Ladies and gentlemen, welcome to the Temenos Q4 2024 results conference call and live webcast. I would like to remind you that all participants will be in listen-only mode and this conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference may not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Jean-Pierre Brulard, CEO. Please go ahead.
Thank you, Operator. Good evening, good afternoon. Thank you for joining us for our Q4 2024 results call. So I would like to talk through our key performance and operational highlight of the quarter before handing over to Takis. So starting with the highlight, as a management team, we have put a lot of focus on consistent execution in the last few months, and so I was pleased that we ended the year with a strong Q4. If we look at two of our KPIs, ARR and free cash flow, we deliver strong ARR, growth of 12% year on year, and free cash flow growth of 25% in the quarter. We have also a strong SaaS ACV of $24.8 million, our strongest SaaS ACV quarter ever. The sales environment was stable through the quarter, and we have positive pipeline development.
We also made good progress on our strategy execution, which I will talk more about in a few minutes. We announced the sale of Multifonds earlier this month, and this is in line with the strategy we announced in November to be more focused in our product portfolio and our investment to support our growth levers. We have issued guidance for 2025 and also updated our 2020 targets to account for the sale of Multifonds. Let me start with customer success. Customer success is my number one priority, which is why we created the One Global Customer Experience team, putting the customer really at the center of everything we do. We have made some excellent new hires, including a new Chief Delivery Officer, to strengthen our customer lifecycle.
This builds on our success in 2024, where we had a total of 347 go-lives across all products, reflecting our scale and industry position, and Aldermore is a great example of our customer-centric approach. They signed a deal with Temenos for business and corporate enterprise services, all delivered as SaaS. As part of this, they will migrate multiple systems onto a single SaaS solution from Temenos, and Aldermore's goal is to modernize the existing savings operation, to scale rapidly, and increase agility. They clearly see the value of working with Temenos in order to achieve these critical objectives. I also like to share one of the other great wins in Europe. CEC Bank is a major bank in Romania with over 2 million customers.
They chose to work with us to migrate from the legacy systems to our core banking, including our solution for payments and analytics, with the goals of faster time to market and increasing efficiency. We are delivering this project with two of our key partners in line with our partner-first strategy. I was delighted that both Aldermore and CEC Bank and many other clients chose to work with Temenos in 2024. It demonstrates, what I have said before, that we are highly relevant to our customers and critical to their success. We presented our new strategic plan in November, so I am sure that many of you have seen this slide already, but I wanted to remind you of our three growth levers.
Number one, we will expand our leadership in best-of-breed for Tier 3 to Tier 5 banks, in particular in the U.S. and Western Europe, and this lever will be the largest contributor to our growth. Second, we will enhance our modular core solution, especially for Tier 1 and Tier 2 banks in retail and corporate. These banks are running legacy cores at very high cost and with a lot of operational risk, and they need modular and open solutions to progressively modernize. Lastly, we will accelerate adjacent point solutions like our digital banking capabilities for the U.S. market, payments, and compliance. We have a structured investment plan building on our strong foundation to outperform the market.
So in terms of execution, we have defined the key business enabler to deliver this strategic plan, which are focus product technology and go-to-market investments, in particular in key geographies like the U.S., U.K., and Western Europe, and investing in the customer lifecycle, which I've already talked about, and investing in our operating model. Alongside all of this, we continue to prioritize our corporate culture to increase empowerment, accountability, and foster collaboration across the business. I would like to give an update on the progress we have made on our strategic plan and roadmap. The sale of Multifonds was a key step to focus on our product portfolio and research and development investment in line with our strategy. We have continued to attract senior talent.
I already mentioned our new Chief Delivery Officer and Barb Morgan, our new CPTO, who you met at CMD, just a year ago, a new Chief Product Officer with a very strong background coming from major U.S. banks and financial technology providers. It's a first step to elevate our product and technology organization to the next level in terms of processes and skill sets. Lastly, we are updating our disclosure to reflect industry-based practice and evolving customer demand. Importantly, included new disclosure of Cloud ARR.
This is highly relevant and strategic given the direction the industry is moving in, as I highlighted in Capital Markets Day. Many banks in the U.S. and Western Europe, in particular, are developing their own in-house cloud skills to encompass proper cloud governance, taking into account security and regulation obligations. So as you can see, we are very busy, and we are absolutely focused on execution and delivering our strategic plan, and we will continue to update you on our progress. With that, I would like now to hand over to Takis to get through the financial highlight of the quarter.
