Ladies and gentlemen, welcome to the Temenos acquisition of additiv conference call and live webcast. I am Matilde, the conference 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&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 must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Adam Snyder, Director of Corporate Affairs. Please go ahead.
Thank you very much. Thank you all for joining us at short notice to discuss the acquisition of additiv that we announced this morning. Takis will run through a short presentation, we'll take Q&A. I'd note the call is only 30 minutes long, so please can you keep to one question per person so we can get through as many as possible. Thanks very much. With that, I will hand over to Takis.
Thank you, Adam, and thanks for joining us. I'd like to start on slide five with an overview of the attractive wealth segment opportunity, building on what we talked about at the Capital Markets Day in February and at the outset of our current strategy. We see banks across all geographies focusing on growing their fee-based revenue streams. In this context, wealth is a major focus area, given a number of structural factors driving the market. There is a generational wealth shift ongoing, and this is changing the demand on wealth managers in terms of innovative and personalized digital services. The mass affluent segment is growing fast, particularly in emerging markets, which are structurally underserved and where digital offerings are critical to capture demand. We see both private banks and retail banks looking to expand their offerings in this area.
Strong AI capabilities can increase advisor capacity as well, as lower the cost to serve, improving retention and increasing a bank's ability to serve this segment at scale. For Temenos, wealth is a key component of our strategy, specifically for growth levers A and C. We have a well-defined innovation roadmap and highlighted some specific areas of focus earlier this year, including mass affluent, expanding our ultra and high-net-worth capabilities, and delivering copilots and agents for wealth. This acquisition fundamentally accelerates our product roadmap, in particular for mass affluent, as well as giving us strong orchestration capabilities for complex customer journeys. Moving to slide six. There are three key drivers for this acquisition. Firstly, it extends our reach into the mass affluent segment, where we already had ambitions to expand our footprint.
It delivers an immediately available offering in this fast-growing market and enables us to evolve from product-centric delivery towards an end-to-end wealth offering in the mass affluent space. Additiv enables wealth managers to offer personalized advice at scale and significantly shortens delivery cycles. To give a sense of the impact, additiv can shorten the implementation cycle from 12 months or more to three to six months. Secondly, additiv gives us a strong foundation to expand into adjacent areas such as complex retail and corporate journeys, in particular for credit origination, and accelerates our ability to offer a state-of-the-art digital onboarding and origination solution to our client base. The same orchestration principles can be applied to all complex end-to-end customer journeys, aligning distribution, risk, and fulfillment through an integrated orchestration layer.
This enhances the flexibility and scalability of our digital capabilities, leveraging the strengths of our core banking platform and composable solutions. Lastly, the acquisition complements our AI strategy with a purpose-built AI-enabled solution, and we will work with the additiv team to build out more AI use cases across their orchestration platform over time. In short, the acquisition adds a state-of-the-art AI-enabled orchestration layer to Temenos' core and composable platform, significantly increasing our offering with wealth. Turning to slide seven, we have an overview of additiv today. The company has an international footprint across Europe, the Middle East, and APAC, and we will expand this into the U.S. through the Temenos go-to-market organization. It has around 200 employees across 10 locations and 30 customers, including a number of leading wealth managers, banks, and insurance companies.
Importantly, it has a very strong NPS score and net retention rate of 138%, which underlines the quality of the platform and strength of relationships additiv has built with its customers. Given its size, there is some customer concentration, and this will evolve over time as we will sell the additiv platform into the Temenos customer base. As you can see, a significant majority of the revenue is generated in the DACH region and Europe. The additiv management team brings with them deep domain expertise and will be an excellent addition to Temenos. There is strong cultural alignment between the two organizations, which both have a deep focus on innovation and customer success. The additiv management team will continue to run their business on a standalone basis for the foreseeable future, and we will work with them to define and shape the product and innovation roadmap going forward.
Moving to slide eight, the strengths of additiv's proposition is the challenges it is solving for banks and financial institutions. Margin pressure on banks are pushing them to increase operational efficiency and monetize underserved client segments whilst facing strict regulatory barriers to launching new customer propositions. The ability of banks to respond to these pressures is limited by their legacy digital platforms, which drives demand for modern orchestration platforms that can connect multiple legacy systems and accelerate customer journeys. Lastly, customer expectations continue to evolve with demand for a broad range of wealth products available through seamless, personalized omni-channel experiences, often integrated with third-party ecosystem offerings, for example, for international payments.
