Temenos Ag · SIX:TEMN
Temenos — Q2 2006 Earnings Presentation
41 slides from Temenos's earnings presentation, Jul 26, 2006
Slide 1: Financial Results & Business Update
Financial Results & Business Update Quarter ended June 30th, 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: Q2 2006 Results – Key Points
Q2 2006 RESULTS – KEY POINTS • Outstanding second quarter exceeding our Q2 targets with strong business momentum continuing • License revenues for the quarter exceeded our target and grew at 149% compared to Q2 2005. Total revenues grew by 50% and diluted EPS grew by 400% compared to Q2 2005. • For
Slide 7: Rolling 12 Months - Business Update
ROLLING 12 MONTHS - BUSINESS UPDATE Revenues (USD m) Costs (USD m) S 148.7 S 189.2 +27% 163.0 +16% 56.0 140.1 +5% Services 53.1 49.8 44.2 +13% Maintenance 83.4 51.4 License +62% 2005 2006 2005 2006 2005 Cash Flow from Operations and EBIT (USD m) Fully Diluted EPS (USD per share) 0.44 30 26.2 25 +193
Slide 8: Sales Performance – Business Update (cont.)
SALES PERFORMANCE – BUSINES UPDATE (CONT.) • T24 license revenues grew by 74% in the quarter compared to Q2 2005 and by 36% in the last 12 months compared to the same period last year. On a like for like basis, T24 license revenues in the last 12 months grew by 54% compared to the same period last y
Slide 9: Rolling 12 Months - Business Update (cont.)
ROLLING 12 MONTHS - BUSINESS UPDATE (CONT.) Revenues – LTM 2005 Revenues – LTM 2006 Americas Americas 14% 12% Asia 12% Asia 22% EMEA 64% EMEA 76% License Revenues – LTM 2005 License Revenues – LTM 2006 Americas Americas 14% 11% Asia 13% Asia EMEA 27% 59% EMEA 76% (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 25% Tier 1&2 41% Others 59% Others 75% License Revenues – LTM 2005 License Revenues – LTM 2006 Others 16% Others 27% Retail / Universal Retail / 74% Universal 84% (1) On a $ basis 10
Slide 11: Competition & Market Share
COMPETITION & MARKET SHARE • In the last 5 quarters, we have been steadily improving our win ratios from an already high 80% and winning consistently against competition including iflex, Misys, Fidelity, Infosys and SAP. • TEMENOS has the richest product and broader distribution, as well as domain e
Slide 12: Position in the Market
POSITION IN THE MARKET Forrester Research, Inc IBS League Table Banking Platform Wins 2005 N ew name Accenture Fidelity CSC customers 10 7 signed Infosys 1 Supplier Product i n 2 0 0 5( 1 ) Customers Live sites 14 TEMENOS i-flex Solutions Flexcube 38 170 200+ 68 TEMENOS T24/TCB 34 478 645 SAP Misys
Slide 13: 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, this is not
Slide 14: Market Trends
MARKET TRENDS Industry analysts also forecast significant growth in spending on corebanking systems : •Forrester reported that more than 68% of western European banks will commence a core renewal project in the period 2005 to 2010 (Source: Forrester Research 2005) •Gartner expects 6 European Core pr
Slide 15: New Product Offering – Temenos Front Office - ARC
NEW PRODUCT OFFERING – TEMENOS FRONT OFFICE - ARC • In response to Banks’ focus on driving revenue growth through managing their client relationships more efficiently we are releasing our Front office suite – ARC (Acquire, Retaining, Cross selling): operational and analytical customer relationship m
Slide 16: Other New Product Offerings
