Avaloq under attack as Temenos starts year strongly
Banking software vendor Temenos has reported a strong start to 2017 with total software licensing revenues up 19% – and it takes a swipe at rival Avaloq in the process.
In its Q1 2017 financial results, its non-IFRS total revenues were $142.7 million compared to $129.4 million for the same period last year. Non-IFRS EBIT was also good – with a rise of 15% in the first quarter of 2017.
Based on these decent results, Temenos CEO David Arnott is in bullish mood with some comments on Avaloq’s performance (answering a question from an analyst) – where it “strategically decided very early to focus on the Swiss market, and they really got themselves trapped in a relatively small geography”.
He adds: “Avaloq got to the point where they need to internationalise because the global model is clearly the right one, and they’re expanding into a number of geographies in the middle of a number of projects. And through that, they need a refinancing to fund their working capital. And also increasingly, they’ve adopted a route to go down more the BPO route [business process outsourcing].”
In Temenos’ view, Arnott says it didn’t take this BPO option as it is “capital intensive. It’s heavy. It’s difficult to differentiate yourself, and it’s not the route we’ve chosen to take. So because very early in their customer’s life they’ve decided whether they want a proper upgradable package or if they want effectively a hosted BPO banking service”.
Although, as Banking Technology reported in February, Avaloq reported increases in its revenue and earnings for the 2016 fiscal year – with three new customers and 28 go-live projects completed.
Back to Temenos – where IFRS total software licensing revenue for the quarter was $45.1 million, and non-IFRS total software licensing revenue for the quarter was $45.4 million, an increase of 19% from Q1 2016 in constant currencies.
In terms of IFRS EBIT, this was $18.7 million in the quarter, up from $12.4 million in Q1 2016. Non-IFRS EBIT was $27.3 million for the quarter, an increase of 15% in constant currencies.
Arnott says: “We have built on the momentum from last year with a strong start to 2017. Our performance and execution has been excellent across all our KPIs.”
Some of the recently publicised projects are at Pakistan-based Khushhali Microfinance Bank; Luxembourg-based Fortuna Banque, a retail co-operative bank with nearly a hundred-year history; and Canada-based FirstOntario Credit Union moving from its legacy Fiserv’s Signature core platform to Temenos’ T24.
Its guidance for 2017, which Temenos says excludes the impact of the proposed $50-million acquisition of Australia-based banking software and services vendor Rubik Financial, includes non-IFRS total software licensing growth at a constant currency of 10% to 15% – implying total software licensing revenue of $276 million to $288 million.
It also anticipates non-IFRS revenue growth at a constant currency of 7.5% to 11.0% – implying revenue of $667 million to $689 million.