Sapiens Announces Q4 2004 and Year-End Results

    Business Editors/High-Tech Writers

    RESEARCH TRIANGLE PARK, N.C.--(BUSINESS WIRE)--Feb. 10, 2005--Sapiens International Corporation N.V. (Nasdaq:SPNS)(TASE:SPNS) today announced its un-audited results of operations for the year ended December 31, 2004 and its un-audited results of operations for the fourth quarter of 2004.
    Reporting Q4 and year-end results, the Company recorded a one-time write-off of software development costs, totaling $0.9 million, which significantly affected its results, for both the quarter and the full year. The fourth quarter showed growth in revenues and, with the exclusion of the one-time write-off, had improved gross profits over the previous quarter and an operating profit. Without the one-time write-off, the full year operational loss showed significant improvement over last year. The growth in net loss from last year is primarily attributable to an increase in financial expenses.
    With the inclusion of the one time write-off, as decided by management, compared to the previous quarter of 2004, the Company's revenues increased 6.2% from $11.3 million to $12.0 million. Gross profit in Q4 was $4.4 million compared with $4.8 million, and the gross profit margin in Q4 was 36.4% compared with 42.3%. The Company reported an operating loss of $0.8 million, compared with an operating loss of $0.2 million in the previous quarter, and a net loss of $1.7 million compared with a net loss of $1.0 million in the previous quarter.
    Total revenues for 2004 were $47.8 million compared with $52.3 million in 2003. The Company's gross profit margin was 42.1% compared with 45.3% in 2003. The operating loss was $1.65 million compared with $1.47 million last year, and the net loss was $5.1 million compared with a net loss of $2.2 million last year.
    Itzick Sharir, President and Chief Executive Officer of Sapiens, commented: "2004 was a year of disappointing results, where we experienced a continued decline in our traditional business and where our penetration of the insurance industry, our strategic focus, was delayed. We continued to make significant progress in the development of our SAPIENS INSIGHT(TM) suite of products, for the global Life & Pensions and Property & Casualty insurance sectors. Our insurance solutions are being recognized by the leading industry analysts and our sales pipeline is developing steadily."
    "Entering 2005, we will continue with our strategic plan and expect to further penetrate the insurance market where we are beginning engagements with several new customers which we will formally announce later this year. We have recently completed a restructuring plan which included changes in management, centralization of headquarters, cost reduction and strengthened sales teams, to be expensed early in the year. We hope to return to operational profitability as early as Q2, and believe we will deliver in 2005, both on our operational profitability and on growing our backlog."

Q4 and 2004 CONFERENCE CALL: -------------------------------------------------------------- Sapiens International will hold a Conference Call to discuss the results on Thursday, February 10th, 2005, at 08:45AM (EST) To participate, please call: United States 1-866-860-9642 United Kingdom 0-800-917-5108 International +972-3-918-0600 Israel 03-918-0600

10 minutes prior to start time -------------------------------------------------------------- FOR ADDITIONAL INFORMATION: -------------------------------------------------------------- Yuval Hadari Itzick Sharir Chief Financial Officer Chief Executive Officer Sapiens International Sapiens International Tel: +1-877-554-2426 Tel: +44-1895-464 265 +972-8-938-2721 E-mail: yuval.h@sapiens.com E-mail: itzick.s@sapiens.com --------------------------------------------------------------

    About Sapiens International

    Sapiens International Corporation N.V. (Nasdaq and TASE: SPNS), a member of Formula Group (Nasdaq:FORTY) and (TASE:FORT), is a leading global provider of proven IT solutions that modernize business processes and enable insurance organizations to adapt quickly to change. Sapiens' innovative solutions are widely recognized for their ability to cost-effectively align IT with the business demands for speed, flexibility and efficiency. Sapiens operates through its subsidiaries in North America, the United Kingdom, EMEA and Asia Pacific, and has partnerships with market leaders such as IBM and EDS. Sapiens' clients include AXA, Liverpool Victoria, Norwich Union, OneBeacon, Principal Financial Group, Prudential, Abbey National, ING, and Occidental Fire & Casualty among others. For more information, please visit http://www.sapiens.com.

