Release Date: April 22, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Temenos AG (TMNSF, Financial) reported strong high-teens growth in software licensing, primarily driven by subscription services.
- The company delivered solid ARR and maintenance growth, providing visibility on future recurring revenue and free cash flow.
- Temenos AG (TMNSF) reconfirmed its full-year guidance despite macroeconomic uncertainties.
- The company announced a share buyback program of up to CHF250 million, which is expected to be accretive to EPS.
- Temenos AG (TMNSF) made significant progress in its US growth strategy, including the opening of a US innovation hub in Orlando, Florida.
Negative Points
- Several deals were pushed to Q2 due to macroeconomic uncertainties, impacting Q1 results.
- Subscription and SaaS revenues were down 2% in Q1, primarily due to deal delays.
- The company faced a downsell impact from a large BNPL client, affecting SaaS revenue.
- Temenos AG (TMNSF) operates in an environment with increased macroeconomic uncertainty, which could impact future performance.
- Service revenues continued to decline as part of the company's strategy to work more closely with partners.
Q & A Highlights
Q: What was the macro weakness observed in late March, and why are clients more confident now in signing deals?
A: Paniagotis Spiliopoulos, CFO, explained that the anticipation of macroeconomic changes led some customers to delay decision-making. However, since the Liberation Day, there is more clarity, which aids in decision-making. The indicative growth rates for Q2 are based on a stable environment and a solid start in the first three weeks of April.
Q: Can you provide details on the magnitude of the slippage in subscription and SaaS in Q1 and expectations for Q2?
A: Jean-Pierre Brulard, CEO, stated that approximately $5 million worth of deals were closed in April, which was the amount missed in Q1. They expect to close all deals in Q2, which supports their growth outlook for the quarter. Paniagotis Spiliopoulos added that the CHF250 million buyback is part of their capital allocation strategy, with potential for more depending on M&A opportunities.
Q: How is the current macroeconomic uncertainty impacting Temenos' business, and are there any risks to the full-year outlook?
A: Jean-Pierre Brulard noted that while there is macro uncertainty, the fundamental demand for their products remains intact as digital transformation is non-discretionary for banks. They are confident in their ability to offset any headwinds with strong subscription performance.
Q: What drove the decision of the BNPL customer to downsize, and how does it affect Temenos' SaaS business?
A: Jean-Pierre Brulard explained that the downsizing was a business decision by the BNPL customer and not related to the performance of Temenos' SaaS product. This customer is non-core, and the impact was anticipated in their guidance.
Q: How does Temenos view the risk of deal slippage from Q2 to Q3, and what are the expectations for the BNPL customer impact throughout the year?
A: Paniagotis Spiliopoulos stated that the Q2 forecast is based on visibility and conversion ratios, with no expected change in ARR attrition assumptions. The BNPL downsell is factored into their guidance, and they do not foresee a significant impact beyond what has been anticipated.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
