Temenos Ag · SIX:TEMN
Temenos — Q1 2018 Earnings Presentation
43 slides from Temenos's earnings presentation, Apr 18, 2018
Slide 1: Temenos – The banking software company
Slide 2: Financial results & business update
Financial results & business update Quarter ended 31 March 2018 18 April 2018
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
Slide 4: Non-IFRS Information
Non-IFRS Information 4 All non-IFRS information in the presentation is under IAS 18, comparable to prior periods. 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
Slide 5: Agenda
Agenda 1 Business update………………………………………..……David Arnott, CEO 2 Financial update…………………………………….. Max Chuard, CFO, COO 3 Summary……………………………………………………. David Arnott, CEO 4 Q&A
Slide 6: Business update
Business update David Arnott, CEO
Slide 7: Review of Q1 2018
Review of Q1 2018 7 Very strong start to 2018 Third party validation of Temenos leadership Total software licensing growth of 40% Total revenues up 20% #1 best selling Core Banking system #1 best selling Digital Banking and Channels system EBIT up 33% #1 best selling Risk and Compliance system
Slide 8: Q1 2018 sales review
Q1 2018 sales review 8 Very strong start to 2018 with acceleration across Strong contribution from competitive deals all geographies and client tiers Q1 2018 software licensing 18 new customer wins in the quarter, gaining market share Competitive deals contributed 54% of software licensing in
Slide 9: New markets opening up
New markets opening up 9 Payments Leading Nordic telco bought T24 for financial technology Payments margins under pressure from regulation, platform to offer lending and leasing products competition and new technology Move away from telco-banking partnership model to Open banking directly li
Slide 10: Q1 2018 services overview
Q1 2018 services overview 10 22 implementation go-lives in Q1 Industrialising training through the Temenos Learning Community 2018 EFG announced completion of BSI migration to T24 LTM Services margin of 10% Key implementations continue to progress well Strong operational performance
Slide 11: Third party validation of our leadership position
Third party validation of our leadership position 11 New-name clients: Top global power seller #1 best selling for the 12th year Core Banking systems in 2017 for the 13th year New and existing clients: #1 best selling Top global player for Digital Banking and Channels system in 2017 the 6th year #1
Slide 12: Vendor of choice for core banking transformation globally
Vendor of choice for core banking transformation globally 12 Core banking systems sales by new-named deals 50 2012 2017 40 30 1.8x 2.4x 2.5x 3.0x 20 10 0 Pulling ahead in a winner-takes-all market *excludes domestic/single country only core banking systems Source: IBS Sales League Tables
Slide 13: Looking forward
Looking forward 13 Industry outlook: Digital and regulatory pressures are top of mind for banks Open banking a new driver of opportunity and changing business models IT renovation is key to banks’ strategy, not discretionary spend Banks moving to front-to-back digital renovation Temenos posi
Slide 14: Financial update
Financial update Max Chuard, CFO, COO
Slide 15: Q1 2018 non-IFRS (IAS 18) financial highlights
Q1 2018 non-IFRS (IAS 18) financial highlights 15 Total software licensing up 40% Y-o-Y Maintenance growth of 14% Y-o-Y Total revenue growth of 20% Y-o-Y EBIT up 33% Y-o-Y, with LTM EBIT margin of 30.4% EPS growth of 48% Y-o-Y, LTM EPS of USD 2.59 Q1 operating cash flows of USD 46m, DSOs
Slide 16: Non-IFRS (IAS 18) income statement – operating
Non-IFRS (IAS 18) income statement – operating 16 Y-o-Y Y-o-Y IAS 18, in USDm Q1 18 Q1 17 Y-o-Y c.c. LTM 18 LTM 17 Y-o-Y c.c. reported reported Software licensing 45.3 32.0 41% 37% 261.8 210.2 25% 24% SaaS and subscription 18.3 13.3 38% 29% 72.6 52.1 39% 37% Total software licensing 63.6 45.4 40% 35
Slide 17: Like-for-like revenue and costs
Like-for-like revenue and costs 17 Q1 LFL non-IFRS revenue Q1 LFL non-IFRS costs Maintenance Total software licensing Services USDm USDm 200 160 180 140 160 -4% +5% 120 140 100 120 +19% 80 100 80 60 60 40 40 +9% 20 20 0 0 Q1 2017 Q1 2018 Q1 2017 Q1 2018 Organic product revenue growth of 14%
Slide 18: Non-IFRS (IAS 18) income statement – non-operating
Non-IFRS (IAS 18) income statement – non-operating 18 In USDm, except EPS Q1 18 Q1 17 Y-o-Y LTM 18 LTM 17 Y-o-Y EBIT 36.4 27.3 33% 232.6 191.6 21% Net finance charge -3.5 -3.9 -11% -14.4 -16.2 -11% FX gain / (loss) 0.6 -0.8 NA -1.2 -0.3 NA Tax -4.8 -3.0 59% -29.4 -21.1 39% Net profit 28.7 19.7 46% 1
Slide 19: IFRS (IAS 18) cash conversion
IFRS (IAS 18) cash conversion 19 USDm 131% 117% 113% 300 250 200 150 100 50 0 LTM Q1 2016 LTM Q1 2017 LTM Q1 2018 EBITDA Operating cashflow Cash conversion remains significantly above target of 100%
Slide 20: Group liquidity
Group liquidity 20 Cash on Change in Cash on balance sheet debt, interest balance sheet Borrowings Net debt USDm (31/12/17) Operating cash Tax Capex and FX (31/3/18) (31/3/18) (31/3/18) 300 (4) (15) 1 200 46 195 100 450 168 0 169 -100 255 -200 -300 Operating cash flow up 26%, leverage at 0.9x
Slide 21: 2018 non-IFRS guidance range (IAS 18, c.c.)
