Temenos AG

Thanks for joining us for our Q4 and full year 25 results call. Before I hand over to Takis, I'd just like to flag that we're hosting our Capital Markets Day tomorrow in London and virtually. You can still register on our website to attend if you've not done so already. We'll be taking questions, as usual, at the end of this call related to the fourth quarter and fiscal year 2025, as well as our outlook for 2026. I'd ask if you could please kindly keep your questions related to strategy for the CMD tomorrow, where we'll also be talking much more extensively about our approach to AI. With that, I'll hand over to Takis.

Thank you, Adam. Good afternoon, good evening. I will talk you through our key performance and operational highlights for the quarter before updating you on our operational and financial performance. As Adam mentioned, we will go into more depth on our strategic execution and roadmap tomorrow at our Capital Markets Day, also covering AI, where we feel very well positioned with a strong vote for Temenos, giving us a structural competitive advantage. Starting on slide six, we achieved all our 2025 guidance metrics and delivered product revenue constant currency growth of 11% in the first year of our strategic plan, which is above the market growth of 7%. The sales environment remained stable throughout the quarter, and we saw strong demand across regions and client tiers, including several wins with Tier 1 banks globally. We also continued to see strong signings for premium maintenance, and this drove very strong maintenance growth in the quarter and full year. We invested across the business in both sales and product in line with our strategic roadmap, in particular, growing our sales quarter carrier headcount by 60% to over 140 by year end. And we executed well on our AI strategy across product, process, and people that we will be talking more about tomorrow. We announced our 2026 guidance, which is based on the stable sales environment our strong pipeline, and our confidence in maintaining business momentum through our focus on execution. And given the strong first year of execution on our strategic roadmap, we have raised our 2028 targets, reflecting the confidence in our strategic positioning and our good levels of visibility. Moving to slide seven, we signed a number of deals with Tier 1 clients in the quarter. This is a client segment we are particularly focused on, given their size and scale, the diversity of business line, and their global reach. We have invested in dedicated global strategic sales, focusing on tier one and two banks, and it was encouraging to see us expanding our footprint in the fourth quarter. I would highlight two deals in particular. We signed a Tier 1 U.S. bank for composable core banking across multiple international markets and a Japanese Tier 1 bank expanding their Temenos platform for core banking and payment to three new countries. These successes demonstrate the strength and scalability of our platform and the value and trust our clients place in Temenos and our deep domain expertise. Turning to slide eight, it is important for us to demonstrate the value we bring to our customers. I highlight this quarter with VT Bank in Vietnam, serving over 30 million customers. They completed one of the largest and most complex core banking upgrades in the region, moving to a hybrid architecture with Temnos Core and AWS for scalability. VT Bank has been a Temnos Core customer since 2006. our platform's scalability, functionality, and local knowledge are key differentiators. The co-banking platform now handles double the daily volume with zero incidents, business processing speeds are 30% faster, and payment transaction volumes are up 40%. This shows the value of our platform and trusts our customers' place in us and our extensive domain expertise. On slide nine, Our product and technology roadmap continues to be validated as market leading by industry analysts. We were particularly pleased to be named a leader by IDC Marketscape for North American retail digital banking solutions, given our focus on delivering our U.S. roadmap, which is a key part of our U.S. growth ambition. We also won best core banking system at the 2025 Banking Tech Awards and we were recognized for customer experience in asset and wealth management. Moving to slide 10, we executed well against our strategic roadmap, which translated into tangible results across the business and a strong financial performance in 2025. We reorganized our product and tech function into agile teams and hired senior talent, which strengthened our ability to deliver our roadmap. We launched multiple new products on our platform in the year, including a number of AI solutions. Our sales organization grew significantly, with individual quarter carrier headcount increasing around 60% to over 140 individuals across our region. We invested in sales operations and enablement, which resulted in strong pipeline growth and strong signing, especially with new logos. Looking at the U.S. specifically, we also made good progress on our U.S. expansion strategy, increasing sales headcount to over 20 individuals and opening our U.S. innovation hub, hiring 70 developers to roll out our U.S. product roadmap. Our U.S. pipeline has grown nicely, and we expect to close more deals in 2026. Turning to the next slide, we will be talking about our approach to AI, our competitive positioning and our AI strategy extensively tomorrow at our C&D. To