Temenos announces new strategic plan and FY-28 targets Dienstag, 12. November 2024 - 06:47

Ad hoc announcement – Art. 53 LR, November 12, 2024

Temenos – Company

GRAND-LANCY, Switzerland, November 12, 2024 – Temenos (SIX: TEMN) today announces new FY-28 targets as part of its new strategy. The targets and strategy will be discussed in detail at Temenos’ Capital Markets Day taking place today, Tuesday 12th November 2024. Details for the Capital Markets Day are available here.

During the event, the company will define its market opportunity and a new strategic and operational plan to drive growth, as well as outline its financial framework and new FY-28 targets. The company is building on a strong foundation of a large and growing market, long-term customer relationships, diverse and committed people, breadth of functionality and innovation.

Temenos’ new strategy will enable it to outperform market growth of c.7% CAGR (FY-24 to FY-28)1, within which public cloud and SaaS are expected to grow double-digits. The company has identified key growth opportunities and mapped its strategy to three defined growth levers:

• Lever A: extend market leadership in “best of suite”
• Lever B: enhance modular core solutions
• Lever C: accelerate adjacent point solutions

To deliver these growth levers, key executional enablers have been identified across the business which will help drive growth. These will be underpinned by driving cultural change at Temenos. These growth initiatives will be backed by incremental investment in FY-25 of c.USD 30m-40m above annual run rate cost growth, with investments scaling in subsequent years, partially offset by operational efficiencies of c.USD 20-25m in FY-25. The growth levers support EBIT margin expansion and sustainable free cash flow growth. In particular, these strategic initiatives are designed to maximize Temenos’ US footprint.

The new strategic plan and midterm targets are based on a timeline to FY-28. The targets are organic:

• Annual Recurring Revenue to reach more than USD 1.3bn
• Non-IFRS EBIT to reach c.USD 500m
• Free cash flow to reach c.USD 420m

In announcing these targets, the following changes have been made vs. the previous mid-term targets:​

• Free cash flow definition changed to market standard, now including impact of IFRS 16 (lease) and interest expense. FY-28 free cash flow of c.USD 420m implies an FY-24E – FY-28 CAGR of 16%
• Target date moved by one year from FY-27 to FY-28​
• Greater subscription license contribution and lower SaaS contribution reflecting market trends and Temenos’ strategic levers of growth​
• Lower deferred revenue growth due to lower SaaS revenue, impacting free cash flow growth​
• Incremental investments driven by operational plan, partially offset by cost efficiencies​

Commenting on the new FY-28 targets and the strategic plan, Jean-Pierre Brulard, CEO of Temenos, said:

“Today marks the beginning of a new chapter at Temenos. During my first six months at the company, we strengthened the leadership team and are now implementing a new, growth-oriented strategy designed to deliver above-market growth. We expect to deliver strong growth in ARR, margin expansion and sustainable free cash flow growth. Building on our enhanced execution ability, we will embed a culture of transparency, accountability and innovation. I would like to warmly thank my colleagues around the world for their commitment to delivering our new 2028 ambitions. We would also like to extend our continued thanks to our valued customers and our shareholders.”

The targets provided above and other statements about Temenos’ expectations, plans and prospects in this press release constitute forward-looking financial information and represent the Company’s current view and estimates as of November 12, 2024. We anticipate that subsequent events and developments may cause the Company’s guidance and estimates to change. Future events are inherently difficult to predict. Accordingly, actual results may differ materially from those indicated by these forward-looking statements as a result of a variety of factors. More information about factors that potentially could affect the Company’s financial results is included in its annual report available on the Company’s website.

Non-IFRS financial Information

Readers are cautioned that the supplemental non-IFRS information presented in this press release is subject to inherent limitations. It is not based on any comprehensive set of accounting rules or principles and should not be considered as a substitute for IFRS measurements. Also, the Company’s supplemental non-IFRS financial information may not be comparable to similarly titled non-IFRS measures used by other companies. The Company’s non-IFRS figures exclude share-based payments and related social charges costs, any deferred revenue write-down resulting from acquisitions, discontinued activities that do not qualify as such under IFRS, acquisition/investment related charges such as financing costs, advisory fees and integration costs and fair value changes on investments, charges as a result of the amortization of acquired intangibles, costs incurred in connection with a restructuring program or other organizational transformation activities planned and controlled by management, and adjustments made to reflect the associated tax charge relating to the above items.

Note 1: market growth refers to Serviceable Addressable Market.

ARR and non-IFRS EBIT targets are constant currency, non-IFRS EPS and FCF are reported.