Temenos Ag · SIX:TEMN
Temenos — Q4 2007 Earnings Presentation
40 slides from Temenos's earnings presentation, Feb 27, 2008
Slide 1: Business Update & Financial Results
Business Update & Financial Results Quarter and year ended 31 December 2007 27 February 2008
Slide 2: Presentation Overview
Presentation Overview Agenda Agenda Speaker Speaker Position Position Introduction Ben Robinson Investor Relations Financial Update David Arnott CFO Strategy and Andreas Andreades CEO Business Update Q&A David Arnott Andreas Andreades Max Chuard Director Slide 2
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: Financial Update
Financial Update David Arnott CFO
Slide 5: Income Statement Highlights – Q4
Income Statement Highlights – Q4 Q4 2007 Q4 2006 yoy Licence revenue 68.3 44.3 54% Total revenue 125.3 78.8 59% EBIT 43.7 26.9 63% Adjusted EPS* 0.66 0.41 61% *Adjusted for amortisation of acquired intangibles (Q407: USD0.4m) USDm, except EPS USD Slide 5
Slide 6: Income Statement Highlights – Full Year
Income Statement Highlights – Full Year 2007 2006 yoy Licence revenue 148.8 97.9 52% Total revenue 329.9 216.3 53% EBIT 62.5 33.3 88% Adjusted EPS* 1.03 0.58 78% *Adjusted for amortisation of acquired intangibles (2007: USD1.1m) USDm, except EPS USD Slide 6
Slide 7: Income Statement Detail
Income Statement Detail Q4 07 Q4 06 2007 2006 Licences 68.3 44.3 +54% 148.8 97.9 +52% Maintenance 21.7 14.9 +46% 76.3 55.0 +39% Services 35.3 19.6 +80% 104.8 63.4 +65% Total revenue 125.3 78.8 +59% 329.9 216.3 +53% R&D (17.0) (7.9) +115% (57.1) (33.8) +69% Cost of services (30.2) (17.3) +75% (97.0)
Slide 8: Like-For-Like Cash Cost P&L
Like-For-Like Cash Cost P&L 2007 2006 Total revenue 329.9 216.3 53% Like for like* adjs. (17.1) 6.1 Adjusted total revenue 312.8 222.4 41% Total costs 267.4 183.0 46% l-f-l and non cash** adjs. (30.2) 9.0 Adjusted total cost 237.2 192.0 24% Reported EBIT 62.5 33.3 88% Like for Like EBIT 75.6 30.4 14
Slide 9: Income Statement Detail
Income Statement Detail Income Statement Detail Q4 07 Q4 06 2007 2006 EBIT 43.7 26.9 62% 62.5 33.3 88% Net Finance charge (0.7) 0.0 (81%) (2.7) 0.0 n/a FX gain 1.0 1.6 (38%) 4.6 5.3 (13%) Tax 0.3 (2.9) n/a 0.3 (4.2) n/a Net earnings 44.3 25.6 73% 64.7 34.4 88% Adjusted EPS* 0.66 0.41 61% 1.03 0.58 7
Slide 10: Full Year Cash Flow Conversion
Full Year Cash Flow Conversion (USDm) Cashflow from ops. EBITDA +136% +82% 80 78.5 64.8 • Cashflow conversion at 60 43.0 77.2 83% vs. 75% outlook 27.5 43.1m 59.8 40 T24 • TCB cashflow and 53.1 EBITDA positive TCB 44.2 20 0 -10.1 -16.7 5.0 1.3 -20 2006 2007 2006 2007 Slide 10
Slide 11: DSOs
DSOs 200 195 days -12% 190 180 172 days 170 160 150 140 2006 2006 2007 • 23 day improvement y-o-y • Target for further 10-15 days improvement by end of 2008 • New methodology*, less complex, easier to understand and benchmark * DSOs calculated as closing receivables less deferred revenue divided by
Slide 12: Share buyback
Share buyback Temenos is actively pursuing its policy of returning free cash flow to shareholders through buybacks: • In 2008, we have takeover board approval to buy back USD60m… • …and so far have purchased USD30.3m at an average price of CHF23.9 • In 2006, we purchased USD13.7m (vs. FCF of USD10m)
Slide 13: Strategy and Business Update
Strategy and Business Update Andreas Andreades CEO
Slide 14: Business update – still executing strongly
Business update – still executing strongly We continue to execute ahead of our plan on both T24 and TCB Superior products Compelling investment and product roadmap Win ratio at above 80% Multiple growth initiatives, which are already starting to deliver Broad geographical reach Services initiatives
Slide 15: Business update - licence sales
