Temenos Ag · SIX:TEMN
Temenos — Q2 2018 Earnings Presentation
41 slides from Temenos's earnings presentation, Jul 18, 2018
Slide 1: Temenos - The banking software company
@) TEMENOS The banking software company
Slide 2: Financial results & business update
Financial results & business update Quarter ended 30 June 2018 18 July 2018
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 All non-IFRS information in the presentation is under IAS 18, comparable to prior periods. 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
Slide 5: Agenda
Agenda 1. Business update David Arnott, CEO 2. Financial update Max Chuard, CFO, COO 3. Summary David Arnott, CEO 4. Q&A
Slide 6: Business update
Business update David Arnott, CEO
Slide 7: Review of Q2 2018
Review of Q2 2018 7 A very strong quarter Recognised as a Leader Total software licensing growth of 23% Gartner Magic Quadrant for Global Retail Core Banking* Total revenue up 17% EBIT up 20% Top vendor for new-name clients and Significant momentum underpinning 2018 new and existing clients
Slide 8: Q2 2018 sales review
Q2 2018 sales review 8 Strong contribution across all tiers Very strong quarter driven by broad based demand across all tiers and geographies Q2 2018 software licensing Competitive deals contributed 41% of software licensing, 13 new customer wins 1 and 2 Europe lapped strong comparative, drive
Slide 9: Overview of key deals in the quarter
Overview of key deals in the quarter 9 Coventry Building Society, UK’s second-largest, chose Northern Trust, a US based financial services provider, Temenos T24 Core Banking for future savings and signed a deal extending its existing investor servicing mortgages servicing contract with Temenos f
Slide 10: Q2 2018 services overview
Q2 2018 services overview 10 24 implementation go-lives in Q2 2018 Total of 49 implementation go lives in H1 2018 Julius Baer went live with WealthSuite in Asia in May 4000+ skilled Temenos 50% growth in partner consultants LTM through Temenos Learning Community partner consultants LTM Ser
Slide 11: TCF 2018 – digital to the core
TCF 2018 – digital to the core 11 Temenos Temenos Temenos Open Enhanced Learning Origination Front Office Banking APIs Data Community Suite Analytics (TLC) FCM – Client Instant Suspicious Robo-advisor Assembly Payments Activity, SaaS Factory High R&D focus
Slide 12: Looking forward
Looking forward 12 Digital, regulatory and competitive pressures on banks continue to intensify, with open banking and payments a key focus Significant increase in cloud and SaaS signings, with strong growth expected in 2019 Building momentum in the US with signing of Northern Trust and digita
Slide 13: Financial update
Financial update Max Chuard, CFO, COO
Slide 14: Q2 2018 non-IFRS (IAS 18) financial highlights
Q2 2018 non-IFRS (IAS 18) financial highlights 14 Total software licensing up 23% Y-o-Y Maintenance growth of 12% Y-o-Y Total revenue growth of 17% Y-o-Y EBIT up 20% Y-o-Y, with LTM EBIT margin of 30.5% EPS growth of 23% Y-o-Y, LTM EPS of USD 2.72 Q2 operating cash flows of USD 67m, up 5
Slide 15: Non-IFRS (IAS 18) income statement – operating
Non-IFRS (IAS 18) income statement – operating 15 Y-o-Y Y-o-Y IAS 18, in USDm Q2 18 Q2 17 Y-o-Y c.c. LTM 18 LTM 17 Y-o-Y c.c. reported reported Software licensing 72.5 57.4 26% 24% 276.9 219.9 26% 23% SaaS and subscription 17.3 15.4 12% 10% 74.4 54.9 36% 29% Total software licensing 89.7 72.8 23% 21
Slide 16: Like-for-like revenue and costs
Like-for-like revenue and costs 16 Q2 LFL non-IFRS revenue Q2 LFL non-IFRS costs Maintenance Total software licensing Services USDm USDm 250 160 140 200 120 +8% +7% 150 100 80 +16% 100 60 40 50 +10% 20 0 0 Q2 2017 Q2 2018 Q2 2017 Q2 2018 Strong organic growth
Slide 17: Non-IFRS (IAS 18) income statement – non-operating
Non-IFRS (IAS 18) income statement – non-operating 17 In USDm, except EPS Q2 18 Q2 17 Y-o-Y LTM 18 LTM 17 Y-o-Y EBIT 57.7 48.0 20% 242.3 200.8 21% Net finance charge -3.8 -4.4 -14% -13.8 -16.4 -16% FX gain / (loss) -0.5 -0.6 NA -1.0 -0.3 NA Tax -6.9 -5.6 23% -30.7 -22.6 36% Net profit 46.5 37.3 25%
Slide 18: IFRS cash conversion
IFRS cash conversion 18 USDm 350 116% 117% 300 130% 250 200 150 100 50 0 LTM Q2 2016 LTM Q2 2017 LTM Q2 2018 EBITDA Operating cashflow Cash conversion remains significantly above target of 100%
Slide 19: Group liquidity
Group liquidity 19 Cash on Change in Cash on balance debt, balance USDm sheet Operating Share interest and sheet Borrowings Net debt (31/3/18) cash Tax Capex buyback Dividend FX (30/6/18) (30/6/18) (30/6/18) 300 (6) (17) 67 200 161 100 195 46 56 88 0 169 -100 504 417 -200 -300 Operating cash flow up
Slide 20: 2018 non-IFRS guidance range (IAS 18, c.c.)