OTHER NEW PRODUCT OFFERINGS • T Risk: TEMENOS risk, Basle II & enterprise risk platform • Data warehouse and management information • T24 on Microsoft stack • J2EE offering and componentisation of our TCB product 16
Slide 17: Misys User Target Replacement Programme
MISYS USER TARGET REPLACEMENT PROGRAMME • Ghana International selected TEMENOS T24 Model Bank for Midas users, to implement in their London operations • This is the fourth Misys replacement win since we started the program seven months ago • The pilot project for validation of the implementation tim
Slide 18: Client Services Strategy: An Update
CLIENT SERVICES STRATEGY: AN UPDATE • Our services strategy to achieve both faster revenue growth and margin improvement have been launched at our Temenos Client Forum in June. • Faster revenue growth will be achieved by broadening our basic implementation services offering as follows: – High value
Slide 19: Acquisitions
ACQUISITIONS • Organic growth model on track delivering exceptional EPS growth • 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
Slide 20: Business Outlook
BUSINESS OUTLOOK • We continue to see strong business momentum into the second half of the year fuelled by banks necessity to correct significant structural issues that precipitate changing their aging legacy systems. • We expect our medium term T24 license revenues to grow at 20% (LTM like for like
Slide 21: 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 21
Slide 22: The Next Challenges
THE NEXT CHALLENGES • Accelerate organic revenue growth for the next 3 to 5 years beyond 2006 levels of 23% (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 23: Financial Results
Financial Results David Arnott CFO 23
Slide 24: Q2 2006 Financial Highlights
Q2 2006 FINANCIAL HIGHLIGHTS Earnings Per Share • Fully diluted EPS for the quarter of USD 0.15 per share compared to USD 0.03 per share for the same period last year. Fully diluted EPS for the LTM of USD 0.44 per share compared to USD 0.15 per share for the same period last year, up 193.3% . EBIT •
Slide 25: Income Statement
INCOME STATEMENT USD million Quarter ended June 30 LTM 2006 2005 Growth 2006 2005 Growth Revenues Licensing 29.2 11.7 148.9% 83.4 51.4 62.0% Maintenance 12.9 11.4 13.2% 49.8 44.2 12.8% Services 13.8 14.1 (2.3)% 56.0 53.1 5.5% Total revenues 55.8 37.2 50.1% 189.2 148.7 27.2% Total operating costs 50.
Slide 26: Like for Like Income Statement
LIKE FOR LIKE INCOME STATEMENT USD million LTM June 30 % 2006 2005 License revenues as reported 83.4 51.4 62.0% Change in methodology - % of completion (5.2) Like for like license revenues 83.4 46.2 80.5% Reported Revenues 189.2 148.7 27.2% Like for like Revenues 189.2 143.5 31.9% Like for like Reve
Slide 27: Operating Costs
OPERATING COSTS USD million Quarter % Q2 Q1 Reported operating costs 50.3 36.4 62.3% Variable costs with higher profit (6.7) One off costs absorbed in Q2 (6.4) Underlying costs 37.3 36.4 2.5% •On an underlying basis, our operating costs have increased by US$0.9 million quarter on quarter. This under
Slide 28: DSOs Analysis
DSOs ANALYSIS 120 101 103 104 104 105 100 97 97 98 80 60 40 20 - Q3 2004 Q4 2004 Q1 2005 Q2 2005 Q3 2005 Q4 2005 Q1 2006 Q2 2006 • DSO definition (see below) based on using average LTM receivables. This allows trend comparisons without the distortion of deal lumpiness and seasonality. •DSOs have rem
Slide 29: DSO's Analysis (cont.)
