Sapiens International Q1 2025 Earnings Report

Sapiens International EPS Results

• Actual EPS: $0.37
• Consensus EPS: $0.35
• Beat/Miss: Beat by +$0.02
• One Year Ago EPS: $0.36

Sapiens International Revenue Results

• Actual Revenue: $136.11 million
• Expected Revenue: $136.25 million
• Beat/Miss: Missed by -$141.00 thousand
• YoY Revenue Growth: +1.40%

Sapiens International Announcement Details

• Quarter: Q1 2025
• Date: 5/8/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, May 8, 2025
• Conference Call Time: 9:30AM ET

Sapiens International (NASDAQ:SPNS) N.V. provides software solutions for the insurance industry in North America, the United Kingdom, Europe, the Middle East, Africa, the Asia Pacific, and internationally. The company provides various solutions for property and casualty commercial and personal lines, life and pensions, and reinsurance fields. It offers IDITSuite, an AI powered, end-to-end insurance software; DigitalSuite, a cloud-native, future-proof digital engagement platform; IDITGo, a pre-configured, data-enriched insurance launch and accelerator platform solutions; consultancy services for property and casualty commercial lines; and Tia Enterprise solution for customer engagement. The company also provides CoreSuite, an end-to-end cloud and digital PAS for individual and group products across life, health, wealth, and pensions; CustomerConnect, a dynamic self-service and persona-based portal to engage with insureds; AgentConnect, a portal for agents and brokers to focus on sales enablement, customer retention, and increasing customer value; and ReinsuranceMaster, a reinsurance automation software that provides insurers full financial control and flexibility over their entire reinsurance process. The company was founded in 1982 and is headquartered in Holon, Israel.

Sapiens International Q1 2025 Earnings Call Transcript

Key Takeaways

• Acquisitions of Candela and Advantage Go enhance Sapiens’ life insurance automation in APAC and add underwriting workbench capabilities for P&C specialty across London and global markets.
• Q1 revenues reached $136 million (+1.4% year-over-year; +$2 million on a constant-currency basis), with annualized recurring revenue of $187 million (+11.8%) and 79% of total revenue from recurring sources.
• Strong North America life and annuity momentum delivered multiple new platform deals, while Europe and APAC secured several go-lives and wins across P&C and life segments despite currency headwinds.
• Sapiens is accelerating its cloud migration by onboarding all new customers to its cloud-native platform and migrating existing clients, targeting over 50% cloud penetration within five years complemented by AI-driven enhancements across its core solutions.
• Raised 2025 non-GAAP revenue guidance to $574 million–$578 million (≈6% growth at midpoint) and adjusted operating profit to $94 million–$96 million (≈16.5% margin), reflecting short-term integration costs from recent acquisitions.

Presentation

[Operator]

Welcome to Sapiens International Corporation's twenty twenty five First Quarter Financial Results Call.

[Operator]

At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. It is now my pleasure to introduce your host, Yapha Koenig Frak, Chief Marketing Officer and Head of Investor Relations. Thank you, Yapha. You may now begin.

[Yaffa Cohen-Ifrah, Chief Marketing Officer & Head of Investor Relations at Sapiens International]

Thank you, operator. I want to welcome you to

[Yaffa Cohen-Ifrah, Chief Marketing Officer & Head of Investor Relations at Sapiens International]

the Sapiens conference call to review our first quarter of twenty twenty five results. With me on the call today are Mr. Roni Adore, President and CEO mister Roni Guiladi, CFO, and mister Eric Zuckerman, chief strategy officer. Following the summary of the results, we will all be available to answer any questions. Before we start, I would like to remind everyone that this conference call may contain projections or other forward looking statements.

[Yaffa Cohen-Ifrah, Chief Marketing Officer & Head of Investor Relations at Sapiens International]

The safe harbor provision in the press release issued today also apply to the content of the call. Patent 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. On today's call, we will refer to the non GAAP financial measures. The reconciliation of GAAP to non GAAP results has been provided in our press release, which was 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 is available in the earnings release we published today.

[Yaffa Cohen-Ifrah, Chief Marketing Officer & Head of Investor Relations at Sapiens International]

I will now turn the call over to Roni Arzot, President and CEO of Sapiens. Roni?

