Temenos Ag · SIX:TEMN

Temenos — Q4 2020 Earnings Presentation

58 slides from Temenos's earnings presentation, Feb 17, 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 17 February 2021 Quarter ended 31 December 2020

  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: COVID-19 – an unprecedented year yet a huge opportunity

    COVID-19 – an unprecedented year yet a huge opportunity 7

  8. Slide 8: Temenos has successfully navigated global crises and come out stronger

    Temenos has successfully navigated global crises and come out stronger Covid-19 1,200 pandemic 1,000 Global European sovereign Finance Crisis debt crisis 800 600 400 200 - 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Resilient business model backed by consistent innovat

  9. Slide 9: A strong end to the year

    A strong end to the year Review of Q4-20 Q4-20 non-IFRS financial highlights  Strong sequential improvement in Q4-20  SaaS ACV of USD11.5m, up 26%  Sales closure rates improved, in particular in  SaaS revenue growth of 7% Europe  Recurring revenue up 2%  Predictability of business reached near

  10. Slide 10: Strong recovery in H2-20

    Strong recovery in H2-20 USDm Total software licensing USDm EBIT EBIT margin 160 140 +11% 50% +9.9% pts -17% 45% 140 120 +4.4% pts 40% 120 100 35% +4% +0.2% pts 100 30% -22% -23% 80 -7% 80 25% -4.3% pts -26% 60 20% 60 -22% 40 15% 40 10% 20 20 5% 0 0 0% Q1-20 Q2-20 Q3-20 Q4-20 Q1-20 Q2-20 Q3-20 Q4-20

  11. Slide 11: Excellent growth in SaaS

    Excellent growth in SaaS  Continued strong acceleration in SaaS with ACV up 26% in Q4-20 and 61% in FY-20  US and Europe drove significant majority of signings  SaaS pipeline continues to build, balanced across Transact and Infinity USDm ACV SaaS revenue SaaS TCV USDm 120 160.0 40 35 140.0 100 30

  12. Slide 12: SaaS ACV pipeline continues to accelerate

    SaaS ACV pipeline continues to accelerate  The significant acceleration in SaaS demand is reflected in the strength of our SaaS pipeline at the start of 2021  This demand is coming from challenger banks and fintechs  SaaS ACV pipeline up 201% over the last 12 months and 136% CAGR SaaS ACV pipelin

  13. Slide 13: Q4-20 and FY-20 sales review

    Q4-20 and FY-20 sales review Q4-20 total software licensing Geographic split  Continued improvement in sales environment and closure rates APAC through Q4-20 14% 13% Europe  Momentum in SaaS continued with strong bookings across Americas Transact and Infinity MEA 27%  Strong pipeline generation g

  14. Slide 14: Announcing strategic partnerships to accelerate growth

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

  15. Slide 15: Accelerating our US business

    Accelerating our US business  Strong growth in the US in 2020  Strong growth in US SaaS ACV, largest ACV deal globally signed in US in 2020  US is largest contributor to global ACV pipeline  Tier 1 US bank go-live in early January on Transact and other products with full regulatory requirements

  16. Slide 16: Continued recognition of global leadership

    Continued recognition of global leadership New-name clients: Top global power seller for the 14th consecutive year Temenos recognized as the only Global Power Seller #1 #1 with a 30% increase in new named deals New and existing clients: Top global player for the 8th consecutive year Core Banking Bes

  17. Slide 17: Q4-20 and FY-20 operational overview

    Q4-20 and FY-20 operational overview  21 implementation go-lives in Q4-20  Total of 307 go-lives across all clients in FY-20  Remote implementation the new standard globally  Nearly all projects have now moved to remote implementation as banks adapt to the ‘new normal’  Use of cloud continues t

  18. Slide 18: After a slow down in H1-20, banks returned to strategic IT investment in H2-20

    After a slow down in H1-20, banks returned to strategic IT investment in H2-20 H1-20 – business continuity and 2021 – acceleration in IT H2-20 – return to IT investment client-level response investment  Banks refocused on infrastructure,  Further acceleration in demand  Banks initially focused on

