Temenos Ag · SIX:TEMN
Temenos — Q2 2017 Earnings Presentation
39 slides from Temenos's earnings presentation, Jul 19, 2017
Slide 1: The software specialist for banking and finance
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Slide 2: Financial results & business update
Financial results & business update Quarter ended 30 June 2017 19 July 2017
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 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. Al
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: Q2 2017 summary
Q2 2017 summary 7 Strong momentum across all KPIs Recognised as a Leader by industry analysts Total software licensing up 22% Gartner Magic Quadrant for Global Retail Core Banking* Total revenues up 15% EBIT up 21% Core renovation critical to digital strategy Digital Banking Engagement Platf
Slide 8: Q2 2017 sales review
Q2 2017 sales review 8 Strong growth in signings and pipeline generation Strong momentum within the installed base across all geographies driven by progressive renovation Digital and regulatory pressure on banks driving Competitive market growth deals Add-ons to 55% of LTM license revenues fro
Slide 9: Market growth drivers
Market growth drivers 9 Geographies Europe - digital transformation and cost focus Developed Asia - growth in Private Banking assets and digital transformation Australia - digitisation and wealth players integrating wealth management and superannuation businesses Emerging Markets - time-to-m
Slide 10: Key implementations progressing well
Key implementations progressing well 10 • Greenfield digital bank (Pepper) and • Core replacement for domestic Retail and subsequent migration of existing business Corporate across 4 Nordic countries • Core replacement and digital transformation for • Core replacement and digital transformation for
Slide 11: U.S. update
U.S. update 11 U.S. banks are focused on fintech competition and risk around supporting ageing legacy systems Increase in banks assessing their digital strategy and considering embarking on progressive renovation Strength and quality of pipeline continues to improve month-on-month Making fur
Slide 12: TCF 2017 – Real-world Fintech
TCF 2017 – Real-world Fintech 12 19th TCF held in Lisbon with over 1,200 attendees, showcasing new products and technologies Temenos Marketplace particularly well received Demonstrated strength of Temenos ecosystem across clients, prospects, partners and fintechs Key takeaways included: Real
Slide 13: Financial update
Financial update Max Chuard, CFO, COO
Slide 14: Q2 2017 non-IFRS financial highlights (c.c.)
Q2 2017 non-IFRS financial highlights (c.c.) 14 Total software licensing up 22% Y-o-Y Maintenance growth of 11% Y-o-Y Total revenue growth of 15% Y-o-Y EBIT up 21% Y-o-Y, with LTM EBIT margin of 30.0% EPS growth of 24% Y-o-Y, LTM EPS of USD 2.25 Q2 operating cash flows of USD 44m, DSOs d
Slide 15: Non-IFRS income statement – operating
Non-IFRS income statement – operating 15 Y-o-Y Y-o-Y In USDm Q2 17 Q2 16 Y-o-Y c.c. LTM 17 LTM 16 Y-o-Y c.c. reported reported Software licensing 57.4 47.8 20% 21% 219.9 191.2 15% 16% SaaS and subscription 15.4 12.6 22% 24% 54.9 48.0 14% 16% Total software licensing 72.8 60.4 21% 22% 274.8 239.3 15%
Slide 16: Like-for-like revenue and costs
Like-for-like revenue and costs 16 Q2 LFL non-IFRS revenues up 13% Q2 LFL non-IFRS costs up 10% Maintenance Total software licensing Services USDm USDm 200 140 180 120 160 +11% +10% 140 100 120 80 100 +18% 80 60 60 40 40 +10% 20 20 0 0 Q2 2016 Q2 2017 Q2 2016 Q2 2017 Continued investment driving str
Slide 17: Non-IFRS income statement – non-operating
Non-IFRS income statement – non-operating 17 In USDm, except EPS Q2 17 Q2 16 Y-o-Y LTM 17 LTM 16 Y-o-Y EBIT 48.0 38.7 24% 200.8 169.8 18% Net finance charge -4.4 -4.2 4% -16.4 -18.3 -11% FX gain / (loss) -0.6 -0.6 NA -0.3 -2.8 NA Tax -5.6 -4.2 36% -22.6 -19.5 16% Net profit 37.3 29.7 25% 161.6 129.2
Slide 18: IFRS cash conversion
IFRS cash conversion 18 USDm 300 117% 130% 250 200 113% 150 100 50 0 LTM Q2 2015 LTM Q2 2016 LTM Q2 2017 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 interest Share Bond sheet Borrowings Net debt (31/3/17) cash Tax Capex and FX Dividend buyback proceeds M&A (30/6/17) (30/6/17) (30/6/17) 400 300 4 16 52 8 149 44 200 40 253 553 31 100 209 379 0 -100 300 -200 -30
Slide 20: Update on Rubik integration
Update on Rubik integration 20 Acquisition of Rubik completed on 22 May 2017 Integration into Temenos Asia Pacific progressing well High level of pipeline activity in Australia for core banking renovation and wealth Market being driven by digitisation and wealth players seeking to integrate
Slide 21: 2017 non-IFRS guidance
2017 non-IFRS guidance 21 Non-IFRS total software licensing growth at constant currencies of 15% to 20% (implying non-IFRS total software licensing revenue of USD 291m to USD 304m) Non-IFRS revenue growth at constant currencies of 10% to 13% (implying non-IFRS revenue of USD 693m to USD 712m)
