Sapiens International Corporation NV

NASDAQ:SPNS

Earnings Call Transcript

[Operator]

Welcome to Sapiens International Corporation's 2024 Fourth Quarter Financial Results Call. [Operator Instructions] It is now my pleasure to introduce your host, Yaffa Cohen-Ifrah, Chief Marketing Officer and Head of Investor Relations. Thank you. Yaffa, you may now begin.

[Yaffa Cohen-Ifrah, executive]

Thank you, operator. I want to welcome you to the Sapiens Conference Call to review our fourth quarter and full year results for 2024. With me on the call today are Mr. Roni Al-Dor, President and CEO; Mr. Roni Giladi, CFO; and Mr. Alex Zukerman, Chief Strategy Officer. Following the summary of the results, we will be available to answer any questions.



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 this 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 of GAAP to non-GAAP results has been provided in our press release, which was 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 now turn the call over to Roni Al-Dor, President and CEO of Sapiens. Roni?

[Roni Al-Dor, executive]

Good morning, everyone, and thank you for joining us today for Sapiens Fourth Quarter 2024 Earnings Call. Our revenue in Q4 was $134 million, a 2.6% increase compared to last year. This quarter showcased solid execution across our key regions and continued expansion of our core Life businesses. In quarter 4, we signed over 15 deals with new and existing customers across Life and P&C. Since the launch of our insurance platform in June 2024, we successfully closed 3 platform deals globally, reflecting the positive impact of our insurance platform. Overall, in 2024, we signed 36 deals with new and existing customers. We continue to transition existing customers to the cloud, ending the year with a total of 169 customers on the Sapiens Cloud, and we see a great potential to accelerate the cloud transition.



Let's drill down into our regional performance. First, as promised, our North America businesses delivered robust growth in 2024. During Q4, we closed 5 wins with new and existing customers. These wins reinforce insurance trust in Sapiens to innovate and drive business transformation, enabling them to remain competitive. Our Life and Annuity businesses continued to expand in the quarter after a few successful North America go-live and upgrade for our business application. We also continue to grow with new logos. The pipeline for North America Life businesses is robust, reaching historical levels.



Recognizing our commitment to product innovation, one of our key investment areas and growth driver, Sapiens has been honored for the third consecutive time by Celent. We received the 2024 XCelent award for Customer Base and Support for our UnderwritingPro for Life and Annuities in North America, reinforcing our leadership in Life underwriting solutions. These awards recognize Sapiens' exceptional solution that empower insurers to streamline their processes and achieve superior customer outcomes.



Let me switch to discuss our CoreSuite P&C in North America for 2024. In Q4 of 2024, a leading property and casualty underwriting agency, a provider of solution for specialty insurance needs, including flood and fine art went live on BillingPro, complementing their core solution of PolicyPro and ClaimsPro already in production. This go-live with additional application is an example of how our insurance platform enables customer upselling.



Overall, the P&C team in North America completed over 10 upgrades projects this year. We seeing customers upgrading the entire Policy Suite, billing and claims. Additionally, we execute the cloud transformation for Tier 2 insurance carriers that provide specialty risk solution across North America. This project includes upgrading to our latest PolicyPro release, which will be completed in early 2025. In quarter 4, we released version 12.1 of CoreSuite of P&C, which includes a technology upgrade, significant improvement to operational monitoring, functional enhancement and integration to Sapiens Digital Suite for both the agent and the consumer and several Insurtech partners. These enhancements provide our customers with additional capabilities and improvements that enable businesses growth and enhance platforms efficiency, easy-to-use distribution and automation.



Sapiens continued to invest in North America P&C platform with Data Suite integration set for 2025, which enables AI automation and advanced analytics. The launch of our P&C platform with the product upgrades will help to enhance our competitive position in North America market and aligns with our go-to-market strategy of driving increased connection to our data and digital platform offering.



