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Edited Transcript of SPNS earnings conference call or presentation 26-Feb-19 2:30pm GMT

Q4 2018 Sapiens International Corporation NV Earnings Call

Rehovot Mar 1, 2019 (Thomson StreetEvents) -- Edited Transcript of Sapiens International Corporation NV earnings conference call or presentation Tuesday, February 26, 2019 at 2:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Roni Al-Dor

Sapiens International Corporation N.V. - President & CEO

* Roni Giladi

Sapiens International Corporation N.V. - CFO & VP

* Yaffa Cohen-Ifrah

Sapiens International Corporation N.V. - CMO & Head of Corporate Communications

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Conference Call Participants

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* Avishai Kantor

Cowen and Company, LLC, Research Division - VP

* Justin Allen Furby

William Blair & Company L.L.C., Research Division - Research Analyst

* Kyle David Peterson

Needham & Company, LLC, Research Division - Associate

* Tavy Rosner

Barclays Bank PLC, Research Division - Head of Israel Equities Research

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Presentation

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Operator [1]

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Welcome to the Sapiens International Corporation Fourth Quarter and Full Year 2018 Results Conference Call. (Operator Instructions) As a reminder, this conference is being recorded February 26, 2019. It is now my pleasure to introduce your host Mrs. Yaffa Cohen-Ifrah, Sapiens' CMO and Head of Corporate Communications. Mrs. Cohen, you may now begin.

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Yaffa Cohen-Ifrah, Sapiens International Corporation N.V. - CMO & Head of Corporate Communications [2]

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Thank you, and good day, everyone. Our quarterly 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, and the safe harbor provisions in the press release issued today also apply to the content of the call. Sapiens expressly disclaims any obligations to update or revise any of these forward-looking statements whether because of future events, new information, a change in its view or expectations or otherwise.

Also, during the course of today's call, we will refer to non-GAAP financial measures. A reconciliation schedule showing GAAP versus non-GAAP results has been provided in our press release issued before the market opened this morning. A replay of this call will be available after the call on our Investor Relations section of the company's website or via website link, which is available in the earnings release that we published today. I will turn the call over to Roni Al-Dor, President and CEO of Sapiens. Roni?

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Roni Al-Dor, Sapiens International Corporation N.V. - President & CEO [3]

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Thank you, Yaffa. Today, I will start this review for fourth quarter, comment in our progress in 2018 and close with our plan for continued excellence in 2019. At the beginning of 2018, we laid out our strategy for turning to growth based on 4 key objectives: Deliver double-digit growth in our P&C line in EMEA and APAC; expand our North America P&C businesses; maintain and support our life and annuity customers; and lastly, increase cross-selling to our existing customers. This objective served as an excellent roadmap. And I am very pleased with successful execution demonstrated by our 2018 revenue growth and operating margin expansion.

Revenue for the year grew 6% to 7%, coming at the high end of our revenue guidance. Synergies and cost control produce a 71.2% increase in annual operating income and we exceed our operating margin guidance. Our global team worked very hard. And as a result, in 2018, we signed 25 new logos and we had 33 customers go live.

I'm very pleased with our strong finish of 2018. Closing out the year with another quarter of improving gross in profitability achieved by maintaining our focus and executing in our key objectives. In the fourth quarter, revenue totaled $73.4 million and operating profit increased 19.7% to $10.9 million.

Top line growth came from increase in our P&C businesses in key geographics and stabilization of our life and annuity segments. The margin improvement drove the 27.4% increase in net income. Roni Giladi will provide more details on our financial result in his prepared remarks.

We continue our double-digit growth in EMEA region for P&C, signing new deals and expanding our relationship with existing customers. During the quarter, we announced the Ecclesiastical Insurance group in the U.K. selected both the Sapiens' IDIT suite for Property & Casualty and Sapiens Reinsurance installed place, it was Ecclesiastical, existing insurance system. The EMEA market remains very active, and we have a strong pipeline for businesses for 2019. We are confident that we will continue our momentum in this region.

Meanwhile, in North America, we enhanced and expand our U.S. P&C businesses by following the same successful strategy we employed in European P&C market.

In 2018, we fully integrated the operation of both Stream and Adaptik and we launch a P&C insurance platform with fully integrated core suite. We had a very productive fourth quarter with several new customer wins. Head of Mutual Insurance Company selected our North America Property & Casualty Insurance platform seeking the system configurability and ability to achieve self-sufficient as a key winning to this client. In November, the Preferred Physicians Medical Risk Retention Group also select our North America P&C platform as a key solution for professional liability insurance.

