Ladies and gentlemen, good morning, and welcome to our Q3 2024 Revenue Presentation. My name is Arthur Carli, and I'm in charge of Investor Relations for the group. I'm here to remind you that this live event is being recorded and will be available for replay as early as possible on our IR website. In addition, as usual, I must inform you that this presentation includes forward-looking estimates that are subject to risks and uncertainties, all described in Axway Universal Registration Document. With that, I would like to hand over to our Group CEO, Patrick Donovan, and our Deputy CEO, Eric Berry.
Thank you, Arthur, and thank you all for joining us for this Q3 report. This is a bit of a extraordinary report. Normally, we don't come to you in October and April when we do first and third quarter revenue announcements only. This will be a bit lighter on the financial side. We'll cover the revenue and the points made in the press release. But what I really wanted to do, and the purpose I asked for this extraordinary call, was to give some of you in attendance the opportunity to get to know the SBS business, to introduce my deputy CEO of the group, Eric Berry, and get you to hear from him a bit.
Because we want to prepare you as we move into the full year results and into the guidance for 2025 on the Axway-SBS business, what they do, the products they serve their customers with, the markets they serve, how they do business. The business model is a little different than you've heard from me on the Axway scope for a while, and how we look forward to this new combined group, because this is truly a new group. We're bringing together two companies of similar size, so we're building something new out of it to try to take the best from both sides and create one common entity that has an even greater opportunity in the market.
With that, let me go ahead and kick off with a few comments on the press release that we just put out in the market, and then we'll move into some bigger comments on the combined group and where we see it going. On the Axway scope, we had very strong revenue performance in Q3 that allowed us to come back on the year-to-date figure of organic revenue of 5.6% for the first nine months. Back on track with what we expected. As you've heard from me over the years, we often have some large deals that fall within one quarter or the next, and we're not always perfectly able to control which quarter they fall in.
But as long as the year to date, by this point, is on track, it gives us good visibility to the full year. So we're happy to see the revenues come back in line for the nine months of where we expected. MFT momentum continues to grow, especially in North America. There's been some market disruption there that and new customers are coming to the Axway stack, which is really good to see that trend continue this year. Our core products continue to lead in the market, and actually, that's under the Axway scope because of the recent Gartner announcement with the API Management Magic Quadrant. Good results, but it applies for both companies. Both the core products of both Axway and SBS have market-leading positions. On the SBS scope, there's really good positive momentum in a new group.
To be clear, we've only been together since September 2nd, officially, and we were able to kick off in a very positive way with the leadership teams of both companies. And we are taking a very measured approach in how we integrate both within the teams and the product set, so we'll make more comments through the presentation on that. I've been really pleased to see that the investments in the new offerings that are coming out around the Sopra Banking Platform, Digital Core and regulatory and reporting solutions are showing some early adoption, which is a good momentum coming out of the gate, and Eric will probably make some more comments later on that, either in his comments or in questions. And then there was a subtle announcement put out there around the SBS summit as well.
Their Sopra B anking Software, post-acquisition, will now become SBS, so you'll hear us refer to Sopra Banking Software as SBS through the presentation, so looking a bit at the numbers for the Q3 and also we'll comment on the year to date. The perimeter for SBS was only one month that was consolidated, so there was a nice organic growth on the SBS scope, but as the teams are getting together and working through the integration of the financial systems and the reporting, we'll have far more detail at the full year effort, but for the one month, we just consolidated the SBS business. Eric will make some comments later on, you know, how their business breaks down with license, maintenance, subscription, et cetera.
On the Axway perimeter, we had, as I said, a very nice Q3, growing 13.4%, and you see the continued trends with the customer managed being a first selection choice of moving from a licensed to a subscription model. Eventually, the customers will come back to us and move to a Axway Managed over time as they start handing off their workloads to the Axway team to manage. The maintenance continued to decrease as we see the migration to subscription, and license revenue continues to drop to the point to where it's getting to be quite small numbers as we move towards a fully subscription model.
When you look at the nine-month scope, you'll see that for Axway, for the nine months, we grew year to date, 5.6% to EUR 227 million, almost, up from the EUR 215 million previously reported, and the SBS scope, as I said, is a one-month scope, grew about 19%. I'll make a small comment here again, with the idea of more of the group revenues. So often, there'll be transactions between Axway and SBS. SBS will often sell their application to the end user, inclusive of some Axway technology inside, and so we'll eliminate those from the top-line revenue through the intergroup revenue operations line. So just a couple points following in the half-year results that Roland Royer made back during his presentation.
