Temenos Ag · SIX:TEMN
Temenos — Q1 2017 Earnings Presentation
42 slides from Temenos's earnings presentation, Apr 20, 2017
Slide 1: The software specialist for banking and finance
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Slide 2: Financial results & business update
Financial results & business update Quarter ended 31 March 2017 20 April 2017
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, CEO
Slide 7: Q1 2017 summary
Q1 2017 summary 7 Strong start to 2017 across all KPIs Third party validation of Temenos leadership Total software licensing +19% Total revenues +13% #1 best selling Core Banking system and Banks under increasing digital pressure #1 best selling Digital Banking and Channels system Strong pip
Slide 8: Q1 2017 sales review
Q1 2017 sales review 8 Strong momentum across geographies, both Integrated front-to-back digital offering signings and pipeline generation Front-to-back digital offering critical to client wins 52% of LTM license revenues from Tier 1 and 2 clients 20 new customer wins in Q1 2017 Continued
Slide 9: Q1 2017 operational overview
Q1 2017 operational overview 9 Q1 go-lives Strong partner ecosystem Implementation go-lives 30 25 20 28 15 26 10 5 0 Q1 2016 Q1 2017 Strong delivery model driving services margin improvement
Slide 10: Third party validation of our leadership position
Third party validation of our leadership position 10 New-name clients Top global power seller #1 best selling for the 11th year Core Banking systems in 2016 for the 12th year New and existing clients #1 best selling Top global player for Digital Banking and Channels system in 2016 the 5th year #2 be
Slide 11: Why we win
Why we win 11 Key factors driving selection include Out of the box, front-to-back digitally integrated solutions Clear vision of the future of banking – highest R&D in the industry Unmatched references, particularly for Tier 1 and 2 banks Progressive renovation capability Proven scalabil
Slide 12: Looking forward
Looking forward 12 Industry outlook: Digitalization and cost focus continue to drive strategic decision making and market growth IT renovation is key to banks’ strategy, it is not discretionary spend Banks are moving to integrated, front-to-back digital solutions Temenos positioning: Vendor
Slide 13: Our strategic initiatives
Our strategic initiatives 13 1 2 3 EXTENDING EXTENDING LEAD LEAD IN CORE PENETRATING IN PRIVATE THE US MARKET BANKING WEALTH FOCUS ON SAAS – TAKING INDUSTRIALISING FRONT-TO-BACK 1ST MOVER SALES & DIGITAL ADVANTAGE PARTNER OFFERING ALIGNMENT 4 5 6
Slide 14: Financial update
Financial update Max Chuard, CFO, COO
Slide 15: Q1 2017 non-IFRS financial highlights (c.c.)
Q1 2017 non-IFRS financial highlights (c.c.) 15 Total software licensing up 19% Y-o-Y Maintenance growth of 9% Y-o-Y Total revenue growth of 13% Y-o-Y EBIT up 15% Y-o-Y, with LTM EBIT margin of 29.5% EPS growth of 29% Y-o-Y, LTM EPS of USD 2.15 Q1 operating cash flows of USD 37m, DSOs do
Slide 16: Non-IFRS income statement – operating
Non-IFRS income statement – operating 16 Y-o-Y Y-o-Y In USDm Q1 17 Q1 16 Y-o-Y c.c. LTM 17 LTM 16 Y-o-Y c.c. reported reported Software licensing 32.0 26.9 19% 23% 210.2 180.2 17% 16% SaaS and subscription 13.3 12.3 8% 10% 52.1 47.1 11% 10% Total software licensing 45.4 39.2 16% 19% 262.4 227.3 15%
Slide 17: Like-for-like revenue and costs
