Temenos Ag · SIX:TEMN
Temenos — Q2 2021 Earnings Presentation
57 slides from Temenos's earnings presentation, Jul 21, 2021
Slide 1: Temenos: The Banking Software Company
TEMENOS THE BANKING SOFTWARE COMPANY
Slide 2: Financial results & business update
Financial results & business update 21 July 2021 Quarter ended 30 June 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 1. Business update……………………………………………Max Chuard, CEO 2. Financial update……………………………………. Takis Spiliopoulos, CFO 3. Summary…………………………………………...............Max Chuard, CEO 4. Q&A 5
Slide 6: Business update
Business update Max Chuard CEO
Slide 7: Strong momentum in Q2-21
Strong momentum in Q2-21 Review of Q2-21 Q2-21 non-IFRS financial highlights Strong momentum in the second quarter SaaS ACV of USD17.4m, up 409% Significant growth in SaaS ACV in particular Total Bookings growth of 104% Excellent growth in Total Bookings of 104%, up on SaaS revenue growt
Slide 8: Significant growth in SaaS
Significant growth in SaaS 409% growth in SaaS in Q2-21 with ACV of USD17.4m US continued to be the strongest contributor Combination of new logo and volume growth in existing clients SaaS ACV now expected to grow 50-60% in FY-21, up from 40-50% previously USDm USDm ACV SaaS revenue +409% y-
Slide 9: SaaS growth is largely incremental
SaaS growth is largely incremental Large banks Progressive renovation based on packaged business capabilities Selective use of cloud and SaaS Cost and complexity reduction, competitive pressure from challenger banks and fintechs, as well as obsolescence AI for smarter, faster projects and di
Slide 10: Excellent growth in Total Bookings
Excellent growth in Total Bookings USDm Total Bookings Excellent growth in Total Bookings of 104% in 180 Q2-21, up on Q2-19 levels 160 Driven by broad based demand across most geographies and products, in particular 140 Transact and Infinity 120 Increasing backlog and long term visibility for
Slide 11: Q2-21 sales and operational review
Q2-21 sales and operational Q2-21 total software licensing review Geographic split Continued momentum in the second quarter with sales APAC environment improving in most regions 18% 21% Europe All regions delivered double digit growth in the quarter Americas US continued to be the largest cont
Slide 12: Recognised for our global leadership
Recognised for our global leadership #1 #1 #1 #1 #1 Best-selling Best-selling Core Banking Neo banks & Best-selling Retail for 16 years Challenger Digital Banking Risk Payments Management banks & Channels System New-name clients: New and existing clients: Top global power seller for the 15th consecu
Slide 13: Progressing strategic partnerships
Progressing strategic partnerships Partnership with Salesforce brings Strategic Partnership with DXC Technology together all the CRM capabilities to accelerate the digital transformation of provided by Salesforce and a broad DXC’s banking clients by offering a set of transactional capabilities p
Slide 14: US business continues to accelerate
US business continues to accelerate US was again the largest contributor to total software licensing in the quarter Strong growth in both license and SaaS New US logos signed in the quarter US continues to be the largest contributor to global ACV pipeline for FY-21 Continued expansion of s
Slide 15: Aligning our sales leadership with the market opportunity
