I'm Mayank Tandon. I'm the FinTech analyst at Needham. I'd like to welcome Roni Giladi from Sapiens. He's the CFO of the company. Roni, thank you for joining us. Cool. So Roni's going to go through a brief presentation, and then we'll do some Q&A after that. Excellent. Thank you all. And thank you, Needham, and Mike especially, for having us here in the Needham Conference. I think every year we attend this conference, and we like it very much. As I mentioned, my name is Roni Giladi. I'm the CFO of the company for the last 17 years. We'd like to go briefly about Sapiens, and then we can move to questions. So who we are? We are a global player serving the insurance market, both for P&C, property and casualty, and life and annuity. And we're helping insurance carriers do transformation from legacy systems to modern technology with all tiers: Tier 1 to 5, Europe, North America, and APAC. A snapshot a little bit about our figure: 2023, $515 million, CAGR of 14% over the last decade, 600 customers serving both the P&C and life, global player serving 38 countries, EBITDA close to $100 million, and operating margin or EBITDA of 19%. The insurance market has high demand to replace the legacy system, and it's forced by several reasons. The first one is this is a very regulated market. Regulation is not nice to have; it's a must, and insurance carriers, in order to meet regulation, need to replace their systems. It's very hard to fix a legacy system that was built 20 years ago. Competition. It's another factor. If you want to issue a new line of business, go from one country to another, you need modern technology. Very hard to do this with the legacy solution, and also efficiency. Last year, we did a conference in North America. We asked customers, about 200 customers, what is the best top priority in the organization, and number one was cost efficiency. Again, if you want to improve your operational, you need modern technology, automation, and things that are done quickly, so many reasons why the insurance carriers need to do transformation to modern technology. The market is massive. Analysts estimate it at $60 billion. Again, one of the biggest markets that a carrier can operate, and it's split half and half between life and P&C. They are the same in size, almost $30 billion each one of them. Much more carriers, insurance carriers in P&C than in life, but the size of each insurer carrier in life is bigger than P&C. In terms of market position here in North America, P&C in life and annuity, you see the bottom life and annuities. We are very strong, both on the core system and also on the complementary solution. At the top line, P&C, the right-hand side reinsurance, we are a global leader on the reinsurance, North America and Europe. P&C, we need to do steps in order to be at the front line also. But right now, we are in the middle. Europe and APAC, the same here. Here we see all the positions are at the top line, both for P&C, life, and reinsurance. So market positioning is very good in a huge market. What steps can we do in order to accelerate growth? Continue as we are doing today. Accelerate cost and opportunity. We'll talk this in a minute. Win new logos.fg We are winning between 20-30 new logos every year. Geographic expansion, transition to cloud and subscription, and of course, M&A, so global company with many products. We talked about core system solutions that we have, P&C and life. But we have, on top of that, many complementary solutions like reinsurance, illustration, underwriting. We have digital data and decision. When we approach a customer and we implement a system, we have the ability to move from P&C to life. We have the ability to move from life to reinsurance, or from reinsurance to P&C, or digital. All of that, if we are approaching an insurance carrier which is global, we can go from one country to another. Sapiens is among the only vendors that are a real global player. This gives us advantage in the global market. Cost and opportunity. Every year, we are signing on average between 20 to 30 new logos. We're investing in sales and marketing and customer success team, and investing in marketing. And as you saw, our products are positioned very good in the market. This gives us the ability to capture new logos to come on board. In this market, to penetrate a new logo, very hard. Sales cycle can run two to three years easily. But once you implement your core system solution, you have a decade at least of recurring revenue year over year. Again, core system, mission critical that we implement our solution. Geographic expansion. We mentioned that we are operating in 38 countries. Some of them are very strong. Some of them we are in the middle. So, being able to expand the presence in countries that we have present but not significant, and penetrate to territories that we do not have present. For example, in France, we do not have present today at all. In the DACH region, which penetrated two, three years ago, we can still expand. So new geography that we do not have present today. And moving to the cloud, we started this journey about three years ago. Today in Sapiens, every deal that we are signing is cloud subscription. But we still have customers from the past, 600 customers, that a quarter of them we already transitioned to the cloud. This leaves us with an additional three quarters, almost 450 customers, that over time, in the next five years, we can transition, let's say, 50% of them to the cloud. This will generate incremental recurring revenue going forward. So, transition to the cloud and subscription. And M&A. M&A is part of Sapiens' DNA. Over the past decade, or