Thank you, Jean-Pierre. On Slide 14, I'll start with an overview of the quarterly financials. All figures are non-IFRS and in constant currency unless otherwise stated. We delivered strong ARR growth of 12% in Q4, which was helped by a very strong SaaS ACV of CHF $24.8 million, as well as healthy growth in subscription. ARR continues to increase as a percentage of our product revenue, now equal to 88% and equal to 77% of our total revenue in 2024. Our transition to subscription from term license is now largely complete, and we expect the contribution from term license to be very limited going forward. I would also like to flag the strong growth in maintenance in Q4, up 12%, which again benefited from strong sales in premium maintenance, as well as the value uplift on subscription signings and renewals.
Free cash flow grew 25% under our old definition or 24% under our new definition, which includes the impact of IFRS 16 leases and interest costs. We will be using this new definition going forward. In total, we generated CHF 121 million of free cash flow under our new definition. DSOs were 152 days at quarter-end, up 11 days due to the strong growth in subscription revenue in Q4. For 2025, we expect DSOs to marginally increase over the coming year and then to start declining from 2026 onward, as we will benefit from the cumulative cash flow from subscription deals sold from 2022 onward.
Lastly, we ended the year with net debt of CHF 595 million and leverage at 1.3 times, well within our target range of 1 to 1.5, and we have announced a dividend of CHF 1.33 for 2024, up 8% on last year to be voted on at the AGM. Moving to slide 15, I would like to flag the new Cloud ARR disclosure we are introducing, which Jean-Pierre mentioned earlier. This includes ARR from both SaaS contracts as well as subscription contracts where the client is using cloud infrastructure to run the software. This is an important metric as it reflects client demand. We see growing appetite for use of hybrid and public cloud, with spend on public cloud expected to grow at around 16% CAGR over the next few years. Therefore, Cloud ARR will give an insight into the demand for cloud infrastructure across our client base.
We expect Cloud ARR to grow at a percentage of total ARR in 2025 and to continue increasing in the mix over the following years. Looking at our services revenue, this continued to decline in line with our partner-first strategy, but there was a strong improvement in the services profitability in the quarter. I would expect service revenues to grow low single digits in 2025. Looking at our cost base, operating costs were up 1% in the quarter as we benefited from the efficiency program we started in H2 2024. This masks the underlying acceleration in investment in R&D and sales and marketing. We have not seen the full P&L impact of our investment program in 2024, and these investments will become more visible as the cost base continues to grow in 2025.
Lastly, we delivered strong growth in our EBITDA margin, up three percentage points for the full year to reach 34%. On slide 16, we have like-for-like revenues and costs adjusting for the impact of M&A and FX. The figures are all organic and therefore in line with our constant currency growth rate. As I mentioned, services margin continued to improve with costs down 11% in the quarter and 7% for the full year. Product-related costs, including services, were up 4% in the quarter as we have started to ramp investments in R&D and sales and marketing, and this will continue under our investment plans for 2025. As a reminder, we had flagged at the CMD we expected to invest an incremental CHF 30 million-CHF 40 million in total in 2025.
I would also like to flag that our net capitalized development costs declined significantly in 2024 to CHF 10 million, down from CHF 18 million in 2023. Looking at FX, there was roughly a CHF 2.5 million headwind on EBITDA, largely due to euro weakness against the dollar, impacting revenue and some impact from hedging. On slide 17, net profit was up 44% in the quarter versus EBITDA growth of 18%, with the outperformance mostly due to a one-off tax benefit of CHF 15 million. EPS was similarly up 47% in the quarter. The underlying tax rate was 20.7%, within the guidance range of 20%-22%. For 2025, we expect a similar tax benefit, so our expected tax rate for 2025 is 15%-17%, and the normalized underlying tax rate excluding the one-off benefit is 19%-21%. Moving to slide 18, we have the changes to group liquidity in 2024.
We generated CHF 391 million of operating cash, paid CHF 97 million of dividends, and bought back CHF 227 million worth of treasury shares. We also used our debt facilities to repay a CHF 150 million Swiss franc bond in April 2024. We ended the quarter with CHF 114 million of net cash on the balance sheet and net borrowings of CHF 727 million. Our leverage stood at 1.3 times, well within our target range of 1 to 1.5 times, and without M&A or share buyback, we'll continue to deleverage further in 2025. In conclusion, we have ample flexibility and optionality to do further buybacks. Moving to slide 19, I'm sure you all saw the sale of Multifonds we announced earlier this month for an EV of around CHF 400 million, including an earn-out. We expect the deal to close in Q2 2025. This aligns with our strategy to simplify our product portfolio and focus R&D investments.
