Temenos (SIX: TEMN), the market leading provider of mission critical software to the financial services industry, today announces the acquisition of TriNovus, a software-as-a-service (SaaS) technology provider that develops and delivers compliance and core processing services to over 800 US financial institutions. The acquisition will significantly increase Temenos’ customer base in the US as well as provide it with the complementary products and local expertise to accelerate growth and launch a SaaS offering for the US market based on its market-leading, real-time T24 core banking platform, its Insight solution for business analytics and its Profile and Screen Anti-Money Laundering (AML) applications.
David Arnott, Temenos CEO, said: “The financial services market is undergoing a generational shift. Changing customer behavior coupled with technological advances, in particular in the area of mobility and multi-access devices, have revolutionized the way we bank and have rendered obsolete batch driven IT platforms built for a world of nine to five branch banking. Temenos has a long and proud history of helping to rid the industry of legacy systems, giving financial institutions the tools to dramatically improve customer service, risk management, innovation and efficiency. We have been working with customers in the US since 1997 and have developed the right set of products, now enhanced and available on a SaaS basis with a much enlarged supporting team, to allow US financial institutions to leapfrog their peers and capitalize on the transformation taking place in the their market. I am delighted to welcome David Brasfield and his team to Temenos and look forward to working together.”
Highlights of the transaction
The acquisition of TriNovus will provide Temenos with:
- Software-as-a-Service core processing expertise and the platform to launch T24, Temenos’ highly acclaimed real-time solution and the world’s most widely-used core banking application, on a SaaS basis for US financial institutions
- A client base of over 800 financial institutions, offering a significant cross-sell opportunity
- A leading authority in US banking compliance, with a marketing leading solution
- An experienced and well-connected team with strong local market knowledge led by David Brasfield, who has over 25 years of experience in the US banking software space, and who will play a key role in developing the combined business
- Ancillary solutions, such as statement rendering, and relationships with other third-party providers which will enable Temenos to offer a comprehensive SaaS offering to US financial institutions
- USD 17m of contracted revenue backlog and significant forecasted standalone growth
CEB TowerGroup senior research director Robert Hunt: “US banks are confronted with increasingly complex regulations, customer demand for new relationship-based products, and the growth of lower cost direct banks and non-bank competitors. Financial institutions can prosper in this new environment, but only by moving to a new operating model that supports the introduction of new value-added products, improves customer service, and significantly reduces operating expenses. This model cannot be realized without modernizing the banks infrastructure, including the streamlining of operations and replacement of legacy software with modern, real-time core systems.”
David Brasfield, TriNovus President & CEO, commented: “We are delighted to be joining forces with Temenos. The combination has huge advantages for our customers, who will have access to a broad portfolio of modern, cutting edge and market-leading solutions and who will benefit from Temenos’ commitment to industry-leading levels of R&D. What is more, the combination brings to the US market for the first time a credible and technologically advanced alternative to the large incumbents vendors. I am greatly looking forward to working with Temenos to shake up the US market and to realizing the significant market opportunity that exists.”
A compelling strategic rationale
Combining Temenos’ rich product suite and existing experience in the US market with TriNovus’ client base, products and expertise will create a unique proposition in the US market:
Software-as-a-service core processing expertise: TriNovus already offers core processing services based on its own software, including ancillary services such as statement rendering and check processing. This expertise will help Temenos to develop a SaaS offering for the US market based on its real-time and market-leading T24 platform and incorporating other technologically advanced applications, such Insight for business analytics and Profile and Screen, its solutions for AML.
A client base of over 800 financial institutions spanning 50 states: spanning coast to coast, TriNovus’ customer base consists of community banks, regional banks, credit unions, and other financial organizations located throughout the US, offering a significant opportunity to cross-sell Temenos’ T24 core processing software, its Insight business analytics application, its Profile and Screen AML solutions and WealthManager and Triple’A Plus wealth management products.
A recognized authority in US banking compliance: Increased scrutiny and legislation has placed significant pressure on banks to proactively manage regulatory compliance. TriNovus offers market-leading compliance solutions, backed by thought leadership, establishing a reputation recognised throughout the industry.
Local market knowledge and presence: TriNovus has more than 50 employees working out of two locations with a deep knowledge of the regulatory and compliance requirements for the US together with extensive existing interfaces and relationships with third party vendors.
An experienced and well-connected team: David Brasfield, TriNovus’ founder, has over 25 years of experience in the banking and software industries, including periods working at Metavante and NCR as well as having founded two other companies, Brasfield Technology and SBS Corporation, the latter a core processing company serving more than 1,000 financial institutions. The team David Brasfield has assembled at TriNovus is similarly experienced in the banking technology industry and possesses a deep understanding of the compliance and core processing environment in which community banks operate.
Financial effects of the acquisition
The acquisition has 2013 forecast revenues of c. USD 8m and forecast costs of c. USD 8m, resulting in the following changes to 2013 guidance:
• Non-IFRS revenue range raised from 2.5%-5.5% to 4.5%-7.5% (USD 470m to USD 483m)
• Non-IFRS cost base raised by USD 8m to USD 368m implying non-IFRS EBIT margin of 21.7% to 23.2%
• No change to Licence revenue, non-IFRS EBIT, cash conversion or tax rate guidance
Temenos makes no change to its medium term targets. Nonetheless, Temenos expects the acquisition to contribute 5-10% of group revenues within the next 3 years and to reach group margins over the same period.
The acquisition is being funded through a combination of cash reserves and treasury shares.
American Depository Receipt
To coincide with the acquisition and underlining its commitment to the US market, Temenos today also announces its intention to launch a Level 1 American Depository Receipt (ADR), with Bank of New York Mellon acting as Depositary. The ADR is expected to begin trading during Q2 2013.