Temenos Ag · SIX:TEMN
Temenos — Investor Day (February 2016)
105 slides from Temenos's investor day presentation, Feb 12, 2016
Slide 1: The software specialist for banking and finance
; ov % The software specialist for banking and finance Ec
Slide 2: Analyst and Investor Day
Analyst and Investor Day 12 February 2016
Slide 3: Agenda
Agenda 10.00 – 10.45 Strategy and vision David Arnott, CEO 10.45 – 11.30 Digitizing the bank Joseph Edwin, Head of Core Banking Programme, Nordea 11.30 – 11.45 Coffee 11.45 – 12.30 Product leadership Mark Winterburn, Group Product Director 12.30 – 13.00 Creating shareholder value Max Chuard, CFO, CO
Slide 4: Strategy and vision
Strategy and vision David Arnott 12 February 2016
Slide 5: Key messages
Key messages 5 2015 was a landmark year. We are delivering on our strategic initiatives. We extended our lead over the competition. We have a significant market opportunity. Our growth is underpinned by multiple drivers.
Slide 6: 2015 was a landmark year
2015 was a landmark year 6 Signed all largest deals in market – in all segments Extended product leadership Delivered unrivalled customer success Crossed USD 500M in revenues Expanded margins and increased profitability
Slide 7: Our strategic initiatives
Our strategic initiatives 7 1 2 3 EXTENDING LEAD IN CORE EXTENDING LEAD PENETRATING BANKING IN PRIVATE THE US MARKET WEALTH OPENING UP NEW MARKET SAAS – TAKING INDUSTRIALISING WITH DIGITAL 1ST MOVER SALES & PARTNER ENGAGEMENT ADVANTAGE ALIGNMENT PLATFORM 4 5 6
Slide 8: Excellent progress in 2015
Excellent progress in 2015 8 Core Signed Nordea, largest core deal ever, made significant technology investments Wealth Win ratio of nearly 100% in 2015 including Julius Baer US Increased scale and distribution capabilities, signed top 25 bank, built qualified pipeline of more than US$20
Slide 9: Fund management – a further growth driver
Fund management – a further growth driver 9 Multifonds rebranded as FundSuite Provides exposure to the growing fund services and asset management segments Leveraging Temenos’ global footprint Significant new and installed base opportunities Partners showing strong interest
Slide 10: The cross-selling opportunity
The cross-selling opportunity 10 No. of clients Installed base by product 700 600 500 400 300 200 100 0 Core banking Analytics Channels Wealth front end Risk & Fund Payments compliance administration
Slide 11: 1st position again – 15th time in 16 years
Clear water between Temenos and the competition 11 1st position again – 15th time in 16 years 137 Number of go-lives in 2015 “On its way to become the category killer in the banking software vertical”
Slide 12: A significant and growing market opportunity
A significant and growing market opportunity 12 Spend on banking software: total vs. third-party CAGR Payments +11% 40 USD 37bn Fund Admin +10% 35 Channels +6% 30 BI +9% 25 Wealth +7% USDbn 20 Core banking +5% 15 +8% CAGR USD 11bn * 10 USD 8bn * 5 0 Total spend Third-party spend today Medium term th
Slide 13: A need to act – structural pressures are growing
A need to act – structural pressures are growing 13 Changing competition Changing Changing regulation technology Changing customer
Slide 14: The profitability gap
The profitability gap 14 Global financial crisis New normal Profitability gap - 6% pts 6% 16% Banks RoE levels globally 10% 10% 9% 9% 10% 7% 4% Source: BCG, Thomson Reuters Industry’s profits remain significantly below pre-crisis levels
Slide 15: Digitization provides an opportunity
