Sapiens International Corporation NV (SPNS) Q4 2020 Earnings Call Transcript

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Sapiens International Corporation NV (SPNS 1.25%)
Q4 2020 Earnings Call
Feb 25, 2021, 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 Fourth Quarter and Full Year 2020 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded February 25, 2021.

It is now my pleasure to introduce your host, Ms. Daphna Golden, Sapiens' VP and Head of Investor Relations. Thank you. Ms. Golden, you may now begin.

Daphna Golden -- Vice President, Head of Investor Relations

Thank you, and good day, everyone. First, let me start by saying that I'm excited to have joined Sapiens. I look forward to meeting with you all, and hopefully, we will be able to meet face-to-face soon. Our earnings 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. 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 after the call on our Investor Relations section of the company's 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?

Roni Al-Dor -- President and Chief Executive Officer

Thank you, Daphna. I'm happy to have you on Sapiens team. Welcome. Thank you to everyone joining us today to review Sapiens' fourth quarter and full year 2020 financial results. I will review highlights from the quarter four results and give an overview of our achievements in 2020. Our CFO, Roni Giladi, will discuss our outlook for 2021. The financial results Sapiens report today show how well the Sapiens team carried out our strategy and their ability to perform under the global pandemic conditions.

Starting with Q4. Sapiens' Q4 was outstanding finish to an excellent year for the company. Despite COVID-19, we crossed, for the first time, the $100 million mark in quarterly revenues, coming in at $103 million, 19% higher than last year. This achievement was further supported by the 30% increase in operating margin to a record of 18.1%. For the full year, revenue increased by 18% to $384 million and we delivered operating margin of 17.7%. These record results were the outcome of our focus on strategic execution. Roni Giladi will elaborate further on the financial results in his section. As you may recall, back in 2016, we focused our efforts on expanding our presence in North America. And today, we have a strong competitive position in this important market.

Over the last 18 months, we focused on expanding in European market. This started with acquisition of Calculo back in 2019 for the Iberian market. Followed by 2020 acquisition of sum.cumo in the DACH region, which I already covered in detail in previous calls. Then, in Q4 of 2020, we announced the acquisition of TIA Technology. With TIA, we deliver on our promise to our Nordic customer to build a local presence. Headquartered in Denmark, TIA has more than 20 years of experience and nearly 70 customers globally, mostly in Denmark, Norway, Sweden, South Africa and the Baltics. One of the most important assets we gain is the insurance domain knowledge of TIA's 200 employees that will help us to expand Sapiens' P&C and Life & Pension offerings in the region. We are committed to serving TIA customer as we strongly believe in long-term partnerships with our customers globally. We have shown that our land and expand strategy is an effective way to grow. With TIA, we will embed into the regional culture and regulatory framework to continue and grow in this region. Sapiens' global presence and broad product offerings supported by local professional team create a unique competitive advantage. During Q4, we continue with the integration of Delphi which we acquired in Q3. Delphi acquisition brought rich NPL domain knowledge and the customer base to enhance our P&C offering and further advance Sapiens' position in the U.S. market.

As we enter 2021, we will remain focused on the successful integration of our recent acquisition and continue to carefully explore additional M&A opportunities. Shifting to business highlights in 2020. The global Sapiens team delivers, once again, many new wins and go-lives across the various region and market segment we're operating in. They have demonstrated our rapid and professional adoption to the challenges of COVID-19. In Europe, the leading Norwegian insurance company, Gjensidige, select Sapiens' CoreSuite for Life & Pension platform for their group risk, group pension, individual risk, savings and annuities businesses to support the expansion of their digital capabilities and grow its market share. Gjensidige is in the process of implementing Sapiens IDITSuite software solution for property casualty coverage across the Nordic region. This is an example of a trend we have recently been seeing where customers require more than one software solution. One of the main differentiators and advantage we offer is our broad portfolio solution, addressing multiple line of business and needs. In the U.S., Gateway, a licensed carrier across 47 states owned by Buckle, selected Sapiens integrated financial solution to streamline and automated back office insurance processes. Sapiens Reinsurance GO, Sapiens FinancialPro and Sapiens StatementPro enabled Gateway to transform its financial compliance and reinsurance management, providing a one-stop shop for their needs. We have also announced a new win with American Farmers and Ranchers, one of the largest U.S. farm organization with over 110,000 members. AFR was looking to replace its legacy system with a flexible solution to support all P&C lines of businesses. The functionality of Sapiens solution met their extensive requirements and provides a single digital platform that enables them to automate their current manual reinsurance.

Another important project I would like to share with you represent the long-term partnership of Sapiens with its customer. Yukon Workers' Compensation Board roll out an update of Sapiens ClaimsPro. Yukon is Sapiens' client since 2006 is now able to streamline end-to-end claims processing and reduce claim processing expenses and settlement costs. The average version will also enable Yukon to respond quickly to new business requirements that are even more critical during the COVID-19 pandemic. During Q4, we also helped many customers reach major milestones in their digital transformation project with Sapiens. To name a few, MAPFRE MSV, leading provider of life and insurance protection, long-term and saving and retirement solution in Malta went live with our CoreSuite for Life & Pension, bundled with our digital solution. The cloud-based platform, including policy administration, digital portals and advanced analytics will enhance and expand their services. The first phase of the implementation was completed on time and on budget despite the COVID-19 global pandemic. The first phase will consolidate MMSV protection into a signal administration platform and the next phase will consolidate the company investment and grow businesses offering.

