Temenos Ag · SIX:TEMN
Temenos — Q2 2009 Earnings Presentation
34 slides from Temenos's earnings presentation, Jul 29, 2009
Slide 1: Financial Results & Business Update
Financial Results & Business Update Quarter ended 30 June 2009 29 July 2009
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-looki
Slide 3: Agenda
Agenda Introduction Ben Robinson Associate Director IR & Business Strategy Strategy and Business update Andreas Andreades CEO Financial update David Arnott CFO Outlook and Summary Andreas Andreades CEO Q&A Andreas Andreades CEO David Arnott CFO Max Chuard Director Slide 3
Slide 4: Agenda
Agenda Introduction Ben Robinson Associate Director IR & Business Strategy Strategy and Business update Andreas Andreades CEO Financial update David Arnott CFO Outlook and Summary Andreas Andreades CEO Q&A Andreas Andreades CEO David Arnott CFO Max Chuard Director Slide 4
Slide 5: Business update
Business update Executing on strategy for growth with better profitability and cash generation Strong margins • EBIT +230bps y-o-y and EBITDA +620bps y-o-y Excellent cash generation • Cash generation of 117% of EBITDA • Reached target for full year operating cash six months early Continued good cost
Slide 6: Business update
Business update Executing on strategy for growth with better profitability and cash generation Strong traction with new customers and new products • 11 new Insight deals and 7 new ARC deals in the quarter • 9 T24 deals vs. 9 in the prior year Significant enhancements to product set • New release of
Slide 7: Overview of new T24 customer sales
Overview of new T24 customer sales ► New deals well-diversified across 4 regions ► Emerging markets decouple New clients (number) LTM 2009 LTM 2008 New clients (licence value) LTM 2009 LTM 2008 Slide 7
Slide 8: New products continue to gain traction
New products continue to gain traction ARC – our suite of front office solutions In Q209, we sold ARC to 7 customers This is down from 11 in Q2 08, but pricing is improving considerably Total ARC licences up 27% in LTM Insight – our new business intelligence tool Continued strong take-up from new an
Slide 9: Update on product development
Update on product development At our annual Temenos Client Forum, we announced over 100 enhancements to T24, including: • Significant advancement of SOA capabilities, with the inclusion of a T24 Services catalogue, where the business services in T24 are defined • New Structured Products module • Lau
Slide 10: Services Update
Services Update Another 10 clients went live in Q209 • 10 clients went live in Q209 (vs. 8 in Q208)... • ...taking number of go-lives to 35 in H109 vs. 18 in H108 ... as services initiatives help us to scale more efficiently • TAM, TIM, Management Consulting, Model Bank have all helped the services
Slide 11: Update on other initiatives
Update on other initiatives Partners • Relationship with Cognizant progressing well → Training has started → Jointly going to market on a number of deals • Expect to sign second Worldwide partnership in H2 M&A • Generating significant free cash to fund acquisitions • Level of M&A activity remains hi
Slide 12: Agenda
Agenda Introduction Ben Robinson Associate Director IR & Business Strategy Strategy and Business update Andreas Andreades CEO Financial update David Arnott CFO Outlook and summary Andreas Andreades CEO Q&A Andreas Andreades CEO David Arnott CFO Max Chuard Director Slide 12
Slide 13: Income statement highlights – Q2 2009
Income statement highlights – Q2 2009 Q2 2009 Q2 2008 y-o-y (USDm) (USDm) Licence revenues 27.3 33.7 (19%) Total revenues 81.9 95.9 (15%) EBIT 10.5 10.1 4% Adjusted EPS* 0.16 0.15 7% * in USD; see appendix for reconciliation Slide 13
Slide 14: Financial statement highlights
Financial statement highlights in USDm Q2 09 Q2 08 LTM 09 LTM 08 Licences 27.3 33.7 (19%) 140.3 161.2 (13%) Maintenance 28.5 23.7 +20% 110.1 88.5 +24% Services 26.1 38.5 (32%) 135.4 130.7 +4% Total revenue 81.9 95.9 (15%) 385.8 380.4 +1% Total operating costs (71.5) (85.8) (17%) (319.3) (313.8) +2%
Slide 15: Like-for-like revenues
Like-for-like revenues ► Adjusting for FX, acquisitions AND Metavante Q2 09 l-f-l growth -12% USDm (35%) +8% 0% Slide 15
Slide 16: Income statement
Income statement Q2 2009 Q2 2008 y-o-y LTM 09 LTM 08 y-o-y (USDm) (USDm) (USDm) (USDm) EBIT 10.5 10.1 3% 66.5 66.6 0% Net finance charge (2.2) (0.8) 185% (7.8) (3.3) (136%) FX (loss)/gain (0.8) (0.8) 0% 1.5 6.1 (75%) Tax (0.1) 0.0 n/a 1.6 0.5 255% Net earnings 7.3 8.6 (14%) 61.8 69.7 (11%) Adjusted
Slide 17: Cash generation very strong in the quarter
Update on cash - Cash generation very strong in the quarter • EBITDA into operating cash conversion of 117% in Q2 • USD21m of operating cashflow arises without Metavante contribution • Target for 12 month operating cashflow of USD80m achieved six months early EBITDA into operating cash conversion +8
Slide 18: Balance sheet – Debt and financing
