Earnings Call: Q3 2019

Oct 16, 2019

Ladies and gentlemen, welcome to the Taimanor's Q3 2019 Results Conference Call and Live Webcast. I'm Sandra, 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 Swart, CEO. Please go ahead. Thank you. Good afternoon, and thank you for joining today's call. I hope you've been able to access our results presentation on our website or through the webcast. I will start with some comments on our Q3 performance, and then I will hand over to Thackis for an overview of the financials before giving some concluding remarks. So starting on Slide 7. We continued our momentum from the first half to deliver total software licensing growth of 15% in the quarter, and we have now delivered total total total licensing growth of 20% year to date. In particular, we've seen strong momentum in our SaaS business with revenue up 93% and ACV up 164% in Q3 on the back of a number of new signings across regions. Overall, total revenue grew 12% in Q3 and 17% year to date. EBIT was up 16% in the quarter and 20% year to date. And EPS is up 18% in the quarter 19% year to date as we continue to deliver strong margin expansion through the operational leverage in our business model. We closed the acquisition of Kurni at the end of Q3, which we are integrating with Stemnos Infinity to enhance our digital front office product as well as bring significant SaaS and cloud expertise and increasing significantly our presence in the U. S. Market. We have updated our 2019 guidance following the acquisition of Kony, which Takis will take you through shortly. I'm pleased with the continued momentum in the business and the growth we've delivered so far in 2019. On Slide 8, I'd like to give you some insights on our sales performance in the quarter. Our end market continues to be driven by the significant digital, regulatory and cost pressures. In particular, the competitive environment for banks is evolving rapidly, with numerous neobanks, challenging banks and new entrants offering a range of financial products through digital channels with customers expecting an Amazon like experience. These new players are setting the benchmark for traditional banks and are struggling to compete with the legacy IT systems. We saw good sales momentum in Europe, Asia and the Americas in Q3. The U. S, in particular, had good momentum across a number of different product lines. Key wins in the quarter included Tier 1 U. S. Bank for fund administration, a Tier 1 Austrian bank for Infinity and a number of signings with existing Tier 1 European clients as we continue to increase our penetration of our existing client base. In terms of products, PEMOCI 24 Transact continues to perform very well, and we expect considered double digit growth in this product going forward based on the level of our pipeline development. We've also seen a significant acceleration in demand for Thermos and Synty, particularly on the back of the acquisition of Avoca and Kony, which significantly enhanced the product functionality. We had a weak sales execution in the Middle East and Africa in the quarter. This should be put in perspective, though, as the region delivered very strong growth in 2018 and so was against a strong comparative. Our Middle East and Africa sales force has grown significantly in the recent quarters. However, I think we need to strengthen our sales management in the regions to ensure better execution. We've put appropriate measures in place and expect to have it resolved by early 2020. On Slide 9, we had very strong performance in SaaS in Q3. Banks are becoming increasingly sophisticated around the understanding and use of the cloud, and we are very well positioned to capitalize on this with our cloud native and cloud agnostic products. QSaaS signings in the quarter included a high profile challenger bank entering into the Australian market, a UK challenger bank focusing on the SME space and a number of wins across different countries in Europe for both neobanks as well as new entrants. The acquisition of Kony is also including our SaaS and cloud expertise, and we've already started to develop pipeline and seen some early customer successes in the 1st weeks of Q4. In terms of SaaS metrics, ACV grew 164% year on year. SaaS revenue is up 93% and TCV increased by 183%. It is important to note that so far, the growth in SaaS is incremental to our business. Moving to Slide 10. We had 21 implementation go lives in Q3 2019, including multiple go lives in Europe with ongoing Tier 1 and Tier 2 continuous renovation projects. We also had 7neo banks going live in the cloud in both Asia and Europe. Our implementations are very well supported by the global network of trained third party consultants. There are now over 6,000 experienced third party and famous consultants available to support our clients in the implementation projects. On Slide 11, I'd like to give a quick overview of the Kurni acquisition and integration. Temenos acquired Kony at the end of Q3 for an enterprise value of $559,000,000 and an earn out of $21,000,000 Kony is a leading vendor of digital banking software in the U. S, as you know, one of our key strategic