Transcription
Winning with products in a multi-speed worldFixed income roadshowMarch 2013
DisclaimerAny remarks that we may make about future expectations, plans and prospects for thecompany constitute forward-looking statements. Actual results may differ materially fromthose indicated by these forward-looking statements as a result of various factors.In particular, the forward-looking financial information provided by the company in thismeeting represent the company’s estimates as of March 2013. We anticipate thatsubsequent events and developments will cause the company’s estimates to change.However, while the company may elect to update this forward-looking financialinformation at some point in the future, the company specifically disclaims any obligationto do so. This forward-looking information should not be relied upon as representing thecompany’s estimates of its future financial performance as of any date subsequent toMarch 2013.2
Investor highlightsIn H2 2012 we laid the foundations for sustained growthAddressing a USD26bn market opportunity, underpinned by structural growth driversStrategy builds on sound fundamentals and capitalises on strong product assets andinstalled base opportunityWe are a true multi-product company with compelling value proposition and roadmapWe are clear on services role in product business, the route to even better customer successPartner programme maturing, partners becoming significant complementary sales channelRevenue growth and operational leverage drive strong earnings and cash over medium termStrong fundamentals & clear strategy to deliver significant returns3
AgendaOverview of TemenosThe market opportunityOur credentialsOur strategic planFinancials4
Temenos – a global market leaderNo.1World’s leading bankingsoftware company 1,200 installationsin 140 countries USD 450M revenuesin 2012 3,700 employees in57 international officesWorld class delivery 43 new customers wentlive in 2012 Strength and depth:900 consultants,100 concurrent projects Community of 1500 certified partnerconsultantsProduct led Highest level of researchand development in theindustry Regular softwareupgrade strategy Passion for standardsand openness5
Global reach3,700 57 38employeesAmericasCanadaCosta RicaEcuadorMexicoUSAofficesMiddle East& AfricaEgyptKenyaLebanonMoroccoSaudi ArabiaSouth AfricaUAEcountriesEuropeAsia ur global network enables us to be close to our clients, understandtheir requirements and deliver solutions quickly and accurately6
Our revenue model: a product led company Rich product suiteRegularly upgradedNew and existing clientsGeographic enance27%Services High level consultancyDirect client feedback forbenefit of wider business Revenue stream growswith Licence sales5 year contracts, thenrenewable annuallyPaid annually in advanceCPI indexed7
A diverse revenue baseFY 2012 licence by new / existingFY 2012 licence by customer tierNew44%1 and 237%Existing56%3, 4 and 563%22%FY 2012 licencebreakdown bygeography27%APACEuropeAmericas14%MEA37%Greater stability of revenue streams8
Financial services landscapeDistribution channelsInvestment uranceLifeTCMBankingAssetmanagementBusiness analyticsRisk and complianceCRMGeneralPaymentsGeneral support9
Financial services landscapeRich product suiteDistribution channelsTemenos UniversalTreasury TraderRetailInvestment servicesmanagementBankingTriple’ A sk and complianceCRMGeneralPaymentsGeneral support10
Management and governanceBoard of DirectorsDavid ArnottMax ChuardCEOCFOCentral functionsMark WinterburnProduct DirectorMark GunningPre-Sales DirectorAndreas AndreadesChris PavlouGeorge KoukisExecutive ChairmanINED, Vice-ChairmanNon-ExecutiveIan CooksonSergio Giacoletto-RoggioThibault de TersantINEDINEDINEDMike DavisServices DirectorMike HeadStrategic Alliance DirectorBen RobinsonStrategy and Marketing DirectorRegional Directors11
AgendaOverview of TemenosThe market opportunityOur credentialsOur strategic planFinancials12
Market opportunityBank spend on third-party software today: a USD 5.5bn market*USD 1.4bnUSD 1.3bnCore bankingUSD 1.8bnUSD 1.0bnWealthBIChannels*Licence and maintenance spendSource: Gartner, IDC, Celent, Temenos estimatesOrganisation aligned around market that is 3x bigger than in 200913