[Roni Al-Dor, President and CEO at Sapiens International]

Good morning, everyone, and thank you for joining us today for Sapiens' first quarter twenty twenty five earnings call. This quarter showcased solid operational execution across our key regions, led by continued momentum in our last business with notable strength in North America. Demand is building for our solution, and we believe we are well positioned with robust portfolio to meet the evolving needs of our clients and capture new opportunity in the market. I would like to begin by discussing two exciting strategic M and A transactions that Sapiens recently announced. Sapiens has implemented a growth strategy that includes several levers to accelerate our businesses, an important one of which is acquisitions.

[Roni Al-Dor, President and CEO at Sapiens International]

Our approach is to explore strategic M and A opportunities and target that with the fifth step in to reach its strategic objective, typically around the following areas. Adding complementary solution to our portfolio that strengthen our value proposition and adding new capabilities to our platform offering, accelerate customer acquisition, attract top insurance talent, and drive scalable geographic expansion. On April 22, we announced the acquisition of Candela, a leading intelligent automation company serving blue chip life insurance clients in a past market. This acquisition enhances the capabilities of our life platform and expands our footprint in APAC. Candela offers an end to end smart insurance automation platform along with digital services and solutions.

[Roni Al-Dor, President and CEO at Sapiens International]

The company brings 23 customers to Sapiens, primarily in the rapidly growing markets of Singapore, Malaysia, Thailand, and Hong Kong, and South Africa. With an expanded physical presence in the region, we are better positioned to accelerate penetration gains in the APAC market. With nearly thirty years of deep industry expertise and teams of over 100 employees, Candela's strong track record will serve as an important catalyst to support strategy in APAC, while providing innovative new capabilities to Sapiens' global customer base. Candela's solutions are complementary to Sapiens' life insurance platform, which we intend to leverage to enhance our life offering globally. In addition to Condela, on April 28, we announced the acquisition of Advantage Go, a leading commercial insurance software provider specializing in underwriting broadband solutions for both London market and borders global specialty and commercial markets.

[Roni Al-Dor, President and CEO at Sapiens International]

This strategic acquisition significantly enhanced Sapiens' global P and C proposition, adding cutting edge underwriting woven capabilities that address one of the most critical challenges in the P and C industry today, managing, assessing and writing risk more effectively. Our analysis shows that this market segment is rapidly growing across both North America and EMEA in correlation with insurers need to improve their risk management. With Advantage Go, segments will expand across the London specialty market and other specialty hubs such as Bermuda and Singapore, and in the specialty and commercial markets across EMEA, APAC, and North America. Our vision is to integrate Advantage Go solution into second insurance platform for P and C while also offering them as a stand alone product. This approach enables us to address both new prospects and existing customers, enhancing our value proposition across multiple markets.

[Roni Al-Dor, President and CEO at Sapiens International]

This acquisition aligns with second strategy to accelerate penetration to the London specialty market, enhance its value proposition to the P and C insurers and strengthen its support for the reinsurance market. The London specialty market is a global hub for complex and high risk insurance and reinsurers, where brokers and underwriters negotiate bespoke coverage primarily through Lloyd's London and London company market. The London specialty market is one of the largest in the world and represents a significant opportunity for Sapiens to expand its footprint. The underwriting Walgreens segment is growing significantly as insurers recognize the value of sophisticated decision support tools. The demand for underwriting Walgreens is growing.

[Roni Al-Dor, President and CEO at Sapiens International]

And according to the research firm, The Land, the number of workbench deals is expected to rise in 2025 and 2026. Advantage Go will also strengthen second value proposition in North America, P and C market, financing its capability for insurers operating in the complex specialty and commercial lines. Now moving on discuss the first quarter of twenty twenty five. Revenue in the first quarter of twenty twenty five totaled $136,000,000 compared to $134,000,000 in the first quarter of twenty twenty four. In quarter one twenty twenty five, we had a negative currency impact compared to quarter one twenty twenty four.