Moving to Europe and to the rest of the world. In Q4, we signed 10 deals across Life and P&C with new logos as well as existing customers in Europe and the rest of the world. We have had several successful go-live projects for customers with our CoreSuite Life Solution, Edit Suite, Tia Suite, and ReinsuranceMaster. In the European market and the rest of the world, which includes APAC and South Africa, demand for Sapiens' solutions remains robust as evidenced by our growing pipeline. There is a continued demand for SaaS platforms across all solution lines and tiers. We are also experiencing increasing demand for AI-driven solutions as clients increasingly want to leverage AI to enhance operational efficiency and elevate customer experience. 



In P&C, the demand for Sapiens' solution remains strong despite the extended sales cycle as evidenced by improved deal close momentum at year-end. In the fourth quarter, we signed new P&C deals with both new and existing customers in Europe and the rest of the world. I want to highlight a few new wins this quarter, including a leading Sapiens customer in the Nordic region who migrated to the Sapiens Cloud with a significant SaaS agreement, leveraging our Microsoft cloud strategy and investments. In APAC, we continue our market expansion and strong momentum and closed an important P&C platform deal with a leading insurer in the Philippines. This is our first win in this country. 



Another highlight is go-live with the Sapiens Data Suite for a long-standing customer base in Africa. Having been with Sapiens for nearly 2 decades, this Tier-1 customer migrated its data platform to the cloud in a consolidated enterprise-wide view to improve performance and productivity while enhancing security and the overall user experience. A few comments on Life and Pension. This quarter, we signed a new platform deal in Europe. We also completed several go-lives in the region. The demand for Sapiens Life platform remains strong as demonstrated by our growing pipeline. We see a significant uplift in RFPs coming to the market and Sapiens, indicating strong market demand across Europe and South Africa. Although the sales cycle in the Life tends to be more extended than P&C as the offset deal size are much larger. 



Moving to Reinsurance. We continue to expand in North America, Europe, and APAC with our ReinsuranceMaster and ReinsurancePro solutions. And in this quarter, we closed new deals with new and existing customers. Let me highlight a couple. In North America, an existing customer, a leading global insurance and investment provider for commercial P&C insurance selected Sapiens ReinsuranceMaster. A major European London market insurer selected Sapiens ReinsuranceMaster to modernize its highly specialized London market operations. This is the first London market insurer to utilize Sapiens' innovative London market operational reporting services and underwriting supporting messages featured for ReinsuranceMaster.



Lastly, we closed the ReinsuranceMaster deal in the Philippines. On the product front, in the first quarter, we rolled out the Sapiens Decision Underwriting Accelerator, a cutting-edge solution designed to enhance underwriting efficiency and significantly improve straight-through processing for property and casualty insurers. As I mentioned earlier, we launched our AI-based Sapiens insurance platform in June 2024. The platform specializes in meeting the unique requirements of each business vertical or domain. We are integrating AI across our core data and digital solutions to enhance automation, improve decision-making, and drive greater efficiency for insurers. 



We enable smarter underwriting, and more accurate risk assessment, and streamline claims processing by embedding AI-driven capabilities into our core system. Our AI-powered solution leverages advanced data analytics and machine learning to provide actionable insight, optimize workflows, and enhance operational agility. Sapiens' Intelligent SaaS solution will help insurers modernize their operational improvement, and customer experience and stay ahead in the digital and data-driven industry. We are focused on connecting the power of generative AI within our comprehensive vision of using AI to drive business operations.



Our latest platform release demonstrates this focus, incorporating powerful AI capabilities that enable both efficiency and decision-making. For agents and brokers, our platform delivers a digital portal offering a 360-degree view of customers and prospects, combining GenAI for summarized QA, Know Your Customer, and a suite of machine learning models for strong risk assessment and predictions. Claim handlers and underwriters benefit from our Copilot GenAI capabilities, which exponentially amplify their ability to manage tasks.



Additionally, we have streamlined business rules configuration, enabling the creation of decision trees and rules via GenAI and automated data mapping for documents and later using AI. Looking ahead, we have reached a road map to create a holistic and Gen AI Copilot experience across the entire platform, further enhancing the value we deliver to our users. Our strategic partnership with Microsoft is instrumental in driving our product innovation with cutting-edge AI technology that differentiates our platform's digital transformation capabilities in the insurance industry.



