Alfa Financial Software Holdings PLC · LSE:ALFA
Alfa Financial Software — FY2021 Earnings Presentation
44 slides from Alfa Financial Software's earnings presentation, Mar 9, 2022
Slide 1: 2021 Full Year Results
2021 Full Year Results Continued strong financial and operational performance 9 March 2022 Stepping into our opportunity 1
Slide 2: Disclaimer
Disclaimer The following presentation is being made only to, and is only directed at, persons to whom such presentation may lawfully be communicated (“relevant persons”). Any person who is not a relevant person should not act or rely on this presentation or any of its contents. Information in the fo
Slide 3: Agenda
Agenda • Introduction and Key Highlights Andrew Denton, CEO • Financial Review Duncan Magrath, CFO • Operational Delivery Matthew White, COO • Business and Sales Update Andrew Denton, CEO • Summary Andrew Denton, CEO • Q&A 3
Slide 4: Introduction and Key Highlights
Introduction and Key Highlights Andrew Denton, CEO 4
Slide 5: Overview
Overview Review of 2021 Looking forward • Strong fundamentals • Strong pipeline in a robust target market • Financial performance • Delivery performance • Continuing to recruit and retain talent in a hot • Staff recruitment, retention and engagement market; plans to create smart engineering hub • Ex
Slide 6: Key Highlights
Key Highlights £83.2m +9% £24.7m 30% Revenue Revenue Operating profit Operating profit movement1 margin 2020: £78.9m At constant currency 2020: £23.9m 2020: 30% £133m 31 +12% 87% Subscription Staff retention Total Contract Value2 Average Headcount customers3 rate4 31 Dec 2020: £113m Growth over 31 D
Slide 7: Strategic Priorities
Strategic Priorities Strengthen Sell Scale Grow our differentiation of Focus on cloud-hosted, Increase our capacity for market leading People, subscription sales to our developing and delivering Product and Delivery. target markets. Alfa Systems. Simplify Synergise Start Develop our partner Simplify
Slide 8: Financial Review
Financial Review Duncan Magrath, CFO 8
Slide 9: Income Statement
Income Statement Strong increase in constant currency revenue and profits 2020 2021 Change Change Key Financial Metrics £m £m £m % Licence revenue - contract extension 5.6 - (5.6) Reported revenues up 5% or 9% at constant currency Other revenue 73.3 83.2 9.9 +14% Operating Profit up 3% or 10% Revenu
Slide 10: Reduced customer concentration
Reduced customer concentration Improved revenue quality Customer revenue - Top 5 No. customers > £2m revenue Improved diversification of customer base with Top 5 70% down to 37% for 2021 61% 16 60% 14 14 In 2021 we have 14 customers 48% 50% 12 28% with revenue over £2m. 10 40% 37% 10 30% 8 7 Signifi
Slide 11: Subscription revenues
Subscription revenues Strong growth in subscription revenues Subscription revenue up 30% 25 23.5 Total Revenue £83.2m ‘Cloud First’ approach to sales 20 18.1 Hosting customers up from 10 15 at end of 2020 to 12 at 31 Dec 21 £m 10 28% Pure hosting revenue up 74%. Bundled licence, maintenance, hosting
Slide 12: Software revenues
Software revenues Reduced licence income offset by increased development 25 £5.6m licence revenue from contract extension in 2020. Total Revenue £83.2m £2.2m of “at a point in time” 20.0 20 licence revenue from recurring customers in 2021, some 5.6 originally expected in 2022. 15 16% 13.6 Customised
Slide 13: Services revenues
Services revenues Increased revenues with strong delivery performance 50 Overall revenues up 13%, in line 46.1 with average headcount growth 45 of 12% 40.8 Total Revenue £83.2m 40 35 Continued high levels of service and delivery, operating 30 remotely £m 25 56% 20 Reduction in pre- 15 implementation
Slide 14: Expenses net of other operating income
Expenses net of other operating income Higher salary costs from headcount increases, but reduced T&E 6% increase in overall costs significantly lower than revenue growth, excl 5 yr contract extension £m 2020 2021 Increased salary costs predominantly due to higher Salaries, pensions and on-costs 35.4
Slide 15: Cash flow
Cash flow Strong cash flow in the period, cash conversion at 114% (2020: Continued strong cashflow 114%) £4.1m increase in contract liabilities, principally due to £m 2020 2021 deferred software implementation up £3.4m due to Operating profit 23.9 24.7 material right balances related to Depreciation
