Temenos Ag · SIX:TEMN
Temenos — Q2 2007 Earnings Presentation
40 slides from Temenos's earnings presentation, Jul 25, 2007
Slide 1: Business Update & Financial Results
Business Update & Financial Results Quarter ended 30 June 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: Business update
Business update • Outstanding H1 performance with excellent cashflow and earnings growth • Our outlook for 2007 is ahead of our strategic plan and targets for 2007 based on strong demand for our products and excellent execution • 2008 and 2009 revised upwards to reflect higher 2007 outlook, with top
Slide 7: Q2 2007 Results – Key Points
Q2 2007 RESULTS – KEY POINTS • Excellent second quarter with strong sales performance and business momentum. Revenues grew by 32% in the quarter and EBIT by 34% compared to Q2 06. • Licence revenues for the quarter were flat compared to Q2 06, lapping an unusually high comparative quarter which incl
Slide 8: 12 Months to 30 June - Business Update
12 MONTHS TO 30 JUNE - BUSINESS UPDATE Revenues (US$ m) Costs (US$ m) Σ 257.4 Σ 189.2 +36% +33% 217.5 82.7 +48% 163.0 56.0 Services 64.5 49.8 +30% Maintenance 110.1 83.4 +32% Licence 2006 2007 2006 2007 Cash Flow from Operations and EBITDA (US$ m) Fully Diluted EPS (US$ per share) +47% 0.58 +32% +22
Slide 9: Sales Performance – Business Update (contd)
SALES PERFORMANCE – BUSINESS UPDATE (contd) • T24 continues to perform strongly, with licence revenues up 42% in the LTM. • New client wins under our licensing model totalled 12 in the quarter (2006: 10) and totalled 46 in the LTM (2006: 37). 50 +24% 46 37 40 +37% 27 30 20 10 0 2005 2006 2007 • Reve
Slide 10: Update on Growth Initiatives
UPDATE ON GROWTH INITIATIVES • Misys Replacement Programme: – This initiative is specifically designed to provide users of Misys with a low risk, cost-efficient and fast-track upgrade path to T24. – Since the launch of our replacement programme the following number of Misys customers have selected T
Slide 11: Update on Growth Initiatives (contd)
UPDATE ON GROWTH INITIATIVES (contd) ACTIS.BSP – Integration of ACTIS.BSP is progressing well – Clients have welcomed the acquisition and the product direction – We have already started marketing our T24 German model bank – Our business case assumed a first T24 deal in 2008. We currently believe we
Slide 12: Services Update
SERVICES UPDATE • Services revenue grew by 84% for the quarter and by 48% in the 12 months to 30 June 07. Services revenue growth lags licence revenue growth by about nine to twelve months. • Services margin for the quarter was 3% compared to -16% in Q2 2006. • Services margin for the half year to 3
Slide 13: Product Roadmap
PRODUCT ROADMAP TEMENOS continues to invest in four main product areas: 1. Focus on the Customer – enterprise wide Banking, not departmental (ARC phase 2) • Integrated and service oriented customer approach • Customer Acquisition, Retention and Cross Sell capability • Customer and product targeting
Slide 14: Acquisitions Update
ACQUISITIONS UPDATE • Organic growth model on track delivering exceptional EPS growth (2007 outlook: +47%) • 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 15: The Next 3 Years – Our Strategic Plan
THE NEXT 3 YEARS – OUR STRATEGIC PLAN • Sustain organic revenue growth for 2008 and 2009 of 20 - 25% per annum on new 2007 base. This would represent a 3 year organic CAGR of 28% given our 2007 outlook. • Establish a profitable and growing services business model. • Deliver a compelling, growing and
