 Okay, I think we are live now. Good afternoon. This is CFA Institute Research Challenge in Switzerland 2021 final event. More welcome to our participants and to our online audience. Today's event is organized by CFA Society Switzerland members and volunteers, professors, assistants, our sponsors and partners, our subject company, Temenos and everyone else who is here to support students. We are organized by CFA Society Switzerland University Relations Team with two our dedicated volunteers, Florian Esterer, who organized the first research challenge here in Switzerland 12 years ago and is still very active and the chair of the University Relations Committee, Olivier Müller. My name is Mirena Vojta, I'm from the CFA Society Switzerland and I would like to thank our colleague Joshua Paris for organizing the meeting for us today. CFA Institute Research Challenge is a global annual equity research competition that provides participating students with intensive training in financial analysis. Students work in groups and assume the role of financial analysts and they are judged on their ability to value stock, write the research report and present their recommendations. Every year, more than 1100 universities participate in the research challenge with more than 5700 students. And on the left, you can see how the global winner were celebrated back in 2019 when in person meetings were possible. And on the right, you can see how research challenges look like today. This photo was taken after University of Lausanne was named one of two winners of the MIA regional final last year. Yesterday we had a very intensive afternoon semifinal rounds. We had 11 universities participating and all of them had an excellent presentations. Today we have six universities with us and we're going to select a university that will represent CFA Society Switzerland at the MIA regional competitions in March and April. And for the very first time, you're going to announce the second and the third place. So today with us are University of Zurich, University of Geneva, University of Lausanne, University of Bern, University of St. Gallen and University of Uganda. Welcome. And I would like to welcome our experienced judges now, Marcus Matuszek, Rahul Senkupta, Peter Omancina, Christoph Gretler, Florian Esther and Olivia Ruehler. Thank you very much for supporting us all these years. And here you can see the schedule for today. We will start with presentations at 14-15 and we will make a short break after the third presentation. After the last presentation, we will make a little longer break and we will be back at seven o'clock with the award ceremony. You're very excited to host two keynote speakers today. Marissa Droom, Chief Sustainability Officer and Global Head Sustainability Strategy, Advisory and Finance from Creditzvis and Monika Rancati, Chief Human Resources Officer from Terminus. For our online audience, please note that there will be a few minutes break between each presentation. Competition rules are very simple. There is 10 minutes for presentation and 10 minutes for Q&A. After that, we will allow a few minutes so the judges can complete their score sheets. And now, without any further due, we will start preparing for the first presentation that will be given by University of Geneva. We will be back at 14-15. Okay, so we are back. It is my pleasure to welcome the first team presenting today, Reem Klaudia and Emilia from University of Geneva. So, students, you can unmute yourself. All good. Would you like to upload your slides now? Sure. Can everybody see my screen? In 10 minutes, I'm going to wave. And minute after that, I will stop your presentation in case you are not finished. And after that, we will have Q&A judges. We are ready when you are. Good luck. Thank you. Good afternoon, everyone. We are pleased to represent the University of Geneva. And today my teammates and I will present you with our investment recommendation for Terminus AG, for which we issue a buy recommendation. The tone of our analysis lies in the following argumentation. We expect the solid SaaS-driven financial position that Terminus shows to hold, with revenues growing strongly thanks to unique competitive positioning and forward-looking market expansion, all of this being backed by improving ESG schools. The financial analysis that we will further present you with gave us a 12-month target price of 141.9 Swiss francs, granting an upside of 19% from the valuation date price at 119.6 Swiss francs. Terminus has entered various markets, both geographically and in terms of clients, with a clear focus on tier one and tier two clients. Though currently the majority of their banking clientele lies in Europe, there is a clear strategy to dominate the United States, which has proven to be vastly under-penetrated, justifying Terminus' new focus, expanding the USA. This new goal translates through a wish to take advantage of a growing need in an underdeveloped industry through the right partnership at the right time. The United States has the largest number of fintech players and the fintech industry grows over 9% each year. US banks need to digitize to survive, and the US market is set to potentially provide an increase of 38% on annual revenues. Terminus has struggled to enter the USA since 2013, but we believe that the Coney acquisition in 2019 flips the dynamic around. Coney not only insists the current Terminus-Infinity product line by combining Terminus-Coney digital banking experience and multi-development platformers, but also gives Terminus the client base to successfully introduce Terminus Transact. Terminus manages to maximize the effects of both R&D and M&A to generate combined growth opportunities and nurture client loyalty over time and through technological revolutions. Seeing a mixed formula of R&D and M&A could pose issues of contradictory strategies, but in the case of Terminus, the two processes complement each other quite well. Both have the same goal of ensuring fast market domination through the mastery of technological and technical advancements and the constant renewal of the product set to fit the new US criteria. M&A is tasked with bringing accelerated forms of what R&D might bring out without giving up on R&D so that they become trans-saturates themselves. The combined effect of R&D and M&A allows Terminus to be specialized in the software banking industry, starting with a competitive and robust one-size-fits-all solution with regards to bank size and client help while allowing each client to customize a product to its own internal devices and platforms. This grants current client satisfaction in a certain sense of belonging to a highly technical and state-of-the-art community and sets the tone in the market for potential new clients to be attracted while also being a deterrent for competitors. The SaaS transition poses an opportunity set and the threat of cannibalization between the SaaS and the licensed product lines is somewhat offset by growing total market. In the case of Terminus, computing the EBITDA margin bridge allows to show that the switch in revenue allocation, meaning the increase of recurring revenue, is the major driver of the increase in the EBITDA between the two boundaries of our analysis period. Computing the EBIT margin, we see the net shock of the 2020 pandemic, which we forecast to be recovered fully at pre-COVID levels by 2025, which is backed by many external research nudging towards the three to five-year-long recovery for industries that didn't suffer directly from COVID, such as tourism. Essentially, we expect slower growth until 2023 and then back at full horsepower. The profit margin follows the same trend as the EBIT margin levels, with a dip in 2020 and a relatively slow recovery, but strong levels reached at the end of the forecasted period. The lowest point being at 19% expected in 2020, going back up to 32% in 2025, which is an increase of 7% in comparison with the pre-COVID levels. The slight smile we observe in the profit margin curve makes sense regardless of the 2020 crisis. In reality, the SAS transition pushes immediate short-term returns to drastically slow down before gaining new highs after a few years, as the structural changes forces the growth upside to be delayed. Our forecasts portray a more rapid growth in revenues than in the costs, further explaining our growing profit margins by the end of our analysis period. This growth in total revenue is a good balance between organic and inorganic growth, as portrayed by the strategies that we spoke about earlier. Our GCF analysis is based on the discounting of the free cash flow to the firm using a WAC of 5.19%, which we computed with a 10.95% cost of equity derived with CAPM and a 4.5% cost of debt derived from interest over interest bearing debt. The market is growing and it has an intrinsic growth level of 15% and a terminal growth of 3.9% based on long-term expected inflation and long-term expectation of growth for the GDP in the eras in which terminals last business, such as regions in advanced economies. Some other valuation methods have been taken into consideration and they are dividend discount model and multiples valuation. The dividend discount model is relevant in terminals case, as it has been paying dividends in a steady manner since 2013. This dividend paying trend is expected to continue and to see dividends grow, at least with the same capacity as seen in the past, meaning at least doubling every five years. For the multiple valuation, we have decided to stick with the same peer group as we have used for financial and strategic comparison, which shows similar price and DPS profiles, allowing to come up with expected P ratio to apply to terminals APS to arrive at a target price of 136 Swiss francs. We have chosen the P ratio, as it is the most consistent to express growth potential within the market, which is one of our requirements for our recommendation. By integrating all the three prices, we decide to allocate different weights to each valuation method and its corresponding price. With this, you have been the heaviest as it depicts the most accurate picture of what terminals value will look like, but not dismissing the other two methods, as the software industry is driven by group momentum and terminals growth is well represented in dividend growth, even though we cannot consider this laughter as the method with the perfect fit for our company. In our analysis, we have identified potential risks that terminals cannot precisely forecast. We observed that the majority of risk are located in the lower portion of the matrix in terms of probability of events. To us, the ones with greatest impact are market related ones, probably closely followed by the risk of failing at finding the perfect M&A matches to conquer the challenges. On a global scale, terminals is right above average in terms of ESG scores, though it is noteworthy to mention that the value of full grants improvement in each section of the score in the past few years with the highest improvement in social issues. ESG factors today are more and more taken into account across all industries, though still hard to identify with precision or into quantity. We have chosen to use the SASB framework for the software industry to analyze terminals as ESG score, which gives us six precise and industry specific components for analysis. From an environmental perspective, we focus on energy management and more specifically on carbon emissions. We have improved the growth in fuel emissions over the last five years due to the amount of policies and the green initiatives are taken with respect to operations. Regarding female inclusivity, terminals is rather average in their female representation overall and the gender wage pay gap. With a gender pay gap of 17%, terminals should attempt to reach the US state industry gender pay gap of 4% as part of the US expansion strategy. As a company working with financial data, data security and customer privacy are major issues that terminals is facing. The company is compliant with the GDPR regulation and applies this across the majority of operations worldwide. In order to prevent cyber attacks, terminals uses advanced artificial intelligence tools. In 2019, 11 incidents were reported, though only one was severe, which really demonstrate their ability to scale down the incidents. To sum up, we extend our bio recommendation to you with the justify expectations that revenues and earnings will grow as a result of terminals' linear position and value creating strategies. Thank you for your attention. We will be taking your questions now. Thank you very much. Judge Kristof. Hey, thank you, Olivia. Thank you team for this great comprehensive presentation and also well done. I have two questions. One relates to your calculation of the VAC and the second relates to the business model of terminals. First on the cost of capital. Could you explain what kind of capital weights you've been using and what kind of justification you have for those? I noticed you have a cost of a depth of around 4.5% and cost of equity around 10% and the VAC is 5%. So you must have a pretty heavy weight towards the depth side. Could you justify that with maybe some comments on the balance sheet? And the second question with respect to the business model. I think you mentioned at the beginning that the company is looking to move to this SAS model from a more of a licensed income model. What do you think this will have impact, this will have in terms of margins effect in the medium term? I noticed you basically assumed that there is a hockey stick and margin will go up substantially. But is this really reflecting this shift in business model that is going on as well? Thank you. So about the different values and so the VAC, which is pretty high, we know, but we have done calculations about the respecting terminal structure of depth, which is pretty high with us 81% of depth and 19% of equity. And we derived it with CAPM and then we used the cost of equity of 10.95% for discounting the precast of the firm. Okay, so in practice we would use higher VACs actually for reference point. We would use more like market value for the depth and equity. So basically if you look at the market cap is around 10 billion and they have a billion in depth. So we would have a 90% equity ratio and also a different tilt than you have. But you, I think, have understood the theory and applied it correctly with your assumption. Thank you. I think this was definitely a challenge because actually in their yearly reports they actually provide some, I guess, nudges as to what cost of debt and cost of equity to use should analysts want to do that. But we found it to be a bit odd with regards to even, I guess, data providers, the capital structure that they had provided as nudges for us to figure out the 80, 20% that we kind of used. So we decided to take the leap and just use our own numbers instead. Yes, well done. That's good in our approach. As for the forecast and how they take it into account, the margin evolution with regards to the SAS transition, we actually did our forecast sort of in three steps. So the first one is really taking into account exactly what's going on with the transition, which happened, started to happen actually a few years ago, but really was even more so evolutionary in this year because of everything that's going on. So the first step was kind of making expectations for 2020, trying to take into account all of this. We took the interim reports and tried to sell sort of extra plate from that. And then for the next three years, so 2021, 22, 23, we took sort of 20%, 50% and 75% of what happened this year to kind of, I guess, include as much as we could this latent delayed evolution of