In 2024, Multifonds contributed around CHF 40 million to total software licensing and CHF 50 million of EBITDA, keeping in mind it had a solid maintenance revenue base as well as some service revenues. We have adjusted our 2025 guidance, 2028 targets, and 2024 pro forma figures to exclude the contribution from Multifonds. Moving now to slide 20, I would like to briefly discuss the change in our revenue disclosure. As I mentioned earlier, we have introduced new disclosure on Cloud ARR to give greater transparency on the progress we are making on cloud. We are also changing our revenue line items to reflect changes in customer demand and industry best practice. We are replacing total software licensing at its start with a single line called subscription and SaaS, which brings our guidance metrics and disclosure in line with global software players.
We expect term license to continue trending down to around 20-30 million per annum at a steady state, but the majority of the revenue in this line item will be from subscriptions and SaaS contracts. On slide 21, we have our guidance for 2025, which is non-IFRS and in constant currency, except EPS and free cash flow, which are reported. Both the 2025 guidance and the 2024 pro forma numbers exclude any contribution from Multifonds, and free cash flow is, of course, under our new definition, including IFRS 16 leases and interest costs. We are guiding for ARR growth of at least 12% and subscription and SaaS growth of 5%. We expect EBITDA growth of at least 5% and EPS growth of 7-9%, and we expect free cash flow growth of at least 12%.
And lastly, on slide 22, we have our 2028 targets, which we have updated for the sale of Multifonds. It is important to note that the implied CAGRs have not changed from the targets we announced at the CMD in November. We now expect ARR to be more than CHF 1.2 billion implying a CAGR of 13%, EBITDA to reach around CHF 450 million implying a CAGR of 10%, and free cash flow now to reach about CHF 400 million at a CAGR of 16%. With that, operator, please can we open the call for questions.
We now begin the question-and-answer session. Anyone wish to ask a question may press star and one on their telephone. If you wish to remove yourself from the question queue, you may press star and two. In the interest of time, please limit yourself to one or two questions. The first question is from Toby Ogg with JP Morgan. Please go ahead.
Yeah, hey, hey, good evening. Maybe just on the subscription and SaaS guide, 5%-7% in 2025, how should we think about the implied growth rates embedded within the different components here across SaaS and the term plus subscription revenues? And then just secondly, just on the SaaS piece, obviously Q4 was 4%. I know the SaaS ACV of almost 25 in Q4 should help drive some of the reacceleration in 2025 on SaaS. But outside of that, could you give us a sense for how the SaaS pipeline is evolving and how we should expect the SaaS ACV to evolve through 2025? Thank you.
Hi, Toby. Yeah, I was expecting this question, so there is a reason why we haven't given any more SaaS guidance or what we have outlined, our disclosure in terms of being aligned with the global software player. No one else discloses SaaS specifically, and it also reflects the reality of the buying decisions from clients, which ultimately dictate the delivery and consumption model, and we see an increasing combination of on-premise, hybrid, public cloud, and SaaS, so clearly we will focus on ensuring that our world-class software services and support deliver the model clients have chosen. On SaaS ACV, it is strong, and it was strong, and we had guided a bit for a stronger performance. Several reasons here. Clearly, we had seen a negative impact also on the SaaS ACV business in the first two quarters of the year with the push-outs due to Hindenburg happening.
So clearly, we had this in terms of catch-up coming in well in Q4. And we also have to acknowledge that there was a sizable contribution from the Multifonds business in Q4 on SaaS ACV, which also contributed to this very good number in Q4. And finally, on the SaaS ACV pipeline, we have seen in the last few years, as we had commented already back in 2023, clearly a negative impact from the funding challenges of FinTechs. But clearly, we have seen now, as for the rest of the business, and a quite good improvement in the underlying, let's say, pipeline development. So we would expect over the next quarters to see a good performance of our SaaS ACV business. But at this point, we can't give any further disclosure.
Let me add, Toby, Jean-Pierre, that in a way, when we say customer demand is mostly for very large banks in the U.S., U.K., and in countries where hyperscalers are developing as well a significant footprint. I met a lot of customers, and even a very important one here in London, which has deployed our software. And what they told me is the following. They said, "We like your software. We think that we can derive a lot of value from that, but with the regulation, with DORA, and with all the investments we have done in our skill set in cloud operation, we started to encompass non-critical applications like, I don't know, Salesforce or Workday. And now we are applying the same governance and the same regulation for mission-critical applications like yours.
