Temenos Ag · SIX:TEMN
Temenos — Q4 2023 Earnings Presentation
49 slides from Temenos's earnings presentation, Feb 19, 2024
Slide 1: Temenos
temenos
Slide 2: Financial Results and Business Update
Financial Results and Business Update Andreas Andreades, CEO Takis Spiliopoulos, CFO 19 February 2024 Quarter ended, 31 December 2023 2
Slide 3: Disclaimer
Disclaimer Our presentation and this document may contain forward-looking statements relating to the future of the business and financial performance of Temenos AG. Any statements we make about our expectations, plans and prospects for the Company, including any guidance on the Company’s financial p
Slide 4: Non-IFRS information
Non-IFRS information In its presentation and in this document, the Company may present and discuss non-IFRS measures. Readers are cautioned that non-IFRS measures are subject to inherent limitations. Non-IFRS measures are not based on any comprehensive set of accounting rules or principles and shoul
Slide 5: Q4-23 highlights
Q4-23 highlights Q4-23 and FY-23 financial FY-24 guidance highlights Q4-23 operational highlights (non-IFRS, c.c.) (non-IFRS, c.c.) • Q4-23 results in line with pre-announcement • Stable sales environment throughout the • ARR growth of about 15% • ARR, Total Software Licensing, EBIT, EPS and quarter
Slide 6: Agenda
Agenda Operational highlights Financial update Conclusion Appendix 6 6
Slide 7: Q4-23 sales and operational review
Q4-23 sales and operational review Total software licensing • Continued stable sales environment throughout Q4-23; positive pipeline development with multiple large deals signed Geographic split • Subscription transition substantially complete with strong value uplift on new deals Q4-23 and renewals
Slide 8: Subscription transition substantially complete
Subscription transition substantially complete Subscription and term license mix Subscription was 44% of FY-22 subscription and term mix 2% 23% 49% 51% 48% 55% 68% 68% 77% 98% 77% 51% 49% 52% 45% 23% 32% 32% Q4-21 Q1-22 Q2-22 Q3-22 Q4-22 Q1-23 Q2-23 Q3-23 Q4-23 Subscription Term License Subscription
Slide 9: SaaS momentum continues with revenue growth of 25% in FY-23
SaaS momentum continues with revenue growth of 25% in FY-23 SaaS Revenue USDm 55 31% CAGR LTM Q4-21 to LTM Q4-23 50 45 40 35 30 25 20 15 10 5 0 Q4-20 Q1-21 Q2-21 Q3-21 Q4-21 Q1-22 Q2-22 Q3-22 Q4-22 Q1-23 Q2-23 Q3-23 Q4-23 Q4-23 SaaS ACV of USD9m; mix of new logos and additional consumption 9 Note: n
Slide 10: Strong ARR growth trajectory, up 16% in FY-23
Strong ARR growth trajectory, up 16% in FY-23 USDm ARR 800 700 15% CAGR LTM Q4-21 to LTM Q4-23 600 500 400 300 200 100 0 Q1-21 Q2-21 Q3-21 Q4-21 Q1-22 Q2-22 Q3-22 Q4-22 Q1-23 Q2-23 Q3-23 Q4-23 ARR growth driven by SaaS growth, maintenance growth acceleration and subscription transition 10 Note: non-
Slide 11: Strategic priorities for 2024
Strategic priorities for 2024 Temenos Temenos Enterprise Leap Services Generative & Lean Responsible AI Core 11
Slide 12: Agenda
Agenda Operational highlights Financial update Conclusion Appendix 12 12
Slide 13: Q4-23 Non-IFRS financial highlights
Q4-23 Non-IFRS financial highlights Revenue and profit (non-IFRS, c.c.) Cash flow • ARR of USD 730.0m, up 16% • Q4-23 operating cash flow of USD 175.7m, up 31% y-o-y; up 24% • Subscription revenue of USD 67.3m in Q4-23 in FY-23 • SaaS revenue up 19% in Q4-23 • FY-23 operating cash conversion of 118%
Slide 14: ARR and Non-IFRS income statement – operating
