Earnings Call: Q4 2018

Feb 12, 2019

Ladies and gentlemen, thank you for standing by, and welcome to the Termina's Q4 2018 Results Conference Call. At this time, all participants are in a listen only mode. There will be a presentation followed by a question and answer session. I must also advise you that today's conference is being recorded, Tuesday, 12 February, 2019. I would now like to hand the conference over to your first speaker for today, David Ardot. Thank you. Please go ahead. Thank you, operator. Good afternoon, everybody, and thank you for taking the time to join today's call. I hope you will be able to get hold of our results presentation, which is on our Web and then we'll be using as a basis for the call we're having now. But before we run through our outstanding Q4 and full year results, I'd first like to comment on the announcement that we made as part of that press release regarding the changes in management. I'll be setting down as CEO on the 28th February. It was a very tough decision for me to make. I think it was someone else before our IPO back in 1, 1st as CFO and then as CEO since 2012. I've seen the business fundamentally a transform over this time, and I'm incredibly proud of the company as it stands today. We've never been in better shape than we are today, and we're getting stronger every day. I'm absolutely certain that Temanoff will continue to be the leader in house sector and will be one of the leading software companies globally over the next few years. After discussions with my family and after 18 years with seminars, I've decided now is the best time for me to step down, spend more time with my new family and my new baby. In fact, it's been playing on my mind since the end of last year when my family expanded. With company so many colleagues who've become such close friends, I have to say, I've worked very closely with MAX for many, many years and have absolute confidence that we'll continue to deliver outstanding success for the company and to all of our stakeholders. And I wish the new management team all the best for the future. I'd like to hand over now to our Executive Chairman, Andreas Andreas, to say a few words. Thank you, David. On behalf of the Board, I'd like first to thank David for his commitment and dedication to Terminus. He's been a key part of the growth and success of the company and leads Terminus in the strongest strategic financial and operational position it has ever been. I hired David myself 15 years ago and actually Max 17 years ago. And this is we have achieved with TELUS over the past 17 years we did together. I know David has been thinking about this new family several months ago, which brings me to the announcement we made today. On behalf of the Board, I'm also pleased to announce that Max Schwarcz will become CEO effective 1st March 'nineteen. Max is a natural successor to David and has been so for several years given his extensive experience in the business and the strength of his leadership. He was confident he is the best person to continue executing our winning strategy and to drive the next phase of growth in the business. As I said, Max has been with Temenos for 17 years with responsibility for strategy, M and A, finance operations, and became CFO in 2012 and also COO in 2016. He's integral to our client engagement of selling and delivery and was instrumental in our expansion into U. S. Running the acquisition and integration of both Accelerant and Avoca as well as platforms, which has been a very successful business. I'm also pleased to announce that Ana Ortiz Villavolos is joining as CFO from 31 March 2019. He joins us from October, which is a leading sweep bank where the head of the researcher was a member of the Investment Bank's executive management team. He brings a unique skill set across technology, finance, operations and strategy. He follows the he follows Telenor's since IPO in 2,001 and have always believed in our strategy and potential, and the Board is confident in a strong cultural fit for the organization. I've been working with David and Matt for nearly 2 decades, and together, we'll seek 7 months into the global leaders that we see today. With our new leadership team in place, I'm confident we'll continue to successfully execute our strategic plan. We have a massive $50,000,000,000 market opportunity to capture, and I'm fully committed, personally committed to the business for at least the next 5 years as we enter this next phase of growth. And with that, I'd like to hand back to David to run through the Q4 results. Thank you, Andreas. So turning now to the Q4 results presentation. I'm going to start with some comments on our Q4 performance, and then I'll hand over to Max for an overview of the financials and to give us some concluding remarks. And I'll start on Slide 7. On Slide 7, the business has delivered another outstanding set of results in both the Q4 and the full year 2018. Our end market continues to expand as banks increasingly understand the urgency we believe we have to address the right to deficit, and TenneMaster is capitalizing on this increasing demand as the leader in our market. We grew total software licensing by 15%, total revenue by 12% and EBIT by 15% in the 4th quarter. For the full year, we grew total software licensing by 21%, total revenues by 14% and EBIT and EPS by 21%. We continue to hear from banks every day that IT spend is not