2018 non-IFRS guidance range (IAS 18, c.c.) 20 FY 2018 guidance Total software licensing (%) 13.5% – 18.5% Implied USDm 363 – 379 Total revenue (%) 10% – 13% Implied USDm 820 – 840 EBIT (USDm) 255 – 260 Implied margin c.31% Cash conversion 100%+ conversion of IFRS EBITDA into operating cash flow Tax
Slide 21: Summary
Summary David Arnott, CEO
Slide 22: Conclusion
Conclusion 22 A very strong quarter across all KPIs Digital, regulatory and competitive pressures on banks continue to intensify, with open banking and payments a key focus IT renovation remains strategic, not discretionary Temenos’ leadership position reconfirmed – pulling ahead in a winner
Slide 23: Appendices
Appendices $ TEMENOS
Slide 24: FX assumptions underlying 2018 guidance
FX assumptions underlying 2018 guidance 24 In preparing the 2018 guidance, the Company has assumed the following FX rates: USD to Euro exchange rate of 0.859 USD to GBP exchange rate of 0.754; and USD to CHF exchange rate of 0.990
Slide 25: FX exposure
FX exposure 25 % of total USD EUR GBP CHF Other Total software licensing 44% 40% 1% 3% 12% Maintenance 68% 22% 5% 5% 0% Services 42% 38% 5% 1% 14% Revenues 53% 33% 3% 3% 8% Non-IFRS costs 23% 20% 14% 8% 35% Non-IFRS EBIT 120% 62% -21% -7% -54% NB. All % are approximations based on 2017 actuals Mitig
Slide 26: Total software licensing revenue breakdown by geography
Total software licensing revenue breakdown by geography 26 Q2 2017 Q2 2018 APAC APAC 7% 15% 15% Europe 19% Europe 16% Americas Americas MEA MEA 14% 52% 62% LTM Q2 2017 LTM Q2 2018 APAC APAC 10% 12% 18% Europe 18% Europe 18% Americas Americas MEA 20% MEA 54% 49%
Slide 27: Total software licensing revenue breakdown by customer tier
Total software licensing revenue breakdown by customer tier 27 Q2 2017 Q2 2018 1 and 2 1 and 2 37% 3, 4 and 5 3, 4 and 5 63% 48% 52% LTM Q2 2017 LTM Q2 2018 1 and 2 1 and 2 3, 4 and 5 3, 4 and 5 46% 54% 45% 55%
Slide 28: Software licensing revenue breakdown by competitive deals / add-ons
28 Software licensing revenue breakdown by competitive deals / add-ons to installed base Q2 2017 Q2 2018 Competitive Competitive deals deals Add-ons to Add-ons to 60% 40% installed base 41% installed base 59% LTM Q2 2017 LTM Q2 2018 Competitive Competitive deals deals Add-ons to Add-ons to 64% 36% i
Slide 29: DSOs have declined significantly
DSOs have declined significantly 29 180 176 160 140 130 124 120 114 100 Q2 2015 Q2 2016 Q2 2017 Q2 2018
Slide 30: Balance sheet – debt and leverage
Balance sheet – debt and leverage 30 Net debt and leverage ratios* USDm 450 1.4x 400 1.3x 1.2x 1.3x 1.1x 1.0x 1.2x 350 0.9x 300 250 0.8x 0.7x 200 150 100 50 0 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 * proforma non-IFRS EBITDA
Slide 31: Capitalization of development costs
Capitalization of development costs 31 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 8.8 35.2 Net cap’ dev’ -2.0 -2.5 -2.0 -3.8 -10.3 USDm Q1 17 Q2 17 Q3 17 Q4 17 FY 17 Cap’ dev’ costs -11.2 -11.8 -13.4 -14.1 -50.5 Amortisation 8.8 9.8 10.9
Slide 32: Reconciliation from IFRS to non-IFRS
