Strong margin expansion and robust licence sales help Temenos to raise outlook for full year free cashflow by 60%

Geneva, Switzerland, July 29, 2009 – Temenos Group AG (SIX: TEMN), the global provider of integrated core banking solutions, today reports second quarter results, for the three months to 30 June 2009, showing higher operating profits and much stronger cash generation than in the year before based on continued solid execution and a more competitive cost structure.

Q2 09 Financial and Operating highlights

• Operating profit increased to USD10.5m (Q208: USD10.1m)
• Operating margin expansion of 230bps to reach 12.8% (Q208: 10.5%)
• Operating cashflow of USD21.3m (Q208: -USD8.1m), representing 117% of EBITDA
• Strong traction with new products: Insight, only launched in Q109, was sold 11 times in the quarter
• A significant tier 1 deal - the fourth tier 1 deal so far this year - with major US investment bank
• Resilient licence sales: excluding Metavante revenues and foreign exchange movements, licences were 5% higher than in the first half of 2008, despite a difficult comparative and a much tougher economic backdrop
• New release of T24 launched, including, inter alia, significant advancement of the product’s SOA capabilities
• Two recent independent and influential industry reports confirm that T24, the most widely used core banking system in the World, retains its leadership status
• Amicable settlement of the dispute with Metavante, which enables Temenos to refocus on its strategic options to develop the US market
  

Commenting on the results, Temenos CEO Andreas Andreades said, “I am delighted with this set of results. We knew the environment would be difficult in 2009, but through early, decisive action and solid execution, we are delivering better profits and cashflow – while continuing to take market share – and so leaving ourselves with the flexibility and resources to exploit fully market opportunities.

The cost cutting has not compromised future growth. We have been able to reduce significantly our cost base without compromising our industry-leading R&D spend, a key plank of our business model, or services capacity; in fact, services headcount continues to grow.

Instead, the cost reduction has quickened the change in delivery model. For some time, we have been reshaping our delivery model to become more profitable and less working capital-intensive – through better processes, greater levels of offshoring, stricter payment terms – but the pace of change has been  accelerated.

We have taken up significantly our outlook for free cashflow generation in 2009, underlining the solidity of our current position, our capacity to take advantage of market opportunities, and the confidence with which we approach the second half of the year.”

Revenue
Revenue for the second quarter was USD81.9m, down from USD95.9m in the same period last year, representing a decline of 15%. Licence revenue for the quarter was USD27.3m, 19% below the previous year. For the Last Twelve Months (LTM), total revenue was USD385.8m, up 1% on 2008, with licence revenue at USD140.3m, 13% behind the previous 12 months.

Operating profit
Operating profit for the quarter was USD10.5m, compared with USD10.1m in the same period last year, an increase of 4%. The LTM operating profit of USD66.5m was flat on the twelve-month period to end of June 2008. Margin for the quarter was 12.8%, 230 basis points higher than in the prior year, with the LTM margin at 17.2%, 30 basis points lower than in the comparative period.

Earnings per Share (EPS)
Adjusted EPS, which excludes amortisation of acquisition-related intangibles and restructuring charges, was USD0.16 in the quarter, up 7% from the prior year (USD0.15). The LTM adjusted EPS was USD1.14, 2% up on the previous 12 months.

Cash
Operating cash was USD21.3m in the quarter, representing cash conversion - conversion of Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) into operating cashflow – of 117% for the quarter. For the LTM cash conversion stands at 88%.

Metavante agreement termination
As announced last week, Temenos and Metavante have reached settlement relating to the termination of their agreement to launch an advanced core banking platform using TEMENOS Core Banking (TCB) in the US market. The amicable settlement resolves all issues associated with the agreement. As part of the settlement, Metavante received a license to continue its use of the Customer Information Management functionality of TEMENOS Core Banking for the development of next-generation core technology. Temenos continues to retain all rights in the development and investment done in TCB to date as a result of the agreement. Both organisations have agreed that they will jointly pursue TEMENOS T24 (T24) deals in the US market on a nonexclusive basis and look forward to collaborating on further future opportunities.

Outlook
Temenos Group continues to expect full year EBIT margins of 19-20% (giving an EBITDA margin range of 27-28%) on a cost base of USD310m.

In addition, it expects full year maintenance revenues to be no less than USD118m and full year services to fall within the range of USD130-140m.

In terms of cash generation, Temenos increases its outlook to reflect stronger performance and also the proceeds from the Metavante settlement and now anticipates operating cash for the year of USD110m (previous outlook was USD80m) giving free cash of USD80m (the previous outlook was USD50m).

Conference call
At 17.30 GMT/ 18.30 CET, today, July 29, Andreas Andreades, CEO, David Arnott, CFO, and Max Chuard, Director of M&A and IR, will host a conference call to present results and offer an update on business outlook. Listeners can access the conference call using the following dial in numbers:

+44 (0) 203 037 9105 (UK)
+1 866 966 5335 (USA)
0800 673 7932 (Germany)
0800 800 038 (Switzerland)

A transcript will be made available on the company website 24 hours after the call. Presentation slides for the call can be accessed using the following link
http://www.temenos.com/Investor-Relations/New-Presentations/

Download the full Q2 2009 press release

Download the Q2 2009 investor presentation

-ENDS-

About Temenos

Founded in 1993 and listed on the Swiss Stock Exchange (SWX: TEMN), Temenos Group AG is a global provider of banking software systems in the Retail, Corporate & Correspondent, Universal, Private, Islamic and Microfinance & Community banking markets. Headquartered in Geneva with 52 offices worldwide, Temenos serves over 700 customers in more than 120 countries.

Temenos’ software products provide advanced technology and rich functionality, incorporating best practice processes that leverage Temenos’ experience in over 600 implementations around the globe. Temenos’ advanced and automated implementation approach, provided by its strong Client Services organisation, ensures efficient and low-risk core banking platform migrations.

Temenos annually invests around 20% in R&D, significantly more than its peers, into a single fully packaged upgradeable software release, which ensures all Temenos customers benefit from modern technology and support indefinitely.

Temenos is top of the IBS Sales League Table 2008, winner of the Best Core Banking Product category in Banking Technology magazine’s Readers’ Choice Awards 2008, winner of the Financial-i Leaders in Innovation award for the most innovative core banking systems solution 2008 and is listed in the American Banker top 100 FinTech companies. For more information please visit www.temenos.com

For more information, contact:

Max Chuard
Temenos Director
Corporate Finance & IR
Member of the Executive Board
Tel: +41 (0) 22 708 1157
Email: mchuard@temenos.com

Ben Robinson
Temenos Investor Relations Manager
Tel: +44 (0) 207 290 3012
Email: brobinson@temenos.com

Petra Shuttlewood
Temenos PR Manager
Tel: +44 (0) 207 423 3751
Email: pshuttlewood@temenos.com

Evelina Amanatidou Team 660
Metia for TEMENOS
Tel: +44 (0) 20 3100 3592
 Email: evelina@metia.com