2020 cfa research challenge report

CFA Institute Research Challenge hosted by

CFA Society Switzerland

University of Bern

The CFA Institute Research Challenge is a global competition that tests the equity research and

valuation, investment report writing, and presentation skills of university students. The following report

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This report is published for educational purposes by students for the CFA Institute Research Challenge. University of Bern ■ 1

TEMENOS AG

GICS Sector: Information Technology

GICS Industry: Software & Services

Recommendation: SELL (29.2% Downside)

Exchange: SIX Swiss

Ticker: TEMN

Current Price: CHF 115

Target Price: CHF 81

Valuation Date: 30/11/20

INVESTMENT SUMMARY

We issue a SELL recommendation for Temenos AG (Temenos) with a target price of CHF 81.28,

representing a downside of 29.2% on the closing price of CHF 114.80 on November 30, 2020. The

target price is derived from a discounted free cash flow to the firm (DCF) and multiples valuation,

mixed by 80%/20%. Our recommendation is based on the following three key arguments: (1) prom-

ising but uncapturable market, (2) a growth stock with limited growth potential and (3) R&D inef-

ficiency hinders margin improvement.

■ 1 – Promising but uncapturable market. Due to increasing pressure on banks to improve

their IT, the global banking software market is forecasted to reach a size of BUSD 60 in 2020 and

to grow at a CAGR of 9.6% until 2024. The amount spent on third party IT is projected to be BUSD

13.7 in 2020 and will grow at a high CAGR of 10.1% until 2024 (Fig. 10). In 2017, Temenos’ existing

tier 1 & 2 clients only spent 4% of their total IT spending on Temenos products (Ref. 10). With reve-

nues from tier 1 & 2 banks having remained constant since then, Temenos clearly failed to improve

its market position with their potentially biggest customers. The all-including offer from Temenos

with end-to-end solutions may become a liability as banks increasingly look for software from dif-

ferent providers in order to minimize their dependency on one single company. Despite enlarging

its product offer, Temenos’ average total software licensing revenue per deployment has re-

mained stable over the last 5 years (Fig. 28), reflecting the unwillingness of banks to increase the

volume of their deals with a single software company.

■ 2 – A growth stock with limited growth prospects. According to the company neither

an addition of new products, nor a geographical market expansion are planned. Hence, Te-

menos has constantly been investing in the development of its presence in the most promising

market, the Americas. With the acquisition of the US-based company Kony in 2019, Temenos at-

tempts once again to strengthen its American position. However, we doubt the American break-

through in the long-term. Management states the intention to get access to the Top100 US banks.

With Kony being a US SaaS-leader and bigger banks often not able to change their IT to cloud

solutions, Temenos strengthened its position for smaller US banks. Temenos may be able to gain

Top100 banks through software licensing, but not in the volume required to achieve the aspired

strong growth. 30-40% of Kony’s customers are non-financial institutions providing little value to

Temenos’ market position and established companies such as Jack Henry, TCS and Infosys repre-

sent strong competition in the race for new customers. After a substantial drop of total revenues

in 2020, a signifiant rebound effect will happen in 2021 and 2022 due to the realization of projects,

which were postponed due to covid-19. The rebound effect together with the Kony deal will help

Temenos to outgrow the market in the short term, but prove to be temporary effects. Adopting a

questionable strategy in the most promising market limits Temenos’ prospects. Accordingly, we

predict total revenues to grow at a CAGR of 8% over the 5-year period 2020-2024, yet organic

CAGR will only be 5%.

■ 3 – R&D inefficiency hinders margin improvement. Temenos spends much more on R&D

than its competitors, yet new products and market opportunities often result from M&A activities

rather than internal innovations (Appx. 3, 5). The high leverage of 81% in 2019 resulting from the

active M&A strategy hinders future compensation of R&D inefficiency through acquisitions (Fig.

1). The inefficiency is shown in the comparatively low return on research capital (gross profit

earned per USD invested into R&D two years prior) of 3.5 in 2019. Temenos constantly reinvests

almost 28% of total revenues or MUSD 270 in 2019 into inefficient R&D labs (Fig. 14). With R&D being

needed to keep the broad product offering up to date, future reductions of R&D expenses are

unlikely. This reduces potential of increases in operating margins. Margins additionally suffer from

SaaS cannibalizing software licensing, as the periodic payments from SaaS contracts lower me-

dium-term margins. We therefore predict EBIT margin to drop to 22% until 2024, opposing analyst

consensus, where improving operating margins are forecasted.

Fig. 1 Key Financials

2018 2019 2020E 2021E 2022E 2023E 2024E

Revenues (MUSD) 840.9 972.0 886.1 1013.4 1’157.5 1’301.3 1’437.5

Revenue Growth (%) 14.4 15.6 -8.8 14.4 14.2 12.4 10.5

EBIT Margin (%) 26.1 24.2 23.3 23.7 23.2 22.7 22.2

ROIC (all R&D capitalized) (%) 16.3 12.9 8.2 10.1 11.5 12.1 12.2

Total Liabilities to Assets (%) 82.5 80.8 75.7 68.6 64.4 62.3 58.3

EPS (USD) 2.4 2.6 2.2 2.4 2.7 3.0 3.2

ROE (%) 49.8 48.7 30.6 27.2 24.8 22.7 20.8

Source: Company Data, Team Analysis

■ COMPANY SNAPSHOT

Founded 1993

Public since 2001

Headquarter Geneva, CH

Employees 7’854

Customers 3’000+

■ KEY FIGURES

Shares Outstanding 70’953’199

Market Cap (M) CHF 8’145

52w Low CHF 91.5

52w High CHF 168.6

Free Float 88.3%

Forward P/E Ratio (2020) 52.6

1 Y. Avg. Daily Volume (K) 430.6

Dividend Yield 0.7%

YTD Price Performance -25.1%

■ VALUATION

Target Price CHF 81.28

DCF (80%) CHF 88.20

Multiple (20%) CHF 53.58

Beta 1.23

WACC 7.63%

■ MAJOR SHAREHOLDERS

Ebner (Martin & Rosmarie) 10.8%

BNP Paribas Asset Manage-

ment UK Ltd. 8.7%

BlackRock Institutional Trust

Company, N.A. 5.5%

Fig. 2 ESG Scores & Topics Overview

REFINITIV

B

MAX. A+

MSCI

A

MAX. AAA

DVFA

78%

MAX. 100%

■ Bad Management Incentives

■ Recent Changes in Key Personnel

Source: Refinitv, MSCI, DVFA, Team Analysis

Fig. 3 Share Price

Source: Refinitiv Eikon

-

2'000

4'000

6'000

8'000

10'000

90

110

130

150

170

190

Mai. 19 Nov. 19 Mai. 20 Nov. 20

TEMN DAILY VOLUME (K)

CHF

University of Bern ■ 2

BUSINESS DESCRIPTION

Founded in 1993, Temenos uses its 25+ years of experience in the global banking industry to pro-

vide premium banking software solutions to banks and financial institutions. Temenos AG, the par-

ent company of multiple directly or indirectly affiliated companies (Appx. 6), is headquartered in

Geneva, Switzerland and went public in 2001 on the SIX Swiss exchange. As of Q1 2020, almost

8’000 employees worldwide work for the company, thereof more than 50% in India (Fig. 4).

■ Business model. Next to developing and marketing its products, Temenos provides mainte-

nance and other services containing upgrades as well as training and support to its client base

(Fig. 5, 6). Temenos offers a wide range of different products (Appx. 3), whereof the most success-

ful ones are Temenos Transact (Core banking solution) with 1’000 customers and Temenos Infinity

(Front office solution) with over 500 customers worldwide (Fig. 7). According to the company, its

products belong to the high price segment. To increase scalability, Temenos’ Partners (e.g.

Capgemini, Accenture) mostly perform the implementation of the software. Next to its own Te-

menos Cloud, the company maintains partnerships with multiple cloud providers (e.g. Google

Cloud, aws) to ensure maximal functionality of its Software as a Service (SaaS) offer (Appx. 4).

■ Shift from licensing to SaaS. All products can be implemented individually or as a solid end-

to-end solution with open application programming interfaces (APIs), based on a license or SaaS

contract (Appx. 2). Under a SaaS contract, the software infrastructure is provided by Temenos or

a third party, with whom the company has concluded an agreement. The client pays periodic

fees to get access to Temenos’ software. As of H1 2020, the shift from software licensing to SaaS

has started earlier than expected for Temenos, leading to a partial cannibalization of the former.

■ All eyes on the Americas (again). Temenos runs its operations from 64 offices in 39 coun-

tries (2019: 68 offices in 40 countries), contributing to a local presence in their four main geograph-

ical regions (Fig. 4) (Appx. 7). Its principal software development facilities are located in Chennai,

Bangalore and Hyderabad in India. As of 2019, Temenos generates most of its revenues in Europe

(42%), followed by the Americas (23%), Asia Pacific (20%) and Middle East & Africa (15%) (Fig. 8).

In 2020, a shift from the European to the American market can be observed. The reason behind

this is the strategic acquisition of Kony, a US digital banking provider and SaaS-leader, for MUSD

559 in September 2019, which is hoped to extend and strengthen Temenos’ position in the US

banking software market. Already in 2007, the company formed a core partnership with Meta-

vante (acquired by FIS in 2009) and in 2013 Temenos acquired TriNovus, a SaaS technology pro-

vider with over 800 US financial institutions as their client base. With Akcelerant (2016) and Avoka

(2018) another two US companies found their way into Temenos’ portfolio, reinforcing the US-strat-

egy the company has now been pursuing for over 10 years (Appx. 5).

■ Market strategy. Temenos, as a growth stock, depends on constantly improving products,

strong and increasing customer relations and strategic M&A activities. With on average 27.6% of

revenues spent on R&D in the last three years (Fig. 14) and almost 50% of its total workforce being

employed in R&D, Temenos invests a lot more than its competitors to develop software products.

By doing that, Temenos focuses on SaaS and Cloud solutions to meet the increasing demand of

the banking industry. Despite the very high R&D expenses, strategic acquisitions were historically

a popular tool to increase the customer base and get access to new software as well as geo-

graphical markets (Appx. 5). Nevertheless, the company is known for its strong marketing and

sales team (Ref. 4) and will continue to build on this essential competence (Ref. 1).

■ Putting Temenos’ business case to the test.

Shift from licensing to SaaS. Although SaaS generally increases recurring revenues, shorter con-

tract terms of the SaaS business (4 – 4.5 years) versus licensing contracts (average of 10 years) and

a decreased vendor lock-in effect threaten Temenos’ future growth stability. In combination with

the covid-19 crisis, which hit Temenos much harder than its competitors, we believe that uncertain

times lie ahead of the company.

All eyes on the Americas (again). We doubt that Kony will be the American breakthrough Te-

menos is hoping for based on four reasons. First and foremost, Temenos follows a strategy that

does not match the market. With Kony being a US SaaS-leader and considering that bigger banks

are often not able to change their IT to cloud solutions, Temenos strengthens its position for smaller

US banks. Nevertheless, management states the intention to get access to the Top100 banks,

which will not be able with the applied strategy. Secondly, 30%-40% of Kony’s customers are non-

financial institutions, providing only little value to Temenos’ market position. Thirdly, former and

long-standing CEO of Kony, T. Hogan, resigned in February 2020 after just five months in the exec-

utive committee of Temenos (Ref. 3). This certainly makes the integration process of the 1’500+

Kony employees more difficult for Temenos, especially because many small fintech companies

are located in Austin, Texas (former headquarter of Kony). With multiple other possible employers

in the area, Temenos, with a rather formal corporate culture, might face employees with valuable

knowledge leaving the company to work at a younger and more agile company (Ref. 11). Finally,

companies such as Jack Henry, TCS and Infosys have already established a well-known brand for

themselves and will represent strong competition in the race for new customers in the Americas.

Market strategy. According to the company neither an addition of new products (e.g. capital

market trading), which would increase the total addressable market nor a further geographical

market expansion (e.g. Asia) are planned, leaving the company next to the American market

with restricted growth opportunities.

Fig. 4 Offices & Headcount per Region

Source: Company Data

Fig. 5 Revenue Stream


Fig. 6 Revenue by Segment


Fig. 7 Main Product Overview

PRODUCT DESCRIPTION

Transact Core banking product for

processes in all manufactur-

ing tasks of a bank.

Infinity Digital front office product for

customer acquisition, servic-

ing and retention, incorporat-

ing APIs.

Payments Universal end-to-end pay-

ments product.

Multifonds Investment accounting and

investor services software

covering all asset classes.



42%

23%

15%

20%

32%34%

13%

20%

EUROPE AMERICAS MEA APAC

Fig. 8 Revenue by Region

2019 2024E

39%29%

6%16%

37% 38%

18% 17%

2019 2024E

SERVICES MAINTENANCE

SAAS & SUBSCRIPTION SOFTWARE LICENSING

0

5

10

15

20

25

0%

10%

20%

30%

40%

50%

60%

70%


HEADCOUNT (%) OFFICES


INDUSTRY OVERVIEW & COMPETITIVE POSITIONING

■ Banking industry faces difficult times. Since the financial crisis in 2008 banks have con-

stantly needed to adapt to new regulations, which drive business efficiency and margins down.

In addition, interest rates fell below zero in large parts of the world, resulting in a flat yield curve

and therefore lower term spreads. These two main reasons decreased the ROE of US banks from

10-15% (Euro-Area: 5-10%) before the crisis to 5-10% (Euro-Area: 2-5%) after the crisis (Ref. 16). Fur-

thermore, the pressure of neobanks, fintechs and bigtech companies on traditional banks is get-

ting stronger every year (Ref. 4). Neobanks provide the core services of retail banks (money trans-

fers, account overviews, currency exchanges, wealth management) at much lower costs be-

cause they abandon branches and provide their services completely online. Due to the cost ad-

vantage and their extensive focus on customer needs they rapidly win customers. Revolut, a British

neobank, increased their customer base from 3.5m to 10m in 2019 alone (Ref. 17). Amazon,

Google, Apple, Facebook as well as Alibaba as bigtech players enter the market with their own

payment solutions by leveraging their huge user base. Apple Pay started in 2014, Google Pay in

2015 and Amazon is lending money to their third-party sellers. Alipay from Alibaba already started

in 2004 and has 1.3 billion active users annually (June 2020). These evolutions result in low growth

rates of traditional banks. According to McKinsey, the global bank lending growth was just 4.4%

in 2018, even below the global nominal GDP growth of 5.9% (Ref. 12).

■ Time for change is now. To this day, many banks are still developing and maintaining their

own core banking systems, which results in big IT departments and even higher costs. This leads to

total IT spendings of banks of BUSD 270 in 2019 (Ref. 14) (Appx. 34). To be able to focus on their

core business, keep up with new competition and increase profitability again, banks need to shift

from their old legacy software to sophisticated outsourced software solutions in the near future.

Temenos tries to get its piece of the pie by offering a broad range of products (Appx. 3). But due

to diversification reasons, banks, especially tier 1 & 2 banks, almost always count on multiple soft-

ware providers for different business areas (Ref. 4, 6). Therefore, customers rarely purchase the

whole product range from Temenos. The company’s stable contract size of total software licens-

ing per deployment over the past five years confirms this growth constraint (Fig. 28). This results in

an expensive product offering that has to be kept up to date by high R&D spendings but does

not lead to higher revenues for Temenos.

■ Digitalization takes over the banking industry. Five main technological trends shape the

banking industry of today (Fig. 9). Firstly, cloud is on the rise, providing banks with the opportunity

to cut costs by implementing SaaS instead of licensed on premise software. Temenos faces this

trend by offering cloud deployment for all of its products. Secondly, open APIs are crucial be-

cause banks increase their stack of technological microservices, which often arise from different

software providers. Thirdly, Big Data uncovers enormous and powerful possibilities. With the acqui-

sition of hTrunk in 2019, Temenos improved its data analytics software, which is one of its supportive

products. Fourthly, Explainable Artificial Intelligence (XAI) solves the problem of the black box of

AI. Due to regulations, banks must be able to explain on which specific criterias the algorithms

depend on and how they come to decisions. By acquiring Logical Glue in 2019, Temenos included

XAI in its AI software (Appx. 3). Lastly, the presence of mobile banking increases every year. Al-

ready back in 2018, 80% of North American banking customers used online banking platforms. In

Europe the rate was at 65% (Ref. 12).

■ The promising banking software market. The total addressable market of Temenos is fore-

casted to reach a size of BUSD 60 in 2020 (Ref. 13) and to grow at a CAGR of 9.6% until 2024. Most

of this amount is currently still spent bank-internally. The amount spent on third party IT is forecasted

to be BUSD 14 in 2020 and will grow at a high CAGR of 10.1% until 2024 (Fig. 10) (Appx. 34).

■ SaaS – a trend with a bad aftertaste. Software licensing contracts lead to a significant

vendor lock-in due to expensive and complicated implementation processes and because bank-

ing software providers gain firm specific know-how about its customer during the partnership (Ref.

4). Being a risk for banks, the vendor lock-in is an important security for Temenos. Started during

the last five years, the shift from software licensing to SaaS leads to banks being able to change

their software partners much easier due to the higher level of standardization and the periodic

payment scheme (Fig. 11) (Appx. 11). On the other hand, SaaS increases the share of recurring

revenues, which leads a company reliably through storms and drives its valuation. Temenos had

recurring revenues of MUSD 416 in 2019 which represents 43% of their total revenues. Jack Henry

has a recurring revenue share of 86% and Infosys even obtains 97%. We expect Temenos to grow

its recurring revenue share to 54% in 2024. Despite resulting in higher recurring revenues, Temenos’

focus on SaaS will decrease the growth of the company in the mid-term because the payments

are no longer made upfront as this was the case with licenses.