Another important go live was CROSIG in Croatia, where we set a record in the implementation time of Sapiens IDITSuite for P&C, which was selected for their new digital brand. This was the first stage in three phases full digital program, and it has already shown positive results for CROSIG. On the product front, I'm proud to share with you that during 2020, four products in our portfolio have been recognized as the market leaders. three of those awards were published during Q4. Our IDITSuite for P&C was recognized by Celent as a leader in functionality in EMEA. We also were selected as a market leader in Gartner EMEA Magic Quadrant for the non-life systems. Our core suite for Life & Pension received the highest rating for five out of seven use cases evaluated by Gartner. And earlier this year, our solution was recognized by Gartner as a market leader in EMEA. Our UnderwritingPro was recognized as a market leader in the Celent report on North America new businesses and underwriting functionality for the life insurance. And our IllustrationPro was recognized as a market leader in the Celent report on North America Illustration Solution. One of our capital allocation priorities is R&D, and we see this investment paying both nicely.

Our recently launched, IDIT Go, a cloud-based plug-and-play P&C solution allows us to expand our market reach and serve smaller carriers. This is a more affordable solution, which brings out-of-the-box capabilities for faster deployment, addressing the low end of the market. With IDIT Go, we now offer smaller carriers the rich capabilities of Sapiens' market-leading solution. During the last quarter, we have also accelerated the platform and functionality of our digital offering. We have introduced the new generation of our digital suite. The new generation of digital offering, which combines Sapiens' in-house development and technology acquired includes an API layer, advanced customer, agent and employer portals, a low cost, no code digital journey builder, a machine learning-based chatbot and an omnichannel live chat. The digital suite allow us to provide a wide range of advanced digital solution that can be rapidly deployed, either together with our core solution, as part of full platform or as a stand-alone solution for companies looking for digital solutions to be deployed quickly onto their existing core systems.

DECISION, our business logic platform, which is used by global Tier one financial institution, continued to gain momentum in the insurance market. Given the success stories and real ROI, we see a growing demand for DECISION. These include Tier one players that find great value in DECISION. I'm certain this is one of the key differentiators in our portfolio. Another area we continue to focus on is our partner InsurTech ecosystem. As our platform is built with open API capabilities, we are adding more and more partners that fully integrated with our solution, enabling our customers to enjoy seamless integration with additional solutions. During Q4, we have announced several partnerships. To name a few, we partnered with VPay to extend digital payments to workers' compensation insurers, with Click-Ins to provide an automated AI-based vehicle damage inspection and accelerate claims management, and with TruthMD to offer MPL insurance advanced data analytics on medical providers. 2020 was the year in which we all had to adjust to new reality. Sapiens and the customer were dedicated to continue executing digital transformation projects despite the challenges that remote work presented. I'm proud of our achievements this year and the fact that Sapiens came out even stronger. We are well positioned for continued growth.

Looking ahead in 2021, our success in P&C market is expected to continue in all regions. The Life & Pension market, we now see growing demand for our platform, supported by recent wins and solid pipeline. Our insurance platform is gaining momentum primarily with the large carriers. In addition, our support of multiple lines of businesses across both Life and P&C makes Sapiens the vendor of choice for multinational global insurers. We have planted the seeds to increase our global expansion with a focus on North America, EMEA and Asia. We already see positive momentum from our investment in Iberia and DACH. With over 600 global customer, Sapiens is making a significant impact with our broad portfolio of solution and one-hand-to-shake business model. With nearly 4,000 of the industry most talented employee spread globally, we have all the tools in place to continue growth. The disruptor of COVID-19 and rapid industry shift to digital are dragging insurers to speed up their digital transformation projects. We are fully prepared to land new customers and expand existing customer businesses. Now I would like to turn the call to Roni Giladi, our CFO. Please, Roni.

Roni Giladi -- Chief Financial Officer

Thank you, Roni. I will begin my commentary with a review of the fourth quarter non-GAAP results. The 2020 annual non-GAAP results, followed by the comments on the balance sheet and cash flow, and we'll wrap up with our outlook for 2021.

An important Q4 milestone detailed by Roni Al-Dor was the completion of the TIA acquisition. TIA result have been consolidated starting December 1, 2020. To give you some perspective, its revenue has been flat at $30 million run rate. We anticipate a small decline in its revenue toward the end of 2021. Its profitability level is at 14%. Revenue in the fourth quarter of 2020 increased to $102.9 million, up 18.7% from the fourth quarter of 2019. Our revenue in North America reached $47.3 million, 13.1% higher than last year. Revenue in Europe reached $49.2 million, up 31.4% and positively impacted during 2020 by sum.cumo, and to the small extent by TIA.

