Temenos Ag · SIX:TEMN
Temenos — Investor Presentation (December 2008)
58 slides from Temenos's investor presentation, December 2008
Slide 1: TEMENOS Company Presentation
TEMENOS Company Presentation December 2008
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: An introduction to TEMENOS
An introduction to TEMENOS a =mMOnae FF eMENOS The Banking Software Company
Slide 4: Our History
OUR HISTORY A vision transformed into the leading provider of banking software systems… 1993 2007 1993 Key Statistics •Listed on SWX in 2001 2007 Key Statistics • 2 Offices •Acquired TCB for Retail Banking • 45 Offices • 34 Employees in 2001 • 2600+ Employees • 19 Banks • 600+ Banks in 120 •Launched
Slide 5: Our Market
OUR MARKET Temenos’ currently addressable market Distribution Channels CRM Banking Investment Services Insurance Business Intelligence Risk & Compliance Life Management Wholesale Treasury Private Asset & Retail/ Universal Capital Markets General General Support Payments Slide 5 13/11/2007
Slide 6: Our Value Proposition
OUR VALUE PROPOSITION Temenos’ products provide a quick and clear return on investment by: • Lowering cost Significantly lower infrastructure and maintenance costs through single integrated system • Enabling growth Cross-selling through single customer view Business agility through faster time to ma
Slide 7: Our Competition
OUR 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
Slide 8: Two Products
TWO PRODUCTS TEMENOS T24™ (T24): Private, Universal, Wholesale and Retail Banks Complementary, limited overlap COREBANKING (TCB): Large scale Retail Banks, 10m accounts+ Slide 8 13/11/2007
Slide 9: Product
PRODUCT • High R&D to maintain openness and best-of-breed functionality 22% 20% 18% 16% Temenos* 14% Peer 12% Group** 10% 8% 2003 2004 2005 2006 2007 • ‘Model bank to reduce installation time and complexity * Cash R&D: adjusted for difference between capitalised dev and amortisation ** SAP, I-Flex (
Slide 10: Unparalleled Breadth of Functionality
UNPARALLED BREADTH OF FUNCTIONALITY Available in To leverage investment in SOA environment component form Allows product to be tailored to different clients Web Call Centre Mobile Branch IVR Other systems BPEL engines Browser Open Financial Service (OFS) – Web Services - SOA Version Presentation Enq
Slide 11: Open and Scalable
OPEN AND SCALABLE Scalable: • more servers can be added Our products are rich in functionality, as volume of transactions open and scalable and number of users risers SCALE Presentation MQ, APIs BROWSER Excel etc Open: • built using industry SCALE Connectivity J2EE standards, such as XML SOA/SOAP SC
Slide 12: One Source Code
ONE SOURCE CODE • Upgrade is simple Client gets continual enhancements High No services input for client or maintenance Temenos and high • Upgrade is annual Temenos maintains all clients margin on on latest versions maintenance Presentation Parameters AND client can still customise locally Product P
Slide 13: Market Trends
MARKET TRENDS Spend on third party software growing much faster than internal development… Third-party software gaining bigger Global banking software spending proportion of banks’ software 80 budget 70 Third-party software** Internal spending* External software spending 60 CAGR 9% 25.5bn growing at
Slide 14: Growing Sales Coverage
GROWING SALES COVERAGE • A key growth driver Frankfurt (1) Vancouver Amsterdam remains the growth Warsaw LONDON (1) HEMEL HEMPSTEAD Seoul in sales coverage Moscow Dublin Luxembourg Bucharest • Temenos now Paris Almaty Zurich GENEVA(1) operates from 46 Montreal MADRID Orlando Athens Beirut Tokyo offi
Slide 15: Financial Update
Financial Update ‘7 sm: FM fe) FA ed Bl F EMENOS The Banking Software Company
Slide 16: Income Statement Highlights – Q3 2008
Income Statement Highlights – Q3 2008 Q3 2008 Q3 2007 yoy Licence revenue 35.3 28.0 26% Total revenue 100.4 70.8 42% EBIT 11.2 6.2 79% Cash from ops. 10.7 (6.4) 17.1 USDm Slide 16
Slide 17: Income Statement Detail
Income Statement Detail Q3 08 Q3 07 LTM 08 LTM 07 Licences 35.3 28.0 +26% 168.5 124.7 +35% Maintenance 25.4 19.3 +32% 94.6 69.5 +36% Services 39.7 23.5 +69% 147.0 89.1 +65% Total revenue 100.4 70.8 +42% 410.0 283.4 +45% R&D (19.2) (14.9) +28% (74.5) (47.9) +56% Cost of services (36.9) (21.6) +71% (1