Market driversBank challengesBank opportunitiesRegulation and costEconomic growthA newly empowered customerDemographicsMore intense competitionInnovationFinancial Services industry undergoing generational shift14
The profitability gapBanks RoE levels globallyPre-crisisGlobal financial crisisProfitability gap6% ptsNew normal6%16%10%10%201020117%9%4%1980-2007 average200820092012Source: BCG, Thomson Reuters[ structural] and cannot be ignoredProfitability pressures are1515
AgendaOverview of TemenosThe market opportunityOur credentialsOur strategic planFinancials16
Leading the competition“Temenos has been the one of twofirms in our Global Power Sellerscategory since Forresterintroduced the global vendorpyramid for the 2006 globalbanking platform deals survey”“(and this year) has theenviable position of thesingle Global Power Sellerin the 2011 survey.” 35 new named deals; more than 4 regions*TemenosInfosys / TataConsultancyServices 15 named deals; more than 3 regions*Nucleus Software ExportsPolaris / SAP 5 new named deals;more than 3 regions*Callatay & WoutersDelta Informatique / DL&AFIS / JHA / Open Solutions / SunGard 5 new named deals;2 to 3 regionsAccenture / BML Istisharat / Cobiscorp / CSCEri Bancaire / FORS-BS / Intrasoft InternationalMisys / Path Solutions / SAB / Top Systems 5 new named deals forfewer than 2 regionsSource: Forrester “Global Banking Platform deals 2011”, published April 2012The only Global Power Seller17
The largest installed baseCore banking installed bases by region in 2012PWM installed bases in osys1003008020060401002000EuropeAfricaAPACNorth AmericaLatamTemenosERIAvaloqNotes: Fidelity (FIS) includes ACBS and Profile; Oracle excludes Daybreak;Temenos includes V.bank, Triple'A Plus and WealthManagerSource: IBS Intelligence, Capgemini, Temenos estimatesLargest customer base in all regions and across all segments18
Growth in top tier customers2012% of Temenos licence revenue37%200722%63%19994%78%96%Tiers 1 and 2Tiers 3, 4 and 5Tier 1 and Tier 2 banksaccount for 60% ofapplication spending inFinancial ServicesTemenos’ customers include 60% of the world’s tier 1 banks19
A proud history of ignFrameworkComponentisationframework2012Retail banking, Corporate banking, Treasury, Lending, Payments Temenos Enterprise Payments PlatformTrade financeTrade finance (forfeiting & factoring)Front office – CRMInternet bankingLoan collections & leasingInsight Business IntelligenceTreasury TraderArrangement ArchitectureAnti money launderingRelationship-based pricingSmart order entry and pre-trade complianceMobile bankingEnhanced wealthTablet apps for Relationship ManagersInsightConnectSupply chain financeCloud & Mobile BIFATCA, Basel IIIApp storeCompelling and unrivalled roadmap20
The most profitable banks run TemenosPerformance of Temenos customers compared to banksusing both other third-party systems and legacy applicationsReturn on assetsReturn on capital1.2%14%1.0%12%25%30%10%0.8%Cost / 4%4%0.2%52%2%0.0%Legacysystems3rd Party50%0%TemenosLegacysystems3rd PartyTemenos48%Legacysystems3rd PartyTemenosData taken from white paper, “Bridging the Profitability Gap”, co-written withBetter results with 3rd party systems, even better results with Temenos21
AgendaOverview of TemenosThe market opportunityOur credentialsOur strategic planFinancials22
Strategic plan in contextBuild1993 to 2002Scale2003 to 2011Lead2012 onwards Domain focus Built out regional structure True multi-product focus Truly global Multi-deployment options Single packaged productExpansion of addressablemarket Commitment to opennessRealising installed baseopportunity Growth in key geos andsegments, partners facilitating Further strategic M&A Maturity and consistency Tier 1-6 High R&D Maintenance model Tier 3-5 M&A programme Partner programme initiated Margin expansion 10pp of market share gains Tier 1-216% revenue CAGR30% adjusted EBIT CAGR*1995 to 2001Creating value23
Converting internal spending to external spendingThird party spend & total spend on banking software today*USDbnCore bankingWealthBIChannels30USD 26.0bn255.6203.04.51510USD 5.5bn12.950Spend with third-parties today*Licences and maintenanceTotal spend on banking software todaySource: Gartner, IDC, Celent, Temenos estimatesMaintaining leadership in Core Banking; establish leadership in other segments24