Moving to gross profit. Gross profit in Q4 2020 was $47 million, up from $38.4 million in Q4 of last year. Our gross margin this quarter increased by 140 basis points to 45.7% from 44.3% in Q4 of 2019. We see constant increase in our gross margin quarter-over-quarter. Moving to operating profit. Operating profit this quarter was $18.7 million, up 30.1% from $14.3 million in Q4 of 2019. Despite the negative impact of TIA profitability, operating margin increased to 18.1% or by 160 basis points. Net income attributable to Sapiens' shareholders for the quarter was $14.5 million, up 37% from $10.6 million net income in Q4 of 2019. EPS for the quarter was $0.27 per diluted share compared to $0.21 per diluted share in the fourth quarter of last year, reflecting 28.6% EPS growth. Please note the EPS reflects the increase in share count due to the public offering we completed in Q4.

Turning now to the full year results for the 12 months ended December 31, 2020. 2020 was obviously affected globally by COVID-19 pandemic. While COVID-19 has negatively affected our organic growth rate, it has enabled us to further improve our profitability, which I will elaborate on shortly. Revenue. 2020 revenue increased to $384.5 million as we achieved high double-digit growth of 18.1%. Our diverse revenue base is clearly represented when looking at the results by geography and product. The main growth driver by region was 29.2% growth in Europe, totaling $172.9 million in 2020. Followed by 15.2% growth in our largest region, North America, which totaled $188.5 million. Rest of the world contributed $23.2 million in 2020. Growth by product was driven mainly by the P&C segment in North America and Europe and in from Life & Annuities in European countries. In North America, life & annuity growth was driven by life components.

Our diversity is also represented by the spread of revenue among our customers. For example, our top 10 customers represented 23.5% of Sapiens' revenue, and the largest customer represented 4% of total revenue, an improvement from previous years. Organic growth in 2020 was 8.7%, of which 0.7% related to the positive impact from the currency tailwind. On top of that, M&A has contributed 9.4%. This included revenue from Calculo, sum.cumo, Delphi and TIA. opex. While the opex increased by $14.2 million year-over-year from increased R&D and SG&A, we have successfully reduced expenses as a percentage of revenue in 2020. Our total opex as a percentage of revenue was down by 60 basis points from 27.9% to 27.3%. As a result, operating margin improved from 16% to 17.7%, steadily crossing the 18% level since Q2 of 2020. COVID-19 was an important contributor to the higher operating margin in 2020, adding approximately 1.3%.

I would like to highlight that the improvement in our operating margin was achieved despite the fact that all 2020 acquisition had profitability level, which were lower than those of Sapiens. In addition, you can see that gross margin has contributed about 2/3 of the operating margin expansion. This expansion was complemented by 1/3 from the lower opex as a percentage of revenue. These various elements resulted in operating profit of $67.9 million, a 30.1% increase from $52.2 million in the prior year. Tax expenses for the year were $11.8 million, representing an effective non-GAAP tax rate of 18.4%. EBITDA increased by 30.4% to $72.6 million in 2020 from $55.7 million in 2019. Our adjusted EBITDA margin was up to 18.8% for the year from 17.1% of last year. Net income for the year increased by 33.6% to $52 million from $38.9 million in 2019. EPS per diluted share reached $1, up from $0.77 per diluted share in 2019, up 29.9% from last year. Turning to our balance sheet. As of December 31, 2020, we had cash and cash equivalents and short-term deposits totaling $182 million, and total debt of $120 million spread over six years. In 2020, we raised a gross amount of $115 million in equity in a public offering which included the exercise of the greenshoe. We also raised $60 million on debt in a nonconvertible debenture. In parallel, we have acquired companies for a total amount of $123 million and distribute a dividend in the amount of $7 million. Touching upon adjusted free cash flow. During 2020, we reached free cash flow of $49.8 million which represent 96% of our non-GAAP net profit, reflecting our clear ability to convert net profit into cash generation.

I would like to turn to our guidance for 2021. As Roni stated earlier, we see increased demand for our offering in the market. We expect to start benefiting from the seed planted in the Iberia and DACH region in 2020 and from our continued investment in our products. In 2021, we anticipate returning to our 10% organic growth level. In addition, the impact of our 2020 M&A will add 9%. As a result, we are introducing 2021 revenue guidance in the range of $457 million to $463 million. Operating margin guidance. Our operating margin improvement will come from continued improvement in Sapiens activities and from improved operating profit of the acquired companies. However, a decline in the pandemic and the resumption of a normal business practice, which would include business travel and other operational expenses might increase our expenses in the second half of 2021. In this scenario, we might see some of the cost savings of about 50 basis points of what we have achieved during 2020 being eliminated. In addition, we see growing demand for employees in the high-tech sector. This might drive average employee cost up. In addition, we will incur expenses related to integration costs from the TIA acquisition. As a result, operating margin in 2021 is expected to be in the range of 17.7% to 18%. We anticipate that our annual tax rate will be at 18.5% to 19.5%, slightly lower than the 2020. This is due to a tax incentive program that we mentioned last quarter. Our number of shares at the end of the year increased to 54.7 million shares, mainly as a result of the public offering. We anticipate that the number of diluted shares will grow by about 400,000 shares every quarter. On the M&A front, we have added several companies to the Sapien family in 2020, and we intend to focus efforts on their integration. We will still evaluate M&A targets in 2021 and act on them if we find the right opportunities.