■ Competition is waiting around every corner in a high growth market. The biggest

competitors of Temenos in the short- to mid-term are the in-house IT departments of banks, as they

still spend over three quarters of their total IT budget internally (Fig. 10). Focusing on the third-party

banking software market, there are only few companies that have a similar business case to Te-

menos (Fig. 12). Most of their competitors do not solely focus on the banking software market, but

also operate in consultancy, business process outsourcing and often simultaneously sell software

for other industries (Appx. 8, 9). Nevertheless, the Herfindahl-Hirschman Index amounts to 5.2%,

indicating a highly concentrated and therefore competitive market. With a market share of

Fig. 9 Banking Industry Trends


Fig. 10 Banking Software Market

Source: Deloitte, Celent reseach, WSJ, Team

Analysis

Fig. 11 SWOT

Strengths

■ specialized on

banking sector

■ cloud native &

cloud agnostic

■ strong sales

team

Weaknesses

■ highest R&D

spending in the

industry

■ limited growth

potential

■ strategy mis-

match

Opportunities

■ pressurized

banks

■ technological

trends

■ US marke po-

tential

Threats

■ bigtech,

fintechs and neo-

banks

■ SaaS cannibal-

izes licensing

■ limited M&A

potential

Source: Team Analysis

Fig. 12 Competitors Comparison

1 2 3 4 5

Line of

Business ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■

Revenues ■ ■

■ ■ ■ ■

■ ■

■ ■ ■ ■

Revenue

Growth ■ ■

■ ■

■ ■ ■ ■ ■ ■ ■ ■

EBITDA

Margin

■ ■

■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■

Leverage ■ ■ ■ ■ ■ ■ ■

Overall ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■

1. Jack Henry|2. Intellect Design|3. Oracle

FSS|4. Infosys|5. TCS

See Appendix 10 for further information


BUSD

0

20

40

60

80

100

2018 2019 2020E 2021E 2022E 2023E 2024E

TOTAL ADDRESSABLE MARKET

THIRD PARTY BANKING SOFTWARE MARKET


Competitive

Rivalry

Supplier

Power

Buyer PowerThreat of New

Entrants

Threat of

Substitutes

estimated 15%, TCS is the biggest player, followed by Finastra (11%), Infosys (7%), Temenos (7%),

Jack Henry (7%) and Oracle FSS (5%). These seven players together account for a market share of

52%. The remaining 48% are scattered over a big number of small players like Intellect Design

(market share: 2%) which mostly sell to smaller banks. Considering integrated, standardized and

packaged end-to-end banking software solutions, which fit smaller tier 3 to 5 banks, Finastra (mer-

ger of former Mysis and D+H), Avaloq, Intellect Design, Mambu & Backbase (Partners), Jack Henry

and Oracle FSS are close competitors. Mambu, Backbase, Avaloq and Finastra are private com-

panies and thus not further considered in the quantitative competitor analysis. For the interna-

tional market of tier 1 & 2 banks, Finastra, TCS and Infosys are close competitors, because they

develop proprietary software solutions, which are more appropriate for this client base due to

their complexity (Ref. 8). This results in the inclusion of TCS, Infosys, Oracle FSS, Jack Henry and

Intellect Design in the further quantitative analysis (Fig. 12) (Appx. 10). Big banks, which represent

most of the remaining market potential, avoid risks by choosing the big and experienced tech-

nology leaders (Ref. 4, 8). The industry is characterized by the ongoing consolidation phase, lead-

ing to high rivalry among existing competitors for additional market share (Fig. 13) (Appx. 12).

■ Most inefficient R&D labs among competitors. Temenos spends by far the most on R&D

in comparison to its competitors. On a three-year average, Temenos spent MUSD 234 or 27.6% of

its revenues on R&D per year, from which MUSD 56 were capitalized (Fig. 31) (Appx. 23). The com-

pany with the second highest R&D spending in percentage of revenues is Intellect Design (16.3%),

closely followed by Jack Henry (13.2%). Oracle FSS reinvested 5.1% of its revenues, Infosys 1.0%

and TCS 0.2% (Fig.14). Temenos’ high R&D investments should lead to new innovative products or

to the development of new regions. Neither of these is the case. By comparing Temenos’ product

portfolio from 2015 to today’s, one will recognize that almost all of the main and supportive prod-

ucts either already were in the portfolio of 2015 or have been added through an acquisition

(Appx. 3). The only exception is Temenos’ Country Model Banks, but this is rather a country-specific

customization of existing products than a new product. The Return on Research Capital (RORC),

which measures the gross profit generated per USD spent on R&D two years prior, strengthens this

finding. While TCS and Infosys have a RORC of 448 and 35.5 respectively on a three year average,

Oracle FSS, Intellect Design and Jack Henry arrive at 18.9, 8.1 and 3.6 respectively. Temenos ranks

last with a poor RORC of 3.2. TCS and Infosys are hardly comparable in terms of RORC because

they generate a big share of their revenues through consulting, which does not require much

R&D. Oracle FSS also earns roughly half of its revenues through consulting. But the more compa-

rable Intellect Design and Jack Henry show clearly that Temenos’ R&D laboratories should work

more efficiently. By comparing the Return on Invested Capital (ROIC), the results are strengthened

further. While competitors had a 2019 ROIC of 27% on average (all R&D capitalized), Temenos

reached 13% (Appx. 22). Temenos needs the high R&D spending to keep its broad offering up to

date while its competitors reach this with much lower R&D budgets.

■ Bought growth – Temenos tops competition. On average over the last five years Temenos

has drawn approximately 28.6% of their annual revenue growth from acquisitions. TCS, Oracle FSS

and Intellect Design did not acquire bigger companies recently and therefore grow fully organi-

cally. Infosys has drawn on average approximately 13.2% and Jack Henry 27.7% of their annual

revenue growth through acquisitions. According to CFO Takis Spiliopoulos, Temenos will continue

to engage in the M&A market but certainly not to the same extent, as their leverage is already at

a record high 81% (Fig. 15). We therefore doubt that Temenos can keep up its high growth rates.

■ Temenos was hit hard by covid-19. So far, covid-19 has had a relatively weak impact on

the banking industry. Although the market for consumer credits is predicted to shrink by a record

high 15.9% in 2020, business lending is expected to grow by 14.4% (Ref. 15). This would be the

highest level in the last 13 years. Since the pandemic and its effect on the economy certainly will

not be over in the near future, these newly granted loans bear a higher average risk than loans in

past years. The further evolution of the pandemic will show, if banks will face delayed trouble with

businesses not being able to fully pay back their loans. Temenos on the other hand is struggling

with the effects. While much less is invested in new software during recessions, existing software

has to be maintained, securing a stable maintenance revenue. In 2020, Temenos’ Q3 revenue

shrank 8%, due to 37% less software licensing sales compared to Q3 2019. Its competitors are doing

significantly better: Infosys’ revenue in the segment financial services grew 5.6% in the quarter

ending September 30, 2020 compared to the prior-year period. TCS’ revenue in the same segment

remained constant. Even the competitors that are more focused on banking software, and thus

similar to Temenos, outperformed the Swiss banking software company clearly. Jack Henry re-

ported a revenue increase of 3%, Oracle FSS 1% and Intellect Design 14%. Temenos’ stronger set-

back is mainly driven by their lower recurring revenues. These different business developments

transferred to a YTD share price performance of -25.1% for Temenos, while its competitors show a

much better performance. Jack Henry climbed 8.2%, Oracle FSS 10.4%, TCS 25.9%, Infosys 51.7%

and Intellect Design’s stock even gained 95.8%.

■ It all results in lost market share. We predict that Temenos will lose market share due to the

following reasons: 1) Too broad product offering from which only small parts can be sold to the

same customer; 2) SaaS cannibalizes the software licensing business; 3) Strategy mismatch: Big

banks do not use standardized software; 4) Innefficient R&D investments without any new product

outputs; 5) Too much debt leads to lower M&A activity. We therefore project Temenos’ market

share to plunge from 7.5% in 2019 to 6.8% in 2024 and 5.8% in 2029 (Fig. 16).

Fig. 13 Porter’s Five Forces


Fig. 14 Total R&D in % of Revenues

Source: Company Data, Competitors Data,

Team Analysis

Fig. 15 Share of Bought Growth


Team Analysis

Fig. 16 Market Share Outlook

Source: Deloitte, Celent reseach, WSJ, Team

Analysis

5%

6%

7%

8%

9%

20

16

20

17

20

18

20

19

20

20E

20

21E

20

22E

20

23E

20

24E

20

25E

20

26E

20

27E

20

28E

20

29E

0%

5%

10%

15%

20%

25%

30%

2017 2018 2019

TEMENOS JACK HENRY

ID ORACLE FSS

INFOSYS TCS

0%

10%

20%

30%

40%

50%

60%

70%

80%

2015 2016 2017 2018 2019

AVG COMPETITORS TEMENOS


ENVIRONMENTAL, SOCIAL & GOVERNANCE

The Software and Services industry contains a lot of high-growth companies that rely on highly

skilled workforce as well as supportive corporate governance structures rather than natural re-

sources (Ref. 2). Temenos bases its ESG reports, which are approved by an independent third

party, on the Global Reporting Initiative (GRI) Standard and commits to the UN Sustainable De-

velopment Goals. Since 2017, the company has only slightly improved its ESG Score from a B- to

a B (A+ being the highest) according to Refinitiv Eikon (Fig. 17) (Appx. 13). However, compared

to industry players, Temenos performs better on average (Fig. 18). MSCI ESG Research attributes

the company an ESG Score of A (AAA being the highest), classifying them in the top third of the

industry. Since ESG ratings of different agencies were found to diverge substantially (Ref. 5), we

included multiple sources in our analysis but only used them as a guideline to develop our own

evaluation, which was finally used in the process of establishing our valuation assumptions.

■ Environmental impact. Business travel (47%), employee commute (27%) and computing re-

sources (24%) contribute most to the environmental footprint of Temenos (24’302 tCO2e). More

critical for the company is that climate change might cause higher risk of business disruptions.

With the increasing application of cloud solutions, Temenos is dependent on hardware and data

centers. Extreme weather can lead to interrupted power supply of such centers and consequently

endanger the business continuity of its clients. In cooperation with its Partners and suppliers, Te-

menos applies a precautionary approach to reduce these threats and has implemented the ISO

27701 Business Continuity Management System (BCMS) to ensure business resilience. We therefore

do not expect extraordinary expenses due to environmental issues during the planning horizon.

■ Data Security & Privacy – potential sources of risk. The importance of Data Security

and Privacy for Temenos is addressed with different initiatives. The workforce in Global Information

Security and Privacy was increased from 10 people in 2018 to 65 in 2019 and processes as well as

the technology used at the Security Operations Centers were upgraded. In addition, 97.5% of all

Temenos employees have completed the Data Protection and 95.5% the Security Awareness

training. Not only are these trainings mandatory for all Temenos employees worldwide but also

Partners must provide them to their staff. While Data Security and Privacy issues can turn out to be

very costly, legal provisions of Temenos only make up 2% (TUSD 28) of total provisions as of De-

cember 31, 2019. With a perfect data security track record, we anticipate total provisions to re-

main at a low level of 0.1% of sales in the upcoming years.

■ Know-how intensive industry. In the Software and IT Services industry human capital is char-

acterized by its significance for value creation and the simultaneous shortage of skilled employ-

ees. To implement the “way of doing things” at Temenos, all employees have to acknowledge

the Business Code of Conduct. To maintain and further develop talent, Temenos conducts surveys

on a regular basis to monitor short- and long-term engagement and provides career develop-

ment frameworks as well as employee recognition programs. Supported by an employee turnover

rate of 11%, which compares slightly favorable to the Technology and Software industry (13%)

(Ref. 3), we rate Temenos as an attractive employer.

■ Personnel fluctuation & lack of diversity in the BoD. So far, the year 2020 has been one

of changes for Temenos: Three directors with 19-, 8- and 6-year tenures did not stand for reelection

at the Annual General Meeting, one of them being George Koukis (co-founder). With Homaira

Akbari and Maurizio Carli, Temenos found qualified successors who complement the Board of

Directors (BoD) with their profound industry knowledge (Fig. 21) (Appx. 16).

Fig. 21 Board of Directors

NAME INFORMATION

Andreas Andreades

(Executive Chairman)

■ MA in Engineering from Cambridge University

■ With Temenos since 1999, former CEO (2003 – 2011)

Thibault de Tersant ■ Currently CFO and Senior Executive Vice President at Dassault Systèmes

Ian Cookson ■ More than 30 years of experience in financial services sector

Erik Hansen ■ Previously Chairman of Myriad Group AG, CEO & Board Member at Day Software

Peter Spenser ■ Over 39 years of experience in financial services sector and technology

Homaira Akbari ■ Ph.D. in particle physics from Tufts University

Maurizio Carli ■ Previously Executive Vice President, Worldwide Sales and Services at VMware


Compared to SMI 20 and SMI Mid companies, Temenos stands out with its high rate of refresh

(28.6%) which might cause uncertainty according to the board structure and the strategy of the

company. Since Homaira Akbari as only director holds three other mandates, Temenos benefits

from its highly committed board members. However, the common lack of gender diversity in the

tech industry does not stop before Temenos and shows with only one out of seven BoD and two

out of seven executive managers being female (Fig. 19) (Appx. 14). As of this year, Temenos has

introduced a share ownership rule for non-executive directors. They are required to retain shares

to the value of the annual remuneration with effect from May 2023, which might lead to them

being more prone to earnings management. Our assessment of the governance quality shows

that Temenos performs above average but is not a governance leader (Fig. 20) (Appx. 15).

Fig. 17 ESG Score Composition 2019

ESG SCORE

B

ENVIRONMENTAL

B-

(14%)

SOCIAL

A+

(40%)

GOVERNANCE

C+

(46%)


Fig. 18 ESG Score 2017-2019

Source: Refinitv Eikon

Fig. 19 Board Characteristics

TEMN CH*

Gender

(women (%) on BoD) 14.3% 25.2%

Foreign Directors 85.7% 53.8%

Independence ratio 85.7% 87.2%

Rate of refresh 28.6% 16.6%

Board commitments 0.4 2

Women (%) of executive

committee 28.6% 8.6%

*SMI20 and SMI Mid

Source: SSB Index 2019, Team Analysis

Fig. 20 Governance Quality

TEMN

I - Shareholders and

Annual General Meeting 64.3%

II - Management Board 87.9%

III - Board of Directors 77.1%

IV - Transparency & Governance 75.9%

V - Reporting & Audit 78.6%

Temenos Total Score 78.0%

Median 74.0%

Source: DVFA Scorecard, Team Analysis

Fig. 22 Compensation Mix 2020


11%2%

17%

70%

FIXED FEE/ SALARY

OTHER COMPENSATION

VARIABLE SHORT-TERM INCENTIVES

VARIABLE LONG-TERM INCENTIVES

0

20

40

60

80

100

2017 2018 2019

TEMENOS

MEDIAN INDUSTRY PLAYERS


■ Alarming management incentives & high remuneration. The executive committee as

well is filled with new but experienced people as of 2020 (Fig. 23) (Appx. 18). Max Chuard (CEO)

has been with Temenos since 2002 and is supported by six other executive managers with diverse

careers and academic backgrounds. The company motivates the executive committee to de-

liver strong short- and long-term performance by providing a compensation package of which

87% is at risk as of 2020 (Fig. 22). Targets are set by the BoD and are mainly based on non-IFRS Key

Performance Indicators (KPIs) (Appx. 17, 19). While reaching short-term performance targets is

rewarded in cash, the accomplishment of mid-term performance targets is settled by the Stock

Appreciation Rights (SARs) programme. Although there are malus and clawback clauses in place

for the compensation at risk, we challenge Temenos’ growth guidance and the incentive system

under which the executive management works, especially since Temenos is known for its lucrative

compensation packages among industry experts (Ref. 6). Non-IFRS numbers as KPIs are relatively

easy to manage and with only 13% of the remuneration being fixed, there is a lot of money at

stake. Out of the MUSD 24.6 of total compensation for the Executive Committee, Max Chuard

earned MUSD 7.7 in 2019, leaving on average MUSD 2.9 per executive manager. A study of PwC

in 2017 has shown that the median remuneration for the CEO and other executives of SMI Mid

companies amounted to significantly lower MUSD 3.4 and MUSD 1.5 respectively (Fig. 24).

■ Ownership structure. With over 350 shareholders and 70’953’199 common shares outstand-

ing (CSO) as of February 2020, the ownership structure of Temenos is well diversified (Appx. 20).

The high free float rate (88.3%) should guarantee low dependency of the stock price on market

trading. Nevertheless, the stock was characterized with high volatility of 40.2% in the last five years.

Shareholders of Temenos have one vote per share and no preferred shares have ever been is-

sued. As of December 31, 2019, the maximum mathematically possible dilution based on the SAR

programme would amount to 8.4% according to the company. In 2020 Temenos paid a dividend

of CHF 0.85 per share to its shareholders. The dividend was increased by CHF 0.10 per year since

2015, reflecting the strong historical share price performance. Martin Ebner, founder of BZ Group

and his wife, Rosmarie Ebner are currently the biggest shareholders of Temenos AG (10.9%). Av-

aloq, the Swiss competitor of Temenos was originally a spin-off of BZ Group. As longtime investors

in Temenos, Martin Ebner and his wife still show confidence in the potential of the company. Cap-

ital Group on the other hand has recently decreased its total investment in the company from

15.5% to 10.2% per end of November 2020 through its subsidiaries Capital Research Global Inves-

tors and Capital World Investors.

FINANCIAL ANALYSIS

As Temenos’ market value is mainly based on growth potential and opportunities, our financial

analysis centers around the company’s revenues.

■ Outgrowing competitors in the past. Since 2014 Temenos has experienced strong revenue

growth (16% CAGR) resulting in MUSD 972 of total revenues in 2019. They clearly outgrew their

competitors who averaged a CAGR of 7% over the same period. Adjusted for M&A, Temenos’

organic growth drops to 12% CAGR, moving the company closer to its competitors (Appx. 27, 35).

Revenues can be divided into the three sectors total software licensing (45% of total revenues

2019), maintenance (37%) and services (18%). Of these three sectors, total software licensing ac-

counts for 48% of Temenos’ total growth in 2019 and is thus its main growth driver (Fig. 25). Total

software licensing is expected to remain the key factor for future growth, however a tectonic shift

between its two components software licensing from on premise solutions and cloud-based SaaS

& subscription solutions is about to happen. SaaS & subscription (85% growth) already clearly out-

grew software licensing (11%) in 2019, even though SaaS revenues are recognized over time

whereas on premise software licensing revenues are recognized at the point of implementation.

■ Penetrating the American opportunity. Geographically, Temenos generates its revenues

in the four regions Europe (42% of total revenues in 2019), Americas (23%), MEA (15%) and APAC

(20%). The most important country is the US, having significantly increased their share of total rev-

enues from 8% in 2015 to 13% in 2019. With the acquisition of the US-based company Kony in 2019,

Temenos tried to further strengthen its American position. Northern America is widely considered

to be a global leader in the adoption of SaaS solutions, rather than on premise solutions. This is

supported by Temenos’ 2020 H1 results. Due to the covid-19 crisis, share of total software licensing

to total revenues significantly decreased in all regions except for the Americas (Fig. 26), indicating

a higher share of recurring SaaS revenues in this region. Due to the focus on strengthening the US-

position and the rapidly growing addressable market in the region, we expect Temenos to expe-

rience strong growth in the Americas, confirming the median organic growth of 18% yearly in this

region until 2023. However, as explained in the sections above, the Kony acquisition is not going

to lead to Temenos’ aspired long-lasting breakthrough in the Americas, but rather only emerge

as a temporary boost, resulting in rapidly decreasing growth rates afterwards.

