Temenos Ag · SIX:TEMN
Temenos — Q1 2008 Earnings Presentation
33 slides from Temenos's earnings presentation, Apr 22, 2008
Slide 1: Financial Results & Business Update
Financial Results & Business Update Quarter ended 31 March 2008 22 April 2008
Slide 2: Presentation Overview
Presentation Overview Agenda Agenda Speaker Speaker Position Position Introduction Ben Robinson Investor Relations Financial Update David Arnott CFO Strategy and Andreas Andreades CEO Business Update Q&A David Arnott Andreas Andreades Max Chuard Director 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 – Q1 2008
Income Statement Highlights – Q1 2008 Q1 2008 Q1 2007 yoy Licence revenue 31.1 23.4 33% Total revenue 88.4 60.3 47% EBIT 6.5 5.2 25% Adjusted EPS* 0.13 0.07 86% *Adjusted for amortisation of acquired intangibles (Q108: USD0.6m) USDm, except EPS USD Slide 5
Slide 6: Income Statement Detail
Income Statement Detail Q1 08 Q1 07 LTM 08 LTM 07 Licences 31.1 23.4 +33% 156.5 110.2 +42% Maintenance 23.7 16.2 +46% 83.8 58.3 +44% Services 33.5 20.7 +62% 117.6 71.2 +65% Total revenue 88.4 60.3 +47% 358.0 239.7 +49% R&D (18.0) (10.7) +68% (64.4) (37.0) +74% Cost of services (32.9) (20.7) +59% (10
Slide 7: Like-For-Like Cash Cost P&L
Like-For-Like Cash Cost P&L Q1 08 Q1 07 LTM 08 LTM 07 Total revenue 88.4 60.3 +47% 358.0 239.7 +49% Like for like* adjs. (3.5) 0.1 (23.4) 4.9 Adjusted total revenue 84.9 60.4 +41% 334.6 244.6 +37% Total costs 81.9 55.1 +49% 294.1 201.7 +46% l-f-l and non cash** adjs. (9.8) (1.1) (37.5) 5.1 Adjusted
Slide 8: Income Statement Detail
Income Statement Detail Income Statement Detail Q1 08 Q1 07 LTM 08 LTM 07 EBIT 6.5 5.2 25% 63.8 38.0 68% Net Finance charge (0.7) (0.3) (133%) (3.5) (0.5) (600%) FX gain 1.1 (0.6) n/a 6.8 4.8 42% Tax 0.1 0.0 n/a 0.4 (4.2) n/a Net earnings 7.0 4.2 67% 67.5 38.1 77% Adjusted EPS* 0.13 0.07 86% 1.07 0.
Slide 9: LTM Cash Flow Conversion (USDm)
LTM Cash Flow Conversion (USDm) LTM Cashflow from ops. LTM EBITDA 90 +125% +68% 80 LTM Cashflow 70 conversion at 85% 60 Q1 08 conversion at 50 87% vs. 69% in Q1 07 40 81.4 68.8 30 48.5 20 30.6 10 0 2007 2008 2007 2008 LTM 2008 % EBITDA Conversion USDm EBITDA Cash Flow from Operations 2008 2007 T24 8
Slide 10: DSOs
DSOs 174 172 days 172 170 days 170 168 166 164 162 160 Dec-07 Dec 07 Mar-08 Mar 08 • 2 day sequential improvement • Target for 15 days improvement by end of 2008 – on track • Simplified methodology*, easier to understand and benchmark * DSOs calculated as closing receivables less deferred revenue di
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 • In 2006, we purchased USD13.7m (vs. FCF of USD10
Slide 12: Strategy and Business Update
Strategy and Business Update Andreas Andreades CEO
Slide 13: Business update – still executing strongly
Business update – still executing strongly We begin the year with an excellent Q1, recording strong growth off a tough comparative We continue to grow ahead of our plan on both T24 and TCB, underpinned by: Superior products T24 was comfortably the best-selling core banking product in 2007* Win ratio
Slide 14: Business update - licence sales
Business update - licence sales Strong growth in new clients… New clients in Q1 at 10 vs. 9 in the prior year (+11%), including global deal with a tier 1 bank LTM, no. of new clients was 50 vs. 44 in LTM 2007 (+14%) … across all verticals… 60% +67% +50% 50% +38% % Growth in LTM 40% 30% +25% 20% 10%
Slide 15: Update on Growth Initiatives
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 • We are organisi
Slide 16: Update on Growth Initiatives: ARC
Update on Growth Initiatives • ARC: • ARC has so far been sold to 31 clients (3 in Q1) • <30% of sales have been to existing clients • ARC penetration of existing T24 base less than 2% • Now represents 6% of total licences (on LTM basis) • Average deal size rising as no. of modules grows and product
Slide 17: Update on Growth Initiatives: Metavante partnership
Update on Growth Initiatives • Metavante partnership: • Joint development is on track, first release on schedule for summer ‘08 • Partnership is strong at all levels • The pipeline is building satisfactorily in line with original plan despite subprime • Sub-prime is throwing up opportunities for our
