Sapiens: Accelerating In Q4 With Margin Levers Pulled

seekingalpha04-16

Sapiens is seeing the promised margin lift from growing recurring revenue in the mix.New customers seem to be coming in at a constant pace, with growth driven by the Nordics.They are changing their ...

Source Link

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

We need your insight to fill this gap

Leave a comment

{"i18n":{"language":"en_US"},"isChannel":false,"data":{"share":"https://ttm.financial/m/news/2427875035?lang=en_US&edition=fundamental","thumbnail":"https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1688769966/image_1688769966.jpg","is_english":true,"pubTime":"2024-04-16 22:44","share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","id":"2427875035","market":"sg","top_or_hot":-1,"title":"Sapiens: Accelerating In Q4 With Margin Levers Pulled","media":"seekingalpha","content":"<div>\n<p>Sapiens is seeing the promised margin lift from growing recurring revenue in the mix.New customers seem to be coming in at a constant pace, with growth driven by the Nordics.They are changing their ...</p>\n\n<a href=\"https://seekingalpha.com/article/4684010-sapiens-accelerating-in-q4-with-margin-levers-pulled\">Source Link</a>\n\n</div>\n","source":"seekingalpha","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Sapiens: Accelerating In Q4 With Margin Levers Pulled</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nSapiens: Accelerating In Q4 With Margin Levers Pulled\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-04-16 22:44 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4684010-sapiens-accelerating-in-q4-with-margin-levers-pulled><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Sapiens is seeing the promised margin lift from growing recurring revenue in the mix.New customers seem to be coming in at a constant pace, with growth driven by the Nordics.They are changing their ...</p>\n\n<a href=\"https://seekingalpha.com/article/4684010-sapiens-accelerating-in-q4-with-margin-levers-pulled\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BK4023","symbol_name":"应用软件","start_time":0,"source_url":"https://seekingalpha.com/article/4684010-sapiens-accelerating-in-q4-with-margin-levers-pulled","article_id":"2427875035","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1688769966/image_1688769966.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2427875035","pubTimestamp":1713278688,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Sapiens is seeing the promised margin lift from growing recurring revenue in the mix.New customers seem to be coming in at a constant pace, with growth driven by the Nordics.They are changing their bi","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4023":"应用软件","BK4213":"石油与天然气的勘探与生产","BK4097":"系统软件","VTS":"Vitesse Energy","SPNS":"Sapiens International Corp","VTS.AU":"VANGUARD TOTL ST MKT ETF-CDI","ASOZF":"Asseco Poland S.A."},"translate_title":"智人：第四季度加速增长，利润杠杆拉动","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"ASOZF":1,"SPNS":1,"VTS":1,"VTS.AU":1},"content_text":"Sapiens is seeing the promised margin lift from growing recurring revenue in the mix.New customers seem to be coming in at a constant pace, with growth driven by the Nordics.They are changing their billing and revenue recognition model in a typical shift to a subscription model, with some negative impact on reported guidance.Private equity firms might be in the mix looking to buy Sapiens. We think they have an attractive profile, and the valuation wouldn't be bad. The only issue is war may slow a deal down.   Richard Drury/DigitalVision via Getty ImagesSapiens International (NASDAQ:SPNS) is one of Asseco Group's (OTCPK:ASOZF) holdings listed on American exchanges that focuses on a cloud-based suite of systems for insurance companies to launch and monitor products. Its strategy has been to land and expand and start working with better profile insurance companies in the Tier 1 world, and get further away from reinsurance. In our last article, we focused on the significant potential for incremental margin expansion as implementation revenues were above-average in the mix. We confirm that the margin lever has been firmly pulled, but there has been no increase in implementation revenue, which is fine as the base still grows. There have also been whispers about an acquisition by a private equity firm, which caused some price speculation. There's been some activity in Insurtech in 2023, but not much, of course, as private equity in general has been dormant. Also, the Israel-Hamas conflict, reportedly the reason for a previous pause in sales plans, may continue to be an issue as Iran gets more explicitly involved. Earnings Revenue increased by 8.4% for the FY and operating profit rose by 12.8%, which is a decent showing. But Q4 has accelerated sharply. This is because of the mix effects that were promised last quarter. Recurring and 50% higher margin revenues compared to implementation and integration revenues went up around 16.3% in the Q4 compared to last year, which was ahead of the overall YoY revenue growth figure at a little under 9%. Consequently, while overall operating profit growth was just over 12% for the FY, the Q4 saw a 22% increase. The increase in recurring revenue accounts for the entirety of the sales increase YoY. Implementation and other revenues would have remained flat YoY, which is fine because the businesses are non-recurring, and flat evolutions just means a constant increase in the installed base which is the driver of overall recurring revenues.   