Temenos Ag · SIX:TEMN
Temenos — Q2 2023 Earnings Presentation
55 slides from Temenos's earnings presentation, Jul 20, 2023
Slide 1: Temenos
temenos
Slide 2: Financial Results and Business Update
Financial Results and Business Update Andreas Andreades, CEO Takis Spiliopoulos, CFO 20 July 2023 Quarter ended, 30 June 2023 2
Slide 3: Disclaimer
Disclaimer Our presentation and this document may contain forward-looking statements relating to the future of the business and financial performance of Temenos AG. Any statements we make about our expectations, plans and prospects for the Company, including any guidance on the Company’s financial p
Slide 4: Non-IFRS information
Non-IFRS information In its presentation and in this document, the Company may present and discuss non-IFRS measures. Readers are cautioned that non-IFRS measures are subject to inherent limitations. Non-IFRS measures are not based on any comprehensive set of accounting rules or principles and shoul
Slide 5: Q2-23 highlights
Q2-23 highlights Q2-23 financial highlights Q2-23 operational FY-23 guidance – ARR and (non-IFRS, c.c.) highlights FCF guidance raised • Strong second quarter with 14% • Sales environment remained stable • ARR growth of 12%-14% ARR growth • Subscription transition progressing • Total software licens
Slide 6: Agenda
Agenda Vision and strategy Operational highlights Financial update Conclusion Appendix 6 6
Slide 7: Everyone's banking platform
Everyone’s banking platform Largest Smallest Client Client 3K clients 500 150M 200+ accounts partners accounts In150+ countries Our top performing banks achieve C/I ratios half the industry average and returns 3X the industry average N.B. Data accurate as of Feb 21, 2023 7
Slide 8: Global client base across tiers and business models
Global client base across tiers and business models Retail Corporate Wealth 8
Slide 9: We've always been pioneers
We’ve always been pioneers Packaged Cloud Cloud Native Upgradable (All products) Ready Open 2003 2020 2022 1993 2011 2021 Cloud Open 24x7 banking Native platform for Multiple (Core Banking) composable Stack support Cloud banking Agnostic XAI $2.8B N.B. Data accurate as of Feb 1, 2023 Unparalleled R&
Slide 10: We service a large and growing market
We service a large and growing market Serviceable addressable market (SAM) $ B By Product By SaaS vs On Premise By Incumbent vs Non-incumbent CAGR CAGR 2022-26 2022-26 34 34 34 11% 12% 27% 30% 34% 23* 23* 23* 14% 7% 88% 9% 70% 5% 86% 93% 2022 2026 2022 2026 2022 2026 Transact Infinity Fund admin On
Slide 11: Targeted strategic initiatives to drive growth
Targeted strategic initiatives to drive growth Continued SaaS Partner centric acceleration approach Increasing North America penetration focus in larger banks 11
Slide 12: Winning against global competitors
Winning against global competitors Core Banking: 2022 win-rates vs top competitors Top traditional vendors Top neo-vendors 73% 76% 65% 64% 52% 50% Traditional Vendor 1 Traditional Vendor 2 Traditional Vendor 3 Next five Neo vendors traditional vendors Temenos has strong win-rates against traditional
Slide 13: IBS reconfirms Temenos as the #1 best-selling banking software
IBS reconfirms Temenos as the #1 best-selling banking software Global Sales Awards – Temenos is #1 in EIGHT Categories 13
Slide 14: Temenos AI and Banking
Temenos AI and Banking Temenos embedded explainable AI in its platform with the acquisition of Logical Glue in 2019, and offers a dedicated AI platform for banking clients who can now: Procure off-the-shelf and bespoke Temenos explainable models for banking automation, efficiency and meaningful cust
Slide 15: Agenda
Agenda Vision and strategy Operational highlights Financial update Conclusion Appendix 15 15
Slide 16: Q2-23 sales and operational review
Q2-23 sales and operational review Total software licensing • Sales environment remained stable in Q2-23 Geographic split • Pipeline developed positively in the quarter; large deals progressing well Q2-23 • Subscription transition continuing to progress and delivering value uplift for both new clien
Slide 17: Subscription transition progressing well
Subscription transition progressing well Subscription and term license mix 2% 23% 49% 51% 48% 68% 77% 98% 77% 51% 49% 52% 23% 32% Q4-21 Q1-22 Q2-22 Q3-22 Q4-22 Q1-23 Q2-23 Subscription Term License Subscription transition driving value upside; expected to be substantially complete in FY-23 17 See Di
Slide 18: Strong SaaS revenue y-o-y growth of 30% in Q2-23
Strong SaaS revenue y-o-y growth of 30% in Q2-23 USDm SaaS Revenue 55 50 45 33% CAGR LTM Q2-21 to LTM Q2-23 40 35 30 25 20 15 10 5 0 Q4-20 Q1-21 Q2-21 Q3-21 Q4-21 Q1-22 Q2-22 Q3-22 Q4-22 Q1-23 Q2-23 Q2-23 SaaS ACV of USD20.2m driven mix of new logos and additional consumption 18 Note: non-IFRS c.c.
