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Sapiens International Corporation NV (NASDAQ:SPNS)
Q4 2019 Earnings Call
Feb 24, 2020, 9:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Sapiens International Corporation's Fourth Quarter and Full Year 2019 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. [Operator Instructions] As a reminder, this conference is being recorded February 24, 2020. It is now my pleasure to introduce your host Mrs. Yaffa Cohen-Ifrah, Sapiens' CMO and Head of Corporate Communications. Thank you, Mrs. Cohen. You may now begin.

Yaffa Cohen-Ifrah -- Chief Marketing Officer and Head of Corporate Communications

Thank you and good day everyone. Our quarterly earning release was issued before the market opened this morning and it has been posted on the company's website at www.sapiens.com. Representing Sapiens today are Roni Al-Dor, President and CEO and Roni Giladi, our CFO.

Before we start, I would like to remind everyone that this conference call may contain projections or other forward-looking statements and the Safe Harbor provision 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 view or expectations or otherwise.

During the course of the call today, 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's website or via the website link, which is available in the earning release that we published today. I will turn the call over to Roni Al-Dor, President and CEO of Sapiens. Roni?

Roni Al-Dor -- President and Chief Executive Officer

Thank you, Yaffa and thanks to everyone who are joining us today to review our fourth quarter and full year 2019 financial results. I will start with a review of fourth quarter followed by an overview of our progress in 2019. Roni Giladi will share our outlook for 2020 in his prepared comments.

Sapiens finished 2019 on a very strong note with revenue growth accelerating in the second half of the year, highlighted by fourth quarter year-over-year goals of 80%, one of our strongest quarter top-line gains in the recent years. Sales growth came from expansion in our P&C businesses in North America and EMEA, as well as improvement in our Life and Annuity businesses. Recent acquisitions and internal investment in our cost of the product improved our competitive position with a wide range of insurance solutions supported by technology-led services for pre and post-production.

As I said in the past, our business is benefiting from two key trends in the insurance industry, the continued migration from legacy system to modem flexible core and cloud-based solution, as well as, the need to meet the customer expectation for digital personalized experience. The insurance carriers see Sapiens innovative insurance solution as essential to gaining a competitive edge by providing superior outcomes for all their stakeholders, including their internal teams, policy holders and agents. We further increased our leverage in fourth quarter by driving more capacity to our offshore entities, which produced improvements in gross margin.

We continue to experience improvement, economies of scales with control over spending resulting in non-GAAP operating margin rising year-over-year to 16.5%. As a result, fourth quarter non-GAAP net income increased 34.8% to $10.6 millions or $0.21 of diluted earning per share. This way, by all means, an outstanding quarter and fantastic finish to the year.

Let's shift to new businesses and expansion of existing partnership recently announced. We signed a new P&C win as well as new businesses in Life and Pension and had a few go-live in the quarter and added another exciting partner to our FinTech ecosystem. We announced two wins in U.S. for our P&C and Life and Annuity businesses. Thomas Union Mutual Insurance Company of Michigan announced as a part of digital transformation project, that the company will replace its 30 years old legacy system with Sapiens CoreSuite for Property & Casualty, as well as our advanced analytic solution to deliver over the cloud. Sapiens solution are expected to reduce overhead costs and decrease time-to-market for future product in the insurers, as well as provide a digital and personalized experience to its policyholders.

[Indecipherable] Life insurance of Montana upgraded its Life and Annuity underwriting capabilities with Sapiens underwriting pool and is a good example of our ability to partner with a third party to deliver seamless integration. This solution improves the customer experience and by accelerating agents' ability to make policy decision, provide a more cost effective underwriting process for the insurer.

