Temenos (TEMN) Q3 2024 earnings summary

Executive summary

• Q3-24 saw stable global sales, strong customer engagement, and 61 product go-lives, but sales execution issues in Middle East & Africa impacted software licensing revenue, which reached $96.4M.

• Leadership changes included the appointment of Barb Morgan as Chief Product and Technology Officer, with efficiency programs and organizational changes underway.

• CHF 200M ($200M) share buyback completed, representing 4.3% of share capital.

• Industry recognition includes top rankings in core banking and digital channels by IBS and IDC.

• Strategic, operational, and financial plan review nearly completed, with updates expected at Capital Markets Day.

Financial highlights

• Q3-24 ARR reached $760.9M, up 9% year-over-year, now 85% of product revenue and 75% of total revenue LTM.

• Total revenue grew 4% year-over-year to $246.9M; EBIT rose 19% to $71.3M, with margin expanding by 4 points to 28.9%.

• Free cash flow was $21.8M, down 21% year-over-year due to investigation payments; adjusted, it grew 26%.

• EPS increased 25% year-over-year in Q3-24; non-IFRS EPS at $0.76, IFRS EPS at $0.43.

• SaaS ACV was $9.4M; SaaS revenue up 5%; maintenance revenue up 10%; subscription revenue up 17-19%.

Outlook and guidance

• FY-24 guidance revised: ARR growth now 11%-12% (was ~13%), total software licensing flattish (was 3%-6%), FCF growth at least 12% (was at least 16%).

• EBIT and EPS guidance for the year unchanged; EBIT expected to grow 7%-9%, EPS 6%-8%.

• Q4-24 software licensing growth expected at ~5%.

• Tax rate expected to remain 20%-22%.

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