Slide 19: Robust ARR growth of 14% in Q2-23
Robust ARR growth of 14% in Q2-23 USDm ARR 700 15% CAGR LTM Q2-21 to LTM Q2-23 600 500 400 300 Q1-21 Q2-21 Q3-21 Q4-21 Q1-22 Q2-22 Q3-22 Q4-22 Q1-23 Q2-23 ARR growth driven by SaaS growth and subscription transition 19 Note: non-IFRS c.c. growth rates. See Disclaimer at beginning of this presentatio
Slide 20: Agenda
Agenda Vision and strategy Operational highlights Financial update Conclusion Appendix 20 20
Slide 21: Q2-23 Non-IFRS financial highlights
Q2-23 Non-IFRS financial highlights Revenue and profit (non-IFRS, c.c.) Cash flow • ARR of USD 666.8m, up 14% • Q2-23 operating cash flow of USD 90.2m, up 4% y-o-y; • Subscription revenue of USD 35.6m • Q2-23 operating cash conversion of 108% of IFRS EBITDA • SaaS revenue up 30% in Q2-23 • Q2-23 Fre
Slide 22: ARR and non-IFRS income statement – operating
ARR and non-IFRS income statement – operating ARR (USDm) Q2-23 Q2-22 Y-o-Y Y-o-Y c.c. reported ARR 666.8 581.9 15% 14% Income statement (USDm) Q2-23 Q2-22 Y-o-Y Y-o-Y c.c. LTM Q2-23 LTM Q2-22 Y-o-Y Y-o-Y c.c. reported reported Subscription 35.6 30.6 16% 16% 133.9 46.4 189% 189% Term Licence 17.0 31.
Slide 23: Like-for-like revenue and costs
Like-for-like revenue and costs • Q2-23 LFL non-IFRS revenues up 0% • Q2-23 LFL non-IFRS costs down -2% Total Software License Maintenance Services 0% 240 160 -2% 220 140 200 180 2% 120 160 100 140 120 80 100 4% 60 80 60 40 40 20 20 (15%) 0 0 Q2-22 Q2-23 Q2-22 Q2-23 23 Note: figures are non-IFRS c.c
Slide 24: Non-IFRS income statement – non-operating
Non-IFRS income statement – non-operating Y-o-Y Y-o-Y In USDm, except EPS Q2-23 Q2-22 reported LTM Q2-23 LTM Q2-22 reported EBIT 84.7 78.3 8% 286.7 352.1 -19% Net finance charge -6.3 -5.7 9% -28.8 -23.0 25% FX gain / (loss) 0.5 0.2 255% 6.1 0.7 811% Tax -16.2 -13.5 20% -52.4 -57.1 -8% Net profit 62.
Slide 25: IFRS cash conversion
IFRS cash conversion USD m 115% 107% 116% 108% 450 400 350 300 250 200 150 100 50 0 LTM Q2-20 LTM Q2-21 LTM Q2-22 LTM Q2-23 IFRS EBITDA Operating Cashflow Cash conversion well above 100% target 25
Slide 26: Group liquidity
Group liquidity USDm (6) (21) 90 (88) (65) 112 101 23 (8) (873) (772) Cash on Operating Tax Capex Dividend Net Proceeds / Interest, FX Cash on Borrowings Reported Net Debt Balance Sheet Cash Repayment of & Leases Balance Sheet (31/3/23) Borrowings and (30/06/23) Investments Leverage at 2.0x at end o
Slide 27: FY-23 guidance (non-IFRS, c.c.)
FY-23 guidance (non-IFRS, c.c.) ARR and FCF guidance raised, other guidance lines reconfirmed FY-23 guidance FY-22 base (USD, c.c.) 12%-14% growth ARR 629m (raised from at least 12%) Total software licensing At least 6% growth 405m EBIT At least 7% growth 276m EPS At least 6% growth 2.82* 12%-14% gr
Slide 28: Mid-term targets (non-IFRS, c.c.)
