Earnings Call: Q3 2021

Oct 14, 2021

Ladies and gentlemen, welcome to Temenos Q3 2021 Results Conference Call and Live Webcast. I'm Joelle, the Chorus Call operator. I would like to remind you that all participants will be in listen only mode and the conference is being recorded. The presentation will be followed by a Q and A session. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Max Schwab, CEO. Please go ahead, sir. Thank you, operator. Good afternoon, and thank you for joining us today. I hope you've been able to access our results presentation on our Web I will start with a review of our Q3 performance. Then I will hand over to Takis to walk through the financials before giving some concluding remarks. Starting on Slide 7, we saw strong momentum in our business this quarter. The environment continues to improve and more banks are pushing ahead with IT transformation. This is reflected in our license and SaaS, which both performed strongly in Q3. SaaS accelerated to 30% Growth in the quarter and license were up 20%. We see demand increasing across all customer tiers and products. Total booking grew at a healthy 19% in the quarter, which is adding to our backlog and increasing our recurring revenue visibility. This is a key metric for tracking the growth in the business overall as it combines the acceleration in the SaaS alongside the ongoing demand for our traditional license business. The growth in sales and maintenance is also driving our ARR, which was up 9% in the quarter. EBIT grew 7%, driving a strong operating and free cash flow performance. We are seeing a rapid evolution of SaaS and clouds, and we are going through a very exciting phase in our growth. Competition for talent is intense, and we must ensure we can attract and retain the right skills and talent. This quarter, we've made some investments to achieve this, and Takis will talk more about this later in the call. Moving to Slide 8. We generated $10,700,000 of SaaS ACV this quarter. In any one quarter, this number is driven by a combination of new bookings and volume growth in existing customers. In Q3, the vast majority of growth came from new bookings. And in fact, this was more than double the amount from last year. We saw very exciting names. And I hope that those new names will also drive increased consumption in the future, of course. The U. S. Was the largest contributor to ACV And Europe was the 2nd largest, and we expect a very strong year with our SaaS ACV growing between 50% to 60% for the full year. Turning to Slide 9. Total bookings this quarter grew 19% with strong demand across all tiers and products. We generated $153,000,000 of total bookings and year to date our total bookings are up 64% versus 2020 and also up very importantly on 2019 as we continue to take market share. The growth was across license and SaaS as well as an increase in the average tenure compared to 2020. On Slide 10, the sales environment improved through the quarter in all regions. We had 18 new clients, which was fairly evenly split across license and SaaS deals. The U. S. Is still our largest contributor to total software licensing. It has a good mix also of license and size, This was some very exciting new names signed in the quarter. Europe had a sequential improvement in sales, and we expect the regions to accelerate further in the 4th quarter across both license and SaaS. We also had a good performance in Asia with 2 Tier 1 banks extending the relationship with us. And pipeline activity with Tier 1 and Tier 2 banks has clearly picked up across most regions, but in particular in the U. S, where we are actively engaged in multiple large deals opportunities. This is very exciting times for us in the U. S. On Slide 11, I'd like to take a minute to discuss an interesting trend we've seen over the last few months. We've announced several exciting partnerships and deals with operators in the BaaS market. We announced 2 partnerships with BaaS Providers in the quarter to enter the BaaS market in the U. S. And in Europe. MBank in the U. S. Offers services to credit unions and which is an estimated market Of 3,600,000,000 and Vodenu is targeting Europe and bus market an estimated around 3,000,000,000 markets annually. We also signed a key deal with Green Dot in the U. S. To power its direct digital bank and banking platform services. Interestingly, We competed against some of the largest U. S. Incumbent vendors and some several and several new vendors on this deal. And the bank chose terminals because of our hyper efficient, highly scalable and secure open cloud capabilities. And obviously, we've made significant investment over the last few years in that respect. I believe the demand for BEST will only increase going forward as financial institutions look to access the digital transformation And Fintechs and Ecommerce Platform look to embed banking services into the ecosystems. This is, I would say, a very exciting and an accelerating trend that is expanding our addressable market. It is great that our technology is at the forefront of this. And Thermos is extremely well