    Except for historical information contained herein, the matters set forth in this release are forward-looking statements that are dependent on certain risks and uncertainties, including such factors, among others, as market acceptance, market demand, pricing, changing regulatory environment, changing economic conditions, risks in new product and service development, the effect of the Company's accounting policies and other risk factors detailed in the Company's SEC filings.

SAPIENS INTERNATIONAL CORPORATION N.V. Condensed Consolidated Statements of Income (U.S. Dollars in thousands, except per share amounts)

For the three months ended For the year ended --------------------------- ----------------------- 12/31/2004 12/31/2003 12/31/2004 12/31/2003 --------------------------- ----------------------- Revenues Products $6,716 $9,082 $26,781 $32,673 Consulting and other services 5,313 4,392 21,023 19,645 --------------- ----------- ----------- ----------- Total revenues 12,029 13,474 47,804 52,318 --------------- ----------- ----------- ----------- Cost of revenues Products 3,845 4,389 16,578 17,489 Consulting and other services 2,903 2,403 10,186 11,118 Impairment of capitalized software development costs 901 - 901 - --------------- ----------- ----------- ----------- Total cost of revenues 7,649 6,792 27,665 28,607 --------------- ----------- ----------- -----------

Gross Profit 4,380 6,682 20,139 23,711

Operating expenses Research and development, net 582 727 2,531 3,656 Selling, marketing, general and administrative 4,626 5,414 19,260 21,539 --------------- ----------- ----------- ----------- Operating Income (Loss) (828) 541 (1,652) (1,484)

Financial income (expenses), net (725) (357) (2,410) (958) Other income (expenses), net (a) (147) (39) (780) 255 --------------- ----------- ----------- ----------- Net Income (Loss) (1,700) 145 (4,842) (2,187) --------------- ----------- ----------- ----------- Settlement of redeemable shares in a subsidiary - - (299) - --------------- ----------- ----------- ----------- Net Income (Loss) to shareholders of common shares $(1,700) $145 $(5,141) $(2,187) =============== =========== =========== =========== Basic and diluted earnings (loss) per share (b) $(0.15) $0.01 $(0.46) $(0.20) =============== =========== =========== =========== Weighted average number of shares used to compute Basic earnings (loss) per share 11,449 10,694 11,273 10,692 Diluted earnings (loss) per share (b) 11,449 17,358 11,273 10,692

Note a: Includes taxes and minority interest.

b: Due to the net loss in 2003 and 2004 the inclusion of dilutive securities would be antidilutive.

SAPIENS INTERNATIONAL CORPORATION N.V. Condensed Consolidated Balance Sheets (U.S. Dollars in thousands)

12/31/2004 12/31/2003 ----------- ----------- Assets

Cash and cash equivalents $10,942 $31,775 Short-term investments 11,156 1,039 ----------- ----------- 22,098 32,814 ----------- ----------- Trade receivables, net 10,029 9,133 Other current assets 4,013 5,647 ----------- ----------- Total current assets 36,140 47,594 ----------- -----------

Property and equipment, net 2,382 3,060 Other assets, net 30,212 26,069 ----------- ----------- Total assets $68,734 $76,723 =========== ===========

Liabilities and shareholders' equity

Short-term bank credit and current maturities of long-term debt $20,873 $9,579 Trade payables 2,718 2,619 Other liabilities and accrued expenses 8,558 11,054 Deferred revenue 3,224 3,254 ----------- ----------- Total current liabilities 35,373 26,506 ----------- -----------

Long-term debt and other liabilities 3,035 8,111 Convertible debentures, warrants and options 18,246 16,672 Redeemable shares in a subsidiary - 11,505 Shareholders' equity 12,080 13,929 ----------- ----------- Total liabilities and shareholders' equity $68,734 $76,723 =========== ===========

Note: Certain prior year's amounts have been reclassified to conform with current year presentation.

--30--KK/se*

CONTACT: Sapiens International Yuval Hadari, +1-877-554-2426 or +972-8-938-2721 E-mail: yuval.h@sapiens.com or Itzick Sharir, +44-1895-464 265 E-mail: itzick.s@sapiens.com

KEYWORD: NORTH CAROLINA ISRAEL INTERNATIONAL AFRICA/MIDDLE EAST INDUSTRY KEYWORD: HARDWARE INSURANCE SOFTWARE NETWORKING EARNINGS CONFERENCE CALLS SOURCE: Sapiens International Corporation N.V.

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