GENEVA, Switzerland, 10 February 2015 – Temenos AG (SIX: TEMN), the market leading provider of mission-critical software to financial institutions globally, today reports its fourth quarter and full year 2014 results.
The definition of non-IFRS adjustments is below with a full reconciliation of IFRS to non-IFRS results can be found in Appendix II
* Like-for-like (LFL) excludes contributions from acquisitions and adjusts for movements in currencies
** Earnings before interest, tax, depreciation and amortisation (EBITDA) into cash generated from operations
Q4 & FY 2014 Financial Highlights
- LFL software licensing growth down 9% in Q4; FY growth of 2%
- LFL maintenance growth of 6% in 2014
- 14% pts improvement in Q4 non-IFRS services margin taking FY margin to 5%, up 9% pts
- Non-IFRS EBIT up 13% in Q4 and FY; 2014 non-IFRS EBIT margin of 27.3%
- FY non-IFRS EPS up 18%
- Q4 operating cashflows of USD 118.5m; FY inflow of USD 190.3m, up 12% on 2013
- FY cash conversion** of 113% with DSOs down 18 days in the year
- Strength of profit growth and cashflows supports 14% increase in annual dividend
- 2015 guidance of total software licensing growth of 15% to 20%, including software licensing growth of 10%+
Q4 & FY 2014 Operational Highlights & Outlook
- Value of competitive deals won in 2014 increased by half – taking market share
- Temenos positioned as a leader for the sixth consecutive year in the 2014 report ‘Magic Quadrant for International Retail Core Banking’
- Acquisition of Akcelerant announced today – additional scale in North America and expands product portfolio
- Strong and growing levels of demand, especially for core banking and digital channels
- Signing of Julius Baer validates belief in product, executability and strategy
- Increasing levels of new business as the market backdrop improves
- Confidence in delivery of the full year
Commenting on the results, Temenos CEO David Arnott said:
“Despite disappointing software licensing revenue in Q4 which impacted full year growth, we have made good progress on our strategic initiatives with the signing of Julius Baer at the start of this year validating our belief in our products and on our ability to execute on key deals. We have taken the necessary actions to address the issues faced at the end of last year and expect strong growth in 2015.
The structural drivers for technology renewal are stronger than ever and we are executing against a clear strategy with key priorities to extend our lead on core banking and wealth, accelerating our penetration of the US market, taking advantage of our first mover advantage in SaaS and industrialising our sales and partner alignment. This strategy will produce strong software licensing growth every year, with an increasing recurring revenue base.”
Commenting on the results, Temenos CFO Max Chuard said:
“We were pleased to be able to report good growth in profit for the year despite the weaker Q4 software licensing performance, highlighting the high levels of variability within our cost base. Our focus on cash generation saw a full year cashflow of USD 190m, up 12% on 2013, with DSOs once again materially down and cash conversion comfortably over our target of 100%.
We expect strong growth in 2015 with software licensing growth of 15% to 20% and revenue growth of between 8% and 13%. Despite significant margin expansion over the past few years, we still expect our non-IFRS EBIT margin to expand by a further 130 basis points in 2015, in line with our target of increasing margins by 100 to 150 basis points every year. With our multiple levers for growth combined with strong cost control and our focus on cash, I am confident that we will deliver our full year guidance.”
Both IFRS and non-IFRS revenue for the quarter was USD 133.1m, down from USD 144.6m in Q4 last year, representing a decrease of 5% on a like-for-like basis. Software licensing revenue for the quarter was USD 48.3m, taking full year LFL software licensing growth to 2%.
Non-IFRS EBIT was USD 60.3m in Q4, 13% higher than in Q4 2013 with a non-IFRS EBIT margin in Q4 of 45.3%, up 8% points on Q4 2013. IFRS EBIT increased from USD 49.1m in Q4 2013 to USD 57.9m in Q4 2014 with a margin of 43.5%, up 9% points.
Earnings per Share (EPS)
Non-IFRS EPS was USD 0.74 in the quarter, up 17% on Q4 2013. FY 2014 non-IFRS EPS was USD 1.44, up 18% on the previous 12 months. IFRS EPS for the quarter increased from USD 0.58 per share to USD 0.71 per share.
Pre-Tax Operating Cash
Operating cashflow was USD 118.5m in Q4 2014 with a FY casflow of USD 190.3m, up 12% on 2013, representing a 113% conversion of EBITDA into operating cash.
Temenos is highly cash generative with a strong balance sheet which enables investment in the business, including industry leading R&D spend, and funding for targeted acquisitions whilst also providing for returning value to shareholders.
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 6 May 2015, Temenos intends to pay an annual dividend of CHF 0.40 on 15 May 2015, representing an increase of 14% over last year’s CHF dividend. The dividend record date will be set on 13 May 2015 with the shares trading ex-dividend on 11 May 2015. Temenos policy is to distribute a sustainable to growing dividend.
Our guidance for 2015, which includes the impact of the Akcelerant acquisition, on a non-IFRS basis is:
- Total non-IFRS revenue growth of 8% to 13% (implying non-IFRS revenue of USD 482m to USD 504m)
- Total software licensing growth of 15% to 20% (implying total software licensing revenue of USD 164m to USD 172m)
- includes software licensing growth of 10%+ (implying software licensing revenue of at least USD 149m)
- Non-IFRS EBIT margin of 28.5% (implying non-IFRS EBIT of USD 137m to USD 144m)
- 100%+ conversion of EBITDA into operating cashflow
- Tax rate of 17% to 18%
*Growth at constant currency (assumptions below).
Medium Term Targets
Our medium term targets on a non-IFRS basis are:
- Non-IFRS revenue growth of 5% to 10% on average per annum with
- total software licensing growth of 15%+ on average per annum
- services contributing c.20% of group revenue
- Non-IFRS EBIT margin improvement of 100 to 150bps on average per annum
- 100%+ conversion of EBITDA into operating cashflow
- DSOs reducing by 10 to 15 days per annum
- Tax rate of 17% to 18%
At 18.30 CET / 12.30 EST / 17.30 BST, today, 10 February 2015, David Arnott, CEO, and Max Chuard, CFO, 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:
0445 804 282 (Swiss Local Call)
0800 650 024 (Swiss Free Call)
+1 866 254 0808 (USA Free Call)
+44 (0)1452 541 003 (UK and International)
0800 694 5707 (UK Free Call)
Conference ID # 74774372.
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:
Currency Assumptions for 2015 Guidance
In preparing the 2015 guidance, the Company has assumed the following:
- USD to Euro exchange rate of 0.891;
- USD to GBP exchange rate of 0.666; and
- USD to CHF exchange rate of 0.890.
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.