Temenos Ag · SIX:TEMN
Temenos — Q4 2021 Earnings Presentation
62 slides from Temenos's earnings presentation, Feb 14, 2022
Slide 1: Temenos: The Banking Software Company
TEMENOS THE BANKING SOFTWARE COMPANY
Slide 2: Financial results & business update
Financial results & business update 14 February 2022 Quarter ended 31 December 2021
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
Slide 7: Accelerating out of the pandemic
Accelerating out of the pandemic Total ARR Total Software Licensing Non-IFRS EBIT c.25% 2022-25 CAGR >19% 2022-25 CAGR >15% 2022-25 CAGR 10%* 19%* 17*% 10% 12% 17% 553 494 2020 2021 2022E 2025E 2020 2021 2022E 2025E 2020 2021 2022E 2025E Note: Numbers are non-IFRS. 2020 and 2021 at constant currency
Slide 8: Our market has fundamentally changed
Our market has fundamentally changed Distribution Manufacturing Product Sales & Marketing Servicing Operations Management Banks – Tier 1,2,3+ Credit unions & Specialty Finance Micro finance Bank owned Incumbents community banks Challenger banks Non- Not bank owned Pureplay BaaS BaaS brands Platform
Slide 9: Temenos is a leader across traditional and non-incumbent markets
Temenos is a leader across traditional and non-incumbent markets Traditional banks Non-incumbents (Digital transformation from legacy to modern) (Rapid scaling of greenfield business) Leading Platform player Greenfield Challenger Bank Flowe 9
Slide 10: Innovation focus drives our market leadership
Innovation focus drives our market leadership 2022 - 2025 AI/Machine Blockchain/ Cloud/SaaS API/Microservices DevOps Big Data Learning Distributed DB $ 2.5B $ 1B cumulative R&D investment R&D investment 1990-2021 2022-25 We invest 20% of revenues in R&D…highest in the industry 10
Slide 11: Move to subscription captures greater value and accelerates our growth
Move to subscription captures greater value and accelerates our growth Client across all tiers and business models are Significant acceleration in Annual Recurring Revenue increasingly asking for subscription contracts ARR % to grow 20-25% CAGR from 2021-2025 c.1.3bn rather than traditional upfront
Slide 12: Value creation from Subscription will drive acceleration in Total Software Licensing and EBIT
Value creation from Subscription will drive acceleration in Total Software Licensing and EBIT Total Software Licensing >19% >15% Non-IFRS EBIT 22-25 CAGR 22-25 CAGR 10%* 17*% 10% 17% 2020 2021 2022E 2025E 2020 2021 2022E 2025E Note: Numbers are non-IFRS. 2020 and 2021 at constant currency * Mid-poin
Slide 13: Tangible subscription benefits to clients and Temenos
Tangible subscription benefits to clients and Temenos Benefits to client Benefits to Temenos Enhanced value proposition for customers Significantly expanding long-term value significantly expanding flexibility creation potential through incremental growth, higher margins and cash flows Lower upfront
Slide 14: A strong Q4-21
A strong Q4-21 Review of Q4-21 Q4-21 and FY-21 non-IFRS financial highlights ▪ Strong momentum in the fourth quarter ▪ SaaS performed particularly well with ACV up 52% and revenue up 33% ▪ Q4-21 SaaS ACV of USD17.0m, up 52%. ▪ Total Bookings up 10% in the quarter, 37% on FY-20 FY-21 of USD57.3m, up
Slide 15: Strong growth in Total Bookings
Strong growth in Total Bookings USDm Total Bookings ▪ Total Bookings grew 10% in Q4-21 driven by strong 800 demand across clients ▪ Total Bookings has now grown 37% in FY-21 as we continue to take market share 700 ▪ Product demand remains broad based ▪ Total Bookings increasing backlog and long term
Slide 16: Excellent growth in SaaS
Excellent growth in SaaS ▪ Continued strong acceleration in SaaS with ACV up 52% in Q4-21 and 65% in FY-21 ▪ US and Europe drove significant majority of signings ▪ SaaS pipeline continues to build, balanced across Transact and Infinity USDm USDm SaaS Revenue ACV 140 70 120 60 100 50 80 40 60 30 20 4
Slide 17: Q4-21 and FY-21 sales review
Q4-21 and FY-21 sales review Total Software Licensing Geographic split Q4-21 FY-21 ▪ Sales environment continued to improve ▪ Very strong momentum in SaaS across both Transact and Infinity APAC 19% 20% 21% 28% Europe ▪ US performed particularly well, as did APAC and MEA 26% Americas 22% ▪ Sequential
Slide 18: Strong momentum in our US business
Strong momentum in our US business Building strong US references ▪ US operations continue to perform very well ▪ SaaS ACV particularly strong in Q4-21 and expected to continue in 2022 Global Tier 1 corporate bank ▪ Reference client base continued to grow with Commerce Bank going live ▪ Pipeline is r
Slide 19: 2022 – a year of accelerating growth
2022 – a year of accelerating growth ▪ Outlook for 2022 is strong with third party market spending accelerating to 10% growth ▪ Demand for SaaS in particular accelerating driven by non-incumbents and small and mid-size banks ▪ Spend by non-incumbents growing very fast at 29% p.a. with explosion in n
Slide 20: Financial update
Financial update Takis Spiliopoulos CFO
Slide 21: Performance vs. 2021 guidance (c.c.)