■ Market potential does not mean market success. After experiencing higher revenue

losses than its competitors during 2020 due to the covid-crisis, Temenos will outperform the market

in 2021 and 2022, mainly due to a strong post-covid rebound effect in software licensing. Projects

which were postponed bank internally will be realized and delayed payments will be made up

for. Furthermore, the strong growth in the Americas adds to the short-term outperformance (Fig.

27). After those two temporary positive impacts will have worn out, Temenos’ market share will

start to deteriorate (Fig. 16). In 2017, Temenos’ existing tier 1 & 2 banks only spent 4% of their total

Fig. 23 Executive Committee

NAME INFORMATION SINCE

Max Chuard

(CEO)

Finance back-

ground 2019

Takis Spiliopoulos

(CFO)

Economics, Fi-

nance and IT

background

2019

Jean-Michel

Hilsenkopf

(COO)

Engineering and

marketing back-

ground

2019

Mark Winterburn

(Chief Product &

Tech. Officer)

Engineering and

business back-

ground

2011

Alexa Guenoun

(President Ameri-

cas)

Finance and

Marketing back-

ground

2019

Colin Jarrett

(Chief Cloud &

Delivery Officer)

Ph.D. in Con-

densed Matter

Physics

2020

Monica Rancati

(CHRO)

Business and HR

background 2020


Fig. 24 Remuneration

(MUSD) TEMN CH*

Total Board 6.8 2.1

Total Executives 24.6 13.6

Chairperson 5.9 0.6

Other BoD 0.1 0.2

CEO 7.7 3.4

Other Executives 2.9 1.5

*SMI Mid, Exchange rate as of 31/12/2019

Source: Company Data, Ref. 7, Team Analysis

Fig. 25 Drivers of Revenue Growth


Fig. 26 Share of Total Software Licens-

ing of Total Revenues


0%

10%

20%

30%

40%

50%

60%


2017 2018 2019 2020 H1

-20%

0%

20%

40%

60%

80%

100%

120%

2019 2024E 2029E

SERVICES MAINTENANCE

SAAS & SUBSCRIBTION SOFTWARE LICENSING


IT spending on Temenos products. With revenues from tier 1 & 2 banks having remained constant

since then, Temenos clearly failed to improve its market position with their potentially biggest cus-

tomers. The all-including offer from Temenos with front to back end solutions might become a

liability as banks increasingly look for software from different providers in order to minimize their

dependency on one single company. Despite enlarging their product offer, Temenos’ average

total software licensing revenue per deployment has remained stable over the last five years (Fig.

28), reflecting the unwillingness of banks to increase the volume of their deals with a single soft-

ware company. Furthermore, Temenos will struggle to keep its broad software up to the newest

standards in comparison to upcoming and smaller fintech companies. Temenos will continue to

grow, mainly through their installed base, which accounted for 69% of software licensing revenues

in 2019, and possible future acquisitions, but slowly lose market share. We predict Temenos to fail

their long-term target of 10 – 15% total revenue CAGR and project a CAGR of 8% for the 5-year

period 2020-2024, ending in total revenues of MUSD 1’437 in 2024. We forecast around 3% of total

revenues to result from acquisitions every year, indicating a true organic revenue CAGR of just 5%

until 2024. Afterwards, growth will continue to diminish (Appx. 33, 34).

■ Saas cannibalizes licensing and lowers margins. As a growth company, Temenos has

not focused on cost reduction in the past. Accordingly, the share of total operating expenses to

total revenues just slightly decreased from 82% in 2015 to 76% in 2019. Biggest matter of expense

are personnel costs and external consultants, being responsible for MUSD 530 or 72% of total op-

erating expenses. In 2019 Temenos had 7’854 employees, of which 57% were employed in the low

wage country India. Therefore, room for cost improvements through outsourcing from high to low

wage countries is rather small. With personnel expenses being considered fixed costs, only 20 –

25% of Temenos’ total operating expenses are variable (Ref. 1). This leaves the company with high

dependency on constantly high revenues. The shift from software licensing to SaaS will down-

grade operating margins in the medium-term, as it is accompanied by a change from upfront to

periodic payments. Accordingly, we project EBIT margin to decrease from 24% in 2019 to 22% in

2024. Due to strong competition and entries of new market players like fintechs, sales and market-

ing expenses will continue to grow faster than revenues in the long-term. We therefore predict the

share of SG&A expenses of total revenues to increase by 0.25 percentage points per year. The

share of cost of sales on the other hand will decrease in the long-term due to the higher scalability

of cloud products. We forecast the shift from software licensing to SaaS to have sufficiently pro-

gressed until 2024 in order to let cost of sales contribute positively to EBIT margin thereafter and

overcompensate the increase in SG&A expenses. This leads to a turnaround in the long-term and

to the EBIT margin recovering to 26% in 2029 (Fig. 29).

■ Middle of the pack efficiency. Temenos does not differ much from its competitors who

achieve an average EBIT margin of 23% and are not expected to experience significant improve-

ments over the next years either (Fig. 30). However, Temenos’ reported EBITDA margin of 38% in

2019 is clearly higher than the average competitor value of 27%. High amortizations of computer

software and capitalized development costs account for this big difference. In 2019 Temenos

spent 28% of its revenues or MUSD 270 on R&D, values none of its competitors achieve and capi-

talized MUSD 65 of these investments (Fig. 31). If we capitalize all R&D expenses both for Temenos

and competitors for reasons of better comparability, the advantage in EBITDA margin increases

to 59% for Temenos against 30% for competitors. A similar pattern can be observed for EBIT margin,

where Temenos’ value increases to 30% (Appx. 22). While adjusting for the high R&D investments

increases operating profitability, the quality of the R&D activities itself remains questionable, as

reflected in the comparatively low RORC of 3.5 (Appx. 26). With the high investments being

needed to keep the broad offering up to date, no substantial decrease in R&D expenses can be

expected, lowering the potential for improvements in operating margins in the near future (Appx.

24, 25).

■ Active M&A strategy, (over-)leveraged balance sheet. In order to pursue an active

M&A strategy, Temenos leveraged its balance sheet. At the end of 2019 total liabilities were 81%

of total assets. This value is almost twice as high as for the highest levered competitor Intellect

Design with a leverage of 43%. For the Kony deal worth MUSD 559 Temenos used a big part of its

cash reserves and a combination of its existing credit facility and a bridge loan, resulting in almost

doubling net debt from MUSD 581 to MUSD 1’022. This opposes competitors who have almost no

debt at all (Appx 22). At the announcement of the deal Temenos declared that net debt to non-

IFRS EBITDA ratio would not exceed 2.5x by year end 2019 and 1.5x by year end 2020. At the end

of 2019 an actual ratio of 2.6x resulted (2.8x with IFRS EBITDA) and the guidance for 2020 was

adjusted to 2x. With regard to our forecast of EBITDA dropping to MUSD 355 in 2020, we deem this

guidance too optimistic and project a ratio of 2.1x for 2020. Concerning the already high leverage

and the intention to decrease net debt to EBITDA, Temenos will no longer be able to undertake

such large acquisitions as in 2019. As the management is keeping M&A in its strategy, we instead

expect Temenos to finance future and smaller acquisitions through a mixture of debt and future

cash flows. By doing so, Temenos will still be able to buy part of their growth and try to keep their

software up to standard, while simultaneously reducing leverage to 58% in 2024, still well above

competitors’ level. Temenos would do well to strengthen its equity, as by the end of 2019 total

equity of MUSD 445 was not even half of goodwill of MUSD 1’079. Overall intangible assets amount

to MUSD 1’660 or 71% of total assets. Despite the highly leveraged balance sheet, Temenos is not

in imminent danger of bankruptcy, achieving an Altmann’s z-score of 4.57 in 2019 (values above

3 indicate low likelihood of default) (Appx. 29).

Fig. 27 Revenue Growth


Fig. 28 Revenue Proxy per Deploy-

ment


Fig. 29 EBIT Bridge


Fig. 30 EBIT Margin


Team Analysis

1'000

1'500

2'000

2'500

3'000

3'500

4'000

4'500

2015 2016 2017 2018 2019

TOTAL SOFTWARE LICENSING

TOTAL REVENUES

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

-

500

1'000

1'500

2'000

TEMENOS TOTAL REVENUES

TEMENOS GROWTH

3RD PARTY MARKET GROWTH

0%

5%

10%

15%

20%

25%

30%

2019 2020E 2021E 2022E

TEMENOS COMPETITORS AVERAGE

EB

IT M

AR

GIN

201

9

CO

S

SG

&A

EX

P

OTH

ER

OP

EX

EB

IT M

AR

GIN

202

4E

CO

S

SG

&A

EX

P

EB

IT M

AR

GIN

202

9E

MUSD

TUSD


■ Strict working capital management compensates low liquidity. Somewhat concern-

ing is liquidity, as the current ratio dropped to 80.31% in 2019. This concern is lessened by the cash

conversion cycle of negative 140 days. In other words, creditors are financing part of Temenos’

operations. This was achieved by successfully lowering DSOs from 160 in 2015 to 125 in 2019. For

the medium term Temenos intends to further lower DSOs to 90. However confronted with covid-

19 and our lower revenue predictions, we expect this goal to be too optimistic and forecast me-

dium term DSOs of 119.

■ Adding debt but not value. Temenos net margin of 19% is in line with its competitors’ profit-

ability, who averaged a net margin of 18% in 2019. This good profitability however does not trans-

late into solid cash flows, with FCFF being negative frequently in the recent past. This was mainly

due to the high variability in acquisition volume (Appx. 5). With the projected change to smaller

acquisitions, we expect FCFF to stabilize, being strictly positive moving forward. After the tempo-

rary effects of covid-19 and Kony, Temenos will be able to generate solid FCFF margins between

15% and 20%. Temenos’ dividend payout ratio in 2019 was 29% of net income. We expect Temenos

to further increase their dividend during their higher growing years until 2024, compensating share-

holders partially for the lower growth perspectives. In the past Temenos delivered a very strong

return on equity (ROE), increasing from 36% in 2017 to 49% in 2019. This value can not be matched

by competitors, who averaged 22% ROE. However, as DuPont analysis shows, Temenos achieved

its strong ROE through leveraging the balance sheet. In terms of efficiency and profitability, Te-

menos finished at or below the level of 2017. It seems as if Temenos is adding debt to its balance

sheet without adding real value to the firm. As Temenos will have to deleverage its balance sheet

in order to meet guidance of lowering net debt to EBITDA moving forward, ROE falls to about

competitors’ level of 21% until 2024 (Fig. 32) (Appx. 21).

VALUATION

We issue a sell recommendation on Temenos with a 12-month target price of CHF 81.28 per share.

This downside of 29.2% from the closing price per November 30, 2020 of CHF 114.80 is based on

the discounted free cash flow to the firm (DCF) target price of CHF 88.20 weighted with 80% and

the EV/Sales multiple target price of CHF 53.58 weighted with 20% (Fig. 33). The multiple valuation

is weighted less than the DCF approach, as Temenos’ size and very specific line of business restricts

the set of peers to only three. In contrast, the DCF model allows us to forecast revenues and cash

flows in detail and especially to take the differences between the four regions into account.

■ Revenue growth. We predict Temenos’ total revenues to grow at a CAGR of 8% until 2024,

well below the estimated 10.1% CAGR for the third-party banking software market. For the fore-

cast of Temenos’ 2020 results we applied the historically observable distribution over the year, with

Q4 revenues contributing 31% of total revenues. As of 2021, we used a geographical approach

to predict revenue growth. Due to little to no information available regarding numbers, volume or

specification of future licensing and SaaS contracts, a traditional bottom-up approach would not

have been appropriate. We instead analyzed total third-party banking software market growth

potential of all four regions Temenos operates in and scaled this market down to Temenos’ prod-

uct offering. In a second step we evaluated Temenos’ ability to participate in this growth with

regard to the company’s strategy, past development and current position in the respective mar-

ket. The decomposition of total revenues per region into the four different revenue segments was

then conducted through the characteristics and technological advancement of each market. In

the Americas, cloud acceptance and adaptation of new technology is higher than in the other

markets. We therefore assumed a lag of two years for Europe in terms of adaptation of cloud

solutions and other technological developments, with further penalties for MEA and APAC who

are further behind in the process. This resulted in a revenue CAGR until 2024 of 2% in Europe, 17%

in the Americas, 5% in MEA and 9% in APAC (Appx. 33). The Americas being Temenos’ strategic

focus and least affected region of the covid-19 crisis explains the clear outperformance. Europe

especially suffers from the covid-19 crisis in 2020, resulting in an expected revenue growth of -28%.

The recovery will take several years, despite 2020 projects only being postponed and not can-

celled. Furthermore, with Temenos Transact already being market leader in Europe (Ref. 1), growth

potential lies generally lower than in the other regions. In APAC the strong position of the Indian

competitors leads to lower growth prospects for Temenos. Lastly, lack of clear efforts to strengthen

and expand the position in MEA explains for this region having the second lowest CAGR. Adding

the regions back together, expected total revenues of MUSD 1’437 result for 2024 and Temenos’

market share decreases from 7.5% in 2019 to 6.8% in 2024. With no lasting improvements of Te-

menos’ market position in sight, revenue CAGR from 2024 to 2029 will fall to 6% and the company’s

market share will further decrease to 5.8% (Fig. 16).

■ Stable yet unimpressive FCFF. The market shows good growth potential in the mid-term as

soon as the pandemic bump has been overcome. But as explained before, Temenos will not be

able to keep up the historical high growth rates. Thanks to the scalability of cloud products, a

positive effect in COS will offset the increase in SG&A and other operating expenses from 2024

onwards. This results in a decrease of the EBIT margin to 22% until 2024 and a recovery to 26% until

2029. Temenos will continue to have substantial ongoing R&D investments as well as an extensive

M&A strategy. Capital expenditures will start growing again in 2022 after two years of ensuring

liquidity in the face of the covid-19 crisis. We assume annual acquisitions of MUSD 233 starting in

2022 based on the average over the past five years. The acquisitions make up for 64% of the

Fig. 31 R&D Expensed & Capitalized

* 3-year average


Team Analysis

Fig. 32 DuPont Analysis

2018 2019 2024E

Net Profit Margin 20% 19% 16%

Asset Turnover 55% 48% 52%

Financial Leverage 4.47 5.41 2.52

ROE 50% 49% 21%


Fig. 33 Target Price Mix

DCF

MULTIPLE

(EV/SALES)

Equity Value (MUSD) 6'892 4'187

Shares out. (M) 71.0 71.0

Target Price (CHF) 88.20 53.58

Weights 80% 20%

Weighted Target Price CHF 81.28


Fig. 34 WACC Computation

Beta - levered 1.23

Market risk premium 6.21%

Risk-free rate 0.68%

Cost of equity 8.30%

Marginal tax-rate 18.00%

Equity to capital 89.52%

Debt to capital 10.48%

Pre-tax cost of debt 2.38%

Pre-tax WACC 7.68%

After-tax WACC 7.63%

Source: Refinitv Eikon, Team Analysis

Fig. 35 Market Risk Premium

REGION MRP WEIGHTS

Europe 6.44% 29.08%

Americas 5.23% 37.75%

MEA 7.70% 12.06%

APAC 6.78% 21.11%

Weighted MRP 6.21%

Source: Refinitiv Eikon, Damodaran, Team

Analysis

Fig. 36 Beta Computation

REGION

Beta of industry 1.20

Average D/E of industry 9.67%

Unlevered beta of industry 1.12

Marginal tax-rate 18.00%

D/E Temenos 11.71%

Beta Temenos 1.23

Source: Refinitiv Eikon, Damodaran, Team

Analysis

0

50

100

150

200

250

EXPENSED* CAPITALIZED*

MUSD


capital expenditures on average for our planning horizon. These factors result in FCFF margin drop-

ping to 10% in 2022, before a turnaround is achieved and FCFF margin starts increasing slowly,

reaching 20% in 2029.

■ Estimating a fair discount rate. We use an after-tax WACC of 7.63% to discount the fore-

casted FCFF (Fig. 34). The debt to capital ratio used to weight the cost of debt amounts to 10.5%.

The after-tax cost of debt of 1.95% is derived from the weighted average of the bonds yield-to-

maturities and the marginal tax rate of 18%. The cost of equity amounts to 8.30% and is estimated

using the CAPM with the following three elements: 1) A risk-free rate of 0.68% which equals the 10y

US treasury bond rate. 2) A market risk premium of 6.21% derived through the weighted average

of geographical market risk premia (Fig. 35). The weights are derived from the estimated future

geographical revenue segmentation of Temenos. 3) A bottom-up beta of 1.23. It is computed

using an industry beta of 1.2 and relevering it according to Temenos’ debt to equity ratio of 11.7%

per June 30, 2020 (Fig. 36).

■ Terminal growth rate. To estimate the terminal growth rate of 4.12% we use a weighted

average of the from OECD forecasted real GDP growth rates (2020 -2060) of the main geographic

regions in which Temenos generates its revenues. The weights are derived from the estimated

future geographical revenue segmentation of Temenos. Looking at the segmentation, in 2029 29%

of Temenos’ revenues are going to be stemming from Europe, 38% from the Americas, 12% from

MEA and 21% from APAC. We expect the revenue segmentation for the years after 2029 to remain

the same. As a proxy for the long-term inflation expectation a value of 2%, representing the Fed-

eral Reserve’s inflation goal, was added to the real terminal growth rate. This leaves us with a

nominal growth rate of 4.12%. The terminal value represents 74.1% of the total firm value. Therefore,

small changes in the terminal growth rate have a strong impact on the valuation (Appx. 38).

■ Intrinsic valuation – discounted free cash flow to the firm. The two-stage DCF model is

used because Temenos is predicted to have relatively stable free cash flows to the firm over the

next years. The first phase is based on a year-to-year forecast until 2029 and includes the market

contraction due to covid-19, the high growth years 2021 and 2022 and the underperfomance in

comparison to the market afterwards. The second phase represents the terminal growth from 2030

onwards with a rate of 4.12%. Based on this DCF-model, the estimated share price per November

30, 2020 is CHF 88.20 (Appx. 37).

