Temenos Ag · SIX:TEMN
Temenos — Investor Day (November 2024)
87 slides from Temenos's investor day presentation, Nov 12, 2024
Slide 1: Capital Markets Day November 2024
temenos Capital Markets Day November 2024
Slide 2: 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 3: 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 4: Agenda
Capital Markets Day Agenda November 2024 09:30-10:20 Jean-Pierre Brulard, CEO Strategy and operational excellence 10:20-10:30 Barb Morgan, CPTO Product and technology overview 10:30-10:50 Coffee break 10:50-11:00 Will Moroney, CRO Go To Market strategy 11:00-11:30 Takis Spiliopoulos, CFO Financial f
Slide 5: Introductory remarks
Introductory remarks Jean-Pierre Brulard Chief Executive Officer 5
Slide 6: Goals of the Capital Markets Day
Goals of the Capital Markets Day Assessment of Temenos today Defining our market opportunity Our growth levers Operational plan to drive growth Financial framework and new mid-term targets 6
Slide 7: Assessment of Temenos today
Assessment of Temenos today 7
Slide 8: Looking back: total revenue: different mix but low growth
Looking back Strong growth in predictable revenue from c.60% to c.80% Transition from term license to subscription nearly complete SaaS revenue now contributing half of total software licensing Successfully moved Services revenue to Partners EBIT and R&D investment protection during business model t
Slide 9: Temenos today: a broad product offering across geos, domains and clients
Temenos today: a broad product offering across geos, domains and clients Core products generate Emerging Markets generate Installed base generates c.90% of c.45% of c.65% of total software licensing total software licensing total software licensing Portfolio Geography Clients • Strong presence in Em
Slide 10: A set of key foundations to build on...
A set of key foundations to build on... Large and Long-Term Diverse and Growing Customer Committed Market Relationships People Breadth of Innovation Functionality 10
Slide 11: ...with a set of challenges to address
...with a set of challenges to address Culture & Overdiversified Underinvestment Execution R&D investments in Go To Market 11
Slide 12: Defining our market opportunity
Defining our market opportunity 12
Slide 13: Structural trends drive growing demand for third-party banking software
Structural trends drive growing demand for third-party banking software Explosion in Digital Increased regulatory Trends in Rise of Hyperscalers, Banking Increasing cost Gen AI and modular interactions C and threat and compliance headwinds architecture from non-incumbents complexity Highly automated
Slide 14: 7% CAGR in SAM FY-24 to FY-28 from USD 23bn to 30bn
7% CAGR in SAM FY-24 to FY-28 from USD 23bn to 30bn Buy Build (3rd party) vs (in-house) Tier 1-2 • Mostly best of breed c.USD 8bn • c.70% in US & W. Europe c.USD 40-45bn Mostly maintenance cost Tier 3-51 driven by FTEs • Mostly best of suite c.USD 15bn • c.50% in Emerging Markets Total c.USD 23bn Co
Slide 15: Public cloud expected to be the fastest-growing deployment method
Public cloud expected to be the fastest-growing deployment method On-Premise Public Cloud SaaS FY-24 SAM USD 15bn USD 3bn USD 5bn CAGR to FY-28 4% 16% 12% Mix shift 67% -> 59% 11% -> 15% 22% -> 26% FY-24 – FY-28 Note: SAM: Serviceable Addressable Market relates to banking 3 rd-party software spend a
Slide 16: Well-defined growth opportunities
Well-defined growth opportunities High Selective investment Invest to win Attractiveness Size of bubble correlates to potential revenue uplift Active portfolio management Sustain market position Low Ability to Win High Note: Attractiveness dimension includes market size, future growth; Ability to Wi
Slide 17: Why we win
Why we win New logos Delivering significant customer value Broadest functionality and localization Widest customer references across key geographies, segments and tiers Leader in: Leader in: Digital Banking Processing Platforms (Retail & Digital Core Banking Platforms Corporate Core Banking) (North
Slide 18: We deliver real and proven value to customers
We deliver real and proven value to customers Mid-tier bank in North America Tier 2 bank in Europe Top thrift bank in Philippines Looking to expand business and scale Launching new mobile apps across Adopting Temenos SaaS to scale & lower rapidly through Temenos SaaS business lines time to market 18
Slide 19: ...with full endorsement of the global partner ecosystem
…with full endorsement of the global partner ecosystem “Banks with a consistent and strategic focus on technology, outperform others on “This expanded collaboration between Temenos and Microsoft will TSR, NPS & Cost-to-Income ratio. These banks use functionally rich and modern redefine what’s possib
Slide 20: Growth strategy & operational plan
Growth strategy & operational plan 20
Slide 21: Our levers to grow above market
Our levers to grow above market A B C Growth Extend market Accelerate levers Enhance modular leadership in adjacent point core solutions "best of suite" solutions Focus: US, Western Europe Best of breed solutions ARR uplift contribution by FY-28 Building from our strong foundation 21
