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Sapiens International Corporation NV (NASDAQ:SPNS)
Q2 2021 Earnings Call
Aug 4, 2021, 9:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Welcome to the Sapiens International Corporation's 2021 Second Quarter Results Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. It is now my pleasure to introduce your host, Daphna Golden, Sapiens' VP, Head of Investor Relations. Daphna, you may now begin.

Daphna Golden -- Vice President and Head of Investor Relations

Thank you, and good day, everyone. Our Q2 2021 earnings release was issued before the market opened this morning and was posted on the company's website at www.sapiens.com. Here with me today representing Sapiens are Roni Al-Dor, President and CEO, who will discuss Q2 highlights, market trends, product strategy and Sapiens' areas of focus in 2021. Roni Giladi, CFO, who will discuss Q2 financials and their outlook for the remainder of 2021; and Alex Zukerman, Chief Product and Strategy Officer, is also joining us today. 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 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, Chief Executive Officer and Director

Thank you, Daphna, and welcome, everyone, to our review of Sapiens Second Quarter 2021 results. In quarter 2, Sapiens delivered a strong year over year revenue growth of 24%, reaching a record high of $150 million. Operating margin reached 17.2% compared to 18% last year, and operating profit increased to $20 million, up from $17 million last year. Sapiens is a global leader in the evolving insurance software industry. We believe our business model and our highly diversified solution portfolio enable us to capture a meaningful share of growth opportunities in a total addressable market estimated at $40 billion. We have a unique position throughout our global presence in nearly 30 countries, plus we address multiple insurance industry segments, P&C, which includes workers' compensation, life and annuity. We serve customers of all tiers, mainly the higher ones. Our go to market strategy provides clear advantage to Sapiens and bring unique value to our customers across their entire lifecycle. First, we offer our global customer base, the most comprehensive set of insurance software solutions from core system to complementary solutions such as reinsurance and financial compliance as well as data, analytics, digital and decision management. Second, we invest heavily in order to maintain our product leadership, leveraging insight from our customers and the market.

In recent years, our products have been recognized by top industry analysts as a leader in their space. Most recently, Sapiens won three important industry awards; two from Xcelent recognized our P&C claims solution as a leader and our large customer base in EMEA; and one from Novarica, recognized Sapiens as a dominant provider of illustration solution for life, health and annuity insurers. These recognitions follow a long list of awards from our product portfolio. Third, we are committing to establishing long term valuable relationship with our 600 plus customers. Our broad offering, global presence and leading position allow us to add new customers and to grow our wallet share with additional software and services opportunity over the lifetime of the engagement or as we call it, land and expand. Our land and expand strategy allows Sapiens and our customers to benefit from cross sell and upsell opportunities. Our strong global presence is supported by our M&As as we land new region and then leverage the synergies, bringing new offerings to the market via local teams and by expanding our penetration with existing customers. And last but not least, operating in a dynamic and growing market, we constantly evolve our vision to further enhance our leadership position. We package our core and data analytics, digital and decision components into a coherent cloudified digital insurance platform. Our pre-integrated low code insurance in a box provides our customer the most compelling offering, enabling them to choose between deploying our end to end solution or any combination of its component to meet their evolving needs. Moving now to our Q2 results. Our strong performance Q2 is proof of our compelling land and expand growth strategy. I'm pleased to share that we have achieved year over year growth on an overall basis across both our P&C and life and annuities businesses. I will now review our performance by key regions.

In North America, we are making progress as we execute our plan. Since the last results call in early May, we continue to build and reinforce North America senior leadership team with new hires of a higher caliber professionals, bringing a strong skill set of delivery, operation and business development to help us to execute our strategy in the U.S. When looking at performance of our various offering in this region, in costs with P&C, we continue to enhance our delivery capabilities to address the growth demand in this region, and we are already seeing improvement. As a dominant leader in reinsurance, we'll continue to gain momentum and add new customers. Since the relaunch of the CoreSuite life and annuity in North America at the beginning of the year, we see increased interest and our pipeline has grown. Our modular proposition for underwriting an illustration system continue to gain momentum, represent by recent new customer wins such as Beneva in Canada and GCU Life in the U.S. This new lease combined offering for CoreSuite life and annuity and modular component is a unique differentiator in the market. And as such, our investment in focused business strategy in the last few years is gaining market traction. We have also recently announced the latest release of our decision management solution, including enhancement models, cloud architecture and new UIs.

