Temenos Ag · SIX:TEMN
Temenos — Q3 2022 Earnings Presentation
52 slides from Temenos's earnings presentation, Oct 20, 2022
Slide 1: temenos
temenos
Slide 2: Financial Results and Business Update
Financial Results and Business Update 20 October 2022 Quarter ended, 30 September 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 Max Chuard, CEO Financial update Takis Spiliopoulos, CFO Summary Max Chuard, CEO Q&A 5
Slide 6: Business update
Business update Max Chuard, CEO 6
Slide 7: Introductory remarks
Introductory remarks • Subscription revenue significantly below expectations Q3 • SaaS and ARR showed strong momentum with growth of +41% and +16% YoY performance • Macro uncertainty and sales execution impacted subscription license signings disappointed • Majority of operational costs in line with
Slide 8: Q3-22 sales review
Q3-22 sales review Total Software Licensing • Some larger banks have become more cautious in their decision-making given future macro economic uncertainty Geographic split Q3-22 • Lengthening sales cycles linked to a number of large deals in the pipeline • Deals are still in the pipeline, not lost 2
Slide 9: Move to subscription ongoing
Move to subscription ongoing • Temenos introduced 5 year subscription licenses in 2022 to replace term licenses, driven by market demand Transition to subscription license accelerating • Lowers upfront cost for clients, increases flexibility 51% of Q3 licensing revenue from subscriptions • Model tra
Slide 10: SaaS momentum continues
SaaS momentum continues • ACV of USD18m in Q3-22 driven by a mix of new clients and additional volume consumption from existing clients • No visible impact from macro headwinds on decision-making by non-incumbents and smaller banks • SaaS revenue growth accelerated to 41% YoY driven by strong ACV in
Slide 11: ARR and Total Bookings continued to grow
ARR and Total Bookings continued to grow • ARR growth of 16% in Q3-22, driven by SaaS revenue growth and subscription transition • Total Bookings growth of 4% despite macro headwinds and sales execution, driven by strong SaaS ACV Revised guidance maintains full year Total Bookings sequential ARR gro
Slide 12: US business update
US business update NAM total software licensing (USDm) • Relatively strong performance in the US in Q3-22, across SaaS and license • President of the Americas has left the business as part of the sales organization review • Replaced by two senior Executives, Colin Jarrett, Chief Client Delivery Offi
Slide 13: Investment in Mbanq to drive growth in Banking-as-a-Service market
Investment in Mbanq to drive growth in the Banking-as-a-Service market • Temenos has made a minority investment in Mbanq, a leading US-based provider of Banking-as-a-Service (BaaS) to capture the fast-growing BaaS market • BaaS is the provision of banking process to enable businesses in any industry
Slide 14: Financial update
Financial update Takis Spiliopoulos, CFO 14
Slide 15: Q3-22 Non-IFRS financial highlights
Q3-22 Non-IFRS financial highlights Revenue and profit Cash flow • Subscription revenue of USD 17m • Q3-22 operating cash flow of USD 35m, down 49% y-o-y; down • SaaS revenue up 41% in Q3-22 10% LTM • Total software licensing down 17% in Q3-22 • LTM Q3-22 operating cash conversion of 117% of IFRS EB
Slide 16: Non-IFRS income statement – operating
Non-IFRS income statement – operating Q3-21 Y-o-Y Y-o-Y c.c. LTM LTM Y-o-Y Y-o-Y c.c. In USDm Q3-22 reported Q3-22 Q3-21 reported Subscription 17.2 2.3 664% 678% 61.4 15.6 293% 298% Term Licence 16.6 61.2 -73% -72% 199.9 273.3 -27% -25% SaaS 42.5 31.3 36% 41% 153.0 115.4 33% 36% Total software licen
Slide 17: Like-for-like revenue and costs