Slide 22: Our three growth levers map to prioritized market opportunities
Our three growth levers map to prioritized market opportunities Lever A: Extend market leadership in "best of suite" Lever C: Accelerate adjacent point solutions Lever B: Enhance modular core solutions Deprioritized Size of bubble correlates to potential revenue uplift High Selective investment Inve
Slide 23: Execution engine to drive growth
Execution engine to drive growth Business enablers 1 2 3 4 Product & Go To Customer Operating Technology Market lifecycle model investment Culture and leadership 23
Slide 24: Product and technology investment
1 Product and technology investment Build out targeted functionality and architecture to support our three growth levers Broaden corporate banking functionality and US country model bank Beach head in Lending and Cash Management Focus on digital channels, compliance and payments 24
Slide 25: Go To Market (GTM)
2 Go To Market (GTM) Enhance GTM approach by expanding FTE footprint and investing in sales operations and partnerships Increase sales capacity Invest in sales operations and effectiveness Strengthen strategic Optimize pricing and partnerships & ecosystem packaging 25
Slide 26: Customer lifecycle
3 Customer lifecycle Deliver exceptional customer experience Enhance integration Hybrid implementation architecture strategy Scale our reach through Optimize operations partners and support 26
Slide 27: Operating model to drive transformation
4 Operating model to drive transformation Drive consistent execution across the organization through key metrics Lean and fit Process & systems Master data and data organization automation accuracy 27
Slide 28: Laser focus on US growth
Laser focus on US growth Our growth levers and operational plan are designed to maximize our US footprint Temenos growth opportunities Accelerated investment in quota carriers Go To Market US SAM USD 8bn, 35% of Expand US partner network for GTM and services total market, with higher 3rd Party spend
Slide 29: Culture and leadership
Culture and leadership Foster a culture of empowerment that drives long-term growth and efficiency Accountability Clarity of direction Alignment & collaboration Transparency 29
Slide 30: Our leadership team
Our leadership team Jean-Pierre Brulard Takis Spiliopoulos Barb Morgan William Moroney Chief Executive Chief Financial Chief Product and Chief Revenue Officer Officer Technology Officer Officer Jayde Tipper Deirdre Dempsey Isabelle Guis Colin Jarrett Chief People Chief Legal Chief Marketing Chief Se
Slide 31: Roadmap and new FY-28 targets
Roadmap and new FY-28 targets 31
Slide 32: Strategic focus and operational excellence to deliver our FY-28 targets
Strategic focus and operational excellence to deliver our FY-28 targets Strategic Growth Levers Business Enablers FY-28 Targets Product & technology Extend market 1 investment FY-28E A leadership in ARR >USD 1.3bn best of suite 2 Go To Market Enhance modular FY-28E B core solutions EBIT c.USD 500m 3
Slide 33: Execution roadmap through key metrics
Execution roadmap through key metrics Strengthen: 2024-2025 Scale: 2025-2028 Cloud attribute Product & technology Targeted ‘easy win’ builds architecture for modular AI investment based solutions Go To Market Increase sales capacity (US) Customer experience investment G&A and Operating Enhance imple
Slide 34: My commitment to you
My commitment to you Relentless focus on timely execution and transformation Act with transparency, accountability & agility 34
Slide 35: Capital Markets Day November 2024
temenos Capital Markets Day November 2024
Slide 36: Product & Technology
Product & Technology Barb Morgan Chief Product and Technology Officer 36
Slide 37: Product and technology: new leadership and ambitions
Product and technology: new leadership and ambitions 25+ years of experience leading global product development organizations, especially in banking and financial services Strong background in integrating cutting-edge AI technologies, transforming business operations and driving customer-centric inn
Slide 38: Product and technology investment priorities
Product and technology investment priorities Impact Driven Strategic Alignment Mindset and Focus Temenos R&D Investment 38
Slide 39: Targeted product investments to deliver our three growth levers
Targeted product investments to deliver our three growth levers Sustained high investment in R&D Lever A: Extend • Enhance retail (deposits and lending) “best of suite” banking • Enhance corporate functionality (cash mgmt., trade finance and lending) software to be • Extend localization capabilities
Slide 40: Cloud native architecture and AI will feature strongly
Cloud native architecture and AI will feature strongly in the evolution of our architecture Cloud-native AI / Gen AI Architecture Enhance delivery of Accelerate journey to deliver operational efficiencies, cloud native modular productivity and smart SaaS architecture operations 40
