Temenos Ag · SIX:TEMN
Temenos — Q3 2021 Earnings Presentation
51 slides from Temenos's earnings presentation, Oct 14, 2021
Slide 1: Temenos – The Banking Software Company
TEMENOS THE BANKING SOFTWARE COMPANY
Slide 2: Financial results & business update
Financial results & business update 14 October 2021 Quarter ended 30 September 2021
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: Continued strong momentum in Q3-21
Continued strong momentum in Q3-21 Review of Q3-21 Q3-21 non-IFRS financial highlights Continued strong momentum in the third quarter SaaS ACV of USD10.7m License and SaaS both performed strongly, with Total Bookings growth of 19% SaaS revenue accelerating to 30% and licenses SaaS revenue
Slide 8: Continued momentum in SaaS
Continued momentum in SaaS 30% growth in SaaS revenue Q3-21 and ACV of USD10.7m US and Europe were the largest contributors to ACV ACV almost entirely driven by new bookings this quarter, more than double new bookings vs. Q3-20 SaaS ACV expected to grow 50-60% in FY-21 USDm USDm ACV YTD SaaS
Slide 9: Strong growth in Total Bookings
Strong growth in Total Bookings USDm Total Bookings grew 19% in Q3-21 on the back of Q3-21 Total Bookings strong demand across client tiers 155 150 145 Total Bookings has now grown 64% 2021 YTD as we 140 continue to take market share 135 130 Product demand remains broad based, Transact 125 and
Slide 10: Q3-21 sales and operational review
Q3-21 sales and operational Q3-21 total software licensing review Geographic split Sales environment continued to improve through the quarter in all APAC regions 13% 24% Europe US continued to be the largest contributor to total software Americas licensing in the quarter MEA Signings in the US
Slide 11: Expanding our addressable market by entering the Banking-as-a-Service market
Expanding our addressable market by entering the Banking-as-a-Service market Two partnerships announced in the quarter with Banking-as-a-Service (BaaS) providers Mbanq and Vodeno Mbanq offerings services to Credit Unions in the US, an estimated USD3.6bn market, and Vodeno is targeting the Europe
Slide 12: Progressing strategic partnerships
Progressing strategic partnerships Partnership with Salesforce brings Strategic Partnership with DXC Technology together all the CRM capabilities to accelerate the digital transformation of provided by Salesforce and a broad DXC’s banking clients by offering a set of transactional capabilities p
Slide 13: Why we win
Why we win Leading functionality, Only focused Packaged product, localization, on banking single code base advanced technology Scaling through Relentless focus on ecosystem of technology Leader in our market, innovation, highest and implementation 3,000+ clients R&D over 27 years partners 13
Slide 14: Outselling the competition
Outselling the competition Neo vendors Traditional vendors New digital entrants, cloud-only Cross-industry, not packaged or offering, limited functional scope, cloud & SaaS ready technology tool-kit Why we win Why we win Cloud native, 27 years of Banking IP Highest R&D in the industry Depth and brea
Slide 15: Financial update
Financial update Takis Spiliopoulos CFO
Slide 16: Q3-21 non-IFRS financial highlights
Q3-21 non-IFRS financial highlights Revenue and profit Cash flow SaaS revenue up 30% in Q3-21 Q3-21 operating cash flow of USD68m, up 7% y-o-y Total software licensing up 23% in Q3-21 LTM operating cash conversion of 113% of IFRS Maintenance growth of 3% in Q3-21 EBITDA Total revenue up
