Temenos Group AG (SWX: TEMN), a market leading provider of mission-critical core banking software, today announced its financial results for the second quarter 2008.
Highlights
- 12 new T24 banking clients signed in the quarter, including deals with Westpac in Asia, Standard Bank in Africa and two deals in Germany (further illustrating the success of the Actis acquisition last year)
- Announced recommended cash acquisition of Financial Objects, which should close in September and which we believe will create significant value for our shareholders.
- Acquired the core banking assets of Informer Group, a long-serving T24 system integrator and authorised licensor, which we expect to boost revenue and earnings from this year.
- Promoted to the SMIM (the SMI-mid) index in Switzerland, which contains the 30 largest, most liquid stocks outside of the blue-chip SMI index, which has 20 constituents.
- Held our annual Temenos Client Forum in Rome, attended by a record number of delegates, at which we launched the R08 releases of T24 and TCB, which incorporate over 150 enhancements, such as a retail product builder for T24.
- Signed in late July a sales and marketing agreement with Metavante for T24 in the US, through which we hope to leverage Metavante's client relationships, distribution network and hosting capabilities to penetrate the foreign banking market in the US.
Commenting on the results, CEO Andreas Andreades said, "I am very pleased by our continued strong performance especially in the context of all that is happening in the financial services sector, which is the only market into which we sell our software. Banks are clearly facing challenging times which if anything have worsened. Since we last reported, more banks - especially Tier 1s - have faced recapitalisation issues. Yet, we continue to deliver ahead of our forecasts. I think in part this reflects the profile of the Temenos customer base - around two-thirds of new licences are coming from emerging markets - and, in part, it reflects the nature of the software we sell, which remains a strategic area of capital expenditure for banks that want to pursue growth and profitability.
We remain confident about our full year performance and indeed have revised up our outlook for organic growth and revenues. The inclusion of the revenue and profit from our Informer acquisition takes our revised outlook for 2008 adjusted EPS to a growth of 35%; an excellent performance by any standard".
Revenue
Revenue for the first quarter was USD96.0m, up from USD73.5m in the same period last year, representing growth of 31%. Licence revenue for the quarter was USD33.8m, 16% ahead of previous year, driven by strong year-on-year growth in T24 licences of 37%.
Operating profit
Operating profit for the quarter was USD10.1m, compared with USD7.4m in the same period last year, an increase of 36%. Margin for the quarter was 10.6%, 50 basis points higher than in the prior year, reflecting natural leverage and good cost control
Notwithstanding the fact that revenues will be higher and we are absorbing the Informer acquisition in the second half, we continue to expect full year margins to be about 2% higher than in 2007.
Net income and Earnings Per Share (EPS)
Net income rose to USD8.6m in the quarter. This represented an increase of 37% on the prior year. Adjusted EPS, which excludes amortisation of acquisition-related intangibles, was USD0.15 in the quarter, a 36% increase over 2007 (USD0.11).
Cash
Operating cash, which can vary significantly from quarter to quarter, was USD -8.1m in the quarter representing cash conversion - conversion of Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) into operating cashflow - of 54% over the last 12 months. This is consistent with achieving our full year targets of 75% cash conversion and a 10-15 day reduction in DSOs (Days of Sales Outstanding).