Temenos Ag · SIX:TEMN
Temenos — Q3 2020 Earnings Presentation
43 slides from Temenos's earnings presentation, Oct 15, 2020
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 September 2020 15 October 2020
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: Underlying sequential improvement in Q3
Underlying sequential improvement in Q3 Q3 2020 Step-change in demand for SaaS Strong growth in recurring revenue of 16% SaaS ACV of USD14m, up 108% SaaS ACV SaaS revenue growth of 61% 16 Total software licensing down 23% 14 Underlying sequential improvement, Q2 12 clearly the trough Str
Slide 8: Step-change in demand for SaaS
Step-change in demand for SaaS Covid-19 is accelerating demand for SaaS with SaaS ACV up 108% in Q3 Signed the largest ever ACV deal to date, for Transact in the US A number of Transact license deals for a combined c. US$16-18m converted from license to SaaS in the quarter, generating incremen
Slide 9: Significant growth in SaaS ACV pipeline
Significant growth in SaaS ACV pipeline The increase in demand for SaaS is reflected in the significant SaaS ACV pipeline growth over the last 3 years SaaS ACV pipeline has grown at a CAGR of 120% over the last 2 years with strong acceleration in the last 12 months SaaS ACV pipeline Sep-18 Sep-1
Slide 10: Q3 2020 sales review
Q3 2020 sales review Q3 2020 total software licensing Strong momentum in SaaS, a number of Transact deals converted from license to SaaS in the quarter Geographic split Strong new pipeline activity for licenses also continued in Q3 with good growth year-on-year APAC 20% 24% Europe Deals with i
Slide 11: Q3 2020 operational overview
Q3 2020 operational overview 15 implementation go-lives in Q3 2020, totalling 78 in 2020YTD, vs. 69 in the first three quarters of 2019 Clients continue to adopt remote implementation methodologies to work around lock-downs Nearly all projects have now moved to remote implementation as banks a
Slide 12: After a slow down in 2020, bank IT spend is expected to accelerate in 2021
After a slow down in 2020, bank IT spend is expected to accelerate in 2021 Q3/Q4 2020 - infrastructure 2021 – acceleration Q1 2020 - ensure Q2 2020 - client-level & operations-level in IT spend business continuity response response expected Initial focus on business Refocus on infrastructure, Capex
Slide 13: Looking forward
Looking forward Covid-19 accelerating demand for SaaS as more banks seek to gain benefit from running core banking and front office platforms in the cloud Banks running on legacy technology continue to struggle to provide best-in-class digital services to their customers Structural drivers of
Slide 14: Financial update
Financial update Takis Spiliopoulos, CFO
Slide 15: Q3 2020 non-IFRS financial highlights
Q3 2020 non-IFRS financial highlights Revenue and profit Cash flow and Balance Sheet SaaS up 61% Q3 operating cash flow of USD 63m, up 27% SaaS ACV up 108% Q3 operating cash conversion of 119% of Total software licensing down 23% IFRS EBITDA Maintenance growth of 8% DSOs at 111 days, d
Slide 16: Non-IFRS income statement – operating
Non-IFRS income statement – operating Y-o-Y Y-o-Y In USDm Q3 20 Q3 19 Y-o-Y c.c. LTM 20 LTM 19 Y-o-Y c.c. reported reported Software licensing 52.6 83.5 -37% -38% 283.3 362.7 -22% -19% SaaS and subscription 23.9 14.6 64% 61% 94.0 50.1 88% 92% Total software licensing 76.5 98.1 -22% -23% 377.3 412.8
Slide 17: Like-for-like revenue and costs
Like-for-like revenue and costs Q3 20 LFL non-IFRS revenues down 16% Q3 20 LFL non-IFRS costs down 27% Maintenance Total software licensing Services USDm USDm 250 250 (29%) 200 200 150 (27%) 150 (29%) 100 100 +2% 50 50 +11% +9% +15% +7% +13% 0 0 Q3 2019 Q3 2020 Q3 2019 Q3 2020 Cost base flexibil
