Temenos Ag · SIX:TEMN
Temenos — Q4 2022 Earnings Presentation
50 slides from Temenos's earnings presentation, Feb 20, 2023
Slide 1: temenos
temenos
Slide 2: Financial Results and Business Update
Financial Results and Business Update 20 February 2023 Quarter ended, 31 December 2022
Slide 3: Disclaimer
Disclaimer Our presentation and this document may contain forward-looking statements relating to the future of the business and financial performance of Temenos AG. Any statements we make about our expectations, plans and prospects for the Company, including any guidance on the Company’s financial p
Slide 4: Non-IFRS information
Non-IFRS information In its presentation and in this document, the Company may present and discuss non-IFRS measures. Readers are cautioned that non-IFRS measures are subject to inherent limitations. Non-IFRS measures are not based on any comprehensive set of accounting rules or principles and shoul
Slide 5: Agenda
Agenda Business update Andreas Andreades, Executive Chairman and Acting CEO Financial update Takis Spiliopoulos, CFO Conclusion Andreas Andreades, Executive Chairman and Acting CEO Q&A 5
Slide 6: Business update
Business update Andreas Andreades, Executive Chairman and Acting CEO 6
Slide 7: Introductory remarks
Introductory remarks Q4 and FY-22 • Q4-22 results in line with pre-announcement performance • Revised FY-22 guidance met with Free Cash Flow exceeding revised guidance • No further lengthening of sales cycles witnessed vs. Q3-22; banks remain cautious based on uncertain 2023 • A number of tier 1 dea
Slide 8: Looking forward
Looking forward • Sales environment expected to remain stable this year, banks to continue remaining cautious in 2023 • Good pipeline development, including a number of tier 1 deals • Subscription transition to be substantially complete by year-end FY-23 • Demand for SaaS and cloud increasing 2023 •
Slide 9: Q4-22 sales review
Q4-22 sales review Total Software Licensing • Effective action taken early in Q4-22 to strengthen sales execution and sales leadership, predictability of business and sales performance restored Geographic split Q4-22 • No further lengthening of sales cycles witnessed compared to Q3-22 • Banks remain
Slide 10: Move to subscription continues at pace
Move to subscription continues at pace Transition to subscription license • 48% of license revenue in Q4-22 signed as subscription accelerating 48% of Q4-22 license revenue from subscriptions • Accelerates shift to more recurring sales model and cash flows in medium term and growth in ARR 2% • With
Slide 11: SaaS momentum continues
SaaS momentum continues • ACV of USD10.5m in Q4-22 driven by mix of new client wins and additional consumption • Significant 2022 ACV growth from new clients as the rise of cloud and SaaS is becoming more mainstream • ACV to remain volatile based on large deal seasonality as well as timing of additi
Slide 12: Strong ARR growth
Strong ARR growth % ARR • ARR growth of 15% in Q4-22 • ARR growth driven by SaaS revenue growth and subscription transition • Both of these revenue streams are benefiting from rise in demand for cloud 16% 16% 15% 14% 12% Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 ARR growth in 2023 driven by SaaS growt
Slide 13: Continuing momentum in North America
Continuing momentum in North America North America Total Software Licensing has grown NAM strategy paying off 2x in the last four years Total software licensing: North America vs. Rest of World1 Target top tier banks for digital transformation • Top 20 bank in US for Retail & Corporate, Global Tier
Slide 14: Financial update
Financial update Takis Spiliopoulos, CFO 14
Slide 15: Q4-22 Non-IFRS financial highlights
Q4-22 Non-IFRS financial highlights Revenue and profit Cash flow • Subscription revenue of USD 47.3m • Q4-22 operating cash flow of USD 135m, down 38% y-o-y; down • SaaS revenue up 36% in Q4-22 33% in FY-22 • Total software licensing down 4% in Q4-22 • FY-22 operating cash conversion of 105% of IFRS
Slide 16: Non-IFRS income statement – operating
Non-IFRS income statement – operating Q4-21 Y-o-Y Y-o-Y c.c. FY-22 FY-21 Y-o-Y Y-o-Y c.c. In USDm Q4-22 reported reported Subscription 47.3 2.9 1,506% 1,535% 105.7 14.4 633% 644% Term Licence 51.0 115.6 -56% -55% 135.4 277.8 -51% -50% SaaS 45.7 34.8 31% 36% 163.7 123.7 32% 37% Total software licensi
Slide 17: Like-for-like revenue and costs