2018 non-IFRS guidance range (IAS 18, c.c.) 21 FY 2018 guidance Total software licensing (%) 13.5% – 18.5% Implied USDm 367 – 383 Total revenue (%) 10% – 13% Implied USDm 825 – 847 EBIT (USDm) 255 – 260 Implied margin c.31% Cash conversion 100%+ conversion of EBITDA into operating cash flow Tax rate
Slide 22: Summary
Summary David Arnott, CEO
Slide 23: TCF 2018 – Dublin, 22 to 24 May
TCF 2018 – Dublin, 22 to 24 May 23 Theme for 2018 is ‘Digital to the core’ Dedicated analyst and investor stream See product launches and our software in action Insights from Temenos executives and industry thought leaders Interaction and learning from Temenos customers and partners Brea
Slide 24: Conclusion
Conclusion 24 Very strong start to 2018 across all KPIs Growth across all geographies and client tiers Combined pressures from digital, regulation and open banking driving bank IT spend IT renovation remains strategic, not discretionary Third party validation of leadership position, pullin
Slide 25: Appendices
Appendices TEMENOS
Slide 26: FX assumptions underlying 2018 guidance
FX assumptions underlying 2018 guidance 26 In preparing the 2018 guidance, the Company has assumed the following FX rates: USD to Euro exchange rate of 0.824 USD to GBP exchange rate of 0.711; and USD to CHF exchange rate of 0.958
Slide 27: FX exposure
FX exposure 27 % of total USD EUR GBP CHF Other Total software licensing 44% 40% 1% 3% 12% Maintenance 68% 22% 5% 5% 0% Services 42% 38% 5% 1% 14% Revenues 53% 33% 3% 3% 8% Non-IFRS costs 23% 20% 14% 8% 35% Non-IFRS EBIT 120% 62% -21% -7% -54% NB. All % are approximations based on 2017 actuals Mitig
Slide 28: Total software licensing revenue breakdown by geography
Total software licensing revenue breakdown by geography 28 Q1 2017 Q1 2018 APAC APAC 15% 19% Europe 13% 18% Europe Americas Americas MEA 22% MEA 28% 38% 47% LTM Q1 2017 LTM Q1 2018 APAC 9% APAC 11% 19% Europe 18% Europe Americas Americas 19% 21% MEA MEA 51% 52%
Slide 29: Total software licensing revenue breakdown by customer tier
Total software licensing revenue breakdown by customer tier 29 Q1 2017 Q1 2018 1 and 2 1 and 2 52% 48% 3, 4 and 5 62% 38% 3, 4 and 5 LTM Q1 2017 LTM Q1 2018 1 and 2 1 and 2 3, 4 and 5 43% 3, 4 and 5 57% 48% 52%
Slide 30: Software licensing revenue breakdown by competitive deals / add-ons
Software licensing revenue breakdown by competitive deals / add-ons to installed base 30 Q1 2017 Q1 2018 Competitive Competitive deals deals Add-ons to Add-ons to 65% 35% installed base 46% 54% installed base LTM Q1 2017 LTM Q1 2018 Competitive Competitive deals deals Add-ons to Add-ons to 63% 37% i
Slide 31: DSOs have declined significantly
DSOs have declined significantly 31 200 183 180 151 160 127 140 117 120 100 Q1 2015 Q1 2016 Q1 2017 Q1 2018
Slide 32: Balance sheet – debt and leverage
Balance sheet – debt and leverage 32 Net debt and leverage ratios* USDm 500 2.4x 450 2.3x 2.1x 400 350 1.3x 1.3x 1.2x 300 1.3x 1.2x 1.1x 1.0x 0.9x 250 200 0.8x 0.7x 150 100 50 0 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 * proforma non-IFR
Slide 33: Capitalization of development costs
Capitalization of development costs 33 USDm Q1 16 Q2 16 Q3 16 Q4 16 FY 16 Cap’ dev’ costs -10.8 -11.3 -10.8 -12.7 -45.6 Amortisation 8.8 8.8 8.8 8.8 35.2 Net cap’ dev’ -2.0 -2.5 -2.0 -3.8 -10.3 USDm Q1 17 Q2 17 Q3 17 Q4 17 FY 17 Cap’ dev’ costs -11.2 -11.8 -13.4 -14.1 -50.5 Amortisation 8.8 9.8 10.9