slightly more, we completed 20 M&As over the years. Some of them for geographic expansion. Some of them to build offshore operations. We have 2,500 employees in India serving the delivery and R&D of the organization. Some of them to open new complementary solutions like illustration. And some of them for niche markets, for example, medical malpractice here in the state. So, M&A—what we are focusing about is M&A between mid- to small-sized organizations. We do not look for the big organization because it's more riskier. And with either the ability to have geographic expansion or complementary solutions that we can sell our product to them and their product to ours. So, ability to increase the cost and opportunity and generate more wallet share from our customers. M&A. In the last three years, we didn't complete M&A. The first two years out of that was the valuation were very high. We didn't want to overpay for companies, so we've been engaged in several transactions, but we didn't complete because of valuation. Last year, the valuation came to a reasonable price, and we are participating right now in scouting for opportunities here either in North America or in Europe. We'd like to complete in 2025. Just from a financial perspective, so this is the growth of Sapiens on the last decade. We see CAGR of 14%. This year, 2024, we are supposed to grow between 5%-6%. We gave an indication for next year that it will be low single digit. We'll talk about this later on, what are the reasons for that, but for sure, DNA of a growth company in the last decade. We are growing in North America and in Europe, and also APAC and South Africa. Europe represents about 40% of the business. USA 40%. And the rest is APAC and South Africa. Here is the breakdown. Policy, P&C, and life and annuity. The P&C represents about 70%. Life slightly more than 25% and growing faster than the P&C. And the rest is technology. And if we look at the breakdown of Europe and North America, as we mentioned, Europe is 50%, North America 40%, and the rest 10% is APAC. Two metrics that I would like to emphasize are the recurring piece of the business, our business model, that we are the system integrator of our products. So we are a product house like Guidewire. We own the product. We develop it. But at the same time, we implement our product. We are not implementing any other company product, only ours. That creates a mix of additional services in our P&L. So if we look at this overall, a third of the revenue of the company is coming from implementation, one-time revenue. Over time, we'd like to decrease this ratio. The other two-thirds are coming from two revenue streams. The first one is recurring revenue, which includes subscription, license, maintenance, and cloud solutions. And the other third, the second third, is basically recurring services that the customer, the insurance carrier, must consume from us, like regulation, upgrade, workflow, additional line of business. This, over time, we'd like to convert part of it to the recurring piece, increasing our ARR and recurring revenue. So what we see is Q3 versus 2023 versus Q3 2024, growth of 15% from the higher two-thirds, the recurring and recurring revenue, while implementation went down. The implementation went down because of two main reasons. First one, our strategic initiative to sell the implementation at low rates but increase the subscription to have it more in the long term. This is number one, and additional factor is we saw less deals of new logos this year in 2024 compared to 2023, so the goal is to increase the higher part, which today is more than two-thirds of the company. This part is only the ARR, the recurring piece, the committed five years ahead. As we mentioned, subscription, cloud solution, license, and maintenance, we see the growth rate is 10%, higher than the growth rate of the company, and representing $173 million revenue of annualized revenue stream. Profitability. We would like to grow our revenue but maintain and grow the profit dollar of the company. We see this year over year. This year, we're supposed to be at close to $100 million EBIT profitability. In 2024, we took a decision not to increase the operating margin, only the dollar, with the main thought of we can increase it, but we'd like to invest more in sales and marketing in order to continue further growing the company in a year ahead. So growth year over year, increase the dollar value. Last year, let's maintain the 18.2%. This is the range in order to invest more for the future. Cash position, we are very strong. We have $186 million. Today, we have only debt of $20 million for payment in early 2026. And we are paying dividend, 40% of the net profit, non-GAAP. We are paying twice a year after Q2 and after Q4, about $32 million in last year. If I need to summarize, $550 million company, growing at a CAGR of 14%, organic and M&A, and profit of $100 million. Thank you. Roni, I'll join you up here for questions. So you mentioned that you have called out some headwinds recently. Maybe you could talk about how much of that is market-driven versus how much of that is the ongoing SaaS transition. So maybe just parse it out between the two factors that have caused the growth rate to decline. OK, perfect. Thank you, Mayank. This quarter, Q3, we reduced the guidance by 1.6% of overall revenue in the company, about $7 million altogether. The main reason coming from three factors. The first one is the dynamic that we have in the P&C core system in North America. Here, we need to invest more in our product, integrate this to the platform that we built last year. Some of the products are