markets. This acquisition significantly exceeds Temenos Infinity, our award winning digital front office product, by combining Infinity with Kony's digital banking and multi experience development platform to create the most advanced digital banking product in the market. KONE has a global team of 1500 people with strong digital and cloud expertise, which are key for banks in this investing in this area. KONE is also transformational for our presence in the U. S. As we are gaining additional scale, digital banking expertise and clients in that market specifically. Tom Hoger, who was the Chairman and CEO of KONI, has joined Thermos as our President for North America and will be responsible for driving our U. S. Strategy and growth across all our products going forward in the U. S. The integration of Skokini and Terence is progressing well, both from a product and people perspective. We have a very detailed integration roadmap in place, including combining the product over the next 18 months and cross training of the sales teams. We've already started development pipeline and are seeing some early success with clients. So on Slide 12, I'd like to give a quick overview of Kony. Kony was founded a decade ago and established itself as a global leader in digital banking and local development platforms. It has a very strong mobile development application capabilities, in particular, which has been recognized by 3rd party industry analysts, including IDC and Forrester, who both ranked KONE as a leader in its market. KONE has a global client base of over 1 banks, with U. S. Banks and trade unions making up around half of the client base. The majority of the U. S. Client base are large financial institutions with assets of EUR 10,000,000,000 and above. The company is headquartered in Austin, Texas and has around 230 employees in the U. S. With broad based coverage in the market and a strong understanding of the digital requirements of U. S. Financial institutions. Globally, 20 has 1500 employees with a strong culture and understanding of digital and cloud solution. It has a very similar R and D model to Temenos with large center of around 1100 employees focused on digital development in Hyderabad in India. And this will become the Temenos R and D hub for digital for terminals as a large group. The Kurni business is also highly compelling, with recurring revenues contributing over 60% of its total revenue under very high retention rate among its client base. You can find a summary of the transaction metrics in the appendix of this presentation. So with that, I will now hand over to Thakis to take you through the financials for the quarter. Thank you, Max. I will walk you through on Slide 14 the financial highlights of the quarter. We had good momentum in Europe, Asia and the Americas, driving total software licensing growth of 15% in Q3, with SaaS revenue growth particularly strong. We have now delivered total software licensing growth of 20% year to date, well above our sustainable annual target of at least 15%. Our maintenance revenues grew 12% in the quarter 12% year to date, and total revenue grew 12% in the quarter 17% year to date. EBIT grew 18% in the quarter, and we delivered strong margin expansion of 127 basis points, reaching an EBIT margin of 34.5% in Q3. This drove EPS growth of 18% in Q3. We generated $50,000,000 of operating cash in Q3 and have now generated $382,000,000 of operating cash over the last 12 months. DSOs ended the quarter at 123 days, 9 of which are due to the acquisition of KONI, meaning the underlying DSOs were flat year on year at 114 days. Our leverage at quarter end was 3.1x net debt to EBITDA, and we collect, as you know, a significant portion of our cash in Q4 linked to our recurring maintenance revenue stream, which is built and collected annually in advance and which will bring down our leverage below 2.5x by the end of the year. Lastly, our services business continues to perform very well with our services margin reaching 12.2 percent in Q3, up 121 basis points as we continue to focus on project governance and are billing more of our services on a time and material basis. Moving to Slide 15, I will highlight some key figures for the quarter. As a reminder, with the adoption of IFRS 15 at the start of 2018, we are showing year to date rather than last 12 month comparisons as we did not restate our 2017 actuals under IFRS 15. Our total software licensing grew 15% in the quarter 20% year to date at constant currency, reflecting the underlying momentum in the business and in our end markets. Our license growth continues to drive our maintenance, which grew 12% in constant currency, and total revenue grew 12 percent in the quarter and 20% year to date also in constant currency. Our business model continues to drive operating leverage in the business, with our average growing 16% in the quarter 20% year to date and our EBIT margin expanding 127 basis points in constant currency to reach 34.5% in the quarter. Moving to Slide 16. We show like for like revenues and costs adjusting for the impact of M and A and FX. Our last acquisition before KONI was Avoca in