Temenos Ag · SIX:TEMN
Temenos — Q1 2023 Earnings Presentation
49 slides from Temenos's earnings presentation, Apr 25, 2023
Slide 1: Temenos
temenos
Slide 2: Financial Results and Business Update
Financial Results and Business Update 25 April 2023 Quarter ended, 31 March 2023
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 • Strong start to the year with 12% total software licensing growth (c.c.), 15% ARR growth (c.c.), and 20% Free Cash Flow Q1-23 growth performance • EBIT growth of 11% (c.c.), good cost management and benefitting from FY-22 investment • Reconfirming FY-23 guidance, FY-23 is a ye
Slide 8: Looking forward
Looking forward • Sales environment expected to remain stable in FY-23 consistent with our assumption at the start of the year • Banks have higher visibility on FY-23 and the interest rate trajectory • Pipeline continues to develop positively, across tiers of banks and geographies • Both subscriptio
Slide 9: Q1-23 sales review
Q1-23 sales review Total software licensing • Strong ARR and TSL performance of both on premise and Temenos Geographic split Banking Cloud deals Q1-23 • Continued momentum with tier 1 institutions in the quarter including deals with Regions in the US, and a leading bank in Latam 15% 26% APAC • US co
Slide 10: Subscription transition progressing well
Subscription transition progressing well Transition to subscription license accelerating • Significant portion of license revenues in Q1-23 signed as 77% of Q1-23 license revenue from subscriptions subscription, with subscription representing 77% of licenses 2% • Accelerates shift to more recurring
Slide 11: Sustained strong momentum in SaaS
Sustained strong momentum in SaaS USDm SaaS Revenue • ACV of USD18.9m in Q1-23 driven by 3x growth in new client ACV and some additional 50 consumption 45 • SaaS revenue growing consistently at c.30%+ 30% CAGR FY-20 to FY-22 40 despite quarterly volatility in ACV • ACV to remain volatile based on la
Slide 12: Robust ARR growth
Robust ARR growth USDm ARR • ARR growth of 15% in Q1-23 700 15% CAGR • ARR growth driven by SaaS revenue growth 600 and subscription transition 500 • Both of these revenue streams are benefiting 400 from rise in demand for cloud from banks across all tiers 300 200 100 0 Q1-21 Q2-21 Q3-21 Q4-21 Q1-22
Slide 13: Strong US performance with signing of Regions
Strong US performance with signing of Regions • Regions, a top bank in the US, selected Temenos Banking Cloud for core banking replacement • Highly strategic win for Temenos, beating incumbent US vendors • Regions selected Temenos to modernize its legacy systems for customers’ records and deposits o
Slide 14: Financial update
Financial update Takis Spiliopoulos, CFO 14
Slide 15: Q1-23 Non-IFRS financial highlights
Q1-23 Non-IFRS financial highlights Revenue and profit Cash flow • Subscription revenue of USD 33.8m • Q1-23 operating cash flow of USD 70.5m, up 17% y-o-y; • SaaS revenue up 30% in Q1-23 • Q1-23 operating cash conversion of 108% of IFRS EBITDA • Total software licensing up 12% in Q1-23 • Q1-23 Free
Slide 16: Non-IFRS income statement – operating
Non-IFRS income statement – operating In USDm Q1-23 Q1-22 Y-o-Y Y-o-Y c.c. LTM Q1-23 LTM Q1-22 Y-o-Y Y-o-Y c.c. reported reported Subscription 33.8 10.6 220% 221% 129.0 21.4 501% 510% Term Licence 10.2 35.9 -72% -71% 109.6 273.6 -60% -59% SaaS 47.3 36.9 28% 30% 174.2 132.4 32% 36% Total software lic
Slide 17: Like-for-like revenue and costs
