Welcome to Sapiens International Corporation's 2021 first quarter results call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. For operator assistance during the conference, please press star zero. As a reminder, this conference is being recorded May 4th, 2021. It is now my pleasure to introduce your host, Daphna Golden, Sapiens VP, Head of Investor Relations. Daphna, you may now begin. Thank you, and good day, everyone. Our 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, and Roni Giladi, CFO. 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 the 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 views or expectations, or otherwise. On today's call, we will refer to the 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 one business day 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. I will turn the call over to Roni Al-Dor, President and CEO of Sapiens. Roni? Thank you, Daphna, Hello to everyone joining us today to review Sapiens' first quarter 2021 financial results. I will review highlights from the quarter one results and provide an overview of our achievements. Our CFO, Roni Giladi, will discuss the financials and outlook for 2021. Quarter one was a good start to the year. The strong revenue shows our continued focus on the execution of our growth strategy, which contains several pillars. First, to establish long-term customer relationships with the best solution to serve their needs and to support their digital transformation initiatives. Second, to grow our business in our key geographies with our land and expand strategy to gain market coverage and become closer with our customers. Third, invest in our products to maintain our market leadership position and competitive advantage. In quarter one, revenue climbed once again, reaching a record of $110 million, 22% higher than last year. This achievement delivered a 30% increase in operating income, with operating margin reach 17.2%, up from 16.1% last year. Sapiens is a global company operating across multiple insurance markets and deploying a diversified product offering. These strategies allow us to balance our growth, resource investment, and risk across region and markets. Over the past quarter, we continued to experience strong industry demand of our Core and Digital offering globally. In North America, we have grown our business in recent years from strategic M&A and organic growth, including investment in the integration and R&D. In the Life & Annuities space in North America, we are starting to see growth in our pipeline for CoreSuite Life & Annuity. To support this pipeline into 2022, we are initiating a partnership program with the leading system integrators towards such projects. Our Life components continue to demonstrate growth year-over-year in the market. Our reinsurance offerings, which include ReinsurancePro and Go, continue to grow, and Reinsurance Master continues to attract interest from top tier carriers in North America and globally. On the CoreSuite P&C front, we have experienced rapid growth in the recent years. Delivering multiple transformation projects requires substantial resource and knowledge. The CoreSuite P&C business is facing growing pains, which resulted in delivery challenges. We are currently increasing resource in order to support existing transformation projects, as well as new business towards the end of the year. In parallel, we are executing a plan to carefully manage and control the growth. To advance our growth in North America, I'm excited to welcome Jamie Yoder, who joined us last week as the President and General Manager of our North America business. Jamie will have overall responsibility for all of our end-to-end business in this region. Jamie brings extensive leadership experience in both P&C and Life, including launching SaaS and cloud-native businesses and holding senior positions with the global insurance system integrators. Most recently, Jamie was President of Snapsheet, a leading technology innovator in the insurance claims space. Before that, he was the insurance advisory leader for PwC, both in the U.S. and globally, advising clients across P&C and Life on the management and transformation initiatives. Before PwC, Jamie also led the insurance practice and served on the management committee at Diamond Management & Technology Consultants, which PwC acquired in 2010. A key objective for Sapiens is to further increase our presence in this region, build strong customer relationships, and expand our market share. We are confident that Jamie's experience in large-scale transformations, along with his relationship with the top-tier insurance carriers and system integrators, will be an asset for Sapiens. His insurance expertise can significantly contribute to our roadmap and direction. While our model remains one hand to shake, we also aim to expand our partnerships with system integrators as per market demand. I'm confident that we will resume growth in North America towards the end of 2021. Moving now to European markets. Our investment in Europe over the last several years is paying off, both in our market presence and our product portfolio position. We have achieved year-over-year revenue growth