December 2018, which is expected to contribute $50,000,000 of revenue for the full year 2019. KONI closed at the end of Q3 and so far had a minimal impact on the quarter. In terms of FX, the weaker euro continued to be a headwind on revenues, while our cost base benefited from a number of currencies weakening against the U. S. Dollar. Taking into account currency movements and hedging, FX had a minimal impact on EBIT in the quarter. Total software licensing delivered 8% like for like growth this quarter, and maintenance grew 11%, with total like for like revenue growth of 7%. Total like for like costs increased only 1% in the quarter, in particular due to lower variable costs linked to the weak sales execution in the EMEA region. Like for like costs have increased 6% year to date versus 11% like for like revenue growth. On Slide 17, we look at below the line items. Net profit grew 20% in both Q3 year to date. Our tax rate for Q3 was 12.1%, which was lower as we continued to benefit from deferred tax assets. We now expect our fiscal year 2019 tax rate to be between 14% 15%, down from 16% to 16% previously. Our medium tax medium term tax rate remains at 18% to 20%, which is a normalized run rate for the business. Finally, EPS grew 18% in the quarter to reach US0.90 dollars and grew 19% year to date. On Slide 18, we look at DSOs. DSOs ended the quarter at 1 flat at 1 more business with Tier 1 and Tier 2 banks and an increasing amount of services we bill as time and material. We plan to continue decreasing DSOs to reach our long term target of less than 90 days. Turning to Slide 19. Our Q3 LTM cash conversion was 107%. This continues to be significantly above our target of converting 100 percent of IFRS EBITDA into operating cash. Moving to Slide 20, we show the key changes to group liquidity. We generated USD 50,000,000 of operating cash in the quarter. The biggest movements in the quarter were driven by the acquisition of Kony, which we paid for mostly with debt. We ended the quarter with $77,000,000 in cash on balance sheet. Our total borrowings at the end of the quarter were $1,200,000,000 and our net was $1,100,000,000 with our leverage at 3.1 times. Given that Q3 is strongest is our strongest cash quarter, our leverage will be below 2.5x by year end. Now on Slide 21, we have given our revised 2019 guidance, taking into account the impact of KONI. The guidance is on a non IFRS basis and in constant currencies. You can find FX rates in the appendix. We are now guiding for full year total software licensing growth of 19.5% to 22.5% versus 17.5% to 22.5% previously. The change includes roughly 200 basis points of headwind from FX, roughly 200 basis points of additional total software licenses from KONI and the remaining delta is due to the sales execution issues in EMEA, which we highlighted. For total revenue, we are guiding for growth of 18% to 20%, up from 16% to 19%. This change also included a roughly 200 basis points headwind from FX, 200 basis points of additional licenses from Komi. The remaining delta is due to the sales execution in EMEA as well as the lower revenues in Q3 due to the strength of our partner program. Finally, our EBIT guidance remains in the range of USD 3.10 dollars to $315,000,000 which implies a full year margin of around 31.9%. We expect Kony to reach group margin within 3 years, and we expect it to be EPS neutral in 2020 and accretive from 2021. Our organic EBIT margin expansion is expected to be 150 basis points, excluding the impact of Avoca and Kony. Finally, we expect conversion of over 100% of EBITDA into operating cash and as mentioned, our 2019 tax rate of 14% to 15%, revised down from 15% to 16% previously. On Slide 22, we reconfirm our sustainable annual growth targets. We expect to deliver compound growth at these rates sustainably in the long term beyond the usual 3 to 5 year period we would consider for medium term target. We have introduced a new lower DSO target of 90 days and an EBIT margin of 36% plus in the long term. We also expect our tax rate to move up to towards 20%. Our order targets remain unchanged as well, with total licenses expected to grow organically at 15% plus per annum, total revenue at 10% to 15% per annum and EPS at 15% plus per annum. We have also retained 2 3 to 5 year targets of expanding the EBIT margin at 100 to 150 basis points per annum and a tax rate of 18% to 20%. With that, I will hand back to Max. Thank you, Takis. So to conclude on Slide 24. Banks are under intense pressure from digital regulation, cost and open banking and the view investments in the IT platform as essential to the businesses. We continue to invest in sales and marketing to support the 6 drivers of growth and to grow our market share across all of these. We had good sales momentum in Europe, Asia and the Americas next quarter, with the U. S, in particular, performing well. We also have strong momentum in SaaS with multiple signings in Q3. And finally, the acquisition of Kony will enhance Pembina's Infinity, strengthen our SaaS and cloud capabilities and significantly expand our presence in the U. S. With that, operator, I'd like to open the call