Slide 18: Like-for-like revenue growth
Like-for-like* revenue growth Like-for-like growth was strong in the quarter across all revenue lines: l-f-l revenue in Q3 140 Acquisitions ** 120 100 vs. stated growth +29% +48% of 42% 80 Services USDm 60 Services +17% Maintenance 40 Maintenance +22% 20 Licence Licence 0 Q3 2007 Q3 2008 2007 restat
Slide 19: Like for like cost growth
Like for like cost growth Despite strong l-f-l revenue growth, underlying costs were down sequentially: Cash l-f-l costs Q308 vs. Q208 120 Non-cash Non-cash 100 FX Acquisitions -3% 80 60 L-f -l Cash L-f -l Cash 40 costs costs 20 0 Q2 08 Q3 08 vs. stated cost growth +4% Slide 19
Slide 20: DSOs – on course for year end target
DSOs – on course for year end target • 9 day decrease in DSOs in quarter, trend remains clearly downwards • On course to meet forecast of 10-15 day improvement in DSOs by end of 2008 190 DSO’s 185 184 Linear (DSO’s) 181 Projected Range 180 175 176 175 172 171 170 167 167* 165 157-162 160 155 150 Dec
Slide 21: EBITDA conversion – full year forecast reiterated
EBITDA conversion* – full year forecast reiterated • EBITDA conversion rebounded in Q3 and trend sustained. • Target for FY of 75% operating cash conversion on track. EBITDA Conversion Target Conversion LTM LTM Linear (EBITDA Conversion) revenue revenue growth: growth: +28% +59% 90% 85% 85% 83% 80%
Slide 22: Share buyback
Share buyback Temenos policy is to return free cash flow to shareholders through share repurchases. This has not changed. • In 2008 Temenos has approval for USD60m of share buybacks • So far we have used US34.6m purchasing our own shares • This leaves us with possibility to spend a further USD25.4m
Slide 23: Acquisition Update
Acquisition Update Slide 23 13/11/2007
Slide 24: Informer
Informer On 18 July 2008 Temenos acquired the core banking assets of Informer SA for USD40.3m This purchase gives Temenos: 15 T24/Globus clients with corresponding maintenance stream 100 staff, including 60 systems implementers Increased presence in Greece, Eastern Europe and the Balkans An immediat
Slide 25: Financial Objects
Financial Objects A recommended cash acquisition of Financial Objects at 60p per share was announced on 3 July 2008, to be implemented by scheme of arrangement By the announcement date, Temenos had irrevocable undertakings to vote in favour of the scheme from 46.7% of shareholders Meetings to obtain
Slide 26: Integration progressing well
Integration progressing well • Integration process now largely completed • Reiterate expected contribution: 2009: revenue USD20m, EBITA USD6.5m, adjusted EPS USD0.08 • Integration process on track, to be completed during Q4 • Reiterate expected contribution: 2009: revenue USD40m, EBITA USD9.4m, adju
Slide 27: Lydian – rationale and update
Lydian – rationale and update Rationale • Complimentary IP, maintenance base, relationship with Misys customers → Customer base with corresponding maintenance stream → Highly complementary Business Intelligence (BI) products that can be integrated with T24 DW to give rich BI product suite → Relation
Slide 28: Acquisitions – performance against objectives
Acquisitions – performance against objectives Financial Objects Informer SA Revenue USD20-50m √ √ Accretive to earnings √ √ Strengthen Distribution/ delivery √ √ Acquire Client Base √ √ No Diversification × × diversification: Temenos remains 100% committed to core banking domain Slide 28 13/11/2007
Slide 29: Acquisition strategy – no change to stated aims
Acquisition strategy – no change to stated aims We continue to look for: • Bolt-on acquisitions to boost organic growth • USD20-50m revenue • Accretive • Geographic expansion into markets where underrepresented • Market penetration through buying up customer bases • Entry into adjacent markets • Pip
Slide 30: Strategy and Business Update
Strategy and Business Update Slide 30 13/11/2007
Slide 31: Business update - licence sales
Business update - licence sales Strong growth in sales to new customers… New clients in Q1-Q3 08 at 35 vs. 30 in Q1-Q3 07 (+17%)… …and Q3 08 new clients at 13 vs. 9 in Q3 07 (+44%) … particularly in retail/universal → Retail and universal licence growth is up 80% in the last twelve months … and acro
Slide 32: Business update - licence sales
