Itiviti Group Holding Q Investor Presentation

Transcription

1 Itiviti Group Holding Q Investor Presentation Torben Munch, CEO Tony Falck, CFO 12 May 2016

2 Agenda 1. Introduction 2. Itiviti in Brief 3. Financial Update 4. Growth Outlook 2

3 Update on recent events Successful completion of integration As a major step in the integration of Orc and CameronTec, in April we announced the combination of the formerly separate legal entities under one combined company, Itiviti In addition to numerous operational synergies it enables us to track our business as one through a consolidated reporting structure Strategy already validated by a number of new opportunities and wins The creation of Itiviti is a step-change, enabling us to address new markets, segments and asset classes Decision to proceed with group integration driven by strong strategic logic, synergies and market demand for a complete offering We see strong evidence in the form of new business (multi-year contract) wins, supporting the rationale for creating Itiviti New contract for development of innovative foreign exchange solution New flagship client for Itiviti s OMS product New contract for Itiviti s new SOR and Systematic Internalizer Strong momentum across the business Customers are excited about our rapidly evolving product suite and its supporting services Itiviti is a unique alternative to both in-house solutions and our competition, based around the buy-and-build concept 3

4 New consolidated Itiviti reporting structure On November 30 th, 2015 Itiviti AB, the owner of Orc Group Holding AB, acquired 100% of the shares in CameronTec and its subsidiaries ( CameronTec ) from the Luxembourg based Cidron Delfi S.a.r.l. Cidron Delfi S.à r.l. The quarterly report for Q as well as the 2015 annual report disclosed on our website on April 29 th included financials for the Orc stand-alone business only. Itiviti AB On March 30 th, 2016 Itiviti Group AB acquired CameronTec from Itiviti AB. This is a transaction under common control, not subject to IFRS 3 rules. Therefore, assets and liabilities in CameronTec have not been revalued. Bond Itiviti Group Holding AB (publ) Comparative figures have however been restated as if CameronTec had been part of the Itiviti Group during the comparison period. Bank credit facilities Itiviti Group AB To reflect the new combined group, the entities Orc Group Holding AB and Orc Group AB have been re-named Itiviti Group Holding AB and Itiviti Group AB, respectively. CameronTec Subsidiaries Orc Group Subsidiaries Tbricks Subsidairies 4

5 Itiviti in Brief

6 Transformation into an integrated provider of trading technology solutions for the future 2012: Two niche companies with limited synergies Change: Accelerated by acquisitions 2016: Integrated provider of complete trading technology solutions Specialised in trading solutions for market makers and proprietary traders Leading technology platform but hampered by legacy technology issues Focused entirely on high quality FIX engine product offering Strategic shift to larger and higher tier customers Broadening of offering towards customer driven business Acquisition of new best-in-class technology platform (Tbricks) Expansion to adjacent business areas such as testing and onboarding Successful add-on acquisitions (Greenline, Lasalletech, E2E) Significant growth of core FIX engine offering State-of-the-art open architecture with flexible, app-based platform Clear synergies between the businesses Enables addressing new market segments not available to either party standalone Complete solution for new market structure Built on Tbricks and Catalys platforms Including new generation OMS Asset class expansion 6

7 A comprehensive trading offering for the sell-side Trading firm Trading firm Unique combination: Best-in-class trading applications Asset Managers Trading system Trading system Fully compliant execution and order management infrastructure High performance: All solutions built for maximum performance Flexibility & speed musthaves in new environment Record Keeping Monitoring Reporting Regulatory Framework (MiFID II) High Touch Execution FIX Connectivity / Onboarding Smart Order Router Pre-trade risk Exchange connectivity Trading Managed Services 7

8 with a complete suite of solutions Itiviti s platform consists of a number of solutions that can be combined seamlessly. All solutions are supported by Itiviti s dedicated services team, ensuring smooth and reliable installation, maintenance and integration. Trading Execution Risk management & compliance Market & liquidity access FIX infrastructure Click trading Client connectivity Regulatory reporting Direct Market Access FIX Engine Market making Sales trading Market abuse Broker connectivity Monitoring Spread trading Trade decision support Pre trade risk Smart Order Router Testing Algorithmic trading Pre and post trade Real time risk & PNL Systematic Internaliser Routing Basket trading reporting Risk and PNL reports Market data Integration Pairs trading Program trading Algo monitoring Broker network Quoting Pricing Hedging Offered as a managed service or deployed at customer site supported by tailored professional services 8