for Q and A. We will now begin the question and answer The first question comes from Michael Fritz from Vontobel. Please go ahead. Excuse me to interrupt, Mr. Firth, but your line is very disturbed. I have to disconnect you. Please reconnect again. The next question comes from Stacy Pollan from JPMorgan. Please go ahead. Hi. Thank you very much for taking the questions. Just the weaker license and the issues in Middle East and Africa, what does the pipeline look like there? And maybe you say you can recover in 2020. So it sounds like the issues might be ongoing in Q4. Could you perhaps give us a little more clarity on that? I know you mentioned sales management, maybe just a little bit more detail there. Have you lost any deals from the pipeline there? And then broader spectrum, are you how does the pipeline look in other regions? Hi, Stacy. Listen, regarding the execution issue that I mentioned in the Middle East and Africa, this is a region that the last couple of years has seen tremendous growth. And I think what we've seen in Q3 is the investment we've put in that region and the capabilities to deliver and close on the transaction has not been as efficient as expected. So for us, the plan is very simple. We need to strengthen the management team, the sales management team to be able to cope with the growth that we've seen in the region. Now we've started that process, so it's something that we knew we needed to do. So the process is ongoing. However, I would expect that to go through and to be able to perform 100% as we've had in the past will take probably until early 2020. Now having said that, the pipeline continues to be very strong in that region. We've not lost any deal. And as I said, it is a region that has performed very strongly in the past. And somehow, that success and that growth came to a point where we couldn't ended the execution. And that's what we've seen. But pipeline is strong. There is no deal that has been lost. In fact, there are some of those deals we expect to close, obviously, in Q4 already. Now globally, I would say across the regions, if you remove this sales execution, we continue to see a strong pipeline. I mentioned in during my part that Transact, which is the core of the business, the largest part, continues to be growing sustainably and very strongly at more than double digit. And also, Infinity, which is this newer product on the digital front, is experiencing extreme growth. And we are very, very positive on our ability to capture that market. And in addition to that, we see the cloud part being very, very positive. And I think what is very interesting on the cloud is our technology give us such an advantage compared to the more traditional vendors that our leadership position when we compete for cloud deals is very much enhanced compared to them. So also seeing a very strong Python development for SaaS type of deals. Maybe just one quick follow-up. Can you give a comment around services and the weakness in the quarter there? And how do you see that going forward? And then in terms of upcoming implementations, I guess you continue to leverage 3rd party SIs more and more? Yes. That's clearly the strategy, and that's why on the services side, we look at it as a margin business and not as a top line as such. So for us, really, it's how can we continue to improve our margin in services. Obviously, continue to improve the services we offer to our customer and the ability to deliver very strong implementation. But it's true that today, if you look at our partner network and how we've been able to grow and train our partners, this is working extremely well. And hence, more and more of the deals are delivered by our partners. And Theranos plays a role of governance and support to the bank, to the customer to ensure that there is a smooth transformation of the bank, yes. Thank you. The next question comes from James Goodman from Barclays. Please go ahead. Yes, good evening. Thanks very much. Just quickly, just elaborating perhaps a little further just on the Middle East and Africa topic. I just wondered if you were able to be any more specific around sort of the countries or subregions there and whether it's a small number of deals. I don't know if you were clear on that or whether it's a sort of a broader sales execution there, whether you'd really encompass any sort of macro commentary into Middle East at all? Or is it that's whether that's still strong and it's purely execution? And then the other question is just on the sequential change in the OpEx. I think, Takis, you mentioned that there's been some lowering of the compensation for the provisions. Just looking for a little bit more detail there, whether that's the key driver, whether there's anything else sequentially there with the OpEx down 10% or so? Thanks. Hi, Jim. So listen, on the Middle East, it's clearly execution. And I wanted to bring transparency and to be able to explain really what happened. But ultimately, if you look at it, it's few deals. So we are not talking of anything major here. It's just probably more towards the Africa region, where we've seen probably most of a need to strengthen