Performance vs. 2021 guidance (c.c.) Guidance Delivered SaaS ACV +50-60% growth 65% ARR +10-15% growth 12% Total software licensing +14-18% 7% Total Non-IFRS Revenue growth 17% TSL revenue Total revenue +8-10% growth Non-IFRS EBIT +12-14% growth 10% 100%+ conversion of EBITDA into DSO at Cash conver
Slide 22: Q4-21 and FY-21 non-IFRS financial highlights
Q4-21 and FY-21 non-IFRS financial highlights Revenue and profit Cash flow ▪ SaaS revenue up 33% in Q4-21 and 27% in FY-21 ▪ FY-21 operating cash flow of USD 473m, up 16% y-o-y ▪ Total software licensing up 11% in Q4-21 and 17% in FY-21 ▪ FY-21 operating cash conversion of 124% of IFRS ▪ Maintenance
Slide 23: Non-IFRS income statement – operating
Non-IFRS income statement – operating Y-o-Y Y-o-Y In USDm Q4-21 Q4-20 Y-o-Y c.c. FY-21 FY-20 Y-o-Y c.c. reported reported Software licensing 118.6 115.3 3% 5% 292.2 259.5 13% 13% SaaS 34.8 26.5 32% 33% 123.7 96.2 29% 27% Total software licensing 153.4 141.7 8% 11% 415.9 355.6 17% 17% Maintenance 100
Slide 24: Like-for-like revenue and costs
Like-for-like revenue and costs ▪ Q4-21 LFL non-IFRS revenues up 7% ▪ Q4-21 LFL non-IFRS costs up 11% ▪ FY-21 LFL non-IFRS revenues up 7% ▪ FY-21 LFL non-IFRS costs up 6% Total Software License Maintenance Services 1200 700 6% 1000 600 800 -5% 500 400 600 4% 300 400 200 11% -8% 200 17% 7% 100 11% 0
Slide 25: Non-IFRS income statement – non-operating
Non-IFRS income statement – non-operating Y-o-Y Y-o-Y In USDm, except EPS Q4-21 Q4-20 FY-21 FY-20 reported reported EBIT 128.4 127.7 1% 356.8 331.0 8% Net finance charge -6.1 -6.8 -9% -25.4 -30.1 -10% FX gain / (loss) -0.5 -0.3 36% -1.2 0.8 -16% Tax -19.8 -17.3 15% -55.3 -41.8 32% Net profit 102.0 1
Slide 26: IFRS cash conversion
IFRS cash conversion USD m 500 117% 100% 112% 124% 450 400 350 300 250 200 150 100 50 0 FY 2018 FY 2019 FY 2020 FY 2021 Cash conversion well above 100% target 26
Slide 27: Group liquidity
Group liquidity USDm Leverage at 1.8x at year end 2021 27
Slide 28: Strong growth in ARR, deferred revenue and FCF
Strong growth in ARR, deferred revenue and FCF ▪ Strong ARR growth of 12% in Q4-21 ▪ Maintenance growth accelerated to 7% in Q4-21 ▪ Maintenance collection and increasing SaaS contribution driving deferred revenue growth and FCF ▪ ARR growth underpins visibility and confidence in FY-22 ARR Deferred
Slide 29: Outlook for 2022
Outlook for 2022 ▪ Increasing competition and customer demands are putting pressure on banks to innovate and invest ▪ Accelerating SaaS demand from challenger banks and fintech ▪ Move to subscription for on-premise deals to capture greater value and accelerate growth Drivers of revenue visibility Ro
Slide 30: Subscription model illustration
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 2 2 2 2
Slide 31: Future reporting to break out Subscription revenue
Future reporting to break out Subscription revenue Total Software Licensing (old) Total Software Licensing (new) + License revenue + License revenue + SaaS + Subscription + SaaS = Total Software Licensing revenue = Total Software Licensing revenue ARR (old) ARR (new) + Maintenance + Maintenance + Sa
Slide 32: Focused Guidance Metrics
Focused Guidance Metrics Medium term targets (absolute / KPI Reporting Annual Guidance CAGR) SaaS ACV Total Bookings ARR Total Software Licensing Total Revenue EBIT Margin / Growth Operating Cash Conversion Free Cash Flow Recurring Revenue DSO Tax Rate 32
Slide 33: 2022 non-IFRS guidance metrics (c.c.)
