Ladies and gentlemen, thank you for standing by. Welcome to the Sapiens International Corporation Third Quarter 2021 Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded November 3, 2021.

It is now my pleasure to introduce your host, Ms. Daphna Golden, Sapiens' VP and Head of Investor Relations. Thank you, Ms. Golden. You may now begin..

Thank you, and good day, everyone. Our Q3 2021 earnings release was issued before the market opened this morning and was posted on the Company's website at www.sapiens.com. Here with me today representing Sapiens are Roni Al-Dor, President and CEO; Roni Giladi, CFO; and Alex Zuckerman, Chief Product and Strategy Officer is also present.

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

Sapiens expressly disclaims any obligation to update or revise any of these forward-looking statements, whether because of future events, new information, a change in its user expectations or otherwise. On today's call, we will refer to 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 Relations section of the Company website. The link is available in the earnings release we published today.

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

Roni?.

Thank you, Daphna and welcome, everyone to our review of Sapiens' third quarter 2021 results. In Q3, Sapiens delivered strong year-over-year revenue growth of 21% reaching a new record high of $118.4 million. Operating margin reached 17.7% compared to 18.2% last year.

On a dollar basis, operating profit increased by over $3 million to record of $21 million, up from $17.9 million last year. These solid results were the direct outcome of successfully executing our strategy and our commitment to achieving consistent growth and improving operating margin.

The transformation of insurance from legacy systems to modern and cloud solutions is a key growth driver for Sapiens. Our global footprint, broad product offerings, business model and commitment to customer success clearly differentiated Sapiens in the insurance software industry.

Q3 results demonstrate the success of our strategy and the variability of our business, stable, profitable and with high level of feasibility.

Our leading software solution serves the evolving technology needs of the insurance industry across a large and growing global market with a target addressable market of $40 billion of insurance software solutions and services across P&C and life and annuity lines of businesses, Sapiens' market opportunity is large.

We are well positioned to achieve continued success for several reasons. First, Sapiens has a global footprint supported by our proven track record with over 600 customers in more than 30 countries. We have teams on the ground that understand the local regulations, culture and languages in the countries in which we operate.

Many existing and potential customers, including Tier 1 multinational carriers appreciate our advantage. Second, our excellent offering. We continuously invest in our research and development to give our customers a wide range of offerings, products and services, deployment options and delivery models.

Our product leadership position is recognized time and time again, not only by customer, but also by industry analysts. Most recently, Sapiens was the only company to be recognized as a leader in two different Gartner Magic Quadrants for the European market from both non-life insurance platform and life insurance policy administration system.

In a diversified market like our, where multiple vendors operate in specific market and segment, this is a true differentiator and a clear testament of the quality of our offerings. And finally, our team is world class. We have over 4,000 professionals that choose to work with Sapiens to build and support our business.

They serve our customers with the highest standard and retain the leadership position of our offerings. We continue to reinforce our already strong global presence across all tiers, both in P&C and life and annuities by winning new customers and entering to new geographies.

While expanding by upselling and cross-selling to existing customers, while focusing on advancing our product offerings, our goal is to continue to offer our customer in innovating diverse and flexible solution to provide their clients with the best experience while empowering them to gain a significant competitive advantage.

Across multiple regions, we enable our customers to transform their business with modern cloud architecture, out-of-the-box functionality and local notebook capabilities. And our business model ensures that we are fully accountable for the success of our customer projects. Turning now to our performance by region. Starting with North America.

In costs with P&C, we continue the path of investing in our products and enhancing our delivery capabilities to address growing demand in the region. The recently announced selection of our claims management platform by Tokio Marine Highland demonstrate the confidence of customers have to Sapiens.

Tokio Marine, a longtime customer for policy and billing recently select Sapiens' ClaimsPro cloud solution to accelerate its claims transformation. Sapiens will enable Tokio Marine to work effectively and seamlessly with the brokers and the agents. In reinsurance, we also continue to gain momentum.

In Q3, we add a new Tier 1 customer, a high caliber, well-known global carrier and a leader in this space that selects our reinsurance solution. Position insurance is another reinsurance win we announced position selected Sapiens to transform its reinsurance process and move to the cloud with our reinsurance platform.

Our life business continued to gain momentum across all the life solution portfolio. A new customer, Guardian Group, a 1 billion carrier serving 21 countries across the English and Dutch Caribbean selected Sapiens UnderwritingPro and Sapiens Intelligence to accelerate its underwriting processes and achieve automation of 95% of its cases.