We continue to see the Net Promoter Score on the Axway scope up to 52. And on the SBS scope, we'll be introducing the Net Promoter Score concept at the public filings here in communicating on that starting in next year as we harmonize the approach and the way we look at it. But they also follow the Net Promoter Score concept as well. So we'll look to harmonize and have a common figure, or we'll see if it makes sense for us to break out both as we go into next year. But it's a key part of the story of both companies, that the customer success and their ability to promote us word of mouth or otherwise is a key part of our overall strategy.
We've seen the trend that Roland talked about at the half year strongly continue, so the Q3 bookings value growth in the Axway Managed, so us running it for the customer, grew 35%, which represent, again, almost 40% of our total booking value. This is a trend we're seeing slowly pick up on the Axway scope. And then with the MFT comment I made earlier, especially in the North America region, we're seeing a nice new customer booking value, about 20% of our booking value for the first nine months of the year versus about 18% first nine months of 2023. And so going into a bit more on the project, that's all I'll say on the financials at the moment.
The rest are in the press release or we could cover in the Q&A. But we've launched the integration immediately after the closing of the deal on the second. We are able to get the teams together and really identify where we will have synergies and shared opportunities. But we're taking this, as a group, as the opportunity to bring together the teams and look at building, what some would call like shared services, or we'll use the term chapters, for all the functions that will support the two strong brand businesses. So you'll have the brand business of SBS and of Axway, but you will have common finance, HR, legal, IT supporting the entire group. And this will give us a chance to do two things.
It will allow us to hopefully provide a better service level to the internal customers, but we should be able to do this and find and leverage synergies within the teams to do things efficiently at a higher scale, but also to remove overlapping coverage and to optimize where we can. So it's a good opportunity for us to do that. On the actual brand side of it, we have some common opportunities to go to market and and we'll share some of those either to the customer or with our product set. But that strength in the brands of SBS and Axway will remain quite strong in the customer's mind, and so we have to honor that and respect that, and deliver the value they have received for years from the products they've bought from the individual companies.
The initial customer meetings, both Eric and I have had, have been positive feedback on what we're trying to do and the story that we're trying to build for the future, and so that's been good to get. The initial customer feedback's been enthusiastic. And the business teams, as always, with this type of transaction, there's a lot of nervousness with the teams and how we'll bring it together, what we'll be looking to do, and the opportunity for them. But we're working through that and trying to quickly get the business teams and the ones delivering value every day, aligned and focused on what we need from them and to secure them in how we're building for the future. And so there's a few slides in here I've pulled from the rights offering roadshow that explained the business well.
At the group level, these are 2023 figures, but at the group level, we had about 5,000 employees being in 26 countries, and just under EUR 700 million of the pro forma revenue for 2023, which puts us as the fifth largest enterprise software vendor here in France. We've become quite relevant in our home market or our headquarters market. It allows us to have a nice coverage, a nice distribution of our revenue, our customer base across the different product set with the integration products you know from Axway, but now including the banking applications and platforms coming over from SBS. It gives us a nice mix of diversity that helps us also mitigate risk.
If any, if there's any risk in one geography or product line, we have a big enough group there, we should be able to have the wherewithal to get through almost any situation. As we look at the products themselves, we're blessed with market-leading products across both companies. As I mentioned, we just had announced a couple days ago, being a leader for, I believe it's the ninth time in a row, in the Gartner Magic Quadrant on the API management offering. But you also see on SBS, on the IBS ranking, they've been ranked there as a strong lending solution over the last five years. So in both of the portfolios, you see strength in the products that were taken to market, and that allows us a nice core foundation to build off of.
And so as we look at the combined businesses, I wanted to give the opportunity for Eric Berry, who's joining or who has joined the group as my deputy, but also is still continuing the role of CEO of SBS. I want to give him the opportunity to help you get to know the SBS business, and the products, and the different activities they do, and how they serve their customers. So, Eric, if you want to say a few words and take it over.
