| Wed 14 Nov 2001, 0:00 | | Temenos Announces Results For The Quarter Ended Se |
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TEMENOS delivers revenue growth of 56% in challenging market conditions
Geneva, Switzerland - November 13, 2001 ---- TEMENOS Group AG (TEMN), a
global vendor of integrated banking software for banks and financial
institutions, announced its results for the quarter ended September 30, 2001
today. Revenues for the quarter were US$35.8 million, up 56% compared to the
same period last year, bringing revenue for the nine months ended September
30, 2001 to US$106.2 million, an increase of 67.4% compared to the same
period last year.
Operating profit for the quarter was US$2.4 million compared to US$4.1 for
the same period last year. This decrease is attributable to lower than
expected revenue for the quarter resulting from a slowdown in contract
signings during the month of September following the events of September 11
as communicated on October 3rd. Operating profit for the nine month period
to September 30, 2001 was US$15.6 million, up from US$10.8 for the same
period last year.
"We believe that the fundamental drivers for IT spending by banks and
financial institutions remain very strong, the business is there, but the
current degree of uncertainty and business restructuring that exists within
our clients' organizations results in delays in decision making" said George
Koukis, Chairman and CEO. "We continue to believe that the significant
investment made by TEMENOS in its products and people ensures that we
continue to be best placed in our market to deliver excellent growth and
shareholder value."
RESULTS FOR THE QUARTER ENDED SEPTEMBER 30, 2001
Revenues
Revenues for the quarter were US$35.8 million, up 56% compared to the same
period last year, bringing nine-month revenues to US$106.2 million and
growth to 67.4%. Licensing revenues for the quarter grew by 51% to US$20.1
million and licensing revenues for the nine-month period grew by 62.4%.
Services revenues for the quarter were US$15.7 million, a growth of 62.8%
compared to the same period last year bringing the growth in services
revenues for the nine month period to 75.4%. Reported licensing revenues for
the quarter were impacted by lower than anticipated new contract signings
during the month of September.
"We believe that the growth in our licensing revenue remains at the high end
of the spectrum for the software sector, benefiting from our significant
backlog and strong execution on projects," said Andreas Andreades, Deputy
CEO.
Operating profit
Operating profit for the quarter was US$2.4 million, compared to US$4.1
million for the same period last year, while operating profit for the nine-
month period grew by 45% to US$15.6 million, up from US$10.8 million for the
same period last year. Operating margin for the quarter was 7% compared to
18% for the same period last year. Our investment in software development
and sales infrastructure was in-line with our pre-September 11 revenue
forecasts and therefore contributed to the weaker than anticipated operating
profit for the quarter.
Service margins for the quarter increased to 26%, compared to 14% for the
same period last year. Leverage of infrastructure was significant with G&A
growing by 20% compared to the same period last year, significantly lower
than top-line growth of 56%.
As announced on October 3rd, we have accelerated our cost management program
to ensure that we are on track for our long-term business model in terms of
profitability for the next fiscal year. "Approximately 70% of the cost
saving measures were implemented in this quarter and the full benefits are
expected to enhance our results from Q1 2002 onwards. We firmly believe that
our cost management program will enable TEMENOS to continue to be in an
excellent position to compete in the global market place." said David
Arnott, Chief Financial Officer.
Earnings per share
Reflecting the shortfall in revenues and investment in line with previous
revenue expectations, diluted earnings per share for the quarter was US$0.03
per share compared to US$0.06 per share for the same period last year. For
the nine months to September 30th, diluted earnings per share were US$0.14
per share compared to US$0.15 for the same period last year. Earnings for
the nine months to September 30th include one-off financing costs incurred
in relation to the company's buyout of financial investors which took place
in November 2000, amount to US$5.8 million or US$0.15 per diluted share.
Business Review
New business
During the quarter, the company signed licenses and client support and
service agreements with new clients, including Suez Canal Bank, Bank Central
Asia and Bank Kosovo American Bank. The summer quarter is one of low
seasonality with new signings for the quarter representing approximately 10%
of new contract signings for the full year. The September slowdown and the
effects of seasonality for the quarter have resulted in license backlog as
of September 30, 2001 of US$46.1 million (June 2001 US$55.2 million). This
backlog continues to provide revenue and cash flow visibility of
approximately 7 to 8 months. In addition, our pipeline remains strong and
our existing client base has committed their intention to continue as
planned with all existing projects. "We remain confident that we will sign
significant deals within the current quarter" said George Koukis.
Operations Management
In line with our press release of October 3rd and in light of current market
conditions, we have taken and continue to take steps to streamline our
operations. We have focused our efforts on a faster transfer of our
development capability to our development centers in India and Bangkok,
while maintaining product direction and coordination in London and Geneva.
We have also renegotiated the rates at which we use third-party consultants
on our projects to deliver better services margins while we remain flexible
to manage growth. In addition, a total of 50 employee positions have been
eliminated in the quarter as part of our cost review.
Our efforts to increase our sales coverage continued in accordance with our
plans in all regions except for the US where we expect to be back on- track
by the end of the current quarter.
Acquisitions
On October 6th we completed the acquisition of IRIS, a core retail banking
product for a total cost of approximately US$15 million. We expect the
combination of IRIS with GLOBUS to significantly accelerate our ability to
penetrate Tier 1 institutions requiring solutions for their retail banking
operations. We believe that this is an area where banks are struggling with
old technology and inefficient legacy systems that need replacement to allow
them to compete effectively.
Product development
Our efforts to increase the number of platforms and operating systems on
which GLOBUS runs are continuing. We expect to launch GLOBUS on the IBM i
series (AS 400) effective January 1. This will allow us to compete in a
segment of the market where we believe there are significant replacement
opportunities.
Consistent with our strategy to further penetrate Tier 1 banks and financial
institutions, we recently completed performance benchmarking tests on GLOBUS
which confirm scalability to more than 20,000 transactions per minute on 2
million banking accounts. We believe this is extremely positive news for
our client base and our prospective clients helping to ensure that we are in
a position to satisfy the needs of even the most demanding Tier 1
institutions.
Finally, our plans for launching a new Asset Management module within the
GLOBUS suite are on track with a scheduled launch date of January 1, 2002.
We expect that this will open up an attractive segment of the market
previously inaccessible to TEMENOS.
About TEMENOS
TEMENOS is a global leader in providing financial institutions with
integrated banking systems that increase productivity, profitability, and
allow them to respond to changing market conditions. The company's
solutions, TEMENOS GLOBUS, are utilised in a variety of segments including
retail and wholesale banking as well as for treasury and accounting
functions. TEMENOS has 25 offices in 19 countries and over 270 installed
client bases. The company had revenues of US$106.2 million for the nine-
month period ended September 30, 2001. In June 2001, TEMENOS became a public
company, quoted on the SWX Swiss Stock Exchange (TEMN).
TEMENOS and TEMENOS GLOBUS are trademarks of TEMENOS GROUP AG.
Any statements in this press release about future expectations, plans and
prospects for the company and statements containing the words "believes,"
"anticipates," "plans," "expects," "will" and similar expressions,
constitute forward-looking statements. Actual results may differ materially
from those indicated by such forward-looking statements as a result of
various factors. In addition, the forward-looking statements included in
this press release represent the company's estimates as of November 13,
2001. The company anticipates that subsequent events and developments will
cause the company's estimates to change. However, while the company may
elect to update these forward-looking statements at some point in the
future, the company specifically disclaims any obligation to do so. These
forward-looking statements should not be relied upon as representing the
company's estimates or views as of any date subsequent to November 13, 2001.
