Alfa Financial Software Holdings PLC · LSE:ALFA
Alfa Financial Software — H1 2022 Earnings Presentation
40 slides from Alfa Financial Software's earnings presentation, Sep 1, 2022
Slide 1: 2022 Half Year Results
2022 Half Year Results Growth in resilient market underpins expectations 1 September 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 2022 H1 Looking forward • Strong fundamentals • Continuing to recruit and retain talent • Financial performance • Employee engagement high • Software delivery • Smart engineering hub in Portugal • Staff recruitment, engagement and retention • Innovate and invest in our product • I
Slide 6: Key Highlights
Key Highlights £43.9m +5% £14.2m 32% Revenue Revenue Operating profit Operating profit movement1 margin H1 2021: £41.1m At constant currency H1 2021: £11.4m 2021: 30% £138m 32 +6% 85% Subscription Staff retention Total Contract Value2 Average Headcount customers3 rate4 30 June 2021: £125m Growth sin
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: H1 Income Statement
H1 Income Statement Strong performance in constant currency revenue and profits Key Financial Metrics 2021 H1 2022 H1 Change Change Revenues up 7% or 5% £m £m £m % at constant currency Revenue 41.1 43.9 +2.8 +7% Expenses net of other op. income (29.7) (29.7) - - Operating Profit up 25% or 21% at con
Slide 10: Reduced customer concentration
Reduced customer concentration Improved revenue quality Customer revenue - Top 5 No. customers > £2m* annual Improved diversification of 70% revenue customer base with Top 5 61% down to 35% for H1 2022 60% 16 15 48% 14 50% 14 In H1 2022 we have 15 40% 37% 12 28% customers with revenue over 35% 10 £1
Slide 11: Subscription revenues
Subscription revenues Strong growth in subscription revenues Subscription revenue up 18%, 14 now accounting for 31% of total revenues 13.5 Total Revenue £43.9m 13.5 13 ‘Cloud First’ approach to sales 12.5 Maintenance revenues up 15% £m 12 11.5 31% Bundled licence, maintenance, 11 11.4 hosting up 27%
Slide 12: Software revenues
Software revenues Licence income at relatively low levels due to v5 upgrades Overall software revenues up 6.8 5% 6.6 6.7 Total Revenue £43.9m Relatively low level of 6.4 underlying licence revenues due to v4 to v5 upgrades 6.2 6.4 15% Development days slightly up 6 on last year £m 5.8 One-off licenc
Slide 13: Services revenues
Services revenues Increased revenues with growing partner days 25 Overall revenues up 2% 24 Total Revenue £43.9m Reduction in pre- 23 23.7 23.3 implementation and 22 implementation work for new customers 21 20 Higher levels of work for £m 54% existing customers, including 19 increase due to v5 upgra
Slide 14: Expenses net of other operating income
Expenses net of other operating income Overall costs held at same level Costs held in line with last year as last year - lower than revenue growth £m 2021 H1 2022 H1 Salaries, pensions and on-costs 19.8 19.7 Salary costs in line with last year, with increased headcount Partner costs 0.7 1.2 and payr
Slide 15: Cash flow
Cash flow Strong cash flow in the period, cash conversion at 112% (2021: Continued strong cashflow 138%) £3.6m increase in contract related £m 2021 H1 2022 H1 liabilities, principally due to Operating profit 11.4 14.2 annual maintenance billing Depreciation and amortisation 1.5 1.6 £2.3m increase in
Slide 16: Balance Sheet
Balance Sheet Robust balance sheet with £21m of cash £m Dec 2021 June 2022 Total non-current assets 44.4 43.8 Increase in receivables due to annual maintenance cycle Current assets Trade receivables 6.0 8.0 Increase in accrued income Prepayments, accrued income and other receivables 10.5 12.8 due to
Slide 17: Total contract value (TCV)
Total contract value (TCV) Continued strong growth in TCV Total TCV Next 12 months 160.0 70.0 Total TCV up 10% over last 12 140.0 £138m £60m £60m months, despite loss of £133m 60.0 £56m implementation customer £125m 120.0 £113m 50.0 Subscription TCV up 16%, Software down 4%, Services 100.0 up 5%. Ov
Slide 18: Capital Allocation and Dividends
Capital Allocation and Dividends • We are a strongly cash generative business with net cash of £21m, after payment of £89m of dividends since Nov 2020 • Regular progressive dividend policy • Cash generated from operations over last 2.5 years of £79m • Special dividend of 3.5 pence per share declared
Slide 19: Modelling guidance
