Scotiabank Financials Summit September 4, 2014

Transcription

1 Scotiabank Financials Summit September 4, 2014

2 Customers Capital Bank ~7,000 customers, high level of recurring revenue 2

3 Forward-Looking Statements This presentation contains certain statements that constitute forward-looking information within the meaning of applicable securities laws ( forward-looking statements ). Statements concerning D+H s objectives, goals, strategies, intentions, plans, beliefs, expectations and estimates, and the business, operations, financial performance and condition of D+H are forward-looking statements. The words believe, expect, anticipate, estimate, intend, may, will, would and similar expressions and the negative of such expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. D+H has also made certain macroeconomic and general industry assumptions in the preparation of such forward-looking statements. While D+H considers these factors and assumptions to be reasonable based on information currently available, there can be no assurance that actual results will be consistent with these forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause D+H s actual results, performance or achievements, or developments in its industry, to differ materially from the anticipated results, performance, achievements or developments expressed or implied by such forward-looking statements. Risks related to forward-looking statements include, among other things, challenges presented by declines in the use of personal and business cheques; the Company s dependence on a limited number of large financial institution customers in Canada and dependence on their acceptance of new programs; strategic initiatives being undertaken to meet the Company s financial objective; stability and growth in the real estate, mortgage and lending markets; increased pricing pressures and competition which could lead to loss of contracts or reduced margins; the Company s ability to successfully integrate acquisitions; changes in the U.S. banking and financial services industry and demand for D+H s products and services; the Company s ability to comply with government regulations; as well as general market conditions, including economic and interest rate dynamics. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. The documents referenced herein also identify additional factors that could affect the operating results and performance of the Company. Forward-looking statements are based on management s current plans, estimates, projections, beliefs and opinions, and D+H does not undertake any obligation to update forward-looking statements should assumptions related to these plans, estimates, projections, beliefs and opinions change except as required by applicable securities laws. All of the forward-looking statements made in this presentation are qualified by these cautionary statements and other cautionary statements or factors contained herein, and there can be no assurance that the actual results or developments will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, the Company. 3

4 A North American FinTech Leader Software and technology provider to banks, credit unions and specialty lenders 5 year transformation created stronger more diversified business Adjusted Revenues 1 42% 58% 1) Q Adjusted Revenue is a non-ifrs term. See Appendix A. 4

5 Our Product Offerings BANKING TECHNOLOGY SOLUTIONS LENDING PROCESSING SOLUTIONS PAYMENTS SOLUTIONS Adjusted Revenue 1 Growth Drivers 48% 26% 26% Regulatory environment Adoption of SaaS, consumerization Need for contemporary core processing Vehicle sales Student lending demand, rising education costs, population growth Appetite for banks to promote additional feebased offerings to their customers Market Position Leader in: U.S. loan compliance SaaS POS Cdn mortgage tech Top 4 in U.S. core banking 2 Leader in lien registry and search Exclusive provider to Canada Student Loans Program Leader in collateral management solutions Leader in Canadian cheque programs Enhancement Services innovator 1) Q Adjusted Revenue is a non-ifrs term. See Appendix A 2) Source: Automation in Banking 2012 Report. 5

6 Our U.S. Strategy BUILD INTEGRATE GROW U.S. FinTech suite organically and through acquisitions Acquired products & technologies: Mortgagebot Avista Solutions Compushare Harland Financial Solutions Capitalize on market trends Realize cross-selling opportunities Add new customers 6

7 HFS Acquisition Transformed D+H More than tripled our customer base Broadened our product portfolio Diversified revenues Reduced risk profile 7

8 Integration Progress Adopted a North American Operating Model We now operate solely as D+H in the U.S. Rebranded collateral Consolidated and incentivised sales team to drive cross-selling Hosted our first integrated U.S. customer conference Deployed process engineering to improve pace and quality of projects 8

9 Cross-Selling Opportunity Lending Lifecycle MORTGAGE APPLICATION UNDERWRITING ORIGINATION COMPLIANCE LOAN CLOSING 5,200 CUSTOMERS 1,700 CUSTOMERS Market leading loan documentation compliance software used by 3,200+ U.S. financial institutions 9

10 Cross-Selling Opportunity - Enterprise Solutions Channels Core Cloud Online Banking Mobile Banking Teller Applications ATM Client Management Deposit/lending transactions Customer information Payments Financial accounting Top Four U.S. Provider of Core Banking Technology 10

11 U.S. Market Opportunity Yearly IT spend * 6,800 U.S. CREDIT UNIONS 6,900 U.S. BANKS $50B ~ ~1,500 CUSTOMERS 20% ~ ~4,000 CUSTOMERS 55% ~ 500 OTHER CUSTOMERS Mid-Sized IT spend $15B * Source: IDC Data 2013 Bankers as Buyers Report 11

12 Trends Reshaping Financial Services REGULATIONS CONSUMERIZATION BIG DATA CLOUD COMPUTING 12

13 Strategies Supported By Strong Cash Flows Capital Expenditures Acquisitions Debt Repayment Dividends Strategic Investment Initiatives Surplus Cash 13

14 Second Quarter Performance Adjusted Revenues 1 (C$ millions) Adjusted EBITDA 1 (C$ millions) Adjusted Net Income Per Share 1 (C$) 48% 59% 10% % margin 31.8% margin Q Q Q Q Q Q Adjusted Reported 1) Adjusted Revenues, Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Net Income per share are non-ifrs terms. See Appendix A. 14

