Temenos ((CH:TEMN)) has held its Q1 earnings call. Read on for the main highlights of the call.
The recent earnings call for Temenos painted a picture of robust growth in certain areas, tempered by challenges in others. The sentiment was generally positive, with strong growth in software licensing and Annual Recurring Revenue (ARR) being highlighted. The company also demonstrated successful cost management and strategic expansions, particularly in the U.S. market. However, there were concerns regarding a decline in subscription and SaaS revenue due to macroeconomic uncertainty and the downsizing of a significant Buy Now Pay Later (BNPL) customer. Despite these hurdles, Temenos remains optimistic about its long-term growth prospects.
Strong Growth in Software Licensing
The company reported high teens growth in software licensing, driven primarily by subscription services. This growth was achieved despite some macroeconomic uncertainties, showcasing the strength of Temenos’ offerings in this segment.
Solid ARR and Maintenance Growth
Temenos saw a 9% increase in Annual Recurring Revenue (ARR) and an 11% growth in maintenance revenue. This was supported by strong sales in premium maintenance and subscription renewals, indicating a healthy demand for the company’s services.
Expansion in Key Markets
Significant strides were made in expanding the U.S. market presence, including the opening of a U.S. innovation hub in Orlando and a partnership with Cognizant in Australia. These moves are expected to bolster Temenos’ market position and drive future growth.
Successful Cost Management
The company reported an 8% growth in EBIT and expanded its EBIT margin to 31.5%, thanks to excellent cost control and ongoing cost savings initiatives. This reflects Temenos’ ability to manage expenses effectively while pursuing growth.
Share Buyback Announcement
Temenos announced a share buyback program for up to CHF 250 million, which is expected to be accretive to EPS by the end of 2025. This move demonstrates confidence in the company’s financial health and future prospects.
Subscription and SaaS Revenue Decline
There was a 2% decline in subscription and SaaS revenues for the quarter, primarily due to deals being pushed to Q2 amid macroeconomic uncertainty. This highlights the challenges faced in this segment.
Impact of BNPL Customer Downsizing
The downsizing of a large BNPL customer affected SaaS revenue. Although anticipated, this still impacted overall revenue, underscoring the challenges in adapting to changes in customer demand.
Macroeconomic Uncertainty
Increased macroeconomic uncertainty was a concern, affecting customer decision-making and potentially delaying deal closures. This uncertainty poses a challenge to Temenos’ growth trajectory.
Forward-Looking Guidance
During the Q1 2025 results call, Temenos reconfirmed their full-year guidance despite recognizing increased macroeconomic uncertainty. The company expects subscription and SaaS revenues to grow between 6% to 10% in Q2 2025. This guidance reflects confidence in overcoming current challenges and achieving growth.
In summary, the earnings call for Temenos highlighted a mix of strong growth areas and challenges. The overall sentiment was positive, with significant achievements in software licensing and ARR growth, alongside successful cost management. However, the decline in subscription and SaaS revenue and macroeconomic uncertainties present challenges that the company aims to navigate. Temenos remains optimistic about its long-term prospects, supported by strategic expansions and a robust financial position.