Temenos Ag · SIX:TEMN
Temenos — Q2 2022 Earnings Presentation
50 slides from Temenos's earnings presentation, Jul 21, 2022
Slide 1: Temenos
temenos
Slide 2: Financial Results and Business Update
Financial Results and Business Update 21 July 2022 Quarter ended, 30 June 2022
Slide 3: Disclaimer
Disclaimer Any remarks that we may make about future expectations, plans and prospects for the company constitute forward-looking statements. Actual results may differ materially from those indicated by these forward-looking statements as a result of various factors. In particular, the forward-looki
Slide 4: Non-IFRS information
Non-IFRS information Readers are cautioned that the supplemental non-IFRS information presented in this presentation is subject to inherent limitations. It is not based on any comprehensive set of accounting rules or principles and should not be considered as a substitute for IFRS measurements. Also
Slide 5: Agenda
Agenda Business update Max Chuard, CEO Financial update Takis Spiliopoulos, CFO Summary Max Chuard, CEO Q&A 5
Slide 6: Business update
Business update Max Chuard, CEO 6
Slide 7: Overview of the quarter
Overview of the quarter Review of Q2-22 Q2-22 non-IFRS financial highlights • Demand for subscription model is accelerating ahead of • ARR of USD582m, up 16% expectations, driving ARR growth of 16%, up from 14% in • Total Bookings up 12% Q1-22 and 12% in Q4-21 • USD31m of subscription licenses, 50%
Slide 8: Strong growth in ARR and Total Bookings
Strong growth in ARR and Total Bookings • ARR accelerated to 16% in Q2-22 from 14% in Q1-22, underpinning confidence in FY-22 guidance of 18-20% growth in ARR • Growth in Total Bookings and ARR continues to add to our increasing backlog and visibility • Total Bookings grew 12% in the quarter includi
Slide 9: SaaS momentum continues
SaaS momentum continues • ACV of USD11m driven by strong new signings growth • Q2-21 comparative included large volume consumption from existing clients • Europe and core banking were major contributors to SaaS ACV in the quarter • SaaS revenue accelerated to 36% driven by strong ACV in prior quarte
Slide 10: Q2-22 sales review
Q2-22 sales review Total Software Licensing • Accelerating demand for subscription across client tiers and geographies, faster transition to subscription model than previously expected Geographic split Q2-22 • US activity remains high, won a top 20 US bank for core banking renovation • Europe recove
Slide 11: Move to subscription accelerates annual recurring revenue growth
Move to subscription accelerates annual recurring revenue growth Transition to subscription license Sequential ARR growth in line with Significant acceleration in Annual accelerating guidance Recurring Revenue 49% of Q2 license revenue from subscriptions FY-22 ARR growth projected between 18-20% ARR
Slide 12: Continued momentum in US business
Continued momentum in US business • Good sales momentum in the US, with strong level of activity • Building on Commerce Bank go-live to drive momentum with Tier 1 and 2 domestic US banks • Significant milestone reached, winning top 20 US bank for core banking replacement, beating domestic incumbents
Slide 13: Recognized for our global leadership
Recognized for our global leadership ESG recognition • SXI Switzerland Sustainability 25® New-name clients: Index • Top Global Power Seller for the 16th consecutive year • Dow Jones Sustainability Index - #1 Core Banking for 17 years World & Europe 2021 Temenos recognized as the only • S&P Sustainab
