Temenos Ag · SIX:TEMN
Temenos — Q4 2019 Earnings Presentation
63 slides from Temenos's earnings presentation, Feb 12, 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 31 December 2019 12 February 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: Excellent performance across KPIs in Q4 and FY 2019
Excellent performance across KPIs in Q4 and FY 2019 Total Software Licensing EPS Saas Revenues 445 67 3.47 373 2.95 316 2.45 256 2.07 214 1.73 31 1.44 148 21 9 10 8 USDm 2014 2015 2016 2017 2018 2019 USD 2014 2015 2016 2017 2018 2019 USDm 2014 2015 2016 2017 2018 2019 Note: figures are non-IFRS c.c.
Slide 8: Taking our product and technology to the next level
Taking our product and technology to the next level Separation of manufacturing The leader in cloud Leading in Explainable AI and distribution and analytics Cloud agnostic, active-active Temenos’ XAI platform enables faster, accurate and Cloud-based banking Global strategic partnership expla
Slide 9: Strategic M&A to accelerate R&D and geographic presence
Strategic M&A to accelerate R&D and geographic presence US #1 digital banking SaaS Innovation SaaS company patented in big data and Explainable AI analytics 1,500 employees with deep digital and SaaS expertise 9
Slide 10: Recognised for our global leadership
Recognised for our global leadership New-name clients: Top global power seller for the 13th consecutive year #1 #1 24% more deals than the next best selling vendors with more than 50 new named deals Core Banking Best-selling New and existing clients: for the last Digital Banking Top global player fo
Slide 11: Outstanding momentum in SaaS and cloud
Outstanding momentum in SaaS and cloud Exceptional performance in SaaS with ACV up 159% in Q4 and 68% in FY19 Signings across the US, APAC and Europe for both Transact and Infinity SaaS pipeline building well with integration of Kony and Avoka SaaS revenue TCV USDm ACV USDm USDm 80 80 25 +159%
Slide 12: A tectonic shift in growth acceleration
A tectonic shift in growth acceleration License bookings ACV bookings equivalent* ~100m ~100m ~0m 1m 1993 2012 2016 2020E 12 *see appendix for definitions
Slide 13: ACV bookings growth set to accelerate further
ACV bookings growth set to accelerate further 2019 license bookings growth* 2019 ACV bookings equivalent 2020E license bookings growth 2020E ACV bookings growth equivalent growth *run-rate Q4 2019 13
Slide 14: Enhancing our global technology partnerships
Enhancing our global technology partnerships Global strategic partnership to accelerate banks’ digital transformation in the cloud Benchmarked Temenos Infinity and Transact on AWS at 50,000 transaction per second on a single instance First cloud partner for Temenos Transact and Infinity Strategic in
Slide 15: Q4 and FY 2019 sales review
Q4 and FY 2019 sales review FY 2019 total software licensing Digital, regulatory and cost pressures and move to open banking continue to drive market growth Geographic split APAC Banks and new entrants are evolving their business models, 13% separating manufacturing and distribution 21% Europe A
Slide 16: Q4 and FY 2019 operational overview
Q4 and FY 2019 operational overview Q4 and FY 2019 update Global partner network 24 implementation go-lives in Q4 2019 6,500+ experienced third party and Temenos consultants globally Total of 330 go-lives across all clients in FY19 supporting client success Canadian digital bank, EQ bank, firs
Slide 17: Financial update
Financial update Takis Spiliopoulos, CFO
Slide 18: Performance vs. revised 2019 guidance (c.c.)
