Temenos AG · SIX:TEMN
Temenos — UBS Swiss Small & Mid Cap Summit 2007
38 slides from Temenos's conference presentation, Aug 22, 2007
Slide 1: Temenos – UBS Swiss Small & Mid Cap Summit
TEMENOS UBS SWISS SMALL & MID CAP SUMMIT 22 AUGUST 2007 MAX CHUARD HEAD OF CORPORATE FINANCE & IR MEMBER OF THE EXECUTIVE BOARD 1
Slide 2: Disclaimer
DISCLAIMER – Any remarks that we may make about future expectations, plans and prospects for the company constitute forward-looking statements. Actual results may differ materially from those indicated by these forward-looking statements as a result of various factors. In particular, the forward-loo
Slide 3: Company Overview
(G TEMENOS COMPANY OVERVIEW
Slide 4: Temenos Vision and Summary
TEMENOS VISION AND SUMMARY TEMENOS’ VISION is to become the leading global brand in financial services software TEMENOS TODAY is the provider of choice for the world’s leading financial institutions: Supporting two product lines for core processing: TEMENOS T24™ (T24): Private, Universal, Wholesale
Slide 5: History & Development
HISTORY & DEVELOPMENT A vision transformed into the leading provider of banking software systems… 1993 2007 •Listed on SWX in 2001 TEMENOS founded •Acquired TCB for Retail Banking in 2001 •Launched T24 in 2004 Investment in R&D: 3’000 man years (+300 million USD) 1993 Key Statistics • 2 Offices 2007
Slide 6: Global Reach
GLOBAL REACH • TEMENOS operates from 43 offices in 33 countries Amsterdam Copenhagen New York(1) LONDON Warsaw HEMEL HEMPSTEAD Moscow Seoul Dublin Luxembourg Paris Zurich GENEVA(1) Beijing Seoul MADRID Tehran Tokyo Orlando Athens Shanghai Beirut Bangkok Miami Hong Kong Mexico City Riyadh Taipei Mani
Slide 7: Business Model
BUSINESS MODEL • Initial Licence Fees; we leverage a largely fixed cost infrastructure through licensing our products • Recurring Maintenance; we charge minimum 5 years committed maintenance at a standard rate of 21 per cent. of ILF. This gives access to yearly updates to the latest versions and 24/
Slide 8: Revenues by Region, 12 Months to 30 June
REVENUES BY REGION 12MONTHS TO 30 JUNE Revenues - Full Year 2003 Revenues - LTM Q2 2006 Revenues - LTM Q2 2007 Asia Asia Asia 19% 14% 22% Americas 8% Americas Americas EMEA 14% EMEA 20% 61% 64% EMEA 78% Licence Revenues - Full Year 2003 Licence Revenues - LTM Q2 2006 Licence Revenues - LTM Q2 2007 A
Slide 9: Licences by Tier & Segment
LICENCES BY TIER & SEGMENT Full Year 2003 LTM Q2 2006 LTM Q2 2007 Tier 1&2 29% Tier 1&2 Others 41% 43% Tier 1&2 Others 57% 59% Others 71% Full Year 2003 LTM Q2 2006 LTM Q2 2007 Others 31% Others 36% Others Retail / 44% Universal 56% Retail / Universal Retail / 64% Universal 69% (1) On a $ basis 9
Slide 10: Temenos Value Proposition
TEMENOS VALUE PROPOSITION Enable Growth Business agility through fast time to market Cross selling through single customer view Ensured customer retention through improved service Clear information directing resources to maximize profit Broad geographic coverage Broad functional coverage Manage Cost
Slide 11: Ensured Customer Retention Through Improved Service
ENSURED CUSTOMER RETENTION THROUGH IMPROVED SERVICE Enable Growth In a recent Survey by Datamonitor, 90% of banks said client switching main banking providers was rising. Temenos believes that enhanced customer service will substantially reduce this. • Selected Temenos as core • ARC – Acquire, retai
Slide 12: Business Agility Through Fast Time to Market
BUSINESS AGILITY THROUGH FAST TIME TO MARKET Enable Growth Faster deployment of new products, services and processes enables the modern financial institution to react to, and keep ahead of, today’s competitive market. • 8,000 users • 22,000 product design • 391 branches parameters • 12.5 million acc
Slide 13: Broad Functional Coverage