Slide 41: Capital Markets Day November 2024
temenos Capital Markets Day November 2024
Slide 42: Go To Market Strategy
Go To Market Strategy William Moroney Chief Revenue Officer 42
Slide 43: Temenos GTM: new leadership and ambitions
Temenos GTM: new leadership and ambitions 25+ years of experience in senior sales and sales leadership positions Joined Temenos in 2020 and was President International before promotion to CRO in July 2024 Previously held senior positions at a number of Will Moroney international banking systems, tec
Slide 44: Customer lifecycle
Customer lifecycle Lead generation Customer Customer Renewal renewal evaluation CRO Team Customer Customer success signing Customer support Project delivery 44
Slide 45: ONE Customer team
Asia Europe ONE Americas Customer MEA team Hybrid delivery with partners Sales operations and customer success 45
Slide 46: A structured sales process – 12-18 months
A structured sales process – 12-18 months Month <0-3 Month 4-6 Month 7-9 Month 10-12 Month 13-15 Month 16-18 Identification and lead generation Inside sales Request for Information Initial product demos Individual Business quota Solutions Request for Proposal carriers Group (pre- with sales) Worksho
Slide 47: Strengthening our commercial performance
Strengthening our commercial performance Sales capacity & mix Effectiveness Pricing Expanded quota carrier team c.2x Strategic prioritization of Tier 3-5 Consistency in pricing and accounts to drive “Lever A” packaging Optimized GTM with right domain expertise, capacity mix and Dedicated sales & del
Slide 48: Our Go To Market plan for US growth
Our Go To Market plan for US growth Targeted plan to grow US market share Temenos targeted growth Enhance US model bank opportunities Product Invest in US specific Corporate Banking functionality investment Lever A: low-end tier 2 and Invest in US specific Digital front end capabilities tier 3 regio
Slide 49: Building scale through Partners
Building scale through Partners Enhance GTM with High ROI, partner- Partner-led Enhance robust partners for our led approach in offerings and partnership best in suite Lever A non-core solutions enabling governance model; sweet spot geographies growth deal capture, revenue and service delivery 49
Slide 50: Conclusion
Conclusion 50
Slide 51: Capital Markets Day November 2024
temenos Capital Markets Day November 2024
Slide 52: Financial framework and FY-28 targets
Financial framework and FY-28 targets Takis Spiliopoulos, CFO 52
Slide 53: Financial framework
Financial framework Revenue Growth • Substantiating how our three growth levers will drive above-market growth Margin Expansion • Delivering sustainable margin expansion through operational excellence Cash Flow • ARR and product revenue converging, EBIT growth driving free cash flow Capital Allocati
Slide 54: Good progress made on subscription revenue model transition
Good progress made on subscription revenue model transition Annual Recurring Revenue Non-IFRS EBIT Free Cash Flow +13% +10% +23% USD USD USD 733m 814-821m* USD 312m 334-340m* USD 230m* USD 203m USD 632m USD 276m USD 151m FY-22 FY-23 FY-24E* FY-22 FY-23 FY-24E* FY-22 FY-23 FY-24E* Subscription model
Slide 55: New FY-28 targets reflecting our three levers of growth
New FY-28 targets reflecting our three levers of growth and operational plan ARR to reach Non-IFRS EBIT to reach FCF to reach >USD 1.3bn c.USD 500m c.USD 420m by FY-28 by FY-28 by FY-28 Changes vs. previous plan: • Free cash flow definition changed to market standard, including impact of IFRS 16 (le
Slide 56: 7% CAGR in medium term for third-party banking software spend
7% CAGR in medium term for third-party banking software spend 3rd party banking software spend1 (USD bn) by tiers and deployment By Tiers2 By Deployment Type CAGR CAGR • Tier 3-5 banks will continue to 7% p.a. 7% p.a. 2024-28 2024-28 make up around two thirds of 30 30 market demand, contributing to
Slide 57: Revenue and deployment models to offer clients choice
Revenue and deployment models to offer clients choice License revenue: subscription and term SaaS revenue Bank runs software a nk Operations B n os runs soft Hybrid Private e wa cloud cloud em nos SaaS r e Op e T em Public s On- Public T Temenos Cloud premise cloud Software • Larger banks likely to
Slide 58: Temenos has a significant cloud business
Temenos has a significant cloud business Cloud vs. non-cloud ARR in FY-23 • Cloud ARR includes annual recurring revenue from all products that run on hyperscaler platforms across both subscription and SaaS revenue models • The double-digit growth in public cloud and SaaS spend will drive strong grow
Slide 59: Our growth is oriented around three levers
Our growth is oriented around three levers A B C Growth levers Extend market Enhance Accelerate leadership in modular core adjacent point "best of suite" solutions solutions ARR uplift contribution by FY-28E USD 225-250m USD 150-175m USD 100-125m * Growth is organic and in constant currency. 59