Aligning our sales leadership with the market opportunity Temenos has announced two key expanded roles in the Executive Committee to strengthen global sales leadership and proactively respond to the return of large Tier 1 and 2 deals in the market Philip Barnett takes on the role of “President G
Slide 16: Financial update
Financial update Takis Spiliopoulos CFO
Slide 17: Q2-21 non-IFRS financial highlights
Q2-21 non-IFRS financial highlights Revenue and profit Cash flow SaaS revenue up 24% in Q2-21 Q2-21 operating cash flow of USD 112m, up 19% Total software licensing up 16% in Q2-21 y-o-y Maintenance growth of 3% in Q2-21 LTM operating cash conversion of 107% of IFRS Total revenue up 8% i
Slide 18: Non-IFRS income statement – operating
Non-IFRS income statement – operating Y-o-Y Y-o-Y In USDm Q2-21 Q2-20 Y-o-Y c.c. FY-21 YTD FY-20 YTD Y-o-Y c.c. reported reported Software licensing 66.6 58.1 15% 13% 110.2 91.6 20% 18% SaaS and subscription 29.3 23.1 27% 24% 57.5 45.8 26% 23% Total software licensing 95.9 81.2 18% 16% 167.7 137.4 2
Slide 19: Impact of HCL on Q2-21 growth rates
Impact of HCL on Q2-21 growth rates Underlying Q2-21 SaaS Underlying Q2-21 growth of 28% TSL growth of 25% Underlying Q2-21 Total Underlying Q2-21 EBIT Revenue growth of 12% growth of 27% Note: c.c. growth rates, non-IFRS 19
Slide 20: Like-for-like revenue and costs
Like-for-like revenue and costs Q2-21 LFL non-IFRS revenues up 8% Q2-21 LFL non-IFRS costs up 3% Total software licensing Maintenance Services USDm USDm 250 250 +3% 200 200 150 +3% 150 +3% 100 100 50 50 +16% 0 0 Q2 2020 Q2 2021 Q2 2020 Q2 2021 20
Slide 21: Non-IFRS income statement – non-operating
Non-IFRS income statement – non-operating In USDm, except EPS Q2-21 Q2-20 Y-o-Y FY-21 YTD FY-20 YTD Y-o-Y EBIT 85.4 75.9 13% 142.3 120.4 18% Net finance charge -6.5 -8.0 -19% -12.7 -15.2 -16% FX gain / (loss) -0.7 -0.4 N.A. -1.3 0.7 N.A. Tax -13.8 -9.2 49% -21.6 -14.5 49% Net profit 64.4 58.3 11% 10
Slide 22: DSOs continue to decline
DSOs continue to decline DSOs 130 120 114 6 110 107 110 106 100 Q2 2018 Q2 2019 Q2 2020 Q2 2021 We expect DSOs to continue declining to below 105 by year end 2021 22
Slide 23: IFRS cash conversion
IFRS cash conversion USDm 111% 115% 107% 450 400 350 300 250 200 150 100 50 0 LTM Q2 2019 LTM Q2 2020 LTM Q2 2021 EBITDA Operating cashflow Cash conversion well above 100% target 23
Slide 24: Group liquidity
Group liquidity Net proceeds/repayment USDm Cash on balance of borrowings and Interest, FX and Cash on balance sheet (31/3/21) Operating cash Tax Capex Share buyback investments Dividend leases sheet (30/6/21) Borrowings Reported net debt 350 (1) (24) 132 (71) (105) (20) 150 88 112 66 -50 -250 1,097
Slide 25: Strong growth in ARR, deferred revenue and FCF
Strong growth in ARR, deferred revenue and FCF Strong ARR growth of 8% and despite HCL headwind* Maintenance continued to grow at similar rates to Q1, expected to continue in Q3 and increase in Q4 Strong maintenance collection and increasing SaaS contribution driving deferred revenue growth an
Slide 26: Overview of KPIs
Overview of KPIs Sales P&L Cash Total Bookings* Total software licensing Operating cash conversion SaaS ACV EBIT margin Free cash flow Total ARR* EPS DSOs *New KPIs Total Bookings – includes fair value of license contract value, committed maintenance contract value on licence, and SaaS committed con
Slide 27: Revised 2021 non-IFRS guidance (c.c.)