Balance sheet – Debt and financing Q2 2009 Comments (USDm) EXISTING DEBT 125.8 1.5% coupon, matures 2013 (converts at Convertible bond CHF18.6) Credit facilities 60.9 Consortium of 7 banks, repayment up to end of 2012 Other 1.1 Obligations under finance leases TOTAL DEBT 187.8 Available funding Cash
Slide 19: Metavante – Settlement reached
Metavante – Settlement reached In July, Temenos settled its dispute with Metavante regarding the termination of the joint agreement to develop and market TCB in the US. Summary of main points: • Settlement is both quick and amicable • Non-exclusive marketing agreement for T24 continues • Leaves us f
Slide 20: Agenda
Agenda Introduction Ben Robinson Associate Director IR & Business Strategy Strategy and Business update Andreas Andreades CEO Financial update David Arnott CFO Outlook and Summary Andreas Andreades CEO Q&A Andreas Andreades CEO David Arnott CFO Max Chuard Director Slide 20
Slide 21: Summary
Summary Executing on strategy for growth with better profitability and cash generation Strong margin progression → EBIT +230bps y-o-y; EBITDA +620bps y-o-y Excellent cash generation → EBITDA into operating cash +117% Continued good cost control → The costs have been removed on a sustainable basis Sl
Slide 22: Summary
Summary Executing on strategy for growth with better profitability and cash generation Licence sales resilient • Sales of new products and to new customers strong • Helping to offset Metavante impact And seeing strong pipeline build up • Pipeline continues to build strongly • Setting the stage for g
Slide 23: 2009 Outlook
2009 Outlook ► We reaffirm our outlook for costs, maintenance revenue and margins ► We add a range for services given higher visibility (>90% locked-in) • 2009 full year cost base of USD310m • EBIT Margin of 19-20% • EBITDA margin of 27% to 28% • Full year maintenance revenue of USD118m+ • Range for
Slide 24: 2009 Outlook
2009 Outlook ► But increase our outlook for operating cash Partly owing to settlement from Metavante and partly to better underlying performance, we increase cash targets for the full year as follows: Operating cash flow: USD110m (from USD80m) Free cash flow: USD80m (from USD50m) Improving operating
Slide 25: Agenda
Agenda Introduction Ben Robinson Associate Director IR & Business Strategy Strategy and Business update Andreas Andreades CEO Financial update David Arnott CFO Outlook and Summary Andreas Andreades CEO Q&A Andreas Andreades CEO David Arnott CFO Max Chuard Director Slide 25
Slide 26: Appendices
Appendices a =mMOnae 9 -MENOS The Banking Software Company
Slide 27: Adjusted EPS reconciliation
Adjusted EPS reconciliation Q2 2009 (USDm) Earnings 7.5 Amortisation of acquired intangible assets 1.9 Total cash Bond interest 1.4 Total adjusted earnings 10.8 Number of diluted shares 68.3 Adjusted EPS 0.16 Slide 27
Slide 28: DSOs trend
DSOs trend DSOs – Q209 vs Q208 (T24 and TCB) 200 180 175 170 160 140 120 100 TCB Series2 T24 Series1 80 60 • DSOs down by 5 days vs. PY • Within this, T24 DSOs down by 10 40 days 20 0 Q208 Q209 Q208 Q209 Sustained improvement driven by Shorter implementation times down from average of 18 months in 0
Slide 29: Constant Currency Income Statement
Constant Currency Income Statement in USDm Q2 09 Q2 08 Total revenues 81.9 95.9 (15%) FX adjs. n/a (5.7) Adjusted total revenues 81.9 90.3 (9%) Total costs 71.5 85.8 (17%) FX adjs. n/a (5.4) Adjusted total costs 71.5 80.4 (12%) Reported EBIT 10.5 10.1 4% EBIT at constant FX 10.5 9.9 6% Reported EBIT
Slide 30: Cost reduction – yielding results
Cost reduction – yielding results Last four quarter cost reduction (USD mn) 100 Operating costs 89.2 have declined 90 86.1 sequentially for the 80 72.5 last 3 quarters 71.5 70 60 50 40 30 20 10 0 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q2 2009 cost base consistent with full year outlook of USD310m Slide 30
Slide 31: Recognition
Recognition Temenos’ products are multi award winning - awards include: T24 was named No.1 best-selling core banking system in 2008 in the IBS Journal’s Annual Sales League Table. Martin Whybrow, editor, commented: “Temenos has maintained a strong position during a challenging year for our industry.
Slide 32: Recognition
Recognition According to Forrester Research, we are one of only two global power sellers Gives us ability to: • Deliver software across all geographies • Endure the current banking crisis (which will see “some vendors leaving the market”) • Dominate – strong vendors “will start to dominate even more
Slide 33: Glossary
Glossary DSO Days Sales Outstanding EBIT(DA) Earnings Before Interest and Tax (Depreciation and Amortisation) EPS Earnings Per Share IP Intellectual Property LTM Last Twelve Months SOA Service Oriented Architecture TAM Temenos Application Management TIM Temenos Implementation Methodology y-o-y Year-
Slide 34: Thank You
Thank You ‘7 sm: FM fe) FA ed Bl F EMENOS The Banking Software Company