Temenos Ag · SIX:TEMN
Temenos — Q2 2010 Earnings Presentation
37 slides from Temenos's earnings presentation, Jul 28, 2010
Slide 1: Financial Results & Business Update
Financial Results & Business Update Quarter ended 30 June 2010 28 July 2010
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 Sarah Bowman Investor Relations Strategy and Business update Andreas Andreades CEO Financial update David Arnott CFO Update on M&A Max Chuard Director, M&A and IR Outlook and Summary Andreas Andreades CEO Q&A Slide 3
Slide 4: Agenda
Agenda Introduction Sarah Bowman Investor Relations Strategy and Business update Andreas Andreades CEO Financial update David Arnott CFO Update on M&A Max Chuard Director, M&A and IR Outlook and Summary Andreas Andreades CEO Q&A Slide 4
Slide 5: Business update
Business update Strong licences drive profit growth • Strong rebound in licence growth... → License growth +26% in the quarter, +19% like-for-like → Strongest licence growth since Q308 • ...driven by increase in volume and deal size... → 12 new customers (vs. 9 in Q2 2009) → Deal size for new custom
Slide 6: Business update
Business update Business well positioned for the year and beyond • Various growth initiatives gaining momentum... → Partners bringing deals, directly and indirectly → Add-on products now account for approximately 15% of total licence revenue compared to 10% in 2009 and 5% in 2008 → Gaining significa
Slide 7: Update on Q2 2010 Sales
Update on Q2 2010 Sales Both volume and deal size increase strongly Core sales • Robust growth seen in all regions, emerging markets and developed alike • Deal size continues to rise as banks commit more capital to transformation • Larger banks and Tier 1s continue to return to the market for new pr
Slide 8: Update on Q2 2010 Sales
Update on Q2 2010 Sales Broader front office suite helps sales, Insight revenue rises strongly ARC & Insight In Q2, we signed 10 Insight licences (vs. 11 in Q2 09)... • Deal size increasing strongly • Revenues more than doubling over the LTM ...and 9 Front Office (ARC, Mobile, Biometrics) customers
Slide 9: Update on Q2 2010 Sales
Update on Q2 2010 Sales AML is a winning product in an exciting market AML & STeP • Sold by global sales force and delivering solidly • Adds best of breed solution to Temenos’ integrated offering 5 AML sales in the quarter • Sales momentum improving • As a stand-alone product, AML functions also as
Slide 10: Product Direction
Product Direction • Java version of T24 • T24 SOA and Componentisation • New option on IBM and Oracle stacks • Major re-architecting of T24 into separately • Same code base so development deployable components progressing well efficiency not compromised • Main target is larger banks who seek • Initi
Slide 11: Product Direction
Product Direction •T24 “stack” strategy • Core banking platform preferences have matured into four distinct markets: • IBM, particularly Java on the Z series • Oracle • Microsoft • HP • Temenos strategy evolves: independent and best in class in each market • Advantages: • Tailored solutions exploiti
Slide 12: Update on partners
Update on partners Over USD25m of pipeline deals brought or strongly influenced by partners Capgemini → Global partnership agreement signed in May → Initial commitment for 300 resources trained as Temenos experts Microsoft → Set up joint competency centre in the UK – Temenos will have a focal point
Slide 13: Agenda
Agenda Introduction Sarah Bowman Investor Relations Strategy and Business update Andreas Andreades CEO Financial update David Arnott CFO Update on M&A Max Chuard Director, M&A and IR Outlook and Summary Andreas Andreades CEO Q&A Slide 13
Slide 14: Income statement highlights – Q2 2010
Income statement highlights – Q2 2010 Q2 2010 Q2 2009 y-o-y (USDm) (USDm) Licence revenues 34.3 27.3 26% Total revenues 100.2 81.9 22% Adj. EBIT 18.1 12.4 46% Adjusted EPS* 0.23 0.16 44% * in USD; see appendix for reconciliation Slide 14
Slide 15: Financial statement highlights
Financial statement highlights in USDm Q2 10 Q2 09 LTM 10 LTM 09 Licences 34.3 27.3 26% 132.3 140.3 (6%) Maintenance 34.9 28.5 22% 130.7 110.1 19% Services 31.0 26.1 19% 138.2 135.4 2% Total revenue 100.2 81.9 22% 401.3 385.8 4% Total operating costs (89.3) (71.5) 25% (327.6) (319.3) 3% Adj. EBIT 18
Slide 16: Q2 like-for-like revenues
Q2 like-for-like revenues Like-for-like revenue +11%... 140 USDm 120 Acquisitions 100 Fx 80 +4% Services Services 60 Maintenance +8% 40 Maintenance 20 +19% Licence Licence 0 Q2 2009 Q2 2010 Slide 16
Slide 17: Q2 like-for-like costs
Q2 like-for-like costs ...vs. like-for-like costs +4% 120 USDm Amortisation** 100 Amortisation** Acquisitions* 80 FX 60 40 Like-for-like Like-for-like costs costs 20 0 Q2 09 Q2 10 *Includes Viveo standalone costs and restructuring costs **This represents amortisation of acquired intangibles Slide 17
Slide 18: Income statement
Income statement Q2 2010 Q2 2009 y-o-y LTM 10 LTM 09 y-o-y (USDm) (USDm) (USDm) (USDm) Adjusted EBIT 18.1 12.4 46% 98.5 77.1 28% Net finance charge (2.4) (2.2) (9%) (8.7) (7.8) (12%) FX (loss)/gain (0.6) (0.8) 25% (0.4) 1.6 n/a Tax 0.0 (0.1) n/a (0.4) 1.6 n/a Adjusted Net 15.1 9.3 62% 89.0 72.5 23%
