Ad hoc announcement pursuant to Art. 53 LR

GENEVA, Switzerland, April 25, 2023 –Temenos AG (SIX: TEMN), the banking software company, today reports its first quarter 2023 results.

Annual Recurring Revenue

Income statement and Free Cash Flow

Q1-23 business update

• Continue to press on our strategic advantage of cloud native, packaged upgradeable platform that can be implemented on premise or on the Temenos Banking Cloud for banks of any size and any banking segment globally
• Continued momentum with top tier banks including signing of Regions, a top 30 US domestic bank, and a leading bank in Latam, both for core banking replacement; revenue mix from tier 1 and 2 at 44% LTM Q1-34
• Signed a deal with a top 10 global bank headquartered in Europe for global transformation of its wealth business
• Overall slower growth in Europe, expected to improve further in H2-23
• Rise of cloud benefiting subscription business as banks start to implement cloud native solutions that they run themselves on public cloud
• Subscription transition continuing at pace with subscription licenses contributing 77% of the license mix in the quarter; term licenses down to 11% of total software licensing
• North America continued to perform well, increasing its LTM contribution to Total Software Licensing to 37% from 34% one year ago
• Strong SaaS ACV performance, 3x increase in new client ACV as well as some additional consumption from existing clients
• Strong ARR growth of 15% c.c. driven by SaaS ACV and subscription revenues
• Services margin improving back to profitability as services cost base starts to normalize, a number of key projects reached go-live and inflection point in services revenue reached; partner model maturing
• Sales environment has stabilized; no impact on demand from events in the US regional banking sector

Q1-23 financial summary (non-IFRS)

• Annual Recurring Revenue (ARR) growth of 15% c.c. in Q1-23
• SaaS Annual Contract Value (ACV) of USD 18.9m in Q1-23
• Non-IFRS SaaS revenue growth of 30% c.c. in Q1-23
• Non-IFRS total software licensing revenues growth of 12% c.c. in Q1-23
• Non-IFRS total revenue growth of 4% c.c. in Q1-23
• Non-IFRS EBIT growth of 11% c.c. in Q1-23
• Q1-23 non-IFRS EBIT margin of 29.7%, up 2% points c.c.
• Q1-23 operating cash flow of USD 70.5m, up 17% y-o-y
• Q1-23 Free Cash Flow of USD 38.7m, up 20% y-o-y
• Leverage at 1.9x at end of Q1-23
• DSOs at 125 days

Outlook

• Sales environment expected to remain stable in FY-23 consistent with our assumption at the start of the year
• Banks have higher visibility on FY-23 and the interest rate trajectory
• Pipeline continues to develop well, including a number of tier 1 deals
• Both subscription and SaaS revenue being driven by demand for cloud native solutions
• Subscription transition to be substantially complete by year-end FY-23
• FY-22 investment in sales and R&D to provide growth platform for FY-23
• Minimum cash flow point on transition from term licenses to subscription behind us with positive working capital from SaaS business more than offsetting remaining negative working capital from subscription transition – Free Cash Flow still expected to grow in line with ARR for the full year
• Subscription revenues and growth in demand for SaaS and cloud driving accelerating ARR growth
• Simplification of communication, ARR primary revenue outlook KPI – appropriate given critical mass of recurring revenue expected to reach over 70% of total revenue and over 80% of product revenue in FY-23, with term licences expected to be below 10% of total product revenues
• Continued strong ARR and SaaS revenue growth driving increasing visibility on profit and FCF

Commenting on the results, Temenos Executive Chairman and Acting CEO, Andreas Andreades, said:

Commenting on the results, Temenos CFO, Takis Spiliopoulos, said:

Q1-23 financial summary (IFRS and non-IFRS)

Revenue

IFRS and non-IFRS revenue was USD 226.5m for the quarter, an increase of 3% vs. Q1-22.

IFRS and non-IFRS total software licensing revenue for the quarter was USD 91.3m, an increase of 10% vs. Q1-22.

EBIT

IFRS EBIT was USD 43.2m for the quarter, an increase of 13% vs. Q1-22.

Non-IFRS EBIT was USD 67.2m for the quarter, an increase of 13% vs. Q1-22.

Non-IFRS EBIT margin was 29.7%, up 3% points vs. Q1-22.

Earnings per share (EPS)

IFRS EPS was USD 0.42 for the quarter, an increase of 11% vs. Q1-22.

Non-IFRS EPS was USD 0.69 for the quarter, an increase of 10% vs. Q1-22.

