Temenos Ag · SIX:TEMN
Temenos — Investor Day (February 2021)
38 slides from Temenos's investor day presentation, Feb 18, 2021
Slide 1: Temenos Capital Markets Day
TEMENOS Capital Markets Day
Slide 2: 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
Slide 3: 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
Slide 4: Financial growth plan
Financial growth plan Takis Spiliopoulos CFO
Slide 5: Consistent and Profitable Growth Trajectory in next 5 years
Consistent and Profitable Growth Trajectory in next 5 years Achieving Expanding Generating more than EBIT margin to more than USD1bn at least USD600m of bookings c.41% of Free Cash by 2025 by 2025 Flow by 2025 Our Vision …from Category Killer to the Industry Standard in Banking Software… Note: Reven
Slide 6: Temenos has successfully navigated global crises and come out stronger
Temenos has successfully navigated global crises and come out stronger A resilient business model 1,800 1,600 Global European sovereign Covid-19 1,400 Finance Crisis debt crisis pandemic 1,200 1,000 800 600 400 200 - 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021E 2025 E
Slide 7: Why Temenos?
Why Temenos? Leading functionality, Only focused Packaged product, localization, on banking single code base advanced technology Scaling through Relentless focus on ecosystem of technology Leader in our market, innovation, highest and implementation 3,000+ clients R&D over 27 years partners 7
Slide 8: Sustained strong growth across revenue KPIs…
Sustained strong growth across revenue KPIs… Total Revenues Total Software Licensing 981 900 445 847 383 737 356 635 316 559 256 469 214 148 2014 2015 2016 2017 2018 2019 2020 2021E 2014 2015 2016 2017 2018 2019 2020 2021E c.15 % CAGR 2014-19 LFL basis since 2014 c.10% CAGR 2014-19 LFL basis since 2
Slide 9: Sustained strong growth across revenue KPIs…
Sustained strong growth across revenue KPIs… Annual Contract Value Saas Revenues 96 35 67 21 13 31 21 1 4 10 2016 2017 2018 2019 2020 2021E 2016 2017 2018 2019 2020 2021E Note: KPIs are non-IFRS * Historical SaaS revenues adjusted for estimated IFRS15 impact Note: 2021E based on mid-point of guidanc
Slide 10: … and delivering very robust profit growth
… and delivering very robust profit growth Non-IFRS EBIT margin Non IFRS EBIT 37.2% 36.0% 35.3% 318 320 331 265 32.4% 224 31.5% 186 30.3% 156 29.4% 128 28.0% 27.3% 2014 2015 2016 2017 2018 2019 2020 2020 2021 E 2014 2015 2016 2017 2018 2019 2020 2020 2021 E Note: Historical Non IFRS EBIT and EBIT ma
Slide 11: Business model generates strong cash-flow profile
Business model generates strong cash-flow profile Operating Cash Flow Operating cash conversion DSO days 133% 114% 114% 117% 112% 100%+ 100% Average 115% 154 406 365 364 127 119 120 114 111 300 256 227 2015 2016 2017 2018 2019 2020 2021E 2015 2016 2017 2018 2019 2020 2021E 2015 2016 2017 2018 2019 2
Slide 12: Disciplined capital allocation (2015-2020)
Disciplined capital allocation (2015-2020) Balance sheet Share buyback (31-Dec-20) - Outflow 24% Weighted average interest rate 2.1% Acquisition - Outflow Dividend - 62% Weighted average debt Outflow maturity 3 years 14% Leverage ratio 2.1x Targeted acquisitions for USD1.2bn+ and returned USD700m+ t
Slide 13: Using M&A to accelerate organic growth
Using M&A to accelerate organic growth Date Price (m) Capabilities Sep 19 $560 US scale, digital banking and low code development, cloud operations excellence Jul 19 £12 Explainable AI expertise across all products Feb 19 N.D. Data lake capabilities Dec 18 $245 Digital front office, cloud operations
Slide 14: Drivers of growth
| Drivers of growth TEMENOS Capital Markets Day
Slide 15: Application software is significantly underpenetrated in banks
Application software is significantly underpenetrated in banks 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Industrial goods Energy Consumer Healthcare Public Sector Insurance Telecom Banking Sources: Temenos estimates 15
Slide 16: An attractive and continuously growing market
An attractive and continuously growing market USD 63bn 2020 2021 On premise market SaaS market CAGR USD 26bn 2020-25 USD 26bn USD 19bn USD 17bn USD 17bn USD 14bn 6% 25% Total Addressable Third party spend Third party spend Third party spend Third party spend Third party spend Third party spend Marke
Slide 17: SaaS on the rise globally
SaaS on the rise globally Overall serviceable market On premise market SaaS market CAGR 8% USD 26bn CAGR 2020-25 USD 17bn 6% 25% 2020 2025 E Source: IDC, Ovum, Celent, McKinsey, Temenos estimates. 17
Slide 18: Building momentum with tier 1 and 2 clients
Building momentum with tier 1 and 2 clients Non-IFRS total software licensing revenues by client tier 45% 40-50% 18
Slide 19: Building momentum in North America
