Temenos Ag · SIX:TEMN
Temenos — Q2 2019 Earnings Presentation
44 slides from Temenos's earnings presentation, Jul 17, 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 June 2019 17 July 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 Q2 2019
Review of Q2 2019 Q2 2019 Recognised as a leader Total software licensing growth of 21% (24% H1 2019) Leader in the Forrester Wave™ for Digital Banking Total revenue up 17% (20% H1 2019) Engagement Platforms EBIT up 20% (23% H1 2019) Top vendor for new-name clients and EPS up 18% (21% H1 201
Slide 8: Q2 2019 sales review
Q2 2019 sales review Geographical diversification Digital, regulatory and cost pressures and move to open banking continue to drive market growth LTM Q2 2019 total software licensing Asia and Americas particularly strong in Q2 with significant US sales across products APAC 15% 18% Europe Key w
Slide 9: Q2 2019 operational overview
Q2 2019 operational overview 22 implementation go-lives in Q2 2019 Key go-lives in Q2 included ABN Amro on Temenos’ WealthSuite to power the bank's international operations for private and corporate banking Grasshopper Bank, a US challenger bank specialising in high-growth technology SMEs
Slide 10: CMD 2019 highlights
CMD 2019 highlights Significant addressable market of USD 57bn globally The leader in a winner takes all market Benefiting from six drivers of growth An expanding ecosystem of 6000+ consultants M&A to accelerate organic growth 10
Slide 11: Six drivers of growth
Six drivers of growth Medium-term third party spend (bn) CAGR $5.0 7% ALL DEPLOYMENT OPTIONS $5.3 8% $0.6 8% $2.7 10% On- $1.6 8% premise 11
Slide 12: 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 Payments Compliance for 14 years & Channels system & Risk Mgmt. New-name clients: New and existing clients: A Leader in Digital Banking: A top global power se
Slide 13: Overview of acquisition of Logical Glue
Overview of acquisition of Logical Glue Temenos completed the acquisition of Logical Glue for GBP 12 million on 17 July 2019 Logical Glue is a London based provider of a patented Explainable AI (XAI) platform to its predominantly financial services clients in the UK and Europe Highly strategic
Slide 14: Financial update
Financial update Takis Spiliopoulos, CFO
Slide 15: Q2 2019 non-IFRS financial highlights
Q2 2019 non-IFRS financial highlights Total software licensing up 21% Y-o-Y (c.c.), 24% in H1 2019 Maintenance growth of 13% Y-o-Y (c.c.), 13% in H1 2019 Total revenue growth of 17% Y-o-Y (c.c.), 20% in H1 2019 EBIT up 20% Y-o-Y (c.c.), 23% in H1 2019, Q2 EBIT margin of 30.9% EPS growth of
Slide 16: Non-IFRS income statement – operating
Non-IFRS income statement – operating Y-o-Y Y-o-Y In USDm Q2 19 Q2 18 Y-o-Y c.c. YTD 19 YTD 18 Y-o-Y c.c. reported reported Software licensing 92.6 83.2 11% 14% 155.8 137.6 13% 17% SaaS and subscription 14.6 7.6 92% 101% 27.6 15.7 76% 85% Total software licensing 107.2 90.8 18% 21% 183.4 153.3 20% 2
Slide 17: Like-for-like revenue and costs
Like-for-like revenue and costs Q2 19 LFL non-IFRS revenues up 12% Q2 19 LFL non-IFRS costs up 6% Maintenance Total software licensing Services USDm USDm 250 250 200 200 +4% 150 +6% 150 +15% 100 100 +2% 50 50 +11% +9% +15% +13% +13% 0 0 Q2 2018 Q2 2019 Q2 2018 Q2 2019 Total like-for-like revenue
Slide 18: Non-IFRS income statement – non-operating
Non-IFRS income statement – non-operating In USDm, except EPS Q2 19 Q2 18 Y-o-Y YTD 19 YTD 18 Y-o-Y EBIT 73.1 60.6 21% 122.6 99.1 24% Net finance charge -4.9 -3.8 30% -9.3 -7.3 28% FX gain / (loss) 0.3 -0.5 NA -0.4 0.1 NA Tax -10.0 -7.4 36% -17.0 -12.4 37% Net profit 58.5 49.0 19% 95.9 79.5 21% EPS
Slide 19: DSOs continue to decline
DSOs continue to decline DSOs 140 130 124 120 114 110 100 Q2 2016 Q2 2017 Q2 2018 Q2 2019 19
Slide 20: IFRS cash conversion
IFRS cash conversion USDm 117% 116% 111% 350 300 250 200 150 100 50 0 Q2 2017 Q2 2018 Q2 2019 LTM EBITDA Operating cashflow Cash conversion significantly above target of 100% 20
Slide 21: Group liquidity
Group liquidity Change in USDm Cash on debt, interest, Cash on balance sheet Operating FX and lease balance sheet (31/3/19) cash Tax Capex Dividend liability (30/6/19) Borrowings Net debt 300 (6) (17) 200 77 (52) (12) 100 97 87 0 -100 -200 -300 654 567 439 -400 -500 -600 Operating cash flow up 16%,
Slide 22: 2019 non-IFRS guidance range (c.c.)