margin. So despite us having actually quite high margins in 2025, we actually delayed as much as we could in that regard. Good. Thank you. Thank you for your thoughts. Thank you. Next question, Florian. There's a follow on this. In the SAS growth, we have to differentiate between existing license clients which switch to a SAS model upon renewal and new clients who come on as SAS clients. How have you accounted for that in your margin evolution? Essentially, if I can take that question, maybe my colleagues can add up on that later on. But essentially, we did take that into account, but not so much quantitatively. And that is kind of a choice that we made because we're betting on two things here for growing revenues, not only the SAS transition bringing better revenues in the midterm to longterm horizon, but also the US expansion, making the market pie a bit bigger, I guess. Because we noticed, we did a little bit of research on the US market for fintech, and we noticed that the 2020 pandemic actually pushed quite a big amount of banks and big banks such as Wells Fargo and JPMorgan to actually digitize as much as they could and reach out for such companies. So we do believe that these two things would offset, and so we didn't go too much into detail and quantitatively speaking about the cannibalization possibility of people transitioning to SAS from the licensing. Sorry. Can you sort of show us how your revenue growth stacks up from US versus rest of the world and license versus SAS? So how do these individual components then add up to your revenue growth? I don't know if my colleagues want to add on that, so that I don't speak too much, but I guess in our models, we don't have a specific breakdown of US versus European and how it would offset. It was sort of, I guess, not so much empirical. So I'm not sure we would have models or numbers to show you for that. Thank you. Next question. Can I ask, in terms, there's a lot of talk about the switch from the normal licensing model to SAS. Why is that important in terms of value for the company? One is you buy, one is you rent. If it's like a car, if you buy the car or lease the car, depending on what you pay for it, the net present value, it doesn't matter. Why the fuss? We believe that this transition to SAS is really important if it is combined with the know how and the ability of terminals to create strong bonds with its clients. And so we are not afraid that this will impact negatively and so we will provide some changes during the years and so switching from one company to another, because we believe that terminals has the right capabilities to monitor in the clients, even though they are not buying anymore but just renting their services. And is one more valuable than the other? Have you checked with the company if one is more valuable than the other in terms of net present value? They do include a price increase in their renting product line to demonstrate that. But so technically it wouldn't make so much of a difference, as you said, considering that with the net present value would be equivalent if they take into account all the other factors that would happen with regards to the price. But from a business model perspective as of right now, from the licensing product lines, only 15% of clients that are in the licensing product line actually get the license again after 10 years. So whereas I'm not sure I have the number in my head again, but for the SAS ones it's slightly higher, quite actually significantly higher of rerun year after year. So in terms of long term revenues, it is more interesting to switch back to the SAS. Thank you very much. If I may jump in here very quickly in terms of valuation, Christoph just asked you about the valuation on the whack. I'm more interested on the sensitivity of your valuation model, especially regarding the DCF. So did you also run a worst case scenario or a best case scenario? So your number must be somewhere in the middle or somewhere around that. So what are the extremes? Actually, so we did two types of sensitivity analysis. So we had actually three types of DCF included in our final DCF price. And maybe I can show you this. So essentially we had a blue and gray sky. And then we had also sort of a sensitivity analysis. Sorry. Um, thank you very much. It was a great presentation. Thank you. We will allow a few minutes for judges now to. Thank you very much. Thanks a lot. Thanks. Thank you very much. Thanks a lot. And we will be back at 1445 University of Ghana presents next. Okay. So right now, welcome to Simon, Xavier, Nabil, Alessandro and Irene from University of Ghana. Before we start, may please ask students to pin my video on top, because after nine minutes, your presentation, I'm going to wave someone to make sure that you can see me. And minute after that, I will stop your presentation. You can upload your slides now. Yes, we see your slides. Perfect. Good. So we're ready when you are. Good luck. Good afternoon, everyone. We're the University of Logano and we pleased to present your bar recommendation on Swiss banking software provider Teminos. Have you ever thought of what's going behind the scenes when you want to open a bank account or make a transaction. When you access your bank through, let's say your smartphone, your device is getting connected to the digital front office of the bank through an application layer. But what is that? Well, it's a storefront of the bank in order to acquire customers, market for them and provide them with services. The digital front office software then communicates with the core banking software. This is the heart and engine of the bank. It is where transactions are processed and bank accounts are stored. The core banking product is called transact and is their largest product with around two thirds of the product revenue. Second in line is their customer facing product called infinity with around 20% of sales. And the rest is attributable to payments, fund administration and walk management. Teminos is founded and based in Geneva Switzerland. It carries its market leading position from the fact that 41 out of 50 top banks use Teminos. And now is the largest market in terms of revenue generation, followed by the Americas and the APEC. Now we issue a buy recommendation on Teminos with a target price of 139 Swiss francs, implying an upside of 20%. Our buy recommendation rests on three main pillars, a sustainable and growing end markets, a strong competitive position and an acceleration in the transformation to SaaS subscriptions. Alessandro, could you please tell us about the outlook on the end markets? Sure, Nabil. We are living in a world which is becoming more and more digital where every single industry must adapt. In fact, COVID-19 further accelerated this process, leading to two years of digital transformation in just two months, according to Microsoft CEO Satya Nadella. In addition to the digital transformation in a broader sense, we see increasing regulation and tough market competition. In this backdrop, we are confident that banks will continue to increase their spending on technology and digitalization, resulting in a 4% cager until 2023. Furthermore, banks have the option to develop in-house their IT infrastructure, as they historically have, or to outsource their system to a fair party software vendor, for example Teminos. It is becoming a period that outsourcing is the superior choice. Our analysis suggests that banks which are running on a fair party software have a lower cost-to-income ratio and a higher return on equity. Hence, we forecast the share of fair party players to expand from roughly 20% today to 40% in the long term. That means that fair party spending, which is Teminos market, will grow even faster than bank anti-spending in general, putting the total growth rate to around 7% in the next years. Additionally, from an environmental point of view, software is one of the best industries to invest in, as they produce comparatively low greenhouse gas emission and have low resource use. Moreover, Teminos is a frontrunner within the industry, as illustrated by sustainable initiatives and leaning scores from third parties. In other words, Teminos is operating in an industry with a sustainable and structural growth. Back Xavier, will Teminos take advantage of this? Yes, Teminos will, Alessandro, thanks to its strong competitive positioning. Taking a look at the third-party bank IT spending market, Teminos has today a market share of 7% in a very fragmented industry. We expect this to go up to 9% by 2024 at the cost of core incumbents. This is due to three factors which set Teminos apart from its competitors. First, it's all focused on financial institutions, in contrary to many of its competitors, whose core activity is not banking software. Second, their product positioning where Teminos is offering a fully packaged and upgradable software on a continuous basis. Again, in contrast to other players. And third, innovation as the key pillar in Teminos corporate strategy. Teminos approach to innovation deserves time on its own. In fact, Teminos innovates in three different ways. First, by allocating over a 20% of revenues on R&D, which means outspending its peers by twice. Second, by investing in its workforce and in the community. Teminos corporate social responsibility is illustrated in its exceptional social score and is a key advantage for Teminos to attract and retain top talent. And third, an active and selective M&A strategy which expands its geographical presence and obtains new technologies. Just investing is however not enough. It must be done in a profitable way. This is exactly what Teminos has done as illustrated by high returns on capital employed. The result is high barriers to entry in a mode built on its technological advantage. In fact, we see a victorious cycle where Teminos is accelerating away from its traditional competitors. One of the areas where Teminos invested at an early stage was cloud and SaaS capabilities. Irene, could you tell us more about the transition into SaaS? Yes, with pleasure Xavier. And as you indicated, the last argument of our investment thesis is the acceleration in the SaaS transition. Together by the understanding, we need to explain how Teminos is selling its software. It can either be sold as a 10 year license fee with compulsory maintenance or as a three to five year SaaS subscription. Both SaaS and maintenance are considered stable and recurring revenue nature and sharp contrast to license sales, which can be rather volatile. We are now seeing an acceleration in the transition from license to SaaS. We expect SaaS revenues to show a 32% keger in the next years, which will drive the share of Teminos recurring revenues to 60% in 2024. A higher share of recurring revenues means more visibility and less volatility, meaning that Teminos will be a more resilient business, motivating a higher multiple and a lower discount rate. Hence, we believe that the SaaS transition will definitely create value for the shareholders. Simon, could you let us know how our investment thesis plays out in terms of forecasts and valuation? Absolutely. Thanks, Irene. Starting with the top line, we expect revenues to show an 11% keger, explained by the market tailwinds and an increasing market share. We also expect continued margin expansion. However, after record profitability in 2020, at the back of massive cost reduction due to the global pandemic, we expect some headwinds in the next two years as costs come back online. From there on, we forecast margin expansion driven by operating leverage and motivated by a relatively fixed GNA. Finally, we expect strong free cash flow generation to be driven by tighter working capital and to be achieved by lowering day sales outstanding. This leads us to forecast 12% free cash flow keger until 2024. We're now ready to put our investment thesis and forecasts into a valuation of the firm where we believe Teminos is undervalued based on a combination of a three-stage GCF and multiples valuation. We see 28% upside to a target price of 139 Swiss francs. The valuation is based more on the GCF model, which weights two-thirds and less on the multiples. This is due to the lack of listed pure pay competitors. We used a 6% discount rate calculated using the weighted average cost of capital with a cost of death of 2.2% and a cost of equity of 6.5% to write thanks to the CAPM model. For the relative valuation, we used a forward-looking EV to EVDA multiple and compared Teminos to two different groups, banking software companies and other software companies. We note that Teminos currently is undervalued against both the peer groups compared to the five-year average. We do not think that it's motivated given the prospects for continued profitable growth and an increasing share of high-quality recurring revenues. So as you now understand, we believe Teminos is a great investment, but all investments do have risks, aren't they, Rena? Of course, we want to highlight that misallocations of the R&D budget, a rough sales transition and the health of the banking sector are all risks that would impact Teminos. In particular, the health of the banking sector should be continuously monitored as we see significant correlation between the stock performance of the European bank sector and Teminos' licensing sales. This is worrisome in the short term as banks push their investments forward due to the global pandemic. However, we expect the secular growth drivers to outweigh this risk in the longer term. To summarize, we issue a buy recommendation on Teminos due to its sustainably growing end market, its strong competitive positioning and the acceleration of the sales transition. Thank you for taking your time and listening to our presentation. We are now happy to answer any questions you may have. Thank you very much. First question comes from Christoph. Thank you, Olivier. Thank you, Tim, for this very enthusiastic presentation. I have two questions for you. First, did you look whether the company capitalizes R&D? Yes, we have looked at that and they are capitalizing 20% of the R&D. Basically, I saw that you are using EV EBITDA as a multiple in your peer comparison. Did you also look at the other companies, whether they follow similar accounting rules? What would you think about the impact it has on your relative valuation methodology used? Thank you for your question. Simon, please go to multiples 3.7. We used EV to EBITDA because we believe that among all the other possible multiples to employ here, this is the one given the clearest picture of the financial performance of Teminos. In particular, we consider enterprise value in order to account for the different leverage and capital structure of all the companies we have compared to Teminos in our analysis. And EBITDA has been considered because we wanted to look for a good substitute here for operating cash flows instead of just free cash flows. Because we also wanted to account for the huge investments that the company carried out in past years in our valuation. So in this way, we are also reflecting these investments in the valuation we have here. There is a certain risk that one overlooks the capitalized R&D in these comparisons. The other question I have was on your ESG rating that you showed. Did you look into why the company has such a relatively poor governance rating? That's a good question. Simon, could you go to... Yeah, exactly. Thank you. So we have looked at governance and what we understand is the main reason why we did not mention governance is because we do not think that it impacts the performance of Teminos for the investors in any negative aspect. As the scores, as you can see, suggest that governance is above average for Teminos in its industry. So