  19. Slide 19: Structural trends driving market growth

    Structural trends driving market growth USD 63bn 27% third party penetration in banking vs. 70-80% in other industries at maturity On premise market CAGR SaaS market 2020-25 USD 26bn USD 26bn USD 17bn USD 17bn 6% 25% Total Addressable Market Third party spend Third party spend Third party spend Thir

  20. Slide 20: Looking forward

    Looking forward  Covid-19 is accelerating demand for digital transformation  Structural drivers of digital, regulatory, cost and competition are intact  Acceleration in demand expected in 2021 driven by strong new pipeline growth  Strong growth in demand for SaaS, largely incremental with limite

  21. Slide 21: Financial update

    Financial update Takis Spiliopoulos CFO

  22. Slide 22: Performance vs. revised 2020 guidance (c.c.)

    Performance vs. revised 2020 guidance (c.c.) Revised guidance Delivered Non-IFRS recurring revenue (SaaS + Maintenance) At least 13% 13%  Non-IFRS EBIT Revenue growth of 12.5% to0% Broadly flat year-on-year 14.5%  100%+ conversion of EBITDA Cash conversion into operating Revenue cashofflow EBIT US

  23. Slide 23: Q4-20 and FY-20 non-IFRS financial highlights

    Q4-20 and FY-20 non-IFRS financial highlights Revenue and profit Operating cash flow  SaaS revenue up 7% in Q4 and 44% in FY-20  FY-20 operating cash flow of USD 406m, up 12% y-o-y  Total software licensing down 17% in Q4 and 21% in FY-20  FY-20 operating cash conversion of 112% of IFRS  Mainte

  24. Slide 24: Non-IFRS income statement – operating

    Non-IFRS income statement – operating Y-o-Y Y-o-Y In USDm Q4 20 Q4 19 Y-o-Y c.c. FY 20 FY 19 Y-o-Y c.c. reported reported Software licensing 115.3 139.1 -17% -21% 259.5 378.4 -31% -32% SaaS and subscription 26.5 24.3 9% 7% 96.2 66.6 44% 44% Total software licensing 141.7 163.4 -13% -17% 355.6 445.0

  25. Slide 25: Like-for-like revenue and costs

    Like-for-like revenue and costs  Q4-20 LFL non-IFRS revenues down 12%  Q4-20 LFL non-IFRS costs down 26%  FY-20 LFL non-IFRS revenues down 15%  FY-20 LFL non-IFRS costs down 23% Total software licensing Maintenance Services USDm USDm 800 -26% 1000 700 600 -23% 800 500 +6% 600 400 400 300 -21% 20

  26. Slide 26: Non-IFRS income statement – non-operating

    Non-IFRS income statement – non-operating In USDm, except EPS Q4-20 Q4-19 Y-o-Y FY-20 FY-19 Y-o-Y EBIT 130.2 116.2 12% 320.4 317.9 1% Net finance charge -6.8 -9.3 -27% -30.1 -24.3 24% FX gain / (loss) -0.3 1.6 N.A. 0.8 2.3 -68% Tax -17.6 -14.9 18% -40.3 -40.9 -1% Net profit 105.4 93.6 13% 250.7 255.