Digitization provides an opportunity 15 Capitalize on Banks’ To primary become assets trusted In turn advisor boosting profitability • Data • Trust Recast role – • Distribution from Greater • Scale transaction efficiency with provider to more effective trusted advisor distribution
Slide 16: Front to back vertically integrated solutions
Front to back vertically integrated solutions 16 Integrated products and technology for a connected world
Slide 17: Integrated solutions freeing up budget for innovation
Integrated solutions freeing up budget for innovation 17 Spend on enhancements vs. maintenance 21.2% 53.7% Celent, IT Spending in Banking: A Global Perspective, 2015* Source: Temenos *Adjusted to remove Temenos customers
Slide 18: Enabling banks to exploit their competitive advantage
Enabling banks to exploit their competitive advantage… 18 Data Single customer view Embedded analytics Real-time campaigns Trust & Distribution Fast time to market Personalization - market of one Rewards & loyalty Scale Cloud deployable 99% STP No batch Allowing banks to reinforce
Slide 19: …and new technology
…and new technology 19 Connected 10x to 100x rise in customer interactions banking Architecture & technology to handle this change Intelligence to turn interactions into opportunities Open Leveraging partner & developer banking ecosystem More innovation Broader range of products and serv
Slide 20: Transforming the customer experience
Transforming the customer experience 20 Delivered at the right place and time Personalised for Through the right individual needs channel Right products & services Experience-driven banking
Slide 21: Driving profitability and returns
Driving profitability and returns 21 Return on assets Return on equity Performance of Temenos customers (during 2008-2014) compared to banks using either other third-party systems or legacy applications Cost/Income 1.4% 14.0% 62.0% 31% 36% 1.2% 14% 60.0% 58.8% 12.0% 19% 58.0% 1.0% 10.0% 56.0% 0.8% -
Slide 22: Looking forward
Looking forward TEMENOS
Slide 23: Capitalizing on the tier opportunity
Capitalizing on the tier 1 opportunity 23 Building great references Core Wealth Strong partner relationships, proven delivery and go-to-market models Disruptive technology roadmap Proven scalability Open and integrated solutions
Slide 24: Accelerating our growth through progressive renovation
Accelerating our growth through progressive renovation 24 Line of business Reducing risk, decreasing time Front to Back to value Back to Front Build & Migrate
Slide 25: Penetrating the U.S.
Penetrating the U.S. 25 Achieved critical mass and scale with strong distribution Built strong pipeline, more than US$20m in last six months Won top 25 U.S. bank, starting line of business renovation Differentiated product value proposition – real time, upgradable, modular architecture Par
Slide 26: Integrated front office – a differentiated offering
Integrated front office – a differentiated offering 26 A single platform for managing customer interaction across all touchpoints Integrates multiple datasets – transactional, locational, contextual Draws real-time insights and uses this to offer the right service (product, content, offers) at
Slide 27: Delivering experience-driven banking
Delivering experience-driven banking 27 Core CRM Customer Product Channel PFM Banking Decision Platform Branch Contact Centre Internet Mobile Email Post
Slide 28: Key messages
Key messages 28 2015 was a landmark year. We are delivering on our strategic initiatives. We extended our lead over the competition. We have a significant market opportunity. Our growth is underpinned by multiple drivers.