Building momentum in North America Non-IFRS total software licensing, North America vs. Rest of World 10% 28% 40-45% 19
Slide 20: SaaS growth is largely incremental
SaaS growth is largely incremental License growth to SaaS Prior total software licensing New total software licensing guidance at 15-20% cannibalization FY21-25 guidance at 15%+ 3% 7.5+% 3+% (1-1.5%) 17.5+% License growth 15+% 12+% 12+% 10+% 10-15% FY25 Note: Non-IFRS. 20
Slide 21: 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 2.1 2.0 NPV: $2.1 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
Slide 22: Future reporting KPIs
Future reporting 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 – include fair value of licence contract value, committed maintenance contract value on licence, and SaaS committed
Slide 23: 2025 Targets
2025 Targets Mid-term Guidance 2020 base (CCY) 2025 Targets Previous guidance Total Software Licensing 359.3 15-20% CAGR 2020-25 >=15% CAGR Total revenue 905.5 10-15% CAGR 2020-25 10-15% CAGR EBIT margin 36.0% c.41% by 2025 36%+ (39%+ equivalent excluding IFRS2 costs) Total Bookings 491.5 17-22% CAG
Slide 24: EBIT Margin % expansion
EBIT Margin % expansion 100-150bps p.a c.41% 70-100bps p.a 36% 120 bps FY2021 Guidance represents 120bps Non IFRS EBIT margin expansion from 36% in FY20 FY22-23 margins at 70-100bps per annum increase from FY21 FY24-25 margins at c.41% representing a further acceleration of margin expansion at
Slide 25: SaaS Gross Margin % evolution
SaaS Gross Margin % evolution 4-6% 75-80% 4-5% 3-4% 8% c.65% 57% 47% Hyper-scalers: unit costs to reduce by 25-35% as volumes increase Automation to drive significant efficiencies in operation centres Operations optimized into centralized offshore function with local hubs to provide “follow th
Slide 26: Key cost lines as a percentage of revenue
Key cost lines as a percentage of revenue 36% Margin% c.41% Margin 15% ~14% 7% ~5% 22% 18% 20% 22%+ FY20 FY25 S&M R&D G&A Services Note: Non-IFRS. 26
Slide 27: Drivers of non-IFRS EBIT margin evolution
Drivers of non-IFRS EBIT margin evolution c.41% 36.0% On-Premise and services gross margin to remain constant SaaS Margin to expand to c.75-80% Continued leverage of R&D and G&A infrastructure Sustained investments in Sales & Marketing Note: Non-IFRS. 27
Slide 28: Drivers of FCF evolution and DSO reduction
Drivers of FCF evolution and DSO reduction Free cash flow growth of at least 15% CAGR DSO Reduction from 111 to < 85 by 2025 > 600 111 ~85 297 28
Slide 29: Growth contribution from SaaS is growing rapidly
Growth contribution from SaaS is growing rapidly Non-IFRS Software licensing vs. SaaS revenues 5% 27% c. 50% 29
Slide 30: 2025 non-IFRS EBIT margin relatively insensitive to revenue mix
2025 non-IFRS EBIT margin relatively insensitive to revenue mix Medium term Lower License growth Higher License guidance scenario growth scenario License growth 10%+ CAGR 7% CAGR 13% CAGR SaaS growth 30%+ CAGR 35%+ CAGR 25%+ CAGR Total Software Licensing growth 15-20% CAGR 15-20% CAGR 15-20% CAGR EB
Slide 31: A three-pronged approach to M&A to accelerate organic growth
A three-pronged approach to M&A to accelerate organic growth Accelerated R&D Adjacent markets roadmap in key Increased and markets and scale complementary segments products 31
Slide 32: Appendix
| Appendix TEMENOS Capital Markets Day
Slide 33: EBIT reconciliation
EBIT reconciliation Changes of Non-IFRS definitions From FY-21, we will be excluding the costs of share based payments (IFRS2) and related social charges from our Non-IFRS presented financials. The change of methodology is supported by the fact that this expense is a primarily non-cash item. Our c
Slide 34: Non-IFRS EBIT reconciliation
Non-IFRS EBIT reconciliation 37.2% 36.0% 35.2% 34.8% FY21 represents mid point of guidance FY20 restated on a constant currency basis Last 10 year average IFRS 2 cost as a % of revenues was c.4% FY22-25 estimated IFRS 2 costs of 3-3.5% on total revenues Note: Non-IFRS Total IFRS2 charges for c
Slide 35: Temenos R&D overview
Temenos R&D overview R&D cash cost in FY 20 was USD 232m Total R&D headcount was 3,758 at year end FY 20 This is split between 83% based in India and 17% based globally outside of India R&D costs also include all other associated costs to run the R&D operations including travel, contractors,
Slide 36: Non-IFRS Definitions
Non-IFRS Definitions Non-IFRS adjustments Other IFRS2 charges Revenue visibility Adjustment made for IFRS2 expenses and social charges linked to Visibility on revenue includes a combination of revenue that is long term incentive plans contractually committed and revenue that is in our pipeline and t
Slide 37: 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
Slide 38: Thank You
Thank You temenos.com