the situation. But it's really very specific. We've not seen any macro event. And I said, if anything, it's really the growth that we've seen in that region, which has put pressure to the team on the delivery side. And so it's now we have started the process to strengthen, to bring more sales management and not just people on the street delivering with SCOTA. That's the action that is ongoing set by the by early 2020. We should be back on track with the pipeline developing very nicely. James, you're correct. A large or the largest part of that was from lower variable accruals, definitely driving this lower cost. Also, as you may remember, we always had said, we have a tight grip on this, especially on G and A. This, we have maintained. So there are also some savings there as we have now fully integrated Avoca, but the largest cost was from the variable. Thank you. The next question comes from Harmus Leitner from UBS. Please go ahead. Yes, good evening. Thank you for letting me on. I got a couple of questions concerning the updated guidance and around the acquisitions. So you mentioned 200 basis points tailwind from the KONE acquisition. Could you identify because the EUR 17,000,000 calculated 200 some mix to 200 basis points. You mentioned that some of it was already booked in Q3. So how should we think about the trajectory going forward as you guide for roughly EUR 115,000,000 run rate next year? That's the first question. Hannes, yes, I'll take that one. As we said, there is very limited contribution from KONI in Q3. For Q4, we would say the 200 basis points, so that's around €8,000,000 to €9,000,000 of total software licensing and maybe around €20,000,000 of total revenue. So the delta is obviously services. Now keep in mind that KONI has a fiscal year end in March. So there is the usual seasonality, I. E, the calendar Q1 quarter is a strong one. So we still feel very confident with €115,000,000 of revenues we have guided for 2020 for KONI. Thank you, Tuck. But isn't that a subscription business? So we would have expected that there is less seasonality in the booking of subscription? Well, it is. But we don't have we don't give the split what is SAAS. So that's definitely included in those EUR 8,000,000. And there is some still new deals to be won. And it's, as we have mentioned, at the KONI acquisition call, there is a very strong growth in this business. Okay. And then the last one is on so if there was really minimal contribution by KONE, that would mean that the implied difference on the organic growth and constant currency would be coming from Avoca. I have year to date a contribution of only €30,000,000 so far. You guided to a €50,000,000 business at the time of the acquisition of Avoca. So that would mean also for a very strong finish, and that would result in a similar question around SaaS and software license split? Okay. On Avoca, I don't think we have given you the quarterly split and contribution from for Avoca. Definitely, with Avoca having, let's say, the normal fiscal year end, their strongest quarter is Q4. So this is incorporated, but we haven't changed the €50,000,000 we see for the full year. Okay. And then if I may, the last quick follow-up on the accounting. You had a deferred income outflow year to date of roughly $40,000,000 versus $25,000,000 So could you help us to understand how much Kornay added in Q3 to that? Okay. We'll have to come back on that. Most of the items we saw in terms of balance sheet changes, obviously, we had a limited impact on the P and L. But obviously, on the balance sheet, most of the changes we have seen from a quarterly and yearly change, that was all mostly driven by KONI. Understood. Thank you. The next question comes from Adam Wood from Morgan Stanley. Please go ahead. Hi. Thanks very much for taking the question. Can I just maybe just start off on the cost base increase? If we look through the last few quarters, the rate of cost base growth has been decelerating kind of generally. And I'm just wondering philosophically how you think about that against top line growth. We're now up at a 35 give or take percent margin for Q3. Unless businesses and software slow, it's generally difficult for companies to push margins dramatically higher. So could you just talk a little bit about how comfortable you feel driving the top line growth that you want with the slowing cost base that we see in the business? Secondly, could you maybe just help us you've highlighted a very strong SaaS performance overall. If you could just help us with what that would specifically SaaS in the quarter? And then just again to the environment generally, a lot of the IT services companies have talked about a weaker environment for financial services spend. I guess we all understand that you're exposed to quite different markets to the IT Services companies purely and the strategic deals that you have might not be impacted. But with more of the business coming from add on deals into the base, could you just talk a little bit about what you see as the risks for financial services companies flagging weaker financial services spend overall? Thank you. Okay. Adam, let