Business update - licence sales Despite lower proportion of T24 licence revenue coming from Tier 1 Banks… LTM 08 LTM 07 Tier 1: 15% Tier 1: 32% …we continue to record strong licence revenue growth, thanks to: • More deals • Better pricing (per user, per module pricing up 20% YTD) Slide 32
Slide 33: Business Update - Growth Initiatives
Business Update - Growth Initiatives • Increasing sales coverage • Broadening and deepening geographical coverage still biggest driver of sales growth • Our client base stands at over 650 banks… …out of 22,000 banks worldwide • We aim to have c.60 quota-carrying salespeople by the year end (55 at 30
Slide 34: Growth Initiatives – Metavante Partnership
Business Update - Growth Initiatives • Update on Partnership with Metavante: • TCB partnership progressing well at all levels • Partnership extended on 30 July to include joint marketing agreement for T24 • First joint T24 deal with EverBank was signed in Q3 • Despite very difficult regional market
Slide 35: Growth Initiatives – ARC
Business Update - Growth Initiatives • ARC: • ARC has so far been sold to 52 clients (10 in Q3) • ARC now represents 5% of total T24 licences (on LTM basis) • So far, good uptake of Internet Banking modules… • … and we expect faster adoption of CRM modules Slide 35
Slide 36: Business Update - Services
Business Update - Services Improving Sales and Margins, Becoming Best in Class Model Bank Used in projects from Q4 2006 onwards Q3 2008 highlights Proven to shorten implementation timeframes by 50% • Revenue up by 69% yoy TEMENOS Application Management TAM progressing in line with plan – headcount u
Slide 37: Business update - visibility
Business update - visibility As a reminder, the sales cycle for our software is 9-12 months → this is consistent with 2007, not elongating Our win rate remains above 80% → it was, in fact, above 85% in Q3 We have good deal coverage → the 12 month forward pipeline is 35% higher than at the start of 2
Slide 38: Business update – deal drivers
Business update – deal drivers Why do banks continue to take decisions in this environment? • As part of the sales process, we track the “compelling event” that obliges a prospect to replace its banking system at this time • The breakdown (by number of deals, not weighted) for Q3 was as follows: 5%
Slide 39: 2008 outlook
2008 outlook Previous New 2007 Outlook Outlook Actual y-o-y Licences 178.5 178.5 148.8 20% Revenue 444 444 329.9 35% Costs 355.4 355.4 267.4 EBIT 88.6 88.6 62.5 42% EBIT margin 20.0% 20.0% 18.9% 110bps Adjusted EPS* 1.40 1.40 1.03 36% • Despite tough economic conditions, strong trading at Q3 allows
Slide 40: Looking ahead – streamlining the business
Looking ahead – streamlining the business • Pro-forma revenue in 2008 is expected to be c.USD475m The product of: → 5 years of rapid growth → 3 acquisitions in 2 years • Size and scale allow us: • To deliver industry-standard margins… • …with sustainable revenue growth Slide 40
Slide 41: Looking ahead – streamlining the business
Looking ahead – streamlining the business • The scope of the integration process for our two recent acquisitions has been extended to encompass a broader group-wide streamlining programme in Q4… • To remove some excess costs in the business • To channel spending into growth areas of the business • T
Slide 42: Looking ahead - 2009
Looking ahead - 2009 Our previous assumptions for 2009 were as follows: • 20 - 25% organic revenue growth for 2009 • 200-300bps margin improvement, which… • …adding USD0.16 accretion from acquisitions… • …gives c.40% EPS growth Based on what we see, no reason for us to change outlook… → Pipeline of
Slide 43: Looking ahead - 2009
Looking ahead - 2009 Nonetheless, given lower base cost going into 2009 … …earnings growth protected even using more pessimistic assumptions: Illustration of 2009 EBIT with zero licence growth 4 USD89m (margin:20%) Outlook EBIT 2008 3 USD20m Locked-in maintenance growth 2009 2 USD21m Reduction in co
Slide 44: Looking ahead – structural drivers more relevant than ever
Looking ahead – structural drivers more relevant than ever Banks are still taking decisions because need for new systems critical… … and likely to become even more so: What banks are facing What this means • Higher credit costs • Need to cut costs • Slow-down in high-margin • Need to grow retail bus