Modelling guidance • Effective tax rate of 16% for H1 2022 – expect an effective tax rate of 17.5% for 2022 full year. • Increase in costs in H2 2022 with increased headcount and payrises, and normalisation of costs • £1m increase in capex over 2021 for the year – capitalized development and office
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 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 23: Cloud Hosting Service
Cloud Hosting Service Agility, automation, and simplification • A growing revenue stream • Strong uptake • Ongoing improvements to product offering Simplify Scale 23
Slide 24: People
People A growing, high-quality, highly engaged team • Record Pulse Survey engagement score of 83% • People Strategy • Attract • Onboard • Develop • Engage • Retain • 23% headcount growth since June 2020 • Lisbon Smart Hub recruitment on target • “Smart Working” patterns implemented • London office s
Slide 25: Software delivery
Software delivery Industry-leading delivery track record is a key differentiator • High delivery cadence Start • Started work with 2 new customers • 2 new go-lives • 1 v4-v5 upgrade project completed • Started first Mexico implementation • Continued investment in methodology and delivery tooling 25
Slide 26: 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 • 51% increase in partner days over H1 2021 • Progress with U
Slide 27: Business and Sales Update
Business and Sales Update Andrew Denton, CEO 27
Slide 28: ESG
ESG Creating a positive impact • Culture • Inclusion, diversity and belonging • Health and wellbeing focus – • Employee community groups thriving Peppy men launched. Focus on • First annual I&D global survey ‘cost of living’ and (Aug/Sep 22) benefits/discounts to come • Alfa Work Experience • New LM
Slide 29: Market Overview
Market Overview Auto and equipment finance market resilient Macro conditions Software drivers • Macro economy seeing rising inflation and • Need for software not just driven by new business recession risk • Regulatory change, digitalisation and flexibility still • Asset finance market has gained sha
Slide 30: Alfa iQ
Alfa iQ Building products • JV formed in 2020 with Bitfount • Achieved ISO27001 and Cyber Essentials certification • Proven value of AI in asset finance – paying customers • Products: • Scorecard as a Service • Workflow analytics • Looking to scale across multiple clients 30
Slide 31: Late Stage Pipeline – Movement in Year
Late Stage Pipeline – Movement in Year Remains strong – three new Auto prospects added Prospects in late stage pipeline at 31 Dec 21 8 Converted into wins (1) Lost (0) New prospects added 1 Prospects in late stage pipeline at 9 Mar 22 8 Converted into wins (1) Lost (0) Moved back to mid-stage pipeli
Slide 32: Growth Drivers and Investment Case
Growth Drivers and Investment Case • Base Case: • Strongly positioned in a large resilient addressable market with clear structural growth drivers • Our differentiated business model is difficult to replicate • Constant innovation delivers leading- edge technology embedding strong long-term customer
Slide 33: Summary
Summary Andrew Denton, CEO 33
Slide 34: Overview
Overview Review of 2022 H1 Looking forward • Strong fundamentals • Continuing to recruit and retain talent • Financial performance • Employee engagement high • Software delivery • Smart engineering hub in Portugal • Staff recruitment, engagement and retention • Innovate and invest in our product • I
Slide 35: Q&A
Q&A 35
Slide 36: Appendices
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Slide 37: 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 MVP go-live May 22. Further delivery ongoing. Auto Fin. D US N Impl. Y Implementation ongoing. MVP approach. Merchant Bank A EMEA Y Y Y v5 upgrade proj
Slide 38: 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 Y v5 upgrade project in implementation. Auto OEM D EMEA Y Impl. Y MVP go-live April 2022. Further delivery ongoing. Wholesale Fin A US N Y Y I
Slide 39: Late Stage Pipeline Update
Late Stage Pipeline Update Three new large additions since March 22 Status Status Potential Client descriptor Size Partners Territory Comment Mar 22 Aug 22 Retail Bank F Y UK/US Talks Talks Letter of Engagement – v5 upgrade Retail Bank G N UK Talks Mid-stage Internal priorities Retail Bank H Y U
Slide 40: 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
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