Temenos Ag · SIX:TEMN
Temenos — Q2 2020 Earnings Presentation
44 slides from Temenos's earnings presentation, Jul 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 June 2020 15 July 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: Q2 highlights
Q2 highlights Q2 2020 Recognised as a leader Strong growth in recurring revenue of 17% SaaS growth of 62% Only Global Power Seller in Forrester’s Global Banking Platform Deals Survey 2020 SaaS ACV up 21% Maintenance growth of 10% Reconfirmed as Top Global Player for 8th R Total software li
Slide 8: Q2 2020 sales review
Q2 2020 sales review Q2 sales continued to be impacted by Covid-19 Q2 2020 total software licensing Many banks remain focused on business continuity; limited visibility on Geographic split when implementations could start also a continued cause of delay Increase in sales activity leading to do
Slide 9: Partnership with HCL signed in Q2 for non-banking services
Partnership with HCL signed in Q2 for non-banking services Temenos and HCL signed a 7 year exclusive strategic agreement for non-banking services The agreement grants HCL a license to develop, market and support Temenos Quantum for non- banking services only Temenos Quantum is the market leadi
Slide 10: Sustained momentum in SaaS and cloud
Sustained momentum in SaaS and cloud Continued growth in demand for SaaS with SaaS ACV up 21% in Q2 and 60% in H1 Signings across all regions globally SaaS expected to continue growing organically in FY 20 despite the current crisis Increased interest in SaaS and cloud as crisis highlights b
Slide 11: Q2 2020 operational overview
Q2 2020 operational overview 28 implementation go-lives in Q2 2020, vs. 22 in Q2 2019 ‘Remote first’ implementation methodology announced at the Temenos Community Forum being rapidly adopted by both new and existing clients Significant majority of projects have now moved to remote implementati
Slide 12: TCF online with Covid-19 specific product developments
TCF online with Covid-19 specific product developments Rapidly adapted TCF to a two day virtual event, showcasing innovation and allow clients to engage directly with our experts Over 4,500 individuals attended sessions over the two days, driving solid new lead generation We announced a number
Slide 13: The world's best selling banking software vendor
The world’s best selling banking software vendor #1 #1 #1 #1 Best-selling Best-selling Best-selling Best-selling Core Banking Digital Banking Retail Compliance for 15 years & Channels Payments & Risk Mgmt. System New-name clients: New and existing clients: A Leader in Digital Banking: A top global p
Slide 14: Looking forward
Looking forward Technology-enabled banks running on modern digital platforms have adapted to the crisis – easily moving to remote working, rapidly launching new products and servicing clients through sophisticated digital channels Banks running on legacy technology have struggled; the crisis wil
Slide 15: Financial update
Financial update Takis Spiliopoulos, CFO
Slide 16: Q2 2020 non-IFRS financial highlights
Q2 2020 non-IFRS financial highlights Revenue and profit Cash flow and Balance Sheet Total software licensing down 22% Q2 operating cash flow of USD 94m, up 21% Maintenance growth of 10% Q2 operating cash conversion of 115% of Total revenue down 8% IFRS EBITDA EBIT down 7% DSOs at 107
Slide 17: Non-IFRS income statement – operating
Non-IFRS income statement – operating Y-o-Y Y-o-Y In USDm Q2 20 Q2 19 Y-o-Y c.c. LTM 20 LTM 19 Y-o-Y c.c. reported reported Software licensing 58.1 92.6 (37%) (36%) 314.3 359.7 (13%) (10%) SaaS and subscription 23.1 14.6 58% 62% 84.7 43.3 96% 105% Total software licensing 81.2 107.2 (24%) (22%) 399.
Slide 18: Like-for-like revenue and costs
Like-for-like revenue and costs Q2 20 LFL non-IFRS revenues down 17% Q2 20 LFL non-IFRS costs down 22% Maintenance Total software licensing Services USDm USDm 250 250 (29%) 200 200 150 (22%) 150 (30%) 100 100 +2% 50 50 +11% +9% +15% +7% +13% 0 0 Q2 2019 Q2 2020 Q2 2019 Q2 2020 Cost base flexibil
Slide 19: Non-IFRS income statement – non-operating
Non-IFRS income statement – non-operating In USDm, except EPS Q2 20 Q2 19 Y-o-Y LTM 20 LTM 19 Y-o-Y EBIT 67.3 73.1 (8%) 302.1 288.8 5% Net finance charge (8.0) (4.9) 62% (30.2) (17.7) 71% FX gain / (loss) (0.4) 0.3 NA 3.4 (1.4) NA Tax (8.0) (10.0) (20%) (36.5) (38.0) (4%) Net profit 50.9 58.5 (13%)
Slide 20: DSOs continue to decline
DSOs continue to decline DSOs 140 124 120 114 110 107 (2 days due to M&A) 100 Q2 2017 Q2 2018 Q2 2019 Q2 2020 DSOs expected to be around 110 day at the end of 2020 20
Slide 21: IFRS cash conversion