To summarize, despite COVID-19, which had a global effect starting early in 2020, we finished the year on a strong note as evident in both top line growth and margin improvement to record levels. Looking ahead, we expect the positive momentum to be continued. I will now turn the call back to Roni Al-Dor. Roni?

Roni Al-Dor -- President and Chief Executive Officer

Thank you, Roni. Our great 2020 results are attributed to our solid business model, which is built on several key pillars. First, our long-term relationship with our customer, the partnership for success and our one-stop to shop strategy once again proved to be the right approach for a major digital transformation project.

Second, our land and expand strategy support by our M&A help us gain better market coverage and closer relations with our customers. And last but not least, our commitment to innovation is recognized by both our customers and industry analysts. Our results in a year of global pandemic are credited to the Sapiens customer success team, which is doing an outstanding job providing critical support to our customers. And to the dedicated delivery teams that are spread globally, which are doing an outstanding job delivering our solution on time, on budget despite the COVID-19 social distancing.

At the same time, our global sales team continue to focus on creating new opportunities, expanding the pipeline and signing new businesses in this challenging market condition. Our leadership team remains focused on delivering growth and margin expansion as we execute against our long-term objective of improving shareholders value. With a focus on growth strategy, global diversity and even stronger balance sheet, Sapiens is well positioned for additional success in growth.

I would like now to close our prepared remarks and open the call for questions. Please.

Questions and Answers:

Operator

[Operator Instructions] The first question is from Ashwin Shirvaikar of Citi. Please go ahead.

Ashwin Shirvaikar -- Citi -- Analyst

Thank you. Hi Roni. Good results here, congratulations. I think I -- the first question I wanted to ask was with regards to understanding a little bit more on the cadence of how revenue and earnings flow through the course of the year, given all the various comp issues that we have to think about and so on. So that was the first question. Thank you.

Roni Giladi -- Chief Financial Officer

Hi Ashwin, this is Roni G. I assume you are asking about 2020. So obviously, during the...

Ashwin Shirvaikar -- Citi -- Analyst

No, no. I'm asking about how we should think from a modeling perspective into 2021 for the fourth quarters.

Roni Giladi -- Chief Financial Officer

Okay, fair enough. No problem. So if I need to start from 2020, I will say that beginning of the year, we had some slowdown on the revenue. And there was a worldwide pandemic and obviously impacted our revenue growth. And as we continue during the year, we saw positive momentum. The positive momentum continue toward Q3 and 4, and obviously entered into 2021. And as we speak right now, we see increasing pipeline and opportunity that will be closed. Therefore, we increase our revenue, organic growth to 10%, coming from all Sapiens companies, excluding the last two acquisitions that came during the middle of the year, which are TIA and Delphi. So 10% organic growth for the entire company. And on top of that, adding TIA, slightly south to $30 million, this is the revenue on a yearly basis and full year of Delphi of $15 million. If we add all of these, we will get to the middle of the range.

Ashwin Shirvaikar -- Citi -- Analyst

Understood. And in terms of the cost actions that you took through the course of 2020 and some of those costs coming back in 2021, how should we think of that?

Roni Giladi -- Chief Financial Officer

Okay. So obviously, during COVID-19, we had positive impact coming from several elements like rent, travel, commute, marketing exhibitions that improve our operating profit by 1.3%. We assume that the impact of this pandemic probably will slow down toward the end of the year, 2021, Q3 and Q4. And obviously, we will have increase in our cost. We assume this as half of it will vanish and half of which will stay with the company. Therefore, about 0.5% of operating margin will be vanish in 2021 because of COVID-19. On top of that, of course, Sapiens is improving efficient processes and, of course, offshore that will compensate for this reduction in profitability.

Ashwin Shirvaikar -- Citi -- Analyst

Got it. And one very quick clarification. The TIA, is there any seasonality in the revenues there?

Roni Giladi -- Chief Financial Officer

There is no seasonality. Basically, there are some solution which are implemented that will go live to the second and third quarter of 2021. And therefore, this is some reduction in revenue toward the end of the year.

Ashwin Shirvaikar -- Citi -- Analyst

Understood. Thank you very much.

Roni Giladi -- Chief Financial Officer

Thank you.

Operator

The next question is from Chris Merwin of Goldman Sachs. Please go ahead.

Chris Merwin -- Goldman Sachs -- Analyst

Okay. Thank you so much for taking my question. Congrats on a strong finish to the year. I wanted to ask about Europe. Can you talk a bit about where you're finding success so far in that market, whether it'd be in terms of the size of customer that you're winning? What type of products they're taking, whether that's core solutions or maybe more of the data and digital products? Just trying to get a sense of where the early traction is so far there. And I have a follow-up. Thanks.