2022 non-IFRS guidance metrics (c.c.) FY-22 Guidance FY-21 Base (CCY) ARR 18% - 20% growth 553m Total Software Licensing (%) 16% - 18% growth 414m Total Revenue (%) At least 10% growth 962m EBIT growth +9% - 11% growth 357m ▪ Cash conversion to remain at 100%+ of EBITDA into operating cash flow ▪ FY
Slide 34: Medium term targets
Medium term targets Medium term 2020 (CCY) 2021 (CCY) Medium term targets Previous guidance targets 20-25% CAGR 2021-25 ARR 494 553 >=15% CAGR 2020-25 c.USD1.3bn of ARR by 2025 Total Software 356 414 15-20% CAGR 2021-25 15-20% CAGR 2020-25 Licensing Total revenue 900 962 10-15% CAGR 2021-25 10-15% C
Slide 35: Non-IFRS EBIT Bridge 2021/2022
Non-IFRS EBIT Bridge 2021/2022 EBIT Margin 37.1% (c.30) bps 36.8% (8) 29 (20) (22) 58 393 357 EBIT FY21 CCY Saas & Maintenance Margin Term & Subscription License Variable costs Investments Wage Inflation EBIT FY22 (Mid-Point of growth Guidance) Strong visibility on SaaS margin expansion and focus on
Slide 36: Summary
| Summary Max Chuard CEO ® TEMENOS
Slide 37: Temenos Capital Markets Day 2022
Temenos Capital Markets Day 2022 ▪ Temenos Capital Markets Day taking place on Tuesday 15th February ▪ Virtual event kicking off at 8am ET / 1pm UK / 2pm CET ▪ The CMD will include presentations and demonstrations covering: ▪ Strategy and Vision ▪ Changes in the banking industry and the Temenos Valu
Slide 38: Conclusion
Conclusion ▪ Strong momentum in the fourth quarter ▪ Sales environment continued to improve ▪ Very strong momentum in SaaS and the US in particular ▪ Sequential improvement in Europe in Q4-21, strong pipeline build for 2022 ▪ Continued investment to ensure we are well positioned for future growth ▪
Slide 39: Appendix
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Slide 40: Q4-21 and FY-21 operational overview
Q4-21 and FY-21 operational overview ▪ 98 implementation go-lives in Q4-21 ▪ Total of 345 go-lives across all clients in FY-21 ▪ Use of cloud continues to increase, driving efficiency ▪ Services margin of 8% in Q4-21 and 12% in FY-21 Taking a client live every day 40
Slide 41: 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 1.14 GBP to USD exchange rate of 1.35; and USD to CHF exchange rate of 0.91 41
Slide 42: 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 43: 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 43
Slide 44: 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 ARR 468.1 475.4 486.4 493.5 500.1 514.4 530.8 553.4 Total Bookings, Q1-20 Q2-20 Q3-20 Q4-20 Q1-21 Q2-21 Q3-21 Q4-21 USD m Total Bookings 60.5 80.0 128.8 272.8 127.5 165.2 153.0 292.6 FCF, USD m Q1-20 Q2-20
Slide 45: Total Bookings average tenure
Total Bookings average tenure Below is the average tenure in FY-20 for the components of total bookings: ▪ Average tenure of SaaS contracts in FY-20 was 3.9 years ▪ Average tenure of license and maintenance contracts in FY-20 was 3.6 years ▪ Average tenure of total bookings in FY-20 was 3.7 years 45
Slide 46: Total software licensing revenue breakdown by geography
Total software licensing revenue breakdown by geography Q4 2020 APAC Q4 2021 14% 13% Europe 19% 28% APAC Americas Europe MEA 27% Americas 26% 46% MEA 27% FY 2020 APAC FY 2021 17% 18% Europe 20% 21% APAC Americas Europe MEA Americas 22% 34% 31% MEA 38% 46
Slide 47: Total software licensing revenue breakdown by customer tier
Total software licensing revenue breakdown by customer tier Q4 2020 Q4 2021 1 and 2 3, 4 and 5 41% 1 and 2 44% 56% 3, 4, and 5 59% FY 2020 FY 2021 1 and 2 36% 36% 3, 4 and 5 1 and 2 3, 4, and 5 64% 64% 47
Slide 48: Software licensing revenue breakdown by competitive deals / add-ons to installed base
Software licensing revenue breakdown by competitive deals/ add-ons to installed base Q4 2020 Q4 2021 Competitive Competitive deals deals 30% 28% 70% Non competitive, Non installed 72% Competitive, based installed base FY 2020 FY 2021 Competitive deals Competitive 28% 27% deals Non 72% competitive, N