[Roni Al-Dor, President and CEO at Sapiens International]

On constant currency basis, our revenue would have been $2,000,000 higher. In Q1, we continue to sign new deals and expand relationships with existing customers across both Life and P and C segments. Less than one year since the launch of our insurance platform, we have already seen promising customer adoption, a clear indication that our strategic investments are resonating with the market and delivering results. We are continuing with transition of existing customers to the cloud while also onboarding all new customers to Sapiens Cloud. Let's drill down into our regional performance.

[Roni Al-Dor, President and CEO at Sapiens International]

First, our North America businesses continue its growth trajectory this quarter with accelerating demand for life and annuity solutions. Our life and annuity business has benefited from strategic investments we have made to drive growth, and our new business wins reflect the success of these initiatives. In the first quarter, we had multiple wins with new and existing customers, which underscore insurers' confidence in Sapiens to innovate, support businesses' transformation and help solidify their competitive position. During the first quarter, we signed a new life platform deal in North America, which incremental to the two Life platform deals signed in North America last year. As we reported this quarter, a major U.

[Roni Al-Dor, President and CEO at Sapiens International]

S. Multiline insurer extended its partnership with us by selecting Sapiens' insurance platform for life and annuities, which includes Sapiens' cost suite for life annuities, Sapiens' data suite, and Sapiens' cloud services. For nearly decades, this existing customer has successfully utilized Secant's underwriting pool, and the implementation of Secant's insurance platform will further accelerate its digital transformation. In addition, this quarter, we had several go lives across our live solution, CallSwift, Illustration Pro and Underwriting Pro, while also making innovative progress with several important project updates. During the first quarter of twenty twenty five, we announced the release of Sapiens Underwriting Pro version 14, which has our award winning, most advanced automated underwriting and new business case management system for licensed annuities insurer.

[Roni Al-Dor, President and CEO at Sapiens International]

The release delivers significant technical enhancements, accelerates greater operational efficiency, seamless communication and advanced AI driven capabilities. Also, during this quarter, we announced the latest release of Sapiens Illustration Pro and Sapiens Application Pro featuring enhanced automation, risk intelligence and operational efficiency, empowering agents and advisers to illustrate policies, manage users and integrate seamlessly with underwriting and sales platform. Turning to workers' compensation. This market continues to hold strong potential for sales trends throughout The U. S.

[Roni Al-Dor, President and CEO at Sapiens International]

And Canada over the coming years. Over the course of the first quarter, our workers' compensation team has demonstrated the progress in the implementation of several key projects as evidenced by the completion of two goal lines we see in CoreSuite for critical working compensation upgrades. Let me switch to discussing the performance of our CoreSuite P and C in North America. Sapiens continues to invest in North America P and C platform with data suite integration set for 2025, which enable AI automation and advanced analytics. I'm happy to share that we signed a new P and C deal for claims processing with North America based customer in this quarter.

[Roni Al-Dor, President and CEO at Sapiens International]

With continued diligent investment in our platform, we are seeing initial positive trends in 2025. And as I mentioned before, the acquisition of Advantage Pro will enhance our P and C platform for North America market. Moving to Europe and the rest of the world. In European market and the rest of the world, which includes APAC in South Africa, demand for certain solutions remains solid. In quarter one, we secured multiple deal across license P and C with new logos as well as existing customer in the region.

[Roni Al-Dor, President and CEO at Sapiens International]

We had numerous successful go live projects for customers with our EBITSuite, CoreSuite for Life, PSuite and reinsurance master upgrades. A significant highlight in the quarter is the go live with our existing P and C customer, East Fox, as a leading insurer in The UK and second partner for over a decade. Espoox provides tailored solutions for businesses and high net worth private clients. This important step forward indicative of commitment to enhancing business performance, resilience and customer satisfaction. I want to highlight that Espoox UK migration to second latest cloud native architecture delivered an immediate average improvement of 30% in application spend, along with improved operational productivity and more consistent services delivery.

[Roni Al-Dor, President and CEO at Sapiens International]

P and C expansion is a top priority for Sapiens, and the recent acquisition of Advantage Go strengthened our value proposition in specialty and commercial P and C market while providing immediate access to the London specialty market. Moving to the life and pension segments. This quarter, we signed a new deal with Universal Life, a living life and health insurance based in Cyprus. As part of the conditional agreement, UniLife will leverage Sapiens' cost suite for life and pension to modernize its coinsurance process and drive strategic growth initiatives. Following an extensive evaluation process, Unilife chose Sapiens, which validates our superior digital SaaS solution for both individual and group life pension projects.

