Temenos (TEMN) Q4 2024 earnings summary

Executive summary

• Q4-24 and FY-24 results met or exceeded guidance, with 12% year-over-year ARR growth, strong SaaS ACV, and free cash flow growth; sales environment remained stable and strategic focus sharpened by the sale of Multifonds for ~$400 million.

• Strategic initiatives included a new global customer experience team, key executive hires, and a focus on product innovation and delivery.

• New strategic plan and updated guidance for 2025 and 2028 were issued, excluding Multifonds, with a focus on cloud and SaaS growth.

• Notable client wins and migration to SaaS/core banking solutions demonstrated continued customer relevance.

• Three growth levers: expanding Tier 3-5 bank leadership, enhancing modular core for Tier 1-2 banks, and accelerating adjacent solutions like digital banking and payments.

Financial highlights

• Q4-24 ARR reached USD 804.2 million, up 12% year-over-year in constant currency; SaaS ACV hit USD 24.8 million, the highest ever.

• Free cash flow increased 25% (old definition) and 24% (new definition) in Q4-24, totaling USD 121.1 million; FY-24 free cash flow up 17%.

• Q4-24 EBIT up 21% year-over-year; EBIT margin at 37.6%, up 4 percentage points; net profit and EPS up 47% in Q4-24, aided by a one-off tax benefit of ~$15 million.

• Maintenance revenue up 12% in Q4-24; SaaS revenue up 4%; subscription revenue up 59%; term license revenue down 84%.

• FY-24 total revenue USD 1,044.1 million, up 5% year-over-year in constant currency.

Outlook and guidance

• FY-25 guidance (excluding Multifonds): at least 12% ARR growth, 5-7% Subscription & SaaS growth, at least 5% EBIT growth, 7-9% EPS growth, and at least 12% free cash flow growth.

• FY-28 targets (excluding Multifonds): ARR >USD 1.2 billion, EBIT ~USD 450 million, free cash flow ~USD 400 million; implied CAGRs of 13%, 10%, and 16% respectively.

• FY-25 tax rate expected at 15-17% due to one-off tax benefit; normalized rate 19-21%.

• Cloud ARR expected to grow as a share of total ARR, reflecting industry cloud adoption trends.