Slide 22: Summary
David Arnott, CEO eS} TEMENOS
Slide 23: Conclusion
Conclusion 23 Strong momentum in Q2 across all KPIs Digital and regulatory pressure on banks is driving market growth Core renovation is non-discretionary Strong growth across all geographies, client tiers and segments Strong start to Q3, increased visibility and strength of pipeline gives
Slide 24: Appendices
Appendices TEMENOS
Slide 25: FX assumptions underlying 2017 guidance
FX assumptions underlying 2017 guidance 25 In preparing the 2017 guidance, the Company has assumed the following FX rates: USD to Euro exchange rate of 0.895 USD to GBP exchange rate of 0.787; and USD to CHF exchange rate of 0.971
Slide 26: FX exposure
FX exposure 26 % of total USD EUR GBP CHF Other Total software licensing 55% 35% 2% 4% 4% Maintenance 65% 22% 6% 6% 0% Services 41% 34% 5% 5% 15% Revenues 56% 30% 4% 5% 5% Non-IFRS costs 26% 18% 18% 8% 30% Non-IFRS EBIT 128% 58% -24% -2% -60% NB. All % are approximations based on 2016 actuals Mitiga
Slide 27: Total software licensing revenue breakdown by geography
Total software licensing revenue breakdown by geography 27 Q2 2016 Q2 2017 APAC APAC 7% 7% 15% 18% Europe Europe 20% 16% Americas Americas MEA MEA 55% 62% LTM Q2 2016 LTM Q2 2017 APAC APAC 10% 10% 17% Europe 18% Europe 17% Americas Americas 18% MEA MEA 56% 54%
Slide 28: Total software licensing revenue breakdown by customer tier
Total software licensing revenue breakdown by customer tier 28 Q2 2016 Q2 2017 1 and 2 1 and 2 48% 52% 3, 4 and 5 37% 63% 3, 4 and 5 LTM Q2 2016 LTM Q2 2017 1 and 2 1 and 2 3, 4 and 5 45% 55% 3, 4 and 5 50% 50%
Slide 29: Software licensing revenue breakdown by competitive deals / add-ons
29 Software licensing revenue breakdown by competitive deals / add-ons to installed base Q2 2016 Q2 2017 Competitive Competitive deals deals Add-ons to Add-ons to 54% 46% installed base 60% 40% installed base LTM Q2 2016 LTM Q2 2017 Competitive Competitive deals deals Add-ons to 64% Add-ons to 59% 3
Slide 30: DSOs have declined significantly
DSOs have declined significantly 30 200 195 180 176 160 140 130 124 120 100 Q2 2014 Q2 2015 Q2 2016 Q2 2017
Slide 31: Balance sheet – debt and leverage
Balance sheet – debt and leverage 31 Net debt and leverage ratios* USDm 500 2.4x 450 2.3x 2.1x 400 350 1.2x 300 1.3x 1.3x 1.3x 1.2x 250 200 0.8x 0.7x 150 100 50 0 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 * proforma non-IFRS EBITDA
Slide 32: Capitalization of development costs
Capitalization of development costs 32 USDm Q1 15 Q2 15 Q3 15 Q4 15 FY 15 Cap’ dev’ costs -10.3 -11.2 -10.8 -13.0 -45.3 Amortisation 8.8 8.8 8.7 8.7 35.0 Net cap’ dev’ -1.5 -2.4 -2.1 -4.3 -10.3 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
Slide 33: Reconciliation from IFRS to non-IFRS
Reconciliation from IFRS to non-IFRS 33 IFRS revenue measure + Deferred revenue write-down = Non-IFRS revenue measure IFRS profit measure +/- Deferred revenue writedown +/- Discontinued activities +/- Acquisition related charges +/- Amortisation of acquired intangibles +/- Restructuring +/- Taxation
Slide 34: Accounting elements not included in non-IFRS guidance
Accounting elements not included in non-IFRS guidance 34 Below are the accounting elements not included in the 2017 non-IFRS guidance: FY 2017 estimated deferred revenue write down of USD 3m FY 2017 estimated amortisation of acquired intangibles of USD 35m FY 2017 estimated acquisition related
Slide 35: Reconciliation from IFRS to non-IFRS
Reconciliation from IFRS to non-IFRS 35 3 Months Ending 30 June Change 2017 2017 2016 2016 In USDm, except EPS IFRS Adj. Non-IFRS IFRS Adj. Non-IFRS IFRS Non-IFRS Total Software Licensing 72.4 0.4 72.8 60.1 0.3 60.4 20% 21% Maintenance 66.8 66.8 61.2 61.2 9% 9% Services 35.1 35.1 32.2 32.2 9% 9% Tot
Slide 36: Net earnings reconciliation
Net earnings reconciliation 36 In USDm, except EPS Q2 17 Q2 16 IFRS net earnings 25.3 20.9 Deferred revenue write-down 0.4 0.3 Amortisation of acquired intangibles 8.1 8.1 Restructuring 2.8 1.5 Acquisition related costs 2.0 - Taxation -1.3 -1.0 Net earnings for non-IFRS EPS 37.3 29.7 No. of dilutive
Slide 37: Reconciliation from IFRS to non-IFRS for EBIT and EBITDA
Reconciliation from IFRS to non-IFRS for EBIT and EBITDA 37 USDm Q2 2017 EBIT Q2 2017 EBITDA IFRS 34.7 54.7 Deferred revenue write-down 0.4 0.4 Amortisation of acquired intangibles 8.1 - Restructuring 2.8 2.8 Acquisition-related charges 2.0 2.0 Non-IFRS 48.0 59.9
Slide 38: Definitions
Definitions 38 Non-IFRS adjustments Other Deferred revenue write-down Constant currencies Adjustments made resulting from acquisitions Prior year results adjusted for currency movement Discontinued activities Like-for-like (LFL) Discontinued operations at Temenos that do not qualify as such under Ad
Slide 39: www.temenos.com
TEMENOS The software specialist for banking and finance www.temenos.com ‘in| iy | Fi Oo ic)