Slide 29: The software specialist for banking and finance
; ov % The software specialist for banking and finance Ec
Slide 30: Digitizing The Bank
Digitizing The Bank Joseph Edwin, 12 February 2016
Slide 31: Background
Background • Head of Core Banking Programme at Nordea Bank AB • Prior roles • Chief Information Officer, CommSec – a fully owned subsidiary of Commonwealth Bank of Australia (CBA) • Overall Head of Delivery on the multi-year CBA Core Banking Modernisation programme • Various positions with Silicon V
Slide 32: Nordea is the largest financial services group in the Nordics
Nordea is the largest financial services group in the Nordics Nordea = Nordic ideas 11 million customers - Approx. 10 million personal customers - 590 000 corporate customers, incl. Nordic Top 500 Distribution power - Approx. 650 branch office locations Financial strength - EUR 10.1bn in full year i
Slide 33: Nordea is the most diversified bank in the Nordics
Nordea is the most diversified bank in the Nordics… Q3 2015 33 •
Slide 34: An industry in transition
1. An industry in transition 2. A need to act 3. The Prize 4. Getting there 34 •
Slide 35: An industry in transition – a digital revolution
An industry in transition Mobile – distribution Big Data – deep separated from personalization of manufacturing banking services A digital revolution Cloud – profitability at a Social Media – new lower scale, unbundling banking media of banking 35 •
Slide 36: A changing relationship between banks and their customers
A changing relationship between banks and their customers Customer switching was as low as 2% as recently as 2003
Slide 37: Customers want a different kind of relationship
Customers want a different kind of relationship % of customers who would expand relationship with a bank which 72% 65% 64% 60% Helps them to meet Rewards Helps them to Recommends financial goals loyalty save money products they really Source: EY need 37 •
Slide 38: An industry in transition
An industry in transition …greater 3pp resilience against future financial crises and removing Estimated adverse impact of Basel III on global bank RoE risks from banks to the public Source: McKinsey finances… Vicker’s Report on Future of Banking
Slide 39: Exploiting regulatory arbitrage, high costs, high friction
Exploiting regulatory arbitrage, high costs, high friction Automated Lending financial management Corporate FX banking Neobanks Payments 39 •
Slide 40: A need to act
1. An industry in transition 2. A need to act 3. The Prize 4. Getting there 40 •
Slide 41: A need to act
A need to act Customers with Negative Customer Experience % change from (%) 2014-2015 2014 2.7% North America 5.2% 2.5% Central Europe 5.1% 1.6% Only 47% of Gen Y 6.7% 6.2% 1.5% customers in North Latin America 7.7% 4.9% 6.8% America are likely to Western Europe 11.7% 6.8% stay with their bank Middl
Slide 42: New competition
New competition Estimated impact of FinTech disruption on consumer finance $ billion 674 14 300 - 40% 35 396 2025 before Lost Price Captured 2025 after disruption volumes erosion by FinTechs disruption Source: McKinsey
Slide 43: A need to act
A need to act Banking profitability has not recovered since the financial crisis Source: The Economist 43 •
Slide 44: The Prize
1. An industry in transition 2. A need to act 3. The Prize 4. Getting there 44 •
Slide 45: Capitalizing on technology and changing customer behaviour
Capitalizing on technology and changing customer behaviour Turn interactions into opportunities Creating an eco-system Relationship banking is turning digital fast 18 Mobile Transactions Millions 8 3 Branches 0 Q1/10 Q1/15 45 •
Slide 46: The Bank of Things & The Customer Definable Bank
The Bank of Things & The Customer Definable Bank if then When I reach my savings goal, post on Facebook “Dream car coming soon!” if then When I go overdrawn, transfer money from my savings account to clear overdraft 46 •
Slide 47: Benefits of experience-driven banking
Benefits of experience-driven banking Help achieving financial goals Partner network Real-time location-based offers Social Media Access to best rates on financial services across market Location Access to complementary services Bank as (e.g. legal advice) at preferred rates facilitator and Friction
Slide 48: What this really means
What this really means Higher customer engagement Better customer Bank as outcomes facilitator and trusted advisor Increased loyalty & wallet share Higher profitability 48 •
Slide 49: Getting there
1. An industry in transition 2. A need to act 3. The Prize 4. Getting there 49 •
Slide 50: The journey: Ditching the legacy
The journey Ditching the legacy Source: BCG Complex, risky, expensive - prevents compelling customer experience 50 •
Slide 51: It all starts with core
Realizing experience-driven banking Analytics Treasury CRM Channels It all starts with core Payments Wealth Management Loyalty PFM 51 •
Slide 52: Simplify First
Best practices to realize experience-driven banking Simplify First Buy a package Renovate progressively 52 •
Slide 53: Benefits of core banking renewal
Benefits of core banking renewal Productised Single view, embedded analytics Model Bank, upgradable, Real-time analysis based on integrated complete customer data Real-time, front Open to back No down-time for batch Digital banking starts with a digital core Supporting open processing; instant archi
Slide 54: Nordea investor day
Nordea investor day You are invited to join us for a presentation and Q&A An update on the Nordea Core Banking Programme Joseph Edwin, Head of Core Banking, Nordea Wednesday 2nd March 13:00 - 14:00: Presentation and Q&A Lunch will be served from 12:00 The event will be held at Goldman Sachs Internat
Slide 55: Thank you!