So our duty in terms of architecture is to build modular applications, either, I mean, run by us in the SaaS model, and it's mostly successful in tier three banks and some point sales as well, or in a way to provide the best software for our customers. And I'm glad as well we have delivered that in a multi-cloud environment, as today we have customers not only on Azure, but as well on AWS, on Google Cloud, and IBM Cloud as well. So it's giving them much more possibilities as well to please our customers. And let me add as well that we have almost completed the term license evolution, as pointed out by Takis. So there is no obvious reason to aggregate term license and subscription.
After three years of subscription license, as many, I mean, companies in the software are doing as well to regroup in a way SaaS and subscription together to give a more recurring and predictable revenue stream as well. It's a reason why we have done that. Not a surprise. We just announced as well this concept in Capital Markets Day, when we have different growth rates about cloud and SaaS as well.
That's great. Thank you.
In a question from Josh Levin with Autonomous Research. Please go ahead.
Good evening. Two questions for me. When you think about the 2025 guidance, what are the greatest areas of uncertainty? That is, if you were to miss or beat guidance, what would be the most likely driver of each? And the second question is, what do you intend to do with the $400 million of proceeds from the Multifonds sale?
Hi, Josh. Okay, let's go step by step. I think on subscription and SaaS, which we have guided 5%-7%. If you look at what we communicated at the Capital Markets Day, where we said we expect the market, which is product growth, to be around 7%. Maintenance, we expect around 7%. So if you take the midpoint, we're, let's say, close to market growth, what we are expecting. This is in line with our stable sales and environment commentary. Clearly, we want to be a bit prudent at the start of the year. Yeah, I think that's one thing. So if the market is developing better, more favorable than our current assessment, you know, we're probably ending then on the upper end and vice versa.
On the ARR growth, we had a good performance in 2024, despite the headwinds we were facing at the start of the year. I think on ARR, and given this is an important metric we have been focusing a lot, clearly, I would say the mix towards subscription is continuing. There is, as you've seen, little left in term, which will further decline. I think that's helping. The premium maintenance business is also helping maintenance and ARR. And clearly, ACV performance should also help ARR. So this is why we're actually quite comfortable with this one. But there is obviously a direct link to the underlying product investment, product growth. A bit, we said back in November that this will be a year of investment. If you take the guidance, this is about flat margin.
There is still a substantial investment program ahead of us, as we have seen also in Q4. Clearly, the efficiency gains, they kick in very quickly, so that was a benefit, so let's see. If we are able to deliver all our investment plans, we will be in the guidance range, but clearly, always, as in the past, we have clearly some prudence in our EBITDA guidance. EPS is a consequence of that, and then finally, free cash flow, we have consistently delivered over the last quarters. It clearly has been a good performance. Now, I think on free cash flow growth, it's nothing special there. We are prudent in our guidance, and clearly, if the inflows come in better and we manage to deliver the rest of the guidance, then there could be clearly.
The one thing which we need to consider is clearly we have a. It's not an adjusted number. So the impact of the restructuring done last year and also being done this year. This is obviously a headwind to free cash flow because there is cash-out impact on this one. So I would say these are the moving parts. In a nutshell, we start with a prudent guidance. It's only mid-February.
Let me add, I mean, before, I mean, maybe Takis is taking the second part of your question, Josh, that this year is a year of investment. I'm glad that we have completed our hiring on US salespeople, initial hiring, that we have committed to do to cover our sweet spots, which is a tier three regional bank. So it's done. All of them were in sales kickoff, and they are onboarding as we talk. But really, in the sales cycle duration, I'm not expecting to be materially visible until the end of the year, and mostly in 2026, 2027, and we will do as well, I mean, the second step of our product and technology as well investment, self-funded by a couple of product simplification and rationalization.
So again, I'm not expecting that there will be meaningful visibles this year, even if we have this 5%-7% growth rate. But let me reiterate my confidence that we will achieve the plan by 2028. And as you have seen, we have not modified the criteria without Multifonds in the landscape as well. So maybe I will hand over to you, Takis, again for the use of proceeds for capital allocation.
Yeah, Josh, let me take part of the question. Given our strong free cash flow profile, both in 2024, but also given our forecast for 2025, clearly there is enough capacity for both share buybacks, but also do selective bolt-on M&A, which is always difficult to time. And let's be clear, we don't have anything transformational or anything looking at. And this clearly is something we also not intend to do. Now, let's be very clear here. I mean, ultimately, it's the board deciding on use of proceeds. And clearly, if we continue to deliver like that, we will fall outside our target range. So I will put a high probability that there will be a sizable share buyback happening this year.
