Grupo Simec, S.A.B. de C.V. Price & Performance (SIM)

Thank you very much, and good morning, everybody, and welcome to Synchrope's Q2 'twenty three results. I'm here in the room together with our CFO, Mikael Pjalpi. Let's get started. First on Page 2, the normal disclaimer that most of you would have seen before. But as always, make sure you familiarize yourself with that. And then Let's go on to the agenda on Slide number 3. I will start by introducing the key headwind highlights about our business And also an update on the Zoidgebursal transaction. Then Michael will take us through the financial review of H1 and then also take us through the financial outlook for the rest of the year. And then as always, we will finish off with a Q and A session. So let's go to Slide number 5, where we have basically an update on the takeover offer from Deutsche Borse Group. You're most likely all familiarized with the actual transaction, the offer with the SEK 7.35 per share And the minimum conditions of 50% plus one share. So we are currently or They are currently working through the approvals and clearances with the authorities as They come and has recently updated and extended the time line with what It seems to be the final time.

And that also indicates that by September 2019, The pending approval from the European Commission would also be completed. In the end, that means that the offer is expected to be settled and completed by 29th September, 2023 at the latest. If we then shift back to SimCorp on Page number 6, it's just a quick recap on the 3 plus 3 Excellence levers and growth levers that we are driving the company towards, starting with the SaaS acceleration, Which is, as you can see in the numbers, is really taking off. The platform leadership was going to continue to generate our competitiveness For now and for into the future. And then those 2 coupled with the ecosystem scaling where we now have more than 100 plus partners That are leveraging our customer base and we're also leveraging their capabilities to basically generate customer value. Then the 3 excellence levels, which are somewhat new to Semcorp, starting with the operating model excellence, which is ultimately driven by our SaaS acceleration, the commercial excellence that allow us to be as effective as we possibly can In our go to market and then finally the cost excellence that has been introduced with the program of fuel, but it's Obviously, much wider than that.

It is basically to ensure that we spend money wisely, allowing us to make the right investments to secure the Slide number 7, a quick update on the continued focus on the so called accelerated investment areas that we Also outlined in the communication earlier this year, starting with the platform leadership that is split into front office And the development efficiency of the overall R and D group of SimCorp, there we are very much on track. We are extending our capabilities in the front office as planned, and we have now fully launched our cloud native performance management module, Which is now fully commercially available, and we also signed the 1st new customer on that, a customer that will go live towards the end of the year. So that's really exciting. The development efficiency and scalability is also on track, and we start continue to see the efforts in creating more and more development capacity Because our developers are becoming more and more effective utilizing the capabilities we have. But we really expect to start seeing The full impact of these things once we turn the dial of the year and move into 2024 and certainly also 25 and beyond.

Then we have the SaaS acceleration points with SaaS TCO and BPAD Ios, Ios. And on the also here, we are on track. So we really start to see the scale advantages from the investments we are doing into the way we run the SaaS, Both in terms of how we utilize the technology, but also the whole administrative capabilities we're building around the SaaS Delivery model. Obviously, a part of that is also the fact that we get more and more customers on to the SaaS platform, and we now turn to a very We believe at least a very important point that we now have more than 25% of our customers being delivered through our SaaS capability. So obviously, also to get more and more customers utilizing it also creates scale. On BPAS, we're also on track. We are now keen implementation projects in many parts of the world. And we are gradually as planned, moving customers Live with some pretty significant go lives towards the end of the year, but we're also building up the pipeline further to hopefully sign some very Exciting customers in the end of 2023 beyond. Then finally, the commercial excellence, The new go to market model, all of the structural changes was executed in Q1.

And now the market unit teams are really transitioning in streamline new ways of working in the new structure. So I would say all in all, I'm very pleased with our progress on these very important accelerated investment projects across the group. If we then shift to Page number 8, As you can see, also in Q2, we were capable of landing new exciting customers, in this case, to Middle Eastern customers, Both are very significant participants in the growth in the Middle East. And we've also managed to kick off Q3 In a great way by signing a very, very large asset manager in the U. S. So it's exciting to get our foot in the door there By delivering our client communications capabilities, actually in this case, as a SaaS solution as well. We've also landed another channel play customers. And finally, with the Artega partnership that most of you would know about, which is our joint venture with our Australian customer, Challenger, In Australia, we're also starting to onboard customers as time is passing on. And now to my final slide, just a quick heads up. As you probably would remember, a big part of our strategic plan announced earlier this year was to make sure that we Do two things in parallel that we secure, that we have a follow the sun approach that allows us to provide our SaaS capabilities everywhere in the world, But at the same time, also create more and more talent locations where we have very good access To all the new talent we need and Mexico is now live.

So we set off an office which has gone live end of Q2. So this office will support in ensuring efficient business delivery models to best support same cost future growth here under the SaaS. Mexico City will complement the existing delivery center set up and providing an opportunity to attract strong talent and support the around the clock concept, which is very important in our SaaS delivery model. The choice of Mexico City was based on a thorough analysis of all potential locations in the Americas, Focused on macroeconomics, labor costs, labor availability and overall risk considerations. So it's really great that we now have the teams on board And we have actually already employees working out of Mexico City, and it's all very exciting. So with those words, Over to the financial part of the presentation. So over to you, Mike.