Teminos is already strong there. And the main reason for this course to be low is mostly attributable to the fact that the management has been changed. As you can see in the center that there has been quite a few changes and this has affected the scores. But we believe that currently management is very strong and we continue to believe in their expertise and the way it is laid out right now will be proven fruitful for the upcoming years for Teminos. Good. Thank you. Best regards to Lugano. Next question comes from Florian. Esto. Yes, thank you very much. One of your arguments in your margin bridge is that GNA or SGNA has been fairly stable. Can you show me how historically SGNA growth has been in comparison to revenue growth? Yes, as you said, or as we said, GNA is a relatively fixed cost. Can you show me that it has been fixed historically? We don't have the numbers on that, but it has been historically fixed, but of course it's also been growing. Compared to Teminos today to five, ten years ago, it's a larger firm, so therefore it's also growing, but not just at the same pace. And maybe secondly, while we're on the topic, can you talk about how you have modeled the margin impact from disaster transition? Yes, for sure. So as you know, sauce cross margins is around 50% right now compared to the license gross margins, which is around 85%. We think that gross margins will decrease a little bit in the next two years as sauce is getting a larger share of the total revenue mix. But we think at around 2024, it will be close to the license. So when we're looking at our 2024 numbers, we think that the impact will be minor. But until then, we'll have some headwinds initially in the next two years. How big is that impact? Sorry. I mean, while you say it. We expect gross margins to fall by around 50 to 100 basis points for the next two years, and then we'll turn again. Thank you. Next question comes from Peter. Yes, you spoke about every day multiples. Have you in that context also looked at cash conversion from EBITDA, i.e. how much free cash they generate compared to their EBITDA and compared to their peers that you used in your EBITDA comparison. Thank you for the question. Yes, we have looked at that. And Terminus has a goal of converting 100% of its EBITDA to operating cash. But of course, there is investments. We expect investments to be around 5% of revenues in CAPEX for the next years. So therefore, of course, they will convert less, but it will be around 70% to be expected. And to the competitors, I would say as a general answer, yes, it's somewhat similar, although, especially some of those companies we compared to in the banking software sector, they are more type of a consultancies. The Indian players have that emphasis. So they have a slightly different structure, but in general, yes. The next question comes from Markus Martusik. Hi guys, thanks for the presentation. I have a quick question with regards to what you mentioned at the beginning. You said that Terminus is serving more than 40 out of the top 50 banks. Insofar, you only have a little bit of room left-right to penetrate that market. So thereafter, you have to basically go to lower tier or smaller banks. What is your view about penetrating that market? Do you see costs increasing? What is your sense there? Thank you very much for your question. So having Terminus a low market share of 7% globally and with 25% of core banking in Europe, we think that the European market is quite consolidated by them. But there's been a shift of focus into the US market, which represents a 40% of the total addressable market of Terminus. And after the acquisitions of Coney and Avoka, we believe that there's great room to grow, especially in the US. But do you think that they can uphold end the margins? Because if you're going after smaller banks, you will have most likely higher acquisition costs for one, and you also will have consolidation within smaller banks. And so ends the question of counting up all the margins. So relating to the margins, of course, they will have a greater number of clients which could translate into bigger costs, which could have a negative effect on the margins. And also, since we expect all these clients to onboard slowly and more commonly through SAS, which in the long term will have a positive effect on the margin, we think that it will compensate that loss. Okay, thanks a lot. Next question comes from Peter Romanzino. Sorry, thank you very much. Well done. Thanks a lot. Bye bye. Thank you. Bye bye. Bye bye. So we will be back at 1550 and the next presenting is University of Bern. Okay, so the next time present the next team presenting is University of Bern. Welcome to Daniel, Joel, Colin and Rachel. So if I may please ask you to pin my video on top. So you can see me when I wave up to nine minutes. I will also give you a thumbs up so you know that you have only one minute left. You can upload your slides now. Okay, we see them. So we are ready when you're ready. Good luck. Thank you microphone is still muted. TEMENOS markets itself as the banking software company. We as the team representing the University of Bern challenged this confident statement and would like to present to you why TEMENOS rather is just a banking software company. Whenever you open a mobile banking app or bank employees, for example, analyze customer data, banking software is needed. With Transact and Infinity as their most important revenue drivers, TEMENOS offers end to end software packages to financial institutions worldwide. But the company is not the only one as the third party market is highly competitive. Nevertheless, the majority is still spent bank internally, but currently reduces TEMENOS addressable market to 14 billion US dollar. We say no to an investment in TEMENOS and issue a sell recommendation with the target price of 72 Swiss francs and the downside of 31%. It's time to face valuation reality. And here's why. One, TEMENOS bets too much on its future growth in the Americas. Two, R&D and AMD activities as the two pillars of innovation start crumbling. Three, the shift from licensing deals to software as a service will lower margins in the midterm, proposing analyst consensus. And four, governance issues increase TEMENOS downside risk potential. Daniel will now elaborate on why TEMENOS shift to the Americas will not bear the expected fruits. With a share of over 40%, TEMENOS Home Market Europe is the company's main source of revenues. However, as TEMENOS only sees limited growth opportunities in APAC, MEA and Europe, the company centers its future strategy around the Americas. TEMENOS has been trying to capture the US through various acquisitions and partnerships. Through those deals, TEMENOS experienced strong growth over the last years. Yet organically, the company has just grown in line with the market. The acquisition of KONI in 2019 for a record high price is the most recent attempt to finally breakthrough in the US. However, KONI clearly is no perfect fit to TEMENOS strategy, with a big part of customers being non-banking clients. Furthermore, KONI is known to be a US SaaS leader. Let's take a look at why this is a problem. TEMENOS wants to build momentum with tier 1 and 2 banks. Yet software licensing revenues from those clients have stagnated. So, in order to change this trend, TEMENOS would need to improve its offer for the tier 1 and 2 banks. As CFO's biliopolis statement shows, this does not happen through the SaaS leadership of KONI. Both KONI SaaS expertise and TEMENOS strength in standardized software are more attractive for smaller banks. TEMENOS, in consequence, will mostly miss out on the targeted tier 1 and 2 clients. Despite the questionable strategy, we project the high efforts in the Americas to have a positive impact on TEMENOS revenues, but only in the short term. Together with the realization of post-point projects due to COVID-19, this will enable revenues to recover to pre-crisis levels quickly. However, as those two effects prove to be temporary, growth will start to diminish in the long run, and revenues will remain far below the targeted levels. While in the past, TEMENOS was able to meet or even exceed its guidance of 10-15% revenue per acre, future growth rates will fall below the high expectations. TEMENOS, therefore, will remain just one among many banking software companies, rather than becoming a market leader. We have just seen how the questionable strategy in the most promising market impacts TEMENOS revenues negatively. Schoil will now explain to you why organic growth will diminish even more due to a lack of innovation. TEMENOS spends 28% of its revenue on R&D, which is almost twice as high as its closest competitor. This effort will result in the development of new and innovative products. Shockingly, this was not the case in the last five years. The only product which has been developed in-house is country model banks, but this is rather a country-specific customization of the existing product portfolio than a new product. The high investments seem to be necessary in order to keep the broad portfolio up-to-date, rather than developing innovative products. Acquisitions have often been the driving force behind growth and an expansion of the product portfolio. Through the active M&A strategy, TEMENOS significantly levered its bond sheet. This peaked in a net debt to EBITDA ratio of 2.8 in 2019, very much opposing the trend of competitors to have little to know that. Because TEMENOS wants to reduce this figure, such an aggressive M&A strategy as in the past will no longer be possible. Without the help of M&A and with very limited internal innovation, TEMENOS growth will slow down in the coming years. Especially organic growth will suffer from this development, fall to below 5% keger in the midterm and almost disappear in the long run. So, despite high R&D spending, the lack of internal innovation and the limited future M&A potential will slow down growth. But enough of unsatisfying growth prospects, I will now present to you why the ongoing shift from software licensing to SaaS is rather a threat than an opportunity. As the management said when presenting the Q3 results, SaaS is expected to start cannibalizing some licenses going forward, which leads to deferred revenue streams. In addition, the vendor login effect decreases due to the higher standardization of SaaS. CFOs Biliopoulos stated that the shift to SaaS has a short-term negative impact on the EBIT. We agree and project a midterm margin bump. However, analysts still project growing margins. Therefore, this evolution is not yet included in the stock price even though it is highly probable. Software companies as Microsoft and Adobe have already gone through this change and suffered a margin bump. So, the shift to SaaS will pressure Temenos margins opposing analysts consensus. Let's now hear from Rahel how the ESG analysis impacts our risk assessment. Temenos achieves solid ESG scores according to Refinitiv and the DVI phase 4 card. Sounds promising, right? Well, two governance risks should change your opinion. First, 87% of management's compensation is variable and mainly tied to non-IFRS KPIs, which are not based on any comprehensive set of accounting rules. Taking a closer look at IFRS versus non-IFRS accounting, the problem becomes clear. Management would not have reached their bonus targets by IFRS measures leading to alarming management incentives. Second, Temenos has gone through multiple changes of key personnel while integrating CONI and battling COVID-19. Compared to SMI companies, Temenos stands out with a high rate of refresh, which lowers leadership stability, especially in these uncertain times. In short, the governance situation increases Temenos downside risk potential and impacts our scenario analysis. Colin will now illustrate our valuation results. The cash flows of the DCF model are discounted with a whack of 7.93%, derived by the CAPM and the average e-automatorities of the issued bonds. On the other side, the terminal growth is made up by weighing the expected GDP growth rates by the regions in which Temenos will generate their future revenue. The classic sensitivity analysis reveals that in only 7 out of 49 cases, we end up with a buy. 63% of all cases support our sell recommendation. A very similar picture emerges from our second sensitivity analysis, where we examined changes in the EBIT margin and revenue growth. We took different risks regarding the evaluation and the company into consideration. By the high long-term revenue cager of 15%, or an unexpected US market breakthrough would change our recommendation, the gray sky risks would lead to an increase in the downside potential of Temenos' share price. Since the EBITDA and price-to-earnings ratios are both prone to accounting standards, we used the forward EBITU sales multiple to compare Temenos to its most similar peers. This resulted in a high downside of 42%. Now looking at how we conducted our sell recommendation, we used the weighted approach of the discounted cash flow and the multiple's assessment. Putting these two together, our resulting target price amounts to 72 Swiss francs, which implies a downside to the current market price of 31%. So, since the growth prospects of Temenos are overestimated, the shift to sales is not yet included in the market price and we find a troubled governance situation. We recommend that you take this wake-up call and don't invest in Temenos. Thank you for your attention and the floor is now open for questions. I will ask the first question. You are forecasting an organic growth of 4.9%. Does that include market share gains or market share losses? And where are they going to or coming from? So our forecast includes market share losses. If we can go to the market development slide, please. This would be slide 14. Exactly. As you can see, so this is in terms of total revenue growth, we still get a market share decrease in the long term. So in the short term, they will gain some market share mainly due to their high efforts in the Americas and because they suffered more than competitors from the dip due to COVID-19. So in 2021-2022, there will be some room for improvement when they get back to their usual levels. Now, as we've seen, they will mostly miss out on the targeted tier 1 and 2 clients where they see most potential lying there as the big banks right now are in the transition to either outsource their software or at least to get it to the new standard. As their strategy does not fit there, the market does not fit the tier 1 and 2 banks. They will not be able to gain more clients from this sector and therefore they will lose market share there. So that's the main reason. And then overall, the organic growth will diminish in all regions among all segments. So that will lead to a market share decrease to competitors that yet that exist already or also to the entry of FinTechs. Thank you. And the next question comes from Christoph Gratler. Mr. Gratler, you're on mute. Sorry. I don't know. Thank you for this enthusiastic presentation to the burn team. Just one question. I mean, one of your kind of rational to sell the stock is this margin pressure coming from the license to disaster transition. So did you actually look into the value impact of this transition? I mean, I can follow obviously kind of the margin pressure argument, but do you think it makes no sense economically to do this transition? So if you were kind of know the company, do you think, you know, it's actually a good idea or basically, you know, just looking at, you know, margin expectation. And if you want to, you know, deliver on margin expectation consensus margin expectation, or do you see an argument actually, you know, to do the transition to in a value