Earnings Call: Q4 2020

Feb 9, 2021

Good day, and welcome to the TeamViewer Q4 and Full Year 2020 Preliminary Results Call and Webcast. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Carsten Keller, Head of Investor Relations and Capital Markets. Please go ahead, sir. Thank you. Good morning, ladies and gentlemen, and welcome to our TeamViewer Q4 and full year 2020 results call. I'm here with Oliver Steil, CEO of TeamViewer and Stefan Geiser, our CFO, who will take you through our presentation with a business update and then details on our Q4 and full year 2020 financials. During the presentation, we will open the floor for your questions. However, before we start, I would like to remind you of the note on forward looking statements that you can find on Page 2 of the presentation. Let me now hand over to Oliver. Thank you, Carsten. Good morning to all of you. Hope you're all well. Thanks for joining Our results call. So it's a pleasure to discuss Q4 and financial year 2020 outcome. Actually very pleased with the year, as you could see from the numbers. I think we were very happy to see that Q4 was a continuing normalization of the business after the corona pandemic effect in the first half of the year, second half of the year, Much more normal and also very successful in that sense in digitalization projects for enterprises. So very pleased with the numbers. Overall billings came out at GBP 456,700,000 which is slightly higher than our outlook. That's the organic billings total, including The Ubimax acquisition for the last 4 months was €460,300,000 Very nice growth overall for the year. Of course, very different quarters, as you remember, but also the last quarter then contributing very nicely. Very pleased with the adjusted EBITDA as well. We got to a margin of 56.8 percent, which is also higher than our outlook, which was 56%, and that brought us to a total adjusted EBITDA of 261 €400,000, which is 44% reported growth, 48% constant currency growth. So very healthy numbers. I think what is Equally important is where the growth came from and that we really see our initiatives that we've put in motion 3, 4 years ago When Stephan and I joined, are really successful. So we saw an increase in enterprise billing by more than 200%, Under 70% growth in enterprise customers. Tensor Billings, which is the enterprise product, which we built and brought to market a bit more than 2 years ago, 2.5 years ago, It was more than 300% up. Remote access, the home working product, clearly driven by effects from the pandemic, up 3 Almost 3 90%. And pilot, the augmented reality product, the one that we had built organically, clearly on a small basis, but still 3 60% up, which, of course, was also one of the reasons why we doubled down on the AR space through the Ubimax acquisition. So Very good to see that our initiatives are successful. We have exceeded our results For the full year, despite even increasing currency headwinds towards the Q4, very important. Q4 was the strongest enterprise quarter. It's now actually 12% of the billings of fiscal year 2020. If you go back to the IPO, when that was this relatively small percentage, and we said it's going to be a more significant part of the business, this is now true. And we're also very pleased with the tuck in acquisition strategy. We have done Ubimax last year, and we recently did Xalian to broaden our solution portfolio. And we believe this is really a very important foundation for the growth going forward. So clearly, one of the key drivers of our success in 2020 were again the various use cases that we address with our innovative products, of course, meeting state of the art security standards and also very high performance requirement. And let me go give you two examples on the next slide. Let me move on, Robert. So very happy to be able to quote those names also. Siemens Healthineers, to give an example, I think we were talking about Medical equipment and the medical devices sector for quite a while. So specifically, Siemens Healthineers uses Siemens to support its Imaging and laboratory diagnostic equipment, such as, for example, MRI, CTs and the likes, which are deployed in hospitals and doctors' offices globally. So in this case, TIMEWO is preinstalled on those devices, enabling remote troubleshooting by having specialists connect directly to the affected devices by a very fast and secure high performance connection. So it's remotely connecting into these devices And being able to troubleshoot. Clearly, when you have that rapid assistance from the distance, that avoids Travel, so really physical travel. It also helps clinic operators and staff to ensure That you have continuous medical care for the patients, so you're reducing downtime, of course. You increase the uptime of these machines, which are incredibly complex And also costly, so very clear ROI. Looking ahead, the number of use cases for this remote access that Siemens has in your sees Within the clinical environment, it's actually increasing. And that's why such partnerships with innovation leaders in their It's become increasingly important. We learn what they want to do. We continue to build our product around it and thereby increase the potential for digitalization in certain industries and certain sectors. And that's why we like those partnerships And we see very big potential in building those partnerships. Another interesting case, different industry, Kind of comparable is from Lely, a leading designer and manufacturer of automated Systems for dairy farmers around the world, so this is in the smart farming area. Lilly has upgraded to TeamViewer's Tensor Enterprise Suite As increased demand, scalability and audisability have become requirements. So the broader scale, more People using it, more devices connected and higher auditability requirements out of this. And of course, it's a large organization growing customer base, so they had to go from Teamwork Classic Core What Lilly does with it is actually remotely Accessing equipment that streamlines their support processes and allows them to troubleshoot really from the distance. The support technician can instantly remotely connect to equipment in any location really, And that allows them to centrally support farmers thousands of farmers in more than 45 countries by now. We're also working with Lely to explore the possibilities of using TeamViewer IoT to collect even more data and learn more from the data That has been provided by the equipment and then play that back to their organization and work with this data. Two examples, Really many situation where we collaborate very closely with our customers and partners to create and package these connectivity solutions in different areas of the organization to drive the value of digitalization. If we move to the next slide, We see a few more deals, selection of further deals that we've closed in the Q4. Again, we were able to close a good amount of larger tensor and frontline tickets, especially with customers across The industry, so industrial applications, industrial sectors. And if I highlight a few transactions here, And you can see how we differentiate against competition. So there's a very large frontline deal, for example, comes from the U. S. Automotive. It's an automotive customer That has implemented X Assist for augmented reality backed remote work guidance at their car dealers. So the classical use case, you have mechanics that are out there in the field. They are less trained than the experts that are in a central location. And the mechanics received technical instructions via smart glasses to perform their service tasks. And through this way of augmented reality Supported collaboration, the knowledge is actually shared in a very efficient manner and the downtimes are reduced, because you can have All the knowledge that is sitting centrally in the headquarter in any repair center, you can basically provide that knowledge to workers in the field. Currently rolled out in the U. S. And the U. K. And The customer wants to implement the solution also in other regions around the