With this new version, decision further empowers business users to efficiently manage their organization business logic. There is a growing interest in decision in the insurance space as the Tier one and two insurers embrace our solution as part of their digital transformation. On the workers' compensation front, as the employment market in the U.S. is recovering, the pipeline is growing again. We recently completed, for example, a major upgrade to the second largest workers' compensation provider in U.S., Ohio Bureau of Workers' Compensation as Sapiens' customer since 2012. We are now planning two major events in North America: Our annual virtual customer summit in late October, where we expect more than 700 attendees. We also are planning a face to face event in mid September with our executive counsel, a team of C-level executive from our leading customers. This event present great opportunities for our customers to collaborate, exchange best practice and engage with Sapiens on our mutual direction, discussion how Sapiens can help its customers enhance their business performance and align with industry innovations. We are confident that our strong and highly experienced local leadership in North America will continue to make progress as we focus on the successful completion of current transformation projects and winning new businesses.

In the European market, Sapiens maintain and continue enhance its strong leadership position, and we delivered yet another outstanding quarter. Momentum is strong, revenue increased and the pipeline is robust, which is a direct outcome of our successful land and expand strategy. Across Europe, we have been winning new businesses and have successfully completed new transformation projects, including with Tier one carriers. We have significantly expanded our strong presence in Europe as we land new regions. Our penetration into the large market of Iberia, which includes Spain and Portugal and the DACH region, which includes Germany, Austria and Switzerland, is starting to bear fruits. We are closing more deals, expanding our businesses with new customers, that join through the acquisition and the pipeline is strong. In the Nordic region, which includes Norway, Denmark, Sweden, Finland and Iceland, our five year proven track record, boosted by the acquisition of Tia in late 2020 has clearly established Sapiens' position as the market leader in the region. Our leading market position, as a result, in many new customers in both life and annuity and P&C as well as cross selling and upselling in this region. Over the last few months, we have reinforced our position in our European hub, the U.K. and develop our local professional management team. In addition, we recently partnered with Munich Re, one of the world's leading provider of reinsurance, primary insurance and insurance related risk solutions. As part of this partnership, Sapiens will offer IDITSuite our cloud low code core solution for smaller carriers initially targeting the U.K. and then the Nordics. Looking at the rest of the world, which includes APAC and South Africa, a smaller, but rapidly growing market for Sapiens, we delivered tremendous growth in the second quarter.

We have grown our customer base and talent, which is also supported by our growing pipeline in the region. An important win we announced last week was Sapiens' selection for one of the largest digital cloud transformations in APAC by a leading non life Thailand based insurer. The insurer's 30 years old legacy core will be transformed through the implementation of our IDITSuite, reinsurance market, Sapiens Intelligence and digital suite API layer. In mid May, we held our first virtual summit for our European and rest of the world existing and prospective customer. We had significant attendance of 450 attendants from insurance carriers across 30 countries. The main themes discussed was the vision of the future of insurance, innovation in cloud and artificial intelligence and machine learning supported for the insurers. In both Europe and rest of the world, we have achieved strong win rates and a higher number of potential deals in the blueprint phases, the final stage before signing an agreement as well as much larger pipeline. This is relevant for both P&C and life and annuity. I would now like to provide you with an update of India. As you may know, the magnitude of COVID-19 pandemic in India has gone down dramatically since its peak in April through May. In early May, Sapiens initiate a care assistant program to help provide support for the safety and health of our employees in India. For example, we provide funding to help cover cost of COVID-19, testing and medication and assistance in emergency support services like ambulance and oxygen.

