TeamViewer : Transcript

TeamViewer

Q2/H1 2023 Results Call & Webcast

1st August, 2023 | 9:00 CEST

Transcript

Speakers:

Oliver Steil

Michael Wilkens

Ursula Querette

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Ursula Querette	Good morning, everyone, and welcome to TeamViewer's
	Q2 2023 Earnings Call. My name is Ursula Querette, and I
	am pleased to host today's call. I am joined by our CEO,
	Oliver Steil, and our CFO, Michael Wilkens. Oliver will kick
	off the presentation by updating you on the business and
	financial highlights of the second quarter of 2023. In the
	second part of today's call, Michael will guide you through
	our Q2 financials in detail.
	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 Steil.
Oliver Steil	Thank you for the introduction, Ursula, and good morning,
	everyone. Thank you for joining our Q2 2023 Earnings Call.
	As always, let me start with a glance at the second quarter
	of 2023. I think, after a solid first quarter, we continued to
	make progress in Q2 in many different ways, not only in
	terms of business growth and financials but also in terms of
	our product offering, the use cases, our go-to-market
	approach and, just in general, our overall leadership in the
	marketplace.
	Let me start with the numbers first. We saw double-digit top
	line growth, with revenues up 12% to €154.2 million and
	billings up 13% at constant currencies in the second quarter.
	And our adjusted revenue EBITDA margin came in at 41%
	despite additional investments in R&D and marketing,
	underlining that TeamViewer is a highly profitable company.
	A strong driver of our success in this quarter was once again
	the SMB business that showed a strong billings growth of
	14% on constant currency. And it's great to see that our core
	business is so resilient.
	To further strengthen our leadership position in the SMB
	space, we recently launched TeamViewer Remote, which is
	the next generation of our remote access and support
	product. And due to the dedicated communication campaign
	around the launch, we were able to generate additional
	awareness for the product in Q2.
	And since our last quarterly call and also since some of you
	met Michael, Peter and Hendrik in London, we've received
	very constructive user feedback that we are building upon
	to continuously optimise the product and improve the
	offering for our SMB customers.
	Not only SMB business showed a strong performance in Q2.
	We also did well in the enterprise business that had a slower
	first quarter, if you remember. Despite a difficult market
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environment, we were able to close some larger deals within the quarter, and we successfully replicated use cases across regions and initiated and executed several measures to increase the traction again and to end the quarter with 9% enterprise billings growth on constant currency.

And given the challenging market in the enterprise software industry in general, we believe this is a good achievement, even though we saw much higher enterprise growth rates in the past for us.

In addition to remote connectivity, we are also well positioned to benefit from an increased augmented reality momentum in the market. With Apple recently presenting their new Vision Pro device, we believe that we will see further adoption of AR and mixed-reality technologies across use cases, regions and different industries. And the whole industrial metaverse space is an ongoing innovation play, certainly takes some time, and will happen in phases, but we are ready to capitalise on that development.

According to our verticalization approach, in the quarter we had focused on increasing our footprint in the logistics sector, with a dedicated go-to-market strategy for Frontline vision picking solution.

And then, lastly, we've added new experienced leaders to our management board and senior leadership team. Mei Dent will join the management board as new Chief Product and Technology Officer at the end of August, clearly strengthening our focus on product development and innovation and centralising all technology responsibilities at management board level.

And Constanze Backhaus joined our senior leadership team as Chief Human Resources Officer in mid-July, so she is on board already. Both are, from our perspective, fantastic additions to the team and will help us double down on a variety of strategic initiatives and further increase our innovation capabilities.

From my perspective, to sum it up, we achieved double-digit growth in Q2 while focusing on improving TeamViewer across the board with many different activities, and we see that our investments into people, product and marketing are paying off.

Let's have a quick look at the development of our SMB business, which was driving our growth in Q2, similar to Q1 actually. And I will be looking at billings on a constant currency only here. Michael will share the full picture, including revenues, later. But as you know, billings are

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rather an indicator of current trading and business momentum, while revenues are the result of past successes.

So you can clearly see on the left-hand side that after a difficult phase for SMB last year, at the end of 2022, SMB billings came back and continued to grow stronger than actually I think a lot of people in the market had expected. But we have worked all the time on our SMB product offering, on sales and all the marketing channels and on our website, and we are now happy to see the results of these ongoing efforts. And as previously mentioned, plus 14% billings growth on a constant currency in Q2 is really strong.

On the right-hand side, you see the increase in average selling price in our SMB business within one year. Plus 12% in ASP underlines once again our strength in up- and cross- selling to our existing customer base as well as demonstrates also our pricing power.

If you go to the next slide, a quick look at enterprise. You can see the development of our billings here. As said before, we see plus 9% growth on constant currency in Q2 as a success, given where the market for enterprise software is at the moment.

We told you in Q1 that the slow performance in enterprise was a temporary weakness, and we worked thoroughly on a number of measures to be able to turn the growth rate around again. What I explicitly want to highlight is the nice increase in the enterprise subscriber number. Within one year, we were able to win 29% more customers, enterprise customers, and are now close to 4,000.

Another important topic is upselling from SMB to enterprise. So if we take a closer look at the billings split for Q2, looking at the chart on the left-hand side, you can see our increased growth momentum in the SMB segment, with LTM billings in Q2 2023 up 13% on a year-on-year basis to almost €530 million. With the largest SMB bucket up 28%, this may come as a slight surprise, but I'd like to take a moment to highlight the development of the smallest SMB bucket here as well.

The bucket containing customers with annual contract values below €500 has developed from minus 6% in Q4 2022 to minus 1% in the first quarter of this year and now actually evened out. This is a very good development at the entry level, where we have seen increased competition in the last years after the COVID spike, if you remember.

Before I continue with the enterprise development on the right-hand side, let me point out that we once again

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managed to record a great net upsell from SMB to enterprise, amounting to €22.3 million.

Enterprise LTM billings increased by 21% on a year-on-year basis and amounted to €132.6 million. The bucket containing largest deals with annual contract values of €200,000 and more returned back to growth from an LTM perspective, after decreasing by 6% in the first quarter. And enterprise growth, in general, was skewed by some larger deals coming through after we had seen some deal slippage in the last quarter.

And as always, let's look at two recent enterprise deals from the upper bucket and why they are relevant in the grand scheme of things on the next slide. One example is from APAC. We've been able to close a Tensor deal of more than €600,000 in volume. One of the "Big Four" banks in Australia and New Zealand is using our enterprise connectivity solution to streamline IT support for their more than 40,000 employees.

The main reason why they decided for TeamViewer is our leading security posture and our compliance with all relevant security and privacy requirements. This means that we are well positioned to serve demanding customers from highly regulated industries such as financial services or the healthcare sector, where security of sensitive data is absolutely key.

And the other example I want to share with you is Nadro. It's the largest Mexican wholesaler for the healthcare industry. Nadro operates 14 warehouses across the country and recently optimised its product picking using TeamViewer Frontline together with SAP's Extended Warehouse Management software. This led to an improved logistics performance of up to 30%.

We were able to win Nadro as a joint customer, based on our SAP partnership, by the end of last year. And now, in Q2, we saw similar pilot projects, with Frontline vision picking and SAP integration taking place across all regions. And that shows, while the sales are quite long and it takes some time, but it's clear that our investments in the SAP partnerships are really starting to pay off now.

And let's now have a dedicated look at our regional performance on the next slide. Billings and revenues increased across all regions in the second quarter, with the strongest operational performance in APAC, where billings were up 20% year on year at constant currency, a good sign that the recent investments in the organisational structure in that region are paying off.

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