Temenos Ag · SIX:TEMN
Temenos — Q3 2016 Earnings Presentation
41 slides from Temenos's earnings presentation, Oct 19, 2016
Slide 1: The software specialist for banking and finance
; ov % The software specialist for banking and finance Ec
Slide 2: Financial results & business update
Financial results & business update Quarter ended 30 September 2016 19 October 2016
Slide 3: Disclaimer
Disclaimer 3 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-loo
Slide 4: Non-IFRS Information
Non-IFRS Information 4 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. Al
Slide 5: Agenda
Agenda 1. Business update David Arnott 2. Financial update Max Chuard 3. Summary David Arnott 4. Q&A
Slide 6: Business update
Business update David Arnott
Slide 7: Summary
Summary 7 Outstanding performance across all KPIs, FY 2016 guidance raised Total software licensing grew 5.5% in constant currencies against tough comparative, which was up 95.5% and included Nordea, our largest deal ever On an LTM basis, total software licensing grew 32% in constant currencie
Slide 8: Q3 2016 sales and revenue update
Q3 2016 sales and revenue update 8 Grew licenses versus tough comparative Q3 2015 which included Nordea Sales execution remains strong across the board, all client tiers and segments BOI win underlines large bank credentials and strength in Europe Asia saw strong license growth with multiple
Slide 9: Overview of the market and pipeline
Overview of the market and pipeline 9 Banks still face same pressures of cost, digitalization and competition IT renovation is key to banks’ strategy, it is not discretionary spend Banks have significantly higher levels of capital vs. last financial crisis No slow down in client engagement a
Slide 10: Overview of the Bank of Ireland deal
Overview of the Bank of Ireland deal 10 Announced deal with BOI for Temenos’ UniversalSuite Complete front-to-back solution for retail, commercial and corporate banking to be implemented as BOI’s new core banking and channels platform Decision driven by multiple factors Need for scalable, mo
Slide 11: Q3 2016 operational overview
Q3 2016 operational overview 11 Q3 2016 maintenance revenue growth of 10% (LFL) Partner ecosystem functioning well Multiple strategic partners engaged in new deals Partners involved in the BOI win Partners continue to be involved in nearly all implementations Increased services activity 18 i
Slide 12: U.S. update
U.S. update 12 Top 20 U.S. bank went live in Q2 with partial replacement of its core, a key reference for closing future deals Sales organisation is in place and building the pipeline Working closely with top U.S. partners to target specific opportunities Continued progress on key campaigns,
Slide 13: Financial update
Financial update Max Chuard
Slide 14: Q3 2016 non-IFRS financial highlights (c.c.)
Q3 2016 non-IFRS financial highlights (c.c.) 14 Total software licensing up 5.5% Y-o-Y, lapping Q3 2015 +95.5% Software licensing up 4% Y-o-Y SaaS and subscription up 12% Y-o-Y Maintenance growth of 9% Y-o-Y Total revenue growth of 9% Y-o-Y and 22% LTM EBIT up 17% Y-o-Y, with LTM EBIT ma
Slide 15: Non-IFRS income statement – operating
Non-IFRS income statement – operating 15 Y-o-Y Y-o-Y In USDm Q3 16 Q3 15 Y-o-Y c.c. LTM 16 LTM 15 Y-o-Y c.c. reported reported Software licensing 51.7 50.3 2.9% 3.9% 192.7 155.4 24.0% 27.0% SaaS and subscription 13.1 11.7 12.4% 12.2% 49.5 31.3 57.9% 57.5% Total software licensing 64.8 61.9 4.7% 5.5%
Slide 16: Like-for-like revenue and costs
Like-for-like revenue and costs 16 Q3 LFL non-IFRS revenues up 10% Q3 LFL non-IFRS costs up 7% Maintenance Total software licensing Services USDm USDm 160 120 140 100 +21% 120 80 +7% 100 +6% 80 60 60 40 40 +10% 20 20 0 0 Q3 2015 Q3 2016 Q3 2015 Q3 2016 Organic license growth lapped exceptional Q3 20