Thank you very much.
The next question is from Charlie Brennan with Jefferies. Please go ahead.
Hi, great. Good evening. Thanks, guys. Just two questions for me, actually. Firstly, just a high-level question on the market backdrop. It feels like banks are in rude health at the moment, certainly healthier now than they've been for some time. Have you detected any change in the nature of your conversations with banks? And is it in any way optimistic to think that you might start to get a bit of a macro tailwind as that feeds through to discretionary spending? And then secondly, just a small financial question. Just on Multifonds, it looks like it's $50 million of EBITDA and about $20 million of free cash flow. What's the delta between EBITDA and free cash flow there? It looks surprisingly wide. It would obviously help with our modeling to understand what's in the middle there. Thank you.
So let me take the first question as well about the banking industry. I spend a lot of time, I mean, meeting CEO and CIO of banks all over the world. And basically, they are facing this dilemma now. So the most performing banks, that's the ones they are investing the most in technology in terms of return on equity, CIR, NPS, etc. But at the same time, they are stuck by legacy bespoke core banking systems, which are very difficult to move. And it's a dilemma that they are facing today. So there is no, according to, of course, we are still using a couple of independent analysts. And as well, the conversations that we could have with all the bankers, there is no slowdown in the technology investment. And there are a lot of projects surrounding the core.
It is the reason why we continue to invest on modular architecture and application, on point solutions, and many banks as well are replacing the core banking, so I'm glad with what, in a way, you're observing Q4, that we have concluded a couple of SaaS solutions with the U.K. banks. We have changed as well our leader in the U.K. and I, and basically, the pipeline I've seen both in the U.K. and U.S. in terms of modernization is encouraging us as well in terms of investment, and we have not seen in our pipeline any slowdown and any signal of slowing down, so with that, regarding the specific question about Multifonds, I mean, Takis, if you can take it.
Yeah, Charlie, there is no magic in the number. Your calculation is not entirely wrong. There is one element, and we have shown this also in the appendix. DSOs would be quite a bit lower without Multifonds. So Multifonds, especially last year, had a very low cash conversion, if you want, also a bit low cash conversion, given a number of larger deals signed also with Tier 1 institutions, with payment terms not very favorable, i.e., high working capital, basically in the business. This explains how you get from the EBITDA to the cash. And it's also something we would have seen over the next years. If you look at the 2025, 2028 updated targets, you see EBITDA down CHF 50 million, but cash only down CHF 20 million. It's the nature of the business, and it has been like that in the past.
And just, sorry, it's a bit technical, but does that mean that you keep the working capital and you now get the cash flow benefit of that? Or has that working capital been sold with Multifonds?
Okay, so you seem to be an M&A specialist. So when we close, there will be, because of the working capital shifts, and let's assume we're going to close on time in Q2, there will be, depending on what we will see by then, whether it's end of April or end of May, there will be a netting of basically the balance sheet position with this is why we said EV. Yeah. So if we get the benefit of cash flows coming in in Q1 plus April, May, this will be obviously netted as part of the transaction with the working capital transfer.
Perfect. Thank you.
Next question from Frederic Boulan with Bank of America. Please go ahead. Boulan, your line is open.
Yes. Sorry. Two questions on my side. One on the U.S. side, if you can provide us an update on where you see the so you mentioned on the sales efforts, but anything you want to share in terms of product position and traction that you've seen at this stage. And then secondly, just to clarify on the commentary around maintenance, I think you mentioned 7%. So if you can mention what kind of growth you expect this year, just for us in terms of modeling on the subs and SaaS side, just to confirm you're not going to provide any split going forward there. Thank you.
Good evening, Frederic, so I will take the first one, so in a way, as I mentioned earlier, we have completed the initial targeted recruitment in the U.S., and I'm very glad as well to have attracted good talent, which is not obvious for a non-U.S. company in sales as well, so we have a very good answer for the market for talent, so no, they are all on board. As I mentioned in CMD, they are fully focused on a list of accounts, which are mostly Tier 3 regional banks, where we would like to implement our Level 1, which is Level A, which is the best-of-breed software. We are contemplating as well our investment to respond to the specific product needs in the U.S., so it's part of the investment that Takis talked about.
