted EBITDA this quarter totaled $4.2 million reflecting 6.1% of total revenue for the quarter. Financial expenses this quarter totaled $709,000 compared to financial income of $326,000 in the second quarter of 2016. The increase in financial expenses is mainly due to the interest expenses on the $40 million loan in bank debt used to finance the StoneRiver acquisition.

Tax expenses this quarter were $605,000, representing an effective non-GAAP tax rate of about 23.9%. I would also like to indicate that following our acquisition of StoneRiver, and as mentioned earlier, our tax rate is expected to be in the level of 25%. Net income for the quarter was $1.9 million or $0.04 per diluted share compared to $6.2 million or $0.13 per diluted share in the second quarter of last year.

Turning to our balance sheet. As of June 30, we had cash and cash equivalents of $46.4 million and total debt was $38 million, which was used to finance the StoneRiver acquisition. GAAP operating cash flow this quarter totaled $7 million compared to $19.1 million in Q2 of 2016. The main reason for the decrease in cash flow is the GAAP operational loss, including the restructure in this quarter compared to operational income of last year.

Earlier today, we filed a shelf prospectus and issued press release regarding our intention to raise debt. First, I would like to emphasize that the company is always seeking to diversify its source of financing in order to improve its financial flexibility. This is part of our continuous effort to optimize our balance sheet and capital structure. We're looking to raise new long-term debt, which will replace our current banks bridge debt with longer maturity and to lock in long-term interest rate.

I would like to note that our goal is to strengthen our balance sheet and to provide additional working capital to support our customer development needs in addition to continue to pursue M&A business opportunities we'll see a head.

Although we continuously look for M&A opportunities, according to our strategy, we do not currently have any plan for additional major M&A activity. We are currently primarily focused on the integration of StoneRiver.

I would like to turn now to our guidance for 2017. We reiterate our annual guidance for 2017. We expect revenue between $265 million and $275 million, representing annual revenue growth rate of 23% to 27%. Sapiens also expect its full year operating profit margin to be between 9% and 10%. We expect operating profit margin to increase to 13.5% to 14.5% in the second half of the year, in each case, on a non-GAAP basis.

As I described earlier, to achieve our double-digit operating margin in the second half of 2017, Sapiens implemented a restructuring and reorganization program during the first and the second quarter of 2017. In Q2, we reached 4.7% operating margin, and we expect to reach the range of 13.5% to 14.5% in the second half of the year. Approximately 2/3 of this improvement will come from gross margin improvement and 1/3 from reduction in operational costs.

I would like now to turn the call back to Roni Al-Dor for closing comments. Roni?

Thank you, Roni. Overall, we delivered double-digit growth for the quarter. We remain very excited about the -- our acquisition of StoneRiver and its contribution to our overall businesses and addressable market opportunity. Our businesses remain strong and customer demand for our product and services remains high. We are confident that we will continue to deliver growth in 2017.

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

(Operator Instructions) First question is from my Mayank Tandon of Needham & Company.

I had a few questions for you. First and foremost, could you talk a little bit more about the revenue synergies from the StoneRiver acquisition? How are you looking at synergies from the integration? You already talked a little bit about the cost side. But I'd be interested in terms of what kind of revenue expectations you have for StoneRiver in the back half of the year. And then, of course, more importantly, in '18 as the company is fully integrated.

This is Roni. As you know, we have -- all of StoneRiver has contributed to us in several area. One of this we're doing a lot of integration on the reinsurance. So we can see a good demand in this area. The other piece is on the stream and the P&C, (inaudible) all the sales organization are selling both life and P&C, so we build a good one.

And the last one is all the life suite, including the underwriting illustration is complementary to our ALIS. So again, this is more or less in U.S., what we start to integrate is to try to bring StoneRiver product to the rest of the world. But this is start -- this is just we're starting right now.

So in that vein, how should we think about organic growth beyond '17? I know you're not giving specific guidance at this point, but what would the revenue share fee look like in '18 and beyond once the deal is fully integrated?

We believe we can see -- in the second half of 2018, we can start to see the growth also in StoneRiver part. As just to remind all of you that we are -- we have 200 new clients. Just for and as an example, in a month from now, we have a big event in the state that right now we have already 240 registered for our client conference that we can do to StoneRiver's client and Sapiens'. And all of those clients are potential clients to Sapiens' product and to StoneRiver.

But again, it takes time. We are -- we increased dramatically our account management in StoneRiver and sales. So I believe we can start to see the fruit. But as I mentioned, it takes time. But definitely those are the clients that we're looking after.

Right. And then just the same kind of questions on margins. And Roni, thank you for the details around the margin drivers for the back half of '17. But I guess the same question applies to '18. What kind of improvement can we expect from margins? Can you get back to that 13%, 14% level for the full year in '18? Is that a reasonable target at this point?

