Yaffa Cohen-Ifrah - VP, Corporate Marketing and Communications Roni Al-Dor - President and CEO Roni Giladi - Chief Financial Officer.

Bhavan Suri - William Blair Tavy Rosner - Barclays Elizabeth Chwalk - Needham.

Ladies and gentlemen, thank you for standing by. Welcome to the Sapiens International Corporation Third Quarter 2015 Results Conference Call. All participants are at 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, November 4, 2015. It is now my pleasure to introduce your host, Mrs. Yaffa Cohen-Ifrah, Sapiens' Chief Marketing Officer and head of Corporate Communications. 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 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 provisions in the press release issued today also apply to the content of the call.

Sapiens expressly disclaims any obligations 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 the today’s call, we will refer to certain non-GAAP financial measures.

A reconciliation schedule showing GAAP versus non-GAAP results has 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 Relation section of the Company’s website or via the webcast link, which appears in the earnings 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. We will provide a business update and discuss our 2015 third quarter financial results. This was a strong quarter for Sapiens, our solid financial results were driven by diverse base of revenue and improved efficiency.

While reporting non-GAAP revenue of $46.1 million which is another quarter of double digit and increasing operating and profit of 58.1% and totaled $6.0 [ph] million. We see the growth result for all of our growth engine in all territories and from both existing and new customers.

The demand for our product and services remain strong this result in a number of important win which visit our competitive position in the market. Over the past few years with significantly investing our technology and today we enjoy the fruit of those investments.

Our products are advanced, innovative and industry-leading and add substantial contribution to us to win new business and deepen our footprint with an existing clients. And now in order to accommodate future growth, we are focused in enhancing the scalability of our organization in terms of human resource, market present and portfolio offerings.

From human resource point of view, we have increased and enrich our customer facing sales team to include the resource for marketing product support, business consulting and professional services. We are globally recruiting and training employees to enhance our existing regional delivery and development centers in Israel and UK.

In addition, following the acquisition of IBEXI and Insseco we have established to a new regional centers in India and Poland to support our global operations. Since the acquisition, both companies have growth substantially.

Over the past few months, since the IBEXI acquisition, we have recruited over 100 new employees in India, growing the number of employees there by more than 50%. The start up of our strategy, our goal is to keep being close to our customer.

We have strengthened our market presence by substantial growth in human resource, located close to our customer premises. This investment in human resource will ensure an on-site local experience and we are still hiring key employees for those sites.

With this long-term investments, Sapiens’ position to manage a larger number of opportunity and include our win rate. To further accelerate our growth, we seek out for merger and acquisition that in line with our growth strategy.

Especially we are looking for opportunity to leapfrog our market penetration through acquisition of legacy customer base or services new market segment that we do not cover today.

In addition, we are looking for complimentary solutions that can expand our solution portfolio and can be offer to our existing and new customer, that said we will remain highly selective in the opportunities we are undertake, our ongoing financial performance healthy balance sheet and strong product portfolio allow us to be extremely carefully in the acquisition transition we undertake.

Now, in fact from the Insseco and IBEXI acquisitions, we announced earlier this year the majority of our growth continues to be organic with increasing sales from new and existing customers. During the third quarter, we record a number of wins to further expand our base of revenue and enhance our competitive position.

For example, Go-Life a leading life and insurance company business cycles selected Sapiens ALIS, our core solutions suit for life and pension to replace the legacy involvement and support older lines of businesses.

Sapiens ALIS will allow your life to deliver your product reducing stand to market and provide an efficient and flexibility operating involvement.

Another [indiscernible] in the third quarter FNB, the south African financial institution provide personal and business banking services to millions of customers selected Sapiens ALIS to launch the new life and insurance company.

This is an important extension of our footprint in South Africa, a region where we have been doing business for over the past few decades. Last quarter, we announced that our decision platform has been selected by top tier UK financial institution for deployment a start of enterprise-wide business improvement initiative.

Now during the third quarter, Sapiens decision was mentioned in the [indiscernible] as one recognized vendors for decision management. This is an important milestone of recognition of decision which was further enhance cycle for BI analytics, BP an application of architecture and consumer good reports.

In addition, one of our Sapiens IDT customer life insurance was recognized as the best insurance for technology by Asian Insurance Technology awards recognized the value they created by leveraging our software suit. In another initiative Sapiens partner with SAP to enhance our solution with an advanced business intelligent and analytic.

Our BI offering empowers customer which is user-friendly and powerful BI in analytics for faster, more inform decision making. The BI data model skill set knowledge best of the team of IBEXI a recent Sapiens company position have instrumental in the development and delivery of Sapiens BI and analytic module.

Meanwhile, we continue with our investment in our sales and marketing to expand our market reach further strengthen the Sapiens brand and increase awareness. Just two weeks ago, we hosted our 2015 insurance client conference in Paris to our European and Asia-Pacific customers.

There are more than 120 participants from over 16 countries representing our insurance customer prospect and analyst.

Event like these which enable us to closely engage with existing customer and keep pace with the changes and challenges we are facing in the industry to work out in line our strategy, this was a great opportunity for all of us to meet share expectation and planning to the future.