across the board and the pipeline is robust. We enter the year with positive momentum in all European markets we are currently operating in and have delivered strong results. Our acquisition in Iberian and DACH region have already achieved strong results, helping us execute our land and expand strategy and accelerate our growth in these high potential markets. With Tia, our most recent acquisition, we are investing to fully integrate the company's R&D, professional services, sales, and operation into Sapiens. The added value we offer to the 70 customers that joined Sapiens with the acquisition includes our broad digital and data offering and managed services. Tia enhances our market presence and deep knowledge in this region. I'm pleased to share that we already see tremendous synergies between the companies. This has resulted in new cross-sell and upsell business and future opportunities. Looking at the rest of the world, APAC and South Africa are showing positive momentum, and we continue to expand our business, offering our customers in the region additional value and exploring new opportunities. Since Tia has a strong presence also in South Africa, we benefit from the acquisition in the region as well. In two weeks, we are hosting our 2021 virtual European and rest of the world customer events. I'm looking forward to this event, in which we will host many new customers that have joined us in the last two years, including those that became part of the Sapiens family through acquisitions. In summary, our quarter one solid result validates our strategy of building global diversity with a broad business portfolio to provide the foundation to Sapiens' continued performance and growth. Across the various region and market segments we are operating in, the global Sapiens team has delivered new wins and upsells. Let me share with you some of the wins we have announced during the quarter. A Tier 1 South African financial services institution, an existing Life & Annuity customer of Sapiens, chose to expand its relationship with us. The customer, which offers banking and insurance services, has selected Sapiens' IDITSuite for property and casualty to support its personal and commercial lines of the business. This is just one example of demand, mainly by large carriers, for solution for both P&C and L ife, positions Sapiens with a significant advantage in the market. U.S.-based Clear Blue Insurance Group has also selected Sapiens ReinsurancePro in quarter one. ReinsurancePro was created and designed for the Reinsurance needs for P&C carriers. This product gives Clear Blue a strong platform to manage complex reinsurance transactions and quickly respond to new reinsurance needs. On the Life side, we expanded our partnership with Atos to deliver transformational Life & Pensions business process outsourcing services to one of its customers. Atos is one of the largest system integrators in Europe. Their selection of Sapiens Life solution, which fully integrated to a wide range of Atos Digital BI and customer experience services, validate our leadership position. This leads me to the product front. Sapiens' focus on R&D investment delivers consistent returns, provide product distinction, and competitive edge. The growing interest in our Life offerings, supported by prestigious industry awards that we won in late 2020, is reflected in strong booking expected to translate revenue in the coming quarters. We released a new version of our CoreSuite for Life & Annuity last month. This latest version takes the cloud-based open architecture one step further. It features an enhanced library of pre-configured life insurance products built in digital and analytics, and low-code and no-code tools, empowering users to tailor and launch new products rapidly. This enhancement ensures faster implementation, rapid go-to-market for our customer, and even greater sales efficiency. We continue to see strong and growing interest in our IDITSuite for P&C across EMEA and APAC. This includes interest in IDITSuite as a standalone, as well as in combination with our DigitalSuite and Sapiens Intelligence, including the managed services and cloud deployment approach. We also see increasing interest in our recently launched proposition of IDIT Go, designed to serve the lower tiers and greenfield insurers. Our portfolio continues to win recognition. In February 2021, IDITSuite received Celent XCelent Awards for the breadth of functionality for P&C policy administration system in EMEA. In March 2021, Celent chose our client, esure Group, for the Model Insurer award in recognition of the business value they gain through the deployment of Sapiens Decision on top of IDITSuite. Sapiens Decision is now driving [esure] U.K. rule-based decision making and customer journeys for claims. This is an excellent example of a customer that's originally deploying one of our products, in this case, the Sapiens P&C IDITSuite for its core system, later to be followed by very successful deployment of Decision to enhance their digital transformation. Our digital solutions are attracting higher demand as the market evolves, and we continue to advance the functionality of our digital offering. We have