Like-for-like revenue and costs • Q3-22 LFL non-IFRS revenues down 5% • Q3-22 LFL non-IFRS costs up 27% Total Software License Maintenance Services 180 +27% 240 -5% 160 220 200 140 -17% 180 120 160 140 100 120 80 100 4% 60 80 60 40 40 3% 20 20 0 0 Q3 2021 Q3 2022 Q3 2021 Q3 2022 17
Slide 18: Non-IFRS income statement – non-operating
Non-IFRS income statement – non-operating Y-o-Y LTM LTM Y-o-Y In USDm, except EPS Q3-22 Q3-21 reported Q3-22 Q3-21 reported EBIT 40.8 86.0 -53% 306.8 356.0 -14% Net finance charge -6.1 -6.5 -7% -22.5 -26.1 -13% FX gain / (loss) -0.8 0.6 -234% -0.8 -1.0 -23% Tax -6.4 -13.8 -53% -49.7 -52.7 -6% Net pr
Slide 19: IFRS cash conversion
IFRS cash conversion USD m 500 107% 119% 113% 117% 450 400 350 300 250 200 150 100 50 0 LTM Q3-19 LTM Q3-20 LTM Q3-21 LTM Q3-22 IFRS EBITDA Operating Cashflow 19 Cash conversion well above 100% target
Slide 20: Group liquidity
Group liquidity USDm 150 35 (7) 100 (23) (26) 106 (11) 50 73 0 (50) (872) (798) (750) (800) (850) Cash on Balance Operating Cash Tax Capex Net Proceeds / Interest, FX Cash on Balance Borrowings Reported Sheet (30/06/22) Repayment of & Leases Sheet (30/09/22) Net Debt Borrowings and Investments 20 Le
Slide 21: Revised 2022 guidance (non-IFRS, c.c.)
Revised 2022 guidance (non-IFRS, c.c.) Revised FY-22 Guidance Prior FY-22 Guidance FY-21 Base (CCY) ARR +17% - 18% growth +18% - 20% growth 541m Total Software Licensing (%) 0% +16% - 18% growth 402m Total Revenue (%) Not provided At least 10% growth - EBIT growth -25% decline +9% - 11% growth 359m
Slide 22: Non-IFRS EBIT Bridge 2021/2022
Non-IFRS EBIT Bridge 2021/2022 • Positive impact from SaaS and Maintenance profit growth offset by decline in subscription and term licenses • Post-Covid increases include substantially higher travel and marketing costs • Additional headwinds from losses in the services business, investments (in par
Slide 23: Summary
Summary Max Chuard, CEO 23
Slide 24: Conclusion
Conclusion • Q3-22 was a very disappointing quarter • Clear action plan in place to address operational issues • We are reflecting a slower and more cautious environment in our forecasts given inflation and slowdown around the world as banks are becoming more cautious • Temenos benefits from a best-
Slide 25: Appendix
temenos Appendix
Slide 26: Winning cloud native product generating strong SaaS momentum
Winning cloud native product generating strong SaaS momentum High quality cloud native product offering SaaS non-IFRS revenue track record (USDm) 17% SaaS as a % of Total Software Licensing 56% 47% ~67% Low-touch SaaS to FY19 SaaS gross margin FY21 Prebuilt Composed enable self-service 45 Banking Se
Slide 27: 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 growth, significantly expanding flexibility higher margins and cash flows Lower upfront
Slide 28: A Leader in The Forrester Wave: Digital Banking Processing Platforms
A Leader in The Forrester Wave: Digital Banking Processing Platforms (DBPP) - Retail Banking & also for Corporate Banking, Q3 2022 According to Forrester, Temenos offers a ‘state-of-the-art application architecture that has been designed from the ground up to offer choice to banks.’ "The Forrester W
Slide 29: The Forrester Wave: Digital Wealth Management Platforms Q1 2022
The Forrester Wave: Digital Wealth Management Platforms (DWMP), Q1 2022 Temenos recognized as a Leader. “Temenos stands out for its end-to-end digital wealth management capabilities. As one of the most established vendors in the DWMP space, Temenos’ knowledge of different markets has given it a dive
Slide 30: Long track record of growth and growing profitability
Long track record of growth and growing profitability 27% EBITDA margin % 46% 0% SaaS as % of Total Software Licensing 30% 1,200 Non-IFRS revenue 1,000 800 $m 600 400 200 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 30
Slide 31: Large addressable market growing at 10% p.a.