■ Sensitivity analysis – strengthening our expected share price. The main drivers of the

DCF share price are the discount rate and the terminal growth rate. Our sensitivity analysis regard-

ing these two drivers results in a sell recommendation in 36 out of 56 cases (Fig. 37) (Appx. 40). In

9 cases we would issue a buy recommendation with a maximum upside of 116%. In this event the

terminal growth rate would need to increase to 4.87% and the WACC to decrease to 6.13%. This

would imply that Temenos had to grow stronger than the market in the long run, which is highly

doubtful. At the same time they would have to adapt their capital allocation such that cost of

equity or cost of debt decreased substantially. In 11 of the 56 cases the share price remains in the

range of +/- 15% and therefore implies a hold recommendation. We went further and examined

the effect of changes in the annual revenue growth rate and annual EBIT margin on the DCF

share price (Fig. 38) (Appx. 40). In every case we either added/subtracted one percentage point

to/from the figures. Still 35 out of the 56 cases support our sell recommendation.

■ Multiple valuation – overpriced compared to peers. To support the DCF model a rela-

tive valuation approach is conducted. We use Jack Henry, Oracle FSS and Intellect Design as

Temenos’ relevant peers because the line of business and size are similar. Since the enterprise

value (EV) to EBITDA and price to earnings ratios are both prone to accounting differences, we

do not see them appropriate figures for the relative firm value. Also differences in capital structures

may lead to noise in the resulting ratios. The price to earnings to growth ratio (PEG) depends on a

positive earnings growth rate. Temenos does not fulfill this criteria for the year 2020 (-15.5%) and

therefore a negative EV would result. Thus, we consider the use of the forward EV to sales multiple

as best suited for our relative valuation as it is robust to accounting differences and the most com-

parable figure in the third-party banking software market. The median forward EV to sales ratio of

Temenos’ peers amounts to 5.59. This results in a relative share price per November 30, 2020 of

CHF 53.58 for Temenos considering sales are expected to be MUSD 886 in 2020 (Appx. 41).

INVESTMENT RISKS

Different scenarios (Fig. 39) and risk factors (Fig. 45) would mostly negatively affect our estimation

of Temenos’ share price, which was historically characterized by high volatility and significant

growth sensitivity.

■ Market risks. Economic environment (MR1). Because of the covid-19 crisis, the real GDP growth rate is at a

lower level than it was during the financial crisis in 2008 (Fig. 40). If the covid-19 crisis holds on,

banks might not be able to grow and invest in their IT until 2022. If Temenos’ revenues shrank an-

other 5% in 2021, our target price would fall to CHF 72.96. Based on the treasury term spread, the

US Federal Reserve Bank estimates the probability of a recession occurring within twelve months

from now to be at 29% (Fig. 41, 42). With interest rates being at an all time low, there would be

very limited possibilites to mitigate a next recession. Temenos most likely would have to record

material payment losses and would struggle to win new customers since banks will not change

Fig. 37 Sensitivity Analysis I

TERMINAL GROWTH RATE

0.63% 3.87% 4.12% 4.37% 4.62%

WA

CC

6.13% 144.90 161.11 181.93 209.62

6.63% 116.87 127.11 139.61 155.22

7.13% 97.45 104.41 112.64 122.50

7.63% 83.22 88.20 93.96 100.66

8.13% 72.34 76.05 80.26 85.06

8.63% 63.76 66.61 69.79 73.36

9.13% 56.83 59.06 61.53 64.27


Fig. 38 Sensitivity Analysis II

EBIT MARGIN PERCENTAGE

POINTS ADDED

- 1 0 + 1 + 2

REV

EN

UE G

RO

WTH

+ 3 107.37 117.75 128.14 138.52

+ 2 97.56 107.11 116.67 126.23

+ 1 88.49 97.28 106.08 114.87

0 80.12 88.20 96.29 104.38

- 1 72.39 79.82 87.26 94.70

- 2 65.26 72.09 78.93 85.76

- 3 58.68 64.96 71.24 77.53


Fig. 39 Scenario Analysis


Fig. 40 Real GDP Growth

Source: International Monetary Fund

-6%

-4%

-2%

0%

2%

4%

6%

8%

2008 2012 2016 2020 2024

ADVANCED ECONOMIES

EMERGING MARKETS

WORLD


their software system during a crisis. Currency risk (MR2). Approximately 62% of Temenos revenues

are recorded in USD. Since a major share of the operating expenses are booked in Euros, Swiss

francs, Rupees and Pounds sterling, the company tries to limit the currency risk by fitting the reve-

nue streams to currencies which match the cost base. Nevertheless, Temenos does not pursue an

aggressive hedging policy. Fluctuations of exchange rates may cause significant additional costs

and finally a distressed financial condition of the company. ■ Legal & regulatory risks. Data security (LRR1). The increasing importance of cloud technology does not only come with

outsourced IT centers but also with client data leaving banks. As a third-party banking software

provider, Temenos faces new responsibilities by holding such client data. Data loss can be caused

by data center failures, product defects or security breaches and could result in major reputa-

tional damage as well as legal charges. Intellectual property (LRR2). Temenos’ intellectual prop-

erty is protected along with others by copyright, trademark and trade secrecy laws as well as

contractual provisions. Due to the global reach of the company, it faces limited protection and

perseverance of intellectual property rights in some countries. Proprietary information might be

misused by stakeholders such as employees, partners or clients and acquisitions of companies

might lead to increased litigation when their business model includes the use of third party code. ■ Strategic risks. Increased competition through new end-market players (SR1). Neobanks, fintechs and bigtech

companies might displace traditional banks or enter strategic partnerships with them and there-

fore erase Temenos’ customer base. In October 2019, multiple US financial regulators joined the

Global Financial Innovation Network, setting good conditions for future innovation in the financial

market and favorable regulations for fintechs (Ref. 9). They themselves will not need third-party

banking software to the same extent since their own business model is mainly based on software

solutions already. Also, the new competitors might start to develop and sell banking software

themselves and claim Temenos’ market share. A negative revenue growth of -3% from 2025 on-

wards and a negative terminal growth rate of -2% would lead to an adjusted target price of CHF

27.92. Mergers and acquisitions (SR2). If the acquisition of Kony bore fruit, Temenos would be able

to gain market share in the fast-growing US market in the long-term. In this case, revenue growth

of 25% per year from 2021 until 2023 would result in an adapted target price of CHF 120.54. On

average Temenos has achieved 28.6% of historical total revenue growth through M&A, making

them a crucial part of its growth story (Appx. 27, 35). If consolidation in the banking software in-

dustry was to increase greatly, interesting acquisition targets might become impossible to find.

The impact of a failed deal has been shown, when Temenos canceled advanced merger talks

with Misys in 2012 and the share price reacted with an instant drop of 4.3%. ■ Operational risks. Shortage of qualified personnel (OR1). The software and services industry is characterized by a

shortage of qualified employees, resulting in high competition among companies for such profes-

sionals. The failure of Temenos to attract, develop and maintain experienced personnel may lead

to a major negative impact on its business operations. Partners Network (OR2). Temenos relies on

more than 6’500 certified consultants, who sell Temenos’ products to clients and in most cases

carry out the implementation projects. Thereby clients enter a contract with a Partner additionally

to the license or SaaS contract they have with Temenos (Appx. 4). The company partly loses con-

trol over the client relationship but risks reputational damage if the implementation process fails.

Such a failure would reduce annual revenue growth by 5% from 2021 onwards compared to the

base case and lead to a compensation payment of MUSD 500 in 2021, resulting in a new target

price of CHF 51.80. Trade receivables past due (OR3). Historically, trade receivables past due

accounted for high 10%-20% of total revenues. Since 2018, overdue receivables have no longer

been disclosed in Temenos’ annual report, without further explanation. Hence, the quality of trade

receivables can not be fully assessed. If a significant amount was to become overdue, historical

revenues would need to be corrected resulting in an overall decrease in revenue growth quality. ■ Financial risks. Missed guidance (FR1). Historically, Temenos was mostly able to meet or even outperform its own

guidance (Appx. 39). However, as the release of the Q3 2020 numbers on October 15, 2020

showed, missing this guidance has a major negative impact on the share price, which fell by 20.3%

over the two weeks following the announcement. If Temenos met its long term goal of 15% CAGR

revenue growth starting in 2020 through 2029 and grew at a terminal growth rate of 4.12% there-

after, we would see a resulting target price of CHF 197.91. Impairment of intangible assets (FR2).

Due to past M&A, intangible assets are now more than three times higher than Temenos’ share

capital and amount to 71% of total assets. An impairment of these assets might occur, if Temenos

is not able to transform them into future revenues. Such impairment would have a serious negative

impact on earnings. Earnings management (FR3). Temenos mainly uses non-IFRS numbers in public

announcements. According to the company, non-IFRS information is not based on any compre-

hensive set of accounting rules. The main difference comes from acquisition related charges

(Appx. 19). With Temenos relying heavily on an aggressive M&A strategy, non-IFRS reported results

do not tell the whole story (Fig. 43, 44). Moreover, since bonuses account for 87% of total com-

pensation and are based on non-IFRS targets, the executive management has strong incentives

for earnings management and might thereby misuse shareholders capital. With the M-score in-

creasing from -2.99 in 2018 to -2.48 in 2019 (Appx. 28), we see a trend that supports our concerns.

Fig. 41 US Treasury Term Spread: 10

Year Bond Rate - 3 Month Bill Rate

Source: Federal Reserve Bank of New York

Fig. 42 Probability of Recession

Source: Federal Reserve Bank of New York

Fig. 43 IFRS vs. Non-IFRS Numbers 2019

MUSD, except EPS IFRS Non-IFRS

Total revenues 972.0 980.6

EBIT 235.4 317.9

EBIT margin 24.2% 32.4%

EPS (diluted) 2.46 3.47


Fig. 44 IFRS vs. Non-IFRS KPIs

GROWTH (%) 2017 2018 2019

IFRS EBIT 19.0 22.3 7.2

Non-IFRS EBIT 19.8 19.1 19.4

IFRS EPS (diluted) 18.0 21.6 6.5

Non-IFRS EPS (diluted) 18.4 20.8 17.2

MARGIN (%) 2017 2018 2019

IFRS EBIT 24.4 26.1 24.2

Non-IFRS EBIT 30.3 31.5 32.4


Fig. 45 Risk Matrix


-1%

0%

1%

1%

2%

2%

3%

3%

2014 2015 2016 2017 2018 2019 2020

0%

5%

10%

15%

20%

25%

30%

35%

40%

2014 2015 2016 2017 2018 2019 2020


APPENDICES – TABLE OF CONTENTS

BUSINESS DESCRIPTION PAGE FINANCIAL ANALYSIS PAGE

Appendix 1 Temenos vs. MSCI World Software & Services Index 11 Appendix 21 Temenos Financial Analysis 21

Appendix 2 Value Chain of Temenos 12 Appendix 22 Metrics Comparison to Competitors 22

Appendix 3 Product Description 12 Appendix 23 Temenos R&D Capitalization 23

Appendix 4 Business Model 12 Appendix 24 EBIT Bridge 23

Appendix 5 Acquisition Timeline 13 Appendix 25 EBITDA Bridge 23

Appendix 6 Direct Subsidiaries of Temenos AG 13 Appendix 26 Return on Research Capital 24

Appendix 7 Organizational Structure 13 Appendix 27 Growth Quality 24

INDUSTRY OVERVIEW & COMPETITIVE POSITIONING Appendix 28 M-Score 24

Appendix 8 Industry Players Description 14 Appendix 29 Z-Score 24

Appendix 9 Industry Players Matrix 14 VALUATION

Appendix 10 Competitors Analysis 15 Appendix 30 Projected Income Statement 25

Appendix 11 SWOT Analysis 15-16 Appendix 31 Projected Balance Sheet 25

Appendix 12 Porter’s 5 Forces 16-17 Appendix 32 Projected Cash Flow Statement 26

ENVIRONMENTAL, SOCIAL & GOVERNANCE Appendix 33 Revenue Forecast 26-27

Appendix 13 ESG Temenos vs. Industry Players 18 Appendix 34 Banking Software Market Forecast 27

Appendix 14 Board Characteristics – Spencer Stuart Board Index 18 Appendix 35 Organic Revenue Growth 28

Appendix 15 DVFA Scorecard for Corporate Governance 19 Appendix 36 Valuation Assumptions 28

Appendix 16 Board of Directors 19 Appendix 37 Free Cash Flow to the Firm 28

Appendix 17 Compensation Targets of Executive Committee 19 Appendix 38 Terminal Growth Rate 29

Appendix 18 Executive Committee 20 Appendix 39 Management Guidance Compliance 29

Appendix 19 Reconciliation from IFRS to Non-IFRS 20 Appendix 40 Sensitivity Analysis 29

Appendix 20 Shareholder Information 20 Appendix 41 Multiples Analysis 30

REFERENCES 30

Disclaimer: Wherever financial years are referenced or mentioned, financial year starting in XXXX is meant. For example 2019 stands for Financial Year 2019 or 2019/20.

BUSINESS DESCRIPTION

Appendix 1: Temenos vs. MSCI World Software & Services Index


-

1'000

2'000

3'000

4'000

5'000

6'000

0%

50%

100%

150%

200%

250%

300%

Nov. 15 Nov. 16 Nov. 17 Nov. 18 Nov. 19 Nov. 20

TEMN DAILY VOLUME (K) MSCI WORLD S&S INDEX TEMENOS


BUSINESS SEGMENT SPECIFICATION

Software Licensing Fees for on premise customer licenses

SaaS

Use of Temenos software by customers in

cloud-native & cloud agnostic environment,

including support, development of software

& hosting infrastructure

Maintenance

Software product upgrades, maintenance,

enhancements & access to help desk for li-

cense customers

Services Consulting, training & implementation ser-

vices


MAIN PRODUCTS SPECIFICATION

COMPARISON TO

PRODUCT PORTFOLIO 2015

Infinity Main product for Digital Front Office focused on customer journey and based on

standalone services and open APIs. Used by more than 500 banks worldwide.

Part of product portfolio

2015

Transact Main product for Core Banking at all types of banks. Used by over 1’000 banks world-

wide.


2015

Payments Can be used for complete payments lifecycle (order intake, clearing, settlement) for

end-to-end functionality.


2015

Multifonds Single platform applicable to the full investment lifecycle for traditional as well as alter-

native funds.

Added through acquisi-

tion of Multifonds in 2015

Financial Crime

Mitigation

Provides fraud prevention, anti-money laundering, watchlist screening and “Know your

customer” (KYC). It can be deployed partially to cover only what is valuable for the cus-

tomer.


2015

Quantum

Platform developed and marketed in cooperation with HCL in 2020, to deliver multi ex-

perience digital journeys for customers and bank employees on engaging web and mo-

bile applications. Including amongst others chatbots, augmented reality and conversa-

tional apps. This product is mainly supported by Artificial Intelligence.


2015 (under the name

“Channels”)

SUPPORTIVE PRODUCTS SPECIFICATION

COMPARISON TO

PRODUCT PORTFOLIO 2015

Analytics

Real-time customer analytics solutions support banks to understand customer and prod-

uct profitability. In combination with Temenos Data Lake, which merges different data

systems, banks can combine multiple data sources.


tion of hTrunk in 2019

Artificial Intelligence

The patented explainable Artificial Intelligence (XAI) platform of Temenos is available

with all Temenos software. It increases transparency and explainability of AI automated

decisions for banks, their customers and regulators.


tion of Logical Glue in

2019

Infinity Wealth Wealth management solution with integrated portfolio management and securities trad-

ing platform. It is pre-integrated into Temenos Infinity.


tion of Rubik in 2017

Country Model Banks Packaged framework, which leads to regional functionality for more than 150 countries

and faster implementation processes.

Added inhouse through

R&D

Regulatory Compliance Pre-integrated into standard Temenos software, this solution helps banks to remain com-

pliant with regulatory and business standards.


2015



Appendix 2: Value Chain of Temenos

Appendix 3: Product Description

Appendix 4: Business Model

TEMENOS CLOUD

PROVIDER

TEMENOS

CLIENTS PARTNERS

SaaS or on premise user rights

Fees

Periodic and/or upfront payments

Software imple-

mentation

Partners contract Periodic payments

Cloud user rights Partners contract


COMPANY YEAR COUNTRY PRICE (M) COMPANY DESCRIPTION ADDED CLIENT BASE

Kony 2019 USA/ India $ 559

Digital banking and low code devel-

opment

30%-40% of total Kony customers are non-fi-

nancial institutions

Logical Glue 2019 UK £ 12 Explainable AI Financial clients in the UK and Europe

hTrunk 2019 India N.D. Data Lake N.D.

Avoka 2018 USA $ 245 Digital front office 300 clients

Rubik 2017 Australia $ 50 Core banking, wealth management 930 clients

Multifonds 2015 Luxembourg $ 260 Fund and securities 30 of the world’s largest financial institutions

Akcelerant 2015 USA $ 55 Core banking, analytics 600 US clients

Trinovus 2013 USA $ 24 Core banking, risk and compliance 800 US clients

Edge IPK 2012 UK $ 15 Channels Deutsche Bank, ABN Amro, Zurich and Allianz

Primisyn 2011 Canada $ 1 Analytics 7 of British Columbia’s top 20 credit unions

Odyssey 2010 Luxembourg $ 86 Digital front office 110 clients

FE Mobile 2010 UK $ 5 Mobile banking N.D.

Viveo 2009 France $ 81 Core banking 750 clients in more than 35 countries

Lydian Associates Ltd. 2008 UK N.D. Business intelligence software 45 (former) Misys clients

Financial Objects Ltd. 2008 UK £ 27 Banking software and services

Financial institutions in the UK, Africa, Eastern

Europe and APAC

Actis. bsp 2007 Germany $ 19 Technology for financial services firms 30 clients

Source: Company Data, finextra.com, Team Analysis

SUBSIDIARY LOCATION DESCRIPTION VOTING RIGHTS

Temenos Headquarters SA Switzerland Holding and licensing company 100%

Temenos Holdings Limited, British Virgin Islands Holding company 100%

Temenos Investments BV Netherlands Holding company 100%

Temenos Egypt LLC Egypt Operating company 50%

Temenos Luxembourg SA Luxembourg Operating company 100%

Temenos Finance Luxembourg SARL Luxembourg Financing company 100%

Temenos UK Limited United Kingdom Holding and operating company 100%

Temenos USA Inc. USA Operating company 100%

Temenos Panama SA Panama Dormant company 100%

As of December 31, 2019, there is a total of 103 direct and indirect subsidiaries included in the consolidated financial statements of Temenos AG.