Slide 45: Appendices
Appendices ‘7 sm: FM fe) FA ed Bl F EMENOS The Banking Software Company
Slide 46: Business update – still executing strongly
Business update – still executing strongly We continue to grow ahead of our plan on both T24 and TCB, underpinned by: Superior products Win ratio at above 80% Compelling investment and product roadmap Broad geographical reach Growing sales force Services initiatives of model bank, business consultin
Slide 47: Non-operating income and expense
Non-operating income and expense Income Statement Detail Q3 08 Q3 07 LTM 08 LTM 07 EBIT 11.2 6.2 +79% 71.5 45.7 +57% Net Finance charge (2.3) (1.0) +130% (4.6) (2.4) +92% FX (loss)/gain (3.6) 4.7 n/a (2.3) 5.7 n/a Tax (0.2) 0.0 n/a 0.3 (2.9) n/a Net earnings 5.0 9.9 -49% 64.9 46.1 +41% Adjusted EPS*
Slide 48: Financing and balance sheet
Financing and balance sheet On balance sheet cash: USDm At Start of year: 93.1 Plus free cashflow outlook for 2008 60.0 Less returned to shareholders through buyback (60.0) Forecast cash at year end 93.1 Debt facility* 220.0 Less debt assumed in relation to two acquisitions (69.6) Remaining debt fac
Slide 49: Research and Development
Research and Development USD millions Q3 08 Q3 07 % 12 mths to Sept 08 Sept 07 % R&D Costs – as reported 19.2 14.9 29% 74.5 47.9 56% Capitalised development costs 5.1 4.1 18.7 15.6 Less Non cash items (4.3) (3.6) 19% (17.1) (12.0) 42% Less ACTIS* 0.0 0.0 (3.9) 0.0 Less Informer (0.1) 0.0 (0.1) 0.0 L
Slide 50: Sales and Marketing
Sales and Marketing USD millions Q3 08 Q3 07 % 12 mths to Sept 08 Sept 07 % S&M costs – as reported 20.2 19.6 3% 77.8 63.3 23% Less non-cash (2.4) (1.8) (6.8) (4.3) Less ACTIS* 0.0 0.0 (1.1) 0.0 Less Informer (1.4) 0.0 (1.4) 0.0 Less Financial Objects (0.2) 0.0 (0.2) 0.0 Currency impact n/a 0.3 n/a
Slide 51: General & Administrative Costs
General & Administrative Costs USD millions Q3 08 Q3 07 % 12 mths to Sept 08 Sept 07 % G&A costs – as reported 13.0 8.4 55% 48.7 42.4 15% Less non-cash (2.9) (1.3) (9.9) (7.4) Less ACTIS* 0.0 0.0 (0.6) 0.0 Less Informer (0.1) 0.0 (0.1) 0.0 Less Financial Objects (0.3) 0.0 (0.3) 0.0 Currency impact n
Slide 52: Revenues by region LTM Q3 2008 vs. 2003
REVENUES BY REGION LTM Q3 2008 vs. 2003 Revenues - Full Year 2003 Revenues – LTM Q3 2008 Asia Asia 18% 14% Americas 8% Americas 14% • More global EMEA 68% • More diversified EMEA 78% Licence Revenues - Full Year 2003 Licence Revenues – LTM Q3 2008 Asia Asia 17% 21% Americas Americas 20% EMEA 11% EME
Slide 53: Impact of deferred tax assets on the effective tax rate
Impact of deferred tax assets on the effective tax rate EFFECTIVE TAX2007 As at 31 December RATEthe Group has significant unrecognised deferred tax assets (DTAs). These arise from: Losses carried forward Taxable temporary differences arising from repatriation of the group’s software intellectual pro
Slide 54: Metavante Agreement
METAVANTE AGREEMENT Potentially exercisable warrants (2007-12) Cumulative Revenue target -Temenos Cumulative warrants exercisable* USD128m 1m USD145m 2m USD195m 2.5m *At CHF19.9 Slide 54
Slide 55: TEMENOS enters the SMIM
TEMENOS enters the SMIM On 8/7/2008, Swiss Exchange announces that Temenos will join SMIM (mid-cap) index The adjustments will be made after closing on September 19th, and take effect on September 22nd Selection is based on average market capitalisation and traded volumes from July 2007 to June 2008
Slide 56: Leading the IBS league table
Leading the IBS league table First place in the 2007 IBS Sales League Table Corebanking Positions Position Product Company Deals 1 T24 TEMENOS 44 2 TCS BANCS TCS 24 3 Flexcube i-flex 20 • Top two positions in the IBS Sales League Table for 9 out of the last 10 years • Second place vendor has 20 fewe
Slide 57: TEMENOS' awards
TEMENOS’ awards TEMENOS’ products are multi award winning. In 2007, awards included: T24 was named no.1 best-selling core banking system in 2007 in the IBS Journal’s annual sales league table. Martin Whybrow, editor, commented, “The company has an established, strong product combined with a large an
Slide 58: Thank You
Thank You ‘7 sm: FM fe) FA ed Bl F EMENOS The Banking Software Company