Temenos Announces Q2-24 Results and Revised FY-24 Guidance
• Customer confidence: all delayed deals from Q1-24 signed in Q2-24, strong TCF attendance
• Q2-24 ARR of USD 742m, up 12% y-o-y c.c.
• Free Cash Flow of USD 73m, up 16% reported
• Launched Temenos SaaS Foundation, our next-gen SaaS platform for banking
• However, 2 month delay in most sales processes from short seller report still impacted Q2-24
• Issued revised FY-24 guidance due to H1 performance, assumes return to growth while de-risking the second half of the year
• Revised FY-24 guidance (non-IFRS, constant currency); ARR growth of about 13% (previously about 15%), total software licensing growth of 3-6% (previously 7-10%), EBIT growth of 7-9% (no change), EPS growth of 6-8% (no change) and free cash flow growth of at least 16% (no change)
Ad hoc announcement pursuant to Art. 53 LR
GENEVA, Switzerland, July 23, 2024 – Temenos AG (SIX: TEMN), the banking software company, today announces its second quarter 2024 results.
Annual Recurring Revenue
Income Statement and Free Cash Flow
The definition of non-IFRS adjustments is set out 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
CEO introduction and update
- Jean-Pierre Brulard was appointed CEO on May 1st, 2024 and has relocated to Zurich from California
- Previously CRO of VMware, based in the US for last 4 years
- First 3 months spent on listening and learning tour meeting 50+ clients, 20+ partners and hundreds of employees
- Immediate incremental investments in go-to-market in key geographies including US and Western Europe
- Appointed Will Moroney as CRO (previously President International), responsible for global revenue, and Rodrigo Silva as President Americas (previously Latam MD and more recently running sales for the Americas)
- US-based new hires including Isabelle Guis, CMO, and Monty Bhatia, Executive Vice President of Global Alliances and Partner Ecosystem
- Strategic and financial plan to be presented at Capital Markets Day on 12 November, 2024, in London and virtually, including review of mid-term targets
Q2-24 financial summary (non-IFRS)
- Annual Recurring Revenue (ARR) of USD 742.4m, up 12% c.c.
- SaaS Annual Contract Value (ACV) of USD 9.4m in Q2-24
- Non-IFRS SaaS revenue of USD 54.2m, up 8% c.c.
- Non-IFRS total software licensing revenues flat y-o-y c.c.
- Non IFRS maintenance revenue growth of 11% in Q2-24 c.c.
- Non-IFRS total revenue growth of 5% in Q2-24 c.c.
- Non-IFRS EBIT up 7% in Q2-24 c.c.
- Q2-24 free cash flow of USD 72.8m, up 16% y-o-y
- Leverage at 1.4x at end of Q2-24
Commenting on the results, Temenos CEO Jean-Pierre Brulard said:
“In my first three months as CEO of Temenos I have met and listened to many of our clients, partners and employees around the world. Temenos has many incredible customer relationships, as a mission critical supplier to its clients. I have seen the talent, dedication and passion of our employees for what we are trying to achieve, and we benefit from the two major ingredients for success in the software industry; customer centricity and innovation.
At the same time, it is clear that there are areas we need to improve on and invest in, and these will be our focus and commitment to our clients.
We have made some initial changes to our Executive management, promoting Will Moroney to Chief Revenue Officer with global responsibility for revenue generation, and promoting Rodrigo Silva to President Americas. We have also made new senior hires in the US, with Isabelle Guis joining as Chief Marketing Officer, and Monty Bhatia joining as Executive Vice President of Global Alliances and Partner Ecosystem. We are making immediate incremental investments in go-to-market, in particular in the US and Western Europe.
One of the first events I attended as CEO was the Temenos Community Forum in Dublin, our annual ecosystem event with over 1,400 people including many clients and partners. This demonstrated our clients and partners reaffirming their commitment to Temenos. We shared many case studies of customer success, with 101 go-lives in the second quarter alone. We also made several exciting product announcements, including the launch of Temenos Enterprise Services and Temenos SaaS Foundation, our next-gen SaaS platform for banks.
We have started a review of our operational and financial strategy, as well as our culture, which we will conclude in October, and will present our strategic and financial plan, including a detailed investment plan for the business, at our Capital Markets Day on November 12th, 2024, in London.”
Commenting on the results, Temenos CFO Takis Spiliopoulos said:
“While we did benefit from all the delayed Q1-24 deals signing in Q2-24, this was offset by the two month delay in most sales processes due to the short seller report. In this context, we had continued good growth in ARR which was again up 12%. Subscription revenue grew double digit, and we saw some recovery in SaaS, with SaaS ACV doubling to USD 9.4m in Q2-24 from the low point in Q1-24. Our maintenance revenue again grew very well, up 11% constant currency, with our sales force doing a good job of selling extended and premium maintenance.