strategic. This strategic is often not discretionary, and they will continue to increase spending on IP irrespective of the economic environment. Ambulatory banks no longer have a choice. If they want to do more than just survive the next decade, then they have to invest in IT renovation. And this is reflected in our outstanding growth in 2018 and the robust outlook for 2019. On Slide 8, I'd like to turn back in the quarter and look a little bit at the momentum in our business over a few years. We've now grown our full software licensing at a CAGR of 27% for the last 4 years and EBIT and EPS at 20%. We're only able to achieve this by having talent and the world's leading banking software talent. The company has demonstrated it can execute on a consistently high standard over many years, delivering strong growth and returns for our shareholders. On Slide 9, I'd like to hear a little bit more insight into our sales performance for the Q4 and for the full year. We saw broad based demand across all segments, peers and geographies, and predictable and regulatory pressures continued to be top of mind for banks as is the inevitable adoption and disruption from Open Banking. We have great momentum in the U. S. As we signed a strategically very important deal with the top tier U. S. Bank for CMOS Infinity, our independent digital front end product. We also signed a deal with PayPal for loan management in the cloud. Again, we're seeing that we complete the domestic U. S. Competition and have gained recognition rapidly in this market. We had a very strong performance in the Middle East and Africa in 2018 with demand from top tier banks across both subregions. We won a significant number of new name clients as well as having strong sales into our existing client base. There's been a significant increase in demand for SaaS and cloud adoption in 2018, with total contract value increasing by over 6x in 2018 to reach $59,000,000 of order book signed in the year, very little of which, of course, is flowing through our P and L. This demand is incremental, bringing new banks to market and driving incremental growth to terminals. We're beginning to see very good demand from Tier 1 and Tier 2 banks, which contributed 53% of the mix in the full year and an even higher 66% in the 4th quarter. We thank you for undertaking multiyear projects with KEMOS as our trusted partner and are a key part of our revenue visibility and pipeline growth going forward. We have robust growth both across our tool base and with new clients with 28 new clients wins in the 4th quarter, giving us a total of 76 new customer wins for the full year. Lastly, we've consistently invested in sales and marketing over the last few years to ensure we've got the right team and individuals in place to capture the market opportunity, and this investment accelerated in 2018. On Slide 10, I'd like to give some color on the growth of our SaaS and cloud adoption. We see strong incremental growth in demand for SaaS and cloud, which is exceeded, thanks to our expectations. As a growing in the cloud, banks benefit from cost savings through elasticity as the infrastructure automatically scales up and down to meet their high end of day and end of month FACTs demands. We also benefit from world class security as provided by our multiple cloud partners as well as unlimited scalability, enabling banks to deal with the exponential growth in transaction volumes as they forecast in areas like payments. By consuming software as a service, banks also benefit from significant reductions in operating costs and also reduced implementation time frames as they tend to stick to more standardized out of the box solutions in the SaaS world, making them easier to deploy as we've been demonstrating. Finally, of course, SAS allows you to more easily take time as we automatically upgrade them as soon as new versions and modules become available. We're seeing a growing appetite across all geographies and fields with even Tier 1 and Tier 2 institutions looking to optimize their implementation projects by leveraging not just cloud based implementations and testing, but real cloud based ongoing deployment. We're a highly differentiated offering with the launch of our new products, which combine market leading banking functionality with true cloud native technology compared to our traditional competition who lacks the depth of cloud expertise. And compared to the newer cloud based vendors, we've got more limited banking functionality and certainly nothing like our pedigree of packaging country models after over 25 years' time frame. Moving to Slide 11. We had very strong success with implementations in the year. Our products are packaged, upgradable. We've obtained 25 years' worth of innovation and functionality that enables seamless deployment from day 1, and none of our competitors have anything close to this. There is benefit from our extensive network of partner consultants. We've now got over 5,000 third party terminals consultants, and our clients can leverage the support of experts across all aspects of delivery from implementation directed to testing and training. Our partner network is critical to ensuring client success as well as enabling Pembina's to continue accelerating this growth. This implementation track record means we've got the best references in the market with a number of key geolines and milestones in the year across some of