Each region is managed by a matrix of regional and global business functions. Regional directors are responsible for all business lines within that

region.

REGION MANAGING DIRECTOR OFFICES SOFTWARE DEVELOPMENT FACILITIES

Europe David Macdonald 21 6 (UK, Switzerland, France, Romania, Belgium, Luxembourg)

Middle East and Africa Jean-Paul Mergeai 7 0

APAC Martin Frick/ Jay Jayanthan (India) 20 3* (India), 1 (Australia), 1 (China)

North America Operating company 11 1 (USA), 1 (Canada)

Latin America and Caribbean Enrique R. O’Reilly 5 1 (Ecuador)

* Principal software development facilities of Temenos


Appendix 5: Acquisition Timeline

Appendix 6: Direct Subsidiaries of Temenos AG

Appendix 7: Organizational Structure


High Medium Low

INDUSTRY OVERVIEW & COMPETITIVE POSITIONING

COMPANY

(HQ) C F S

REVENUES 19

(MUSD) BUSINESS DESCRIPTION

R&D SPENDING

(MUSD)** ()***

Oracle FSS

(India) ■ ■ ■ 686

Oracle FSS is a subsidiary of the tech company Oracle. It is focused on providing banking software

solutions. Its main product Flexcube has 286m end customers. The company makes half of their

revenues through consulting.

29

(4.2%)

Jack Henry

(USA) ■ ■ ■ 1’697

With its three primary brands named Jack Henry Banking, Symitar and ProfitStars the company is

focused on selling software solutions and services to the banking industry.

110

(6.5%)

Intellect Design

(India) ■ ■ ■ 190

Intellect Design is a medium-size company with a strong focus on providing an all-in-one (end-to-

end) banking solution. They also provide a solution for capital markets

17.1

(9.0%)

*Avaloq

(Switzerland) ■ ■ ■ 664

Avaloq provides front- to back-end solutions for banking software with a focus on SaaS. In Octo-

ber 2020 the company was acquired by NEC Corporation for BUSD 2.25. n/a

*Finastra

(UK) ■ ■ ■ 1’900

Finastra arose due to the merger of Mysis and D+H in 2017. The private company provides univer-

sal banking software solutions for 90 of the top 100 banks around the world. It is one of the largest

banking software providers in the world.

n/a

*Mambu

(Germany) ■ ■ ~58

Mambu is a young company focused on core banking software deployed on the cloud, espe-

cially for neobanks. It partners with Backbase to provide a complete solution from front- to back-

end on all big public clouds. Its core banking solution is used by 20m end users.

n/a

*Backbase

(Netherlands) ■ ■ ~93

Backbase is focused on providing front-end software solutions for financial institutions. It partners

with Mambu to provide a complete solution from front- to back-end on all big public clouds. n/a

Infosys

(India) ■ ■ ■ 12’813

Finacle from Infosys is a universal end-to-end core banking product used by over 100 banks to

serve 1 billion customers. It is developed by Infosys which is engaged in business consulting, IT and

outsourcing services. Infosys generates 30% of its revenues in the financial services industry.

117

(0.9%)

TCS

(India) ■ ■ ■ 22’150

TCS is a big company providing IT services and consulting for different industries. 40% of its BUSD 22

of revenues comes from the banking industry. TCS is known for its proprietary software solutions.

43

(0.2%)

FIS

(USA) ■ ■ ■ 10’333

FIS develops and sells services and software for merchant solutions (20% of its revenues), banking

solutions (60% of its revenues) and capital market solutions (20% of its revenues). It has grown due

to several acquisitions. Since the acquisition of worldpay for BUSD 35 in 2019 it has become the

world’s largest processing and payments company.

~300-400

(3-4%)

Q2

(USA) ■ ■ ■ 315

Q2 creates end-to-end banking and lending experiences. It was founded in 2004 and reported

negative EBITDA in the last four years.

76

(24%)

Crealogix

(Switzerland) ■ ■ 106

Crealogix provides front-end banking software solutions with a focus on mobile banking, security

and wealth management. n/a

Fiserv

(USA) ■ ■ ■ 10’190

Fiserv sells services and software products for different industries. It is focused on payment pro-

cesses and banking software solutions.

~500-700

(5-7%)

ATOS

(France) ■ ■ ■ 13’633

ATOS provides software solutions and consulting services for different industries. 19% of its BUSD 13.6

of revenues comes from financial services including banking software.

235

(2%)

NCR

(USA) ■ ■ ■ 6’920

NCR provides software solutions for different industries like banking, restaurants, telecom, tourism.

NCR is focused on front-end banking software but also delivers end-to-end solutions.

259

(3.7%)

Sopra Steria

(France) ■ ■ ■ 5’216

Sopra Steria is a merger of Sopra Group and Group Steria. It is engaged in management and soft-

ware consulting. It develops and sells software solutions for different industries. It has partnered

with SAP for 20 years.

105

(2.6%)

C: Core | F: Front-End | S: SaaS, *Private company | **excl. capitalized spending | *** % of revenues

Congruence of the total company business model:

Source: Company Data, Competitors Data, Team Analysis

Size of the circle: estimated revenue made through

banking software

*Low: most of revenues made through proprietary software

*High: most of revenues made through standardized soft-

ware


Appendix 8: Industry Players Description

Public company

Private company

Appendix 9: Industry Players Matrix


INDUSTRY PEERS LINE OF BUSINESS REVENUES REVENUE GROWTH EBITDA MARGIN LEVERAGE OVERALL

Jack Henry ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■

Intellect Design ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■

Oracle FSS ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■

Infosys ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■

TCS ■ ■ ■ ■ ■ ■ ■ ■ ■ ■

Comparison Very Similar Similar Unsimilar Very Unsimilar

Scale ■ ■ ■ ■ ■ ■ ■ ■ ■ ■


STRENGTHS

Specialized on banking

sector: concentrated ex-

pertise in this sector

Temenos is one of the only companies operating exclusively in the niche of banking software. Almost all of its competitors cover multiple

sectors. This allows for operating efficiency. The 25 years of experience of Temenos lead to a deep understanding of the banking software

market.

Cloud native & cloud

agnostic

All Temenos products can be deployed either on premise or on the upcoming modern way over the cloud. Cloud native means that the

software is developed for a specific platform, cloud agnostic means that the software can be moved seamlessly between cloud platforms.

Temenos also covers all famous public clouds like Amazon aws, Microsoft Azure, Google Cloud, IBM Cloud and Oracle Cloud.

Different products based

on country regulatory

Temenos products are adapted to the specific regulatory laws of each country clients operate in. This gives the company an advantage

over new entrants.

Global reach since day

one

Temenos understood from the beginning, that software development workforce is best found in India. The development centers in India

helped the firm to obtain a global orientation and reach from the very beginning.

Recognized as award-

winning company

Temenos has been ranked as a banking software leader for the 11th time according to the Gartner 2020 Magic Quadrant for Global Retail

Core Banking (GRCB), the best-selling core banking system for 15 years and the best-selling vendor for digital banking for the fourth con-

secutive year.

Strong sales team Temenos is excellent in selling its products (Ref. 4). The company wants to increase its investments in marketing and sales further in the

coming years (Ref. 1).

WEAKNESSES

Big banks can not use

standardized software

Temenos is focused on developing standardized and packaged banking software. This software perfectly fits for tier 3 to 5 banks. But Te-

menos wants to exploit the big potential of tier 1 & 2 banks. These big banks have more complex processes, for which standardized software

often does not fit (Ref. 8).

Wide product range is a

liability

A wide product range is expensive to maintain, especially for a software company which has to update its products almost monthly. Te-

menos’ wide product range does not lead to bigger deals, because bigger banks never rely on one software provider (Ref. 4, 8). Therefore,

Temenos can never sell its whole range of products to one customer.

Highest R&D spending in

the industry (28% of rev-

enues)

Temenos’ total R&D spending (expensed + capitalized) amounts to almost 28% of its revenues, which is more than twice as high as the

spending of the next pursuer. The R&D labs of Temenos are not efficient. This is shown by the RORC of 3.5 in 2019 (2018: 3.4) which is the

lowest value among its near competitors. The R&D inefficiency could be the reason why Temenos buys innovations through M&A (Ref. 18).

Confusion about ac-

counting standards

Temenos has been criticized several times from analysts and finance journalists for its loose accounting standards. Its non-IFRS numbers are

significantly higher than the IFRS-numbers. Moreover, the company reduced its credit loss rate from 2.13% in 2018 to 0.75% in 2019, which

improves EBIT. Temenos did this by applying a calculation method which is commonly used for banks (Ref. 18) without even listing receivables

in delay.

Weak market presence

in Asia

Temenos has a weak market presence in Asia. The market’s big potential is grazed by the Indian competitors like Infosys, Oracle FSS and

TCS. .

High price Temenos sells its products for high prices and is the most expensive player in the market (Ref. 1, 4).

Goodwill larger than eq-

uity capital

Temenos goodwill amounts to MUSD 1’079 while the share capital amounts to MUSD 445 in terms of book value. If the company had to

impair a bigger part of its goodwill, this could lead to bankruptcy. However, this case is very unlikely as Temenos has never had to impair its

goodwill so far (Ref. 1).

OPPORTUNITIES

Increasing pressure on

banks

There are several factors putting pressure on traditional banks to go through digital transformation as soon as possible. First of all, most banks

sit on their legacy systems, which are one of the biggest barriers to growth, higher ROE and higher margins. Additionally, bigtech, fintechs

and neobanks are entering the banking market with cheap and easy to use services. While fintechs and neobanks first have to increase

their customer bases, bigtech already has a huge user base. This puts pressure on traditional banks.

Little potential exploited

at tier 1 & 2 customers

Temenos serves 41 of the top 50 banks worldwide. But these big banks just bought small parts of Temenos’ software, because they still rely

on their legacy systems. In 2017 Temenos' existing tier 1 & 2 clients spent only 4% of their total IT expenses on Temenos' products.

US market holds poten-

tial

The North American banking software market already is almost as big as the rest of the world. American banks spent 37% of their technology

budget on new technology in 2019. In Europe, this rate was 27%. Temenos tries to participate more in this potential with the acquisition of

Kony.

Appendix 11: SWOT Analysis

Appendix 10: Competitors Analysis


Increasing customer de-

mand for digital services

Almost 80% of US population used digital channels for their banking needs back in 2018. In Europe, this rate was at 65%. These numbers will

increase as time goes on (Source: McKinsey). Temenos’ software helps banks to exploit this potential.

Riding the wave of tech-

nological trends

There are five technological trends defining the future of the banking software market: cloud (SaaS), AI, open banking (open APIs), big data

and mobile banking. Temenos includes all of these in its software. In explainable AI Temenos has big know-how due to the acquisition of

logical glue in 2019. To face the trend to open banking, the company develops its software using easy-to-implement APIs. Big data is one

of the most important trends because big banks have huge data lakes of customer data. Temenos acquired hTrunk to improve its data

analytics software. The trend to mobile banking is realized through easy to use mobile banking apps for smartphones and tablets.

Increasing regulatories

In 2008, the world lost its trust in banks. Therefore, regulations steadily increased over the past years, resulting in the implementation of Basel

III and Basel IV. Especially for smaller banks it is difficult to meet these regulations. Temenos software is suited to the banking regulatories of

the 150 countries where they serve customers. As Joe Biden will be the US president for the next four years, regulatories might increase in the

US, too (Ref. 19).

Takeover of Temenos Although the possibility of a takeover is small, it would drive up the share price of Temenos.

THREATS

Bigtech, fintechs and ne-

obanks replace tradi-

tional banks

While in the short- and mid-term the presence of bigtech, fintechs and neobanks puts pressure on traditional banks to buy software from

Temenos, these new entrants could blow away the market share of traditional banks in the long-term. Neobanks and fintechs continue to

have a material cost advantage. Often, these tech players develop their software on their own. This would make the services of Temenos

obsolete in the long-term.

SaaS cannibalizes the li-

censing business

The upcoming SaaS business cannibalizes the sales of licenses. This leads to higher recurring revenues, but on the other hand, licensing

revenue breaks away. This trend results in slower growth of Temenos’ revenues in the short- to mid-term.

Banks’ risk aversion

slows down contract

conclusion

In general, banks do not fear third-party relationships. But in terms of core banking software, which represents the heart of a bank, relation-

ships with external technology vendors, suppliers or service providers expose banks to big risks. Information misuse and theft (insider risk),

system failures, business disruptions (operational risk) and regulatory noncompliance are just the main fears of traditional banks (Ref. 8).

Strategic partnerships of

banks with fintechs

Strategic partnerships of traditional banks with fintechs or even neobanks could replace Temenos products.

Upcoming private equity

competitors

In the last years, there was big activity in the private equity market for banking software. Finastra, a big player, which is similarly focused on

the banking software market, arised from the merger of D+H and Misys through Vista Equity Partners. Moreover, smaller players like Mambu,

Backbase and Avaloq increase competition.


COMPETITIVE RIVALRY 3.6

Concentration

There are about six players with a market share of over 5% in the banking software industry, combining for a market share of 52%

together. The rest of the market is split among many small players. Most of them are private companies. The Herfindahl-Hirschman

Index amounts to 5.24%, which indicates a concentrated and therefore highly competitive market.

5

Size of competitors

The size of competitors ranges from companies with revenues over BUSD 10 like TCS, Infosys, FIS and Fiserv to small and often more

focused players like Intellect Design and Mambu. The bigger players are not focused on banking software, but often provide software

for other industries and operate in management consulting.

3.5

Industry growth The banking software market is forecasted to grow at 9.6% CAGR until 2024. Due to the high growth opportunities, all competitors

can have a smaller or bigger piece of the cake. 2

Fixed costs Approximately 25% of Temenos costs are variable costs (Ref. 1). Therefore, they could not reduce their cost base fast if they had to. 4.5

Appendix 12: Porter’s 5 Forces


Exit barriers Developing a good and competitive banking software needs huge upfront investments in R&D and software development and it

takes years before one single license can be sold. This leads to high exit barriers as this software can not be used anywhere else. 5

Product differentiation

The market is segmented into two parts: big banks (tier1 & 2) and smaller banks (tier 3 to 5). Big banks usually need proprietary

software. Smaller banks often implement standardized software because it is cheaper (Ref. 8). Some players like Temenos focus more

on standardized & packaged software and others focus more on individual developed software. Bigger players still try to address

both markets. So does Temenos. Temenos sells core banking, front-end, payment processing and fund administration software. Not

all competitors are active in all these markets.

3

Business line similarity There are few players like Temenos who are only focused on the banking software market. Most competitors, especially the big ones,

also develop software for other industries and do business consulting. 2

SUPPLIER POWER 2.5

Diversification

The diversification of Temenos’ suppliers is high. The company only has software and consulting companies as suppliers (Source:

Refinitv Eikon). One of the suppliers are the cloud providers. The majority of Temenos software is developed by its own employees in

India.

1.5

Switching costs

The switching costs for Temenos to change a supplier are moderate. Temenos only buys small parts of its software, so its vendor lock-

in is low. But changing a software supplier still needs upfront coordination, because the new software part must work seamlessly with

the current software.

3

Substitution Substitutes for software parts and consulting do not exist. On the other hand, Temenos could relatively easily insource these services

by hiring the right people. 2

Dependence on the in-

dustry

The amount Temenos spends on outsourced software development and consulting services is relatively small. Also, the banking

software market is a niche. Therefore, Temenos’ suppliers do not depend on these contracts. 4.5

Forward integration The risk of forward integration is very low due to the high upfront investments required to develop competitive banking software. A

takeover would be possible but is very unlikely because the synergies are low due to the low amounts Temenos spends at its suppliers. 1.5

BUYER POWER 2.4

Diversification Temenos has over 3’000 customers. On the other hand, 43% of its total software licensing revenue comes from few tier 1 & 2 banks.

It would be painful for Temenos to lose one of these. 3.5

Backward integration

A backward integration is extremely unlikely. Banks have developed their software inhouse for the last forty years. They learned that

it is better to keep their business model concentrated and outsource the development and even hosting of their software (Ref. 4,

8).

1

Importance to buyers The core banking software is the heart of a bank. It is crucial to the daily business of the bank to have a smoothly functioning, scalable

and easy to use software. Without a strong performing banking software, it is not possible to survive (Ref. 8). 1.5

Relative costs for buy-

ers

The relative costs for banks to buy and implement banking software are rather high. On the other hand, it is the most important part

of their operating business. Therefore, the price is not the most important factor for them (Ref. 1). 3

Substitution There does not exist any substitute for banking software. 1.5

Use of multiple vendors

Banks fear the risk of information misuse and theft (insider risk), system failures, business disruptions (operational risk) and regulatory

noncompliance (Ref. 8). Therefore, they usually have several software providers. It is not very easy, but possible to find several good

vendors.

4.5

Switching costs: strong

vendor lock-in

Due to the high implementation costs and complex and relatively risky implementation processes, the switching costs for banks are

high. Therefore, the vendor lock-in to their core banking software providers is high. On the other hand, SaaS is coming up for banking

software at least for the more standardized parts of the software. The higher standardization and more flexible deployment of SaaS

will reduce the vendor lock-in in the future.

2

THREAT OF NEW ENTRANTS 2.3

Economies of scale

The economies of scale in the software industry are high if the software is standardized and packaged (Ref. 4). Once a standardized

software is developed, it can be sold and deployed arbitrarily often. But especially for big banks, not all parts of banking software

are standardized and packaged.

3

Capital requirements Much capital for R&D is needed to develop a banking software. And before a single banking software license can be sold, the

software has to be fully developed and tested, which results in a long dry period without revenues for new entrants. 1.5

Expertise requirements To develop a competitive banking software, one needs experts in two sectors: software development and banking. Especially work-

force in the IT industry is hard to find these days. In addition, Temenos as a company has over 25 years of experience in the industry. 2.5

Switching costs: strong

vendor lock-in

Due to the high implementation costs and complex and relatively risky implementation processes, the vendor lock-in and therefore

the switching costs for banks are high. This makes it very difficult for new entrants to win customers. The emergence of more stand-

ardized SaaS reduces this effect.

2

Distribution channels

Due to the strong vendor lock-in, Temenos has long-lasting relationships with key-customers. The renewal rate of licensing contracts

is close to 90% (Ref. 1). In addition, Temenos can sell new products and microservices more easily using the existing relationships to

its customers. New entrants will need time to build a network like this.

2.5

THREAT OF SUBSTITUTES 1.5

Number of substitutes No substitutes for banking software exist. 1

Relative price The price for new banking software is relatively high for banks. But as it is the heart of a banks processes, the price is by far not the

most important thing (Ref. 8). Still, a high price incents to find another solution. 2.5

Relative quality Banks are extremely picky regarding their core banking software (Ref. 8). Temenos is known for its expertise and high-quality products.