In January 2025, we announced the availability of Sapiens SaaS solution in the Microsoft Azure marketplace. Microsoft Azure customers can purchase Sapiens SaaS solution, enabling them to leverage Azure scalability, reliability and agility to drive their application development and shape their business strategic. Moving to system integrators. Sapiens continued to make progress this quarter in its collaboration with system integrators. This emerging channel is open doors to insurers that were previously beyond our reach, expanding our market opportunity and our pipeline.



In 2024, Sapiens formalized a commitment and internal process to support an SI alignment model for our go-to-market and delivery. As a result, in 2024, we closed a significant live platform deals in North America with the SI partner. Also, SI were involved with a meaningful number of opportunities. Sapiens continued to strengthen its existing partnership with Deloitte globally with LTIMindtree in North America. We also developed a new partnership with [indiscernible], Cognizant and other regional SI. We are excited about the outcomes our growing SI relationship deliver, and we'll continue to develop this valuable channel as a top strategic initiative in 2025.



Before I wrap up, I would like to share our focus for 2025. Our commitment to building a robust pipeline and expanding our client base across all key markets remains solid. To support this commitment and achieve our goals in 2025 and beyond, we have identified the following areas of focus for our teams and our resources. First, platform innovation and advanced AI capabilities. We will continue to invest in Sapiens' Intelligent insurance platform, focusing on innovation and client success aims to drive sustainable growth globally and improve our competitive position. We will continue to actively integrate AI into our offering to enhance various aspects of our customer operation. In addition, we are integrating AI tools into our implementation and delivery process to reduce implementational costs.



Second, increasing cross-sell to expand with existing customers. Cross-selling to existing customers presents a significant opportunity for growth, especially considering that most of our customers current only have one Sapiens product. We have done extensive analysis to validate the cross-selling opportunity for our core business application, data, digital, AI and decision solution by identifying and targeting the specific needs of our customer. We can introduce them to additional solutions that complement their existing solution. We are also increasing our investment in the client management and relationship building by expanding our client partner team and our account management team within our divisions. This effort extends across our entire customer base to drive deeper relationships, maximize customer value and unlock new growth opportunities. Cross-selling has a shorter sales cycle compared to acquiring new customers, allow us to achieve faster revenue growth.



Third, accelerating cloud adoption for our existing customers through a scalable and efficient SaaS model. This transition supports our long-term customer relationship and will drive sustained growth and value creation. We now have a unique opportunity to accelerate cloud adoption as our new SaaS solution offer exclusive benefit such as AI-driven capabilities that are not available in older versions. Four, we aim to enhance our growth in our life and pension and annuities businesses globally. The demand for Life system transformation is strong as insurers seek to modernize legacy infrastructure. This market shift presents a significant opportunity for our life offerings. 



Sapient Flight solution featuring market-leading components seamlessly integrated into a powerful platform, provide a strong competitive advantage and differentiation. This position us as a market leader, and we are already gaining significant momentum. Our objective is to capitalize our momentum pipeline, which currently is the highest among all Sapiens products. And lastly, we continue building out our system integrator partnership globally. In 2025, there will be a focus on developing a new pipeline with SI partners by formalizing enablement, training, certification and joint delivery models to continue to support the strategy. There will be an increased focus on maturing the model in North America to support the growth plan in the region.



In summary, Q4 2024 marked another quarter of growth and operational progress, and we remain committed to delivering long-term growth across all of our key territories. I will turn the call over to our CFO to provide more details on our financial performance.

[Roni Giladi, executive]

Thank you, Roni. I will begin my commentary by reviewing the fourth quarter and full year 2024 non-GAAP results, followed by comments on the balance sheet and cash flow. I will wrap up with our guidance for 2025.



Revenue in the fourth quarter of 2024 totaled $134 million, an increase of 2.6% compared to $131 million in the fourth quarter of 2023. In Q4 2024, we had currency headwind compared to Q3 of 2024. On a constant currency basis, our Q4 revenue was $2 million higher than the reported Q4 revenue. Reported revenues for Q4 and the full year were in line with the updated guidance we provided last quarter despite the currency headwind in Q4. For 2024, our annualized recurring revenue, ARR reached $175 million, reflecting a 6.5% increase from Q4 of last year, higher than the total reported revenue growth during the same period. 