Thanks, Patrick. Good morning to all of you. So, as you said, the scope which has been part of the transaction has been the EUR 359 million of revenue. Meaning that before transaction, we did transfer EUR 100 million revenue around services and exclusively in Europe to Sopra Steria before transaction. And I think it's very important to secure that we stay very focused on the software activities and within the... I would say, securing, not having services which are not dedicated to our clients to implement our solution. If we are looking and giving some insight on what are the main product line behind SBS, so there are two main, I should say, starting with the smaller one, the Sopra Financing Platform. It's around 20% of this total revenue.
The primary markets of this business line are U.K. first, U.S., and the, I would say, captives of big OEMs, which are operating at a global level. The second is Sopra Banking Platform, so roughly around 80% of the total revenue, and dedicated to the market in Western Europe and in Africa. Within that business line, there are obviously core banking systems and which are localized in these two main regions, but also several different components which can be composable together to address the different banking domains, such as the open banking, but also deposit and savings, all the different lending life cycle. We know that behind lending, there are several different assets which can be covered by a lending life cycle.
Everything on payment and cards, and obviously, everything related to risk and regulation, and with a clear focus on the European, reporting one.
Eric, maybe it'd be good for you to say a word about how the two companies have worked in the past as well, Axway helping the Sopra Banking platforms deliver value to customers and moving data, if you want to say a few words-
Yeah
On that as well.
The core business of SBS is processing data for our clients. When we started to work together, we did have the good surprise to see that we have 176 clients in common. Not because we were operating and contracting with these clients separately, but because the Axway technology was embedded for these 176 clients inside the SBS product, allowing the SBS product to expose the data, to transfer this data, to orchestrate the APIs. I think that's a very important common way to look at what's going to be the future of finance, because this will be all about data and for sure, data is a product for the future.
If you move forward and looking at the current momentum inside SBS, which did start before transaction, I think it's something very important. The subscription model did start within the financial services industry, I would say, a bit later, if I do compare with the environment on the technological product. And the second is, our clients within the financial service industry are expecting a lot as to operate the solution. So when we do compare the business model with the Axway Managed and the customer managed, a large part, and I would say more than 80% today of the bookings, are linked to the Axway Managed equivalents, for the SBS part. So what does it mean?
It means first that the level of maintenance is very important within our revenue scope, and it's one-third, and we do not see on a very short term within the different regions where we do operate a change within that level of maintenance. The license is still a large part of our revenue, being 13% in 2024, as a way to estimate the current revenue on license. And the professional services, which is something I think very different in the way we do address our clients when we do compare Axway and SBS, is still a very important part. We are around EUR 100 million plus in term of services, and I do insist it's after the carve-out we did before transaction.
Meaning that these services are very critical to our banks as a client, to support that our product are very well implemented, and also within the complexity of the IT ecosystem of our clients. These services are critical to secure that our product are very well used. When we are looking at the life cycle for our clients, when they launch core banking replacement or a lending in term of domain replacement or new offering to the market, usually it's taking more time in term of implementation. Core banking could take between eighteen months to three years of implementation. Behind this, this mean that we're gonna stay with this client for the next ten, fifteen years. Services supporting that positioning long term with the client is very critical.
So you can see also that subscription is becoming and is important in the business mix and growing. But I do repeat myself, large part of this subscription is SBS Managed, meaning that it's taking time in term of revenue recognition to receive all the benefit from that movement, which did start the last three, four years already. Looking at the portfolio much more in detail and also to compare with the way Axway did build that successful journey until now, it has been a mix between several acquisition, bringing a client base, which is very important, but also bringing a lot more knowledge, because within the banking industry, the localization impact is very important. So meaning that we cannot arrive and suddenly consider that we are localized for a new country.
So that experience has been acquired, of course, internally, but by this different acquisition within the UK markets and especially around the mortgages within Africa with the acquisition of Delta, where we did multiply by three the client base. Also with SAB, with a leadership position in France, and Caden with us 10 years ago, giving us a strong positioning within the Benelux markets. So this is the part which did give us that client base and the knowledge being able to operate, and on the other side, giving us also first the ability to invest in more what we call modular products. So we are public cloud, SaaS by design, and with the ability to leverage all the capabilities from the cloud with microservices.
