Temenos Ag · SIX:TEMN
Temenos — Q1 2020 Earnings Presentation
43 slides from Temenos's earnings presentation, Apr 14, 2020
Slide 1: Temenos – The Banking Software Company
TEMENOS THE BANKING SOFTWARE COMPANY
Slide 2: Financial results & business update, Quarter ended 31 March 2020
Financial results & business update Quarter ended 31 March 2020 14 April 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: Q1 2020 new license performance significantly impacted by COVID-19
Q1 2020 new license performance significantly impacted by COVID-19 Q1 2020 Resilient business model Total software licensing down 26% Recurring revenue growth driving cash Robust growth in recurring revenue of 20% and profit visibility for 2020 SaaS growth of 79% Flexible cost base enables
Slide 8: Q1 2020 sales review
Q1 2020 sales review Sales in the first two months of the quarter were in line with expectations. Q1 2020 total software licensing There was a significant negative impact on licenses in the last month of the quarter due to COVID-19 Geographic split APAC Deals that did not sign in Q1 are being de
Slide 9: Continued momentum in SaaS and cloud
Continued momentum in SaaS and cloud Demand for SaaS continues to grow with SaaS ACV up 104% in Q1 Signings across all regions globally, with demand for both Transact and Infinity SaaS expected to continue growing organically in FY 20 despite the current crisis Crisis highlights benefit of r
Slide 10: Q1 2020 operational overview
Q1 2020 operational overview 35 implementation go-lives in Q1 2020 Partner involvement continues to increase Banks are rapidly adapting to deliver mission critical transformations remotely and to keep implementations progressing during the crisis Temenos already able to run significant part
Slide 11: Enabling our clients to adapt to the crisis
Enabling our clients to adapt to the crisis Temenos software enables our clients to rapidly adapt to the evolving crisis Easily move to remote operations for front and back office Adapt existing products to accommodate changing customer needs e.g., payment holidays, loan restructuring Maintain and e
Slide 12: Looking forward
Looking forward Banks are much better capitalized and in a much stronger position; regulators and central banks have been acting more quickly and decisively than in 2008/2009 Banks’ customers significantly more dependent on digital channels and the crisis will accelerate use of digital in the me
Slide 13: Financial update
Financial update Takis Spiliopoulos, CFO
Slide 14: Q1 2020 non-IFRS financial highlights
Q1 2020 non-IFRS financial highlights Revenue and profit Cash flow and Balance Sheet Total software licensing down 26% Q1 operating cash flow of USD 60m, up 9% Maintenance growth of 11% Q1 operating cash conversion of 106% into Total revenue down 5% IFRS EBITDA EBIT down 22% DSOs at 10
Slide 15: Non-IFRS income statement – operating
Non-IFRS income statement – operating Y-o-Y Y-o-Y In USDm Q1 20 Q1 19 Y-o-Y c.c. LTM 20 LTM 19 Y-o-Y c.c. reported reported Software licensing 33.6 63.2 (47%) (47%) 348.8 350.4 (0%) 1% SaaS and subscription 22.7 13.0 74% 79% 76.2 36.3 110% 120% Total software licensing 56.2 76.2 (26%) (26%) 424.9 38
Slide 16: Like-for-like revenue and costs
Like-for-like revenue and costs Q1 20 LFL non-IFRS revenues down 15% Q1 20 LFL non-IFRS costs down 17% Maintenance Total software licensing Services USDm USDm 250 250 200 200 (23%) 150 (17%) 150 (35%) 100 100 +2% 50 50 +11% +9% +15% +9% +13% 0 0 Q1 2019 Q1 2020 Q1 2019 Q1 2020 Flexible cost base
Slide 17: Non-IFRS income statement – non-operating
Non-IFRS income statement – non-operating In USDm, except EPS Q1 20 Q1 19 Y-o-Y LTM 20 LTM 19 Y-o-Y EBIT 39.4 49.5 (20%) 307.9 276.3 11% Net finance charge (7.2) (4.3) 67% (27.2) (16.5) 65% FX gain / (loss) 1.1 (0.7) N.A. 4.1 (2.2) N.A. Tax (4.6) (7.0) (34%) (38.5) (35.4) 9% Net profit 28.6 37.4 (23
Slide 18: DSOs continue to decline
DSOs continue to decline DSOs 130 127 120 117 6 111 109 (4 days of which due to M&A) 110 100 Q1 2017 Q1 2018 Q1 2019 Q1 2020 We expect DSOs to be around 110 day at the end of 2020 18
Slide 19: IFRS cash conversion
IFRS cash conversion USDm 115% 106% 113% 400 350 300 250 200 150 100 50 0 Q1 2018 Q1 2019 Q1 2020 LTM EBITDA Operating cashflow Cash conversion expected to be above 100% at year end 2020 19
Slide 20: Group liquidity
Group liquidity Cash on Cash on USDm balance Net proceeds balance sheet Operating from Interest, FX sheet Reported net (31/12/19) cash Tax Capex borrowings M&A and leases (31/3/20) Borrowings debt 450 250 60 (4) (20) (72) (1) (13) 103 50 153 -150 -350 1,108 1,005 -550 -750 -950 -1150 Leverage at 2.6
Slide 21: Revised 2020 non-IFRS guidance (c.c.)