Performance vs. revised 2019 guidance (c.c.) Initial guidance Revised guidance Delivered Non-IFRS total software licensing 17.5% to 22.5% 19.5% to 22.5% 23% Non-IFRS Total revenues Revenue growth of18% 16% to 19% 12.5% to to 20%14.5% 19% Non-IFRS EBIT EBIT of USD Revenue USD 310 to 315m 184mUSD
Slide 19: Q4 and FY 19 non-IFRS financial highlights
Q4 and FY 19 non-IFRS financial highlights Revenue and profit Operating cash flow Total software licensing up 27% in Q4 19, 23% in FY19 FY19 operating cash flow of USD 364m Maintenance growth of 17% in Q4, 14% in FY19 FY19 operating cash conversion of 100% into Total revenue growth of 23%
Slide 20: Non-IFRS income statement – operating
Non-IFRS income statement – operating Y-o-Y Y-o-Y In USDm Q4 19 Q4 18 Y-o-Y c.c. FY 19 FY 18 Y-o-Y c.c. reported reported Software licensing 139.1 123.4 13% 15% 378.4 341.6 11% 14% SaaS and subscription 24.3 7.9 209% 215% 66.6 31.4 112% 121% Total software licensing 163.4 131.3 25% 27% 445.0 372.9 1
Slide 21: Like-for-like revenue and costs
Like-for-like revenue and costs Q4 19 LFL non-IFRS revenues up 9% Q4 19 LFL non-IFRS costs up 1% FY19 LFL non-IFRS revenues up 11% FY19 LFL non-IFRS costs up 4% Maintenance Total software licensing Services USDm USDm 700 900 800 600 -1% +4% 700 500 600 400 500 +15% 300 400 300 200 -16% 200 +
Slide 22: Non-IFRS income statement – non-operating
Non-IFRS income statement – non-operating In USDm, except EPS Q4 19 Q4 18 Y-o-Y FY 19 FY 18 Y-o-Y EBIT 116.2 98.0 19% 317.9 265.3 20% Net finance charge -9.3 -4.2 120% -24.3 -15.7 55% FX gain / (loss) 1.6 -0.4 N.A. 2.3 -0.9 N.A. Tax -14.9 -12.5 20% -40.9 -33.4 22% Net profit 93.6 80.9 16% 255.1 215.
Slide 23: Underlying DSO trend impacted by inflow timing and Kony acquisition
Underlying DSO trend impacted by inflow timing and Kony acquisition DSOs 130 127 120 (6 days of which due to M&A) 119 120 6 114 110 114 100 Q4 2016 Q4 2017 Q4 2018 Q4 2019 We expect DSOs to continue declining in Q1 and to be below 110 day at the end of 2020 23
Slide 24: IFRS cash conversion
IFRS cash conversion USDm 400 114% 114% 100% 350 300 250 200 150 100 50 0 FY 2017 FY 2018 FY 2019 EBITDA Operating cashflow Cash conversion of 100% at year end; expected to be well above 100% by year end 2020 24
Slide 25: Group liquidity
Group liquidity Cash on Net Cash on USDm balance proceeds balance sheet Operating Dividends from Interest, FX sheet Reported (31/12/18) cash Tax Capex paid borrowings M&A and leases (31/12/19) Borrowings net debt 950 750 (17) (78) (52) 295 550 364 600 350 47 153 150 287 -50 -250 1,175 1,022 -450 -65
Slide 26: Outlook for 2020
Outlook for 2020 Digital, regulatory and cost pressures and move to open banking continue to drive market growth This is driving Temenos’ pipeline growth and revenue visibility Drivers of revenue visibility Increasing contribution from Higher certainty revenue Key drivers of demand recurring rev
Slide 27: Our pipeline is accelerating
Our pipeline is accelerating Total Software Licensing pipeline Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Strength of pipeline underpins 2020 guidance 27
Slide 28: 2020 non-IFRS guidance range (c.c.)