creative way. Thank you for the question. It's actually it's a good one. It's an important one for Temenos. As you see on the right side of the slide, the transition to South is actually a good idea. So the margin improves in the long term. That's clear because actually, yes, the South business has higher margins because it's way more standardized and you can implement the software way easier. But in the short term, it's actually not very good for Temenos, as you can see on the right side of the margin slide on the margin graph. The margin goes down over the next two or the next four years. And actually that's due to the lower vendor lock in and more important due to the due to the later revenues, the deferred revenue streams. So to answer in short, actually, in the short term, it's bad for Temenos, but it's in the long term, it's good. And what we say is the short term bump is not implemented in the market so far. And that's the problem to the stock price. And obviously the question is now with the stock off from 180 to 100, whether that's not already kind of priced in and understood by the market. So that's basically kind of known the buy side guys already have that in mind and the sell side continues just to be over enthusiastic. But it's a good clear opinion. Thank you for it. Thank you. The next question comes from Rahul Sengupta. Hi, thank you very much for your presentation. I like your contrarian view on the market. I would like to understand a little bit more about the three pillars you showed at the beginning of your presentation. So we have the core banking system, but we have also very attractive fields such as payments. So what is tenement strategy there, and what is the growth potential there so to live it contract your recommendation. Thank you for the question. Well, you're right. The two, the two most important products of Temenos as you can see here is these are transact and infinity. And as a good example, the payments part the payments product. Temenos will sell it in the next year as they said, but it's not their focus they don't like their focus on payments. So payment has a good growth prospect. Actually, they prospect they project 10 10% cager for their payments for their payments product, but still it's not their focus. Okay, and maybe a follow on question to Chris of question you mentioned also during your presentation that Microsoft has gone through this dip of the sauce transfer transferring the model to the sauce model. The software companies are doing that. So why shouldn't it be good in the long run. My market has not come factored it already into the share price. Okay. And thank you for the question trial maybe you can go to go to slide 41. Here you can see the margins for Microsoft and also Adobe over eight years. So as you can see here, we project more or less the same. Well, the same line of margins for the future. So in the long run, it's good for Temenos. Transition to sauce is good for Temenos and for other companies because they give higher margins, but what we say is in the short term, it's not good for Temenos. And even though some people know that the analyst consensus doesn't project this margin bump we see and we believe in and that's our that's the problem what we see and not the long term. In fact, the long term margins are better than than the actual ones. That's true. But that's not the problem. Thank you very much. The next question comes from Peter Romanzino. I have two questions on the one hand you say it's good in the long term it's bad in the short term the transition to sauce but given that you value the company with a DCF the DCF is very, very, very much geared towards the long term, because the value of the company coming out of the next three or four years discount the cash flow is probably about six, seven, eight percent. The whole rest comes beyond 2025. So basically, what if you're saying this is a good in the long term, you should be enthusiastic about it. How would you counter that argument? We would counter that argument as we see very low growth prospects in the long term. So it's kind of a bit marching and growth prospects go in opposite directions. So while we see some growth in the short term, we see very little growth in the long run, whereas marching goes the opposite round. Now the growth in the long run, we already have lower growth rates, total growth rates than implied in the market. Now we forecast that organic growth will fall to about one percent in the long run. So the rest or the biggest part of their growth will come from acquisitions. Those acquisitions then again lower the cash flows and therefore cash flows are lower going into the terminal growth. And therefore this will overcompensate the benefits from the EBIT marching from the shift to SAS. And if I look again at this marching bump that you project, if I look how much the company sort of has turned over with DAS and initial licenses, how much of a transition did you factor in order for the margin to drop so much in the short term beyond the 2020 COVID year? Just as a mix, because this comes from mix your marching bump. Yes. So for the long run, we assume or we forecast a share of about 50% from SAS of total software licensing. So it will equal the classic, the traditional licensing revenues. Now we did not imply a drastic fall in the margins. If you take a look at Adobe and Microsoft, they had much worse dips in the margins as they had to transition their entire business to SAS. So actually those 2% if we compare it to Microsoft and Adobe are very little that they have to suffer. Is that not due to a completely different industry? I mean Adobe, everybody can have this on in the cloud while large banks that large customers will still have it on premise. So it's not comparable. The business mix shift is absolutely not comparable of a Microsoft Adobe versus Temenos. Thank you very much for the question, but 10 minutes is over. Thanks a lot guys. Thank you. So we are going to make a short break now and we will be back at four o'clock University of Galen presents next. See you later. Good afternoon. Hello, everyone. Are you ready? So we will wait one minute before we start. Hello everyone. Hello. Welcome back everyone after the break. The next team to present is University of San Galen and with us are Shulin, Dan, Mark, Yawar and Matias. Students if you don't mind pinning my video at the top so you can see me I'm going to wait after nine minutes. I'm also going to leave your thumbs up sign and we'll stop your presentation in 10 minutes. Okay. You can upload your slides now. Good. I believe everyone should be able to see the slides now. Yes. Good. So good luck. We are ready when you are. Thank you very much. Hello and welcome to the Swiss final of this year's CFA research challenge. On behalf of SNG 500, I'm delighted to present to you the results of our analysis into Temenos. I would like to start off with an allegory. You will most likely be familiar with the tail of Icarus, the man who made himself wings, only to come crashing into the sea after flying too close to the sun. We believe this tail of hubris has great parallels to Temenos, which we would now like to elaborate on. Temenos is a banking software company founded in 1998 and headquartered in Geneva. It offers premium end to end software solutions, which cater exclusively to the banking sector. Most prominent among its products is Temenos transact. It's back end offering, which accounts for about two thirds of the firm's revenues. We initiate coverage in the company with a sell recommendation and a 13% downside on its closing price as of February 8th, 2021. The core elements of our reasoning are that banks are too financially weakened to have the funds available for premium software, a strategic push into the United States will encounter great obstacles and Temenos's financial state does not help to improve the firm's prospects. And on that first point, I will issue an elaborate. Thank you, Mark. So Temenos likes to refer itself as the world's leading banking software company. But what is the use of that distinction if your target market is in structural decline? Unfortunately, this applies to Temenos customers, the banks. Since the global financial crisis, banks have been bathing in a low interest rate environment, which erodes the net interest margin that is a core component of banks' profitability measure. At the same time, an increasing number of regulations are put in place, but banks are hindered by these regulations as they add more complexity in compliance and therefore additional costs, which further lower banks' profitability. On the other hand, the new entrants, such as the big techs and the fintechs, don't have to comply with as many regulations as banks do. So taking this advantage and combining it with their technological heft, the new entrants are able and have begun competing in a large range of banks' profitable segments, such as business loans or credit card business, for example. So with a low interest rate environment, ever-increasing regulatory requirements, and the entry of new competitors, banks' return on equity cannot even meet the costs of equity. And this drop in profitability limits banks' available cash flows for premium banking software products, thus weakening Temenos outlook in its main market. Our analysis also indicates another issue that Temenos is facing, and I would let Matthias also say that this matter. Thank you, Schubert. So the second reason for our seller recommendation is that the US expansion, which is a key pillar in Temenos' strategy, is not going to be successful. First of all, because of the sticky nature of relationships in the United States, Temenos won't gain relevant market share from its competitors. If you look at the current US banking software market, you can see on the left-hand side that we currently have three very strong incumbents, FIS, Pfizer and Jack Henry, while Temenos only captures a very small fraction of total revenue. At the same time, banks are biased against switching their software provider. As you can see on the right-hand side, in a recent survey, only 21% of bank directors indicated that they were completely satisfied with their current provider. But on the other hand, only 7% considered switching very likely, because switching involves a high risk of disruption and a high failure rate of around 70%. Secondly, the US banking market is losing momentum. As you can see on the left-hand side, the number of US commercial banks has been declining for over 30 years now, which of course reduces the number of potential customers for Temenos. Apart from that, only 25% of investors have faith that banks can successfully digitize their current systems. So it will be difficult for Temenos to onboard their remaining banks as well. And while organic growth prospects are bleak, acquisitions won't add a significant number of new customers either, so far M&A for Temenos has been a constant story of over-promising and under-delivering. They've paid huge premiums for their acquisitions in the past, but these ultimately failed to meet the expectations. And with a specific focus of the US expansion in mind, you can see that only Evoca and Coney added a handful of customers in the United States. But compared to the market share of Temenos or its competitors in the region, the impact of M&A to customer growth is negligible. With that, I'm going to hand it over to Don. Thank you, Matias. So keeping the macro strategic perspectives in mind, we have concerns regarding Temenos' future financial performance. In terms of revenues, we've received a declining growth rate as a result of a shrinking EU market and limited expansion in the US. Furthermore, we've received this declining growth rate exacerbated by the introduction of the SAS model, which will cannibalize licensing revenues, thereby splitting 10-year lump sum payments into fractured yearly fees. The introduction of SAS will thus decline margins in the short term until it reaches a recovery point, at which margins will improve due to the markup that SAS offers by cloaking its costs in a bundle. However, there is a concern in development on the cost side of the margins. As over 50% of Temenos' employees reside in India, where wages are expected to rise by 9% per year, Temenos will have limited control over its employee salaries. Thus, cost inflation puts Temenos in a difficult position. With wages rising quickly across the globe and regulations in India restricting employee mobility, Temenos may have to limit its R&D expenditures in order to maintain these margins, which will harm its status as a premium player. There are also worrying concerns involving on the balance sheet. Temenos' aggressive M&A activity has pumped its asset base full of goodwill. This drastically increases the risk on equity in the event of impairment. Worsening the matter, the acquisition industry has levered the firm and dried its cash reserve. Forcing the firm to take a step back from M&A in a rapidly consolidating industry with high valuations and protect firms. Now onto the valuation. We conducted our valuation of Temenos through a blend of discounted cash flow multiples and residual income analyses. This is yielded at a target price of 96.8 Swiss franc, a 13% downside on the last closing price. Our discounted cash flow analysis has been assigned the largest weight. Our discounted free cash flow had a whack of 7.4%, which has been derived using the CAPM and regressing the firm with the SMI. Moreover, a terminal growth rate of 3.1% was used, which comes from an even split between the long-term GDP growth rate of Temenos' relevant regions and the long-term IT spending growth rate. A relative valuation of the use of four multiples, namely EV sales, EV EBITDA, EV EBIT and PE, and finally, our residual income model may use of the cost of equity of 8.1%. Now onto Yavor for the investment risks. Thank you, Dan. Now that we've seen the more technical side of our analysis, it is time to take a look into some additional considerations that an investor should have. First, we will examine the ESG factors. As we can see on the left-hand side, Temenos appears to be committed to performing well on environmental and social issues, and we do not see any major concerns coming from these two pillars. However, the picture looks rather different when it comes to governance. On the right-hand side, you can see the main ESG issues that Temenos faces, ordered in terms of likelihood and severity. Some of the governance concerns are questionable board independence, gender inequality on the board, excessive management pay, and above all, high management turnover. On the next slide, you can see on the left-hand side how these issues have led to a continuous underperformance of Temenos relative to its peers. To give you some more insight on the issue, the graph on the right-hand side clearly illustrates the significant turmoil in the Executive Committee. For example, in 2019, only one position remained unchanged. Finally, let's look into some general investment risks. In addition to the already discussed market and financial risks, the company faces notable implementation risks because it relies on a network of external consultants to implement its products. And now, Mark will deliver the closing remarks. Thank you very much, Jawor. Now, having provided you with our analysis, I would like to reiterate our seller recommendation. The essence of the story is that Temenos's fundamentals cannot justify the current share price. With its customers under structural and financial pressure, organic growth difficult to come by, the firm's finances and risky territory, and shortcomings in ESG and particularly in governance, we think that Temenos, just like Icarus, would do well