globe. That's Typically, process, they take one location or one part of the company, they install the solution and then they scale from there, which is a very Common way how the Frontline solution is being rolled out. There's different another example, also Frontline, It is a U. S. Manufacturer of medical devices, also using XAssist to guide clinical staff via smart glasses Medical treatments given to patients. So basically, there's a frontline remote expert, And that expert participates in the treatment as if he was on-site and instructs the doctor through AR to ensure that the procedure is being conducted correctly. So yes, it's a different case. So this is not troubleshooting On maintenance of any devices, but it's actually the regular business process medical treatment of a patient where the expert is participating. So it's a live AR medical treatment, AR supported medical treatment. And that's a great example of how we are moving from maintenance of equipment in supporting people who are on-site, Supporting them in their regular processes. I think you have heard examples of xPick in the warehouse. You have an examples of in the manufacturing plants where people are working on the assembly line, new technicians for remote maintenance. Here, we have a different case. Here, we have support of A knowledge worker, so to say, and doctor in this case or paramedical treating patients. So very, very interesting. This is the Frontline piece, just two examples on Frontline. In addition, of course, we have also tensor deals, more horizontal deals, Big driver of our success in the last quarter as well. There's a couple of them on the very top of the list With contract values ranging from €100,000 to well above €200,000 Again, compare that to 3 years ago, very different world. And it's also worth highlighting that the financial services sector, including banks, insurance companies, are also increasingly interested In those solutions, I think here, the pandemic has brought quite some extra push because also these organizations had to think about more remote work. For example, a large German financial institution has decided to roll out Tensor for their internal support. Why does it work now? Why is it interesting With the Tensor product, there's features which are important like single sign on, conditional access, state of the art security standards. Those are very important for those type of customers and also for this particular customer. So just a few examples, where customers around the world use Our solutions to digitalize their processes really of all types. And this success is built on continuous innovation, product improvement, That's just the integration of co browsing into the Tencent suite. So this is the latest example where already last year, We decided to pick a co browsing solution and integrate it into the Tensor suite, which has been delivered by Axallion. We then decided to acquire Axallion because we've seen the significant interest from customers for this solution. Why is that? More and more companies are very dedicated now in virtualizing the sales and service interactions. So if you order cars, if you order furniture, if you work on customer service with your insurance company, Many of these situations are now virtual, partly remote based on an interaction platform. You use chat, you use Co browsing, you also finalize the contract. You have electronic signatures. So all of this is a customer engagement suite, as we call it, which Clarion is a provider of, and we decided to integrate this into our platform. So Very interesting to broaden the solution portfolio like this. And I think you can see on our stats That this has paid off. So if you go to the next slide, just to give you a bit more color on the enterprise development. During the Q4, we have won additional 227 enterprise customers with annual contract values of €10,000 and also growing this Customer base to 1885 enterprise around the globe. So remember, it's very important. We've put this we've picked this €10,000 number because we believe this Kind of a threshold whereby all sales channels are positioning the Tensor product, which comes with much higher security features and allows for Significant up and cross sell potential going forward. So this increase is 170% increase over the last 12 months And 3 50% more than at the end of 2018. So you can clearly see how much traction we win there. If you compare this To our overall subscriber growth, you can clearly see how fast the enterprise business has been ramping as a result of innovative products, the much broader solution portfolio and of course, significant investments into our global enterprise sales team, which we have started to do in 3 years ago. Overall billings from this customer is tripled in size. Now we are at €53,000,000 in 2020, which is now 12% of total billings, as I said before, so getting it's getting really significant. Also in terms of total billings, We've told you that as a percentage of new billings, of course, it's even higher and even more relevant, but it's also now kind of making an impact on the total billings. While the majority of our billings have been generated Customers with ACVs below €10,000, that continues to be the case. We are very pleased with this shift towards higher price subscription in 2020. Clearly, this is one growth initiative. Remember, we were also rolling out To APAC countries, we were doubling down on the Americas. More and more use cases of that enterprise motion has actually worked extremely well. Clearly, higher price subscription, this is fueled by up and cross sell. It's not fueled by price increases. We still haven't done almost any price increases during last year. So this is really positioning more solutions, either Tensor or Frontline Or acquiring new customers with more differentiated solutions, the qualitatively different type of business we do with these customers. And as you can see, the share of enterprising enterprise billings with ACVs of 100 ks and above has already been 25% by year end. I think these numbers show that our investments that we have done, strategic growth initiatives to increase the enterprise footprint have really paid off. And I think the key thing to note is that we are operating in a world where there's lots of changes. We have talked about these trends already years ago and at the IPO. And I think by now, what is really clear It's that the way we work actually did really change. And I think as we always said, the pandemic was a catalyst to this. Companies of all sizes and in all sectors do see what has what is possible, and there will be more change coming. There will be more digitalization coming, and that's the key driver for our success going forward. And in order to really leverage those trends and those developments in the best possible way, We have invested quite significantly to broaden our solution portfolio. So if you look at the next page, we really have something to offer now across the entire value chain. Clearly, areas like the product development, where you have shared workspaces, work from This is where TeamViewer Core has been successful for long years. The same is true in corporate In the corporate environment, in the IT environment, where we talk about IT support, asset management, asset monitoring, tracking, quality insurance and so forth, These were areas where TIMEO has been very successful for years. We've told you and we've shown you at the IPO road That we are decisively moving into non office applications and that we have connectivity in these places as well, In vehicles, in buildings, in manufacturing footprints, machinery of all kinds, and we have doubled down on this. So in manufacturing and supply chain, We have doubled down by doing the Ubimax acquisition. Clearly, there, we have an AI suite. We are now able to support robotics Even more or at least call it semi robotics while we're supporting frontline workers. We have solutions Or shop floor and warehouse manufacturing, servicing applications through Frontline. So this is why it's shown in red here because