2020 non-IFRS guidance range (c.c.) FY 20 guidance FY 19 base Total software licensing (%) 18.5% - 23.5% Implied USDm USD 527 – 550m 445 Total revenue (%) 16% - 20% Implied USDm USD 1,137 – 1,177m 981 EBIT (USDm) USD 380 – 385m 318 Implied margin c.33% 32.4% SaaS ACV to grow by more than 100%, imply
Slide 29: Summary
| Summary Max Chuard, CEO
Slide 30: TCF 2020 – Madrid, 28-30 April
TCF 2020 – Madrid, 28-30 April Dedicated analyst and investor stream See product launches and our software in action Insights from Temenos executives and industry thought leaders Interaction and learning from Temenos customers and partners Breakout sessions with senior management 30
Slide 31: Conclusion
Conclusion Excellent 2019 results, delivered against revised guidance Digital, regulatory and cost pressures and move to open banking continue to drive market growth Exceptional growth in SaaS and cloud Temenos Transact grew double digit, Temenos Infinity grew multiple times fasters Strong
Slide 32: Appendix
| Appendix YW TEMENOS 32
Slide 33: 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 1.12 GBP to USD exchange rate of 1.28; and USD to CHF exchange rate of 0.99 33
Slide 34: 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% 44% (20)% (9)% (47)% NB. All % are approximations based on 2019 actuals Mitig
Slide 35: Total software licensing revenue breakdown by geography
Total software licensing revenue breakdown by geography Q4 2018 APAC Q4 2019 APAC 18% 18% 16% Europe 23% Europe Americas Americas MEA MEA 20% 23% 44% 38% FY 2018 APAC FY 2019 APAC 16% 13% 18% Europe 21% Europe Americas Americas MEA MEA 21% 27% 45% 39% 35
Slide 36: Total software licensing revenue breakdown by customer tier
Total software licensing revenue breakdown by customer tier Q4 2018 Q4 2019 1 and 2 1 and 2 34% 33% 3, 4 and 5 3, 4 and 5 66% 67% FY 2018 FY 2019 1 and 2 1 and 2 43% 3, 4 and 5 3, 4 and 5 47% 53% 57% 36
Slide 37: Software licensing revenue breakdown by competitive deals / add-ons
Software licensing revenue breakdown by competitive deals / add-ons to installed base Q4 2018 Q4 2019 Competitive Competitive deals deals 35% 59% 41% Non 65% Non competitive, competitive, installed installed based based FY 2018 FY 2019 Competitive Competitive deals deals 31% 40% Non 60% Non competit
Slide 38: Balance sheet – debt and leverage
Balance sheet – debt and leverage Net debt and leverage ratios* USDm 1200 3.1x 1000 2.6x 800 600 1.6x 1.6x 1.5x 1.4x 1.4x 400 1.0x 0.9x 200 0 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 * proforma non-IFRS EBITDA adjusted for lease expense now reported under depreciation
Slide 39: FY19 v FY18 assets
FY19 v FY18 assets 2,322 153 323 1,648 Comments: 287 Fixed assets up $700m driven by $650m driven 262 by acquisitions, up $46m from IFRS16 recognition 1,727 Other assets up $47m driven primarily by Kony earn-out and investments (convertible loan) 1,027 USDm 72 119 2018 2019 39
Slide 40: FY19 v FY18 liabilities
FY19 v FY18 liabilities 2,322 238 287 1,648 186 Comments: 263 Trade and Other payables increase mainly 1,175 driven by Kony $40m Borrowings increase of c.$300m funding 814 acquisitions 177 Other Liabilities driven by Kony deferred tax 86 liabilities 445 USDm 299 Equity change driven mostly b
Slide 41: 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 42: 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 43: 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 15m FY 2020 estimated amortisation of acquired intangibles of USD 65-70m FY 2020 estimated restructuring cost
Slide 44: Reconciliation – IFRS to non-IFRS
Reconciliation – IFRS to non-IFRS 3 Months Ending 31 December 3 Months Ending 31 December 2019 2019 2018 2018 In USDm, except EPS IFRS Non-IFRS adj. Non-IFRS IFRS Non-IFRS adj. Non-IFRS Software licensing 139.1 139.1 123.4 123.4 SaaS and subscription 19.0 5.3 24.3 7.9 7.9 Total Software Licensing 15
Slide 45: Net earnings reconciliation
Net earnings reconciliation In USDm, except EPS Q4 19 Q4 18 FY 19 FY 18 IFRS net earnings 62.2 71.3 181.1 168.2 Deferred revenue write down 5.3 0.0 8.6 0.1 Amortisation of acquired intangibles 18.1 9.0 55.2 37.2 Restructuring 10.4 0.9 14.7 3.3 Acquisition related costs 0.7 1.0 4.0 12.6 Acquisition r
Slide 46: Reconciliation from IFRS to non-IFRS for EBIT and EBITDA
Reconciliation from IFRS to non-IFRS for EBIT and EBITDA USDm Q4 19 EBIT Q4 19 EBITDA FY 19 EBIT FY 19 EBITDA IFRS 81.5 120.4 235.4 366.0 Deferred revenue write-down 5.3 5.3 8.6 8.6 Amortisation of acquired 18.1 - 55.2 - intangibles Restructuring 10.4 10.4 14.7 14.7 Acquisition related costs 0.7 0.7