Sapiens, together with its insurtech partner Atidot will enable Garden Group to leverage Sapiens' best practice, new data sources and AI to support accelerated underwriting. Our CoreSuite life and annuity in North America enjoy growing traction.

We continue to grow our pipeline and we completed the blueprint process at three project analysis with a prospective customer. Decision is gaining momentum, which ensures and is providing a unique value proposition in growing number of use cases.

A recent example is Berkshire Halfway, Guard Insurance companies that select Sapiens' decision, no-code automation platform to support Guard's business user in their decision processes, empowering them to make rapid change on policy terms. On the worker compensation front, as the job market improves, we see new opportunity and RSPs.

Just two weeks ago, we attend the National Workers' Compensation and Disability Conference in Las Vegas. It was a great for the team to meet customers and prospects in-person after last year's virtually events.

I would like to elaborate now how maintaining an ongoing dialogue with our customers help us remain close to market trends, while also seeding future business opportunity.

In September, we held our Annual Executive Council, where C-level executive from our leading customer meet virtually to collaborate, share-based practice and discuss industry trends. During the first week of October, we attend the Insurtech Connect Conference in Las Vegas, the world's largest event in this space.

This was the first major non-virtual event this year with thousands of participants from global insurance carriers. Sapiens present a keynote speech on digital insurance hosted and private event with more than 100 insurers and partners.

Finally, last week, we held the second 2021 North America Summit, a three-day virtual event, more than 800 attendants from approximately 200 organization participating the events. We provide the gateway for productive collaboration between Sapiens' customer and employee with exchange idea, discuss market trends and explore innovative propositions.

In North America, the build-out of our leadership team continue under Jamie Yoder leadership. We are enhancing our senior team of highly accomplished experienced professional in all areas. In the European market, Sapiens has expanded its presence in the region, a direct outcome of our successful land and expense strategy and M&A investments.

Our leadership position as a dual leader by Gartner, which I mentioned earlier is clearly unique and a big advantage for Sapiens in the European market. Our momentum in this region is growing with insurer transforming their businesses to become more digital. Let me share a few examples of recent customer wins in Europe.

Long-time customer, Dentists' Provident, a leading provider of income protection insurance for dental professionals in the UK and Ireland expanded the relationship with Sapiens. They select Sapiens to leverage market trend and accelerate digital transformation.

Sapiens' digital suite will refresh dentist digital customer and agent portal together with our CoreSuite and customer connect. In Norway, pension provider also expanded its relationship with us by adding Sapiens digital suite to our already implemented CoreSuite.

And German-based HDI Global Specialty select our Redit suite solution for a multi-country deployment to modernize its core business using our cloud architecture with out-of-the-box functionality. Our business in the rest of the world, which include APAC and South Africa is a smaller and growing market.

In Asia, we announced the expansion of our relationship with DirectAsia, a leading digital of automobile and travel insurers in Singapore and Thailand with a digital core upgrade to its existing Sapiens platform. The upgrade enable integration with external system and support their cloud strategy.

DirectAsia joins Thailand-based BKI which I discussed last quarter. We have also expanded our presence in South Africa. We recently announced that APSA, one of the country's leading financial institutions select Sapiens as its transformation partner.

Applying our industry experience, we are working with APSA to migrate its systems and data to the cloud and ensure a seamless integration into its broad banking ecosystem.

To sum up, we are clearly achieving tremendous success in both landing new business with customer and geographies as well as expanding our relationship with existing customers with wholesale opportunities. Our Q3 results demonstrate the continued accomplishment of Sapiens' strategy across the industry and around the globe.

Insurance are transforming the way they do business, from how they launch new product and proposition to expanding their distribution and engagement channels and evaluating the risk and capital. This trend fuel the need for our products and services as insurance embark on the transformation journey.

Sapiens has high-performing global team of professionals, excellent product development capabilities and multiple competitive advantage to address the market trends and support our growth strategies.

As a global player that is serving customers in more than 30 countries in both P&C and life and annuity in the insurance software industry, Sapiens is uniquely positioned to play a critical role in the growing disruptive insurance software. Now, I would like to turn the call to Roni Giladi, our CFO.

Roni?.

Thank you, Roni. I will begin my commentary with a review of the third quarter 2021 non-GAAP results. All comparisons are year-over-year versus Q3 of 2020, unless otherwise stated. I will follow with the comments on the balance sheet and cash flow and we will wrap up with the update of our outlook for 2021.