BROAD FUNCTIONAL COVERAGE Enable Growth TEMENOS are the only supplier to cover a full range of banking and investment support in a single, integrated system Bank of Shanghai Web Call Centre Mobile Branch IVR Other systems BPEL engines Browser Open Financial Service (OFS) – Web Services - SOA Version
Slide 14: Perpetual Release and Upgrade Philosophy
PERPETUAL RELEASE AND UPGRADE PHILOSOPHY Temenos invests a market leading 20% of its revenues in product improvement. A simple annual product upgrade strategy enables Manage Cost our customers to take full advantage of this investment. • One single release per year incorporates all core developments
Slide 15: Efficiency Through Joined Service Centre
EFFICIENCY THROUGH JOINED SERVICE CENTRE Early indications leave the bank confident of exceeding the expectations which foresaw a 43% reduction in overall infrastructure costs of the Manage Cost banks that joined the service centre. • Existing Temenos client entered in to full centralisation project
Slide 16: No Obsolescence Through Continuous Development
NO OBSOLESCENCE THROUGH CONTINUOUS DEVELOPMENT Temenos’ commitment to its clients is to continuously invest and improve its products whilst providing a simple upgrade process. Control Risk • 1 simple release per year Mees Pierson, • 500+ clients in 107 countries, Fortis Group same software PW Suppor
Slide 17: Putting the market opportunity in context
Putting the market opportunity in context 17
Slide 18: Market Trends - External IT Spending
MARKET TRENDS - EXTERNAL IT SPENDING • External IT spending now consumes 57% of total IT expenditure (1999:53%) • Global External spending growing at CAGR 7.9% versus CAGR 4.5% for Global IT spending • Budget shift towards further external IT spending driven by replacement of legacy systems • System
Slide 19: Market Trends - IT Spending Mix
MARKET TRENDS- IT SPENDING MIX 19
Slide 20: Replacement Cycle
REPLACEMENT CYCLE By 2006 we expect core banking replacement drivers to surpass the reluctance to change, leading to an increase in new core banking systems implementations • Reluctance to change drivers – Implementation Cost Core Banking Replacement Cycle – Risk – Technology capacity + – Internal D
Slide 21: Market Trends
MARKET TRENDS Industry analysts also forecast significant growth in spending on corebanking systems: • Forrester reported that more than 68% of western European banks will commence a core renewal project in the period 2005 to 2010. (Source: Forrester Research 2005) • Gartner expects 6 European core
Slide 22: Leading Providers of Core Banking System by Number of Live Clients
Leading Providers of Core Banking System by Number of Live Clients Fiserv 3620 Metavante 520 Temenos 505 Fidelity Information Services / Sanchez 421 Misys 411 Jack Henry 348 iFlex 272 Open Solutions 245 ERI 136 SAP 92 Alnova 91 CSC 68 Infosys 55 System Access 45 Kordoba 31 Polaris 10 Financial Objec
Slide 23: Competition: Major Players by Segment
COMPETITION Major players by segment Vendor Products Retail Private Wholesale Universal TEMENOS T24 TCB I-Flex Flexcube Misys Equation, Midas, Bankmaster Infosys Finacle Fidelity Corebank, Systematics TATA Consulting FNS SAP Corebanking Source: IBS Market Report; Companies announcements, Temenos 23
Slide 24: Business Update
(G TEMENOS BUSINESS UPDATE
Slide 25: Q2 2007 Results – Key Points
Q2 2007 RESULTS – KEY POINTS • Excellent second quarter with strong sales performance and business momentum. Revenues grew by 32% in the quarter and EBIT by 34% compared to Q2 06. • Licence revenues for the quarter were flat compared to Q2 06, lapping an unusually high comparative quarter which incl
Slide 26: 12 Months to 30 June - Business Update
12 MONTHS TO 30 JUNE - BUSINESS UPDATE Revenues (US$ m) Costs (US$ m) Σ 257.4 Σ 189.2 +36% +33% 217.5 82.7 +48% 163.0 Services 56.0 64.5 +30% 49.8 Maintenance 110.1 +32% Licence 83.4 2006 2007 2006 2007 Cash Flow from Operations and EBITDA (US$ m) Fully Diluted EPS (US$ per share) +47% +32% 0.58 +22