Currently, only a few of our employees in India are impacted. We resumed steady recruitment in India as planned, and the majority of our recruiting in Q2 was in India, our largest offshore location. Before turning the call to Roni Giladi, I would like to provide some more highlights on our product strategy. The main pillars of our product strategy include: Number one, continuous enhancement of our cloud proposition with an emphasis on our major offerings. We offer our main product in a cloud first approach, and we have partnered with both AWS and Azure as our preferred cloud providers. Over the last 18 months, the vast majority of Sapiens' transformation projects were cloud based deployments, a portion of which included our managed services in order to operate the cloud infrastructure. Our solution helped business users to leverage our low code no code tools and a rapid configuration approach. This offers our customers smooth and fast deployment as well as solution flexibility. As an example, top-tier insurers and financial services carriers benefit from decision, our cloud native offering as the underlining platform to effectively manage their businesses rules and logic, leveraging the low code no code approach provides greater efficiency and empowers business users. Number two, our digital engagement proposition is designed to serve both carriers that aim to modernize their operation with Sapiens core and digital solution as well those interested in a rapid digital enhancement without having to replace their core solutions. Number three, data and analytics. We have recently launched substantial enhancement to provide a complete analytics solution to our customers.

It spans from data warehouse and reporting to real time analytics to set of machine learning analytics for various insurance use cases. Finally, the second partner hub, our insurer collaboration program is a key value proposition that we bring to our clients. Our open API architecture enables us to pre-integrated solution from various insurtech into the Sapiens proposition to enable our clients to enjoy even richer portfolios. To summarize, our second quarter results demonstrate the success of Sapiens strategy. As we continue to expand our global market presence and provide insurers of all tiers, the broadest product and services portfolio in the market, allowing them to benefit from our insurance in a box approach. Our engagement in significant opportunity across the markets and the regions we're operating in demonstrates that we are leveraging our expand presence and our rich product portfolio to further increase market share. We play an important role in our customers' entire lifecycle, upgrade and transformation journey, which is key to Sapiens' continued performance and growth. Now I would like to turn the call to Roni Giladi, our CFO. Roni?

Roni Giladi -- Chief Financial Officer and Vice President

Thank you, Roni. I will begin my commentary with a review of the second quarter non-GAAP results. All comparisons are year over year versus Q2 of 2020, unless otherwise stated. I will follow-up with comments on the balance sheet and cash flow and wrap up with an update of our 2021 outlook. Revenue in the second quarter of 2021 increased to a record of $115 million, up 23.6% from the second quarter of 2020, 12% of the growth was driven by organic growth. Our revenue in North America reached $46.8 million, slightly higher than Q2 of last year. On a sequential basis, we achieved 4.5% growth. To echo on his comments, we continue to make progress as we execute our plan and are seeing improvement in this region. We expect to continue a trend of growth in North America on a sequential basis throughout the year. Revenue in Europe reached a new record high of $59.7 million, up a remarkable 45.5%, driven by a combination of a very strong organic growth. And in addition by M&A as we successfully execute Sapiens' land and expand strategy. Our revenue from rest of world, South Africa and APAC continue on its path of growth. Revenue Q2 reached $8.6 million, 57.7% higher than last year. Gross profit, our gross profit has risen to $51.7 million, almost $10 million higher than Q2 of 2020. Our gross margin this quarter was 45%, similar to last year. Moving on to our operating expenses. Our investment in research and development this quarter increased by 43.9% to $15.2 million, up from $10.6 million. Sales and marketing and G&A reached $16.7 million compared to $14.5 million in the corresponding period of last year.

Operating profit this quarter increased to $19.8 million, a 17.9% increase and $3 million higher than the $16.8 million in Q2 of 2020. Operating margin reached 17.2%, higher than our guidance. We attribute the higher than anticipated operating margin in Q2, primarily to a faster recovery from the COVID outbreak in India as well as the progress we have made to our delivery capability in CoreSuite P&C in the U.S. Interest expenses in Q2 of 2021 on debenture was $0.9 million and will continue throughout the year. This was offset by income of hedging transactions, which lowered interest costs incurred in Q2 of 2021 to $0.1 million. Net income attributed to Sapiens' shareholders for the quarter was $16 million, up 19.8% from $13.3 million in net income in Q2 of 2020. EPS for the second quarter of 2021 was $0.29 per diluted share, up from $0.26 from last year. Turning to our balance sheet. As of June 30, 2021, we had a cash and cash equivalents and a short-term deposits totaling $176 million. This is after a record cash dividend of $20 million that we paid in May, which represents a distribution rate of essentially 40% of the 2020 annual non-GAAP net income. This dividend policy distribution reflects Sapiens' solid performance and our confidence in our continued growth and free cash flow generation quarter over quarter, advancing to adjusted free cash flow.

