Temenos AG (SIX: TEMN), the banking software company, today reports its first quarter 2021 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
Q1 2021 highlights
- Strong start to the year across all KPIs
- Very strong growth in SaaS and licenses driving total software licensing growth
- Outstanding growth in Total Bookings, up 105%, driven by demand from new and existing customers and an increase in average tenure
- Strong sales momentum driving significant growth in backlog and increasing long term visibility
- US the largest contributor to total software licensing, in particular driven by growth in SaaS
- Strong performance also in Europe as the region continued to recover and see increased demand
- Continued investment in R&D and Sales
- Strong operating and free cash flow generation
- 10 new client wins in Q1-21
- 28 implementation go-lives in the quarter
- Pipeline continued to build through Q1-21, giving confidence in outlook for 2021
Q1 2021 financial summary (non-IFRS)
- Total Bookings growth of 105% c.c. in Q1-21
- SaaS Annual Contract Value (ACV) up 130% c.c. in Q1-21
- Annual Recurring Revenue growth of 7% c.c. in Q1-21
- Non-IFRS SaaS & subscription revenue growth of 22% c.c. in Q1-21
- Non-IFRS total software licensing revenues up 26% c.c. in Q1-21
- Non-IFRS total revenue up 7% c.c. in Q1-21
- Non-IFRS EBIT growth of 31% c.c. in Q1-21
- Q1-21 non-IFRS EBIT margin of 27.2%, up 5% points c.c.
- Operating Cash Flow growth of 25% and Free Cash Flow growth of 28% in Q1-21
- Leverage at 2.1x, expected to be at similar levels by year end
- DSOs down 2 days year-on-year and 4 days sequentially to 107 days
Commenting on the results, Temenos CEO Max Chuard said:
“We had a strong start to the year, with outstanding growth in Total Bookings of 105% and SaaS ACV of 130%, and very strong growth in total software licensing of 26%, reflecting the continued momentum in the business, increasing our revenue visibility and underpinning our future growth. We are seeing an acceleration in demand with the structural drivers remaining firmly in place. An increasing number of banks are embarking on strategic transformations in the face of significant digital disruption to their end market, new competition, and continued cost pressures, and we are strengthening our market leading position through continuous investment in innovation, our SaaS and cloud capabilities and Sales to ensure we capture the growing demand.
We had a particularly strong quarter in the US, with growth in both license and SaaS, and with new logo signings. Europe also had a strong quarter and the pipeline especially for larger deals has been improving.
We saw demand across all tiers of banks, with tier 1 and 2 banks contributing 37% of total software licensing, and we continue to see demand from challenger banks and fintechs for our SaaS offerings, which is largely incremental, and where we are the market leader with over 60 digital banks running on our platform.
We had strong pipeline generation in the quarter, which supports our outlook and guidance for 2021. I expect to be at 2019 levels of combined license and equivalent ACV bookings for the full year, having already exceeded Q1-19 levels in Q1-21.”
Commenting on the results, Temenos CFO Takis Spiliopoulos said:
“I am very pleased with our performance in Q1-21 with a strong acceleration in recurring revenue. SaaS ACV was up 130%, ARR up 7% and our maintenance returned to growth of 3% this quarter. License and SaaS revenue returned to strong growth driven by structural demand in our end market. Total bookings also grew 105%, generating significant backlog, which underpins the outlook for FY 21 and beyond. Overall, total revenue grew 7% in constant currency driven by 11% growth in product revenues. Our non-IFRS EBIT grew 31% in the quarter, and we delivered a non-IFRS EBIT margin of 27.2%, up 5% points.
I am particularly pleased with our cash generation in Q1-21, with operating cash inflow of USD 75m in the quarter, up 25%, and representing an LTM conversion of operating cash to EBITDA of 110%. We generated USD 46m of Free Cash Flow in the quarter, up 28%, and ended the quarter with DSOs at 107 days, down 4 days sequentially, and debt leverage at 2.1x.
We are confident to deliver our reconfirmed FY-21 guidance, given the strength of demand in Q1-21 and the strong backlog generation. We are guiding for ARR growth of 10-15% and ACV growth of 40-50%. Despite a c.5% headwind on FY-21 total software licensing growth from last year’s HCL transaction, we expect non-IFRS total software licensing growth of 14% to 18%, and non-IFRS total revenue growth of between 8% and 10%. We are guiding for a 2021 non-IFRS EBIT growth of 12-14%, implying an EBIT margin of 37.2%.”
IFRS revenue was USD 209.4m for the quarter, an increase of 11% vs. Q1 2020.
Non-IFRS revenue was USD 209.4m for the quarter, an increase of 8% vs. Q1 2020.