Slide 17: Overview of maintenance growth rates
Overview of maintenance growth rates 17 USD m 66 10.0% 9.0% 64 8.0% 62 7.0% 60 6.0% 58 5.0% 4.0% 56 3.0% 54 2.0% 52 1.0% 50 0.0% Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Maintenance revenue LFL LTM Maintenance growth LFL License growth driving consistent increase in ma
Slide 18: Non-IFRS income statement – non-operating
Non-IFRS income statement – non-operating 18 In USDm, except EPS Q3 16 Q3 15 Y-o-Y LTM 16 LTM 15 Y-o-Y EBIT 50.8 43.6 16% 177.0 152.0 16% Net finance charge -4.2 -4.9 13% -17.7 -15.7 -12% FX gain / (loss) 0.4 -0.7 N.A. -1.7 -0.9 N.A. Tax -5.7 -5.2 -9% -20.0 -15.7 -27% Net profit 41.2 32.9 26% 137.6
Slide 19: IFRS cash conversion
IFRS cash conversion 19 USDm 300 108% 125% 250 200 150 100 50 0 LTM Q3 2015 LTM Q3 2016 EBITDA Operating cashflow Cash conversion significantly above target of 100%
Slide 20: Stable group liquidity
Stable group liquidity 20 Cash on Cash on balance sheet Change in debt balance sheet Borrowings Net debt Net debt USDm (30/6/16) Operating cash Capex and interest Hedging and FX (30/9/16) (30/9/16) (30/9/16) (30/6/16) 200 150 14 6 3 35 100 116 50 97 97 0 1 -50 389 -100 273 -150 288 -200 -250 -300 St
Slide 21: Revised 2016 guidance
Revised 2016 guidance 21 Non-IFRS total software licensing growth at constant currencies of 15% to 20% (implying non-IFRS total software licensing revenue of USD 245m to USD 256m), up from 10% to 15% Non-IFRS revenue growth at constant currencies of 12.5% to 14.5% (implying non-IFRS revenue of U
Slide 22: Share buyback to be launched
Share buyback to be launched 22 Board approval has been given for a share buyback of up to a total of USD 100m Temenos intends to use the repurchased shares to cover future employee stock ownership plans (ESOP) and/or for potential acquisitions Launch is contemplated to take place in Q4 The
Slide 23: A structured approach to M&A
A structured approach to M&A 23 Large pipeline of ongoing discussions, from early stage to more advanced Three areas of focus Increasing scale Accelerating growth in key markets and segments Acquiring complementary products More than USD 1bn of funding available for M&A Disciplined app
Slide 24: Summary
David Arnott eS} TEMENOS
Slide 25: Conclusion
Conclusion 25 Digitalization and cost focus continue to drive strategic decision making and market growth Temenos grew licenses versus tough comparative Q3 2015 which included Nordea, and gained market share Sales execution remains strong across the board, all client tiers and segments BOI w
Slide 26: Appendices
Appendices TEMENOS
Slide 27: FX assumptions underlying 2016 guidance
FX assumptions underlying 2016 guidance 27 In preparing the 2016 guidance, the Company has assumed the following FX rates for the unhedged element of Q4: USD to Euro exchange rate of 0.909 USD to GBP exchange rate of 0.820; and USD to CHF exchange rate of 0.988
Slide 28: FX exposure
FX exposure 28 % of total USD EUR GBP CHF Other Total software licensing 36% 45% 8% 8% 3% Maintenance 65% 20% 6% 6% 3% Services 45% 29% 10% 10% 6% Revenues 49% 31% 8% 8% 4% Non-IFRS costs 20% 20% 20% 10% 30% Non-IFRS EBIT 127% 60% -24% 1% -64% NB. All % are approximations based on 2015 actuals Mitig
Slide 29: Total software licensing revenue breakdown by geography
Total software licensing revenue breakdown by geography 29 Q3 2015 Q3 2016 APAC APAC 10% 11% 14% Europe Europe 31% Americas Americas 18% 17% MEA MEA 59% 40% LTM Q3 2015 LTM Q3 2016 APAC APAC 14% 14% 9% Europe 23% Europe Americas 17% Americas 20% MEA MEA 52% 51%
Slide 30: Total software licensing revenue breakdown by customer tier