9 Itiviti has the tools for customers to prosper in the new market structure Pre MiFID II Post MiFID II Trad. brokerage (telephone) LIS venues Trad. Brokerage (<LIS) Trad. Brokerage (>LIS) Cont. auction Liquidity access Lit trading venues (alternative model) Liquidity access Systematic Internalisers Dark pools Dark pools (<LIS) Lit trading venues (traditional continuous order books) Covered by regulation: Equities only Lit trading venues (traditional) Equities, derivatives and fixed income Note: LIS = large in scale 9

10 Global footprint with nearly 400 staff in 13 locations We have highly skilled and cost efficient offshore resources based in St. Petersburg and Mumbai Americas Chicago: 53 New York: 3 Toronto: 1 We have among the largest R&D departments in the market, with 150+ software engineers, and a substantial global product management team EMEA Stockholm: 111 St. Petersburg: 70 London: 37 Milan: 9 Paris: 3 Frankfurt: 1 APAC Mumbai: 54 Hong Kong: 25 Sydney: 8 Tokyo: 4 Proprietary operations in low-cost areas 10

11 Well-diversified growing platform with significant recurring revenue Accelerating growth profile and positive margin developments not yet yielding full potential of unified group SEK MM % Primarily recurring revenue % CAGR: 13% % % 92% Recurring Non-recurring % 45% 46% 24% 314 1% % Geographically diversified revenue 24% 22% 54% EMEA APAC Americas LTM Revenue EBITDA EBITDA Margin 0 Note: Financials are in reported FX rates. Revenue does not include the effect of a fair value adjustment resulting from the acquisition of Tbricks. EBITDA as defined in bond terms. LTM = Last Twelve Months. LTM as of Q

12 Leading position in an attractive, large and growing market Operating in an attractive market set for structural change, in which Itiviti has the leading offering MiFID II and Dodd-Frank - Regulatory complexity drives need for compliance and risk reporting, including derivatives and fixed income - Increasing demand for investor transparency Regulation: MiFID II & Dodd-Frank Globalization & electronification - Diversification of investment / trading strategies - Globalization of asset management - Increased automation of trading Demand for outsourced solutions Globalization & electronification Demand for open, flexible software partners - 3 rd party software spending increasing as markets become more advanced - Banks seek partners to combine buy-and-build Demand for open, flexible software partners Outsourcing capabilities - IT spending shifting steadily from in-house to outsourced with an increase of managed applications - Managed solutions provides significant upsell opportunities as customer base adapts offering 12

13 Global innovation leadership leveraged further in new combination Game-changing opportunity Pioneers in options trading With MiFID II and new regulations the entire landscape is changing Itiviti was early in building a unique solution for the complexities facing our customers Ahead of the market on new regs Market leaders since 1987 First electronic options trading system First automated server based trading platform 2003 Voted prop traders ISV of the year 2015 State-of-the-art technology App based architecture gives endless possibilities Platform for growth Shaping the industry Thought leaders in the industry Early adopter of what has become language of the financial markets (FIX) Flexibility is a requirement for future success Dedicated market structure team with long capital markets experience 13

14 Well-defined strategy based on a set of key pillars Expand addressable market significantly Increase focus on higher tier customers Expand across asset classes Leverage regulatory opportunity Combination of Orc and CameronTec enables targeting of new customer groups Flexible modular technology allows for tailored solutions, open for full integration, with the option of outsourced management Itiviti targets larger sell-side institutions across the globe, who can fully benefit from our comprehensive offering Recent customer wins validate our strategy Built on a heritage in listed derivatives and equities, many Itiviti solutions are now truly asset class agnostic Sophisticated modern platform enables broadening of focus, evidenced by expansion into foreign currency Uniquely positioned to benefit from regulatory changes, with new flagship offering targeting MiFID II in the first instance Competing legacy platforms are unable to cater to new and constantly evolving requirements Itiviti offers a truly comprehensive trading solution for the sell-side 14

