Temenos Ag · SIX:TEMN
Temenos — Q1 2022 Earnings Presentation
51 slides from Temenos's earnings presentation, Apr 26, 2022
Slide 1: Temenos – The Banking Software Company
TEMENOS THE BANKING SOFTWARE COMPANY
Slide 2: Financial results & business update
Financial results & business update 26 April 2022 Quarter ended 31 March 2022
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 Business update……………………………………………Max Chuard, CEO Financial update……………………………………. Takis Spiliopoulos, CFO Summary…………………………………………...............Max Chuard, CEO Q&A 5
Slide 6: Business update
Business update Max Chuard CEO
Slide 7: Overview of the quarter
Overview of the quarter Review of Q1-22 Q1-22 non-IFRS financial highlights ▪ Sequential improvement in sales environment with no impact on demand from macro events to date ▪ USD10.6m of subscription licenses signed ▪ Strong momentum in the first quarter with first deals closed under new subscriptio
Slide 8: Strong growth in ARR and Total Bookings
Strong growth in ARR and Total Bookings ▪ ARR accelerated to 14% in Q1-22 from 12% in Q4-21, underpinning confidence in FY-22 guidance of 18-20% growth in ARR ▪ Growth in Total Bookings and ARR continues to add to our increasing backlog and visibility ▪ Total Bookings grew 25% in the quarter with br
Slide 9: Excellent momentum in SaaS
Excellent momentum in SaaS ▪ ACV growth of 58% driven by significant levels of new signings, as well as some additional consumption from existing clients ▪ US and core banking drove majority of signings, with Europe and front office also key contributors ▪ Strong ACV over last few quarters driving a
Slide 10: Q1-22 sales review
Q1-22 sales review Total Software Licensing ▪ Continued sequential improvement in sales environment in the quarter Geographic split ▪ Positive engagement with clients around subscription pricing, with first deals signed under new subscription model in the quarter and most on premise deals in Q1-22 t
Slide 11: Continued strong momentum in our US business
Continued strong momentum in our US business ▪ US operations continued to perform very well in Q1-22 ▪ Multiple new client wins including Battle Financial which selected Temenos core banking and payments for Battle Bank to underpin its global markets technology stack ▪ US SaaS ACV was very strong fr
Slide 12: Move to subscription captures greater value and accelerates ARR growth
Move to subscription captures greater value and accelerates annual recurring revenue growth Client across all tiers and business models are Significant acceleration in Annual Recurring Revenue increasingly asking for subscription contracts ARR % to grow 20-25% CAGR from 2021-2025 c.1.3bn rather than
Slide 13: Tangible subscription benefits to clients and Temenos
Tangible subscription benefits to clients and Temenos Benefits to client Benefits to Temenos Significantly expanding long-term value Enhanced value proposition for customers creation potential through incremental significantly expanding flexibility growth, higher margins and cash flows Accelerate th
Slide 14: Why we outsell the competition
Why we outsell the competition Traditional vendors Neo vendors Cross-industry, not packaged nor New digital entrants, cloud-native cloud native nor SaaS ready offering, but limited functional scope Why we win Why we win 100% Banking focused Depth and breadth of functionality Market leadership, inclu
