Temenos Ag · SIX:TEMN
Temenos — Q1 2007 Earnings Presentation
39 slides from Temenos's earnings presentation, Apr 25, 2007
Slide 1: Business Update & Financial Results
BUSINESS UPDATE & FINANCIAL RESULTS QUARTER ENDED 31 MARCH 2007 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
Slide 6: Q1 2007 Results – Key Points
Q1 2007 RESULTS – KEY POINTS • Excellent start to the year with strong sales performance and business momentum. Revenues grew by 64% in the quarter and net profit by more than 8 times. • Licence revenues for the quarter exceeded our target and grew at 110% (organic: 104%) compared to Q1 06. Accelera
Slide 7: 12 Months to 31 March - Business Update
12 MONTHS TO 31 MARCH - BUSINESS UPDATE Revenues (US$ m) Costs (US$ m) Σ 170.6 Σ 239.7 201.7 +41% +36% 71.2 +26% 147.8 Services 56.3 58.3 +21% Maintenance 48.3 110.2 +67% Licence 65.9 2006 2007 2006 2007 Cash Flow from Operations and EBITDA (US$ m) Fully Diluted EPS (US$ per share) +47% 0.63 +99% +9
Slide 8: Sales Performance – Business Update (contd.)
SALES PERFORMANCE – BUSINESS UPDATE (CONTD.) • T24 licence revenues grew by 53% in the quarter compared to Q1 06 and by 81% in the 12M to March 2007 compared to the same period last year. • TCB licence revenues grew by 480% in the quarter compared to Q1 06 and by 12% in the 12M to March 2007. • New
Slide 9: Update on Growth Initiatives
UPDATE ON GROWTH INITIATIVES • Misys Replacement Programme: – Following the success of our Misys Equation user replacement programme launched in February 2006, we have announced in March 2007 a tailored upgrade for Midas users with Temenos T24 Model Bank. This initiative is specifically designed to
Slide 10: Services Update
SERVICES UPDATE • Service revenue for the quarter grew by 60% and by 26% in the 12 months to 31 Mar 07. • Service margin for the quarter was breakeven compared to -16% in Q1 2006. • Service margin for the year to 31 Mar 07 was 1% compared to -11% in the same period last year. • Our Model Bank offeri
Slide 11: TCB and Metavante Update
TCB AND METAVANTE UPDATE • In February 2007 we signed a joint development and distribution partnership with Metavante, a leading US software and services provider. This partnership will form the backbone of our TCB growth for the next 3 – 5 years. • TEMENOS and Metavante will co-operate in the devel
Slide 12: Acquisitions Update
ACQUISITIONS UPDATE • Organic growth model on track delivering exceptional EPS growth (2007 outlook: +46%) • Majority of banks are expected to replace their Corebanking systems in the next five years. Vendor growth over the next 3-5 years will determine long term leadership in our market. TEMENOS ai
Slide 13: 2003 – 2006: What Have We Achieved?
2003 – 2006: WHAT HAVE WE ACHIEVED? • Established a growing and profitable company. • Built product superiority and client successes. • Strengthened management team. • Broadened sales coverage. • Increased Tier 1 and Tier 2 penetration. 13
Slide 14: The Next 3 Years – Our Strategic Plan
THE NEXT 3 YEARS – OUR STRATEGIC PLAN • Sustain organic revenue growth for the next three years of 20 - 25% per annum. • Establish a profitable and growing services business model. • Deliver a compelling, growing and profitable partnership for the US market with our US partner. • Consolidate a clear
Slide 15: Financial Results
FINANCIAL RESULTS DAVID ARNOTT CFO 15
Slide 16: Q1 2007 & 12M to 31 March 2007 – Financial Highlights
Q1 2007 & 12M TO 31 MARCH 2007- FINANCIAL HIGHLIGHTS Revenue • Q1 07 Revenues up 64% at USD 60.3 million compared to USD 36.8 million in Q1 06 (12m to Mar 07: up 41%). Operating Costs • Q1 07 Operating Costs up 51% at USD 55.1 million compared to USD 36.4 million in Q1 06 (12m to Mar 07: up 36%). EB
Slide 17: Income Statement
INCOME STATEMENT USD million Quarter ended 31 March 12M to 31 March 2007 2006 Growth 2007 2006 Growth Revenues Licensing 23.4 11.1 110% 110.2 65.9 67% Maintenance 16.2 12.9 26% 58.3 48.3 21% Services 20.6 12.9 60% 71.2 56.3 26% Total revenues 60.3 36.8 64% 239.7 170.6 41% Operating costs 55.1 36.4 5
Slide 18: Currency Movements
CURRENCY MOVEMENTS USD millions Q1 07 Q1 06 % 12m to % Mar 07 Mar 06 Revenue – as reported 60.3 36.8 64% 239.7 170.6 41% Currency impact n/a 1.2 n/a 3.2 Revenue adj. for Currency 60.3 38.0 59% 239.7 173.8 38% Operating costs – as reported (55.1) (36.4) 51% (201.7) (147.8) 36% Currency impact n/a (2.