Revenue in the third quarter of 2021 increased to a record of $118.4 million, up 20.9% from the third quarter of 2020. Organic growth this quarter was 10.1%. Our revenue in North America was $49 million compared to $50 million in Q3 of last year. On a sequential basis, North America revenue was up from $46.8 million in Q2.

Revenue in Europe reached $59.7 million, up from $42.4 million in Q3 of last year. This solid growth was mainly organic and complemented by M&A. The organic growth which exceeded 20% came from both P&C and life. The non-organic growth represented the contribution from the Tia acquisition.

Our revenue from rest of world, South Africa and APAC continued to grow steadily. Revenue in Q3 of 2021 from this region reached a record of $9.8 million, up from $5.6 million of last year, driven mostly by P&C. In gross profit, our gross profit rose to $53.4 million, $9.2 million higher than Q3 of 2020.

Gross margin this quarter was 45.1% similar to the same quarter of last year. Moving to operating expenses. We remain committed to investing in our products and the expanding of our sales and marketing efforts. Operating expenses totaled $32.4 million, 23% higher than Q3 of last year.

The increase in operating expenses was due to adding headcount in R&D and SG&A and the impact of the Tia and Delphi acquisitions. Operating profit this quarter increased to a record high of $21 million demonstrating a continuous and steady trend. Operating margin reached 17.7% compared to 18.2% of last year.

As a reminder, the 2020 results benefited from COVID-19 related cost reductions. The Q3 operating margin of 17.7% was 50 basis points higher than 17.2% in previous quarter, Q2 of 2021. Interest income in Q3 of 2021 was $0.1 million compared to interest expenses of $1 million in Q3 of 2020.

During Q3 of 2021, we incurred interest expenses of $0.9 million on outstanding debenture which will continue until the beginning of 2026. These interest expenses were offset by interest income of currency-related hedging transaction.

Net income attributable to Sapiens' shareholders for the quarter was $17 million, 23.5% higher than $13.7 million in Q3 of 2020. EPS for the third quarter of 2021 was $0.31 per diluted share, up from $0.27 in Q3 of 2020.

This 15% increase in EPS was achieved along with an 8% increase in the average diluted share count compared to the corresponding period. Turning to our balance sheet. As of September 30, 2021 we had cash and cash equivalents and short-term deposits totaling $184.7 million.

Adjusted free cash flow in Q3 was $11.9 million compared to $14.5 million in Q3 of 2020. Over the last nine months, our adjusted free cash flow was $46.3 million, representing 97% of our net income. I would like to turn now to our guidance for 2021.

Revenue, we are reiterating our revenue guidance for the year with the range of $461 million to $466 million. On the profitability side, in Q3 we continue to make progress with expanding our offshore employee base, primarily in India. As part of our business model, we continue to focus on our profitability, although the global increase in labor costs.

Based on our achievement, as of end of Q3 of 2021, we are increasing our annual operating margin from 17.2% to 17.5% to a range of 17.4% to 17.5%. I will now turn the call back to Roni Al-Dor.

Roni?.

Thank you, Roni. Sapiens is well-positioned in a $40 billion market that provides a macro tailwind as insurance move from legacy software to digital and cloud solutions. We have built a global presence with a growing footprint. Sapiens has the broadest product offering in the industry with P&C and life and annuities.

Our proving lend and extend framework enable us to consistently deliver scalable growth to drive improving margins. Sapiens is well positioned to continue to increase its share in the growing market it's operating in and to deliver long-term shareholder value. Now I would like to close our prepared remarks and open the call for questions. Please..

Thank you. Ladies and gentlemen, at this time, we will begin the question-and-answer session. The first question is from Bhavan Suri. Please go ahead..

Good morning, Roni. And Roni, can you just hear me okay..

Yes. Thank you..

Hi, Bhavan..

Great. Congrats that was a solid quarter. I guess I'll start off with a high level, maybe this is for Roni Giladi to start off with. But you had a good quarter. You had some really good wins. You're seeing life insurance come back a little bit and some really good wins there.

Just given that momentum, help us understand maintaining full-year revenue guidance, sort of is that just conservatism on your part? Or are you seeing something else in the market? Just help us think through that a little bit?.

Hi, Bhavan. This is Roni. If I need to give a little bit recount. If you remember, we already increased our revenue guidance twice in the year, first in Q1 and then second in Q2. We are reiterating right now our guidance to the same level as we provided last quarter.