[Roni Al-Dor, President and CEO at Sapiens International]

Also this quarter, one of the largest global life insurers has selected Sapiens' insurance platform for life and pension to drive digital transformation for its Czech Republic business, modernize its coinsurance process, and accelerate its growth strategy. The insurer was looking to replace its legacy platform with innovative core system that would empower the company to integrate new technologies and expand functionalities as it scales. Sapiens' robust cloud based digital platform will optimize efficiency, simplify policy and claims management, and improve digital engagement for both customers and brokers. This collaboration expands Sapiens' presence in Central And Eastern Europe, reinforcing our commitment to delivering innovative insurance solution worldwide. Moving to reinsurance.

[Roni Al-Dor, President and CEO at Sapiens International]

We are seeing growing demand for insurers across all tiers, high, medium and low, as they look modernized and streamline their insurance operation. We continue to expand across North America, Europe, and APAC with our reinsurance matter and reinsurance poll solutions. Moving to APAC region. The momentum at the end of last year has continued into the first quarter of twenty twenty five. The region remains a priority for us, and we continue to focus on accelerating growth, which the Candela acquisition supports.

[Roni Al-Dor, President and CEO at Sapiens International]

In the quarter, we secured a new APAC win for P and C with Pioneer Insurance and Surety Corporation, the leading insurance provider in Philippines, Omnitrol Sapiens insurance platform to drive its digital transformation and UX enhancement. This is an important new win in the region that reinforce our strategy to improving core processing throughout our advanced technology, enabling our customers to navigate evolving market trends with precision. Innovation remains a cornerstone of our playbook. Our AI based systems insurance platform continue to evolve with specializations in addressing the unique requirements of each business vertical or domain. We are integrating AI across our core data digital solution to enhance automation, improve decision making, and drive greater efficiencies for insurers.

[Roni Al-Dor, President and CEO at Sapiens International]

By embedding AI driven capability into our core system, we enable smarter underwriting, more accurate risk assessments and streamline claims processing. Our roadmap is robust as we continue to develop a holistic Gen and I based copilot experience across the entire platform, further enhancing the value we deliver to our customer. Before I wrap up, I would like to reiterate our focus for 2025. We are committed to building a robust pipeline and expanding our client base across all key markets. To support this commitment and achieve our goals, we are focusing our teams and resource on sales, platform innovation, and advanced AI capabilities.

[Roni Al-Dor, President and CEO at Sapiens International]

We will continue investing in Sapiens' intelligence insurance platform to drive sustainable growth globally and improving our competitive position. Second, increase cross sell to extend relationships with existing customer. Cross selling to existing customer represents a significant opportunity for growth. Third, accelerating cloud adoption for our existing customer to a scalable, efficient SaaS model. Our advanced solutions are experiencing strong momentum in customer utilization, and we remain on pace to achieve our target penetration rate over 50% within the next five years.

[Roni Al-Dor, President and CEO at Sapiens International]

Four, enhanced growth in our life businesses globally. The demand for life system transformation is strong as insurers seek to modernize legacy infrastructure. The market shift presents a significant opportunity for our life offerings. Fifth, we will continue building out our system integration partnership globally. Our pipeline is strong standing, and we are enthusiastic about the new opportunity resulting from our collaboration with system integrators throughout the global market we're operating in.

[Roni Al-Dor, President and CEO at Sapiens International]

And lastly, following the Advantage Go acquisition, we see an opportunity to expand our global P and C platform with Underattic broad bench and risk management capability and strengthen second value proposition across global commercial specialty and longer market segments. I will turn the call over to our CFO to provide more detail on our financial performance. Roni?