Like-for-like revenue and costs 17 Q1 LFL non-IFRS revenues up 13% Q1 LFL non-IFRS costs up 12% Maintenance Total software licensing Services USDm USDm 160 140 140 120 +11% 120 +12% 100 100 +19% 80 80 60 60 40 40 +9% 20 20 0 0 Q1 2016 Q1 2017 Q1 2016 Q1 2017 Sustained investment driving revenue grow
Slide 18: Non-IFRS income statement – non-operating
Non-IFRS income statement – non-operating 18 In USDm, except EPS Q1 17 Q1 16 Y-o-Y LTM 17 LTM 16 Y-o-Y EBIT 27.3 22.2 23% 191.6 162.8 18% Net finance charge -3.9 -4.6 -14% -16.2 -18.0 -10% FX gain / (loss) -0.8 -0.7 N.A. -0.3 -2.7 N.A. Tax -3.0 -2.2 36% -21.1 -17.9 18% Net profit 19.7 14.7 34% 154.0
Slide 19: IFRS cash conversion
IFRS cash conversion 19 USDm 300 131% 117% 250 200 150 100 50 0 LTM Q1 2016 LTM Q1 2017 EBITDA Operating cashflow Cash conversion remains significantly above target of 100%
Slide 20: Stable group liquidity
Stable group liquidity 20 Cash on Change in Cash on balance sheet debt, interest balance sheet Borrowings Net debt USDm (31/12/16) Operating cash Tax Capex and FX Share buyback (31/3/17) (31/3/17) (31/3/17) 300 2 13 1 7 200 37 100 194 210 0 379 169 -100 -200 -300 Operating cash flow up 53%, leverage
Slide 21: Financing overview
Financing overview 21 Q1 2015 Q1 2016 Q1 2017 Weighted average interest rate 3.8% 3.6% 3.0% Weighted average maturity 2 years 5 years 5 years Total debt financing USD 670m USD 875m USD 925m Leverage ratio 2.2x 1.3x 0.7x Q1 bond issuance enhances financing profile
Slide 22: 2017 non-IFRS guidance
2017 non-IFRS guidance 22 Non-IFRS total software licensing growth at constant currencies of 10% to 15% (implying non-IFRS total software licensing revenue of USD 276m to USD 288m) Non-IFRS revenue growth at constant currencies of 7.5% to 11.0% (implying non-IFRS revenue of USD 667m to USD 689m)
Slide 23: Update on Rubik acquisition
Update on Rubik acquisition 23 Transaction progressing on schedule Rubik shareholder meeting to approve the transaction on 26 April 2017 Transaction expected to close end of May 2017 Rubik’s three largest shareholders representing c. 48% of shares outstanding have announced they intend to vo
Slide 24: Summary
David Arnott, CEO eS} TEMENOS
Slide 25: TCF 2017 – Lisbon: 25 to 27 April
TCF 2017 – Lisbon: 25 to 27 April 25 Theme for 2017 is ‘Real World Fintech’ Dedicated analyst and investor stream See our software in action and learn about our product roadmap Insights from Temenos executives and industry thought leaders Interaction and learning from Temenos customers and
Slide 26: Conclusion
Conclusion 26 Digitalization and cost focus continue to drive strategic decision making and market growth Banks are moving to integrated, front-to-back digital solutions Sales execution remains strong across the board, all client tiers and segments Industry analyst validation of Temenos lead
Slide 27: Appendices
Appendices TEMENOS
Slide 28: FX assumptions underlying 2017 guidance
FX assumptions underlying 2017 guidance 28 In preparing the 2017 guidance, the Company has assumed the following FX rates: USD to Euro exchange rate of 0.955 USD to GBP exchange rate of 0.811; and USD to CHF exchange rate of 1.025
Slide 29: FX exposure
FX exposure 29 % of total USD EUR GBP CHF Other Total software licensing 55% 35% 2% 4% 4% Maintenance 65% 22% 6% 6% 0% Services 41% 34% 5% 5% 15% Revenues 56% 30% 4% 5% 5% Non-IFRS costs 26% 18% 18% 8% 30% Non-IFRS EBIT 128% 58% -24% -2% -60% NB. All % are approximations based on 2016 actuals Mitiga
