Slide 1: Financial Results & Business Update
Financial Results & Business Update Quarter ended 30 June 2008 30 July 2008
Slide 2: Presentation Overview
Presentation Overview Agenda Agenda Speaker Speaker Position Position Introduction Ben Robinson Investor Relations Financial Update David Arnott CFO Update on Acquisitions Max Chuard Director Strategy and Andreas Andreades CEO Business Update Q&A 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 – Q2 2008
Income Statement Highlights – Q2 2008 Q2 2008 Q2 2007 yoy Licence revenue 33.8 29.1 16% Total revenue 96.0 73.5 31% EBIT 10.1 7.4 36% Adjusted EPS* 0.15 0.11 36% *Adjusted for amortisation of acquired intangibles (Q208: USD0.5m) USDm, except EPS USD Slide 5
Slide 6: Income Statement Detail
Income Statement Detail Q2 08 Q2 07 LTM 08 LTM 07 Licences 33.8 29.1 +16% 161.2 110.1 +46% Maintenance 23.7 19.1 +24% 88.5 64.6 +37% Services 38.5 25.3 +52% 130.8 82.7 +58% Total revenue 96.0 73.5 +31% 380.4 257.4 +48% R&D (20.3) (14.4) +41% (70.3) (42.2) +67% Cost of services (37.5) (24.5) +53% (12
Slide 7: Like-for-like revenue growth
Like-for-like* revenue growth l-f-l growth in Q2 +25% LTM l-f-l growth +37% 120 450 Actis USD15.5m** 400 100 350 +48.5% 80 +45.2% 300 Services Services +44% 250 USDm USDm Services +45% Services +29.3% 60 200 Maintenance +19.7% Maintenance +25% 40 150 Maintenance Maintenance +20% 100 20 +11.7% +39.3%
Slide 8: Non-operating income and expense
Non-operating income and expense Income Statement Detail Q2 08 Q2 07 LTM 08 LTM 07 EBIT 10.1 7.4 +36% 66.6 39.9 +67% Net Finance charge (0.8) (0.9) (11%) (3.3) (1.4) +136% FX (loss)/gain (0.8) (0.2) +300% 6.1 0 n/a Tax 0.1 0.0 n/a 0.5 (2.8) n/a Net earnings 8.6 6.3 37% 69.8 35.7 96% Adjusted EPS* 0.
Slide 9: DSOs – on course for year end target
DSOs – on course for year end target • Small increase in DSOs in quarter, but trend remains clearly downwards • On course to meet forecast of 10- 15 day improvement in DSOs by end of 2008. 190 184 DSO’s 185 181 Linear (DSO’s) 180 175 176 Projected Range 175 172 171 170 167 165 157-162 160 155 150 De
Slide 10: EBITDA conversion – full year forecast reiterated
EBITDA conversion* – full year forecast reiterated • EBITDA conversion lower in Q2, but trend sustained. • Target for FY of 75% operating cash conversion on track. EBITDA Conversion LTM LTM Target Conversion revenue revenue Linear (EBITDA Conversion) growth: growth: +28% +59% 85% 83% 85% 90% 75% 80%
Slide 11: 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 USD60.0m… • …and so far have purchased USD30.3m at an average price of CHF23.9 • Remainder of buyback to take place between now a
Slide 12: Financing and balance sheet
Financing and balance sheet On balance sheet cash: USDm At Start of year: 93.1 Plus free cashflow generated during 2008 60.0 Less returned to shareholders through buyback (60.0) Forecast cash at end of year 93.1 Acquisition facility*: 175.0 Less anticipated use for Financial Objects (54.4) Informer
Slide 13: Acquisition Update
Acquisition Update Max Chuard Director of M&A & IR
Slide 14: Financial Objects
Financial Objects A recommended cash acquisition of Financial Objects at 60p per share was announced on 3 July 2008, to be implemented by scheme of arrangement By the announcement date, Temenos had irrevocable undertakings to vote in favour of the scheme from 46.7% of shareholders Meetings to obtain
Slide 15: Informer
Informer On 18 July 2008 Temenos acquired the core banking assets of Informer SA for USD40.3m This purchase gives Temenos: 15 T24/Globus clients with corresponding maintenance stream 100 staff, including 60 systems implementers Increased presence in Greece, Eastern Europe and the Balkans An immediat