Our revenue mix shows that revenue from recurring software products and reoccurring postproduction services increased year-over-year by 7.7% to $97 million compared to $90 million in Q4 of 2023. Growth of this segment was higher than the overall reported growth in line with our strategy to increase recurring and reoccurring revenues. I want to emphasize that recurring and reoccurring revenues in Q4 2024 represent 72.5% of total revenue, reflecting a 3.4% increase compared to Q4 of last year.



Moving on to profitability. Gross profit in the quarter was $63 million compared to $59 million in Q4 of 2023. The gross margin in the quarter was 46.7% compared to 45.4% in Q4 of 2023, representing an increase of 130 basis points. This increase in gross margin was primarily due to a higher recurring and reoccurring revenue ratio of total revenue with a higher gross margin than the gross margin from one-time implementation. Operating profit in the fourth quarter of 2024 was $24 million, similar to Q4 2023. Net income attributable to Sapiens' shareholders for the fourth quarter of 2024 was $21 million, up 3.1% from $20 million in Q4 of 2023. Earnings per share was $0.37 for the fourth quarter of 2024, up from $0.36 of the fourth quarter of last year. 



Turning now to full-year results for the 12 months ended December 31, 2024. 2024 revenues totaled $542 million, up 5.4% compared to $515 million in 2023. We met our full-year updated revenue guidance, which we provided in Q3 despite the currency headwind that happened in Q4. Turning to revenue mix. In 2024, revenue from recurring software products and reoccurring postproduction services totaled $390 million compared to $342 million in 2023, a $48 million increase or 14.1% growth. This recurring and reoccurring revenue represents 72% of our total revenue in 2024.



Moving to geographic breakdown. Revenue in North America represents 42% of total revenue. Our European revenue represents 50% and the rest of the world represents 8% of total revenue. Growth in 2024 was derived from the growth of 6.3% in North America, 4.9% in Europe, and 3.7% in the rest of the world. We do not have customer concentration as evidenced by the fact that our top 10 customers represent 21.5% of revenue with no customer representing more than 5% of total revenue. 



Gross profit increased by $16 million in 2024, while gross profit margin increased by 60 basis points to 45.9%. The main reason for the gross margin improvement are a better ratio of recurring and reoccurring revenue than last year and an improved offshore ratio. Our operating profit increased by $5 million or 4.8%. The operating margin was 18.2%, which is in line with our guidance. Despite the increase in gross margin of 60 basis points, our operating margin declined by 10 basis points versus 2023 due to our strategic decision at the beginning of the year to increase investment in sales and marketing in absolute dollars and as a percentage of total revenue.



Net income attributable to Sapiens' shareholders for 2024 was $83 million, up 10.5% from $75 million in 2023. Earnings per diluted share was $1.48, up 9.6% from $1.35 in 2023.



Turning now to our balance sheet. As of December 31, 2024, we had cash and cash equivalents and short-term deposits totaling $216 million and debt of $40 million. In January 2025, we paid the annual debenture coupon of $20 million. The last and final payment of $20 million is scheduled for January 2026. 



Turning to adjusted free cash flow. In Q4 2024, we generated an adjusted free cash flow of $41 million compared to $37 million in Q4 of 2023. During 2024, we generated an adjusted free cash flow of $75 million compared to $71 million in 2023. Our adjusted free cash flow represents 89.5% of our non-GAAP net income, proving our business model of converting net profit to free cash flow. 



Let me now introduce our guidance for 2025. Revenues. Non-GAAP revenue in the range of $553 million to $558 million, representing growth of 2.4% at the midpoint. This growth assumes a currency headwind on revenue, mainly to the euro and pound, which have weakened by 4% and 2%, respectively, versus the USA dollar. On a constant currency basis, our growth rate would be 3.4%. Profit. Non-GAAP operating profit in the range of $98 million to $102 million with operating margin of 18% at the midpoint. On a constant exchange rate, our operating profit would be higher and implies an operating margin of 18.7%. The negative currency impact on operating profit is mainly due to the euro and pound weakening versus the USA dollar and the strengthening of the Israeli shekel versus the USA dollar.