recently announced a new version of our DigitalSuite. This cloud-native modular solution empowers insurance to leverage digital opportunities and enhance customer engagement. Our Digital Suite can be deployed together with Sapiens Core product to provide the full digital experience. It can also be deployed as a standalone suite over the legacy or other core products. We continue to see strong traction for our cloud-based and managed services proposition across Life, P&C, and Digital. Most of the deals signed over the last 18 months include cloud deployment and managed services. I'm happy to share that our customers keep providing positive feedback, recognizing the high level of services we offer them. Another area we continue to focus on is our partner Insurtech ecosystems. Our platform feature open API capabilities, enabling our customers to enjoy seamless integration with additional solutions. We recently announced a partnership with Atidot to offer AI-based predictive insight and personalization to Life Insurance providers. The partnership creates new ways for insurers to generate revenue through analytics and actionable insights. We also announced a new partnership with ECHO to offer a complete digital payment solution for insurance carriers. Our integrated offering will empower insurers to achieve immediate total electronic adoption, ensuring payment efficiency with minimal IT requirements. Together with Sapiens Core solutions, ECHO's payment processing solution will enable carriers to eliminate complex manual payment processes. We also partners with Rising Medical to simplify processes, reduce costs for Workers' Compensation, and property casualty carriers. Our diversified portfolio and market presence continue to allow Sapiens to enjoy the different trends in the various markets and, at the same time, to mitigate risk across the board. Looking ahead to 2021, since the outbreak of COVID-19, Sapiens has been dedicated to business continuity and mitigating the pandemic impact on the company while maintaining our growth momentum. Life is returning to normal in many of the regions in which we operate. In the last few weeks, the pandemic in India has increased substantially, impacting about 8% of Sapiens employees in India. The rest of the employees in India continue to work remotely without disruption. We are currently working on initiatives to mitigate potential risks while keeping our growth plans in India intact. This plan also includes expanding our partnerships with system integrators, recruiting from other regions, and potentially shifting resources from R&D. The situation obviously has impact on our short-term outlook, Sapiens committed to balancing our business responsibility with the personal health and well-being of our employees. To summarize our achievement and trends in the various markets Sapiens operates in, the demand in the P&C market is expected to continue in all regions. In EMEA and rest of the world, we have already expanded our presence to meet the growing demand. In North America, we are scaling up our delivery capabilities. Our insurance platform continue to gain momentum, mainly with large carriers. In the Life & Annuity market, we see growing demand for our platform, supported by recent wins, a solid pipeline, and continued analyst recognition. In addition, we also see growing demand for multiple lines of business across both Life and P&C, which makes Sapiens the vendor of choice. In addition, multinational carriers recognize Sapiens' added value as a global player. I am proud of the successes we continue to demonstrate from our organic growth, complemented by strong results from our investment in Iberia, DACH, the Nordic, and South Africa. With over 600 global customers, Sapiens is making a significant impact with our broad portfolio of solutions and one hand to shake business model. With nearly 4,000 of industry's most talented employees spread globally, we have all the tools in place to continue to grow. The disruptions of COVID-19 and rapid industry shift to digital are driving insurers to speed up their digital transformation projects. We are looking ahead to land new customers and expand existing customer business. 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 first quarter of 2021 non-GAAP results. All comparison are year-over-year versus Q1 of 2020, unless otherwise stated. This will be followed by comments on the balance sheet and cash flow. I will wrap up with an update of our 2021 outlook. Revenue in the first quarter of 2021 increased to $110.2 million, up 21.7% from the first quarter of 2020. Our revenue in North America reached $44.8 million, similar to last year. During Q4 of 2020, we successfully completed go-lives of large transformation implementation, which resulted in lower revenue in Q1 of 2021. An additional effect on the Q1 year-over-year was the negative impact of COVID-19 on our Workers' Compensation business, which is highly correlated to employment rates. As Roni already mentioned, the delivery challenges in the Sapiens CoreSuite P&C North America impact Q1 revenue. I would like to reiterate that with a clear plan in place, we anticipate returning to growth in the region towards