Frontline comes as a kind of the red And then at the other end of the spectrum, sales and service, clearly sales doubling down with the Exelion acquisition being able to Drive customer engagement solutions, customer interactions even more in an integrated way. And on service, we have the classical Customer support, Latimya was strong. And now we have repair and maintenance with frontline and pilot, very supporting Experts which are out there in the field, either top completely remotely or in a hybrid model where the expert is remote And another operator is on-site. And if you think about the Siemens Healthinea example, it could be any flavor of Doing work completely from the distance or with the help of somebody who is on-site. So very interesting positioning now. We have the offices in all markets. We have the offices in all major markets now. We have increased our footprints in APAC. We have doubled down on in the Americas. We have a new solution portfolio, a much broader solution portfolio with 10xorg, Saleon, Frontline And of course, the continuous development of TeamViewer Core and TeamViewer Remote Management. And in that sense, we have delivered Significantly across these three dimensions that we have been showing you at the IPO, which is use case expansion into all parts of an enterprise, Getting ready for enterprise customers by having the latest and best security features and then also having a global footprint. We have done so organically. We have invested a lot into our R and D force. We have done selected M and A as tuck ins to improve the portfolio. We have shown that we can grow into enterprise, and we know that the whole market is anyway growing at 27% plus All its different elements, and that's why we believe we have all the room to grow with our solution portfolio for the next Coming years, we believe the 30% around this 30% growth over the next year's CAGR is something which we will achieve. And logically, that will be €1,000,000,000 of revenues by the end of 2023. And we wanted to give that midterm objective Because I think with the corona pandemic and the turmoil around it last year, we got asked quite often what the midterm outlook would be and how And with this, I would like to hand over to Stephan. Thanks, Oliver. Good run through. So a warm welcome from my side as well. Good morning, everyone. Let's take a look at the year 2020 and then obviously focus on the guidance for 2021. On Slide 11, you can see that with the strong Q4, we have closed another remarkable year This record billings of €460,000,000 And as Oliver already mentioned, the past years clearly revealed the need of digitalized processes and remote work across Business landscape worldwide, especially in the first half of the year, as we talked about a lot, we have seen that accelerated immediate demand for remote working solutions. But also in the second half of the year, when we returned to more normalized trading, our strong business performance continued with very high growth Combined with above industry average profitability is now post the pandemic closed 2 quarters with around 30% growth. So very good to see Our organic growth directions are very well on path. So this development has again demonstrated the attractive Growth markets we are addressing as well as the resilience of the business model and showed once again that the growth initiatives we have taken over the last years have clearly paid off. Let's take a closer look at the figures. In Q4, billings were up 32% year over year on a constant currency basis. Obviously, that's an increasingly important metric stripping out FX headwinds. We are very pleased with this growth rate on top of a very strong Q4 last year, and this has concluded the year 2020 very successfully and resulted in billings growth of 44% on a constant currency basis, With billings of SEK 460,300,000 of which SEK 3,600,000 came from Frontline, we slightly beat the 2020 billings guidance that we raised in November. As you know, our global billings are exposed to FX movements, in particular to the U. S. Dollar, which comprise around 30% of overall billings. So but despite the continued weakening of the U. S. Dollar during the last quarter, We achieved 27% reported growth in Q4 and 42% for the full year, again demonstrating the strong underlying business performance. On the targeted EBITDA level, Q4 grew by 22% year over year on constant currency basis and So despite the significant investments we made during the year as well as the initially dilutive impact of the UVMAX acquisitions, As you all know, that business was more or less breakeven. We have been able to keep our margins at very high levels of slightly above 56%. And for the full year, in fact, our adjusted EBITDA margins increased from 56% to 56.8%, and again, slightly above our guidance of the adjusted EBITDA range. And we increased our adjusted EBITDA by 48% constant currency and 44% reported. Let's take a look at the regional performance. Again, a pleasure to report a strong traction across all regions. Q4 has again underlying the strength of our global business covering all customer segments now in all regions. Americas has performed Extremely well in Q4, showing the highest growth of all regions with 48% on constant currency basis. We've seen a very strong traction across all sales channels In Q4, clearly showing the results of the sales investments and the market potential we are seeing there. Q4 has also benefited from the resumption of pre user monetization in North America up until Thanksgiving more or less as we talked about. But due to the continuing devaluation of the U. S. Dollar as well as other currencies in the Americas, especially in Latin America, Reported growth is 12 percentage points lower and it's still a very healthy 36% growth rate. For the full year, Americas has performed very nice with a growth of 50% constant currency and 44% reported growth, resulting in EUR157,700,000, which amounts to a third roughly of our total billings, showcasing our success in the market and frankly, our rising importance to us. Moving on to EMEA. It remained the largest of the 3 regions with Q4 billings of a bit more than SEK 73,000,000 Very pleased with the well balanced growth of 28% constant currency across all customer segments in our core markets, including Germany, U. France and Italy. Very pleased to say that the EMEA Enterprise business had a particularly strong Q4, Really strong pipeline conversion, including significant new deals, as Oliver mentioned, in the OT space, but as well as a significant up and cross sell to For the full year, EMEA delivered billings up 42% of CHF 246,000,000 And still representing a bit more than 50% of overall billing share, clearly showing that our investments in sales and solution delivery are paying off, And we are able to realize strong cross and upsell throughout all customer cohorts. And then finally, APAC, Q4 billings have been up 6% constant currency, resulting in a bit more than SEK 10,000,000 of overall billings. The reason for the lower growth is We've implemented tighter credit controls here during the year and as such certain billings from certain customer segments are only taken into account if and when paid And covered with no free user monetization in the 4th quarter, this clearly kept reported growth, but underlying growth was Significantly more healthy. For the full year though, strong underlying demand has continued, resulting in high growth of close to 40% constant currency, mainly due to the very strong performance across all sales channels, particularly in Japan, which doubled in size and is now Actually the largest market for us in APAC and roughly contributing 30% of our billings in APAC, clearly showcasing the growth potential we are having there in Japan is So turning to the next page, subscribers metrics. You can see that our subscriber base kept growing Strongly to around 584,000 at year end, corresponding to an increase of 26% over the last 12 months. And on a net basis, we added roughly 120,000 during the last 12 months. LTM subscriber churn has decreased