The EMEA team saw notable wins in the fourth quarter in both P&C and Life. CoreSuite selected Sapiens IDITSuite for Property and Casualty and Sapiens ReinsuranceMaster for digital transformation for them. The insurer is replacing its legacy IT system with Sapiens solution to facilitate the digitalization of its entire P&C and Health Insurance segments, as well, it's claims handling. Sapiens advanced analytic solution digital tools will increase productivity and reduce time-to-market. Hollard Group Risk of South Africa expanded its strategic long term partnership with Sapiens by adding our flagship CoreSuite for Life and Pension to transform its business and improve flexibility, speed of process and enhance the customer experience, important differentiation in a very competitive market. Another anticipated benefit is reduced operational costs from streamline automation for Hollard customer, partner and personnel.

Overall, during 2019, we signed 34 new logos across all of our products and territories. Today over 500 customers worldwide are using Sapiens solution. We will continue to work closely with these customers to help them to maintain their system and maximize efficiency. We support them with the introduction of new capabilities or expansions of their businesses.

In the fourth quarter, we had go-live with Equitable Life in Canada, one of the Canadian's largest life insurance companies. Equitable Life has modernized its new business process with Sapiens underwriting pool for Life and Annuities. The insurance expect to significantly decrease its turnaround time with our web-based solution for automated underwriting and new case management.

During 2019, more than 30 customers have gone live and moved into production, which means our solution is being used as the core operational system. Go-live is a major event for both Sapiens and customer. It is a major demonstration of our ability to deliver, offer customer the ability to adapt and to roll out a new technology across their organizations. We continue to expand our insured partnership ecosystem with Lightico platform that allows us to deliver our solution, including our core P&C and Life and Pension and Annuities offerings with a customer facing solution to achieve the time incentive, redundant paperwork process to completely digital platform to increase sales growth ratio and improve the customer experience.

We also continue with our M&A activity in 2019. In October, we expanded our European footprint with acquisition of Calculo, a leading insurance software solution and services provider to Iberian region. We see this acquisition as a catalyst for long term goals by selling Sapiens core and digital suites into the market which add percentage of in-house system and where we see good growth potential for both our P&C and Life and Pension CoreSuite. This acquisition checks all the boxes of our M&A growth strategy with geographical expansion in new market growing our customer base and improve our leasing product and services by on-boarding Calculo teams of expert consulting and solutions.

2020 started off with announcement in January that we are expanding our footprint in the DACH region with the acquisition of a German-based insurtech company sum.cumo. Sum.cumo services insurance in Germany, Switzerland and Austria, helping them to set up their business' model and obtain marketing edge with successful e-commerce involvement. Sapiens' will core sell it's complete product and services portfolio alongside the sum.cumo offering to their customers in the region. Sum.cumo is one of the most innovative insurtech companies in the large DACH region in an area that has been part of Sapiens' long term growth strategy.

Our investment in R&D and enhancement across all platform are paying off and lead, once again, to recognition from industry experts. During the quarter, Sapiens CoreSuite for Life and Pension won an excellence award for its advanced Life and Pension technology in EMEA. The lengthy report indicates Sapiens heavy investment in Sapiens core for Life and Pension, as well as suite cloud readiness, future readiness and net user interface. In the previous quarter, our Sapiens IDITSuite was recognized again as a leader in Gartner's Magic Quadrant for non-life insurance platform in European for Sapiens IDITSuite.

On the marketing front, in October, we hosted our Global Client Conference in Rome, more than 150 participants from approximately 33 organization, including insurance and financial services customer and prospects discussed the future of insurance, industry trends and Sapiens' strategy and vision.

For the year, we advanced our businesses globally in 2019, growing revenue by 12.2% to $325.7 million, the high end of the annual guidance range, increased revenue combined with significant operating leverage from our offshore operation, improved Sapiens non-GAAP annual operating margin by 240 basis points to 16%, the high end of our guidance range. This was a strong exceptional year of execution on many fronts and I want to congratulate the Sapiens global team for their outstanding work in 2019. The results we delivered in 2019 show that our strategy is working and that by focusing our investment to deliver profitable growth, we can significantly enhance shareholder value. We remain focused on building unified global platform of innovating digital insurance solution to advance our competitive position as a one-stop shop for insurance software with enhanced product and services.