Mid-term targets (non-IFRS, c.c.) Mid-term targets (USD) FY-22 base (USD, c.c.) ARR >1.3bn 629m EBIT >570m 276m Free Cash Flow (reported) >700m 193m* * FY-22 Free Cash Flow is reported figure and not restated. See Disclaimer at beginning of this presentation on forward-looking statements 28
Slide 29: Agenda
Agenda Vision and strategy Operational highlights Financial update Conclusion Appendix 29 29
Slide 30: Concluding remarks
Concluding remarks • Sales environment expected to remain stable in H2-23; banks have greater visibility • Pipeline continues to develop well, including a number of large tier 1 and 2 deals • Subscription transition progressing well and delivering value uplift across new clients and renewals; transi
Slide 31: Agenda
Agenda Vision and strategy Operational highlights Financial update Conclusion Appendix 31 31
Slide 32: Illustrative Non-IFRS EBIT Bridge FY-22/FY-23
Illustrative Non-IFRS EBIT Bridge FY-22/FY-23 >=7% y-o-y growth 276 EBIT FY-22 CC Saas Profit Services Profit Variable, Investments, EBIT FY-23 (Guidance) Wage inflation • Visibility on SaaS profitability driving FY-23 EBIT growth • Prior year headwinds on services business overcome contributing to
Slide 33: Illustrative FCF Evolution FY-22/FY-23
Illustrative FCF Evolution FY-22/FY-23 Estimated movements for illustrative purposes only >=12% growth 193 FY-22 Opex investment Net Services Term License Subsc License SaaS & Maint Tax Capex & Cap Dev FY-23 & inflation Impact Impact Impact Revenue/Deferred 33
Slide 34: Impact of subscription transition on P&L, cashflow and ARR
Impact of subscription transition on P&L, cashflow and ARR 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
Slide 35: Impact of SaaS contracts on P&L, cashflow and ARR
Impact of SaaS contracts on P&L, cashflow and ARR SaaS model – P&L 2 2 2 2 2 2 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 SaaS revenue Cashflow SaaS model – Cash 2 2 2 2 2 2 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Cashflow SaaS model – ARR 2 2 2 2 2 2 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 ARR 3
Slide 36: Q2-23 operational overview go-lives
Q2-23 operational overview 104 go-lives including 56 implementation go-lives in Q2-23 36
Slide 37: FX and other assumptions underlying FY-23 guidance
FX and other assumptions underlying FY-23 guidance In preparing the FY-23 guidance, the Company has assumed the following FX rates: EUR to USD exchange rate of 1.09 GBP to USD exchange rate of 1.24; and USD to CHF exchange rate of 0.90 The Company has also assumed the following for FY-23 guidance: •
Slide 38: FX exposure
FX exposure % of total USD EUR GBP CHF INR RON Other Total software licensing 68% 22% 2% 4% 0% 0% 4% Maintenance 79% 13% 2% 1% 0% 0% 5% Services 52% 29% 5% 6% 0% 0% 8% Revenues 71% 18% 2% 3% 0% 0% 6% Non-IFRS costs 19% 22% 12% 5% 18% 2% 23% Non-IFRS EBIT 202% 8% (23)% (4)% (44)% (4)% (35)% NB. All %
Slide 39: Quarterly SaaS ACV
Quarterly SaaS ACV 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 17.9 10.5 USDm Q1-23 Q2-23 SaaS ACV 18.9 20.2 Figures are on a re
Slide 40: Quarterly ARR, FCF
Quarterly ARR, FCF ARR, USD m Q1-20 Q2-20 Q3-20 Q4-20 Q1-21 Q2-21 Q3-21 Q4-21 Q1-22 Q2-22 Q3-22 Q4-22 Q1-23 Q2-23 ARR 468.1 475.4 486.4 493.5 500.1 514.4 530.8 553.4 568.4 581.9 595.9 626.1 645.2 666.8 FCF, USD m Q1-20 Q2-20 Q3-20 Q4-20 Q1-21 Q2-21 Q3-21 Q4-21 Q1-22 Q2-22 Q3-22 Q4-22 Q1-23 Q2-23 FCF
Slide 41: Total software licensing revenue breakdown by geography
Total software licensing revenue breakdown by geography Q2-22 Q2-23 14% 14% 20% APAC 29% APAC Europe Europe Americas Americas 27% MEA MEA 40% 17% 39% LTM Q2-22 LTM Q2-23 19% 17% APAC 22% 22% APAC Europe Europe Americas Americas 19% MEA MEA 22% 37% 42% 41
