Temenos Ag · SIX:TEMN
Temenos — Q1 2009 Earnings Presentation
38 slides from Temenos's earnings presentation, Apr 23, 2009
Slide 1: Financial Results & Business Update
Financial Results & Business Update Quarter ended 31 March 2009 23 April 2009
Slide 2: Presentation Overview
Presentation Overview Agenda Speaker Position Introduction Ben Robinson Associate Director, IR & Strategy Financial Update David Arnott CFO Strategy and Andreas Andreades CEO Business Update Q&A Andreas Andreades CEO David Arnott CFO 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 2009
Income Statement Highlights – Q1 2009 Q1 2009 Q1 2008 yoy Licence revenue 27.8 31.1 (10.7)% Total revenue 81.2 88.4 (8.1)% EBIT 8.7 6.5 34% Adjusted EPS* 0.13 0.13 2% * See appendix for reconciliation USDm, except EPS USD Slide 5
Slide 6: Income Statement Detail
Income Statement Detail Q1 09 Q1 08 LTM 09 LTM 08 Licences 27.8 31.1 (11%) 146.7 156.5 (6%) Maintenance 27.8 23.7 +17% 105.3 83.8 +26% Services 25.6 33.5 (24%) 147.7 117.6 +26% Total revenue 81.2 88.4 (8%) 399.7 357.9 +12% R&D (18.6) (18.0) +3% (75.6) (64.4) +15% Cost of services (25.4) (32.9) (23%)
Slide 7: Cost Reduction – yielding results
Cost Reduction – yielding results Total Cost – Last three quarter cost reduction 100 Operating costs 89.2 86.1 90 have declined sequentially for the 80 72.5 last 2 quarters 70 60 50 40 30 20 10 0 Q3 2008 Q4 2008 Q1 2009 Total Costs (in USD m) • Q1 2009 cost base consistent with full year outlook of
Slide 8: Income Statement Detail
Income Statement Detail Income Statement Detail Q1 09 Q1 08 LTM 09 LTM 08 EBIT 8.7 6.5 34% 66.2 63.8 4% Net Finance charge (1.4) (0.8) 77% (6.4) (3.5) 83% FX (loss)/gain (2.4) 1.2 n/a 1.5 6.8 (78%) Tax 0.1 0.1 0% 1.8 0.4 342% Net earnings 5.0 7.0 (29%) 63.1 67.5 (7%) Adjusted EPS* 0.13 0.13 2% 1.14
Slide 9: Like-for-like revenue growth
Like-for-like* revenue growth Q1 09 l-f-l growth -14% LTM 09 l-f-l growth +5% 100 450 Acquisitions USD 26m 90 400 Acquisitions USD8.8m 80 350 70 +17% Services 300 Services (31%) Services 60 Services USDm USDm 250 50 +13% +8% 200 40 Maintenance Maintenance Maintenance Maintenance 30 150 20 100 Licens
Slide 10: Balance sheet – debt and funding
Balance sheet – debt and funding Value (USDm) Comments Existing Debt Convertible bond 118.9 1.5% coupon, matures 2013 Credit facilities 66.8 Consortium of 7 banks, repayment up to end of 2012 Other 1.0 Obligations under finance leases Total 186.7 Cash 68.6 Held in short-term deposits Unusued facilit
Slide 11: Update on cash
Update on cash Q1 09 USDm Comments Cash collection 85 Cash opex (65) Cash from operations - 20 normalised Reduction in payables (12) Cash costs related to higher cost base in Q4 – one-off timing lag Cash from operations - reported 7.5 • Cash from operations in the quarter would have been USD20m, but
Slide 12: DSOs
DSOs DSOs flat on last quarter, although trend remains downwards 190 185 184 DSO’s Linear (DSO’s) 180 175 176 176 175 172 171 170 168 168 167 165 160 155 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Sustained improvement driven by Shorter implementation times: Down from average of
Slide 13: Update on Metavante
Update on Metavante • Metavante has unilaterally terminated our joint agreement and we are in dispute • Parties are engaging in dialogue to resolve the dispute • Temenos is preparing arbitration proceedings to recover all amounts due under the agreement in the event that dialogue is not fruitful • T
Slide 14: Strategy and Business Update
Strategy and Business Update Andreas Andreades CEO
Slide 15: Business update – strong rebound from Q4