already integrated to that. We plan to integrate this in 2025. The entire P&C market, at least what we hear, are not growing as in the past. We hear it from private companies and also from public companies. So this is one of the reasons that created the declining growth. The second factor that we have is the geopolitical situation. We are perceived as an Israeli company. The headquarters is in Israel. As you know, the situation in Israel, we feel some challenge with some specific countries in Europe that have made the sales cycle longer than in the past. So this is the second factor. We didn't lose any deal because of that, but we felt that the sales cycle is becoming longer. Hopefully, we hope for a ceasefire very soon and to go back to normal. And the third thing is what you mentioned, Mayank, is the transition to SaaS. Beginning of 2024, we started to sell globally all products on a subscription base. We started a year prior to that to do this with a specific product only in North America. And beginning 2024, we did it for the entire product globally. We anticipated the headwind of this transition to be 1% on the growth rate. And as Q3 came, we did an evaluation of the metrics, and it's between 2%-3%. So on average, 1.5% higher than what we anticipated at the beginning of the year. We see this as a positive at the end to do this transition because we are getting more recurring revenue and potentially more profitability over the year to come, just taking the toll in the short term. So this is the three majors. Just focusing on the SaaS transition, how long do you think this will continue? Is this a 2025 issue mainly, or do you think this will carry over into 2026 and beyond? So in other words, how should we think about the headwind on a sort of continuing basis? We estimate that the headwind of this transition will take two to three years. One year we already took, so additional two years, 2025, 2026. And starting mid-2026 to the end, we are going to feel the upside of this. If you think about this, the first two years, it's really the impact of the new logo coming on board. And year number three is incremental revenue when we start to do this transition. We started in 2024. So end of 2026, this sounds pretty conservative that we'll see the uplift. Then what has been the response from clients as part of this transition? Have you lost any opportunities because the clients have moved to another SaaS provider because of the transition? Or has it been pretty, what I would call, say, smooth in terms of converting these customers from the on-prem to a SaaS model? So I will split the answer between North America and Europe. Pretty smooth in North America, for sure, for the new logo. Less smoother in European countries because the deal size, the initial deal size for them is bigger than initially what we sold the term license with cloud. So this is for a new logo. As we mentioned earlier, we have also existing customers. We've been able to convert European customers and North America customers to the subscription successfully. Got it. And then in terms of the market, you talked about being an Israeli company. You've seen longer sales cycles. But how is the overall market, the buying environment overall, both in terms of P&C and life and annuity in North America? And of course, if you could talk about Europe in that regard as well. OK, let's start with the P&C North America. P&C North America, we have three products. We have the core system P&C. We have Workers' Compensation and reinsurance. In terms of market dynamic, I will talk about Sapiens. We feel some headwind in the sales. As I mentioned, we need to do additional investment in the product, the platform that we already start to invest on it. But we also feel some slowdown in terms of growth for the entire P&C core system here in North America. We do not feel it in Workers' Compensation. We do not feel it also in reinsurance. So it's only in the core system P&C. In life North America, we have a very good pipeline. We see demand. The entire life market is right now in a good wave, good trend. We have less competition. So we are winning deal and market share. What about the market overall in terms of the penetration? Where do you think we are in terms of cloud penetration for both the P&C and the life and annuity side? So looking more like long term, what is the growth runway for a company like Sapiens? Our desired growth rate is between 8%-10% organically. This is what we've been in the past, and this is what we'd like to return to. We feel this is doable. As we mentioned, as I mentioned earlier, this year, 2024, we maintain the operating margin in order to additionally increase in sales and marketing and also in R&D in order to accelerate the growth that we are right now. I think from a penetration perspective, moving to the cloud, a lot of customers have been buying in the past solutions that are not in the cloud. As I mentioned, we have 600 customers. Only a quarter of them moved to the cloud. So like Sapiens, there are other vendors and other insurance carriers that still need to do transition. There is a long way ahead of us, both moving to the cloud existing customer and moving legacy solution also to modern technology. So the market is under-penetrated. There is a lot of room to grow more on the life than the P&C as the P&C is more advanced in terms of moving to modern technology. Roni, have you seen any change in the competitive landscape both on the P&C and the life and annuity side, whether it's North America or in Europe in the recent past? No. I didn't see any change. What we saw is different. We saw a lot of private