And we can use that client base, which is very strong, to progressively converge and bringing all of these new features to address the needs for the future. You gave and in the introduction two key messages saying that they are the first proof of this new product reaching their targets and reaching the first clients. So of course, we did use our existing client base to give the proof that these products were well prepared for the future on the regulatory reporting and on the new digital core, which is only microservices composable-based for SaaS in the future. But also this is now giving us the opportunity to prepare to address also clients which are not part of our existing client base.
Okay. Thanks, Eric, for the detail on SBS, and hopefully through that, you started hearing a lot of commonalities about the way we've. I've talked to you about the Axway business, with the Axway team for years. And now you're hearing about the SBS business, but you could really see why it was interesting for us to do this acquisition and bring these two companies together. Because it's even though the banking applications business and the infrastructure business is of a different variety, and the buyers are often different departments within the organization, you have a very similar product strategy, I would call it, where the products are very customer-centric. You have to serve your customers well. These are enterprises that are relying on your tech.
It has to work, it has to work securely, and in return, these customers will be with you for ten plus years. And so building a culture where the employees are thinking about the experience of the customers every day is a critical part of both companies and their journey, and so things like NPS, NPS are critical for both companies. And the way we look at the portfolio is really critical. If you've been with the Axway story for a while, you've heard us move from talking about Axway as a group to Axway as a portfolio company. Why? Because what I realized over the years is each of our portfolio products serves a customer use case and needs, and we've got to be strong in each of these products, in the value we serve and also in our competitive position.
And we've been made in Axway through a combination of primarily acquisitions, but also some internally built technology. And if you look inside the SBS business, we were finding the same. Through a combination of acquisitions and internal development, has built out the portfolio for which they serve the variety of customers. And now it's the job for the group to really make sure we're focusing our R&D for delivering the value with the products to the customers, and having a very efficient sales and marketing team to go after all the business we could get in the market, but also to do it in a very cost efficient way.
Having the teams engaged, on the Axway scope, we've talked about the employee engagement scores and the surveys we use to get the feedback from our employee set, and taking that information to try to build the place of Axway, where everybody wants to be. Clearly that same methodology and thinking needs to come across in SBS, and it was really pleasant to hear. They use a methodology, Great Place to Work, to capture some of that feedback. We'll try to harmonize and really build a machine out of getting the feedback from our employees about their experience working for a company, and making sure on both sides we have engaged employees.
Because every survey we've looked at and every article I've read continues to confirm if your team is engaged, it has a much better experience for your customers and much better performance as a group, and so the principles and baselines of both companies were quite similar. The way we look at the products and being there for the long term is quite similar, and the size and the target for the customers is quite similar. We just have a different offering and a different buyer on both sides, so it was a natural fit, especially both coming out of Sopra Steria at one point, Axway spinning out in 2011, and SBS now spinning out through this acquisition, and so today you probably saw one little line in the press release that is helping me and my communications.
When we launched this, we talked about a software house and building a software house. But it was quite difficult to explain because Axway was the buyer, and then SBS was the brand underneath. Now, today, we've started the first part of the process, and we have filed to have extraordinary general assembly in December to change the group name to 74Software, and we'll do this in December. This is really kind of going back. I've gotten some good questions of really what that means. It's going back to the origins of both company. So, Department 74, Savoie, if my French is good enough for some of you, is the location in France, in Annecy, where both companies, including Sopra Steria, all began their journey.
It's a bit of a throwback to the origin of both companies and where we came from, but also the culture that we've brought forward in both companies of really being employee-centric, being with our customers for the long term, and having the long-term relationship in mind, not going through the machinations of a lot of our competitors and their changing shareholder structures often. It's remembering where we came from and where we're trying to go. That allows us now with what we were calling the software house, and now give it a name, 74Software, and we'll be changing our ticker in December with that as well, assuming we get all approvals. That will allow us to talk about the great brands of Axway and the great brands of SBS.
So you'll still hear us using both brand names, SBS and Axway. The teams will be organized as such because that's who our customers know us for, and we don't want to lose twenty plus years on both sides of that type of awareness, and take this group forward to accomplish the things that we're forecasting here on the next slide. As part of the roadshow and in some of the prospectus and other documents, this was the early indication of where we see bringing together the two companies and to start harmonizing the way we run both companies. It should allow us to grow nicely the overall business.