Total software licensing revenue breakdown by customer tier 30 Q3 2015 Q3 2016 1 and 2 1 and 2 31% 3, 4 and 5 47% 3, 4 and 5 53% 69% LTM Q3 2015 LTM Q3 2016 1 and 2 1 and 2 3, 4 and 5 3, 4 and 5 50% 50% 51% 49%
Slide 31: Software licensing revenue breakdown by competitive deals / add-ons
31 Software licensing revenue breakdown by competitive deals / add-ons to installed base Q3 2015 Q3 2016 Competitive Competitive deals deals Add-ons to Add-ons to 45% 55% installed base 56% installed base 44% LTM Q3 2015 LTM Q3 2016 Competitive Competitive deals deals Add-ons to Add-ons to 57% 43% i
Slide 32: DSOs continue to decline
DSOs continue to decline 32 220 211 198 198 200 195 186 181 183 180 176 169 160 154 151 140 130 129 120 100 30 Sept 13 31 Dec 13 31 Mar 14 30 Jun 14 30 Sep 14 31 Dec 14 31 Mar 15 30 Jun 15 30 Sep 15 31 Dec 15 31 Mar 16 30 Jun 16 30 Sep 16
Slide 33: Balance sheet – debt and leverage
Balance sheet – debt and leverage 33 Net debt and leverage ratios* USDm 500 2.4x 450 2.3x 2.1x 400 350 300 1.3x 1.3x 1.3x 1.2x 250 200 150 100 50 0 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 * proforma non-IFRS EBITDA Strong deleveraging profile
Slide 34: Capitalization of development costs
Capitalization of development costs 34 USDm Q1 14 Q2 14 Q3 14 Q4 14 FY 14 Cap’ dev’ costs -9.7 -9.8 -9.7 -13.9 -43.1 Amortisation 8.3 8.3 8.3 8.5 33.4 Net cap’ dev’ -1.3 -1.5 -1.4 -5.5 -9.8 USDm Q1 15 Q2 15 Q3 15 Q4 15 FY 15 Cap’ dev’ costs -10.3 -11.2 -10.8 -13.0 -45.3 Amortisation 8.8 8.8 8.7 8.7
Slide 35: Reconciliation from IFRS to non-IFRS
Reconciliation from IFRS to non-IFRS 35 IFRS revenue measure + Deferred revenue write-down = Non-IFRS revenue measure IFRS profit measure +/- Deferred revenue writedown +/- Discontinued activities +/- Acquisition related charges +/- Amortisation of acquired intangibles +/- Restructuring +/- Taxation
Slide 36: Accounting elements not included in non-IFRS guidance
Accounting elements not included in non-IFRS guidance 36 Below are the accounting elements not included in the 2016 non-IFRS guidance: FY 2016 estimated amortisation of acquired intangibles of USD 35m FY 2016 estimated restructuring costs of USD 4m Restructuring costs include completion of Multi
Slide 37: Reconciliation from IFRS to non-IFRS
Reconciliation from IFRS to non-IFRS 37 3 Months Ending 30 September Change 2016 2016 2015 2015 In USDm, except EPS IFRS Adj. Non-IFRS IFRS Adj. Non-IFRS IFRS Non-IFRS Total Software Licensing 64.6 0.3 64.8 58.5 3.4 61.9 10% 5% Maintenance 63.4 63.4 59.0 0.3 59.3 8% 7% Services 32.6 32.6 27.5 0.1 27
Slide 38: Net earnings reconciliation
Net earnings reconciliation 38 In USDm, except EPS Q3 16 Q3 15 IFRS net earnings 32.8 20.6 Deferred revenue write-down 0.3 3.9 Amortisation of acquired intangibles 8.0 8.4 Restructuring 1.1 1.3 Acquisition related costs - - Taxation -1.0 -1.3 Net earnings for non-IFRS EPS 41.2 32.8 No. of dilutive s
Slide 39: Reconciliation from IFRS to non-IFRS for EBIT and EBITDA
Reconciliation from IFRS to non-IFRS for EBIT and EBITDA 39 USDm Q3 2016 EBIT Q3 2016 EBITDA IFRS 41.4 60.1 Deferred revenue write-down 0.3 0.3 Amortisation of acquired intangibles 8.0 - Restructuring 1.1 1.1 Acquisition-related charges - - Non-IFRS 50.8 61.5
Slide 40: Definitions
Definitions 40 Non-IFRS adjustments Other Deferred revenue write-down Constant currencies Adjustments made resulting from acquisitions Prior year results adjusted for currency movement Discontinued activities Like-for-like (LFL) Discontinued operations at Temenos that do not qualify as such under Ad
Slide 41: Thank you
Thank you TEMENOS The software specialist for banking and finance www.temenos.com ‘in| iy | Fi Oo ic)