the end of 2021. Revenue in Europe reached a record $57.7 million, up 43.3%, driven by a combination of organic growth and M&A. As a reminder, this was the first full quarter contribution from Tia to our results. To complete the revenue growth picture, our revenue in rest of world, South Africa and APAC, reached $7.8 million, 36% higher than last year. Moving to gross profit. Gross profit in Q1 2021 was $49.2 million, up from $39.8 million in Q1 last year. Our gross margin this quarter increased by 70 basis points to 44.7% from 44% in Q1 2020. Operating profit this quarter was $19 million, a 30% increase from $14.6 million in Q1 of 2020, and slightly higher than the $18.7 million recorded in Q4 of 2020. Operating margin rose by 110 basis points to 17.2% from 16.1% of last year. This year-over-year increase in operating margin was achieved despite the fact that R&D and SG&A were about $5 million higher. Additionally, as I shared last quarter, Tia profitability is lower than Sapiens'. Since this was the first quarter in which Tia was consolidated on a full quarter basis, its impact on profitability was higher than our Q4 of 2020 results. Tia profitability is expected to improve towards the end of the year. Interest expenses in Q1 of 2021 on debenture was $0.8 million and will continue throughout the year. It was offset by income from hedging transaction, which lowered interest costs incurred in Q1 of 2021. Total interest expenses for the quarter were $0.5 million. Net income attributable to Sapiens shareholders for the quarter was $14.9 million, up 43.2% from the $10.4 million net income in Q1 of 2020. EPS for the quarter was $0.27 per diluted share, up from $0.20 per diluted share in the first quarter of last year, reflecting 35% increase. Please note that EPS reflects the full share count following the public offering we have completed in Q4. Turning to our balance sheet. As of March 31st, 2021, we had cash and cash equivalents and short-term deposits totaling $172.2 million. Total debt stood at $101 million, reflecting the $20 million debenture payment in the first quarter of 2021. The debt term is five years, and it will be paid in equal installments until January 1st, 2026. Touching upon adjusted free cash flow. In the first quarter of 2021, we reached an adjusted free cash flow of $10.6 million, a 135% increase from Q1 of 2020. In addition, we recently announced a cash dividend of $0.37 per share, which amount to $20.2 million. This year, we return to our normal pre-COVID distribution rate of up to 40% of our annual non-GAAP net income. This record dividend distribution reflects Sapiens' solid performance and our ability to generate free cash flow quarter over quarter. I would like to turn now to our guidance for 2021. In Europe, we are seeing organic growth in P&C as well as Life & Annuity. We are also benefiting from the acquisition in the Iberia, DACH, and Nordic regions, all of which clearly demonstrate the success of our land-and-expand strategy. We expect to continue to reap the fruits of this investment in 2021 and in the coming years. In North America, taking into account our plan to carefully manage and control the growth, we anticipate that the growth resume towards the end of 2021. Given the high growth in Europe and rest of world, and taking into account low growth in North America, we are increasing our revenue guidance from the range of $457 million-$463 million to the range of $459 million-$464 million. Turning to our operating profit guidance. Our updated profitability guidance for 2021 has been influenced mainly by the following. First, our plan initiated to manage our growth and investment in delivery capabilities in North America P&C CoreSuite business. Second, the recent spike in COVID-19 in India, which will increase our labor cost in the short term. We assume these two factors are only temporary. In Q2 2021, we expect operating margin to be at least 16.5%. As to operating margin for the full year of 2021, is now expected to be in the range of 17%-17.4%, compared to previous range of 17.7%-18%. On the M&A front, we have added several companies to Sapiens family in 2020, and we intend to focus efforts on their integration and supporting the customer of the new companies. We are still evaluating M&A targets in 2021 and act on them if we find the right opportunities. I will now turn the call back to Roni Al-Dor. Roni? Thank you, Roni. With the focus of growth strategy, global diversity, and increasing market demand, Sapiens is well-positioned for additional success and growth. On a personal note, I would like to express our deepest concern for our Sapiens family in India. The health and well-being of our employees is our highest priority and concern. We are making every effort to provide support. I would like now 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. If you have a question, please press star one. If you wish to cancel your request, please press star two. If you're using speaker equipment, kindly lift the handset before pressing the numbers. Please ask your questions in a loud and clear voice. Your questions will be polled in the order they are received. Please stand by while we poll for your