Temenos Announces 25% Total Software Licensing Growth in Q3-23; ARR, EBIT and EPS Guidance Raised.
Q3-23 ARR of
Subscription revenue of
SaaS ACV of
Total software licensing growth of 25% and product revenue growth of 14% c.c. in Q3-23
EBIT growth of 44% c.c. in Q3-23; EBIT margin of 25.2%, up 6% points c.c.
Free Cash Flow (FCF) of
Revised FY-23 guidance (non-IFRS, c.c.); ARR guidance raised to 13-15% growth (up from 12-14%), EBIT guidance raised to at least 8% growth (up from at least 7%) and EPS guidance raised to at least 7% growth (up from at least 6%)
Other FY-23 guidance reconfirmed: total software licensing growth of at least 6%, FCF growth of 12-14%
Ad hoc announcement pursuant to Art. 53 LR
Q3 2023 Results Press Release & Primary Statements
Q3 2023 Results Presentation
Annual Recurring Revenue
Income statement and Free Cash Flow
The definition of non-IFRS adjustments is set out below and a full reconciliation of IFRS to non-IFRS results can be found in Appendix II.
Constant currency (c.c.) adjusts prior year for movements in currencies
Q3-23 operational highlights
Continued stable sales environment throughout Q3-23
Positive pipeline development and progress made on large deals
Acceleration in
13 new client wins in the quarter, across SaaS and subscription
Services revenue grew sequentially and has been profitable every quarter this year
Temenos named trusted cloud provider by
Received investment grade Long-Term Issuer Default Rating (IDR) of 'BBB' with a stable outlook, and a senior unsecured rating of 'BBB' from Fitch Ratings
Issued
Annual Recurring Revenue (ARR) of
Non-IFRS SaaS revenue growth of 23% c.c.
Non-IFRS total software licensing revenue growth of 25% c.c.
Non IFRS maintenance revenue growth of 6% c.c.
Non-IFRS product revenue growth of 14% c.c.
Non-IFRS total revenue growth of 10% c.c.
Non-IFRS EBIT growth of 44% c.c.
Q3-23 non-IFRS EBIT margin of 25.2%, up 6% points c.c.
Q3-23 operating cash flow of
Q3-23 Free Cash Flow of
Leverage at 1.8x at end of Q3-23
DSOs at 124 days
Commenting on the results, Temenos CEO,
'The momentum from the first half of the year continued in the third quarter, with strong sales execution across regions and in particular in
Looking across our various regions, the
With our ongoing investments in R&D and our focus on SaaS and cloud, we are planning for a number of exciting new product and SaaS services launches in
We have raised our guidance for ARR, EBIT and EPS given the strong momentum in the business and visibility we have. We expect the sales environment to remain stable at least until year end and I am confident in delivering on our upgraded guidance.'
Commenting on the results, Temenos CFO,
'We have continued our strong growth in recurring revenue, with our ARR up 15% in Q3-23. This was driven by our SaaS revenue growth, our subscription transition and, in this quarter, an acceleration in our maintenance revenue growth. Maintenance was up 6% in Q3-23, from the growth in our subscription revenue which contributes to maintenance in the P&L, the value uplift we are achieving on contract renewals, and the positive impact of CPI clauses in our contracts.
Our Services revenue grew sequentially from Q2-23 to Q3-23 as expected and has also remained profitable in all quarters this year. Whilst our total non-IFRS cost base this quarter was only up 2% as we continued to benefit from lower Services costs, our product related costs increased by 7% as we make targeted investments in particular in R&D and S&M in preparation for 2024.
We had another good cash quarter, with Free Cash Flow of
We have raised our full year guidance for ARR, EBIT and EPS. We now expect ARR to grow 13%-15%, EBIT to grow at least 8% and EPS to grow at least 7%. We have reconfirmed our other FY-23 guidance metrics.'
Update on CEO search
In
This process is still ongoing with both external and internal candidates evaluated and the Board of Directors has resolved to extend the period during which
Commenting on this,
'I am delighted with the progress of the business in the last 12 months. Under the leadership of Andreas, the business has continued to perform strongly, and the Board is fully supportive of the company strategy which the management team is executing well. I am leading a Board committee of independent directors to find our next CEO and we have retained a tier 1 executive search firm.