Slide 15: Single code and configuration base drives higher margin and competitive edge
Single code and configuration base drives higher margin, competitive edge and profitable growth Retail SME Corp. Wealth Segment agnostic Higher margin Total Assets Traditional Non- incumbent Tier 1 Tier 2 Tier 3+ Type agnostic Single code and Size agnostic Competitive advantage configuration base Te
Slide 16: Outlook for 2022
Outlook for 2022 ▪ Outlook for 2022 is strong with third party market spending accelerating to 10% growth ▪ No demand impact to date from macro economic events in Q1-22 or the first weeks of Q2-22 ▪ Demand for SaaS is accelerating driven by non-incumbents, with new business models around BaaS and em
Slide 17: Financial update
Financial update Takis Spiliopoulos CFO
Slide 18: Q1-22 non-IFRS financial highlights
Q1-22 non-IFRS financial highlights Revenue and profit Cash flow ▪ SaaS revenue up 33% in Q1-22 ▪ Q1-22 operating cash flow of USD 60m, down 19% y- ▪ Total software licensing up 18% in Q1-22 o-y ▪ Maintenance growth of 4% in Q1-22 ▪ LTM Q1-22 operating cash conversion of 118% of IFRS ▪ Total revenue
Slide 19: Non-IFRS income statement – operating
Non-IFRS income statement – operating Y-o-Y Y-o-Y In USDm Q1-22 Q1-21 Y-o-Y c.c. LTM Q1-22 LTM Q1-21 Y-o-Y c.c. reported reported Subscription 10.6 3.6 198% 199% 21.4 14.7 46% 45% Term Licence 35.9 40.0 -10% -9% 273.6 254.8 7% 9% SaaS 36.9 28.2 31% 33% 132.4 101.7 30% 29% Total software licensing 83
Slide 20: Like-for-like revenue and costs
Like-for-like revenue and costs ▪ Q1-22 LFL non-IFRS revenues up 7% ▪ Q1-22 LFL non-IFRS costs up 8% Total Software License Maintenance Services 180 250 8% 160 200 140 -4% -5% 120 150 100 4% 80 100 60 -8% 40 50 18% 17% 7% 20 11% - - Q1 2021 Q1 2022 Q1 2021 Q1 2022 20
Slide 21: Non-IFRS income statement – non-operating
Non-IFRS income statement – non-operating Y-o-Y Y-o-Y In USDm, except EPS Q1-22 Q1-21 LTM Q1-22 LTM Q1-21 reported reported EBIT 59.3 56.9 4% 359.1 343.5 5% Net finance charge -4.6 -6.2 -26% -23.8 -29.1 -18% FX gain / (loss) 0.4 -0.6 -159% -0.2 -0.9 -76% Tax -9.9 -7.9 26% -57.3 -44.4 29% Net profit
Slide 22: IFRS cash conversion
IFRS cash conversion USD m 500 115% 106% 110% 118% 450 400 350 300 250 200 150 100 50 0 LTM Q1-19 LTM Q1-20 LTM Q1-21 LTM Q1-22 IFRS EBITDA Operating Cashflow Cash conversion well above 100% target 22
Slide 23: Group liquidity
Group liquidity USDm Leverage at 1.7x at quarter end Q1-22 23
Slide 24: Move to subscription model illustration
Move to subscription model illustration Term model – P&L Subscription model – P&L 5 5 5 1 1 1 1 1 1 1 1 1 1 1 Year 1 Year 2 Year 3 Year 4 Year 5 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Maintenance Term License Maintenance Subscription License Term model – Cash Subscription model – Cash 6 1 1 1 1 2
Slide 25: 2022 non-IFRS guidance metrics
2022 non-IFRS guidance metrics (c.c.) FY-22 Guidance FY-21 Base (CCY) ARR 18% - 20% growth 553m Total Software Licensing (%) 16% - 18% growth 412m Total Revenue (%) At least 10% growth 956m EBIT growth +9% - 11% growth 357m ▪ Cash conversion to remain at 100%+ of EBITDA into operating cash flow ▪ FY
Slide 26: Medium term targets