In this context, additiv is providing an omni-channel, state-of-the-art solution that is core agnostic and cloud-native with a strong partner ecosystem, making it a compelling offering for wealth managers and other financial institutions looking to expand into the wealth space or orchestrate complex customer journeys in other banking verticals. On slide nine, we have an overview of the benefits that this transaction brings to Temenos. additiv enables a significant reduction in time to market versus other providers or banks building for themselves, with implementations as fast as three to six months. This is a significant advantage in a fast-moving, high-growth market like mass affluent, where it is important to be first to market with new offerings. This is only possible because of additiv's deep domain expertise and knowledge of wealth and other financial services workflows they have built into their orchestration platform.
I already referenced their above industry average, very high net retention rate of 138% earlier, which shows strong traction with our clients and the embedded growth trajectory. This also creates cross-selling opportunities across the combined Temenos and additiv client base, we are building a structure plan across the combined go-to-market teams to capitalize on this. Lastly, as I mentioned, their platform fits very well with our existing AI strategy, notably on our product pillar. We will work with additiv, leveraging each other's AI expertise to build new AI agents for specific use cases. This will continue to support Temenos' structural AI advantage. Moving to slide 10. I thought it is useful to show this slide again that we first showed at our Capital Market stage so you can see how additiv fits into the Temenos AI era tech stack.
Temenos already has a strong orchestration layer for retail customer journeys in Temenos' digital and Journey Manager. Additiv complements our existing capabilities in the workflow and orchestration layer with a platform capable of orchestrating more complex customer journeys, in particular in mass affluent. Over time, we will expand this into complex customer journeys in other banking verticals. This acquisition is highly complementary to our existing platform, leveraging the Temenos core banking intelligence and execution layer, accelerates our offering in the AI-driven orchestration layer. Lastly, on slide 11, we have an overview of the transaction and its impact on our guidance. We are acquiring 100% of additiv for an approximately equal mix of cash and equity. The deal is expected to close in early Q3 2026, subject to customary regulatory approvals. Our board commissioned an independent expert to provide a fairness opinion.
As I mentioned earlier, the founder-led team will continue to run additiv on a standalone basis after closing of the transaction, reporting directly to myself. In terms of impact on guidance, the acquisition is marginally accretive to ARR growth and subscription and SaaS growth in 2026 and has a neutral impact on EBIT, EPS, and free cash flow. Lastly, our pro forma leverage is expected to be within our target range of 1x to 1.5x by year-end. With that, Operator, please can we open for questions?
We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the telephone. You'll hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Questioners on the phone are requested to disable the loudspeaker mode and eventually turn off the volume from the webcast while asking a question. Please limit yourselves to one question per person. Anyone who has a question may press star and one at this time. The first question comes from the line of Josh Levin from Autonomous Research. Please go ahead.
Thank you. Good morning. Can you just explain what's the rationale for running the new company on a standalone basis for the foreseeable future? Does that mean no cross-sell for the time being? Thank you.
Hi, Josh. There is clearly, we have learned some lessons, clearly there is a long-term integration plan. The near-term integration plan is really that additiv will operate as a largely standalone business with its own product stack, R&D organization, and go -to -market for the immediate future. Then we'll start working with additiv post-closing of the transaction to shape their R&D roadmap to align with Temenos' strategic priorities. I think this approach will ensure the preservation of additiv's successful culture and integrate our past learnings as well. I think after a period of ownership, we will evaluate if there are areas where closer collaboration integration is to the benefit of all stakeholders, especially clients and we.
In terms of the synergies, I think if we look at, there's no specific guidance, the near-term focus is on expanding the wealth offering and the AI-enabled orchestration layer technology. There are a number of areas where we see revenue synergies. Number one, accelerating Temenos' mass affluent proposition, which clearly represents a comparable, serviceable addressable market to the high-net worth and ultra-high-net worth layer. Then cross-selling additiv's wealth orchestration capabilities into Temenos' existing client base. Also expanding additiv's reach into markets where Temenos has a strong penetration, but additiv does not yet do. That includes the Americas, many markets in Europe, Middle East, Asia-Pacific, and also LATAM. Building out new complex orchestration journeys across all the banking verticals, then also building out AI capabilities across additiv's orchestration layer. There are quite a number of synergies which we see.
The next question comes from the line of Frederic Boulan from Bank of America. Please go ahead.
Hey, good morning. Thanks for taking the question. Just a quick one around the funding structure. Why did you decide to go with a share issuance? Is it a question of consideration of the size of the deal? Anything you can share around the kind of founder lockup?
Hi, Fred.
Yes.
I think the selling shareholders agreed to a 50% equity consideration or 50% consideration taken in shares as they clearly see the strong growth potential and value creation for Temenos based on the strategic roadmap and strong first year of execution we have seen in 2025. Also gives them exposure to the compelling Temenos growth story and the growth potential for the combined Temenos and additiv group. I think this was something very key for them, given the growth potential they see as a combined base. In terms of the if we look at the lockup, we have not disclosed the information on any lockup for our shareholders. I think having taken 50% shares as they believe in and want exposure to the growth and shows a lot about the commitment for them of Temenos, through Temenos, and the combined group.
