Creating digital advantage for businesses and society

Investor presentation November 2021Investor presentation
sector with >80% of revenues • Global software and product
development services
customers in ~80 countries
Creating digital advantage for businesses and society – augmented by TietoEVRY merger
2020 Revenue: €2 786m Adj. EBITA: 12.7%
Czech 10%
Finland 13%
4
50+ years of experience in realizing complex enterprise transformations across multiple technology lifecycles
Digital capabilities at scale >6 500 professionals in Digital Consulting, forming the largest Nordic Digital practices – with accelerated
growth internationally
Leading software-driven digital transformation in high-growth industries Nordic Health & Care and Education & Case management
Nordic Banking Platform Payments, Cards and ATM globally
Building on our strengths – realizing full potential of the merger So
ftw ar
e C
on su
lti ng
Nordic market leader in cloud and infrastructure managed services Leader in hosted private clouds in Nordics
Accelerating in managed multi cloud and security services In fr
a
5
Managed cloud, security and end-user services, including cloud migration advisory and transformation
Industry-specific software, SaaS solutions including related professional services for Public sector, (Case management, Healthcare, Welfare, Education), Industrial (Oil & gas, Manufacturing, Utilities) and Data platform services
Software, SaaS, platform-based BPO and related professional services for core processes and functions for Financial Services industry - Core banking, Payments incl Cards, Credit and wealth management
Advanced software R&D services across Telecom, Automotive, Consumer Electronics industries
*Adjusted for amortization of acquisition-related intangible assets, restructuring costs, capital gains/losses, goodwill impairment charges and other items affecting comparability
Digital Consulting
6
Revenue
Dividend / share
97 m€
355 m€
2016 2017 2018 2019 2020
Adjusted* EBIT
152 m€
355 m€
** Additional dividend
1.20€ 1.25€
Norway Finland Sweden
Strong client base with major customer wins cross all Service Lines and countries
Gender balanced
value chain
Zero Breaches of
Avoided emissions
15% annually
80% Reduction of
2020-2023
O PL
E PL
AN ET
Solid foundation to rethink our future
Attractive market with high opportunities
Solid integration progress
Strong customer base and market position
Time to step ahead and reshape the future!
Technology industry reshaping with cloud as the foundation
T i e to E V RY S T RAT E G Y 2 0 2 1 Source: Multiple analyst reports (e.g. Gartner) and TietoEVRY analysis, Growth CAGR ‘18-23
-10% -5% 0 5% 10% 15% 20% 25%
Managed traditional
Data & AnalyticsEnterprise
software SaaS
Cloud capacity
P R
O F
IT A
B IL
IT Y
G R O W T H
TRADI T I ONAL M O DERNIZE CLO UD NATI VE
Distinct competitive drivers as world evolves towards cloud native
TietoEVRY reshaping businesses to drive customer value and growth through specialization
End-to-end businesses with full accountability and broader options to scale
Clear business choices to capture market growth and expansion opportunity
Drive partnerships to scale in managed application and infrastructure services
Focus investments to expand cloud native capabilities and scalable software businesses
Specialist customer
returns
1
2
3
4
S T R AT E G I C C H O I C E S T O D R I V E …
Attractive business mix to drive financial performance
Value foundation: Openness, Trust, Diversity
• Leading capabilities addressing global market demand • Expand markets and scale incl. M&A
Business Design & Engineering
• Customer base and knowledge built over the years • Invest to managed services automation
Enterprise Modernization
• Competitive software and as-a-service offering • Investments into Banking-as-a-service for growth and
expansion incl. M&A
• Fit for purpose software and solutions • Competitive software, customer knowledge and
installed base Industry Software
L O N G T E R M P O T E N T I ALC U R R E N T
T i e to E V RY S T RAT E G Y 2 0 2 1
R E V E N U E M I X E BI T A a d j . D R I V E R SG R O W T H
High
High
Medium
Medium
Lower
Lower
Indicative growth profile: High: >8% Medium: 3-8% Lower: <3%
Business profiles with restated numbers to be available prior to Q1’22 report
Investment priorities geared towards sustainable high growth businesses
Business Design & Engineering
Health & Care Software Enterprise Modernization
Invest to expand Partner to scale Focus for value
• Invest to accelerate products, services and capabilities
• Prioritized M&A
• Invest in capabilities to drive scale and automated managed services
• Seek partners (operational and structural) to jointly invest and scale
• Optimize investments for selected businesses
• Develop portfolio to increase focus
Active portfolio development to drive focus and scale in all businesses
T i e to E V RY S T RAT E G Y 2 0 2 1T i e to E V RY S T RAT E G Y 2 0 2 1
Cloud Platform Services
Industry Software
N E W R E P O R T ABL E S E G M E N T S S T AR T I N G Q 1 / 2 0 2 2
Enterprise Modernization
Solutions
I N D I C AT I V E R E V E N U E S I Z I N G
Cloud & Infra
Business with selected customers
Design, Cloud, data & software engineering practices
Health & Care Software business
Preliminary revenue mapping to new businesses and new reportable segments
Financial targets maintained – new strategy support potential for enhanced performance
Accelerating growth to 5% by 2023
EBITA adjusted 15% by 2023
One-time items ~1% of revenues by 2022
Increased dividends annually
AC H I E V E D
Improved growth profile and profit
Continued strong cash flow generation
Continued dividend attractiveness
Reduced discount to SoTP valuation
Summary: Renewed strategy to drive focus, specialization and expansion
Financial targets* maintained – new strategy supports potential for enhanced performance5
Structure and leadership aligned to renewed strategy - Go-live by January 20224
Reshaping TietoEVRY future through specialized end-to-end businesses and prioritized investments3
Growth and expansion opportunity for TietoEVRY by specializing in cloud, data, engineering and software2
Hyperconnected data enabled by cloud is redefining customer priorities and reshaping technology industry1
* Financial targets as communicated at CMD 2020: 5% growth, 15% EBITA adj. by the end of 2023
Why invest in TietoEVRY?