questions. The first question is from Sterling Auty of JPMorgan. Please go ahead. Thanks. Hi, guys. I wanted to better understand in North America, given the traditional strategy of a single hand to shake, how you're going to balance moving to partnering with system integrators. What part of the project do you plan the system integrators to handle? What part of the project do you intend to continue to hang on in-house? Let's start with that. Hi, this is Roni Al-Dor. To answer your question, just to remind, we have several products in North America. We started with Core Suite, and then we have our Decision management, we have Reinsurance, we have Life component, we have Life Core, and we have Workers' Compensation. Many products. If we are going one by one, right now with our land and extend approach, we made a decision to start to do business on the CoreSuite on North America. As you remember, like many years ago, we decide to focus mainly in the rest of the world. Right now, we did all of our work, so the product is ready for North America, and we try to do it together with SI. Meaning right now we have selected the few SI in order to do a workforce for them, with them, on the L&A core system. That's one. The second thing on the P&C Core Suite, we are focusing today on the mid and lower tier, but we believe that our product is good fit for the highest tiers, and this is what we plan to do it together with system integrators. That's the second one. The third product that we are discussing for a long time with SI is our Sapiens Decision. Again, in Sapiens Decision it's pure product, so it's not a lot of hand to shake issue because it's mainly the product and sometimes the customer or the SI can do the work by themselves. On top of all of these, those are the main product. On top of that, as I mentioned, we hired Jamie as President and General Manager for all North America, and he came for many years from PwC, and he came with all of this experience. He can really help us, in the future, to build a relationship to exactly to see what they can do, what we can do. It is gradually we plan to grow, mainly in North America. All right. Great. I had one follow-up and just a heads up, I've got two teammates that are on the call in two different locations. They say that the audio went silent, I don't know if the Operator might be able to check into that. My follow-up question is around gross margin. Looking at the sequential dip, how much of that is just pure seasonality versus other factors that may have influenced it? Hi, Sterling. This is Roni. This is mainly coming from P&C, also with P&C in the U.S. As we mentioned, we need to increase the team to manage the growth accordingly. We expect to increase the gross margin following from the next quarter. Got it. Thank you. The next question is from Bhavan Suri of William Blair. Please go ahead. Thank you. Hey, Roni, Roni, and Daphna Golden, thanks for taking my question. I guess I want to follow up on Sterling's question a little bit more. One of the value adds you've had and the differentiations is the one hand to shake. The other piece is in COGS, the reason why professional service is so important is you get some R&D. In Sapiens Decision, which is a pure product, it makes sense to have partners. In some of the other businesses, Reinsurance, which you're seeing growth in and innovation in, P&C, what happens to innovation and the R&D piece if you hand that off to a systems integrator? How should we think about the, whatever it is, 8 percentage points of COGS that are R&D? How should we try to understand where innovation will happen if that goes to Atos, for example? Hi, Bhavan. This is Roni Al-Dor. Roni Giladi will continue. First of all of this idea is part of our product, not all of them, very focused on a segment. It's not the entire segment. We plan to do it gradually and mainly in the U.S. and mainly all the others, again, if you're talking about Atos, they are more BPO type of work. We are doing the full SI. Because we want, we as a company that's looking to grow, we believe it will take us much faster to grow in the U.S. for the Life. That anyway today we don't have business or relatively, we don't have a big business on the Core product. The same thing on the P&C part. I think the P&C for the higher tier today, as you know, it's Guidewire and Duck Creek, and we don't see any reason why Sapiens cannot play in this Tier 1. This is why we would like to start work. As you know, and we know and we learn it right now, it's still a small part of our business, but it can really influence. If I need to add one more thing. Today, we are working also with BPO system integrator with two product, Workers' Compensation and Reinsurance Master, and we know to manage the allocation of resource and still to invest in our product. As Roni mentioned, the moving to more system integrator will be gradually over the years, so it's not one-time event. It will take us time to do this. I guess just to push a little bit. As you move upper tier, that's more innovation, that's more complexity, that's more product work. If you give that to system integrators, does your R&D go up? Roni Giladi, should we think of that