Temenos Ag · SIX:TEMN
Temenos — FY2008 Earnings Presentation
40 slides from Temenos's earnings presentation, Feb 18, 2009
Slide 1: Financial Results & Business Update
Financial Results & Business Update Quarter and year ended 31 December 2008 18 February 2009
Slide 2: Presentation Overview
Presentation Overview Agenda Speaker Position Introduction Ben Robinson Associate Director, IR & Strategy Strategy and Andreas Andreades CEO Business Update Financial Update David Arnott CFO Outlook and Summary Andreas Andreades CEO Q&A Andreas Andreades CEO David Arnott CFO Max Chuard Director Slid
Slide 3: 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 4: Strategy and Business Update
Strategy and Business Update Andreas Andreades CEO
Slide 5: 2008 Highlights
2008 Highlights • Revenue growth of 23% • Adjusted EPS growth of 10% • Operating cashflow of USD56m • 48 new customer wins • Successful completion and integration of 3 acquisitions • Strengthened management team across several areas • Further independent recognition of product • Record number of go-
Slide 6: Quarter 4 2008
Quarter 4 2008 After 3 outstanding quarters... ...Q4 proved to be a difficult quarter for Temenos: • For the first time since the start of the credit crisis, customers delayed signings • Extreme macro uncertainty made some CEOs reluctant to commit to projects • >10 deals slipped out of the Q4 foreca
Slide 7: Overview of FY Sales
Overview of FY Sales Taking the year as a whole, headline licence growth flat... → +1% in reported terms → -1% in like-for-like terms ...reflecting lack of growth in new name clients → new name clients at 48 vs. 49 in prior year The clients were also smaller... → Last significant tier 1 deal was in
Slide 8: ARC and Misys replacements progressing well
ARC and Misys replacements progressing well ARC • We sold 35 ARC licences in 2008, up 21% year on year... • ...reflecting increased take-up from the installed base... • ...where no of sales was up almost 90% year on year Misys replacements • The average deal size of the Misys deals continues to rise
Slide 9: Overview of new customer sales
Overview of new customer sales New clients varied across regions: FY 2008 FY 2007 New clients (number) 15% 14% 27% MEA 37% MEA Europe 12% Europe 21% Americas Americas APAC APAC 37% 37% FY 2008 FY 2007 New clients (licence value) 12% 17% 28% 29% MEA MEA 23% Europe Europe 15% Americas Americas APAC AP
Slide 10: Update on Metavante Partnership
Update on Metavante Partnership TCB • In January, Everbank become the first adopter of the Global Customer Information Management (CIM) product, a component of Metavante’s next- generation core processing solution, which is based on Temenos’ TCB solution. • Together we continue to invest in TCB for
Slide 11: Update on acquisitions
Update on acquisitions Integration of Informer and Financial Objects largely complete... • Staff have been integrated with the Temenos team At the time of the • Salesforce retrained to sell T24 acquisitions, we guided for USD3.1m (USD2.5m • Offices amalgamated at 2009 FX) of cost synergies We now ex
Slide 12: Update on acquisitions: Lydian Associates
Update on acquisitions In November we acquired Lydian Associates Our Business Intelligence product • the acquisition greatly enhances our Business Intelligence suite, Temenos offering... Insight, has the • ...allowing our clients to use a pre-packaged range of potential to be as analytical tools to
Slide 13: Update on acquisitions
Update on acquisitions Until revenue visibility improves, acquisition policy will be pragmatic • Our aim is to balance capital protection... • ...with the opportunity to make strategic acquisitions... • ...at attractive valuations • ...that can be easily absorbed... • ...and will deliver quick but s
Slide 14: Services Update