IFRS total software licensing revenue for the quarter was USD 71.8m, an increase of 38% vs. Q1 2020.
Non-IFRS total software licensing revenue was USD 71.8m for the quarter, an increase of 28% vs. Q1 2020.
IFRS EBIT was USD 32.1m for the quarter, an increase of 197% vs. Q1 2020.
Non-IFRS EBIT was USD 56.9m for the quarter, an increase of 28% vs. Q1 2020.
Non-IFRS EBIT margin was 27.2%, up 4% points vs. Q1 2020.
Earnings per share (EPS)
IFRS EPS was USD 0.29 for the quarter, an increase of 625% vs. Q1 2020.
Non-IFRS EPS was USD 0.58 for the quarter, an increase of 29% vs. Q1 2020.
IFRS operating cash was an inflow of USD 75m in Q1 2021 compared to USD 60m in Q1 2020, an increase of 25% and representing an LTM conversion of 110% of IFRS EBITDA into operating cash.
USD 46m of Free Cash Flow was generated in the quarter, an increase of 28% vs. Q1 2020.
2021 non-IFRS guidance
ARR was included as a new guidance metric for 2021. ARR is Annual Recurring Revenue committed at the end of the period for both SaaS and Maintenance. It includes New Customers, up-sell/cross-sell, and attrition. It only includes the recurring element of the contract and exclude variable elements.
The guidance for 2021 is non-IFRS and in constant currencies.
- SaaS ACV growth of 40-50%
- ARR growth of 10-15%
- Total software licensing growth of 14-18%*
- Total revenue growth of 8-10%*
- EBIT growth of +12-14% (USD 362-369m)*, implying 37.2% margin
- 100%+ conversion of EBITDA into operating cash flow
- Expected FY 2021 tax rate of 16% to 18%
- DSOs to be below 105 days by year end
Non-IFRS EBIT is adjusted for share-based payments and related social charges costs going forward. For comparison purposes, the FY-20 EBIT adjustments exclude USD 11m of costs. Estimated FY-21 share-based payments and related social charges costs are c.USD 20m. The share-based payment cost in Q1-21 was USD6.9m.
*Q1-21 HCL impact of 9% headwind on SaaS growth, 8% headwind on total software licensing growth, 2% headwind on total revenue growth and 16% headwind on EBIT growth. Expected FY-21 HCL impact of c.5% headwind on SaaS growth, c.5% headwind on total software licensing growth, 3% headwind on total revenue growth, and 5% headwind on EBIT growth, linked to the migration of the acquired non-banking business of Kony to HCL.
Currency assumptions for 2021 guidance
In preparing the 2021 guidance, the Company has assumed the following:
- EUR to USD exchange rate of 1.19;
- GBP to USD exchange rate of 1.38; and
- USD to CHF exchange rate of 0.92
Conference call and webcast
At 18.30 CET / 17.30 GMT / 12.30 EST, today, April 20, 2021, Max Chuard, CEO, and Takis Spiliopoulos, CFO, will host a webcast to present the results and offer an update on the business outlook. The webcast can be accessed through the following link:
Please use the webcast in the first instance if at all possible to avoid delays in joining the call. For those who cannot access the webcast, the following dial-in details can be used as an alternative. Please dial-in 15 minutes before the call commences.
Switzerland / Europe: + 41 (0) 58 310 50 00
United Kingdom: + 44 (0) 207 107 06 13
United States: + 1 (1) 631 570 56 13
Temenos is holding its annual user event, Temenos Community Forum Online, on Wednesday 26th and Thursday 27th of May. To register for the Investor Track, please using the following link and select ‘Investor’ in the relevant drop-down menu:
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. The Company’s non-IFRS figures exclude share-based payments and related social charges costs, any deferred revenue write-down resulting from acquisitions, discontinued activities that do not qualify as such under IFRS, acquisition related charges such as financing costs, 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.
Note: share-based payments and related social charges costs are considered as non-IFRS adjustments from FY21.
Below are the accounting elements not included in the 2021 non-IFRS guidance.
- FY 2021 estimated share-based payments and related social charges charges of USD 20m
- FY 2021 estimated amortisation of acquired intangibles of USD 50m
- FY 2021 estimated restructuring costs of USD 10-12m
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 20 April 2021. The above figures are estimates only and may deviate from expected amounts.
SaaS ACV is Annual Contract Value which is the annual value of incremental business taken in-year. This includes new customers, up-sell and cross-sell. It only includes the recurring element of the contract and excludes variable elements. Total Bookings includes fair value of license contract value, committed maintenance contract value on license, and SaaS committed contract value. All must be committed and evidenced by duly signed agreements.