Slide 17: Non-IFRS income statement – operating
Non-IFRS income statement – operating Y-o-Y Y-o-Y In USDm Q3-21 Q3-20 Y-o-Y c.c. FY-21 YTD FY-20 YTD Y-o-Y c.c. reported reported Software licensing 63.5 52.6 21% 20% 173.7 144.2 20% 19% SaaS and subscription 31.3 23.9 31% 30% 88.8 69.7 27% 25% Total software licensing 94.8 76.5 24% 23% 262.5 213.9
Slide 18: Like-for-like revenue and costs
Like-for-like revenue and costs Q3-21 LFL non-IFRS revenues up 9% Q3-21 LFL non-IFRS costs up 10% Total software licensing Maintenance Services USDm USDm 250 250 -5% 200 200 150 +10% 150 +3% 100 100 50 50 +23% 0 0 Q3 2020 Q3 2021 Q3 2020 Q3 2021 18
Slide 19: Non-IFRS income statement – non-operating
Non-IFRS income statement – non-operating In USDm, except EPS Q3-21 Q3-20 Y-o-Y FY-21 YTD FY-20 YTD Y-o-Y EBIT 86.0 83.0 4% 228.3 203.4 12% Net finance charge -6.5 -8.1 -20% -19.3 -23.3 -17% FX gain / (loss) 0.6 0.4 N.A. -0.7 1.1 N.A. Tax -13.8 -10.0 38% -35.4 -24.5 44% Net profit 66.3 65.4 1% 173.0
Slide 20: DSOs will continue to decline
DSOs will continue to decline DSOs 130 123 120 6 114 111 111 110 106 100 Q3 2018 Q3 2019 Q3 2020 Q3 2021 DSOs expected to continue declining to c.105 by year end 2021 20
Slide 21: IFRS cash conversion
IFRS cash conversion USDm 107% 119% 113% 450 400 350 300 250 200 150 100 50 0 LTM Q3 2019 LTM Q3 2020 LTM Q3 2021 EBITDA Operating cashflow Cash conversion well above 100% target 21
Slide 22: Group liquidity
Group liquidity Net proceeds/repayment USDm Cash on balance sheet of borrowings and Cash on balance sheet (30/6/21) Operating cash Tax Capex Share buyback investments Interest, FX and leases (30/9/21) Borrowings Reported net debt 350 (3) (24) (6) 28 150 (9) 85 68 88 -50 -250 -450 1,058 973 -650 -850
Slide 23: Strong growth in ARR, deferred revenue and FCF
Strong growth in ARR, deferred revenue and FCF ARR growth of 9% Maintenance continued to grow at similar rates to Q2-21, expected to accelerate in Q4-21 Maintenance collection and increasing SaaS contribution driving deferred revenue growth and FCF ARR growth underpins confidence in FY-21 gu
Slide 24: Overview of KPIs
Overview of KPIs Sales P&L Cash Total Bookings* Total software licensing Operating cash conversion SaaS ACV EBIT margin Free cash flow Total ARR* EPS DSOs *New KPIs Total Bookings – includes fair value of license contract value, committed maintenance contract value on licence, and SaaS committed con
Slide 25: 2021 non-IFRS guidance (c.c.) confirmed
2021 non-IFRS guidance (c.c.) confirmed FY-21 guidance FY-20 base SaaS ACV +50-60% 34 ARR +10-15% 494 Total software licensing (%) +14-18% 357 Total revenue (%) +8-10% 902 EBIT – margin and growth growth of +12-14% (USD360-367m), implying 37.1% margin 35.8% margin, USD323m Cash conversion to remai
Slide 26: Re-confirming 2025 Targets
Re-confirming 2025 Targets Mid-term Guidance 2020 base (CCY) 2025 Targets Total Software Licensing 357 15-20% CAGR 2020-25 Total revenue 902 10-15% CAGR 2020-25 EBIT margin 35.8% c.41% by 2025 Total Bookings 491 17-22% CAGR 2020-25 ARR 494 >=15% CAGR 2020-25 FCF 297 >=15% CAGR 2020-25 to reach >USD6
Slide 27: Non-IFRS EBIT Bridge 2020/2021
