5/3/2023

speaker
Operator
Conference Operator

Ladies and gentlemen, thank you for standing by. Welcome, and thank you for joining the TeamViewer SEQ1 2023 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'd like to ask a question, you may press star followed by one on your telephone keypad. Please press the star key followed by zero for operator assistance. I would now like to turn the conference over to Ursula Caret Head of Investor Relations, please go ahead.

speaker
Ursula Caret
Head of Investor Relations

Good morning, everyone, and welcome to TeamViewer's Q1 2023 earnings call. My name is Ursula Caret, and I am pleased to host today's call. I am joined by our CEO, Oliver Steyl, and our CFO, Michael Wilkins. Oliver will kick off the presentation by updating you on the business and financial highlights of the first quarter of 2023. He will also give some details on the launch of TeamViewer Remote, the major upgrade of our core remote access and support product. As you have probably seen, we are hosting an investor and analyst event in London on 10th of May. Our CCO Peter Turner and our CPO Hendrik Witt will be on site to present the strategic relevance of key features of this new product and discuss our innovation pipeline in general. We are looking forward to welcoming many of you at this event. For those of you who have not yet registered, you can do so until tomorrow, Thursday, end of business. In the second part of today's call, Michael will guide you through our Q1 financials in detail and conclude with the key highlights of the quarter. As always, the presentation will be followed by a Q&A session. Please note that, as always, you can find the important notice and the APM disclosure on slides two and three. And with that, I hand it over to our CEO, Oliver Steyl.