to a justice level of ambition. And on that note, we thank you for your attention and remain open to your questions. Thank you very much, judges. All right, I'm going to start with the first question, right? You used three valuation models, discounted cash flow, relative valuation, and a residual income model. Could you please explain why you selected these three valuation models? Yes, I will gladly take this question. So Mark, could you please go to slide 72, the blended valuation to just have an overview. So as you said, we use three valuation models, namely the DCF, the multiples of residual income. We use the discounted cash flow valuation because it allows us to make very detailed assumptions about how we project Temenos's business sequence to evolve, but also it's cost-based to evolve. Because what we currently see with Temenos is that we have two main product lines, namely licensing and software as a service, who are at different stages of their product development or their maturity. So it allows us to forecast different revenue growth rates for these segments. And then on the cost side, we, as we mentioned in the presentation, we are facing, we are seeing a very high importance of our employee cost, especially in India, which we also wanted to model very in a very detailed way. So that's why we assigned the highest rate to the discounted cash flow valuation. Then for the multiples valuation, we included it because we wanted to also get a feeling as to how the market is valuing the company and to get a better feeling as to what similar companies like other banking software providers are valued at. And then finally, sorry, we used the residual income model as sort of a backup or a hatch against our discounted cash flow valuation because, as you know, the discounted cash flow valuation relies heavily on the terminal value of the pre-cash flows. And the advantage of the residual income model is that it is based on the fundamental value, namely the bulk value of equity. And to have it grounded on the fundamental value, it is a bit of a backup or a security against the uncertainty that we have in the terminal value of the discounted cash flow terminal value. And so we arrived at a target price of 96.8 Swiss francs through the bless of DCF multiple and residual income. Thank you. Next question comes from Peter. Hi, two questions actually. On the one hand, you sort of portrayed that the banking industry is consolidating less and less banks. You showed a chart to this, insinuating that the market for banking software is shrinking. Why is that? From my understanding, it is not so important to how many banks you sell, but to the size of each bank and how much market share you have within each bank that you sell to. Why is that important that you showed that there are less and less banks? I'm happy to address that question. Now, if we go back to the slide. The argument we're making is not so much that the total banking software market is shrinking. That is not the case. The structural factors clearly point towards continued growth, be it digitalization or what have you. And it's absolutely true what you said about the importance of bigger customers. But the argument is rather especially in the United States, there's an inherent bias against companies or banks switching their providers. And given the strength of the three main incumbents, Pfizer, FIS and Jack Henry, that works against Temenos, considering also the absence of success in the M&A strategy. So it's not so much a story about growth being absent. That's not the case. But it's rather Temenos is lacking ability to penetrate in a meaningful manner. That is the problem. My second question would be why is regulation, banking regulation bad for Temenos? Now, superficially, I'm also happy to take that question. Superficially, it is a benefit to software providers or technology companies in general due to the need for digitalization. However, if you look at the two main products, Temenos is offering the back end of the front end solution. These two account for about 90% of the firm's revenues. On the back end side, banks are more focused on a solution which is compliant with all applicable regulations and then also offers them reliability. But there's little marginal benefit for a premium product from the banks point of view. And on the front end, it sounds counterintuitive, but Temenos has the disadvantage of being a technology company. Meaning that Temenos tries to offer banks a suite of software solutions covering everything from the back end to the front end. And in that sense, banks are more boxed in on the front end, meaning that they are less able to distinguish themselves in user experience, which is central to front end, obviously. So regulation superficially supercharges the need for digital transformation and on the surface increases the demand for software in general, but not necessarily for a premium provider like Temenos. So the benefit of a premium product in that sense is exaggerated and therefore also the benefit of increasing regulation. Thank you. Next question comes from Florian Ester. Florian, Flor is yours. Yeah, sorry. So this is a follow on Peter's first question. So can you show me what has been the bank IT spend growth in the US market historically and what is your expectations over total addressable market growth. First, and then what are your assumptions of historical market share evolutions for Temenos in the US market. What is your argument number one? Now, if I recall it correctly, the total addressable market is growing at about 8% a year 7 or 8% a year in the United States market. And this is the forecasts are usually on a five year time scale up to 2025. So how do you do? How do you define that total addressable market? That is usually conducted on a basis. Well, you could do take a very wide view and look at total IT spending. However, that is a rather expansive definition. And usually it's third parties spending on third party software and the addressable market there to my knowledge is based on Temenos data, $16 billion worldwide actually. And the United States accounts for about 40% of global market. So that would take a addressable market of six and a half billion thereabouts in the United States. And then what is the market? What is what is your market share development assumptions for Temenos in the US market? I think when it comes to growth, I can hand that over to Javor and move to the appropriate slide. Yes, certainly how we have to take this one. So this is how we derived our growth models. So our growth models were not divided by different markets, rather we divided them by the different segments of the company. So if I can go so first we projected the growth of the market and then we projected the relative performance of Temenos relative to the market. And finally we added a code adjustment. And we did this for software licensing SAS and services. And this is how we derived the growth rates for these segments and maintenance it's tied to software licensing. But we did not do the breakdown based on region. We made it based on product category. Thank you. And to add on what Javor said, can we go back to the appendix. So right now Temenos has around 1300 customers in the US. We can see it in the inorganic growth slide number 10. So we can see that Temenos has experienced they can gain clients thanks to Avoka and Kony. But this addition as we've explained during the presentation is quite insignificant to the market share that Temenos has. Because if we compare to the size of FISA, FIS and Jack Henry actually Temenos has a really small clients. We can go to slide back. Yes. So in the US banking software market we can see that Temenos has on average 0.15 compared to for example Jack Henry is operating in the lower tier banks. But on average their contract size is 0.95. So we can really see that Temenos has a small market share and small players in the US market. Time is up. Thank you very much. Thank you. Thank you very much. Thank you very much. Okay, so we are back at 16.30 and next to present is University of Lausanne and joining us now are Luca, Constance, Alessandro, Paul and Simone from University of Lausanne. Welcome. Thank you. So before you upload your slides, can you please pin my video on top? I'm going to wait under nine minutes so you know that you have only one minute left. And after that you can upload your slides. Can you see my slides? Yes, we can see your slides. Hey team, so be ready when you're ready. Good luck. Good afternoon. We are the University of Lausanne and today Constance, Luca, Simone, Alessandro and myself will present you our sell recommendation for Temenos, a market leader flying blind. We forecasted a 26% downside of a target price of 92 francs. This recommendation is based on three main reasons. The failure of the US expansion, an inefficient capital allocation and over optimistic expectation from both the management and the market. Today, banks are facing an increased cost pressure. Indeed, they're relying on outdated legacy softwares that are extremely complex. As a result, up to 68% of bank IT expenditures is not to develop new softwares, but rather to maintain and operate the outdated legacy softwares. Banks are evolving in a low interest environment that is pushing the net interest margin and the pressure. As we expect this environment to remain in the future, it will further urge its banks to cut costs and modernize the systems. When we expect this market to experience a shape recovery in 2021, these two main drivers will further push banks IT spendings for softwares in the future. As a result, we expect this market to experience a 8% curve in tough body softwares and a curve of 4% in the total addressable market. Today, Temenos is one of the main players. However, in the future, we expect the company to lose market shares from 7.5% to 7.1% in 2024. This loss of market shares will be mainly due to an intensifying competition for Q SaaS players, the failure of the US expansion and the cannibalization of revenues from the SaaS offering. Now Simone, we'd rather explain you why we think the company will fail in the US. Thank you Paul. The expansion in the US, which is the biggest addressable market for Temenos, represents a key pillar of the company's strategy. Temenos is going after the top 100 US banks, which in our opinion do not represent a suitable customer target. First of all, big banks have huge internal budgets and important human resources that allow them to internally develop their own software solutions. Moreover, these big players have developed throughout the years highly customized systems which are very difficult to replicate with a standardized software package such as those of Temenos. Finally, especially the top 20 US banks are highly focused on investment banking, which is not directly covered by Temenos product offering. For all these three reasons, we believe that Temenos will have to switch its attention from the top tier US banks and focus more on the small and middle sized banks. However, at these middle sized players, competition is particularly intense. Since three companies, FIS, FISER and Jack and Harry, dominate the local market with a combined share of 80%. These players have developed long-standing relationships with both local customers and local suppliers and are able to offer solutions which are far less costly than those of Temenos. On the other hand, small banks tend to prefer solutions which are highly customized and are offered by the new entrants, such as the pure sized players. Finally, the third issue related with the expansion in US has to do with the governance for which we assign the triple B grade and a weight of 50% in our ESG analysis. As we can see from the table on the left-hand side, only two members out of seven of the board of directors have direct experience in the US software sector. On the other hand, if we look at the position of the president of the Americas, we can see a high level of turnover which shows a high degree of uncertainty for a position considered to be key in order to successfully expand overseas. Now Luca will guide you through the inefficient capital allocation. Thank you Simone. Observing the average R&D expenses ratio of the industry between 2015 and 2019, we can see that the level of Temenos is so elevated to have no rivals. In fact, it spent almost twice as much as Oracle and ACP, which plays respectively second and third. However, what really matters is not how much you invest, but how efficiently you do it. With this regard, we evaluated the impact of R&D investment on organic growth using the R&D efficiency index. It shows that on average in the last five years, Temenos R&D has been inefficient compared to the industry average. This result makes investors aware of the fact that the company is allocating excessive capital to activities that are not supporting its growth. This situation will further deteriorate in the future, since the company will continue to invest at least 21% of its revenues in R&D. This waste of capital could be more widely used in future R&D activities, which in the past contributed to increase the growth. Since all the companies that were acquiring the last five years were not listed, we considered the return on the date of the announcement to evaluate the quality of this acquisition. Markets have always reacted positively, with an average increase of 3%, confirming positive sentiments about these deals. Since Temenos claimed that he will continue with the M&S strategy also in the future, more and more depth will arise about whether the level of R&D is appropriate or not. And now Alessandro, could you give us more information about the financial situation? Thank you Luca. In 2020, we expect revenues to decrease by 10%, followed by a B-shaped recovery, assuming the finalization of the pending deals due to COVID. In the coming years, Temenos will experience a marginal decrease, ending its double-digit growth in 2025. During this period, it will generate revenue cager of 7.7%, far below the over-optimistic management target between 10% to 15%. We can say the same about the current stock price, which implies a revenue cager of 11.4%, in line with the management. The failure to meet the target explained by the disappointing US expansion is worsened by the ongoing transition from licensing to SAS. Indeed, despite SAS has been the main driver of revenue growth with a cager of 34%, this shift will cannibalize part of future licensing revenues. In fact, the portion of licensing contracts shifted to SAS will generate a net cumulative loss of 64 million, mainly related to maintenance, which is already included in a SAS contract. The transition to SAS has also implication on profitability. Indeed, its actual lower gross profit, given its nobility, will hurt profitability in the short term. It will take four years for SAS to converge at the same level of the other products at 75%. As a result, EBIT margin will require three years to fully recover from the COVID shock. The improvement in cost of goods sold, mainly driven by SAS, is partly offset by higher sales and marketing costs, since SAS will require more spending. In addition, JNA and OPEX will decline because of the scale, effect, infixed costs, and R&D. Nevertheless, this will not be sufficient to meet the management target of about 29%, which, as with revenues, are too optimistic about the potential of terminals. Now Constance will talk to you about the valuation and investment risk. Thank you, Esanko. We computed a price based on our decision evaluation, leading to a target price of 92 francs. We deliver a style recommendation based on the 26% downside from the current market price of 124 francs. The cost of capital of 7% is based