Slide 19: Net Earnings Analysis
NET EARNINGS ANALYSIS USD million Quarter ended 31 March 12M to 31 March 2007 2006 Growth 2007 2006 Growth EBIT 5.2 0.5 969% 38.0 22.8 67% Foreign Exchange (0.6) 0.2 4.9 (1.1) Other Financing (0.4) (0.1) (0.6) (0.9) Tax (0.0) (0.1) (4.2) (2.4) Net Earnings 4.2 0.5 804% 38.1 18.4 107% Tax Rate 0% 13%
Slide 20: Cashflow Conversion – 12M to 31 March
CASHFLOW CONVERSION – 12M TO 31 MARCH USD million EBITDA Cash Flow from % EBITDA conversion Operations 2007 2006 T24 52.5 36.0 69% 76% TCB (4.0) (5.4) n/a n/a TOTAL 48.5 30.6 63% 47% • Cash flow from operations for 12m to 31 Mar 07 growing by 99% compared to the same period in 2006 driven by increas
Slide 21: Share Buy Back
SHARE BUY BACK • In Q1 2007 we continued our share buyback programme and purchased 931,522 shares for an average price of CHF21.15 and a total consideration of US$16.5 million. • During April 2007 we have already bought 150,000 TEMENOS shares at an average price of CHF 24.01, or an equivalent of US$
Slide 22: 2007 Outlook
2007 OUTLOOK New USD million Previous Change organic Acquisitions Revised 2006 Growth outlook Licence revenues 115.0 0-5 115 - 120 5.0 120 - 125 97.9 25% Total revenues 270.0 5.0 275.0 15.0 290.0 216.3 34% EBIT 54.0 1.0 55.0 - 55.0 33.3 65% EBIT margin 20% - 20% - 19% 15% 4 pts EPS 81 cents 2 cents
Slide 23: 2007 Outlook (contd.)
2007 OUTLOOK (CONTD.) convertible convertible USD million as debt as equity Outlook operating profit 55.0 55.0 Net Financial Costs & Foreign Exchange -2.3 -2.3 Tax 0.0 0.0 Outlook net earnings 52.7 52.7 add back convertible interest expense 0.0 4.8 Net earnings for EPS 52.7 57.5 Outlook Dilutive sha
Slide 24: Outlook Assumptions
OUTLOOK ASSUMPTIONS In arriving at our 2007 guidance we have made the following assumptions: • Tax rate: Zero effective tax rate. • Foreign exchange: USD 1 : EUR 1.28 USD 1 : CHF 1.20 USD 1 : GBP 1.90 24
Slide 25: Appendices
TEMENOS™ APPENDICES
Slide 26: US Strategy Update
US STRATEGY UPDATE • In February 2007 TEMENOS entered into an exclusive joint development and distribution agreement with Metavante, a leading US software and services company. • Metavante will be the distributor of TCB in the US and TEMENOS will retain royalties on licence and maintenance fees, out
Slide 27: US Strategy Update (contd.)