You see, coming from where we are today to approximately EUR 700 million is our first indication of where we see revenue landing for twenty twenty-five in a 14%-16% profit on operating activities. But just as important, with the way we've structured this deal, free cash flow needs to continue to grow coming out of the combined entity to help us de-lever the business, and we're looking to bring our leverage ratio down by the end of 2025 below two times. We approach closer to three times leverage as we finance the deal, the acquisition, but we should see the leverage ratio for year-end end up somewhere between two and a half and three.
So we've already started to have a relaxation of the leverage being up around three, coming down a bit, and we look forward to seeing that continue to drop in 2025. As we push towards 2027, we should be in a position with a leverage ratio below one and our free cash flow getting back towards about 15% of our revenues. And we'd like to see our profit on operating activity by 2027, around 17% or greater, approaching 20% as quick as possible. Clearly, if we have the opportunity through good revenue growth coupled with good expense management, to get to 20% sooner than 2028, we will.
We'll look for every opportunity to do so, but you can see a nice measured trend for the ambitions we have of the combined business. And we'll do this as a group with the same ambitions I've always talked about for the shareholder base and for the customers and employees. So simply, we have three constituents that we're trying to manage to serve well, and we believe we put together a group to continue to do so. It was a breath of fresh air when we were going through the due diligence and meeting the teams.
For me to get to know the leadership team that Eric has built underneath him and Eric himself, it was really aligned with what we've tried to build here in Axway over the past several years, where we're focusing on the customers and delivering a good experience, and making sure we do that every day. We put in place a GM model we've talked about to really push down the portfolio owner of the product to be aligned with their customers, and Eric's started that journey at the beginning of this year and is really pushing hard into the same model, so that it's great to see that we're building an organization to manage the portfolio with the leader clearly accountable to delivering that experience for the customers.
And if we're doing the job well for our customers, the return should be a great place to work for our employees, and they should be also aligned with delivering that value to the customer and take a lot of pride in it. And if we do both of those well, we should be able to deliver the value you would expect of such an organization as a shareholder. And on the capital allocation, we haven't talked about much, our capital allocation strategy and priorities, but we'll continue to slowly introduce it. And as I said, we will focus on deleveraging the business quickly. We pushed a bit high-end this year to finance acquisition, and we'll look to bring that down by the end of 2025.
And we'll return to a dividend as soon as it makes sense, and if we have no other logical priorities with the capital we generate out of the entity, then we'll look to return the dividends, and we will continue to look at regularly buying back shares. Currently, we're doing it to serve the share plans that we distribute to our employees, but we'll continue to evaluate and build a structured model that makes sense, and we may start in the coming years if it makes sense, if the shares are undervalued, to look at that as another option to give value back to the shareholders. So we're trying to balance all three of these well.
It's always a difficult challenge, but the mindset is there, and we have it from top to bottom of the company, this mindset. So it's so far working out. And with that, operator and Arthur, I'll open the lines up for questions, so I'll let you take it away, and Eric and I are here answering questions you may have.
Thank you. Ladies and gentlemen, if you would like to ask a question over the conference call, please signal by pressing star one on your telephone keypads. That is star one for questions. And first up, we have Erik Karlsson from CapeView Capital. Please go ahead.
Thanks for taking my question. I want to talk a little bit about the financial leverage and free cash flow generation. I think at the first half, you had EUR 71 million of net debt, and then in Q3, it's EUR 236 million. So can I just ask if all the money has now been paid for SBS, so that's no more outflows? Because it only went up with EUR 165 million; I would have expected it to be a bit more. Was the cash flow generation very strong during Q3? If you could just help me understand that, that'd be helpful. And then also Q4, anything specific we should think about with regards to free cash flow generation here in the next few months?
Yeah, so we reported the net debt of EUR 230-EUR 236 for the first nine months, and just, at least what I'm looking at, we'll end up in that range for the full year, which is, as you were indicating, a little better than expected. So just through the mechanics of the deal, we ended up having a little less outflow upfront of cash, so we were able to protect a little cash. Our net debt should be a little less than we were estimating for the year-end, which is a positive way to start, for sure. And we were.
