Temenos Ag · SIX:TEMN
Temenos — Debt Investor Presentation (March 2013)
51 slides from Temenos's debt investor presentation, March 2013
Slide 1: Winning with products in a multi-speed world
Winning with products in a multi-speed world Fixed income roadshow March 2013
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-looki
Slide 3: Investor highlights
Investor highlights In H2 2012 we laid the foundations for sustained growth Addressing a USD26bn market opportunity, underpinned by structural growth drivers Strategy builds on sound fundamentals and capitalises on strong product assets and installed base opportunity We are a true multi-product comp
Slide 4: Agenda
Agenda Overview of Temenos The market opportunity Our credentials Our strategic plan Financials 4
Slide 5: Temenos – a global market leader
Temenos – a global market leader No.1 World class delivery • 43 new customers went live in 2012 • Strength and depth: World’s leading banking 900+ consultants, software company 100 concurrent projects • Community of 1500+ • 1,200+ installations certified partner in 140+ countries consultants • USD 4
Slide 6: Global reach
Global reach 3,700 57 38 Europe Belgium Asia Pacific Australia employees offices countries France Bangladesh Germany China Greece Hong-Kong Kazakhstan India Americas Middle East Luxembourg Indonesia Canada & Africa Netherlands Japan Costa Rica Egypt Romania Malaysia Ecuador Kenya Russia Pakistan Mex
Slide 7: Our revenue model: a product led company
Our revenue model: a product led company • Rich product suite • Regularly upgraded • New and existing clients • • Geographic spread Referencability 28% Maintenance Licence 45% Maintenance 27% Services • High level consultancy • Revenue stream grows • Direct client feedback for with Licence sales ben
Slide 8: A diverse revenue base
A diverse revenue base FY 2012 licence by new / existing FY 2012 licence by customer tier New 1 and 2 37% 44% Existing 3, 4 and 5 56% 63% 22% 27% APAC FY 2012 licence Europe breakdown by 14% Americas geography MEA 37% Greater stability of revenue streams 8
Slide 9: Financial services landscape
Financial services landscape Distribution channels CRM Risk and compliance Banking Investment services Insurance Business analytics management Retail Universal Life Asset TCM Wholesale Private General Payments Payments General support 9
Slide 10: Financial services landscape: rich product suite
Financial services landscape Rich product suite Distribution channels Temenos Connect CRM Risk and compliance Banking Investment services Insurance analytics Treasury Trader WealthManger Triple’ A Plus Insight management AML Retail Universal Life T24 Asset TCM Business Wholesale Private General Paym
Slide 11: Management and governance
Management and governance Board of Directors David Arnott Max Chuard CEO CFO Mark Winterburn Product Director Andreas Andreades Chris Pavlou George Koukis Central functions Executive Chairman INED, Vice-Chairman Non-Executive Mark Gunning Pre-Sales Director Mike Davis Services Director Mike Head Str
Slide 12: Agenda
Agenda Overview of Temenos The market opportunity Our credentials Our strategic plan Financials 12
Slide 13: Market opportunity
Market opportunity Bank spend on third-party software today: a USD 5.5bn market* USD 1.4bn USD 1.8bn USD 1.3bn USD 1.0bn Core banking Wealth BI Channels *Licence and maintenance spend Source: Gartner, IDC, Celent, Temenos estimates Organisation aligned around market that is 3x bigger than in 2009 13
Slide 14: Market drivers
Market drivers Bank challenges Bank opportunities Regulation and cost Economic growth A newly empowered customer Demographics More intense competition Innovation Financial Services industry undergoing generational shift 14
Slide 15: The profitability gap
The profitability gap Banks RoE levels globally Pre-crisis Global financial crisis New normal Profitability gap 6% 6% pts 16% 10% 10% 9% 7% 4% 1980-2007 average 2008 2009 2010 2011 2012 Source: BCG, Thomson Reuters 15 [ structural] and cannot be ignored Profitability pressures are 15
Slide 16: Agenda
Agenda Overview of Temenos The market opportunity Our credentials Our strategic plan Financials 16
Slide 17: Leading the competition