We generated adjusted free cash flow of $23.8 million during the quarter, up 62.2% compared to $14.7 million in Q2 of 2020. Over the last six months, our adjusted free cash flow was 111% of our net income, a clear testament to our robust operating model. I would like to turn now to our guidance for 2021, starting with a summary of key points. In North America, we have achieved a sequential growth, a trend expected to continue. In Europe and the rest of world, we have performed accelerated growth. We are winning new deals and have a material strong pipeline ahead of us. On the operating profit side, we are back on track. In India, we increased our headcount, adding about 10% since last quarter. This will help us to improve our operating margin and support our strong growth. Given the high growth in Europe and rest of world and taking into account the positive trend in North America, we are increasing our revenue guidance for the second time. The new revenue guidance is in the range of $461 million to $466 million. We are also increasing operating margin guidance to a range of 17.2% to 17.5%. On the M&A front, we continue to explore M&A opportunities and will act upon them as we have in the past. I would like to summarize Sapiens' key financial metrics. One, our CAGR over the last 10 years was 17%, with the majority being organic growth. This year, we anticipate midpoint revenue growth of more than 20%. Two, on average, our revenue from existing customers is in the range of 85% to 90%, which is evidence for the stickiness of our business. Three, we successfully expand our geographical reach every few years, penetrating new regions. Sapiens is currently present in about 30 countries worldwide. Four, while we focus on growth, we also achieved improved profitability in parallel, which today is north of 17%. Five, we generate strong cash flow attribute to our strong performance and returning capital to investors by paying dividends on a yearly basis. I will now turn the call back to Roni Al-Dor. Roni?

Roni Al-Dor -- President, Chief Executive Officer and Director

Thank you, Roni. We, at Sapiens, are taking an active role in shaping the evolving insurance software industry. Taking into account our global and diversified footprint, focused our strategy and increasing market demand, Sapiens is well positioned for further success and growth. I would also like to share with you that Sapiens has published its 2020 environmental, social and governance, ESG report last week. I believe that the integration of sustainability in our business strategy demonstrates our resilience in a strong presence, and I'm proud to be part of an industry that assist and support businesses and people in need. Now I would like to close our prepared remarks and open the call for questions, please.

Questions and Answers:

Operator

Thank you. [Operator Instructions] The first question is from Mayank Tandon of Needham.

Mayank Tandon -- Needham -- Analyst

[Indecipherable] Roni and Roni and Daphna on a strong quarter. I wanted to start, obviously, you've had tremendous success with your wins across the globe. So maybe, Roni Al-Dor, I wanted to start with just, what is really separating Sapiens from some of the other players in the market that have similar or maybe compatible cloud offerings? Is it really coming down to the product capabilities? Is it the fact that the clients like your approach of combining software plus services? What is really the driver behind your win rates in some of these large opportunities?

Roni Al-Dor -- President, Chief Executive Officer and Director

Yes, Mayank, the answer is altogether. I think what we offer today to the market is product, services, managed services, global company, digital altogether, the people, the long term, the history of Sapiens altogether, it's become, I think the investment that we did in, all over the world that we have a real presence in the, in terms of culture for, in many, many countries, the offshore capability that we are supporting from difference, from Europe, from India and so on. So it's altogether. So I think the investment payback, I think, so that's general answer. So it's not one, one fit all, we call it. It's case by case, we are still, we have all the RFP. We are going, we are competing. The win rate is pretty good. We have excellent reference site. We don't have any vendor that we know that have 600 customers worldwide, many, many history and a good track record of delivery. So I think altogether, it's giving us the, I think the next thing that I would like to share, as you know, we are doing very well also in the life business as well as P&C and digital. And we see more and more customers looking for the combined solution. We call it insurance in a box. So it's including the life, the P&C, the reinsurance, digital analytics. I think we are the only, based on our knowledge, we are the only supplier that's been doing all of this, plus they wanted the same approach. So this is unique for us.