Cash flow

IFRS operating cash was an inflow of USD 70.5m in Q1-23, an increase of 17% vs. Q1-22, representing an LTM conversion of 108% of IFRS EBITDA into operating cash. USD 38.7m of Free Cash Flow was generated in Q1-23, an increase of 20% vs. Q1-22. Free Cash Flow is still expected to grow in line with ARR for the full year.

Transition to subscription revenue and impact on future reporting

Temenos moved to selling five-year subscription contracts for on-premise license and maintenance as standard from 2022, including for renewals. This will accelerate growth by capturing greater contract value and accelerate the shift to more consistent financial performance driven by a much higher proportion of recurring revenues. To reflect this change, on the P&L the license revenue is split into either subscription license or term license, depending on the nature of contract.

The impact of the move to a subscription model on the income statement, cash and ARR is shown for illustrative purposes below:

FY-23 non-IFRS guidance

The guidance for FY-23 is non-IFRS and in constant currencies.

• ARR growth of at least 12%

Currency assumptions for 2023 guidance

In preparing the FY-23 guidance, the Company has assumed the following:

• EUR to USD exchange rate of 1.09;
• GBP to USD exchange rate of 1.22; and
• USD to CHF exchange rate of 0.92

Mid-term targets

The mid-term targets and are non-IFRS and in constant currencies, except Free Cash Flow which is reported:

• ARR of at least USD 1.3bn
• EBIT of at least USD 570m
• FCF of at least USD 700m

The guidance provided above and other statements about Temenos’ expectations, plans and prospects in this press release constitute forward-looking financial information and represent the Company’s current view and estimates as of 25 April 2023.  We anticipate that subsequent events and developments may cause the Company’s guidance and estimates to change.  Future events are inherently difficult to predict.  Accordingly, actual results may differ materially from those indicated by these forward-looking statements as a result of a variety of factors.  More information about factors that potentially could affect the Company’s financial results is included in its annual report available on the Company’s website.

Conference call and webcast

At 18.30 CET / 17.30 GMT / 12.30 EST, today, April 25, 2023, Andreas Andreades, Executive Chairman and Acting CEO, and Takis Spiliopoulos, CFO, will host a webcast to present the results and offer an update on the business outlook. The webcast can be accessed through the following link:

Q1 2023 webcast link

Please use the webcast in the first instance if at all possible to avoid delays in joining the call. For those who cannot access the webcast, the following dial-in details can be used as an alternative. Please dial-in 15 minutes before the call commences.

Switzerland / Europe: + 41 (0) 58 310 50 00

United Kingdom: + 44 (0) 207 107 06 13

United States: + 1 (1) 631 570 56 13

Non-IFRS financial Information

Readers are cautioned that the supplemental non-IFRS information presented in this press release is subject to inherent limitations. It is not based on any comprehensive set of accounting rules or principles and should not be considered as a substitute for IFRS measurements. Also, the Company’s supplemental non-IFRS financial information may not be comparable to similarly titled non-IFRS measures used by other companies. The Company’s non-IFRS figures exclude share-based payments and related social charges costs, any deferred revenue write-down resulting from acquisitions, discontinued activities that do not qualify as such under IFRS, acquisition/investment related charges such as financing costs, advisory fees and integration costs and fair value changes on investments, charges as a result of the amortisation of acquired intangibles, costs incurred in connection with a restructuring program or other organizational transformation activities planned and controlled by management, and adjustments made to reflect the associated tax charge relating to the above items.

Below are the accounting elements not included in the FY-23 non-IFRS guidance.

• FY-23 estimated share-based payments and related social charges charges of c.5% of revenue
• FY-23 estimated amortisation of acquired intangibles of USD 50m
• FY-23 estimated restructuring costs of USD 14m

Restructuring costs include realizing R&D, operational and infrastructure efficiencies. These estimates do not include impact of any further acquisitions or restructuring programs commenced after April 25, 2023. The above figures are estimates only and may deviate from expected amounts.

Other definitions

SaaS ACV is Annual Contract Value which is the annual value of incremental business taken in-year. This includes new customers, up-sell and cross-sell. It only includes the recurring element of the contract and excludes variable elements. Total Bookings includes fair value of license contract value, committed maintenance contract value on license, and SaaS committed contract value. All must be committed and evidenced by duly signed agreements.

Investor and media contacts

Investors	International media	Swiss media
Adam Snyder Corporate Affairs Director, Temenos Email: [email protected] Tel: +44 207 423 3945	Conor McClafferty FGS Global on behalf of Temenos Email: [email protected] Tel: +44 7920 087 914	Martin Meier-Pfister IRF on behalf of Temenos Email: [email protected] Tel: +41 43 244 81 40