Leading the competition “Temenos has been the one of two firms in our Global Power Sellers >35 new named deals; more than 4 regions* Temenos category since Forrester introduced the global vendor pyramid for the 2006 global Infosys / Tata banking platform deals survey” Consultancy >15 named deals; mo
Slide 18: The largest installed base
The largest installed base Core banking installed bases by region in 2012 PWM installed bases in 2012 700 180 Temenos 600 160 Oracle 500 TCS 140 SAP 120 400 Infosys 100 300 80 200 60 40 100 20 0 0 Europe Africa APAC North America Latam Temenos ERI Avaloq Notes: Fidelity (FIS) includes ACBS and Profi
Slide 19: Growth in top tier customers
Growth in top tier customers 2012 % of Temenos licence revenue 37% 2007 63% 22% 1999 4% 78% Tier 1 and Tier 2 banks account for 60%+ of Tiers 1 and 2 application spending in 96% Tiers 3, 4 and 5 Financial Services Temenos’ customers include 60% of the world’s tier 1 banks 19
Slide 20: A proud history of innovation
A proud history of innovation Data Interaction Design Componentisation Framework framework Framework framework 1993 2012 Retail banking, Corporate banking, Treasury, Lending, Payments… Temenos Enterprise Payments Platform Trade finance Front office – CRM Trade finance (forfeiting & factoring) Intern
Slide 21: The most profitable banks run Temenos
The most profitable banks run Temenos Performance of Temenos customers compared to banks using both other third-party systems and legacy applications Return on assets Return on capital Cost / income 1.2% 14% 64% 1.0% 12% 62% 25% 30% 37% 46% -7.4% -8.5% 10% 60% 0.8% 58% 8% 0.6% 56% 6% 0.4% 54% 4% 52%
Slide 22: Agenda
Agenda Overview of Temenos The market opportunity Our credentials Our strategic plan Financials 22
Slide 23: Strategic plan in context
Strategic plan in context Build Scale Lead 1993 to 2002 2003 to 2011 2012 onwards • Domain focus • Built out regional structure • True multi-product focus • Truly global • Expansion of addressable • Multi-deployment options market • Realising installed base • Single packaged product • M&A programme
Slide 24: Converting internal spending to external spending
Converting internal spending to external spending Third party spend & total spend on banking software today* Core banking Wealth BI Channels USDbn 30 USD 26.0bn 25 5.6 20 3.0 15 4.5 10 USD 5.5bn 12.9 5 0 Spend with third-parties today Total spend on banking software today *Licences and maintenance S
Slide 25: Installed base opportunity
Installed base opportunity Temenos has more than 1,200 customers using its software (>1,000 discrete financial institutions) Penetration rates across our product sets remain low (e.g. Insight at 20%, Internet banking at 18%) There is a significant revenue opportunity coming from relicensing customer
Slide 26: Our strategic plan: licences and maintenance
Our strategic plan: licences and maintenance Focus on product Sustainably grow licence and maintenance revenues Continued high investment in product Underpins margin expansion and DSO reduction Focus on target areas of growth Core banking to grow slower Channels, PWM, BI expected to be high growth a
Slide 27: Our strategic plan: services
Our strategic plan: services Higher margin services supporting product business 20% to 25% of group revenues Higher value-add expert and productised services, driving even better levels of customer success Reducing implementation times Maximising reusability Reduced cost base providing operational l
Slide 28: Our strategic plan: partners
Our strategic plan: partners Partner strategy moving into the next phase Totally aligned with services strategy, leveraging partners to support growth Partners to drive growth in licensing, instrumental in opening up key segments and markets Services partners taking greater role on projects, leading
Slide 29: Cautious and disciplined approach to M&A
Cautious and disciplined approach to M&A Increased scale Accelerated growth in key markets and A three-pronged segments approach Complementary products 2007 2008 2009 2010 2011 2012 2013 29
Slide 30: Agenda
Agenda Overview of Temenos The market opportunity Our credentials Our strategic plan Financials 30
Slide 31: A track record of success
A track record of success Total revenue (USDm) – 15% CAGR Adjusted EBIT (USDm) – 27% CAGR 500 120 400 100 80 300 60 200 40 100 20 0 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Maintenance revenue (USDm) – 22% CAGR Installations (no.