speaker
Oliver Steyl
Chief Executive Officer

Thank you for the introduction, Ursula. Good morning, everyone. Thank you for joining our Q1 2023 earnings call. Let me start with a glance at the first quarter of 2023 on the next slide. So from our perspective in Q1, we made good progress in executing our strategic initiatives and laid the ground to reach our targets for 2023. We invested in existing and new relationships, which is very typical for the first three months of the new year, and engaging and connecting with customers and partners and attending events across regions, especially important as we build our pipeline. Overall, we concluded Q1 with strong financials and good momentum in the business, especially in SMB. And with that, we are well on track to meet our full year guidance. Let me point out a few more highlights. First, revenue growth was clearly double digit and came in at 151 million euro, which is a plus of 13% compared to last year's first quarter. The development is particularly driven by our successful up and cross selling measures and resulted in the stable net retention rate of 107%. Secondly, I would like to highlight the strong momentum in our SMB business, where we have delivered very good Q1 results. And this was especially important as the enterprise business started a bit slower into the year. SMB strength was mainly driven by significant improvements to our e-commerce customer experience, as well as targeted cross and upselling measures that we consider one of our strengths, particularly in the SMB space. In addition, we were able to capitalize on price increases. Another highlight was, again, our strong underlying profitability. supported by an increased top line and diligent cost management. Adjusted EBDA in the first quarter amounted to 64 million euro. This is an increase of 18% compared to the prior year's quarter. An adjusted EBDA margin improved by 2 percentage points to 42%. Let's now look at our regional split. EMEA and APEC delivered consistent results in the first quarter. Our Americas region was again affected by longer procurement cycles. and a somewhat challenging macroeconomic environment. To further develop and strengthen the sales organization in the Americas, we have established a new leadership, Georg Beischlag, our former chief of staff and strategy. He's the new Americas president. And additionally, we opened a new office in Mexico to serve as a sales hub into Latin America. In total, all regions recorded double-digit growth rates in revenues in the first quarter. In addition, we continue to invest in our leading position in the core remote business. In Q1, we prepared and initiated the most important product launch of recent years, TeamViewer Remote. Based on the positive user feedback following a soft launch in the Nordic countries, we introduced the product globally end of April, actually last week. And I will provide some more details about TeamViewer Remote later in the presentation. Last but not least, we are continuously fostering our partnerships. With the launch of our new partner program, TeamUp, we are strengthening the channel ecosystem and support lead generation. The program will complement TeamViewer's global sales activities to drive growth across all regions. And seeing a high level of participation and interest at the regional launch events, which we had during Q1, was extremely encouraging. To sum it up, from our perspective, Q1, particularly strong growth momentum in the SMB business. which we intend to strengthen even further after the launch of TeamViewer Remote. And in parallel, we are working on building our enterprise pipeline for the remainder of the year. Bottom line, we are very satisfied with our start into 2023, both regarding the strategic initiatives, but also our key financial figures. Let's move on. Let's now take a closer look at our SMB and enterprise LTM billing splits. Looking at the chart on the left-hand side, You can see our increased growth momentum in SMB with LTM billings in Q1 2023 up 13% on a year-on-year basis to 517 million euro. Compared to all quarters in 2022, this is actually the strongest growth rate that we achieved. And in this context, it's worth mentioning that the lowest bucket with contract values below 500 euros continued to recover and LTM billings were nearly stable. As a comparison in the third quarter of the past year, this was down 12% and in the fourth quarter it was down 6%. So we really getting it to a stability now. The highest SMB bucket with annual contract values between 1500 and 10,000 Euro showed a 28% increase and was therefore again, the main driver of overall LTM SMB billings performance. When we look at enterprise on the right, LTM billings in Q1 2023 increased by 25% on a year-on-year basis and amounted to 131 million euro. The lower enterprise buckets saw healthy performance, supported by good tensor traction and an enlarged enterprise customer base. The higher bucket enterprise business, however, saw a slow start into the year. This was mainly due to a slower frontline business and longer procurement process of some high-profile deals, especially in the Americas region. However, we do expect a re-acceleration here. Our enterprise sales pipeline is growing because of the intensified engagement with global customers and channel partners since the beginning of the year. And the new leadership that we have set up in the Americas region will contribute to this development. And to reignite the frontline growth and activate our full potential here, we have put in place a cross-functional task force. This involves teams and work streams across product development, go-to-market, delivery, and operations. All in all, the numbers on this slide show that our transition into a more enterprise-focused software company is continuing, supported by our strength in cross and upselling, including the upsell from SMB to enterprise. To illustrate an exemplary team viewer customer journey and show in detail what up and cross selling looks like in practice, we included the journey of a real customer on this slide. And this is the example of a German hidden champion in the plastics processing industry with more than 3,000 employees globally. The company has actually been a customer since 2009 and started with one TeamViewer core premium license, very typical. In the following years, The contract was continuously renewed, but the volume remained relatively stable. And then in 2020, the customer started adding additional product features. After successful talks with our sales team, we were then able to convince them to upgrade to our Tensor product earlier this year. And the Tensor product better reflects the global needs of our customer to remotely support and manage devices in the production and office environment. And as a result, we doubled the contract volume from 2022 to 2023 and achieved a KGAR of 20% over the entire contract term. In addition, the company then transitioned from SMB to an enterprise customer. And of course, this is just one example of many, but our consistent strong results of upselling customers from SMB to enterprise show how successful our sales team is in that regard. Next slide, please. As always, let me continue with two more examples of customers from our enterprise segment. On the left, you find one of our customers from the APEC region. It's the global luxury cosmetics brand Aesop from Australia. Their IT team uses TeamViewer Tensor to remote into in-store IT devices at the point of sale for fast troubleshooting and fixing of IT problems. And for Aesop, Tensor is an important tool to keep their store operations running smoothly for their own customers. And furthermore, when we talk about Tensor in the enterprise sector, security is always a major requirement and a very strong sales proposition for basically all our customers in that segment. Same was true for Aesop. Besides ease of use, the integration into their IT landscape security was the main reason for them to opt for TeamViewer Tensor. On the right side, customer from the enterprise segment using Frontline. Samsung STS is part of Samsung Group and focuses on logistics. They use our augmented reality-based workflow solution TeamViewer Frontline to digitally transform the picking operations in their warehouse in the Netherlands. From this warehouse, they supply all of Europe with spare parts for Samsung products. Benefits are clearly the hands-free picking process, which led to an increase in picking efficiency of 30%. The warehouse workers are satisfied with the solution as they are working with smart glasses in our software because ergonomics have improved and they hardly make any errors. And besides the impressive improvement, this customer is particularly interesting for us from a business perspective. Samsung SDS operates many warehouses worldwide. So this project obviously has potential to scale. Let's now turn to our regional performance. On this slide, you can see how previous billings translated into Q1 revenues per region. All our three regions saw double-digit revenue growth, 10% in EMEA, 18% in the Americas, and 12% in APEC. This development is the result of successful up and cross-selling measures, targeted monetization campaigns, and an increasing number of multi-year deals in previous periods. Past currency tailwinds, mainly from the US, supported the positive development. On the next slide, let's see how billings developed, which will drive future revenue development. Overall, billings increased by 8% in Q1 2023, And as you can see, APAC performed particularly well in the first three months of the year, with a billings increase of 14% to 90 million euro. The region continued its successful turnaround. Our business in EMEA achieved solid billings growth of 8% in Q1 to 101 million euro, making a pretty good start into the new year. The region particularly benefited from successful up and cross-selling campaigns, as well as price increase motions. And with the billings increase, the billings growth of 6% to 56 million euro, the business in the Americas continue to be marked by longer procurement cycles, especially in the enterprise business and the challenging overall macroeconomic environment. Further develop and strengthen the regional sales organization, leverage its potential. We've taken measures in the first quarter to reaccelerate the local business. And I already mentioned the leadership change and the Latin American office opening. Next slide, please. An important milestone in Q1 was the successful soft launch of TeamViewer Remote in the Nordics. The product is a major upgrade of our core remote access and support solution. Based on the promising user feedback and good adoption rate, we rolled it out globally with the commercial launch last week. TeamViewer Remote clearly highlights our commitment to quality and our ambition to deliver best-in-class remote connectivity for our customers. Key highlight of the product, a new intuitive modern user interface, a unified web and desktop experience with a full featured web client and simplified connection with one click session invites. Moreover, we've enhanced security through mandatory account creation for those delivering support and by making the origin of incoming connections more transparent. The new web first approach with advanced APIs will accelerate our innovation capabilities and pave the way for the integration of the entire product portfolio and additional third party application on the same technical architecture. TeamViewer Remote is set up to increase attractiveness within the main target audience and thus create momentum in the free user ecosystem as well as in the SMB space. This will increase the cross and upsell potential in order to accelerate growth in the SMB business. As mentioned by Ursula in the beginning, we will host an investor and analyst event in London on 10th of May. There you will get a detailed briefing about the new product and it's relevant for our business. And with that, I'd like to hand over to Michael for the financial highlights.

Disclaimer

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