Avaloq, a pioneer in digital banking solutions, core banking software as well as Software as a Service (SaaS) and Business Process as a Service (BPaaS) solutions provider to private banks, wealth managers and universal banks with an advice-led model, has reported record results for 2019 driven by strong, continued demand from new and existing clients. The company posted full-year revenues of CHF 609 million, a year-on-year rise of 6% over 2018. Adjusted EBITDA for 2019 was CHF 97 million, up from CHF 91 million, underpinned by robust growth in operating free cashflow. Liquidity remains robust with over CHF 200 million available. Avaloq is fortunate in the present climate to have built a cash-rich business with a resilient business model which is attractive to its clients as well as talented employees.
Avaloq saw a significant number of successful “go-lives” and new client wins in 2019, with particularly strong growth in the Asia-Pacific wealth management sector. Besides its first client in the Philippines, new institutions included Bank Mandiri, the largest banking group in Indonesia in terms of assets, loans and deposits. The expansion into markets such as Indonesia underscores Avaloq’s successful focus on new markets and the growth of its network of clients globally.
In addition, DBS Bank announced an expanded partnership with Avaloq to deliver enhanced levels of personalized service to wealth management clients, and Maybank went live with the Avaloq Banking Suite to better serve Maybank Premier clients in Singapore. As Maybank has successfully been using the Avaloq platform for its Singapore-based private banking business since 2016, the extension of its cooperation with Avaloq to the affluent segment underpins Avaloq’s capabilities to democratize wealth management.
2019 was notable for a number of firsts and important initiatives for the firm. Along with the successful onboarding of Raiffeisen – Avaloq’s largest implementation project to date – it announced new clients in three new markets: Spain, the Philippines and Indonesia. Also, through its expanded relationship with NORD/LB, for the first time American and mainland Chinese client entities had been consolidated in one centralized Avaloq operation.
In addition, the launch of the Avaloq.one Ecosystem in April 2019 marked a major new development in the way that Avaloq clients interact with best-of-breed third-party fintechs. The Avaloq.one Ecosystem gives banks and wealth managers the ability to easily connect to innovative third-party fintech applications and to launch new products and services in an extremely efficient manner, such as offering digital advisory platforms or structured product trading. Numerous fintechs have since become part of the Avaloq.one Ecosystem.
Juerg Hunziker, Avaloq’s Group CEO, said: “2019 was another exceptional year in Avaloq’s growth story, marked at the beginning by the go-live of all Raiffeisen banks in Switzerland and our announcement in December of a significantly expanded relationship with DBS Bank. Throughout the year, we continued to see increased demand for our solutions, from new and established clients, in the SaaS and, especially, BPaaS areas, and we expect this growth to accelerate further in 2020 as more and more banks and wealth managers switch to highly efficient digital operating models.
“Our success is based on a simple truth: the future of financial services is digital. Only banks and wealth managers with highly agile digital platforms across front, middle and back offices will compete effectively and succeed – particularly as the likes of automation, robotics and even Artificial Intelligence have now become mainstream developments.
“Even in today's most challenging circumstances, we persevere and help our clients keep the promises they've made to their customers. Our clients can always rely on us, be it through BPaaS, SaaS or on-premise solutions. Our business model, with long-term contracts and recurring revenue streams, provides us with precisely the stability a financial institution looks for in a partner these days.”
In recognition of its compelling product and service proposition, Avaloq received a number of awards in 2019, including Leader in the 2019 NelsonHall NEAT vendor evaluation for Wealth & Asset Management Services, one of the most comprehensive assessments globally. In September, it was named Overall Winner in the 2019 XCelent European Wealth Management Technology Vendors report, Europe’s most influential market accolade and further testament to the market-leading capabilities of the Avaloq Banking Suite.
Capitalizing on its growth momentum, Avaloq has continued to invest in talent and grow its capabilities. During 2019, close to 30% of software-based revenue was reinvested in R&D in preparation for the launch of new, upcoming standalone platforms. At the beginning of the year, Avaloq opened a state-of-the-art office building in Bioggio, Switzerland, offering modern office space for more than 800 people, and it doubled the size of its London office to cater for growth in the UK market.
Dean Gluyas, Avaloq’s Group CFO, said: “We have been able to improve profitability and further scale our business, having been able to onboard new clients in existing as well as new markets. Our single platform offering is unique in the industry, allowing our clients to scale elegantly as they grow their business and displace multiple legacy and competitor systems at the same time. We are delighted that Asia-Pacific has become a primary market with excellent momentum. What also stands out in 2019 is the number of existing clients that have expanded their relationship with Avaloq and the sustainable income this represents going forward. Building on momentum from services leveraging software, we will continue to focus on scalability and repeatability as a key strategic theme going forward.”
Avaloq reports its results according to the prevailing IFRS standards. During 2019 the Group adopted the new accounting standard for leases – IFRS 16. The new standard has been applied from 1 January 2019 using the modified retrospective method. Under the modified retrospective method, the 2018 and prior period results will not be restated under IFRS 16. Going forward from 2019, the results of the business will be reported only as provided under IFRS 16. The adoption of IFRS 16 did not have a material effect on how the Group reports the operational performance of the business.
Avaloq maintained its B credit rating with Standard & Poor’s and B2 with Moody’s in 2019, both with a stable outlook.