Temenos Ag · SIX:TEMN
Temenos — Q3 2019 Earnings Presentation
44 slides from Temenos's earnings presentation, Oct 16, 2019
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 2019 16 October 2019
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: Review of Q3 2019
Review of Q3 2019 Q3 2019 Acquisition of Kony strengthens Total software licensing growth of 15% in Q3, Temenos Infinity, US strategy and 20% YTD SaaS and cloud expertise Strong momentum in SaaS, with revenues up 93% and ACV up 164% in Q3 Total revenue growth of 12% in Q3, 17% YTD EBIT up 16
Slide 8: Q3 2019 sales review
Q3 2019 sales review Digital, regulatory and cost pressures and move to open Geographic split of total software licensing banking continue to drive market growth Good sales momentum in Europe, Asia and Americas, in Q3 2019 total software licensing particular in the US, continuing the trend from
Slide 9: Significant momentum in SaaS
Significant momentum in SaaS Strong performance in SaaS in Q3 Key signings include High profile challenger bank entering Australian market Alba, UK challenger bank, focusing on SME Multiple wins across countries in Europe for neo-banks and new entrants Developing SaaS pipeline with Kony
Slide 10: Q3 2019 operational overview
Q3 2019 operational overview Q3 2019 update Global partner network 21 implementation go-lives in Q3 2019 Multiple go-lives in Europe with ongoing tier 6,000+ experienced third party 1 and 2 continuous renovation projects and Temenos consultants Multiple cloud go-lives in Asia and Europe global
Slide 11: Kony integration progressing well
Kony integration progressing well Temenos acquired Kony in September 2019 for an enterprise value of USD 559m and an earn-out of USD 21m Kony is the No.1 digital banking SaaS provider in the US Strengthens Temenos Infinity as the richest and most technologically advanced digital banking product Glob
Slide 12: Kony is the market leader in digital banking
Kony is the market leader in digital banking • Global leader in digital banking and low-code development platforms Market leader in digital • Recognized as a leading player by analysts including Forrester & IDC banking • Very strong mobile development and application capabilities • Global client bas
Slide 13: Financial update
Financial update Takis Spiliopoulos, CFO
Slide 14: Q3 2019 non-IFRS financial highlights
Q3 2019 non-IFRS financial highlights Total software licensing up 15% Y-o-Y (c.c.), 20% 2019 YTD (c.c.) Maintenance growth of 12% Y-o-Y (c.c.), 12% 2019 YTD (c.c.) Total revenue growth of 12% Y-o-Y (c.c.), 17% 2019 YTD (c.c.) EBIT up 16% Y-o-Y (c.c.), 20% 2019 YTD (c.c.), Q3 EBIT margin of 3
Slide 15: Non-IFRS income statement – operating
Non-IFRS income statement – operating Y-o-Y Y-o-Y In USDm Q3 19 Q3 18 Y-o-Y c.c. YTD 19 YTD 18 Y-o-Y c.c. reported reported Software licensing 83.5 80.5 4% 7.0% 239.3 218.2 10% 13% SaaS and subscription 14.6 7.8 87% 93% 42.3 23.5 80% 88% Total software licensing 98.1 88.4 11% 15% 281.5 241.7 16% 20%
Slide 16: Like-for-like revenue and costs
Like-for-like revenue and costs Q3 19 LFL non-IFRS revenues up 7% Q3 19 LFL non-IFRS costs up 1% Maintenance Total software licensing Services USDm USDm 250 250 200 200 -6% 150 1% 150 +8% 100 100 +2% 50 50 +11% +9% +15% +11% +13% 0 0 Q3 2018 Q3 2019 Q3 2018 Q3 2019 Total like-for-like revenue gr
Slide 17: Non-IFRS income statement – non-operating
Non-IFRS income statement – non-operating In USDm, except EPS Q3 19 Q3 18 Y-o-Y YTD 19 YTD 18 Y-o-Y EBIT 79.1 68.2 16% 201.7 167.3 21% Net finance charge -5.7 -4.2 36% -15.0 -11.4 31% FX gain / (loss) 1.2 -0.6 NA 0.7 -0.5 NA Tax -8.9 -8.5 5% -26.0 -21.0 24% Net profit 65.6 54.9 20% 161.5 134.4 20% E
Slide 18: DSOs continue to decline
DSOs continue to decline DSOs 140 129 123 124 (9 days of which due to M&A) 120 9 114 114 100 Q3 2016 Q3 2017 Q3 2018 Q3 2019 18
Slide 19: IFRS cash conversion
IFRS cash conversion USDm 107% 400 111% 116% 350 300 250 200 150 100 50 0 LTM Q3 2017 LTM Q3 2018 LTM Q3 2019 EBITDA Operating cashflow Cash conversion significantly above target of 100% 19
Slide 20: Group liquidity
Group liquidity Change in USDm Cash on debt, interest, Cash on balance sheet Operating FX and lease balance sheet (30/6/19) cash Tax Capex liability M&A (30/9/19) Borrowings Net debt 500 (592) (552) (1) (20) 200 50 87 77 -100 -400 1,218 1,141 -700 439 -1000 -1300 Leverage expected to be below 2.5x b
Slide 21: Revised 2019 non-IFRS guidance range (c.c.)