going up as a percentage of revenue, maybe transferring resources to do more R&D directly in the product? How should we think about that? I got a quick follow-up. You probably are right, also the license part will go up, that they will compensate for that. Yes, the answer for that is yes. Again, I would like to emphasize this is gradually over time, not in one-time event. Got you. I want to touch on North America a little bit. Obviously, we've seen now two quarters of just not great growth in North America, right? We've sort of seen that down sequentially 5% for two consecutive periods. Help me understand, I know projects end, so post-production is less revenue than during the pre-production and the rollout. Given all the wins you've had and the acquisitions, shouldn't those just be layering on? Help me think through that process, Roni. Hi, Bhavan. Several things into it. I think when COVID came last year in 2020, one of the businesses we had, the Workers' Compensation, being affected by that, and revenue was reduced. This reduction in revenue is continued from Q3, Q4, and still continue with us going forward throughout the year. This is one of the reason for the reduced revenue that you see. The other thing is what Roni mentioned about the challenge in delivering and managing the growth. We'd like to do this more carefully, and therefore, we see right now a slower growth on the P&C CoreSuite. I want to emphasize that we see quarter-over-quarter growth, but to get to the level of, let's say, you mentioned two quarter ahead, probably we'll get this towards the end of the year. Got it. Helpful. Thank you guys. Thanks for taking my question. Thank you, Bhavan. The next question is from Chris Merwin of Goldman Sachs. Please go ahead. Hi. Yes, Kevin here for Chris. Thanks for taking my question. It sound like most of the deals signed over the last 12 months included cloud. Can you unpack that for us a bit? Are those Core systems that are being taken in the cloud, or are they more digital add-ons? Would be great to understand any major change in appetite among customers to migrate to the cloud. Thanks. Hi, Chris. This is Roni Giladi. You're totally right. Most of the deals that we signed in the last 18 months are cloud. We like to say it's not native cloud, it's single tenant cloud, both in Europe and in the U.S. I hope this answer. Great. Maybe just a follow-up. Are you seeing more demand from customers? Are you seeing to migrate to cloud within bigger projects, or is it more incremental add-on deals? Currently, what we see is when a prospect would like to go to cloud, this is not if they are existing customer, then shift to cloud. This is usually new deal come to bear, come to close. New deal come, then they move to the decision is on the cloud, of course, new technology. With existing customer, only when he would like to upgrade, this will come to question if we move to cloud, yes or no. Right now, mainly is a full system solution on the cloud, not add-on. Great. Thank you so much. Thank you. The next question is from Mayank Tandon of Needham & Company. Please go ahead. Thank you. Hi, Roni and Roni and Daphna. I wanted to start with a question about the land and expand. Roni Al-Dor, you mentioned that's obviously a focal point for you. Could you talk about how many products you're selling into the install base today, and how we should think about that over time? What is sort of the goal here as you look at the business model over the next few years in terms of selling more and more into your install base? Hi, Mayank. I will try to answer, and then can Roni help. First of all, the first thing is what we can see more and more is our core product. This, for us, is very encouraged that you can see more companies that says policy, sorry, Life and general insurance, P&C. That in the start one of them, they are happy with us, happy with the product and implementation, and they asking us the second Core system. This is we can see more, and we also see some kind of a global player that's coming with a package that they want to see, to buy from one vendor all the suites, including Life to Core. That's one. The second thing that we can see right now, it's the digital. Majority of our deal are now coming together, the CoreSuite and the Digital. The next one is the Reinsurance. We are very strong on Reinsurance, we, again, try sometimes the first-time company are selecting us and maybe implement it later on, that's another type of example. We have Decision that we already mentioned. I think the big suite that we have, big has a lot of combination. Also we have some type of example that we start with Reinsurance, then people are asking us Core. We have many product to offer. Great. That's helpful color. I wanted to turn to the model and for Roni Giladi. Roni, what was the organic growth in Q1, and what are you building into your expectations for the full year? Hi, Mayank. The organic growth on consolidated basis during Q1 was about 8%. On a yearly basis, we'll reach the 10%, even slightly higher. Slightly. Okay. Final question on margins. Could you size the impact of the disruption in India from the increased COVID cases on the model? I'm just trying to