Temenos Group AG (SIX: TEMN), the market leading provider of mission-critical software to financial institutions globally, today reports its fourth quarter and full year 2015 results.
Q4 and FY 2015 financial summary
- Non-IFRS total software licensing revenues up 63% (cc) and 31% (LFL) in Q4 2015, and up 52% (cc) and 20% (LFL) in FY 2015
- Non-IFRS maintenance growth of 13% in Q4 2015 and 11% in FY 2015 (cc)
- Non-IFRS services margin improvement of 340bps in FY 2015
- Non-IFRS EBIT up 11% in Q4 2015 (cc), FY 2015 non-IFRS EBIT margin of 28.1%
- FY 2015 non-IFRS EPS increase of 20%
- FY 2015 cash conversion of 133%
- DSOs down 27 days Y-o-Y (30 days proforma)
- Profit and cashflow strength support proposed dividend of CHF 0.45, a 12.5% annual increase
- 2016 guidance of non-IFRS total software licensing growth of 10% to 15% (cc), and non-IFRS revenue growth of 7.5% to 11.0% (cc)
Q4 and FY 2015 operational highlights and outlook
- Outstanding year driven by high levels of client activity, particularly in developed markets
- Significant growth across all products in Q4, in particular Private Banking and Channels
- Strong progress on larger deals and the U.S., major growth drivers for the future
- Progressive renovation opening up significant opportunities
- Strong pipeline generation in Q4 gives confidence for 2016
- Highest total revenue visibility ever, driven by high recurring revenues and progressive renovation
Commenting on the results, Temenos CEO David Arnott said:
“2015 has been a landmark year for Temenos. We have had exceptional performance across all lines of business. We have won all key new large deals, as well as seeing significant momentum in the installed base. Our value proposition is driving our growth, with progressive renovation and our multi-product offering opening up substantial opportunities with Tier 1 banks. Our industry-leading levels of product investment and culture of innovation are creating clear water between us and the competition, which we are capitalising on. Geographically our growth this year was driven largely by developed markets, with emerging markets only contributing 22% of total software licensing revenues.
We have made excellent progress on our strategic initiatives in 2015, extending our leadership in retail and wealth, gaining key references in the US and taking our partnership model to the next level. With the digitization of the financial services industry, banks have no choice but to invest in modern technology to stay relevant and capitalise on the opportunities this creates. With these structural drivers in place, we are well positioned for 2016 and are confident we will continue gaining market share.”
Commenting on the results, Temenos CFO and COO Max Chuard said:
“Our top line growth in both Q4 and the full year has been exceptional. Our results in 2015 reflect the strength of our business model, delivering substantial growth in revenues whilst improving our margins and profitability year- on-year. Our value proposition is enabling us to compete for and win large Tier 1 progressive renovations which, combined with our strong pipeline generation in the fourth quarter, have greatly improved our revenue visibility in
2016 and the medium term. With a 20% increase EPS, and cash flow generation well above our target of 100% of
EBITDA, I am pleased to recommend a dividend of CHF 0.45 for 2015, an increase of 12.5% on last year.
We expect our strong financial performance to continue in 2016 with non-IFRS total software licensing growth of
10% to 15% and total revenue growth of between 7.5% and 11.0%. We are guiding for 2016 non-IFRS EBIT of
USD 180m to 185m, which implies a margin of 30%.”
Revenue
IFRS revenue for the quarter was USD 168.4m, up from USD 133.1m in Q4 2014. Non-IFRS revenue was USD
173.4m for Q4 2015 up from USD 133.1m in Q4 2014, representing an absolute increase of 30% and a 36% increase in constant currency. IFRS total software licensing revenue for the quarter was USD 73.3m, and non-IFRS total software licensing revenue for the quarter was USD 77.8m, up 54% from Q4 2014 on a reported basis and
63% in constant currencies.
EBIT
IFRS EBIT was USD 50.1m this quarter. Non-IFRS EBIT was USD 65.2m in Q4 2015, 11% higher than in Q4 2014 (cc), with a FY 2015 non-IFRS EBIT margin of 28.1%, an increase of 80bps on FY 2014.
Earnings per share (EPS)
IFRS EPS was USD 0.54 and non-IFRS EPS was 0.73 in Q4 2015. Non-IFRS EPS for FY 2015 was USD 1.73, up
20% vs FY 2014.
Pre-tax operating cash
IFRS operating cash was an inflow of USD 161.3m in Q4 2015 compared to USD 118.5m in Q4 2014. For FY
2015, operating cash was USD 227m representing a conversion of 133% of IFRS EBITDA into operating cash.
Dividend
Taking into account the strength of profit growth and cash generation, as well as the expected strength of future cashflows, subject to shareholder approval at the AGM on 10 May 2016, Temenos intends to pay an annual dividend of CHF 0.45 per share. The shares will trade ex-dividend on 13 May 2016, and the dividend record date will be set on 17 May 2016. The dividend will be paid on 18 May 2016. As with previous years, the 2015 dividend will be paid as a distribution of capital contribution reserves and therefore be exempted of withholding tax. Temenos’ policy is to distribute a sustainable to growing dividend.
2016 guidance
Our guidance for 2016 is as follows:
- Non-IFRS total software licensing growth at constant currency of 10% to 15% (implying total software licensing revenue of USD 234m to USD 245m)
- Non-IFRS revenue growth at constant currency of 7.5% to 11.0% (implying revenue of USD 594m to USD 614m)
- Non-IFRS EBIT at constant currency of USD 180m to 185m (implying non-IFRS EBIT margin of c.30%)
- 100%+ conversion of EBITDA into operating cashflow
- Tax rate of 17% to 18%
Medium term targets
Our medium term targets are as follows:
- Non-IFRS total software licensing growth of 15% CAGR
- Non-IFRS revenue growth of 10% CAGR
- Non-IFRS EBIT margin improvement of 100 to 150bps on average p.a.
- Non-IFRS EPS growth of 15% CAGR
- Cash conversion over 100% p.a.
- DSOs reducing by 10 to 15 days p.a.
- Tax rate of 17% to 18%
Currency assumptions for 2016 guidance
In preparing the 2016 guidance, the Company has assumed the following:
- USD to Euro exchange rate of 0.901;
- USD to GBP exchange rate of 0.691; and
- USD to CHF exchange rate of 0.992.