Slide 16: Balance Sheet
Balance Sheet Robust balance sheet with £23m of cash £m Dec 2020 Dec 2021 Small increase in receivables Total non-current assets 44.8 44.4 due to higher billings, but Current assets debtors still well controlled; 26 days (2020: 27 days) Trade receivables 5.8 6.0 Prepayments, accrued income and other
Slide 17: Total contract value (TCV)
Total contract value (TCV) Continued strong growth in TCV 140 £133m £125m Same methodology used as previously, using new revenue 120 £112m splits Next 12 months 100 70 Total TCV up 18% over last 12 £53m £60m months. Subscription TCV up 60 80 24%, Software up 16%, 50 Services up 5%. £m 40 60 £m Next
Slide 18: Capital Allocation and Dividends
Capital Allocation and Dividends • We are a strongly cash generative business with net cash of £23m, after payment of special dividends of £74m since Nov 2020 • Regular progressive dividend policy initiated with our 2020 results - proposing a 10% uplift for 2021 • Pre returns to shareholders, averag
Slide 19: Modelling guidance
Modelling guidance • Effective tax rate of 20% for 2022 – rises in UK corporate tax rate from 2023 onwards • Increase in national insurance/social tax by 1.25% from April 2022 • Slight increase in capex – fit-out Michigan and Sydney new offices, and potential refit of London office as shrink from 3
Slide 20: Operational Delivery
Operational Delivery Matthew White, COO 20
Slide 21: Strategic Priorities
Strategic Priorities Strengthen Sell Scale Grow our differentiation of Focus on cloud-hosted, Increase our capacity for market leading People, subscription sales to our developing and delivering Product and Delivery. target markets. Alfa Systems. Simplify Synergise Start Develop our partner Simplify
Slide 22: Software and Technology
Software and Technology We remain the premier platform in a market with complex requirements • Ongoing functional and technical Strengthen product enhancement • Business Rules improvements • Configuration management • Credit decisioning • Business intelligence improvements • “Render” user interface
Slide 23: Cloud Hosting Service
Cloud Hosting Service A fast-growing new revenue stream; a compelling offering for customers • Provides agility and automation • Simplifies Alfa Systems delivery • Ongoing improvements to tooling and service provision Simplify Scale 23
Slide 24: Product Engineering Smart Hub - Lisbon
Product Engineering Smart Hub - Lisbon Expanding our access to talent, without expanding our office infrastructure Strengthen • Recruiting for remote workers in Lisbon • Access to talent • Good tech centre & cultural fit • Lower cost than London • Minimal up-front investment, no office • Teams seede
Slide 25: People
People In a challenging recruitment market, we are attracting, developing and retaining the best talent in our industries 12% growth in average headcount • Strong retention at 87% • Sustained positive engagement >70% Improving our learning and development tooling and processes • Future hybrid workin
Slide 26: Delivery
Delivery Increasing delivery cadence enables revenue growth Alfa Deliveries 30 • Further increase in delivery cadence 25 • Ongoing Alfa Start improvements 20 15 10 5 0 2015 2016 2017 2018 2019 2020 2021 Simplify Start H1 H2 26
Slide 27: Delivery Progress
Delivery Progress An increasing and diverse portfolio of Alfa Implementation projects, delivering in line with our strategy • 4 new customers live in H2 2021 • 3 of which have significant ongoing work • 15 countries now live for “OEM B” • 11 ongoing implementations • 1 of which is in the Definition
Slide 28: Partnering
Partnering Increasing delivery capacity, and moving towards partner-led implementation • Benefits of partner model: • Increased capacity • Flexibility • Sales leads • Client-side resourcing • Increased usage of staff augmentation partners • 54% increase in days in 2021 • Progress with US partnering
Slide 29: Business and Sales Update
Business and Sales Update Andrew Denton, CEO 29
Slide 30: ESG
