Temenos Ag · SIX:TEMN
Temenos — Q1 2024 Earnings Presentation
45 slides from Temenos's earnings presentation, Apr 23, 2024
Slide 1: Temenos
temenos
Slide 2: Financial Results and Business Update
Financial Results and Business Update Andreas Andreades, CEO Takis Spiliopoulos, CFO 23 April 2024 Quarter ended, 31 March 2024 2
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: Q1-24 highlights
Q1-24 highlights Q1-24 financial highlights FY-24 guidance confirmed Q1-24 operational highlights (non-IFRS, c.c.) (non-IFRS, c.c.) • ARR of USD 723m, up 12% y-o-y • Temporary lengthening of sales cycles • ARR growth of about 15% • Subscription revenue of USD 20m due to short seller allegations impa
Slide 6: Agenda
Agenda Operational highlights Financial update Conclusion Appendix 6 6
Slide 7: Q1-24 sales and operational review Total software licensing
Q1-24 sales and operational review Total software licensing • Q1-24 signings impacted by temporary delays in client decision making due to short seller allegations Geographic split • Sales environment otherwise remained stable Q1-24 • Despite sales challenges, APAC and Europe still grew year-on-year
Slide 8: Subscription transition substantially complete
Subscription transition substantially complete Subscription and term license mix Subscription was 44% of FY-22 and 67% of the FY-23 subscription and term license mix 2% 23% 49% 51% 48% 55% 68% 68% 73% 77% 98% 77% 51% 49% 52% 45% 23% 32% 32% 27% Q4-21 Q1-22 Q2-22 Q3-22 Q4-22 Q1-23 Q2-23 Q3-23 Q4-23 Q
Slide 9: SaaS momentum continues with revenue growth of 19% in Q1-24
SaaS momentum continues with revenue growth of 19% in Q1-24 SaaS Revenue USDm 60 55 27% CAGR LTM Q1-22 to LTM Q1-24 50 45 40 35 30 25 20 15 10 5 0 Q4-20 Q1-21 Q2-21 Q3-21 Q4-21 Q1-22 Q2-22 Q3-22 Q4-22 Q1-23 Q2-23 Q3-23 Q4-23 Q1-24 Q1-24 SaaS ACV of USD 5m; mix of new logos and upsell/cross-sell 9 No
Slide 10: Strong ARR growth trajectory, up 12% in Q1-24
Strong ARR growth trajectory, up 12% in Q1-24 USDm ARR 800 700 13% CAGR LTM Q1-21 to LTM Q1-24 600 500 400 300 200 100 0 Q1-21 Q2-21 Q3-21 Q4-21 Q1-22 Q2-22 Q3-22 Q4-22 Q1-23 Q2-23 Q3-23 Q4-23 Q1-24 ARR growth driven by subscription, SaaS and maintenance 10 Note: non-IFRS c.c. growth rates. See Disc
Slide 11: Agenda
Agenda Operational highlights Financial update Conclusion Appendix 11 11
Slide 12: Q1-24 Non-IFRS financial highlights
Q1-24 Non-IFRS financial highlights Revenue and profit (non-IFRS, c.c.) Cash flow • ARR of USD 723.1m, up 12% • Q1-24 operating cash flow of USD 71.6m, up 1% y-o-y; • Subscription revenue of USD 20.1m • Q1-24 operating cash conversion of 118% of IFRS EBITDA • SaaS revenue up 19% in Q1-24 • Q1-24 fre
Slide 13: ARR and non-IFRS income statement – operating
ARR and non-IFRS income statement – operating ARR (USDm) Q1-24 Q1-23 Y-o-Y Y-o-Y c.c. reported ARR 723.1 645.2 12% 12% Income statement (USDm) Q1-24 Q1-23 Y-o-Y Y-o-Y c.c. LTM Q1-24 LTM Q1-23 Y-o-Y Y-o-Y c.c. reported reported Subscription 20.1 33.8 (41%) (41%) 146.7 129.0 14% 13% Term Licence 7.6 1
Slide 14: Like-for-like revenues and costs
Like-for-like revenues and costs • Q1-24 LFL non-IFRS revenues up 2% • Q1-24 LFL non-IFRS costs down 1% • Q1-24 LFL non-IFRS product revenues up 2% • Q1-24 LFL non-IFRS product costs flat LFL non-IFRS Services revenue LFL non-IFRS Services cost LFL non-IFRS Product costs LFL non-IFRS Product revenue
Slide 15: Non-IFRS income statement – non-operating
Non-IFRS income statement – non-operating Y-o-Y Y-o-Y In USDm, except EPS Q1-24 Q1-23 reported LTM Q1-24 LTM Q1-23 reported EBIT 72.9 67.2 9% 318.7 280.3 14% Net finance charge (3.4) (5.3) (37%) (20.4) (23.8) (14%) FX gain / (loss) (1.9) 0.4 (633%) (1.5) 1.3 (216%) Tax (13.9) (12.1) 14% (61.4) (49.7
Slide 16: IFRS cash conversion
IFRS cash conversion USD m IFRS EBITDA 103% 118% 108% 118% Operating Cashflow 500 450 400 350 300 250 200 150 100 50 0 LTM Q1-21 LTM Q1-22 LTM Q1-23 LTM Q1-24 Cash conversion well above 100% target 16
Slide 17: Group liquidity
Group liquidity 302 (8) USDm 155 (2) (21) 72 107 (871) (568) Cash on Operating Cash Tax Capex Net Proceeds / Interest, FX Cash on Borrowings Reported Net Debt Balance Sheet Repayment of & Leases Balance Sheet (31/12/23) Borrowings and (31/03/24) Investments Leverage at 1.4x at end of Q1-24 17 Note:
Slide 18: FY-24 guidance confirmed (non-IFRS, c.c.)