Revised 2021 non-IFRS guidance (c.c.) FY-21 guidance FY-20 base SaaS ACV +50-60% (increased from 40-50%) 34 ARR +10-15% 494 Total software licensing (%) +14-18%* 358 Total revenue (%) +8-10%* 904 EBIT – margin and growth growth of +12-14% (USD362-369m)*, implying 37.2% margin 35.9% margin, USD324m
Slide 28: Re-confirming 2025 Targets
Re-confirming 2025 Targets Mid-term Guidance 2020 base (CCY) 2025 Targets Total Software Licensing 358 15-20% CAGR 2020-25 Total revenue 904 10-15% CAGR 2020-25 EBIT margin 35.9% c.41% by 2025 Total Bookings 492 17-22% CAGR 2020-25 ARR 494 >=15% CAGR 2020-25 FCF 297 >=15% CAGR 2020-25 to reach >USD6
Slide 29: EBIT Bridge 2020/2021 – New Non-IFRS Definition
EBIT Bridge 2020/2021 – New Non-IFRS Definition 35.9% +130bps 37.2% EBIT Margin 36.8% 12 c. 28 13 c. 38 7 366 331 324 EBIT FY20 Reported Impact of FY20 CCY Recurring Revenue License Invest. (Net of Variable EBIT FY21 currencies growth cost reversals) compensation (Guidance Mid- Point) Strong visibil
Slide 30: Share buyback update
Share buyback update The share buyback for up to a total of USD 200m at the market price commenced on 19 February 2021 and will end on 30 December 2021 at the latest USD 194m of shares repurchased in Q1 and Q2 2021 Temenos intends to use the repurchased shares to finance potential acquisitions
Slide 31: Summary
| Summary Max Chuard CEO ® TEMENOS
Slide 32: Looking forward
Looking forward USD63bn market with 73% of spend still in-house Structural demand drivers of digital, regulatory, cost and competition are accelerating Demand is accelerating driving strong new pipeline growth Strong momentum in SaaS, largely incremental Significant momentum in Total Booki
Slide 33: Ready for SaaS Acceleration
Ready for SaaS Acceleration Temenos runs the software Bank runs the software SaaS Revenue License Revenue Bank’s Private cloud On-Premise Cloud Private Public Single code base, same product 33
Slide 34: Conclusion
Conclusion Strong momentum in the second quarter Substantial growth in SaaS in particular Excellent growth in Total Bookings, up 104%, higher than Q2-19 EBIT growth and margin expansion continued to drive operating and free cash flow generation FY-21 guidance revised for increased SaaS mom
Slide 35: Appendix
Appendix 35
Slide 36: FX assumptions underlying 2021 guidance
FX assumptions underlying 2021 guidance In preparing the 2021 guidance, the Company has assumed the following FX rates: EUR to USD exchange rate of 1.19 GBP to USD exchange rate of 1.38; and USD to CHF exchange rate of 0.92 36
Slide 37: FX exposure
FX exposure % of total USD EUR GBP CHF Other Total software licensing 67% 21% 2% 2% 8% Maintenance 75% 17% 2% 2% 5% Services 55% 28% 3% 2% 13% Revenues 68% 20% 2% 2% 8% Non-IFRS costs 23% 17% 13% 7% 39% Non-IFRS EBIT 149% 26% (19)% (7)% (50)% NB. All % are approximations based on 2020 actuals Mitiga
Slide 38: EBIT Bridge 2020/2021 – Old Non-IFRS Definition
EBIT Bridge 2020/2021 – Old Non-IFRS Definition EBIT Margin 35.6% +40bps 35.2% 34.8% 12 c.28 13 9 c.38 6 346 320 314 EBIT FY20 Impact of FY20 CCY Recurring License Invest. (Net of Variable Stock based EBIT FY21 Reported currencies Revenue growth cost reversals) compensation compensation (Mid-Point o
Slide 39: 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 39
Slide 40: Quarterly ARR, Total Bookings, FCF
Quarterly ARR, Total Bookings, FCF ARR, USDm Q1-20 Q2-20 Q3-20 Q4-20 Q1-21 Q2-21 ARR 468.1 475.4 486.4 493.5 500.1 514.4 Total Bookings, USDm Q1-20 Q2-20 Q3-20 Q4-20 Q1-21 Q2-21 Total Bookings 60.5 80.0 128.8 222.0 127.5 165.2 FCF, USDm Q1-20 Q2-20 Q3-20 Q4-20 Q1-21 Q2-21 FCF 36 70 34 158 46 87 40
Slide 41: 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 41
