Q1 2019 highlights
- Strong broad based demand across regions and tiers
- Digital, regulatory and costs pressure, and move to open banking are driving market growth
- Key deals announced in the quarter including signings with Al Rajhi Bank, the largest Islamic bank globally, for it’s digital transformation and ABN Amro for Temenos Continuous Deployment
- Strong contribution from installed base, growing wallet share in existing clients
- 22 new customer wins in Q1 2019 vs. 18 in Q1 2018
- Benefiting from six major engines of growth – T24 Transact, Temenos Infinity, Wealth, Payments, Fund Management and SaaS
- Continued investment in sales and marketing
- Strong incremental growth in demand for SaaS and cloud adoption
Q1 2019 financial summary (non-IFRS)
- Non-IFRS total software licensing revenues up 28% c.c.
- Non-IFRS maintenance growth of 13% c.c.
- Non-IFRS total revenue growth of 23% c.c.
- Non-IFRS EBIT up 27%, EBIT margin of 24.1%
- Non-IFRS EPS increase of 24%
- Operating cash flow up 19%, LTM cash conversion of 115%
- DSOs down 6 days to 111 days (8 days proforma)
Commenting on the results, Temenos CEO Max Chuard said:
“We had a very strong start to 2019, delivering an excellent set of results across all our KPIs. With the launch of our next generation products in January, we are the only vendor in our market able to offer a combination of 25 years of rich, packaged functionality with a cloud native, cloud agnostic technology platform. We are leveraging this competitive advantage to continue taking market share and pull further ahead of the competition.
The growth in Q1 was broad based across geographies, tiers and products, and I am particularly pleased with the traction we have with Avoka, both on a standalone basis and as part of Temenos Infinity, our independent digital platform. We announced a number of important deals in Q1 including with ABN Amro for Temenos Continuous Deployment, our new product to significantly reduce the cost of running, testing and deploying new innovation, and with Al Rajhi Bank, the largest Islamic Bank globally, for it’s digital transformation. We also held our annual client event, the Temenos Community Forum, which was our largest ever with nearly 2,000 people in the Temenos ecosystem attending to hear about our latest innovation and share ideas, and this has already generated numerous leads for us.”
Commenting on the results, Temenos CFO Takis Spiliopoulos said:
“Q1 was a very strong quarter with total software licensing growth of 28% and total revenue growth of 23%, driving EBIT growth of 27%. We are benefiting from our broad range of product offerings across Temenos Transact, Temenos Infinity, Wealth, Payments, Fund Management and SaaS, meaning we have more levers of growth than ever before.
Our cash flow was very strong in the quarter, with an inflow of USD 55m of operating cash, up 19%. Our DSOs continued to decline and were down 6 days in the quarter or 8 days proforma to reach 111 days. With the strength of our Q1 performance and the level of revenue visibility we have, I am confident we will achieve our full year guidance for 2019.
On a personal note, I am delighted to have joined Temenos as CFO this month. I look forward to supporting Max in driving the business going forward and working with all our stakeholders to achieve our strategic vision.”
IFRS revenue were USD 203.8m for the quarter, an increase of 18% vs. Q1 2018.
Non-IFRS revenue was USD 204.9m for the quarter, an increase of 19% vs. Q1 2018.
IFRS total software licensing revenue for the quarter was USD 75.1m, an increase of 21% vs. Q1 2018.
Non-IFRS total software licensing revenue was USD 76.2m for the quarter, an increase of 22% vs. Q1 2018.
IFRS EBIT was USD 34.7m for the quarter, an increase of 27% vs. Q1 2018.
Non-IFRS EBIT was USD 49.5m for the quarter, an increase of 29% vs. Q1 2018.
Non-IFRS EBIT margin was 24.1%, up 2% points vs. Q1 2018.
Earnings per share (EPS)
IFRS EPS was USD 0.34 for the quarter, an increase of 48% vs. Q1 2018.
Non-IFRS EPS was USD 0.52 for the quarter, an increase of 24% vs. Q1 2018.
Operating cash flow
IFRS operating cash was an inflow of USD 55m in Q1 2019 compared to USD 46m in Q1 2018, representing an LTM conversion of 115% of IFRS EBITDA into operating cash.
Our guidance for 2019 is in constant currencies. The guidance is as follows:
- Non-IFRS total software licensing growth at constant currencies of 17.5% to 22.5% (implying non-IFRS total software licensing revenue of USD 431m to USD 450m
- Non-IFRS revenue growth at constant currencies of 16% to 19% (implying non-IFRS revenue of USD 966m to USD 991m)
- Non-IFRS EBIT at constant currencies of USD 310m to 315m, (implying non-IFRS EBIT margin of c. 31.9%, or 150bps expansion organically excluding the impact of Avoka)
- 100%+ conversion of EBITDA into operating cash flow
- Expected FY 2019 tax rate of 15% to 16%
Currency assumptions for 2019 guidance
In preparing the 2019 guidance, the Company has assumed the following:
- USD to Euro exchange rate of 0.881;
- USD to GBP exchange rate of 0.757; and
- USD to CHF exchange rate of 1.00.
At 18.30 CET / 17.30 GMT / 12.30 EST, today, 16 April 2019, Max Chuard, CEO, and Takis Spiliopoulos, 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:
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 # 8949259
A transcript will be made available on the Company website 48 hours after the call. Presentation slides for the call can be accessed on the Temenos Investor Relations website.
Temenos has implemented IFRS 16 for reporting period 1st January 2019 onwards using the modified retrospective method. Under the modified retrospective method the 2018 and prior results will not be restated under IFRS 16. From 2019, the reporting results will only be provided under IFRS 16.
For more information on the impact of IFRS 16, please visit the Temenos Investor Relations website.
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 2019 non-IFRS guidance:
- FY 2019 estimated deferred revenue write down of USD 4m
- FY 2019 estimated amortisation of acquired intangibles of USD 48m
- FY 2019 estimated restructuring costs of USD 5m
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 16 April 2019. The above figures are estimates only and may deviate from expected amounts.