[Roni Giladi, Chief Financial Officer at Sapiens International]

Thank you, Roni. I will begin my commentary by reviewing the first quarter twenty twenty five non GAAP results, followed by comments on

[Roni Giladi, Chief Financial Officer at Sapiens International]

the balance sheet and cash flow. I will wrap up with our updated guidance for 2025. Revenue in the first quarter of twenty twenty five totaled $136,000,000 an increase of 1.4% compared to $134,000,000 in the first quarter of twenty twenty four. In Q1 twenty twenty five, we had a negative currency impact compared to Q1 of twenty twenty four. On a constant currency basis, our revenue would have been $2,000,000 higher.

[Roni Giladi, Chief Financial Officer at Sapiens International]

Looking at our revenue by geography. Revenue in North America totaled $57,000,000, an increase of 3.1% compared to last year. Revenue in Europe totaled $67,000,000 a decrease of 1.8% compared to last year. On a constant currency basis, our revenue in Europe would have been 0.6% higher. Revenue in rest of world that includes South Africa and APAC totaled $12,000,000, a 13.4% decrease compared to last year.

[Roni Giladi, Chief Financial Officer at Sapiens International]

For q one two thousand twenty five, our annualized recurring revenue, ARR, totaled $187,000,000, reflecting 11.8% increase from February, coming mainly due to new logo we signed last quarter. Our revenue mix showed that revenue from recurring social products and reoccurring post products and services increased year over year by 14.7% to $108,000,000 compared to $94,000,000 in Q1 of twenty twenty four. Recurring and reoccurring revenue in Q1 twenty twenty five represent 79% of total revenue. Revenue from implementation totaled $28,000,000 compared to $40,000,000 in February. This reflects the completion of several go live projects and the expansion of existing implementation projects over longer time frame.

[Roni Giladi, Chief Financial Officer at Sapiens International]

Additionally, revenue from deals we signed in Q4 of last year is expected to materialize and ramp up starting Q2 of this year. Moving on to profitability. Gross profit in the quarter was $63,000,000 compared to $61,000,000 in Q1 of twenty twenty four. The gross margin in the quarter was 46.3% compared to 45.4% in Q1 of twenty twenty four, representing an increase of 90 basis points. The increase in gross margin was primarily due to higher recurring and recurring revenue ratio.

[Roni Giladi, Chief Financial Officer at Sapiens International]

Operating profit in the third quarter of twenty twenty five was $25,000,000 compared to $24,000,000 in Q1 of twenty twenty four. Operating margin was 18%, slightly lower than the 18.1% margin in Q1 twenty twenty four and in line with our target. Net income attributable to staff and shareholders for the first quarter of twenty twenty five was $21,000,000 an increase of 1.3% compared to Q1 of twenty twenty four. Earnings per diluted share was zero three seven dollars for the first quarter of twenty twenty five compared to 36¢ for the comparable period. Turning to our balance sheet.

[Roni Giladi, Chief Financial Officer at Sapiens International]

As of 03/31/2025, we had cash and cash equivalents and short term deposits totaling $2.00 $6,000,000 and debt of $20,000,000 In April 2025, we paid a cash dividend of $16,800,000 or $0.30 per share for the second half of twenty twenty four. The dividend is in line with the company policy of distributing on semiannual basis up to 40% of its annual non GAAP net income. In addition, the Board of Directors has approved distribution of a special cash dividend of 36¢ per share or $20,100,000 in total. In declaring the special dividend, the Board of Directors evaluated Sapiens' financial stability and determined that issuing the special dividend was both prudent and in appropriate way to reward our long standing shareholders. Adjusted free cash flow for the first quarter of twenty twenty five was $23,000,000 compared to $17,000,000 in Q1 of twenty twenty four.

[Roni Giladi, Chief Financial Officer at Sapiens International]

Let me now review our revised guidance for 2025. Revenues. Today, we are raising our non GAAP revenue guidance to a range of $574,000,000 to $578,000,000 from previous range of $553,000,000 to $558,000,000 representing growth of 6% at the midpoint. Profit. We are also revising our non GAAP operating profit to a range of $94,000,000 to $96,000,000 with operating margin of 16.5% at the midpoint from a range of 98,000,000 to $102,000,000 with operating margin of 18% at the midpoint.