Thank you! Joseph Edwin joseph.edwin@nordea.com
Slide 56: The software specialist for banking and finance
; ov % The software specialist for banking and finance Ec
Slide 57: Product
Product Mark Winterburn, Group Product Director 12 February 2016
Slide 58: Temenos software
Temenos software CHANNELS Branch Agent Call Centre Mobile ATM Internet RM Open API Marketing FRONT Service OFFICE RISK Sales REPORTING & & ANALYTICS COMPLIANCE Retail Private Wealth CORE BANKING Corporate & Treasury PAYMENTS
Slide 59: The market view - Suites
The market view - Suites @® RetailSuite ®) UniversalSuite © @ S WealthSuite © IslamicSuite CorporateSuite IVs FundSuite MicroBankingSuite coe ees newiiGicie TEMENOS
Slide 60: Integrated solutions freeing up budget for innovation
Integrated solutions freeing up budget for innovation 60 Rest of Banks* Temenos Clients 53.7% 21.2% Celent, IT Spending in Banking: A Global Perspective, 2015* *Adjusted to remove Temenos customers Source: Temenos
Slide 61: Today – WealthSuite
Q WealthSuite TEMENOS
Slide 62: Strength in depth - RetailSuite
Strength in depth - RetailSuite OVERVIEW AML KYC CHANNELS Business Branch Agent Call Centre Mobile ATM Internet Open API Intelligence Basle II/III CRM Origination / Customer Product Catalog Market onboarding Output Customer Risk and Teller Intelligence Contact Order Mgt. ALM Social Media Centre FRON
Slide 63: Why we win in Tier 1 Retail
Why we win in Tier 1 Retail 63 The Biggest banks now want packaged software Modern Core a prerequisite for Digital Our Frameworks deliver the right architecture Lower risk implementations via progressive renovation The right Partners for Tier 1 Massive and linear scalability on commodity
Slide 64: Strength in depth – WealthSuite
Strength in depth – WealthSuite OVERVIEW Basle II/III CHANNELS Business Branch Agent Call Centre Mobile ATM Internet RM Open API Intelligence IFRS CRM Customer Loan origination Customer Market Risk Customer Output Intelligence and ALM Onboarding Portfolio Order Social Media Management Management FRO
Slide 65: Why we win the biggest Private Banks
Why we win the biggest Private Banks Integrated best of breed components Quick value from progressive renovation 90% plus out of the box Features and investment no-one else can match Strong digital offer Global and proven in more than 30 countries Seamless support for Retail > Mass Aff
Slide 66: How we upgrade client software – decoupled innovation cycle
How we upgrade client software – decoupled innovation cycle Channels (6m -2 years) Front – Office (1-3 years) Core Banking (2-5 years) Upgrading product family independently reducing risk and decreasing Time To Market
Slide 67: The architectural perspective
The architectural perspective Platform Framework Interaction Framework Design Framework Integration Framework Component Framework Data Framework
Slide 68: The architectural perspective
The architectural perspective Platform USABILITY 85% faster UI Framework FLEXIBILITY Lowest TCO development through choice of stacks including Cloud. Interaction Framework AGILITY 3x faster integration MAINTAINABILITY Partial software Design Framework upgrades across all software Integration Framewo
Slide 69: Track record of innovation…
Track record of innovation… 1993 2015 Windows Open Multie Process Model Reporting GUI SO XML Database ntity 24/7 Workflow Cloud SmartHybridTM Banks database A Retail banking, Corporate banking, Treasury, Lending, Securities Technology Trade finance Internet banking Product builder Financial Crime Mo
Slide 70: …extending into the future
…extending into the future Windows SOA XML GUI Open Multientity 24/7 Database Process Model Workflow Banks Reporting Cloud SmartHybridTM database Online Partial In- Instant upgrades Upgrades memory COB Retail banking, Corporate banking, Treasury, Lending, Payments back office, Securities Graphical p