Services Update In 2008, we achieved a record number of go-lives... • In 2008, 44 T24 customers went live (vs. 36 in 2007) • Peak number of concurrent projects handled by our services team was >150 ... reflecting the success of services initiatives • Temenos Application Management, Temenos Implement
Slide 15: Introducing New Partner Programme for 2009
Introducing New Partner Programme for 2009 Why are we launching a partner programme? • To create a scalable growth model for Temenos • Create a community to deliver complete solutions • Create indirect sales channel for T24 • To cater for tier 1 banks Why now? • Temenos is ready • Temenos and the co
Slide 16: Introducing New Partner Programme for 2009
Introducing New Partner Programme for 2009 What are the plans? To attract and certify a community of partners consisting of: • Management consultants/ System Integrators • Staff Augmenters • Technology Partners When will it start to deliver? • Director appointed, programme launched in January • Alre
Slide 17: Financial Update
Financial Update David Arnott CFO
Slide 18: Income Statement Highlights – FY 2008
Income Statement Highlights – FY 2008 FY 2008 FY 2007 yoy Licence revenue 150.1 148.8 +1% Total revenue 406.9 329.9 +23% EBIT 64.0 62.5 +2% Adjusted EPS* 1.13 1.03 +10% *Adjustments in 2008 total USD13.1m – see appendix for reconciliation USDm, except EPS USD Slide 18
Slide 19: Income Statement Highlights – Q4 2008
Income Statement Highlights – Q4 2008 Q4 2008 Q4 2007 yoy Licence revenue 49.9 68.3 -27% Total revenue 122.2 125.3 -2% EBIT 36.1 43.7 -17% Adjusted EPS* 0.73 0.66 +11% *Adjustments total USD5.1m – see reconciliation in appendix USDm, except EPS USD Slide 19
Slide 20: Income Statement Detail
Income Statement Detail USDm Q4 08 Q4 07 FY 08 FY 07 Licences 49.9 68.3 -27% 150.1 148.8 +1% Maintenance 28.4 21.7 +31% 101.2 76.3 +33% Services 44.0 35.3 +25% 155.7 104.7 +49% Total revenue 122.2 125.3 -3% 406.9 329.9 +23% R&D (17.5) (17.0) +3% (74.9) (57.1) +31% Cost of services (33.5) (30.2) +11%
Slide 21: Like-for-like revenue growth
Like-for-like* revenue growth Q4 08 l-f-l growth -7% FY 08 l-f-l growth +16% 140 450 USDm USDm Acquisitions 400 Acquisitions USD20.7m USD11.6m 120 350 100 Services +38% 300 Services Services +21% Services 80 250 Maintenance 60 Maintenance +13% 200 Maintenance Maintenance +20% 150 40 Licence 100 Lice
Slide 22: Non-operating income and expense
Non-operating income and expense Income Statement Detail Q4 08 Q4 07 FY 08 FY07 EBIT 36.1 43.7 -17% 64.0 62.5 +5% Net Finance charge (1.9) (0.8) +155% (5.8) (3.1) +85% FX (loss)/gain 8.4 1.0 +724% 5.1 5.0 +2% Tax 1.9 0.3 +597% 1.9 0.3 +589% Net earnings 44.5 44.3 +1% 65.2 64.7 +1% Adjusted EPS* 0.73
Slide 23: Balance sheet – debt and funding
Balance sheet – debt and funding Value (USDm) Comments Existing Debt Convertible bond 128.5 1.5% coupon, matures 2013 Credit facilities 56.8 Consortium of 7 banks, repayment up to end of 2012 Other 1.1 Obligations under finance leases Total 186.4 Cash 65.6 Held in short-term deposits Unusued facilit
Slide 24: Balance Sheet – significant movements
Balance Sheet – significant movements Trade receivables - as reported Balance 2008 2007 ∆ Trade receivables 279.4 187.1 +49% Receivables (Current) have only increased in line Trade receivables 8.2 26.0 (68%) with revenue (non-current) growth... Total 287.6 213.1 +35% Trade receivables - restated for
Slide 25: DSOs – still tracking down
DSOs – still tracking down 4 day decrease in DSOs in year, trend remains downwards DSO’s 190 184 Linear (DSO’s) 181 180 175 176 172 171 167 170 167 168 160 150 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Sustained improvement driven by Shorter implementation times: Down from avera
Slide 26: Total Operating Expenses
Total Operating Expenses A sequential fall in operating expenses in Q4, ‘09 cost base materially lower The cost base is under control and coming 140 down sequentially... USDm 120 ...setting the foundations for strong 100 cash and margins in 85.8 89.2 86.1 81.9 2009 77.5* 80 Revenue 60 Operating cost