positioned to capture this opportunity because of our market leadership, because of our credibility and the strength of our solution. Moving to Slide 12. We are making good progress with the both Partnerships, strategic partnerships that we've announced at the start of the year. With Salesforce, we've completed the integration of our product For retail, we are working now on the business and the wealth version of the integrated product. And we've seen already some strong interest in the U. S. And globally across all those three business lines. Then secondly, on the partnership with DXC, which continues to grow as well. We are engaging with a number of DXC's customers on core banking replacement, and this is supporting the acceleration of our Tier 1 and Tier 2 I'd like to spend a minute on our competitive positioning. Temenos is Uniquely placed to meet the demands of our clients across all tiers and business models. We have a unique value proposition as banking is all we do, 100% focused. We have deep domain expertise unmatched in our markets. And all our R and D and innovation is customer centric, using our domain expertise to meet the demands of our customers today and in the future. We combined our leading functionality with extensive localization capabilities for our clients in 150 countries. We have a game changing technology. Our platforms are cloud native, cloud agnostic, And that gives our clients efficiency, scalability and freedom to choose how and where they want to run our software. Our technology is API first with AI embedded across the platform. And our packaged products, which a single code base means that all our clients are running on the same platform, and they can All benefit from our innovation in R and D, which is the highest in the industry. We have scaled to our extensive ecosystem of technology and implementation partners. Now On Slide 14, I'll continue a little bit on our unique value proposition, which give us a winning combination of game changing technology and rich, highly localized package functionality. What is important is that our investments are not diluted across overlapping products. We have 1 core banking platform, 1 digital banking platform and one code base. So when we invest All our clients can take advantage of this. These are strengths our competitors cannot match. With a focus on technology toolkits and highly customer solution for each IndiML client, their model is not scalable. When clients choose Telenor's, our clients know they are working with the market leader and they know we can provide the business benefit We are looking forward selecting a vendor. And let me give you some example of those business benefits we provide to our customers. Like Paper, Paper had its fastest product launch ever using our Themis platform. In the U. S, the Challenger Bank Varo estimated that it is able to operate at a 25 Percent cost of an incumbent bank using our technology. And now Green Dot, as I said before, Selecting Theranos because of our hyper efficient, highly scalable and highly secure open cloud capabilities. So, these business benefits are only posted because Of our unique approach, package upgradable software, 1 single code, built using deep domain expertise and obviously our passion and relentless focus on innovation. Having said that, I will now hand over to Takis to go through the numbers for the quarter. Yes. Thank you, Max, and hello everyone from my side as well. Starting on Slide 16, I'll start with an overview of the quarterly financial performance. All figures are in constant currency unless otherwise stated. Our SaaS revenue accelerated to 30% growth in the quarter With now several quarters of strong ACV growth starting to be reflected in the P and L. We also had Strong license growth with increased activity across all tiers, and these together drove total software licensing growth of 23%. Maintenance grew 3% as expected, giving total revenue growth of 9%. EBIT grew 7% and we achieved an EBIT margin of 37.2%, down 1 percentage points. You should bear in mind that the Q3 'twenty cost base has the full run rate benefit of cost savings from our 2020 restructuring program. Our cash generation remains strong with Operating cash flow up 7% to €68,000,000 and free cash flow up 19% to €48,000,000 DSOs ended the quarter at 1:11 days and we expect DSOs to be around 105 days by year end. Our net debt moved below €1,000,000,000 and our leverage stood at 2.2 times, sequentially down from 2.3 times. We now expect our leverage to be at around 2 times by year end. Moving to Slide 17, our strong ACV growth The last few quarters drove an acceleration of SaaS revenue growth to 30%. I expect SaaS revenue to increase by about $3,000,000 in Q4. I was particularly pleased with the good license growth of 20% this quarter, driving total software licensing growth of 23%. Maintenance continues to recover as expected, growing 3% in the quarter. We expect maintenance growth to accelerate into Q4 to give full year maintenance growth of around 4%, driven by the stronger license growth in the first half of the year. After 