Alfa Financial Software Holdings PLC · LSE:ALFA
Alfa Financial Software — FY2022 Earnings Presentation
40 slides from Alfa Financial Software's earnings presentation, Mar 2, 2023
Slide 1: 2022 Full Year Results
2022 Full Year Results 2 March 2023 Leading software | Smart people Unrivalled delivery | Exceptional IP
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 2022 Looking forward • Strong fundamentals • Continuing to recruit and retain talent • Financial performance • Software delivery • Ongoing innovation and investment in our • Staff recruitment, engagement and retention product • Investors In People – Gold status • Expansion of prod
Slide 6: Key highlights
+12% Revenue movement +8% at constant currency1 £93.3m Key highlights Revenue 2021 : £83.2m +17% Growth in Subscription revenues £143m Total Contract Value2 2021 : £133m £29.6m Operating profit 2021: £24.7m 90% Staff retention rate3 2021 : 87% 32% (1) Constant currency. See “Definitions” for further
Slide 7: Financial Review
Financial Review Duncan Magrath, CFO 7
Slide 8: Income Statement
Income Statement Strong overall financial performance Revenues up 12% or 8% 2021 2022 Change at constant currency Key Financial Metrics £m £m % Revenue 83.2 93.3 12% Operating Profit up 20% Cost of sales (29.0) (33.4) 15% with a margin of 32% Gross profit margin (%) 65% 64% (1%) Sales, general & adm
Slide 9: Revenue profiles
Revenue profiles Subscription customers all recurring revenues; 29% of overall revenues Strong base of revenue of a recurring nature 57% of software revenues from existing customers: 10% Revenue from existing and new customers of overall revenues 2022 By Stream Sub Soft Serv Total 68% of Services re
Slide 10: Improved customer diversification
Improved customer diversification Improved revenue quality Customer revenue - Top 5 Improved diversification of 70% customer base with Top 5 61% down to 35% for 2022 60% 50% 48% Growing strength of customer 40% 37% 35% base - 17 customers with revenue over £2m 30% 20% 10% 0% 2019 2020 2021 2022 10
Slide 11: Subscription revenues
Subscription revenues Strong growth in subscription revenues ‘Subscription First’ approach to sales +17% Subscription revenue up 17%, now accounting for 29% of total revenues Hosting revenues up 28% with total 13 hosting customers at the year end (2021: 12) Maintenance revenues up 15% Subscription r
Slide 12: Software revenues
Software revenues Software increase driven by growth in development days Overall software revenues up 20%, now accounting for 17% of total revenues +20% One-off licence revenue of £0.4m (2021 £2.1m); excluding this software up 39% Development days (which enhance the software and generate revenue) up
Slide 13: Services revenues
Services revenues Increased revenues with growing partner days Overall services revenues up +8% 8% year on year Reduction in implementation work for new customers, making up 32% of total services (2021: 45%) Higher levels of work for existing customers, including increase due to v5 upgrade work, mak
Slide 14: Expenses net of other operating income
Overall operating expenses Expenses net of other operating up 9% income Salary costs up 11% over last year, average headcount up Net cost increase lower than revenue growth 10% to 420 (2021: 383). Y/e headcount up 15%. £m 2021 2022 Salaries, pensions and on-costs 37.8 41.8 Partner costs Partner cost
Slide 15: Cash flow
Cash flow Continued strong cashflow – 102% cash conversion Cash conversion of 102% - £m 2021 2022 expect c.100% going forwards Cash generated from operations 31.3 34.0 as transition to subscription Adjusted for: revenues Principal element of lease payment (1.9) (1.6) Capital expenditure (1.3) (2.3)
Slide 16: Balance Sheet
Trade receivables up £2.9m driven Balance Sheet by strong Oct / Nov billings up 23% - only £0.1m overdue by > 30 days. Robust balance sheet with £19m of cash Prepayments, accrued income and £m Dec-21 Dec-22 other receivables up £0.9m, mainly Total non-current assets 44.4 37.5 due to deferred contrac
Slide 17: Total contract value (TCV)
Total contract value (TCV) Total TCV up 7% over last Continued strong growth in TCV 12 months Subscription TCV up 9%, Software up 35%, Services TCV down 9% over last 12 months Next 12 months TCV up 9% from a year ago, with Subscription TCV up 12%, Software TCV up 52% and Services TCV down 6% Exchang
Slide 18: Total contract value (TCV)
Total contract value (TCV) 5 year subscription profile Rather than using 3 year life Total TCV on 3 yr basis Total TCV on 5 yr basis for subscription revenues, TCV would be £201m 225 225 £201m (2021: £188m) if we used a 5 200 200 £188m year measure 30 175 175 32 20 150 £143m 150 15 This better repre
Slide 19: Capital Allocation
Capital Allocation Strongly cash generative business • Even allowing for funds to invest in the business we generate excess cash. • We return the excess via: • Regular progressive dividend policy - ordinary dividend proposed of 1.2 pence per share (c£3.6m) • Share buyback – 2.8m shares purchased in
Slide 20: Modelling guidance