Overall, we improved our competitive position. We accelerate our go-to-market timing, and we fully expect to increase market share for this region. We've already signed new deals with DECISION platform. And like EMEA, we had a strong pipeline in the U.S. for 2019. And in order to support the anticipated goals, we expanded our U.S. management and sales team. Like in annuity, we made significant progress by focusing on top-tier support for our customer base. Our life businesses is comprised of 3 solutions. Core solution, complementary life solution for underwriting electronic application and illustration and Consolidation Master for the management of runoff businesses. In 2018, we maintained our growth in our complementary life solution, which gained Sapiens no customer win in the region. During this quarter, we went live with Catholic life insurance one of the top 10 fraternal benefit society in the U.S., which launched Sapiens' electronic application for its life and annuity businesses.

We saw our core solution during the quarter, a current life and annuity customer, a Tier 1 South African bank extended use of Sapiens' core suite for life and annuity, with addition of annuities in (inaudible) businesses. This customer originally chose us in 2015, and there's been a successful production results ever since. On the product front, in December, we announced enhancement to our core suite for life and annuity. We enhanced core functionality, improved features and new digital capabilities. These new features allow our customers to easily create and rapidly launch product. The recovery of our life and annuity business clears the foundation for growth in 2019. In addition, we see increased demand for our Consolidation Master solution and our pipeline is building nicely, as in our complementary life solutions.

Moving to our North America DECISION management activity. During the first quarter, a top-tier insurance in U.S. selected Sapiens DECISION of business decision management solution that now includes underwriting and product-creation capability to modernize its insurance application and provide the highest level of services to its customers. Lastly, on cross-selling to our existing customer. In the past few years, we significantly expand our solution and services offering with new product development initiative and focus acquisitions.

In 2018, we made a strategic decision to build a new team to evolve our previous customer support model from a siloed by business support approach to what we are now fully integrated customer success team that support all of our product lines. We recorded several key executive in 2018, and we will continue to expand this team in 2019. On the marketing front, at the beginning of February, we announced complete rebrand highlighting our solution to unified global provider for insurance outlook solution. Sapiens' solution portfolio now feature for more descriptive product names to help prospective and existing customer until expand our solution.

We already signed our website and marketing collateral to reflect Sapiens' human-to-human H2H approach to build stronger relationship with customer and improve communications about the capabilities. I'm happy to share with you that since the launch, we are receiving positive feedback from our customer and from the industry experts. Our investment in R&D and enhancement, because our platforms are paying off with new customers win and increasing businesses with existing customer. It is also a lead recognition from industry experts. Last December, Sapiens was recognized as a leader in Gartner Magic Quadrant for nonlife insurance platform in Europe for Sapiens' IDIT suite. We are positioning the leader quadrant based on our completeness of vision and ability to execute.

Sapiens' centralized digital division, which collaborates with Insurtech and partner to develop new insurance solution, is significantly enhanced our nonlife offering to Europe.

On the digital front, we focused in 2018 on enhancement of our digital offering and leveraging our digital division. Today, we offer a comprehensive digital solution that is fully integrated with our core solution, including customer and agent total and digital hub that facilitates an open communication. API-based platform, which enable carrier to interact with Insurtech companies, ecosystem technology provider and business partners. Sapiens' open architecture ensures seamless interaction with any service under any technology aligns provider to easily choose the building blocks they need and they integrate these elements into their own insurance ecosystem, enable success today and securing a stronger competitive position for the future. Our digital unit plays a critical role in supporting our sales and marketing teams, who are already responding to an increase in demand for our digital solution worldwide. So overall, a good end to successful 2018. I would now like to turn the call over to our CFO, Roni Giladi, to provide more details around financial results. Please go ahead, Roni.

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Roni Giladi, Sapiens International Corporation N.V. - CFO & VP [4]

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Thank you, Roni. I will begin my commentary with a review of the fourth quarter results followed by the full year result. After which, I will provide some commentary on the balance sheet and end with our 2019 annual guidance that we introduced in our press release earlier today. Revenue in the fourth quarter of 2018 totaled $73.4 million, up 1.4% from the fourth quarter of 2017. Our revenue in North America totaled $34.9 million, represents 47.6% of our total revenue. Revenue in the region increased by 10.7% compared to last year but slightly declined compared to previous quarter due to delaying operational milestone that is expected to be reversed in the first half of 2019.