Slide 27: Sales Performance – Business Update
SALES PERFORMANCE – BUSINESS UPDATE (contd) • T24 continues to perform strongly, with licence revenues up 42% in the LTM. • New client wins under our licensing model totalled 12 in the quarter (2006: 10) and totalled 46 in the LTM (2006: 37). 50 +24% 46 37 40 +37% 27 30 20 10 0 2005 2006 2007 • Reve
Slide 28: Update on Growth Initiatives
UPDATE ON GROWTH INITIATIVES • Misys Replacement Programme: – This initiative is specifically designed to provide users of Misys with a low risk, cost-efficient and fast-track upgrade path to T24. – Since the launch of our replacement programme the following number of Misys customers have selected T
Slide 29: Update on Growth Initiatives: ACTIS.BSP
UPDATE ON GROWTH INITIATIVES (contd) ACTIS.BSP – Integration of ACTIS.BSP is progressing well – Clients have welcomed the acquisition and the product direction – We have already started marketing our T24 German model bank – Our business case assumed a first T24 deal in 2008. We currently believe we
Slide 30: Services Update
SERVICES UPDATE • Services revenue grew by 84% for the quarter and by 48% in the 12 months to 30 June 07. Services revenue growth lags licence revenue growth by about nine to twelve months. • Services margin for the quarter was 3% compared to -16% in Q2 2006. • Services margin for the half year to 3
Slide 31: Acquisitions Update
ACQUISITIONS UPDATE • Organic growth model on track delivering exceptional EPS growth (2007 outlook: +47%) • Majority of banks are expected to replace their Corebanking systems in the next five years. Vendor growth over the next 3-5 years will determine long term leadership in our market. TEMENOS ai
Slide 32: Market Outlook
MARKET OUTLOOK • Robust and increased growth in core spending for Retail, Universal and Private banks on a global basis • Core system replacement today represents the number one or number two priority for CIO’s of major institutions • Key drivers are growth and strategic cost management, this is not
Slide 33: 2007 Financial Outlook
2007 FINANCIAL OUTLOOK USD million Previous Change Revised 2006 Growth Licence revenues 120 - 125 5.0 125 - 130 97.9 30% Total revenues 290.0 10.0 300.0 216.3 39% EBIT 55.0 2.0 57.0 33.3 71% EBIT margin 19% - 19% 15% 4 pts EPS 83 cents 3 cents 86 cents 57 cents 51% Adjusted EPS* 86 cents 3 cents 89
Slide 34: The Next 3 Years – Our Strategic Plan
THE NEXT 3 YEARS – OUR STRATEGIC PLAN • Sustain organic revenue growth for 2008 and 2009 of 20 - 25% per annum on new 2007 base. This would represent a 3 year organic CAGR of 28% given our 2007 outlook. • Establish a profitable and growing services business model. • Deliver a compelling, growing and
Slide 35: Appendices
(G TEMENOS APPENDICES
Slide 36: Stock Buy Back
STOCK BUY BACK • In Q2 2007 we continued our stock buyback programme and purchased 655,100 shares for an average price of CHF27.80 and a total consideration of US$15.6 million, resulting in total buyback year to date of US$32 million at an average price of CHF 23.6. • In 2008 and 2009 we expect to c
Slide 37: Outlook Assumptions
OUTLOOK ASSUMPTIONS In arriving at our 2007 outlook we have made the following assumptions: • Tax rate: Zero effective tax rate (see slide 38) • Foreign exchange: USD 1 : EUR 0.72 USD 1 : CHF 1.21 USD 1 : GBP 0.49 • Number of shares for diluted EPS*: 69.4m * including impact of convertible 37
Slide 38: Effective Tax Rate
EFFECTIVE TAX RATE • Temenos has significant unrecognised deferred tax assets (DTAs) relating to losses carried forward as well as arising from our agreement with the Swiss authorities reached during 2005 to repatriate the group’s IP to Switzerland. The majority of these DTAs are currently not recog