The pipeline for 2020 is very robust and we see further opportunity to increase operating efficiency and improved margins. With a strong balance sheet and expanding portfolio of product and solution, a deep support team to meet the end to end needs of our clients, support our goals and growing global footprint, Sapiens is well-positioned to deliver long term sustainable growth. I would like now to turn the call over to our CFO, Roni Giladi to provide more details on our financial results. Please go ahead, Roni.

Roni Giladi -- Chief Financial Officer

Thank you, Roni. I will begin my commentary with a review of the fourth quarter non-GAAP results, annual results and then followed by comments on the balance sheet, cash flow and, at the end, our outlook for 2020.

Revenue in the fourth quarter of 2019 totaled $86.7 million, up 18.1% from the fourth quarter of 2018. The 18.1% revenue growth was positively impacted by the Calculo acquisition and the first time consolidation and the organic growth this quarter was 14.7%. Our revenue in North America totaled $41.8 million, an increase of 19.5% compared to last year. Revenue in Europe totaled $37.5 million, up 21.6%, increase compared to last year and up 13.5%, if we eliminate Calculo first time consolidation.

Moving to gross profit. Gross profit this quarter totaled $38.4 million compared to $31.3 million in Q4 of last year. Our gross margin this quarter increased to 44.3% from 42.7% in the fourth quarter of last year and 44.4% in prior quarter. We have delivered continuous improvement in gross profit in every quarter of 2019 and plan to continue to improve it in the future.

Moving to operational profit. Operating profit totaled $14.3 million this quarter compared to $10.8 million in Q4 of 2018 and $13.5 million in prior quarter. Operating margin increased in the fourth quarter and rose to 16.5% despite the impact of Calculo low profitability and was above Q4 2018 by 170 basis points. The improvement in operating margin was mainly due to improvements in gross margin.

Net income attributed to Sapiens shareholders for the quarter was $10.6 million or $0.21 per diluted share compared to $7.8 million or $0.16 per diluted share in the fourth quarter of last year, which reflects 31.3% EPS growth.

Turning now to the full-year result for the 12 months ended December 31, 2019. At the beginning of 2019, we stated that our goal for the year were double-digit growth of our P&C revenue with Life and Annuities revenue stabilizing and the remaining segment stable, organic growth of approximately 10%. On the margin front, we stated operating margin improvement that would come from offshore operation and improved economies of scale supporting higher top-line. I'm very pleased to say that we exceeded all our 2019 revenue and margin goals. I will explain in detail our progress in these metrics.

Our annual 2019 revenue were $325.7 million, up 12.2% and slightly exceeding the high end of our guidance range of $323 million to $325 million that was updated last quarter. Each quarter in 2019, we delivered increased revenue year-over-year. Our annual organic growth in 2019 was 12.5%, eliminating the 1.9% negative impact of currency, and 1.6% positive impact of M&A. We delivered strong double-digit growth in P&C. In addition, we stabilized our Life and Annuities revenue with small growth toward the end of the year. In 2019, we saw our organic growth rate rise from 3% in 2019 to 12.5% this past year putting Sapiens back on track as a growth platform.

Our operating profit in the full year was $52.2 million compared to $39.6 million in 2018, an increase of 32%. Our operating margin improved sequentially throughout the year from 15.3% in Q1 to 15.8% in Q2 to 16.4% in Q3 and reaching 16.5% in Q4. On an annual basis, operating margin reached 16%, an improvement of 240 basis points compared to last year.

Tax expenses for the year were $10.3 million representing an effective non-GAAP tax rate, remained at the same level of about 20.8% as in last year. EBITDA increased 28.4% to $55.7 million in 2019 from $43.4 million in 2018. Our adjusted EBITDA margin was 17.1% for the year compared to 14.9% last year.

Net income for the year was $38.9 million or $0.77 per diluted share compared to $28.1 million or $0.56 per diluted share in 2018. EPS increased by 37.5% respectively compared to last year.

