Temenos Group AG (SIX: TEMN), the market leading provider of mission-critical software to financial institutions globally, today reports its second quarter 2014 results.
Q2 2014 financial highlights
Strong Q2 results across all key performance indicators
LFL software licensing growth in Q2 of 10% taking growth in H1 to 16%
Continued strong execution on services strategy with non-IFRS services margin positive on LTM basis
Non-IFRS EBIT up 12% in Q2 2014 vs Q2 2013 and up 19% on an LTM basis
Non-IFRS EBIT margin up 1.8% points in Q2; LTM margin of 25.5%
Cash conversion** of 115% in the twelve months to June 2014; DSOs down 16 days vs Q2 2013
USD 120m share buyback initiated
Full year guidance reaffirmed
Q2 2014 operational highlights and outlook
Strong sales to new customers
10 new customer wins (Q2 2013:7)
Continued strong execution with 9 implementation go-lives (Q2 2013: 8) taking H1 total to 28 (H1 2013:15)
Continued encouraging levels of customer activity across all geographies
Progress made on discussions for larger deals
Strong H1 and pipeline underpins confidence in achieving reaffirmed full year guidance
Commenting on the results, Temenos CEO David Arnott said:
"I am once again pleased to report strong quarterly results across all key performance indicators. The strong performance through the first half of the year, together with the strength of our market leading product offering and the highest levels of customer success we deliver, gives me confidence in our ability to continue to take market share.
The encouraging levels of customer activity seen at the start of the year have continued as has the positive trend of larger deals emerging, and we are making good progress in discussions on these deals. This emerging trend is reflected in the mix of our pipeline and we are anticipating good growth as the rest of the year progresses and remain on track to meet our full year guidance."
Commenting on the results, Temenos CFO Max Chuard said:
"Software licensing saw dodouble-digit growth in the quarter taking growth for the half year to 16%. Our improving revenue mix and operational leverage drove further margin expansion, with the non-IFRS EBIT margin at 25.5% on a twelve month basis. Our continued focus on cash delivered cash conversion of 115% for the twelve months to the end of Q2 2014.
The strength of our operational and financial performance gives me confidence in delivering another year of growth in revenues and profit, margin expansion, strong cash inflows and a further reduction in DSOs."
Both IFRS and non-IFRS revenue for the quarter was USD 112.3m, up from USD 110.0m in Q2 last year, representing an increase of 2% on a reported basis and 1% on a like-for-like basis. Licence revenue for the quarter was USD 30.5m, 10% higher than in the same period in 2013 on both a reported basis on a like-for-like basis.
Non-IFRS EBIT was USD 22.5m in Q2, 12% higher than in Q2 2013, with a non-IFRS EBIT margin in Q2 of 20.0%, up 1.8% points on Q2 2013. IFRS EBIT increased from USD 14.4 in Q2 2013 to USD 20.1m in Q2 2014.
Earnings per share (EPS)
Non-IFRS EPS was USD 0.23 in the quarter compared to USD 0.19 in the prior year. LTM 2014 non-IFRS EPS was USD 1.34, up 17% on the previous 12 months. IFRS EPS for the quarter increased from USD 0.12 per share to USD 0.20 per share.
Pre-tax operating cash
Operating cash was an inflow of USD 21.6m in Q2 2014 compared to USD 18.9m in Q2 2013. For LTM to June 2014, operating cash was USD 184.3 representing a 115% conversion of EBITDA into operating cash.
Our reaffirmed guidance for 2014 on a non-IFRS basis is:
Total non-IFRS revenue growth of 5% to 10% (implying non-IFRS revenue of USD 491m to USD 515m)*
Software licensing growth of 10% to 15% (implying software licensing revenue of USD 152m to USD 158m)*
Non-IFRS EBIT margin of 25.1% (implying non-IFRS EBIT of USD 123m to USD 129m)*
100%+ conversion of EBITDA into operating cashflow
Tax rate of 17% to 18%