on a low and on a cost of debt in line with the triple B rating. Compared to peers, Temenos is also of a value. With an enterprise value of 11 times itself, twice the value implied by the market. This peer analysis is in line with the style recommendation. However, we decided to rely entirely on our VCL valuation due to a lack of comparables. We identified two key risks. The first regarding the US expansion, which is a key argument in our analysis. Hence, a successful implementation in the US would challenge our forecast and investment recommendation. Temenos invest heavily to mitigate data security risks, which represents a point of strength in the social factor of our energy analysis, proven by the increasing number of certification and a total loss of $0 from legal precedents. The company also shows higher training hours and lower turnover ratio compared to peers. Overall, Temenos benefits from an ESG grade of A. To conclude, given a strategic mismatch in its US expansion and an inefficient capital allocation leading to missing management targets, we do not recommend investing in Temenos as its gross potential does not justify its current price of 124 francs. Thank you for your attention. The floor is now open for questions. Thank you very much. Judges. The first question comes from Markus. Please, Markus. Yeah, thanks for the presentation. Well done. Can you go to the slide where you have the two valuation methods, please? Because it's probably just a confusion I have. Markus basically said, no, you're not using your unit doing any multiple valuation because you do not have any comparables. But on the other hand, you mentioned actually on another slide, you know that you have 80% of other players. And Temenos only represents, you know, represented in the 20% pocket. So clearly there are comparables, maybe not perfect ones that you do have. So what did you, you know, why did you come to the conclusion, right? What was the logic behind it? Did you conclude that you don't have any comparables at hand? Well, it's pretty because we can't, we divided the comparables in two main groups. First the traditional banking software, which are here in light blue. And then the first has players which are in dark blue. So for the first one, the traditional banking software, they didn't, they don't have the wish to fully transition to SAS yet. So they don't really offer exactly the same solutions. A lot of them also evolve in different industries. And the ones that are serving only financial institutions, not only banks, but also credit unions or insurance. So they don't exactly have the same client target as Temos. And regarding the pure SAS players, they have different growth potential and also evolve in different industries. For example, if we look at the last slide that we have with only pure SAS players, we can also see that Temenos is very valued compared to those. That's why we thought that even with the comparables, we do not wish to take it into consideration in our valuation. Okay. Thanks for that. If I may just add a second question. You said that when it comes to the R&D spend, they are very inefficient, right? They are below their peers. We also have a very nice chart with regard to the efficiency. Have you looked into whether it would be possible for Temenos to actually get in line with competitors in terms of R&D spending? Because it seems like an easy one, right? You have to just spend smarter. And what that would imply in terms of the other metrics amongst others also valuation? We observe that Temenos is investing too much. In fact, 80% corresponding to the 17% out of 22% is expensive in internal development. And this is the part that could reduce it. Where the rest of 5% is to integrate product acquisition and that one is in line with the market. So the problem is the internal development that is excessively high considering that they are investing in a much smaller portfolio compared to peers. So with the internal development, this could be a very important part of for Temenos to reduce cost and increase also the valuation. Okay. Do you think this is feasible or you're just stating the fact that currently they are just inefficient? No. Well, it is feasible. But just Temenos should have reduced the internal R&D, which have proven to be inefficient and focus more on the opposition of external product from M&A activities. Okay. Thanks. Thank you. Next question comes from Christoph. Christoph of Florian. Sorry, I got unmuted. Thank you, Olivier. Thanks, team, for this presentation. One question. So you are recommending to sell the stock. So some of our clients would short. So what's the risk if you short such a stock and such a company in your view? In our opinion, especially following the share price evolvement today, it's even more a short today, especially since the share price today went up and is reflecting our growth assumption in terms of revenue. So our top line growth is still aligned with the one we had. The bit margin is slightly improved according to the figures that were reported yesterday by the company. However, we think that this improvement is just one time improvement because they only cut it cost recently to improve this margin, but it's not going to be a long term advantage. And we still would like to recommend this short to your clients in this case. And in terms of the downside for your clients, if they were shorting this position, we realized a blue-gray-sky scenario and in this scenario, and also we saw that the downside was way much lower, sorry. And also through a Monte Carlo simulation, we could see that in 90% of the cases, it was a sell still. So the probability of this short position to have margin call is way lower, I would say. Okay. Well, how do you see the likelihood of Temenos getting acquired since this is a consolidating industry? And if so, who do you think would acquire such a business? Maybe not for consolidation, but for example, companies that are offering consulting services in IT such as Accenture, Temenos and most of the market, they have partnership with them, and they could actually be interested in purchasing such a company as they can capture most of the sales opportunities. It would be a good diversification for them as they would be able to capture significant market share. Good. Thank you. Thank you. Next question comes from Florian Ester. Okay. One of your assumptions is that license growth forward will be four and a half percent. Could you put that four and a half percent into relations of the historical license growth as well as the addressable market growth? Yes, sure, sure. In terms of historical market growth for the licensing, it was much higher in the past since licensing represented most of Temenos revenues in the past. And that's why now we expect this growth to be lower. And yeah, exactly. So what was the historical licensing growth of the company? It was 15% from 2015 to 2019. So if we put your assumptions on licensing growth and ZAZ growth together, how much would that be in a keiger format and how does that compare to the historical experience? It will be around 10.5% between the period from 2019 and 2024. And how does that compare to the total addressable market growth? The total addressable market growth is 4%, but it includes also the spending internally developed software. And so then the total addressable market growth for third-party spenders? It's 8%. Okay, thank you. As you can see in slide number three, we have the numbers we divided between the total addressable market, which includes both the spending third-party and internally developed and only the spending third-party. Thank you. Next question comes from Peter. When you look at your R&D efficiency, you look at total revenues. However, the company deliberately is not selling a lot of services. They outsource the whole service side. Shouldn't you for the R&D efficiency only look at software, i.e. ILFs and ZAZ revenues? Instead of maintenance and services, which has nothing to do with the innovations, particularly maintenance? We also look in this way, looking also only in software licensing. However, the final result was... I'm sorry. Thank you very much. Thanks a lot. Thank you. Thank you. We will be back shortly with the last presentation for today's University of Zurich. Hello, University of Zurich. Hello. Before we start, may I please ask you that you pin my video? Because I'm going to wave after night, maybe so you can see me. I have a thumbs up sound so you know that you have only one minute left. Okay, you can upload your video. Yeah, just a second. Got kicked out earlier. Just a minute. Can you hear me? Yes. Okay, works. We are ready when you are. Perfect. Good luck. What are you willing to pay for growth? That's a question we ask ourselves at the beginning of our analysis process of terminals. To assess that, we had to look at the price earnings to growth ratio in the past five years, immediately spotting two outliers. One of them being terminals trading at a visible premium compared to its peer group. Over the next minutes, we want to talk you through why the market is overestimating the true potential of terminals. While it's first overestimating its revenue growth, it's second overlooking the negative impact of the SAS transition and only focusing on the good side. And it's third underestimating the true cost of its growth. All this leads to a sell recommendation from our side with a target price of 85 Swiss francs, a further downside potential of 25%. Terminus is a software banking provider focusing on core banking system, a heart of a bank. With its main product, Terminus Transact, making up two-thirds of its complete revenue. Other important products like infinity, payments and fund administration are serving the complete value chain of the bank. So let's zoom in on how each of these markets develop. For our first point, the overestimation of revenue growth, we start off by looking at our top-down approach. In this, we see that the total addressable market will slow down over the coming years with a caker being considerable below the historical one. This is behind three main factors. One, a short-term COVID impact. Two, the continued digital transition by banks but free and maturing banking software market. Moving on to the market shares, we forecast that Terminus Transact, their core banking offering will become global market leader by 2029. This is behind a highly rated product offering and a breakthrough in the American market. For the rest of Terminus offerings, we forecast that their growth will be in line with the historical growth as Terminus continues its M&A activity but cross and opportunities remain limited. Combining these two, we arrive at a forecast of revenue with a 13% caker over our forecast period. This falls way short of the current implied revenue growth based on the current market price. For our second point, the overlooked impact of the SaaS transition. We start off by looking at the characteristics of the SaaS contract compared to their traditional licensing plus maintenance contracts. We see that SaaS contracts merges two revenue streams into one and has a way shorter contract duration. This leads to lower short-term revenue but an increase in long-term revenue. However, bear in mind that this increase is contingent upon the contracts actually being renewed. Looking at the cost side of SaaS, we see that currently SaaS cross margins are way lower than those of licensing. Terminus acknowledges but believes that SaaS margins will catch up in the future. However, what we see in the market is that tier one and two banks remain reluctant towards switching to SaaS. Therefore, at most 40% of Terminus customers will switch to SaaS. This has three major implications for Terminus. First of all, they will not achieve substantial savings in sales and marketing as other SaaS companies have done. Second of all, they will not reach their economies of scale required in order to operate their own cloud. Therefore, third of all, they will have to rely on cloud providers with high pricing power. All of this leads us to the conclusion that Terminus will not close the gap in margins of setting the extra revenue earned. Looking at costs, we can see that Terminus capitalized less and less in terms of total development costs over the last few years. Also, by comparing Terminus to its peers, we can see the capitalized way less than their peers, indicating one inefficiency. When we plot Terminus revenue growth against their R&D, we can see the default short behind their peers on their spending, indicating another inefficiency. Terminus highly markets its non-IFRS numbers, which are currently 35% higher than the IFRS numbers. But bear in mind, they do not really differentiate between the two different intangible S-classes they propose, and also they do not account for their constant M&A activity. Therefore, we adjusted these factors in our forecast with our non-IFRS EBIT, leaving us 15% lower than Terminus numbers. Forecasting this EBIT margin into the future, we can see Terminus fall short of their midterm goal of 36% EBIT margin in the midterm on the different adjustments we already mentioned and the different sales impact. Let's now look at ESG. We use the SASB materiality map factors to analyze the ESG performance of the company. For the environmental pillar, we find that Terminus has low direct emissions, implemented supply chain management and monitoring into its strategy, and that the resource use has room for improvements. We conclude that Terminus performs good in this pillar. Our research regarding the social pillar shows that there are no customer issues nor data security breaches in recent history, and that Terminus is a very diverse and inclusive employer. We conclude that the company performs strong in this pillar. When looking at governance, we see that the company was not involved in anti-competitive behavior proceedings and has few service disruptions and a low customer downtime for its products. However, management share sales and non-IFRS adjustments raise a red flag. On the left, we see that the share sales by the management are relatively large. This can indicate an overvaluation of the stock. On the right graph, we see that the non-IFRS adjustments done by the company have increased a lot in the past two years, and the management compensation is heavily dependent on non-IFRS results. As Moritz has pointed out before, these adjustments are too high and can overstate the profitability of a company. As a result, we downgrade the ESG performance for the governance pillar. Summarizing all this, we calculate an ESG impact of 2.5%. Therefore, lowering our beta by 2.5% and increasing our multiples by 2.5%. Let's then zoom in on the evaluation. We already heard about the three key drivers for future cash flows and how they are going to affect our revenue and earnings in the future. This leads to a stable free cash flow to the firm in the near future, only following afterwards with a steadily increase. The present value of ESG in the past two years result in $37 per share in our share price decomposition. For the terminal value, we use the fate rate model with the main drivers as a competitive advantage period of 10 years, which is the typical renewal cycle for core banking systems in the bank. In addition, we adjusted our net operating assets by sales and marketing expenses since Timenos is highly relying on the reputation and sales structure of a terminal value of $74 per share. Reducing the net debt of $14 per share leads us to a final target price of $97 per share in our DCF valuation. On the sensitivity side, we can see that only a way higher terminal growth rate or competitive advantage time paired with a way longer cost of capital would lead