Temenos Ag · SIX:TEMN
Temenos — Investor Day (February 2013)
87 slides from Temenos's investor day presentation, Feb 27, 2013
Slide 1: Winning with products in a multi-speed world
Winning with products in a multi-speed world Analyst & Investor Event 27 February 2013
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: Running order for today
Running order for today 10.00 to 10.45 Our strategic plan David Arnott, CEO 10.45 to 11.30 Products Mark Winterburn, Group Product Director Mark Gunning, Director of Business Solutions 11.30 to 11.45 Coffee 11.45 to 12.15 Services and Partners Mike Davis, Global Head of Services Mike Head, Director
Slide 4: Key takeaways
Key takeaways In H2 2012 we laid the foundations for sustained growth Addressing a USD26bn market opportunity, underpinned by structural growth drivers Strategy builds on sound fundamentals and capitalises on strong product assets and installed base opportunity We are a true multi-product company wi
Slide 5: Agenda
Agenda The market opportunity Our credentials Our strategic plan 5
Slide 6: Market opportunity
Market opportunity Bank spend on third-party software today: a USD 5.5bn market* USD 1.4bn USD 1.8bn USD 1.3bn USD 1.0bn Core banking Wealth BI Channels *Licence and maintenance spend Source: Gartner, IDC, Celent, Temenos estimates Organisation aligned around market that is 3x bigger than in 2009 6
Slide 7: Market drivers
Market drivers Bank challenges Bank opportunities Regulation Economic growth A newly empowered customer Demographics More intense competition Innovation Financial Services industry undergoing generational shift 7
Slide 8: Why haven't banks been renovating systems?
Why haven’t banks been renovating systems? Bank factors Supplier factors Investment horizons shortened Componentisation/progressive during crises renovation story was immature Renovation was conditional on moving Profitable enough to defer decisions to newer technologies Suppliers lacked critical ma
Slide 9: The profitability gap
The profitability gap Banks RoE levels globally Pre-crisis Global financial crisis New normal Profitability gap 6% 6% pts 16% 10% 10% 9% 7% 4% 1980-2007 average 2008 2009 2010 2011 2012 Source: BCG, Thomson Reuters 9 [ structural] and cannot be ignored Profitability pressures are 9
Slide 10: The expectations gap
The expectations gap Banking customers want They have alternatives They are voting with their feet 65% A provider they trust Traditional banks Consistent, interactive New banks experience across all channels Use comparison sites for best deals One view of their bank High Street retailers 69% Online
Slide 11: Agenda
Agenda The market opportunity Our credentials Our strategic plan 11
Slide 12: Our value proposition
Our value proposition Our products are open, integrated, componentised and upgradable, supported Sustainably Economies by a dedicated lower cost of scale professional services Low cost, organisation and highly automated, a strong partner scalable systems ecosystem. Rapid launch of personalised produ
Slide 13: Leading the competition
Leading the competition “Temenos has been the one of two firms in our Global Power Sellers >35 new named deals; more than 4 regions* Temenos category since Forrester introduced the global vendor pyramid for the 2006 global Infosys / Tata banking platform deals survey” Consultancy >15 named deals; mo
Slide 14: The largest installed base
The largest installed base Core banking installed bases by region in 2012 PWM installed bases in 2012 700 180 Temenos 600 160 Oracle 500 TCS 140 SAP 120 400 Infosys 100 300 80 200 60 40 100 20 0 0 Europe Africa APAC North America Latam Temenos ERI Avaloq Notes: Fidelity (FIS) includes ACBS and Profi
Slide 15: Growth in top tier customers
Growth in top tier customers 2012 % of Temenos licence revenue 37% 2007 63% 22% 1999 4% 78% Tier 1 and Tier 2 banks account for 60%+ of Tiers 1 and 2 application spending in 96% Tiers 3, 4 and 5 Financial Services Temenos’ customers include 60% of the world’s tier 1 banks 15
Slide 16: The highest R&D in the industry
The highest R&D in the industry 35 30 25 % of revenues 20 Temenos spends 15 on average 20% of sales on R&D, 10 more than 2x the industry average 5 Source: Company Annual 0 Reports, Temenos estimates 2003 2004 2005 2006 2007 2008 2009 2010 2011 *Normalised cash R&D – adjusted for difference between c
Slide 17: The most profitable banks run Temenos
The most profitable banks run Temenos Performance of Temenos customers compared to banks using both other third-party systems and legacy applications Return on assets Return on capital Cost / income 1.2% 14% 64% 1.0% 12% 62% 25% 30% 37% 46% -7.4% -8.5% 10% 60% 0.8% 58% 8% 0.6% 56% 6% 0.4% 54% 4% 52%