Slide 34: Reconciliation from IFRS to non-IFRS
Reconciliation from IFRS to non-IFRS 34 IFRS (IFRS 15) revenue measure +/- IFRS 15 impact + Deferred revenue write-down = Non-IFRS (IAS 18) revenue measure IFRS (IFRS 15) profit measure +/- IFRS 15 impact +/- Deferred revenue write down +/- Discontinued activities +/- Amortisation of acquired intang
Slide 35: Accounting elements not included in non-IFRS (IAS 18) guidance
Accounting elements not included in non-IFRS (IAS 18) guidance 35 Below are the accounting elements not included in the 2018 non-IFRS (IAS 18) guidance: FY 2018 estimated deferred revenue write down of USD 1m FY 2018 estimated amortisation of acquired intangibles of USD 38m FY 2018 estimated r
Slide 36: Reconciliation – IFRS (IFRS 15) to IFRS (IAS 18)
Reconciliation – IFRS (IFRS 15) to IFRS (IAS 18) 36 3 Months Ending 31 March 2018 2018 In USDm, except EPS IFRS IFRS IFRS 15 adj. (IFRS 15) (IAS 18) Software Licensing 54.4 (9.1) 45.3 SaaS and subscription 8.0 10.3 18.2 Total Software Licensing 62.4 1.2 63.5 Maintenance 76.3 (2.2) 74.1 Services 34.1
Slide 37: Reconciliation – IFRS (IAS 18) to non-IFRS (IAS 18)
Reconciliation – IFRS (IAS 18) to non-IFRS (IAS 18) 37 3 Months Ending 31 March Change 2018 2018 2017 2017 IFRS Non-IFRS Non-IFRS IFRS Non-IFRS Non-IFRS IFRS Non-IFRS In USDm, except EPS (IAS 18) adj. (IAS 18) (IAS 18) adj. (IAS 18) Software Licensing 45.3 45.3 32.0 32.0 41% 41% SaaS and subscriptio
Slide 38: Reconciliation – IFRS (IFRS 15) to non-IFRS (IFRS 15)
Reconciliation – IFRS (IFRS 15) to non-IFRS (IFRS 15) 38 3 Months Ending 31 March 2018 2018 In USDm, except EPS IFRS Non-IFRS IFRS 15 adj. (IFRS 15) (IFRS 15)* Software Licensing 54.4 54.4 SaaS and subscription 8.0 0.1 8.1 Total Software Licensing 62.4 0.1 62.5 Maintenance 76.3 76.3 Services 34.1 34
Slide 39: Reconciliation – Balance sheet IAS 18 to IFRS 15 reported
Reconciliation – Balance sheet IAS 18 to IFRS 15 reported 39 31 March 2018 IFRS 15 reported IFRS 15 adj. IAS 18 In USDm, except EPS Cash and cash equivalents 195.3 - 195.3 Trade receivables 246.6 5.8 252.5 Other receivables 49.1 (5.3) 43.8 Property, plant and equipment 16.7 - 16.7 Intangible assets
Slide 40: Net earnings reconciliation
Net earnings reconciliation 40 In USDm, except EPS Q1 18 Q1 17 IFRS (IFRS 15) net earnings 16.8 12.1 IFRS 15 adjustment -2.1 - Deferred revenue write down 0.1 0.3 Amortisation of acquired intangibles 9.8 7.4 Restructuring 1.3 1.0 Acquisition related costs 4.6 - Taxation -1.8 -1.1 Net earnings for no
Slide 41: Reconciliation from IFRS (IFRS 15) to non-IFRS (IAS 18) for EBIT and EBITDA
Reconciliation from IFRS (IFRS 15) to non-IFRS (IAS 18) for EBIT and EBITDA41 USDm Q1 2018 EBIT Q1 2018 EBITDA IFRS (IFRS 15) 27.3 50.5 IFRS 15 adjustment -2.1 -2.1 Deferred revenue write-down 0.1 0.1 Amortisation of acquired intangibles 9.8 - Restructuring 1.3 1.3 Acquisition-related charges - - No
Slide 42: Definitions
Definitions 42 Non-IFRS adjustments Other Impact of IFRS 15 Adjustments made resulting from elimination of impact of IFRS 15 accounting Constant currencies Prior year results adjusted for currency movement Deferred revenue write-down Adjustments made resulting from acquisitions Like-for-like (LFL) A
Slide 43: Thank You
Thank You TEMENOS The banking software company