Slide 16: Acquisitions – performance against objectives
Acquisitions – performance against objectives Financial Objects Informer SA Revenue USD20-50m √ √ Accretive to earnings √ √ Strengthen Distribution/ delivery √ √ Acquire Client Base √ √ No Diversification × × diversification: Temenos remains 100% committed to core banking domain Slide 16
Slide 17: Acquisition strategy – no change to stated aims
Acquisition strategy – no change to stated aims We continue to look for: • Bolt-on acquisitions to boost organic growth • USD20-50m revenue • Accretive • Geographic expansion into markets where underrepresented • Market penetration through buying up customer bases • Entry into adjacent markets • Pip
Slide 18: Strategy and Business Update
Strategy and Business Update Andreas Andreades CEO
Slide 19: Business update – still executing strongly
Business update – still executing strongly We continue to grow ahead of our plan on both T24 and TCB, underpinned by: Superior products Win ratio at above 80% Compelling investment and product roadmap Broad geographical reach Growing sales force Services initiatives of model bank, business consultin
Slide 20: Product roadmap – T24 R08 and TCB R08
Product roadmap – T24 R08 and TCB R08 Temenos has spent more than USD140m on R&D in the last 3 years At our Temenos Client Forum in May, we announced the latest releases of T24 and TCB. In total, there were over 150 enhancement, including: T24 R08 TCB R08 • Retail product builder, modelled on • Ente
Slide 21: Business update - licence sales
Business update - licence sales Strong growth in sales to new customers… New clients in H108 at 22 vs. 21 in H107 (+5%)… …but new client licences up 75% at constant currency... …and T24 licencing up 37% …reflecting better pricing (+20% in LTM), continued flow of new business … particularly in retail
Slide 22: Update on Growth Initiatives: sales coverage
Update on Growth Initiatives • Increasing sales coverage • Broadening and deepening geographical coverage still biggest driver of sales growth • Our client base stands at over 600 banks… …out of 22,000 banks worldwide • We aim to have c.60 quota-carrying salespeople by the year end (52 at 30 June 20
Slide 23: Update on Growth Initiatives: Metavante partnership for TCB
Update on Growth Initiatives • Update on Partnership with Metavante for TCB: • Joint development is on track, first release already launched • Partnership is strong at all levels • The pipeline is building satisfactorily, and we are seeing a significant shift in the level of interest. • Sub-prime is
Slide 24: Update on Growth Initiatives: Metavante agreement for T24
Update on Growth Initiatives • Introducing Metavante agreement for T24: • Joint sales and marketing agreement (for US market only) • To target foreign banking institutions in the US, target list of c.120 banks, smaller universal banks • Offer T24 on licence and hosted bases • Temenos salesforce augm
Slide 25: Update on Growth Initiatives: ARC
Update on Growth Initiatives • ARC: • ARC has so far been sold to 42 clients (11 in Q2) • Sales to existing clients up to 55% in quarter from 34% in LTM, as we begin to target the T24 customer base… • …but penetration of existing T24 base still less than 2% • ARC now represents 5% of total licences
Slide 26: Services Update
Services Update Improving Sales and Margins, Becoming Best in Class Model Bank Used in projects from Q4 2006 onwards Q2 2008 highlights Proven to shorten implementation timeframes by 50% • Revenue up by 52% yoy TEMENOS Application Management TAM progressing in line with plan – headcount up to 326 •