slightly from around 15% to around 15% now, pretty much in line with our expectations. And but when we assess our subscriber growth against the billings growth, It becomes clearly evident that our deal sizes are increasing as the enterprise customer base growth has clearly accelerated. We also still convert the long tail of all the perpetual customer base even though the amount becomes continuously smaller, less material. But nevertheless, it reflects the stickiness of our product and continued usage even across significantly older customer cohorts. Let's take a look at the billings composition and the key elements of the 44% billings growth. Clearly, the Broaden Solutions portfolio, including Frontline for AR supported workflow management, was a key driver to drive new billings as well as The monetization and addressing successfully addressing the potential with larger up and cross sell in our installed base. New billings growth has accelerated compared to the last year fueled by the enterprise business, as we talked about, and higher deal sizes in general. Our NRR stayed comfortably above 100%, reflecting the strength of our software had a negative impact of 1% during the Q4. And please remember that our net retention rate is calculated for an LTM basis always and is based on billings net of payment defaults compared to the gross billings shown in the tables below. As our payment defaults have now significantly improved and normalized around or below 3%. And also based on improved insight into our customer base, we will augment the disclosure going forward so that you can fully reconcile our NRR calculations. Let's move on to next slide covering the cost structure. GP margins have remained comfortably above 92%. That's what we expect also going in 2021, Despite the significant investments we made into additional routers and the general IT infrastructure to deal with the increased usage of our platform since the outbreak of the pandemic. We talked a lot about our growth strategy in the past, which includes significant investments across all functions, especially hiring more people. During 2020, we've significantly strengthened our sales force by growing it by more than 50% with a clear focus on solution sales, which resulted in more than 70% growth in sales expenses, obviously, also including significantly higher sales commissions payouts Given the very strong outperformance in 2021. But also R and D saw a significant increase. R and D FTEs increased by more than 50 percent with a focus on augmented reality and IoT solutions and therefore, resulting in more than 40% growth of R and D expenses. But as I mentioned, we've invested across all functions and also increased our investments in corporate functions And therefore, as of year end, we employed 1256 full time employees, Nearly 50% more than a year earlier. This also includes 75 new colleagues from Ubimax, which have already been merged into the TeamViewer group in January. So very fast post merger integration process, legal entities have been merged. So very glad to see how fast we are progressing here. But despite all those investments into product development, sales and marketing and corporate infrastructure, which will allow us to fully address our potential. We have achieved an EBITDA margin of 56% in the 4th quarter and EUR 56,000,000 or slightly more for the full year and in fact slightly ahead of our guidance overall. Turning to next slide. Profitability remained very high in Q4, so did our cash conversion very strong 4th quarter. Net cash from operating activities before tax has increased 60% for the 4th quarter and by 60% for the full year. Tax payments also increased to a more normal level in line with our expectations. CapEx excluding M and A came out at the lower end of the guided range of €25,000,000 €30,000,000 And as these one off CapEx investments are related to our new headquarter and the rollout of a new ERP system, which has now been largely completed, we CapEx to decrease to well below CHF 20,000,000 in 2021. Now due to the substantial deleveraging and improved loan financing terms we are also able to significantly lower the interest paid compared to 2019. And therefore, as a result, our levered free cash flow has increased very by 78 percent to €56,100,000 and more than doubled to €165,000,000 for the full year. And please note that the full year 2020 levered cash flow excludes loan repayments of €62,000,000 and the €84,000,000 cash paid for Ubimax. As you can see in the next page, our net leverage has reduced significantly and we used cash flow to make further loan repayments in Q4 and therefore net leverage is now down to 1.7x, very healthy ratio, 0.3% below the target, which we have given us at the time of the IPO. Clearly very pleased with this development And continues to demonstrate our unique financial model, strong billings combined with very strong profitability, resulting in very strong cash flows. And despite the EUR 26,000,000 of CapEx, despite the UBMARC's cash consideration of EUR 84,000,000 And reducing load facilities by EUR 100,000,000. Cash and cash equivalents stood at EUR 83,000,000 at year end, so very strong cash generation. And I think the improved credit profile and our strong balance sheet gives us clearly quite some firepower to continue Now before we come to the 2021 guidance, I'd like to take the chance to summarize The results of a new carbon emission avoidance study, which we conducted by a leading sustainability institute, which is called DFGE. They cover significant amount of tax companies as well, and we have released it just last week highlighting the importance of our ESG initiatives. It's really part of our vision that our remote connectivity solutions not only help to save time and money, But also they have a significant positive impact on the environment and in fact combating climate change. Therefore, we have commissioned DFGE to quantify the impact that the use of TeamViewer solutions have on the environment in a scientific study. And not surprisingly, we have found out that Solutions help to significantly avoid carbon emissions. And in fact, it helps to avoid 37 megatons of carbon emissions per year based on the data collected by the FGE. This is equivalent to a fully booked A380. Obviously, nowadays, they're not flying so much anymore, But this is equivalent to such a plane flying 7,000 times nonstop from Singapore to New York or equivalent to The emissions of 11,000,000 average cars in one single year. So very substantive carbon emission reduction as part as a result of the So a single team of subscriber actually can avoid on average around 4 tons of carbon footprint or carbon emissions per year. I think this proves clearly that our solutions are playing a critical role Meeting the sustainability goals to limit global warming, preferably to the 1.5 degrees asset out in the Paris Climate Agreement. I think we are clearly convinced that digitalization is a key lever to fight climate change and ultimately create a cleaner and more sustainable future for all of us. We are committed to constantly developing a new range of tailored and solutions that connect people of all kinds of devices around the world. And you will hear more about our ESG initiatives in the future, but this is a very strong start overall. Now let's turn to the outlook for 2021. Building on this very strong development in 2020, we clearly expect to keep our growth momentum in 2021 supported by all of the megatrends around digitalization and sustainability. We expect constant currency billings growth of 29% to 33% in 2021, including the contributions from recent acquisitions. Due to the exchange rate headwinds, primarily related to the U. S. Dollar, Reported billings is expected or are expected in a range between €585,000,000 to €605,000,000 with quarterly growth rates in between 20% 40% reported year over year. And this is all based on a U. S. Dollar exchange rate of €1.20 per euro and broadly stable other currencies. Full year revenue is expected to be in a range between €525,000,000 and 5 €40,000,000 