Temenos Group, the global provider of integrated core banking solutions, […]
Temenos Group, the global provider of integrated core banking solutions, today reports its final audited financial results for the full year 2008 and provides outlook for 2009.
2008 Financial and Operating Highlights
– Revenue of USD407m, up 23% on 2007 and adjusted EPS of USD1.13, an increase of 10% compared to 2007.
– 48 new clients signed, including many prominent names across a broad cross-section of banking verticals and geographies.
– 44 new client go-lives (up from 36 in 2007), including Bank of Shanghai, which, with 11 million accounts and around 2.5m transactions per day, became T24’s highest volume retail reference site.
– Further independent recognition of product quality, including T24’s promotion to “leader” in the Forrester Wave™: “Global Banking Platforms, Q1 ’09” and T24 winning for the second consecutive year the Banking Technology Readers’ award for Best Core Banking Product
– The successful conclusion and integration of three strategic acquisitions, providing, inter alia, improved services capacity, supplemental high margin maintenance revenues, product enhancements as well as substantial costs and revenue synergies, all of which are delivering significant value to our shareholders.
– Strengthening of the management team with key appointments in the areas of Product Strategy, Marketing, Retail Business Development, Regional Management and Partners.
– First success of joint marketing agreement with Metavante (for T24 and TCB)
• The difficult environment has reduced visibility, especially over deal closure rates, and so management has chosen at this time not to give formal revenue outlook for 2009
• In terms of profitability, management is targeting an operating margin of 19%- 20%
• Our outlook for the cost base in 2009 is USD310m (and a reconciliation of this figure to management’s previous estimates for 2008 pro-forma costs is given in the detailed results presentation).
• Management expects 2009 EBITDA into operating cash conversion of no less than 75%
• 2009 maintenance revenues are expected to be no less than USD118m; the group expects no tax charge; and, depreciation and amortisation are expected to total USD30m.
Commenting on the results, CEO Andreas Andreades said, “Overall, 2008 was another good year for Temenos. We grew revenue and profits, successfully completed and integrated three strategically important acquisitions and produced a number of operational successes – such as a record number of customer go-lives. However, trading through the fourth quarter was difficult. Uncertainty regarding 2009 made some CEOs reluctant to commit to big projects, which adversely affected our closure rates. As a consequence, management has taken a number of actions to protect shareholder value and mitigate the impact of the difficult economic environment. We have substantially reduced our 2009 cost base and, together with the increase in locked-in maintenance, we believe that the business is capable of delivering higher margins and profitability in 2009. We expect our 2009 costs to be USD33m lower than 2008 pro-forma levels, which, coupled with a baseline maintenance stream of around USD118m, allows us to be comfortable with our margin outlook of 19% to 20% and our target of at least 75% EBITDA to operating cash conversion. Thanks to its significant growth over recent years, Temenos is now of a size and scale where it can manage costs to manage margins. Looking ahead, we have a bright future. The market for core banking software has strong, sustainable drivers and Temenos is currently the best-placed company in this market. Once the outlook for banks has stabilised, they will once again focus on improving return on assets. Core replacement, by facilitating cost efficiency and revenue growth, will again become a strategic priority. As the market leader in the packaged core banking market, Temenos will capitalise on this growth.”
Revenue for the fourth quarter was USD122.2m, down from USD125.3m in the same period last year, representing a decline of 2%. Licence revenue for the quarter was USD49.9m, 27% behind the previous year. For the full year total revenue was USD406.9m, up 23% on 2007, with licence revenue at USD150.1m, 1% ahead of the previous 12 months.
Operating profit for the quarter was USD36.1m, compared with USD43.7m in the same period last year, a decrease of 17%. The full year operating profit was USD 64.0m, up from USD62.5m in the prior year, representing a 2% increase. Margin for the quarter was 29.6%, 530 basis points lower than in the prior year, with the full year margin at 15.7%, 320 basis points lower than 2007.
Net income and Earnings Per Share (EPS)
Net income rose to USD44.5m in the quarter. This represented an increase of 1% on the prior year. The full year net income rose to USD65.2m, again 1% ahead of the prior year. Adjusted EPS, which excludes amortisation of acquisition-related intangibles and restructuring charges, was USD0.73 in the quarter, an 11% increase over 2007 (USD0.66). The full year adjusted EPS was USD1.13, 10% up on the previous year.
Operating cash was USD43.8m in the quarter (taking full year operating cash to USD56.2m) representing cash conversion – conversion of Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) into operating cashflow – of 64% over the last 12 months.