Slide 27: Outlook and Summary
Outlook and Summary Andreas Andreades CEO
Slide 28: 2009 Outlook
2009 Outlook Revenue visibility remains limited... • In Q4, the level of uncertainty was high and some CEOs were unwilling to commit to large capex projects • Still uncertainty exists ...Therefore, we give outlook on margins and costs, instead of revenues • We target operating margins of 19% to 20%
Slide 29: 2009 Outlook: cash generation
2009 Outlook We expect cash generation to be strong... Given higher D&A • We expect EBITDA into operating cashflow conversion of no in 2009, we expect less than 75% c.100% • D&A likely to be USD30m in 2009 given higher amortisation conversion of from acquisitions operating profit • Cash cost savings
Slide 30: Concluding remarks
Concluding remarks We have shown that we can grow BOTH revenue AND margin: LTM Revenue and Operating Margin since Q2 2005 80 450 70 400 60 350 300 50 250 40 200 Revenue 30 150 EBIT 20 100 10 50 0 0 Dec-05 Dec-06 Dec-07 Dec-08 Sep-05 Sep-06 Sep-07 Sep-08 Jun-07 Jun-05 Jun-06 Jun-08 Mar-06 Mar-07 Mar-
Slide 31: Concluding remarks
Concluding remarks Despite disappointing finish to the year, we remain well placed... • Our business model remains unique in core banking → Packaged solutions, high R&D, single annual release • We are the market leader → Highest sales in core banking market, win rate >80% • We are enjoying the advan
Slide 32: Appendices
Appendices ‘7 sm: FM fe) FA ed Bl F EMENOS The Banking Software Company
Slide 33: Adjusted EPS reconciliation
Adjusted EPS reconciliation Q4 FY Earnings 44.5 65.2 Amortisation of acquired 1.2 5.1 intangible assets Restructuring 2.5* 2.5* Bond Interest 1.3 5.5 Total Adj Earnings 49.5 78.3 Total Diluted # of shares 67.4 69.1 Adjusted EPS 0.73 1.13 All figures in USDm, except shares in m *USD1m for Financial O
Slide 34: EBITDA conversion
EBITDA conversion* 83% 85% 90% 85% 80% 68% 64% 70% 63% 63% 64% 54% 60% 50% 40% 30% 20% 10% 0% Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 * Conversion of LTM EBITDA in LTM operating cash flow Slide 34
Slide 35: Reconciliation to lower cost run rate
Reconciliation to lower cost run rate USDm Coming from: Given lower FX effect on • acquisition Includes than revenues synergies full expected also • office consolidation variable revenues c.USD27.5m • offshoring more costs 390 383 support functions, services capacity, 12.5 development 370 27.5 350 3
Slide 36: Research and Development
Research and Development USD millions Q408 Q4 07 % 12 mths to Dec 2008 2007 R&D Costs – as reported 17.5 17.0 3% 74.9 57.1 31% Capitalised development costs 6.6 6.0 19.9 16.9 Less Non cash items (7.9) (4.0) 98% (21.1) (13.8) 53% Less ACTIS* 0.0 0.0 (1.4) 0.0 Less Informer (0.1) 0.0 (0.2) 0.0 Less Fi
Slide 37: Sales and Marketing
Sales and Marketing USD millions Q408 Q407 % 12 mths to Dec 2008 2007 S&M costs – as reported 19.4 22.3 (13)% 74.9 71.8 4% Less non-cash (0.4) (0.8) (6.2) (3.8) Less ACTIS* 0.0 0.0 (0.2) 0.0 Less Informer (1.7) 0.0 (3.1) 0.0 Less Financial Objects (1.2) 0.0 (1.4) 0.0 Currency impact n/a (1.3) n/a 0.
Slide 38: General & Administrative Costs
General & Administrative Costs USD millions Q4 08 Q4 07 % 12 mths to Dec 2008 2007 G&A costs – as reported 15.7 12.1 30% 52.3 41.5 26% Less non-cash (2.6) (1.9) (10.7) (8.4) Less ACTIS* 0.0 0.0 (0.4) 0.0 Less Informer (0.1) 0.0 (0.2) 0.0 Less Financial Objects (2.6) 0.0 (2.6) 0.0 Currency impact n/a
Slide 39: Impact of deferred tax assets on the effective tax rate
Impact of deferred tax assets on the effective tax rate EFFECTIVE TAX RATE As at 31 December 2008 the 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 p
Slide 40: Thank You
Thank You ‘7 sm: FM fe) FA ed Bl F EMENOS The Banking Software Company