Revenue in Europe totaled $30.9 million, an increase of 3.6% compared to last year and represents 42% of our total revenue. South Africa revenue declined compared to last year, mainly due to the change in scope of the project that we mentioned on prior call. The project, as originally planned will not continue. We will have small revenue stream throughout 2019. Moving to gross profit. Gross profit this quarter totaled $31.3 million compared to $29.5 million in Q4 of last year. Our gross margin this quarter increased to 42.7% from 40.7% in the fourth quarter of last year. Operational cost R&D and SG&A in the fourth quarter was essentially flat compared to last year. Our operating income this quarter totaled $10.8 million or 14.8%, compared to $9.1 million or 12.5% in the fourth quarter of 2017. Our operating margin this quarter continued to improve compared to last year and compared to previous quarter. Net income for the quarter was $7.8 million or $0.16 per diluted share compared to $6.1 million or $0.12 per diluted share in the fourth quarter of last year. While our revenue grew 1.4%, our net income this quarter increased by 27.4% compared to last year.

Our adjusted EBITDA this quarter totaled $11.8 million, reflecting 16.1% of total revenue for the quarter. Turning now to the full year result of the 12 months ended December 31, 2018. When we began the year, we stated that our 2018 priorities were: improving our non-GAAP operating margin; and improving our long-term organic growth. I'm happy to say that we successfully achieved our goals and I will review our progress on both of those fronts.

Our annual 2018 revenues were $290.3 million, up 6.7% compared to $272 million in the prior year. And reaching the high end of our guidance range of $285 million to $290 million. Our organic growth in 2018 was 3%. Taking into account 4 elements: one, $14 million impact of the new M&A of Adaptik and KnowledgePrice; two, additional 2 months of StoneRiver revenues in 2018 compared to 2017 in the total amount of $13 million; three, $18 million impact of the reduction in revenues mainly from Japan and South Africa on customers; four, and positive impact on the currencies in the amount of $3 million. When analyzing now 3% organic growth this year and we see 3 trends: one, our P&C revenues grew double-digits this year, continuing the positive momentum that Roni discussed earlier; two, life and annuities revenue declined as we anticipated; and three, the rest of the business remained stable.

Moving to operating income. Our operating income in the full year was $39.6 million compared to $23.1 million in 2017, an increase of 71.2%. Our operating margin was 13.6% compared to 8.5% in 2017. The improvement in operating margin was primarily due to: one, 2-cost reduction program, reimplemented in 2017, and mainly delayed program in 2017 that affected 2018 results; two, the completion of the integration of StoneRiver, which we acquired in 2017, which resulted in doubling StoneRiver's profitability; three, they're increasing now offshore activities for both delivery and R&D. Operating margin improved sequentially throughout the year from 12.5% in Q1 to 13.2% in Q2, 14% in Q3, and reaching 14.8% in Q4. Tax expenses in 2018 were $7.3 million, representing an effective non-GAAP tax rate of about 20.6% compared to 24.3% last year.

The main reason for the decrease in our tax rate is due to USA Corporate Tax reform, which reduced our blended tax rate. We expect our 2019 tax rate to be in the range of 21% to 22%. Net income for the year was $28.1 million or $0.56 per diluted share compared to $15.5 million or $0.31 per diluted share in 2017. Net income in EPS increased by 80.6% compared to last year.

Turning to our balance sheet. As of December 31, we had cash and cash equivalent of $64.6 million compared to $71.5 million in 2017. Our strong cash position and improved profitability enabled us to pay dividend, once again, to our shareholders. And in October 2018, we paid a cash dividend of $10 million in total or $0.20 per share. Total debt by the end of the year was $78 million.

And in January 1, 2019, we paid the first annual principal payment of our series B debenture in the amount of $9.9 million. The remaining of the debt will be paid over the next 7 years. Total trade and receivable as of December 31, was $59.2 million compared to $53.2 million in 2017, reflecting an increase of 7 days in the result from 68 to 75 days.

While we see improvement in these sort of accounts receivable and these receivable we saw was increased due to payment milestone which we anticipate, part will be converting in the first half of 2019. Net cash provided by operating activities this year totaled $27.7 million compared to $9.2 million in 2017, reflecting increase of $18.5 million. I would like to turn now to our guidance for 2019. In 2019, we anticipate non-GAAP revenue in the range of $318 million to $323 million and non-GAAP operating margin in the range of 15.2% to 15.6%. On the revenue side, we expect continued double-digit growth of our P&C revenues, with our life and annuities revenue stable with a positive outlook and the rest of the business expected to be stable again with the positive outlook.