Slide 16: Financial Results
Financial Results David Arnott CFO 16
Slide 17: Q2 2007 & 12 Months to 30 June 2007 - Financial Highlights
Q2 2007 & 12 MONTHS TO 30 JUNE 2007- FINANCIAL HIGHLIGHTS Revenue • Q2 07 Revenues up 32% at USD 73.5 million compared to USD 55.8 million in Q2 06 (12 mths to Jun 07: up 36%). Operating Costs • Q2 07 Operating Costs up 32% at USD 66.1 million compared to USD 50.3 million in Q2 06 (12 mths to Jun 07
Slide 18: Income Statement
INCOME STATEMENT USD million Quarter ended 30 June 12 mths to 30 June 2007 2006 Growth 2007 2006 Growth Revenues Licensing 29.1 29.2 0% 110.1 83.4 32% Maintenance 19.1 12.9 48% 64.5 49.8 30% Services 25.3 13.8 84% 82.7 56.0 48% Total revenues 73.5 55.8 32% 257.4 189.2 36% Operating costs 66.1 50.3 3
Slide 19: Net Earnings Analysis
NET EARNINGS ANALYSIS USD million Quarter ended 30 June 12 mths to 30 June 2007 2006 Growth 2007 2006 Growth EBIT 7.4 5.5 34% 39.9 26.2 53% Foreign Exchange (0.2) 4.7 0.0 3.8 Other Financing (0.9) (0.1) (1.4) (0.7) Tax (0.0) (1.3) (2.8) (3.5) Net Earnings 6.3 8.8 (28)% 35.7 25.8 38% Tax Rate 0% 13%
Slide 20: Currency Movements
CURRENCY MOVEMENTS USD millions Q2 07 Q2 06 % 12 mths to % Jun 07 Jun 06 Revenue – as reported 73.5 55.8 32% 257.3 189.2 36% Currency impact n/a 1.3 n/a 4.8 Revenue adj. for Currency 73.5 57.2 28% 257.3 194.0 33% Operating costs – as reported (66.1) (50.3) 32% (217.5) (163.0) 33% Currency impact n/a
Slide 21: Cash Cost Leverage
CASH COST LEVERAGE Q2 2007 Q2 2006 Growth LTM 2007 LTM 2006 Growth Product revenue 48.2 42.0 15% 174.7 133.2 31% Like for like adjustments -2.2 0.9 -3.5 3.4 Like for like product revenue 46.0 42.9 7% 171.2 136.6 25% Product costs 41.6 34.3 21% 138.4 98.7 40% Like for like & non-cash adjustments -7.6
Slide 22: Cash Cost Leverage
CASH COST LEVERAGE Q2 2007 Q2 2006 Growth LTM 2007 LTM 2006 Growth Total revenue 73.5 55.8 32% 257.4 189.2 36% Like for like adjustments -4.3 1.3 -6.1 4.8 Adjusted total revenue 69.2 57.1 21% 251.2 194.0 30% Total costs 66.1 50.3 31% 217.5 163.0 33% Like for like & non-cash adjustments -8.7 2.2 -9.2
Slide 23: Cashflow Conversion – 12 Months to 30 June
CASHFLOW CONVERSION – 12 MONTHS TO 30 JUNE USD million EBITDA Cash Flow from % EBITDA conversion Operations 2007 2006 T24 53.1 42.1 79% 81% TCB (1.1) 1.9 n/a n/a TOTAL 52.0 44.0 85% 39% • Cash flow from operations for 12 mths to 30 June 07 growing by 223% compared to the same period in 2006 driven b
Slide 24: 12 Month Rolling Cashflow from Operations
12 MONTH ROLLING CASHFLOW FROM OPERATIONS (US$’000) 60,000 50,000 40,000 30,000 20,000 10,000 0 LTM Q2- LTM Q3- LTM Q4- LTM Q1- LTM Q2- 2006 2006 2006 2007 2007 LTM Cash Flow from operations LTM EBITDA Cashflow generation continues to exceed EBITDA growth 24
Slide 25: Stock Buy Back
STOCK BUY BACK • In Q2 2007 we continued our stock buyback programme and purchased 655,100 shares for an average price of CHF27.80 and a total consideration of US$15.6 million, resulting in total buyback year to date of US$32 million at an average price of CHF 23.6. • In 2008 and 2009 we expect to c
Slide 26: 2007 Outlook
2007 OUTLOOK USD million Previous Change Revised 2006 Growth Licence revenues 120 - 125 5.0 125 - 130 97.9 30% Total revenues 290.0 10.0 300.0 216.3 39% EBIT 55.0 2.0 57.0 33.3 71% EBIT margin 19% - 19% 15% 4 pts EPS 83 cents 3 cents 86 cents 57 cents 51% Adjusted EPS* 86 cents 3 cents 89 cents 57 c
Slide 27: Outlook Assumptions
