Temenos Ag · SIX:TEMN
Temenos — Investor Presentation (June 2010)
50 slides from Temenos's investor presentation, June 2010
Slide 1: Introductory Presentation
Introductory Presentation June 2010
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: Agenda
Agenda Introduction to Temenos Strategy and Business update Financial update Outlook and Summary Q&A Slide 3
Slide 4: Who we are
Who we are A leading global banking software company A company with a firm foundation and strong financials • Headquartered in Geneva, global presence through 3,500+ employees in 56 offices • Listed on the Swiss stock exchange • USD370 million revenues • 56 Offices in 38 countries Internationa
Slide 5: Our addressable market
Our addressable market Temenos current addressable market DISTRIBUTION CHANNELS CRM BUSINESS INTELLIGENCE BANKING INVESTMENT SERVICES INSURANCE RISK & COMPLIANCE Retail/Universal Wholesale Asset management Life Private Treasury & Capital Markets General GENERAL SUPPORT PAYMENTS Slide 5
Slide 6: The core banking market
The core banking market One the most attractive software markets in the World - Software penetration levels are low and growth is high Market size today Addressable market* USD 3.8bn USD23.5bn *Source: Celent, Gartner, IDC, Temenos estimates; represents total bank spending on core banking systems (i
Slide 7: The competitive landscape
The competitive landscape Major players by segment Vendor Products Retail Private Wholesale Universal TEMENOS T24 TCB Oracle FS Flexcube Misys Equation, Midas, Bankmaster Infosys Finacle Fidelity Corebank, Systematics TATA Consulting FNS SAP Corebanking Source: IBS Market Report; Companies announcem
Slide 8: Why do banks choose Temenos?
Why do banks choose Temenos? All USDm except SAP INFOSYS TCS ORACLE MISYS TEMENOS employees Market* Capitalisation 77,232 33,494 32,791 123,777 1,958 1,651 LFY Revenue 14,884 4,858 6,374 23,225 1,047 370 Employees** 47,578 104,850 143,761 86,000 5,411 3,144 *As at 9th March 2010 ** Employees as at l
Slide 9: Credibility
Credibility Temenos T24 has the largest and most geographically diverse installed base Number of live customers by region for major core banking systems 350 300 250 200 150 100 50 0 Europe Americas Asia Pacific Africa Temenos T24 i-flex Flexcube Infosys Finacle Misys Equation Misys Midas SAP TB TCS
Slide 10: Vendor viability is more important than ever
Vendor viability is more important than ever According to Forrester Research, we are one of only two global power sellers 2009 caused a major shakeup in the vendor landscape “Oracle and Temenos remain the Global Power Sellers. They defended their 2009 territories against the smallest group of Global
Slide 11: Credibility & Choice
Credibility & Choice Se errnGe > Capgemini CONSULTING. TECHNOL OGY.OUISOURCING @ LET'S DO AMAZING CSC. ORACLE
Slide 12: High R&D
High R&D In 2008, as % of sales, we spent >2x more than our biggest competitors... R&D spend as % of revenues 22% 20.9% 20.8% 20.3% 20.1% 19.9% 20% 19.0% 18% 16% 14% 12% 10% 9.6% 9.4% 8.6% 8.8% 8.9% 8.5% 8% 2003 2004 2005 2006 2007 2008 Temenos* Peer Group** * Cash R&D, adjusted for the difference b
Slide 13: Business Model: Packaged software
Business Model Packaged software... Presentation Parameters Product Parameters Regional platform Core Application Core Logic Application Logic Local Logic Core Application Logic Java Version RnVersion Rn+1 C# Database Local Data Slide 13
Slide 14: Business Model
Business Model ...translating into very low cost of ownership... IT spending as a % of costs 16% 14% 12% 10% 8% Average IT Spending 6% 4% 2% 0% Slide 14
Slide 15: Product
Product Integrated solution gives single customer view over the whole bank Improved Risk Management Able to see entire counterparty risk in less than 30 mins NPLs of 0.61% vs. 71% asset growth CAGR Source: Schroders case study, FCB annual reports
Slide 16: Product
Product Integrated solution gives single customer view over the whole bank Improved customer service and innovation 45,000 8.0% 40,000 7.0% 35,000 6.0% 30,000 5.0% in VND bn 25,000 4.0% 20,000 3.0% 15,000 10,000 2.0% 5,000 1.0% - 0.0% FY 04 FY 05 FY 06 FY 07 FY 08 Deposits NIM Source: Techcombank an
Slide 17: Product
Product Integrated and scalable solution gives leverage... 35000 IT headcount and AUM rebased at 100 at1996 levels 30000 25000 20000 IT headcount 15000 Clients' AUMs in CHF bn 10000 5000 0 1997 1998 1999 2000 2001 2005 2006 2007 2008 1996 2002 2003 2004 Source: EFG
Slide 18: The most profitable banks