Mayank Tandon -- Needham -- Analyst

That's very helpful color. And then just as my follow-up, Roni, could you talk a little bit more about the land and expand? What is the penetration today in terms of your products within your client base? And if you look at some of your more mature clients, where are they today? So what is sort of the runway for you to expand the product positioning within your customer base? So maybe just a little bit more sort of details around the land and expand initiative.

Roni Giladi -- Chief Financial Officer and Vice President

Mayank, this is Roni G. So we have 600 customers today. We are winning about 25 to 30, even more in new logos year over year. And what we're seeing with new logos that we are winning is that most of the winning is with several products. It's co-products and additional digital decision, reinsurance component next to it. So this is about ability to do cross-sell and of course, the services. With the existing customer base, we establish a CSC, customer success team that are doing cross-sell. We see positive trend, although the opportunity with this customer is significant and still ahead of us. So we have been able to sell components to core solutions with existing customers, but the ability to sell right now digital is very strong, and we are pushing into this. Recently, I may add, that we have been able and we announced the ability to sell a core system to core system. We started with customers that implement core system P&C and later on, move to life and annuities. We saw also a global player that start with one country and go to the other. So this is allowing us to expand with the existing customers.

Operator

The next question is from Ashwin Shirvaikar of Citibank.

Ashwin Shirvaikar -- Citibank -- Analyst

Thanks you, hi Roni, Roni G, Daphna, good quarter here. I have a couple of North America questions. One is with regards to just maybe a status update in the process of finding SI partners in North America, where do you stand on that? And also in terms of just improving delivery in North America? What actions do you still plan to make? What remains to be done?

Roni Al-Dor -- President, Chief Executive Officer and Director

This is Roni Al-Dor. First of all, as we mentioned last time, we hired Jamie to manage all North America. After he joined us, he brought few people, one to manage the entire P&C business in North America and also another few people helping on the, to manage the project there, and one of them is also to manage the, to help us on the life. So in terms of management, we are doing progress. It's not just Jamie. He's building, continue to build a strong with the current staff and also new. That's one. In terms of the SI question, as we mentioned, we are, our business model is one and two shake, but we are still open to work with SI, case by case and in specific situation. We mentioned a few times, for example, on the life in North America, on the core system, we are coming back to North America with our life system, and we decide also to partner with SI. So we are, we have some progress. It's still on the work. And they also, on the P&C, for the hire tier and also from decision management, so we are building. You can see more and more in the future. Right now, we are mainly engaged with them, signing the agreement, people start to learn. It takes time. It's not overnight. And again, just not to confuse after we can do all of this, it can be, continue to be a small part of our business, at least for the next six to 12 months.

Ashwin Shirvaikar -- Citibank -- Analyst

Understood. Understood. And then sticking with the delivery side, of course, it's good to see the progress made in India, it's good to see some of the unfortunate pandemic related issues begin to be behind you. But as you think of broader delivery, does have the pandemic and what you had to go through made you reconsider perhaps more diversification in terms of where the lower cost delivery comes from beyond India? How are you thinking about that?

Roni Al-Dor -- President, Chief Executive Officer and Director

First of all, in terms of overall Sapiens is more than 4,000. So India, it's not more than 1/3 of Sapiens. So we are not doing all the delivery from India. We still have internal knowledge more than 800 in U.S. We have the same numbers in Israel. We have many, many people in Poland, in the Lita in Latvia. So our delivery is not just coming from India. In order to reduce the cost, we shift thing to India and also, we are very happy with them. So the concept of competent center in different area right now, we are also considering another area in Europe. So that's, we don't plan to do anything. In terms of progress on delivery in North America, we definitely see progress. We made some decision in terms of slowing down a little bit new business, make sure that we stabilize the client base that we have. We see definitely improvement. As I mentioned, we also brought more people. We are helping from all over the world. So we believe in the near future, we will continue and start to get new clients as well.

Ashwin Shirvaikar -- Citibank -- Analyst

It's good to see your top and bottom lines going up again. Congratulations.