Yes. Thank you, Christian, and good morning to all from me. Please turn to Slide number 11 for a snapshot of the Q2 financial performance. So Q2 was a solid quarter and we created double digit growth, organic growth across all our revenue parameters for the 2nd consecutive quarter in the year. It is clear from the numbers that our transformation to SaaS is now having effect, especially on the revenue. After some investment years, this is really coming through. The ARR growth, which is our main KPI and what we are driving the business after increased 13.6% by the end of Q2 and this compares to 12.6% by the end of Q1, so accelerated. This acceleration was in line with expectations and we continue to see that trend going forward. The ratable revenue, which is really the cash generating revenue grew more than 20%, and this drives continued strong cash flow. You can see that in the first half year, we have actually been able to increase the cash flow by 111% compared to 2022, and I'll come back The reported revenue was €132,000,000 an increase of 15% organically In Q2 and almost 17% in H1. The profitability reflects the strong reported revenue growth also compared to the more muted cost growth.

And this means that we see that the EBIT margin is Up nicely compared to last year and for the first half year at 17.5 percent EBIT margin. Please go to the next slide, and we will dive into the details and I'll start with the forward looking ARR. So the forward looking ARR is really the The main KPI for us, how we manage the commercial organization, how we manage the business and what we try to drive the business into a more Predictable and recurring revenue stay. It accelerated in Q2 as we added €11,000,000 net to the book of business. Indexation only had a quite small effect in Q2. So if you look at New Business One excluding the indexation effect, We actually added more in Q2 than we did in Q1. The largest contributions were the SaaS conversions, 3 of those in the quarter. And then, of course, also supported by our 2 new customers that Christian mentioned were the larger one, Hesana, And around between €1,000,000 €2,000,000 in ACV as well as AR. In the first half year, we saw a churn of approximately 1% revenue. This is in line with the historic trend. 50% of our churn was comprised by a middle Seized customer in EMEA due to a merger and consolidation, we are not a player in that market.

As you know, our contracts are completely remarkable and hence the Customer paid the committed licenses upfront, which had an effect on ratable revenue as we will go through on the next slide, Slide number 13. So ratable revenue grew more than 20% in the quarter, and we really see that this is driven by the SaaS services We continue to have more SaaS implementations, and this is driving a higher business and cash generating revenue. We just mentioned the churn that we have in the EMEA region added approximately 1 fourth of that growth. So hence, underlying ratable revenue grew just above 15% in the quarter. In that sense, you can see also on the Reported revenue figures that we are really shaping the business now to a real SaaS business, creating scale and efficiency on our SaaS offering and creating predictability as well as recurrence for our reported revenue. In that sense, on premises revenue was Flat to slightly declining both in Q1 and H1 as well as Q2. And our SaaS revenue grew materially almost 80% organically in the quarter. Professional Services were up 7 0.3% in Q2. And so we still see strong growth in that part of the business, mostly as a result of the higher complexity and the larger projects We are implementing with the SaaS.

Move to the next slide, Slide number 14 for a review of the cost. The cost development is on track compared to our plans. We are seeing that the fuel cost program has the effect that is intended, We are confirming that. At the same time, we are accelerating hard in the acceleration cases that Christian presented. FTEs, so in that sense, you really see that the business is still moving fast and increasing. If you see how we are saving the cost to Really investing where it creates the most value. You can see that the administration cost is flat for the first half year, year over year. And we see that our R and D investments is up almost 16%. So we're reshaping from administrative cost Into more R and D, and this is basically all of our accelerated investments that are creating that increase. Special items amounted to €3,400,000 in the quarter, €2,400,000 related to the execution of Programme Fuel And EUR 1,000,000 exactly related to the transaction, mainly adviser fee. Please move to the next slide on Slide number 15. As I mentioned, the free cash flow increased by 111% in the first half year compared to last year.

This is an increase of more than €30,000,000 and in big ballpark figures, you can say that half of that is driven by our strong ratable revenue growth Compared to our more muted COSCO, this creates one half of the increase in cash flow and the other half Of the cash flow increase is really driven by the working capital improvements that we're doing, and this is both related to payables as well as receivables. So in that sense, I have a very strong cash flow and also stronger than expected in the first half year. Was a review of the financials in for H1 and Q2. And I'll now move to Section 3 and Slide number 17 on the financial guidance. Overall, we are confident that we are on the right track. We are shaping the business into a more predictable, stronger And the recurring business and on all our KPIs and reported figures, we are close to plan. On the strategic agenda, we believe that the strategic investments are progressing and program fuel has the effect that we intended. So ARR is expected to accelerate during the year and hence we expect to climb up in the guided range that we have between 12% 17% And then higher than where we are currently by the end of Q2.

Readable revenue is in H1 materially above guidance range, but this is more dependent on timing. And we do see that we have a quite tough comparison base in Q3, which means that we still see that the guidance range is relevant, although this probably might end in the higher end of the range. On the reported revenue, I think it's important to remember that we have very strong growth and we expect that to continue also in Q3. But in Q4, we will have a tough comparison base and hence, it will probably be less strong in the Q4 as planned all along. The EBIT margin is fully on track and as always skewed towards the Q4 as well. So overall, confirming the guidance on all parameters. With that, I will hand back to the operator and Any potential Q and A, it's probably not a long Q and A given the circumstances of the transaction.

Thank you, Thank you. There will be We have no questions on the phone lines. I'll hand back to you. Thank you.

And we have no questions on the webcast as far as we can see. So Michael, you are absolutely correct. A very short round of questions. But As we probably also said, we do understand the circumstances. So we are very proud of Q2 and H1. So with that, we wish you a wonderful weekend. Thank you very much. Thank you all.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect your lines. Thank you.