equity getting into this market, acquiring some of our competitors that have been public, for example, Majesco or either Duck Creek. But in terms of demand, acceleration, or decline, no. Let's turn to capital allocation. As you said, you have a very healthy balance sheet. You generate cash flow. So as you look ahead, what are you thinking in terms of how to deploy that capital between M&A, potential buybacks? I know you pay a dividend as well. So if you could just discuss that, that would be helpful. So the number one for capital allocation is M&A. We see this as a growth leverage of Sapiens. We completed 20 M&As so far. I think out of them, 18 were successful, plus two of them so-so. We think we have the knowledge, the ability to identify, to explore companies, and also integrate them within Sapiens but with reasonable price. This is the reason why we didn't complete M&A two years back. Right now, the valuation came to reasonable price. So this is the top priority in terms of deployment of capital. As I mentioned earlier, we are looking for small to mid-sized companies, again, to mitigate the risk. We know how to fix the organization either from a growth perspective or profitability perspective. So this is number one priority, M&A. The second priority is dividend. We have a policy of dividend distribution of 40% of the non-GAAP net income, paying this twice a year. If a question will come, what to do first, dividend or M&A, the answer will be M&A. We do not have any plan to do buyback of shares at this point. Maybe I'll turn to margins next. So again, you've done a really good job of driving margin expansion over the years. As we look forward, what are the potential drivers behind both gross margins and EBIT or EBITDA margins? What are the levers you have in place? What are the sort of longer-term targets that you have, like you shared, for the organic growth as well? So if I look back about five, six years ago, we were at about 13%. And we set a goal to reach 20%. Year over year, although we were growing, we've been able to improve operating margin. We have several leverages in the company. Number one, offshore operation. I mentioned that we have 2,500 employees in India. We have also nearshore in Poland and Latvia. And this is leverage to us because these team members are involved almost in every project in the company in terms of delivery and R&D for product, all product of the company. We are today about 50% offshore ratio. And we can shoot for around 60%. This reduces the average cost of the company per employee and obviously increases the margin. This is number one. The transition to subscription cloud solution also, we can leverage our profitability in the midterm. If I need to differentiate between one-time implementation gross margin, which is 28%, and the recurring revenue, which is 55%, you will see that as we continue to do the transition to cloud, we'll be able to improve our operating margin. And as we sell more and more in the same countries of our product, the ability to make more money is higher. Three major items. We've been able to increase profit margin even in 2024. We took the strategic decision not to do this because we wanted to invest more in sales and marketing and R&D. If I need to compare Sapiens versus our competitors, for example, on a profitable level, when Duck Creek was public, it was about 13%. Majesco was about 8% when it was public. We are at 18% today. We can shoot for the 20%. But right now, for the time being, we'd like to invest more in sales and marketing and R&D to come back to the growth rate that we are used to. And later on, we can think about this. But 20%, this is something achievable very much. OK. Any questions? Yeah. What was the first competitor you named when you said when it was public? Yeah, it was Duck Creek. Duck Creek was bought by Vista how many years ago? Two and a half, three years ago. Losing track of time here. But yeah, it was. And then the other one was Majesco. Bought by Thoma Bravo. Yeah. And in relation to size, how much bigger do you [inaudible] If I remember, when Duck Creek was bought, it was about $200 million. Sapiens was about $450, something like that. Majesco, when it was private, was about $150 million, ballpark. Anyone else? Well, before we wrap up, Roni, one last question. What are the top priorities for the company for 2025? Growth. This is the number one initiative of the company. We would like to go back to the organic growth rate that we have, this on top of M&A. We implement initiatives right now to go more further with existing customers and do cross-sell with the entire product suite that we have. We are increasing the team that we're responsible for that globally in Europe and North America and give the team more opportunity to approach our customers. It's a dedicated team that will focus on that. The other thing is new logo. This is also very important to us as matter is number one. Here, we are exchanging some team members in North America and Europe to make a bigger team and more, let's say, angry team in order to win the deal. In terms of product, we feel that we have the right product, the right positioning globally, P&C in Europe, life in Europe, life in the States. P&C in the States needs some improvement. We are focusing on that. But we have also other products in P&C, workers' compensation, reinsurance that can grow very nicely. So growth is number one priority. Perfect. OK, go ahead. Yeah. Can you remind us the portion of revenue that you've called out as being facing extra competition? [inaudible] Ballpark is about 5%. Yeah, how much revenue comes from? Ballpark is about $50 million.