our largest implementations as well as very rapid 6 month deployments for 2 digital MEO banks in the U. S. And another one in Australia. In 2018, we had 95 clients building lives on our software for the first time and 233 realized across all implementations, including clients taking new modules and upgrading their software. And this is equivalent to approximately one go live every day and a half. We continue to make significant investments in training our partners and clients to the Temenos learning community ensure consistently high quality implementations globally. And with that, I'd like to hand it over to Matt to talk about the financials. Thank you, David. And before I start on the slides, I would like to thank David for all he has done for ThermoDos. I've really enjoyed working with him over the years. We've delivered so many of these quarters together, and we will all meet him up. I hope he enjoys his time with his new family and new baby, and hopefully, he will not get bored too quickly changing habits. I'm very honored and excited to be taking on the role of CEO. In my current roles, I've been heavily involved in the day to day operation of the company as well as leading client engagement, both from a sales and delivery perspective. We have a highly successful strategy that under the lead and I have put in 3 years and that has delivered very strong performance. With Taki Spyopoulos joining as CFO and the strengthening of our elected committee with Jean Michela, appointed as COO and Alex Agenor, our Chief Customer Officer joining the Executive Committee as well. I am confident we have the right team in place to ensure continuity of strategy and execution. That is as well as enhancing a very mature world class finance organization that has built over the last few years. The company has a massive opportunity in front of it, and I am determined to capture this as we enter the next phase of growth with our new product set we announced in January. Now starting with Slide 13. I'd like to run through our performance in 2018 versus our guidance for the year. We increased our guidance at the time of the Q3 results, and I am very pleased that we were able to exceed the top end of our revised guidance. We grew total software licensing at 21%, which is a revised guidance range of 15% to 20%, and total revenues grew over 14%, exceeding the revised guidance range of 12% to 14%. Finally, we exceeded the top line of our EBIT guidance, achieving an EBIT of $266,000,000 for the full year with our business model enabling us to deliver strong revenue growth and expand margins. This is an outstanding set of results and continues our very strong execution track record over the past few years. On Slide 14, I will highlight the key numbers for the quarter and full year. I will focus on the constant currency growth rate. Our total software licensing grew 15% in the quarter and 21% for the full year 2018. The demand in 2018 was broad based across all segments, fields and geographies. We were able to deliver this level of growth with no contribution from mega large transformational deals, and we are confident we can continue delivering very strong growth without the last one of these given our leadership position and the broadly structural growth in our market. Our maintenance has benefited from our strong license growth with maintenance up 13% in the quarter and 12% for the full year. As you know, maintenance is a very high margin and key to growing our future profitability. Total revenue grew 12% in the quarter and 14% for the full year, approaching the top line of our medium term target of 10% to 15%. Lastly, we grew our EBIT by an increase 21% in 2018 to reach an EBIT margin of 31.5% for the full year, an expansion of 1.1 percentage points. On Slide 15, I summarize our for the quarter and for the year. We had strong growth in earnings and achieved an EPS of $2.96 per share for the full year, an increase of 21%. We generated $365,000,000 of operating cash in the full year 2018, up 22% on 2017. This represents a cash conversion of 117%, well above our target of 1% of I1st per big year. DSOs ended the quarter down 9 days organically. The acquisition of Avoca added 4 days of DSOs. So overall, we ended the year at 1 14 days as we had the impact of Avoca on our balance sheet at the year end without any revenue contribution in the P and L. Going forward, we expect the approach to continue declining around 5 to 10 days per annum to reach 100 days in the medium term. The strength of our cash flows in other than to launch buyback to acquire Avoca to make a minority investment in EOGD and core dividend in 2018 and still end the year with our leverage at 1.6x. This will have significant room to pursue growth opportunity if they arise. Lastly, I'm pleased to announce a dividend of CHF0.75 for the full year 2018, an increase of 15% from last year. This is obviously subject to shareholder approval at our AGM in May. Moving to Slide 17. We had a very strong start to 2019 with several very exciting announcements. In January, we launched our 2 new cloud native, cloud agnostic products, Pemenos C24 Transact and SEMENOS incentive. These are the next generation of SEMENOS products, and I'll give some more details on this on the next slide. We recently announced the acquisition of Aboca, a U. S.