understand, when do you think you'll be able to recover that impact as you move through 2021 into 2022? Sorry, not to belabor the point, but the question will be around, if you already had people working from home, what has been the cause for disruption? Is it the inability to hire more staff, or are there other factors that are causing the impact on margins to be negative? Hi, Mayank, this is Roni. As Roni mentioned in his note, we are very focused on the well-being and the health of the Indian employee. Today, we have about 1,400 employees in India. About 8% of them, as of today, are being affected by the COVID-19. You are totally right. In the last year, all of the employees, I would say 98% of the employee, worked remotely from home and been able to do this successfully, and do complete project and going live, and the customer were very satisfied. We see this environment right now and the spike in COVID can affect some of the resource that we have today, in terms of being able to work with their family at home. We are basically looking to find other solution, either hire more in India, either go to other territories in order to compensate for this resource, because we need this resource for the revenue that we are focusing on. This will create some additional cost. We expect this, hopefully, will continue for few months with us until it will go over. You mentioned about recruiting. I can share some insight. For example, in the last week, we recruited about 14 employees in India, so we are still continue to recruit, but we need to find ways to compensate if we have some delays in that area. That's understandable. Thank you so much. Thank you, Mayank. The next question is from Ashwin Shirvaikar of Citi. Please go ahead. Thank you. Hi, Roni. Hi, Roni Giladi. Hi, Daphna. I just want to follow up on that last question, and the clarification, I guess is, if it seems like a quarter and a half impact, the margin impact as well, your margins should recover by Q4. If you could break down the margin outlook change, how much is India COVID-19 impact versus North America delivery investments? Hi, this is Roni Giladi. In my notes, I mentioned that Q2 profitability level can go at the minimum to 16.5%. It will be 16.5% or above. You can assume that the entire difference from Q1 will be the India spike. After a few months, in Q3, probably will go up. I mentioned earlier, previous question from Sterling about gross margin. This also will affect Q2 gross margin, and also from Q3, we go see it up. Okay. Got it. I know a few questions have been asked about SIs. Just from a strategic perspective, the partnering with more SIs, is that driven by you, or is that the ask from customers? Why the change? What's driving it? Assuming you roll out more SIs, how does the financial model change in terms of margins? Okay. I will start. This is Roni Al-Dor. I just want to clarify, maybe it was a little bit confused. We, as Sapiens, we believe on one hand to shake. We plan to continue with one hand to shake. This is our business model, and we stick on it. What we decide to do, in the past, we have Atos as an example. They are fully BPO. They look after our product. We are doing the implementation together with them. That's fine. This is, we are not calling SI. This is just partner. They are bringing the BPO, we are bringing all the rest. In North America, it's in one of two products. Like Decision. Decision, it's like a product that we don't have the services around it, so why not to go to a system integrator? They are looking, and they can more, almost like a reseller. It's not really one hand to shake. On the very specific product in the Life & Annuity space for North America, in order to penetrate, because we believe that we have excellent product for Life and Annuity, but we had for many years, reputation issue. Based on all the good things that we did in the past, right now, we want to penetrate to the U.S. with our product. It's not because nobody, no customer ask us. It came from us. That's one. Second, right now in Europe and rest of the world, we are competing with many Guidewire and all the others. Sometimes we see others, but we are working in all tiers. In North America, only in CoreSuite. In order to penetrate in a very cloud environment that you have Guidewire and Duck Creek, I think we can increase our chance to go to this market with SI. Everything is came from us, and it's very selective, and also gradually. I hope it. Got you. Yeah. That's great. Seems like it's entirely about incremental distribution for a couple of products. Correct. Correct. Ashwin, therefore, the business model will not change. It will continue with that. It may slightly change, over time, remember that we have today 600 customer. All of them are one hand, to shake. The additional incremental will have minimal impact in the beginning. Got it. Yeah, this is just incremental. Thank you. Got it. Thank you. The next question is from Tavy Rosner of Barclays. Please go ahead. Hi. Good afternoon. Thanks for taking my questions. Most of them have been asked. I was wondering, for the new contracts that you sign, are you still primarily formatting them in a license plus maintenance type