I'm glad as well that we will announce, and I will be in the U.S. in two weeks now, our new innovation hub in Florida. We have hired a lot of new executives in the U.S. I mentioned the Chief Product Officer that came from a major U.S. bank and U.S. technology provider. We are as well recruiting a new UI design architect as well. Many other executives will reinforce as well our team to take into account the specific needs of the U.S. I'm very encouraged by our progress. I will spend with Takis and the team as well a couple of weeks in the U.S., early March. On the second part of the question, Takis, if you can take it, please.
Yeah, thanks, Fred. On maintenance, we had clearly another strong performance, both in Q4 and also for the full year at 12%. It was definitely helped by the easier base in 2023. So the base now becomes a tougher comparison. If we look at the drivers for maintenance growth, ultimately, it's growth of our subscription business with the value uplift we continue to see versus term license. And also with the CPI locked in and also premium maintenance, which is something we have started to put salespeople on. And this is clearly delivering what we expected. Now, the base is now a bit higher. This is why we say it should be around 7% growth for maintenance in 2025, maybe a bit higher in Q1. And then you have a bit lower growth than in Q4. This is where we should arrive. It's correct.
We're not going to guide for the individual components of subscription and SaaS.
Thank you.
The next question is from Chandra Sriraman. Please go ahead.
Yeah, hi. Good evening, Jean-Pierre and Takis. Thanks for taking the question. I have a couple. Firstly, I mean, you mentioned a lot of interesting hires that you have made. I'm just trying to get a sense of the incremental investment, how much of it is already locked in, just to get a better sense of the seasonality of these incremental costs. And my second question is, in terms of geographies, obviously, Q4 was very good, but I couldn't see any significant change in terms of any geography contributing to the strength. So would you like to call out any geography that moved the needle significantly? Thanks.
Hi, Chandra. Okay. On the costs, we have seen some slight pickup, as I mentioned, on sales and marketing and R&D costs in Q4, but this is obviously not yet visible for the full year. So I would expect that especially Q1 and Q2, maybe also Q3, but especially Q1 and Q2, we would see mid-high single-digit cost increases given the easier comps for both sales and marketing and R&D. Yeah. I mean, some people have been hired in December. So it's visible in the exit rate. This is why we say overall, you should see a cost increase, mid- to high single-digit in Q1. Don't forget, we still have services cost declining, let's say cost of, I don't know, 7%-8% in Q1 and similar in Q2.
There is, as Jean-Pierre mentioned, we had front-loaded US sales hiring, but Will Moroney has continued to hire salespeople across the world. It's not just the US. It's also Western Europe, UK, Ireland, and clearly also Barb. And you have seen some of the announcements that she's bringing in senior talent in her product organization in Q1, and this will also continue. And this is what we have reflected in our model. Yes, hiring is always usually takes longer, but we are committed to our investment plans, and this is what we have kind of grown.
Yeah, to give you some color about the investment in product and technology as well. So of course, we will go a little bit more details. And once Barb and I, we will announce our new model for product and technology, but it's basically shared between products. Of course, I mentioned our US product portfolio, but let me mention as well investment around digital and around corporate banking. And we continue to innovate, to innovate on modular architecture and modular solutions, to innovate in SaaS and cloud architecture. And lastly, and you will see that in our flagship event in May in Madrid in January as well. So it's, in a way, a very focused investment that we will announce at the occasion of TCF in Madrid on the 20th and 21st of May.
Regarding the second part of your question, we have a significant traction coming from APAC for the first time in the year, which was, in a way, I mean, mostly driven by a couple of larger deals, and I'm glad as well to have seen a very large bank converting on-prem to SaaS, which is basically a very good move, and as well, as I mentioned earlier, I'm feeling encouraged by a couple of SaaS transactions that we have concluded in the UK.
Great. Thank you.
Chandra, just to add on the regions question, APAC saw a good performance. I think on the other regions, they developed as expected. There was nothing specific actually to be said. As you saw from our performance, I think there were a few surprises. We delivered a good performance across the regions in line with the budgets. Also on product, nothing specific to highlight, Transact or Core product being the main driver also of the performance. As we had mentioned, good contribution from Multifonds as well.
Yeah. Just let me add as well that we have completed our sales management team. We just hired, as I mentioned earlier, a new leader in UKI. As well, I'm glad that we have hired a new leader in APAC that has immediate impact as well in Q4. And if you remember as well that we have an issue in the Middle East in Q3, so we will have our new leader in the Middle East starting in March. So we have completed as well all the sales leadership under Will Moroney.
Thank you very much.
The next question is from Sven Merkt with Barclays. Please go ahead.