Mayank, this is Roni. Just to add on Roni comments. When we acquired StoneRiver we saw a company in decline mode in revenue, the overall figure. And the main task for Sapiens for 2017 was to stabilize the revenue. We see right now, the sign that we can achieve the target of stabilizing the revenue of StoneRiver in 2017 and, as Roni mentioned, growth in the second half of 2018.

On the margin, obviously, the entire management is focused on getting back to track on the second half of 2017 to reach the range of between 13.5% to 14.5% on the second half. And we see this for the full year of 2018, also.

Got it. Final question from me on competition. Just wanted to get your thoughts around how you are faring, especially in Europe with Guidewire becoming more aggressive in that region? And also just generally, if could talk about the competitive environment that you're seeing today versus, say, 6 to 12 months ago? How has that changed, if at all?

Yes. We definitely see Guidewire. We see them, they are trying to drop the price. As you know, we signed -- relatively to us, many deals at the beginning of the year, and we hope to sign more. I think the main -- the good -- that's the -- that's all the challenges.

What we -- we don't see a lot Duck Creek is -- again, we see them less and less, and the other we start to get a big advantage on the P&C. So we and Guidewire are definitely the leaders in the market right now. Again, it's not means that we don't see others, but we are in a very good shape.

Just to add a differentiator between us is our business model. We need to find customer -- they like our business model that we're doing also the overall solution. And we can see more and more opportunities for analytics, for digital, for managed service, for additional, additional services.

So right now, what we can start to see the competition is not just between us and Guidewire, it's between us and the big system integrator. And this is the area that we're also working to improve ourselves in all the service area. But, again, the company that's like our business model that's one-stop shop, we definitely has a huge advantage.

The next question is from Justin Furby of William Blair.

I guess, maybe to start Roni Al-Dor, just curious in terms of pipeline on the life and annuity side. I know it's early in terms of the recent release. But are there any visible signs that that's starting to impact pipeline growth? And I guess, from a product standpoint in the life space, do you feel like you have sort of everything you need now? Or is there more development or acquisitions on that front as well?

I think from a product, we did a lot of investment in the past and also the StoneRiver is a huge complementary to us. So this is in the good side. We -- as just to remind, we signed a very big tender in Alexander Forbes in South Africa. It includes big business for the life also on the group side.

So in terms of a pipeline, it's not as good as the P&C, but we put a lot of effort, also, sales and marketing effort to improve it. We did a lot of work with the analyst community -- that's listen to them for their advice. Right now, we are in a shortlist in a couple of business, we hope to sign it.

Got it. That's helpful. And then on the P&C side, in terms of where you're seeing the most activity from a geography standpoint, what regions would you call out? And then, are there any regions where maybe they're not that active today, but if you look out 6-months, a year from now, you feel like there's a lot of opportunity?

Look, the area that we [second] decided to penetrate is to the U.S. In Europe, we showed in the last 2 years huge growth on the P&C. And we believe that we continue to see the same. But Sapiens decided of mid-'16 to penetrate with the single year acquisition and then StoneRiver. In both areas, we're doing a lot of work, and we definitely will see the results.

In Stingray, we have good confidence. We stream -- it's still in early stage, but we also see potential. So the area that we -- for us is relatively new is the U.S., but we did everything in order to be there, and I hope to see the growth.

Got it. And then maybe if you look out longer term, 5 years from now, say, what do you think the mix might look like between P&C and life. And then I've got just one last follow-up for Roni G.

Okay. Right now, it looks the P&C has become a bigger part of our cake. But we plan to continue to invest on the life. Again, just to remember, the life is very stickiness business, it's hard to get new deals. But when you are there you are there for long term, a lot of new regulation. We're also doing a lot of investment on the close book area. So if you ask me 2017, '18, definitely the P&C will be -- if you think about long term, we hope to be more or less 50-50, but that's '19 and more.

Got it. Very helpful. And then, Roni G, just in terms of the currency impact, what is it for the full year on revenue that you're embedding? And then in terms of the margin in the second half, is it fair to say that Q3 will be somewhere below that 13.5% to 14.5% and Q4 somewhere there or above? Or what's the right way to think of it?

So on the currency side, we did analysis. If we compare the results versus comparable quarter, the impact on the gross profit was 2% higher and operational profit 3% higher. So significant impact on the currency side. And if you assume forward, this will be the impact, although we see -- starting to see some strength in the pound and the euro, which is in favor to us. So this is on that pound. Can you repeat the second question?

Yes. Just on the ramp in profitability in the second half in terms of Q3 being below the 13.5% to 14.5% and Q4 above it -- is that a fair way to think of it?

I think the answer for this is yes. We also saw -- when we analyze by month Q2 results, we see by month improvement, month after month. So we assume the improvement will continue like this also in Q3 and Q4. And I would say that Q4 will be probably higher than Q3. So you can do the analysis and what you assessed is right.

The next question is from Avishai Kantor of Cowen.

So my first question is, it seems that the organic growth rate, excluding the canceled software project, actually slightly accelerated sequentially. If I recall correctly, it was 15% in the last quarter, now you said it's 15-plus percent. What are the drivers? Is it from new clients, existing clients or is it initial some early signs of success from integrating StoneRiver in some cross-selling opportunities?