2021, we expect our maintenance growth to accelerate in 2022 and beyond as licenses continue to grow. Service revenues were down 5% in a seasonally slow quarter. I expect growth to considerably accelerate in Q4 with service revenues growing around 3% for the full year. Looking at the cost base, our operating costs were up 10% year on year. As expected, the cost base in H2 is catching up with the continuous hiring across the business, and we would expect our 2021 While travel costs are lower than forecast at the start of the year, Those savings are offset by competition for talent in some areas of the business. Next on Slide 18, we have like for like revenues and costs Adjusting for the impact of M and A and FX. The Q3 figures are all organic and therefore in line with our constant currency growth rates. In terms of EBIT, the euro weakened against the dollar and the sterling and the Swiss strengthened against the dollar creating an EBIT headwind of around 2,000,000. We have also factored in the €2,000,000 headwind on EBIT guidance for the full year. Turning to Slide 19, net profit grew 1% in the quarter, largely due to the higher tax rate. EPS grew 3%. Our tax rate was 17.2% for the And we continue to guide for 2021 tax rate at 16% to 18%. Now moving to Slide 20. Our DSOs reached 11 days at the end of the quarter, flat year on year. As Q3 is normally a back end loaded Quarter due to summer holidays, this usually results in a seasonal sequential uptick in DSOs as also seen last year. We still expect DSOs to reduce to around 105 days by year end. Beyond 2021, we expect DSOs continue on their downward trend towards 85 days by 2025, driven by continued improvement in licenses and services, cash collection And an increasing contribution from SAAS in the P and L, which typically has DSOs more in line with maintenance. On Slide 21, Our Q3 'twenty one LTM cash conversion was 113%, well above our target of converting at least 100% of IFRS EBITDA into operating cash. We expect our cash conversion to be at least 100% for 2021, driven by strong growth in recurring revenue, which we have continued to deliver for at least a few quarters now. Next on Slide 22, we show the key changes to the Group liquidity since Q2 'twenty one. We generated €68,000,000 of operating cash. Other movements to highlight include the completion of our share buyback, which ended in August And the net outflow of borrowings of 28,000,000. Our cash on balance sheet at the end of the quarter was 85,000,000 With our net leverage reaching 2.2 times, down from 2.3 times at the end of Q2. We expect our net leverage Moving to Slide 23. Our ARR continues to accelerate on the back of strong sales growth and on the recovery of our maintenance revenue with ARR reaching 9% growth in this quarter. ARR growth will continue to accelerate in the 4th As both SaaS growth and maintenance growth reached more normal levels. Our deferred revenue continues to grow nicely at 13% With strong advanced collections and growth in sales being the key drivers. Free cash flow was up 19% year on year to reach €40,000,000 And our net CapEx was €5,800,000 down €1,400,000 versus Q3 'twenty and still expected to be at 2020 levels for the full year assuming no further M and A. On Slide 24, I have kept this slide in here to remind you of the new KPIs we introduced in February, total bookings and ARR. I won't go over it again now, You can find tables in the appendix with SaaS, ACV, ARR, total bookings and free cash flow by quarter to help you track these numbers. Now on Slide 25, we have confirmed our non IFRS guidance for 2021. The guidance is in constant currencies and you can find the FX rate assumptions in the appendix. For ACV, we are guiding for 50% to 60% growth As we have seen strong growth in both new names and volume growth with a number of clients throughout 2021. For ARR, we guide for 10% to 15% growth, driven by committed sales revenue from the ACV We have booked and the reacceleration in our maintenance growth in Q4. We expect total software licensing growth 14% to 18% with continuous license growth as seen in the 1st three quarters and driven by the accelerating growth in SaaS. Total revenue growth is forecast at 8% to 10% with the impact of slower growth in maintenance and services on the back of lower license growth last year. We expect both of these to accelerate in Q4 and in 2022 and beyond. We are guiding for average growth of 12% to 14% to $360,000,000 to $367,000,000 including the $2,000,000 FX headwind on EBIT for the full year. This implies an EBIT margin expansion of 130 basis points from 35.8% to 37.1%. Under our definition of non IFRS, which we changed in January 2021 to bring us in line with our peers, we are now including IFRS 2 charges. There is a significant amount of volatility in these costs, including the share price and if and when individuals exercise their options. Our estimated IFRS 2 cost For the full year have increased from around €20,000,000 to an estimated €50,000,000 While the normal IFRS 2 run rate cost It's still estimated at around €20,000,000 to €25,000,000 The