Roni Al-Dor -- President and Chief Executive Officer

Yes. Chris, this is Roni Al-Dor. We -- in terms of the product line, we continue to see demand for the core system as well in digital. We are seeing also demand in the core system, we have our P&C platform, reinsurance platform, the life platform. So we see a slightly higher demand on the life that it was in the past, mainly the rest of the world, what we call EMEA and Asia. On the P&C, we are continuing to grow. For sure, as Roni and I myself mentioned about Iberia and the DACH, we start to see some positive momentum on those areas. On the digital, we are -- in all of our core systems, we are fully embedded our digital solution, but we also start to see demand for our stand-alone digital offering. Again, in U.S. and Europe as well.

Chris Merwin -- Goldman Sachs -- Analyst

Okay. Great. And just the follow-up was that, I think for the '21 guidance, you talked about 10% organic growth which sounds like an acceleration from fiscal '20. So can you talk a bit about some of the main drivers of the organic growth acceleration that you're anticipating this year?

Roni Giladi -- Chief Financial Officer

Chris, this is Roni G. If we look again back to the history of Sapiens, over the years, we've been able to grow about 10% organically year-over-year. This is our target model to continue going forward. Of course, we can accelerate this, but it will be very -- affect our profitability. When we enter 2020, this was our guidance also 10%. And because of COVID-19 and the impact from the customer and from Sapiens, we reduce it. So we think we are back on track right now. And we see the growth from P&C globally, both in the states and in Europe, European life. And as Roni mentioned also the seed that we plant in the Iberia and DACH region, we hope to see fruit in 2021.

Chris Merwin -- Goldman Sachs -- Analyst

Thanks so much.

Roni Al-Dor -- President and Chief Executive Officer

Thank you Chris.

Operator

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

Dylan Carden -- William Blair -- Analyst

Hey guys, thanks for taking my question. This is Dylan actually on for Bhavan. A nice job closing out the year. I guess, first, I just wanted to start, I mean, obviously, 2020 was a highly acquisitive year. And then going back even to 2018 with your expansion into North America, can you kind of help me understand -- or help us understand how integrated those P&C solutions are? And you have a different offering in North America, a different offering in Europe. So kind of integrating those two solutions and kind of looking at you guys have spend on R&D as a percent of revenue compared to maybe some of your competitors that offer a global solution on one kind of platform. Can you kind of help us get a sense of your plans and thoughts kind of around integrating the two solutions there?

Roni Al-Dor -- President and Chief Executive Officer

I will -- Roni Al-Dor, I will start with the -- I will start not on the numbers, just to explain where we are. As you mentioned, we have two platforms for rest of the world and North America. And -- but what we are seeing, all of our digital platform is good for both sides. So the investment is the same digital offering, and that's become, percentage-wise, more part of the offering that we are serving. In terms of where we are on the integration, we integrated -- fully integrated our policy and claim system. We continue ahead with our billing system. So right now, we are supporting full policy billing claims in North America. Last year, this is -- we have really grow this business. In Europe, we are, for many, many years with our IDIT platform, we really see a lot of growth. As I mentioned, we also announced our -- we launched our IDIT Go to serve also the smaller clients. So the overall, we are continuing to develop in both solutions.

Roni Giladi -- Chief Financial Officer

Yes, I will add. Hi, Dylan, this is Roni G. I will just want to answer your question about R&D investment compared to other companies. So I think the business model of Sapiens is different from the rest. And therefore, you see different in percentage-wise. We are a one-stop shop, meaning we develop the software, but we are also the system integrator, which allow us during the implementation of our solution and the customer to develop our product and enhance it in generic way. Therefore, it's not only the percentage that we see in the report, which is about 12% to 13%. But it's also have even percentage in the cost of goods, which are really R&D. We estimate this about 7% altogether, that if we combine the 2, we are reaching about 20%.

Dylan Carden -- William Blair -- Analyst

Right. Okay. Yes, that's great. That's helpful. And then I guess two, just wanted to follow-up. It sounds like kind of over the last couple of quarters, there's been some steady demand on the life side compared to maybe what we've seen a couple of years prior. Can you kind of just give us a sense of what's driving kind of some of that uptick in interest from a client perspective, maybe even in a product perspective? And then how that competitive landscape maybe differentiates as well compared to -- relative to the P&C side? Thanks guys.

Roni Al-Dor -- President and Chief Executive Officer

Yes. So if we are going to the history when we acquired many, many years ago, the ALIS platform today, we call it CoreSuite for Life. We -- Sapiens did huge investment on technology side and also on the -- to develop all the line of business and also the regulation. So it was a lot of investment that we did in the past. At the same time, we also -- we penetrate to the U.S. market. What we decide to do in 2018, we decided to focus mainly on the rest of the world. Based on our investment also on the group function, that was a very important function because until then, we are more specialized on the individual. So what we start to see momentum in 2019, 2020, we signed a few deals. And beside those -- both those areas, we also have a product that's focused on the runoff business. So if you take all of these investment that we did, plus the success with the customer and also, Gartner, as we mentioned, position us as a leader, it's also helped us in the sales [Indecipherable] reference. All in all, it bring more demand and more win rate on the deals that we have. Right now, as I mentioned, we have -- we are now considering to go back to U.S. also on our policy. This is -- we are in the starting point in this phase, but I believe, in the future, we'll start to see results as well.