Like-for-like revenue and costs • Q1-23 LFL non-IFRS revenues up 4% • Q1-23 LFL non-IFRS costs up 2% Total Software License Maintenance Services +2% 240 +4% 160 220 140 200 180 12% 120 160 100 140 120 80 100 3% 60 80 60 40 40 20 20 (10%) 0 0 Q1-22 Q1-23 Q1-22 Q1-23 17
Slide 18: Non-IFRS income statement – non-operating
Non-IFRS income statement – non-operating Y-o-Y Y-o-Y In USDm, except EPS Q1-23 Q1-22 reported LTM Q1-23 LTM Q1-22 reported EBIT 67.2 59.3 13% 280.3 359.1 -22% Net finance charge -5.3 -4.6 15% -28.2 -23.8 19% FX gain / (loss) 0.3 0.3 0% 5.7 -0.2 N.M. Tax -12.1 -10.0 22% -49.7 -57.3 -13% Net profit 5
Slide 19: IFRS cash conversion
IFRS cash conversion USD m 106% 110% 118% 108% 500 450 400 350 300 250 200 150 100 50 0 LTM Q1-20 LTM Q1-21 LTM Q1-22 LTM Q1-23 IFRS EBITDA Operating Cashflow 19 Cash conversion well above 100% target
Slide 20: Group liquidity
Group liquidity USDm (9) (22) 71 (10) 112 (7) 90 (841) (729) Cash on Operating Cash Tax Capex Net Proceeds / Interest, FX & Leases Cash on Borrowings Reported Net Debt Balance Sheet Repayment of Balance Sheet (31/12/22) Borrowings and (31/03/23) Investments 20 Leverage at 1.9x at Q1-23
Slide 21: FY-23 guidance (non-IFRS, c.c.)
FY-23 guidance (non-IFRS, c.c.) FY-23 guidance FY-22 base (USD, c.c.) ARR At least 12% growth 627m Total software licensing At least 6% growth 405m EBIT At least 7% growth 275m 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 be
Slide 22: Illustrative Non-IFRS EBIT Bridge FY-22/FY-23
Illustrative Non-IFRS EBIT Bridge FY-22/FY-23 >=7% y-o-y growth 275 EBIT FY-22 CC Saas Profit Services Profit Variable, Investments, EBIT FY-23 (Guidance) Wage inflation • Visibility on SaaS profitability driving FY-23 EBIT growth • Prior year headwinds on services business overcome contributing to
Slide 23: Illustrative FCF Evolution FY-22/FY-23
Illustrative FCF Evolution FY-22/FY-23 Estimated movements for illustrative purposes only >=12% growth 193 FY-22 Opex investment Net Services Term License Subsc License SaaS & Maint Tax Capex & Cap Dev FY-23 & inflation Impact Impact Impact Revenue/Deferred
Slide 24: Mid-term targets (non-IFRS, c.c.)
Mid-term targets (non-IFRS, c.c.) Mid-term targets (USD) FY-22 base (USD, c.c.) ARR >1.3bn 627m EBIT >570m 275m Free Cash Flow (reported) >700m 193m* * FY-22 Free Cash Flow is reported figure and not restated. 24 See Disclaimer at beginning of this presentation on forward-looking statements
Slide 25: Conclusion
Conclusion Andreas Andreades, Executive Chairman and Acting CEO 25
Slide 26: Concluding remarks
Concluding remarks Total Software Licensing Geographic split • Continue to press on our strategic advantage of cloud native, packaged upgradeable platform that can be implemented on premise or on the Temenos banking cloud • Pipeline continues to develop well, including a number of tier 1 deals • Sub
Slide 27: Appendix
temenos Appendix
Slide 28: 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 29: 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 30: Q1-23 operational overview
Q1-23 operational overview • 89 go-lives including 34 implementation go-lives in Q1-23 30
Slide 31: FX assumptions underlying FY-23 guidance
FX assumptions underlying FY-23 guidance In preparing the FY-23 guidance, the Company has assumed the following FX rates: EUR to USD exchange rate of 1.09 GBP to USD exchange rate of 1.22; and USD to CHF exchange rate of 0.92 31
Slide 32: 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 33: 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 SaaS ACV 18.9 33 Figures are on a reported b
