Temenos announces outstanding FY 2016 with total software licensing growth of 21% and earnings growth of 20%
GENEVA, Switzerland, 14 February 2017 – Temenos Group AG (SIX: TEMN), the software specialist for banking and finance, today reports its fourth quarter and full year 2016 results.
The definition of non-IFRS adjustments is below and a full reconciliation of IFRS to non-IFRS results can be found in Appendix II
* Constant currency (c.c.) adjusts prior year for movements in currencies
Q4 and FY 2016 highlights
- Outstanding performance in 2016, after landmark 2015
- Growth across all geographies, Europe and Asia particularly strong
- Digitalization and cost focus continue to drive strategic decision making and market growth
- Vendor of choice for Tier 1 banks, won all key deals in the market
- U.S. momentum and credibility with Commerce Bank win and Ally Financial go-live
- Strong pipeline growth, breadth and depth of deals gives confidence for 2017
- Proposed acquisition of Rubik announced today, accelerating growth in the Australian market
Q4 and FY 2016 financial summary
- Non-IFRS total software licensing revenues up 21% in Q4 16 and up 21% in FY 16 (c.c.)
- Non-IFRS maintenance growth of 8% in Q4 16 and 9% in FY 16 (c.c.)
- Non-IFRS EBIT up 18% in Q4 16, FY 16 non-IFRS EBIT margin of 29.4%
- FY 16 non-IFRS EPS increase of 20% to USD 2.07
- FY 16 non-IFRS services margin improvement of 64bps to 9.1%
- FY 16 cash conversion of 114%
- DSOs down 27 days Y-o-Y to 127 days
- Profit and cashflow strength support proposed dividend of CHF 0.55, a 22% annual increase
- 2017 guidance of non-IFRS total software licensing growth of 10% to 15%, non-IFRS revenue growth of 7.5% to 11.0% (c.c.) and non-IFRS EBIT of USD 210m to 215m
Commenting on the results, Temenos CEO David Arnott said:
"2016 has been another outstanding year for Temenos, coming off the back of a record 2015. We have had growth across all geographies, driven by our market leading value proposition which is resonating with financial institutions around the globe. I am particularly pleased with our traction with Tier 1 and 2 banks, where we won all the largest deals in the market. Our clients are under intense pressure and are responding by embarking on IT renovation with digital at the heart of their strategies. In this environment our vertically integrated suites comprising core coupled with digital and analytics, is seen as the benchmark for the market.
We have continued to make good progress on our strategic initiatives, and are the clear market leader in both retail and wealth. We have built great momentum and credibility in the U.S. with the Commerce Bank win, and our ecosystem of strategic partners is maturing. With the underlying market
growth and our unique value proposition, I am confident we will continue to take market share in 2017."
Commenting on the results, Temenos CFO and COO Max Chuard said:
"I am very pleased with our performance in 2016, having grown our total software licensing by 21% and our earnings by 20%. We have achieved this rate of revenue growth whilst also delivering significant margin expansion of 128bps year-on-year. With EPS growing 20% in 2016, and our cash flow generation which remains significantly above our target of 100% of EBITDA, I am pleased to recommend a 2016 dividend of CHF 0.55 which is an increase of 22% on last year.
We continue to expect strong growth in 2017, and are guiding for non-IFRS total software licensing growth of 10% to 15% and non-IFRS total revenue growth of between 7.5% and 11.0%. We are guiding for 2017 non-IFRS EBIT of USD 210m to 215m, which implies a margin of around 31%. With more of our customers embarking on progressive renovation and the growth and quality of our pipeline, I am confident in delivering another year of strong growth."
IFRS revenue for the quarter was USD 190.8m, up from USD 168.4m in Q4 2015. Non-IFRS revenue was USD 191.1m for the quarter, up from USD 173.4m in Q4 2015, representing an increase of 13% in constant currencies. IFRS total software licensing revenue for the quarter was USD 91.5m, and non-IFRS total software licensing revenue for the quarter was USD 91.8m, an increase of 21% from Q4 2015 in constant currencies.