We are focused on securing the best possible successor to lead the business, with the right mix of skills to deliver on our strategic growth plan. We have a strong management team in place that is performing well. I am pleased that Andreas is willing to continue as CEO until his successor is appointed and the Board and the Executive management team are committed to a seamless succession for the benefit of all stakeholders.'
Q3-23 financial summary (IFRS and non-IFRS)
Revenue
IFRS and non-IFRS revenue was
IFRS and non-IFRS total software licensing revenue for the quarter was
EBIT
IFRS EBIT was
Non-IFRS EBIT was
Non-IFRS EBIT margin was 25.2%, up 6% points vs. Q3-22.
Earnings per share (EPS)
IFRS EPS was
Non-IFRS EPS was
Cash flow
IFRS operating cash was an inflow of
FY-23 non-IFRS guidance
The guidance for FY-23 is non-IFRS and in constant currencies. Guidance for FY-23 ARR, EBIT and EPS has been raised, other guidance items have been reconfirmed:
ARR growth of 13-15% (up from 12-14%)
Total software licensing revenue growth of at least 6%
EBIT growth of at least 8% (up from at least 7%)
EPS growth of at least 7% (up from at least 6%)
FCF growth of 12%-14%
Currency and other assumptions for FY-23 guidance
In preparing the FY-23 guidance, the Company has assumed the following:
EUR to USD exchange rate of 1.08;
GBP to USD exchange rate of 1.24; and
USD to CHF exchange rate of 0.90
The Company has also assumed the following:
Expected FY-23 tax rate of 19-21%
Cash conversion expected to remain at 100%+ of EBITDA into operating cash flow
Mid-term targets
The mid-term targets are non-IFRS and in constant currencies, except Free Cash Flow which is reported:
ARR of at least
EBIT of at least
FCF of at least
The guidance provided above and other statements about Temenos' expectations, plans and prospects in this press release constitute forward-looking financial information and represent the Company's current view and estimates as of
Conference call and webcast
At 18.30 CET / 17.30 GMT / 12.30 EST, today,
Q3 2023 webcast link
Please use the webcast in the first instance if at all possible to avoid delays in joining the call. For those who cannot access the webcast, the following dial-in details can be used as an alternative. Please dial-in 15 minutes before the call commences.
Non-IFRS financial Information
Readers are cautioned that the supplemental non-IFRS information presented in this press release is subject to inherent limitations. It is not based on any comprehensive set of accounting rules or principles and should not be considered as a substitute for IFRS measurements. Also, the Company's supplemental non-IFRS financial information may not be comparable to similarly titled non-IFRS measures used by other companies. The Company's non-IFRS figures exclude share-based payments and related social charges costs, any deferred revenue write-down resulting from acquisitions, discontinued activities that do not qualify as such under IFRS, acquisition/investment related charges such as financing costs, advisory fees and integration costs and fair value changes on investments, charges as a result of the amortisation of acquired intangibles, costs incurred in connection with a restructuring program or other organizational transformation activities planned and controlled by management, and adjustments made to reflect the associated tax charge relating to the above items.
Below are the accounting elements not included in the FY-23 non-IFRS guidance.
FY-23 estimated share-based payments and related social charges charges of c.5% of revenue
FY-23 estimated amortisation of acquired intangibles of
FY-23 estimated restructuring/M&A related costs of
Restructuring / M&A related costs include costs incurred in connection with a restructuring programme or other organisational transformation activities planned and controlled by management, or cost related mainly to advisory fees, integration costs and earn out credits or charges. estimates do not include impact of any further acquisitions or restructuring programs commenced after
Other definitions
SaaS ACV is Annual Contract Value which is the annual value of incremental business taken in-year. This includes new customers, up-sell and cross-sell. It only includes the recurring element of the contract and excludes variable elements.
Investor & Media Contacts
Head of Investor Relations, Temenos
+44 207 423 3945
asnyder@temenos.com
+44 7920 087 914
conor.mcclafferty@fgsglobal.com
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