Q4 Evolutions (VTS)Nordic wins helped propel sales growth in Europe which drove overall results at above 10%, also on a constant currency basis, while North America still achieved solid results with around 8% overall sales growth. APAC is smaller and idiosyncratic, and is in decline due to some specific closes last year. A Norwegian win drives results, and SPNS is continuing to consolidate its Nordic positioning, which has been a receptive market with some minor M&A. Guidance comes in somewhat weak compared to the Q4 showing, meaning average performance looks to be declining for the coming FY according to management forecasts. But the case is that the underlying economics and trends remain about as strong as before, and the slightly weaker looking guidance is a consequence of some changes in the business model. Like many other companies in our coverage, they are shifting to a subscription model, rather than an implementation and then recurring service model that they currently have, and would be typical of perpetual license sales businesses. This will spread out the implementation revenues over a subscription, which will be the new mode of revenue recognition according to their changing billing terms. It will also average down the surge of the recurring revenues as is currently recognised in the mix, since the entire service will be included in the subscription.  The continued transition to SaaS for new deal will result in; one, convert part of revenue from post-production services to subscription revenue; two, shift of revenue that are currently part of pre-production revenue, which are non-recurring into subscription revenue, which are recurring and will be recognized over a longer period. The financial impact will be reduction in our total revenue in the short term, one to two years, and an increase in our recurring revenue and ARR in the mid to long term. We expect the impact of our annual growth rate due to the change to be around 1% headwind to revenue. Therefore, our growth rate would've been approximately 8.3% at the midpoint had we not made the shift to subscription recurring revenue.  Roni Giladi, CFO of SPNS  Bottom Line There has been some reporting that SPNS is exploring a sale to a private equity firm. We think the change in model is also likely part of that strategy, since PE firms are very concerned with predictable economics and subscriptions are more predictable and palatable for customers. On the matter of the sale, SPNS definitely has the economic profile to be picked up by a PE, and there is a lot of scope for penetration and winning share and getting into larger wallets, which is something that a PE would want to have a hand in accelerating. Recurring economics and decent profitability are attractive. The only issue is that there'd also been some reporting that these plans had started earlier in the year, but had been paused by the conflict. While they might have initiated again, Iran's retaliation to the attack on their embassy in Syria might be a reason why PE firms would stay on the sidelines for a little while longer. We also note that while there had been some deals in Insurtech this year, there hasn't been many and that's on account of the underlying situation in private equity. On the speculation of the PE buyer a couple of weeks ago, the price spiked to almost 20% above current levels. This probably doesn't take into account a full valuation of the control premium plus any valuation premium that could be expected for SPNS from cash-loaded and in a scarce opportunity environment for PE. SPNS P/E ratio is around 21x, which is not low, but it's also not terribly high considering the growth record, forecasts and recurring economics. It trades at around 15x EV/EBITDA on a forward basis, which is not low but again also not high considering limited, fixed and working capital intensity of the business. It will become even less working capital intense when it becomes a subscription business. It's definitely a fair multiple, and there'd of course be a control premium upside at least if a PE firm is really going to buy this thing at some point, which again wouldn't be a wild prospect. A good hold.  Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.","kind":null,"is_publish_news":null,"is_publish_highlight":null,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"symbols":[],"gpt_button":0},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.22.4","shortVersion":"4.22.4","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2427875035"}