Operator

The next question is from Jackson Ader of J.P. Morgan.

Jackson Ader -- J.P. Morgan -- Analyst

The first is on the R&D growth that we saw in the quarter. And then, I guess, expectations for kind of technology and development costs for the rest of the year. Could you give us just a sense, maybe rank ordering some of the projects that you're investing in at the moment and how that's going to impact that particular line item going forward?

Roni Giladi -- Chief Financial Officer and Vice President

Yes. This is Roni G. We have around $15 million of R&D spend. I can say that we increased the investment on the digital side and enhance cloud development on the core system solution that we have, life and P&C. We increased the R&D staff, mainly in the offshore side. So the headcount went up. You do not see significant impact on the dollar value. We will continue to maintain the same level of R&D in terms of dollar value, slightly higher, but the percentage stay as the same throughout the year. Just to mention that because of our business model, part of the R&D is funded by our customer. And therefore, it's not only the R&D that we see in the line item R&D, but also from the delivery perspective because every project or every implementation we are doing, we're enhancing our product. This is the funded R&D that we have because of our model.

Jackson Ader -- J.P. Morgan -- Analyst

Okay. Great. That is helpful, especially the, thinking about it from the customers' funding a portion of that. And then, so the follow-up is a little bit more strategic. So Roni, when you think about acquiring your way into new regions, you spoke about Iberia or Germany, Austria, Switzerland. Does that, does the cross-sell between regions become a little bit more difficult if you acquire your way into reasons rather than organically moving into new regions?

Roni Al-Dor -- President, Chief Executive Officer and Director

Yes. No, it's vice versa, just to make sure that I understand your question. The main reason to acquire all of these companies to accelerate our growth in the region because we did it for, for example, by ourselves in the Nordic and now we see the fruits, but it took us a long time to get where we are now. Because we start to get the first-line and then second and third and fourth, and now we acquire Tia, and now we have a few others on the pipeline. We want to, because we believe in our product and our delivery capability, the excellent brand recognition from the analysts, everything is positive, but still to enter to DACH and all of these German company and Iberia, it will take time. So the reason that we acquire all of these companies to accelerate the penetration to the region and I can share with you, it's, we just say, if you just remember, we did just last year, one in February, the second during the year. So we really see fruits of all of this investment.

Roni Giladi -- Chief Financial Officer and Vice President

Just to echo this from a financial perspective, what we see in the quarter is north to 20% organic growth. This is coming from our product on the European side, from life and in P&C in the region that we are present, including the new one, the Iberia market and the DACH region. So we are coming with our core system solution with the component. And basically, with the reference, with the people on the ground, we have been able to do this growth.

Operator

The next question is from Surinder Thind of Jefferies

Surinder Thind -- Jefferies -- Analyst

The first question I have is on the large win in Asia Pac with the non-life insurance company. So any color you can provide there? In the past, it seems that Asia Pac generally has not been a regional focus, but this seems like it was a large win. Was this kind of opportunistic or has there been a subtle change in strategy there?

Roni Al-Dor -- President, Chief Executive Officer and Director

No, that's definitely not opportunistic. We have, for many, many years, business in the Asia Pac. When we also, in the past, we acquired our distributor in Asia Pac, that's become now the big CoreSuite business. Just to remind you, also when we acquired IDIT 10 years ago, the IBEXI that time was the name, that would represent IDIT in Asia Pac and then we acquired them. And with all the excellent experience on the life and non-life because all of those people also, at that time, support our competitors on the life. So we have a lot a lot of knowledge in the region. We had, today, we have business in India. We have business in Australia. We have in Hong Kong. We have in Singapore, and we have right now in Thailand. But we are, we have a business development team, sales team. All the delivery is going to our office in India, also from cost point. So this is definitely one of the regions that we invest, but for sure, one of the second advantage is diversified between all the regions. So we are, so again, we are also believe in the land and expand. So we started in India in one client, and when we have second line, third client. I think this is, as a client, we believe it can open us a lot of opportunity in Thailand and also in other areas.