Installed base opportunityTemenos has more than 1,200 customers using its software ( 1,000 discretefinancial institutions)Penetration rates across our product sets remain low (e.g. Insight at 20%, Internetbanking at 18%)There is a significant revenue opportunity coming from relicensing customersreaching end of their 10-year licence agreements, although still immaterial in 2013and 2014Significant cross-selling opportunity25
Our strategic plan: licences and maintenanceFocus on productSustainably grow licence and maintenance revenuesContinued high investment in productUnderpins margin expansion and DSO reductionFocus on target areas of growthCore banking to grow slowerChannels, PWM, BI expected to be high growth areasAPAC and Americas to be fastest growing regionsRefocus sales to increase contribution from existing customers26
Our strategic plan: servicesHigher margin services supporting product business20% to 25% of group revenuesHigher value-add expert and productised services, driving even better levels ofcustomer successReducing implementation timesMaximising reusabilityReduced cost base providing operational leverage27
Our strategic plan: partnersPartner strategy moving into the next phaseTotally aligned with services strategy, leveraging partners to support growthPartners to drive growth in licensing, instrumental in opening up key segments andmarketsServices partners taking greater role on projects, leading more projects28
Cautious and disciplined approach to M&AIncreased scaleAccelerated growth inkey markets andsegmentsA 2009201020112012201329
AgendaOverview of TemenosThe market opportunityOur credentialsOur strategic planFinancials30
A track record of successTotal revenue (USDm) – 15% CAGRAdjusted EBIT (USDm) – 27% CAGR50012040010080300602004010020002002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Maintenance revenue (USDm) – 22% CAGR2502002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Installations (no.) – 14% CAGR1600200120015080010040050002002 2003 2004 2005 2006 2007 2008 2009 2010 2011 201220042005200620072008200920102011201231
Resilience of cashflowsOperating cashflows (USDm)Operating cash: EBITDA as a 009201020112012Installed based contribution to Licence rev’20082009201020112012Maintenance as a % of 122008200920102011201232
Development of key metricsNet debt (USDm)Net debt / EBITDA 0201120082012EBITDA / Interest (x)2009201020112012EBITDA 0920102011201233
Financing policy and objectivesCommitment to key financial targets Optimal leverage of 1.0x to 1.5x net debt / EBITDA (with flexibility to go to 2.5x for theright strategic acquisition if clear path to deleveraging) 100% conversion of EBITDA into operating cashflow 10 to 15 day reduction in DSOs pa A sustainable dividend policyDevelop and maintain a core banking group of solid international playersEstablish Temenos credit in the capital marketsCommitment to highest levels of transparencyClear, measurable financial policies and objectives34
Medium term targets10% licencegrowth5% revenuegrowthper annumEconomiesof scale100-150bps ofmarginexpansionHigherservicesmarginson averageRevenue mixshiftper annumShorterprojectsNew /existing mixMore cashup-frontCashconversionover 100%per annumSignificant value creation35
Investor highlightsIn H2 2012 we laid the foundations for sustained growthAddressing a USD26bn market opportunity, underpinned by structural growth driversStrategy builds on sound fundamentals and capitalises on strong product assets andinstalled base opportunityWe are a true multi-product company with compelling value proposition and roadmapWe are clear on services role in product business, the route to even better customer successPartner programme maturing, partners becoming significant complementary sales channelRevenue growth and operational leverage drive strong earnings and cash over medium termStrong fundamentals & clear strategy to deliver significant returns36
Questions37
AppendixBackground materials
2012: Q4 and FY KPIs (vs 2011)LFL licence revenueLFL total revenueQ4 up 17%FY down 14%Q4 up 5%FY down 3%Adjusted EBITDA (and margin)Adjusted EPSQ4 up 36% (margin up 9.4% pts)FY up 3% (margin up 2.0% pts)Q4 up 103%FY up 1.1%CashLeverageUSD 114m of operating cash flow in Q4102% conv’ of EBITDA:op’ cash for FYUSD 97m of free cash flow in Q4Net debt: EBITDA of 1x as at Dec 2012Strong Q4 licence growth; cost control drives margin expansion39