ARR and Non-IFRS income statement – operating Q4-23 Q4-22 Y-o-Y Y-o-Y c.c. FY-23 FY-22 Y-o-Y Y-o-Y c.c. ARR (USDm) reported reported ARR 730.0 626.1 17% 16% 730.0 626.1 17% 16% Q4-23 Q4-22 Y-o-Y Y-o-Y c.c. FY-23 FY-22 Y-o-Y Y-o-Y c.c. Income statement (USDm) reported reported Subscription 67.3 47.3
Slide 15: ARR Bridge FY-22/FY-23
ARR Bridge FY-22/FY-23 (16) 730 (20) 9 111 626 20 Opening ARR Expansion ARR Expansion ARR - Contraction Churn FX changes FY23 ARR - new logos upsell/cross sell ARR - downsell • Expansion ARR – new logos are deals done with new customers • Expansion ARR – upsell/cross include deals with existing cust
Slide 16: Like-for-like revenues and costs
Like-for-like revenues and costs • Q4-23 LFL Non-IFRS revenues up 6% • Q4-23 LFL Non-IFRS costs up 7% • FY-23 LFL Non-IFRS revenues up 5% • FY-23 LFL Non-IFRS costs up 2% LFL Non-IFRS Services revenue LFL Non-IFRS Product Revenue LFL Non-IFRS Services costs LFL Non-IFRS Product costs 1,200 +2% 700 (
Slide 17: Non-IFRS income statement – non-operating
Non-IFRS income statement – non-operating Y-o-Y Y-o-Y In USDm, except EPS Q4-23 Q4-22 reported FY-23 FY-22 reported EBIT 101.3 94.0 8% 313.0 272.4 15% Net finance charge (5.8) (6.7) (13)% (22.4) (23.1) (3)% FX gain / (loss) (0.8) 1.6 (149)% 0.8 1.3 (40)% Tax (19.8) (17.6) 13% (59.7) (47.5) 26% Net p
Slide 18: IFRS cash conversion
IFRS cash conversion USD m 100% 112% 124% 105% 118% 500 450 400 350 IFRS EBITDA 300 Operating Cashflow 250 200 150 100 50 0 FY-19 FY-20 FY-21 FY-22 FY-23 Cash conversion well above 100% target 18
Slide 19: Group liquidity
Group liquidity USDm (61) (88) 392 (195) 90 (31) 107 (765) (658) Cash on Operating Cash Tax Capex Net Proceeds / Interest, FX Cash on Borrowings Reported Net Debt Balance Sheet Repayment of & Leases Balance Sheet (31/12/22) Borrowings and (31/12/23) Investments Leverage at 1.6x at end of Q4-23 19 No
Slide 20: FY-24 guidance (non-IFRS, c.c.)
FY-24 guidance (non-IFRS, c.c.) FY-24 guidance FY-23 base (USD, c.c.) ARR About 15% growth 729m Total software licensing 7-10% growth 445m EBIT 7-9% growth 310m EPS 6-8% growth 3.19* Free Cash Flow At least 16% growth 243m* * FY-23 EPS and Free Cash Flow are reported figures and not restated. See Di
Slide 21: Agenda
Agenda Operational highlights Financial update Conclusion Appendix 21 21
Slide 22: Mid-term targets (non-IFRS, c.c.)
Mid-term targets (non-IFRS, c.c.) Mid-term targets (USD) FY-23 base (USD, c.c.) ARR >1.3bn 729m EBIT >570m 310m Free Cash Flow (reported) >700m 243m* * FY-23 Free Cash Flow is reported figure and not restated. See Disclaimer at beginning of this presentation on forward-looking statements 22
Slide 23: 2024 Capital Markets Day
2024 Capital Markets Day • Capital Markets Day being held on Tuesday 20th February 2024, from 0900 – 0930 UK / 1000 – 1030 CET with presentations commencing at 0930 UK / 1030 CET • Event will be held virtually and in person at The Institute of Engineering and Technology, Savoy Place, London, WC2R 0B
Slide 24: Concluding remarks
Concluding remarks • Successfully moving to recurring revenue business model with USD730m of ARR at end of Q4-23, representing 84% of FY-23 product revenue • Significant contribution to ARR growth from upsell/cross sell of existing customer base • Subscription transition substantially complete, mini
Slide 25: Agenda
Agenda Operational highlights Financial update Conclusion Appendix 25 25
Slide 26: Illustrative Non-IFRS EBIT Bridge FY-23/FY-24