  27. Slide 27: DSOs continue to decline

    DSOs continue to decline DSOs 130 120 (6 days of which due to M&A) 120 119 6 114 111 110 100 Q4 2017 Q4 2018 Q4 2019 Q4 2020 We expect DSOs to continue declining to below 105 by year end 2021 27

  28. Slide 28: IFRS cash conversion

    IFRS cash conversion USDm 450 117% 100% 112% 400 350 300 250 200 150 100 50 0 FY 2018 FY 2019 FY 2020 EBITDA Operating cashflow Cash conversion well above 100% target 28

  29. Slide 29: Group liquidity

    Group liquidity Net USDm Cash on balance proceeds/repayment Interest, FX and Cash on balance sheet (31/12/19) Operating cash Tax Capex Dividends paid of borrowings M&A leases sheet (31/12/20) Borrowings Reported net debt 750 (23) (86) 550 (63) 350 406 271 44 49 150 110 153 -50 -250 978 -450 868 -650

  30. Slide 30: Outlook for 2021

    Outlook for 2021  Covid-19 has accelerated pressure on banks to innovate and invest  SaaS demand from challenger banks and fintech  Market expected to return to growth in 2021 Drivers of revenue visibility Robust pipeline Higher probability Key drivers of growth revenue demand  Re-licensing and

  31. Slide 31: 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

  32. Slide 32: 2021 non-IFRS guidance metrics (c.c.)

    2021 non-IFRS guidance metrics (c.c.)  ARR will be included as a new guidance metric going forward  ARR is the annual recurring revenue committed at the end of the period for both SaaS and Maintenance. Includes New Customers, up-sell/cross-sell, and attrition. Only includes the recurring element o

  33. Slide 33: EBIT Bridge 2020/2021 – New Non-IFRS Definition

    EBIT Bridge 2020/2021 – New Non-IFRS Definition 36.0% +120bps 37.2% EBIT Margin 36.8% 12 c. 28 13 c. 38 4 368 331 327 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

  34. Slide 34: 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 4 348 320 316 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

  35. Slide 35: Share buyback announced

    Share buyback announced  Board and regulatory approvals has been granted for a share buyback of up to a total of USD 200m at the market price  The share buyback will start on 19 February 2021 and end on 30 December 2021 at the latest  Temenos intends to use the repurchased shares to finance poten

  36. Slide 36: Summary

    | Summary Max Chuard CEO ® TEMENOS

  37. Slide 37: Temenos Capital Markets Day 2021

    Temenos Capital Markets Day 2021  Temenos Capital Markets Day taking place on Thursday 18th February  Virtual event kicking off at 8am ET / 1pm UK / 2pm CET  Please follow this link to access the Capital Markets Day microsite on the day  https://www.temenos.com/about- us/investor-relations/cmd-2

  38. Slide 38: Conclusion

    Conclusion  Strong sequential improvement in Q4-20  Sales closure rates improved, in particular in Europe  Predictability of business reached near pre-Covid levels  Banks returned to strategic transformation projects  Flexible cost base ensured profit protection  Continued investment in R&D an

  39. Slide 39: Appendix

    Appendix 39

  40. Slide 40: 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 1.21  GBP to USD exchange rate of 1.37; and  USD to CHF exchange rate of 0.89 40

  41. Slide 41: 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

  42. Slide 42: Strong rebound in growth hidden by HCL

    Strong rebound in growth hidden by HCL Underlying SaaS Underlying TSL Underlying 2021 growth of 35% in guidance 19-23% EBIT margin 2021 2021 growth 37.9% 19-23% 14-18% Note: non-IFRS 42

  43. Slide 43: 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 43

  44. Slide 44: Total software licensing revenue breakdown by geography

    Total software licensing revenue breakdown by geography Q4 2019 APAC Q4 2020 APAC 16% 14% 13% 23% Europe Europe Americas Americas MEA MEA 23% 27% 46% 38% FY 2019 APAC FY 2020 APAC 13% 17% 18% 22% Europe Europe Americas Americas MEA MEA 27% 34% 31% 39% 44

  45. Slide 45: Total software licensing revenue breakdown by customer tier

    Total software licensing revenue breakdown by customer tier Q4 2019 1 and 2 Q4 2020 1 and 2 33% 3, 4 and 5 3, 4 and 5 44% 56% 67% FY 2019 FY 2020 1 and 2 1 and 2 43% 3, 4 and 5 36% 3, 4 and 5 57% 64% 45