revenue growth still slightly below billings growth as the recognition of prior year's perpetual licenses has now been phased out. But going into 2022, revenue growth is projected to be in line with billings growth. And in terms of operating profitability, we expect an Adjusted EBITDA margin of 55% to 57%. So that concludes the billings guidance. And now we would open it up for Q and A. Thank We'll now take our first question from Stacy Pollard from JPMorgan. Please go ahead. Your line is open. Hi, thank you very much for taking a few questions from me. First of all, can you talk Your enterprise sales team, how many people were located? Secondly, you mentioned no price increases so far. So wondering what your plans are, If you might have any plans for 2021 on that front? And sorry, third question, just competitive environment. Look, for the sector is strong, so why not attract why don't you think it might attract more competitors, just Sort of where you stand there? And then more specifically, you're pretty focused, it seems like on machine connectivity as opposed to maybe all PC to PC. So Who is your specific competition there? So sorry for so many. Sure. I'll start with the enterprise. So the enterprise team, which includes what we call mid market team, I. E, the account executives as well as Sales team focusing on midsized enterprise deals is now more than 100 people around 116 overall, of which A bit more than half is based in EMEA. Clearly, EMEA was the region where we started the enterprise to address the enterprise potential In the first place, followed by the AmeriGas, where we have around 40 people and then a dozen or so in the APAC region, we've clearly Significantly strengthened that team, now also due to the Ubimax acquisition, which brought along quite some experienced sales Enterprise sales team as well. And we continue to expand the region, especially around OT and IoT use cases. So you will continue to see A significant increase of our enterprise sales reps going forward. Maybe price increases, indeed, as we said, Like for like price increases, we haven't done last year. I think for renewal price increases, we've also not done renewal price increases We only moved to subscription some years ago, and we clearly wanted to give customers the confidence that we are not doing any price hikes After the subscription migration, which other players had done in the past and wasn't helpful, so we were keeping that Keeping prices stable. This year, we are planning to do smaller renewal price increases like is normal in So there we're talking inflationary price increases, 3% to 5% depending on market and product segment. And clearly always based on cohort analysis, We've done testing before. We understand that the churn risk is low in most segments, where that's not the case because we So you can expect a small contribution from renewal price in 2021. Competition, I think it's fair to say that in the area of digitalization, there is A large number of players, large and small, playing. It's a huge market across sectors and functions in businesses. So we continue to work in IT support very clearly and in remote access, and we consider ourselves one of the leaders there because we have the largest number of Subscribers and the largest number of free devices. We're using that strong position to move into new areas. For example, the industrial segment, I think with the acquisition of Ubimax, then we have one of the best solutions suites in the AR enabled, if not the best solutions for front end workers. So that's something where we run into other competitors. But so for example, PDC or other large players That have Industrial Solutions and IoT Solutions. But I think it's generally fair to say that this competitive environment In the digitalization space, when we talk about industrial applications, frontline working and so forth, That the competitive environment is relatively benign because a lot of it is greenfield or brownfield installations, really new projects where industries in different countries Only now start to move decisively into the space at their pace. And therefore, we feel that we are very well positioned When it comes to competition. That's great. Thank you. We will now move to our next question from Mohammed Moala from Goldman Sachs. Please go ahead. Your line is open. Great. Thank you very much. Good morning, Oliver and Stefan. I had a couple as well. Firstly, as we think about the 2021 The midpoint is sort of around 31% growth. How should we think of the quarterly cadence of that? I know you're lapping some pretty tough Comps in Q1. So maybe give us a sense of how that kind of Q1 could progress, but also Your visibility around sort of Q1 across both enterprise and the core connectivity business in SMB. And then secondly, as we think about the business going forward and that midterm outlook you've given, What's the sort of expectation on enterprise growth? Are you still expecting that to kind of Significantly, outgrow the average. Is that kind of triple how long is the triple digit sort of momentum Sustainable in your view and any comments on sort of pipeline and obviously deal sizes are clearly going up. So Could we see potentially a bit more lumpiness around the delivery of the growth? Or do you have any more visibility around that? Thank you. Sure. Let me start with the phasing of the quarterly growth in 2021. We said out that we expect each quarter to grow between 20% 40% compared against the quarter of the comparable period. And clearly, that's a bit tougher in Q1 and Q2, A, due to the fact that we've been growing very strongly in H1 2020, but also due to the fact that the FX headwind is If FX rates remain as they currently are, it's most pronounced clearly in H1 before we move to more like Like for like basis. But that being said, also in Q1 and Q2, we expect growth of 20%, Obviously, depending a little bit on when we throw in free to paid monetization, that's one of the levers which we can pull to achieve higher growth and So forth and so forth. And clearly, as you said, the enterprise business is gaining in importance. In Q4, we've seen the strongest on experience, the strongest enterprise quarter ever despite actually a pretty good Q1 and Q2, we had the strongest quarter in the 4th quarter towards year end, very strong pipeline conversion in EMEA. I think the team is extremely close to the pipeline, pipeline build and pipeline conversion. And based on what we See what we saw in Q3 and in Q4 and now also early in Q1, we have very good visibility into our pipeline, and that makes us confident The enterprise business is on the right path and the pipeline overall is very healthy. Customer engagement is healthy. A couple of deals, as you would expect, were closed early on in January. So from all what we see in the enterprise, Very good. We feel very good about it. Will it outgrow the rest of the business? Absolutely. Will it triple in size compared to the SMB business? I think that's a bit tough, right? I mean given that FX has significantly increased now from CHF 17,000,000 to CHF 53,000,000 in just 1 year. Probably keeping that growth rate is a tough one. But obviously, if I take a look at our solution portfolio, the Acquisitions we made and their full year contribution, I mean, they are all firmly playing in the enterprise segment. And therefore, I expect Geely, the enterprise business, to out Growth the rest of the business, but obviously the rest of the business is also growing at very healthy rates. Great. Thank you. We will now move to our next question from James Goodman from Barclays. Please go ahead. Your line is open. Great. Good morning. Thanks very much. Maybe just coming back to the building blocks of the midterm ambition that you've put out. I mean, Clearly above the sort of rate of growth we're talking about at the IPO and where the market is now. So I just wanted to come Specifically on to the point around the smaller acquisitions, I think, that you mentioned in the release being part of that. So can you give us a sense of What sort of a deal size would be