incremental portion is driven by 2 one off elements. Firstly, The introduction of a new one off LTIP program extended across an increased number of employees To align a broader segment of the middle and upper management with the overall company performance. Our company is going through a rapid evolution With significant changes around cloud across the organization, while the competition for talent in our sector has intensified. Our Board and Exco made the decision to give this one off grant to a large number of senior and middle management below Exco level to ensure we can attract and retain the necessary skills and talent to drive the growth of our business going forward. The second element Driving the increase of IFRS 2 costs is the alignment of outstanding years of existing L PIC programs with the new KPIs introduced in 2021 as voted on at the May 2021 AGM. Lastly, in terms of guidance, we have maintained our target of converting over 100% of EBITDA into operating cash and expect DSOs to reduce to around 1 or 5 days by year end. We expect the tax rate of 16% to 18% for 2021 And our net leverage to be around 2 times by the end of the year. On Slide 26, I'd like to reconfirm also our 2025 Targets which are presented which we presented at our Capital Markets Day in February. These targets are organic growth rates per annum. We expect total software licensing to grow 15% to 20%, and sales will clearly grow significantly faster at around 30% plus with licenses expected to grow at 10% plus per annum. This will drive total revenue growth of 10% to 15% per annum. We expect to expand the EBIT margin to around 41% by 2025, driven by strong growth in license and maintenance, Improving our SaaS gross margin and leveraging R and D and G and A, while still growing R and D on absolute basis by 7% to 8% per annum. We expect total bookings to grow 17% to 22% per annum with ARR to grow at least 15%. ARR in particular will drive free cash flow growth of at least 15% to reach more than €600,000,000 by 2025. And then finally on Slide 27. This is a slide we showed during the last couple of quarters, but I wanted to give a quick run through of our non IFRS EBIT and margin expansion in 2021. Our EBIT growth will be driven in particular by our growth in recurring revenues as well as licenses, While we continue to invest in R and D and sales and marketing and with greater variable cost accruals compared to 2020. As such, we expect to deliver an EBIT margin expansion of around 130 basis points in 2021. With that, I hand back to you, Max. Thank you, Takis. And so on Slide 29, in conclusion, we continued our strong momentum In the Q3, license and SaaS both performed strongly with SaaS revenue accelerating to 30% And licenses up 20%. Our total bookings continues to grow strongly, driving backlog and visibility, As does our ARR, our EBIT growth is driving our strong operating and free cash flow generation. And finally, we are going through a very exciting phase of growth, and I am confident to deliver our 20 I look forward to updating you on our Q4 results in February. So with that, operator, I'd like to open the call for Q and A. We will now begin the question and answer session. The first question comes from Laurent Dore from Kepler Cheuvreux, please go ahead. Good evening, Max and Tarkas. I have three questions on my side. The first Point is on the Green Dot deal. Seems quite an attractive deal. Could you elaborate a bit further With more details on this deal, the ramp up phase, I suppose the ACV will be impacted by this deal in Q4. And Any granularity on the size this deal could reach maybe 1 or 3 years from now? The second question, Takisimo, for you. You reconfirmed all your guidance. I was thinking about the licensing growth 14 to 18, why have you kept the low end of this guidance unchanged? Because it seems to imply More or less flattish license in the Q4. And final question is on the stock option you just This is correct. At the CMD, on the long run, you were expecting the charge to be free I think 3% to 3.5% of revenues With more fight for talents, is there a risk that this number may be adjusted Hi, Laurent. Thanks for the question. I'll take the first one. Yes, listen, Green Dot is a very exciting deal. It It's the Temoz Banking Cloud, so it is an ACV deal. It is a large deal. We signed it in Q3. So It will really start impacting if you own the P and L more towards 2022. But it's an exciting deal. What we are seeing in the markets with embedded finance and The ability to expand our market into different ecosystems and the ability for Thermos to be The technology to power this, I think that's very exciting. And the path Of traction and the speed at which we saw we are seeing this happening is very, very exciting. And I think we're extremely well positioned. We do want to be the de facto player and technology provider to those VaaS providers. You've seen with our end bank in the U. S. With that now. So they know we are selected, we are choose by Green Dot that has 33,000,000 customers, it's a very, very exciting company. So very pleased with the deal. And