Temenos Ag · SIX:TEMN

Temenos — Q1 2021 Earnings Presentation

57 slides from Temenos's earnings presentation, Apr 20, 2021

  1. Slide 1: Temenos – The Banking Software Company

    TEMENOS THE BANKING SOFTWARE COMPANY

  2. Slide 2: Financial results & business update

    Financial results & business update 20 April 2021 Quarter ended 31 March 2021

  3. 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

  4. 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

  5. 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

  6. Slide 6: Business update

    Business update Max Chuard CEO

  7. Slide 7: A strong performance in Q1-21

    A strong performance in Q1-21 Review of Q1-21 Q1-21 non-IFRS financial highlights  Strong start to the year across all KPIs  SaaS ACV of USD12.1m, up 130%  Very strong growth in SaaS and licenses driving  ARR growth of 7% total software licensing  Total Bookings growth of 105%  Outstanding gro

  8. Slide 8: Very strong momentum in SaaS

    Very strong momentum in SaaS  Very strong momentum in SaaS with ACV up 130% in Q1-21  US was the strongest contributor, followed by Europe  ACV growth was driven by new logos as well as volume growth in existing clients  Majority of SaaS ACV pipeline for FY 21 driven by Transact, Infinity also s

  9. Slide 9: SaaS growth is largely incremental

    SaaS growth is largely incremental Large banks  Renovation on-premise by domain-specific microservices  Selective use of cloud and SaaS  Cost and complexity reduction, speed-to-market for new products  AI for smarter, faster projects and digital insights Mid to lower tier banks  Largely on-prem

  10. Slide 10: Outstanding growth in Total Bookings

    Outstanding growth in Total Bookings USDm Total Bookings  Total Bookings grew 105% in Q1-21, 140 demonstrating very strong levels of demand across Transact and Infinity 120  Strong sales momentum driving significant growth in backlog and increasing long term 100 visibility 80  Total Bookings grow

  11. Slide 11: Q1-21 sales and operational review

    Q1-21 sales and operational Q1-21 total software licensing review Geographic split  Sales environment continued to improve through the quarter with APAC Covid-19 accelerating demand for digitisation 13% 20% Europe  US was the largest contributor to total software licensing, in Americas particular

  12. Slide 12: Update on strategic partnerships to accelerate growth

    Update on strategic partnerships to accelerate growth  Partnership with Salesforce brings  Strategic Partnership with DXC Technology together all the CRM capabilities to accelerate the digital transformation provided by Salesforce and all the programs of DXC’s banking clients by broad set of trans

  13. Slide 13: Momentum in our US business

    Momentum in our US business  US was the largest contributor to total software licensing in Q1-21  Strong growth on both license and SaaS  Multiple US SaaS reference customers now live with significant volume growth in their client bases, including Varo, and PayPal running their Buy Now Pay Later

  14. Slide 14: Looking forward

    Looking forward  USD63bn market with 73% of spend still in-house  Structural demand drivers of digital, regulatory, cost and competition are accelerating  Demand is accelerating driving strong new pipeline growth  Strong momentum in SaaS, largely incremental  Significant momentum in Total Booki

  15. Slide 15: Current Reality at Incumbent Banks

    Current Reality at Incumbent Banks High Operational costs Complex, Monolithic, High  Dependencies on end-of-life Long times to Inflexible, operational market systems major cause for Batch Legacy risk concern Based IT Landscapes  Basel committee introduces new rules to standardize operational risk

  16. Slide 16: Outselling the competition

    Outselling the competition Neo vendors Traditional vendors New digital entrants, cloud-only Cross-industry, not packaged or offering, limited functional scope cloud & SaaS ready Why we win Why we win Cloud native, 27 years of Banking IP Highest R&D in the industry Depth and breadth of functionality

  17. Slide 17: Financial update

    Financial update Takis Spiliopoulos CFO

  18. Slide 18: Q1-21 non-IFRS financial highlights

    Q1-21 non-IFRS financial highlights Revenue and profit Cash flow  SaaS revenue up 22% in Q1-21  Q1-21 operating cash flow of USD 75m, up 25% y-o-y  Total software licensing up 26% in Q1-21  LTM operating cash conversion of 110% of IFRS  Maintenance growth of 3% in Q1-21 EBITDA  Total revenue u