The deals that we announced takes time, obviously, it takes time to close and initiate the revenue from them and we feel comfortable with the revenue and we expect the revenue will increase as we continue throughout the year. But right now, the deal that we just signed and announced takes time to recognize..

Fair enough. And then maybe more fundamentally on the business, I guess, for Roni Al-Dor and for you, Roni Giladi. When you look at the life business, it feels like that started to show some really nice growth here.

You're also trying to innovate and integrate as you're moving to P&C North America, how are you thinking about the pace of innovation, like the investment in R&D and in sales and marketing between life and P&C, given you've got sort of both pieces seeming to start to do better in Europe certainly and then obviously, the investment in North America P&C.

Help us think through how you're balancing that and how you're thinking about the investment, both in innovation and in sales and marketing?.

So, this is Alex Zeckerman, VP Strategy at Sapiens. So Bhavan, I'll try to answer your question. And absolutely, we see this growth and we reflect the investment in the products going into 2022 in our plans to support this growth to continue progressing it.

As mentioned by Roni, we see a strong growth in Europe but we also see enhanced pipeline still initial stages but we are doing nice progress in North America on the life side. And naturally, to reflect this we will put a strong investment in the product to continue that.

On the P&C front, I think we will continue in the same pace that we are doing, the investment that we did across the last year proved itself in the right direction.

It helped us win the business and position our product as the leading product for sure in Europe and improving substantially in North America and we'll continue those investments in the two areas..

Got it. And one last one, if I might just squeeze it in, on decision. It felt like you brought up maybe a couple of wins around the decision offering in the quarter.

Maybe just give us a quick update on where that business is and sort of what verticals are adopting historically, we've had the Fannie Mae in the financial services, but maybe a quick update decision would be great. Thank you..

So, it's Alex here again. So definitely, Bhavan, that's the trend that we see and we also focus on that and push to this direction. And it is predominantly starting to leverage the decision into the insurance world. We started, as mentioned in the banking around the mortgage and then private banking.

But actually, now with the ability to create the right use cases and to use decision in insurance, it definitely resonates with the majority of our customers and our ability to go to them to cross-sell and upsell. And as you can see also from the latest news on the wins, this is decision for insurance.

So we developed several use cases around accelerated underwriting, around smart management of claims and claims automation. And those use cases are definitely getting the traction in the insurance space, and this is where we have the latest wins with decision..

Yes, Alex. That's right I mean, Roni and I talked about this for years. That makes sense. With the logo, no-go to-do well in that space. Great, thanks for answering my questions guys I appreciate it..

Thanks, Bhavan..

The next question is from Ashwin Shirvaikar of Citibank. Please go ahead..

Hi, Roni and Roni. It’s Ashwin..

Hi, Ashwin..

Hi. Congratulations on the quarter there. Earlier in the year, you guys mentioned supply challenges, particularly in India. Is that behind you now, obviously, from a delivery perspective, the supply of IT services professionals continues to be relatively tight.

But how are you faring? Could you provide kind of a little bit deeper update?.

Yes, hi. This is Roni Al-Dor. Yes, what we shared at the beginning of the year is based on the COVID situation, definitely in India. Now the situation is much better, as you know. We start to see people start to come to the office also in India. So I think all the challenges around the COVID and the resource in India, it's passed.

The challenge that we have right now, as you see, the overall IT, there is huge demand for employee and we have challenges on the attrition area and also to hiring. But this is a general thing that we are facing..

Got it.

And in terms of how budgets and project time lines are shaping up for as we look forward into 2022, could you comment on that? Should we still – should we continue to expect for better than sort of double-digit growth rate organically just based on what you're seeing? And particularly, referring to as I look at your website, for example, the frequency of press releases, customer signing announcements has gone up?.

Hi Ashwin, this is Roni. We see the trend continue. We do not see this decreasing at all. We will provide guidance for the full-year 2022 in February, but we'll be in the same range as we are saying all the time, between 8% to 11%. We'd like to continue what we have today. So this is a trend and this is what we are working for.

This year, we grew about 10% organically and complemented by additional 10% of M&A. So we'd like to continue the organic growth..

Okay. Thank you..

The next question is from Jackson Ader of JPMorgan. Please go ahead..

Great, thanks. Good morning guys. The first question and maybe it's best answered by Alex, I'm not sure. But I was just curious, given that there's so much innovation happening in the cloud in this space from you guys and also competitors.