Like-for-like revenue and costs • Q4-22 LFL non-IFRS revenues down 1% • Q4-22 LFL non-IFRS costs up 22% • FY-22 LFL non-IFRS revenues up 1% • FY-22 LFL non-IFRS costs up 17% Total Software License Maintenance Services +17% 1,000 +1% 700 900 600 800 0% 500 700 600 400 500 300 400 +22% -1% 4% 300 200
Slide 18: Non-IFRS income statement – non-operating
Non-IFRS income statement – non-operating Y-o-Y Y-o-Y In USDm, except EPS Q4-22 Q4-21 reported FY-22 FY-21 reported EBIT 94.0 128.4 -27% 272.4 356.8 -24% Net finance charge -6.7 -6.1 9% -23.1 -25.4 -9% FX gain / (loss) 1.6 -0.5 -451% 1.3 -1.2 -211% Tax -17.6 -19.8 -11% -47.5 -55.3 -14% Net profit 71
Slide 19: IFRS cash conversion
IFRS cash conversion USD m 100% 112% 124% 105% 500 450 400 350 300 250 200 150 100 50 0 FY-19 FY-20 FY-21 FY-22 IFRS EBITDA Operating Cashflow 19 Cash conversion well above 100% target
Slide 20: 2021/22 Free Cash Flow Bridge
2021/22 Free Cash Flow Bridge 358 193 FY-21 Customization Term license Subscription SaaS & Opex Net services Tax Capex & FY-22 reduction decline license Maintenance investment margin Capital transition revenue / & inflation Development impact deferred revenue 20
Slide 21: Group liquidity
Group liquidity USDm (19) (105) 317 (199) 139 (44) 90 (841) (751) Cash on Operating Cash Tax Capex Net Proceeds / Interest, FX & Leases Cash on Borrowings Reported Net Debt Balance Sheet Repayment of Balance Sheet (31/12/21) Borrowings and (31/12/22) Investments 21 Leverage at 2.0x at quarter end FY
Slide 22: 2023 guidance (non-IFRS, c.c.)
2023 guidance (non-IFRS, c.c.) FY-23 Guidance FY-22 Base (CCY) ARR At least 12% growth 628m Total Software Licensing At least 6% growth 407m EBIT At least 7% growth 274m EPS At least 6% growth 2.82* Free Cash Flow In line with ARR – at least 12% growth 193m* • FY-23 tax rate expected to be between 1
Slide 23: Illustrative Non-IFRS EBIT Bridge 2022/2023
Illustrative Non-IFRS EBIT Bridge 2022/2023 >=7% y-o-y growth 273 EBIT FY22 CCY Saas Profit Services Profit Variable, Investments, EBIT FY23 (Guidance) Wage inflation • Visibility on SaaS profitability driving FY23 TSL growth • Prior year headwinds on services business overcome contributing to margi
Slide 24: Illustrative FCF Evolution 2022 to 2023
Illustrative FCF Evolution 2022 to 2023 Estimated movements for illustrative purposes only >=12% growth 193 FY22 Opex investment Net Services Term License Subsc License SaaS & Maint Tax Capex & Cap Dev FY23 & inflation Impact Impact Impact Revenue/Deferred
Slide 25: Conclusion
Conclusion Andreas Andreades, Executive Chairman and Acting CEO 25
Slide 26: 2023 Capital Markets Day
2023 Capital Markets Day • Capital Markets Day being held on February 21st 2023, from 11am CET – 2pm CET • Event will be held in person and virtually, registration can be accessed here • Address to attend in person is The Westin London City 60 Upper Thames Street London, EC4V 3AD UK • The event will
Slide 27: Concluding remarks
Concluding remarks • Sales environment expected to remain stable this year, banks to continue remaining cautious in 2023 • Good pipeline development, including a number of tier 1 deals • Subscription transition to be substantially complete by year-end FY-23 • Demand for SaaS and cloud increasing • 2
Slide 28: Appendix
temenos Appendix
Slide 29: Relicensing mix of Total Software Licensing
Relicensing mix of Total Software Licensing 9% 11% 10% 10% 9% 14% 91% 89% 90% 90% 91% 86% FY17 FY18 FY19 FY20 FY21 FY22 Relicensing Other Total Software Licensing NB. Relicensing includes traditional Term Licenses sold for a fix period (predominantly transact and wealth) and excludes deals renewed o
Slide 30: Impact of subscription transition on P&L, cashflow and ARR
Impact of subscription transition on P&L, cashflow and ARR 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
Slide 31: Impact of SaaS contracts on P&L, cashflow and ARR
Impact of SaaS contracts on P&L, cashflow and ARR SaaS model – P&L 2 2 2 2 2 2 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 SaaS revenue Cashflow SaaS model – Cash 2 2 2 2 2 2 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Cashflow SaaS model – ARR 2 2 2 2 2 2 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 ARR 3
Slide 32: Q4-22 operational overview
Q4-22 operational overview • 95 go-lives including 45 implementation go-lives in Q4-22 • Total of 346 go-lives in FY-22 Taking a client live every day 32
