GENEVA, Switzerland, 18 April 2018 – Temenos AG (SIX: TEMN), the banking software company, today reports its first quarter 2018 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
Please note that non-IFRS numbers are under IAS 18 and comparable to the prior periods. IFRS numbers are under IFRS 15, with IFRS IAS 18 numbers also provided for the purpose of comparison with the prior periods.
Q1 2018 Highlights
- Very strong start to 2018 across all KPIs
- Growth across all geographies and client tiers
- Combined pressures from digital, regulation and open banking driving bank IT spend
- 18 new customer wins in the quarter
- Competitive deals contributed 54% of software licensing in the quarter
- Third party validation of leadership position, pulling ahead of the competition
- Revenue visibility continues to increase driven by strong pipeline growth and committed spend
Q1 2018 Financial Summary (Non-IFRS, IAS 18)
- Non-IFRS total software licensing revenues up 40% in Q1 18
- Non-IFRS maintenance growth of 14% in Q1 18
- Non-IFRS EBIT up 33% in Q1 18, LTM non-IFRS EBIT margin of 30.4%
- Non-IFRS EPS increase of 48%
- Operating cash flow up 26%, cash conversion at 113%
- DSOs down 10 days Y-o-Y to 117 days
Commenting on the results, Temenos CEO David Arnott said:
“It has been an excellent start to 2018 across all parts of the business. The level of engagement from banks continues to increase and we see the pressure of open banking generating new opportunities for Temenos. Our growth this quarter was broad based across geographies and I was particularly pleased that we signed our first strategically important deal in Australia as well as announcing our first deal in the telco-banking market with the signing of Telia. As our market evolves, we will continue to leverage our leadership position to capture new addressable spend.
We were delighted to be recognised as the leader in our market, with IBS ranking Temenos as the #1 best selling core banking solution for the 13th year as well as the best selling digital and channels solution. We were also ranked at the top of both of the Forrester pyramids for sales to new and existing clients. This is a testament to the strength of the Temenos product, the commitment of our employees and the confidence our clients place in us when selecting mission-critical solutions for their business.”
Commenting on the results, Temenos CFO and COO Max Chuard said:
“Q1 was a very strong quarter, with total software licensing growth of 40%, total revenue growth of 20% and EPS growth of 48%. This was driven by the strong contribution from new clients with 18 wins in the quarter as we continue taking market share, pulling ahead of the competition in a winner-takes-all market.
I am also very pleased with our cash flow which was up 26%, and the strength of our balance sheet, with our leverage below 1x EBITDA at the end of the quarter.
Our revenue visibility is the highest it has ever been, driven by strong pipeline growth and committed spend. Given the strong start to 2018 and our significant revenue visibility, I am confident in reconfirming our full year guidance.”
IFRS (IFRS 15) revenue for the quarter was USD 172.7m.
IFRS (IAS-18) revenue were USD 171.8m, an increase of 21% vs. Q1 2017. Non-IFRS (IAS 18) revenue was USD 171.9m for the quarter, up from USD 142.7m in Q1 2017, an increase of 20%.
IFRS (IFRS 15) total software licensing revenue for the quarter was USD 62.4m.
IFRS (IAS 18) total software licensing revenue for the quarter was USD 63.5m, an increase of 41% vs. Q1 2017. Non-IFRS (IAS 18) total software licensing revenue was USD 63.6m for the quarter, an increase of 40% vs. Q1 2017.
IFRS (IFRS 15) EBIT was USD 27.3m for the quarter.
IFRS (IAS 18) EBIT was USD 25.3m for the quarter, an increase of 35% vs. Q1 2017. Non-IFRS (IAS 18) EBIT was USD 36.4m for the quarter, an increase of 33% vs. Q1 2017. Q1 2018 non-IFRS (IAS 18) EBIT margin was 21.2%, up 2% points vs. Q1 2017.
Earnings per Share (EPS)
IFRS (IFRS 15) EPS for the quarter was USD 0.23.
IFRS (IAS 18) EPS was USD 0.21 for the quarter, an increase of 24% vs. Q1 2017. Non-IFRS (IAS 18) EPS was 0.40 for the quarter vs. USD 0.27 in Q1 2017, an increase of 48%.
Operating Cash Flow
IFRS (IFRS 15) operating cash was an inflow of USD 46.1m in Q1 2018 compared to USD 36.6m in Q1 2017. For LTM to March 2018, operating cash was USD 309.2m representing a conversion of 113% of IFRS (IAS 18) EBITDA into operating cash.
Annual General Meeting
Temenos will hold its 17th AGM on 15 May 2018 at its offices in Geneva, Switzerland. Further information can be found on the company website – https://www.temenos.com/en/about-temenos/investor-relations/annual-general-meeting/
Temenos has implemented IFRS 15 for reporting period 1st January 2018 onwards using the modified retrospective method. Under the modified retrospective method the 2017 and prior results will not be restated under IFRS 15. The reporting of the results for 2018 will be provided under IAS 18 and under IFRS 15, which will allow for comparability against 2017 and prior periods. From 2019, the reporting of results will be provided only under IFRS 15. For more information on the impact of IFRS 15, please visit the Temenos Investor Relations website:https://www.temenos.com/en/about-temenos/investor-relations/
Our guidance for 2018 is in constant currencies and under IAS 18. The guidance is as follows:
- Non-IFRS total software licensing growth at constant currency of 13.5% to 18.5% (implying total software licensing revenue of USD 367m to USD 383m)
- Non-IFRS revenue growth at constant currency of 10% to 13% (implying revenue of USD 825m to USD 847m)
- Non-IFRS EBIT at constant currency of USD 255m to 260m (implying non-IFRS EBIT margin of c.31%, 100bps expansion in constant currencies)
- 100%+ conversion of EBITDA into operating cashflow
- Tax rate of 15% to 16%
Currency Assumptions for 2018 Guidance
In preparing the 2018 guidance, the Company has assumed the following:
- USD to Euro exchange rate of 0.824;
- USD to GBP exchange rate of 0.711; and
- USD to CHF exchange rate of 0.958.
At 18.30 CET / 17.30 GMT / 12.30 EST, today, 18 April 2018, 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 740 377 (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 # 6269489
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: https://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 2018 non-IFRS guidance:
- FY 2018 estimated deferred revenue write down of USD 1m
- FY 2018 estimated amortisation of acquired intangibles of USD 38m
- FY 2018 estimated restructuring costs of USD 5m
- FY 2018 estimated acquisition costs of USD 27m
Restructuring costs include realising R&D, operational and infrastructure efficiencies and does not include any estimated restructuring costs related to the Fidessa acquisition. Acquisition costs include the estimated costs associated with the successful acquisition of Fidessa.
These estimates do not include impact of any further acquisitions or restructuring programmes commenced after 18 April 2018.
The above figures are estimates only and may deviate from expected amounts.