Non-IFRS EBIT Bridge 2020/2021 EBIT Margin 36.8% 35.8% +130bps 37.1% 12 c.28 13 c.38 8 363 331 323 EBIT FY20 Reported Forex EBIT FY20 CCY Recurring Revenue License growth Investments (Net of Variable EBIT FY21 (Mid-Point (Margin) cost reversals) compensation of Guidance) Strong visibility on margin
Slide 28: Summary
| Summary Max Chuard CEO ® TEMENOS
Slide 29: Conclusion
Conclusion Continued strong momentum in the third quarter License and SaaS both performed strongly, with SaaS revenue accelerating to 30% and licenses up 20% Total Bookings growth driving backlog and recurring revenue visibility into 2022 EBIT growth continued to drive operating and free cas
Slide 30: Appendix
Appendix 30
Slide 31: FX assumptions underlying 2021 guidance
FX assumptions underlying 2021 guidance In preparing the 2021 guidance, the Company has assumed the following FX rates: EUR to USD exchange rate of 1.17 GBP to USD exchange rate of 1.37; and USD to CHF exchange rate of 0.92 31
Slide 32: FX exposure
FX exposure % of total USD EUR GBP CHF Other Total software licensing 67% 21% 2% 2% 8% Maintenance 75% 17% 2% 2% 5% Services 55% 28% 3% 2% 13% Revenues 68% 20% 2% 2% 8% Non-IFRS costs 23% 17% 13% 7% 39% Non-IFRS EBIT 149% 26% (19)% (7)% (50)% NB. All % are approximations based on 2020 actuals Mitiga
Slide 33: Quarterly SaaS ACV
Quarterly SaaS ACV USDm Q3-18 Q4-18 SaaS ACV 2.5 3.4 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 33
Slide 34: Quarterly ARR, Total Bookings, FCF
Quarterly ARR, Total Bookings, FCF ARR, USDm Q1-20 Q2-20 Q3-20 Q4-20 Q1-21 Q2-21 Q3-21 ARR 468.1 475.4 486.4 493.5 500.1 514.4 530.8 Total Bookings, Q1-20 Q2-20 Q3-20 Q4-20 Q1-21 Q2-21 Q3-21 USDm Total Bookings 60.5 80.0 128.8 222.0 127.5 165.2 153.0 FCF, USDm Q1-20 Q2-20 Q3-20 Q4-20 Q1-21 Q2-21 Q3-
Slide 35: Total Bookings average tenure
Total Bookings average tenure Below is the average tenure in FY-20 for the components of total bookings: Average tenure of SaaS contracts in FY-20 was 3.9 years Average tenure of license and maintenance contracts in FY-20 was 3.6 years Average tenure of total bookings in FY-20 was 3.7 years 35
Slide 36: Total software licensing revenue breakdown by geography
Total software licensing revenue breakdown by geography Q3-20 APAC Q3-21 APAC 20% 24% Europe 13% 24% Europe Americas Americas MEA MEA 18% 33% 23% 45% LTM Q3-20 APAC LTM Q3-21 APAC 17% 15% 19% 22% Europe Europe Americas Americas MEA MEA 33% 30% 38% 29% 36
Slide 37: Total software licensing revenue breakdown by customer tier
Total software licensing revenue breakdown by customer tier Q3-20 1 and 2 Q3-21 1 and 2 29% 3, 4 and 5 43% 3, 4 and 5 57% 71% LTM Q3-20 LTM Q3-21 1 and 2 1 and 2 32% 3, 4 and 5 37% 3, 4 and 5 63% 68% 37
Slide 38: Software licensing revenue breakdown by competitive deals
Software licensing revenue breakdown by competitive deals / add-ons to installed base (excluding SaaS ACV) Q3-20 Q3-21 Competitive 16% Competitive 23% deals deals Non Non competitive, competitive, 77% installed installed 84% based based LTM Q3-20 LTM Q3-21 Competitive Competitive 31% deals deals 28%
Slide 39: Balance sheet – debt and leverage
Balance sheet – debt and leverage Net debt and leverage ratios USDm 1200 2.3x 2.2x 1000 2.1x 2.1x 800 600 400 200 0 Q4 2020 Q1 2021 Q2 2021 Q3 2021 39
Slide 40: Q3 21 v Q3 20 assets
Q3 21 v Q3 20 assets 2,169 2,209 125 99 Comments: Trade receivable marginal increase linked with improvement 1,668 1712 in revenue and DSO remains flat year on year 1,699 1,678 Other assets increased primarily 285 driven by prepaid cloud support 291 85 113 invoices Q3-2021 Q3-2020 Cash Trade rec