Let me elaborate on the factors impacting our 2025 guidance. In Q3 2024 earnings calls, we discussed the factors impacting 2024 and 2025 growth. Transition to SaaS, core P&C in North America and macroeconomic uncertainty. We will now provide an update on these variables as they relate to our growth outlook. The transition to SaaS. We anticipate a similar impact on growth in 2025, as we mentioned in the earnings call of Q3 with the transition of existing customers and the signing of new SaaS contracts expected to create an estimated 2% to 3% revenue headwind. Core P&C in North America. Roni Al-Dor, mentioned in his remarks that we are making a strategic investment in our P&C platform and are already seeing early positive indicators. We expect this effort to provide contributions starting in 2026 and beyond.



Macroeconomic uncertainty continues to persist across global markets, including North America, the Middle East and other regions. We do not control these factors and cannot predict when they will stabilize. Those macroeconomic factors can lead to delay in signing new deals, which can, in turn, impact our revenue growth. As mentioned, those 3 factors that emerged in 2024 will impact our growth in 2025.



In late Q4 of 2024, we had a strong deal closing momentum. Even with this strong deal closing momentum, the timing of this closing affects the pace of revenue realization in 2025, and as a result, our overall growth. I want to reiterate that we remain focused on accelerating our growth trajectory. To accelerate our growth beyond 2025, we are taking the following steps: one, expanding new logo acquisition globally. We are strengthening our sales team, introducing our comprehensive insurance platform and deepening our relationship with system integrators. Since we started our initiative to work with SI, we signed 2 new logos in North America through SI partnership. Driving cross-sell opportunities with existing customers. We are expanding our team and leveraging our pre-integrated insurance platform as a key enabler to cross-sell additional applications and maximize customer value. In 2024, cross-selling grew by 18% compared to last year.



Three, advancing the transition of existing customers to cloud and subscription. In 2023, we successfully migrated 7 customers to the cloud, followed by an additional 10 cloud migrations in 2024. The total number of cloud customers at the end of 2024 was 169, and we are focused on accelerating this momentum in the coming years. Currently, 28% of our customers are on the cloud and our goal is to reach over 60% of our total customers within the next 5 years, reinforcing our commitment to long-term growth and higher ARR ratio.



Before handing the call back to Roni Al-Dor, I want to reiterate that we remain focused on successful execution of our strategy, prioritizing sustainable growth and profitability. I will now turn the call back to Roni Al-Dor. Roni?

[Roni Al-Dor, executive]

Thank you, Roni. We delivered a solid fourth quarter reflecting the progress across our key markets. Our continued investments in our insurance platform remains a critical driver for growth. Most importantly, we are committed to deliver long-term growth across all of our key territories and reinforce our position as a trusted provider of intelligent insurance solutions. I want to thank our global team for their commitment to excellence and growth and our investors for their ongoing support of Sapiens.



I will now ask the operator to please open the call for questions.

[Operator]

[Operator instructions] The first question is from Dylan Becker of William Blair.

[Dylan Becker, analyst]

Maybe Roni, sticking with some of the 2025 initiatives you called out is kind of cross-selling and obviously accelerating the migration framework. You touched on a lot of the cloud customers landing more wall-to-wall, having that kind of full-suite adoption approach due to the integration of the platform. I wonder how that kind of fuels your confidence in those 2 initiatives, given you do have a vast ecosystem of customers to migrate, and it seems that their propensity to kind of spend more and adopt more of the core platform continues to grow with the cloud as well.

[Roni Al-Dor, executive]

This is Roni Al. To answer your question about the cloud and the platform, in both areas, we feel very comfortable. We are migrating many, as we said, but we have a huge potential for both of them. This is also on our core platform, core system, also the business application as well. For the new clients, this is almost standard. So, it's 99% are going with these 2 solutions. From the existing, there are still many opportunities ahead of us. At this moment, we are trying to convince the customer to go, but we are not pushing, and this is our plan for the future, in the upgrade situation that they will have to push them to the cloud. So that's for my side. Maybe Alex want to add.