Slide 18: Agenda
Agenda The market opportunity Our credentials Our strategic plan 18
Slide 19: Strategic plan in context
Strategic plan in context Build Scale Lead 1993 to 2002 2003 to 2011 2012 onwards Domain focus Built out regional structure True multi-product focus Truly global Expansion of addressable market Multi-deployment options Single packaged product M&A programme Realising installed base opportunity Partne
Slide 20: Management and governance
Management and governance Board of Directors David Arnott Max Chuard CEO CFO Mark Winterburn Product Director Andreas Andreades Chris Pavlou George Koukis Central functions Executive Chairman INED, Vice-Chairman Non-Executive Mark Gunning Pre-Sales Director Mike Davis Services Director Mike Head Str
Slide 21: Strategy aligned to market growth
Strategy aligned to market growth 3% 10% Size of bubbles reflects market size PWM Islamic Universal Competitive Channels intensity Retail Payments Lending AML Risk Business intelligence Corporate T1&2 Retail Key Core banking BI PWM Channels Other Market/segment software growth CAGR 2012-14e An addre
Slide 22: Converting internal spending to external spending
Converting internal spending to external spending Third party spend & total spend on banking software today* Core banking Wealth BI Channels USDbn 30 USD 26.0bn 25 5.6 20 3.0 15 4.5 10 USD 5.5bn 12.9 5 0 Spend with third-parties today Total spend on banking software today *Licences and maintenance S
Slide 23: Installed base opportunity
Installed base opportunity Temenos has more than 1,200 customers using its software (>1,000 discrete financial institutions) Penetration rates across our product sets remain low (e.g. Insight at 20%, Internet banking at 18%) There is a significant revenue opportunity coming from relicensing customer
Slide 24: Our strategic plan: licences and maintenance
Our strategic plan: licences and maintenance Focus on product Sustainably grow licence and maintenance revenues Focus on reusable product investment Underpins margin expansion and DSO reduction Focus on target areas of growth Core banking to grow slower Channels, PWM, BI expected to be high growth a
Slide 25: Our strategic plan: services
Our strategic plan: services Higher margin services supporting product business 20% to 25% of group revenues Higher value-add expert and productised services, driving even better levels of customer success Reducing implementation times Maximising reusability Reduced cost base providing operational l
Slide 26: Our strategic plan: partners
Our strategic plan: partners Partner strategy moving into the next phase Totally aligned with services strategy, leveraging partners to support growth Partners to drive growth in licensing, instrumental in opening up key segments and markets Services partners taking greater role on projects, leading
Slide 27: M&A complementing growth
M&A complementing growth Increased scale Accelerated growth in key markets and A three-pronged segments approach Complementary products 2007 2008 2009 2010 2011 2012 27
Slide 28: Medium term targets
Medium term targets 10%+ licence Economies Shorter growth of scale 100-150bps of projects margin Cash Higher expansion New / conversion 5%+ revenue services existing mix over 100% margins growth on average More cash per annum Revenue mix up-front per annum shift per annum Significant, sustained shar
Slide 29: TCF 2013 - Abu Dhabi
TCF 2013 - Abu Dhabi 14- 16 May 2013 • Great venue • Lots of new product launches • Separate Investor track • Eminent industry speakers • Meet senior management • Hear directly from our customers 29
Slide 30: Thank you
Thank you www.temenos.com
Slide 31: Winning with products in a multi-speed world: Products
Winning with products in a multi-speed world Products – Mark Winterburn and Mark Gunning 27 February 2013
Slide 32: Agenda
Agenda A product company Architecture Leveraging product Our four key markets Temenos Connect demo 32
Slide 33: Product within the strategic plan
Product within the strategic plan Build Scale Lead 1993 to 2002 2003 to 2011 2012 onwards A solid product foundation Expand addressable market True multi-product Clear strategy Investment in architecture Leverage R&D Investment in functionality Product acquisition Multi-deployment options Core banki
Slide 34: Temenos' Product Principles
Temenos’ 8 Product Principles High investment, upgradeable regular releases Supports predictable and Highly flexible progressive implementation Modular/ 8 product Model banks and componentised principles country models Modern, open Product breadth technology Front to back, seamless integration 34