Medium term targets Medium term targets 2021 (CCY) Medium term targets 20-25% CAGR 2021-25 ARR 553 c.USD1.3bn of ARR by 2025 Total Software 412 15-20% CAGR 2021-25 Licensing Total revenue 956 10-15% CAGR 2021-25 EBIT margin 37.4% c.41% by 2025 FCF (Reported) 358 10-15% CAGR 2021-26 to reach >USD600m
Slide 27: EBIT growth to closely track prior year ARR growth
EBIT growth to closely track prior year ARR growth ▪ Subscription, SaaS and maintenance bookings contribute to ARR in the quarter, with full revenue impact from SaaS and maintenance in the P&L Total ARR Non IFRS EBIT over the following 12 months c.25% 22-25 CAGR >15% 22-25 CAGR ▪ Blended ARR gross m
Slide 28: Non-IFRS EBIT Bridge 2021/2022
Non-IFRS EBIT Bridge 2021/2022 EBIT Margin 37.4% (c.40) bps 37.0% (12) 28 - (36) - 56 393 358 EBIT FY21 CCY Saas & Maintenance Margin Term & Subscription License Post-Covid normalisation (travel, Variable, Investments, Wage EBIT FY22 (Mid-Point of growth events) inflation Guidance) Strong visibility
Slide 29: Summary
| Summary Max Chuard CEO ® TEMENOS
Slide 30: Temenos Community Forum, London
Temenos Community Forum, London ▪ Join us in London for Temenos Community Forum (TCF) from Tuesday 17th – Thursday 19th May ▪ Dedicated investors and analysts track on Wednesday 18th May ▪ TCF provides investors and analysts the opportunity to: ▪ See product launches and software in action ▪ Gain in
Slide 31: Conclusion
Conclusion ▪ Sequential improvement in demand environment through the quarter ▪ First signings under new subscription model and positive feedback from clients around subscription pricing ▪ Strong growth in SaaS, ARR and Total Bookings, giving confidence for the year ▪ US continues to perform very we
Slide 32: Appendix
| Appendix | V lee —~ “ | oe §@ TEMENOS | 32
Slide 33: Q1-22 operational overview
Q1-22 operational overview ▪ 70 go-lives including 29 implementation go-lives in Q1- 22 ▪ Use of cloud continues to increase, driving efficiency Taking a client live every day 33
Slide 34: FX assumptions underlying 2022 guidance
FX assumptions underlying 2022 guidance In preparing the 2022 guidance, the Company has assumed the following FX rates: EUR to USD exchange rate of 1.11 GBP to USD exchange rate of 1.32; and USD to CHF exchange rate of 0.93 34
Slide 35: FX exposure
FX exposure % of total USD EUR GBP CHF Other Total software licensing 71% 18% 2% 1% 9% Maintenance 77% 15% 2% 1% 5% Services 47% 29% 4% 4% 16% Revenues 69% 19% 2% 1% 8% Non-IFRS costs 24% 20% 11% 5% 40% Non-IFRS EBIT 146% 17% (12)% (5)% (46)% NB. All % are approximations based on 2021 actuals Mitiga
Slide 36: 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 17.0 USDm Q1-22 Q2-22 Q3-22 Q4-22 SaaS ACV 19.0 36
Slide 37: Quarterly ARR, Total Bookings, FCF
Quarterly ARR, Total Bookings, FCF ARR, USD m Q1-20 Q2-20 Q3-20 Q4-20 Q1-21 Q2-21 Q3-21 Q4-21 Q1-22 ARR 468.1 475.4 486.4 493.5 500.1 514.4 530.8 553.4 568.4 Total Bookings, Q1-20 Q2-20 Q3-20 Q4-20 Q1-21 Q2-21 Q3-21 Q4-21 Q1-22 USD m Total Bookings 60.5 80.0 128.8 272.8 127.5 165.2 153.0 292.6 156.6
Slide 38: Total software licensing revenue breakdown by geography
Total software licensing revenue breakdown by geography Q1 2021 Q1 2022 13% 12% 15% 20% APAC APAC Europe Europe Americas 27% Americas 25% MEA 42% MEA 46% LTM Q1-21 LTM Q1-22 19% 20% 16% 18% APAC APAC Europe Europe Americas 22% Americas MEA MEA 39% 35% 31% 38
