The definition of non-IFRS adjustments is below with a full reconciliation of IFRS to non-IFRS results can be found in Appendix II
* Constant currency (CC) adjusts prior year for movements in currencies
** Earnings before interest, tax, depreciation and amortisation (EBITDA) into cash generated from operations
Q1 2015 Financial Summary
- Weak software licensing performance in Q1 2015 with total software licensing revenues down 14.7% Y-o-Y (constant currency)
- Maintenance growth of 9% Y-o-Y and 5.5% LTM (constant currency)
- Continued focus on high margin services has delivered profitability in Q1
- EBIT margin of 15.8% in Q1 2015 and 26.8% for LTM
- Strong cash conversion above target of 100%
- Continued strong cost control protects margins
- Strong start to Q2 and full year guidance reconfirmed
Q1 2015 Operational Highlights and Outlook
- Two strategic acquisitions, Akcelerant and Multifonds, completed and integration on track
- Signing of Julius Baer key event for wealth management business
- Sole vendor at top of Forrester Global Banking Platform Deals for new-named clients and all counted deals
- #1 position in IBS league table for third consecutive year
Commenting on the results, Temenos CEO David Arnott said:
“The licensing revenue number in Q1 was clearly disappointing, but business fundamentals remain sound and we expect a strong rebound in Q2. License revenue in the quarter was negatively affected by a number of factors, such as the sales reorganization we initiated at the start of the year, the lack of compelling events for new business to close in Q1, and despite the strong performance from the installed base we were unable to lap the strong comparative in Q1 2014. Our win rate remains high and we expect execution to improve materially from here.
The fundamentals of the Temenos business are sound and we see market conditions gradually improving. In Q1, Temenos made two strategic acquisitions, which we are now integrating. Our services business is now back to profitability. Cost control remains tight, helping to protect margins in the quarter and underpinning strong cash conversion and further material reductions in DSOs. Demand in many areas, such as channels and analytics, is buoyant and for core banking, the largest part of our business, we see conditions improving as corroborated by recent third party analysis.
Given the strong start to Q2, expected improvement in sales execution as remedial action takes effect, solid execution in most areas of the business and strong market fundamentals, we remain confident we can deliver our full year outlook.”
Commenting on the results, Temenos CFO Max Chuard said:
“Despite weaker than expected licenses revenues, we have continued to grow our recurring revenue base with maintenance revenue growing at 9% at constant currencies and our SaaS revenue increasing materially through organic growth and the contribution of our recent acquisitions. We continue to focus on cash generation with DSOs once again materially down and cash conversion comfortably over our target of 100%. Our leverage has increased following the acquisition of Multifonds but with very strong anticipated cashflows, we expect to bring this back to the range of 1-1.5x EBITDA within 12 to 18 months.”
IFRS revenue for the quarter was USD 102.0m and non-IFRS revenue was USD 104.3m, down from USD 109.6m in Q1 last year, representing an absolute decrease of 4.8% and a 0.5% increase in constant currency. Total software license revenue for the quarter was USD 25.9m, 17.9% lower than in the same period in 2014 on a reported basis and 14.7% lower adjusted for constant currencies.
Non-IFRS EBIT was USD 16.4m in Q1, 17.1% lower than in Q1 2014, with a non-IFRS EBIT margin in Q1 of 15.8%, down 2.3% points on Q1 2014. IFRS EBIT decreased from USD 17.3m in Q1 2014 to USD 4.0m in Q1 2015 with a margin of 4%, largely due to the two acquisitions in the quarter.
Earnings Per Share (EPS)
Non-IFRS EPS was USD 0.18 vs. 0.20 in Q1 2014. LTM non-IFRS EPS was USD 1.43, up 10% on the previous 12 months. IFRS EPS for the quarter was USD 0.01 per share, down from USD 0.17 per share in Q1 2014.
Pre-Tax Operating Cash
Operating cash was an inflow of USD 10.1m in Q1 2015 compared to USD 20.4m in Q1 2014. For LTM to March 2015, operating cash was USD 180m representing a 115% conversion of EBITDA into operating cash.
The company reaffirms its outlook for the year as follows*:
- Total non-IFRS revenue growth of 18% to 23% (implying non-IFRS revenue of USD 526m to USD 548m)
- Total non-IFRS software licensing growth of 36% to 41% (implying total non-IFRS software licensing revenue of USD 192m to USD 199m) which includes software licensing growth of 13%+ (implying software licensing revenue of at least USD 152m)
- Non-IFRS EBIT margin of 28.5% (implying non-IFRS EBIT of USD 150m to USD 156m)
- 100%+ conversion of EBITDA into operating cashflow
- Tax rate of 17% to 18%
*Assumes FX rates as disclosed in Q1 2015 results presentation – https://www.temenos.com/en/about-temenos/investor-relations)
At 18.30 CET / 17.30 BST / 12.30 EST, today, 21 April 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:
0315 800 059 (Swiss Local Call)
0800 920 016 (Swiss Free Call)
1 866 966 1396 (USA Free Call)
+44 (0) 2071 928000 (UK and International)
0800 376 7922 (UK Free Call)
Conference ID # 29021298
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 2015 non-IFRS guidance:
- FY 2015 estimated deferred revenue write-down of approximately USD 23m
- FY 2015 estimated amortisation of acquired intangibles of USD 30m
- FY 2015 estimated acquisition related charges of USD 5m
- FY 2015 estimated restructuring costs of USD 8m
These estimates do not include impact of any further acquisitions or restructuring programmes commenced after 21 April 2015.
The above figures are estimates only and may deviate from expected amounts.