Revised 2019 non-IFRS guidance range (c.c.) Revised FY 19 guidance Original FY 19 guidance Total software licensing (%) 19.5% - 22.5% 17.5% - 22.5% Implied USDm USD 431 - 442 Total revenue (%) 18.0% - 20.0% 16% - 19% Implied USDm USD 970 - 986 EBIT (USDm) USD 310 – 315m USD 310 – 315m Implied margin
Slide 22: 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 DSOs Less than 90 days EBIT Margin 36%+ Tax rate c. 20% Cash conversion 100%+ of EBITDA p.a. 3-5 year targets EBIT Margi
Slide 23: Summary
| Summary Max Chuard, CEO
Slide 24: Conclusion
Conclusion Digital, regulatory and cost pressures and move to open banking are driving demand Ongoing investment in sales and product to support the six drivers of growth Good sales momentum in Europe, Asia and the Americas, in particular the US Strong momentum in SaaS in particular Acquis
Slide 25: Appendix
| Appendix YW TEMENOS 25
Slide 26: FX assumptions underlying 2019 guidance
FX assumptions underlying 2019 guidance In preparing the 2019 guidance, the Company has assumed the following FX rates: EUR to USD exchange rate of 1.095 GBP to USD exchange rate of 1.210; and USD to CHF exchange rate of 0.980 26
Slide 27: FX exposure
FX exposure % of total USD EUR GBP CHF Other Total software licensing 60% 25% 2% 1% 12% Maintenance 68% 22% 5% 5% 0% Services 46% 30% 8% 3% 13% Revenues 60% 25% 4% 3% 8% Non-IFRS costs 23% 20% 13% 8% 36% Non-IFRS EBIT 142% 35% -15% -9% -53% NB. All % are approximations based on 2018 actuals Mitigate
Slide 28: Total software licensing revenue breakdown by geography
Total software licensing revenue breakdown by geography Q3 2018 APAC Q3 2019 APAC 14% 9% 23% Europe Europe 25% Americas Americas MEA MEA 34% 31% 32% 32% LTM 2018 APAC LTM 2019 APAC 12% 17% 13% Europe 20% Europe Americas Americas 22% MEA MEA 26% 50% 42% 28
Slide 29: Total software licensing revenue breakdown by customer tier
Total software licensing revenue breakdown by customer tier Q3 2018 Q3 2019 1 and 2 1 and 2 45% 3, 4 and 5 49% 3, 4 and 5 51% 55% LTM 2018 LTM 2019 1 and 2 1 and 2 3, 4 and 5 3, 4 and 5 46% 54% 46% 54% 29
Slide 30: Software licensing revenue: competitive deals vs add-ons
Software licensing revenue breakdown by competitive deals / add-ons to installed base Q3 2018 Q3 2019 Competitive Competitive deals 19% deals 30% Add-ons to Add-ons to installed base installed base 70% 81% LTM 2018 Competitive LTM 2019 Competitive deals deals Add-ons to 32% Add-ons to 55% 45% instal
Slide 31: Kony transaction summary
Kony transaction summary • Temenos acquired Kony for an Enterprise Value of USD 559m and an earn-out of USD Acquisition price 21m • Kony had c. USD 50m of debt on Balance Sheet • The acquisition was funded through cash and debt • Temenos used a combination of its existing revolving credit facility a
Slide 32: Balance sheet – debt and leverage
Balance sheet – debt and leverage Net debt and leverage ratios* USDm 1200 3.1x 1000 800 600 1.6x 1.6x 1.5x 1.4x 1.4x 400 1.1x 1.0x 0.9x 200 0 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 * proforma non-IFRS EBITDA adjusted for lease expense now reported under depreciation
Slide 33: Capitalization of development costs
Capitalization of development costs USDm Q1 17 Q2 17 Q3 17 Q4 17 FY 17 Cap’ dev’ costs -11.2 -11.8 -13.4 -14.1 -50.5 Amortisation 8.8 9.8 10.9 10.5 40.0 Net cap’ dev’ -2.4 -2.0 -2.5 -3.6 -10.5 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.