Slide 14: Outlook for H2-22
Outlook for H2-22 • Supportive demand environment • US and Europe driving majority of the growth for the full year from a • Move to subscription is accelerating, geographic perspective driving ARR growth • Increased sales activity through partner • Demand for SaaS also contributing to channel drivin
Slide 15: Financial update
Financial update Takis Spiliopoulos, CFO 15
Slide 16: Q2-22 non-IFRS financial highlights
Q2-22 non-IFRS financial highlights Revenue and profit Cash flow • Subscription revenue of USD 31m • Q2-22 operating cash flow of USD 87m, down 22% y-o-y; down • SaaS revenue up 36% in Q2-22 1% LTM • Total software licensing up 8% in Q2-22 • LTM Q2-22 operating cash conversion of 116% of IFRS EBITDA
Slide 17: Non-IFRS income statement – operating
Non-IFRS income statement – operating Q2-21 Y-o-Y Y-o-Y c.c. LTM LTM Y-o-Y Y-o-Y c.c. In USDm Q2-22 reported Q2-22 Q2-21 reported Subscription 30.6 5.7 441% 451% 46.4 16.0 190% 192% Term Licence 31.8 60.9 -48% -47% 244.5 262.0 -7% -5% SaaS 38.7 29.3 32% 36% 141.8 108.0 31% 33% Total software licensi
Slide 18: Like-for-like revenue and costs
Like-for-like revenue and costs • Q2-22 LFL non-IFRS revenues up 4% • Q2-22 LFL non-IFRS costs up 11% Total Software License Maintenance Services 180 300 160 250 140 -6% 120 200 100 150 3% 80 100 60 -8% 40 50 8% 17% 7% 20 11% - - Q2 2021 Q2 2022 Q2 2021 Q2 2022 18
Slide 19: Non-IFRS income statement – non-operating
Non-IFRS income statement – non-operating Y-o-Y LTM LTM Y-o-Y In USDm, except EPS Q2-22 Q2-21 reported Q2-22 Q2-21 reported EBIT 78.3 85.4 -8% 352.1 353.0 0% Net finance charge -5.7 -6.5 -12% -23.0 -27.6 -17% FX gain / (loss) 0.1 -0.7 -120% 0.7 -1.2 -154% Tax -13.5 -13.8 -2% -57.1 -48.9 17% Net prof
Slide 20: IFRS cash conversion
IFRS cash conversion USD m 500 115% 107% 116% 450 400 111% 350 300 250 200 150 100 50 0 LTM Q2-19 LTM Q2-20 LTM Q2-21 LTM Q2-22 IFRS EBITDA Operating Cashflow 20 Cash conversion well above 100% target
Slide 21: Free Cash Flow Bridge 2021/2022
Free Cash Flow Bridge 2021/2022 -10% to -15% YoY 358 FCF 2021 Revenue Growth Outflows Subscription Impact Deferred Rev / DSO Tax / Capex FCF 2022 Improvements Mitigated impact of transition to subscription model on free cash flow 21
Slide 22: Group liquidity
Group liquidity USDm 22 Leverage at 1.8x at quarter end Q2-22
Slide 23: Reconfirming 2022 non-IFRS guidance (c.c.)
Reconfirming 2022 non-IFRS guidance (c.c.) FY-22 Guidance FY-21 Base (CCY) ARR +18% - 20% growth 546m Total Software Licensing (%) +16% - 18% growth 407m Total Revenue (%) At least 10% growth 947m EBIT growth +9% - 11% growth 359m • Cash conversion to remain at 100%+ of EBITDA into operating cash fl
Slide 24: Medium term targets
Medium term targets Medium term targets 2021 (CCY) Medium term targets 20-25% CAGR 2021-25 ARR 546 c.USD1.3bn of ARR by 2025 Total Software 407 15-20% CAGR 2021-25 Licensing Total revenue 947 10-15% CAGR 2021-25 EBIT margin 38.0% c.41% by 2025 FCF (Reported) 358 10-15% CAGR 2021-26 to reach >USD600m
Slide 25: EBIT growth to closely track prior year ARR growth
EBIT growth to closely track prior year ARR growth • Subscription, SaaS and maintenance bookings Total ARR Non IFRS EBIT contribute to ARR in the quarter, with full revenue c.25% 22-25 CAGR >15% 22-25 CAGR impact from SaaS and maintenance in the P&L over the following 12 months • Blended ARR gross m
Slide 26: Non-IFRS EBIT Bridge 2021/2022