[Alex Zukerman, executive]

So, Dylan, just to add to what Roni said, this is Alex. When it comes to the existing customers, so again, reiterate what Roni said, we increased the pace of transferring existing customers from on-prem to cloud. Our plan is to continue and focus on that to reach the 60% level within the next 5 years. This is one clear target. The second one is the modular notion of the platform allows us to come back to our customers -- to the existing customer base and find their missing solutions that we can provide. So, we see a lot of white space within our customer base and the connectivity of the platform, it means for them that there is a strong economy of scale and usability by taking those models from us and not from someone else, and this is part of our offering. So also there, we see lots of interest and the plan is to continue in that. In order also to facilitate that, not on the product side, but on the sales side, we increased the team at Sapiens that looks after existing accounts, and we are encouraging them to go stronger after this customer base.

[Roni Giladi, executive]

Maybe one more sentence into that. This year, we've been able to transfer 10 existing customers to the cloud. We see also increasing momentum on this opportunity. We've also been able to transfer big accounts that gives us confidence that we are being able to do this with many customers of us going forward. And this gives us the notion of reaching 60% in 5 years.

[Dylan Becker, analyst]

Maybe to the Life side seems to be another area of notable strength. Can you kind of give us a sense maybe the dynamics, obviously, on that space that are pushing for faster modernization now? And maybe how we can kind of reconcile that or look back as some of the trends you've seen play out or you're seeing play out maybe on the Life side relative to how the P&C modernization opportunity has played out over the last several years? That sounds really exciting as well.

[Alex Zukerman, executive]

So, this is Alex again. So, what we've seen on the life insurance space globally, a strong focus on North America, but also in the rest -- other parts of the world. A strong emphasis of carriers to replace systems and to drive modernization on the Life side. What we've seen in the past 5 to 7 years in the P&C market is happening now on the Life side. The P&C went a bit before the Life into this replacement and into this modernization process in general. Now we see a strong tendency on the Life side. It's a combination of factors. One is the overall digitalization of the world, the strong competition that requires them to be tech-savvy. The second part is the macroeconomics, the volatile stock market, the interest rate, the inflation, they all drive to stronger adoption of life insurance, especially on the individual side as it comes as a solution to the individual market.



This is a great momentum for us also from a timing perspective coming into the North America market with the platform approach that, in this case, provides a strong differentiation because we managed to combine several leading products and capabilities as a stand-alone basis to combine them into a holistic combined offering that really tick the boxes for the majority of needs of our customers, and we see a great adoption on the platform notion with the customers. It's a strong differentiation compared to our competition in the market. So, we feel very, very strong on the combination of we have the right offering to the market, powerful platform approach together with the macroeconomics that drives adoption to the Life, we feel we have a strong opportunity here.

[Dylan Becker, analyst]

Maybe one last clarification, one for Roni G here. You guys gave out the constant currency revenue number and impact in 2024. But any sense on constant currency from an ARR perspective in the quarter and how to think about '25 given the post-production strength we see in the business?

[Roni Giladi, executive]

Thank you. We grew this quarter 6.4% on the ARR versus the lower number, 2% or 2.4% in the quarter in total revenue. Obviously, the ARR is growing faster. The constant exchange obviously impacts the ARR. We need to add an additional 1%. So, we are 7.4% ARR growth in the company today. We are looking to increase this ratio going forward, going to 2025, '26 and going onwards. And as we mentioned, we'd like to do a transition to the cloud, which will support this ARR what we discussed a minute ago. And obviously, all the new customers are automatically on the cloud on a subscription base. So, both of these factors will impact the ARR growth and increase the growth rate to 10% and onwards.

[Operator]

The next question is from Chris Reimer of Barclays.

[Chris Reimer, analyst]

I was wondering if you had been thinking about M&A in the pipeline and if there's anything new around that, seeing as it's been a while since there's been any acquisitions by you guys. Just wondering what's your thinking on that right now given the environment you're in?