Slide 42: Total software licensing revenue breakdown by geography
Total software licensing revenue breakdown by geography Q2-20 APAC Q2-21 APAC 19% 21% Europe 18% 21% Europe Americas Americas MEA MEA 18% 18% 42% 43% LTM Q2-20 APAC LTM Q2-21 APAC 15% 16% 19% 22% Europe Europe Americas Americas MEA MEA 33% 35% 30% 30% 42
Slide 43: Total software licensing revenue breakdown by customer tier
Total software licensing revenue breakdown by customer tier Q2-20 1 and 2 Q2-21 1 and 2 20% 3, 4 and 5 3, 4 and 5 59% 41% 80% LTM Q2-20 LTM Q2-21 1 and 2 1 and 2 36% 34% 3, 4 and 5 3, 4 and 5 66% 64% 43
Slide 44: Software licensing revenue breakdown by competitive deals / add-ons
Software licensing revenue breakdown by competitive deals / add-ons to installed base Q2-20 Q2-21 Competitive Competitive deals deals 35% 63% 37% 65% Non Non competitive, competitive, installed installed based based LTM Q2-20 LTM Q2-21 Competitive Competitive 29% deals deals 30% Non 70% Non competit
Slide 45: Balance sheet – debt and leverage
Balance sheet – debt and leverage Net debt and leverage ratios USDm 1200 2.3x 1000 2.1x 2.1x 800 600 400 200 0 Q4 2020 Q1 2021 Q2 2021 45
Slide 46: Q2 21 v Q2 20 assets
Q2 21 v Q2 20 assets 2,177 2,186 120 98 Comments: Trade receivable reduction driven 1,690 1,697 by DSO improvement 1,699 1,678 Other assets increase primarily driven by prepaid cloud services No other significant changes 272 277 88 121 Q2-2021 Q2-2020 USDm Cash Trade receivables Fixed asset Ot
Slide 47: Q2 21 v Q2 20 liabilities
Q2 21 v Q2 20 liabilities 2,177 2,186 360 408 216 Comments: 193 174 Deferred revenues increase driven by strong growth in SaaS revenues 930 1,108 Equity is lower due to share buy back 1,097 1,118 184 174 344 295 501 413 183 191 Q2-2021 Q2-2020 Trade & Other payables Deferred revenues Borrowings
Slide 48: 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 49: 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 50: 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 2021 non-IFRS guidance: FY 2021 estimated share-based payments charge of USD 20m FY 2021 estimated amortisation of acquired intangibles of USD 50m FY 2021 estimated restructuring costs o
Slide 51: 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 2021 2021 2020 2020 IFRS Non-IFRS adj. Non-IFRS IFRS Non-IFRS adj. Non-IFRS Software licensing 66.6 66.6 58.1 58.1 SaaS and subscription 29.2 29.2 18.9 4.2 23.1 Total Software Licensing 95.
Slide 52: EBIT & EBITDA reconciliation from IFRS to non-IFRS
EBIT & EBITDA reconciliation from IFRS to non-IFRS USDm Q2 21 EBIT Q2 21 EBITDA IFRS 64.7 100.7 Share-based payments 6.0 6.0 Deferred revenue write-down - - Amortisation of acquired intangibles 12.8 - Restructuring 1.9 1.9 Acquisition related costs - - Non-IFRS 85.4 108.6 52
Slide 53: Net earnings reconciliation IFRS to non-IFRS
Net earnings reconciliation IFRS to non-IFRS In USDm, except EPS Q2 21 Q2 20* IFRS net earnings 47.2 42.9 Share-based payments 6.0 8.6 Deferred revenue write down 0.0 4.2 Amortisation of acquired intangibles 12.8 16.4 Restructuring 1.9 10.6 Acquisition related costs - -20.4 Taxation -3.6 -4.1 Net ea
Slide 54: Non-IFRS Definitions
Other Non-IFRS Definitions Revenue visibility Visibility on revenue includes a combination of revenue Non-IFRS adjustments that is contractually committed and revenue that is in our pipeline and that is likely to be booked, but is not Share-based payment charges contractually committed and therefore
Slide 55: 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 guid
Slide 56: 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 NPV: $2.1 2.1 2.0 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 57: Thank You
Thank You temenos.com