  19. Slide 19: Non-IFRS income statement – operating

    Non-IFRS income statement – operating Y-o-Y Y-o-Y In USDm Q1 21 Q1 20 Y-o-Y c.c. FY-21 YTD FY-20 YTD Y-o-Y c.c. reported reported Software licensing 43.6 33.6 30% 28% 43.6 33.6 30% 28% SaaS and subscription 28.2 22.7 25% 22% 28.2 22.7 25% 22% Total software licensing 71.8 56.2 28% 26% 71.8 56.2 28%

  20. Slide 20: Impact of HCL on Q1-21 growth rates

    Impact of HCL on Q1-21 growth rates Underlying Q1-21 SaaS Underlying Q1-21 growth of 32% TSL growth of 33% Underlying Q1-21 Total Underlying Q1-21 EBIT Revenue growth of 9% growth of 47% Note: non-IFRS 20

  21. Slide 21: Like-for-like revenue and costs

    Like-for-like revenue and costs  Q1-21 LFL non-IFRS revenues up 7%  Q1-21 LFL non-IFRS costs flat y-o-y Total software licensing Maintenance Services USDm USDm 250 250 200 200 (9%) 150 0% 150 +3% 100 100 50 50 +26% 0 0 Q1 2020 Q1 2021 Q1 2020 Q1 2021 21

  22. Slide 22: Non-IFRS income statement – non-operating

    Non-IFRS income statement – non-operating In USDm, except EPS Q1-21 Q1-20 Y-o-Y FY-21 YTD FY-20 YTD Y-o-Y EBIT 56.9 44.4 28% 56.9 44.4 28% Net finance charge -6.2 -7.2 -14% -6.2 -7.2 -14% FX gain / (loss) -0.6 1.1 N.A. -0.6 1.1 N.A. Tax -7.9 -5.3 48% -7.9 -5.3 48% Net profit 42.2 32.9 28% 42.2 32.9

  23. Slide 23: DSOs continue to decline

    DSOs continue to decline DSOs 130 120 117 6 111 109 110 107 100 Q1 2018 Q1 2019 Q1 2020 Q1 2021 We expect DSOs to continue declining to below 105 by year end 2021 23

  24. Slide 24: IFRS cash conversion

    IFRS cash conversion USDm 450 115% 106% 110% 400 350 300 250 200 150 100 50 0 LTM Q1 2019 LTM Q1 2020 LTM Q1 2021 EBITDA Operating cashflow Cash conversion well above 100% target 24

  25. Slide 25: Group liquidity

    Group liquidity Net USDm Cash on balance proceeds/repayment Interest, FX and Cash on balance sheet (31/12/20) Operating cash Tax Capex Share buyback of borrowings M&A leases sheet (31/3/21) Borrowings Reported net debt 350 (7) (23) (89) 150 75 (2) (6) 7 66 110 -50 -250 930 864 -450 -650 -850 -1050 L

  26. Slide 26: Strong growth in ARR, deferred revenue and FCF

    Strong growth in ARR, deferred revenue and FCF  Strong ARR growth of 7% with limited attrition on maintenance and SaaS, and despite HCL headwind*  Maintenance returned to growth in Q1-21 as expected  Strong maintenance collection and increasing SaaS contribution driving deferred revenue growth an

  27. Slide 27: Overview of KPIs

    Overview of KPIs Sales P&L Cash Total Bookings* Total software licensing Operating cash conversion SaaS ACV EBIT margin Free cash flow Total ARR* EPS DSOs *New KPIs Total Bookings – includes fair value of license contract value, committed maintenance contract value on licence, and SaaS committed con

  28. Slide 28: Re-confirming 2021 non-IFRS guidance (c.c.)

    Re-confirming 2021 non-IFRS guidance (c.c.) FY-21 guidance FY-20 base SaaS ACV +40-50% 34 ARR +10-15% 493 Total software licensing (%) +14-18%* 359 Total revenue (%) +8-10%* 904 EBIT – margin and growth growth of +12-14% (USD362-369m)*, implying 37.2% margin 35.9% margin, USD325m  Cash conversion t

  29. Slide 29: Re-confirming 2025 Targets

    Re-confirming 2025 Targets Mid-term Guidance 2020 base (CCY) 2025 Targets Total Software Licensing 359 15-20% CAGR 2020-25 Total revenue 904 10-15% CAGR 2020-25 EBIT margin 35.9% c.41% by 2025 Total Bookings 492 17-22% CAGR 2020-25 ARR 493 >=15% CAGR 2020-25 FCF 297 >=15% CAGR 2020-25 to reach >USD6