Slide 41: Q3 21 v Q3 20 liabilities
Q3 21 v Q3 20 liabilities 2,209 2,169 216 Comments: 405 446 Deferred revenues increase due to 199 178 growth in SaaS and strong advance collections for Maintenance 930 1,108 1,058 Lower borrowings mainly linked to 1,114 bridge facility repayment 184 174 Equity change driven mostly by buy back
Slide 42: Capitalization of development costs
Capitalization of development costs USDm Q1-19 Q2-19 Q3-19 Q4-19 FY-19 Cap’ dev’ costs (14.1) (14.3) (15.2) (21.0) (64.6) Amortisation 11.7 12.0 12.2 13.7 49.6 Net cap’ dev’ (2.5) (2.3) (3.0) (7.3) (15.1) USDm Q1-20 Q2-20 Q3-20 Q4-20 FY-20 Cap’ dev’ costs (17.7) (18.0) (20.8) (19.9) (76.3) Amortisat
Slide 43: 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 +/- Share-based payments and related social charges +/- Deferred revenue write down +/- Discontinued activities +/- Amortisation of acquired intangibles +/- Acquisit
Slide 44: 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 2021 non-IFRS guidance: FY 2021 estimated share-based payments charge of USD 50m FY 2021 estimated amortisation of acquired intangibles of USD 50m FY 2021 estimated restructuring costs o
Slide 45: Earnings Reconciliation – IFRS to non-IFRS
Earnings Reconciliation – IFRS to non-IFRS 3 Months Ending 30 September 3 Months Ending 30 September In USDm, except EPS 2021 2021 2020 2020 IFRS Non-IFRS adj. Non-IFRS IFRS Non-IFRS adj. Non-IFRS Software licensing 63.5 63.5 52.6 52.6 SaaS and subscription 31.3 31.3 19.8 4.1 23.9 Total Software Lic
Slide 46: EBIT & EBITDA reconciliation from IFRS to non-IFRS
EBIT & EBITDA reconciliation from IFRS to non-IFRS USDm Q3-21 EBIT Q3-21 EBITDA IFRS 40.8 75.6 Share-based payments 26.2 26.2 Deferred revenue write-down - - Amortisation of acquired intangibles 12.4 - Restructuring 5.2 5.1 Acquisition related costs 1.4 1.4 Non-IFRS 86.0 108.3 46
Slide 47: Net earnings reconciliation IFRS to non-IFRS
Net earnings reconciliation IFRS to non-IFRS In USDm, except EPS Q3-21 Q3-20* IFRS net earnings 28.3 41.0 Share-based payments 26.2 -0.4 Deferred revenue write down 0.0 4.1 Amortisation of acquired intangibles 12.4 15.8 Restructuring 5.2 7.7 Acquisition related costs 1.4 - Taxation -7.1 -2.7 Net ear
Slide 48: Non-IFRS Definitions
Other Non-IFRS Definitions Revenue visibility Visibility on revenue includes a combination of revenue Non-IFRS adjustments that is contractually committed and revenue that is in our pipeline and that is likely to be booked, but is not Share-based payment charges contractually committed and therefore
Slide 49: SaaS Financial metrics definitions and reporting
SaaS Financial metrics definitions and reporting Annual Contract Annual value of incremental business taken in-year. Includes New Customers, up-sell/cross-sell. Value (ACV) Only includes the recurring element of the contract and exclude variable elements. Disclosure: quarterly reporting, annual guid
Slide 50: License vs SaaS Profitability
License vs SaaS Profitability Cumulative Gross profit 5.4 4.8 4.2 3.7 NPV: $3.6 3.1 2.8 2.6 2.6 2.4 2.2 NPV: $2.1 2.1 2.0 1.8 1.7 1.5 1.5 1.3 1.1 1.0 0.5 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 License & Maintenance Saas Break even Net present value of SaaS gross mar
Slide 51: Thank You
Thank You temenos.com