Slide 35: A proud history of innovation…
A proud history of innovation… GUI SOA XML Open Multi 24/7 Process Models Cloud Platform Integration DB entity Workflow Framework Framework 1993 2012 Retail banking, Corporate banking, Treasury, Lending, Payments back office, Securities Trade finance Front office – CRM Internet banking Insight Busin
Slide 36: …extending into the future
…extending into the future Data Interaction Design Componentisation Framework framework Framework framework 1993 2012 Retail banking, Corporate banking, Treasury, Lending, Payments… Temenos Enterprise Payments Platform Trade finance Front office – CRM Trade finance (forfeiting & factoring) Internet
Slide 37: Agenda
Agenda A product company Architecture Leveraging R&D Our four key markets Temenos Connect demo 37
Slide 38: Platform framework
Platform framework Exploiting platform resources for • Connectivity • Scalability • Clustering • Database connectivity • Authentication Deployment neutral • On Premise • Community/hybrid Cloud • Cloud Applications deployed natively on major stacks 38
Slide 39: Integration framework
Integration framework Synchronous/asynchronous integration Faster implementations Standard middleware and ESB Interface building 10x faster Project delivered in 3 months vs. 12 months A step change in implementation time and complexity 39
Slide 40: Architectural frameworks
Architectural frameworks Interaction Design Data Component Framework Framework Framework Framework What is it? What is it? What is it? What is it? • Separation of user • Single environment to • Separated and specialised • Separation of the logic of experience configure and control read-write and rea
Slide 41: Agenda
Agenda A product company Architecture Leveraging product Our four key markets Temenos Connect demo 41
Slide 42: Leveraging the product group
Leveraging the product group One Product team • One product and development team across all products • Global view of priorities, skills, utilisation etc. • Common use of process, tooling and methodologies Maximum re-use • Triage process on all significant projects • True “bespoke” work sub-contract
Slide 43: Agenda
Agenda A product company Architecture Leveraging product Our four key markets Temenos Connect demo 43
Slide 44: Market dynamics
Market dynamics Market Dynamics Our products Main players Temenos USD 1.8bn, growing at c.3.5%* pa Core Oracle Hottest areas: Islamic, South Asia, ME, T24 banking Infosys, TCS LatAm SAP USD 1.0bn, growing at c.9.5%* pa TAP / WM Temenos PWM Hottest areas: Emerging markets, mass T24 Avaloq affluent, I
Slide 45: Core banking: market drivers and value proposition
Core banking: market drivers and value proposition Market drivers Value proposition Single customer view – cross-selling New regulation – lowering RoE capabilities More intense competition – losing more Product builder – rapid launch of profitable customers personalised, innovative products Less loy
Slide 46: Wealth: market drivers and value proposition
Wealth: market drivers and value proposition Market drivers Value proposition New regulation – lowering RoE, changing cost to 360° integrated view of assets to afford serve and risk profile of certain customer types best advice and service Competition - retail banks for mass affluent market, Scalabl
Slide 47: BI: market drivers and value proposition
BI: market drivers and value proposition Market drivers Value proposition Pressure on profits highlighting need for Deep domain knowledge - translated into customer analysis to identify retention and pre-packaged reports and dashboards and cross-selling opportunities analytical applications Heighten
Slide 48: Channels: market drivers and value proposition
Channels: market drivers and value proposition Market drivers Value proposition Ability to build one UI and deploy across Proliferation of different channels over which multiple channels, products, users, languages to bank – multiple access devices (tablets, and devices – 5-fold improvement in smart
Slide 49: Selected Roadmaps
Selected Roadmaps Advanced relationship-based pricing Core Supply Chain Finance banking Advanced Islamic functionality Advanced loan collections & leasing Wealth client and professional users tablets Front and back end process integration Wealth Smart order entry and pre-trade compliance FATCA withh
Slide 50: Agenda
Agenda A product company Architecture Leveraging product Our four key markets Temenos Connect demo 50
Slide 51: What is a User Experience Platform?
