Temenos Ag · SIX:TEMN
Temenos — Q1 2006 Earnings Presentation
36 slides from Temenos's earnings presentation, May 3, 2006
Slide 1: Financial Results & Business Update
Financial Results & Business Update Quarter ended March 31st, 2006 1
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-loo
Slide 3: Presentation Overview
Presentation Overview Agenda Speaker Position Introduction Max Chuard Director Business Update Andreas Andreades CEO Financial Results David Arnott CFO 3
Slide 4: Business Update
Business Update Andreas Andreades CEO 4
Slide 5: Temenos Vision and Summary
TEMENOS VISION AND SUMMARY TEMENOS VISION is to become the leading global brand in financial services software TEMENOS TODAY is the provider of choice for the world’s leading financial institutions: Supporting two product lines for core processing: TEMENOS T24™ (T24): Private, Universal, Wholesale a
Slide 6: Q1 2006 Results – Key Points
Q1 2006 RESULTS – KEY POINTS • Excellent start to the year with strong business momentum • License revenues for the quarter exceeding our target and growing at 16% compared to Q1 2005. Like for like license revenues growing at 41% in the quarter compared to Q1 2005. Excellent cost management with co
Slide 7: Rolling 12 Months - Business Update
ROLLING 12 MONTHS - BUSINESS UPDATE Revenues (USD m) Costs (USD m) S 148.8 S 170.5 +15% +6% 56.3 147.8 +9% 139.5 51.6 Services 48.3 42.2 +14% Maintenance 55 65.9 License +20% 2005 2006 2006 2005 2006 2006 2005 Cash Flow from Operations (USD m) Fully Diluted EPS (USD per share) 0.33 +45% 15.4 20 +106
Slide 8: Sales Performance
SALES PERFORMANCE • Like for Like T24 license revenues grew by 64% in the quarter compared to Q1 2005 and by 32% in the last 12 months compared to the same period last year • TCB license revenues were flat in the quarter compared to Q1 2005 and an increase of 73% in the last 12 months compared to th
Slide 9: Rolling 12 Months - Business Update (Cont.)
ROLLING 12 MONTHS - BUSINESS UPDATE (CONT.) Revenues – LTM 2005 Revenues – LTM 2006 Americas Americas 16% 12% Asia 11% Asia 19% EMEA 65% EMEA 77% License Revenues – LTM 2005 License Revenues – LTM 2006 Americas Americas Asia 8% 21% 11% EMEA 58% Asia 21% EMEA 81% (1) On a $ basis 9
Slide 10: Rolling 12 Months - Business Update (Cont.)
ROLLING 12 MONTHS - BUSINESS UPDATE (CONT.) License Revenues – LTM 2005 License Revenues – LTM 2006 Tier 1&2 27% Tier 1&2 39% Others 61% Others 73% License Revenues – LTM 2005 License Revenues – LTM 2006 Others 25% Others 27% Retail / Retail / Universal Universal 73% 75% (1) On a $ basis 10
Slide 11: Client Services Strategy
CLIENT SERVICES STRATEGY • Historically the role of the TEMENOS Services business has been to complement our product business • Our services offering has been restricted in scope to basic implementation and support for our clients delivered primarily with the engagement of locally based consultants
Slide 12: Client Services Strategy (Cont.)
CLIENT SERVICES STRATEGY (Cont.) • Strategies have been identified to achieve both faster revenue growth, and margin improvement: • Faster revenue growth will be achieved by broadening our basic implementation services offering as follows: • High value consulting focused on helping banks optimize pr
Slide 13: Competition & Market Share
COMPETITION & MARKET SHARE • In the last 4 quarters, we have been steadily improving our win ratios from an already high 80% and winning consistently against competition including iflex, Misys, Fidelity and SAP • TEMENOS has the richest product and broader distribution, as well as domain expertise t
Slide 14: Position in the Market
POSITION IN THE MARKET IBS League Table New name • For the last eight years, customers Supplier Product signed in 2005 Customers Live sites TEMENOS has been ranked i-flex Solutions Flexcube 38 170 200+ either #1 or #2 in terms of TEMENOS T24/TCB 34 478 645 new client wins per year by Misys Summit 17
Slide 15: Market Outlook
MARKET OUTLOOK • Robust and increased growth in core spending for Retail, Universal and Private banks on a global basis • Core system replacement today represents the number one or number two priority for CIO’s of major institutions • Key drivers are growth and strategic cost management – Customer r
Slide 16: Market Growth & Temenos Business
MARKET GROWTH & TEMENOS BUSINESS • Industry analysts are assessing our market to be growing at around 6% to 8% • TEMENOS is increasingly confident it can continue to outpace the market. We grew like for like license revenues by 38% for the last 12 months. • Analysts expect that 68% of European Finan
Slide 17: Acquisitions
ACQUISITIONS • Organic growth model on track, EPS growth + 46% (2005/2004) • Majority of banks are expected to replace their Core Banking systems in the next 5 years. Vendor growth over the next 3-5 years will determine long term leadership in our market. TEMENOS intends to take advantage of the opp
Slide 18: Business Outlook
BUSINESS OUTLOOK • Since the end of the quarter we have won and are concluding contracts for a number of large and strategic T24 and TCB deals with Tier 1 and Tier 2 banks. • We have increased our medium term T24 license revenues growth from 10% to 20%. • We continue to target aggressive medium term
Slide 19: 2003 – 2005: What Have We Achieved?