Turning to our balance sheet, as of December 31, we had cash and cash equivalents of $66.3 million. Our cash does not include $22.9 million that was on ESCO for the acquisition of sum.cumo. Total debt was $68.7 million at the end of the year and on January 1, 2020, we paid the annual principal payment for our Series B debenture in the amount of $10 million. The remainder of our debt will be paid over the next six years.

I'd like to touch on adjusted free cash flow. In the fourth quarter, we reached $18 million of free cash flow and $58.9 million for the full year of 2019, reflecting our ability to convert net profit to cash generation, which is another positive indicator for Sapiens performance.

I would like to turn now to our guidance for 2020. In 2020, we anticipate non-GAAP revenue in the range of $377 million to $383 million and non-GAAP operating margin in the range of 16% to 16.5%. On the revenue side, we expect continued double-digit growth for our P&C revenue, single-digit growth for Life and Annuities revenue and stability in the rest of the business. Our long term target for the company is organic growth of 10%, which will be accelerated additionally by M&A.

In 2020, our midpoint growth target is 16%. We expect organic growth to be around 10% and in addition, we will have positive impact of the last two acquisition in Spain with the full-year impact in Germany starting February 2020. We expect that the investment in these two territories to provide revenue growth in 2021. Our operating margin improvement is anticipated to come from continuous improvement in Sapiens' activities and we expect Sapiens' stand-alone margin to pass 17%. This improvement will be offset by the low profitability of the acquired companies, which we expect to improve mainly in the second half of the year.

This year, we trade off higher improvement in operating margin for the benefit of higher revenue growth. We anticipate that our annual tax rate will be similar to last year. In addition, we anticipate that the number of diluted shares will grow by about 300,000 shares every quarter as we continue to recruit talented people and following the shares issuance on behalf of sum.cumo acquisition.

On the M&A front, we started 2020 with the announcement of the acquisition of the German-based insurtech company sum.cumo and we are continuing to look for M&A opportunities across Europe and North America with small to mid-sized companies.

In August, 2019, the company announced its dividend policy that states that the company will payout up to 40% of our annual non-GAAP net profit. We will announce our dividend amount after publishing the annual audited financial report on Form 20-F, which is expected toward the end of March. Many of you may question on the potential impact of Sapiens business from the coronavirus. At this time, we see minimal impact on our business from the coronavirus. Sapiens does not have revenue in China and, overall, has limited exposure to the APAC region. Our revenue in Singapore, Thailand, Hong Kong and Japan represents about 3% of our total revenue. We continue to monitor the situation and update the market as needed.

To summarize, 2019 was a year of strong growth for Sapiens as we exited the year with double-digit growth in operating margin above 16%. As we enter 2020, we expect to accelerate our growth rate, while continuing our progress of margin expansion. I would like now to turn the call back to Roni Al-Dor for closing comments. Roni?

Roni Al-Dor -- President and Chief Executive Officer

Thank you, Roni. We are off to a strong start in 2020 with newly opened acquisition and the means to continue investing to further growth. Our global sales team is focused on executing to our sales priority of lending new customer cross-selling to existing ones. The customer success team provides critical support of our customers globally. The leadership remains focused on delivering growth and margin expansion as we execute against our long term objective of improving shareholder value. I would like now to close our prepared remarks and open the call for questions, operator.

Questions and Answers:

Operator

Thank you. Ladies and gentlemen, at this time, we'll begin the question and answer session. [Operator Instructions] Your first question is from Tavy Rosner of Barclays. Please go ahead.

Tavy Rosner -- Barclays Capital -- Analyst

Hi, guys. Thanks for my questions and for the results, I wanted to discuss the long term forecast a little bit. You introduced [Technical Issues] ahead and you touched on the percent of the midpoint while including for the multiple acquisition. So I guess, can you run through the different moving parts? I mean you discussed a little bit about the different segments. I mean, can you give some granularity of what's going on across the segments by geography? And if you can talk a bit on an organic basis, that would be helpful.