over and above versus what you're expecting within that ambition for M and A? And then we've discussed this in the past, but I think it's interesting the debate on investment versus growth. Clearly, you're seeing a huge amount of opportunity to, if not accelerate, that keep the growth rate of the business very high. I mean, are you still wedded to a Sort of 60% above and above EBITDA margins. Is that how we should think about the margin profile for 2023? Or are we Are you shifting more in terms of sort of investing for higher rates of growth? Maybe just a Final clarification. Stefan, could you just explain what happened with the APAC Q4 situation? I didn't quite catch that. It sounds like there was a bit of a What's an accounting change? Thanks. Yes. So maybe midterm ambition. Clearly, what we see now, the way we see the business is, I think we have slightly or not slightly, we have accelerated The broadening of the solution portfolio over the last 2 years, I think when we were discussing at IPO, we were clearly seeing that we want to move into enterprise, which we did and that we want to broaden our use case portfolio, mostly organically at We've then figured out, I think, during last year that there was opportunity to accelerate this by doing selective M and A. And I think if we look at Miuvi Maxx and Xyleon, just within 6 months, we have significantly broadened the solution portfolio for digitalization. And I think that's one of the key drivers going forward that we can Keep our growth ambition and grow 30% for longer because we now have much more to offer for enterprises in all industries. That was a very A good move, and we also see very good success early on already in the integration internally, but also in terms of customer interest for these solutions. So having said that, I think going forward, looking at what's going on in the industry and how much is evolving in The way I like to think about it is that there will potentially be smaller tuck in acquisitions. I would think of a Book ends where the Xtalion acquisition is probably at the lower end and the U. M. X at the high end, so something in between, Complementing our solution portfolio, either coming with customers and billings or just with a great solution that we can then integrate into ours and use our scale, Brands and sales force globally to sell it. So I do believe part of the midterm ambition will be contribution from smaller acquisitions, Selected number, I would say. That also, I think, fits into your second question, Acceleration of growth, investment in growth versus profitability. If we think if we look at the current mix where we are operating at 56 plus percent margin At and the 30% growth that gives us, from our perspective, ample room to organically invest Every single year into either marketing or sales or R and D or all of that to some extent in order To grow our business and if we layer on top of that selective M and A, then I think we are in a very strong position. So now Some of the M and A will be, to some extent, a bit dilutive on margins given our overall billings number and Profitability, if we continue to be active in this type of acquisitions We just did. I think the dilutive effect will be quite minimal. And of course, then our ambition has to be at the smaller acquisition, we do start growing quite significantly and then reach profitability and high profitability. So that's why we believe with the midterm ambition, The margins that you see at the moment are probably the best guidance going forward as well. And APAC? Yes. So on APAC, as you know, we want to forcefully address all customer segments, including smaller SMBs. Clearly, since we have no marginal cost when we ship our software, it makes a whole lot of sense to be very generous in terms of our credit limit. But that being said, we clearly see that some of the customer segments, the less mature customer segments have higher payment defaults. And therefore, I want to make sure that we only recognize those billings and those revenues once from certain segments once we have received the cash. So that's a little bit of a change here. And that resulted in a onetime growth reduction in the reported growth in APAC. And you can clearly see our bad debt, which was in 2019, 4.5 percentage points has significantly decreased. It's now only 3, 3.5 percentage points or slightly below 3, and that's where I wanted to be going forward. That's really a one time effect in Apex. Underlying growth was significantly stronger. Okay. That's perfect. So actually Q1 to Q3 next year, there's no annualization effect. That's done and dusted in Q4 and we're back A little bit. There will be a little bit, but the underlying growth, which will fail out, is not affected by that. Okay. Thanks a lot. We will now move to our next question from Hannes Leitner from UBS. Please go ahead. Your line is open. Yes. Thanks for letting me on. I have also a couple of questions around the Enterprise segment. Maybe you can talk a little bit about the sales cycle. Then also what where the budgets come from? Are you displacing anybody or Customers expanding those budgets. And then also in terms of implementation cycle, is it much more demanding? So what's the enterprise segment come in at a lower gross margin on your side given more demanding customers? And then just on the medium term ambition, maybe you can give us some scenarios what would make you just grow in line with the market as you Laid out, this should be 28% CAGR above. And what would be basically the perfect storm to go well beyond the 30% CAGR you So enterprise sales cycle depends a bit on the use case. If it's Happening in the around the IT department, more horizontal or whether it's really industrial use cases that we are in manufacturing, warehousing. Sales type is typically, I would say, 3 to 6 months could be faster. If it's easier, typically not longer really. So 3 to 6 months is our is what we typically see in terms of pipeline. And then what which budgets? It's Often now in those projects that we're having a combination of budgets that come from the ITdigitalization budget, so many companies have a Chief Digital Officer that is embarking on these projects. And then, of course, also the operational units, so we're talking The logistics and supply chain organization, the retail organization, manufacturing organization, sales service organizations, it's often a combination of both because in these companies, That's also what makes these projects from a customer perspective sometimes difficult. It's often a joint venture from Infrastructure improvement, general strategic initiatives and then, of course, the operational units. And of course, we're tapping into these operational budgets quite significantly, and that's from our perspective, that's really a good thing. On implementation side, It really varies. And you're right. Some of these projects are significantly more complex. They often start with a proof of concept With a single installation in a certain location, one warehouse or one part of a Production plant or a part of the contact center, so and then being rolled out from there. If we talk about these more Kind of industrial complex use cases, then often a POC where we need to help the customer with some professional support for some time, sometimes a few months, Not in a huge effort on professional services, though these are not huge integration projects on our side. There's often a lot happening on the customer side, And we contribute to that, but it's not that these are mega integration projects. This then takes a while. The customer wants to see this is all working. And then the next Scale, so when they scale up and connect more locations or more offices or more people, that's This is then relatively straightforward. From a gross margin perspective, overall, we believe that it will be pretty neutral. Of course, we have put a significant amount of salespeople in place, but that happened earlier already. So that was a pre invest 1, 2 years ago. So the picture you're seeing at the moment in terms of margin is effectively