DSO’s ANALYSIS (CONT.) USD million LTM 2006 LTM 2005 % Revenues 189 149 27% EBITDA 35 25 44% Average LTM Receivables 96 76 26% DSO’s 105 103 2% •With broadly constant DSOs average LTM receivable have grown in line with revenues. •As we continue to leverage revenues, EBITDA is expected to grow faster
Slide 30: 12 Month Rolling Cashflow from Operations
12 MONTH ROLLING CASHFLOW FROM OPERATIONS (US$’000) 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 LTM Q2- LTM Q3- LTM Q4- LTM Q1- LTM Q2- LTM Q3- LTM Q4- LTM Q1- LTM Q2- 2004 2004 2004 2005 2005 2005 2005 2006 2006 • Cashflow from operations in line with our plan for the quarter and o
Slide 31: Cash EBITDA
CASH EBITDA USD million LTM 2006 LTM 2005 % Revenues 189.2 148.7 27% Reported Operating Costs 163.0 140.1 16% Capitalised development 13.9 8.4 65% Non-cash costs (4.7) (2.7) 74% Depreciation & amortisation (9.2) (13.8) (33)% Cash cost 163.0 132.0 23% “Cash EBITDA” 26.2 16.7 57% EBITDA 35.3 24.6 44%
Slide 32: Free Cash Flow and Repurchase of Own Shares
FREE CASH FLOW AND REPURCHASE OF OWN SHARES TO FUND STOCK OPTION OBLIGATIONS • Continued consistent management of our DSO’s and working capital, as achieved in the last 8 quarters, is expected to result in free cash flow at an accelerated pace, when compared to EBIT and EBITDA, during the next few y
Slide 33: Outlook 2006
OUTLOOK 2006 US$ million Previous Mvt Revised 2005 % LTM Q2 06 License Revenues 80 - 85 +5 85 - 90 64.4 +36% +62% Revenue 200 + 5 -10 205 - 210 168.7 +23% +27% EPS per diluted shares n/a +45cts +32cts +40% 44cts EPS Growth* + 30% +10% + 40% +193% * Our EPS outlook excludes any potential profit from
Slide 34: Assumptions Driving Outlook
ASSUMPTIONS DRIVING OUTLOOK • Foreign Exchange Gain (Losses) – net – We are assuming no gain or losses on our hedging activities during 2006. We have taken the view that H1 gain on foreign exchange will revert during H2. This means that we are assuming that USD 4 million exceptional foreign exchange
Slide 35: Appendix
@ TEMENOS* Appendix
Slide 36: Q2 2006 Cash Flow
Q2 2006 CASH FLOW US$ million Qtr ended June 30 LTM 2006 2005 2006 2005 Net cash at beginning of period 116.6 19.3 17.3 25.3 Cashflow from operating activities 1.3 3.1 13.6 13.2 Capital spending (4.8) (4.1) (17.7) (19.0) Other (tax, FX impact, etc) (0.1) (0.4) (1.4) (1.0) Free cashflow (3.6) (1.4) (
Slide 37: Services Margin
SERVICES MARGIN USD million Q2 2006 Q1 2006 Q2 2005 LTM Services revenue 13.8 12.9 14.1 56.0 Costs (16.0) 15.0 (14.1) 64.3 Margin (2.2) (2.1) (0.0) (8.3) % Margin (16.0%) (16.3%) (0.0%) (14.8%) 37
Slide 38: Research & Development
RESEARCH & DEVELOPMENT US$ million Q2 2006 Q1 2006 Q2 2005 R&D costs – as reported 9.2 7.5 5.7 Capitalised development costs 3.6 3.2 2.1 Non cash items (2.4) (1.9) (2.6) Cash R&D costs 10.4 8.8 5.2 38
Slide 39: Research & Development (cont.)
RESEARCH & DEVELOPMENT (CONT.) US$ million LTM 2006 LTM 2005 % R&D costs – as reported 28.3 24.7 15% Capitalised development costs 13.9 8.4 Non cash items (8.7) (10.6) Cash R&D costs 33.5 22.5 49% 39
Slide 40: Currency Movements
CURRENCY MOVEMENTS USD millions Q2 06 Q2 05 % LTM 06 LTM 05 % Revenue – as reported 55.8 37.2 50.1% 189.2 148.7 27.2% Currency impact n/a n/a n/a (2.2) Revenue adj. for Currrency 55.8 37.2 50.1% 189.2 146.5 29.1% Operating costs – as reported (50.3) (35.1) 43.4% (163.0) (140.0) 16.4% Currency impact
Slide 41: Calculation of DSO's
CALCULATION OF DSO’s Average LTM receivables (‘000 revenues*(‘000 DSOs USD) USD) Q3 2004 97 70,254 187,507 Q4 2004 97 73,045 196,805 Q1 2005 101 74,707 192,967 Q2 2005 103 75,924 191,579 Q3 2005 104 76,746 192,471 Q4 2005 98 80,463 214,174 Q1 2006 104 87,245 217,145 Q2 2006 105 95,790 236,646 *reven