Just curious like how much current cloud capabilities matter in customer decisions or whether product roadmap or future product innovations might be taking a little bit of kind of an outsized role in customer decisions when they end up choosing vendors..

Very good. So when we look at the decision process, so definitely, we see a strong balance between the need to cater for the business today in terms of functional capabilities, robustness of the system, its stability, maintainability, et cetera. And between the need to cater for future, sometimes, the future is coming fast.

So some companies are doing really quick innovation processes and looking for a one system that can support it.

And second, to ensure when they take a decision specifically on core projects which is a long-term decision, they want to make sure that they choose a partner that has one strong road map going to the future, the ability to execute it and the ability to be a partner.

So definitely, point such as cloud capabilities, innovation, ecosystem, partners and track record in being able to lead such innovation and execute it are super important.

When we look at specifically at the cloud capabilities, so definitely, we see the over the last, let's say, 12 months to 18 months, the majority of deals that we are participating and winning our cloud-based deals where we are deploying our system in the cloud, typically also providing our cloud services on top of that.

So this is definitely strong, strong trend in the industry.

I would say that at the moment, we see more traction on the ability to put it in the cloud and to ensure its maintainability in the cloud, less on a multi-tenant versus single tenant, even with more tendency still to look at a single-tenant approach because of security because of confidentiality because of the need of insurance carriers to protect their data and database.

But definitely, they need to be able to install the system in the cloud, preferably with Amazon or Azure as the two leading cloud providers and to be able to run native capabilities on the cloud. This is essential and this is what we are doing on a constant basis..

And so my follow-up, I mean, if I look at the gross margin line, Roni, the gross margin expansion, I think, the last few years has been certainly more robust than the first nine months of 2021. I think maybe we would have expected it to be a little bit better given the shift to continued kind of cloud implementation.

So I'm just curious, what are your expectations maybe for gross margin expansion going forward? What are the levers that you kind of have left there in order to lift that as we move into 2022?.

Yes. A few comments on this. So if we take out all currency impact on the gross margin, we'll see the gross margin going up by 0.2%. So instead of 45.1%, 45.3% this should be this quarter. In terms of impact, we see two trends. Yes, the gross margin needs to go up. One factor is what you mentioned, the implementation of the cloud.

The other fact is offshore but in the same time, we have also what Roni mentioned earlier, increasing all-global IT costs. So we saw cost up much more than in the past. But overall, we intend to increase gross margin steadily at least quarter-over-quarter..

All right. Great. Thank you..

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

Hi, good afternoon. Thanks for taking my questions. I was wondering more broadly speaking about the level of competition. Would you say that it has intensified since the beginning of the pandemic? Are you coming across more competition on the RFPs that you're responding to? Any color would be helpful..

Yes. I will answer, Hi. I think we see less competition. Let's talk about Europe for a second. As I said before, Sapiens has a very positive momentum in the Europe market. And this is again because our brand, because our analysts, because our reference, because our experience and because the M&A that we did in the DACH, Iberia and in the Nordic.

Right now, I think from the state, the real competitor is Guidewire on the P&C, all the rest only in the life is only the local player. And it's very difficult to survive for the smaller vendors in Europe if they don't have enough customers, meaning they don't have enough money for investing the product, in digital and so on.

So overall, competition in Europe is not as strong as in U.S. In U.S. is different, more same level of competition like Guidewire on the P&C and then also in the life. So it's more competitive environment. But again, it's more or less in the same level.

And we have some products – sorry, we have some products like insurance that Sapiens become – for many years, that we have become the market leader, again, together with SAP but we feel very, very comfortable, decision is unique. So there is no competition. Again, not huge competition in this area.

So there is a few areas that we are purely leading the market..

I appreciate the color. A couple of months ago, you talked about putting some of your applications available with a system integrator.

I was wondering if there was any traction or any early takeaways you had from that?.

Yes. We are building, as we talked, we are building, we sold many SI program but it's still pretty small but we see the benefit of it. And again, we are very focusing in the area that we want the help from them. For example, P&C for the higher tier to compete with Guidewire or to penetrate back to U.S. with our life and so on.

So it's a very dependent situation. But the answer is yes, we are reinvesting this area. Thank you..

Great. Thank you, Roni..

Thank you..

The next question is from Surinder Thind of Jefferies. Please go ahead..

Thank you. I was hoping to get maybe a little bit more color on what you may be seeing for 4Q trends in terms of revenues.

Can you maybe talk a little bit about your outlook for North America versus Europe? As I look over the past few quarters, we're seeing sequential growth in North America which I think you've mentioned as being driven by life and decisioning.