Business update - licence sales Strong growth in new clients… New clients in Q4 at 19 vs.16 in the prior year (+19%). In 2007, no. of new clients was 49 vs. 41 in 2006 (+20%) … and in retail/ universal 80 +67% 70 % Growth in LTM 60 50 40 +25% 30 20 10 0 Retail/Univeral Private/Wholesale Slide 15
Slide 16: Business update – taking market share
Business update – taking market share Licence sales vs i-flex in 2007 Licence sales vs Misys and i-flex – last reported quarter 160 60% 150 +52% 50% 140 130 40% Temenos 120 30% Temenos +54% 110 20% i-flex I-flex 100 10% +4% 90 0% -14% Misys 80 -10% 70 -20% -20% 60 Q4 2006 Q1 2007 Q2 2007 Q3 2007 Q4
Slide 17: Update on Growth Initiatives: Increasing sales coverage
Update on Growth Initiatives • Increasing sales coverage • Broadening and deepening geographical coverage still biggest driver of sales growth • In 2007, we increased no of sales people by 26%... …but still only have 46 people covering 126 countries… • And our client base stands at over 600 banks… …
Slide 18: Update on Growth Initiatives: ARC
Update on Growth Initiatives • ARC: • ARC has already been sold to 28 clients (10 in Q4) • Demand has been accelerating following the General Availability (“GA”) release in Q2 • So far, under 30% of sales are to existing clients • ARC penetration of existing T24 base less than 2% • Now represents 5%
Slide 19: Update on Growth Initiatives: Metavante partnership
Update on Growth Initiatives • Metavante partnership: • Joint development is on track, first release on schedule for summer ‘08 • Partnership is strong at all levels • The pipeline is building satisfactorily in line with original plan despite subprime • Sub-prime is throwing up opportunities for our
Slide 20: Update on Growth Initiatives: Misys Replacement, T-Risk
Update on Growth Initiatives • Misys Replacement Programme: Progress to date • The programme was launched in 2005 • Since then, we have signed 12 customers (2005: 1; 2006: 4; 2007: 7) Update for 2008 • Larger multi-country Misys clients in early stage evaluations for potential replacement. • The dea
Slide 21: Actis.BSP/ German Market
Actis.BSP/ German Market Our target: • To double existing client base over 3-5yrs • EBITDA USD11m by 2011 Our progress: • 2 T24 deals in Germany signed in 2007 (our business case assumed none) • Puts us way ahead of acquisition plan • Actis clients happy to upgrade to T24 over time – licence upside
Slide 22: Services Update
Services Update IMPROVING SALES AND MARGINS 2007 New Head of Services • Revenue up by 39% yoy Introducing tighter KPIs, processes and project execution • Margin at 7.4% (up from -2.4% in prior year) Model Bank Used in projects from Q4 2006 onwards Proven to shorten implementation timeframes by 50%.
Slide 23: Acquisition update
Acquisition update To complement accelerating organic growth model to achieve leadership in growing market. Targeting companies with revenues of USD20-50m to: Strengthen delivery capability and distribution in key markets Acquire client base Enhance product Slide 23
Slide 24: Business Update – demand conditions
Business Update – demand conditions Demand • Minimal exposure to the investment banking sector • Exposure to retail/universal (71%), private and wholesale • Exposure to the US chiefly through Metavante - annual contracted revenues intact • Exposure to emerging markets • Drivers for core systems stru
Slide 25: 2008 Outlook – reflecting continued momentum
2008 Outlook – reflecting continued momentum 2008 Outlook 2007 173 149 +16% Licences 400 330 +21% Revenue EBIT margin 21.3% 18.9% +240bps EBIT 85 62.5 +36% Adjusted EPS* 1.33 1.03 +30% • 21% top line growth plus 240bps of margin expansion gives 36% EBIT growth • Large non-cash FX gain in 2007 (USD4.