as I said, It's also that we were able again to show our value proposition, to show the business benefit we can bring to them, Again, some very established U. S. Incumbent vendors and also the traditional NIO vendor. So very pleased with this deal. Hi, Laurent. Let me take the other two questions. License growth, clearly, we're pleased that we have shown 20% again in Q3. We had Q1 and Q2 also good. Keep in mind, the comparison base gets So that's maybe one reason why we feel confident with the guidance as it And second is, we still have the largest traditionally the largest quarter ahead of us. As we mentioned in the past, we expect closure rates to be back at the pre COVID levels by the end of the year. So at this point in time, I think we feel confident with our guidance as it is out there. On your IFRS 2 costs, Clearly, we need to highlight that this is a one off, okay. Now, we have been investing across The organization in our talent pool in terms of salary increases, so this is all reflected in our cost base. From today's point of view, I think it's too early to come up with an IFRS 2 number for the next year. We'll inform in February. Maybe it's going to be slightly higher, a couple of basis points. We don't know at this point in time. But clearly, it will be not driven by this one off or only partially. So I think, Yes, even if we end up at 3% to 4% next year, but I think we'll see where we stand in February. I mean one of the reasons as we have mentioned is exactly what has happened this year. The share price recovered first, then it came back again. You really don't know what is happening. So we were constantly wrong even when we're estimating for ourselves The cost, but the run rate, I think that's the important one, the €20,000,000 to €25,000,000 still stands. Another €5,000,000 €6,000,000 for Q4. The next question comes from James Gutman from Barclays. Please go ahead. Good evening. Thank you. You talked about being engaged, I think, in multiple large deal opportunities in the U. S. I mean, we saw obviously a particularly big cloud vendor win in the U. S. Recently from, I guess, a complex domestic operation. When I think about the Customers that you target with your SaaS offering typically it's sort of well outside of that kind of Tier 1 category. So I was just wondering if you could help us there with, I guess, The evolution of the competitive situation with the native cloud vendors as we think about larger The second question, just I think there was in Q2 some discussion of A modest amount of slippage out of that quarter. And I was curious as to whether you closed those deals this quarter, if not, If that's been anticipated for the year and did you experience any further Superdigital on the license side? Thank you. Hi, James. Let me take the first one. Yes, we do see a large Amount of exciting opportunities in the U. S. Some of those During with from our partnership with DXC, some are just driven by Our own operation that we had there. And also, as I mentioned, we've got a particular focus on Global accounts and big banks, and we've got a team that is looking specifically after those accounts. Those are, I would say, Tier 1 to Tier 3 institutions. It's mainly, I would say, At the back end, that's the one to renovate, is it through microservices or line of business, But it is significant type of activities. Now to your question about the competitive landscape, I tried to explain during my presentation how we differentiate ourselves And why we win? We clearly don't win all the deals because there are some deals that if our model doesn't fit For those deals, we our goal is to provide a highly scalable model, which We can repeat, we invest massively and we can show very clear Business benefits to our banks, to our customers. And I tried to give some of that. We are not in the business of Building a tailored platform for a single bank account, that's not our business. That will never be our business. So there'd be cases where a bank will want to invest in something Very specific for them that they'll be able to tailor it made to evolve it in the very specific requirements. That's not Pembina's. Pembina's is about heavy investing innovation, leading innovation, Brings value. And that's why also you see Telnos running at high margins. We are able to sell that value to the customer. They see the benefit of what we bring to them when a borrower Is able to operate at 25 percent of the cost of the incumbent vendors, they see the benefit of what we can bring to them. And that's our model. So we will not renew the deals because some of the deals will not be for us. Hi, James. Let me take the second one. The one example given at the time of Q2 Results was just to show the impact one deal can have on growth rates. So Can't really comment on this specifically other than not much happened with the legal team. So it's Expected to close now shortly, so let's say October or November. But clearly, as we see from our Tier 1 Total software license share, we had some very good older deals closed in Q3. So yes, So still the one ahead and