Temenos Ag · SIX:TEMN
Temenos — FY2008 Earnings Presentation
47 slides from Temenos's earnings presentation, Feb 18, 2009
Slide 1: TEMENOS Introductory Presentation
TEMENOS Introductory Presentation
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: An introduction to TEMENOS
An introduction to TEMENOS a =mMOnae FF eMENOS The Banking Software Company
Slide 4: Our Market
OUR MARKET Temenos’ currently addressable market Distribution Channels CRM Banking Investment Services Insurance Business Intelligence Risk & Compliance Life Management Wholesale Treasury Private Asset & Retail/ Universal Capital Markets General General Support Payments Slide 4 13/11/2007
Slide 5: Our Value Proposition
OUR VALUE PROPOSITION Temenos’ products provide a quick and clear return on investment by: • Lowering cost Significantly lower infrastructure and maintenance costs through single integrated system • Enabling growth Cross-selling through single customer view Business agility through faster time to ma
Slide 6: Our Competition: Major players by segment
OUR COMPETITION Major players by segment Vendor Products Retail Private Wholesale Universal TEMENOS T24 TCB I-Flex Flexcube Misys Equation, Midas, Bankmaster Infosys Finacle Fidelity Corebank, Systematics TATA Consulting FNS SAP Corebanking Source: IBS Market Report; Companies announcements, Temenos
Slide 7: Two Products
TWO PRODUCTS TEMENOS T24™ (T24): Private, Universal, Wholesale and Retail Banks Complementary, limited overlap COREBANKING (TCB): Large scale Retail Banks, 10m accounts+ Slide 7 13/11/2007
Slide 8: High R&D
HIGH R&D In 2007, as % of sales, we spent >2x more than our biggest competitors... 25% 20% 15% 10% 5% 0% 2003 2004 2005 2006 2007 Temenos* Peer Group** ...to maintain our advantage in terms of openness and best of breed functionality *Cash R&D, adjusted for the difference between capitalisation and
Slide 9: Unparalleled Breadth of Functionality
UNPARALLED BREADTH OF FUNCTIONALITY Available in To leverage investment in SOA environment component form Allows product to be tailored to different clients Web Call Centre Mobile Branch IVR Other systems BPEL engines Browser Open Financial Service (OFS) – Web Services - SOA Version Presentation Enq
Slide 10: Open and Scalable
OPEN AND SCALABLE Scalable: • more servers can be added Our products are rich in functionality, as volume of transactions open and scalable and number of users risers SCALE Presentation MQ, APIs BROWSER Excel etc Open: • built using industry SCALE Connectivity J2EE standards, such as XML SOA/SOAP SC
Slide 11: One Source Code
ONE SOURCE CODE • Upgrade is simple Client gets continual enhancements High No services input for client or maintenance Temenos and high • Upgrade is annual Temenos maintains all clients margin on on latest versions maintenance Presentation Parameters AND client can still customise locally Product P
Slide 12: Market Trends
MARKET TRENDS Spend on third party software growing much faster than internal development… Third-party software gaining bigger Global banking software spending proportion of banks’ software 80 budget 70 Third-party software** Internal spending* External software spending 60 CAGR 9% 25.5bn growing at
Slide 13: Financial Update
Financial Update ‘7 sm: FM fe) FA ed Bl F EMENOS The Banking Software Company
Slide 14: Income Statement Highlights – FY 2008
Income Statement Highlights – FY 2008 FY 2008 FY 2007 yoy Licence revenue 150.1 148.8 +1% Total revenue 406.9 329.9 +23% EBIT 64.0 62.5 +2% Adjusted EPS* 1.13 1.03 +10% *Adjustments in 2008 total USD13.1m – see appendix for reconciliation USDm, except EPS USD Slide 14
Slide 15: Income Statement Detail
Income Statement Detail USDm Q4 08 Q4 07 FY 08 FY 07 Licences 49.9 68.3 -27% 150.1 148.8 +1% Maintenance 28.4 21.7 +31% 101.2 76.3 +33% Services 44.0 35.3 +25% 155.7 104.7 +49% Total revenue 122.2 125.3 -3% 406.9 329.9 +23% R&D (17.5) (17.0) +3% (74.9) (57.1) +31% Cost of services (33.5) (30.2) +11%
Slide 16: Non-operating income and expense
Non-operating income and expense Income Statement Detail Q4 08 Q4 07 FY 08 FY07 EBIT 36.1 43.7 -17% 64.0 62.5 +5% Net Finance charge (4.5) (1.9) +137% (12.7) (2.9) +338% FX (loss)/gain 11.0 2.1 +412% 12.0 2.4 +400% Tax 1.9 0.3 +597% 1.9 (2.9) n/a Net earnings 44.5 44.3 +5% 65.2 46.1 +45% Adjusted EP
Slide 17: Like-for-like revenue growth