  30. Slide 30: EBIT Bridge 2020/2021 – New Non-IFRS Definition

    EBIT Bridge 2020/2021 – New Non-IFRS Definition 35.9% +130bps 37.2% EBIT Margin 36.8% 12 c. 28 13 c. 38 6 366 331 325 EBIT FY20 Reported Impact of FY20 CCY Recurring Revenue License Invest. (Net of Variable EBIT FY21 currencies growth cost reversals) compensation (Guidance Mid- Point) Strong visibil

  31. Slide 31: Share buyback update

    Share buyback update  The share buyback for up to a total of USD 200m at the market price commenced on 19 February 2021 and will end on 30 December 2021 at the latest  USD 89m of shares repurchased in Q1-21  Temenos intends to use the repurchased shares to finance potential acquisitions and/or to

  32. Slide 32: Summary

    | Summary Max Chuard CEO ® TEMENOS

  33. Slide 33: TCF Online 2021

    TCF Online 2021  TCF online taking place Wednesday 26th and Thursday 27th May  Global client forum, opportunity to see new product releases, hear case studies and engage with Temenos product and management teams  Investor specific track, please follow this link to register for the event and selec

  34. Slide 34: Conclusion

    Conclusion  Strong start to the year across all KPIs  Very strong growth in SaaS and licenses driving total software licensing  Outstanding growth in Total Bookings, up 105%, driven by demand from new and existing customers and an increase in average tenure  Strong EBIT growth and margin expansi

  35. Slide 35: Appendix

    Appendix 35

  36. Slide 36: FX assumptions underlying 2021 guidance

    FX assumptions underlying 2021 guidance In preparing the 2021 guidance, the Company has assumed the following FX rates:  EUR to USD exchange rate of 1.19  GBP to USD exchange rate of 1.38; and  USD to CHF exchange rate of 0.92 36

  37. Slide 37: FX exposure

    FX exposure % of total USD EUR GBP CHF Other Total software licensing 67% 21% 2% 2% 8% Maintenance 75% 17% 2% 2% 5% Services 55% 28% 3% 2% 13% Revenues 68% 20% 2% 2% 8% Non-IFRS costs 23% 17% 13% 7% 39% Non-IFRS EBIT 149% 26% (19)% (7)% (50)% NB. All % are approximations based on 2020 actuals Mitiga

  38. Slide 38: EBIT Bridge 2020/2021 – Old Non-IFRS Definition

    EBIT Bridge 2020/2021 – Old Non-IFRS Definition EBIT Margin 35.6% +40bps 35.2% 34.8% 12 c.28 13 9 c.38 6 346 320 314 EBIT FY20 Impact of FY20 CCY Recurring License Invest. (Net of Variable Stock based EBIT FY21 Reported currencies Revenue growth cost reversals) compensation compensation (Mid-Point o

  39. Slide 39: 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 39

  40. Slide 40: Quarterly ARR, Total Bookings, FCF

    Quarterly ARR, Total Bookings, FCF ARR, USDm Q1-20 Q1-21 ARR 468.1 500.1 Total Bookings, USDm Q1-20 Q1-21 Total Bookings 62.2 127.5 FCF, USDm Q1-20 Q1-21 FCF 36 46 40

  41. Slide 41: Total Bookings average tenure

    Total Bookings average tenure Below is the average tenure in FY-20 for the components of total bookings:  Average tenure of SaaS contracts in FY-20 was 3.9 years  Average tenure of license and maintenance contracts in FY-20 was 3.6 years  Average tenure of total bookings in FY-20 was 3.7 years 41

  42. Slide 42: Total software licensing revenue breakdown by geography

    Total software licensing revenue breakdown by geography Q1-20 APAC Q1-21 APAC 15% 18% 13% Europe 20% Europe Americas Americas MEA MEA 25% 24% 43% 42% LTM Q1-20 APAC LTM Q1-21 APAC 14% 16% 18% 22% Europe Europe Americas Americas MEA MEA 29% 35% 31% 36% 42

  43. Slide 43: Total software licensing revenue breakdown by customer tier

    Total software licensing revenue breakdown by customer tier Q1-20 1 and 2 Q1-21 1 and 2 18% 37% 3, 4 and 5 3, 4 and 5 63% 82% LTM Q1-20 LTM Q1-21 1 and 2 1 and 2 40% 3, 4 and 5 39% 3, 4 and 5 61% 60% 43