Roni Giladi -- Chief Financial Officer

Hi, Tavy. This is Roni G. At the starting point of your remarks, it was very hard to hear you. I will try to answer and please let me know if I answered all of your questions. We mentioned that our organic growth going forward will be around 10% and this will be accelerated by additional M&A, of course, what we did and what is -- will be on the forward. This year, 2020, we are presenting about 16.7% of total growth combined from M&A and organic and we mentioned that our organic growth, excluding sum.cumo or Calculo is 10%. The rest, representing about $24 million will come from these two acquisition during this year. We expect that the fruits from these two acquisitions will come in 2021.

In terms of the business nature, we see significant growth in the state in North America coming from our P&C -- mainly from our P&C and good pipeline there, I would say double-digit, the highest in the company today. And in terms of Europe, we see growth in P&C double-digit in Life moving from stability to mid small organic growth on the Life, which is a change compared to last year and stability in the other business, meaning technology and decision. This is our main two focus area, North America and Europe. Anything that you would like to ask on top of this?

Chris -- Barclays Capital -- Analyst

Thank you. That's very helpful. This is Chris. Tavy got disconnected, so I was just following on his question. That's very helpful. Thank you. No further questions.

Operator

The next question is from Mayank Tandon of Needham & Company. Please go ahead.

Mayank Tandon -- Needham & Company -- Analyst

Thank you. Congrats on a strong finish to 2019. Maybe for Roni Al-Dor first. Roni, what does the pipeline look like this year versus say 12 months ago? And are you seeing increased adoption of cloud-based modern systems within the insurance client base versus 12 months ago or is it pretty much status quo with what you've been seeing the last six to 12 months?

Roni Al-Dor -- President and Chief Executive Officer

Yes, hi, this is Roni Al-Dor. In terms of the pipeline, the pipeline is definitely stronger than previous year and it's also based on our investment in the sales and marketing and also in the customer success. And as the company revenue grow, you know they grow in numbers, we need more pipeline in terms of to achieve the double-digit growth that we are looking for. So that's about the pipeline. As Roni mentioned, it's coming from EMEA, South Africa, Asia and the U.S., the -- as Roni mentioned, strongest in P&C, but we also see more opportunity on the Life.

In terms of cloud, there is more open for the cloud option and also we build our managed services, so it also gives us some advantage in the market right now. So there are system that we are supporting, not just cloud, we are giving all the application support around it based on our managed service capability.

Mayank Tandon -- Needham & Company -- Analyst

Great. And then as a follow-up. I just was curious if you're seeing some of your Tier 3 to Tier 5 clients, maybe, push more toward a subscription-type model. Is that something that's of interest to the clients or is that not something you anticipate in the near to medium term, you still expect to be primarily focused on term license sales? I'm just curious in the context of some of your competitors who have been talking more about subscription-type deals especially within that Tier 3, Tier-5 client base.

Roni Giladi -- Chief Financial Officer

Hi, Mayank, this is Roni G. We do not see any material request from our customers to move to subscription and we are continuing with our term license both in Europe and in the States, and on top of this, provided the managed services, that Roni mentioned. We are looking into this, but we will do this moving toward subscription-based, but if we will do this, we will do this very gradually only for the new business at the beginning in special areas first. So if we move to subscription, again, gradually over time, not in a rush, as they have an impact on the financial results.

Mayank Tandon -- Needham & Company -- Analyst

Great and then one final question in terms of competition. Again, just looking at Guidewire, some of the other larger players in the market -- are you seeing them become more active in that sweet spot for you when it comes to the competitive landscape, or is it still pretty much in terms of the competition still being confined to some of the smaller players when you're going head-to-head against them in these type of deals?

Roni Al-Dor -- President and Chief Executive Officer

We continue to see Guidewire everywhere, but we are also in those areas wherein most of the case, definitely in Europe, we are in the final, most of the time together with Guidewire. In the States, as you know, there is few other players like in Insurity, Majesco and others. So we are competing with them, but we are in a -- think we are in a good shape today.

Mayank Tandon -- Needham & Company -- Analyst

Excellent. So, no change.

Roni Al-Dor -- President and Chief Executive Officer

No.