Surinder Thind -- Jefferies -- Analyst

That's helpful. And then maybe can you talk about geographically, the growth that you're seeing in Europe at this point on an organic basis, perhaps the sustainability of it, what's really driving it? I mean, you've given some color, but if you're growing at 20% plus organically, how should we think about that longer term of the evolution of your,.

Roni Al-Dor -- President, Chief Executive Officer and Director

So I will say a few words then Roni can follow me. So again, in, we need to, just to remind everybody, insurance business is risk averse. So people prefer to work with people that have real reference on the ground and so on. So I think one of our big advantage that we put a lot of seed on the ground. And one of the main reasons beside that we are very good at products and delivery is our reference. So if you are doing a good job in one area, you are building all the country there. You have the local people. You have the reference. You have a huge advantage against your competitors. So I think what's going on right now that we see that we are, the market is happy with what we are bringing. The analysts help us in terms of risk. And the last thing is about life versus P&C. Sapiens, for many, many years, we are continuing to grow in the P&C. In the life, we did huge investment in the last two, three years also on technology. Also, we completely develop our group. So it's altogether, we are seeing a huge growth also on the life besides P&C.

Surinder Thind -- Jefferies -- Analyst

That's helpful. And then kind of the last question here, how do you maybe feel about the M&A market at this point? Maybe some color on the deal pipeline, perhaps your thoughts on valuation and maybe the potential for doing one or more deals before year end?

Roni Giladi -- Chief Financial Officer and Vice President

This is Roni Gi. Part of Sapiens strategy is organic growth followed by M&A, with M&A to expand our solution on the component side, geographical expansion and also, of course, presence and customer reference. We are looking to continue doing M&A. As we speak, we are looking with opportunities, but I must say that current valuation are at the peak going highly. And we are staying conservative. We will not go very expensive because we believe in our model. So we are looking for the right opportunity for us to acquire. And as I mentioned, we are looking and continue, although the valuation right now are very hig

Operator

The next question is from Bhavan Suri of William Blair.

Bhavan Suri -- William Blair -- Analyst

Roni, I wanted to touch a little bit, and I know it was asked a little earlier on the North America growth. I guess, you brought Jamie on, Jamie has brought on some folks, but what sort of gives you the confidence that you'll see that sequential growth start to improve a little bit because that business hasn't grown in North America for a while. And so just help us understand, what's in the pipeline? What deals you've won? Some sense of sort of the confidence you've got in growth resuming in North America P&C?

Roni Al-Dor -- President, Chief Executive Officer and Director

Bhavan, when we are talking growth, it's not just on the P&C, overall Sapiens, just to remind quickly what we have in Sapiens North America. We have decision management, we have reinsurance, new products for the large and the smaller ones. We have workers' compensation. It's also part of the P&C but specific solution. We have financial and compliance. We have two life, we have life component, and we have the life that we are now bringing from Europe to U.S. and then we have the P&C. So the overall growth is what we plan is from all the product line and not just for the P&C, as we shared in the P&C in one specific area, we had delivery challenges that right now, we are working on it, and we believe in 2022, we can start to see fruits of all of this investment. In terms of the, one of the reasons that we brought Jamie and all the other people, because we did in the last three years, all the investment in the product. We acquired a few company, we merge with them, we invest, but we really need to build a strong sales organization, and this is where Jamie is now focused to build, to try to do the best also on the marketing. We, Alex is doing the strategy side. So altogether, we think that we have a lot to offer to the market, and we can improve our brand there, and we can see growth.

Bhavan Suri -- William Blair -- Analyst

Got you. Got you. Can I ask Alex a question, if that's OK?

Roni Al-Dor -- President, Chief Executive Officer and Director

Yes.

Bhavan Suri -- William Blair -- Analyst

Or I'll ask all of you, but so when you look at the P&C, I'm going to pick on that specifically and you look at Tier one, Tier two, when they are picking a solution, right, you can take a big tier one carrier. They're picking the solution in conjunction with someone who's doing strategy work with them, like an Accenture, a Deloitte, a McKinsey, a Bain. And obviously, the other guys that play in that space are partnered with them, and you aren't. So tell me a little bit, you said win rates were good, but I'd love to understand sort of in that range, kind of how do you get involved in that strategic level conversation or is it only sort of the Tier three, Tier four place in the P&C, which is kind of the sweet spot? Help me think through that dynamic?