Slide 27: Business update – our forecasts in context
Business update – our forecasts in context The banking sector/ IT spending • Banks face challenging times “ The velocity of core banking replacement is accelerating. There will be activity as • Banks forced to raise USD331bn* to recapitalise balance sheets banks turn from [research and development]
Slide 28: Updated 2008 outlook
Updated 2008 outlook Previous Update Informer Revised y-o-y Licences 175 +1.5 176.5 19% Revenue 415 +10 +8 433 29% Costs 327.5 +9 +7.9 344.4 EBIT 87.5 +1 +0.1 88.6 42% EBIT margin 21.1% 20.5% 160bps Adjusted EPS* 1.36 +0.01 +0.02 1.39 35% • We increase EBIT outlook to USD88.6m, giving 42% growth • W
Slide 29: 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 for 2009, even though now off higher base (given increase to 08 outlook): • 20 - 25% organic revenue growth for 2009, but off higher base We anticipate significant and sustained EPS growth • 2
Slide 30: Appendices
Appendices % sm: FM fe) FA ed Ba * EMENOS The Banking Software Company
Slide 31: Research and Development
Research and Development USD USDmillions millions Q2 Q208 08 Q2 Q207 07 %% 12 12mths mthsto to Jun Jun 08 Jun07 08 Jun 07 %% R&D costs – as reported 20.3 14.4 41% 70.3 42.2 67% Capitalised development costs 4.9 3.5 17.2 15.6 Non cash items (4.7) (3.5) (12.4) (7.6) Less Actis* 0.0 0.0 (7.6) (0.8) Cur
Slide 32: Sales and Marketing
Sales and Marketing USD USDmillions millions Q2 Q208 08 Q2 Q207 07 %% 12 12mths mthsto to Jun Jun 08 Jun07 08 Jun 07 %% S&M costs – as reported 16.6 15.4 8% 77.3 54.6 42% Less Actis* 0.0 0.0 (1.1) (0.1) Currency impact n/a 0.8 n/a 2.7 Less non-cash (1.1) (3.0) (3.5) (2.1) S&M costs underlying 15.5 1
Slide 33: Revenues by region LTM Q2 2008 vs. 2003
REVENUES BY REGION LTM Q2 2008 vs. 2003 Revenues - Full Year 2003 Revenues – LTM Q2 2008 Asia Asia 18% 14% Americas 8% Americas 15% • More global EMEA 67% • More diversified EMEA 78% Licence Revenues - Full Year 2003 Licence Revenues – LTM Q2 2008 Asia Asia 16% 21% Americas 20% Americas EMEA 11% EME
Slide 34: Licences by Tier & Segment
Licences by Tier & Segment Full Year 2003 LTM Q2 2008 Tier 1&2 29% Tier 1&2 35% • Larger deal size Others Others 65% • More diversified 71% Full Year 2003 LTM Q2 2008 Private 12% Retail / Universal Private 72% 12% Retail / Universal Wholesale 56% 32% Wholesale 16% (1) On a $ basis Slide 34 13/11/200
Slide 35: 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 36: TEMENOS enters the SMIM
TEMENOS enters the SMIM On 8/7/2008, Swiss Exchange announces that Temenos will join SMIM (mid-cap) index The adjustments will be made after closing on September 19th, and take effect on September 22nd Selection is based on average market capitalisation and traded volumes from July 2007 to June 2008
Slide 37: Leading the IBS league table
Leading the IBS league table First place in the 2007 IBS Sales League Table Corebanking Positions Position Product Company Deals 1 T24 TEMENOS 44 2 TCS BANCS TCS 24 3 Flexcube i-flex 20 • Top two positions in the IBS Sales League Table for 9 out of the last 10 years • Second place vendor has 20 fewe
Slide 38: TEMENOS' awards
TEMENOS’ awards TEMENOS’ products are multi award winning. In 2007, awards included: T24 was named no.1 best-selling core banking system in 2007 in the IBS Journal’s annual sales league table. Martin Whybrow, editor, commented, “The company has an established, strong product combined with a large an
Slide 39: Thank You
Thank You sm: FM fe) FA ed Ba WF EMENOS The Banking Software Company