a significant sales force, a significant Solution delivery presales group that we have already and good billings, but there is significant scaling potential for the people we brought on board to We will, of course, add new people. So for some time, this will be the balance will be adding more people but also winning more business. But these effects will compensate each other. And therefore, we see in the mix, we see very good margins or the same margins in the business, which are coming through. And your last point, the perfect storm in terms of what would it take to outperform the 3% growth. I think one of the key levers might be the speed of the enterprise build out, Coupled in a bit of few geographic levers, if you think about the U. S, I mean, we have a very strong enterprise Footprint now in EMEA, in the U. S, we are clearly behind the curve in terms of ticket size and also less Strong in OT use cases, so there's significant room to actually accelerate growth in the Americas. I think that could be one area, Which could actually bring us to a higher growth rate there, but obviously too early to really tell. Yes. I think if I may from If I go back to the discussions we had at the IPO, we always said we have a good set of growth initiatives. We have The strategic markets where we haven't been really present in the past and we opened offices there, we moved into enterprise, We now expanded the solution portfolio on the industrial side and on the sales and service side with Calleone. We also Work more and more, we've launched a product for the, for remote management of IT infrastructure. And I think what you see in the numbers is that Some of these initiatives were incredibly successful enterprise, some were okay, some are still a little bit behind. And I think if I were to describe the perfect storm, then it is I would say it's the synergistic effect of The office is really humming along because they now have the full solution portfolio. We cracked the code in China and India as we did it in Japan. We have Americas broadening the use cases, as Stephan said. So if all these things come together, Then I think the 30% is a conservative view, but we never wanted to lay out our base plan where everything has to work and come together. And therefore, if we are just successful, somewhat successful in some of the initiatives, Then we will be able to deliver our numbers quite comfortably. And that was the stance we took at the posture we took at the IPO, and that's still true. We will now move to our next question from Ben Castillo from Exane BNP Paribas. Please go ahead. Your line is open. Hi. Thanks very much for taking the question. I just had a question on the use of the balance sheet. You're now continuing to reduce your net debt, now less than 2 times EBITDA. If you look ahead, how do you view the use Your balance sheet, it seems like priorities are on tuck in M and A from your comments. Is there anything that would prompt you Change your view there? Can you considering a larger scale transaction or using the balance sheet more? Thanks. No, I think, clearly, as you pointed out, we've But in the overall few things, I mean, we've now around CHF 80,000,000 of cash on the balance sheet. Obviously, we have some Potential to raise debt and the likes, right? And the cash we can generate now obviously gives us some room to Do more of those tuck in acquisitions. But it's also good frankly to be in a position where you have a strong balance sheet. I think we can still Accumulate quite some cash before I would need to think about returning any cash to shareholders. I think there's so much room to grow and use cases which we can address in markets to go after either organically or through M and A that I don't see any Cash redistribution to shareholders in the midterm. No, that's fine. That's helpful. I have one follow-up question, if I may. On your sort of deal highlight slide, it shows plenty of larger above €200,000 deals. You used to disclose your the ACV of your largest Customers, which I don't believe I can see in the slides today, but can we assume that that number is still growing as before? And looking forward, do you expect that to Kind of plateau now that you're more penetrated in larger enterprises? Or should that keep growing as it has been before? Yes, I think it should slightly So, yes, I think over now, obviously, it consists of a significant amount of 100 to 200 KADs already, as you can see by that improved Disclosure of the total ACV contribution from deals of north of CHF 100,000, right, which are 25% of overall enterprise billings around CHF 15,000,000 I think top 50 deals have been slightly growing, same pace as in the previous quarter. Yes. But I think overall, they are already in a good shape. The sweet spot of deal size is 300,000 up to 300,000, 400,000. So I think overall, what you will see is significantly Faster growth in the enterprise business, obviously, top 50 deals. I don't see necessarily any step changes here because I The sweet spot of us is really in that $100,000,000 to $200,000 maybe $300,000 range. Makes sense. Thank you. We will now move to our next question from Gianmarco Conte from Deutsche Bank. Please go ahead. Your line is open. Hi, Stefan. Hi, Oliver. Thank you very much for taking my questions. So I also have a few to ask. On the first one, could you perhaps shed some color on the subscriber churn versus dollar churn in Q4 And whether this is accelerating, being stable or decelerating. And secondly, would you perhaps give Shed some color on the enterprise billing split that you're kind of targeting in 2021 as a percentage of billings. And yes, I'll start with these two questions. Sure. So on subscriber churn, Obviously, subscriber churn was always higher than gross value churn, right, reflecting Our free to pay monetization campaigns and those subscribers have a higher churn tendency than obviously enterprise subscribers. What happened in Q4 is actually cross churn, subscriber cross churn came down by 1 percentage point over the last 12 months. So very good development and pretty much in line with what we thought because Q4 consists of a very long standing loyal customer base. So that churn was exactly as we thought it's going to look like. And gross value churn remained pretty stable as well. So subscriber churn is slightly down and gross value churn remains stable at around slightly above 10%, which has been more than offset by Hub and cross sell. So overall, very healthy development and in line with our expectations. Enterprise going forward, Right now, 12%. If you actually take a look at the enterprise new ACV, so from €17,000,000 to €50 CHF 36,000,000 ACV increase in that business. Overall, last year, we had an ACV increase of CHF 135,000,000. So actually, As part of the new ACV, it's already between 25% 30%. And I do think going forward with the Tucken acquisition, Full year consolidation, a few remarks and the likes. I think the midterms enterprise business will be onethree of our billings. That won't happen within a year's time, yes? I think next I expect it to be in around the 15% to 20% range and clearly north of onethree of new ACVs, so to say. That That's actually very helpful. I just have a couple of more to follow-up. The one I have is in regards to last quarter you mentioned about having India and China Still having a few problems in terms of converting those subscribers to paying ones. And just I wanted to get kind of a sense of how is customers It's in those two regions specifically. And then the second question would just be around, if you could kind of give like a rough estimate, what portions of billings is derived from remote accessremote support use cases versus the IoT Industry 4.0 use case. I know it's very specific, but just like a rough estimate will be quite helpful for me. Thank you. Yes, sure. So China, India, customers are actually very sticky there. So there, we don't have a churn I think what we're seeing is that these markets in these markets, there is a very high tendency Free products as long and as much as is possible. And