[Roni Giladi, Chief Financial Officer at Sapiens International]

We expect Q2 twenty twenty five operating profit to be in the range of $20,000,000 to $21,000,000 The revised revenue and operating profit guidance assumes the following: Revenues. Currency fluctuations are expected to impact our revenue going forward, primarily driven by the strengthening of euro and British pound against the USA dollar. In addition, in April, we signed agreement to acquire Sandella in APAC and Advantage Go in The UK, and we expect both transaction to close towards the end of the second quarter. We currently anticipate the aggregate impact on revenue to be approximately $21,000,000 at the midpoint. Profit.

[Roni Giladi, Chief Financial Officer at Sapiens International]

Both gain exchange movements are expected to have positive effect on our profitability, offset by the impact of recent acquisition. While Candela is expected to contribute positively to profit in Q4, Advantage Go will remain loss making throughout the year. Please also note that Candela and Advantage Go were subsidiary of a larger organization, and not all their assets and functions were consolidated under single legal entity. This adds complexity to the integration process, including areas such as cloud migration, legal entity closure, and in provision serve. We anticipate that the aggregate impact on profit to be approximately negative of $5,000,000 at the midpoint.

[Roni Giladi, Chief Financial Officer at Sapiens International]

In summary, while we see a short term dip in our profits and margins due to acquisition, the strategic value and recurring revenue stream from this acquisition position us for robust growth and enhanced profitability in the future. Looking ahead to 2026, we expect our revenue growth to be in the mid to high single digits range, and we are also looking to improve profitability as we have proven successfully in past years. Please note that the recent proposed tariff changes currently do not have direct impact on Sapiens. However, they may pose a risk if they affect our customer, which could in turn impact our results. We did not include tariff impact on our year end guidance.

[Roni Giladi, Chief Financial Officer at Sapiens International]

Before I turn the call back to Oneal though, I would like to reiterate that we remain fully committed to disciplined execution of our strategy, driven growth and long term profitability.

[Roni Giladi, Chief Financial Officer at Sapiens International]

Thank

[Roni Giladi, Chief Financial Officer at Sapiens International]

you. I will now turn the call back to Oneldo. Oney?

[Roni Al-Dor, President and CEO at Sapiens International]

Thank you, Rone. We delivered a solid first quarter, reflecting the progress across our key markets.

[Roni Al-Dor, President and CEO at Sapiens International]

Our continued investment in our insurance platform remains a critical driver of growth. In summary, Q1 twenty twenty five marks another quarter of operational progress. We remain committed to deliver long term growth across all our key territories. We are continuously exploring M and A opportunities, and our most recent acquisition of Advantage Go and Candela will serve as a channel to enhance our go to market strategy in key regions we are targeting in order to accelerate our growth trajectory.

[Roni Al-Dor, President and CEO at Sapiens International]

I will now ask the operator to please open the call for questions.

[Operator]

Thank you. Ladies and gentlemen, at this time, we will begin the question and answer session. If you have a question, please press 1. If you wish to cancel your request, please press 2.

[Operator]

If you're using speaker equipment, kindly lift the handset before pressing the numbers. Please ask your question in a loud and clear voice. Please stand by while we poll for your questions. The first question is from Dylan Becker of William Blair. Please go ahead.

[Dylan Becker, Research Analyst at William Blair]

Hey, everyone. Nice job here. Hope everyone's well. Maybe, Ronnie A or Alex, starting with you. On the underwriting workbench side, this is an area we've we've continued to hear, kind of positive momentum around in the P and

[Dylan Becker, Research Analyst at William Blair]

C space. And you kind

[Dylan Becker, Research Analyst at William Blair]

of touched on it in the prepared remarks, but wondering how you think about that acquisition in particular, the opportunity to kind of accelerate some of the traction and momentum you're pushing forward on in North America as well as globally. And then for Ronnie G, how you think about the benefits to the model from that transaction as well too as it relates to kind of the growth profile of that business, the gross margin component, the recurring mix as a part of this kind of ongoing model evolution?

[Alex Zukerman, Chief Strategy Officer at Sapiens International]

Hey, Dylan. This is Alex speaking. So first step, bolt on on the market acceleration point. We've seen the underwriting space rising very substantially over the past year, a lot of traction in the market, the need of the P and C industry to run better risk assessment and to connect it with processes. We saw a great traction on this, and this is very much in line with our strategic approach to the market and with platform offering.

