Temenos Group AG (SIX: TEMN), the global provider of integrated core banking solutions, today reports third quarter results demonstrating continued strong growth in operating profit based on resilient licence sales and tight cost management.
Q3 09 Financial and Operating highlights
• Operating profit growth of 81% to USD20.3m (Q308: USD11.2m) • Operating margin expansion of over 1,000bps to reach 23% (Q308:11.1%) • An increase in like-for-like licences* of 6% in the quarter against a tough comparative quarter • 2 tier 1 deals, taking to 6 the number of tier 1 deals so far this year • Operating cash of USD31.6m in the quarter, an increase of 195% on the same quarter last year (Q308: USD10.7m)
Commenting on the results, Temenos CEO Andreas Andreades said, "I am very pleased with this set of results. Against a tough comparative quarter, we grew underlying licences, while operating profit increased strongly in both absolute and percentage terms and, for the second quarter running, we generated operating cash well in excess of EBITDA.
At the end of last year, we set out to change the operating model to make the business more cash generative and to lock in higher profitability. This is clearly paying off as, even with lower revenues, the business is much more profitable and cash generative than in the past.
Looking ahead, we anticipate - and are investing for - growth in 2010. Thanks to better payment terms, an expanding partner network and a market-leading product, Temenos will be able to invest and realise significant growth in the year ahead while continuing to expand margins and converting operating cash around the level of EBITDA."
Revenue for the third quarter was USD88.6m, down from USD100.4m in the same period last year, representing a decline of 12%. Licence revenue for the quarter was USD26.8m, 24% behind the previous year. For the Last Twelve Months (LTM), total revenue was USD373.9m, down 9% on 2008, with licence revenue at USD131.9m, 22% behind the previous 12 months.
Operating profit for the quarter was USD20.3m, compared with USD11.2m in the same period last year, an increase of 81%. The LTM operating profit was USD 75.7m, up from USD71.5m in the prior period, representing a 6% increase. Margin for the quarter was 23%, 1,190 basis points higher than in the prior year, with the LTM margin at 20.2%, 280 basis points lower than the previous 12 months.
Earnings Per Share (EPS)
Adjusted EPS, which excludes amortisation of acquisition-related intangibles and restructuring charges, was USD0.34 in the quarter, up from USD0.13 in the same quarter of the previous year. The LTM adjusted EPS was USD1.35, 25% up on the previous 12 months.
Operating cash was USD31.6m in the quarter, representing cash conversion - conversion of Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) into operating cashflow - of 113% for the quarter.
With one quarter of the financial year remaining, Temenos replaces an operating margin outlook of 19-20% with a range for operating profit of USD75-USD80m.
The outlook for full year operating costs has been lowered by USD10m, reflecting a lower outlook for services revenues and costs of USD10m. The new outlook range for services stands at USD120-130m.
The company continues to expect full year maintenance revenues of around USD118. Further, the full year outlook for operating cashflow and free cashflow also remain unchanged, at USD110m and USD80m, respectively.
A transcript from the a results call with Andreas Andreades, CEO, David Arnott, CFO, and Max Chuard, Director of M&A and IR, is available on the company website.