If you remember right, Axway was coming back on the cash flow generation, and the hockey stick of the move to the subscription was starting to turn a bit in our favor, so we're generating better on the Axway side this year than we did in prior years. Then on the SBS side, so far we anticipated a little worse cash activity, more outflows in the second half when we acquired, and at this point, for one month, it hasn't been as strong as planned, and we're not forecasting as strong as planned. We were a little conservative in the forecast and the guidance, and it looks like we'll be able to be a little more on the positive side of the equation.
That's great. So just to get around the same-
Yeah, Eric, you had one other question I didn't answer. All the cash has been paid to Sopra.
Very clear. Thank you. And, and for the full year, around the same level of net debt by and large?
Correct. If you, I don't believe you've heard me talk about this before, but in the Axway scope, but I'm seeing a bit similar in the SBS scope, a lot of the cash gets generated in the first half, and then Q3 and Q4 is a bit more flat. And so where we're at at the end of Q3, roughly will be where we're at for the end of the full year.
Great. Thank you so much.
Yeah.
Thank you, and there are currently no further questions over the conference call, so I'd like to hand the call back over for questions via the webcast.
So I have a question on the chat. Can you come back on your name change announcement and explain what will be the role of the new structure? It's from Thibault Masset, 92 Capital.
Sure. So we have to go through the formalities and the process for the name change. So the bulletin was filed yesterday and given the process to have the general assembly to change the name. But what we've created, the software house concept that we've talked about, we're bringing together very strong brands, and the brands have a place in the market and the business, the SBS known for the banking applications, Axway known for the integration technologies. We don't want to lose that, and we don't want to, for example, taint the SBS by calling it Axway and changing the SBS to Axway 'cause Axway was an acquirer.
But to really, to keep the brand awareness in the marketplace, and so to do so and to make some logical sense of the grouping, the public company, the investor-facing, branding, the way we are talking about the business and the market as a group will be 74Software. That is the ultimate parent company, the one that will be listed in the exchange. Now, it will have the great brands underneath of SBS and Axway, and a lot of customers will continue to know us by those names.
But the company overall will be at the top level, 74Software, and that will allow us to show these brands not only of Axway and SBS, but in the future, if we continued down this path and used M&A as a tool to grow the business, if we had another material acquisition that had established a very strong brand awareness in the market, it will allow us to welcome them into the group and be able to protect their branding. So a good analogy to this, if you look at what Salesforce is doing in the market. Salesforce, we all know, is a great CRM and the hub of all the business. But over the years, they've bought some really good brands and companies like Mulesoft or Tableau.
When you go look at the website and you look at Mulesoft, that's all the branding, coloring, and everything that you would know as a Mulesoft customer, hopefully to soon to be an Axway customer, but a Mulesoft customer and or Tableau, you know, as a Tableau customer, but they're all owned at the group level by Salesforce. Salesforce existed and was strong in their own right, and so they've just added the good brands underneath. Axway and SBS were peers, and we took the opportunity to put this new entity or naming on top of it, so we're allowed to add other brands and not try to explain why seventy-four Software is now SBS or something like that. So hopefully that's clear for you.
It is. Thanks. Another question from Jeremy please of H2O Asset Management: Can you share with us the organic growth at SBS year to date? September was very strong, but what is the underlying trend so far this year?
So no, we can't share the organic growth year to date, and we'll come back at year-end and try to give some indication of how full year 2024 looked. But the carve-out and the allocation of the revenue and the contracts and everything has been a bit complex, and we're still shaking it out and making sure we have the good figures to report. So we just have the one month at the moment 'cause we're having to rebuild 2023 and 2024 to give you the organic growth. But I will let Eric make some comments on the trends in the business and what he's seeing and how the business is performed year to date and what he's seeing going forward.
Yeah. The trend is more looking at the 3-4% when we are looking at that industry at the moment. And we all know that the macroeconomic situation is shifting a bit, the decision dates and the willingness for them to largely transform their IT landscape. So I think the current trend is this one, and as I said also during the speech, many of our deals are generating recognized revenue coming in the next 12 to 18 months. So that's the current trend we see to the market.
And one thing, and I may be repeating something Eric said, but it's an important point. When Axway, the Axway business and the Axway scope, when it makes a sale, the sales cycle is about six to nine months, and the installation by the customer of the technology is a few months after. It's a big project, but it's not at the heart of the business. The banking application's a longer sales cycle, and it takes longer to fully implement, especially a core banking application. And so a lot of the sales, as Eric just mentioned, that they're making today and that we'll talk about in the full year results on bookings and how the bookings look, will be revenue over the coming years. And so they're constantly building the future by what they're doing in the sales effort today.