Business update – strong rebound from Q4 • We have executed on our cost reduction programme → Costs down sequentially → Margins up strongly y-o-y (+330bps) • T24 is performing robustly → Absolute growth y-o-y → Most of the slipped deals now signed → Outperforming peers – number 1 selling product aga
Slide 16: Business update - Q1 licences
Business update - Q1 licences Growth in T24 customers... • New T24 clients in Q1 at 12 vs. 11 in the prior year (+9%)... • ...including first significant tier 1 deal since Q1 08 (plus 2 other entry-level tier 1 deals) • ...and 3 large Misys customers... • Strong growth in universal/retail ...leads t
Slide 17: Overview of new customer sales
Overview of new customer sales New clients varied across regions: New clients (number) LTM 2009 LTM 2008 17% 24% 35% 31% MEA MEA Europe 10% Europe Americas Americas 14% APAC APAC 27% 42% New clients (licence value) LTM 2009 LTM 2008 12% 16% MEA 26% MEA 32% EUROPE EUROPE AMERICAS 13% AMERICAS 24% APA
Slide 18: New products continue to gain traction
New products continue to gain traction ARC – our suite of front office solutions for T24 customers • In Q1, we sold ARC to 7 customers (up from 3 in Q108) ... • ...reflecting the fact that most new T24 customers now take ARC as part of the solution • And, as the product matures, so does the price po
Slide 19: Update on acquisitions
Update on acquisitions Our visibility is improving, particularly over the level of cash generation... ...and so we begin to focus again on acquisitions As before, we look for the following characteristics: • Attractive valuations → And supported by robust maintenance stream • Good strategic fit → Wi
Slide 20: Services Update
Services Update In Q1 09, we achieved a record number of quarterly go-lives... • 25 clients went live (including a major tier 1 customer)... • ...up 108% on Q408 (12) and 127% on Q107 (11) ... as services initiatives help us to scale more efficiently • TAM, TIM, Management Consulting, Model Bank hav
Slide 21: Update on Partner Programme
Update on Partner Programme What is the objective? To attract and certify a community of partners (SIs, technology partners)... ...in order to be able to deliver: • Scalable growth • Complete solutions • Larger projects What is the progress to date? • Discussions continue with several Sis... • ...an
Slide 22: Update on US Strategy
Update on US Strategy We remain excited about our prospects for the US • The high end of the market offers few growth prospects at present • Large banks in the US have been disproportionately affected by the banking crisis - no funds for large core banking projects • Top 100 banks are probably becom
Slide 23: Update on US Strategy/TCB
Update on US Strategy/TCB • Internationally, there is no change to our TCB strategy • We continue to develop the product and support existing customers • We continue to seek country-type outsourcing deals • We continue to focus on selected large retail deals, especially in Asia • In the US, we are a
Slide 24: 2009 Outlook
2009 Outlook Strong Q1 gives us more confidence about the year... • T24 licences to new customers grew by 48% in the quarter in a tough environment and against a tough comparative • Cost reduction programme executed ...and allows us to offset lower TCB revenues... • We have stopped booking revenues
Slide 25: 2009 Outlook
2009 Outlook Uncertainty persists... • We saw some stabilisation in the quarter • Clients were again prepared to commit to capital projects and conversion rates recovered • Despite a more stable sales cycle, the environment is still uncertain ...and so we still prefer not to give a revenue outlook:
Slide 26: 2009 Outlook
2009 Outlook Full year maintenance expectation of USD118m+ unchanged • Mix likely to move in favour of maintenance (>30% of mix in 2009) • Highest margin revenue line and minimal working capital investment Visibility over cash generation has improved: • The cost savings are reflected in the lower co
Slide 27: Concluding remarks
Concluding remarks • Operating profit is increasing again... • ...even in the absence of revenue growth... • ...as we deliver on costs and T24 sales remain resilient LTM Revenue and Operating Profit since Q2 2005 80 450 70 400 60 350 300 50 250 40 200 30 150 20 100 10 50 0 0 Sep-05 Dec-05 Sep-06 Dec
Slide 28: Concluding remarks – looking ahead
Concluding remarks – looking ahead Growing sales to new customers Coherent and modern product portfolio Global reach and scale A materially lower cost base Potential for substantial margin leverage Slide 28
Slide 29: Appendices
Appendices ‘7 sm: FM fe) FA ed Bl F EMENOS The Banking Software Company
Slide 30: Adjusted EPS reconciliation
Adjusted EPS reconciliation Q1 2009 Earnings 5.0 Amortisation of acquired 2.3 intangible assets Bond Interest 1.3 Total Adj Earnings 8.6 Total Diluted # of shares 66.6 Adjusted EPS 0.13 All figures in USDm, except shares in m Slide 30
Slide 31: Constant Currency Income Statement
Constant Currency Income Statement Q1 09 Q1 08 Total revenue 81.2 88.4 -8% FX adjs. n/a (4.0) Adjusted total revenue 81.2 84.4 -4% Total costs 72.5 81.9 -11% FX adjs. n/a (1.6) Adjusted total cost 60.5 80.4 -25% Reported EBIT 8.7 6.5 +34% EBIT at constant FX 8.7 4.1 +112% Reported Margin 10.7% 7.4%
Slide 32: Research and Development
Research and Development USD millions Q1 09 Q1 08 % Q408 % 12 months to % Mar-09 Mar-08 R&D costs – as reported 18.6 18.0 3% 17.5 6% 75.6 64.4 17% Capitalised development costs 4.0 3.3 6.6 20.6 16.9 Non cash items (6.2) (4.2) (8) (22.9) (15.3) Less Acquisitions (1.8) 0.0 (1.9) 4.5 0.0 Currency impac
Slide 33: General & Administrative Costs
General & Administrative Costs USD millions Q1 09 Q1 08 % Q408 % 12 months to % Mar-09 Mar-08 G&A costs – as reported 10.9 12.2 (11%) 15.7 (31%) 51.1 44.5 15% Less Acquisitions (0.4) 0.0 (2.2) (3.1) 0.0 Less non-cash (3.0) (3.0) (2.6) (10.9) -9.7 Currency impact n/a (0.2) 0.0 n/a 0.3 G&A costs under
Slide 34: Sales and Marketing
Sales and Marketing USD millions Q1 09 Q1 08 % Q408 % 12 months to % Mar-09 Mar-08 S&M costs – as reported 17.5 18.8 (7%) 19.4 (10%) 73.7 76.0 (3%) Less Acquisitions (0.2) 0.0 (1.5) (1.9) 0.0 Currency impact n/a (0.3) 0.0 n/a (0.7) Less non-cash (1.2) (2.0) (0.4) (5.0) (6.6) S&M costs underlying 16.
Slide 35: Impact of deferred tax assets on the effective tax rate
Impact of deferred tax assets on the effective tax rate EFFECTIVE TAX RATE As at 31 December 2008 the 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 p
Slide 36: Recognition
Recognition Temenos’ products are multi award winning - awards include: T24 was named No.1 best-selling core banking system in 2008 in the IBS Journal’s Annual Sales League Table. Martin Whybrow, editor, commented: “Temenos has maintained a strong position during a challenging year for our industry.
Slide 37: Leading the IBS League Table
Leading the IBS League Table First place in the 2008 IBS Sales League Table Corebanking Positions Position Product Company Deals 1 T24 TEMENOS 40 2 Flexcube Oracle FSS 39 3 OmniEnterprise Infrasoft 34 • Top two positions in the IBS Sales League Table for 10 out of the last 11 years Slide 37
Slide 38: Thank You
Thank You ‘7 sm: FM fe) FA ed Bl F EMENOS The Banking Software Company