Overall, we expect our organic growth this year to be approximately 10%, with the growth accelerating throughout the year. We expect the growth in the second half of the year to be stronger than the first half. I would like to remind you that Sapiens' long-term growth strategy is a mixture of organic growth in M&A. After a planned slowdown in M&A activities in 2018, we started in 2018, I was counting for M&A opportunities that are in line with our overall growth strategy. Our operating margin is expected to increase by 180 basis points. The margin improvement is anticipated to come from: one, gross margin improvement due to the headcount expansion with offshore operations where we can grow the team very cost-effectively to support our delivery efforts, to accommodate that we planned to expand our facility in India with further capital investments; two, in addition, increasing revenue with leverage coming from improved economic of scale with our current infrastructure able to support higher top line growth that will allow us to improve our operational margin. As we said in the past, our midterm operation margin goal is to be in the range of 15% to 17%. And in 2018, we expect for the first time to enter this range. To summarize all, 2018 was a transition year for Sapiens, and we plan to be back on track with growth and margin expansion in 2019. I would like now to turn the call back to Roni Al-Dor for closing comments. Roni?

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Roni Al-Dor, Sapiens International Corporation N.V. - President & CEO [5]

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Thank you, Roni. As I said earlier, we recently announced the launch of our new brand architecture to reflect our evolution into unified global provider of Innovative Digital Solutions and to position the company as a partner for our client success. With an improved competitive position as a one-stop shop for insurance software solution and enhanced product platform. I'm looking forward to another year of advancing our global position.

We are building on our foundation for growth and leveraging our investment made over the past few years. Today, we're strongly positioned with a wide range of insurance platform, technology-led services, brand postproduction, and we offer enhancement digital solution by collaborating with Insurtech partners. Our winning businesses model of product and services enable us to advance our long-term relationship with our customers. Our 2018 priorities are: Continue to expand our P&C businesses in North America and EMEA; growth in our life and annuity business and margin expansions. We are executing on our strategy to drive sustainable long-term growth, improved profitability and improved shareholder value. I would now like to close our prepared remarks and open the call for questions. Operator?

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question is from Mayank Tandon of Needham & Company.

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Kyle David Peterson, Needham & Company, LLC, Research Division - Associate [2]

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This is actually Kyle Peterson on for Mayank. Just want to see in terms of the P&C growth outlook for the year, is that -- will that be kind of split pretty evenly between North America or Europe? Or kind of how are you guys looking at the geographic growth for the coming year in P&C?

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Roni Giladi, Sapiens International Corporation N.V. - CFO & VP [3]

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This is Roni G. In 2018, we saw double-digit growth from the P&C in Europe and rest of the world and while we see growth -- single-digit growth on North America P&C. As we look at 2018, we see both of the area growing double-digit growth. We have some indicators coming from recently from the stake where we signed several deals on the P&C side and we have very good pipeline to continue. So we're confident on the double-digit growth on the P&C in the stake. And in Europe, we're continuing the trend as we had in the past, this will continue going forward. So basically, [it will be] both of them double-digit.

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Kyle David Peterson, Needham & Company, LLC, Research Division - Associate [4]

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Great, that's good color. Good to see acceleration in North America. And then just wanted to touch on the life and annuities business. I know you guys mentioned stable with a little bit of a positive bias. Just wanted to see your overall thoughts, just what it might take to be able to return to a little bit of positive organic growth in the life and annuity space?

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Roni Al-Dor, Sapiens International Corporation N.V. - President & CEO [5]

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This is Roni Al-Dor. We are seeing the life and annuity 3 type of solution. One is our core, what we call today Sapiens' core suite for life and where is the component, include illustration and underwriting, and then we have the runoff businesses calling today Consolidation Master. The 2 areas that we plan to continue to see a growth between single- and double-digit is the component in the runoff. In our core suite, we still see a business many from Europe. This is what we made a decision 2018, and this is going forward. So the overall is growing, but not as high growth like the P&C.

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Kyle David Peterson, Needham & Company, LLC, Research Division - Associate [6]

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Okay, great. And last one for me and then I'll hop out. Just want to touch and see if you can give any background on the M&A pipeline. What you guys might be looking for? Whether it's specific capabilities, geographies, product offerings? Any color would be great.