FY-24 guidance confirmed (non-IFRS, c.c.) FY-24 guidance FY-23 base (USD, c.c.) ARR About 15% growth 728m Total software licensing 7-10% growth 444m EBIT 7-9% growth 310m EPS 6-8% growth 3.19* Free cash flow At least 16% growth 243m* * FY-23 EPS and Free Cash Flow are reported figures and not restat
Slide 19: Mid-term targets (non-IFRS, c.c.)
Mid-term targets (non-IFRS, c.c.) Mid-term targets (USD) FY-23 base (USD, c.c.) ARR >1.3bn 728m EBIT >570m 310m Free cash flow (reported) >700m 243m* * FY-23 Free Cash Flow is reported figure and not restated. See Disclaimer at beginning of this presentation on forward-looking statements 19
Slide 20: Agenda
Agenda Operational highlights Financial update Conclusion Appendix 20 20
Slide 21: Concluding remarks
Concluding remarks • USD 723m of ARR at end of Q1-24, up 12% • Shift to recurring revenue model with ARR as key metric is reducing quarterly volatility, with total revenue growing despite lower license sales • Pipeline continued to grow in Q1-24 • Publication of independent report expected to restor
Slide 22: Agenda
Agenda Operational highlights Financial update Conclusion Appendix 22 22
Slide 23: Illustrative Non-IFRS EBIT Bridge FY-23/FY-24
Illustrative Non-IFRS EBIT Bridge FY-23/FY-24 7-9% y-o-y growth 310 EBIT FY23 CCY Maintenance Saas Profit Subs License Services Profit Variable, Investments, EBIT FY24 (Guidance) Wage inflation • Visibility on maintenance and subscription driving FY-24 EBIT growth • Prior year headwinds on services
Slide 24: FCF evolution 2023 to 2024
FCF evolution 2023 to 2024 Estimated movements for illustrative purposes only At least 16% growth 243 FY-23 Opex investment Net Services Term License Subsc License SaaS & Maint Tax Capex & Cap Dev FY-24 & inflation Impact Impact Impact Revenue/Deferred 24
Slide 25: 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 26: 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 2
Slide 27: 62 go-lives
Q1-24 operational overview 62 go-lives including 25 implementation go-lives in Q1-24 27
Slide 28: FX and other assumptions underlying FY-24 guidance
FX and other assumptions underlying FY-24 guidance In preparing the FY-24 guidance, the Company has assumed the following FX rates: EUR to USD exchange rate of 1.08 GBP to USD exchange rate of 1.26; and USD to CHF exchange rate of 0.87 The Company has also assumed the following for FY-24 guidance: •
Slide 29: FX exposure
FX exposure % of total USD EUR GBP CHF INR RON Other Total software licensing 69% 19% 2% 3% 0% 0% 6% Maintenance 77% 15% 2% 1% 0% 0% 6% Services 55% 27% 6% 5% 0% 0% 7% Revenues 70% 18% 3% 3% 0% 0% 6% Non-IFRS costs 27% 18% 10% 5% 16% 2% 21% Non-IFRS EBIT 165% 19% (15)% (3)% (35)% (3)% (27)% NB. All
Slide 30: Quarterly SaaS ACV
Quarterly SaaS ACV 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 USDm Q1-23 Q2-23 Q3-23 Q4-23 SaaS ACV 18.9 20.2 12.8 8.