Slide 34: 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 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 FCF, 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 FCF 36 70 34 158 46 8
Slide 35: Total software licensing revenue breakdown by geography
Total software licensing revenue breakdown by geography Q1-22 Q1-23 12% 15% 15% 26% APAC APAC Europe Europe 11% Americas Americas MEA 27% MEA 46% 48% LTM Q1-22 LTM Q1-23 19% 20% 21% 20% APAC APAC Europe Europe Americas Americas MEA MEA 16% 23% 38% 35 43%
Slide 36: Total software licensing revenue breakdown by customer tier
Total software licensing revenue breakdown by customer tier Q1-22 Q1-23 40% 45% 1 and 2 1 and 2 3, 4, and 5 55% 3, 4, and 5 60% LTM Q1-22 LTM Q1-23 37% 1 and 2 1 and 2 3, 4, and 5 44% 3, 4, and 5 56% 63% 36
Slide 37: Software licensing revenue breakdown by competitive deals/add-ons
Software licensing revenue breakdown by competitive deals/ add-ons to installed base Q1-22 Q1-23 35% Competitive deals 43% Competitive deals Add-ons to installed base Add-ons to installed base 57% 65% LTM Q1-22 LTM Q1-23 29% Competitive deals Competitive deals 42% Add-ons to installed base Add-ons t
Slide 38: DSOs
DSOs 129 130 125 120 117 115 114 112 111 110 107 106 100 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 Q1-23 DSOs at 125 at Q1-23 38
Slide 39: 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 1.9x 1.7x 1.8x 1.5x 1.0x 0.5x 0.0x Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 39
Slide 40: Capitalization of development costs
Capitalization of development costs USDm Q1-21 Q2-21 Q3-21 Q4-21 FY-21 Cap’ dev’ costs (19.2) (20.9) (20.9) (25.2) (86.2) Amortisation 13.8 15.6 15.1 17.0 61.4 Net cap’ dev’ (5.4) (5.4) (5.8) (8.2) (24.8) USDm Q1-22 Q2-22 Q3-22 Q4-22 FY-22 Cap’ dev’ costs (21.9) (22.3) (21.3) (20.8) (86.3) Amortisat
Slide 41: FCF evolution FY-22 to mid-term
FCF evolution FY-22 to mid-term Estimated movements for illustrative purposes only >700 193 FY-22 IFRS EBITDA Net Trade Deferred Revenue Tax Capex & Cap Dev Mid-term Receivables & Payables 41 Figures are on a reported basis
Slide 42: 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 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 FY-23 non-IFRS guidance: FY-23 estimated share-based payments charge of c.5% of revenue FY-23 estimated amortisation of acquired intangibles of USD50m FY-23 estimated restructuring costs of US
Slide 44: 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 2023 2023 2022 2022 IFRS Non-IFRS adj. Non-IFRS IFRS Non-IFRS adj. Non-IFRS Subscription 33.8 33.8 10.6 10.6 Term Licence 10.2 10.2 35.9 35.9 SaaS 47.3 47.3 36.9 36.9 Total Software Licen
Slide 45: EBIT & EBITDA reconciliation from IFRS to non-IFRS
EBIT & EBITDA reconciliation from IFRS to non-IFRS USDm Q1-23 EBIT Q1-23 EBITDA IFRS 43.2 75.7 Share-based payments 9.1 9.1 Deferred revenue write-down - - Amortisation of acquired 11.1 - intangibles Restructuring and acquisition 3.8 3.8 related Non-IFRS 67.2 88.5 45
Slide 46: Net earnings reconciliation IFRS to non-IFRS
Net earnings reconciliation IFRS to non-IFRS In USDm, except EPS Q1-23 Q1-22 IFRS net earnings 30.6 27.6 Share-based payments 9.1 6.6 Deferred revenue write down - - Amortisation of acquired intangibles 11.1 12.4 Restructuring and acquisition related 3.8 2.0 Fair value change on financial instrument
Slide 47: 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 48: 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 49: Thank you
Thank You Thank you