Use of free cash flow
2
1
3
Investing into the businesses
Investing in growth areas to support the 5% growth target of 2023
Capital allocation priorities to support growth ambitions and create shareholder value
Increased dividends annuallyDividend
Share price appreciation
• Improved free cash flow
Maximizing total shareholder return
Appendix
0
200
400
600
800
Q320
• Reported growth 1%, currency impact EUR 11 million
Adjusted EBITA** EUR 94.0 (90.2) million, 14.5% (14.0)
Strong organic growth in Industry Software, Financial Services Solutions, Product Development Services and International Operations
Revenue impact from pre-merger lost customers in Cloud & Infra appr. 2%
Profitability improvement driven by strong performance in software businesses and synergy contribution, while higher attrition and salary inflation constrain profitability
Healthy cashflow – operating cashflow EUR 92 (108) million
Adj. EBITA % Revenue
Organic growth* 1%
Q321
Growth continues to accelerate in Cloud, Data & Analytics
Traditional application services continue to decline as anticipated
Productivity impacted by higher attrition – net increase of 140 in personnel since Q2’21, up by 2%
In Q4’21: Adjusted operating margin anticipated to be below Q4’20 level
15.1%14.7% 17.3% 13.4%
Q320 Q321Q420 Q121 Q221
Cloud & Infra
0
50
100
150
200
250
300
Revenue decline impacted by: • Pre-merger lost customer appr. 6% • Reduced hardware sales due to global supply chain
disruptions appr. 3% Turnaround program on schedule – capacity reduction in legacy services and automation driving profit improvement
In Q4’21:
Revenue decline expected to be less than Q3’21
Adjusted operating margin expected to be at or above Q4’20 level
8.5% 9.2%10.9% 4.0%
Adj. EBITA % Revenue
Industry Software
Strong growth across the businesses, including Health & Care
Profit development driven by growth and continuous productivity improvement
Continued portfolio development – three small business divestments in Industrial sector as announced
In Q4’21:
Adjusted operating margin anticipated to be below Q4’20 level
27.8%26.2% 23.1%21.7% 20.1%
Adj. EBITA** 27.8% (up 6.1%)
Q320 Q420 Q121 Q221 Q321
Financial Services Solutions
Continued growth driven by strong performance in core banking, credit and cards businesses
Profit development driven by revenue growth and continuous efficiency improvement
In Q4’21:
Adjusted operating margin anticipated to be at or above Q4’20 level
101 109 112 119 111
0
50
100
Q320 Q321Q420 Q121 Q221
Growth driven by Mobile Networks and Automotive industries
New customers in Electronics and strong overall pipeline supporting future growth
Profitability impacted by attrition, increased subcontracting and salary inflation.
Extended partnership with Ericsson to build R&D center in Nanjing, China. Revenue contribution starting in November with 330 employees having joined the company.
In Q4’21:
Adjusted operating margin anticipated to be below Q4’20 level
33 36 37 36 36
0
10
20
30
40
50
10.4%
29
• Enhancement of digital customer and citizen experiences
• Digitalisation of business processes e.g., supply chain and financial management
• Transition to cloud-based applications and infrastructure services
Leveraging strong capabilities in cloud technologies, architecture and cloud-native software development and testing
Organic growth in Q3
• Digital consulting services for markets outside the Nordics
• Deliveries through scalable centres in India and Ukraine
• Focus on industrial, public and telecom sectors in Europe, healthcare, insurance and professional services in the US
• International Operations included in reporting segment Other
Creating digital advantage for businesses and society
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Building on our strengths – realizing full potential of the merger
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Creating digital advantage for businesses and society