ESG Continuing to create a positive impact • Culture • Communities • Health and wellbeing focus • Fundraising – The Climate Coalition, Feeding America, • Recruitment and retention Share The Dignity, KidsCan – and a host of other charity • Innovation, events and connection (real world activities and
Slide 31: Market Overview
Market Overview Auto and equipment finance market remains a great place to be Short term Medium to Long term • Markets robust • Asset finance markets do well during downturns, • Demand for subscription with greater share of finance necessary for recovery • Penetration in Wholesale and broader lendin
Slide 32: Alfa iQ: Moving from theory to practice
Alfa iQ Moving from theory to practice ● JV formed in 2020 with Bitfount ● Achieved ISO27001 and Cyber Essentials certification ● Actively recruiting ● Proven value of AI in asset finance ● First two customers with two different applications of artificial intelligence and machine learning: ○ Improve
Slide 33: Late Stage Pipeline – Movement in Year
Late Stage Pipeline – Movement in Year Good conversion in 2021, good start to 2022 Prospects in late stage pipeline at 31 Dec 20 10 Converted into wins (7) Lost (0) New prospects added 5 Prospects in late stage pipeline at 31 Dec 21 8 Converted into wins (1) Lost (0) New prospects added 1 Prospects
Slide 34: Growth Drivers and Investment Case
Growth Drivers and Investment Case • Base Case: • Accelerators: • Strongly positioned in a large resilient addressable • Subscription market with clear structural growth drivers • Alfa Start • Our differentiated business model is difficult to • Partnerships replicate • Technology/Alfa iQ • Constant
Slide 35: Summary
Summary Andrew Denton, CEO 35
Slide 36: Summary: we are stepping into our opportunity
Summary ……..we are stepping into our opportunity Review of 2021 Looking forward • Strong fundamentals • Strong pipeline in a robust target market • Financial performance • Delivery performance • Continuing to recruit and retain talent in a hot • Staff recruitment, retention and engagement market; pl
Slide 37: Alfa’
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Slide 38: Appendices
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Slide 39: Delivery Progress – New Alfa v5 Implementations
Delivery Progress – New Alfa v5 Implementations Client descriptor Size Territory Partners Hosting Contracted Comment Auto Fin. A US N N Y Phase 2 ongoing. Auto Fin. B US N N Y Live Sept 2021. Auto Fin. D US N Impl. Y Implementation ongoing. MVP approach. Merchant Bank A EMEA Y Y Y v5
Slide 40: Delivery Progress - New Alfa v5 Implementations (Contd)
Delivery Progress - New Alfa v5 Implementations (Contd) Client descriptor Size Territory Partners Hosting Contracted Comment Retail Bank H EMEA Y Y N v5 upgrade project in implementation. Auto OEM D EMEA Y Impl. Y Project in implementation. Wholesale Fin A US N Y Y Implementation in progre
Slide 41: Late Stage Pipeline Update
Late Stage Pipeline Update Three new large additions Status Status Potential Client descriptor Size Partners Territory Comment Sept 21 Mar 22 Retail Bank F Y UK/US Talks Talks Letter of Engagement – v5 upgrade Retail Bank G N UK Talks Talks Preferred supplier Retail Bank H Y UK Existing Won Lett
Slide 42: Definitions
Definitions Measures not specifically defined by IFRS Constant currency Total contract value (TCV) When the Company believes it would be helpful for understanding trends in its TCV is calculated by analysing future contracted revenue based on the business, the Company provides percentage increases o
Slide 43: New revenue disclosures
New revenue disclosures Comparison of 2020 results on new and old basis 2020 Revenues as previously presented H1 H2 FY £k Software implementation 16,194 11,134 27,328 Maintenance 8,223 10,956 19,179 Ongoing Development Services 13,757 18,606 32,363 Total – originally presented 38,174 40,696 78,870 2
Slide 44: New revenue disclosure
New revenue disclosure Definitions • Software - Revenue from selling or developing software • Subscription – All revenue charged to clients on a for new or existing customers subscription basis Software revenue follows the Group’s customised licence revenue Subscription revenue is the Group’s recurr
Alfa Financial Software Holdings — FY2021 Earnings Presentation on 6ix