Alex Zukerman -- Chief Strategy Officer

Sure. So as Roni mentioned also before, there are specific segments and areas of the business in a point type of approach where we see usage or partnership with system integrators as really the right way to penetrate into this segment. We talked before about specific regions in the world where we are not operating, for example, physically. So we like to partner with an SI to help us overcome this. Some deals we have now in Latin America are a good example. And the same logic goes to the higher Tier three Tier one in the U.S. where we feel that what we are lacking or what is, what will help us to go into these higher tiers of the P&C in the U.S. is the partnership with the system integrators. And as Roni mentioned, we are now in the discussions with them in order to build the joint go to market and the agreement to train them on the system and then turn it to go to market. But definitely, that would be our approach in order to progress on the higher deals. Another aspect that we plan to start leveraging in order to go up tiers in the U.S. P&C market, specifically, is the use of our decision tool. As you might know, and decision tool that we started on the banking, and we have several Tier one banks as our customers. We started to shift the usage of decision into insurance. And this is typically applicable and getting traction for the highest tiers as a really added value solution for those tiers, and this is also for us an opening position into stepping into those higher tiers. The third approach of tackling the higher tier is leveraging our success with the reinsurance system on the higher tier, to be as a door opener and start to establish our contact with that tier. The success on the reinsurance, which is predominantly a Tier one proposition with our Sapiens ReinsuranceMaster and this, we plan to leverage this in order to open the door, create a relationship and create a trust for Sapiens to work with those peers.

Operator

The next question is from Chris Reimer of Barclays.

Chris Reimer -- Barclays -- Analyst

This is Chris on for Tavy, actually from Barclays. He had to step away. I wanted to ask about the overall pipeline and if you feel that the amount of RFPs have been increasing compared to last year?

Roni Giladi -- Chief Financial Officer and Vice President

This is Roni G. I think Roni on his note mentioned this, I will echo him. We see significant pipeline ahead of us in the European side. We are progressing with it. We mentioned some first step of being called blueprint that is before signing that we are witnessing. So we really see a strong pipeline in the European side. And on the state, we are basically building this for the future for the next year.

Chris Reimer -- Barclays -- Analyst

For next year, OK. And also, I know that you did mention the portion of recurring revenues. Could you just review that, just the number?

Roni Giladi -- Chief Financial Officer and Vice President

Yes. Sapiens, due to its business model, we are between 85% to 90% of our business coming from existing customers, customers that we have a long time history relationship. We know what they need for the future, what they implement and what they are looking to implement, either to grow or to expand in new territories. So this is coming from 85% to 90% of the business, give us great visibility and very high stickiness. If I need to differently look at this, I would say that we have about 35% of our business is also recurring revenue, an additional 30% which is [Indecipherable] in revenue, customers that didn't sign, but continue doing with us quarter-over-quarter with additional revenue stream.

Operator

[Operator Instructions] There are no further questions at this time. Before I ask Mr. Al-Dor to go ahead and with his closing statement, I would like to remind participants that a replay of this call is scheduled to begin in two hours. In the U.S., please dial one (877) 456-0009. In Israel, please call 039-255-900. And internationally, please call 972-39255-900. Mr. Al-Dor, would you like to make your concluding statement?

Roni Al-Dor -- President, Chief Executive Officer and Director

Yes. Thank you for all of you joining our call today. Have a good day.

Operator

[Operator Closing Remarks]

Duration: 54 minutes

Call participants:

Daphna Golden -- Vice President and Head of Investor Relations

Roni Al-Dor -- President, Chief Executive Officer and Director

Roni Giladi -- Chief Financial Officer and Vice President

Alex Zukerman -- Chief Strategy Officer

Mayank Tandon -- Needham -- Analyst

Ashwin Shirvaikar -- Citibank -- Analyst

Jackson Ader -- J.P. Morgan -- Analyst

Surinder Thind -- Jefferies -- Analyst

Bhavan Suri -- William Blair -- Analyst

Chris Reimer -- Barclays -- Analyst

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