Temenos Ag · SIX:TEMN
Temenos — Q4 2018 Earnings Presentation
53 slides from Temenos's earnings presentation, Feb 12, 2019
Slide 1: Temenos – The Banking Software Company
TEMENOS THE BANKING SOFTWARE COMPANY
Slide 2: Financial results & business update, Quarter ended 31 December 2018
Financial results & business update Quarter ended 31 December 2018 12 February 2019
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 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 r
Slide 5: Agenda
Agenda 1. Business update……………………………………………David Arnott, CEO 2. Financial update…………………………………. Max Chuard, CFO, COO 3. Summary…………………………………………....Max Chuard, CFO, COO 4. Q&A 5
Slide 6: Business update
Business update David Arnott, CEO
Slide 7: Outstanding Q4 and FY 2018
Outstanding Q4 and FY 2018 Q4 2018 FY 2018 Total software licensing growth of 15% Total software licensing growth of 21% Total revenue up 12% Total revenue up 14% EBIT up 15% EBIT up 21% EPS of USD 2.96, +21% Banks urgently need to move to a state-of-the-art application landscape. With
Slide 8: Consistently very strong performance
Consistently very strong performance USDm USDm USDm 450 Total software 300 EBIT 3.5 Non-IFRS EPS licensing 400 250 3.0 350 2.5 300 200 250 2.0 150 200 1.5 150 100 1.0 100 50 0.5 50 0 0 0.0 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2014 FY 2015 FY 2016 FY 2017
Slide 9: Q4 and FY 2018 sales review
Q4 and FY 2018 sales review Broad based demand in 2018 across all segments, tiers Strong contribution across tiers and geographies FY 2018 total software licensing Digital and regulatory pressure, move to open banking and cloud adoption are driving market growth 1 and 2 Signed two strategicall
Slide 10: Strong growth in SaaS and cloud adoption
Strong growth in SaaS and cloud adoption Strong incremental growth in demand for SaaS and cloud adoption, exceeding our expectations Banks are seeking multiple benefits from the cloud: De-risk implementation Decrease time-to-market Lower infrastructure costs Increase resilience We see
Slide 11: FY 2018 operational overview
FY 2018 operational overview Packaged, upgradeable product with 25 years of innovation and functionality enables seamless deployment from day 1 Over 5,000 third party Temenos consultants, critical mass of experts available to support clients across implementation, testing and training Best ref
Slide 12: Financial update
Financial update Max Chuard, CFO, COO
Slide 13: Performance vs. revised 2018 guidance (c.c.)
Performance vs. revised 2018 guidance (c.c.) Initial guidance Revised guidance Exceeded Non-IFRS total software 21% licensing 13.5% to 18.5% 15% to 20% Non-IFRS Revenue growth of12% 10% to 13% 12.5% to to 14%14.5% 14% Total revenues Non-IFRS EBIT of USD 184mUSD to 12.5% USD Revenue USD 255 to 260m g
Slide 14: Non-IFRS (IAS 18) income statement – operating
Non-IFRS (IAS 18) income statement – operating Y-o-Y Y-o-Y IAS 18, in USDm Q4 18 Q4 17 Y-o-Y c.c. FY 18 FY 17 Y-o-Y c.c. reported reported Software licensing 115.1 99.2 16% 16% 307.4 248.5 24% 23% SaaS and subscription 20.0 19.1 4% 6% 75.6 67.5 12% 12% Total software licensing 135.1 118.3 14% 15% 38
Slide 15: Other key financial metrics
Other key financial metrics EPS Operating cash flow Q4 18 EPS of USD 1.15, +15% FY 18 operating cash flow of USD 365m, up 22% FY 18 EPS of USD 2.96, + 21% FY 18 operating cash conversion of 117% into non-IFRS EBITDA DSOs down 9 days organic Debt and leverage Dividend Net debt of USD 526m