Slide 33: FX assumptions underlying 2023 guidance
FX assumptions underlying 2023 guidance In preparing the 2023 guidance, the Company has assumed the following FX rates: EUR to USD exchange rate of 1.09 GBP to USD exchange rate of 1.24; and USD to CHF exchange rate of 0.92 33
Slide 34: FX exposure
FX exposure % of total USD EUR GBP CHF INR RON Other Total software licensing 68% 22% 2% 4% 0% 0% 4% Maintenance 79% 13% 2% 1% 0% 0% 5% Services 52% 29% 5% 6% 0% 0% 8% Revenues 71% 18% 2% 3% 0% 0% 6% Non-IFRS costs 19% 22% 12% 5% 18% 2% 23% Non-IFRS EBIT 202% 8% (23)% (4)% (44)% (4)% (35)% NB. All %
Slide 35: 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 10.6 17.9 10.5 35 Figures are on a r
Slide 36: 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 Q2-22 Q3-22 Q4-22 ARR 468.1 475.4 486.4 493.5 500.1 514.4 530.8 553.4 568.4 581.9 595.9 626.1 Total Bookings, Q1-20 Q2-20 Q3-20 Q4-20 Q1-21 Q2-21 Q3-21 Q4-21 Q1-22 Q2-22 Q3-22 Q4-22 USD m Total Bookin
Slide 37: Total software licensing revenue breakdown by geography
Total software licensing revenue breakdown by geography Q4-21 Q4-22 21% 17% 19% APAC 28% APAC Europe Europe Americas Americas 21% MEA MEA 26% 27% 40% FY-21 FY-22 20% 21% 18% 20% APAC APAC Europe Europe Americas Americas MEA MEA 19% 22% 38% 43% 37
Slide 38: Total software licensing revenue breakdown by customer tier
Total software licensing revenue breakdown by customer tier Q4-21 Q4-22 41% 42% 1 and 2 1 and 2 59% 3, 4, and 5 58% 3, 4, and 5 FY-21 FY-22 36% 1 and 2 1 and 2 3, 4, and 5 43% 3, 4, and 5 57% 64% 38
Slide 39: Software licensing revenue breakdown by competitive deals/add-ons
Software licensing revenue breakdown by competitive deals/ add-ons to installed base Q4-21 Q4-22 28% 35% Competitive deals Competitive deals Add-ons to installed base Add-ons to installed base 65% 72% FY-21 FY-22 27% Competitive deals Competitive deals 38% Add-ons to installed base Add-ons to instal
Slide 40: DSOs
DSOs 129 130 120 117 115 114 112 111 110 107 106 100 90 80 70 60 50 40 30 20 10 0 Q1-21 Q2-21 Q3-21 Q4-21 Q1-22 Q2-22 Q3-22 Q4-22 DSOs at 129 at Q4-22 40
Slide 41: 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 2.0x 2.0x 1.8x 1.7x 1.8x 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
Slide 42: 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 43: Reconciliation from IFRS to non-IFRS
IFRS revenue measure + Deferred revenue write-down = Non-IFRS revenue measure Reconciliation from IFRS to +/- IFRS profit measure Share-based payments and related social charges non-IFRS +/- Deferred revenue write down +/- Discontinued activities +/- Amortisation of acquired intangibles +/- Acquisit
Slide 44: 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 2023 non-IFRS guidance: FY 2023 estimated share-based payments charge of c.5% of revenue FY 2023 estimated amortisation of acquired intangibles of USD50m FY 2023 estimated restructuring costs
Slide 45: Earnings Reconciliation – IFRS to non-IFRS
Earnings Reconciliation – IFRS to non-IFRS 3 Months Ending 31 December 3 Months Ending 30 September In USDm, except EPS 2022 2022 2021 2021 IFRS Non-IFRS adj. Non-IFRS IFRS Non-IFRS adj. Non-IFRS Subscription 47.3 47.3 2.9 2.9 Term Licence 51.0 51.0 115.6 115.6 SaaS 45.7 45.7 34.9 34.9 Total Softwar
Slide 46: EBIT & EBITDA reconciliation from IFRS to non-IFRS
EBIT & EBITDA reconciliation from IFRS to non-IFRS USDm Q4-22 EBIT Q4-22 EBITDA FY-22 EBIT FY-22 EBITDA IFRS 64.0 97.5 163.4 302.0 Share-based payments 12.9 12.9 47.8 47.8 Deferred revenue write-down - - - - Amortisation of acquired 11.0 - 45.8 - intangibles Restructuring and acquisition 6.0 5.9 15.
Slide 47: Net earnings reconciliation IFRS to non-IFRS
Net earnings reconciliation IFRS to non-IFRS In USDm, except EPS Q4-22 Q4-21 FY 22 FY21 IFRS net earnings 48.0 77.0 114.4 173.4 Share-based payments 12.9 9.5 47.8 48.6 Deferred revenue write down - - - - Amortisation of acquired intangibles 11.0 12.4 45.8 52.7 Restructuring and acquisition related 6
Slide 48: Non-IFRS definitions
Non-IFRS definitions Other 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 Non-IFRS adjustments is not contractually committed and therefore may not occur. Share-based
Slide 49: 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. Only includes the recurring element of the contract and exclude variable elements. Value (ACV) Disclosure: quarterly reporting, annual repo
Slide 50: Thank you
Thank You Thank you