The most profitable banks ...resulting in much lower relative costs Bank of Shanghai Banking Industry IT Cost to Income 2% 9% IT Cost to Op. Cost 5% 14% IT Cost to Total Assets 5bps 23bps IT Cost to FTE EUR 2,650 EUR 20,000 Source: BCG, Bank of Shanghai
Slide 19: Most profitable banks
Most profitable banks Better risk management + improved service and innovation + lower costs = better profitability Slide 19
Slide 20: Agenda
Agenda Introduction to Temenos Strategy and Business update Financial update Outlook and Summary Q&A Slide 20
Slide 21: Business update
Business update Highlights: • Return to l-f-l revenue growth → Like-for-like revenues up 3% in the quarter → First quarter in six to show like-for-like growth • Larger deals sizes help to grow licences against tough comparative → 4 new tier 1 customers added in the quarter → 10 new customers (vs. 14
Slide 22: Business update
Business update Highlights: • Pipeline growing strongly → All regions, retail and corporate in particular → Supports double-digit like-for-like licence growth outlook • Good traction with new AML and STP products → Significant deals with Barclays and ANZ • Viveo Integration proceeding well → First V
Slide 23: Update on Q1 2010 Sales
Update on Q1 2010 Sales Seeing bigger banks come to market for core replacement T24 sales More tier 1 deals result in higher deal sizes... • 8 new T24 customers added in the quarter vs. 11 in prior year • 2 new tier 1 T24 customers • 2 large pure-play lending wins • IBS league table results confirm
Slide 24: Update on Q1 2010 Sales
Update on Q1 2010 Sales Insight continues to outperform ARC & Insight In Q1, we signed 9 Insight licences (36 for the LTM)... • Adding functionality for risk and private wealth management • Several sites now live and acting as references • Launched direct marketing campaign, which should see take-up
Slide 25: Update on partners
Update on partners Partners Microsoft → Adoption of MS Platform continues to accelerate following formal partnership → Danske notable new taker in the quarter Cognizant → Number of trained resources increases to 255 in the quarter (all fully utilised on existing projects and client engagements) → Co
Slide 26: Agenda
Agenda Introduction to Temenos Strategy and Business update Financial update Outlook and Summary Q&A Slide 26
Slide 27: Financial statement highlights
Financial statement highlights in USDm Q1 10 Q1 09 LTM 10 LTM 09 Licences 27.2 27.8 (2%) 125.4 146.8 (15%) Maintenance 35.1 27.8 26% 124.4 105.3 18% Services 31.6 25.6 24% 133.3 147.7 (10%) Total revenue 93.9 81.2 16% 383.1 399.8 (4%) Total operating costs (92.1) (72.5) 27% (309.8) (333.6) (7%)
Slide 28: Q1 like-for-like revenues
Q1 like-for-like revenues ► Adjusting for FX, acquisitions and Metavante 120 Total revenue +3% 100 USDm Acquisitions 80 Fx Services +1% Services 60 40 Maintenance Maintenance +6% 20 License License +1% 0 Q1 2009 Q1 2010 • Q1 09 is the last comparative quarter with Metavante revenues • In Q1 2010, al
Slide 29: Update on cash
Update on cash Continued strong cash generation • Adj. EBITDA into adj. operating cash conversion of 133% in Q1 • LTM 2010 conversion at 119% EBITDA into operating cash conversion 160 +119% +124% 140 140 120 120 +60% 100 +59% 100 80 80 USDm 60 60 40 +133% 40 +185% +48% +48% 20 20 0 0 Q1 2009 Q1 2010
Slide 30: Balance sheet – debt and financing
Balance sheet – debt and financing Q1 2010 Comments (USDm) 1.5% coupon, matures 2013 (converts at Convertible bond 131.7 CHF18.6) 131.3 Consortium of 7 banks, repayment up to Credit facilities end of 2012 Other 1.2 Obligations under finance leases TOTAL DEBT 264.2 CASH 155.1 Held in short-term depos
Slide 31: Agenda
Agenda Introduction to Temenos Strategy and Business update Financial update Outlook and Summary Q&A Slide 31
Slide 32: 2010 Outlook
2010 Outlook Outlook • Revenue range of USD440-450m (giving like-for-like growth of 6% at the midpoint) • Licence revenue of approximately USD150m (representing like-for-like growth of 12% vs. 6% previously, see appendix) • Adjusted EBIT* range of USD110-115m (giving margin at midpoint of 25.3%) • E
Slide 33: Summary
Summary Bigger banks are starting to make strategic IT investment IT pivotal part of business plans to address: • Stricter and more fragmented regulation • Shoring up deposit base (in absence of government liquidity) • Profitable growth (especially in emerging markets) • Improving customer experienc
Slide 34: Summary