India is, generally speaking, a low priced market. China, not so much. But China, there is lots of, call it, other IP fraud Going on. So therefore, we have a large user base in these markets. We have good interest. Our brand is very well known, but converting into our classical paying licenses It's a bit more difficult. Now China is also a new project for us, relatively new project for us. We're making good progress. We have nice frontline wins, for example. We have nice tender wins. We're working well with 1 of the largest telecom providers as So there's a lot of good things happening, but of course, coming from a low base and that takes a while to Meaningfully contribute to the overall billings number despite the fact that the growth is good. And India, good Customer growth, good activities, a sizable team on the ground now. But given the price levels there, again, it takes some time, Although the growth is far above average of our total company growth. So that once we have customers As paying customers, the renewal rates and the renewal development is broadly in line with And on the remote access part of the business, Tough to say because as you know, you can use our platform for a variety of use cases. I think we did the market study a couple of years ago, so a bit outdated now. And I think back then, Remote access use cases to all sorts of devices were contributing around 40% of use cases. By the way, how I think about it actually and also explaining the stickiness of our solutions is that many customers use our software for Many different use case. I mean, Lilly is a case in point, right? They started with remote access, IT support, and now they've Ranged out to potentially IoT solutions, right, but still using our software for their daily IT operations well, I think that's what's so exciting about TeamViewer. You get put into those accounts basically with maybe an easy remote access IoT Support Solutions, but then we can quickly expand into much more complicated and value add solutions around IoT and AR And obviously, carrying significantly higher ACVs. Right, great. Thank you very much. We will now move to our next question from Victor Chang from Bank of America. Please go ahead. Your line is open. Hi, Oliver. Hi, Stefan. Thank you for taking my question. Just 2 from my side. So So you've touched upon this just now, but I just want to understand a bit more. Obviously, net retention rate has been consistently about 100%, Just thinking about churn as a percentage of subscribers, you mentioned Q4, there's quarter on quarter improvement. But looking at the Previous three quarters, it seems like the churn is a bit higher relative to historical numbers. Is that a result of stronger competition And then on the on my second question, just thinking about the 30% CAGR growth You're talking about, obviously, you mentioned some of the growth drivers about stronger enterprise growth about, so the M and A is expected. But are you able to unpack that 30% growth a bit more? How much we should be expecting organically? And how much more Sure. On subscriber churn, first of all, From our perspective, actually pretty much a development in line with our expectations. In 2019, we did run more free to pay campaigns. So I think those typically convert previous private users into commercial subscribers. And then typically in the 1st year of renewal, they have a higher tendency to churn. In 2019, especially during the time of the IPO, We did run more of those campaigns because obviously we've been on the road quite a bit, yes? And that maybe resulted in a little bit of a higher churn in subscriber churn in 2020, but I think much more important part is really the cross value churn and that remains fairly stable. Now given that we had less significantly less free to pay campaigns Of course, monetization in 2020, that will also actually lead result towards lower subscriber churn going forward or at least Keep it at the same level. But as I said, I think important for me is to see that the gross value churn and that always remains fairly stable at around the 10%. And then, unpacking the growth, the midterm growth of 30%, I think Oliver explained, the way how we see it is That we continue to pursue smaller tuck in acquisitions. And tuck in, we would define as Something like Exelion, which maybe has some customers already. Obviously, they have a couple of future customers. The overall billings contribution is still fairly small. So that's the low end of the book range, so to say. And then high end would probably be Ubimax, where we acquire €10,000,000 to €15,000,000 of billings. That's about it. I think anything which goes beyond that would be a change and result in additional billings contribution going forward. Okay. Thank you. That's clear. And we'll now move to our next question from George Webb from Morgan Stanley. Please go ahead. Your line is open. Great, thanks. On the enterprise side of your business, can you remind us what sort of net retention rates you're seeing on that customer base? And then when you think out your new FY 'twenty three midterm targets, do you have a net retention rate you expect to achieve within that? Or do you expect to speak broadly flat on what you've done historically? Thank you. Yes, interesting. We have not disclosed NRR on the enterprise, but what we see there is And what's really exciting is that we've actually been able to convert a significant amount of customers who maybe spend like $3,000 to 5 Okay. We start in the prior year and then move them up to a tensile solution, which means like 15 ks, 20 ks, 25 ks. And obviously, that's like 3, 4, 5 times the previous And but that would not be included in the net retention, right, because there we only contribute or include customers Who spent 10 ks or more in both years, yes. And that's a net retention rate, which is north of 120%, yes. So We are carefully disclosing that number because it's early days for us, yes, and it's now becoming more meaningful and hence less volatile. So going forward, we might break this out, But it's actually not 120%, so pretty much in line with other enterprise software companies who Obviously, also flow in price increases, which we haven't done. But I think much more exciting is really, George, moving customers from the 3 to 10 ks range, so customers which we wouldn't consider enterprise customers then moving them into the enterprise space. That's really exciting and that was a significant part of the growth in the enterprise savings contribution. Perhaps if I can just follow-up. When you're approaching enterprises today, clearly you've got a much broader product offering than what you've had in the past. Are you leading with a specific product? You're tailing it based on the enterprise you're really looking at? It depends on all scenarios. I mean, we have special sales forces who actually Focus on the AR solutions, right, depending on who you talk to that organization. I think that's the beauty of our expanded solutions portfolio. We can go after Sophisticated shop floor solutions or we can start with a tensor deal, provide ground connectivity, so to say, In the IT and OT environment and then on top provide frontline. So I think it's a healthy mix. But clearly, since we have a strong penetration, but not strong penetration, but since we have, I'd say, although good penetration of our product across many customers, quite often we use Tensor basically as an enterprise connectivity platform upon which we then layer additional solutions. Perfect. Thank you. As there are no further questions, I'd like to hand the call back to our speakers for any additional or closing remarks. Well, thank you very much all for attending. If there are any follow-up questions, please reach out to the IR team. Management will be on the road, as you probably know, tomorrow and the day after, and we hope for good attendance on your side. Thank you very much. Thank you. Thanks, everyone. Thank you very much. Bye. Ladies and gentlemen, this concludes today's call. Thank you for your participation. You may now disconnect.