me take the last one, and I will leave the 2 first to Takis. On the environment, clearly, we monitor the environment and the macros on a continuous basis. So far, we've not seen an impact of the macro elements. So, so far, the discussion we've got with our customers that what we do is really highly strategic, It's mission critical. We ultimately support to improve the profitability and the performance of those banks. So we've not seen any change in conversion, in pipeline, except, as I mentioned, very conscious, and we track the pipeline, the conversion rates. We try to assess if there's any changes. But so far, we've not seen any impact from any worsening environment from our customers. But we will continue to monitor that and make sure that we are tracking very closely. And on the cost side, yes, correct. We have been like for like, up 1% and on revenues of +7%. There is still quite some investments we signed for Q4. So we think a double digit cost increase for the full year It's probably what we're going to end up with. Obviously, there is quite a bit of discretionary spending. We're not saving on R and D. We're not saving on sales and marketing. So that was largely G and A, where we reaped some of the benefits from the integration of Avoca. On the SARS organic growth, we used to give guidance, and this is still valid. We say we expect the SaaS revenue to grow 30% to 35%. So, you can assume that the organic growth in Q3 was also in that ballpark. Great. Thank you very much. The next question comes from Chandra Surajam from MainFirst. Please go ahead. Yes. Hi. Good morning, Max. Good evening, Zadgis. Just a couple of questions from my side. So I noticed that maintenance growth has dramatically slowed. It's still strong in double digits. But just wondering, is there anything to it or just more timing related? And my second question is DSS of the underlying business have also increased after declining for a very long time. Is there anything to read into this? Or it's just, again, one off? Thanks. Okay. So on the DSOs first, we are at 1 14 days. And if you look at the cash flow statement, obviously, with licenses not growing as strongly as in the previous quarter, There was also some headwind on the cash side. So this is just basically momentary view. I would not read anything into that. We expect this to revert basically in Q4. Now on maintenance revenue, with 12% on a constant currency basis, again here, I wouldn't read too much into one particular quarter. We see that growing 12%, 13%, 14%, slightly slower than total software licenses. So no change in terms of guidance for the maintenance revenue line. Perfect. And maybe a quick one on the SaaS business. I thought it's supposed to dip a bit in this quarter due to sunsetting of some of your products in Australia. Has that happened? Or is it pushed to next quarter, just for modeling purposes? No, that has really happened. As we had indicated, what surprised us on the positive was, as Max mentioned, the strong underlying business in SaaS. So that was basically more than offsetting what we expected to lose in terms of revenues from that. Perfect. Thank you. The next question comes from Charles Brennan from Credit Suisse. Please go ahead. Great. Thanks for taking my question. Can we just go back to the Middle East? I'm not entirely sure what the reason for the weakness is. I think the way in which you described it was a successful team struggling to manage growth that they've delivered. But if I look at the numbers, it looks like software licensing was down about 30% in the period. That makes it feel a little bit more significant than that. Have you lost some salespeople? Or have there been changes of management that have driven that underperformance? And inevitably, I think investors are going to be focused on the recovery of that software licensing in Q4. I'm not quick enough to calculate what's implied in your Q4 guidance, but can you just help us with your expectations for software licensing growth in Q4? Thank you. Hi, Charles. Listen, regarding to give more color on the Middle East and Africa. As I said, this is a region that the last couple of years have seen very, very strong growth. And it's true that when you look at it just specifically on 2019, the performance is not where I would like it to be. Now if we look at it over the period of 2 years, this is still bringing significant growth to the company. What has happened is the fact that we've been able to grow that business so much. We've invested a lot and the sales force has grown at around 30% in that territory. And probably, as I mentioned, we had not sufficient sales management to be able to qualify, to be able to close the deals that the people were working on. So it's really about sales execution in that region. There is nothing more than that. We are already working on that. And as I said, by early 2020, this will be resolved. But don't look at the performance within the first nine months. It's clearly, if you look at it over 2 to 3 years, you will see how that part of the rollout has contributed to the growth. On the guidance question, I'll leave Stac is to respond