This conference provides Sapiens with an opportunity to listen to the customer, feed their inputs so that we continue to improve and provide high value to our clients. I would now like to turn the call over Roni Giladi to discuss the financials.

Roni?.

higher licenses revenue. Our investment in R&D in the third quarter of 2015 total $4 million, compared to $4.3 million in the same quarter of last year. The reduction in the R&D expenses is primarily due to the exchange rate.

Our non-GAAP selling general administration expenses totaled $9.7 million this quarter compared to $7.7 million in the third quarter of last year.

The improve in non-GAAP SG&A was the result of our continued increase in sales and marketing efforts over the last quarter to accelerate our future growth, the consolidation of our SG&A expenses from recent acquisitions and expenses associated with provision made to reflect the potential litigation.

Our non-GAAP operating income for the third quarter of 2015 increased by 58.1% to $7 million from $4.4 million in the third quarter of last year. Non-GAAP operating margin this quarter was 15.1% of total revenue compared to 10.9% of last year. We clearly see the kind of operating margin improvement throughout the year.

Our adjusted EBITDA this quarter totaled $7.5 million, an increase of 56.2% compared to $4.8 million in the third quarter of last year and reflect 16.2% of total revenue. Non-GAAP expenses this quarter was $1.2 million compared to GAAP expenses of $4.3 million in the third quarter of 2013 representing a tax rate of 17.2%.

These tax rates reflects the [indiscernible] of the company. Non-GAAP net income for the third quarter of 2015 was $5.8 million or $0.12 per diluted share, a 42.4% increase compared to $4.1 million or $0.08 per diluted share in the third quarter of last year. As you know we acquired Insseco during the third quarter.

Since acquisition of the Insseco, it's from the indirect controlling shareholder of Sapiens's, the GAAP treatment for the consolidation purposes is pooling of interest, with effective date of December 2014.

For non-GAAP purposes we have treated Insseco acquisition in a similar way to all other acquisitions we completed in the past to reflect the economic impact on our results. Therefore, in the GAAP year-to-date reports we are consolidating Insseco results from the beginning of the year.

Please note that Q1 and Q2 graph reported result of operations have been changed to include Insseco result due to these accounting treatment. In our non-GAAP report the Insseco result are consolidated only from mid-Q3 when we completed the acquisition.

Supplement information is provided in our PR to reflect it specifically the adjustment of GAAP versus non-GAAP related to Insseco acquisition. Turning to our balance sheet, as of September 2015, we had cash, and cash dividend and security investments of approximately $85 million compared to $80 million in December 2014.

I would like to remind you that this amount is both the payment of dividend for our shareholders and the payment for the acquisition of IBEXI and Insseco.

From a cash flow perspective, in the nine months ended September 2015, we generate $28.6 million in cash from operating activities, significantly stronger than the $16.2 million in the first half nine months of 2014.

As most of the business on the call are aware, we filed the shelf registration last month to allow us flexible capital structure to pursue the capital range. Turning to our guidance, we are reiterating our 2015 full year revenue guidance. We expect revenue in the range of $176 million to $180 million.

We are increasing our full-year 2015 operating margin guidance. We expect operating margin of 14.5% to 15% of total revenue. At this point, I would like to turn the call back to Roni Al-Dor for closing comments.

Roni?.

Thank you, Roni. This far 2015 has been marked by strong financial performance, two acquisition and new businesses wins that built our foundation for future growth. We have built a business model that generates revenue from a diverse, yet complimentary suite of solution across geographies.

We have invested in our innovating product and in certain marketing program to properly support and delivery them to the market place. I would now like to turn the call over the operator for Q&A. Operator, please poll for questions..

[Operator Instructions] The first question is from Bhavan Suri of William Blair. Please go ahead..

Just a few questions, to start off with, first just of the overall demand environment, get some color on pipeline and spot demand, and it seems like rates have improved, but any color on how is doing enhances about Europe and North America from a pipe in perspective would be helpful..

As you ask about the P&C, with this as you know right now we are doing a good business in Europe. Two or three years ago we started to move back into the UK. We see a lot of progress there so we expected lots of growth and lots of demand from these areas. According to the U.S. we are also investing and try to benefit.

We tried to leverage over other businesses, whereas in U.S. the P&C and ALIS, and try to find some kind of growth and sale opportunities. Also we have pipeline here in U.S. as well as in Europe. In general I can say P&C has slowed down a little bit last years, and right now we see a big progress in the pipeline and deals are coming..

And Roni, you had a lot of new staff and marketing researchers, you have now, you built on your team, as you look on that and you look at productivity, do you think you need to have the same sort of investment next year? Or do you thing that the ramp in productivity with the sales people and impact of marketing activities should be able to drive sort of incremental wins without having to invest as much itself in marketing?.

We plan to continue on this certain marketing gear to keep the same level of investment percentage wise. I think we will see the fruits. Just to share with you as I mentioned before, we did that conference for our customer, but we are also doing a lot of activities worldwide and also to penetrate into the U.S.

It also needs some kind of branding of [indiscernible] in U.S. .