2019 non-IFRS guidance range (c.c.) FY 19 guidance Total software licensing (%) 17.5% - 22.5% Implied USDm USD 431 – 450m Total revenue (%) 16% - 19% Implied USDm USD 966 – 991m EBIT (USDm) USD 310 – 315m Implied margin c.31.9% Implied organic margin increase c. 150 bps Cash conversion 100%+ convers
Slide 23: 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 24: Summary
| Summary Max Chuard, CEO
Slide 25: Conclusion
Conclusion Strong performance across all KPIs in Q2 and H1 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 Acquisition of AI platform Logical Glue significantly enhances the Temeno
Slide 26: Appendix
| Appendix YW TEMENOS 26
Slide 27: FX assumptions underlying 2019 guidance
FX assumptions underlying 2019 guidance In preparing the 2019 guidance, the Company has assumed the following FX rates: USD to Euro exchange rate of 0.881 USD to GBP exchange rate of 0.757; and USD to CHF exchange rate of 1.00 27
Slide 28: 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 29: Total software licensing revenue breakdown by geography
Total software licensing revenue breakdown by geography Q2 2018 APAC Q2 2019 APAC 19% 15% Europe 13% 20% Europe Americas Americas MEA 25% MEA 14% 52% 42% LTM 2018 APAC LTM 2019 APAC 12% 15% 18% Europe 18% Europe Americas Americas 20% MEA MEA 25% 50% 42% 29
Slide 30: Total software licensing revenue breakdown by customer tier
Total software licensing revenue breakdown by customer tier Q2 2018 Q2 2019 1 and 2 1 and 2 48% 3, 4 and 5 48% 3, 4 and 5 52% 52% LTM 2018 LTM 2019 1 and 2 1 and 2 3, 4 and 5 3, 4 and 5 47% 53% 46% 54% 30
Slide 31: Software licensing revenue breakdown by competitive deals / add-ons
Software licensing revenue breakdown by competitive deals / add-ons to installed base Q2 2018 Q2 2019 Competitive Competitive deals deals Add-ons to Add-ons to 59% 41% installed base 60% 40% installed base LTM 2018 Competitive LTM 2019 Competitive deals deals Add-ons to Add-ons to installed 35% inst
Slide 32: Balance sheet – debt and leverage
Balance sheet – debt and leverage Net debt and leverage ratios* USDm 600 1.6x 1.6x 1.5x 500 1.4x 1.4x 400 1.2x 300 1.1x 1.0x 0.9x 0.7x 200 100 0 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 * proforma non-IFRS EBITDA adjusted for lease expense now reported under depreciati
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 4m FY 2019 estimated amortisation of acquired intangibles of USD 48m FY 2019 estimated restructuring costs of
Slide 36: Reconciliation – IFRS to non-IFRS
Reconciliation – IFRS to non-IFRS 3 Months Ending 30 June 3 Months Ending 30 June 2019 2019 2018 2018 In USDm, except EPSd IFRS Non-IFRS adj. Non-IFRS IFRS Non-IFRS adj. Non-IFRS Software Licensing 92.6 92.6 83.2 83.2 SaaS and subscription 13.5 1.1 14.6 7.6 7.6 Total Software Licensing 106.1 1.1 107
Slide 37: Net earnings reconciliation
Net earnings reconciliation In USDm, except EPS Q2 19 Q2 18 IFRS net earnings 45.0 33.3 Deferred revenue write down 1.1 0.0 Amortisation of acquired intangibles 12.3 9.3 Restructuring 1.8 1.1 Acquisition related costs 0.3 7.0 Taxation -2.0 -1.7 Net earnings for non-IFRS EPS 58.5 49.0 No. of dilutive
Slide 38: Reconciliation from IFRS to non-IFRS for EBIT and EBITDA
Reconciliation from IFRS to non-IFRS for EBIT and EBITDA USDm Q2 19 EBIT Q2 19 EBITDA IFRS 57.7 88.0 Deferred revenue write-down 1.1 1.1 Amortisation of acquired intangibles 12.3 - Restructuring 1.8 1.8 Acquisition-related charges 0.3 0.3 Non-IFRS 73.1 91.2 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 June 2019 2019 In USDm IFRS Impact of IFRS 16 IFRS 16 adjusted Total Revenue 236.0 - 236.0 Operating Expense (178.3) (0.4) (178.7) EBIT 57.7 (0.4) 57.3 D&A 30.4 (3.4) 27.0 EBITDA 88.0 (3.8) 84.3 Financing Costs (4.7) 0.4 (4.3) Taxation (8.
Slide 41: Reconciliation – IFRS 16 Balance Sheet
Reconciliation – IFRS 16 Balance Sheet 3 Months as at 30 June 2019 2019 In USDm IFRS Impact of IFRS 16 IFRS 16 adjusted Property, plant and equipment 60.1 (43.1) 17.0 Other assets (current / non-current) 1,430.1 (2.3) 1,427.8 Totals assets 1,490.2 (45.4) 1,444.8 Borrowings ( current / non-current) 6
Slide 42: Reconciliation – IFRS 16 net debt calculation
Reconciliation – IFRS 16 net debt calculation 3 Months Ending 30 June 2019 In USDm IFRS Non-IFRS EBITDA 91.2 IFRS16 adjustment (3.8) IFRS 16 adjusted EBITDA 87.4 LTM EBITDA 346.3 Net Debt reported 567.0 SWAP add-back 16.4 IFRS16 adjustment (48.7) IFRS 16 adjusted Net Debt 534.7 Leverage 1.54x 42
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