What is a User Experience Platform? Device Language Brand Targeted Users Social “User Experience Platform” Banking & non-banking capabilities A new approach to a generational shift in technology and customer behaviour 51
Slide 52: Demo – Temenos Connect
Demo — Temenos Connect PF GBP 35.00 OF Gap 55.75 °F Gap 6.00 e TEMENOS The Banking Software Company 52
Slide 53: Product summary
Product summary Building products – we have a great track record Acquiring products – we know what to buy and we know how to integrate Core Banking – Clear leadership position PWM – Clear leadership position Channels – Acquisition of Edge has allowed us to leapfrog the competition Business Intellige
Slide 54: Thank you
Thank you www.temenos.com
Slide 55: Winning with products in a multi-speed world: Services and Partners
Winning with products in a multi-speed world Services and Partners – Mike Davis and Mike Head 27 February 2013
Slide 56: Agenda
Agenda Services Partners e TEMENOS The Banking Software Company 56
Slide 57: The services business today
The services business today 89 go-lives, serving 59m end customers, processing 4bn banking transactions a year 161,000 days of consultancy, to over 200 customers Partners involved in 80% of Temenos projects Margin improvement Forrester Wave highest score for Services vs Competitors 57
Slide 58: Services strategy for a product company
Services strategy for a product company Highest levels of execution Regional delivery Reducing implementation times Accountability within the regions Delivery excellence Global support remains Referenceability Rich methodologies and model banks Supportive partner model Higher value / higher margin o
Slide 59: Regional ownership
Regional ownership Regional ownership & Central support & accountability governance Governance Productised Europe Americas Asia MEA services Expert services Delivered by the regions with central support 59
Slide 60: Productised services
Productised services Sold like a product Repeatable, predictable, proven Delivering expertise and added value Licence sales enablers Education: key growth area delivered Demonstrable value for clients through multiple channels High impact, high value, high margin services 60
Slide 61: Examples of productised services
Examples of productised services Rapid Temenos Mobile Performance Healthcheck Temenos Mobile in 100 days Controlled scope Benefit to all clients for streamlined using all products delivery “We are extremely satisfied…..massive Short engagement – improvement in quarter Dedicated Centre circa 2 weeks
Slide 62: Highest levels of execution: implementation time
Highest levels of execution Model Bank….TIM….Country platforms….Partners….Integration framework Continual enhancement Risk reduction Implementation time - months 20 Product centricity Customer success 15 10 5 2008 2009 2010 2011 2012 2013 Average implementation times are falling 62
Slide 63: Financial impact
Financial impact Services reducing as % of group revenue Changing mix of services revenues in the medium term • increasing % of high-value services • falling % of revenue from implementations Returning services to profitability • increasing % of high margin services • reduced cost base • fixed cost
Slide 64: Agenda
Agenda Services Partners e TEMENOS The Banking Software Company 64
Slide 65: What is a partnership?
What is a partnership? ‘e TEMENOS The Banking Software Company 65
Slide 66: Aligning with partners to maximise impact
Aligning with partners to maximise impact Technology partner Complementary solution partner Services partners Powered by Temenos Plus 13 regionally based partners Plus Regional and Local 66
Slide 67: Partners in numbers
Partners in numbers Licences brought by partners vs no. of partner consultants % Licence brought by partners (LHS) • 14% of licence revenue in Partner consultants (RHS) 2012 16% 2,000 • 18 deals in 2012 across Asia, 12% 1,500 Middle East, Africa and Europe 8% 1,000 • Partners involved in projects as
Slide 68: Update on service partners
Update on service partners ASP & Hosting interest growing • Fortress Data Services - 6 clients, 2 live, < 18 months from start • 3 major partners looking at private wealth ASP New products & new markets • Edge – CGI, Accenture, Deloitte and Cognizant for banking & beyond Customer specific developmen
Slide 69: Lifecycle of a partner
Lifecycle of a partner Staff augmentation Appoint Temenos sales staff Deliver full projects Appoint more Temenos sales staff Move into new Temenos product areas Success generates its own momentum 69
Slide 70: Technology partners