IFRS cash conversion USDm 111% 115% 116% 400 350 300 250 200 150 100 50 0 Q2 2018 Q2 2019 Q2 2020 LTM EBITDA Operating cashflow Cash conversion significantly above target of 100% 21 Note: IFRS EBITDA adjusted for Kony earn-out
Slide 22: Group liquidity
Group liquidity Cash on Net Cash on USDm balance proceeds balance sheet Operating from M&A Interest, FX sheet Reported (31/3/20) cash Tax Capex Dividend borrowings related and leases (30/6/20) Borrowings net debt 450 250 94 (4) (20) (63) (2) 28 14 121 50 103 -150 -350 -550 1,118 997 -750 -950 -1150
Slide 23: 2020 non-IFRS guidance confirmed
2020 non-IFRS guidance confirmed The 2020 guidance is based on the assumption that the recessionary crisis due to COVID-19 had the largest impact in H1 2020, with continued gradual improvement in our end market environment in Q3 and Q4 2020 as banks adapt to the crisis and lockdowns are gradually re
Slide 24: 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 DSOs 90 days EBIT Margin 36%+ Tax rate 18-20% 2
Slide 25: Summary
| Summary Max Chuard, CEO
Slide 26: Conclusion
Conclusion Continued impact of Covid-19 on license signings in Q2 Deals are being delayed, not cancelled – one third of delayed deals from Q1 signed in Q2 Gradual improvement expected in Q3 and Q4 2020 Recurring revenue growth, cost base flexibility and strong cost control driving cash gener
Slide 27: Appendix
| Appendix @ TEMENOS | 27
Slide 28: 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 1.10 GBP to USD exchange rate of 1.23; and USD to CHF exchange rate of 0.96 28
Slide 29: 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 30: Total software licensing revenue breakdown by geography
Total software licensing revenue breakdown by geography Q2 2019 Q2 2020 13% 20% APAC 19% 21% APAC Europe Europe 25% Americas 18% Americas MEA 42% MEA 42% LTM 2019 LTM 2020 15% 18% APAC 15% 22% APAC Europe Europe 25% Americas Americas 32% 42% 30% MEA MEA 30 Note: Q1-20 geographic breakdown adjusted f
Slide 31: Total software licensing revenue breakdown by customer tier
Total software licensing revenue breakdown by customer tier Q2 2019 Q2 2020 1 and 2 1 and 2 48% 3, 4 and 5 41% 3, 4 and 5 52% 59% LTM 2019 LTM 2020 1 and 2 1 and 2 36% 3, 4 and 5 3, 4 and 5 47% 53% 64% 31
Slide 32: Software licensing revenue: competitive vs non-competitive, installed base
Software licensing revenue breakdown by competitive deals / non-competitive, installed base Q2 2019 Competitive Q2 2020 Competitive deals deals Non- Non- competitive, 35% competitive, 40% 60% installed base 65% installed base LTM 2019 Competitive LTM 2020 Competitive deals deals 35% 29% Non- Non- co
Slide 33: 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 1000 800 600 1.6x 1.6x 1.5x 1.5x 1.4x 1.4x 400 200 0 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 * proforma non-IFRS EBITDA adjusted for lease expense now reported under deprecia
Slide 34: Q2-20 v Q2-19 assets
Q2-20 v Q2-19 assets 2,186 121 277 1,490 Comments: 87 273 Fixed assets up $642m driven 1,692 by acquisitions 1,050 USDm 80 96 Q2 2019 Q2 2020 34
Slide 35: Q2-20 v Q2-19 liabilities and equity
Q2-20 v Q2-19 liabilities and equity 2,186 191 295 1,490 Comments: 195 240 1,118 Borrowings increase of $464m, 654 including draw down on facility and issuance of bond 174 86 USDm 315 408 Other Liabilities driven by Kony deferred tax liabilities 2019 2020 Equity change driven mostly by LTM pro
Slide 36: 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 37: 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 38: 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 39: Reconciliation – IFRS to non-IFRS
Reconciliation – IFRS to non-IFRS 3 Months Ending 30 June 3 Months Ending 30 June 2020 2020 2019 2019 In USDm, except EPS IFRS Non-IFRS adj. Non-IFRS IFRS Non-IFRS adj. Non-IFRS Software Licensing 58.1 58.1 92.6 92.6 SaaS and subscription 18.9 4.2 23.1 13.5 1.1 14.6 Total Software Licensing 77.0 4.2
Slide 40: Net earnings reconciliation
Net earnings reconciliation In USDm, except EPS Q2 20 Q2 19 IFRS net earnings 42.9 45.0 Deferred revenue write down 4.2 1.1 Amortisation of acquired intangibles 16.4 12.3 Restructuring 10.7 1.8 Acquisition related costs (20.4) 0.3 Taxation (2.9) (2.0) Net earnings for non-IFRS EPS 50.9 58.5 No. of d
Slide 41: Reconciliation from IFRS to non-IFRS for EBIT and EBITDA
Reconciliation from IFRS to non-IFRS for EBIT and EBITDA USDm Q2 20 EBIT Q2 20 EBITDA IFRS 56.5 93.6 Deferred revenue write-down 4.2 4.2 Amortisation of acquired intangibles 16.4 - Restructuring 10.7 10.7 Acquisition-related charges (20.4) (20.4) Non-IFRS 67.3 88.1 41
Slide 42: 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 43: 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 44: Thank You
Thank You temenos.com