US STRATEGY UPDATE (CONTD.) • We expect that the combination of Metavante’s leading position and development and distribution prowess in the banking software market, its expertise in outsourcing services, along with the product superiority of TCB, will prove a formidable combination both in the Unit
Slide 28: Operating Costs by Quarter
OPERATING COSTS BY QUARTER USD million Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Reported costs 36.4 50.3 44.4 51.9 55.1 Non-trend costs (2.3) (15.3) (6.9) (13.4) (9.0) Trend costs 34.1 35.0 37.5 38.5 46.1 Closing headcount 1429 1497 1648 1724 1947 28
Slide 29: Research and Development
RESEARCH AND DEVELOPMENT USD millions Q1 07 Q1 06 % 12M to % MAR 07 MAR 06 R&D costs – as reported 10.7 7.5 43% 37.0 24.9 49% Capitalised development costs 3.2 3.2 14.8 12.4 Non cash items (2.7) (1.9) (8.8) (8.1) Less Actis (0.8) - (0.8) - Cash R&D costs 10.4 8.8 18% 42.2 29.2 45% Of which: T24 65%
Slide 30: Services
SERVICES USD millions Q1 07 Q1 06 % 12M to % MAR 07 MAR 06 Service revenues 20.6 12.9 60% 71.2 56.3 26% Less Actis (0.6) - (0.6) Currency impact n/a 0.5 n/a 1.0 Service revenues underlying 20.0 13.4 49% 70.6 57.3 23% Service costs – as reported 20.7 15.0 38% 70.6 62.4 13% Less Actis (0.5) - (0.5) -
Slide 31: Sales and Marketing
SALES AND MARKETING USD millions Q1 07 Q1 06 % 12M to % MAR 07 MAR 06 S&M costs – as reported 14.6 7.8 87% 55.1 33.7 63% Less Actis (0.1) - (0.1) - Currency impact n/a 0.5 n/a 1.1 S&M costs underlying 14.5 8.3 75% 55.0 34.8 58% 31
Slide 32: General & Administrative Costs
GENERAL & ADMINISTRATIVE COSTS USD millions Q1 07 Q1 06 % 12M to % MAR 07 MAR 06 G&A costs – as reported 9.2 6.1 50% 39.0 26.8 46% Less Actis (0.3) - (0.3) - Currency impact n/a 0.4 n/a 1.0 G&A costs underlying 8.9 6.5 37% 38.7 27.8 39% 32
Slide 33: 12 Month Rolling Cashflow from Operations
12 MONTH ROLLING CASHFLOW FROM OPERATIONS (USD’000) 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 LTM LTM LTM LTM LTM LTM LTM LTM LTM LTM LTM LTM Q2- Q3- Q4- Q1- Q2- Q3- Q4- Q1- Q2- Q3- Q4- Q1- 2004 2004 2004 2005 2005 2005 2005 2006 2006 2006 2006 2007 33
Slide 34: DSOs Analysis
DSOs ANALYSIS 120 114 114 113 101 103 104 104 105 100 97 97 98 80 60 40 20 - Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2004 2004 2005 2005 2005 2005 2006 2006 2006 2006 2007 • DSO definition (see below) based on using average 12M receivables. This allows trend comparisons without the distortion of deal lumpi
Slide 35: Calculation of DSO's
CALCULATION OF DSO’s Average 12M receivables (‘000 revenues*(‘000 DSOs USD) USD) 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 Q3 2006 114 106,666 242,216 Q4 2006 114 116,396 265,530 Q1
Slide 36: Revenues by Region 12M to 31 March
REVENUES BY REGION 12M TO 31 MARCH Revenues – 2006 Revenues – 2007 Americas Americas 18% 16% Asia 19% Asia EMEA EMEA 21% 61% 65% licence Revenues – 2006 licence Revenues – 2007 Americas Americas 19% 18% EMEA EMEA Asia 58% Asia 58% 24% 23% (1) On a $ basis 36
Slide 37: Revenues by Tier & Segment – 12M to 31 March
REVENUES BY TIER & SEGMENT – 12M TO 31 MARCH licence Revenues – 2006 licence Revenues – 2007 Tier 1&2 39% Tier 1&2 45% Others Others 55% 61% licence Revenues – 2006 licence Revenues – 2007 Others Others 32% 32% Retail / Retail / Universal Universal 68% 68% (1) On a $ basis 37
Slide 38: Effective Tax Rate
EFFECTIVE TAX RATE • Temenos has significant unrecognised deferred tax assets (DTAs) relating to losses carried forward as well as arising from our agreement with the Swiss authorities reached during 2005 to repatriate the group’s IP to Switzerland. The majority of these DTAs are currently not recog
Slide 39: Analyst Comments
ANALYST COMMENTS TEMENOS “…offers the strongest overall core banking functionality, without particular functional weak spots. TEMENOS also scored best on international versatility: If a bank needs a strong core banking solution that can comprehensively support multiple languages and character sets i