Formpipe - Temenos sees rapid growth ahead

FPIP’s partner, Temenos, recently hosted a CMD… …now targeting a ’20-’25e sales CAGR of 12% Its new targets align well with FPIP’s new strategy Temenos is a cloud-native supplier of software to banks Yesterday, FormPipe’s partner, Temenos, hosted a capital markets day. Founded in 1993, Temenos is a cloud-native provider of banking systems, with 2020 sales of USD 906m and established relationships with 41 of the world’s top 50 banks. According to Temenos, the cost for banking of running its cloud-based platform is only 10% of the cost of having legacy systems. This has been a major driver for the market’s adoption of cloud-based platforms in recent years, and also Temenos’ cloud-transition.

Similar to FormPipe, its revenue contribution from SaaS is growing rapidly (27% of 2020 software sales were SaaS, compared with 5% in 2015). It targets a ratio of 50% by 2025. Temenos wants to increase its presence in North America At the CMD, it revealed its new financial targets.

Temenos wants to achieve 2025 sales of USD 1,600m (12% ’20-’25 CAGR) coupled with an EBIT margin of 41%. It wants to achieve ever higher growth for its software licenses, with a 15-20% CAGR for ‘20-‘25. In order to do this, Temenos wants to accelerate its presence in North America (which aligns with FormPipe’s own strategy) and enhance its partnerships (which we argue is beneficial to FormPipe).

We see rapid growth for FormPipe over the coming years We note that Temenos’ new targets align well with FormPipe’s recently updated strategy, in which FormPipe wants to achieve 10% annual sales growth between ‘21-‘25 and reach 20% EBIT margin by 2025. Both companies are seeing tailwinds from the fact that banks are gradually increasing their adoption of cloud-based platforms. As we highlighted in our last research, we expect rapid growth for FormPipe over the coming years.

We look for 2025e sales of SEK 610m, corresponding to a ’20-‘25e CAGR of 9%.