[Roni Giladi, executive]

I will start and maybe Roni and Alex will continue. Obviously, M&A is part of our growth trends. And therefore, we are pursuing for this opportunity. You are right, in the last 2 to 3 years, we didn't complete any M&A. The main reason 2 years ago was the valuation. And right now, we are in, let's say, a reasonable market in terms of valuation. We have internal team that's looking for that, and we are pursuing several opportunities across the globe, North America and Europe. We are focusing on mid to small companies. Potentially sometimes when there is opportunity, we are looking also for big organization. I can emphasize that during 2024, we had a good opportunity in the European market, both on P&C and Life.



We compete with several competitors to do this acquisition at the end came to the final 2. And we lost, again, based on valuation, the price at the last point was unreasonable to us. I'm mentioning this to show the confidence that we are really engaged in this opportunity, and we are looking in 2025 to complete at least one M&A until the end of the year. So, fully engaged in this opportunity to execute. We have the cash and we are ready to do so.

[Operator]

The next question is from Alexey Gogolev of JPMorgan.

[Alexei Gogolev, analyst]

Roni G, I was wondering if you can elaborate on the comment you made about customer concentration. I noticed that top 10 now represents 21.5% versus 18.8% in 2023. And same with the largest customer, which used to be just over 3% of sales. So, can you maybe talk about what was the dynamic there, maybe reveal those large customer trends?

[Roni Giladi, executive]

Alexei, this is Roni. Obviously, I think we have amazing metrics in terms of customer concentration. And there isn't any one dependent of customer. As I mentioned, the biggest customer is only 4%, yes, slightly higher than last year of 3%, but this is not material in terms of the total volume of Sapiens. Going forward, we are looking to keep this momentum of the same level, 21%, 20% of the top 10, and less than 5% from the overall. We do not see any risk from this customer and obviously, not risk for Sapiens' overall revenue.

[Alexei Gogolev, analyst]

And then a follow-up on Dylan's question about cloud. So, as I understood, you've added 10 customers to Sapiens Cloud in 2024. It sounds like you're looking to add another 200 over the next 5 years. Can you talk about the pace that you are hoping to accelerate per year? And what sort of carrots and sticks you have in mind in order to persuade these customers to migrate to the cloud?

[Roni Giladi, executive]

Yes. Obviously, the growth from 28% to 60% looks a lot. But if you dive into the figures, we basically came from 2 verticals. The first one that is ongoing all the time. As Roni and Alex mentioned, all new deals that we are signing are on the cloud subscription. So, this is by itself going to contribute significant amount of percentage to the 60% total volume. The second vertical is that we have almost 450 customers or slightly less customers that we sold several years ago, and we are approaching them, push them to move to the subscription/cloud over the years. Last year, we did 10. We are looking to increase these factors even to 15, 20 and 30 going forward. And the adoption for subscription/cloud is growing bigger and bigger as we speak. So, coming from 2 verticals, new customer and shifting existing one to cloud.

[Alexei Gogolev, analyst]

And Roni, just to clarify a comment you made earlier on the call. So, 36 deals total in 2024, similar number to 2023. But could you maybe talk about the contribution to ARR and the average size of those deals has increased year-over-year?

[Roni Giladi, executive]

No, the contribution did not decrease, but in the early years, the contribution to the ARR is slightly smaller than as we continue. The contribution from the ARR is increasing as we're signing them. I think we had a higher number of deals that we signed from cross-sell and sometimes cross-sell is already in the cloud. But every deal that we are signing new logo contribute to the ARR. Again, in the early years, less than as we continue going forward.

[Alexei Gogolev, analyst]

And are those deals mostly in P&C or in Life or broadly equal?

[Roni Giladi, executive]

Across the board.

[Operator]

[Operator Instructions] There are no further questions at this time. Before I ask Ms. Yaffa Cohen-Ifrah to go ahead with her 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 [phone]. In Israel, please call [phone]. And internationally, please call (9723)-9255938. Ms. Cohen-Ifrah, please go ahead.

[Yaffa Cohen-Ifrah, executive]

Thank you for joining our call today. We look forward to discussing our first quarter results on the next earnings call. We welcome you to contact us if you have any further questions. Thank you.

[Operator]

Thank you. This concludes the Sapiens International Corporation Fourth Quarter 2024 Results Conference Call. Thank you for your participation. You may go ahead and disconnect.