Great. Good evening. Can I just check how you will report Q1 and Q2? Is Multifonds moving into discontinued operations? So you will provide us with the P&L and cash flow on a continued basis. And then secondly, how big is the Multifonds earn-out of the CHF 400 million? And when would you get it? Thank you.
Thanks, Wayne. On the first one, no, it does not, given the size of the business and the accounting requirements, Multifonds does not, is not discontinued operations. So it will be, as you look at the balance sheet, it's what we call assets held for sale. And on the opposite side, liabilities held for sale. So it will be reported as part of the operating business. However, because of our guidance, we will clearly exclude the impact of Multifonds. But it will be visible. It's not part of our guidance, definitely for Q1. And then Q2, we'll see whether it's a few weeks, one, two months, but it's not going to be a discontinued operation. Yeah. So yeah, that's what it is. What was the other question?
On the earnout.
So the earnout, clearly we have agreed with Montagu to disclose all the details of the transaction. It's something which, given management, the existing Multifonds management is also investing in the business. So it's basically aligned with the incentive plan for the management. So we're in the same boat. It's a multi-year earnout. The very vast majority, more of 80%, is upfront. Yeah. We're going to get this at closing. Yeah. And then the remaining part is split over the next few years.
Perfect. Thank you.
The next question is from Laurent Daure with Kepler Cheuvreux. Please go ahead.
Yes. Good evening, gentlemen. I also have two questions. The first one is if we could have a little bit more disclosure on Multifonds to help us to deconsolidate it. Particularly, I was a bit surprised on the very high profitability. Could you share with us the total revenue this company is doing and maybe a little bit of granularity on the split of revenue by region? And my second question is more an update on Europe, which has been relatively weak for years. Do you consider now you have the right team? And do you start to see the very early signs of potential inflation in this region? Thank you.
Hi, Laurent. I think we have provided already the details which we are comfortable with. It's, again, part of the confidentiality with the buyer. We said, think about there was a sizable maintenance base in the business. Multifonds was a highly profitable business. There was also some services. I think this is as much as we can say.
Hi, Laurent, Jean-Pierre. In your second question as well, we have made a couple of changes in our European operation. Last year, we have two teams in a way, a geographic team and a strategic account coverage about the top 10 accounts that we have in Europe. So in a way, we came back to a more linear organization based on geography and across four different sub-regions. I already mentioned that we changed our leadership in UKI. We have done the same in France and Benelux as well, a new leadership. The rest is organized around Southern Europe and Germany and Eastern Europe, which was traditionally working well because it's a market of first equipment. It's more a market of buys and builds. As well, I met a lot of customers in Europe.
In a way, they are all waiting for us just to release our modular architecture. It's a different market than in the U.S. or in emerging countries. And as I said before, I'm encouraging with the first SaaS success that we have in UKI. And we will double-click on the wealth where we have a very good traction across a couple of countries, but we would like to extend to countries like the UK, for instance, which we are also strong in Europe. And lastly, as well, we are fortunate to have top 10 tier one and tier two banks in Europe that, in a way, are ready to develop all their investment with us as well. If I summarize in Europe, three priorities: UKI, wealth, and strategic accounts.
Great. Thank you, Jean-Pierre.
The next question is from Michael Foeth with Vontobel. Please go ahead.
Yes. Hi, good evening, gentlemen. Just two more questions on Multifonds. Sorry to get back on that. I was just puzzled by the high profitability of the business and you're selling it for an EV of CHF 400 million. You can share any comments on the valuation and your motivation to sell the business for what seems at least a low price. Maybe tying into that, you're taking out only CHF 50 million of the CHF 28 million EBITDA target as well. So that implies that you wouldn't expect any growth in that business. So maybe that explains the low valuation. Anything you can share in addition, please.
Yeah. Let me start with the strategic reason first. As we mentioned in CMD as well, we would like to focus on really what matters for us, which is our core business. And it's fair to recognize that Multifonds was ring-fenced within the organization in terms of go-to-market, in terms of products. And we would never get, I mean, in a way, the interlock that this business would deserve with maintenance. They are mostly in very few limited Tier 1 banks. And the personnel within the account as well are far different. So in a way, we have made the strategic assessment of Multifonds. And we are considering different options as well to keep in the landscape of Temenos. And we have pros and cons. And at the end as well, we have taken the strategic decision to put Multifonds on the market.
We are satisfied with the transaction we have done with Montagu. I will hand over to Takis to give you the reason why we are glad with the result of the transaction.