to this one. Yes. Hi, Charlie. If you look at the let's take like for like total software license growth, which was 14% year to date. And if you basically look at our the implied Q4 guidance, that's clearly in the double digit space. If we deliver the midpoint, you probably will get towards the range we usually guide for the year. So clearly, double digit, we expect a clear improvement of the like for like total software license growth for Q4. And just a quick follow-up and a clarification. Did you say that TRANZACT grew double digits during the period, then you had very strong growth from Infinity and Cloud. Given that Transact is the biggest chunk of the revenues, that implies considerable weakness elsewhere. Have I got that right? Or have I misinterpreted the comment on transact? No, no, no. You got it right. In fact, it's something that in 2018, one of in fact 2017, 2018, one of our probably our 2nd largest business line, which is the fund accounting, had a very, very strong performance. And we knew that we were facing with a comparative on the fund side. So this was not, if you want, a surprise to us. We knew that we were lapping on the front side a very high comparative. I wanted to mention Transact because clearly, for me, this is the largest contribution to growth. I wanted to make sure that you understand that this continues to be growing significantly and at the double digit, as I said. Then we've got this new product line with Infinity, which is very exciting, which is now strengthened with the acquisition of Aboca and Kearney that we've done. And finally, you have multifound, which I just mentioned. And then if you look at our drivers of growth, you have 2 more products, which is wealth and payment. And those are smaller very small contributor to the group. So I would not spend too much time. So yes, the one that we knew though was affecting a large comparative work on the phone side. Perfect. Thank you. The next question comes from John King from Bank of America. Please go ahead. Yes, good evening. Thanks. Just one question actually. Just in relation, obviously, it's been a long time since, I guess, Kennenov has adjusted, tweaked down the guidance based on an execution issue. It's been some time anyway, I think. And I'm just wondering why you would say that is. Has there been anything changes to the kind of visibility of the business? I mean, I know last quarter you were talking about not relying on large deals. But do you feel as confident as you might have done 12 months ago? And let's say if we look into the next 12 months, the deals are there, the deals are closing pretty predictably. This is a very isolated issue. Maybe just give I know you've already addressed that a little bit, Max, but maybe you can look at it through that prism. Yes. No, listen, it's really taking a, let's call it, a more conservative view on what we can deliver in Q4 in the Middle East and Africa. That's really about data. And reflecting of what happened in Q3, which was disappointing in that specific region and taking a more prudent view of what that team will deliver in Q4. Now it's very tactical. It's very we actually understand where the need for improvement is. There is nothing more than that. Now across the board, as I said, the transact business continue to be growing strongly. The Infinity is clearly the one where we see the fastest growth. From a territory point of view, we see the U. S. Clearly being very strong and with now the enhanced scale with Kony, we see a very strong opportunity. And I would say digital is really top of mind in specifically in the U. S. Customers banks today are in a need to offer a personalized customer experiences. And specifically in the U. S, if you were to if you look at the largest banks, they've built very competitive offerings themselves, the largest banks, the top 5 banks. And you get the whole market that needs to be able to offer a similar type of experiences to the customers and they cannot beat themselves and the growth of packages. And this is why we see, specifically in the U. S, a clear window of opportunity for the next 2 to 3 years. And that's why Kearny is so strategic to that opportunity. So that's so overall, as I said, the conversion and the execution remains strong except in that very specific situation. And the fact that you've done the KONE deal, does that signal that maybe your conviction that actually I mean, I know not maybe for all of the applications, but we may see a more concerted shift towards SaaS and cloud in the market. I mean, is that something that you're starting to say that could play out more meaningfully than perhaps it has done? Maybe and I guess, would that change your view as to what you could deliver in terms of on premise licensing growth? I guess, are you going to see a faster shift towards SaaS essentially? SaaS is very exciting as an opportunity. And the ability that and the cost benefit that the infrastructure is that provides to banks. We are quoting that cloud can bring the infrastructure costs up to 10x because really you use the environment for on demand really with what you need. And when you are a cloud native