2003 – 2005: WHAT HAVE WE ACHIEVED? • Established a growing and profitable company • Built product superiority and client referenceability • Strengthened management team • Broadened sales coverage • Demonstrated increasing Tier 1 and Tier 2 penetration 19
Slide 20: The Next Challenges
THE NEXT CHALLENGES • Accelerate organic revenue growth for the next 3 to 5 years beyond 2006 levels of 19% (15% CAGR for the past 4 years) • Consolidate a clear leadership in high end retail banking with TCB • Establish a profitable and growing services business model • Demonstrate a credible and g
Slide 21: Financial Results
Financial Results David Arnott CFO 21
Slide 22: Q1 2006 Financial Highlights
Q1 2006 Financial Highlights Earnings Per Share • Fully diluted EPS for the quarter of USD 0.01 per share compared to USD 0.00 per share for the same period last year. Fully diluted EPS for the LTM of USD 0.33 per share compared to USD 0.16 per share for the same period last year, up 106.3%. EBIT •
Slide 23: Profit & Loss
Profit & Loss USD million Quarter ended March 31 LTM 2006 2005 Growth 2006 2005 Growth Revenues Licensing 11.1 9.6 16.1% 65.9 55.0 19.9% Maintenance 12.9 11.3 13.7% 48.3 42.2 14.4% Services 12.9 14.1 (8.3)% 56.3 51.6 9.1% Total Revenues 36.8 34.9 5.5% 170.6 148.8 14.6% Total Expenses 36.4 34.5 5.5%
Slide 24: Like for Like Revenues
Like for Like Revenues USD million Quarter ended March 31 LTM 2006* 2005 2006 2005 Licence revenues as reported 11.1 9.6 65.9 55.0 Legacy % completion revenues (1.7) (7.0) Like for like licence revenues 11.1 7.9 65.9 48.0 Maintenance revenues 12.9 11.3 48.3 42.2 Services revenues 12.9 14.1 56.3 51.6
Slide 25: Like for Like Results
Like for Like Results USD million Quarter ended March 31 LTM 2006* 2005 2006 2005 Revenues as reported 36.8 34.9 170.6 148.8 Legacy % completion revenues (1.7) (7.0) Like for like licence revenues 36.8 33.2 170.6 141.8 Like for like EBIT 0.5 (1.2) 22.8 4.4 Like for like EPS 0.01 (0.02) 0.33 0.06 Gro
Slide 26: 12 Month Rolling Cashflow from Operations
12 month rolling Cashflow from Operations 25,000 20,000 15,000 10,000 5,000 0 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 03 03 03 04 04 04 04 05 05 05 05 06 • Cashflow from operations in line with plan for the quarter and 12 months to 31/3/2006 26
Slide 27: Convertible Debt Instrument
Convertible Debt Instrument • In March Temenos raised CHF130m net cash (USD $100m) from the issuance of a 7 year convertible bond for the purpose of acquisitions. • Under IFRS39 this convertible debt instrument has been bifurcated into its debt and equity components. Although Temenos will only pay 1
Slide 28: Outlook 2006
Outlook 2006 US$ million Previous Mvt Revised 2005 % License Revenues 75 - 80 +5 80 - 85 64.4 +28% Total Expenses 158 - 167 +5 163 - 172 145.9 +15% EPS Growth + 30% 0 + 30% Revenue n/a 200 168.7 +19% 28
Slide 29: Appendix
@ TEMENOS* Appendix 29
Slide 30: Q1 2006 Cash Flow
Q1 2006 Cash Flow US$ million Qtr ended March 31 LTM 2006 2005 2006 2005 Net cash at beginning of period 15.6 30.8 19.3 26.2 Cashflow from operating activities 2.7 (7.6) 15.4 10.6 Capital spending (4.8) (2.7) (17.0) (16.3) Financing 103.2 (0.6) 100.6 (0.2) Other (Tax, FX impact, etc) 0 (0.7) (1.7) (
Slide 31: Services Margin
Services Margin USD million Q1 2006 Q1 2005 LTM Services revenue 12.9 14.1 56.3 Costs (15.0) (14.1) (62.4) Margin (2.1) (0.1) (6.1) % margin (16.3%) (1%) (10.8%) 31
Slide 32: Research & Development
Research & Development US$ million Q1 2006 Q4 2005 Q1 2005 R&D costs – As reported 7.5 6.2 6.6 Capitalised Development costs 3.2 4.2 1.6 Non Cash items (1.9) (2.2) (2.8) Cash R&D costs 8.8 8.2 5.4 32
Slide 33: Research & Development (Cont.)
Research & Development (Cont.) US$ million LTM 2006 LTM 2005 R&D costs – As reported 24.8 26.4 Capitalised Development costs 12.4 7.5 Non Cash items (8.2) (10.7) Cash R&D costs 29.0 23.2 33
Slide 34: Cash Cost
Cash Cost USD million Q1 2006 Q4 2005 Q1 2005 Total Cost- As reported 36.4 42.5 34.5 Capitalised development 3.2 4.2 1.6 Depreciation & Amortisation (2.5) (2.2) (3.5) Total Cash Cost 37.1 44.5 32.6 34
Slide 35: Cash Cost (Cont.)
Cash Cost (Cont.) USD million LTM 2006 LTM 2005 Total Cost- As reported 147.8 139.5 Capitalised development 12.4 7.5 Depreciation & Amortisation (10.2) (14.2) Total Cash Cost 150.0 132.8 35
Slide 36: Currency Movements
Currency Movements USD millions Q1 06 Q1 05 % LTM 06 LTM 05 % Revenue – as reported 36.8 34.9 5.5% 170.6 148.8 14.7% Currency impact n/a (0.1) n/a 0.1 Revenue Adjusted for FX 36.8 34.8 6.0% 170.6 148.9 14.7% Operating Expenses – as reported (36.4) (34.5) 5.5% (147.8) (139.5) 6.0% Currency impact n/a