We continued our strong free cash flow generation and our deleveraging, with leverage still at 1.4x net debt to non-IFRS EBITDA by quarter-end, down from 1.6x at the end of FY-23. We also launched a CHF 200m share buyback in June which will last until the end of FY-24 at the latest. I still expect our leverage to be towards the low end of our target operating leverage of 1.5 to 2.0x net debt to non-IFRS EBITDA by year-end.
DSOs also trended down to 133 days as expected, having peaked at 141 days at the end of FY-23 and with the transition to subscription which is now substantially complete.
We have announced our revised FY-24 guidance which is non-IFRS and in constant currencies. We are now expecting ARR growthof about 13%, down from about 15%, and total software licensing growth of 3-6%, down from 7-10%. Our other guidance lines remain unchanged, with EBIT growth of 7-9%, EPS growth of 6-8% and free cash flow growth of at least 16%.”
Revenue
IFRS and non-IFRS revenue was USD 248.4m for the quarter, an increase of 4% vs. Q2-23.
IFRS and non-IFRS total software licensing revenue for the quarter was USD 101.9m, a decrease of 1% vs. Q2-23.
EBIT
IFRS EBIT was USD 52.6m for the quarter, a decrease of 4% vs. Q2-23.
Non-IFRS EBIT was USD 90.4m for the quarter, an increase of 7% vs. Q2-23.
Non-IFRS EBIT margin was 36.4%, up 1% point vs. Q2-23.
Earnings per share (EPS)
IFRS EPS was USD 0.50 for the quarter, a decrease of 6% vs. Q2-23.
Non-IFRS EPS was USD 0.94 for the quarter, an increase of 8% vs. Q2-23.
Cash flow
IFRS operating cash was an inflow of USD 96.7m in Q2-24, an increase of 7% vs. Q2-23, and representing an LTM conversion of 121% of IFRS EBITDA into operating cash. USD 72.8m of free cash flow was generated in Q2-24, an increase of 16% vs. Q2-23.
Revised FY-24 non-IFRS guidance
The guidance for FY-24 is non-IFRS and in constant currencies.
- ARR growth of about 13% (previously about 15%)
- Total software licensing growth of 3-6% (previously 7-10%)
- EBIT growth of 7-9% (no change)
- EPS growth of 6-8% (no change)
- FCF growth of at least 16% (no change)
The Company has also assumed the following for FY-24 guidance:
- Cash conversion of 100%+ of IFRS EBITDA into Operating Cash
- FY-24 tax rate expected to be between 20-22%
Currency assumptions for FY-24 guidance
In preparing the FY-24 guidance, the Company has assumed the following:
- EUR to USD exchange rate of 1.08;
- GBP to USD exchange rate of 1.26; and
- USD to CHF exchange rate of 0.89
The guidance provided above and other statements about Temenos’ expectations, plans and prospects in this press release constitute forward-looking financial information and represent the Company’s current view and estimates as of July 23, 2024. We anticipate that subsequent events and developments may cause the Company’s guidance and estimates to change. Such events may include adverse publicity from information put into the marketplace by a short seller, which the company believes to be inaccurate and misleading, as well as the time and efforts relating to the company’s response thereto. Future events are inherently difficult to predict. Accordingly, actual results may differ materially from those indicated by these forward-looking statements as a result of a variety of factors. More information about factors that potentially could affect the Company’s financial results is included in its annual report available on the Company’s website.
Conference call and webcast
At 18.30 CET / 17.30 GMT / 12.30 EST today, July 23, 2024, Jean-Pierre Brulard, 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
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/investment related charges such as financing costs, advisory fees and integration costs and fair value changes on investments, charges as a result of the amortization of acquired intangibles, costs incurred in connection with a restructuring program or other organizational transformation activities planned 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 FY-24 non-IFRS guidance.
- FY-24 estimated share-based payments and related social charges charges of c.5% of revenue
- FY-24 estimated amortisation of acquired intangibles of USD 50m
- FY-24 estimated restructuring/M&A related costs of USD 25m
Investor & Media Contacts
Investors
Adam Snyder
Head of Investor Relations, Temenos
Email: [email protected]
+44 207 423 3945
International media
Conor McClafferty
FGS Global on belhalf of Temenos
[email protected]
+44 7920 087 914
Swiss media
Martin Meier-Pfister
IRF on belhalf of Temenos
[email protected]
+41 43 244 81 40