Large addressable market growing at 10% p.a. USD 64bn USD 26bn USD 26bn USD 26bn USD 18bn 18% USD 18bn USD 18bn 9% 70% 82% 84% 91% 30% 16% Total Addressable Market Third party software spend Third party software spend Third party software spend Third party software spend Third party software spend T
Slide 32: 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 33: 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 34: Q3-22 operational overview
Q3-22 operational overview • 99 go-lives including 59 implementation go-lives in Q3-22 Taking a client live every day 34
Slide 35: 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 1.02 GBP to USD exchange rate of 1.14; and USD to CHF exchange rate of 0.96 35
Slide 36: 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 37: 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 37
Slide 38: 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 ARR 468.1 475.4 486.4 493.5 500.1 514.4 530.8 553.4 568.4 581.9 595.9 Total Bookings, Q1-20 Q2-20 Q3-20 Q4-20 Q1-21 Q2-21 Q3-21 Q4-21 Q1-22 Q2-22 Q3-22 USD m Total Bookings 60.5 80.0 128.8
Slide 39: Total software licensing revenue breakdown by geography
Total software licensing revenue breakdown by geography Q3 2021 Q3 2022 13% 22% 21% APAC 24% APAC Europe Europe Americas Americas 12% MEA MEA 18% 44% 45% LTM Q3-21 LTM Q3-22 15% 19% 20% 21% APAC APAC Europe Europe Americas Americas MEA MEA 21% 38% 29% 38% 39
Slide 40: Total software licensing revenue breakdown by customer tier
Total software licensing revenue breakdown by customer tier Q3 2021 Q3 2022 35% 43% 1 and 2 1 and 2 57% 3, 4, and 5 3, 4, and 5 65% LTM Q3-21 LTM Q3-22 37% 1 and 2 37% 1 and 2 3, 4, and 5 3, 4, and 5 63% 63% 40
Slide 41: Software licensing revenue by competitive deals/add-ons
Software licensing revenue breakdown by competitive deals/ add-ons to installed base Q3 2021 Q3 2022 16% Competitive deals 40% Competitive deals Add-ons to installed base Add-ons to installed base 60% 84% LTM Q3-21 LTM Q3-22 28% 35% Competitive deals Competitive deals Add-ons to installed base Add-o
Slide 42: DSOs
DSOs 120 117 115 114 112 111 110 107 106 100 90 80 70 60 50 40 30 20 10 0 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 DSOs at 112 at Q3-22 42
Slide 43: 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 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 Q2 20
Slide 44: 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 45: 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 46: 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 costs
Slide 47: Earnings Reconciliation – IFRS to non-IFRS
Earnings Reconciliation – IFRS to non-IFRS 3 Months Ending 30 September 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 17.2 17.2 2.3 2.3 Term Licence 16.6 16.6 61.2 61.2 SaaS 42.5 42.5 31.3 31.3 Total Software
Slide 48: EBIT & EBITDA reconciliation from IFRS to non-IFRS
EBIT & EBITDA reconciliation from IFRS to non-IFRS USDm Q3-22 EBIT Q3-22 EBITDA IFRS 10.2 44.2 Share-based payments 14.5 14.5 Deferred revenue write-down - - Amortisation of acquired 11.1 - intangibles Restructuring 4.7 4.6 Acquisition related costs 0.3 0.3 Non-IFRS 40.8 63.6
Slide 49: Net earnings reconciliation IFRS to non-IFRS
Net earnings reconciliation IFRS to non-IFRS In USDm, except EPS Q3-22 Q3-21 IFRS net earnings 2.1 28.3 Share-based payments 14.5 26.2 Deferred revenue write down - - Amortisation of acquired intangibles 11.1 12.4 Restructuring 4.7 5.2 Acquisition related costs 0.3 1.4 Taxation (5.3) (7.1) Net earni
Slide 50: 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 51: 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 52: Thank you
Thank You Thank you