Non-IFRS EBIT Bridge 2021/2022 EBIT Margin 38.0% (c.50) bps 37.5% (12) 29 (38) 394 56 359 EBIT FY21 CCY Saas & Maintenance Subscription & Term Post-Covid Variable, Investments, EBIT FY22 (Mid- Margin License growth normalisation Wage inflation Point of Guidance) (travel, events) 26 Strong visibility
Slide 27: Summary
Summary Max Chuard, CEO 27
Slide 28: Conclusion
• Supportive demand environment • Demand for subscription model is accelerating, driving ARR growth • Total software licenses growth of 8% below FY-22 guidance due to large tier 1 European deal slippage and now expected to close shortly • Multiple drivers to deliver FY22 guidance Conclusion • Large
Slide 29: Appendix
temenos Appendix
Slide 30: Q2-22 operational overview
Q2-22 operational overview • 83 go-lives including 23 implementation go-lives in Q2-22 Taking a client live every day 30
Slide 31: Move to subscription model illustration
Move to subscription model illustration Term model – P&L Subscription model – P&L 5 5 5 1 1 1 1 1 1 1 1 1 1 1 Year 1 Year 2 Year 3 Year 4 Year 5 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Maintenance Term License Maintenance Subscription License Term model – Cash Subscription model – Cash 6 1 1 1 1 2
Slide 32: Tangible subscription benefits to clients and Temenos
Tangible subscription benefits to clients and Temenos Benefits to client Benefits to Temenos Significantly expanding long-term value Enhanced value proposition for customers creation potential through incremental growth, significantly expanding flexibility higher margins and cash flows Lower upfront
Slide 33: FX assumptions underlying 2022 guidance
FX assumptions underlying 2022 guidance In preparing the 2022 guidance, the Company has assumed the following FX rates: EUR to USD exchange rate of 1.05 GBP to USD exchange rate of 1.24; and USD to CHF exchange rate of 0.96 33
Slide 34: FX exposure
FX exposure % of total USD EUR GBP CHF Other Total software licensing 71% 18% 2% 1% 9% Maintenance 77% 15% 2% 1% 5% Services 47% 29% 4% 4% 16% Revenues 69% 19% 2% 1% 8% Non-IFRS costs 24% 20% 11% 5% 40% Non-IFRS EBIT 146% 17% (12)% (5)% (46)% NB. All % are approximations based on 2021 actuals Mitiga
Slide 35: Quarterly SaaS ACV
Quarterly SaaS ACV USDm Q3-18 Q4-18 SaaS ACV 2.5 3.4 USDm Q1-19 Q2-19 Q3-19 Q4-19 SaaS ACV 2.7 2.9 6.6 8.8 USDm Q1-20 Q2-20 Q3-20 Q4-20 SaaS ACV 5.3 3.5 14.3 11.5 USDm Q1-21 Q2-21 Q3-21 Q4-21 SaaS ACV 12.1 17.4 10.7 17.0 USDm Q1-22 Q2-22 Q3-22 Q4-22 SaaS ACV 19.0 10.6 35
Slide 36: Quarterly ARR, Total Bookings, FCF
Quarterly ARR, Total Bookings, FCF ARR, USD m Q1-20 Q2-20 Q3-20 Q4-20 Q1-21 Q2-21 Q3-21 Q4-21 Q1-22 Q2-22 ARR 468.1 475.4 486.4 493.5 500.1 514.4 530.8 553.4 568.4 581.9 Total Bookings, Q1-20 Q2-20 Q3-20 Q4-20 Q1-21 Q2-21 Q3-21 Q4-21 Q1-22 Q2-22 USD m Total Bookings 60.5 80.0 128.8 272.8 127.5 165.2
Slide 37: Total software licensing revenue breakdown by geography
Total software licensing revenue breakdown by geography Q2 2021 Q2 2022 18% 14% 21% APAC 29% APAC Europe Europe Americas Americas 18% MEA 40% MEA 43% 17% LTM Q2-21 LTM Q2-22 16% 18% APAC 19% 22% Europe APAC Americas Europe MEA Americas 35% 30% 22% MEA 38% 37
Slide 38: Total software licensing revenue breakdown by customer tier
Total software licensing revenue breakdown by customer tier Q2 2021 Q2 2022 20% 31% 1 and 2 1 and 2 3, 4, and 5 3, 4, and 5 69% 80% LTM Q2-21 LTM Q2-22 34% 38% 1 and 2 1 and 2 3, 4, and 5 3, 4, and 5 62% 66% 38
Slide 39: Software licensing revenue breakdown by competitive deals/add-ons to installed base
