Temenos (TEMN) Q4 2023 earnings summary

Executive summary

• FY-23 results exceeded raised guidance; ARR grew 16% c.c. to $730m, EBIT grew 12% c.c., and FCF rose 26% to $242.6m.

• The shift to recurring revenue was substantially complete: subscription made up 67% of the subscription and term-license mix, versus 44% in FY-22; ARR represented 84% of FY-23 product revenue.

• Stable sales conditions, positive pipeline development and SaaS demand supported FY-24 revenue visibility.

Financial highlights

• Q4-23 non-IFRS revenue was $298.0m, up 6% c.c.; EBIT was $101.3m, up 5% c.c., with a 34.0% margin.

• FY-23 non-IFRS revenue was $1,000.2m, up 5% c.c.; EBIT was $313.0m, up 12% c.c., and net profit was $231.7m, up 14% reported.

• FY-23 non-IFRS diluted EPS was $3.19, up 13%; Q4-23 EPS was $1.03, up 4%.

• Q4-23 FCF was $113.6m, up 7% YoY; FY-23 FCF was $242.6m, up 26%.

• FY-23 LFL non-IFRS revenue grew 5% c.c. and costs rose 2%; Q4-23 LFL revenue and costs grew 6% and 7%, respectively.

Outlook and guidance

• FY-24 non-IFRS c.c. guidance: ARR growth ~15%; total software licensing growth 7–10%; EBIT growth 7–9%; EPS growth 6–8%; FCF growth at least 16%.

• FY-24 guidance assumes operating cash conversion of 100%+ of IFRS EBITDA and a tax rate of 20–22%; FX assumptions include EUR/USD 1.08, GBP/USD 1.27 and USD/CHF 0.87.

• Mid-term non-IFRS c.c. targets: ARR at least $1.3bn, EBIT at least $570m and reported FCF at least $700m.

• EBIT growth outlook reflects SaaS profitability visibility and services recovery, alongside ongoing cloud, sales and marketing, and R&D investment and wage inflation.