Summary We are seeing good momentum across all regions, bigger deals • Organic revenue trajectory improving • Increase in number of multi-site corporate and retail banks in pipeline • All regions showing higher pipelines, especially APAC, Europe and N. America ex-US • Better visibility plus larger p
Slide 35: Closing comments
Closing comments • Operating profit growth trend firmly restored • Resumption of revenue growth in quarter • The business is poised to take advantage of better conditions LTM revenues and adj. operating profit since Q3 2005 (USDm) 450 100 400 90 350 80 70 300 60 250 50 200 40 150 30 100 20 50 10 0 0
Slide 36: Appendices
Appendices ‘7 =m: FM] Ce) FA ed * EMENOS The Banking Software Company
Slide 37: Income statement
Income statement Q1 2010 Q1 2009 y-o-y LTM 10 LTM 09 y-o-y (USDm) (USDm) (USDm) (USDm) EBIT 1.8 8.7 (79%) 73.4 66.1 11% Net finance charge (2.2) (1.4) (57%) (8.5) (6.4) (33%) FX (loss)/gain 0.7 (2.4) (71%) (0.6) 1.5 n/a Tax (0.1) 0.0 n/a (0.5) 1.8 n/a Net earnings 0.2 5.0 (96%) 63.8 63.1 1% Adjust
Slide 38: Adjusted EPS reconciliation
Adjusted EPS reconciliation Q1 2010 Q1 2009 (USDm) (USDm) Earnings 0.3 5.1 Amortisation of acquired intangible assets 3.6 2.3 Bond interest 1.5 1.3 Restructuring 7.1 0.0 Total adjusted earnings 12.5 8.6 Number of diluted shares 72.7 66.2 Adjusted EPS 0.17 0.13 Slide 38
Slide 39: 2010 Outlook
2010 Outlook Reconciliation to revised outlook USDm Previous FX Disposals Upgrade*** Revised outlook** outlook Revenue 437-463 (7.3)**** (4.3) 6.6 440-450 Adjusted 109-116 0 0.2 110-115 EBIT* *Adds back restructuring and amortisation of acquired intangibles. Amortisation of acquired intangibles expe
Slide 40: Reconciliation to 12% licence growth
Reconciliation to 12% licence growth USDm 2009 2010 % change Reported/ outlook 125.9 150.0 19% licences MV contribution (2.4) Viveo contribution* (14.3) FX** (2.2) Like-for-like licences 121.3 135.7 12% *This is stated net of USD1.7m of non-core revenue disposed in the year **This restates the 2009
Slide 41: Reconciliation of FX effect on outlook
Reconciliation of FX effect on outlook Currency Budget Spot change Effect on weighting rates rates 2010 revenues (USDm) EUR/USD 25% 1.414 1.33 (6%) 6.5 GBP/USD 5% 1.602 1.540 (4%) 0.9 CHF/USD 1% 0.92 0.93 1% (0.1) 7.3 Slide 41
Slide 42: Like-for-like cost growth
Like-for-like cost growth 100 92.1 90 85.1 77.9 80 72.5 74.4 70 60 50 40 30 20 10 0 Q4 09 Q109 Q1 2010 Q1 2010 Pre- Q1 2010 like-f or- restructuring like • Like-for-like costs in Q110 down on Q409 because of higher variable costs in Q4 • Like-for-like costs in Q110 up year-on-year as we begin to mak
Slide 43: Geographical breakdown of licence revenue
Geographical breakdown of licence revenue LTM 2010 LTM 2009 Americas 6% MEA Americas 31% 13% MEA 25% APAC 22% APAC 17% Europe 47% Europe 40% Excludes any contribution from Metavante Slide 43
Slide 44: DSOs trend
DSOs trend DSOs – last 9 quarters 176 171 171 Days 168 168 167 165 164 156 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Slide 44
Slide 45: T24 Overview – Functional Architecture
T24 Overview – Functional Architecture Indirect Channels Direct Channels Tech. Admin System Admin Branch Call Centre Internet Mobile IVR 3rd systems BPEL Bank Middleware (optional) T24 Browser Open Financial Service (Web Services, API, Messaging) Security Management System Brokerage, Wealth Manageme
Slide 46: T24 Overview – Application Objects
T24 Overview – Functional Architecture Indirect Channels Direct Channels Tech. Admin System Admin Branch Call Centre Internet Mobile IVR 3rd systems BPEL Bank Middleware (optional) T24 Browser Open Financial Service (Web Services, API, Messaging) Security Management System Trade Finance Advices Bran
Slide 47: One annual release
One annual release Upgrade is annual and simple • Client gets annual enhancements • No services input for client or Temenos • Temenos maintains all clients on latest versions High maintenance and high margin on maintenance Slide 47
Slide 48: Our products are open and scalable
Our products are open and scalable XML Built using industry standards, such as SOA/SOAP Have the framework to be run on any platform, any database More servers can be added to cope with increasing volume Slide 48
Slide 49: Leading the IBS League Table
Leading the IBS League Table First place in the 2009 IBS Sales League Table Corebanking Positions Position Product Company Deals 1 T24 TEMENOS 40 2 Flexcube Oracle FSS 33 3 TCS Bancs TCS Financial 17 Solutions • Top two positions in the IBS Sales League Table for 11 out of the last 12 years Slide 49
Slide 50: Thank You
Thank You ‘j =m: FM] Ce) FA ed * EMENOS The Banking Software Company