15 New offerings will significantly enhance value proposition New products positively received by the market. Customers signed up pre-launch, and the pipeline is growing Product Overview Client Feedback Itiviti Analyst OMS / Flow FX expansion SOR / Systematic Internalizer Solution designed to make banks compliant with MAR and MiFID II requirements Target customers: sell-side banks Q launch Next generation OMS infrastructure supporting full order flow value chain Target customers: sell-side banks Q launch EMS and DMA solution extended to FX market Target customers: sell-side banks and trading firms 2017 launch Low latency SOR for flow and trading exchange traded instruments Target customers: sell-side banks Q launch Long-term commitment from pilot clients Customers attracted to Itiviti s single broad integrated platform, based on modern flexible technology Leading financial institutions have signed long-term contracts, realizing the complexity of building a proprietary integrated platform in-house Itiviti s product expansion aligned with drive for system consolidation 15

16 Multiple clearly defined avenues for further expansion Trading Take market share from other vendors Win over in-house solutions Managed Services Capitalise on increasing demand for fully outsourced solutions Broker/Flow New addressable market through creation of Itiviti Challenge incumbents with superior solution built for the future FIX infrastructure Continue strong sales growth of enterprise solutions Capitalise on spreading of FIX across asset classes DMA/Sponsored access Client acquisition via broker channel Sell enterprise DMA solution to broker/clearers Regulatory compliance & analytics New category emerging from new regulation Gain product leadership with best in class solution Asset class expansion Leverage modular technology to provide comprehensive solutions for e.g. FX trading 16

17 Financial Update

18 Positive license trend continuing... Revenue (MSEK) Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 License fees Professional Services License revenue grew by +10% compared to the same quarter last year, and now represents 95% of total revenue. Revenue in APAC grew by +25% between Q and Q1 2016, driven mainly by demand in China. Professional services were largely flat vs. the same quarter last year, and in line with historical seasonality, as a number of projects were completed in Q4. The foreign exchange effect was previously favorable but has in the last two quarters been somewhat negative. New deals related to OMS and FX have longer lead times until revenue is recognized. 18

19 ...with reduced cost level... Adjusted Cost (MSEK) Adjusted cost reduced by 7.4% vs. Q Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Positive effect from foreign exchange rate development, lower bad debt provisions and office synergies. ~2 MSEK for resources dedicated to Managed Services have been shifted to capex. Operations well invested and set to scale on expected revenue growth. 19

20 ...resulting in EBITDA YoY growth of 31% and expanding margin Adjusted EBITDA (MSEK) % 50% 46% 80 42% 44% Q1 15 Q2 15 Q3 15 Q4 15 Q % 50% 40% 30% 20% 10% 0% EBITDA growth of 21 MSEK (+31%) compared to Q Revenue growth supported by beneficial foreign exchange development. 8 percentage point margin uplift since Q

21 Strong YoY improvement in underlying cash flow generation trend EBITDA - Capex (MSEK) % 40 14% % 49 19% 18% % 25% 20% 15% 10% 5% EBITDA-Capex grew by 9 MSEK (41%) between Q and Q The quarter includes positive effects from foreign exchange movements. Positive cash flow effect somewhat reduced by investments in new product development and more capacity for Managed Services. Cumulative EBITDA-Capex of 147 MSEK over the last 12 months. 0 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 0% Q cash flow generation comparatively high due to seasonal effects on personnel cost. 21