clearly part of our full year forecast. Thank you, Ben. Very helpful. The next question comes from Chandra Streeraman from Stifel. Please go ahead. Yes. Good evening, Max. Good evening, Takis. Maybe a couple of questions from my side. So when I look at Europe, it still seems to be very Q4 loaded like 2020. Can you give some color on what's driving this? You have been quite positive in terms of the demand bouncing back in Europe for a while now. What are the key hurdles you see here for things not to have improved already? And maybe a very quick question in terms of The sales and marketing costs, you have mentioned that you're seeing some increased competition there. How should we see this evolving as licenses continue to progress as you expect? Thanks. Hi, Chandra. Let me take the first one. So listen, Europe, we saw A sequential improvement compared to Q2 to Q3. Clearly, the largest quarter is Q4. Europe is pretty much closed for most of the Q3. The summer is long in Europe, and especially after COVID times, people are taking time off and that was The case, clearly. But I think as well what probably you don't fully appreciate is But we do also see quite some traction in our SaaS business in Europe. And when you look at our performance in Europe from a bookings point of view, where you take into account, if shown, the The total contract value from our societies, then the picture is totally different. And then you will see Europe in Q3 being strongly on last year. So I think this is a little bit So what is not that what you cannot see is the fact that we see more and more traction In our SaaS business coming from Europe, clearly U. S. Continues to lead the way, but second is Europe, and we see Increased activity from our SaaS business in Europe and hence when you look at the total contract value of both the license And the SaaS then Europe has clearly strongly rebounded in Q3 in that respect. Maybe on, Sandler, the sales and marketing costs. I think as we explained at the start of the year, the CMD Sales and marketing will grow faster than the revenue this year, but also the future years. And clearly, this is something we not only started this year, but if you remember, we were already making Selective investments in both R and D and sales and marketing on the back end of 2020. So this is I think something which is going to increase. Now, as we mentioned, this loyalty program clearly And also some sales people benefiting from this, but this is just one element. We do regular Salary benchmarking reviews, but this is something we saw or we predicted in our forecast. So I would say no change expected from what we said at the start of the year. Great. Thank you. The next question comes from Knut Wohler from Baader Bank. Please go ahead. Yes. Thank you. Also a couple of questions from my side. First, on the SaaS ACV, which was basically down year over year, Against the back of tough comps, still it was, I think, the weakest SARS ACV now that you delivered in the last five quarters. So I'm trying to get a better feeling for the momentum that you're seeing on the SaaS side, Which I don't see reflected in the SaaS ACV and would appreciate here some more color. And then secondly, on the cash flow. It looks like the cash flow in Q3 has been particularly driven by trade payables, while receivables were a headwind. And here particularly looking at receivables, That's been up sequentially. Can you give here some ideas what drove the receivables up in the Q3? Thank you. Hi, Timna. Let me take the first one. Listen, our SaaS ACV business It's very, very strong. And there is lots of activity, very strong pipeline. Now, When you look at the ACV for this quarter, the element I'll try to highlight is Within every quarter, you will have an amount of consumption. And this is difficult to predict when A second customer will require increased consumption. And clearly, this year, This quarter, sorry, we had minimal from that. So if you look at and that's why for me, Ultimately, this is a very positive KPIs. When you look at the incremental The ACV Discourse, almost all of it is new business activity, which will generate in the future Increased consumption. So yes, it is below a year ago, that's for sure. But this is just new business activity, new logos that would hopefully be successful customers that will Increased consumption and so on. So for me, I'm very pleased with the delivery of what we signed on the ECB side in Q3. It's lots of new logos, very exciting new logos, exciting names that hopefully will generate much more consumption in the future. Hi, Knoep. Let me take the cash flow question. So yes, we had an outflow of around €26,000,000 on the receivables. So clearly, we had, as I mentioned, a very back end loaded quarter. So quite a number of deals Signed very late and basically the cash will come in Q4. This is also visible with The DSO number moving sequentially up. On the payables, I think, if you go back into the quarters And clearly, we had some positive impact there of payments we had done to suppliers Basically prepayments and therefore this was