And then as you look at retirement products, it seems like a very interesting area, that certainly an area that's growing even from a secular perspective.

How traction has been within your retirement services products, and how should we think about how faster should we grow sale for the next two to three years?.

If you are looking, the government service is one area that we believe that we have a lot of future. We are still working on the product and we are still looking hopefully to go to production early next week, early next year. And I think based on these results we will see a growth.

I think right now the customers are waiting to see the results after all of these investments and it would get the confidence and we can see more traction.

We hired an executive here, a guy from one of our customers and he is doing a lot of activities, just for example next week we have a big event, we are in the broad meeting of Park, again with R&D suits retirement facilities..

Got it. One last one from me before I turn back on queue.

When you look at the SAP relationship, obviously the DIPs around, I know it’s very interesting, how do you think that matures? How do you think that if SAP structure cross out DIP? Do they start pushing some of your insurance product? How do you think plays out and maybe you have some of the product have a how the relationship structured?.

Just to remind you, when the acquired IBEXI, besides the business Southeast Asia and offshore, they invested a lot to build a group, take a model for the DI.

So we see a lot of demand from our customers so what we decided is to go to SAP and to just buy them the tools instead of tool developing and so we combined our assets just getting from a IBEXI combined with the DI tools. We did some agreement with them and we are going to the market. So again SAP, we just used the tools and the data model we own it..

I see.

One quick question again for me, on the margin expansion with business models, how much of that came from the Polish acquisition and how much of that if you could break it out whatever it was, just bought of the business and the shift to offshore?.

In terms of gross margin, I think few factors that are basically came and as you mentioned the license pension, this is ongoing where preparation improvement. This is one part. The second part is Shekel versus the dollar, we see about 1% is coming from this area. The offshore we just started this year. We see some initial fruits.

I think we will be able to see much more in the future. So it's a small amount, less than 1% of offshore, which is reversing the see trending and only then they can be productive. So only initial in fact we have to do it.

In terms of profitability from the acquisition we see the gross margin, it remain now is to what we have slightly higher but more significant impact because we only started to consolidate and should meet quarter and that’s it..

Great. That’s very helpful. Thanks guys and nice job again..

The next question is from Tavy Rosner with Barclays. Please go ahead..

Thanks for taking my question.

Just a broad question to start, you mentioned that your product are innovative but with regard your positioning when you speak to client, do you feel that the discussion have changed and you can talk more about your technology and that’s so much about pricing and in general when you see that client don’t buy your product what is the main reason for the pushback?.

If you are talking about the PNC, we are losing many from guide wire, mainly because executive relationship, the seat engaged to house and we don’t have in the level, we don’t have any information when we are doing win/loss analysis, we don’t see any type of information based on our product technology in turn.

So it’s mainly because type of relationship with the customer at the executive level. The other thing if we are competing with the local market and it’s about the price but again we are, I think in the last 10 months something like that in all of the situation we have at least in the shortlist and we feel very comfortable..

Thank you, that’s helpful.

And the follow-on decision, you mentioned the investment in business intelligence in general, what kind of revenue contribution you think that could add to the business in the coming years?.

IBEXI is a small part, it’s just a type of services laid on. It just compliments our solution and improve our probability to get this, this is not something that can be major part in terms of revenue..

Okay that’s great and just a last if I may.

You guys talked about [indiscernible] what would be the main use of cash since you guys already have about 80 million of net cash in the bank?.

Hi, this is Roni Giladi. In general the flexible capital structure will allow us to execute a strategy, potentially in the future to go for bigger M&A and [indiscernible] to the market..

Great. Thank you guys..

The next question is from Mayank Tandon of Needham. Please go ahead..

Good morning this is Elizabeth Chwalk for Mayank. I have a follow up question on the previous one about competition.

Are you guys breaking out your run-rate for each business and can you talk about how your run-rate has been trending for each business?.

We don’t have a number that we are sharing but you can see it’s again relatively very high and it’s about close to 50 in the life in Europe right now we see, I think may be little bit higher than they, in the States may be a little bit lower and the run rate is very high it just depend how long it will take to the customer to make their decisions.

So the overall we are in a good shape..

Okay thank you and can you also break out what the revenue growth for the quarter was on an organic basis? And also I think you have mentioned earlier what it was OpEx?.

Hi Elizabeth this is Roni G. So if we little bit elaborate about it, if we take out the currency impact on the growth in compare to comparable growth there, as we mentioned we grow about 20%, this is including the position of the IBEXI and Insseco.

If we eliminate both of these acquisition but also it has accounting impact, [indiscernible] 15% about the acquisition but taking out the impact of the [indiscernible]. As you can see from the profit, 40% which include two factors there..

Thank you..

[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 the participants that a replay of this call is scheduled to begin in 2 hours.

In the U.S., please call 1 (888) 295-2634; in Israel, please call 03-925-5904; and internationally, please call 972-3-925-5904. Mr.

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

Yes, definitely. Thank you everyone for joining our call and see you next quarter..

Thank you. This concludes the Sapiens International Corporation Third Quarter 2015 Results Conference Call. Thank you for your participation. You may go ahead and disconnect..