Slide 39: Total software licensing revenue breakdown by customer tier
Total software licensing revenue breakdown by customer tier Q1 2021 Q1 2022 37% 40% 1 and 2 1 and 2 3, 4, and 5 3, 4, and 5 63% 60% LTM Q1-21 LTM Q1-22 37% 39% 1 and 2 1 and 2 3, 4, and 5 3, 4, and 5 61% 63% 39
Slide 40: Software licensing revenue by competitive deals / installed base
Software licensing revenue breakdown by competitive deals/ add-ons to installed base Q1 2021 Q1 2022 Competitive Competitive 26% deals deals 35% Non Non Competitive, Competitive, 65% installed base 74% installed base LTM Q1-21 LTM Q1-22 Competitive Competitive deals deals 29% 29% Non Non Competitive
Slide 41: DSOs
DSOs DSOs 118 116 114 109 (4 days of which due to M&A) 112 110 108 106 104 102 100 98 Q1 2018 Q1 2019 Q1 2020 Q1 2021 Q1 2022 DSOs at 115 at Q1-22 41
Slide 42: Balance sheet – debt and leverage
Balance sheet – debt and leverage Net debt and leverage ratios 3.5x 3.1x 3.0x 2.6x 2.6x 2.6x 2.6x 2.5x 2.3x 2.1x 2.2x 2.1x 2.0x 1.8x 1.7x 1.6x 1.6x 1.5x 1.4x 1.0x 0.5x 0.0x Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 42
Slide 43: Capitalization of development costs
Capitalization of development costs USDm Q1-20 Q2-20 Q3-20 Q4-20 FY-20 Cap’ dev’ costs (17.7) (18.0) (20.8) (19.9) (76.3) Amortisation 12.9 13.6 13.6 13.7 53.8 Net cap’ dev’ (4.8) (4.4) (7.2) (6.2) (22.6) USDm Q1-21 Q2-21 Q3-21 Q4-21 FY-21 Cap’ dev’ costs (19.2) (20.9) (20.9) (25.2) 86.2 Amortisatio
Slide 44: 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 45: 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 2022 non-IFRS guidance: ▪ FY 2022 estimated share-based payments charge of c.5% of revenue ▪ FY 2022 estimated amortisation of acquired intangibles of USD 50m ▪ FY 2022 estimated restructuring
Slide 46: Earnings Reconciliation – IFRS to non-IFRS
Earnings Reconciliation – IFRS to non-IFRS 3 Months Ending 31 March 3 Months Ending 31 March In USDm, except EPS 2022 2022 2021 2021 IFRS Non-IFRS adj. Non-IFRS IFRS Non-IFRS adj. Non-IFRS Subscription 10.6 10.6 3.6 3.6 Term Licence 35.9 35.9 40.0 40.0 SaaS 36.9 36.9 28.2 28.2 Total Software Licensi
Slide 47: EBIT & EBITDA reconciliation from IFRS to non-IFRS
EBIT & EBITDA reconciliation from IFRS to non-IFRS USDm Q1 22 EBIT Q1 22 EBITDA IFRS 38.3 74.1 IFRS 2 6.6 6.6 Deferred revenue write- - - down Amortisation of acquired 12.4 - intangibles Restructuring 2.0 1.9 Acquisition related costs - - Non-IFRS 59.3 82.6 47
Slide 48: Net earnings reconciliation IFRS to non-IFRS
Net earnings reconciliation IFRS to non-IFRS In USDm, except EPS Q1 22 Q1 21 IFRS net earnings 27.6 20.9 IFRS 2 Cost 6.6 6.9 Deferred revenue write down - - Amortisation of acquired intangibles 12.4 15.1 Restructuring 2.0 2.8 Acquisition related costs - - Taxation (3.6) (3.5) Net earnings for non-IF
Slide 49: Non-IFRS Definitions
Other Non-IFRS Definitions Revenue visibility Visibility on revenue includes a combination of revenue that is contractually committed and revenue that is in our pipeline and that is likely to be booked, but is not contractually committed and Non-IFRS adjustments therefore may not occur. Share-based
Slide 50: 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 repo
Slide 51: Thank You
Thank You