  44. Slide 44: Software licensing revenue breakdown by competitive deals / add-ons

    Software licensing revenue breakdown by competitive deals / add-ons to installed base Q1-20 Q1-21 Competitive Competitive 19% deals 26% deals Non Non competitive, 74% competitive, 81% installed installed based based LTM Q1-20 LTM Q1-21 Competitive Competitive 31% deals deals 29% Non Non 71% 69% comp

  45. Slide 45: Balance sheet – debt and leverage

    Balance sheet – debt and leverage Net debt and leverage ratios* USDm 1000 2.1x 900 2.1x 800 700 600 500 400 300 200 100 0 Q4 2020 Q1 2021 45

  46. Slide 46: Q1 21 v Q1 20 assets

    Q1 21 v Q1 20 assets 2,132 2,191 103 66 269 289 Comments:  Other assets down driven primarily by release Nuo DB investment $20.5m (equity and convertible 1,699 1,678 note)  Trade Receivables reduction driven by DSO improvement  Fixed assets increase primarily driven by FX movement on USDm intangi

  47. Slide 47: Q1 21 v Q1 20 liabilities

    Q1 21 v Q1 20 liabilities 2,132 2,191 157 216 Comments: 360 281  Trade and other payables decrease mainly driven by reduction due to lower costs and volume driving lower 930 1,108 payments  Deferred revenues increase due to 184 growth in SaaS and strong advance 174 collections for Maintenance 501

  48. Slide 48: Capitalization of development costs

    Capitalization of development costs USDm Q1 19 Q2 19 Q3 19 Q4 19 FY 19 Cap’ dev’ costs (14.1) (14.3) (15.2) (21.0) (64.6) Amortisation 11.7 12.0 12.2 13.7 49.6 Net cap’ dev’ (2.5) (2.3) (3.0) (7.3) (15.1) USDm Q1 20 Q2 20 Q3 20 Q4 20 FY 20 Cap’ dev’ costs (17.7) (18.0) (20.8) (19.9) (76.3) Amortisat

  49. Slide 49: 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

  50. Slide 50: 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 2021 non-IFRS guidance:  FY 2021 estimated share-based payments charge of USD 20m  FY 2021 estimated amortisation of acquired intangibles of USD 50m  FY 2021 estimated restructuring costs o

  51. Slide 51: 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 2021 2021 2020 2020 IFRS Non-IFRS adj. Non-IFRS IFRS Non-IFRS adj. Non-IFRS Software licensing 43.6 43.6 33.6 33.6 SaaS and subscription 28.2 28.3 18.4 4.2 22.7 Total Software Licensing 7

  52. Slide 52: EBIT & EBITDA reconciliation from IFRS to non-IFRS

    EBIT & EBITDA reconciliation from IFRS to non-IFRS USDm Q1 21 EBIT Q1 21 EBITDA IFRS 32.1 68.5 Share-based payments 6.9 6.9 Deferred revenue write-down - - Amortisation of acquired intangibles 15.1 - Restructuring 2.8 2.8 Acquisition related costs - - Non-IFRS 56.9 78.2 52

  53. Slide 53: Net earnings reconciliation IFRS to non-IFRS

    Net earnings reconciliation IFRS to non-IFRS In USDm, except EPS Q1 21 Q1 20* IFRS net earnings 20.9 3.0 Deferred revenue write down 0.0 4.2 Amortisation of acquired intangibles 15.1 17.6 Restructuring 2.8 6.9 Acquisition related costs - - Share-based payments 6.9 5.0 Taxation -3.5 -3.8 Net earnings

  54. Slide 54: Non-IFRS Definitions

    Other Non-IFRS Definitions Revenue visibility Visibility on revenue includes a combination of revenue Non-IFRS adjustments that is contractually committed and revenue that is in our pipeline and that is likely to be booked, but is not Share-based payment charges contractually committed and therefore

  55. Slide 55: 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 guid

  56. Slide 56: License vs SaaS Profitability

    License vs SaaS Profitability Cumulative Gross profit 5.4 4.8 4.2 3.7 NPV: $3.6 3.1 2.8 2.6 2.6 2.4 2.2 NPV: $2.1 2.1 2.0 1.8 1.7 1.5 1.5 1.3 1.1 1.0 0.5 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 License & Maintenance Saas Break even  Net present value of SaaS gross mar

  57. Slide 57: Thank You

    Thank You temenos.com

Temenos — Q1 2021 Earnings Presentation on 6ix