15 Investment Thesis Strong Demand Forces Driving FinTech Spending Increasing regulatory complexity Consumerization Big Data Legacy IT replacement Large Market Opportunities Available market ~13,000 banks and credit unions Cross selling opportunities with 7,000 customers New business opportunities with other 6,000 Proven Business Model and Strategies Long-term customer contracts Highly recurring revenues with attractive margins Strong free cash to support growth, dividend and deleveraging 15

16 Appendix A - Non-IFRS Financial Measures This presentation makes reference to certain non-ifrs financial measures. These non-ifrs financial measures are not recognized measures under IFRS, do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement IFRS measures by providing further understanding of operations from management s perspective. Accordingly, non-ifrs measures should never be considered in isolation nor as a substitute to using net income as a measure of profitability or as an alternative to the IFRS consolidated statements of income or other IFRS statements. Management presents non-ifrs measures, specifically Adjusted revenues, EBITDA, EBITDA margin Adjusted EBITDA, Adjusted EBITDA margin, Adjusted net income, and Adjusted net income per share as it believes these supplementary disclosures provide useful additional information related to the operating results of D+H and uses these measures of financial performance as a supplement to the consolidated statements of income of D+H. The definitions of the non-ifrs measures contained in this presentation are as follows: (i) Adjusted revenues, which is calculated as revenue after removing the effect of purchase accounting on the fair value of acquired deferred revenue; (ii) EBITDA which is calculated as net income, excluding interest, taxes, depreciation and amortization and fair value adjustments of interestrate swaps which are directly related to interest expense, income from investment in an associate, gain on remeasurement of previously held equity interest in an associate and income (loss) from discontinued operations; (iii) EBITDA margin calculated as EBITDA divided by revenue; (iv) Adjusted EBITDA which is calculated as EBITDA adjusted to remove the effect of purchase accounting on the fair value of acquired deferred revenue and deferred costs, acquisition-related and other charges, including expenses incurred in connection with cost-realignment initiatives, corporate development expenses related to strategic acquisition initiatives, certain retention and incentive expenses, transaction costs and business integration costs incurred in connection with acquisitions, all of which are not considered to be incurred in the normal course of operations and are not indicative of the underlying business performance; (v) Adjusted EBITDA margin calculated as Adjusted EBITDA divided by Adjusted revenues; and (vi) Adjusted net income which is calculated as net income after removing the impacts of purchase accounting adjustments related to the fair value of deferred revenue and other non-recurring items, certain non-cash charges such as amortization of intangibles from acquisitions and fair value adjustments of interest-rate swaps and certain items of note such as acquisition-related and other charges, discontinued operations, including tax effects of these items and tax effects of acquisitions and corporate conversion and Adjusted net income per share which is calculated as Adjusted net income divided by the weighted average number of issued and outstanding Common Shares during the relevant financial period. For further details on these measures and for a reconciliation to the closest IFRS measure, see D+H s most recent Management Discussion and Analysis ( MD&A ), copy of which is available on SEDAR at 16

17 Disclaimer This documentation is a presentation of general background information about D+H s activities current as the date of the presentation. It is information in a summary form and does not purport to be complete. It is not intended to be relied upon as advice to investors or potential investors and does not take into account the investment objectives, financial situation or needs of any particular investor. These should be considered, with or without professional advice, when deciding if an investment is appropriate. The information contained in this presentation is derived solely from otherwise publicly available information concerning D+H and does not purport to be all-inclusive or to contain all the information that an investor may desire to have in evaluating whether or not to make an investment in D+H. The information has not been independently verified and is subject to material updating, revision and further amendment, and is qualified entirely by reference to the D+H s publicly disclosed information. Without limiting the generality of the foregoing, the selected financial information included in this presentation is qualified in its entirety by, and should be read together with D+H s Consolidated Audited Financial Statements for the year ended December 31, 2013, D+H s unaudited condensed interim consolidated financial statements for the three months ended June 30, 2014 and the accompanying MD&A, all of which are available on SEDAR at No representation or warranty, express or implied, is made or given by or on behalf of D+H or any of its affiliates or subsidiary undertakings or any of the directors, officers or employees of any such entities as to the accuracy, completeness or fairness of the information or opinions contained in this presentation and no responsibility or liability is accepted by any person for such information or opinions. In furnishing this presentation, D+H does not undertake or agree to any obligation to provide the attendees with access to any additional information or to update this presentation or to correct any inaccuracies in, or omissions from, this presentation that may become apparent. No person has been authorised to give any information or make any representations other than those contained in this presentation and, if given and/or made, such information or representations must not be relied upon as having been so authorised. The information and opinions contained in this presentation are provided as at the date of this presentation. The contents of this presentation are not to be construed as legal, financial or tax advice. Each prospective investor should contact his, her or its own legal adviser, independent financial adviser or tax adviser for legal, financial or tax advice. The securities of D+H have not been and will not be registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act") and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the U.S. Securities Act and applicable state securities laws. This presentation does not constitute or form part of any offer or invitation for the sale or purchase of securities or any of the assets, business or undertaking described herein nor shall it or any part of it form the basis of or be relied on in connection with, or act as any inducement to enter into, any contract or commitment whatsoever. Recipients of this presentation who are considering acquiring securities of D+H are reminded that any such purchase or subscription must not be made on the basis of the information contained in this presentation but are referred to the entire body of publicly disclosed information regarding D+H. This Presentation is being supplied to you solely for your information and may not be reproduced, further distributed or published in whole or in part by any other person. Distribution of this presentation may be restricted or prohibited by law. Recipients are required to inform themselves of, and comply with, all such restrictions or prohibitions and D+H does not accept liability to any person in relation thereto. 17