  46. Slide 46: Software licensing revenue breakdown by competitive deals / add-ons to installed base

    Software licensing revenue breakdown by competitive deals / add-ons to installed base Q4 2019 Q4 2020 Competitive Competitive deals deals 30% 35% 65% Non 70% Non competitive, competitive, installed installed based based FY 2019 FY 2020 Competitive Competitive 31% deals deals 28% Non Non 72% competit

  47. Slide 47: Balance sheet – debt and leverage

    Balance sheet – debt and leverage Net debt and leverage ratios* USDm 1200 3.1x 2.6x 2.6x 2.6x 1000 2.6x 2.1x 800 600 1.4x 1.6x 1.6x 400 200 0 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 * proforma non-IFRS EBITDA adjusted for lease expense now reported under depreciation

  48. Slide 48: FY20 v FY19 assets

    FY20 v FY19 assets 2,332 2,216 153 110 322 Comments: 274  Reduction in Trade Receivables due to strong collection - DSO reduction by 9 days 1,731 1,725  Other assets down driven primarily by release Nuo DB investment $20.5m (equity and convertible note). USDm 101 132 2020 2019 48

  49. Slide 49: FY20 v FY19 liabilities

    FY20 v FY19 liabilities 2,332 Comments: 2,216 244 162  Trade and Other payables 357 287 decrease mainly driven by reduction due to lower cost and volume in FY20 driving lower payments 978 1,175  Deferred Revenues increase due to growth in SaaS and strong advance collections for 196 Maintenance 181

  50. Slide 50: Capitalization of development costs

    Capitalization of development costs USDm Q1 18 Q2 18 Q3 18 Q4 18 FY 18 Cap’ dev’ costs (12.6) (13.2) (13.0) (13.9) (52.6) Amortisation 10.8 11.1 11.1 11.9 44.9 Net cap’ dev’ (1.8) (2.0) (1.9) (2.0) (7.7) USDm Q1 19 Q2 19 Q3 19 Q4 19 FY 19 Cap’ dev’ costs (14.1) (14.3) (15.2) (21.0) (64.6) Amortisati

  51. Slide 51: 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

  52. Slide 52: 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

  53. Slide 53: Earnings Reconciliation – IFRS to non-IFRS

    Earnings Reconciliation – IFRS to non-IFRS 3 Months Ending 31 December 3 Months Ending 31 December In USDm, except EPS 2020 2020 2019 2019 IFRS Non-IFRS adj. Non-IFRS IFRS Non-IFRS adj. Non-IFRS Software licensing 115.3 115.3 139.1 139.1 SaaS and subscription 26.5 26.5 19.0 5.3 24.3 Total Software L

  54. Slide 54: EBIT & EBITDA reconciliation from IFRS to non-IFRS

    EBIT & EBITDA reconciliation from IFRS to non-IFRS USDm Q4 20 EBIT Q4 20 EBITDA FY 20 EBIT FY 20 EBITDA IFRS 110.4 147.6 233.6 382.5 Deferred revenue write-down - - 12.6 12.6 Amortisation of acquired 15.9 - 65.6 - intangibles Restructuring 3.9 3.9 29.0 29.0 Acquisition related costs - - -20.4 -20.4

  55. Slide 55: Net earnings reconciliation IFRS to non-IFRS

    Net earnings reconciliation IFRS to non-IFRS In USDm, except EPS Q4 20 Q4 19 FY 20 FY 19 IFRS net earnings 80.1 62.2 175.0 181.1 Deferred revenue write down - 5.3 12.6 8.6 Amortisation of acquired intangibles 15.9 18.1 65.6 55.2 Restructuring 3.9 10.4 29.0 14.7 Acquisition related costs - 0.7 -20.4

  56. Slide 56: 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

  57. Slide 57: 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

  58. Slide 58: Thank You

    Thank You temenos.com

Temenos — Q4 2020 Earnings Presentation on 6ix