Reconciliation from IFRS to non-IFRS 32 IFRS (IFRS 15) revenue measure +/- IFRS 15 impact + Deferred revenue write-down = Non-IFRS (IAS 18) revenue measure IFRS (IFRS 15) profit measure +/- IFRS 15 impact +/- Deferred revenue write down +/- Discontinued activities +/- Amortisation of acquired intang
Slide 33: Accounting elements not included in non-IFRS guidance
Accounting elements not included in non-IFRS (IAS 18) guidance 33 Below are the accounting elements not included in the 2018 non-IFRS (IAS 18) guidance: FY 2018 estimated deferred revenue write down of USD 1m FY 2018 estimated amortisation of acquired intangibles of USD 38m FY 2018 estimated r
Slide 34: Reconciliation – IFRS (IFRS 15) to IFRS (IAS 18)
Reconciliation – IFRS (IFRS 15) to IFRS (IAS 18) 34 3 Months Ending 30 June 2018 2018 IFRS IFRS IFRS 15 adj. In USDm, except EPS (IFRS 15) (IAS 18) Software Licensing 83.2 (10.8) 72.5 SaaS and subscription 7.6 9.7 17.3 Total Software Licensing 90.8 (1.1) 89.7 Maintenance 77.3 (2.3) 75.0 Services 38.
Slide 35: Reconciliation – IFRS (IAS 18) to non-IFRS (IAS 18)
Reconciliation – IFRS (IAS 18) to non-IFRS (IAS 18) 35 3 Months Ending 30 June Change 2018 2018 2017 2017 IFRS Non-IFRS Non-IFRS IFRS Non-IFRS Non-IFRS IFRS Non-IFRS In USDm, except EPS (IAS 18) adj. (IAS 18) (IAS 18) adj. (IAS 18) Software Licensing 72.5 72.5 57.4 57.4 26% 26% SaaS and subscription
Slide 36: Reconciliation – IFRS (IFRS 15) to non-IFRS (IFRS 15)
Reconciliation – IFRS (IFRS 15) to non-IFRS (IFRS 15) 36 3 Months Ending 30 June 2018 2018 IFRS Non-IFRS Non-IFRS adj. In USDm, except EPS (IFRS 15) (IFRS 15)* Software Licensing 83.2 83.2 SaaS and subscription 7.6 7.6 Total Software Licensing 90.8 90.8 Maintenance 77.3 77.3 Services 38.0 38.0 Total
Slide 37: Reconciliation – Balance sheet IFRS 15 reported to IAS 18
Reconciliation – Balance sheet IFRS 15 reported to IAS 18 37 30 June 2018 IFRS 15 reported IFRS 15 adj. IAS 18 In USDm, except EPS Cash and cash equivalents 88.0 - 88.0 Trade receivables 250.0 8.9 258.9 Other receivables 44.3 (4.5) 39.8 Property, plant and equipment 16.8 - 16.8 Intangible assets 765
Slide 38: Net earnings reconciliation
Net earnings reconciliation 38 In USDm, except EPS Q2 18 Q2 17 IFRS (IFRS 15) net earnings 33.3 25.3 IFRS 15 adjustment -3.0 - Deferred revenue write down - 0.4 Amortisation of acquired intangibles 9.3 8.1 Restructuring 1.1 2.8 Acquisition related costs 7.0 2.0 Taxation -1.3 -1.3 Net earnings for no
Slide 39: Reconciliation from IFRS to non-IFRS for EBIT and EBITDA
Reconciliation from IFRS (IFRS 15) to non-IFRS (IAS 18) for EBIT and EBITDA 39 USDm Q2 2018 EBIT Q2 2018 EBITDA IFRS (IFRS 15) 45.4 68.4 IFRS 15 adjustment -3.0 -3.0 Deferred revenue write-down - - Amortisation of acquired intangibles 9.3 - Restructuring 1.1 1.1 Acquisition-related charges 4.8 4.8 N
Slide 40: Definitions
Definitions 40 Non-IFRS adjustments Other Impact of IFRS 15 Constant currencies Adjustments made resulting from elimination of impact of IFRS 15 accounting Prior year results adjusted for currency movement Deferred revenue write-down Like-for-like (LFL) Adjustments made resulting from acquisitions A
Slide 41: www.temenos.com
@) TEMENOS The banking software company www.temenos.com ‘in| iy | Fi oe] ic)