Temenos ((CH:TEMN)) has held its Q4 earnings call. Read on for the main highlights of the call.
Discover the Best Stocks and Maximize Your Portfolio:
- See what stocks are receiving strong buy ratings from top-rated analysts.
- Filter, analyze, and streamline your search for investment opportunities with TipRanks’ Stock Screener.
Temenos’ recent earnings call exuded a generally positive sentiment, marked by significant achievements such as record SaaS ACV and impressive customer wins. The discussion conveyed optimism around strategic initiatives, like the sale of Multifonds, which align with the company’s growth strategy. However, challenges were also acknowledged, including increased Days Sales Outstanding (DSO) and a decline in term license contributions.
Strong ARR and Free Cash Flow Growth
Temenos announced a robust annual recurring revenue (ARR) growth of 12% year-on-year and an impressive 25% increase in free cash flow during Q4 2024. This growth underscores the company’s successful financial management and operational efficiency.
Record SaaS ACV Performance
The company reached its highest SaaS Annual Contract Value (ACV) to date, totaling $24.8 million. This record performance highlights Temenos’ strength and leadership in the SaaS market, reflecting its ability to adapt to evolving customer needs.
Successful Strategic Execution
Temenos completed the sale of Multifonds, a strategic move to streamline its product portfolio. This decision aligns with the company’s broader strategy to focus on its core offerings and invest in strategic growth areas.
Improved Services Profitability
The earnings call reported a significant improvement in services profitability, with service costs reduced by 11% in the quarter and 7% for the full year. This improvement demonstrates Temenos’ commitment to operational efficiency and cost management.
Positive Customer Success Stories
Temenos continues to secure major customer wins, with banks like Aldermore and CEC Bank choosing its core banking solutions. These successes highlight the company’s strong customer relationships and competitive edge in the banking technology sector.
Increased Days Sales Outstanding (DSO)
Despite strong growth in subscription revenue, Temenos reported an increase in Days Sales Outstanding (DSO) by 11 days, reaching 152 days at the quarter’s end. This increase poses a challenge to the company’s cash flow management.
Decline in Term License Contribution
Temenos is nearing the completion of its transition from term licenses to subscriptions, resulting in a reduced contribution from term licenses. This shift reflects broader industry trends towards subscription models.
Deferred Revenue Growth Concerns
The company noted concerns over deferred revenue growth, which showed the lowest sequential uptick in years, growing by just 1%. This stagnation may indicate potential challenges in future revenue streams.
Forward-Looking Guidance
Looking ahead, Temenos provided guidance for 2025, projecting at least 12% ARR growth and 5% to 7% growth in subscription and SaaS. The company also expects EBIT growth of at least 5% and EPS growth between 7% and 9%. By 2028, Temenos aims for ARR to exceed $1.2 billion and free cash flow to reach about $400 million. The ongoing sale of Multifonds, set to conclude in Q2 2025, and strategic investments in key markets, underpin the company’s forward-looking strategies.
In summary, Temenos’ earnings call reflected a strong financial performance and strategic alignment with growth objectives. While challenges like increased DSO and deferred revenue growth were noted, the company’s record SaaS ACV and strategic initiatives, such as the sale of Multifonds, highlight its potential for continued success in the evolving financial technology landscape.