Roni Giladi -- Chief Financial Officer

One more comment on the state, on the component side, we see growth in the last several years, about single mid digit.

Dylan Carden -- William Blair -- Analyst

Yes. And if I can squeeze in one more quickly in there as well, yes. Just expanding on that. I know it had been kind of a no-growth kind of segment for a little while. But if we kind of think about that 10% organic piece, the contribution may be coming from the life side there?

Roni Giladi -- Chief Financial Officer

Currently, it's below 10%. We do not provide the percentage there, but it's below 10%.

Dylan Carden -- William Blair -- Analyst

Thanks for taking my questions guys.

Operator

The next question is from Surinder Thind of Jefferies. Please go ahead.

Surinder Thind -- Jefferies -- Analyst

Good morning. I'd like to start with a question just about the general outlook for the insurance space and just client demands. I think one of the working thesis that's been out there is with all of the disruption that's going on in the space that there is a potential to see demand accelerate over the next few years. It sounds like you guys are back to your normal expected growth rates of around 10%. Can you comment on the ability to maybe get above that at this point? Or is it just clients are going to kind of grow at the pace that they've been growing at? Historically?

Roni Al-Dor -- President and Chief Executive Officer

Hi. In our business model because we are believe on the one hand to shake. And when we grow, we also growing our services business. It all depends of hiring more employees. So we, all the time, balance between growth and profitability. And if you ask me if we can grow more, yes, but it will affect our profitability. And this is why we are now put ourselves on the percentage that Roni mentioned. In terms of demand of the market, we have demand on the market. We, as a management, we will make a decision if we can do a little bit more. But right now, we are focusing on what we share with you.

Surinder Thind -- Jefferies -- Analyst

Understood. But would you say that demand is back at historical levels or it's greater than historical levels and you're just being careful about your growth strategy? Or how would you characterize that from an industry perspective?

Roni Al-Dor -- President and Chief Executive Officer

Look, the life business was very slow many, many years. Mainly people start to buy a lot of insurance company, bought books of business from a different company. It was a lot of consolidation. Right now, we see more demand in general in the life business and also for us. So right now, the trend is positive growth.

Surinder Thind -- Jefferies -- Analyst

Understood. And then a question about M&A. One of the comments that was made that you're carefully continuing to explore additional acquisitions. How should we think about the timing of any potential deals, given that you guys just did a large deal? Does it make sense to maybe hold off for a while? Or is there increased risk if you were to do something near term?

Roni Giladi -- Chief Financial Officer

Hi. This is Roni G. We -- as you mentioned correctly, we completed five M&As in the last year. And obviously, this is -- takes a lot of attention in terms of integration, doing the right tools, keeping the employees, integrating the product, corporate staff and all of that. A lot of effort because we want to succeed. And of course, we are not holding companies, so the effort is much higher on integration. We are, right now, focusing on integration, but still looking for additional opportunities. If you ask us probably toward the second half of the year, we should expect to do M&A. The size of the M&As are typically what we are looking, midsized to medium-sized company. This is what we are good at, and we'd like to continue with that in order to minimize risk.

Surinder Thind -- Jefferies -- Analyst

Got it. Okay. Thank you guys for taking my questions.

Roni Al-Dor -- President and Chief Executive Officer

Thank you.

Operator

The next question is from Sterling Auty of JPMorgan. Please go ahead.

Sterling Auty -- JPMorgan -- Analyst

Yeah, thanks. Hi guys. So I wanted to follow-up on the comment that you made, demand is a little bit better on the life side. I'm curious why perhaps we're not seeing better demand in P&C. And maybe a follow-on to that, where are you seeing the best demand in terms of size of organization, Tier 1, Tier 2, all the way down?

Roni Al-Dor -- President and Chief Executive Officer

Yes, just to make sure that I understand your question. You asked about the life? Or you ask general also on the P&C? Or...

Sterling Auty -- JPMorgan -- Analyst

General, including the P&C.

Roni Al-Dor -- President and Chief Executive Officer

Look, we Sapiens, we are -- in Europe, we are targeting also higher tier. In U.S., we are not going to the higher tier with our P&C and life core. In the component and reinsurance, we are going also for the higher tier. In terms of demand, we see demand in all area. So the -- also the higher tier in U.S., most of them are already invest heavily on the P&C. So we more see the medium and lower tiers. And -- but in the -- in Europe, we are definitely see the higher tier as well as the medium tier. That's general answer. If we are going more deep, in the P&C, P&C in Europe, Sapiens is ready for all tiers. In U.S., we are, at this moment, we are more on the medium and low tier. And again, as I mentioned, on the life, we are more focusing on rest of the world at this moment. And we plan to come to the U.S., mainly with our individual. Not because we don't have group, but the group is more competitive situation right now. And individual, we have advantage.

Sterling Auty -- JPMorgan -- Analyst

Okay. And then one follow-up. You mentioned the new digital platform. What opportunities in 2021 do you see to migrate some of your existing customers onto the new platform? And if you do, what kind of revenue impact will that have?