Like-for-like* revenue growth Q4 08 l-f-l growth -7% FY 08 l-f-l growth +16% 140 450 USDm USDm Acquisitions 400 Acquisitions USD20.7m USD11.6m 120 350 100 Services +38% 300 Services Services +21% Services 80 250 Maintenance 60 Maintenance +13% 200 Maintenance Maintenance +20% 150 40 Licence 100 Lice
Slide 18: DSOs – still tracking down
DSOs – still tracking down 4 day decrease in DSOs in year, trend remains downwards DSO’s 190 184 Linear (DSO’s) 181 180 175 176 172 171 167 170 167 168 160 150 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Sustained improvement driven by Shorter implementation times: Down from avera
Slide 19: Acquisition Update
Acquisition Update Slide 19 13/11/2007
Slide 20: Update on acquisitions
Update on acquisitions Integration of Informer and Financial Objects largely complete... • Staff have been integrated with the Temenos team At the time of the • Salesforce retrained to sell T24 acquisitions, we guided for USD3.1m (USD2.5m • Offices amalgamated at 2009 FX) of cost synergies We now ex
Slide 21: Update on acquisitions: Lydian Associates
Update on acquisitions In November we acquired Lydian Associates Our Business Intelligence product • the acquisition greatly enhances our Business Intelligence suite, Temenos offering... Insight, has the • ...allowing our clients to use a pre-packaged range of potential to be as analytical tools to
Slide 22: Update on acquisitions: pragmatic policy
Update on acquisitions Until revenue visibility improves, acquisition policy will be pragmatic • Our aim is to balance capital protection... • ...with the opportunity to make strategic acquisitions... • ...at attractive valuations • ...that can be easily absorbed... • ...and will deliver quick but s
Slide 23: Strategy and Business Update
Strategy and Business Update Slide 23 13/11/2007
Slide 24: 2008 Highlights
2008 Highlights • Revenue growth of 23% • Adjusted EPS growth of 10% • Operating cashflow of USD56m • 48 new customer wins • Successful completion and integration of 3 acquisitions • Strengthened management team across several areas • Further independent recognition of product • Record number of go-
Slide 25: Quarter 4 2008
Quarter 4 2008 After 3 outstanding quarters... ...Q4 proved to be a difficult quarter for Temenos: • For the first time since the start of the credit crisis, customers delayed signings • Extreme macro uncertainty made some CEOs reluctant to commit to projects • >10 deals slipped out of the Q4 foreca
Slide 26: Overview of FY Sales
Overview of FY Sales Taking the year as a whole, headline licence growth flat... → +1% in reported terms → -1% in like-for-like terms ...reflecting lack of growth in new name clients → new name clients at 48 vs. 49 in prior year The clients were also smaller... → Last significant tier 1 deal was in
Slide 27: ARC and Misys replacements progressing well
ARC and Misys replacements progressing well ARC • We sold 35 ARC licences in 2008, up 21% year on year... • ...reflecting increased take-up from the installed base... • ...where no of sales was up almost 90% year on year Misys replacements • The average deal size of the Misys deals continues to rise
Slide 28: Overview of new customer sales
Overview of new customer sales New clients varied across regions: FY 2008 FY 2007 New clients (number) 15% 14% 27% MEA 37% MEA Europe 12% Europe 21% Americas Americas APAC APAC 37% 37% FY 2008 FY 2007 New clients (licence value) 12% 17% 28% 29% MEA MEA 23% Europe Europe 15% Americas Americas APAC AP
Slide 29: Update on Metavante Partnership
Update on Metavante Partnership TCB • In January, Everbank become the first adopter of the Global Customer Information Management (CIM) product, a component of Metavante’s next- generation core processing solution, which is based on Temenos’ TCB solution. • Together we continue to invest in TCB for
Slide 30: Services Update
Services Update In 2008, we achieved a record number of go-lives... • In 2008, 44 T24 customers went live (vs. 36 in 2007) • Peak number of concurrent projects handled by our services team was >150 ... reflecting the success of services initiatives • Temenos Application Management, Temenos Implement
Slide 31: Introducing New Partner Programme for 2009
Introducing New Partner Programme for 2009 Why are we launching a partner programme? • To create a scalable growth model for Temenos • Create a community to deliver complete solutions • Create indirect sales channel for T24 • To cater for tier 1 banks Why now? • Temenos is ready • Temenos and the co