Slide 18: Non-IFRS income statement – non-operating
Non-IFRS income statement – non-operating In USDm, except EPS Q3 20 Q3 19 Y-o-Y LTM 20 LTM 19 Y-o-Y EBIT 83.5 79.1 5% 306.4 299.7 2% Net finance charge -8.1 -5.7 42% -32.6 -19.2 70% FX gain / (loss) 0.4 1.2 NA 2.7 0.3 NA Tax -10.0 -8.9 12% -37.6 -38.4 -2% Net profit 65.8 65.6 0% 238.9 242.4 -1% EPS
Slide 19: DSOs continue to decline
DSOs continue to decline DSOs 140 124 123 (9 days of which due to M&A) 120 114 9 111 100 Q3 2017 Q3 2018 Q3 2019 Q3 2020 19
Slide 20: IFRS cash conversion
IFRS cash conversion USDm 119% 400 116% 107% 350 300 250 200 150 100 50 0 LTM Q3 2018 LTM Q3 2019 LTM Q3 2020 EBITDA Operating cashflow Cash conversion significantly above target of 100% 20
Slide 21: Group liquidity
Group liquidity Cash on Cash on USDm balance Net proceeds balance sheet Operating from Interest, FX sheet Reported net (30/6/20) cash Tax Capex borrowings M&A related and leases (30/9/20) Borrowings debt 450 250 63 (6) (24) (30) (3) (9) 113 50 121 -150 -350 1,114 1,001 -550 -750 -950 -1150 Leverage
Slide 22: Revised 2020 non-IFRS guidance
Revised 2020 non-IFRS guidance The 2020 guidance is based on the assumption that the recessionary crisis due to COVID-19 had the largest impact in H1 2020, with steady improvement in our end market environment in Q4 2020 as banks adapt to Covid-19. Our guidance for 2020 is in constant currencies.
Slide 23: Sustainable annual growth targets
Sustainable annual growth targets Metric Sustainable long term annual targets (Non-IFRS) Total software licensing At least 15% CAGR Total revenue 10-15% CAGR EPS At least 15% CAGR Tax rate c. 20% Cash conversion 100%+ of EBITDA p.a. Medium-term targets (3-5 years) DSOs 90 days EBIT Margin 36%+ Tax r
Slide 24: Summary
| Summary Max Chuard, CEO
Slide 25: Conclusion
Conclusion Strong acceleration in SaaS which is expected to continue in 2021 and beyond Q2 was the trough, underlying sequential improvement in Q3 Even stronger improvement adjusting for conversion of license to SaaS ACV in Q3 USD16-18m of Transact license deals converted to USD7m of SaaS AC
Slide 26: Appendix
| Appendix @® TEMENOS | 26
Slide 27: FX assumptions underlying 2020 guidance
FX assumptions underlying 2020 guidance In preparing the 2020 guidance, the Company has assumed the following FX rates: EUR to USD exchange rate of 1.17 GBP to USD exchange rate of 1.29; and USD to CHF exchange rate of 0.92 27
Slide 28: FX exposure
FX exposure % of total USD EUR GBP CHF Other Total software licensing 59% 25% 3% 3% 10% Maintenance 71% 20% 2% 2% 5% Services 53% 29% 3% 1% 13% Revenues 62% 24% 3% 2% 9% Non-IFRS costs 29% 14% 13% 8% 36% Non-IFRS EBIT 131% 44% (20)% (9)% (46)% NB. All % are approximations based on 2019 actuals Mitig
Slide 29: Total software licensing revenue breakdown by geography
Total software licensing revenue breakdown by geography Q3 2019 Q3 2020 9% 25% APAC 20% 24% APAC Europe Europe 34% Americas Americas MEA 33% 23% MEA 32% LTM 2019 LTM 2020 13% 20% APAC 17% 22% APAC Europe Europe 26% Americas Americas 33% 28% 41% MEA MEA 29 Note: Q1-20 geographic breakdown adjusted fo
Slide 30: Total software licensing revenue breakdown by customer tier
Total software licensing revenue breakdown by customer tier Q3 2019 Q3 2020 1 and 2 1 and 2 29% 49% 3, 4 and 5 3, 4 and 5 51% 71% LTM 2019 LTM 2020 1 and 2 1 and 2 32% 3, 4 and 5 3, 4 and 5 46% 54% 68% 30
Slide 31: Software licensing revenue: competitive vs non-competitive installed base