Slide 19: Update on cash
Update on cash • Q2 lower by USD23m on faster payments to suppliers; adjusting for this, EBITDA conversion is 52% • LTM cash conversion 91% or 112% adjusting for faster payments to suppliers. Adjusted EBITDA conversion EBITDA conversion +91% +89% +88% +88% USDm N/A +117% N/A +117% Slide 19
Slide 20: DSOs trend
DSOs trend Days DSOs – last 9 quarters Year-on-year reduction (days): 5 2 4 12 11 • Payment terms continue to improve: >60% upfront • In Q2, no licence cash was tied to milestones Slide 20
Slide 21: Balance sheet – debt and financing
Balance sheet – debt and financing Q2 2010 Comments (USDm) Convertible bond 130.4 1.5% coupon, matures 2013 (converts at CHF18.6) Credit facilities* 107.7 Consortium of 7 banks, repayment up to end of 2012 Other 1.2 Obligations under finance leases TOTAL DEBT 239.3 CASH 110.6 Held in ST deposits & t
Slide 22: Agenda
Agenda Introduction Sarah Bowman Investor Relations Strategy and Business update Andreas Andreades CEO Financial update David Arnott CFO Update on M&A Max Chuard Director, M&A and IR Outlook and Summary Andreas Andreades CEO Q&A Slide 22
Slide 23: Viveo update
Viveo update Viveo integration progressing well: • Migration of Viveo clients continues → Two new Viveo core banking migrations in the quarter (taking to 3 in total) • AML gaining further traction → 5 new deals in Q2, a total of 8 in H1 • VBF Consulting disposal → Disposed of in May 2010, had USD7m
Slide 24: Acquisition update
Acquisition update We continue to look for acquisitions... → We have developed good expertise and a strong record of integration → We have the internal capacity to manage further acquisitions → Valuations are still attractive → Environment presents interesting opportunities → Temenos leverage remain
Slide 25: Agenda
Agenda Introduction Sarah Bowman Investor Relations Strategy and Business update Andreas Andreades CEO Financial update David Arnott CFO Update on Viveo Max Chuard Director, M&A and IR Outlook and Summary Andreas Andreades CEO Q&A Slide 25
Slide 26: Summary
Summary Another quarter underlines improving market dynamics IT pivotal part of banks’ business plans to address: • Stricter and more fragmented regulation • Shoring up deposit base • Rapid growth (especially in emerging markets) • Improving customer experience (and rebuilding of trust) • M&A integr
Slide 27: Summary
Summary We are seeing good momentum across all regions, bigger deals • Strong Q2 like-for-like growth confirms our full year outlook • Solid start to Q3 • Pipeline continues to grow robustly across all regions and fully supports our full year outlook • Substantial margin improvement is based on: • l
Slide 28: 2010 Outlook
2010 Outlook • Revenue range of USD435-445m* (maintaining like-for-like growth of 6% at the midpoint) • Licence revenue of approximately USD150m (representing like-for-like growth of 12%) • Adjusted EBIT** range of USD110-115m unchanged (implying mid-point margin of 25.6% and growth of 24%) • EBITDA
Slide 29: Closing comments
Closing comments LTM revenues and adj. operating profit since Q3 2005 (USDm) Adjusted EBIT CAGR of 42% LTM Revenue Adjusted EBIT Slide 29
Slide 30: Agenda
Agenda Introduction Investor Relations Investor Relations Strategy and Business update Andreas Andreades CEO Financial update David Arnott CFO Update on M&A Max Chuard Director, M&A and IR Outlook and Summary Andreas Andreades CEO Q&A Slide 30
Slide 31: Appendices
Appendices a =mMOnae 9 -MENOS The Banking Software Company
Slide 32: Adjusted EPS reconciliation
Adjusted EPS reconciliation Q2 2010 Q2 2009 (USDm) (USDm) Net Earnings 7.8 7.5 Amortisation of acquired intangible assets 3.3 1.9 Bond interest 1.4 1.4 Restructuring 4.0 0.0 Earnings for adjusted EPS 16.5 10.8 Number of diluted shares* 72.5 68.3 Adjusted EPS 0.23 0.16 * Option dilution over last 3 y
Slide 33: Geographical breakdown of licence revenue
Geographical breakdown of licence revenue All Deals – Q2 2010 Slide 33
Slide 34: 2010 Outlook
2010 Outlook Reconciliation to revised outlook USDm Previous FX Disposals**** Revised outlook** outlook Revenue 440-450 (2)*** (3.0) 435-445 Adjusted 110-115 0.0 0.0 110-115 EBIT* *Adds back restructuring and amortisation of acquired intangibles. Amortisation of acquired intangibles expected to be U
Slide 35: Reconciliation of crystallised FX impact in Q2 10
Reconciliation of crystallised FX impact in Q2 10 Additional FX impact Currency Rates given Average rate in Impact weighting at Q1* Q2 2010 EUR/USD 25% 1.33 1.27 1.5 GBP/USD 5% 1.54 1.49 0.3 CHF/USD 1% 0.93 .90 0 1.8 *These are also the rates that apply to second half outlook Slide 35
Slide 36: Sensitivity to Foreign Exchange
Sensitivity to Foreign Exchange Euro Rate 1.25 1.30 1.35 FX Effect in USDm Revenue -4.0 -1.5 1.0 Cost -4.0 -1.5 1.0 EBIT 0 0 0 Slide 36
Slide 37: Thank You
Thank You ‘7 sm: FM fe) FA ed Bl F EMENOS The Banking Software Company