Slide 47: 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 48: Reconciliation – IFRS 16 Income Statement
Reconciliation – IFRS 16 Income Statement 3 Months Ending 31 December 2019 2019 In USDm IFRS Impact of IFRS 16 IFRS 16 adjusted Total Revenue 304.3 - 304.3 Operating Expense (222.7) (0.2) (222.9) EBIT 81.5 (0.2) 81.3 Financing Costs (7.9) 0.4 (7.5) Taxation (11.4) - (11.4) Net Earnings 62.2 0.2 62.4
Slide 49: Reconciliation – IFRS 16 Balance Sheet
Reconciliation – IFRS 16 Balance Sheet 3 Months as at 31 December 2019 2019 In USDm IFRS Impact of IFRS 16 IFRS 16 adjusted Property, plant and equipment 67.3 (45.9) 21.4 Other assets (current / non-current) 2,255.1 (1.6) 2,253.5 Totals assets 2,322.4 (47.5) 2,274.9 Borrowings ( current / non-curren
Slide 50: Reconciliation – IFRS 16 net debt calculation
Reconciliation – IFRS 16 net debt calculation 3 Months Ending 31 December 2019 In USDm IFRS Non-IFRS EBITDA 136.9 IFRS16 adjustment (4.2) IFRS 16 adjusted EBITDA 132.7 LTM EBITDA 377.5 Net Debt reported 1,021.8 SWAP add-back 12.0 IFRS16 adjustment (51.3) IFRS 16 adjusted Net Debt 982.5 Leverage 2.6x
Slide 51: 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 52: SaaS - Financial metrics definitions and reporting
SaaS - Financial metrics definitions and reporting 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) Disclosure: quarterly reporting, annual gu
Slide 53: Overview of Temenos compensation policies
Overview of Temenos compensation policies
Slide 54: Overview of Temenos compensation policies
Overview of Temenos compensation policies The two key goals of the Temenos compensation structure are1: Pay for Performance alignment with shareholder by making the major portion of compensation dependent on achieving increased shareholder value for the long term Foster a performance based cor
Slide 55: Accounting for SARs
Accounting for SARs SARs are accounted for under IFRS standards. Temenos applies the standard consistently and wholly in line with best practice1 The fair value of options is calculated by a third party expert on an annual basis and audited by Temenos’ auditor1 The fair value of the options is
Slide 56: Dilution from SARs
Dilution from SARs When issuing SARs, the Compensation Committee reviews the planned dilution to ensure it remains within a target of less than 2% p.a. of shares outstanding on a CAGR basis1 ISS, the leading global proxy advisor, allows total cumulative dilution of up to 10% for high growth comp
Slide 57: Dilution vs. peer group
Dilution vs. peer group ISS, a leading global proxy advisor, allows total cumulative dilution of up to 10% for high growth companies1 Total cumulative dilution for Temenos as of 31/12/18 from all outstanding SARs and stock options was 5%, half of the 10% cap which ISS states is acceptable for fa
Slide 58: SARs performance criteria
SARs performance criteria The long term variable compensation granted in 2019 is based on the following criteria1: Non-IFRS EPS growth at 15% CAGR (40%) Non-IFRS product revenue growth at 14% CAGR (60%) There is a minimum payout threshold of 85% of the target for any SARs to vest, compared t
Slide 59: Net debt and share buybacks
Net debt and share buybacks Temenos targets an optimized balance sheet leverage of 1-1.5x net debt to EBITDA1 Increases in leverage and net debt are directly linked to M&A, and not share buybacks, for example: Leverage increase from 1.5x to 3.1x from Q2 to Q3 2019 on the acquisition of Kony2
Slide 60: Non-IFRS adjustments
Non-IFRS adjustments Temenos does not adjust its IFRS numbers for stock option expenses when calculating non-IFRS metrics1 Only the following items are adjusted for when calculating non-IFRS metrics1 IFRS revenue measure + Deferred revenue write-down = Non-IFRS revenue measure IFRS profit measur
Slide 61: Total value of shares sold by Temenos executives
Total value of shares sold by Temenos executives Temenos reports all exercises of SARs, sales and purchases of shares by its Executive Management and Executive Chairman to the Swiss Stock Exchange This information is publicly available on the Swiss Stock Exchange website through the following li
Slide 62: Settlement of SARs and Banque Havilland
Settlement of SARs and Banque Havilland Employees can choose to exercise and hold the shares, or sell the shares and receive the net cash proceeds Temenos can meet this demand for shares either through conditional capital or through treasury shares1 Temenos receives approval from its sharehold
Slide 63: Thank You
Thank You temenos.com