OUTLOOK ASSUMPTIONS In arriving at our 2007 outlook we have made the following assumptions: • Tax rate: Zero effective tax rate (see slide 38) • Foreign exchange: USD 1 : EUR 0.72 USD 1 : CHF 1.21 USD 1 : GBP 0.49 • Number of shares for diluted EPS*: 69.4m * including impact of convertible 27
Slide 28: Appendices
@ TEMENOS™ Appendices
Slide 29: 2007 Outlook EPS Calculation
2007 OUTLOOK EPS calculation convertible convertible USD million as debt as equity Outlook operating profit 57.0 57.0 Net Financial Costs & Foreign Exchange -2.3 -2.3 Tax 0.0 0.0 Outlook net earnings 54.7 54.7 add back convertible interest expense 0.0 4.8 Net earnings for EPS 54.7 59.5 Outlook Dilut
Slide 30: Operating Costs by Quarter
OPERATING COSTS BY QUARTER USD million Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Reported costs 50.3 44.4 51.9 55.1 66.1 Non-trend costs (15.3) (6.9) (13.4) (9.0) (12.5) Trend costs 35.0 37.5 38.5 46.1 53.6 Headcount 1497 1648 1724 1947 2128 30
Slide 31: Research and Development
RESEARCH AND DEVELOPMENT USD millions Q2 07 Q2 06 % 12 mths to % Jun 07 Jun 06 R&D costs – as reported 14.4 9.2 57% 42.2 28.3 49% Capitalised development costs 3.4 3.6 14.6 13.9 Non cash items (3.5) (2.0) (10.3) (7.6) Less Actis (2.3) - (3.1) - Currency impact - - 1.4 Cash R&D costs 12.0 10.8 11% 43
Slide 32: Services
SERVICES USD millions Q2 07 Q2 06 % 12 mths to % Jun 07 Jun 06 Service revenues 25.3 13.8 84% 82.7 56.0 48% Less Actis (2.2) - (2.8) Currency impact n/a 0.4 n/a 1.4 Service revenues underlying 23.1 14.2 63% 79.9 57.4 39% Service costs – as reported 24.5 16.0 53% 79.1 64.3 23% Less Actis (1.1) - (1.6
Slide 33: General & Administrative Costs
GENERAL & ADMINISTRATIVE COSTS USD millions Q2 07 Q2 06 % 12 mths to % Jun 07 Jun 06 G&A costs – as reported 11.9 9.3 28% 41.7 29.2 43% Less Actis (0.4) - (0.7) - Less non-cash (3.0) (1.6) (6.3) (2.1) Currency impact n/a 0.4 n/a 1.5 G&A costs underlying 8.5 8.1 5% 34.7 28.6 21% 33
Slide 34: Sales and Marketing
SALES AND MARKETING USD millions Q2 07 Q2 06 % 12 mths to % Jun 07 Jun 06 S&M costs – as reported 15.4 15.8 (0.3)% 54.6 41.1 33% Less Actis (0.1) - (0.2) - Currency impact n/a 1.0 n/a 1.6 Less non-cash (1.7) (1.7) S&M costs underlying 13.6 16.8 (19)% 52.7 42.7 23% 34
Slide 35: DSOs Analysis
DSOs ANALYSIS 120 114 114 113 111 103 104 104 105 100 101 97 97 98 80 60 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2004 2004 2005 2005 2005 2005 2006 2006 2006 2006 2007 2007 • DSO definition (see below) based on using average 12 month receivables. This allows trend comparisons without the distortion of d
Slide 36: Calculation of DSO's
CALCULATION OF DSO’s Average 12 mths 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 114 116,396 265,53
Slide 37: Revenues by Region 12 Months to 30 June
REVENUES BY REGION 12MONTHS TO 30 JUNE Revenues - Full Year 2003 Revenues - LTM Q2 2006 Revenues - LTM Q2 2007 Asia Asia Asia 19% 14% 22% Americas 8% Americas Americas EMEA 14% EMEA 20% 61% 64% EMEA 78% Licence Revenues - Full Year 2003 Licence Revenues - LTM Q2 2006 Licence Revenues - LTM Q2 2007 A
Slide 38: Licences by Tier & Segment
LICENCES BY TIER & SEGMENT Full Year 2003 LTM Q2 2006 LTM Q2 2007 Tier 1&2 29% Tier 1&2 41% Others 43% Tier 1&2 Others 57% 59% Others 71% Full Year 2003 LTM Q2 2006 LTM Q2 2007 Others 31% Others 36% Others Retail / 44% Universal 56% Retail / Universal Retail / 64% Universal 69% (1) On a $ basis 38
Slide 39: 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 40: 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