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Roni Giladi, Sapiens International Corporation N.V. - CFO & VP [7]

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This is Roni G. As we mentioned in 2018 we had a decision to slow down our activities into the M&A, focusing on operational and building the foundation of organic growth. As we close to end of the year in Q4 of 2018, we started the scouting process in the company, looking basically for the angle that you mentioned, either additional complementary solution, customer base and also geographic expansion territories that we do not have present today. We're in early stage, and we're looking to do so. And hopefully, we can announce something in 2018, but right now in very, very early stage.

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Operator [8]

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The next question is from Avishai Kantor of Cowen.

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Avishai Kantor, Cowen and Company, LLC, Research Division - VP [9]

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My first question. So we're talking about 10% organic growth for the year, a stronger second half versus the first half. And you mentioned that the reason is, I would say, delays in some ramp-up within U.S. clients. Are we talking about 1 specific client or a handful of clients?

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Roni Giladi, Sapiens International Corporation N.V. - CFO & VP [10]

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Avishai, this is Roni G. We are talking about the specific customer, on specific item. I do not see the something that it goes above. Very specific and we convert on the first half of 2018.

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Avishai Kantor, Cowen and Company, LLC, Research Division - VP [11]

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And then you've been able to -- throughout 2018 and what seems to be going forward into 2019. You've been able to post very nice gradual margin expansion despite as you characterized, continued investments in U.S. sales and management capabilities. Obviously, this is coming from back office and delivery capabilities. How much more levers do you -- and you were talking about moving some of the functions to India. How much more of lever do you have in the business model to support that margin expansion?

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Roni Giladi, Sapiens International Corporation N.V. - CFO & VP [12]

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Again, this is Roni. Our guidance for 2018 basically take into effect additionally, acceleration or lever in the model. We have significant stuff right now, doing delivery, but we would like to accelerate also the R&D part. This will also improve our margin going forward. And also, without their offshore -- as we scale our business and growth the revenue with some economic of scale that will improve margin. Our midterm range is 15%, 17%. We think we can achieve this in the midterm. 2019 will be the first year that we are entering this range with the range of 15.2% to 15.6%. And as Q4 already with 14.8%, we are enriched with this range.

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Avishai Kantor, Cowen and Company, LLC, Research Division - VP [13]

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And then, is the accelerating U.S. pipeline driven by new or existing clients? Is that -- is it driven by your strong marketing efforts in the second half and then the rebranding? What's driving it?

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Roni Giladi, Sapiens International Corporation N.V. - CFO & VP [14]

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I think the first part is coming from the new customer. We see a lot of promising opportunities coming on the P&C platform on the stake. As Roni mentioned, we also established a current customer-centric team that will support to improve or increase the revenue from existing customer. I think we see this increase in revenue -- potential revenue towards the second half of the year but right now, what we see is more on the new customer coming on.

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Avishai Kantor, Cowen and Company, LLC, Research Division - VP [15]

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And my last question for the team. Can you talk -- give us a sense on cloud-based wins for your platforms. Do we see an acceleration in the ratio or the mix of cloud-based platform contracts?

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Roni Al-Dor, Sapiens International Corporation N.V. - President & CEO [16]

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Yes. The answer is yes. We see more and more interesting in cloud solution for all of our products. So the answer is yes.

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Avishai Kantor, Cowen and Company, LLC, Research Division - VP [17]

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Okay. And I assume this is a long term -- this is another long-term lever to your margin expansion?

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Roni Al-Dor, Sapiens International Corporation N.V. - President & CEO [18]

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Yes.

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Operator [19]

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The next question is from Tavy Rosner of Barclays.

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Tavy Rosner, Barclays Bank PLC, Research Division - Head of Israel Equities Research [20]

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All of my questions were basically answered. I guess I just had a follow-up on the M&A one. Before you made that comment that you're looking into additional M&A next year, given your 10% organic growth, am I to assume that you would also take '19 as a break? So I guess looking at where your balance sheet is, would you go into taking that if you saw an interesting opportunity on the M&A front?

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Roni Giladi, Sapiens International Corporation N.V. - CFO & VP [21]

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Tavy, this is Roni. So as we mentioned, we'd like to wake up the still level of growth in the company. And the 10% is only organic and we'd like to accelerate it. And we're right now focusing on talking M&A, not big M&A, and we think we can -- the cash position that we have allows us to do this acquisition. In case, we'll see something which is a bigger opportunity, we always -- opportunity to look at equity or debenture. Today, we have a debenture of about $80 million, but over 8 years will give us a lot of flexibility. And if we look at our EBITDA for next year, we'll be close to $50 million and obviously, the ratio of EBITDA to debenture is very low and increased debenture. So both angle are open to us, equity or debenture. If we see big M&A, we consider at the time, but the opportunity, we'll talk on M&A.