to a deviation from our initial side recommendation. But how does Timenos compare to its peer group? We can see in terms of EVAPDR, EVAPIT and price earnings to growth, Timenos is trading at a premium compared to the median of its peer group. Already after accounting for the ESG premium, the gap to the mean would be even higher, resulting in a multiple target price of $94 per share. As Maldic just pointed out, we arrive at a target price of $97 in our DCF and $94 in our multiples approach. With a weighting of 60% on our DCF and 40% on our multiple valuation, we then arrive at a target price of $96. Since Timenos reporting currency is a dollar, but it is traded in France, we apply a one-year forward rate of 0.88 US dollars to France to arrive at a target price of 85 francs. In our analysis of different scenarios, we identified three key risk areas to our base case scenario. First, a faster revenue growth of SARS that would be driven by big banks switching faster to SARS. Second, outsourcing of the services faster than expected, which would lead to lower costs in relation to revenues and a higher EBIT margin. And third, highly effective R&D spendings that would reduce costs and lead to new signings due to more innovative products. Apart from that, we also considered the ESG performance, upselling and cross-selling issues, and a strong COVID recovery. To complete our analysis, we incorporated all these risks that we just analyzed into different scenarios, reaching a blue sky scenario price of 122 francs with an 8% upside potential. In contrast, we arrive at a gray sky scenario price of 52 francs with a 54% downside potential by considering a resistant banking sector, low cross-selling opportunities and slow outsourcing of the services area. Summarizing the analysis that we did as a team of the University of Zurich, the overestimation of revenue growth, the overlooked impact of the SARS transition, and the underestimation of costs lead us to a target price of 85 francs. So what is growth worth? The answer is not that much, and that's why Temenos is a sell. Ladies and gentlemen, thank you for your attention. That was great, 9 minutes and 52 seconds. Thank you very much. Judges? Thank you very much. The first question comes from Christoph Gretler. Thank you, Oliver. Thanks to the team for this enthusiastic presentation. Just one question on your evaluation. You had this 60-40% split between DCF and multiples. How do you actually come up with that? And why is it not 30, 70, or 20, 80? Is there any kind of thoughts behind that? If we go to our page 37 or appendix, we can clearly see several positive aspects, but also negative aspects of each evaluation technique. DCF, in our opinion, is much more robust against current market fluctuations, and we have a much higher flexibility in different types of scenarios that we already analyzed in our presentation. Furthermore, if we go to page 91 in our appendix, we can see that in our peer group, we didn't have a perfect comparable company. We had good comparables, but in terms of line of business size and revenue caga over the past five years, they are not perfectly comparable. And that's why we decided to use a 60% weight on our DCF. Thank you. Perhaps continuing on your evaluation, right? Why did you choose these multiples? So if you take a look at our multiple selection slides, we choose the price earnings growth multiple since the growth is the key point we are looking at. The question we were asking is, why do we have to pay so much for the company and what's the effect of growth? On the other side, we looked at the EVAPDR and EVAPD multiple since they are independent of the capital structure. We looked at both of these multiples since the companies in our peer group had different adjustments in their different shadows because they expand and they capitalize and also to be robust for different DNA shadows. Thank you. Next question comes from Rahul, Sen Gupta. Hi. Thank you very much for your presentation. Very interesting indeed. So I have a question. You outlined a couple of risks to your recommendation at your, I think, closing slide or the one before. So which one of these risks to your recommendation would you make change your mind? Meaning what would make you change to make a buy recommendation on this company? What does need to happen? So we have several risks here that we have to consider on slide 86 in our appendix. We can see several upside risks to our valuation being a large portion of tier one and two banks switching from licensing to SaaS. Then another risk would be a fast outsourcing of the services area faster than what we expect and a more effective R&D spending. However, what the market currently doesn't get is that all these risks are linked to several mitigating factors that are reducing the risk of the stock price going up in our opinion. This is largely driven by banks that are resistance during that switch from licensing to SaaS, especially tier one and two banks. Thank you. Next question comes from Christoph. Yes, actually just following up on that topic. What do you think is actually the likelihood that Taminos could be acquired? So sorry. For the acquisition related part, Taminos is of course a large company, but nevertheless you have to bear in mind that there are no currently anti-takeover measurements currently in place, which of course a problem, but nevertheless we can't see that Taminos with its market size of almost 10 billion as of today is a potential candidate in the situation. You wouldn't go as far as to assign a probability or five percent or so. You have companies like Oracle also for them, 10 billion is no kind of breakfast. Now, if we please go to slide 80 of our appendix, due to the reason that Taminos has a very high EBTA multiple, it is unlikely that somebody will buy Taminos and for example Oracle will also most likely not consider buying Taminos since implementing Taminos into its group is coming with huge costs. So the only competitors or which are not competitors but companies that would be considerable are companies like TechKines, Amazon or Microsoft, which is also not likely the case. Thank you. What is your assessment? No, go ahead. I do have another question. How do you assess management quality and what is your opinion? Well, if we please go to slide 73 of our appendix, then we can see that management is actually quite new or if we even better move to the slide 78 where we can have an overview about the management and most of them are quite long in the company but not too long in this executive position so it would be too early to really judge the management on its performance also due to the impact of COVID-19. Thank you, Florian. Very early in your slides you had an implied growth by the market of 19%. How did you derive that and how does that compare to sort of the growth that analysts are giving and couldn't that growth just be the issue that some of the assumptions you took to derive that, which is wrong? Yes, first of all, we start off by just looking at how we arrived there. We took the current share price and saw with our assumptions what would the revenue growth be needed in order to sustain the share price that is currently and for your assumptions and if whether our assumptions were correct or not, I'll hand it over to Moritz who can tell you more about the analyst estimates. Yes, so the market estimations were actually really close in line on the top line with our assumptions. We also already a little bit overestimated the consensus of the analysts for the full year and also for the next years but nevertheless we had a bit more downside on the bottom line resulting in a different scenario in this case. Thank you. So, hanging on this topic, so you're saying that the market is overestimating the cost side in general or underestimating the cost side? Yes, so if you go to the cost analysis, we see two main factors for that, like the main factor if you go to the non-IFRS adjustment is that the analyst and the market is truly focusing on these non-IFRS adjustments and we see that they include a lot of recurring stuff to do the MLA transaction. So if you go one slide further to the adjustment bridge, you can see that they have part of the recurring and cost for the MLA activities plus also the differentiation between the two parts of monetization. So they amortize via quite the tangibles and they add back the customer-based and the software-based amortization but they should only add back in our case the customer-based ones. Okay, thank you. Next question comes from Peter Romantino. I struggle a bit with your implied growth rate. That means that the only factor you consider to look what the market implies, it's a one-factor model, it's growth. Have you looked at the margin use of capital or capital allocation? There is a multiple array that goes into a fair value. You look at one factor and say it's all growth. The rest doesn't matter. You couldn't be wrong on other assumptions. Why is that? Why do you only consider one factor? So for our whole valuation, we are not only considering one factor. No, that's not what I mean. Sorry, Peter. For the implied growth on the first slide. So we also compare to the analyst expectations for the margin that went quite fast back to the 36% adjusted EBIT level that they wanted. However, for the implied revenue growth here, we assumed our margins instead of adjusting them for all the time. That makes it a one-factor model. For the slide where we have the implied market growth of 15%, yes. Is that wise? It would be more robust if it would include also the other adjustments, yes. Thank you. Thank you. The next question comes from Markus Matusek. Yeah, you had a nice ESG analysis done, including some conclusion that you're actually reducing the valuation based on the ESG analysis itself. How much of an impact is that on the valuation? I'm sorry. 10 minutes is over. Okay. Thanks a lot, guys. Thank you very much. Congratulations. Well done. Thank you. Thank you to all teams who presented today. Our judges are going to deliberate now and we will see you back at the word ceremony at seven o'clock. Until then. Thank you. Goodbye. Hello. Hello. Hello, Janna. Good evening and welcome back. It is my pleasure to open the award ceremony of the CFA Institute Research Challenge in Switzerland 2021. The great test for all students who are bold enough to face it. But like any other great challenge, the rewards and opportunities it offers are even bigger. Research challenge is about real life experience of financial analysis. Research challenge is about telling a story because that is what is going to connect with people. One can do the most sophisticated analysis, but if you cannot communicate what it means and why people should care, it doesn't make the real, the same impact. Research challenge is about teamwork and we understand how difficult it must have been for students this year to work remotely. And finally, research challenge is a confidence building. So dear students, we are very pleased and very proud with what you have achieved and we look forward to seeing what more you will achieve in your professions. CFA Institute Research Challenge would not be possible without our volunteers. This year, we have been supported by more than 80 volunteers of CFA Society Switzerland. And those where, industry experts who gave lectures to students, industry mentors who worked closely with students on their reports and presentations, graders who reviewed and graded reports and finally judges who you met today. Thank you all for your time, passion and expertise you shared with students. Dear professors and assistants, thank you very much for organizing courses and teaching students. We hope you enjoyed the experience and we look forward to welcoming next generations in this competition. And a big thank you to University of Zurich for hosting the kickoff meeting last October. We would like to thank our partners and sponsors now. A big thank you to Finance and Leadership who has been covering research challenge for many years. Now, and who is providing students with free online subscription to their news portal. A big thank you to Karen Coddy from Coddy International. She's a brilliant presentation skills coach and one of the biggest fans of the research challenges Switzerland. Karen is also very passionate about working with students and developing talents. Finally, thank you to Credit Suisse. Credit Suisse, through its experiences and campus recruitment Switzerland, has been generously supporting research challenge for 12 years now. Over the years, our relationship grows stronger and we look forward to working together in the future. A big thank you to Jeanine Hochstraße, Orfe Chatou and other colleagues from Credit Suisse. And now I would like to invite our first keynote speaker, Marissa Drew, Chief Sustainability Officer and the global head of the Sustainability Strategy, Advisory and Finance in Credit Suisse. Welcome Marissa, the floor is yours. Is Marissa on the call? I think we just lost her a second ago. Let me just check. Or I think she's back again. Yes, she's there. Marissa, can you hear us? Okay, I will invite then our second keynote speaker, Monica Rencati from Terminus, our subject company. Monica is Chief Human Resources Officer at Terminus. Welcome Monica. Thank you very much. And thank you to CFA and everyone who is part of this initiative. I'm really delighted to be here with you this evening or this afternoon, depending on which part of the world we are, and really have the opportunity to share the appreciation from the staff of Terminus for the work and the contribution that all of you have offered us participating into this challenge and really sharing your insights, your perspective and the richness of what you are experiencing every day. I've been really brought up into that and I learned that we had a very large number of students from almost 12 universities organized around 32 teams and really delivering outcomes that have made our life, the life of our judges extremely difficult to pick from and choose from in terms of the quality, in terms of the innovation and the efforts that have been put into that. Even more in a year like 2020 that we all know how unprecedented it has been, but to see the passion, the energy and the commitment is positively overwhelming and is a great inspiration and example for all of us. Let me just share a little bit about Terminus. We are a banking software company and an organization with a strong sense of purpose and with a strong vision, which is really to provide financial institutions of any size around the world, technology to thrive in the digital banking age and as a matter of fact, through that the opportunity to bring banking to everyone in a sustainable way around the world. If you can move to the next slide just to give you a sense of who we are, we are approximately 7,500 people around 150 countries around the world. We are the third largest European soft company from the market cap perspective with the reach of 1.2 billion and it might have grown in the meantime people around the world that are really have access to bank and banking services through the capabilities that our software offer to our customers around the world. We've got approximately 3,000 banks as customers, 41 of the top 50 banks are part of our portfolio and we are facilitating to manage more than 2.5 billion transitions on a daily basis. I'm not sure the impact that this has on you, but frankly speaking, when I hear the story, when I listen to the story every time, there is a positive overwhelming impact really in terms of the impact we can really have on people around the world. But this is not what we are driven from only. We are also driven from making sure that