Thank you.
We now have a question from the line of Toby Ogg from JPMorgan. Please go ahead.
Yeah. Hi, good morning. Thanks for the question. I think this is the first notable acquisition you've done in a while, and I guess the market had somewhat got used to a rhythm on the buyback side. Does this signal a sort of shift in terms of appetite for M&A? Just how are you thinking about capital allocation now going forward? Thank you.
Yeah. Hi, Toby. I think there is no change to what we have said at the capital markets day and what we have been saying before. Clearly, we want to use our capital for the best of Temenos and all its stakeholders. It does not change our approach to that. Given that 50% of the consideration is paid in cash, there is still capacity for a share buyback also this year, yeah. No change to our capital allocation framework, which prioritizes organic investment. We retain enough ammunition for share buybacks and M&A. In the future, this is a bolt-on acquisition also from a size perspective. Clearly we'll return to doing regular share buybacks already this year, but especially also next year if there is no additional bolt-on M&A. No change.
Great. Thank you.
The next question comes from the line of Charles Brennan from Jefferies. Please go ahead.
Hi. Good morning. Thanks, Takis. The NRR at 138 is particularly high. Can you just give us the drivers behind that? What's driving the cross-sell? Is it as you roll out across geographies for customers? Is it just account expansion? What's driving that NRR? It looks like additiv was founded something like 25 years ago. It obviously hasn't been growing at 38% consistently since it was founded. It feels like this business has re-accelerated more recently. Can you give us an average growth over the last three years or five years, something that's a little bit more representative of go-forward growth rates? Thank you.
Hi, Charlie. Yeah, on the net retention rate, this is also reflecting the high NPS score of 90, which I've never seen in the industry. We chose, once the clients are onboarded, not only they can grow up across different geographies, given these are larger wealth players and banks, it's mainly driven by two pillars. Number one is you put more volume on the platform. Yeah, more accounts, more customers, more assets, more products. Also more use cases. You may start with a Robo-Advise, then you add mortgage origination and so on. It's really growing across three dimensions, which shows in the very high net retention rate. In terms of the history of the company, well-researched. What we're looking at additiv today is quite different to its roots.
Clearly the company has, in the last three to four years, built a complete cloud-native orchestration wealth platform and has driven a lot of success through their platform. I think if we look at just the last three years, there has been very strong double-digit ARR growth in this business. Finally, on the forward-looking part, clearly we would expect, even on a standalone basis, this business to continue the kind of strong ARR growth trajectory.
Perfect. Thank you.
As a reminder, if you wish to register for a question, please press star one on your telephone. We now have a question from the line of Justin Forsythe from UBS. Please go ahead.
Good morning, Takis. Thank you very much for the question, congrats on the acquisition. Just wanted to circle back on the wealth business itself. If you could just remind us again, I think you classify wealth within your core banking proposition, but maybe you could whittle it down and remind us again what the percentage of revenues or SaaS and Subs revenue that wealth is. Just wondering as well, if you could make a delineation between wealth and the core banking account product. From an industry perspective, what percentage of that is in-house versus third-party spend? Is it a similar, call it 1/3, 2/3 split, as you would see in the core banking market, or is there a bigger opportunity to move from in-house to third party?
Hi, Justin. On the first one, we always say the core is around 80%-85%. If you add wealth, and obviously there is a wealth front part and the wealth backend part, that's maybe 10% of the group. It's clearly been growing quite nicely. The reason for the acquisition, or one of the rationales is we have been quite strong and still are in the ultra-high-net worth and high-net worth segment, which is still showing very good momentum. Clearly, especially in emerging markets and with a lot of new players also coming to the market, the mass affluent, we were not present, and this is really plugging that hole.
In terms of in-house versus third-party spend, as you can see from some of the client names we have shared, even larger institution moving to third parties, I think, and we need to check this, but I think the penetration is probably similar to the core banking space.
Got it. Thank you very much for that. I just wonder, one quick follow-up, if you don't mind. How were you made aware of this company? Were you competing against them? Did you get a lead from somebody? Are you working with them from an integration perspective at all and you felt it pertinent? Thank you so much, Takis, for the questions. Appreciate it.
Yeah. If you're playing in the banking space, clearly we were aware, and we are aware of many players in the space. When I think the company or the selling shareholders decided to run a process, clearly we were raising our hands and also being interested given the good fit. It was always a founder-like company, was always a company known to us, especially given it's a Zurich-based company. Yeah, when the process run by an investment bank, clearly we were also contacted and this is how it went.
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