vendor like Temenos, you can really optimize and get the benefit from that. So this clearly is appealing to banks that probably we're not able and we're not willing to take more traditional on premise solution. At the same time, there is a perception that to do on the cloud through more, let's say, flexible environment, faster ways to implement. There is also a view that the timing and the risk aversion for some banks is seen lower on the cloud. And finally, the level of resilience performance on the security level as well has been significantly enhanced over the years. So all of those attributes are making lots of progress, and we see more and more banks. And even in some territories, for instance, in Q3, we signed a size in a country in Europe where we've not been able to penetrate for the last 25 years. And through our cloud and SaaS, we were able to bring this. So to summarize, I continue to believe that SaaS will remain incremental, that there is still and there is clearly an increased demand for those type of solution and deployment and that the market for traditional on premise is still there because you still have many banks that are not yet ready to move to the South. And so far, I would say, at this stage, I continue to see the Sarta as being incremental to the business. Okay. Thank you. The next question comes from Alex Douc from Deutsche Bank. Please go ahead. Yes. Hi, guys. Thanks for taking the question. Am I right in thinking that the organic cut to revenue in FY 2019 is about €10,000,000 And if so, are you assuming any net catch up in license sales in the Q4? I think the shortfall versus consensus this quarter was about 7,500,000 dollars and you're only guiding down by $10,000,000 for the year at the midpoint. So are you assuming some catch up, some resolution of those issues in the Q4? And then secondly, could you just update us on Commerce Bank in the U. S? Is the go live still on track for the end of this year? And also perhaps if you could update on the other major rollouts that are in progress, notably Nordea? Thank you. Alex, okay. On the guidance, yes, this is about correct. The underlying, let's say, reduction or revision related to Temenos or the MIR situation is about EUR 10,000,000. So that's about correct. What was the rent, the other question? Yes. So it's a €10,000,000 slide down. Yes. Yes. You've mid sized out €7,000,000 in the quarter. So are you expecting any net catch up in licenses in the Q4? No. As Max pointed out, and I think the consensus we put on our website is about around a EUR 6,000,000 miss. So that's definitely, as Max explained, not something we expect to catch up. We remain prudent in our assessment what the Middle East and Africa region can deliver by the end of the year. So overall, I think the $10,000,000 you alluded to is about the right number. And on the large deals, on the progress of implementation, I have to say that if you look at Commerce, if you look at Nordea, if you look at Openbank, those are progressing extremely well. It's exciting times because for all of those projects, we are getting in the next, let's say, 6 to 12 months, a lot of those will go will start to go live. And I think I'm hopeful that we'll be able to make some very interesting announcements and to have them also to communicate more and more. So all those projects are on track, progressing very well. In fact, we are doing more stuff with them. And remember, our strategy with the largest banks, it is one of increasing our wallet share with those. And that's really our continuous goal is how can we continuously renovate the banks. And that is applying as well to those ones. And so I'm basically with the relationship and the progress we are making on the go live case. Okay. Thank you. The last question comes from Paul Katz from Jefferies. Please go ahead. Hi, everyone. Just looking at your numbers and stripping out the I guess the declines in the Middle East and Africa, it suggests when I take out your acquisitions you've done this year that your growth in all the other regions is basically in the single digits. I mean, could you maybe explain or maybe clarify as to why you've seen such a slowdown in those regions ex acquisitions? Hi, Paul. Okay. So the one thing I can say is the calculation is not quite right. So we have very strong double digit growth in most of the regions. Yes, Middle East and Africa, we highlighted. But clearly, especially the Americas and also Asia Pacific are very strongly in the double digit range. And if you do the math in Europe, it's still growing quite nicely. But as you would expect from the largest region, the growth is a bit lower than what we have the Americas and Asia Pacific. So the culprit both on Q3, but also year to date is definitely on Middle East and Africa. We lost connection with the questioner. Ladies and gentlemen, that was the last question. I would like now to turn the conference back over to Max Ward for any closing remarks. Thank you. Thank you very much for attending the call, and looking forward to talking to you and seeing you very shortly. Thank you. Thanks. Ladies and gentlemen, the conference is now over.