Illustrative Non-IFRS EBIT Bridge FY-23/FY-24 7-9% y-o-y growth 310 EBIT FY23 CCY Maintenance Saas Profit Services Profit Variable, Investments, EBIT FY24 (Guidance) Wage inflation • Visibility on SaaS profitability driving FY-24 EBIT growth • Prior year headwinds on services business overcome, cont
Slide 27: FCF evolution 2023 to 2024
FCF evolution 2023 to 2024 Estimated movements for illustrative purposes only At least 16% growth 243 FY-23 Opex investment Net Services Term License Subsc License SaaS & Maint Tax Capex & Cap Dev FY-24 & inflation Impact Impact Impact Revenue/Deferred 27
Slide 28: Impact of subscription transition on P&L, cashflow and ARR
Impact of subscription transition on P&L, cashflow and ARR Term 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 model – Cash Subscription model
Slide 29: Impact of SaaS contracts on P&L, cashflow and ARR
Impact of SaaS contracts on P&L, cashflow and ARR SaaS model – P&L 2 2 2 2 2 2 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 SaaS revenue Cashflow SaaS model – Cash 2 2 2 2 2 2 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Cashflow SaaS model – ARR 2 2 2 2 2 2 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 ARR 2
Slide 30: Q4-23 and FY-23 operational overview
Q4-23 and FY-23 operational overview 111 go-lives in Q4-23 including 51 implementation go-lives 391 go-lives in FY-23 including 191 implementation go-lives 30
Slide 31: FX and other assumptions underlying FY-24 guidance
FX and other assumptions underlying FY-24 guidance In preparing the FY-24 guidance, the Company has assumed the following FX rates: EUR to USD exchange rate of 1.08 GBP to USD exchange rate of 1.27; and USD to CHF exchange rate of 0.87 The Company has also assumed the following for FY-24 guidance: •
Slide 32: FX exposure
FX exposure % of total USD EUR GBP CHF INR RON Other Total software licensing 69% 19% 2% 3% 0% 0% 6% Maintenance 77% 15% 2% 1% 0% 0% 6% Services 55% 27% 6% 5% 0% 0% 7% Revenues 70% 18% 3% 3% 0% 0% 6% Non-IFRS costs 27% 18% 10% 5% 16% 2% 21% Non-IFRS EBIT 165% 19% (15)% (3)% (35)% (3)% (27)% NB. All
Slide 33: Quarterly SaaS ACV
Quarterly SaaS ACV 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 10.7 17.0 USDm Q1-22 Q2-22 Q3-22 Q4-22 SaaS ACV 19.0 10.6 17.9 10.5 USDm Q1-23 Q2-23 Q3-23 Q4-23 SaaS ACV 18.9 20.2 12.8 8.
Slide 34: Quarterly ARR, FCF
Quarterly ARR, FCF ARR, USD m Q1-20 Q2-20 Q3-20 Q4-20 Q1-21 Q2-21 Q3-21 Q4-21 Q1-22 Q2-22 Q3-22 Q4-22 Q1-23 Q2-23 Q3-23 Q4-23 ARR 468.1 475.4 486.4 493.5 500.1 514.4 530.8 553.4 568.4 581.9 595.9 626.1 645.2 666.8 687.5 730.0 FCF, USD m Q1-20 Q2-20 Q3-20 Q4-20 Q1-21 Q2-21 Q3-21 Q4-21 Q1-22 Q2-22 Q3-
Slide 35: Total software licensing revenue breakdown by geography
Total software licensing revenue breakdown by geography Q4-22 Q4-23 15% 17% APAC APAC 33% Europe Europe 40% MEA MEA Americas 21% Americas 28% 24% 22% FY-22 FY-23 15% 20% APAC APAC Europe Europe 41% 43% MEA MEA 24% Americas 19% Americas 18% 20% 35
Slide 36: Total software licensing revenue breakdown by customer tier
Total software licensing revenue breakdown by customer tier Q4-22 Q4-23 42% 1 and 2 46% 1 and 2 54% 58% 3, 4, and 5 3, 4, and 5 FY-22 FY-23 1 and 2 1 and 2 43% 3, 4, and 5 43% 3, 4, and 5 57% 57% 36
Slide 37: Software licensing revenue by competitive deals / add-ons
Software licensing revenue breakdown by competitive deals/ add-ons to installed base Q4-22 Q4-23 33% 35% Competitive deals Competitive deals Add-ons to installed base Add-ons to installed base 65% 67% FY-22 FY-23 Competitive deals 38% Competitive deals 38% Add-ons to installed base Add-ons to instal