IFRS EBIT was USD 66.5m this quarter, up from USD 50.1 in Q4 2015. Non-IFRS EBIT was USD 74.8m in Q4 2016, an increase of 18% in constant currencies. Q4 2016 non-IFRS EBIT margin was 39.1%, up 2% points on Q4 2015.
Earnings per share (EPS)
IFRS EPS for the quarter was USD 0.77, an increase of 43% vs. Q4 2015. Non-IFRS EPS was 0.88 for the quarter vs. USD 0.73 in Q4 2015. For FY 2016, non-IFRS EPS was USD 2.07, and increase of 20%
Operating cash flow
For FY 2016 IFRS operating cash was an inflow of USD 256.0m compared to USD 227.0m in FY 2015, representing a conversion of 114% of IFRS EBITDA into operating cash.
Taking into account the strength of profit growth and cash generation, as well as the expected strength of future cashflows, subject to shareholder approval at the AGM on 10 May 2017, Temenos intends to pay a dividend of CHF 0.55 per share for 2016. The shares will trade ex-dividend on 15 May 2017, and the dividend record date will be set on 16 May 2017. The dividend will be paid on 17 May 2017. As with previous years, the 2016 dividend will be paid as a distribution of capital contribution reserves and therefore be exempted of withholding tax. Temenos' policy is to distribute a sustainable to growing dividend.
Our guidance for 2017, which excludes the impact of the proposed acquisition of Rubik, is as follows:
- Non-IFRS total software licensing growth at constant currency of 10% to 15% (implying total software licensing revenue of USD 276m to USD 288m)
- Non-IFRS revenue growth at constant currency of 7.5% to 11.0% (implying revenue of USD 667m to USD 689m)
- Non-IFRS EBIT at constant currency of USD 210m to 215m (implying non-IFRS EBIT margin of c.31%)
- 100%+ conversion of EBITDA into operating cashflow
- Tax rate of 14% to 15%
Medium term targets
Our medium term targets are as follows:
- Non-IFRS total software licensing growth of 15% CAGR
- Non-IFRS revenue growth of 10% CAGR
- Non-IFRS EBIT margin improvement of 100 to 150bps on average p.a.
- Non-IFRS EPS growth of 15% CAGR
- Cash conversion over 100% of EBITDA p.a.
- DSOs reducing by 5-10 days p.a.
- Tax rate of 17% to 18%
Currency assumptions for 2017 guidance
In preparing the 2017 guidance, the Company has assumed the following:
- USD to Euro exchange rate of 0.955;
- USD to GBP exchange rate of 0.811; and
- USD to CHF exchange rate of 1.025.
At 18.30 CET / 17.30 GMT / 12.30 EST, today, 14 February 2017, David Arnott, CEO, and Max Chuard, CFO and COO, will host a conference call to present the results and offer an update on the business outlook. Listeners can access the conference call using the following dial in numbers:
0800 920 016 (Swiss Free Call)
1 866 966 1396 (USA Free Call)
0800 376 7922 (UK Free Call)
+44 (0) 207 192 8000 (UK and International)
Conference ID # 63937135
A transcript will be made available on the Company website 48 hours after the call. Presentation slides for the call can be accessed using the following link: http://www.temenos.com/en/about-temenos/investor-relations/results-and-presentations/.
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. In the reconciliation of IFRS to non-IFRS found in Appendix II, the Company sets forth the most comparable IFRS financial measure and reconciliations of this information with non-IFRS information. The Company's non-IFRS figures exclude any deferred revenue write-down resulting from acquisitions, discontinued activities that do not qualify as such under IFRS, acquisition related charges such as advisory fees and integration costs, charges as a result of the amortisation of acquired intangibles, costs incurred in connection with a restructuring plan implemented 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 2017 non-IFRS guidance:
- FY 2017 estimated amortisation of acquired intangibles of USD 32m
- FY 2017 estimated restructuring costs of USD 5m
Restructuring costs include realising R&D, operational and infrastructure efficiencies. These estimates do not include impact of any further acquisitions or restructuring programmes commenced after 14 February 2017.
The above figures are estimates only and may deviate from expected amounts.