Roni Al-Dor -- President and Chief Executive Officer

No. We don't need -- all of our digital platforms, just to remind, we are -- what we decide to do, we take -- we build something called ACE is to open all of our core system to work very efficient with any digital platform includes Sapiens. That's one. This we already did. So in the next release of all of our products, they're getting the major release for them is our digital open API. Beside this, we have everything around digital and data, everything that I mentioned in my call, and this is additional to what they have today. It's not replaced, it's additional.

Sterling Auty -- JPMorgan -- Analyst

Got it. Thank you.

Roni Al-Dor -- President and Chief Executive Officer

Thank you.

Operator

The next question is from Tavy Rosner of Barclays. Please go ahead.

Tavy Rosner -- Barclays -- Analyst

Hi, good afternoon. I just wanted to touch a little bit on the bigger picture. I guess, in your conversation with the insurance companies that are still using legacy software. Are you still going after those? And I mean, proactively, in your go to market, knocking on doors and trying to convince them to move to digital. And how has the conversation evolved with corona? I mean, does that mean that post-pandemic, there is more interest in kind of moving their solution to something more dynamic and cloud based?

Roni Al-Dor -- President and Chief Executive Officer

Yes. Hi Tavy. First of all, in terms of COVID, we cannot knock in the door anymore. So we do it by dialing for them. It's a joke. So we -- yes. So the answer is yes. We are continuing to look after, as you remember, in our many of presentation, we shared that we still 80% of our compared to the local IT and legacy system. So this is a good target to go after them. And the way that we are growing, we have, as you remember, we have a very broad offering. So we prefer, as a company, we prefer to full implementation of our core system. But if that's not work, we are going to MVP just to find one line of business, and we can do it. Or if the company is not ready for full-blown replacement, we are taking our silo approach or we can come with our digital offering or with the reinsurance. So the idea is that we are -- when we knock in the door, where we try to do something. By the way, we -- last year, it was a very good year for our DECISION, also for the insurance space. So this is another area to us. And if we are -- if we start to work with the customer, Sapiens has a lot to offer. And in terms of COVID, I think the -- yes, we all have -- still have the COVID, but insurance carrier continued to invest mainly in the digital. And I think everything that's happened in our InsurTech and Lemonade, Next Insurance. All of this, for us, it's a wake-up call for the insurance. So they are all understand they need to invest because the competitors are around.

Tavy Rosner -- Barclays -- Analyst

Great. Appreciate it. Thanks for the comment.

Roni Al-Dor -- President and Chief Executive Officer

Thank you, Tavy.

Operator

The next question is from Omri Velvart of Legacy Value Partners. Please go ahead.

Omri Velvart -- Legacy Value Partners -- Analyst

Hi Roni and Roni, congratulations for the great quarter. Another great quarter. Two questions, please. The first one is regarding the previous 12-month acquisitions of TIA, which was more recent, and sum.cumo in Germany. It is now, I think, a little bit more than 10 months, been 12 months since sum.cumo acquisition closed. What do you see in the DACH market, the D-A-C-H market? And you recently announced a major executive hire over there. But still no new deals over there, if I'm remembering correctly. So if you can give a little bit color on the progress over there, obviously a very important and large market. And regarding the TIA acquisition, from what we can understand and from what Gartner has to say, it's a very well regarded company, very respected. It's actually not that far from Sapiens in the Magic Quadrant of Gartner. So what qualities do you see in TIA? You paid handsomely for this company. And how do you see it complete Sapiens and maybe accelerating growth over the next several years from now? This is my first question.

Roni Al-Dor -- President and Chief Executive Officer

You asked two question in one question. So let's start with DACH. DACH, it's a very important market for Sapiens that we decide to penetrate and it was a good idea for us to do through sum.cumo. sum.cumo, as you remember, they are specialized on digital offering for this market, doing -- they continue to do their business very well, more than expectation. In terms of the integration between the companies, also work very well. We are -- already have some customer for Sapiens in the region. So they start to be involved. We -- the person that you mentioned is a sales and presale that we hire from our competitors. And all of them are now built with the marketing, building pipeline hopefully to see some results this year. So overall, it's a growing market for Sapiens. Definitely see demand Sapiens welcome very well. The only thing it's -- in the insurance business, is everything takes time. It takes time to build presence, marketing, confidence and so on. But I think with the 200 people that we have today and the good job that we are doing end day, so in the next -- in this year and the next few years, definitely, we'll see a growth. If we are going to TIA, as you say, and you're right, TIA is a very good company. It's excellent product with 50, 60 customers. Nordic, South Africa and several other areas. They are also working with system integrator, not the same model of Sapiens. So this is something that we are learning right now. We are -- what we decide to do is fully integrated their business with Sapiens, that's one plus one will be 3, four and 5. We are -- next week, we plan to launch the fully integrated between this company. It's in three months, it's very short time. We don't see any churn from the customer. We are -- give all the confidence to the customer that we are fully continue to support. Strategy-wise, we decide where to put Sapiens and where to continue to sell TIA, and this is something that we are working on it. But definitely, we plan to continue to develop. We integrated with our digital platform on top of there. We are already start to put many service for their clients. We take something then decide to invest, they call it [Indecipherable] and we find is very good for the entire Sapiens. So all in all, very positive with TIA. And culture-wise is excellent fit. No issue. So let's -- I hope I answered.