Software licensing revenue breakdown by competitive deals / non-competitive, installed base Q3 2019 Competitive Q3 2020 Competitive deals deals 19% 23% Non- Non- competitive, competitive, installed base installed base 77% 81% LTM 2019 Competitive LTM 2020 Competitive deals deals 32% 31% Non- Non- co
Slide 32: Balance sheet – debt and leverage
Balance sheet – debt and leverage Net debt and leverage ratios* USDm 1200 3.1x 2.6x 2.6x 2.6x 2.6x 1000 800 600 1.6x 1.6x 1.5x 1.5x 1.4x 400 200 0 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 * proforma non-IFRS EBITDA adjusted for lease expense now reported under deprecia
Slide 33: Q3-20 v Q3-19 assets
Q3-20 v Q3-19 assets 2,188 2,209 76 113 312 285 Comments: Trade receivables – 12 days improvement in DSO 1,702 1,713 No other significant changes USDm 98 98 Q3 2019 Q3 2020 33
Slide 34: Q3-20 v Q3-19 liabilities and equity
Q3-20 v Q3-19 liabilities and equity 2,188 2,209 208 191 245 280 Comments: Strong deferred revenue 1,218 1,114 growth driven by SaaS growth Lower borrowings mainly linked 178 to Bridge facility repayment 162 USDm 355 446 Other Liabilities driven by Kony deferred tax liabilities 2019 2020 Equ
Slide 35: Capitalization of development costs
Capitalization of development costs USDm Q1 18 Q2 18 Q3 18 Q4 18 FY 18 Cap’ dev’ costs (12.6) (13.2) (13.0) (13.9) (52.6) Amortisation 10.8 11.1 11.1 11.9 44.9 Net cap’ dev’ (1.8) (2.0) (1.9) (2.0) (7.7) USDm Q1 19 Q2 19 Q3 19 Q4 19 FY 19 Cap’ dev’ costs (14.1) (14.3) (15.2) (21.0) (64.6) Amortisati
Slide 36: 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 +/- Deferred revenue write down +/- Discontinued activities +/- Amortisation of acquired intangibles +/- Acquisition related charges +/- Restructuring +/- Taxation =
Slide 37: 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 2020 non-IFRS guidance: FY 2020 estimated deferred revenue write down of USD 13m FY 2020 estimated amortisation of acquired intangibles of USD 65-70m FY 2020 estimated restructuring cost
Slide 38: Reconciliation – IFRS to non-IFRS
Reconciliation – IFRS to non-IFRS 3 Months Ending 30 September 3 Months Ending 30 September 2020 2020 2019 2019 In USDm, except EPS IFRS Non-IFRS adj. Non-IFRS IFRS Non-IFRS adj. Non-IFRS Software Licensing 52.6 52.6 83.5 83.5 SaaS and subscription 19.8 4.1 23.9 13.5 1.1 14.6 Total Software Licensin
Slide 39: Net earnings reconciliation
Net earnings reconciliation In USDm, except EPS Q3 20 Q3 19 IFRS net earnings 41.0 49.3 Deferred revenue write down 4.1 1.1 Amortisation of acquired intangibles 15.8 12.3 Restructuring 7.7 0.9 Acquisition related costs - 3.3 Acquisition related financing costs - 0.7 Taxation (2.8) (2.0) Net earnings
Slide 40: Reconciliation from IFRS to non-IFRS for EBIT and EBITDA
Reconciliation from IFRS to non-IFRS for EBIT and EBITDA USDm Q3 20 EBIT Q3 20 EBITDA IFRS 55.9 92.8 Deferred revenue write-down 4.1 4.1 Amortisation of acquired intangibles 15.8 - Restructuring 7.7 7.7 Acquisition-related charges - - Non-IFRS 83.5 104.6 40
Slide 41: Definitions
Definitions Non-IFRS adjustments Other Deferred revenue write-down Revenue visibility Adjustments made resulting from acquisitions Visibility on revenue includes a combination of revenue that is contractually committed and Discontinued activities revenue that is in our pipeline and that is likely to
Slide 42: SaaS - Financial metrics definitions
SaaS - Financial metrics definitions Annual value of incremental business taken in-year. Includes New Customers, up-sell/cross-sell. Only includes the Annual Contract recurring element of the contract and exclude variable elements. Value (ACV) Total value of incremental business taken in-year (Booki
Slide 43: Thank You
Thank You temenos.com