Slide 32: Introducing New Partner Programme for 2009: plans
Introducing New Partner Programme for 2009 What are the plans? To attract and certify a community of partners consisting of: • Management consultants/ System Integrators • Staff Augmenters • Technology Partners When will it start to deliver? • Director appointed, programme launched in January • Alre
Slide 33: Outlook and Summary
Outlook and Summary e =mMOnae 9 -MENOS The Banking Software Company
Slide 34: 2009 Outlook
2009 Outlook Revenue visibility remains limited... • In Q4, the level of uncertainty was high and some CEOs were unwilling to commit to large capex projects • Still uncertainty exists ...Therefore, we give outlook on margins and costs, instead of revenues • We target operating margins of 19% to 20%
Slide 35: 2009 Outlook: cash generation
2009 Outlook We expect cash generation to be strong... Given higher D&A • We expect EBITDA into operating cashflow conversion of no in 2009, we expect less than 75% c.100% • D&A likely to be USD30m in 2009 given higher amortisation conversion of from acquisitions operating profit • Cash cost savings
Slide 36: Concluding remarks: revenue and operating margin
Concluding remarks We have shown that we can grow BOTH revenue AND margin: LTM Revenue and Operating Margin since Q2 2005 80 450 70 400 60 350 300 50 250 40 200 Revenue 30 150 EBIT 20 100 10 50 0 0 Dec-05 Dec-06 Dec-07 Dec-08 Sep-05 Sep-06 Sep-07 Sep-08 Jun-07 Jun-05 Jun-06 Jun-08 Mar-06 Mar-07 Mar-
Slide 37: Concluding remarks
Concluding remarks Despite disappointing finish to the year, we remain well placed... • Our business model remains unique in core banking → Packaged solutions, high R&D, single annual release • We are the market leader → Highest sales in core banking market, win rate >80% • We are enjoying the advan
Slide 38: Appendices
Appendices ‘7 sm: FM fe) FA ed Bl F EMENOS The Banking Software Company
Slide 39: Balance Sheet – significant movements
Balance Sheet – significant movements Trade receivables - as reported Balance 2008 2007 ∆ Trade receivables 279.4 187.1 +49% Receivables (Current) have only increased in line Trade receivables 8.2 26.0 (68%) with revenue (non-current) growth... Total 287.6 213.1 +35% Trade receivables - restated for
Slide 40: Research and Development
Research and Development USD millions Q408 Q4 07 % 12 mths to Dec 2008 2007 R&D Costs – as reported 17.5 17.0 3% 74.9 57.1 31% Capitalised development costs 6.6 6.0 19.9 16.9 Less Non cash items (7.9) (4.0) 98% (21.1) (13.8) 53% Less ACTIS* 0.0 0.0 (1.4) 0.0 Less Informer (0.1) 0.0 (0.2) 0.0 Less Fi
Slide 41: Sales and Marketing
Sales and Marketing USD millions Q408 Q407 % 12 mths to Dec 2008 2007 S&M costs – as reported 19.4 22.3 (13)% 74.9 71.8 4% Less non-cash (0.4) (0.8) (6.2) (3.8) Less ACTIS* 0.0 0.0 (0.2) 0.0 Less Informer (1.7) 0.0 (3.1) 0.0 Less Financial Objects (1.2) 0.0 (1.4) 0.0 Currency impact n/a (1.3) n/a 0.
Slide 42: General & Administrative Costs
General & Administrative Costs USD millions Q4 08 Q4 07 % 12 mths to Dec 2008 2007 G&A costs – as reported 15.7 12.1 30% 52.3 41.5 26% Less non-cash (2.6) (1.9) (10.7) (8.4) Less ACTIS* 0.0 0.0 (0.4) 0.0 Less Informer (0.1) 0.0 (0.2) 0.0 Less Financial Objects (2.6) 0.0 (2.6) 0.0 Currency impact n/a
Slide 43: Adjusted EPS reconciliation
Adjusted EPS reconciliation Q4 FY Earnings 44.5 65.2 Amortisation of acquired 1.2 5.1 intangible assets Restructuring 2.5* 2.5* Bond Interest 1.3 5.5 Total Adj Earnings 49.5 78.3 Total Diluted # of shares 67.4 69.1 Adjusted EPS 0.73 1.13 All figures in USDm, except shares in m *USD1m for Financial O
Slide 44: Reconciliation to lower cost run rate
Reconciliation to lower cost run rate USDm Coming from: Given lower FX effect on • acquisition Includes than revenues synergies full expected also • office consolidation variable revenues c.USD27.5m • offshoring more costs 390 383 support functions, services capacity, 12.5 development 370 27.5 350 3
Slide 45: 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 46: Metavante Agreement: potentially exercisable warrants
METAVANTE AGREEMENT Potentially exercisable warrants (2007-12) Cumulative Revenue target -Temenos Cumulative warrants exercisable* USD128m 1m USD145m 2m USD195m 2.5m *At CHF19.9 Slide 46
Slide 47: Thank You
Thank You ‘7 sm: FM fe) FA ed Bl F EMENOS The Banking Software Company