Temenos Group AG (SIX: TEMN), the market leading provider of mission-critical software to financial institutions globally, today reports its third quarter 2015 results.
Q3 2015 financial summary
Non-IFRS total software licensing growth in Q3 2015 with total software licensing revenues up 95% Y-o-Y (constant currency), 44% LFL
Non-IFRS maintenance growth of 10% Y-o-Y and 8% LTM (constant currency)
Non-IFRS services margin improvement of 470bps Y-o-Y
Non-IFRS EBIT up 72% Y-o-Y (constant currency), LTM non-IFRS EBIT margin to 29.3% up 410bps Y-o-Y
Continued strong cash conversion above target of 100%
DSOs down 17 days Y-o-Y (25 days proforma)
Q3 2015 operational highlights and outlook
Strong momentum across all geographies
Landmark Nordea deal demonstrates product superiority and unique business model
Traction with global partners
Strong growth in signings and pipeline across all geographies, all customer segments; new and installed base
Investing in the business to capitalise on improving market conditions and drive future growth
Strong start to Q4, confident in meeting full year guidance
Improved revenue visibility for 2016 and the medium term
Commenting on the results, Temenos CEO David Arnott said:
"This was an outstanding quarter for Temenos. We saw great momentum across the whole business, in all geographies and market segments with both new and existing customers. On top of this, the Nordea deal is a landmark for the company. It demonstrates the superiority of our business model, including our packaged software solutions and local presence, as well as the traction we are building with our global partners and a growing appetite for large banks to replace their core systems.
Our key initiatives in the US, partnering for Tier 1 accounts and disruptive and very compelling product roadmap, coupled with a clear recovery in our end markets leaves us very well positioned for the coming quarters and years."
Commenting on the results, Temenos CFO Max Chuard said:
"We had very strong top line growth in Q3, with total non-IFRS software license revenues up 95%, of which software licensing was up 69%. The strength of our business model with leading, upgradeable packaged software solutions is enabling us to capitalise on improving market conditions. With the license growth and pipeline generation in Q3, our revenue visibility in 2016 and the medium term has substantially increased. Our cash flow generation remains consistently above our target of 100% of EBITDA."
IFRS revenue for the quarter was USD 145.0m, up from USD 113.7m in Q3 2014. Non-IFRS revenue was USD 148.9m, up from USD 113.7m in Q3 2014, representing an absolute increase of 31% and a 38% increase in constant currency. IFRS total software license revenue for the quarter was USD 58.5m, and non-IFRS total software license revenue for the quarter was USD 61.9m, 87% higher than in the same period in 2014 on a reported basis and 95% higher adjusted for constant currencies.
IFRS EBIT was USD 30.0m this quarter, up from USD 23.0m in Q3 2014. Non-IFRS EBIT was USD 43.6m in Q3 2015, 72% higher than in Q3 2014 (constant currency), with a non-IFRS EBIT margin of 29.3%, up 6% points on Q3 2014 (constant currency).
Earnings per share (EPS)
IFRS EPS was USD 0.30 vs. USD 0.25 in Q3 2014. Non-IFRS EPS was USD 0.49 vs. USD 0.28 in Q3 2014. LTM non-IFRS EPS was USD 1.78, up 33% on the previous 12 months.
Pre-tax operating cash
IFRS operating cash was an inflow of USD 36.6m in Q3 2015 compared to USD 29.9m in Q3 2014. For LTM to September 2015, operating cash was USD 184m representing a 108% conversion of IFRS EBITDA into operating cash.
The company reaffirms its outlook for the year as follows*:
Total non-IFRS software licensing growth of 42% to 46% (implying total non-IFRS software licensing revenue of USD 202m to USD 206m) which includes software licensing growth of 21%+ (implying software licensing revenue of at least USD 162m)
Total non-IFRS revenue growth of 20.5% to 24.5% (implying non-IFRS revenue of USD 536m to USD 553m)
Non-IFRS EBIT of USD 153m to USD 158m (implying non-IFRS EBIT margin of 28.5%)
100%+ conversion of EBITDA into operating cashflow
Tax rate of 17% to 18%
*Assumes FX rates as disclosed in Q2 2015 results presentation - https://www.temenos.com/en/about-temenos/investor-relations/