There are not many incentives to substitute the banking software. 1



ESG Score

B

Environmental

B-

(14%)

Social

A+

(40%)

Governance

C+

(46%)

() Weights

ENVIRONMENTAL, SOCIAL & GOVERNANCE

Crealogix, Intellect Design. and Oracle FSS are not covered by the ESG section in Refinitiv Eikon.

ESG Score

Thomson Reuters ESG Combined Score is an overall company score based on the

reported information in the environmental, social and corporate governance pillars

(ESG Score) with an ESG Controversies overlay.

Resource Use

Score

Resource use category score reflects a company's performance and capacity to

reduce the use of materials, energy or water, and to find more eco-efficient solutions

by improving supply chain management.

Emission Score Emission category score measures a company's commitment and effectiveness to-

wards reducing environmental emission in the production and operational processes.

TRDIR Score Thomson Reuters Diversity Inclusion Rating is an overall score of a company based on

reported workforce information that define diverse and inclusive workplaces.

Workforce Score

Workforce category score measures a company's effectiveness towards job satisfac-

tion, healthy and safe workplace, maintaining diversity and equal opportunities, and

development opportunities for its workforce.

Source: Refinitiv Eikon, Team Analysis

TEMENOS

SSBI SWITZERLAND,

SMI 20

SSBI SWITZERLAND,

SMI Mid

SSBI SWITZERLAND,

Average

SSBI U.S. TECH-

NOLOGY

Board size 7 10.8 8.3 9.55 9

Gender (% of women on BoD) 14.3% 26.0% 24.3% 25.2% 22.0%

Total non-executive pay $ 122'165 CHF 321'475 CHF 208'043 CHF 264'759 $ 290'751

Foreign directors 85.7% 58.1% 49.5% 53.8% n/a

Independence ratio 85.7% 88.4% 86.0% 87.2% n/a

Rate of refresh 28.6% 16.6% n/a 16.6% n/a

Average age 63.4 59.6 59.8 59.7 61.5

Board commitments 0.4 2.2 1.8 2 3.5

Women in senior management (%) 28.6% 9.4% 7.8% 8.6% n/a

Source: Spencer Stuart Board Index 2019, Team Analysis

COMPANY

ESG SCORE

RESOURCE USE

SCORE

EMISSION

SCORE TRDIR SCORE

WORKFORCE

SCORE

2016 2017 2018 2019 2019 2019 2019 2019

FIS 26.52 41.53 55.45 56.67 80.29 48.08 50.75 73.08

Q2 23.51 33.22 26.42 24.84 0.00 0.00 n/a 27.28

TCS 73.44 62.88 62.72 47.84 90.81 79.68 39.75 92.50

NCR 39.51 40.64 32.20 49.60 38.46 55.94 47.00 58.15

Sopra Steria 46.57 56.99 49.63 59.20 91.67 98.40 54.25 93.37

Fiserv 23.82 27.96 25.75 19.50 0.00 0.00 n/a 19.58

Infosys 91.61 56.43 71.22 50.54 96.37 96.12 66.50 99.67

ATOS 68.47 64.65 68.23 66.55 87.77 93.79 59.25 97.59

Jack Henry 25.49 23.84 29.35 35.33 0.00 0.00 46.50 12.72

Temenos AG 54.69 56.16 59.19 64.97 87.82 94.29 54.50 97.72

Average 47.36 46.43 48.02 47.50 57.32 56.63 53.14 67.17

Median 43.04 48.84 52.54 50.07 84.03 67.81 54.25 82.79

Appendix 13: ESG Temenos vs. Industry Players

Appendix 14: Board Characteristics – Spencer Stuart Board Index


TEMENOS MAX. POINTS RELATIVE PERFORMANCE

I - Shareholders and Annual General Meeting 4.5 7 64.29%

II - Management Board 12.75 14.5 87.93%

III - Board of Directors 22.75 29.5 77.12%

IV - Transparency & Governance 11 14.5 75.86%

V - Reporting & Audit 8.25 10.5 78.57% Total Score 59.25 76 77.96% Average*

72.67%

Median* 74.01%

Source: DVFA Scorecard for Corporate Governance, Team Analysis

NAME A C N INFORMATION

MEMBER

SINCE

Andreas Andreades

(Executive Chairman) ■

▪ MA in Engineering from Cambridge University

▪ With Temenos since 1999, former CEO (2003 – 2011)

▪ Early career at KPMG and PepsiCo 2011

Thibault de Tersant

(Vice-Chairman/ Lead

Independent Director)

■*

▪ Graduate of ESSEC Business School & of Institut d’Etudes Politiques de Paris

▪ Currently CFO and Senior Executive Vice President at Dassault Systèmes

▪ Over 30 years of experience in software industry 2012

Ian Cookson ■ ■ ■* ▪ Previously COO and member of Executive Committee of EFG International

▪ More than 30 years of experience in financial services sector 2012

Erik Hansen ■

▪ Graduate of business college in Horsens, Denmark

▪ Previously Chairman of Myriad Group AG, as well as CEO and Board Member at Day

Software

▪ Senior management roles at Siemens Pyramid Technology Inc. and Apple

2013

Peter Spenser ■ ■

▪ Ph.D. in Astrophysics from University College London

▪ MA in Theoretical Physics from Cambridge University

▪ Previously senior Partner Financial Services at Deloitte Consulting

▪ Co-Founder of AcquiData Inc.

▪ Over 39 years of experience in financial services sector and technology

2017

Homaira Akbari ■*

▪ Ph.D. in particle physics from Tufts University

▪ MBA from Carnegie Mellon Tepper School of Business

▪ Currently President and CEO of AKnowledge Partners, LLC

▪ Serves on the Board of Directors of 3 other companies

▪ Previously multiple senior management roles in Fortune 1000 companies

2020

Maurizio Carli ■ ■

▪ BSc in Electronic Engineering from Politecnico di Milano

▪ Currently strategy advisor to VMware

▪ Previously Executive Vice President, Worldwide Sales and Services at VMware

▪ Several leadership positions at IBM

2020

A: Audit Committee, C: Compensation Committee, N: Nomination Committee, ■* Chairman of Committee

Source: Company Data, LinkedIn, Team Analysis

SHORT-TERM TARGETS (1 YEAR) % OF BONUS (2019) TARGET USD (2019) ACTUAL USD (2019) %OF BONUS (2020)

Non-IFRS Software Licensing 40% 432m 445m 37.5%

SaaS Annual Contract Value (ACV) 15% 17m 17m 17.5%

Non-IFRS EPS 20% 3.39 3.47 20%

Non-IFRS Operating Cash 25% 420m 364m 25%

LONG-TERM TARGETS (3 YEARS) WEIGHTING 2019 SARs CAGR

Non-IFRS EPS growth 40% 15%

Non-IFRS product revenues 60% 14%

Stock Appreciation Rights Programme: The positive difference between the stock and the exercise price is paid in stock or cash.


Appendix 15: DVFA Scorecard for Corporate Governance

Appendix 16: Board of Directors

Appendix 17: Compensation Targets of Executive Committee

Rating levels:

100%-90% Excellent

90%-80% Very Good

80%-70% Good

70%-60% Satisfactory

* based on DAX30 companies and

MDAX companies (total of 84 com-

panies as of 2019)


NAME INFORMATION

POSITION

SINCE

Max Chuard

(Chief Executive Officer)

▪ MSc in Finance from University of Lausanne

▪ Previously CFO and COO at Temenos, with the company since 2002

▪ Early career at JP Morgan 2019

Takis Spiliopoulos

(Chief Financial Officer)

▪ MSc in Computer Science and Business Economics from ETH Zürich

▪ Diploma as Certified European Financial Analyst (CEFA) from EFFAS

▪ Previously Head of Research and member of Investment Banking management

team at Vontobel

2019

Jean-Michel Hilsenkopf

(Chief Operating Officer)

▪ MSc in Computer Engineering from Polytech of Clermont-Ferrand

▪ MBA in international marketing from University of Geneva

▪ Formerly Chief Revenue Officer at Temenos, with the company since 1993 2019

Mark Winterburn

(Chief Product and Technology Officer)

▪ Degree in Product Management from Harvard Business School & in Leadership from

Cranfield School of Management

▪ Diploma in Software Engineering from Coventry University

▪ Formerly VP -Global Product Development & Solutions Management at Finastra

2011

Alexa Guenoun

(President, Americas and Global Head of

Partners)

▪ BA in Marketing and Finance from American BBA INSEEC

▪ Previously Chief Client Officer at Temenos, with the company since 2006

▪ Several leadership positions at Finastra 2019

Colin Jarrett

(Chief Cloud and Delivery Officer)

▪ Ph.D. in Condensed Matter Physics from Cambridge University

▪ Previously multiple leadership roles at Temenos, with the company since 2016

▪ Early career at Accenture 2020

Monica Rancati

(Chief Human Resource Officer)

▪ Degree in Business Administration from Università di Pavia

▪ Previously Senior Human Resources Director for Western Europe 2020

Source: Company Data, LinkedIn, Team Analysis

CALCULATION

IFRS revenue measure

+ Deferred revenue write-down

= Non-IFRS revenue measure

IFRS profit measure

+/- Deferred revenue write down

+/- Discontinued activities

+/- Acquisition related charges

+/- Amortisation of acquired intangibles

+/- Restructuring

+/- Taxation

= Non-IFRS profit measure


SHAREHOLDER I P INFORMATION % CSO

Ebner (Martin & Rosmarie) ■ Swiss banker/ investor & his wife 10.8%

BNP Paribas Asset Management UK Limited ■ French investment bank 8.7%

BlackRock Institutional Trust Company, N.A. ■ American investment management company 5.5%

Capital World Investors* ■ American investment management company 5.2%

Baillie Gifford & Co. ■ British investment management company 5.2%

Capital Research Global Investors* ■ American investment management company 5.1%

T. Rowe Price Associates, Inc. ■ American investment management company 4.9%

DWS Investment GmbH ■ German asset manager belonging to Deutsche Bank 4.8%

Comgest S.A. ■ International asset management group with focus on ESG 3.2%

UBS Asset Management (Switzerland) ■ Swiss investment bank 3.1%

I: Institutional investor, P: Private investor

*Capital Group = Capital World Investors (Subsidiary of Capital Research Global Investors) + Capital Research Global Investors (Subsidiary of Capital

Group)

Capital Group = 5.2% + 5.1% = 10.3%

Source: Refinitiv Eikon, Team Analysis

Appendix 18: Executive Committee

Appendix 20: Shareholder Information

Appendix 19: Reconciliation from IFRS to Non-IFRS

Deferred revenue write-down: Adjustments made resulting from acquisitions

Discontinued activities: Discontinued operations at Temenos that do not qualify as such

under IFRS

Acquisition related charges: Relates mainly to advisory fees, integration costs and earn

outs

Amortisation of acquired intangibles: Amortisation charges as a result of acquired in-

tangible assets

Restructuring: Costs incurred in connection with a restructuring plan implemented and

controlled by management. Severance charges, for example, would only qualify un-

der this expense category if incurred as part of a company-wide restructuring plan

Taxation: Adjustments made to reflect the associated tax charge relating to the above

items


FINANCIAL ANALYSIS

SOLVENCY 2018 2019 2020E 2021E 2022E 2023E 2024E

Debt (MUSD) 868.5 1'174.6 1'094.6 797.5 715.3 769.9 670.1

Debt/Assets 51.0% 50.6% 46.8% 35.7% 30.0% 28.7% 23.7%

Total liabilities/Assets 82.5% 80.8% 75.7% 68.6% 64.4% 62.3% 58.3%

Net debt/EBITDA 1.77 2.79 2.15 1.28 1.17 0.77 0.55

Goodwill/Equity 212.5% 242.5% 176.2% 135.3% 124.0% 111.1% 101.4%

LIQUIDITY 2018 2019 2020E 2021E 2022E 2023E 2024E

Current ratio 0.97 0.80 1.04 0.96 0.85 0.99 0.95

Cash ratio 0.48 0.23 0.52 0.41 0.27 0.43 0.41

WORKING CAPITAL 2018 2019 2020E 2021E 2022E 2023E 2024E

Working Capital (MUSD) -15.5 -132.8 25.5 -25.6 -113.4 -9.2 -47.0

Receivables turnover 3.10 2.91 2.47 2.88 2.91 2.96 3.06

DSO 117.6 125.3 147.5 126.5 125.2 123.4 119.3

Payables turnover 1.58 1.37 1.20 1.25 1.29 1.28 1.27

DPO 230.6 265.6 303.6 291.2 283.5 285.6 288.0

Inventory turnover Temenos does not report any inventory

DIO

Cash conversion cycle -113.0 -140.3 -156.2 -164.7 -158.3 -162.2 -168.7

PROFITABILITY 2018 2019 2020E 2021E 2022E 2023E 2024E

Gross margin 72.7% 72.8% 70.2% 71.6% 71.4% 71.1% 70.9%

EBITDA margin 39.0% 37.7% 40.1% 40.5% 37.7% 40.7% 38.6%

EBIT margin 26.1% 24.2% 23.3% 23.7% 23.2% 22.7% 22.2%

Net margin 20.1% 18.6% 17.5% 17.0% 16.6% 16.2% 15.8%

EPS 2.43 2.57 2.18 2.43 2.71 2.97 3.20

ROA 14.5% 11.7% 8.9% 10.5% 11.7% 11.7% 11.6%

ROE 49.8% 48.7% 30.6% 27.2% 24.8% 22.7% 20.8%

ROIC (R&D as reported) 17.2% 13.0% 10.0% 11.7% 12.6% 12.9% 13.2%

CASH FLOWS 2018 2019 2020E 2021E 2022E 2023E 2024E

OCF margin 45.7% 36.4% 42.7% 40.7% 38.3% 42.5% 40.1%

OCF conversion 117.2% 96.7% 106.6% 100.5% 101.4% 104.2% 104.0%

FCFF margin 5.4% -44.4% 38.2% 32.3% 9.7% 16.2% 15.6%

FCFF conversion 13.9% -117.8% 95.3% 79.8% 25.8% 39.7% 40.3%

Payout ratio 27.3% 28.9% 33.8% 33.9% 33.6% 33.6% 33.9%

DUPONT ANALYSIS 2018 2019 2020E 2021E 2022E 2023E 2024E

Operating efficiency

Net income (MUSD) 168.9 181.1 154.8 172.6 192.4 210.9 227.1

Total revenues (MUSD) 840.9 972.0 886.1 1013.4 1157.5 1301.3 1437.5

Net margin 0.20 0.19 0.17 0.17 0.17 0.16 0.16

Asset use efficiency

Total revenues (MUSD) 840.9 972.0 886.1 1013.4 1157.5 1301.3 1437.5

Average assets (MUSD) 1515.1 2013.0 2331.0 2287.7 2309.1 2530.9 2753.4

Asset turnover 0.55 0.48 0.38 0.44 0.50 0.51 0.52

Financial Leverage

Average assets (MUSD) 1515.1 2013.0 2331.0 2287.7 2309.1 2530.9 2753.4

Average equity (MUSD) 339.1 371.9 506.3 634.5 775.4 929.3 1094.4

Financial Leverage 4.47 5.41 4.60 3.61 2.98 2.72 2.52

ROE 49.81% 48.70% 30.58% 27.20% 24.81% 22.70% 20.75%


Appendix 21: Temenos Financial Analysis


Solvency

Total Liabilities/ Assets Total Debt/ Assets Net Debt/ EBITDA Goodwill/ Equity

2017 2018 2019 2017 2018 2019 2017 2018 2019 2017 2018 2019

ID 41% 38% 43% 13% 10% 16% 0.21 0.49 2.35 4% 4% 3%

Jack Henry 37% 36% 36% 3% 3% 3% 0.05 -0.05 -0.26 49% 47% 44%

Oracle FSS 23% 22% 18% 3% 3% 1% -1.31 -1.21 -1.85 13% 12% 9%

Infosys 21% 26% 29% 3% 3% 5% -1.17 -1.06 -0.77 3% 5% 8%

TCS 23% 25% 30% 4% 4% 7% -1.09 -0.88 -0.61 2% 2% 2%

Avg. Comp. 29% 30% 31% 5% 5% 6% -0.66 -0.54 -0.23 14% 14% 13%

Temenos 71% 82% 81% 37% 51% 51% 1.16 1.77 2.79 137% 213% 243%

Liquidity

Current Ratio Cash Ratio Net debt/ EBITDA Goodwill/ Equity

2017 2018 2019 2017 2018 2019 2017 2018 2019 2017 2018 2019

ID 1.49 1.50 1.30 0.34 0.18 0.17

Jack Henry 1.02 1.17 1.35 0.07 0.19 0.43

Oracle FSS 3.72 3.90 6.32 2.30 2.54 4.74

Infosys 3.44 2.75 2.62 1.77 1.34 1.10

TCS 4.34 4.02 3.33 2.28 1.82 1.32

Avg. Comp. 2.80 2.67 2.98 1.35 1.22 1.55

Temenos 1.01 0.97 0.80 0.39 0.48 0.23

Working Capital

DSO DIO DPO Cash Conversion Cyle

2017 2018 2019 2017 2018 2019 2017 2018 2019 2017 2018 2019

ID 155 148 183 - - - 946 1'045 713 -790 -897 -529

Jack Henry 76 76 72 - - - 44 49 53 32 27 19

Oracle FSS 113 117 107 - - - 1'811 1'559 784 -1'698 -1'442 -677

Infosys 98 98 101 1 1 1 34 37 41 65 61 61

TCS 101 109 113 5 4 3 280 316 298 -174 -203 -182

Avg. Comp. 109 110 115 1 1 1 623 601 378 -513 -491 -262

Temenos 122 118 125 - - - 201 231 266 -79 -113 -140

Profitability

Revenues (MUSD) EBITDA Margin (R&D AR*) EBITDA Margin (R&D AC*) EBITDA Margin (R&D AE*)

2017 2018 2019 2017 2018 2019 2017 2018 2019 2017 2018 2019

ID 169 208 190 9% 11% 5% 16% 18% 14% -1% 3% -3%

Jack Henry 1'471 1'553 1'697 35% 34% 33% 41% 40% 39% 29% 27% 26%

Oracle FSS 703 710 686 41% 44% 46% 46% 49% 46% 41% 43% 46%

Infosys 10'943 11'843 12'813 28% 26% 25% 29% 27% 26% 28% 26% 25%

TCS 19'103 20'980 22'150 28% 28% 27% 28% 29% 27% 28% 28% 27%

Avg. Comp. 6'478 7'059 7'507 28% 29% 27% 32% 32% 30% 25% 26% 24%

Temenos 735 841 972 38% 39% 38% 59% 60% 59% 31% 33% 31%

EPS EBIT Margin (R&D AR*) EBIT Margin (R&D AC*) EBIT Margin (R&D AE*)