Slide 16: 2019 outlook and guidance
2019 outlook and guidance Max Chuard, CFO and COO
Slide 17: Strong start to 2019
Strong start to 2019 Revolutionising Temenos Acquisitions and investments Strategic deal signed banking software 17
Slide 18: Deployment options
Combining the richest banking functionality with ground-breaking technology Experience Driven Designed around customer experience excellence Design Lead Delivering innovative solutions quickly On- premise Independent Deployment options Independent front office and core banking Deployment Open APIs b
Slide 19: Distribution – Digital Front Office
Distribution – Digital Front Office A winning independent, omni-channel digital banking solution Open API-first design Outstanding digital customer acquisition and onboarding capabilities in the cloud Designed around customers using design- led thinking, user journeys and a single customer v
Slide 20: Manufacturing – Core Banking
Manufacturing – Core Banking Continuous deployment Cloud-native, cloud-agnostic Independently scalable Reduced TCO
Slide 21: Building momentum in the US
Building momentum in the US Key US deals signed in 2018 PayPal, Inc. for a loan management system in the cloud Strategically important top tier US bank for Temenos Infinity Acquired Avoka, a US headquartered market leader in customer acquisition and on boarding with over 85 customers in the
Slide 22: SaaS and cloud driving incremental demand
SaaS and cloud driving incremental demand SaaS Total Contract Value Significant growth in incremental demand US$m USD 59m for SaaS and cloud adoption 60 Highly differentiated packaged product with full cloud capabilities Total Contract Value has increased over 6x 40 from FY 17 to FY 18 Growt
Slide 23: Very high product revenue visibility at start of 2019
Very high product revenue visibility at start of 2019 Strong visibility on c.85% of FY 2019 product revenues Maintenance SaaS Subscription and Progressive renovation Sales to installed Strong revenue visibility relicensing base Visibility driven by recurring revenue, committed spend and the installe
Slide 24: Very strong pipeline growth
Very strong pipeline growth Software licensing pipeline Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Strength of pipeline underpins 2019 guidance 24
Slide 25: 2019 non-IFRS guidance range (c.c.)
2019 non-IFRS guidance range (c.c.) FY 19 guidance (IFRS 15) FY 2018 (IFRS 15) base Total software licensing (%) 17.5% - 22.5% Implied USDm USD 438 – 457m 373 Total revenue (%) 16% - 19% Implied USDm USD 975 – 1,000m 841 EBIT (USDm) USD 310 – 315m 265 Implied margin c.31.7% 31.5% Implied organic mar
Slide 26: Medium term targets
Medium term targets Metric Medium term targets Achieved in last 3 years (Non-IFRS) Total software licensing At least 15% CAGR 21% CAGR Total revenue 10-15% CAGR 15% CAGR EBIT 100-150 bps p.a. 114bps average EPS At least 15% CAGR 20% CAGR DSO reduction 5-10 days reduction p.a. 13 days average Cash co
Slide 27: Summary
Summary Max Chuard, CFO and COO
Slide 28: TCF 2019 – The Hague, 2–4 April
TCF 2019 – The Hague, 2 – 4 April Dedicated analyst and investor stream See product launches and our software in action Insights from Temenos executives and industry thought leaders Interaction and learning from Temenos customers and partners Breakout sessions with senior management
Slide 29: Conclusion