Revised 2020 non-IFRS guidance (c.c.) Total software licensing guidance withdrawn FY 20 guidance FY 19 base Total revenue guidance withdrawn SaaS ACV guidance withdrawn New guidance on recurring revenue Recurring revenue At least 13% growth 419 (SaaS + Maintenance) growth (SaaS + Maintenance
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 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 23: Summary
| Summary Max Chuard, CEO
Slide 24: TCF 2020 online, 29-30 April
TCF 2020 online, 29-30 April 2-day virtual event Product announcements and software demonstrations by Temenos experts Mix of streamed content and on-demand sessions Register to attend with this link: TCF Online
Slide 25: Conclusion
Conclusion Impact from COVID-19 on new license sales in last month of the quarter Deals that did not sign in Q1 are being delayed, not cancelled Structural drivers of digital, regulation, cost pressures and move to open banking are intact and likely to accelerate post-crisis Recurring revenu
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 1.08 GBP to USD exchange rate of 1.20; and USD to CHF exchange rate of 0.98 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 130% 43% (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 Q1 2019 APAC Q1 2020 APAC 10% 17% Europe 15% 18% Europe Americas Americas 29% MEA MEA 24% 44% 43% LTM 2019 APAC LTM 2020 APAC 16% 18% 14% Europe 22% Europe Americas Americas MEA MEA 22% 29% 44% 36% Note: Q1-20 geographic breakdown adjusted for
Slide 30: Total software licensing revenue breakdown by customer tier
Total software licensing revenue breakdown by customer tier Q1 2019 Q1 2020 1 and 2 1 and 2 18% 42% 3, 4 and 5 3, 4 and 5 58% 82% LTM 2019 LTM 2020 1 and 2 1 and 2 40% 3, 4 and 5 3, 4 and 5 47% 53% 60% 30
Slide 31: Software licensing revenue breakdown by competitive deals / installed base
Software licensing revenue breakdown by competitive deals / non-competitive, installed base Q1 2019 Competitive Q1 2020 Competitive deals deals 19% 27% Non- Non- competitive, competitive, installed base installed base 73% 81% LTM 2019 Competitive LTM 2020 Competitive deals deals 33% 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 1000 2.6x 800 600 1.6x 1.6x 1.5x 1.4x 1.4x 400 0.9x 200 0 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 * proforma non-IFRS EBITDA adjusted for lease expense now reported under depreciation
Slide 33: Q1-20 v Q1-19 assets
Q1-20 v Q1-19 assets 2,191 103 288 1,499 Comments: 97 Fixed assets up $620m driven by acquisitions 266 Other assets up $44m driven primarily by Kony 1,678 earn-out and investments (convertible loan) 1,058 USDm 78 122 Q1 2019 Q1 2020 33
Slide 34: Q1-20 v Q1-19 liabilities and equity
Q1-20 v Q1-19 liabilities and equity 2,191 216 280 1,499 Comments: 191 Trade and Other payables increase mainly 265 1,108 driven by Kony $34m Borrowings increase of c.$500m, including 646 issuance of bond funding acquisitions 174 Other Liabilities driven by Kony deferred tax 64 liabilities 413
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 31 March 3 Months Ending 31 March 2020 2020 2019 2019 In USDm, except EPS IFRS Non-IFRS adj. Non-IFRS IFRS Non-IFRS adj. Non-IFRS Software Licensing 33.6 33.6 63.2 63.2 SaaS and subscription 18.4 4.2 22.7 11.9 1.1 13.0 Total Software Licensing 52.0 4
Slide 39: Net earnings reconciliation
Net earnings reconciliation In USDm, except EPS Q1 20 Q1 19 IFRS net earnings 3.0 24.6 Deferred revenue write down 4.2 1.1 Amortisation of acquired intangibles 17.6 12.4 Restructuring 6.9 1.0 Acquisition related costs - 0.3 Taxation -3.1 -2.0 Net earnings for non-IFRS EPS 28.6 37.4 No. of dilutive s
Slide 40: Reconciliation from IFRS to non-IFRS for EBIT and EBITDA
Reconciliation from IFRS to non-IFRS for EBIT and EBITDA USDm Q1 20 EBIT Q1 20 EBITDA IFRS 10.8 48.5 Deferred revenue write-down 4.2 4.2 Amortisation of acquired intangibles 17.6 - Restructuring 6.9 6.9 Acquisition-related charges - - Non-IFRS 39.4 59.6 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