And, a bit of the mix, if you study both of the business models, the infrastructure market needs a higher sales and marketing spend than the banking applications. The customers are less. There's less core banks than there are people that need infrastructure technology, and the average selling price is much higher on the core banking systems. And so the way they go to market and sell, and they build their sales structure is definitely different, and we have to respect that when we communicate and the way we look at the business. So just trying to point out how you could see the two different businesses.
We have a question on the conference call.
Yeah.
From Erik Karlsson from Capeview Capital . Please go ahead.
Thanks for taking another question. Just on SBS, Eric, it would be great if you could clarify. Did I understand you right, that you see some hesitancy and, like, deals moving to the right from your customers?
If I understood the question, Eric, correctly, you're asking, are we seeing some delays in the closing of deals in the banking market?
Yes.
We currently see that the different programs and transformation programs are not stopped, but the way the decisions are taken at the moment, there are some slippage, depending on the region and depending on the domain. The auto finance business, and especially for U.K. and the U.S., and the big OEMs, are again accelerating their transformation program to adapt themselves to the market. When we are looking at the Western Europe area, of course, we see that these different transformation still moving, but there are some slippage in the decision. So, we are not losing deals when I'm saying that, but that timeline is a bit longer than what we have seen in the past.
But currently, as a group, we haven't changed the forecasted guidance or what we've showed. So even with that momentum, that's manageable, and it doesn't appear to be the risk to the guidance in the market. And one point on the slide. I'll go back to the slide here on the guidance. We're showing a 2%-4% organic growth rate. Well, if you remember, I've been talking in the past on the Axway side that we should expect a 1%-3% annual growth rate. When you look at our business, our customer base, and what's there for the portfolio we have, we saw a little bit higher run rate, something more on the 2-5 range, coming from the banking application business.
Combined, that gives us 2-4% organic growth that if everything were equal year over year, we should be able to see in the market. We may have spikes by one deal or another, or revenue recognition topics, but we should be able to hopefully continue to predict that level of organic growth, unless there's some big market disruption, which we're not seeing at the moment.
Thank you so much.
Yeah.
I've got a new question on the chat-
Yeah
... from Rafael Lucet at Moneta Asset Management. "Good morning. Can you comment on your pipeline for Q4 for both Axway and SBS? Many software companies experience a slowdown, but you may have your own dynamics. Thank you.
Both companies, a lot of the business they do is with the existing base of customers. And, for a core banking application or an infrastructure application, what's nice about both of these markets is sometimes they're countercyclical. They're not always a nice, shiny tool that's come on the market, and we gotta play with, but it's a core part of them running their business. So when companies are focused back on the core value they provide to their customers and trying to cut costs in the business to make sure they're resilient, that often doesn't slow down the purchasing cycle of a core banking application or infrastructure project. I just sat through the QBR, on the Axway side, and Eric sat through on the SBS side.
For the Axway side, from the summary I've received, the pipeline's there to do the Q4 that's forecasted to meet the guidance. Eric, you want to make a comment on this?
It's exactly the same. We have the pipeline at the moment to deliver the Q4 bookings, and we do not see a major disruption within that pipeline for Q4.
Fantastic. Other questions, Arthur?
Nope. Nothing on the chat. Operator, can you confirm we are done with phone questions, too?
We currently have no further telephone questions.
Okay, with that, I want to thank you all for joining and for your questions. Like I said, we wanted to use this, a bit of a special event to just give you better exposure to the SBS business and Eric Berry, and to let you hear from him. We look forward to coming back to you at the full year with more of a traditional presentation. And as we go into 2025, we'll be looking at this format if we start doing more quarterly calls and come back to you, after we evaluate the pros and cons there.
We'll be, as we talked about, looking to do a Capital Markets Day to go deeper into both businesses and help you see why we brought these together and the opportunities in front of us, either at the end of Q1, or if the calendar and timing and things are better in Q2, we may move it to Q2, just depending on availability of everybody to get the message out. We look forward to both coming to you for a full year and a capital markets day in the coming months. Thank you all for joining.