2017 2018 2019 2017 2018 2019 2017 2018 2019 2017 2018 2019

ID 0.06 0.15 0.02 5% 7% 0% 4% 9% 3% -1% 4% 0%

Jack Henry 4.73 3.52 3.86 24% 22% 23% 25% 23% 24% 24% 21% 22%

Oracle FSS 2.25 2.32 2.40 39% 42% 44% 40% 42% 39% 39% 41% 44%

Infosys 0.55 0.51 0.55 25% 23% 22% 25% 23% 22% 25% 23% 22%

TCS 1.04 1.19 1.22 25% 26% 25% 25% 26% 25% 25% 26% 25%

Avg. Comp. 1.73 1.54 1.61 23% 24% 23% 24% 25% 22% 22% 23% 22%

Temenos 1.98 2.43 2.57 24% 26% 24% 32% 32% 30% 23% 25% 23%

ROA ROIC (R&D AR*) ROIC (R&D AC*) ROIC (R&D AE*)

2017 2018 2019 2017 2018 2019 2017 2018 2019 2017 2018 2019

ID 4% 6% 0% 6% 8% 0% 4% 9% 2% -2% 6% 0%

Jack Henry 18% 16% 16% 14% 14% 15% 13% 13% 14% 16% 15% 16%

Oracle FSS 29% 33% 30% 48% 44% 49% 42% 37% 39% 48% 44% 50%

Infosys 21% 22% 22% 33% 30% 31% 32% 29% 30% 33% 30% 31%

TCS 29% 31% 33% 48% 49% 49% 47% 48% 49% 48% 49% 49%

Avg. Comp. 20% 22% 20% 30% 29% 29% 28% 27% 27% 29% 29% 29%

Temenos 14% 14% 12% 17% 17% 13% 17% 16% 13% 9% 11% 11%

* AR: as reported|AC: all capitalized|AE: all expensed

Appendix 22: Metrics Comparison to Competitors


DuPont Analysis

Net Margin Asset Turnover Financial Leverage ROE

2017 2018 2019 2017 2018 2019 2017 2018 2019 2017 2018 2019

ID 4% 9% 1% 0.85 0.91 0.78 1.82 1.66 1.70 7% 14% 2%

Jack Henry 25% 18% 17% 0.74 0.72 0.73 1.70 1.58 1.57 31% 20% 20%

Oracle FSS 27% 28% 30% 0.75 0.77 0.69 1.52 1.28 1.25 31% 28% 26%

Infosys 23% 19% 18% 0.86 0.94 1.03 1.24 1.31 1.38 24% 23% 26%

TCS 21% 21% 21% 1.16 1.22 1.33 1.24 1.32 1.38 30% 35% 38%

Avg. Comp. 20% 19% 18% 0.87 0.91 0.91 1.50 1.43 1.45 25% 24% 22%

Temenos 19% 20% 19% 0.58 0.55 0.48 3.26 4.47 5.41 36% 50% 49%

Temenos and its competitors report according to different accounting standards (IFRS, US GAAP and Ind-AS). As the reporting of R&D is not stand-

ardized, different treatments of R&D might impact financial results and distort comparison. In order to enable better comparison, we considered

three different types of R&D treatment: 1) as reported 2) all R&D capitalized 3) all R&D expensed




25%

26%

27%

28%

29%

30%

-

100

200

300

400

2015 2016 2017 2018 2019 2020E 2021E 2022E 2023E 2024E

R&D capitalized (lhs) R&D expensed (lhs) Amortization of Research Asset (lhs) R&D/Total Revenues (rhs)

Appendix 23: Temenos R&D Capitalization

Appendix 24: EBIT Bridge Appendix 25: EBITDA Bridge

MUSD


(MUSD) 2015 2016 2017 2018 2019

Temenos

R&D spending* 206.5 178.7 203.2 229.5 269.7

Gross profit 384 442.8 528.5 611.7 707.5

RORC** 2.56 3.42 3.48

Jack Henry

R&D spending* 170.2 177.7 186.9 207.5 227.3

Gross profit 581 582.4 617.7 629.7 688.6

RORC** 3.63 3.54 3.68

ID

R&D spending* 16.5 22.2 28.4 31 32.8

Gross profit 117 129.3 156.6 195.4 171.5

RORC** 9.49 8.80 6.04

Oracle FSS

R&D spending* 42 34.7 33.2 37.2 36.3

Gross profit 619.6 645.6 688.8 699.1 667.6

RORC** 16.40 20.15 20.11

Infosys

R&D spending* 113.6 117.7 116.1 115.1 118.7

Gross profit 3595 3776 3962 4127 4242

RORC** 34.88 35.06 36.54

TCS

R&D spending* 35.8 41.9 46.2 43.8 43.2

Gross profit 14653 15562 16976 18737 19558

RORC** 474.19 447.18 423.33

* expensed + capitalized|** 2 year delay


INPUT (MUSD) 2017 2018 2019

Total Revenues 735.4 840.9 972.0

Cost of Sales 206.9 229.2 264.5

SG&A Expense 202.8 232.3 277.2

Depreciation 6.4 6.6 21.7

Net Income 139.5 168.9 181.1

Net Receivables 258.6 283.2 384.2

Total Current Assets 430.5 577.2 541.4

PPE 16.4 18.0 67.3

Total Assets 1'326.5 1'703.7 2'322.4

Total Current Liabilities 425.2 592.7 674.2

Long-Term Debt 470.6 745.2 1'074.0

Cash Flow from Operations 299.7 365.1 364.3

Calculations

Day's Sales Receivables Index (DSRI) 1.0 1.0 1.2

Gross Margin Index (GMI) 1.0 1.0 1.0

Asset Quality Index (AQI) 1.0 1.0 1.1

Sales Growth Index (SGI) 1.2 1.1 1.2

Depreciation Index (DEPI) 0.9 1.0 1.1

SG&A Expenses Index (SGAI) 1.0 1.0 1.0

Total Accruals to Total Assets (TATA) -0.1 -0.1 -0.1

Leverage Index (LVGI) 1.1 1.2 1.0

M-Score -2.96 -2.99 -2.48

Source: Company Data, Beneish and Vorst 2020, Team Analysis

INPUT (MUSD) 2017 2018 2019

Total Revenues 735.4 840.9 972.0

EBIT 179.5 219.6 235.4

Current Assets 430.5 577.2 541.4

Total Assets 1'326.5 1'703.7 2'322.4

Current Liabilities 425.2 592.7 674.2

Total Liabilities 947.0 1'404.9 1'877.3

Retained Earnings 624.7 740.7 870.0

Market Value of Equity (MC) 8'412.4 8'011.6 10'521.1

Calculations

Working Capital/Total Assets (Z1) 0.0 -0.0 -0.1

Retained Earnings/Total Assets

(Z2) 0.5 0.4 0.4

EBIT/Total Assets (Z3) 0.1 0.1 0.1

MC /Total Liabilities (Z4) 8.9 5.7 5.6

Total Revenues/Total Assets (Z5) 0.6 0.5 0.4

Z-Score 7.0 4.9 4.6

Appendix 28: M-Score Appendix 29: Z-Score

Z-Score = 1.2 * Z1 + 1.4 * Z2 + 3.3 * Z3 + 0.6 * Z4 + 1.0 * Z5

The Altman Z-Score analysis evaluates a firm's financial health and its

likelihood of filing for bankruptcy within the upcoming years. A Z-Score

below 1.81 indicates high likelihood of bankruptcy, a Z-Score above

2.99 points to a financially sound firm and low likelihood of bankruptcy.

M-Score = -4.84 + 0.92 * DSRI + 0.528 * GMI + 0.404 * AQI + 0.892 * SGI +

0.115 * DEPI - 0.172 * SGAI + 4.679 * TATA - 0.327 * LVGI

The Beneish M-Score is a statistical model to discriminate manipulators

from non-manipulators. The model classifies a firm as a potential ma-

nipulator if the M-Score is higher than -1.78.

Appendix 26: Return on Research Capital Appendix 27: Growth Quality

Average over the last five years

0% 20% 40% 60% 80% 100%

TCS

INFOSYS

ORACLE FSS

ID

JACK

HENRY

TEMENOS

Average Organic Growth

Average Growth from Acquisitions


VALUATION

(MUSD) 2018 2019 2020E 2021E 2022E 2023E 2024E

Software licensing 341.6 378.4 209.4 264.9 337.8 379.6 416.1

SaaS & subscription 31.3 57.9 83.0 109.9 149.6 186.5 226.5

Total software licensing 372.8 436.3 292.3 374.8 487.5 566.1 642.7

Maintenance 314.4 357.7 415.0 435.9 450.1 500.9 550.5

Services 153.7 178.0 178.8 202.7 219.9 234.2 244.4

Total revenues 840.9 972.0 886.1 1'013.4 1'157.5 1'301.3 1'437.5

Cost of sales -229.2 -264.5 -264.3 -287.7 -331.5 -375.9 -418.8

Sales and marketing -144.5 -177.4 -142.7 -172.9 -200.4 -228.5 -256.1

General and administrative -87.7 -99.8 -147.6 -109.1 -124.7 -140.1 -154.8

Other operating expenses -160.6 -194.9 -125.1 -203.0 -231.9 -260.7 -288.0

Total operating expenses -621.3 -736.6 -679.8 -772.7 -888.4 -1'005.3 -1'117.7

Operating profit (EBIT) 219.6 235.4 206.4 240.6 269.1 296.0 319.8

Finance income 3.1 11.1 4.6 5.3 6.0 6.8 7.5

Finance costs -26.5 -34.0 -31.0 -35.5 -40.5 -45.5 -50.3

Profit before taxation (EBT) 196.2 212.6 180.0 210.5 234.6 257.2 277.0

Taxation -27.3 -31.4 -25.2 -37.9 -42.2 -46.3 -49.9

Profit for the year 168.9 181.1 154.8 172.6 192.4 210.9 227.1

EPS 2.43 2.57 2.18 2.43 2.71 2.97 3.20

EBITDA 327.61 366.03 355.38 410.66 436.92 530.22 554.57

(MUSD) 2018 2019 2020E 2021E 2022E 2023E 2024E

Cash and cash equivalents 287.4 152.8 331.3 273.2 204.9 360.4 364.0

Trade and other receiveables 283.2 384.2 331.9 370.7 423.5 456.5 482.8

Other financial assets 6.6 4.4 4.4 4.4 4.4 4.4 4.4

Total current assets 577.2 541.4 667.7 648.4 632.8 821.4 851.2

Property. plant and equipment 18.0 67.3 51.3 44.7 41.6 41.0 41.9

Capitalized lease payments 54.4 - - - - - -

Intangible assets 1'009.9 1'659.8 1'567.9 1'488.2 1'652.0 1'758.8 1'874.8

Trade and other receiveables 11.0 12.3 11.2 12.9 14.7 16.5 18.2

Other financial assets 15.4 22.4 22.4 22.4 22.4 22.4 22.4

Deferred tax assets 17.7 19.2 19.2 19.2 19.2 19.2 19.2

Total non-current assets 1'126.4 1'781.0 1'672.0 1'587.3 1'749.8 1'857.8 1'976.5

Total assets 1'703.7 2'322.4 2'339.7 2'235.6 2'382.6 2'679.2 2'827.7

Trade and other payables 164.9 219.9 219.8 239.2 275.6 312.6 348.3

Other financial liabilities 2.2 2.5 2.5 2.5 2.5 2.5 2.5

Deferred revenues 262.5 287.3 262.0 299.6 342.2 384.7 424.9

Income tax liabilities 38.6 62.9 62.9 62.9 62.9 62.9 62.9

Borrowings 107.8 100.6 93.7 68.3 61.3 65.9 57.4


Provisions 1.3 0.9 1.3 1.5 1.7 1.9 2.1

Total current liabilities 592.7 674.2 642.2 674.0 746.2 830.6 898.2

Trade and other payables - 2.3 2.3 2.5 2.8 3.2 3.6

Other financial liabilities 19.4 12.0 12.0 12.0 12.0 12.0 12.0

Borrowings 706.3 1'074.0 1'000.8 729.2 654.0 704.0 612.7


Provisions 0.3 0.7 0.3 0.3 0.4 0.4 0.5

Deferred tax liabilities 37.0 103.7 103.7 103.7 103.7 103.7 103.7

Retirement benefit obligations 10.3 10.5 10.9 12.4 14.2 16.0 17.6

Total non-current liabilities 812.2 1'203.1 1'129.9 860.0 787.1 839.3 750.0

Share capital 233.2 241.9 241.9 241.9 241.9 241.9 241.9

Treasury shares -264.6 -264.6 -264.6 -264.6 -264.6 -264.6 -264.6

Share premium and other reserves -289.1 -258.4 -238.4 -218.4 -198.4 -178.4 -158.4

Other equity -121.5 -143.7 -143.7 -143.7 -143.7 -143.7 -143.7

Retained earnings 740.7 870.0 972.4 1'086.5 1'214.1 1'354.2 1'504.4

Total equity 298.8 445.1 567.5 701.6 849.3 1'009.4 1'179.5

Total liabilities and equity 1'703.7 2'322.4 2'339.7 2'235.6 2'382.6 2'679.2 2'827.7

Appendix 30: Projected Income Statement

Appendix 31: Projected Balance Sheet


(MUSD) 2018 2019 2020E 2021E 2022E 2023E 2024E

Profit before taxation 195.4 212.6 180.0 210.5 234.6 257.2 277.0

Adjustments:

PPE depr. inta asset amor and imp of fin assets 95.7 131.9 149.0 170.0 167.8 234.2 234.8

Loss on retirement / disposal of PPE 0.0 0.3 0.0 0.0 0.0 0.0 0.0

Cost of share options 38.0 39.5 20.0 20.0 20.0 20.0 20.0

Forex loss on non-operating activities -5.5 -10.2 0.0 0.0 0.0 0.0 0.0

Interest expenses net / Net Financial Costs 11.8 20.3 20.6 23.6 26.9 30.2 33.4

Net loss from financial instruments 2.1 6.7 0.0 0.0 0.0 0.0 0.0

Other finance costs 10.6 4.9 5.8 6.6 7.6 8.5 9.4

Other non-cash items 0.3 0.9 0.0 0.0 0.0 0.0 0.0

Changes in:

Trade and other receivables -35.3 -57.5 53.4 -40.4 -54.5 -34.9 -28.0

Trade and other payables/ provisions/ ret ben obl 27.2 9.3 0.2 21.4 38.8 39.4 38.0

Deferred revenues 24.6 5.7 -25.4 37.6 42.6 42.5 40.3

Income taxes paid -20.9 -17.2 -25.2 -37.9 -42.2 -46.3 -49.9

Net cash generated from operating activities 344.2 347.1 378.4 411.4 441.6 550.9 575.0

Purchase of PPE -8.3 -10.0 -8.8 -10.0 -11.4 -12.9 -14.2

Disposal of PPE 0.0 0.4 0.0 0.0 0.0 0.0 0.0

Purchase of intangible assets -3.7 -4.0 -3.6 -4.2 -4.8 -5.3 -5.9

Capitalized development costs -52.6 -64.6 -60.8 -69.5 -79.4 -89.3 -98.7

Acquisitions of subsidiary. net of cash acquired -242.5 -573.1 32.1 0.0 -232.9 -232.9 -232.9

Escrow deposit on acquisition 0.0 -21.0 0.0 0.0 0.0 0.0 0.0

Investment in equity securities -15.0 0.0 0.0 0.0 0.0 0.0 0.0

Acquisition of long term loan instruments 0.0 -6.0 0.0 0.0 0.0 0.0 0.0

Settlement of financial instruments -3.9 -4.2 0.0 0.0 0.0 0.0 0.0

Interest received 1.8 1.2 1.4 1.6 1.9 2.1 2.3

Net cash used in investing activities -324.2 -681.3 -39.6 -82.1 -326.7 -338.3 -349.3

Dividend paid -46.1 -52.4 -52.4 -58.5 -64.7 -70.8 -77.0

Acquistion of treasury shares -205.6 0.0 0.0 0.0 0.0 0.0 0.0

Proceeds from borrowings 200.0 607.6 0.0 0.0 0.0 0.0 0.0

Repayments of borrowings -0.1 -431.0 -80.0 -297.1 0.0 0.0 0.0

Proceeds from issuance of bond 174.4 219.0 0.0 0.0 96.3 232.9 52.7

Repayment of bond 0.0 -100.7 0.0 0.0 -178.5 -178.3 -152.6

Payment of lease liabilities 0.0 -16.3 0.0 0.0 0.0 0.0 0.0

Interest payments -12.7 -21.7 -22.0 -25.2 -28.8 -32.4 -35.8

Payment of other financing costs -9.0 -5.8 -5.8 -6.6 -7.6 -8.5 -9.4

Net cash generated from financing activities 101.0 198.8 -160.2 -387.5 -183.2 -57.1 -222.0

Effect of exchange rate changes -1.4 0.8 0.0 0.0 0.0 0.0 0.0

Net increase in cash and cash equivalents 119.6 -134.7 178.6 -58.1 -68.3 155.5 3.6

Cash and cash equivalents at beginning of year 167.9 287.4 152.8 331.3 273.2 204.9 360.4

Cash and cash equivalents at end of year 287.4 152.8 331.3 273.2 204.9 360.4 364.0

ITEM ASSUMPTION

Software licensing

Most affected by covid-19 crisis. Revenues of 2020 are postponed rather than cancelled, leading to a strong increase in

2021 and 2022, especially in Europe. This rebound effect is slightly slowed down by banks changing from licensing to SaaS,

meaning less agressive revenue recognition.

SaaS & subscription

More widely adapted in the Americas than in the other regions. With the acquisition of the American SaaS leader Kony in

2019, we assume strong growth in the Americas until 2023. Because of the strategy mismatch (Temenos wants to win Ameri-

can Top100 banks and focuses on SaaS, which tier 1& 2 banks hesitate to adopt), growth will steadily slow down afterwards.

The other three regions profit less or delayed in time from the shift towards SaaS and all show similar patterns.

Maintenance Not directly predicted, results from predicting all other revenue segments.