we continue to drive value creation around the world in a sustainable way and if we can move to the next slide what our company, our team is really focused on is making sure that everything we do is sustainably tested and vetted in a way that we can have a broader impact into the society and it goes from environmental sustainability which I understand in some cases is difficult to grasp from a technology company but also from our data centers and our systems to make sure that we do things right to the social aspect of that if I think about also the crisis and the difficult moments that the world has gone through 2020 from micro financing services having the opportunity to reach broader population around the world and make credit available to them is absolutely important. We have done a lot of work around diversity and inclusion around the world and our employees are frontline volunteering in multiple initiatives from supporting the communities helping in upscaling people in technology and making things better in the countries where we operate and finally a sustainable and responsible governance is core to our values as well and we need to make sure that everything we do is done in the right way to reflect our values and to reflect what we believe into that. We've got almost 27 years of deep experience in this sector in fact we were born in Switzerland in Geneva and we feel really proud about that and about what we do every day and if you will ever be couriers about Temenos and exploring what means as well being successful at Temenos I make myself available you can find information in our website and you will be more than welcome to have a dialogue and have a conversation about the future as we constantly look for opportunities to onboard young talent graduates and really to leverage from your experience your insights and your fresh eyes into what we are doing every day. Thank you again very much for your contribution and your passion and Mirjana I will give it back to you so to allow the other panellists to join us. Thank you very much and thank you to Takis Piliopoulos for actively participating in the competition this year fortunately Takis couldn't be with us today. Today you cannot be with us because it's a big day for us we've got a capital market day and so we are constantly we are at the moment in a road show with our investors and future investors there is no one better than this community who can understand the value and the importance of that and that's the reason why Takis unfortunately couldn't be with us but again thank you for that and thank you on ESBF. Thank you So I think Marissa is with us Marissa can you hear us? Hi this is Dana Barski from Credit Swiss. Marissa asked me to jump in last minute she's having serious technical problems. Hi Oh sorry go ahead Marissa are you back? Nope If it's okay I would like to jump in for her. I think the first lesson for this is always have backup and so it's my pleasure to be here today I love seeing everyone here in their suits it's just apologies I'm so casuals making me feel like I'm not ready for the occasion I'm Dana Barski I'm the Chief Operating Officer of the Sustainability Strategy and Advisory Department I work for Marissa and I'm going to jump in here cold I started at Credit Swiss in 1995 out of Harvard Business School I started my career as an M&A banker moved on to venture capital and then I joined in this capacity about 3-4 years ago focused on sustainability I like to say I'm a Reformed Investment Banker if you can move the slides I would like to see I don't even know what she has in the slides so not that page Top Career I'm very much aligned with Marissa on do's and don'ts so I would like to spend a little bit of time on this page I think we really both share very similar goals as to have goals I would say as to what makes success in an institution that's as large and complex as Credit Swiss so I'm going to go through some of these really I think some of the tips I would give would be always be the go-to team member and own what you do I think that's so important I see that in our team that is around the globe right now we've got about 30 people in the sustainability strategy advisory team and really stepping up and making yourself the go-to team member is just so valuable networking I think that's a big one as well it's really important especially in sustainability that you have a large network because Credit Swiss for instance right now when it comes to sustainability it's not just about our group it's about embedding sustainability broadly and deeply throughout the entire organization seek opportunities outside your day-to-day job I think that's really important too in terms of contributing where you can be it on diversity and inclusion helping others learning about how different divisions work that's a critical thing as well and communicating where you would like your career to go really valuable and just thinking about it on a day-to-day you know I think she put in some derailers in here as well positive attitude goes a long way and a negative attitude always can impact others and please always think yourselves of role models be confident confidence breeds success a lot of people I see do have unnecessary self-doubt and I think you really need to not be so hard on yourself sometimes and think about the successes that you have had and likewise don't be afraid to ask for more responsibility and don't let a setback paralyze you being called to present last minute and you know when things do go wrong I think it's also really important to not burn bridges because the network that you make at the office will always be important to you and you need to communicate and deal with the things that you may have I think the final one she has here is never moving outside your comfort zone and don't be shy to take calculated risks I don't know if we're doing Q&A at the end but I might come back to that let me see what's on the next page sustainable investing I'm just so proud to be part of the sustainable investing activities at Credit Suisse the generations such as you have really embedded purpose in the way that you're investing and we see that and what ESG investing is can I just see the next slides I just want to know what I'm dealing with here and the next one I just want to see what's in the deck great thank you so you can go back to the previous page I just wanted to see what was in here just defining what ESG is I'm assuming you have some base knowledge we define ESG along the spectrum from simple exclusions where a client or an entity may come to us and say I don't want to invest in tobacco so please exclude that ESG integration which is really making investment decisions along ESG criteria and truly embedding considerations be it environmental, social, or governance in your investing decisions along that spectrum we also look at thematic investing and then thematics could be looking from environmental funds to trying to reduce carbon footprints to social funds trying to really empower minority groups and then we also look at impact investing which is having deep intentionality to the investments that we make and that's often in the private markets sustainable investing at Credit Suisse right now is more than just our group it's really taking a look at ESG factors be it investing financing everything that we're doing now we're trying to bring that into the into the equation next page great global sustainable investing is just taking off tremendous growth rate you can see between 2014 2016 the market went from 18 to 22 trillion but now just four years later it's practically double the growth rate is astonishing but there's a reason for that is not just that people are waking up to the fact that sustainable investing is purposeful but also it's proving to be good investing and there has been alpha generation from a sustainable investing versus the non ESG benchmarks similarly global impact investing has just skyrocketed you can see that on the bottom left you know people used to believe that you couldn't invest with impact and receive market rate returns and we have certainly shown that those two things are not mutually exclusive and we're working to build many opportunities for true impact be it again on the environmental side or the social side for instance with respect to education and sustainable debt issuance are just taking off as well be it green bonds social bonds sustainability link bonds which is really a new phenomena setting specific targets along ESG factors whereas a company can receive a reduction in the interest rates that they're paying if they meet certain targets is really a very recent financial instrument phenomena that's really been taking off and then on the next page yep oh this is the spectrum well look I think on the previous page we said three out of four companies recently three out of four the sustainable equity funds have really outperformed their comparable fund categories in 2020 you know this COVID environment has really I think driven this home that ESG investing has outperformed and really has shown that looking and analyzing best of class companies along ESG categories is truly good investing and then sorry I don't know much time I have so please someone signal me we talked about the spectrum the the credit Swiss likes to speak about our fabulous super trends which are really long term trends in the marketplace where we find that there'll be alpha creation for instance for those of you in this room millennial values also you know technology at the service of humans climate change the silver economy which is aging and we very much also believe that these long term trends investing trends that will provide alpha generation are very much tied to the UN sustainable development goals you know we have seen the buying power the investing power that millennials have had you know across a big spectrum of UN SDGs be it education be it your consumer buying patterns in terms of alternative foods or you know looking at the labels of where your clothes are made and caring about you know if your clothes are recycled and where they come from and what the materials are made from the supply chains behind that and that is really just driving investments and in really just making a tremendous difference on the world and then is there more in here every page is a surprise for me to go back you know just trying to see what's here a lot of these themes that you see on the left are really starting to drive investment opportunities alternative food is just an amazing one I mean not just to be on meats of the world but also all the lab based meats the lab based fish that are coming out and I think there's been a real awakening of biodiversity and the considerations that come along with that you know every time you make an investment you can really think about what that is doing to our to not to our environment and specifically to biodiversity I invite you for those of you who are interested in the topic to look at a paper that we did with responsible investor to show that it's just really everyone knows it's critical to think about biodiversity in your investment decisions but it's hard people don't know how to and until we're able to communicate that framework that you know we need to help our our clients and investors figure out how to have such considerations in their investment decisions another big trend that we're we're also looking at right now is decarbonizing the economy and decarbonizing your portfolio and thinking about the investments that you make and the carbon footprint that those companies have and it's also good investing because you know as you think about the transitions that clients have to make that companies have to make you know you don't want to be investing in companies with a high carbon footprint because ultimately they're going to have headwinds be it being be it carbon tax and so we're looking at that as well in in our portfolio decisions um I don't know if I hit on at all what I was supposed to and I don't know if there's a Q&A so you know I welcome uh I don't know if I'm supposed to pass it on to the next speaker or I welcome Q&A and um the luck in all of your journeys so thank you so much Donna for jumping in thank you very much indeed we won't have time for Q&A because I think everybody is excited to hear about the results and I'm inviting our judge today the godfather of the CFA Institute of Research Florian Esther to announce the results I'm not sure godfather really sounds right here but okay thanks thanks Michaela Monika for these kind words really interesting thanks a lot for that but to move on to the announcement of the winners what we have decided is to make this a little bit more exciting doing this on a zoom call is kind of dry let me put it this way so what we're gonna try to do is we're gonna reverse zoom etiquette what I would like you to do is to unmute yourself I will then announce first the third place winner and then I want everybody to shout scream and holler as loud as you can and the winning team I hope they get up start dancing jumping around so we all know who it is that actually has won okay those are the rules if I then raise my hand so please pin my window if I then raise my hand that would be kind of the time to kind of come back here alright everybody clear everybody has unmuted excellent alright let's try how this works now we'll go from third place up to first drum roll so third place we have University of Switzerland Italian excellent excellent excellent okay congratulations to Lugano you did an excellent job third second year in a row up there in the top three well done for the rest of you guys this you can do that better with the first one now we get the second place I want a little bit more enthusiasm particularly the guys who have won I really want them jumping up and down I know who you are so please make sure you get that thank you with that we'll come to the announcement of the second place and the second place goes to Zurich now Morten and Malte were kind of to dry there we have to work on that one Christoph you have to talk to these guys you know a little bit more enthusiasm and with that we come to the winner and please make the really loud applause for the winner of this year's team and the winner is University of Bern wow excellent now this is the enthusiasm I would have expected from Bern thanks Colin, thanks Joel well done well deserved excellent work there and thanks to Philipp as well and with that I'll hand back to Magiano, thanks a lot guys and everybody mute of course again congratulations to everyone everyone did an excellent job and if this was an out of university Zurich we will hand out trophies to you but we are going to send them to your addresses well done congratulations now before we wish everyone a lovely evening may please ask three winning teams to stay on the call and your professors as well and to everyone else thank you very much for participating today thank you to our only audience we wish you good health and goodbye until next year bye bye so how do you feel guys feeling great I don't know what to say speechless at the moment yes I don't really know what to say I'm sorry guys I would have liked to share a beer with you right I'll do it virtually right so congratulations well done to all of you I already had a glass of champagne so that's okay so you knew where we were coming it wasn't from me you know no no no that's not the case but I knew that I'm proud of our team no matter what very well yes well done actually to all three teams right I mean super well done tight race right good work convincing work we are very proud of you and this was one of the most contentious discussions we had amongst the judges really you know tight