Slide 31: Quarterly ARR, FCF
Quarterly ARR, 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 Q1-23 Q2-23 Q3-23 Q4-23 Q1-24 ARR 468.1 475.4 486.4 493.5 500.1 514.4 530.8 553.4 568.4 581.9 595.9 626.1 645.2 666.8 687.5 730.0 723.1 FCF, USD m Q1-20 Q2-20 Q3-20 Q4-20 Q1-21 Q2-21 Q3-21 Q4-21 Q1-
Slide 32: Total software licensing revenue breakdown by geography
Total software licensing revenue breakdown by geography Q1-23 Q1-24 15% 17% APAC APAC Europe Europe 11% MEA 48% MEA 15% 52% Americas Americas 26% 16% LTM Q1-23 LTM Q1-24 15% 20% APAC APAC Europe Europe 41% 43% MEA MEA Americas 16% Americas 25% 21% 19% 32
Slide 33: Total software licensing revenue breakdown by customer tier
Total software licensing revenue breakdown by customer tier Q1-23 Q1-24 37% 45% 1 and 2 1 and 2 55% 3, 4, and 5 3, 4, and 5 63% LTM Q1-23 LTM Q1-24 1 and 2 1 and 2 44% 3, 4, and 5 42% 3, 4, and 5 56% 58% 33
Slide 34: Software licensing revenue breakdown by competitive deals/ add-ons
Software licensing revenue breakdown by competitive deals/ add-ons to installed base Q1-23 Q1-24 25% Competitive deals Competitive deals 43% Add-ons to installed base Add-ons to installed base 57% 75% LTM Q1-23 LTM Q1-24 32% Competitive deals 42% Competitive deals Add-ons to installed base Add-ons t
Slide 35: DSOs
DSOs 150 141 136 129 125 124 124 117 115 114 111 112 107 106 100 50 0 Q1-21 Q2-21 Q3-21 Q4-21 Q1-22 Q2-22 Q3-22 Q4-22 Q1-23 Q2-23 Q3-23 Q4-23 Q1-24 DSOs at 136 at Q1-24 35
Slide 36: Balance sheet –leverage
Balance sheet –leverage Leverage ratios 3.0x 2.6x 2.6x 2.6x 2.5x 2.3x 2.1x 2.2x 2.1x 2.0x 2.0x 2.0x 2.0x 1.9x 1.8x 1.8x 1.8x 1.7x 1.6x 1.5x 1.4x 1.0x 0.5x 0.0x Q1-20 Q2-20 Q3-20 Q4-20 Q1-21 Q2-21 Q3-21 Q4-21 Q1-22 Q2-22 Q3-22 Q4-22 Q1-23 Q2-23 Q3-23 Q4-23 Q1-24 36
Slide 37: Capitalization of development costs
Capitalization of development costs USDm Q1-22 Q2-22 Q3-22 Q4-22 FY-22 Cap’ dev’ costs (21.9) (22.3) (21.3) (20.8) (86.3) Amortisation 15.8 16.4 15.7 15.6 63.4 Net cap’ dev’ (6.1) (6.0) (5.6) (5.2) (22.9) USDm Q1-23 Q2-23 Q3-23 Q4-23 FY-23 Cap’ dev’ costs (19.7) (18.2) (19.4) (19.3) (76.6) Amortisat
Slide 38: FCF Evolution 2023 to Mid-term
FCF Evolution 2023 to Mid-term Estimated movements for illustrative purposes only >700 243 FY23 IFRS EBITDA Net Trade Deferred Revenue Tax Capex & Cap Dev Mid-term Receivables & Payables 38
Slide 39: Reconciliation from IFRS to non-IFRS
IFRS revenue measure + Deferred revenue write-down = Non-IFRS revenue measure Reconciliation IFRS profit measure from IFRS to +/- +/- Share-based payments and related social charges Deferred revenue write down non-IFRS +/- Discontinued activities +/- Amortisation of acquired intangibles +/- M&A rela
Slide 40: 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 FY-24 non-IFRS guidance: FY-24 estimated share-based payments charge of c.5% of revenue FY-24 estimated amortisation of acquired intangibles of USD 50m FY-24 estimated restructuring / M&A rela
Slide 41: 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 2024 2024 2023 2023 IFRS Non-IFRS adj. Non-IFRS IFRS Non-IFRS adj. Non-IFRS Subscription 20.1 20.1 33.8 33.8 Term Licence 7.6 7.6 10.2 10.2 SaaS 56.3 56.3 47.3 47.3 Total Software Licensi
Slide 42: Net earnings reconciliation IFRS to non-IFRS
Net earnings reconciliation IFRS to non-IFRS In USDm, except EPS Q1-24 Q1-23 IFRS net earnings 32.3 30.6 Share-based payments 10.4 9.1 Amortisation of acquired intangibles 10.8 11.1 Restructuring / M&A related costs 5.3 3.8 Taxation (5.1) (4.5) Net earnings for non-IFRS EPS 53.8 50.1 No. of dilutive
Slide 43: 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 44: Financial metrics definitions and reporting
Financial metrics definitions and reporting SaaS 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 45: Thank you
Thank You Thank you 45