Slide 26: 2008 Outlook - guidance raised
2008 Outlook - guidance raised Given 2007 overperformance, 2008 outlook ahead of previous guidance: Previous 2008 Outlook Outlook Upgrade Licences 173 Revenue 400 383* +4% EBIT margin 21.25% 21.5% EBIT 85 82 +4% * Mid-point of 2007 guidance (312.5m) vs. mid-point of 2008 guidance (22.5% growth) All
Slide 27: Looking forward – no change to management assumptions
Looking forward – no change to management assumptions We see no reason to change the guidance we have given beyond 2008: • 20 - 25% organic revenue growth for 2009, but off higher base We anticipate significant and sustained EPS growth • 200-300bps margin improvement and value creation • Continued c
Slide 28: Appendices
Appendices ‘7 sm: FM fe) FA ed Bl F EMENOS The Banking Software Company
Slide 29: Outlook Assumptions
Outlook Assumptions In arriving at our 2008 outlook we have made the following assumptions: Tax rate: Zero effective tax rate (see slide) Foreign exchange: USD 1 : EUR 0.68 USD 1 : CHF 1.09 USD 1 : GBP 0.50 Number of shares for diluted EPS*: 69.4m * including impact of convertible Slide 29
Slide 30: Operating Costs by Quarter
Operating Costs by Quarter USD USDmillion million Q4 Q406 06 Q1 Q107 07 Q2 Q207 07 Q3 Q307 07 Q4 Q407 07 Reported costs 51.9 55.1 66.1 64.6 81.6 Non-trend costs* (13.4) (9.0) (12.5) (10.1) (22.6) Trend costs** 38.5 46.1 53.6 54.5 59.0 Headcount 1724 1947 2128 2173 2309 * Includes cost of sales, mark
Slide 31: Research and Development
Research and Development USD USDmillions millions Q4 Q407 07 Q4 Q406 06 %% 12 12mths mthsto to Dec Dec 07 Dec06 07 Dec 06 %% R&D costs – as reported 17.0 7.9 115% 57.1 33.8 69% Capitalised development costs 5.3 3.8 15.9 14.7 Non cash items (4.0) (2.3) (13.8) (8.0) Less Actis (2.5) - (8.4) - Currency
Slide 32: Services
Services USD USDmillions millions Q4 Q407 07 Q4 Q406 06 %% 12 12mths mthsto to Dec Dec 07 Dec06 07 Dec 06 %% Service revenues 35.3 19.6 80% 104.8 63.4 65% Less Actis (1.7) - (6.6) - Currency impact - 0.7 - 1.7 Service revenues underlying 33.6 20.3 66% 98.2 65.1 51% Service costs – as reported 30.2 1
Slide 33: General & Administrative Costs
General & Administrative Costs USD USDmillions millions Q4 Q407 07 Q4 Q406 06 %% 1212mths mthsto to Dec Dec 07 Dec06 07 Dec 06 %% G&A costs – as reported 12.1 12.9 (6%) 41.5 36.0 15% Less Actis (0.2) - (1.3) - Less non-cash (1.9) (0.9) (8.4) (4.6) Currency impact - 0.8 - 1.1 G&A costs underlying 10.
Slide 34: Sales and Marketing
Sales and Marketing USD USDmillions millions Q4 Q407 07 Q4 Q406 06 %% 12 12mths mthsto to Dec Dec 07 Dec06 07 Dec 06 %% S&M costs – as reported 22.3 13.8 62% 71.8 48.3 49% Less Actis (0.8) - (1.7) - Currency impact - 0.8 - (2.1) Less non-cash (0.8) (0.6) (3.8) (1.7) S&M costs underlying 20.7 14.6 42
Slide 35: Organic revenues
Organic revenues 140 Actis USD120m 120 +48% 100 USD78.8m Licence USDm 80 +46% Licence 60 Licence Maintenance +30% Maintenance Services 40 Maintenance 20 +64% Services Services 0 1 Q4 2006* 2 Q4 2007 • Strong organic growth in each revenue line • Actis added USD5.3m in Q4 07 *2006 restated at 2007 FX
Slide 36: Revenues by Region 2007 vs. 2003
REVENUES BY REGION 2007 vs. 2003 Revenues - Full Year 2003 Revenues – Full Year 2007 Asia Asia 18% 14% Americas 8% Americas • More global 19% EMEA 63% • More diversified EMEA 78% Licence Revenues - Full Year 2003 Licence Revenues – Full Year 2007 Asia Asia 16% 21% EMEA Americas Americas 58% EMEA 26%
Slide 37: Licences by Tier & Segment
Licences by Tier & Segment Full Year 2003 Full Year 2007 Tier 1&2 29% Tier 1&2 43% Others • Larger deal size 57% Others • More diversified 71% Full Year 2003 Full Year 2007 Private 12% Retail / Universal Private 71% 12% Retail / Universal Wholesale 56% 32% Wholesale 17% (1) On a $ basis Slide 37
Slide 38: 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 39: TEMENOS’ awards
TEMENOS’ awards TEMENOS’ products are multi award winning. In 2007, two TEMENOS products have won prestigious awards within the banking software industry T24 won the best core banking product at the European banking technology awards. TEMENOS system beat off competition from both I-flex and Misys. D
Slide 40: Thank You
Thank You ‘7 sm: FM fe) FA ed Bl F EMENOS The Banking Software Company