Slide 38: DSOs
DSOs 150 141 129 125 124 124 117 115 114 111 112 107 106 100 50 0 Q1-21 Q2-21 Q3-21 Q4-21 Q1-22 Q2-22 Q3-22 Q4-22 Q1-23 Q2-23 Q3-23 Q4-23 DSOs at 141 at Q4-23 38
Slide 39: Balance sheet – leverage
Balance sheet –leverage Leverage ratios 3.0x 2.6x 2.6x 2.6x 2.5x 2.3x 2.1x 2.2x 2.1x 2.0x 2.0x 2.0x 2.0x 1.9x 1.8x 1.8x 1.8x 1.7x 1.6x 1.5x 1.0x 0.5x 0.0x Q1-20 Q2-20 Q3-20 Q4-20 Q1-21 Q2-21 Q3-21 Q4-21 Q1-22 Q2-22 Q3-22 Q4-22 Q1-23 Q2-23 Q3-23 Q4-23 39
Slide 40: Capitalization of development costs
Capitalization of development costs USDm Q1-21 Q2-21 Q3-21 Q4-21 FY-21 Cap’ dev’ costs (19.2) (20.9) (20.9) (25.2) (86.2) Amortisation 13.8 15.6 15.1 17.0 61.4 Net cap’ dev’ (5.4) (5.4) (5.8) (8.2) (24.8) USDm Q1-22 Q2-22 Q3-22 Q4-22 FY-22 Cap’ dev’ costs (21.9) (22.3) (21.3) (20.8) (86.3) Amortisat
Slide 41: FCF Evolution 2023 to Mid-term
FCF Evolution 2023 to Mid-term Estimated movements for illustrative purposes only >700 243 FY23 IFRS EBITDA Net Trade Deferred Revenue Tax Capex & Cap Dev Mid-term Receivables & Payables 41
Slide 42: Reconciliation from IFRS to non-IFRS
IFRS revenue measure + Deferred revenue write-down = Non-IFRS revenue measure Reconciliation IFRS profit measure from IFRS to +/- +/- Share-based payments and related social charges Deferred revenue write down non-IFRS +/- Discontinued activities +/- Amortisation of acquired intangibles +/- M&A rela
Slide 43: 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 FY-24 non-IFRS guidance: FY-24 estimated share-based payments charge of c.5% of revenue FY-24 estimated amortisation of acquired intangibles of USD50m FY-24 estimated restructuring / M&A relat
Slide 44: Earnings Reconciliation Q4-23 – IFRS to non-IFRS
Earnings Reconciliation Q4-23 – IFRS to non-IFRS 3 Months Ending 31 December 3 Months Ending 31 December In USDm, except EPS 2023 2023 2022 2022 IFRS Non-IFRS adj. Non-IFRS IFRS Non-IFRS adj. Non-IFRS Subscription 67.3 67.3 47.3 47.3 Term Licence 31.7 31.7 51.0 51.0 SaaS 54.9 54.9 45.7 45.7 Total So
Slide 45: Earnings Reconciliation FY-23 – IFRS to non-IFRS
Earnings Reconciliation FY-23 – IFRS to non-IFRS 12 Months Ending 31 December 12 Months Ending 31 December In USDm, except EPS 2023 2023 2022 2022 IFRS Non-IFRS adj. Non-IFRS IFRS Non-IFRS adj. Non-IFRS Subscription 160.4 160.4 105.7 105.7 Term Licence 78.1 78.1 135.4 135.4 SaaS 205.1 205.1 163.7 16
Slide 46: Net earnings reconciliation IFRS to non-IFRS
Net earnings reconciliation IFRS to non-IFRS In USDm, except EPS Q4-23 Q4-22 FY-23 FY-22 IFRS net earnings 43.9 48.0 134.7 114.4 Share-based payments 18.8 12.9 53.9 47.8 Amortisation of acquired intangibles 11.8 11.0 45.0 45.8 Restructuring and M&A related costs 2.5 6.0 14.7 15.4 Fair value change o
Slide 47: Non-IFRS definitions
Non-IFRS definitions Other Revenue visibility Visibility on revenue includes a combination of revenue that is contractually committed and revenue that is in our pipeline and that is likely to be booked, but Non-IFRS adjustments is not contractually committed and therefore may not occur. Share-based
Slide 48: Financial metrics definitions and reporting
Financial metrics definitions and reporting SaaS Annual Contract Annual value of incremental business taken in-year. Includes New Customers, up-sell/cross-sell. Only includes the recurring element of the contract and exclude variable elements. Value (ACV) Disclosure: quarterly reporting, annual repo
Slide 49: Thank you
Thank You Thank you 49