22 Strong operational cash flow generation and significant available liquidity Analysis of cash position (MSEK) Cash beginning of period EBITDA-Capex (incl NRIs excl FX) 27-3 Paid interest -6-3 Income tax paid -4-6 Change in working capital Subtotal Amortization of debt Change in overdraft facility 29 0 Cash from acquisition of subsidiaries and other items 29 Cash flow in period Cash end of period Net Debt Net debt / EBITDA - Leverage ratio (<3.0x)* 2.0x EBITDA to Debt service - Interest cover ratio (>2.0) * 4.3x *In accordance with definitions in bond terms Q1 16 Q1 15 EBITDA-Capex after NRIs improved to +27 MSEK. Q was affected by redundancy costs. Interest on the bond is paid twice a year, in April and October. The negative change in working capital for Q was expected as a consequence of yearly invoicing in advance. The positive change in Q was a combination of large NRI:s and postponed yearly invoicing. Bank loans were repaid in March using cash and existing credit facilities. Available liquidity, including unutilized credit facility, amounts to 98 MSEK. Net debt primarily improved from a shareholder contribution. Large headroom on the bond covenants. The amortization of debt will lead to financial net gains and positive cash flow effects. 22

23 Growth Outlook

24 We have a clearly defined path for continued growth Trading Take market share from other vendors Win over in-house solutions Managed Services Capitalise on increasing demand for fully outsourced solutions Broker/Flow New addressable market through creation of Itiviti Challenge incumbents with superior solution built for the future FIX infrastructure Continue strong sales growth of enterprise solution Capitalise on spreading of FIX across asset classes Asset class expansion Regulatory compliance & analytics Leverage modular technology to provide comprehensive solutions for e.g. FX trading New category emerging from new regulation Gain product leadership with best in class solution DMA/Sponsored access Client acquisition via broker channel Sell enterprise DMA solution to broker/clearers 24

25 Growing and highly profitable current operations... Trading Take market share from other vendors Win over in-house solutions FIX infrastructure Continue strong sales growth of enterprise solution Capitalise on spreading of FIX across asset classes DMA/Sponsored access Client acquisition via broker channel Sell enterprise DMA solution to broker/clearers Current markets where Itiviti has the leading offering Sizable and growing market Continued investments into existing solutions Strong EBITDA margin at around 50% Business further streamlined through Q1 integration activities 25

26 paired with new wins to further accelerate growth Large expansion investments in hardware capex New launches planned in Q Evidence of strategic fit as tier 2 banks have directly signed up as managed customers Managed Services Capitalise on increasing demand for fully outsourced solutions Broker/Flow New addressable market through creation of Itiviti Challenge incumbents with superior solution built for the future Investment into new High Touch solution (OMS, SOR, SI) Tier 2 European banks signed up as first clients, replacing incumbent solutions. Validation of strategy gives comfort around significant R&D effort in 2016 First part of Itiviti Analyst (MAR) to be launched in July 2016 Strong pipeline of customers Regulatory compliance & analytics New category emerging from new regulation Gain product leadership with best in class solution Asset class expansion Leverage modular technology to provide comprehensive solutions for e.g. FX trading New solution built on our flexible platform enables development synergies Large contract signed with partner client to build and deliver FX DMA solution 26

27 Appendix

28 Stable base of costs and capex Cost and Capex (MSEK) Total cost and capex remained unchanged compared to previous quarter Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Excluding hardware investments, cost and capex were unchanged compared to Q

29 Development team expanded to deliver new product suites Adjusted Capex excl. Hardware (MSEK) The development & product management team now counts 157 software engineers. Significant development efforts are being allocated to the development of the new product suites related to MiFID II and the next generation Order Management System Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 The project to develop the new state-ofthe-art product suite for Foreign Exchange trading and execution has just been initiated. Developing new Managed Services offering for the US market. 29

30 Margin remains high despite significant investments in new product suite EBITDA - Capex excl. Hardware (MSEK) 60 29% % 30 15% % 22% % 30% 25% 20% 15% 10% 5% Over 60% growth during the year on the back of 10% license revenue growth, coupled with flat cost development. The total salary cost remained unchanged compared to a year ago despite staff increasing from 356 to 377. This has been achieved by increasing the ratio of staff located in Sankt Petersburg. Despite large development projects for new products, our margin remains at the strong 22% level vs the previous quarter. 0 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 0% 30

31 Investments driven by Managed Services and merging of offices Adjusted Hardware Capex (MSEK) Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 The increase in hardware investments in the last two quarters is primarly related to the increase in Managed Services capacity. Some offices have been modernized to enable consolidation of offices. In return, our cost for occupancy has been reduced. 31

32 Thank you! Itiviti.com