Slide 32: Resilience of cashflows
Resilience of cashflows Operating cashflows (USDm) Operating cash: EBITDA as a % 228% 140 120% 120 100% 100 80% 80 60% 60 40 40% 20 20% 0 0% 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 Installed based contribution to Licence rev’ Maintenance as a % of revenue 80% 60% 60% 40% 40% 20% 20% 0% 0%
Slide 33: Development of key metrics
Development of key metrics Net debt (USDm) Net debt / EBITDA (x) 140 2.5 120 2.0 100 80 1.5 60 1.0 40 0.5 20 0 0.0 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 EBITDA / Interest (x) EBITDA margin 16 30% 12 20% 8 10% 4 0 0% 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 33
Slide 34: Financing policy and objectives
Financing policy and objectives Commitment to key financial targets • Optimal leverage of 1.0x to 1.5x net debt / EBITDA (with flexibility to go to 2.5x for the right strategic acquisition if clear path to deleveraging) • 100%+ conversion of EBITDA into operating cashflow • 10 to 15 day reduction in
Slide 35: Medium term targets
Medium term targets 10%+ licence Economies Shorter growth of scale 100-150bps of projects margin Cash Higher expansion New / conversion 5%+ revenue services existing mix over 100% margins growth on average More cash per annum Revenue mix up-front per annum shift per annum Significant value creation
Slide 36: Investor highlights
Investor highlights In H2 2012 we laid the foundations for sustained growth Addressing a USD26bn market opportunity, underpinned by structural growth drivers Strategy builds on sound fundamentals and capitalises on strong product assets and installed base opportunity We are a true multi-product comp
Slide 37: Questions
Questions e TEMENOS The Banking Software Company 37
Slide 38: Appendix
Appendix Background materials
Slide 39: 2012: Q4 and FY KPIs (vs 2011)
2012: Q4 and FY KPIs (vs 2011) LFL licence revenue LFL total revenue Q4 up 17% Q4 up 5% FY down 14% FY down 3% Adjusted EBITDA (and margin) Adjusted EPS Q4 up 36% (margin up 9.4% pts) Q4 up 103% FY up 3% (margin up 2.0% pts) FY up 1.1% Cash Leverage USD 114m of operating cash flow in Q4 USD 97m of f
Slide 40: 2013 guidance
2013 guidance Non-IFRS revenue growth of 4.5% to 7.5% (implying revenue of USD 470m to USD 483m)* Licence growth of 5% to 10% (implying licence revenue of USD 131m to USD 138m)* Non-IFRS cost base of USD 368m with non-IFRS EBIT margin of 21.7% to 23.2% (implying non-IFRS EBIT of USD 102m to USD 112m
Slide 41: Operating income statement
Operating income statement In USDm Q4 12 Q4 11 Y-o-Y FY 12 FY 11 Y-o-Y Licences 47.9 41.1 16.6% 125.1 146.0 -14.3% Maintenance 52.8 49.9 5.8% 201.7 197.3 2.2% Services 33.5 36.0 -7.1% 123.4 130.1 -5.2% Total revenue 134.2 127.0 5.7% 450.2 473.5 -4.9% Adj. operating costs 86.3 91.8 -6.0% 364.7 385.7
Slide 42: Below the line income statement
Below the line income statement In USDm except EPS (USD) Q4 12 Q4 11 Y-o-Y FY 12 FY 11 Y-o-Y Adj. EBIT 47.9 35.2 36.0% 85.5 87.7 -2.5% Net finance charge (2.1) (2.5) 17.2% (7.8) (8.6) 9.3% FX gain / (loss) 0.1 (2.7) NM (3.5) (5.4) 35.0% Tax (3.4) (9.0) 61.8% (12.6) (12.2) -3.2% Adj. net profit 42.4
Slide 43: Cash
Cash Cash conversion* Adjusted operating cashflow (USDm) 250% 160 200% 120 150% 80 100% 40 50% 0% 0 FY 2009 FY 2010 FY 2011 FY 2012 FY 2009 FY 2010 FY 2011 FY 2012 * EBITDA into operating cashflow High quality of earnings; cashflow resilience 43
Slide 44: Balance sheet – debt and financing
Balance sheet – debt and financing In USDm 31 Dec 12 Comment Credit facilities 213.8 USD 350m facility, due in 2017 Others 0.6 Total debt 214.4 Cash (117.7) Held in short term deposits Net debt 96.6 1.0x EBITDA Treasury shares (50.8) Held at market value as of 31 Dec 2012 Net debt and financing 45.8
Slide 45: Medium term: Revenue
Medium term: Revenue Licence • Single digit growth in Core Banking; double digit growth in PWM, BI and Channels • Single digit growth in Europe; double digit growth in other geographies • Capitalising on cross-selling opportunities into the installed base • Leveraging the partner channel to capture
Slide 46: Medium term: Cost base
Medium term: Cost base Cost breakdown • Cost of services falling as % of revenue: focus on higher end services and leveraging Cost of Services R&D G&A S&M fixed costs 100% • R&D falling as % of revenue (although increasing in actual amounts): exploiting 80% scale synergies and productivity improveme
Slide 47: Medium term: Margin
Medium term: Margin 100-150bps of margin expansion on average per annum in the medium term Margin improvement to be driven by • shift in revenue mix • improving services margin • economies of scale Investment will be monitored and released as we deliver licence growth, meaning that incremental maint
Slide 48: Dividend
Dividend Temenos is highly cash generative with a strong balance sheet which enables • servicing of our debt obligations; and • investment in the business, including industry leading R&D spend; and • funding for targeted acquisitions; and • returning value to shareholders The Board intends to initia
Slide 49: Aligning with partners to maximise impact
Aligning with partners to maximise impact Technology partner Complementary solution partner Services partners Powered by Temenos Plus 13 regionally based partners Plus Regional and Local 49
Slide 50: Partners in numbers
Partners in numbers Licences brought by partners vs no. of partner consultants % Licence brought by partners (LHS) • 14% of licence revenue in Partner consultants (RHS) 2012 16% 2,000 • 18 deals in 2012 across Asia, 12% 1,500 Middle East, Africa and Europe 8% 1,000 • Partners involved in projects as
Slide 51: Thank you
Thank you www.temenos.com