summarize, we have a clearly defined AI strategy across product, process and people. This is focused on lowering total cost of ownership for our customers, speeding up delivery and empowering our people to leverage AI and enable greater productivity. As an example, we are also rolling out entropic tools across our entire software development lifecycle. The adoption threshold for AI in the banking sector is very high due to high product complexity and significant risk aversion. This, combined with our deep customer trust and domain knowledge, creates a strong competitive mode for Temenos and gives us the right to win in the AI era. I will now run through our Q4 and 2025 financial highlights, focusing on constant currency non-IFRS financials, which are pro forma, excluding any contribution from multifunds. On slide 13, we delivered strong ARR growth of 12%, with ARR now representing over 90% of product revenue. The growth in ARR was driven by growth in all our recurring revenue lines, for subscription and SaaS, as well as maintenance. Our ARR growth gives excellent visibility on recurring revenue and future cash flows, supporting our long-term growth targets. Our product revenue, which is subscription and SaaS, and maintenance grew 11% well above the market growth rate of 7% in the first year of our strategic plan. On the next slide, we exceeded our 2025 subscription and SaaS revenue growth target with 9% growth year-on-year. We also delivered strong total revenue growth of 9% in the quarter and 10% for the full year. Growth was growth-based, reflecting robust demand across geographies and client tiers for our platform and products. On the next slide, non-IFRS EBIT grew 21 percent for the year, and non-IFRS EPS grew 25 percent. While we made significant investments in our business product, DTM, and operations, this was largely self-funded to our cost efficiency program. We have good operational leverage in our business, and so the strong revenue growth, in particular premium maintenance, drove our profitability. Let me highlight a few items on slide 16. We delivered strong ARR growth of 12% year-on-year in Q4-25, with ARR now at 860 million. Cloud ARR was 39% of total ARR, excluding any contribution from multifunds or the BNPL client, which terminated their contract in 2025. We expect Cloud ARR to increase in the mix going forward, as more clients move workloads to cloud environments. Maintenance revenue grew 15% in Q4-25 and 12% for the full year, driven by premium maintenance signings. On profitability, EBIT margin improved by 3 percentage points to 34.7% for the year, reflecting strong operating leverage and savings from cost efficiencies. These results demonstrate the strength of our business model and our ability to simultaneously drive growth while investing in the future. Turning to non-operating items on slide 17, net profit was up 9% in Q4-25 and 21% for the year. EPS grew 14% in Q4 and 25% for the full year, benefiting from both profit growth and a lower share count. We had an increase across net finance charges, tax, and ethics losses in Q4, offset by our strong operating performance. The tax rate for the year was 17% in line with our guidance. On slide 18, free cash flow grew 15% year-on-year ahead of our guidance, reaching $256 million. This was supported by strong ARR growth, disciplined capital allocation, and a continued focus on operating efficiency. On slide 19, we have our changes in group liquidity in the quarter. We generated $179 million of operating cash in the quarter and bought back 13 million worth of shares in the buyback launched in December. We also repaid a bond which matured in November 2025. We ended the year with leverage at 1.3 times, comfortably within our target range of 1.0 to 1.5 times. Turning to slide 20, a few comments on our debt leverage and capital allocation. We launched our second share buyback program in 2025 for a total of 100 million Swissy in December 2025. This will run until December 2026 at the latest. Report and net debt stood at 605 million at year end. Finally, the board is proposing a dividend of 140 Swissy for 2025 which will be voted on at the AGM in May. Our approach remains disciplined and balanced, returning capital to shareholders while maintaining flexibility for future investment. Next, we have our 2026 guidance, which is non-IFRS and in constant currencies except EPS and free cash flow, which are reported. For 2026, we are guiding to 12% ARR growth, about 9% growth in subscription and SaaS, about 9% EBIT growth, about 7% EPS growth, and about 16% free cash flow growth. This guidance reflects the strong foundation we built in 2025, our execution focus, and confidence in our competitive positioning and also our pipeline visibility. The guidance includes the headwind from the termination of a BNPL client in 2025, which we have given on the slide. There will be no further headwind from this beyond the current year, 2026. And lastly, we have raised our 2028 targets based on a strong first year of execution, confidence in our strategic positioning, and good visibility. The new targets are for ARR above 1.23 billion, EBIT of about 480 million and free cash flow around 410 million. I am very pleased with our first year's execution and I'm very confident about our strategic positioning and momentum. I look forward to sharing more at our capital markets day tomorrow. Operator, please can be open for questions.

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