Slide 42: Total software licensing revenue breakdown by customer tier
Total software licensing revenue breakdown by customer tier Q2-22 Q2-23 31% 39% 1 and 2 1 and 2 3, 4, and 5 61% 3, 4, and 5 69% LTM Q2-22 LTM Q2-23 1 and 2 1 and 2 38% 3, 4, and 5 46% 3, 4, and 5 54% 62% 42
Slide 43: Software licensing revenue breakdown by competitive deals/add-ons
Software licensing revenue breakdown by competitive deals/ add-ons to installed base Q2-22 Q2-23 22% Competitive deals Competitive deals 45% Add-ons to installed base Add-ons to installed base 55% 78% LTM Q2-22 LTM Q2-23 30% Competitive deals Competitive deals 37% Add-ons to installed base Add-ons t
Slide 44: DSOs
DSOs 129 130 125 124 120 117 115 114 112 111 110 107 106 100 90 80 70 60 50 40 30 20 10 0 Q1-21 Q2-21 Q3-21 Q4-21 Q1-22 Q2-22 Q3-22 Q4-22 Q1-23 Q2-23 DSOs at 124 at Q2-23 44
Slide 45: Balance sheet – debt and leverage
Balance sheet – debt and leverage Net debt and leverage ratios 3.0x 2.6x 2.6x 2.6x 2.5x 2.3x 2.1x 2.2x 2.1x 2.0x 2.0x 2.0x 2.0x 1.9x 1.8x 1.8x 1.7x 1.5x 1.0x 0.5x 0.0x Q1-20 Q2-20 Q3-20 Q4-20 Q1-21 Q2-21 Q3-21 Q4-21 Q1-22 Q2-22 Q3-22 Q4-22 Q1-23 Q2-23 45
Slide 46: Capitalization of development costs
Capitalization of development costs USDm Q1-21 Q2-21 Q3-21 Q4-21 FY-21 Cap’ dev’ costs (19.2) (20.9) (20.9) (25.2) (86.2) Amortisation 13.8 15.6 15.1 17.0 61.4 Net cap’ dev’ (5.4) (5.4) (5.8) (8.2) (24.8) USDm Q1-22 Q2-22 Q3-22 Q4-22 FY-22 Cap’ dev’ costs (21.9) (22.3) (21.3) (20.8) (86.3) Amortisat
Slide 47: FCF evolution FY-22 to mid-term
FCF evolution FY-22 to mid-term Estimated movements for illustrative purposes only >700 193 FY-22 IFRS EBITDA Net Trade Deferred Revenue Tax Capex & Cap Dev Mid-term Receivables & Payables Figures are on a reported basis 47
Slide 48: Reconciliation from IFRS to non-IFRS
IFRS revenue measure + Deferred revenue write-down = Non-IFRS revenue measure Reconciliation IFRS profit measure from IFRS to +/- +/- Share-based payments and related social charges Deferred revenue write down non-IFRS +/- Discontinued activities +/- Amortisation of acquired intangibles +/- Acquisit
Slide 49: 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 FY-23 non-IFRS guidance: FY-23 estimated share-based payments charge of c.5% of revenue FY-23 estimated amortisation of acquired intangibles of USD50m FY-23 estimated restructuring costs of US
Slide 50: 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 2023 2023 2022 2022 IFRS Non-IFRS adj. Non-IFRS IFRS Non-IFRS adj. Non-IFRS Subscription 35.6 35.6 30.6 30.6 Term Licence 17.0 17.0 31.8 31.8 SaaS 50.2 50.2 38.7 38.7 Total Software Licensi
Slide 51: Net earnings reconciliation IFRS to non-IFRS
Net earnings reconciliation IFRS to non-IFRS In USDm, except EPS Q2-23 Q2-22 IFRS net earnings 38.3 36.7 Share-based payments 14.2 13.8 Deferred revenue write down - - Amortisation of acquired intangibles 11.1 11.3 Restructuring and acquisition related 4.3 2.3 Fair value change on financial instrume
Slide 52: Net earnings reconciliation IFRS to non-IFRS
Net earnings reconciliation IFRS to non-IFRS In USDm, except EPS Q2-23 Q2-22 IFRS net earnings 38.3 36.7 Share-based payments 14.3 13.8 Deferred revenue write down - - Amortisation of acquired intangibles 11.1 11.3 Restructuring and acquisition related 4.3 2.3 Fair value change on financial instrume
Slide 53: 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 54: Financial metrics definitions and reporting
Financial metrics definitions and reporting SaaS 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 55: Thank you
Thank You Thank you 55