Temenos (TEMN) Q2 2024 earnings summary

Executive summary

• Q2 2024 saw all delayed Q1 deals signed, strong customer engagement at the Temenos Community Forum, and 101 customer go-lives, up from 62 in Q1.

• The Temenos SaaS Foundation, a next-gen SaaS platform, was launched and already has a tier-one European bank live.

• Leadership changes included a new CEO, CMO, EVP of Global Alliances, CRO, and President of Americas, with a focus on strengthening go-to-market and partner strategies in the US and Western Europe.

• Two-month sales delays from a short seller report impacted Q2, leading to revised FY-24 guidance.

• Strategic and financial plan to be presented at Capital Markets Day in November 2024.

Financial highlights

• Q2-24 ARR reached USD 742.4m, up 12% year-over-year at constant currency, with total revenue up 5% and non-IFRS EBIT up 7% to USD 90.4m.

• EBIT margin expanded to 37.4% (non-IFRS: 36.4%), and free cash flow was USD 73m, up 16% year-over-year.

• Net profit increased 11% and non-IFRS EPS rose 8% in Q2-24.

• SaaS revenue grew 8% year-over-year; subscription revenue up 10%; maintenance revenue up 11%.

• Cash conversion was 121% of IFRS EBITDA into operating cash for Q2-24.

Outlook and guidance

• Revised FY-24 guidance: ARR growth about 13% (was 15%), total software licensing growth 3-6% (was 7-10%), EBIT growth 7-9%, EPS growth 6-8%, and free cash flow growth at least 16%.

• Guidance assumes return to growth and de-risking for H2-24, with Q3 expected to be better than Q2 for software licensing.

• FY-24 tax rate expected between 20-22%, with assumed FX rates: EUR/USD 1.08, GBP/USD 1.26, USD/CHF 0.89.

• Midterm targets will be revisited at the Capital Markets Day in November.