Yes. Hi, Michael. Indeed, we're very happy with the outcome. The EV is a good number, and let me respond to the question from two different angles. Number one, why is the 2028 target now only 50 million less? As we mentioned a couple of times, Multifonds had a very strong 2024 year on the back of a relatively weak 2023, also held by a strong finish to the year. Clearly, we would not expect this performance to continue if we look at the business plan we had. Clearly, there is an outsized impact in Q4. That's reason number one. Reason number two, which you don't see, but contrary to the rest of the products, Multifonds has really only started in the second half of 2024 its transition to SaaS. We mentioned they had a good ACV quarter. Now, you know what this means.
If you transition to SaaS, there will be a multi-year headwind to your model, and that was also something clearly we didn't want to carry forward, so it's not visible, but clearly, it's visible in the investment plan that this SaaS transition is only starting, and then finally, we mentioned that we want to be focused in our R&D investments. Clearly, the Multifonds business for the transition to SaaS is also requiring quite some investments. For us, this explains the possibility of why we think there are better owners than this one, and then finally, unfortunately, this is not the way buyers look at. They look at, and I think we gave in the footnote, the adjusted cash EBITDA multiple. Now, there is limited amortization within the business, so the EBITDA is maybe slightly higher than the EBITDA.
But the way private equity looked at this was clearly you need to subtract a number or a plethora of items, standalone costs. They did adjustments for the billing. We book how we book subscriptions. There were sales commission, a number of adjustments, which basically then get you to an adjusted cash EBITDA, which is materially lower than the basically reported EBITDA. And the 20-24 times adjusted cash EBITDA multiple, depending on the year, I think this is a good outcome and was really in line with similar transactions. Yeah. So this bit long response, but this is how we think about this and why we're happy with the EV of CHF 400 million.
Okay. Thank you. That's very helpful. Thank you.
Next question is from Knut Woller with Baader Bank. Please go ahead.
Yeah. Thank you. Just two quick questions. The first one, looking at the third-party revenues, they have been down 5% year over year in Q4 and showed the lowest sequential uptick with a plus of CHF 45 million quarter over quarter in many years. Can you just give us some more color here? What drove this development? And then secondly, can you also please provide some more color on one of the tax benefits that you cited in 2024 and that you expect to persist in 2025? Thank you.
Yeah. Hi, Knut. Let me take those two questions. Maybe first on the tax rate. As you've seen, the underlying tax rate was 20.7%, so in line with our guidance range for 2024, and we're actually structurally going the right way, so the underlying one for 2025, we see at 19%-21%, so clearly, we're moving in the right direction. We had in 2024 success on a few, call it uncertain tax positions and tax filings from prior years, which we benefited from. I think this is what it is, and I think the same, if we look at what we have done now, we're definitely going to see we've been conservative in the past, and clearly, those uncertain tax positions are moving in our favor, and also tax authorities are usually very late with confirming some of the filings.
These are what we would call one of the benefits in the amounts we have stated. On deferred revenues, yeah, we grew; those were about the absolute number, but the growth was just 1%. That's correct. I think if you look at deferred revenues, the balance sheet is clearly without Multifonds. Yeah. You don't really see a like-for-like view on deferred revenues. We had a healthy increase in our deferred revenues, excluding funds, which is masked by the asset held for sale accounting position. That's clearly one reason. Secondly, there was quite a substantial negative FX impact on our balance sheet at the end of the year. Deferred revenues is a balance sheet position. Recurring revenues are constant currency, but it's not really comparable to the balance sheet movement.
And finally, I think 2023, we had 14% deferred revenue growth, and recurring revenue growth was lower. So clearly, there is some timing difference. However, I think what's more important, I think we'll see deferred revenues growing in the next few quarters also due to base comparatives. And the momentum we have in maintenance and in ACV growth should support an acceleration in deferred revenue growth. But I think we're guiding on enough metrics. And yeah, I think that should be okay for now.
Thank you very much, Takis.
Ladies and gentlemen, that was the last question. I would like to turn the conference back over to Jean-Pierre Brulard, CEO, for any closing remarks.
Thank you. Thank you for your time and your question and your support. It's a long journey, but let me reiterate my full confidence for our midterm plan by 2028. I look forward to seeing you in our earnings calls in April and as well to welcoming you in our flagship event, Temenos Community Forum in May 20th-22nd, and we have the pleasure to announce that we will restart the investment breakout during this event as well. Thank you a lot. Have a nice evening. Bye.
Ladies and gentlemen, the conference is now over. Thank you for your participation. You may now disconnect your lines.