Technology partners • PureFlex performance test (IBM, TAFJ and TAFC) • TAFJ system z (mainframe) benchmark • exalogic / exadata performance test (1,770 tps) multi node Oracle RAC • Oracle Data Appliance for smaller customers • Windows Azure performance & scalability test • Extension of MCB on Azure
Slide 71: Scaling the programme
Scaling the programme Regions Corporate Active inclusion of partners in the Development and support of new territory initiatives for partners Approval of new partners & Execution of sales targets removal of non performers Governance on ALL partner projects Corporate partner marketing in the region P
Slide 72: Taking the programme to the next level
Taking the programme to the next level USD1bn Revenue opportunity The value of services opportunity around Temenos applications Self-sustaining People Generate Investment sales, deliver • Consultants growth in key • Pre-sales geographies and segments Partners moving from implementation support to sa
Slide 73: Thank you
Thank you www.temenos.com
Slide 74: Winning with products in a multi-speed world: Financials
Winning with products in a multi-speed world Financials – Max Chuard, CFO 27 February 2013
Slide 75: Q4 and FY KPIs
Q4 and FY KPIs LFL licence revenue LFL total revenue Q4 up 17% Q4 up 5% FY down 14% FY down 3% Adjusted EBITDA (and margin) Adjusted EPS Q4 up 36% (margin up 9.4% pts) Q4 up 103% FY up 3% (margin up 2.0% pts) FY up 1.1% Cash Leverage USD 114m of operating cash flow in Q4 USD 97m of free cash flow in
Slide 76: H2 2012: Returned to growth
H2 2012 Licence momentum Regional structure reintroduced Cost base right-sized Services structure simplified Role of partners clarified, programme reinvigorated Growth restored Returned to growth 76
Slide 77: 2013 guidance
2013 guidance Non-IFRS revenue growth of 2.5% to 5.5% (implying revenue of USD 462m to USD 475m)* Licence growth of 5% to 10% (implying licence revenue of USD 131m to USD 138m)* Non-IFRS cost base of USD 360m reaffirmed with non-IFRS EBIT margin of 22.0% to 23.5% (implying non-IFRS EBIT of USD 102m
Slide 78: Medium term targets
Medium term targets Non-IFRS revenue growth of 5%+ pa with • Licence growth of 10%+ pa • Services contributing 20% to 25% of group revenue and be profitable Non-IFRS EBIT margin improvement of 100 to 150bps on average pa Cash conversion over 100% pa DSOs reducing by 10 to 15 days pa Tax rate of 17%
Slide 79: Revenue
Revenue Licence • Single digit growth in Core Banking; double digit growth in PWM, BI and Channels • Single digit growth in Europe; double digit growth in other geographies • Capitalising on cross-selling opportunities into the installed base • Leveraging the partner channel to capture new markets M
Slide 80: Cost base
Cost base Cost breakdown • Cost of services falling as % of revenue: focus on higher end services and leveraging Cost of Services R&D G&A S&M fixed costs 100% • R&D falling as % of revenue (although increasing in actual amounts): exploiting 80% scale synergies and productivity improvements 60% • G&A
Slide 81: Margin
Margin 100-150bps of margin expansion on average per annum in the medium term Margin improvement to be driven by • shift in revenue mix • improving services margin • economies of scale Investment will be monitored and released as we deliver licence growth, meaning that incremental maintenance revenu
Slide 82: Cashflows and capital structure
Cashflows and capital structure 100%+ conversion of EBITDA into operating cashflow Adjusted operating cashflow (USDm) underpinned by quality of earnings 160 10 to 15 days reduction in DSOs per annum driven by 120 • reducing implementation time 80 • higher proportion of sales to existing customers (i
Slide 83: Dividend
Dividend Temenos is highly cash generative with a strong balance sheet which enables • servicing of our debt obligations; and • investment in the business, including industry leading R&D spend; and • funding for targeted acquisitions; and • returning value to shareholders The Board intends to initia
Slide 84: Winning with products in a multi-speed world: Wrap up
Winning with products in a multi-speed world Wrap up - David Arnott, CEO 27 February 2013
Slide 85: Why targets are achievable
Why targets are achievable Already made the investment in our asset base Regional model – the right people already in the right place Lower cost base already locked-in Services moving to higher value, higher margin business Massive market opportunity Targets built on continuing to do more
Slide 86: Key takeaways
Key takeaways In H2 2012 we laid the foundations for sustained growth Addressing a USD26bn market opportunity, underpinned by structural growth drivers Strategy builds on sound fundamentals and capitalises on strong product assets and installed base opportunity We are a true multi-product company wi
Slide 87: Thank you
Thank you www.temenos.com