a positive impact. But clearly over the Full year, we always expected more quarterly specific variations to normalize. Other than the receivable with the DSO increase with the traditionally No back end loaded quarter, nothing specific to mention here. Excellent. Thank you. The next question comes from Stacy Pollard from JPMorgan. Please go ahead. Hi, thanks. Just a couple of catch up questions. First of all, what happened in services again? Can you maybe speak about that a bit more And what we should expect in services going forward? How much is being taken by 3rd parties now? And does that shift continue? And second question, just kind of a follow-up around the ARR and the 9% looks a little bit below the 10% to 15% target for the full year. Is that catch up mainly coming from the higher signings in Q4? Is that the way we should think about it? Stacy, let me take those. Maybe first on the ARR. Clearly ARR, which is Driven by maintenance and sales growth, we'll see an acceleration, a pretty considerable acceleration in both maintenance And chart growth in Q4, which will basically going to drive the AR growth into the 10% to 15% range as we have guided. So I think nothing specific to read into that. And Given the visibility we have, this is something we're pretty happy to forecast. So yes, ARR growth will materially accelerate in Q4 as well maintenance and sales. On the services, I think there are 2 elements to consider. 1 is what we have seen in terms of the revenue impact. Clearly, we had A particularly high number of partner implementation in Q3, which is something It's always difficult to time. From the current point of view, we would see Q4, let's say, With the normal share of partner implementation, so material growth acceleration in service revenues in Q4 To arrive around the 3% mark for the full year. And then the other element is clearly having Also an impact on profitability was more that we have been making some selective Investments into our partner model, especially around governance, customer success, which is also, I mean, It's still small, having a small impact on the margin, but this clearly should help us drive license growth In 2022 and beyond and also become more efficient in terms of the implementation time frame for future projects. The next question comes from Michael Sood from Vontopen. Please go ahead. Yes. Good evening, gentlemen. Two questions also from me. The first one is regarding the additional Board members That you announced 2 additions, which look very good. The question is whether they are going to replace other Board members Although whether you're expanding the board and if you're expanding wider seminars feel it needs to expand the board. Second question is regarding your view on your overall pipeline. How is that Developing, how would you qualify your pipeline of business now versus a quarter ago and a year ago? Thank you. Hi, Michael. So yes, we are going to Board members, which I have, I would say, quite a probably a different profile, which will very nicely complement, I would say the our current border, it is about expanding it. It is about, as I said, Three new type of Ideas, new interest into that border. And I think it's going to be very, very interesting to have them as We are also obviously nicely moving to a more diversified with Now 3 female at the Board, so around 30% will be driven by female at the Board, which I think is greater. So it is about expanding, if you want, the Board with new and very interesting backgrounds. On the question about the pipeline, listen, clearly, I would say, the U. S. Is where we see the most active Because of, I would say, some very large deals that are progressing well and which said it's very, very exciting. And so the U. S. Is clear, we are making now significant inroads in the U. S. And as you've seen, now it's now quite a few quarters that The U. S. Is the largest contributor to total software licensing. And we see both, I would say from license and SARS, I would say the rest of the regions Clearly, coming back from the COVID crisis, and we see both, I would say, Asia Starting as well, I mentioned we had 2 very interesting Tier 1 deals that extended the footprint with Temenos this quarter. But there is more activity happening across Asia, also in Australia, which has been A very important market for us in the past and then during COVID, it slowed down and now we see increased activity again. So clearly, Asia as well is coming back. I mentioned Europe, obviously, Europe where That has been the regions which has been the most impacted and that has been slow the slowest to come back compared to I understand the U. S. But there as well we are starting to see increased activities. There is a need of digitalization across the globe And we see both traction on the license side, but as well on the ACV. So clearly a picture which is clearly Improving compared to last year, a picture that is improving compared to a month ago. So we see Continuous improvement in the environment, which is, I will say, giving us ultimately the confidence for the medium