Services Percentage of total revenues is expected to decrease 1 percentage point every year. This is based on CFO Spiliopoulos'

comments during the conference call, that Temenos tries to outsource Services to Partners, as it is a lower margin business.

Total revenues

Where no significant changes in market characteristics or effects of the covid-19 crisis are expected, we assume total reve-

nues in that region to continue growing at the median total growth rate (last five years) in the short term. Taking the median

still allows for some bought revenue from acquisitions, while eliminating excessive inorganic growth from big M&As.

(MUSD) GLOBAL 2018 2019 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E

Software licensing 342 378 209 265 338 380 416 448 474 496 514 531

SaaS & subscription 31 58 83 110 150 186 227 269 314 361 409 462

Total software licensing 373 436 292 375 487 566 643 717 788 857 922 993

Maintenance 314 358 415 436 450 501 550 590 626 653 667 680

Services 154 178 179 203 220 234 244 249 250 246 238 228

Total revenues 841 972 886 1'013 1'157 1'301 1'437 1'556 1'664 1'756 1'827 1'901

Appendix 32: Projected Cash Flow Statement

Appendix 33: Revenue Forecast


(MUSD) EUROPE 2018 2019 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E




Maintenance 140 165 167 168 160 174 185 195 206 213 220 227

Services 68 75 60 68 75 78 79 78 76 73 70 66

Total revenues 372 410 297 342 393 433 463 487 506 521 537 553

(MUSD) AMERICAS 2018 2019 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E




Maintenance 52 63 79 91 108 129 150 163 173 180 177 172

Services 29 41 52 60 68 76 83 88 90 91 89 86

Total revenues 160 221 256 302 357 422 489 548 603 651 684 718

(MUSD) MEA 2018 2019 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E




Maintenance 58 66 83 85 88 91 94 97 101 104 107 110

Services 27 28 34 34 34 33 33 32 31 30 29 28

Total revenues 148 151 166 172 179 185 192 199 206 214 221 229

(MUSD) APAC 2018 2019 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E




Maintenance 64 63 86 92 94 108 122 135 146 156 163 171

Services 29 35 34 39 43 47 50 52 52 52 50 48

Total revenues 161 190 167 197 229 261 293 323 349 370 385 401

(MUSD) BY REGION 2019 2024E 2029E

Europe 42% 32% 29%

Americas 23% 34% 38%

MEA 15% 13% 12%

APAC 20% 20% 21%


ITEM ASSUMPTION

New technology market

Covid-19 setback in 2020 and 2021. Afterwards banks continue to invest more in new technology and outsource

their IT due to high pressure of digitalization. Growing percentage of total bank IT spending going away from

legacy systems into new technology until 2028 (2026 in the Americas due to this market being more advanced in

the adaption of new technology).

Scaling down factor

73.1% is used as the factor to scale down total bank IT spending excluding legacy systems in order to obtain the

adressable market for products offered by Temenos. This is the ratio of Temenos' reported total adressable market

in 2019 to the total bank IT spending on new technology in that year.

Third-party banking software

market

Calculated using percentage of total adressable (new technology) market. Until 2022 constant share due to

covid-19 setback, banks do not change to outsourcing during crisis. Temenos’ predictions of future third-party

banking software market imply a year on year growth of about 0.25 percentage points (share of third-party grows

+0.25pp every year). We apply that growth as of 2023 moving forward.

(MUSD) 2018 2019 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E

Bank total IT investments 261'000 270'000 284'000 297'000 309'000 321'746 335'042 348'459 362'439 377'005 391'493 406'570

Bank total IT investments excl.

legacy

(New technology market)

66'190

77'950

81'980

85'740

92'420

107'237

123'131

137'224

152'256

163'043

176'573

183'473

Scaled down to Temenos

products (73.1%)

48'401

57'000

59'947

62'696

67'581

78'416

90'038

100'343

111'335

119'223

129'117

134'163

Third-party banking software

market 10'000 13'000 13'672 14'299 15'413 18'080 20'985 23'638 26'506 28'682 31'385 32'946

Temenos total revenues

841

972

886

1'013

1'157

1'301

1'437

1'556

1'664

1'756

1'827

1'901

Temenos market share 8.41% 7.48% 6.48% 7.09% 7.51% 7.20% 6.85% 6.58% 6.28% 6.12% 5.82% 5.77%

Source: Celen, Deloitte, WSJ, Team Analysis

(MUSD) BY SEGMENT 2019 2024E 2029E

Software licensing 39% 29% 28%

SaaS & subscription 6% 16% 24%

Total software licensing 45% 45% 52%

Maintenance 37% 38% 36%

Services 18% 17% 12%

Appendix 34: Banking Software Market Forecast


0%

10%

20%

30%

Europe Americas MEA APAC

Average Revenue Growth

2015 – 2019

Total Organic

-15%

-5%

5%

15%

25%

Revenue Growth

Organic Bought

REVENUE GROWTH (%) 2017 2018 2019

Total Europe 7.1% 5.6% 10.3%

Organic Europe (approximated) 7.1% 5.6% 5.7%

Total Americas 38.7% 18.1% 38.6%

Organic Americas (approximated) 38.7% 18.1% 23.0%

Total MEA 10.9% 37.5% 1.5%

Organic MEA (approximated) 4.6% 37.5% -1.2%

Total APAC 27.0% 14.8% 18.1%

Organic APAC (approximated) 15.9% 14.8% 7.6%


2019 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E

Revenue growth (%) 15.6 -8.8 14.4 14.2 12.4 10.5 8.2 6.9 5.5 4.1 4.1

COS % Sales 27.2 29.8 28.4 28.6 28.9 29.1 28.1 27.1 26.1 25.1 24.1

Depreciation % PPE_t-1 29.9 36.7 32.4 32.4 32.4 32.4 32.4 32.4 32.4 32.4 32.4

Amortization % (intangibles_t-1 -

goodwill_t-1) 29.1 21.4 31.4 31.4 31.4 31.4 31.4 31.4 31.4 31.4 31.4

Sales & marketing % Sales 18.3 16.1 17.1 17.3 17.6 17.8 18.1 18.3 18.6 18.8 19.1

General & administrative % Sales 10.3 16.7 10.8 10.8 10.8 10.8 10.8 10.8 10.8 10.8 10.8

Other operating expenses % Sales 20.0 14.1 20.0 20.0 20.0 20.0 20.0 20.0 20.0 20.0 20.0

Finance income % Sales 1.1 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5

Finance costs % Sales 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5

Finance costs net % Sales 2.4 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0

Tax rate % Sales 14.8 14.0 18.0 18.0 18.0 18.0 18.0 18.0 18.0 18.0 18.0

Current trade & other receivables % Sales 39.5 37.5 36.6 36.6 35.1 33.6 32.1 30.6 29.1 27.6 26.1

Current trade & other payables % COGS 83.2 83.2 83.2 83.2 83.2 83.2 83.2 83.2 83.2 83.2 83.2

Deferred revenues % Sales 29.6 29.6 29.6 29.6 29.6 29.6 29.6 29.6 29.6 29.6 29.6

Provisions % Sales 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1

Retirement benefit obligations % Sales 1.1 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2

Purchase of PPE % Sales 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0

Purchase of intangibles % Sales 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4

Capitalized development costs % Sales 6.7 6.9 6.9 6.9 6.9 6.9 6.9 6.9 6.9 6.9 6.9


(MUSD) 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E

Profit for the year 154.8 172.6 192.4 210.9 227.1 255.4 283.3 309.8 333.6 358.9

+ Depreciation & Amortization 149.0 170.0 167.8 234.2 234.8 250.1 261.9 274.0 285.4 296.0

+ Cost of share options adjustment 20.0 20.0 20.0 20.0 20.0 20.0 20.0 20.0 20.0 20.0

+ Finance costs 26.4 30.2 34.5 38.8 42.8 46.3 49.6 52.3 54.4 56.6

+ Other cash adjustments 1.4 1.6 1.9 2.1 2.3 2.5 2.7 2.9 3.0 3.1

- Changes in NWC -27.2 -18.4 -26.5 -46.6 -50.0 -34.5 -33.8 -31.7 -28.1 -29.8

- CAPEX 40.0 85.3 330.4 342.3 353.4 363.0 371.7 379.2 384.8 391.0

FCFF 338.8 327.5 112.7 210.4 223.6 245.9 279.5 311.6 339.8 373.5

FCFF (discounted*) 336.8 302.4 96.7 167.7 165.6 169.2 178.6 185.0 187.5 191.4

Terminal Value (discounted*) 5’674.8

Enterprise Value 7’655.7

Cash & cash equivalents 331.3

Debt 1’094.6

Equity Value 6’892.5

Number of shares outstanding (M) 71.0

Share Price (USD) 97.14

Exchange rate USD/CHF (30.11.2020) 0.91

Share Price (CHF) 88.20

*discounted to November 30, 2020, with a WACC of 7.63%


Appendix 37: Free Cash Flow to the Firm

Appendix 36: Valuation Assumptions

Appendix 35: Organic Revenue Growth


REGION

AVG REAL

GDP GROWTH WEIGHTS

Europe 1.82% 29.1%

Americas 1.93% 37.8%

MEA 2.61% 12.1%

APAC 2.60% 21.1%

Weighted real terminal

growth rate 2.12%

Long-term inflation expec-

tation 2%

Weighted Terminal Growth 4.12%

Source: OECD, Team Analysis


Sensitivity Analysis I

TERMINAL GROWTH RATE

0.63% 3.37% 3.62% 3.87% 4.12% 4.37% 4.62% 4.87%

WA

CC

6.13% 121.27 131.91 144.90 161.11 181.93 209.62 248.28

6.63% 101.09 108.32 116.87 127.11 139.61 155.22 175.26

7.13% 86.30 91.48 97.45 104.41 112.64 122.50 134.54

7.63% 75.00 78.85 83.22 88.20 93.96 100.66 108.58

8.13% 66.08 69.04 72.34 76.05 80.26 85.06 90.60

8.63% 58.88 61.20 63.76 66.61 69.79 73.36 77.42

9.13% 52.94 54.80 56.83 59.06 61.53 64.27 67.34

9.63% 47.96 49.47 51.11 52.90 54.85 57.01 59.39

Sensitivity Analysis II

EBIT MARGIN PERCENTAGE POINTS ADDED

0.63% - 3 - 2 - 1 0 + 1 + 2 + 3

REV

EN

UE G

RO

WTH

PER

-

CEN

TAG

E P

OIN

TS

AD

DED

+ 4 95.42 106.70 117.98 129.26 140.53 151.81 163.09

+ 3 86.60 96.98 107.37 117.75 128.14 138.52 148.90

+ 2 78.44 88.00 97.56 107.11 116.67 126.23 135.79

+ 1 70.90 79.70 88.49 97.28 106.08 114.87 123.67

0 63.94 72.03 80.12 88.20 96.29 104.38 112.47

-1 57.51 64.95 72.39 79.82 87.26 94.70 102.14

-2 51.58 58.42 65.26 72.09 78.93 85.76 92.60

- 3 46.12 52.40 58.68 64.96 71.24 77.53 83.81


Appendix 39: Management Guidance Compliance

Upper bound of management guidance range considered

RELATIVE DEVIATION

FROM GUIDANCE 2015 2016 2017 2018 2019

Total software licensing

revenue (TSLR) 5.9% 4.6% 9.8% -1.6% -2.6%

TSLR growth 9.7% 31.5% 55.9% -2.9% -14.1%

Total revenues 1.6% 3.4% 6.9% 0.1% -1.9%

Revenue growth -16.2% 23.8% 45.4% 8.9% -12.6%

EBIT 0.0% 0.8% 4.0% 2.4% 0.9%

Growth 0.0% 5.4% 29.8% 17.3% 6.0%

EBIT-margin -1.4% -2.0% -2.3% 1.3% 2.2%

Average deviation

(excl. growth) 1.5% 1.7% 4.6% 0.6% -0.4%

Lower bound of management guidance range considered

RELATIVE DEVIATION

FROM GUIDANCE 2015 2016 2017 2018 2019

Total software licensing

revenue (TSLR) 10.3% 9.5% 14.5% 2.7% 1.6%

TSLR growth 25.0% 97.2% 133.8% 33.1% 10.5%

Total revenues 5.9% 6.9% 10.4% 2.7% 0.6%

Revenue growth 7.0% 81.5% 113.3% 41.6% 3.7%

EBIT 4.7% 3.6% 6.4% 4.4% 2.5%

Growth 31.5% 28.3% 57.4% 35.9% 18.1%

EBIT-margin -1.4% -2.0% -2.3% 1.6% 2.2%

Average deviation

(excl. growth) 4.9% 4.5% 7.3% 2.9% 1.7%

Appendix 40: Sensitivity Analysis

Appendix 38: Terminal Growth Rate

Expected real GDP growth (annual percentage change)

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

2020 2028 2036 2044 2052 2060

APAC MEA EUROPE AMERICAS

SENSITIVITY

SCENARIO

NUMBER OF

SCENARIOS PERCENTAGE

Total 56 100%

Buy 9 16%

Hold 11 20%

Sell 36 64%

SENSITIVITY

SCENARIO

NUMBER OF

SCENARIOS PERCENTAGE

Total 56 100%

Buy 6 11%

Hold 15 27%

Sell 35 63%


EV/SALES EV/EBITDA

PEERS 2017 2018 2019 2020E 2021E 2022E 2017 2018 2019 2020E 2021E 2022E

Jack Henry 7.20 7.12 6.52 6.26 5.84 5.45 20.32 21.78 20.02 20.46 18.19 16.49

Oracle FSS 6.48 5.92 6.04 5.59 5.09 4.60 16.21 13.69 13.17 11.28 10.47 9.86

Intellect Design 1.83 1.37 1.47 1.37 1.22 1.06 27.44 15.57 28.04 6.93 5.88 4.33

Median 6.48 5.92 6.04 5.59 5.09 4.60 20.32 15.57 20.02 11.28 10.47 9.86

Temenos Financials (MUSD)

Sales 735 841 972 886 1'013 1'157 735 841 972 886 1'013 1'157

EBITDA 278 328 366 355 411 437 278 328 366 355 411 437

EV 4'769 4'978 5'870 4'950 5'158 5'321 5'659 5'102 7'330 4'009 4'298 4'307

Cash 168 287 153 331 273 205 168 287 153 331 273 205

Debt 440 814 1'175 1'095 797 715 440 814 1'175 1'095 797 715

Equity Value per 30.11.2020 4'496 4'452 4'848 4'187 4'634 4'811 5'387 4'575 6'308 3'246 3'774 3'796

Shares outstanding 69 69 71 71 71 71 69 69 71 71 71 71

Share Price (USD) 65.09 64.29 68.33 59.00 65.31 67.80 77.99 66.07 88.90 45.75 53.19 53.50

Exchange Rate 0.97 0.98 0.97 0.91 0.93 0.96 0.97 0.98 0.97 0.91 0.93 0.96

Share Price (CHF) 63.42 63.10 66.14 53.58 60.74 65.09 75.99 64.85 86.05 41.63 49.46 51.36

Source: Refinitv Eikon, Team Analysis

REFERENCES

1 T. Spiliopoulos. CFO at Temenos. (CFA Research Challenge Kickoff Switzerland, October 1st 2020 & Conference Call, November 12th 2020)

2 Sustainability Accounting Standards Board (SASB). Sustainable Industry Classification System (SICS) (2018). Available from: https://www.sasb.org/wp-con-

tent/uploads/2018/11/Software_IT_Services_Standard_2018.pdf

3 Professional Network Platform LinkedIn. https://www.linkedin.com

4 B. Jaccottet. Head of Business Development & Core Banking Transformation at PostFinance Ltd. (Private interview on October 6th 2020, Switzerland)

5 F. Berg, J.F. Kölbel, R. Rigobon. (2020) Aggregate Confusion: The Divergence of ESG Ratings. MIT Sloan School Working Paper 5822-19 (2019). Available from:

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3438533

6 G. V. Müller. Economic Editor at Neue Zürcher Zeitung (NZZ), focused on Technology and Medtech. (Private interview on October 22nd 2020, Switzerland)

7 PwC. (2018) Executive Compensation & Corporate Governance Insights 2018 – Part 2. Research and insights. Available from: https://www.pwc.ch/exco-

insights-2018

8 C. Honegger. Head Innovation & Technical Transformation at Credit Suisse. (CFA Research Challenge Webinar on October 26th 2020, Switzerland)

9 Deloitte. (2020) Banking Regulatory Outlook 2020. Perspectives. Available from: https://www2.deloitte.com/us/en/pages/regulatory/articles/banking-regula-

tory-outlook.html

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11 S. Kilmer, J. Burson. (2019) Temenos to Acquire Kony: So What?. GonzoBanker. Available from: https://gonzobanker.com/2019/09/temenos-to-acquire-kony-

so-what/

12 McKinsey. (2019) The last pit stop? Time for bold late-cycle moves. McKinsey Global Banking Annual Review 2019. Available from: https://www.mckin-

sey.com/industries/financial-services/our-insights/global-banking-annual-review-2019-the-last-pit-stop-time-for-bold-late-cycle-moves

13 Deloitte. (2019) 2020 banking and capital markets outlook. Insights. Available from: https://documents.deloitte.com/insights/2020bankingoutlook

14 R. Toplensky. (2019) Technology Is Banks’ New Battleground. The Wall Street Journal. Available from: https://www.wsj.com/articles/technology-is-banks-new-

battleground-11568114378

15 V. Luttig. (2020) Bank lending to firms surges to a 13-year high as COVID-19 leads to UK businesses borrowing more. Available from:

https://www.ey.com/en_uk/news/2020/08/bank-lending-to-firms-surges-to-a-13-year-high-as-covid-19-leads-to-uk-businesses-borrowing-more

16 Committee on the Global Financial System. (2018) Structural changes in banking after the crisis. Available from: https://www.bis.org/publ/cgfs60.pdf

17 M. Heim. (2020) Revolut vermeldet hohes Wachstum – auch beim Verlust. Das Wirtschaftsportal von Handelszeitung und BILANZ. Available from:

https://www.handelszeitung.ch/unternehmen/revolut-vermeldet-hohes-wachstum-auch-beim-verlust

18 L. Ghaleb. Senior Manager at BearingPoint. (CFA General Research Challenge at University of Lausanne, Speaker on forensic accounting on October 22nd

2020, Switzerland)

19 M. Hirsh. (2020) Watch Out Wall Street: Biden May Be Coming for You. Foreign Policy. Available from: https://foreignpolicy.com/2020/11/13/watch-out-wall-

street-joe-biden-financial-banking-regulation/

Appendix 41: Multiples Analysis

2020 cfa research challenge report

Documents