Conclusion An outstanding Q4 and FY 2018 Digital and regulatory pressures and move to open banking are driving demand SaaS and cloud adoption driving incremental demand Strong sales execution across geographies and segments Ongoing investment in sales and product Strong start to 2019, ve
Slide 30: Appendix
| Appendix YW TEMENOS 30
Slide 31: FX assumptions underlying 2019 guidance
FX assumptions underlying 2019 guidance In preparing the 2019 guidance, the Company has assumed the following FX rates: USD to Euro exchange rate of 0.851 USD to GBP exchange rate of 0.750; and USD to CHF exchange rate of 1.00 31
Slide 32: FX exposure
FX exposure % of total USD EUR GBP CHF Other Total software licensing 60% 25% 2% 1% 12% Maintenance 68% 22% 5% 5% 0% Services 46% 30% 8% 3% 13% Revenues 60% 25% 4% 3% 8% Non-IFRS costs 23% 20% 13% 8% 36% Non-IFRS EBIT 142% 35% -15% -9% -53% NB. All % are approximations based on 2018 actuals Mitigate
Slide 33: Like-for-like revenue and costs
Like-for-like revenue and costs Q4 18 LFL non-IFRS revenues up 12% Q4 18 LFL non-IFRS costs up 9% FY 18 LFL non-IFRS revenues up 12% FY 18 LFL non-IFRS costs up 9% Maintenance Total software licensing Services USDm USDm 600 900 800 +5% 500 +9% 700 400 600 500 +17% 300 400 200 300 +2% 200 +11
Slide 34: Non-IFRS (IAS 18) income statement – non-operating
Non-IFRS (IAS 18) income statement – non-operating In USDm, except EPS Q4 18 Q4 17 Y-o-Y FY 18 FY 17 Y-o-Y EBIT 100.9 87.6 15% 266.3 223.5 19% Net finance charge -4.2 -3.0 41% -15.7 -14.9 5% FX gain / (loss) -0.4 -0.5 NA -0.9 -2.5 NA Tax -12.9 -11.6 11% -33.5 -27.6 21% Net profit 83.4 72.6 15% 216.2
Slide 35: IFRS cash conversion
IFRS cash conversion USDm 114% 114% 117% 350 300 250 200 150 100 50 0 FY 2016 FY 2017 FY 2018 EBITDA Operating cashflow 35
Slide 36: Group liquidity
Group liquidity Cash on Change in Cash on USDm balance debt, balance sheet Operating Dividends Bond Share interest sheet (31/12/17) cash Tax Capex paid M&A proceeds buyback and FX (31/12/18) Borrowings Net debt 750 550 (21) (65) (46) 350 365 257 174 206 175 150 287 168 -50 439 -250 814 527 -450 Leve
Slide 37: Total software licensing revenue breakdown by geography
Total software licensing revenue breakdown by geography Q4 2017 5% APAC Q4 2018 APAC 13% 18% Europe 18% Europe 21% Americas Americas MEA MEA 20% 45% 61% FY 2017 APAC FY 2018 APAC 9% 19% 16% 18% Europe Europe Americas Americas 22% MEA MEA 21% 50% 44% 37
Slide 38: Total software licensing revenue breakdown by customer tier
Total software licensing revenue breakdown by customer tier Q4 2017 Q4 2018 1 and 2 1 and 2 29% 34% 3, 4 and 5 3, 4 and 5 66% 71% FY 2017 FY 2018 1 and 2 1 and 2 41% 3, 4 and 5 3, 4 and 5 47% 53% 59% 38
Slide 39: Software licensing revenue: competitive deals / add-ons to installed base
Software licensing revenue breakdown by competitive deals / add-ons to installed base Q4 2017 Q4 2018 Competitive Competitive deals deals 44% Add-ons to Add-ons to installed base 59% 41% installed base 56% FY 2017 Competitive FY 2018 Competitive deals deals Add-ons to Add-ons to 59% 40% installed in
Slide 40: DSOs continue to decline
DSOs continue to decline 160 154 140 127 110 days organic, 4 days from Avoka 119 acquisition 120 114 100 Q4 2015 Q4 2016 Q4 2017 Q4 2018 40
Slide 41: Balance sheet – debt and leverage
Balance sheet – debt and leverage Net debt and leverage ratios* USDm 600 1.6x 500 1.4x 1.4x 400 1.3x 1.3x 1.2x 1.2x 1.1x 300 1.0x 0.9x 200 0.8x 0.7x 100 0 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 * proforma non-IFRS EBITDA 41