Mayank Tandon -- Needham & Company -- Analyst

Great, great job, guys. Thanks so much.

Roni Giladi -- Chief Financial Officer

Thank you very much.

Roni Al-Dor -- President and Chief Executive Officer

Thank you, Mayank.

Operator

The next question is from Bryan Bergin of Cowen. Please go ahead.

Bryan Bergin -- Cowen and Company -- Analyst

Hi, thank you. I wanted to start on margins. So just as far as the guidance goes, I'm curious how you expect to open the year just understanding that sum.cumo comes in at a lower level and it will take you some time to work that up. So help us understand how the cadence of margin will flow through 2020. And then in -- heard your comment on 17% or so stand-alone margin, what are the levers you still have in your base there to continue to help on margin?

Roni Giladi -- Chief Financial Officer

Hi, Bryan. This is Roni G. I will start with Q4. We announced Q4 operating margin with a 16.5% operating margin. If we look at the entire year, the improvement in operating margin came almost only from the gross margin improvement. The acquisition of Calculo is another territory, anyhow we'd like to have present for future growth. But the operation today is breaking even and therefore shifted the operating margin of the company in Q4 downwards. Without Calculo, our operating margin was 17%. If we look further how we can improve, today, we have about 41% of our team offshore capabilities and we still can have a 2%, 3% going forward in the next mid terms in order to improve our operating margin.

In terms of 2020, on top of Calculo, sum.cumo is at the same concept we'd like present in the DACH region, which we do not have today in order to accelerate and grow our revenue in the future and the operation today is below 5% operating margin profit and also have it on our margin. Therefore what we see is a small improvement toward the year from 16% on the full year, so the guidance between 16% to 16.5%. Obviously management target is to reach the higher level of this -- summarize this by 50 basis points above what we have in 2019.

Bryan Bergin -- Cowen and Company -- Analyst

Okay, thank you. That was helpful. And then with some of these larger wins, the Tier 1 wins, Tier 1 and 2 carriers. Can you talk about just how the nature of those engagements may be different than your traditional base in the Tier 3, Tier 5? I'm thinking in terms of the team you required to service those for potential profitability over the longer term. If you can give us a sense of color around that. Thank you.

Roni Giladi -- Chief Financial Officer

The Tier 1 customer that we are signing also having managed services on top of our core system implementation. Obviously this will require further investments in the beginning, but after going live, the managed services and post-production support is supposed to increase our revenue. Overall, the deal size is, we'd say, close to $20 million and can -- even to $20 million to $30 million and can go up to five years.

Bryan Bergin -- Cowen and Company -- Analyst

Thank you.

Operator

The next question is from Bhavan Suri of William Blair. Please go ahead.

Bhavan Suri -- William Blair -- Analyst

Hey, guys. Thanks for taking my questions, and nice job there. I just want to follow up a little bit starting off on gross margin. So Roni G, this will be for you, but you've talked about sort of the managed services model, you've talked about cloud a little bit, you've talked about subscription and term licenses. As you think about gross margin, you've mentioned offshore, but does the license part -- the managed services part and the cloud part provide better gross margin than the professional services part of the business and so does that provide a lever? So some color just around how those gross margins for those businesses are and how as they grow, will that be a lever for gross margin expansion.

Roni Giladi -- Chief Financial Officer

Bhavan, the managed services will provide leverage in gross margin perspective, but it will come mainly after going live, not in the first one or two years. So potentially in year number three, we're supposed to have a higher gross margin in terms of our profitability. In terms of subscription, we did not start this yet, this will have negative impact on financial. If we'll start, we'll do this very moderately and we'll check one location then move to another, and only on the new business, not on the -- all the existing ones. So potentially the managed services will have leverage in year number three, subscription, we'll do this in a way that will not impact financial and on top of that will be the offshore operation that will improve our services and profitability.

