* Q3 EBIT rose 16 percent to US$50.8 mln
* Total revs up 8 pct to $160.8 mln; license rev up 5 pct
* Raises forecast for 2016 yr; says 2017 pipeline strong
* Announces $100 mln share buyback
By Eric Auchard
FRANKFURT, Oct 19 (Reuters) - Swiss banking software supplier Temenos topped third-quarter revenue and profit expectations on Wednesday as it benefited from an accelerating shift by financial institutions to outside software suppliers.
The company raised its outlook for 2016 and Chief Executive David Arnott said Temenos’s sales pipeline for new licensing deals into 2017 “is looking very healthy”.
Banks are turning to outside software providers like Temenos for help in running core banking operations to cut costs, meet stricter regulations, fend off fintech rivals, and as they address mercurial consumer expectations.
“This is the start, in our opinion, of a structural shift,” Arnott told Reuters in an interview. “It is not cyclical. It is not something that is going to dry up when banks get in a bit of difficulty. The deals are becoming more and more frequent”.
Over the past year, the company has signed bank modernisation deals with Nordea, its largest contract ever, and Standard Chartered for wealth management software. It kicked off the current fourth quarter with a broad deal for core banking software with Bank of Ireland.
Temenos said in a quarterly results statement that it now expected revenue for 2016 to grow by 12.5-14.5 percent in constant currencies, while total software licensing would grow by 15-20 percent, according to U.S. accounting standards.
Third-quarter adjusted operating profit rose 16 percent to US$50.8 million, or 58 cents a share, beating analyst consensus forecasts by 6.2 percent, according to Thomson Reuters data.
Total revenue rose 8 percent to $160.8 from the year earlier quarter, outpacing the average estimate of $154.67 million by five analysts, according to Thomson Reuters.
Software licensing revenue rose 5 percent to $64.8 million.
Temenos faced a higher hurdle in the latest quarter due to the outsized licensing deal it signed in the third quarter of last year to run Nordea Bank operations across Scandinavia, a breakthrough into one of the world’s top 50 banks by assets.
It also announced a $100 million share buyback, subject to regulatory approval, for the fourth quarter.
Its shares, which closed at 66.10 in Zurich ahead of the report, have gained 31 percent in the year to date.
The company’s long-time rival, London-based Misys is preparing to re-list its shares in an initial public offering in coming weeks.
Reporting By Eric Auchard; Editing by Susan Fenton