of format, or you guys are able to offer kind of subscription-based contracts? Hi, Tavy. This is Roni Giladi. I think more than two years ago we shifted from a license mode to term license, which mean including a license and maintenance bundle together. I can say in the last few months, some of the offer that we already sent out, moved to subscription solution. As we are signing between 25 to 35 new logo, this is only incremental, so we'll not see effect immediately of that. We started to do shift into this area. Thanks. I wanted to ask about the competitive landscape. Pretty clear that Duck Creek, Guidewire that you mentioned, are there with the Tier 1, competing head-to-head. I'm wondering more into the Tier 2 and 3. Do you see them bidding against you, or you're primarily still enjoying kind of peace and quiet among the customer you're pitching to. We see two of them in also the lower tier, and we see more also Majesco and Insurity. We see all of them, mainly in U.S. In all the rest of the world, we are more seeing Guidewire. Again, they are also going to the lower tier. As you know, in Europe, at least in few of the regions, we have a very good reputation, and based on our local SI, it can give us some advantage. The company that we acquired give us some advantage. The answer is yes. They are also looking for the mid and lower tier. Great. Thank you, Roni. Have a good one. Thank you. The next question is from Surinder Thind of Jefferies. Please go ahead. Thank you. Just another follow-up question. This one's about product strategy, I guess. As you incrementally think about partnering with systems integrators on the margin, does that also impact the product strategy in terms of, right now, you have different products for different regions. Any consideration about moving certain products to single code bases, single architectures that may help? How should we think about the longer-term implications for a product? Hi. The only thing that we now have a different product is on our P&C. We did in the CoreSuite for North America. All the rest, the Reinsurance Master is a global one. Take our Life CoreSuite, global. Sapiens Decision is global. That's for a specific case that Sapiens decide that it will take us many, many years to penetrate with our P&C to North America. The answer is, general, we prefer to work with one product to all the territories. Understood. In terms of just the impact from India, I apologize, I missed the very first question as the line dropped. Did you quantify the revenue impact of the challenges that you were having in India? Hi. We mentioned the challenge on the delivery side that we have 1,400 employees that basically support our revenue globally, in Europe and in the States. Because of the spike in COVID-19, we see a challenge that we'll be able to support this. Today, we have about 8% of our employee affected by the COVID-19. For that, we need either to recruit more people or to do overtime or to go to other location, at least only temporarily in the short term in order to answer the demand for resource. Just to clarify, those 8% of the employees, they are non-revenue generating at this point? Correct. For the time being, correct. Understood. When you talk about looking for resources potentially outside of India, is that more of a short-term solution or just more of a broader term strategy that this may be an opening to think about? This is only short-term solution. We'd like to continue to grow India. We have facility there, management there. We're sure that over time, it will recover, and we'll be able to support Sapiens in globally level. Just to mention, the 8%, some of them are also including R&D, and therefore, do not affect the delivery. Overall, today, altogether, 8% of India resource are being affected. Got it. One just final bookkeeping question. What was the impact in the quarter on margins from Tia? Tia, as you remember, was acquisition that we did in November 2020, where we only consolidated for one month. Overall profitability level is 14%, and in Q1, it came in full quarter. We mentioned that transition or integration with Tia will take us a full year, and therefore, Q1 obviously was being affected by this margin, a lower margin compared to Sapiens. As we continue down the year, we'll see improvement and also improvement in Sapiens level. Got it. Just to clarify, is the anticipation that you will get the Tia margins, or once you're fully integrated, that they'll be at firm margins, or are you just anticipating an improvement at this point? As we continue down the year, it will be the similar level as of Sapiens. Got it. Thank you. That's it from me. Thank you. If there are any additional questions, please press star one. If you wish to cancel your request, please press star two. Please standby while we poll for more questions. 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 972-392-55900. Mr. Al-Dor, would you like to make a concluding statement? Yes. Thank you for all of joining our call today. See you next quarter. Thank you. This concludes the Sapiens International Corporation First Quarter 2021 Results Conference Call. Thank you for your participation. You may go ahead and disconnect.