term. Excellent. Thank you very much. The next question comes from Dan Marco Kond from Deutsche Bank Hi there. Good evening, Max and Patis. Thanks for taking my questions. I have about 3 or 4. So the first one is just a quick one around whether the one off LTIP is truly a one off and not just recurring cost I might come back next year. The second question is with regards to the lower SaaS ACV, I know you've explained this My question is, is there a risk that to continue to grow ACV SaaS, you would always need to basically increase new winnings? And given that the banking environment is quite conservative with regards to cloud, it will be tricky to have this basically grow sustainably from only Fintechs and Challenger Banks in the life, Especially as consumption is unpredictable. I'm just trying to understand what's the strategy and how you guys think of guiding for SaaS A to be? The third question is, Rafi, I know you've given some metrics around the exchange rates, but could you perhaps quantify what, In percentage terms, what is the FX impact you expect both on TSL and revenues for the full year? And the 4th question is just around DXC. I was wondering if you could give any update then, a bit more granular detail. For example, if you've been invited to 10 RFPs or Or if it's just still proof of concept at this time or if it's like or if there have been any significant developments? Let me take the second question and the last one. So on the SARS PCV, Listen, we clearly don't see a slowdown and we don't expect a slowdown of our staff ACV. What we expect is A continuous strong, very strong growth of our ACV business. And again, as I said before, Q3, The whole ACV has been done just on new logos. And And remember, last year, same period was the year where we had seen PayPal. We have seen some deals moving into ACV. So I think that's it, For me, the quarter has been a very strong quarter on the ACV side because it's all incremental. And there is so much activity happening. Look at what's happening on the device side. And the market is doubling And this is not going to start and we are extremely well positioned for to capture it. Now on the DXC side, DXC, yes, we are involved in some RSP processes. Some are more advanced than others. But as I said, there is some very interesting activity going on. As I said, some of the large Pipeline deal activity, some of them are with DXC and some are advanced, some are less advanced, but it is going well. It is Progressing well. And clearly, those are large deals, so it takes time. And As we had mentioned when we signed the partnerships at the start of the year, this would be a 2022 story and not Having really an impact on 2021, but listen, it is progressing well. It follows the flow. So we are confident that with DXC being The owner ultimately of the IAP, knowing the customer extremely well, we're extremely well positioned to win those deals. Let me take the other two questions. The first one on the one off for the LT. This was clearly also communicated that way also internally. We have Clearly, the regular, as I mentioned, the regular salary increases, People have a variable component in their total compensation. So this is always reflecting The changes in environment, I think these people which we have now awarded with this loyalty share program, this It's also maybe the team or the key people to drive this current transformation over the next 3 full year because you need continuity, you need stability and I guess also some of the future leaders. So Clearly, it's also something we will not be able to afford every year, let's be clear here. So it's definitely a one off. On the FX, we always post the FX rates. Currently, we basically take Last call and then the spot rate going forward. On the top line, as most of our revenues are Dollar denominated and a bit of euro, yes, you have some impact there, but not much. So clearly, this is why we give you Usually, the currency mix, we're short the British pound, short the Swissy, also short a For the currencies, the Romanian and the Indian lupus being the most important one. So This is the way we currently see it. So this year, yes, we had an overall negative impact on our cost base That's where we end up. We're reporting transparently, and this is why we also I have adjusted the guidance to reflect this. So if we stay where we are, I think it's probably not going to be A lot maybe update of additional headwind, but I think this is in the ballpark as we have guided. Fair enough. Thank you. Just a follow-up on the DXC. Just to clarify, there have been no invites to RFPs, right? It's still just Discussion, some in more advanced, some in Nesa bonds, but in those specific RFPs, in those RFPs? No, no, what I say is, in some of them are more advanced, which means that there's been an ISP And that we as I said, we are extremely well positioned because of the relationship From the XEON because of what Temenos can bring also to the table. So I think this partnership really strengthen our value proposition, Thank you, operator. That was the last question. Thank you very much