Slide 60: Our three growth levers map to prioritised market opportunities
Our three growth levers map to prioritised market opportunities Lever A: Extend market leadership in "best of suite" Lever C: Accelerate adjacent point solutions Lever B: Enhance modular core solutions Deprioritised Size of bubble correlates to potential revenue uplift by FY-28 High Selective invest
Slide 61: ARR expected to reach over USD 1.3bn by FY-28
ARR expected to reach over USD 1.3bn by FY-28 ARR drivers by growth lever Lever A: Extend market leadership in best of suite USD • ARR uplift of USD 225-250m by FY-28 • Increasing penetration in tier 3 US banks and tier 3-5 banks in USD 100-125m Western Europe 150-175m • Significant opportunity in r
Slide 62: Subscription will be the largest driver of ARR growth
Subscription will be the largest driver of ARR growth ARR growth drivers by revenue model Subscription to contribute over 40% of ARR by FY-28 USD 175-200m USD c.25% USD 325-350m -30-10m 40-45% c.30% USD >1.3bn c.30% c. USD 814 - 821m* c.45% 25-30% FY-24E ARR* Subscription SaaS Maintenance FY-28E ARR
Slide 63: ARR and product revenues will converge by FY-28
ARR and product revenues will converge by FY-28 c.105% ARR Non-IFRS c.90% Product revenues 84% Conversion 78% USD USD >1.3bn c.1.2bn USD USD 814- c.910m 821m FY-22 FY-23 FY-24E* FY-25E FY-26E FY-27E FY-28E Impact of upfront revenue recognition for Subscription License vs ARR contribution will not be
Slide 64: A P&L view of our revenue growth
A P&L view of our revenue growth Non-IFRS Product revenue growth drivers by revenue model • Subscription license will be the USD primary driver of product USD 100-110m revenue growth USD 100-110m 120-140m • Maintenance will continue to grow due to subscription revenue recognition as upfront USD lice
Slide 65: Delivering operating leverage while increasing investment
Delivering operating leverage while increasing investment Cost base as a percentage of non-IFRS revenue • Annual run-rate cost base growth driven largely by wage inflation and 8% 8% increased variable costs in line with +USD c.5m revenue growth 13% 12% G&A Services • In addition, incremental combine
Slide 66: A clear pathway for EBIT growth and margin improvement
A clear pathway for EBIT growth and margin improvement EBIT bridge by business enabler; change in cumulative costs and efficiencies Incremental cumulative R&D costs of USD 40-55m by FY-28 Broaden retail and corporate banking functionality, extend US country model bank, beach head in retail and corpo
Slide 67: Targeting EBIT to FCF conversion of 85%
Targeting EBIT to FCF conversion of 85% c.85% USD c.500m USD c.420m c.68% EBIT 65% FCF 55% Conversion FY-22 FY-23 FY-24E* FY-25E FY-26E FY-27E FY-28E CCC FCF conversion to increase to c.85% by FY-28E * FY-24 guidance (non-IFRS, constant currency) as per 23rd October 2024, EBIT growth of 7-9%, FCF re
Slide 68: Change in FCF definition
Change in FCF definition • FY-24 FCF guidance of at least 12% +12% excludes IFRS16 lease and interest costs +13% • Under new FCF definition, FY-23 FCF adjusted for USD15m of lease liability payments and USD25m of financing costs. FY-24E FCF adjusted 272 for USD15m of lease liability 243 230 203 paym
Slide 69: Targeting c.USD420m FCF by FY-28
Targeting c.USD420m FCF by FY-28 • FCF target now at market standard definition FCF bridge including leases and interest expense USD • Change in FCF vs. previous mid-term targets 80-100m reflects increased subscription contribution to USD revenue growth, with lower SaaS vs. previous 320-360m plan an
Slide 70: EPS expected to grow in-line with EBIT
EPS expected to grow in-line with EBIT USD USD 2.2 0 USD c.5.0 USD USD -0.4 -0.2 • FY28 EBIT of USD c.500m to drive USD majority of EPS growth c.3.38-3.43 • EPS is expected to grow at around 10%, in line with EBIT growth • We expect our tax rate to marginally decrease from 20-22% to 19-21% • Share d
Slide 71: Capital allocation
temenos Capital allocation
Slide 72: Target lower leverage ratio of 1.0-1.5x going forward
Target lower leverage ratio of 1.0-1.5x going forward 2.0x Targeting net debt / non-IFRS EBITDA range of 1.0-1.5x, down from 1.5-2.0x 1.6x 1.6x Weighted average interest cost of 1.0 – 1.5x 2.2% as of 30.09.24 Weighted average debt maturity of 1.8 years as of 30.09.24 Maintain investment-grade credit
Slide 73: Disciplined Capital Allocation
Disciplined Capital Allocation Investment in the business, in particular S&M and R&D: ability to Organic investment invest for higher returns organically Selective opportunities to support growth lever C – adjacent point Selective solutions Share bolt-on buybacks acquisitions Share buybacks to ensur
Slide 74: Conclusion
Conclusion 74
Slide 75: New FY-28 targets reflecting our three levers of growth
New FY-28 targets reflecting our three levers of growth and operational plan ARR to reach Non-IFRS EBIT to reach FCF to reach >USD 1.3bn c.USD 500m c.USD 420m by FY-28 by FY-28 by FY-28 FCF includes the impact of IFRS16 (lease) and interest costs. FY-28 FCF target implies FY-24E – FY-28 CAGR of 16%.
