Israel insurance software company Sapiens International Corp. (Nasdaq: SPNS; TASE: SPNS) today published a profit warning as part of its preliminary results for 2017 and its guidance for 2018. The company put its 2017 revenue at $270-273 million, and its non-GAAP operating profit margin for the year at 8.3-8.6%.
Sapiens was affected in 2017 by an important customer calling off a project in Japan during the year, leading to a downward revision in its guidance and the restructuring of the company. In August, the management of Sapiens, controlled by Formula Systems Ltd. (Nasdaq: FORTY; TASE: FORT), a subsidiary of Polish group Asseco, said that its revenue for the year would total $265-275 million, $5 million less than its previous guidance, and slashed its non-GAAP operating profit margin guidance from 13% to 9-10%. Sapiens is managed by CEO Roni Al-Dor.
Sapiens fulfilled the revenue guidance it gave in August, but lowered its operating profit guidance even further, due to the canceled project and streamlining in the company in 2017, in which Sapiens spent $8 million on restructuring. Sapiens is now projecting $280-285 million in non-GAAP revenue and a non-GAAP operating profit margin of 12-13%.
Sapiens's share price responded to the news by plummeting 15%, pushing the company's market cap down to $500 million. Sapiens's share price was down 30% in 2017.
Al-Dor said today, "We're channeling our resources to match activities with the most profitable growth opportunities in order to maximize our global potential, obtain market share, and bolster profitability." He added, "In 2018, we expect growth in elementary insurance business in Europe and the US, together with an improvement in our competitive position. Management plans to focus on improving operating profit and profit margins, and we expect improved profit margins throughout the year."
Sapiens's revenue grew 24% in January-September 2017, due, among other things, to the acquisition of Stone-River early in the year for $102 million. At the same time, Sapiens posted a $2.8 million net loss and a $9.4 million non-GAAP net profit, 48% less than in the corresponding period in 2016 (excluding various accounting expenses).
The project cancelled in 2017 accounted for over 5% of Sapiens's revenue. The customer claimed that Sapiens breached the agreement between them, while Sapiens asserted that it had violated no undertakings. While discussions were taking place, the project was halted.
Sapiens reported last week that it was acquiring Pennsylvania-based company Adaptik, a provider of software for elementary insurance management. Sapiens will pay $19.5-22 million, subject to performance. In January, Sapiens acquired Knowledge Price for an insubstantial sum for the purpose of expanding its digital division.
In addition to its expansion in the US, Sapiens is implementing its cost-cutting plans, including laying off several dozen employees in Israel.
Published by Globes [online], Israel Business News - www.globes-online.com - on February 12, 2018
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