Software licensing revenue breakdown by competitive deals/ add-ons to installed base Q2 2021 Q2 2022 Competitive Competitive 37% deals deals 45% Non Non Competitive, 55% 63% Competitive, installed base installed base LTM Q2-21 LTM Q2-22 Competitive 30% deals Competitive 30% deals Non Competitive, No
Slide 40: DSOs
DSOs DSOs 120 118 116 114 112 110 117 108 115 114 106 111 104 107 106 102 100 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 DSOs at 114 at Q2-22 40
Slide 41: Balance sheet – debt and leverage
Balance sheet – debt and leverage Net debt and leverage ratios 3.5x 3.1x 3.0x 2.6x 2.6x 2.6x 2.6x 2.5x 2.3x 2.1x 2.2x 2.1x 2.0x 1.8x 1.7x 1.8x 1.6x 1.6x 1.5x 1.4x 1.0x 0.5x 0.0x Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 41
Slide 42: Capitalization of development costs
Capitalization of development costs USDm Q1-20 Q2-20 Q3-20 Q4-20 FY-20 Cap’ dev’ costs (17.7) (18.0) (20.8) (19.9) (76.3) Amortisation 12.9 13.6 13.6 13.7 53.8 Net cap’ dev’ (4.8) (4.4) (7.2) (6.2) (22.6) USDm Q1-21 Q2-21 Q3-21 Q4-21 FY-21 Cap’ dev’ costs (19.2) (20.9) (20.9) (25.2) 86.2 Amortisatio
Slide 43: Reconciliation from IFRS to non-IFRS
IFRS revenue measure + Deferred revenue write-down = Non-IFRS revenue measure Reconciliation from IFRS to +/- IFRS profit measure Share-based payments and related social charges non-IFRS +/- Deferred revenue write down +/- Discontinued activities +/- Amortisation of acquired intangibles +/- Acquisit
Slide 44: Accounting elements not included in non-IFRS guidance
Accounting elements not included in non-IFRS guidance Below are the accounting elements not included in the 2022 non-IFRS guidance: FY 2022 estimated share-based payments charge of c.5% of revenue FY 2022 estimated amortisation of acquired intangibles of USD 50m FY 2022 estimated restructuring costs
Slide 45: Earnings Reconciliation – IFRS to non-IFRS
Earnings Reconciliation – IFRS to non-IFRS 3 Months Ending 30 June 3 Months Ending 30 June In USDm, except EPS 2022 2022 2021 2021 IFRS Non-IFRS adj. Non-IFRS IFRS Non-IFRS adj. Non-IFRS Subscription 30.6 30.6 5.7 5.7 Term Licence 31.8 31.8 60.9 60.9 SaaS 38.7 38.7 29.3 29.3 Total Software Licensing
Slide 46: EBIT & EBITDA reconciliation from IFRS to non-IFRS
EBIT & EBITDA reconciliation from IFRS to non-IFRS LTM Q2 22 LTM Q2 22 USDm EBIT EBITDA IFRS 230.6 373.2 IFRS 2 56.1 56.1 Deferred revenue write-down - - Amortisation of acquired 48.4 - intangibles Restructuring 14.9 14.2 Acquisition related costs 2.1 2.1 Non-IFRS 352.0 445.6
Slide 47: Net earnings reconciliation IFRS to non-IFRS
Net earnings reconciliation IFRS to non-IFRS In USDm, except EPS Q2-22 Q2-21 IFRS net earnings 36.7 47.2 IFRS 2 Cost 13.8 6.0 Deferred revenue write down - - Amortisation of acquired intangibles 11.3 12.8 Restructuring 1.6 1.9 Acquisition related costs 0.7 - Taxation (4.8) (3.6) Net earnings for non
Slide 48: Non-IFRS definitions
Non-IFRS definitions Other Revenue visibility Visibility on revenue includes a combination of revenue that is contractually committed and revenue that is in our pipeline and that is likely to be booked, but Non-IFRS adjustments is not contractually committed and therefore may not occur. Share-based
Slide 49: SaaS Financial metrics definitions and reporting
SaaS Financial metrics definitions and reporting Annual Contract Annual value of incremental business taken in-year. Includes New Customers, up-sell/cross-sell. Only includes the recurring element of the contract and exclude variable elements. Value (ACV) Disclosure: quarterly reporting, annual repo
Slide 50: Thank you
Thank You Thank you