Slide 76: Capital Markets Day November 2024
temenos Capital Markets Day November 2024
Slide 77: Appendix
Appendix 77
Slide 78: 7% CAGR in medium term for third-party banking software spend
7% CAGR in medium term for third-party banking software spend 3rd party banking software spend1 USD bn by product and region By Product By Region CAGR • Core banking spend expected to 7% p.a. 7% p.a. 2024-28 remain at nearly 50% of market 30 30 demand 11% 29% 8% 23 23 18% 8% • US contributes >90% of
Slide 79: Lower leverage will drive stronger EPS growth
Lower leverage will drive stronger EPS growth Leverage scenarios by FY-28 Leverage (net debt-non-IFRS 1.5x 1x 0.5x 0.0x -0.5x EBITDA) Annual financing costs 27 22 18 15 12 (USDm) Non-IFRS EPS growth 10% 11% 11% 11% 11% FY-24E* - FY-28E 79 *Assumes FY-24 guidance (non-IFRS, constant currency) as per
Slide 80: Subscription modelling illustrative example
Subscription modelling illustrative example Impact of signing USD 10m ARR of subscription deals every year Product Revenues ARR : Product Revenue ARR 50 100% 50 45 40 89% 40 35 20 25 30 15 30 10 75% 5 20 57% 10 25 25 25 25 25 33% Year 1 Year 2 Year 3 Year 4 Year 5 Year 1 Year 2 Year 3 Year 4 Year 5
Slide 81: Subscription modelling illustrative example
Subscription modelling illustrative example 5-year impact of USD 10m of Subscription ARR ARR Subscription License Maintenance 10 10 10 10 10 25 5 5 5 5 2.5 Year 1 Year 2 Year 3 Year 4 Year 5 Year 1 Year 2 Year 3 Year 4 Year 5 Year 1 Year 2 Year 3 Year 4 Year 5 Receivables Deferred Revenue FCF 20 2.5
Slide 82: SaaS ACV modelling illustrative example
SaaS ACV modelling illustrative example 5 year impact of USD10m of SaaS ACV ACV ARR SaaS Revenue 10 10 10 10 10 10 10 10 10 10 5 Year 1 Year 2 Year 3 Year 4 Year 5 Year 1 Year 2 Year 3 Year 4 Year 5 Year 1 Year 2 Year 3 Year 4 Year 5 Deferred Revenue FCF 5 5 5 5 5 10 10 10 10 10 Year 1 Year 2 Year 3
Slide 83: Non-IFRS definitions
Non-IFRS definitions Other Cloud ARR Cloud ARR includes annual recurring revenue from all products that run on Non-IFRS adjustments hyperscaler platforms across both subscription and SaaS revenue models Share-based payment charges Constant currencies Adjustment made for shared-based payments and soc
Slide 84: 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 excludes variable elements. Value (ACV) Disclosure: quarterly reporting, annual rep
Slide 85: Bank tiering
Bank tiering • Temenos defines bank tiers by assets on balance sheet • The tier levels are: • Tier 1 >USD 250bn • Tier 2 >USD 50bn • Tier 3 >USD 10bn • Tier 4 >USD 1bn • Tier 5 <USD 1bn 85
Slide 86: Thank you
Thank you 86
Slide 87: Capital Markets Day November 2024
temenos Capital Markets Day November 2024