Slide 34: 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 35: 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 2019 non-IFRS guidance: FY 2019 estimated deferred revenue write down of USD 9-10m FY 2019 estimated amortisation of acquired intangibles of USD 58-60m FY 2019 estimated restructuring co
Slide 36: Reconciliation – IFRS to non-IFRS
Reconciliation – IFRS to non-IFRS 3 Months Ending 30 September 3 Months Ending 30 September 2019 2019 2018 2018 In USDm, except EPSd IFRS Non-IFRS adj. Non-IFRS IFRS Non-IFRS adj. Non-IFRS Software Licensing 83.5 83.5 80.5 80.5 SaaS and subscription 13.5 1.1 14.6 7.8 7.8 Total Software Licensing 97.
Slide 37: Net earnings reconciliation
Net earnings reconciliation In USDm, except EPS Q3 19 Q3 18 IFRS net earnings 49.3 46.8 Deferred revenue write down 1.1 0.0 Amortisation of acquired intangibles 12.3 9.1 Restructuring 0.9 0.1 Acquisition related costs 3.3 Acquisition related financing costs 0.7 Taxation -2.0 -1.2 Net earnings for no
Slide 38: Reconciliation from IFRS to non-IFRS for EBIT and EBITDA
Reconciliation from IFRS to non-IFRS for EBIT and EBITDA USDm Q3 19 EBIT Q3 19 EBITDA IFRS 61.5 92.7 Deferred revenue write-down 1.1 1.1 Amortisation of acquired intangibles 12.3 - Restructuring 0.9 0.9 Acquisition-related costs 3.3 3.3 Non-IFRS 79.1 98.0 38
Slide 39: Transition to IFRS 16 Leases
Transition to IFRS 16 “Leases” IFRS 16 “Leases” primarily changes lease accounting for lessee and moves to single accounting model eliminating the distinction between finance leases and operating lease. Leases qualified under IFRS16 are captured on the balance sheet from 1st January 2019. Temeno
Slide 40: Reconciliation – IFRS 16 Income Statement
Reconciliation – IFRS 16 Income Statement 3 Months Ending 30 September 2019 2019 In USDm IFRS Impact of IFRS 16 IFRS 16 adjusted Total Revenue 228.0 - 228.0 Operating Expense (166.5) (0.1) (166.6) EBIT 61.5 (0.1) 61.4 D&A (31.2) 3.9 (27.3) EBITDA 92.7 (4.0) 88.7 Financing Costs (5.3) 0.4 (4.8) Taxat
Slide 41: Reconciliation – IFRS 16 Balance Sheet
Reconciliation – IFRS 16 Balance Sheet 3 Months as at 30 September 2019 2019 In USDm IFRS Impact of IFRS 16 IFRS 16 adjusted Property, plant and equipment 70.4 (48.2) 22.2 Other assets (current / non-current) 2,118.1 (2.1) 2,116.0 Totals assets 2,188.5 (50.3) 2,138.2 Borrowings ( current / non-curre
Slide 42: Reconciliation – IFRS 16 net debt calculation
Reconciliation – IFRS 16 net debt calculation 3 Months Ending 30 September 2019 In USDm IFRS Non-IFRS EBITDA 98.0 IFRS16 adjustment (4.3) IFRS 16 adjusted EBITDA 93.7 LTM EBITDA 357.3 Net Debt reported 1,140.9 SWAP add-back 12.2 IFRS16 adjustment (54.2) IFRS 16 adjusted Net Debt 1,098.9 Leverage 3.0
Slide 43: 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 44: Thank You
Thank You temenos.com