[Alex Zukerman, Chief Strategy Officer at Sapiens International]

We see the advantage to go acquisitions serve us across multiple aspects of our business. When we look, we can speak about the support that it's gonna bring us in The US market. We've seen many, many deals of underwriting in The US market, and connecting it to our platform is definitely answering the market needs. Similar similar approach in in Europe on the P and C side. I'd like to uniquely add also the London market, which is close to $60,000,000,000 GWP market that we today are not active in.

[Alex Zukerman, Chief Strategy Officer at Sapiens International]

Particle allows us to go straight into this market with a with a strong product. And this is also helping us we expect it to help us on the cross sell because we can take it back to all our existing customer base on the P and C side globally, both US and Europe, and enhance our offering to them.

[Roni Giladi, Chief Financial Officer at Sapiens International]

Dylan, regarding the metrics of the model implication of this acquisition. So obviously, as we mentioned, we expect with this transaction that also will start to grow next year from mid single digit to mid to high single digit. Specifically, if I'm going to Advantage Go, they are expecting to grow next year, double digit growth. And in terms of metrics, their gross margin is higher than the Sapient today, about 60%. If we look at Sapient overall, we have about 33% of our revenue coming from ARR, and they are slightly above 50.

[Roni Giladi, Chief Financial Officer at Sapiens International]

Obviously, from a profit perspective, they are today losing money. But as we mentioned, we expect to move gradually over this year in 02/1926 and be profitable in 02/1927. So a lot of upside in terms of growth, gross margin in ARR, and and we've been able to successfully do transition of other companies to profit. We expect to do this also with Advantage Group.

[Dylan Becker, Research Analyst at William Blair]

Okay. Fantastic. Very helpful. Thank you there. Also, it seems like the life side is continuing to see healthy kind of broad based momentum.

[Dylan Becker, Research Analyst at William Blair]

We've talked about kind of competitive dynamics there in the past. But how should we think about that kind of step up in the LNA business today, kind of the share of the mix that it that it currently represents, maybe its growth profile, and and how you think about kind of the evolution on the LNA side of the house as well?

[Alex Zukerman, Chief Strategy Officer at Sapiens International]

So from it's Alex again. From the business perspective, definitely, see continuation of the trend that we reported over the last couple of quarters, strong demand on the life side and across, again, North America and and Europe. In North America, we see the platform proposition combining, you know, our core core suite together with the underwriting illustration and application connected to digital and data as a whole makes a huge market differentiation. It brings a lot of traction in the market. The pipeline keeps on growing, and and the business keeps on growing.

[Alex Zukerman, Chief Strategy Officer at Sapiens International]

We we expect to continue this trend. And similar trend in in Europe and UK where we also start to to enter into sales processes on pension and retirement that then if we focus most of our business in Europe on on protection and risk, we are also setting it with the wealth and the investment management and the pension. So both sides,

[Alex Zukerman, Chief Strategy Officer at Sapiens International]

we see and expect to continue the growth.

[Roni Giladi, Chief Financial Officer at Sapiens International]

Also, from and this is only G. Also, from metrics perspective, we see gradual increase of overall life on overall revenue of Sapiens. So if we ended the we are providing this metric by the end of the year, like, was 25. This was already 26%.

[Roni Giladi, Chief Financial Officer at Sapiens International]

And if we compare to February, we almost almost 300 basis points more. So from '33 to 26%.

[Dylan Becker, Research Analyst at William Blair]

Okay. Great. Thank you, guys.

[Roni Giladi, Chief Financial Officer at Sapiens International]

Thanks.

[Operator]

The next question is from Chris Reimer of Barclays.

[Operator]

Please go ahead.

[Chris Reimer, Analyst at Barclays Capital]

Hi. Thanks for taking my questions and congratulations on a strong quarter. I was wondering if you could talk about how you see the revenue progressing, playing out through the rest of the year, if there'll be any kind of heaviness towards the end of the year or if it will be evenly dispersed. And then if you could just talk about some of the drivers contributing to your outlook.

