Temenos reports very strong Q3 results, full year guidance raised and share buyback announced
GENEVA, Switzerland, 18 October 2017 – Temenos Group AG (SIX: TEMN), the software specialist for banking and finance, today reports its third quarter 2017 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
- Strong momentum across all KPIs, FY 2017 guidance raised
- Lapped two years of Q3 transformational tier 1 contributions through broad based momentum
- Digital and regulatory pressure on banks continue to drive market growth
- Continue to take market share and pulling further ahead of the competition
- Signed Openbank, the digital bank of Santander Group, in Q4 2017
- Robust tier 1 activity following signings with Nordea, Standard Chartered, Bank of Ireland and Openbank
- Acceleration in pipeline growth and deal signings
- Intention to launch share buyback of up to CHF 150m in Q4 2017 subject to regulatory approvals
Q3 2017 financial summary
- Non-IFRS total software licensing revenues up 23% y-o-y
- Non-IFRS total revenue growth of 16% y-o-y
- Non-IFRS EBIT up 19% y-o-y, LTM non-IFRS EBIT margin of 30.3%
- Non-IFRS EPS increase of 17%
- Q3 2017 LTM cash conversion of 111%
- DSOs at 124 days, down 5 days y-o-y
Commenting on the results, Temenos CEO David Arnott said:
"This has been another excellent quarter for Temenos. We had great sales momentum globally and our pipeline has seen substantial growth across markets.
Banks are challenged with digital and regulatory pressures which is driving our market growth. We have continued to take market share and are pulling further ahead of the competition. In particular I am delighted that in Q4 we announced the signing of Openbank, the digital bank of Santander Group, demonstrating that Temenos is the partner of choice for the world's largest banks.
The robust levels of tier 1 activity, continued roll out across our customer base and acceleration in our pipeline underpins our confidence in 2018 and the medium term."
Commenting on the results, Temenos CFO and COO Max Chuard said:
"We have had another very strong quarter, with total software licensing up 23% and EBIT up 19%. We also had outstanding execution in our services business with 29 clients going live on our software and we continue to invest in Sales and Marketing and our product as we see the scale of the market opportunity in front of us.
With the signing of Openbank we have had a strong start to Q4 and have raised our full year guidance to reflect the market momentum and increased revenue visibility. We are now guiding for total software licensing growth of 20% to 22.5% and total revenue growth of 13% to 14.5%."
IFRS total revenue for the quarter was USD 186.3m, up from USD 160.6m in Q3 2016. Non-IFRS total revenue was USD 186.6m for the quarter, up from USD 160.8m in Q3 2016, representing an increase of 16% reported and 14% in constant currencies. IFRS total software licensing revenue for the quarter was USD 79.3m, and non-IFRS total software licensing revenue for the quarter was USD 79.6m, an increase of 23% reported and 20% in constant currencies from Q3 2016.
IFRS EBIT was USD 49.8m this quarter, up from USD 41.4m in Q3 2016. Non-IFRS EBIT was USD 60.6m in this quarter, an increase of 19% reported and 16% in constant currencies. Q3 2017 non-IFRS EBIT margin was 32.5%, up 1% point on Q3 2016.
Earnings per share (EPS)
IFRS EPS for the quarter was USD 0.55, an increase of 20% reported vs. Q3 2016. Non-IFRS EPS was USD 0.68 for the quarter vs. USD 0.58 in Q3 2016.
Operating cash flow
IFRS operating cash was an inflow of USD 40.1m in Q3 2017 compared to USD 39.7m in Q3 2016. For LTM to September 2017, operating cash flow was USD 277.2m representing a conversion of 111% of IFRS EBITDA into operating cash.
The company raises its outlook for full year 2017 as follows*:
- Non-IFRS total software licensing growth at constant currencies of 20% to 22.5% (implying non-IFRS total software licensing revenue of USD 309m to USD 315m), up from 15% to 20%
- Non-IFRS revenue growth at constant currencies of 13% to 14.5% (implying non-IFRS revenue of USD 724m to USD 732m), up from 10% to 13%
- Non-IFRS EBIT at constant currencies of USD 219m to 223m, (implying non-IFRS EBIT margin of c. 30.4%), up from USD 210m to 215m
- 100%+ conversion of EBITDA into operating cash flow
- Expected FY 2017 tax rate of 14% to 15%
*Assumes FX rates as disclosed in the Q3 2017 results presentation - https://www.temenos.com/en/about-temenos/investor-relations
- Board approval has been given for a share buyback of up to a total of CHF 150m
- This will be funded through our strong cash flow generation and we expect to maintain our leverage at 1-1.5x EBITDA by year end
- Temenos intends to use the repurchased shares to cover future employee stock ownership plans (ESOP) and/or for potential acquisitions
- Launch is planned for Q4 2017
- The buyback will be subject to regulatory approval
At 18.30 CET / 17.30 GMT / 12.30 EST, today, 18 October 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)
0844 571 8892 (UK local)
+44 (0) 207 192 8000 (UK and International)
Conference ID # 99668199
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 deferred revenue write down of USD 3m
- FY 2017 estimated amortisation of acquired intangibles of USD 35m
- FY 2017 estimated acquisition related charges of USD 2m
- FY 2017 estimated restructuring costs of USD 7m
Restructuring costs include realising R&D, operational and infrastructure efficiencies and the integration of Rubik. These estimates do not include impact of any further acquisitions or restructuring programmes commenced after 18 October 2017.
The above figures are estimates only and may deviate from expected amounts.