Temenos Ag · SIX:TEMN
Temenos — Investor Day (February 2022)
27 slides from Temenos's investor day presentation, Feb 1, 2022
Slide 1: Financial growth plan
Financial growth plan Takis Spiliopoulos CFO
Slide 2: Accelerating growth trajectory
Accelerating growth trajectory To grow ARR at a To grow Expanding Total Software EBIT margin CAGR of 20-25% Licensing from 2021-25, to c.41% revenue at a by 2025 To reach c.USD1.3bn CAGR of by 2025 (85%+ of total revenues) 15-20% from 2021-25 2 Note: Revenue, cost and profit numbers are non-IFRS
Slide 3: Accelerating ARR and Total Software Licensing…
Accelerating ARR and Total Software Licensing… Total ARR Total Software Licensing c.25% 22-25 CAGR >19% 22-25 CAGR 19%* 17%* c.19% 17-19 CAGR 12% 17% c.16% 17-19 CAGR 553 445 414 462 494 383 356 391 316 345 2017 2018 2019 2020 2021 2022E 2025E 2017 2018 2019 2020 2021 2022E 2025E Note: Numbers are n
Slide 4: …driving acceleration in EBIT and Free Cash Flow
…driving acceleration in EBIT and Free Cash Flow Non IFRS EBIT FCF >15% 22-25 CAGR >25% 23-26 CAGR 10%* 10% c.19% 17-19 CAGR c.9% 17-19 CAGR 357 358 318 323 297 265 280 269 224 227 2017 2018 2019 2020 2021 2022E 2025E 2017 2018 2019 2020 2021 2022E 2023E 2026E Note: Numbers are non-IFRS. 2020 and 20
Slide 5: 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 % of Total Revenue c. 1.3b rather than traditional upfront license 85%+ 80% 7
Slide 6: Tangible benefits to clients and Temenos
Tangible 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 cost, reflec
Slide 7: Subscription will become a material contributor to ARR
Subscription will become a material contributor to ARR Term and Perpetual model Move to Subscription model 27% 27% c.45% c.50% c.30% 73% 73% c.50% c.25% 2021 2022E 2023 2024 2025 2021 2022E 2023 2024 2025 Maintenance SaaS Maintenance Subscription SaaS Subscription and SaaS to become main contributor
Slide 8: Subscription model illustration
Subscription model illustration Term / Perpetual 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 / Perpetual model – Cash Subscription model –
Slide 9: Drivers of growth
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Slide 10: Application software is significantly underpenetrated
Application software is significantly underpenetrated Third Party Software penetration by industry in 2021 2021 2025 70% 40% 65% 39% 40% 61% 38% 60% 53% 35% 50% 32% 41% 30% 28% 40% 31% 35% 30% 25% 20% 20% Government Manufacturing Retail Healthcare Banking Payments Corporate Wealth Retail Banking Tem
Slide 11: Sizeable and fast-growing addressable market
Sizeable and fast-growing addressable market USD 64bn CAGR 10% CAGR 10% CAGR 10% USD 26bn USD 26bn USD 26bn USD 18bn 18% USD 18bn USD 18bn 9% 82% 91% Total Addressable Market Third party software Third party software Third party software Third party software Third party software Third party software
Slide 12: Building momentum with tier 1 and 2 clients
Building momentum with tier 1 and 2 clients Non-IFRS total software licensing revenues by client tier 26% 36% 40-50% 12
Slide 13: Building momentum in North America
Building momentum in North America Non-IFRS total software licensing, North America vs. Rest of World 10% 33% 40-45% 13
Slide 14: Future Reporting - Subscription
Future Reporting - Subscription Total Software Licensing (old) Total Software Licensing (new) + License revenue + Term & Perpetual License revenue + SaaS + Subscription + SaaS = Total Software Licensing revenue = Total Software Licensing revenue ARR (old) ARR (new) + Term & Perpetual Maintenance + T
Slide 15: Focused Guidance Metrics
Focused Guidance Metrics KPI Reporting Annual Guidance 2025 Targets (absolute / CAGR) SaaS ACV Total Bookings ARR Total Software Licensing Total Revenue EBIT Operating Cash Conversion Free Cash Flow Recurring Revenue DSO Tax Rate 15
Slide 16: Medium Term Targets
Medium Term Targets Mid-term Guidance 2020 (CCY) 2021 (CCY) Medium Term Targets Previous guidance 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% CAG
Slide 17: EBIT Margin % expansion
EBIT Margin % expansion 130-150bps p.a c.41% SaaS c.150bps SaaS 100bps 37% BAU BAU 36% (150-200 bps) FY20 CCY FY21 FY21 CCY FY22 FY22 FY23-25 FY25 Expansion Expansion Investment Expansion After years of margin expansion (FY14-21 averaging >100bps p.a.), FY22 represents a year of investment (e.g. w
Slide 18: SaaS Gross Margin % evolution
SaaS Gross Margin % evolution 6%+ >=80% 4%+ 3%+ 7% c.67% 60% 57% 47% Hyper-scalers: unit costs to reduce as volumes increase Automation to drive significant efficiencies in operation centres Operations optimised into centralised offshore function with local hubs to provide “follow the sun” ser
Slide 19: Drivers of non-IFRS EBIT margin evolution
Drivers of non-IFRS EBIT margin evolution c.41% 37% On-Premise and services gross margin to remain constant SaaS Gross Margin to expand to at least 80% Continued leverage of R&D and G&A infrastructure Sustained investments in Sales & Marketing 19
Slide 20: Disciplined capital allocation (2015-2021)
Disciplined capital allocation (2015-2021) Balance sheet (31-Dec-21) Share buyback - Outflow Weighted average 30% interest rate 2.1% Acquisition - Outflow 55% Weighted average debt maturity 2.2 years Dividend - Outflow 15% Leverage ratio 1.8x Targeted acquisitions for USD1.2bn+ and returned c.USD1bn
Slide 21: Using M&A to accelerate organic growth
Using M&A to accelerate organic growth Date Price (m) Capabilities Sep 19 $560 US scale, digital banking and low code development, cloud operations excellence Jul 19 £12 Explainable AI expertise across all products Feb 19 N.D. Data lake capabilities Dec 18 $245 Digital front office, cloud operations
Slide 22: A three-pronged approach to M&A to accelerate organic growth
A three-pronged approach to M&A to accelerate organic growth Accelerated R&D Adjacent markets roadmap in key Increased and markets and scale complementary segments products 22
Slide 23: Driving shareholder value through accelerating growth
Driving shareholder value through accelerating growth A sizeable and fast growing market Temenos is a leader across all client that is changing rapidly types, incumbent and non-incumbent Single code base drives higher margin, Move to subscription will further competitive edge and profitable accelera
Slide 24: Appendix
| Appendix ENOS — tkets Day
Slide 25: Key cost lines as a percentage of revenue
Key cost lines as a percentage of revenue 37% Margin c.41% Margin 14% ~12% 7% ~5% 21% <17% 21% 25%+ FY21 FY25 S&M R&D G&A Services Note: Non-IFRS. 25
Slide 26: Non-IFRS EBIT reconciliation
Non-IFRS EBIT reconciliation 35.2% Last 10 year average IFRS2 cost as a % of revenues was c.4-5% Total IFRS2 charges for companies in peer group is 4.5% 26
Slide 27: Thank You
Thank You