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Teamviewer Se
11/2/2022
Good morning, ladies and gentlemen. Thank you for standing by. Welcome and thank you for joining the TeamViewer AG Q3 2022 results call and webcast. Throughout today's recorded presentation, all participants will be in a listen-only mode. The presentation will be followed by a question and answer session. If you would like to ask a question, you may press star followed by a one. Please press the star key followed by zero for operator assistance. It's my pleasure, and I would now like to turn the conference over to Ursula, Head of Investor Relations. Please go ahead, ma'am.
Thank you. Good morning, everyone, and welcome to TeamViewer's Q3 2022 earnings call. My name is Ursula Caret, and I'm happy to host TeamViewer's earnings call for the first time today. I recently joined the company in my new role as VP Capital Markets and Head of IR, and I am looking forward to being your contact person going forward. I already met some of you virtually or in person, and I'm really looking forward to meeting many of you in the coming weeks and months. I am joined today by our CEO, Oliver Steyl, as well as our CFO, Michael Wilkins. They will now present our business and financial update for the third quarter of 2022. As always, the presentation will be followed by a Q&A session. Please note that the deck contains some new slides, as we slightly adjusted the flow of the presentation. But of course, we will present you the same KPI set as usual, and the appendix with tables for all relevant figures also remains the same. One last thing before we start. As always, please pay attention to the statement with respect to forward-looking statements on slide two. With that, I hand it over to our CEO, Oliver Stein.
Good morning, everyone. Thank you for joining our Q3 earnings call. Thank you for the introduction, Ursula. I would like to take this opportunity to welcome you as our new head of investor relations. I think we're all really, really glad to have you on board. And as usual, I will start by updating you on this quarter's business and financial highlights. I will then hand over to our CFO, Michael Wilkens. Also to you, Michael, a very warm welcome on this particular stage. We already mastered two months together in this environment since your start, and I'm looking forward to partnering with you on TeamViewer's next milestones. Today, Michael will guide you through our financials in detail, including updates on our financial structure, cost development, and cash generation. So next slide, please. Overall, we are satisfied how the business developed in Q3. Of course, the overall macroeconomic environment remains challenging, but I think TeamView once again displayed strong resilience amidst these circumstances. Based on our Q3 performance, we confirm our full-year guidance. At the conclusion of fiscal year 2022, we expect billings at or around 630 million euros IFRS revenue between 565 and 580 million euros and an adjusted billings EBTA margin between 45 and 47%. I think this is based on various drivers from our perspective. So firstly, total billings in Q3 came in at 144.6 million euro, which is a plus of 15% and 7% on a constant currency basis compared to the third quarter in 2021. Secondly, profitability in Q3 remains strong. This was accompanied by big improvements in free cash flow and cash conversion. Furthermore, we also increased our EPS substantially, both in Q3 and from a nine-month perspective. Thirdly, we continue to implement monetization measures, such as cross and upsell campaigns, as well as price adjustments. And against this backdrop, strong customer retention and high satisfaction underscore the quality of our product portfolio. And this point is particularly important to me. It shows how customers value TeamViewer's products above potential alternatives. Continuous customer satisfaction is really a key asset for TeamViewer. Fourth, our regional diversification again paid off. The APEC region shows signs of a turnaround, and EMEA particularly proved to be a very resilient region, despite the prevailing economic headwinds, with a year-on-year constant currency growth of 13%. Fifth, our enterprise business retains a vibrant growth momentum showing 47% blinks growth year over year. Enterprise has a strong net retention rate of 113% and growth is fueled by a combination of larger customer wins and upselling into higher pricing buckets. And sixth, We further increased the momentum with our strategic partnerships in Q3. For instance, we conducted a number of successful joint sales events with our tech partners SAP and Google Cloud. And a couple of weeks ago, we entered into a partnership with Hyundai Motor and explored together how we can support their smart factory with our solutions in the best possible way. So satisfied customers, profitable growth. and high-level partnerships for the enterprise business, we believe that we are actually quite well on track. And while the economic uncertainties are likely here to stay for the time being, we have a reasonably positive view on Q4, which traditionally is a strong quarter, given our back-end loaded pipeline. The team is a resilient business, underpinned by a solid financial structure. And speaking of financials, let me highlight the most relevant Q3 KPIs on the next slide. To begin with, we continued our top-line growth. Billings and revenue increased with 15 percent and 12 percent, respectively. The pronounced currency effects clearly reflect the volatile exchange rate environment. The share of enterprise business increased by four percentage points year on year overall. Forty-five percent of TeamViewer's total billings growth in Q3 came from the enterprise segments. The other 55 percent were driven by SMBs. Our products are highly attractive for a wide range of customers from various industries. We continue to establish TeamViewer as the go-to partner for high-impact strategic investments in digital transformation across industries, but at the same time help our customers to increase short-term automation and efficiency, and obviously this is key in the current environment. All these factors made us achieve a strong net retention rate of 103% on group level, And on year-over-year base, we improved group net retention rate by 7 percentage points. In addition, TeamView is again growing profitably. Adjusted EBITDA grew by 42% to more than €60 million. And our adjusted EBITDA margin stood at 42%, which is 8 percentage points higher than last year's Q3. It's also the result of our effectiveness in execution. And in turn, we raised basic EPS to 23 euro cents per share from a nine-month perspective. Compared to the previous year period, this is more than doubling of basic EPS. This was partly driven as well by a lower number of outstanding shares due to our successfully concluded share buyback program. Michael will elaborate later on more drivers of our net profit in his part of the presentation. In total, we are well positioned to cope with the limited visibility around economic development in the coming months and beyond. Fundamental demand for TeamViewer solutions remains strong. And