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Tavy Rosner, Barclays Bank PLC, Research Division - Head of Israel Equities Research [22]

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And just a broad one on life and specifically on the core aspect. We've spoken about the decline last year over the -- I'm just curious fundamentally, how we explain that, is it just kind of insurance company postponing their investment decision into a layer of time? Or simply they realize that they have (inaudible) alternatively days and they can just stay with their legacy core and then figure something out later.

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Roni Giladi, Sapiens International Corporation N.V. - CFO & VP [23]

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Tavy, this is Roni. When we enter 2019, we set a specific goal to our life division to focus first of all on existing customer. We basically put all the effort, not searching for new opportunity, but to maintain our existing customer, customers that some of them are going live and some of them are basically in preproduction phase. And obviously, when post-production phase come, obviously, there is some decline in revenue. This is the event that happened to us in 2018 basically on the core life business. So right now, we have a level that the customer are [possible realize] and basically the revenue is stable. During that we continue to look for opportunities and we have some pipeline in the life division mainly on the runoff business, mainly on the components of the solution but also very few on the life. We're right now working on that but right now we'd like to be conservative, and we're mentioning the business has been stable.

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Operator [24]

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Our next question is from Justin Furby of William Blair.

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Justin Allen Furby, William Blair & Company L.L.C., Research Division - Research Analyst [25]

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Just to start off in the P&C business. Can you remind us what percent or give a sense for the coming in as cloud deals versus people hosting on-premise? And then in terms of the success that you're starting to see there in North America, what kind of insurers, I think, are you resonating most of the terms of the sizes whether it's commercial, whether it's personalized? Just any more color on North America and what you're seeing there would be helpful. And then I've got one quick follow-up.

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Roni Al-Dor, Sapiens International Corporation N.V. - President & CEO [26]

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Yes, in the -- this is Roni Al-Dor. In the P&C North America, we have a few type of solution. The workers' comp is going for the stake and for the Tier 1 clients. And our core solution is mainly for Tier 3, 4 and sometimes Tier 2. All of them are looking for cloud and hosting, as a smaller company it's more interesting for them. On the reinsurance, we're also seeing more Tier 1 clients, Tier 2, Tier 1 type of clients.

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Justin Allen Furby, William Blair & Company L.L.C., Research Division - Research Analyst [27]

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Super helpful. And then if you look at Europe, I'm just sticking with P&C. Any notice that Brexit is having some sort of impact in the market in the U.K. specifically? I was just curious what you're seeing there. And then what areas within Europe specifically, are you seeing the most pipeline build on the P&C side?

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Roni Al-Dor, Sapiens International Corporation N.V. - President & CEO [28]

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Okay. So we don't see any impacts of the Brexit until now. In terms of Tiers, we're in Europe, we're mainly moving towards Tier 2, so Tier 3, 2. And the Nordic is very hot area for Sapiens as well as U.K. We are also start to see some deals in the Duck area, mainly in Duck. But also we are working, what you call, rest of the world. We're working also in the South Africa and Asia Pacific. So those are the areas that we are working right now.

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Justin Allen Furby, William Blair & Company L.L.C., Research Division - Research Analyst [29]

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Okay, great. And then Roni, Roni G, on the acceleration and growth, maybe I missed it, but are you -- is it sort of single-digit growth in the first half and double-digit in the back half? Is it sort of what you're pointing to? Or any more color there would be helpful.

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Roni Giladi, Sapiens International Corporation N.V. - CFO & VP [30]

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Justin. So obviously, the 10% is a blended one. We see the first half slightly below and second half is higher. This is what we meant when we talked about the growth for 2019.

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Operator [31]

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(Operator Instructions) There are no further questions at this time. Before I ask Mr. Al-Dor to go ahead with his closing statement I would like to remind participants that a replay of this call is scheduled to begin in 2 hours. In the U.S., please call 1 (888) 295-2634. In Israel, please call 039-25-5918. And internationally, please call 9 (723) 925-5918. Mr. Al-Dor, would you like to make your concluding statement?

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Roni Al-Dor, Sapiens International Corporation N.V. - President & CEO [32]

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

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Operator [33]

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This concludes the Sapiens International Corporation fourth quarter 2018 Results Conference Call. Thank you for your participation. You may go ahead and disconnect.