2013 guidanceNon-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% (implyingnon-IFRS EBIT of USD 102m to USD 112m)*100% conversion of EBITDA into operating cashlflowTax rate of 17% to 18%* At constant currencyLicence and revenue growth in 2013 with significant improvement in margins40
Operating income statementIn USDmQ4 12Q4 11Y-o-YFY 12FY 1%123.4130.1-5.2%134.2127.05.7%450.2473.5-4.9%Adj. operating costs86.391.8-6.0%364.7385.7-5.5%Adj. EBIT47.935.236.0%85.587.7-2.5%35.7%27.7%8.0% pts19.0%18.5%0.5% pts56.241.236.3%119.8116.72.6%41.9%32.5%9.4% pts26.6%24.7%2.0% ptsTotal revenueMarginAdj. EBITDAMarginLicence momentum, strong maintenance and margin improvement41
Below the line income statementIn USDm except EPS (USD)Q4 12Q4 11Y-o-YFY 12FY 11Y-o-YAdj. EBIT47.935.236.0%85.587.7-2.5%Net finance (5.4)35.0%Tax(3.4)(9.0)61.8%(12.6)(12.2)-3.2%Adj. net profit42.420.9102.2%61.661.50.1%Adj. EPS0.610.30103.3%0.880.871.1%FX gain / (loss)Adj. EPS up in both Q4 and FY with well controlled financing and tax structure42
CashCash conversion*Adjusted operating cashflow (USDm)250%160200%120150%80100%4050%00%FY 2009FY 2010FY 2011FY 2012FY 2009FY 2010FY 2011FY 2012* EBITDA into operating cashflowHigh quality of earnings; cashflow resilience43
Balance sheet – debt and financingIn USDmCredit facilitiesOthersTotal debtCashNet debtTreasury shares31 Dec 12 Comment213.8USD 350m facility, due in 20170.6214.4(117.7)96.6(50.8)Net debt and financing45.8EBITDA95.6Held in short term deposits1.0x EBITDAHeld at market value as of 31 Dec 20120.5x EBITDA1x leveraged at year end44
Medium term: RevenueLicence 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 new marketsMaintenance Resilience of maintenance with 97% renewal rateServices To contribute 20% to 25% of total revenuesRevenue growth of 5% ; Licence growth of 10% 45
Medium term: Cost baseCost breakdownCost of ServicesR&DG&A Cost of services falling as % of revenue:focus on higher end services and leveragingfixed costs R&D falling as % of revenue (althoughincreasing in actual amounts): exploitingscale synergies and productivityimprovements G&A falling as % of revenue: leveragingfixed costs of running an already globalbusiness S&M rising as % of revenue: improvingproductivity coupled with significantinvestment drives licencing growthS&M100%80%60%40%20%0%2012AMedium term estimateS&M benefitting from leveraging cost of services, G&A and R&D46
Medium term: Margin100-150bps of margin expansion on average per annum in the medium termMargin improvement to be driven by shift in revenue mix improving services margin economies of scaleInvestment will be monitored and released as we deliver licence growth, meaning thatincremental maintenance revenue will entirely contribute to margin expansionSignificant margin expansion47
DividendTemenos 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 shareholdersThe Board intends to initiate regular dividend paymentsSubject to shareholder approval at the AGM on 24 May 2013, Temenos intends to pay aninitial annual dividend of CHF 0.28 (c.USD 0.30) on 31 May 2013. The dividend record datewill be set on 30 May 2013 with the shares trading ex-dividend on 28 May 2013Temenos policy is to distribute a sustainable to growing dividendDividend reflects maturity of the business48
Aligning with partners to maximise impactTechnology partnerComplementary solution partnerServices partnersPowered by TemenosPlus Regional and LocalPlus 13regionallybasedpartners49
Partners in numbersLicences brought by partners vsno. of partner consultants% Licence brought by partners (LHS)Partner consultants (RHS)16%2,00012%1,5008%1,0004%5000%200920102011 14% of licence revenue in2012 18 deals in 2012 across Asia,Middle East, Africa andEurope Partners involved in projectsas of start of 2013 – 70 2012A sizeable ecosystem delivering results50
Thank youwww.temenos.com
Loan collections & leasing Relationship-based pricing App store Treasury Trader Retail banking, Corporate banking, Treasury, Lending, Payments Trade finance Front office - CRM Internet banking Insight Business Intelligence Arrangement Architecture Mobile banking Anti money laundering Enhanced wealth Connect Insight