with that, let's have a closer look on our regional performance on the next slide. While Americas showed single digit growth at constant currency, APEC showed signs of a turnaround in Q3 and EMEA proved to be robust. So in EMEA, we saw good development in our billings growth rates, even despite the macro challenges, high inflation rates and geopolitical uncertainties. Here, Q3 billings increased by 13% to 68 million euros and by 10% to 230.9 million euros on a nine-month basis. We accelerated our sales momentum and particularly benefited from a well-developed, sticky and satisfied customer base, which is key in the current macro environment. strongest increase in billings on a year-over-year basis was recorded in the Americas. Here Q3 billings increased by 18% to 58.5 million euro and by 19% to 159.2 million euros in the first nine months respectively. However, clearly our performance in the Americas was largely driven by ethics tailwinds. So our Americas growth at constant currency was clearly weaker and behind our own expectations. While we are disappointed with this development, we are reasonably confident that Americas will pick up again in Q4 as the pipeline looks promising. Furthermore, and from our point of view, EMEA is a little bit ahead of the curve in terms of recovery. We witnessed decision makers taking a kind of a pause here in Q2, which has reversed itself now in Q3. And this is also what we believe happened in Q3 in the Americas and should reverse in Q4. We are pleased to see that APEC showed signs of a turnaround after the beginning of 2022 had been rather challenging. If you recall, under the leadership of Sojung Lee, the president, she joined in December last year. APEC now delivered a 12% increase to 18.1 million euros in the third quarter billings and 9%. to 54.1 million euros in nine months respectively. Particularly in this region, our enterprise segment continues to grow steadily. It's at the beginning, but it continues to grow. And we are entering high-level partnerships, which indicate that the enterprise motion starts to bear fruit in this region as well. Next slide, please. Now I have a closer look at our SMB and enterprise billing split. With an overall shift towards higher ACV buckets, we successfully increased the quality of our customer base again. When looking at our SMB segment on the left, LTM billings in Q3 increased by 8% on a year-over-year basis and amounted to €480 million. This was partly driven by our free-to-paid monetization campaign, which is actually stabilizing the entry segment as well as FX tailwinds. However, And I think that's a recurring theme. The strongest contribution to the SMB growth clearly came from our very successful cross and upselling efforts. Accordingly, the lowest ACV bucket of customers with a volume of less than 500 euros each declined by 12% on a year-on-year basis. But at the same time, the billings from our highest SMB bucket, between 1,500 and 10,000 euros, significantly increased by 22% and mounted to a very strong 203 million euros. And in addition to that, and that's very important, we saw a net upsell from SMB to enterprise of 18.6 million euros. And this was largely driven by the general trend towards shifting large SMB clients to our Tensor license for enterprise connectivity. This clearly shows the continued Tensor success for larger customers who are looking for more efficient and highly secure solutions as a right answer in those times. Total Q3 LTM billings in our enterprise segment increased by 52% year-over-year to €118 million. This growth originated from all ACV buckets, as you can see in the chart on the right. Next slide, please. I mentioned the growth momentum of our enterprise business in my intro, and let me give you two different examples of how our enterprise customers use our solutions. Firstly, let us look at British multinational optical retail chain Specsavers. The company leverages TeamView as enterprise remote connectivity solution, Tensor, to provide powerful remote support to its 32,500 employees across roughly 2,300 stores in 10 countries. For them, it is important that our solution is compliant with their security and GDPR requirements as they deal, of course, with sensitive health data. By using TeamViewer, spec savers can globally connect and fix issues with in-store PCs as well as medical devices like their patient management system. And to enhance their support capabilities, Specsavers recently introduced TeamViewer's augmented reality based remote assistance solution in its UK stores, which makes it even easier for their technical experts to visually guide opticians or retail staff through maintenance and repair processes of optical devices from afar. This leads to smooth store operations without major disruptions and therefore ultimately to a seamless customer experience. Very different case, Global Foundries. That's a good example of the success of our enterprise AR platform, Augmented Reality Platform Frontline. Global Foundries, we know one of the world's leading semiconductor manufacturers. They recently introduced TeamViewer's vision picking solution in Europe's largest semiconductor factory. Introduction of TeamViewer Frontline leads to a 35% time saving in the warehouse picking process. And besides the quicker picking time, inventory accuracy increased by one-third, pretty much comparable to use cases like Coca-Cola and DHL and so forth. And what is also important, the new digitalized process also eliminates 100,000 sheets of paper printouts per year because it's a full straight-through digital process, which obviously helps save costs and also helps the environment. TeamViewer's solution fully meets Global Foundry's high requirements for data protection as well as health and safety for their workers. And then there's a new partnership with Hyundai Motors. I mentioned our high-level partnerships before. We talked about SAP and Siemens a lot. And recently we announced a partnership with the South Korean automotive company Hyundai Motor. which I think nicely illustrates our growing presence in the APEC region as well. It also demonstrates our company's strong value proposition to the automotive industry and underlines our pioneering role in the industrial metaverse space. We at TIMIU will provide its augmented reality platform and AI capabilities to Hyundai Motor Smart Factory in Singapore. Together, we will conduct research and development activities around AR-powered smart factory operations, including immersive digital experience for frontline workers and AI support. It's our joint goal to support Hyundai Motors in shaping how cars will be manufactured in the future by digitalizing processes in assembly, maintenance, quality management, logistics, and workforce training. And I think all in all these examples give you a good overview of how TeamViewer solutions enable large companies worldwide from different industries, different use cases, different parts of our solutions, but always with the aim to digitalize their business critical processes. And with this, let me now hand it over to our new CFO, Michael. Thank you, Oliver.
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