Slide 71: How we build software – Agile Development
How we build software – Agile Development Agile is a discipline that delivers software frequently with continuous learning through iteration. It ensures we deliver software faster, with better quality, minimal risk that meets our client’s requirements. Cost Value Cost Value RISK
Slide 72: Temenos Software in action
Temenos Software in action
Slide 73: Today
Today 73
Slide 74: Why we win in Tier 1 Retail
Why we win in Tier 1 Retail 74 The Biggest banks now want packaged software Modern Core a prerequisite for Digital Our Frameworks deliver the right architecture Lower risk implementations via progressive renovation The right Partners for Tier 1 Massive and linear scalability on commodity
Slide 75: Business Perspective – RetailSuite
Business Perspective – RetailSuite OVERVIEW AML KYC CHANNELS Business Branch Agent Call Centre Mobile ATM Internet Open API Intelligence Basle II/III CRM Origination / Customer Teller Market onboarding Output Customer Risk and Alerts Intelligence Contact Order Mgt. ALM Social Media Centre FRONT o Ca
Slide 76: Business Perspective – RetailSuite
Business Perspective – RetailSuite OVERVIEW AML KYC CHANNELS Business Branch Agent Call Centre Mobile ATM Internet Open API Intelligence Basle II/III CRM Origination / Customer Teller Market Risk onboarding Output Customer and ALM Alerts Intelligence Contact Order Mgt. Social Media Centre FRONT o Ca
Slide 77: Why we win the biggest Private Banks
Why we win the biggest Private Banks Integrated best of breed components Quick value from progressive renovation 90% plus out of the box Features and investment no-one else can match Strong digital offer Global and proven in more than 30 countries Seamless support for Retail > Mass Aff
Slide 78: Business Perspective – WealthSuite
Business Perspective – WealthSuite OVERVIEW Basle II/III CHANNELS Business Branch Agent Call Centre Mobile ATM Internet RM Open API Intelligence IFRS CRM Customer Loan origination Customer Market Risk Output Customer and ALM Onboarding Intelligence Portfolio Order Social Media Management Management
Slide 79: Business Perspective – WealthSuite
Business Perspective – WealthSuite OVERVIEW Basle II/III CHANNELS Business Branch Agent Call Centre Mobile ATM Internet RM Open API Intelligence IFRS CRM Customer Output Loan origination Customer Market Risk Customer and ALM Onboarding Intelligence Portfolio Order Social Media Management Management
Slide 80: Highly differentiated product
Highly differentiated product 80 Packaged, upgradable Front-to-back, vertically integrated Progressive renovation Scalable Model bank Open architecture
Slide 81: The software specialist for banking and finance
; ov % The software specialist for banking and finance Ec
Slide 82: Creating shareholder value
Creating shareholder value Max Chuard, CFO, COO
Slide 83: Agenda
Agenda 83 1. Creating shareholder value 2. Growth strategy 3. Medium term targets
Slide 84: Temenos drivers of value
Temenos drivers of value 84 Substantial revenue growth Business model drives margin expansion d Shareholder value Significant free cash flow generation Disciplined capital allocation
Slide 85: Substantial license revenue growth
Substantial license revenue growth 85 Non-IFRS Total Software License Revenues Medium term target of USDm c.15% CAGR 300 250 200 150 100 50 0 2012 2013 2014 2015
Slide 86: Significant growth in recurring revenue
Significant growth in recurring revenue 86 Non-IFRS Maintenance, SaaS and Subscription revenues and as percentage of total revenues USDm 45% 46% 49% 51% 300 250 200 150 100 2012 2013 2014 2015
Slide 87: Business model drives margin improvement
Business model drives margin improvement – packaged, upgradable, recurring 87 Non-IFRS EBIT margin Medium term target of 100 to 150 bps 27.3% 28.1% expansion p.a. 24.1% 19.3% 2012 2013 2014 2015