Slide 18: Services Update
Services Update IMPROVING SALES AND MARGINS, BECOMING BEST IN CLASS Model Bank Used in projects from Q4 2006 onwards Q1 2008 highlights Proven to shorten implementation timeframes by 50% • Revenue up by 62% yoy TEMENOS Application Management • Margin at 2% (0% in PY) TAM progressing in line with pla
Slide 19: Acquisition strategy
Acquisition strategy To complement accelerating organic growth model to achieve leadership in growing market. Targeting companies with revenues of USD20-50m to: Strengthen delivery capability and distribution in key markets Acquire client base Enhance product Slide 19
Slide 20: Business Update – demand conditions
Business Update – demand conditions Demand – we still see no slowdown • Minimal exposure to the investment banking sector • Exposure to the US chiefly through Metavante - annual contracted revenues intact • Clients spread across retail, universal, private and wholesale banks • Strong emerging market
Slide 21: Updated 2008 outlook
Updated 2008 outlook Previous Update Revised yoy ∆ Licences 173 +2 175 +18% Revenue 400 +15 415 +26% EBIT margin 21.2% 21.1% +220bps EBIT 85.0 +2.5 87.5 +40% Adjusted EPS* 1.33 +0.03 1.36 +32% On outlook • 26% top line growth plus 220bps of margin expansion gives 40% EBIT growth On update • FX adds
Slide 22: 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 23: Appendices
Appendices ‘7 sm: FM fe) FA ed Bl F EMENOS The Banking Software Company
Slide 24: Research and Development
Research and Development USD USDmillions millions Q1 Q108 08 Q1 Q107 07 %% 12 12mths mthsto to Mar Mar 08 Mar07 08 Mar 07 %% R&D costs – as reported 18.0 10.7 68% 64.4 37.0 74% Capitalised development costs 3.3 3.2 15.8 14.8 Non cash items (4.2) (2.6) (15.4) (8.8) Less Actis* (1.4) (0.8) (9.1) (0.8)
Slide 25: Services
Services USD USDmillions millions Q1 Q108 08 Q1 Q107 07 %% 12 12mths mthsto to Mar Mar 08 Mar07 08 Mar 07 %% Service revenues 33.5 20.6 63% 117.6 71.2 65% Less Actis* (2.1) (0.6) (8.1) (0.6) Currency impact n/a 0.7 n/a 1.9 Service revenues underlying 31.4 20.7 52% 109.5 72.5 51% Service costs – as r
Slide 26: General & Administrative Costs
General & Administrative Costs USD USDmillions millions Q1 Q108 08 Q1 Q107 07 %% 1212mths mthsto to Mar Mar 08 Mar07 08 Mar 07 %% G&A costs – as reported 12.2 9.2 33% 44.5 39.0 14% Less Actis* (0.4) (0.3) (1.4) (0.3) Less non-cash (3.0) (1.7) (9.6) (6.1) Currency impact n/a 0.7 n/a 2.0 G&A costs und
Slide 27: Sales and Marketing
Sales and Marketing USD USDmillions millions Q1 Q108 08 Q1 Q107 07 %% 12 12mths mthsto to Mar Mar 08 Mar07 08 Mar 07 %% S&M costs – as reported 18.8 14.6 29% 76.0 55.1 38% Less Actis* (0.2) (0.2) (1.8) (0.2) Currency impact n/a 0.7 n/a 2.3 Less non-cash (1.9) (0.5) (5.2) (2.1) S&M costs underlying 1
Slide 28: Organic revenues
Organic revenues 120 Actis 100 USDm 84.9 +37% 80 USDm 62.1 Licence USDm 60 +30% Licence 40 Maintenance +33% Maintenance 20 +47% Services Services 0 Q1 2007* Q1 2008 • Strong organic growth in each revenue line • Actis added USD3.5m of inorganic revenue in Q1 08** *2007 restated at 2008 FX (adding US
Slide 29: Revenues by Region LTM Q1 2008 vs. 2003
REVENUES BY REGION LTM Q1 2008 vs. 2003 Revenues - Full Year 2003 Revenues – LTM Q1 2008 Asia Asia 18% 14% Americas 8% Americas 16% • More global EMEA 66% • More diversified EMEA 78% Licence Revenues - Full Year 2003 Licence Revenues – LTM Q1 2008 Asia Asia 15% 21% Americas 22% EMEA Americas 11% EME
Slide 30: Licences by Tier & Segment
Licences by Tier & Segment Full Year 2003 LTM Q1 2008 Tier 1&2 29% Tier 1&2 41% • Larger deal size Others 59% Others • More diversified 71% Full Year 2003 LTM Q1 2008 Private 12% Retail / Private Universal 11% 70% Retail / Universal Wholesale 56% 32% Wholesale 19% (1) On a $ basis Slide 30 13/11/200
Slide 31: 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 32: 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 33: Thank You
Thank You ‘7 sm: FM fe) FA ed Bl F EMENOS The Banking Software Company