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.
- Like-for-like software licencing growth of 4%, the fourth consecutive quarter of growth
- Services strategy ahead of expectations with continued improvement in non-IFRS services margin (-4% in Q3 2013 vs -11% in Q3 2012)
- Non-IFRS EBIT up 24%, with non-IFRS EBIT margin up 5% pts, and IFRS EBIT up 75%
- Non-IFRS EPS more than doubled for the twelve months ending September 2013
- Operating cash inflow of USD 16.1m in Q3 (Q3 2012: USD 11.4m ) with cash conversion** of 125% in the twelve months ending September 2013; DSOs expected to reduce by c. 20 to 25 days in 2013
- 2013 share buyback completed with USD 54m returned to shareholders
- Remain on track to deliver reaffirmed 2013 guidance
Sales and operational highlights
- Strong sales into the installed base with continued resilience in Europe
- First sales of T24 on a SaaS basis in the US
- Continued leadership in product development with launch of Temenos Payment Suite and expansion of availability of T24 on the Azure platform
- Global core banking agreement signed with Accenture with a commitment to double the number of certified consultants, taking the total to 250
- Temenos positioned as a “leader” in Gartner’s Magic Quadrant for 5th consecutive year
- Accelerating sales activity and sound execution underpins confidence in achieving full year guidance
Commenting on the results, Temenos CEO David Arnott said:
Q3 has once again been a quarter of good execution, delivering on our strategic plan that we set out earlier this year, with the fourth quarter of consecutive licence growth, underlining further market share gains. Delivery of our services strategy is ahead of expectations with the shift to higher value services taking place faster than expected and resulting in strongly improving margin. Our strong pipeline for Q4 gives us confidence in delivering our full year guidance, with increasing large retail bank deal activity outside of Europe, especially in LatAm and Asia, especially encouraging.
Our multi-product offering means that we are not dependent on any one product or any one geography to achieve growth. We continue to out-spend and out-innovate the market and we have already started to see significant interest following the launch of Temenos Payment Suite, our ground breaking payments hub, which takes us into a fast growing USD 6bn market. Having a broad solution set spanning several fast-growing markets gives us confidence in achieving our medium term targets, including growing software licensing by at least 10% every year.
Both IFRS and non-IFRS revenue for the quarter was USD 109.6m, which was flat on Q3 2012 despite the significant fall in services revenues. Software licence revenue for the quarter was USD 30.9m, 4% higher than in the same period in 2012.
Non-IFRS EBIT was USD 25.8m in Q3, 24% higher than in Q3 2012, with a non-IFRS EBIT margin in Q3 of 23.5%, up 4.6% points on 2012. IFRS EBIT was up 75% from USD 12.4m in Q3 2012 to USD 21.7m in Q3 2013.
Earnings per share (EPS)
Non-IFRS EPS was USD 0.28 in the quarter, compared to USD 0.22 in the prior year. For the twelve months to September 2013, non-IFRS EPS was USD 1.21, more than doubling from USD 0.59 in 2012. IFRS EPS for the quarter moved from USD 0.10 to USD 0.23.
Pre-Tax Operating Cash
Operating cash was USD 16.1m in Q3 2013 compared USD 11.4m in Q3 2012. For the twelve months to September 2013, operating cash was USD 157.2m, representing a 125% conversion of EBITDA into operating cash.
2013 Share Buyback Programme
Having repurchased USD 54m of shares, the 2013 share buyback programme initiated on 18 June 2013 is now complete. In total, 2,134,786 registered shares of the company were bought back at an average price per share of CHF 23.44 on a second trading line on the SIX Swiss Exchange. These shares represent 2.96% of the company’s share capital. All shares repurchased under the buyback program will be proposed for cancellation in a capital reduction at the AGM in 2014.
Our guidance for 2013 on a non-IFRS basis is:
- Total non-IFRS revenue growth of 4.5% to 7.5% (implying non-IFRS revenue of USD 469m to USD 482m)*
- Software licensing growth of 5% to 10% (implying software licensing revenue of USD 131m to USD 137m)*
- Non-IFRS EBIT margin of 21.7% to 23.2% (implying non-IFRS EBIT of USD 102m to USD 112m)*
- 100%+ conversion of EBITDA into operating cashflow
- Tax rate of 17% to 18%
* Based on the currency assumptions set out below which remain the same as at the Q1 and Q2 2013 results
At 17.30 BST / 18.30 CET / 12.30 EST, today, 22 October 2013, 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:
+44 (0)1452 569 335 (UK and International)
0808 238 0673 (UK Free Call)
0445 804 038 (Swiss Local Call)
0800 650 052 (Swiss Free Call)
+1 866 655 1591 (USA Free Call)
Conference ID # 79155239
Currency Assumptions For 2013 Guidance
In preparing the 2013 guidance, the Company has taken the actual Q1, Q2 and Q3 2013 results and for Q4 2013 assumed the following (which are unchanged from the assumptions in the Q1 and Q2 2013 results):
- USD to Euro exchange rate of 0.780;
- USD to GBP exchange rate of 0.658; and
- USD to CHF exchange rate of 0.950.
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.