Slide 49: DSOs
DSOs DSOs 122 120 (6 days of which due to M&A) 120 118 116 114 112 110 108 106 Q4 2017 Q4 2018 Q4 2019 Q4 2020 Q4 2021 DSOs at 117 at year end 2021 49
Slide 50: 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 1.6x 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 50
Slide 51: Q4-21 v Q4-20 assets
Q4-21 v Q4-20 assets 2,234 2,216 128 Comments: 101 ▪ Increase in Trade Receivables reflects revenue growth 1,657 1,731 ▪ Fixed assets reduce due to 1,699 1,678 amortisation and foreign exchange gain on intangibles 311 274 ▪ Other assets includes convertible 139 110 note investment Q4-2021 Q4-2020 Ca
Slide 52: Q4-21 v Q4-20 liabilities
Q4-21 v Q4-20 liabilities 2,234 2,216 475 216 Comments: 523 ▪ Increase in Trade and Other Payables 209 195 reflects growth in activity 930 1,108 ▪ Deferred revenue increase driven by 960 strong SaaS growth 978 ▪ Reduction in equity reflects share 184 buy-back 174 398 357 501 413 193 163 Q4-2021 Q4-2
Slide 53: Capitalization of development costs
Capitalization of development costs USDm Q1-19 Q2-19 Q3-19 Q4-19 FY-19 Cap’ dev’ costs (14.1) (14.3) (15.2) (21.0) (64.6) Amortisation 11.7 12.0 12.2 13.7 49.6 Net cap’ dev’ (2.5) (2.3) (3.0) (7.3) (15.1) USDm Q1-20 Q2-20 Q3-20 Q4-20 FY-20 Cap’ dev’ costs (17.7) (18.0) (20.8) (19.9) (76.3) Amortisat
Slide 54: Reconciliation from IFRS to non-IFRS
Reconciliation from IFRS to non-IFRS IFRS revenue measure + Deferred revenue write-down = Non-IFRS revenue measure IFRS profit measure +/- Share-based payments and related social charges +/- Deferred revenue write down +/- Discontinued activities +/- Amortisation of acquired intangibles +/- Acquisit
Slide 55: 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
Slide 56: Earnings Reconciliation – IFRS to non-IFRS
Earnings Reconciliation – IFRS to non-IFRS 3 Months Ending 31 December 3 Months Ending 31 December In USDm, except EPS 2021 2021 2020 2020 IFRS Non-IFRS adj. Non-IFRS IFRS Non-IFRS adj. Non-IFRS Software licensing 118.5 118.5 115.3 115.3 SaaS 34.9 34.9 26.5 26.5 Total Software Licensing 153.4 153.4
Slide 57: EBIT & EBITDA reconciliation from IFRS to non-IFRS
EBIT & EBITDA reconciliation from IFRS to non-IFRS USDm Q4 21 EBIT Q4 21 EBITDA FY 21 EBIT FY 21 EBITDA IFRS 100.5 137.3 238.1 382.1 IFRS 2 9.5 9.5 48.6 48.6 Deferred revenue write- - - - - down Amortisation of acquired 12.4 - 52.7 - intangibles Restructuring 6.0 5.9 16.0 15.6 Acquisition related co
Slide 58: Net earnings reconciliation IFRS to non-IFRS
Net earnings reconciliation IFRS to non-IFRS In USDm, except EPS Q4 21 Q4 20 FY 21 FY 20 IFRS net earnings 77.0 88.1 173.4 175.0 IFRS 2 Cost 9.5 (2.5) 48.6 11.1 Deferred revenue write down - - - 12.6 Amortisation of acquired intangibles 12.4 15.9 52.7 65.6 Restructuring 6.0 3.9 17.4 8.1 Acquisition
Slide 59: Non-IFRS Definitions
Other Non-IFRS Definitions Revenue visibility Visibility on revenue includes a combination of revenue that is contractually committed and revenue that is in our pipeline Non-IFRS adjustments and that is likely to be booked, but is not contractually committed and therefore may not occur. Share-based
Slide 60: 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. Value (ACV) Only includes the recurring element of the contract and exclude variable elements. Disclosure: quarterly reporting, annual repo
Slide 61: License vs SaaS Profitability
License vs SaaS Profitability Cumulative Gross profit 5.4 4.8 4.2 3.7 NPV: $3.6 3.1 2.8 2.6 2.6 2.4 2.2 2.1 2.0 NPV: $2.1 1.8 1.7 1.5 1.5 1.3 1.1 1.0 0.5 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 License & Maintenance Saas Break even ▪ Net present value of SaaS gross mar
Slide 62: Thank You
Thank You