Slide 30: Total software licensing revenue breakdown by geography
Total software licensing revenue breakdown by geography 30 Q1 2016 Q1 2017 APAC APAC 13% 15% 19% 22% Europe Europe Americas Americas 20% MEA MEA 28% 38% 45% LTM Q1 2016 LTM Q1 2017 APAC APAC 12% 16% 11% Europe 19% Europe 17% Americas Americas 19% MEA MEA 55% 51%
Slide 31: Total software licensing revenue breakdown by customer tier
Total software licensing revenue breakdown by customer tier 31 Q1 2016 Q1 2017 1 and 2 1 and 2 60% 40% 3, 4 and 5 52% 48% 3, 4 and 5 LTM Q1 2016 LTM Q1 2017 1 and 2 1 and 2 3, 4 and 5 3, 4 and 5 54% 46% 48% 52%
Slide 32: Software licensing revenue breakdown by competitive deals / add-ons
32 Software licensing revenue breakdown by competitive deals / add-ons to installed base Q1 2016 Q1 2017 Competitive Competitive deals deals 30% Add-ons to Add-ons to 70% installed base 65% 35% installed base LTM Q1 2016 LTM Q1 2017 Competitive Competitive deals deals Add-ons to Add-ons to 40% insta
Slide 33: DSOs have declined significantly
DSOs have declined significantly 33 220 198 200 183 180 160 151 140 127 120 100 Q1 2014 Q1 2015 Q1 2016 Q1 2017
Slide 34: Balance sheet – debt and leverage
Balance sheet – debt and leverage 34 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 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 * proforma non-IFRS EBITDA Strong deleveraging profile
Slide 35: Capitalization of development costs
Capitalization of development costs 35 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 35.0 Net cap’ dev’ -1.5 -2.4 -2.1 -4.3 -10.3 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
Slide 36: Reconciliation from IFRS to non-IFRS
Reconciliation from IFRS to non-IFRS 36 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 37: Accounting elements not included in non-IFRS guidance
Accounting elements not included in non-IFRS guidance 37 Below are the accounting elements not included in the 2017 non-IFRS guidance: FY 2017 estimated amortisation of acquired intangibles of USD 32m FY 2017 estimated restructuring costs of USD 5m Restructuring costs include realising R&D, oper
Slide 38: Reconciliation from IFRS to non-IFRS
Reconciliation from IFRS to non-IFRS 38 3 Months Ending 31 March Change 2017 2017 2016 2016 In USDm, except EPS IFRS Adj. Non-IFRS IFRS Adj. Non-IFRS IFRS Non-IFRS Total Software Licensing 45.1 0.3 45.4 38.9 0.3 39.2 16% 16% Maintenance 64.9 64.9 60.5 60.5 7% 7% Services 32.5 32.5 29.6 29.6 9% 9% To
Slide 39: Net earnings reconciliation
Net earnings reconciliation 39 In USDm, except EPS Q1 17 Q1 16 IFRS net earnings 12.1 6.1 Deferred revenue write-down 0.3 0.3 Amortisation of acquired intangibles 7.4 7.9 Restructuring 1.0 1.6 Acquisition related costs - - Taxation -1.1 -1.2 Net earnings for non-IFRS EPS 19.7 14.7 No. of dilutive sh
Slide 40: Reconciliation from IFRS to non-IFRS for EBIT and EBITDA
Reconciliation from IFRS to non-IFRS for EBIT and EBITDA 40 USDm Q1 2017 EBIT Q1 2017 EBITDA IFRS 18.7 37.5 Deferred revenue write-down 0.3 0.3 Amortisation of acquired intangibles 7.4 - Restructuring 1.0 1.0 Acquisition-related charges - - Non-IFRS 27.3 38.7
Slide 41: Definitions
Definitions 41 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 42: Thank you
Thank you TEMENOS The software specialist for banking and finance www.temenos.com ‘in| iy | Fi Oo ic)