Avishai, this is Roni G. So first of all, you're totally right. If we exclude the strategic decision about deemphasize APAC operation, currency and the halted project, we see above 15% organic growth. I would not say that we see a trend or changing trend in the behavior of the company. If we look overall several quarters, I think it's the same. So I would say the market is still strong for our product, slightly more on the P&C, right now, life as Roni had mentioned, but overall the same.

And then where do you stand on the headcount reorganization phase following that canceled project. Is that behind us?

I would say that, first of all, in terms of the plan, we're 100% planning completed and execution I would say 90% done. I think we mentioned that most of the activities are executed. We still will have more or less [over], especially on the APAC region, but this is small part. We'll probably finish this by the end of this year, 2017. So I would say significant major part is behind us and all forward to achieve our guidance.

And then my next question, I know it's still early, and -- but do you have any initial thoughts on how do you plan or you can monetize the IP assets, which you received as part of the separation agreement?

This is a internal task that we have right now in the company, on the business development side. Obviously, we totally think there is IP, which is not reflected in the books of Sapiens. We're looking to potentially partner or to sell the IP, or to do some combination of the two. When we'll have something to announce, we'll say it. Currently, it's on plan.

And my next one. You mentioned investments in offshore capabilities in both India and Poland. I assume they are related to delivery capabilities. Are those related specifically to StoneRiver or it's a combination of both Sapiens and StoneRiver?

I would say the second line is the accurate one. Sapiens is growing. And we have a high target to increase our offshore capability in order to improve profitability in the company. The main region for offshore is India and Poland, and we are relocating the employees and management to these territories to support the growth of Sapiens.

When we acquired the StoneRiver, we mentioned that they have also offshore capabilities, but this was with a third party. And our plan is over time to shift this operation to Sapiens. So we're investing for both Sapiens and StoneRiver.

And then a completely different topic, we'll change the conversation. Can you talk a little bit about the clients' appetite for your cloud-based services, which I believe, have a higher-margin profile for the company? Any areas of strength, any areas of success that you can talk about?

The answer for that is yes. And again, when we're saying cloud, we're saying private cloud, this is very important to me to emphasize. We're talking mainly on, let's say, tier #3 and 4 customers that to provide a -- ask Sapiens to provide for them hosting environment for their product outside of their IT organization.

I can say, also, we've some starting success also in higher tier, I would say, tier #2 and 3, also, for this capability. Currently, it's more on the low tier, but we see some trend also for, let's say, tier #2 and 3.

And can you characterize the demand for that is growing? I mean, do see that?

I would say, I think, the answer for that is gradually growing.

The next question is from Tavy Rosner of Barclays.

Most of my questions were answered. So I was just wondering -- you touched a little bit on Africa where you kind of expanded physical presence and also planning on leveraging Microsoft data center there. So can you talk a little bit about Sapiens' presence in Africa? The opportunity down the road? And what you expect would be the potential revenue contribution, let's say, 2 or 3 years from now?

Okay. When we talk about South America, just to remind, we are talking about South Africa. We, Sapiens, invest many, many years, we had like a, let's say, 7 to 8 clients in South Africa. And then we penetrate with our life and annuity to one of the big bank there. That's happened like 2 years ago with ALIS, very successful client and they bring us more and more business all the time. And then we signed a big contract with Alexander Forbes.

What we are doing in parallel, it's very similar to what we're doing in Scandinavia area. We hire local people, we build an office, we hire sales, we're doing a lot of marketing event there. Just 2 weeks ago, we presented in a very big event for insurance. It's, again, like a year before. So we are shortly seeing a few areas there.

So again, we see this as a market that interest for us. It's very similar to regulation in terms of life to U.K. and English speakers. So we see a big demand there. I believe after we can deploy Alexander Forbes' third phase, we can show to the South Africa market that we're able to do what we plan to do for them, and that can bring us more business as well. So the long answer is definitely interesting market for us.

Okay. That's helpful. And the last one you mentioned in the prepared remarks, the shelf for potential debt issuance in Israel. I might have missed it in your prepared remarks. Is that to refinance the debt that you raised for the acquisition of StoneRiver?

This is Roni G. The answer for that is yes. We would like to increase our strength of the balance sheet and also for investment and for future M&A activities. And obviously, of course, we'll return the bank loan that we have right now.

(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 a replay of this call is scheduled to begin in 2 hours. In the U.S., please call 1 (866) 500-4953. In Israel, please call (03) 925-5947. And internationally, please call 9 (723) 925-5947. Mr. Al-Dor, would you like to make your concluding statement?

Yes. Thanks for you, and thank you to all participants for joining our call today. Have a good day. Thanks.

Thank you. This concludes the Sapiens International Corporation Second Quarter 2017 Results Conference Call. Thank you for participation. You may go ahead and disconnect.