[Roni Giladi, Chief Financial Officer at Sapiens International]

Hello? Yes. I will answer. I think I have the the first question. So if we look at the revenue stream going forward this year, 02/2025, we see we we didn't close the two acquisitions that we mentioned, neither the Advantage Go or Candela, but we expect them to close during the end of this quarter.

[Roni Giladi, Chief Financial Officer at Sapiens International]

So we see gradual increase in Q2, but then jump into Q3 and Q4 between them slightly higher in Q4 versus Q3. So gradual increase in Q2 depends on the closing date and then higher in q three and q four, higher than q three.

[Chris Reimer, Analyst at Barclays Capital]

Got it. Yeah. And then could you just mention any of the drivers you are either seeing behind behind the outlook?

[Roni Giladi, Chief Financial Officer at Sapiens International]

In terms of overall growth of the company, nothing has changed from the previous outlook that we gave. The growth is the continuation of the organic growth that we mentioned, plus some currency tailwinds that affect our revenue and, of course, the acquisition. We are not sure about the exact consolidation debt. So this is the reason that this is the number that we provided, but mainly continue of the organic growth, currency tailwinds and the M and A.

[Operator]

The

[Operator]

next question is from Alexei Gogilev of JPMorgan. Please go ahead.

[Elyse Kanner, Equity Research Analyst at JP Morgan]

Hi. This is Elise Kennard on for Alexei Gogilev. Thank you for clarifying the guide. Is there any further detail you can provide on how much exactly is the currency tailwind versus how much you contribute to inorganic growth? Thank you.

[Roni Giladi, Chief Financial Officer at Sapiens International]

Hi. This is Roni G. As we mentioned, we do not know the closing date, And therefore, we are not providing the split of the currency and versus the M and A impact. We will provide this by the end of the year, the exact amount as we are going all the time in terms of currency and M and A. The guarantee, the blended is the amount that we are providing, $21,000,000 incremental.

[Roni Giladi, Chief Financial Officer at Sapiens International]

What I can say, vast majority is coming from the m and a and slightly on the guarantee payment.

[Elyse Kanner, Equity Research Analyst at JP Morgan]

Got it. Thank you. And then in terms of getting the 60% of customers to the cloud, should we expect that to look like a bell curve, and are we still kind of on the left side, maybe approaching a peak where you'll see the most transitions to cloud? Thanks.

[Roni Giladi, Chief Financial Officer at Sapiens International]

We are seeing the trend that we mentioned last quarter and prior to that. We are continue moving to the cloud existing and new. As we mentioned all the time, almost 100% of the deal, if not 100, are on the cloud, the new logo. And every quarter, we are shifting some existing customers to the cloud. We provide the exact percentage by the end of this year.

[Elyse Kanner, Equity Research Analyst at JP Morgan]

Got it. Thank you so much.

[Roni Giladi, Chief Financial Officer at Sapiens International]

Thank you.

[Operator]

If there are any additional questions, please press 1. If you wish to cancel your request, please press 2. Please stand by while we poll for more questions. There are no further questions at this time. Before I ask miss Koeni Frach to go ahead with her closing statement, I would like to remind participants that a replay of this call is scheduled to begin in two hours.

[Operator]

In The US, please call +1 888269005. In Israel, please call 039255938. And internationally, please call 97239255938. Miss Koenig Brah, please go ahead.

[Yaffa Cohen-Ifrah, Chief Marketing Officer & Head of Investor Relations at Sapiens International]

Thank you, Yoni. And thank you everyone for joining our call today. We really look forward to discussing our first quarter results on our next our second quarter results on our next earnings call. And of course, as usual, we welcome you to contact us if you have any further questions. Thank you all for joining.

[Operator]

Thank you. This concludes the Sapiens International Corporation first quarter twenty twenty five results conference call. Thank you for your participation. You may go ahead and disconnect.

Participants

Executives

• Yaffa Cohen-Ifrah, Chief Marketing Officer & Head of Investor Relations
• Roni Al-Dor, President and CEO
• Roni Giladi, Chief Financial Officer
• Alex Zukerman, Chief Strategy Officer

Analysts

• Dylan Becker, Research Analyst at William Blair
• Chris Reimer, Analyst at Barclays Capital
• Elyse Kanner, Equity Research Analyst at JP Morgan