Slide 42: Capitalization of development costs
Capitalization of development costs 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 10
Slide 43: Reconciliation from IFRS to non-IFRS
Reconciliation from IFRS to non-IFRS 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 intangibl
Slide 44: Accounting elements not included in non-IFRS (IFRS 15) guidance
Accounting elements not included in non-IFRS (IFRS 15) guidance Below are the accounting elements not included in the 2019 non-IFRS (IFRS 15) guidance: FY 2019 estimated deferred revenue write down of USD 4m FY 2019 estimated amortisation of acquired intangibles of USD 45m FY 2019 estimated re
Slide 45: Reconciliation – IFRS (IFRS 15) to IFRS (IAS 18)
Reconciliation – IFRS (IFRS 15) to IFRS (IAS 18) 3 Months Ending 31 December 2018 2018 IFRS IFRS IFRS 15 adj. In USDm, except EPS (IFRS 15) (IAS 18) Software Licensing 123.4 (8.3) 115.1 SaaS and subscription 7.9 12.1 19.9 Total Software Licensing 131.3 3.8 135.1 Maintenance 81.9 (0.3) 81.6 Services
Slide 46: Reconciliation – IFRS (IAS 18) to non-IFRS (IAS 18)
Reconciliation – IFRS (IAS 18) to non-IFRS (IAS 18) 3 Months Ending 31 December 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 115.1 115.1 99.2 99.2 16% 16% SaaS and subscript
Slide 47: Reconciliation – IFRS (IFRS 15) to non-IFRS (IFRS 15)
Reconciliation – IFRS (IFRS 15) to non-IFRS (IFRS 15) 3 Months Ending 31 December 12 Months Ending 31 December 2018 2018 2018 2018 IFRS Non-IFRS IFRS Non-IFRS Non-IFRS adj. Non-IFRS adj. In USDm, except EPS (IFRS 15) (IFRS 15)* (IFRS 15) (IFRS 15)* Software Licensing 123.4 123.4 341.6 341.6 SaaS and
Slide 48: Reconciliation – Balance sheet IFRS 15 reported to IAS 18
Reconciliation – Balance sheet IFRS 15 reported to IAS 18 31 December 2018 In USDm, except EPS IFRS 15 reported IFRS 15 adj. IAS 18 Cash and cash equivalents 287.4 - 287.4 Trade receivables 262.5 9.0 271.5 Other receivables 53.9 (3.5) 50.4 Property, plant and equipment 18.0 - 18.0 Intangible assets
Slide 49: Net earnings reconciliation
Net earnings reconciliation In USDm, except EPS Q4 18 Q4 17 FY 18 FY 17 IFRS (IFRS 15) net earnings 71.3 61.5 168.1 138.4 IFRS 15 adjustment 2.9 - 1.0 - Deferred revenue write down - 0.4 0.1 1.3 Amortisation of acquired intangibles 9.0 9.9 37.2 35.0 Restructuring 0.9 2.3 3.3 6.9 Acquisition related
Slide 50: Reconciliation to non-IFRS (IAS 18) for EBIT and EBITDA
Reconciliation from IFRS (IFRS 15) to non-IFRS (IAS 18) for EBIT and EBITDA USDm Q4 2018 EBIT Q4 2018 EBITDA FY 2018 EBIT FY 2018 EBITDA IFRS (IFRS 15) 87.1 110.7 218.8 311.5 IFRS 15 adjustment 2.9 2.9 1.0 1.0 Deferred revenue - - 0.1 0.1 write-down Amortisation of 9.0 - 37.2 - acquired intangibles
Slide 51: Transition to IFRS 16 Leases
Transition to IFRS 16 “Leases” IFRS 16 “Leases” primarily changes lease accounting for lessee and moves to single accounting model eliminating the distinction between finance leases and operating lease. Leases qualified under IFRS16 will be captured on the balance sheet from 1st January 2019. Te
Slide 52: Definitions
Definitions Non-IFRS adjustments Other Impact of IFRS 15 Revenue visibility Adjustments made in 2018 financials only resulting from elimination of impact Visibility on revenue includes a combination of of IFRS 15 accounting revenue that is contractually committed and revenue that is in our pipeline
Slide 53: Thank You
Thank You temenos.com