Modelling guidance • Exclude £2m of gains from 2022 costs from future cost estimates • Annualisation of 2022 headcount increase • Still some further normalization of costs from Covid to occur – c£1m additional in 2023 • £1m increase in capex planned for 2023 – including increased software developmen
Slide 21: Operational Delivery
Operational Delivery Matthew White, COO 21
Slide 22: Strategic priorities
Strategic priorities Simplify Start Sell Simplify our product, implementations and Improve our offering for smaller asset finance Focus on cloud-hosted, processes to enable more providers as a platform subscription sales to our concurrent Alfa Systems for innovation and target markets. implementatio
Slide 23: Software and Technology
Software and Technology The premier platform for a complex market • Alfa v5.7 • Updated UI/UX • Credit decisioning • Asset level charges • Billing contract charges • Configuration segregation • Updated messaging frameworks • Vehicle subscription product launched • Partnership with “Tomorrow’s Journe
Slide 24: Cloud Hosting Service
Cloud Hosting Service Agility, automation, and simplification • A growing revenue stream Cloud hosting • Strong uptake • Ongoing improvements to product offering • SOC1 reporting • Improving self-service capability Proven 24Hr support performance Simplify Scale 24
Slide 25: People
People A growing, high-quality, highly engaged team • Record Pulse Survey engagement score of 84% • Clear People Strategy • A growing team (441 @ Dec 22) • Lisbon smart hub operational • Investors in People Gold status • Ranked #4 in Newsweek’s Most Loved Workplaces 25
Slide 26: Software delivery
Software delivery Industry-leading delivery track record is a key differentiator • Maintained high delivery cadence • 28 deliveries in 2022 • 7 ongoing new implementations • 4 ongoing v4 to v5 upgrades • High level of ongoing services work with existing customers underpins services revenues • Contin
Slide 27: 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 implementation partners • 58% increase in partner days • Second EMEA partner operational
Slide 28: Business and Sales Update
Business and Sales Update Andrew Denton, CEO 28
Slide 29: Creating a positive impact
Creating a positive impact Environment Alfa Communities • UN SDGs refreshed • Alfa for Racial Equity – work • Scope 3 emissions calculated experience programme • SBTi process underway • LGBTQ+ - Pride month • Women’s Community – Breast Cancer Awareness month Culture • Parents’ Community – podcast •
Slide 30: Market overview
Market overview Auto and equipment finance market resilient Macro conditions Alfa resilience • Macro economic outlook remains dynamic • Diversified customer base • Asset finance market has gained share in the past in • Across 37 countries, 5 continents difficult times, expect the same this time • En
Slide 31: Late Stage Pipeline – Movement in Year
Late Stage Pipeline – Movement in Year Remains strong – five new large prospects added Prospects in late stage pipeline at 31 Dec 2021 8 2 3 - 3 Converted into wins (2) (1) (1) Lost - Moved back to mid-stage pipeline (3) (1) (2) New prospects added 6 1 5 Prospects in late stage pipeline at
Slide 32: Compelling investment case
Compelling investment case 32
Slide 33: Summary
Summary Andrew Denton, CEO 33
Slide 34: Overview
Overview Review of 2022 Looking forward • Strong fundamentals • Continuing to recruit and retain talent • Financial performance • Software delivery • Ongoing innovation and investment in our • Staff recruitment, engagement and retention product • Investors In People – Gold status • Expansion of prod
Slide 35: Q&A
Q&A 35
Slide 36: Appendices
Alfa Appendices
Slide 37: Delivery progress
Delivery progress • 7 New Alfa Implementations in progress • Of which: • 1 pre-implementation • 3 US; 3 EMEA; 1RoW • 4 use staff augmentation partnering • 3 will be hosted. (2 more use hosting as an implementation accelerator) • 1 Alfa Start implementation • 4 Alfa v4 to v5 upgrades in progress • Of
Slide 38: Revenue profiles
Revenue profiles 2021 revenue by new and existing customers 2021 By Stream Sub Soft Serv Total Existing 100% 57% 55% 68% New 0% 43% 45% 32% Total 100% 100% 100% 100% 2021 All Revenue Sub Soft Serv Total Existing 28% 9% 31% 68% 68% New 0% 7% 25% 32% % of Total Revenue 28% 16% 56% 100% 38
Slide 39: Late Stage Pipeline Update
Late Stage Pipeline Update Two new additions since August 22 Status Status Potential Client descriptor Size Territory Comment Aug 22 Mar 23 Retail Bank F UK/US Talks Talks Letter of Engagement – v5 upgrade Retail Bank G UK Mid-stage Mid-stage Internal priorities Retail Bank H UK Won Won Announce
Slide 40: Definitions
Definitions Measures not specifically defined by IFRS Total contract value (TCV) TCV is calculated by analysing future contracted revenue based on the following components: Constant currency When the Company believes it would be helpful for understanding trends in (i) an assumption of three years of
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