And so, should we expect that trend to continue? And then, European revenues were generally flat quarter-over-quarter.

Any color that you can provide there? And how we should think about that on a go-forward basis?.

Hi, Surinder. Regarding the state, this is the second quarter that we see sequential growth in the state. What we see right now is we see that trend will continue. Again, low, moderate but trend should go up. This is a trend that we see right now. In the terms of European side, we saw growth quarter-over-quarter, very strong one.

We are growing European area by organic growth of north to 20%. This quarter is same as Q2 but we expect the growth will continue..

That’s helpful.

And then in terms of the Asia Pacific region, another strong sequential improvement for the large non-life insurance win that you have there, are we effectively at run rate levels at this point? Or should we expect continued sequential growth there as well?.

On the APAC side, what we see is by the way, a combination of organic growth and M&A impact, some of revenue came from a Delphi acquisition and some revenue come from the Tia acquisition but we have the growth which is north to 10% organically. We recently signed a deal on the P&C side and we expect this to grow..

So the expectation is that we're not at run rate revenues yet, just to clarify?.

It should go..

Got it. And then following up on a comment about I think you mentioned – well, I guess, one, I'd like to begin with. It sounds like India is fully back to normal at this point.

Is that the right way to think about it? Or are you still seeing some modest impact on your margins from delivery capabilities not fully being to normal levels?.

If I need to look at the India side, what Roni mentioned earlier is that we do not see impact of the COVID on delivery. If I need to look on the open position, so to us, the COVID impact that we talked about in Q1 is right now, not exist at all.

If I need to look right now in the open position that we have in the company, significant – the vast majority of the recruitment is done by in offshore operation, India, Poland, for example, we'd like to continue.

We talked about the increasing cost of labor cost, but I can say that we increased our percentage of offshore ratio that allow us to improve margins. So we are going to continue this trend as it supports our customer and obviously, Sapiens as a company..

Got it. That's helpful. Thank you..

The next question is from Omri Lapidot of Leumi Partners. Please go ahead..

Hey guys. Good job with this quarter's result. If you look back at the last couple of years, we saw growth increasing. Now I believe that 2021 is quite a unique one-time record year with the growth we are supposed to see. And that we suppose to see the growth decrease in the upcoming years.

But if you can maybe help us understand your level of confidence regarding the organic growth rate in the double-digit area for the next couple of years? How many years do you see it continuing? How confident are you? Thanks..

Hi, Omri. I will start to answer maybe, Roni and Alex will join me. We are growing organically for the last several good years, the range of organic growth between 8% to 11%. We see the deal coming, we see the request for our products in Europe. And right now, slightly increase in the state also.

This gives us confidence that we'll be able to continue to grow in this level of range. This year was unique at about 20%, but it's mainly the additional 10% came from M&A. I must say that right now, we see a bigger pipeline of M&A that fit our, let's say, requests compared to Q2. But M&A is a subjective, we do not know if it will happen, yes or no.

So overall, organic growth, we see the demand increase from the market and we'd like to continue the trend, the range of between 8% to 11%. About the market demand, maybe Alex is here can add addition..

Maybe before, Alex, I would like to add, when you ask about organic growth, this is exactly what Roni mentioned, I would like to – if you break down our revenue, there is a part of our revenue or because of legacy or because sometimes we're acquiring company, not for growth in order to help us to grow other business.

So if you can break down, you can see that part of our business growing by 20% organic or 15% or more than 10% and part of it not. So the overall is exactly what Roni mentioned. But I think for the investor, I think it's important to understand that we have part of our revenue growing more than 10%.

And this is that give us the confidence about our products, reference, et cetera..

So just to complete what Roni and Roni said and to take it from the market perspective, we definitely see the – and this is published by different analyst firms that the demand for IT products, services and software in the insurance industry is going to increase year-on-year over the next five years.

The percentage of the budget that insurance companies are allocating to IT projects is increasing, both on the services side and on the software side, and that's definitely we see it as a potential positive impact on our ability to grow..

Okay. Thanks guys..

Thank you..

Thanks..

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 two hours. In the U.S., please call 1-877-456-0009. In Israel, please call 03-925-5900. And internationally, please call 9-723-925-5900. Mr.

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

Yes. Thank you all for joining us today. Have a good day..

Thank you. This concludes the Sapiens International Corporation’s third quarter 2021 results conference call. Thank you for your participation. You may go ahead and disconnect..