Slide 88: Consistent growth in profitability
Consistent growth in profitability 88 Non-IFRS EBIT (USD m) Non-IFRS EPS (USD) 1.73 157 1.44 128 1.22 113 87 0.90 2012 2013 2014 2015 2012 2013 2014 2015
Slide 89: Exceptional Cash Flow generation
Exceptional Cash Flow generation 89 Operating Cash Flow and DSOs Medium term target DSO reduction of USDm 226 days 198 days 180 days 154 days 10 to 15 days p.a 250 200 150 100 50 0 2012 2013 2014 2015
Slide 90: Disciplined capital allocation
Disciplined capital allocation 90 Capital allocation 2012 - 2015 Share buyback Dividends Acquisitions 30% 57% 13%
Slide 91: Track record of M&A
Track record of M&A 91 2007 2008 2009 2010 2011 2012 2013 2015
Slide 92: Track record of M&A
Track record of M&A 92 2007 2008 2009 2010 2011 2012 2013 2015
Slide 93: Balance sheet strength
Balance sheet strength 93 2012 2015 Weighted average interest rate 5.1% 3.7% Weighted average maturity 1.5 years 2.6 years Total available financing USD 350m USD 725m Leverage ratio 0.8x 1.3x Low-cost debt structure with significant flexibility
Slide 94: We have created significant shareholder value
We have created significant shareholder value 94 Total shareholder return* 1 year 3 years 10 years (31/12/15) Temenos 48% 210% 458% Swiss Market Index 1% 31% 106% Stoxx Euro 600 -1% 19% 56% Nasdaq 7% 72% 155% Peer group average 24% 66% 282% Exceptional shareholder value creation *in USD
Slide 95: Growth strategy
Growth strategy TEMENOS
Slide 96: We have grown our addressable market
We have grown our addressable market 96 Addressable market (USD billions) 12.0 10.0 8.0 6.0 4.0 2.0 0.0 2005 2012 2015 Medium term Core banking Wealth BI Channels Fund Admin Payments
Slide 97: Consistent growth in revenues from Tier 1+2 clients
Consistent growth in revenues from Tier 1+2 clients 97 Tier 1+2 non-IFRS total software licensing revenues $101m $46m $27m 2005 2012 2015 Medium term Tier 1+2 clients engaged in progressive renovation buy average of $3-5m additional new license p.a.
Slide 98: Maximising the installed base
Maximising the installed base 98 Installed base will continue to represent 60%+ of non-IFRS total software licensing going forward Breakdown of the installed base Cross selling Tier 1+2 progressive renovation Relicensing c.15-20% CAGR 2012 2015 Medium term c.15-20% CAGR growth driven by multi-produc
Slide 99: Our North America strategy will drive incremental growth
Our North America strategy will drive incremental growth 99 Non-IFRS total software licensing, North America vs. Rest of World North America 25%+ c.35% CAGR 2012 2015 Medium term North America to become increasingly important
Slide 100: SaaS and Subscription revenues are growing rapidly
SaaS and Subscription revenues are growing rapidly 100 Non-IFRS Software licensing vs. SaaS and subscription revenues SaaS and subscription 20%+ c.20% CAGR 2012 2015 Medium term SaaS and subscription revenues expected to grow rapidly
Slide 101: A three-pronged approach to M&A
A three-pronged approach to M&A 101 Increased scale Accelerated growth in key markets and segments A three-pronged approach Complementary products
Slide 102: Medium term targets
Medium term targets TEMENOS
Slide 103: Medium term targets
Medium term targets 103 Metric 2012-2015 performance Medium term targets (Non-IFRS) Total software licensing 20% CAGR 15% CAGR Total revenue 7% CAGR 10% CAGR EBIT 293bps p.a. 100-150bps EPS 24% CAGR 15% CAGR Cash conversion 118% p.a. 100%+ of EBITDA Tax rate 14% p.a. 17-18% DSO reduction 24 days p.a
Slide 104: Thank you
Thank you TEMENOS The software specialist for banking and finance www.temenos.com ‘in| iy Fl Oo ic)
Slide 105: The software specialist for banking and finance
; ov % The software specialist for banking and finance Ec