Omri Velvart -- Legacy Value Partners -- Analyst

Yes. Okay. Thank you. That was very helpful. Now if I may, another question, more question. Now, obviously, the stock, I know that you want to focus on execution, not on the stock, but if we can ask a question about the stock price. It's done very well over the last few years. And still a major valuation gap between you and some of your more shiny maybe competitors. I'd like to ask what are your thoughts about this gap? And if you are considering especially with now with more interesting Sapiens from large Wall Street banks, institutions, etc. And after your last secondary IPO, secondary offering, if you're considering maybe give more KPIs, more data, more non-GAAP measures about the business. Maybe it's a question more for Roni Giladi. I would like to -- I would be love to hear your thoughts about it. Thanks.

Roni Giladi -- Chief Financial Officer

Omri, this is Roni G. Obviously, we are focusing on the execution. You're totally right. And if you measure the execution over the year, the share price continue to grow, and we hope to see this also in the future. As we evolve as a company, we are improving the reporting and adding additional metrics. I'm sure that you will be able to see additional metrics in 2021. As we continue growing, having other products, recruiting employees worldwide. So the answer for that is, of course, yes. Regarding the follow-on that we completed last year, end of last year, major banks were involved with this. And as we talk right now with investors, we are talking with bigger investors than in the past. And hopefully, this is taking time. We'll see -- we'd like to see the results during 2021 as we continue to progress with the results.

Omri Velvart -- Legacy Value Partners -- Analyst

I see. Okay. Thank you again guys. And congratulations for the quarter.

Roni Giladi -- Chief Financial Officer

Thank you very much.

Roni Al-Dor -- President and Chief Executive Officer

Thank you.

Operator

The next question is from Bryan Satterly of Robeco. Please go ahead.

Bryan Satterly -- Robeco -- Analyst

Hi. Thanks so much for taking my question. Congratulations on your results. I was hoping you could provide a bit more detail or examples on how you're growing revenues with your existing customers over time. And how much of your revenue growth you see going forward from areas like software and other sources that are more recurring versus onetime in nature?

Roni Giladi -- Chief Financial Officer

This is Roni G. I will start with the second one. Although we are one-stop shop combination of software house and service -- providing service, so implementation around our product, significant part of our revenue are recurring in nature. Although they are not signed, they are recurring year-over-year. If we analyze the metrics of how much revenue we have in a given year, coming from existing customers, it's running between 86% to 88% average of the last three years. This is an indicator of strong reputable business from our customers. The additional percentage coming from new logo of about 8% to 10%, and the other is coming from M&A. So although it's not SaaS driven or this phase, although it's not committed or backlog, the business from existing customers that have a relationship with us using our product, they need us to support their operation is significantly high and continue over the year, as I mentioned, between 86% to 88%. This was related to this question. Can you remind us the first one?

Bryan Satterly -- Robeco -- Analyst

No. That's great. I'll actually change it a little bit here because you're talking about the amount coming from existing customers. How long would you say, these days, does it take for you to get sort of the full earning potential per customer? Is there like a multiyear uptick? And how much you can earn per new logo gained?

Roni Giladi -- Chief Financial Officer

So if I talk about core system implementation, it's usually running the first deal, let's say, $7 million to $15 million over the -- first two years. And after that, I would say, a quarter of this amount every year, running from upgrade, extended maintenance, maintenance, license, batches, all of this, meaning supporting the customer, hosting managed services, supporting the customer on the day-to-day business. Usually, it can run lifetime 10, 15 years easily. This is core system implementation, and in nature, survive for many years with us.

Bryan Satterly -- Robeco -- Analyst

Understood. Thank you. That's very helpful. Appreciate it. Congratulations again.

Roni Giladi -- Chief Financial Officer

Thank you very much.

Roni Al-Dor -- President and Chief Executive Officer

Thank you.

Operator

[Operator Instructions] There are no further questions at this time. Before I ask Mr. Al-Dor to go ahead with his concluding 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 (1877) 456-0009. In Israel, please call (03) 925-5900. And internationally, please call (9723) 925-5900. Mr. Al-Dor, would you like to make your concluding statement?

Roni Al-Dor -- President and Chief Executive Officer

Yes. Thank you for all of you to joining us today. See you next quarter.

Operator

[Operator Closing Remarks]

Duration: 66 minutes

Call participants:

Daphna Golden -- Vice President, Head of Investor Relations

Roni Al-Dor -- President and Chief Executive Officer

Roni Giladi -- Chief Financial Officer

Ashwin Shirvaikar -- Citi -- Analyst

Chris Merwin -- Goldman Sachs -- Analyst

Dylan Carden -- William Blair -- Analyst

Surinder Thind -- Jefferies -- Analyst

Sterling Auty -- JPMorgan -- Analyst

Tavy Rosner -- Barclays -- Analyst

Omri Velvart -- Legacy Value Partners -- Analyst

Bryan Satterly -- Robeco -- Analyst

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