Bhavan Suri -- William Blair -- Analyst

Got you, got you, got you, OK. And then I want to touch now sort of fundamentally on the business. If we look at the Life and Annuities business, you have seen some improvement, you're guiding to some growth. I guess, what's changed in that business? What are you seeing in the pipeline? What's changed from decision making from customers to sort of drive that improvement that we've seen over the last couple of quarters and now you're sort of projecting into 2020?

Roni Al-Dor -- President and Chief Executive Officer

Hi, Bhavan. The issue is not the market is more in Sapiens. We -- two years ago we decided to put -- to stabilize the Life and Pension business as we have some issues, so we put more effort on the R&D and make sure that our customers are satisfied. We stabilized the system in-house and then we started -- then we start to go to the market and what we are seeing relatively and after two years, we see a lot of interest in the market. We signed few deals in 2019. We started this year with -- a few selected us, still not signed. So we -- that's the positive that we are seeing. All, what I mentioned, is mainly in, what we call, EMEA, South Africa, rest of the world. But right now, we are starting to put more investment also in U.S. So overall, it's not just because of the market, it's because Sapiens' internal.

In terms of competition, we don't have here a Guidewire. So we -- we have good competitors like Alcare, like SAS, like Accenture, but we -- in terms of our product, we can be proud of what we offer.

Bhavan Suri -- William Blair -- Analyst

Got it, got it. Thank you. And then touching on P&C for a little bit, you touched on Guidewire as a competitor everywhere Tier 1 all the way down to Tier 5. Are you seeing Duck Creek as well or is that sort of still tied to Tier 1, Tier 2? Because, obviously, they do offer sort of a subscription cloud-based model across all tiers. I was wondering if you're seeing them run into them or if that's something you see less of?

Roni Al-Dor -- President and Chief Executive Officer

In Europe, we understand they start to put investment in, you know what they call it, come back to Europe. But we still don't really see them, maybe once out of 20 or 30 deals and in U.S., definitely, we are seeing them a lot. But in Europe, we don't see, but I believe in the long term, we will start to see them.

Bhavan Suri -- William Blair -- Analyst

Got it, got it. That's very helpful. And then just touching lastly on Decision a little bit. You know it's not when you talk about a lot, but obviously the product is very applicable. And I think we talked about it last time of that being now seeing interest in the insurance space. Just an update on how Decision is doing and sort of the cross sell into the insurance base for that product.

Roni Al-Dor -- President and Chief Executive Officer

Decision, we are doing OK. We are not growing as we want to, but again the people -- it's -- the people that start to use it really love it, but still we see challenges to enter to a new clients, but when the client start to see it, we can see more and more and more clients. So what we are doing right now, we are putting Sapiens sales force, and not just Decision's sale force, to help to bring Decision to the insurance market and we -- as you know, we have some big win and very large clients that can be referenced and we can go to other clients as well.

Bhavan Suri -- William Blair -- Analyst

Got it. Thank you for taking my questions, guys, and nice job.

Roni Giladi -- Chief Financial Officer

Thank you.

Roni Al-Dor -- President and Chief Executive Officer

Thank you, Bhavan.

Operator

[Operator Instructions] There are no further questions at this time. Before I ask Mr. Al-Dor to go ahead with his closing statements, 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, 1-888-295-2634. In Israel, please call 03-925-5901 and internationally, please call 972-3-925-5901. Mr. Al-Dor, would you like to make your concluding statement?

Roni Al-Dor -- President and Chief Executive Officer

Yes. Thank you, operator and thank you to all the participants for joining us on the call today. Have a good day.

Operator

[Operator Closing Remarks]

Duration: 43 minutes

Call participants:

Yaffa Cohen-Ifrah -- Chief Marketing Officer and Head of Corporate Communications

Roni Al-Dor -- President and Chief Executive Officer

Roni Giladi -- Chief Financial Officer

Tavy Rosner -- Barclays Capital -- Analyst

Chris -- Barclays Capital -- Analyst

Mayank Tandon -- Needham & Company -- Analyst

Bryan Bergin -- Cowen and Company -- Analyst

Bhavan Suri -- William Blair -- Analyst

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