-based company specializing in customer onboarding and customer acquisition. This has strengthened our digital product as well as giving us further momentum in the U. S. Market. We also announced minority investment in UHDV in Q4, which provides a cloud native distributed database and numbers our clients to maximize the benefit of running in the cloud by allowing significant scalability. Lastly, we announced a very exciting deal with Bloomberg, who we have partnered with to offer contingency net asset value cancellation to the buy side through Bloomberg's global terminal network. This allows asset managers to generate net asset value estimates in the present of the fund administrators to facilitate daily oversight and ensure continuity of operation in case of an outage. This opened up a whole new market for terminals and has the potential to be significant to run stream in the future. On Slide 18, I'd like to introduce our new products and technology. These new products combine the most complete Genzyme functionality in the market, leveraging 25 years of functionality from 3,000 banks with the most advanced cloud native, cloud agnostic, API first technology and design led thinking. This technology is cloud native, allowing our clients to take full advantage of elastic scalability, active active resilience across multi cloud. This on demand modern enterprise only pay for the resources they use, which we estimate could save them up to 10x on the infrastructure costs. Our technology is also cloud agnostic, continuing Temenos' traditional strength of offering our clients a choice of platforms upon which to run our software. Temenos was the 1st mainstream provider to launch core banking in the cloud back in 2011, and we've continued to show innovation. Last year, launching the 1st payment card in the cloud, we put more banks in the cloud than any other vendor with real success stories from challenger banks to large incumbent banks like Itau. Our new products are revolutionary in our market and will open up significant incremental demand as a faster, cheaper and lower risk growth to digital transformation. It will bring banks to market that would have previously been reluctant to embark on IT renovation. Moving to Slide 19. I'm pleased to introduce our next generation independent cloud native digital banking solution, Telenor's Infinity. Telenor's Infinity is a comprehensive omnichannel digital banking product with best of breed customer precision and onboarding, ready to be deployed independently or integrated with MNOs 2 24 transact. This is the next major step in an award winning Pemos digital front office product, which has over client banking clients. Thermos Infinity is powered by APIs, enabling banks to easily connect Thermos Infiniti to any core banking system. HCI in other banks to prudently queue quickly to other systems, partners, developers and fintechs to innovate on top of our software and extend the functionality. Famous Infiniti is designed around the bank customer using design led thinking, user journeys and single content due to support banks across all the customer touch points. Today, this platform purpose is almost entirely in house with banks building up layers of legacy calls in an attempt to respond to the customer demand. The competition is a mix of channels and UXV vendors and platform toolkits. In terms of Infiniti, we have highly differentiated products, and we are confident we'll get a significant demand to release. Moving on to Slide 20, I'd like to introduce MST24 Transactor, our next generation core banking product. MNO C24 Transactor takes the deep and extensive banking capabilities of MNO C24 core banking and we platform them onto a new cloud native and cloud agnostic platform. 10% of these banks continue to deploy, meaning they are able to test and deploy changes, like new products and ideas in a matter of minutes. This currently takes banks its legacy solution months or years to do that. A lot of us are able to be in the morning and deploy in the afternoon, giving them freedom to create and to experience. Thermo's Transact share the same API technology with Thermo's Infiniti. So it also can plug and play quickly toward the systems, partners and fintechs, including other front office digital solutions. The existing clients can upgrade to Tenors Infinity and Tenors Transfer Transact seamlessly using the same upgrade technology you used for previous upgrades. The RST24 transact is a product that allows banks to transform faster, innovate quicker and reduce the cost. On Slide 21, I'd like to give an update on our U. S. Strategy. We signed a number of key deals in 2018, including PayPal for a loan management system in the Plaora as well as a strategically important deal with a top tier U. S. Bank for Temenos Infinity, which we will integrate it with a 3rd class banking system. After the acquisition of Aboca, we now have a total of 450 employees in the U. S, giving us critical mass and traction on the ground. The U. S. Contributed 16% of our total total licensing in 2018. And with the addition of Abrocar, we expect our growth in the U. S. To reach 25% of total total licensing in the medium term. Avoca is the U. S. Headquarters leader in customer acquisition and onboarding, which we acquired in December 2018. It has over 85 clients across the U. S, Europe and Australia. It's another thing to create simple customer experiences to improve conversion rates. Integration is progressing very well, and the product has already been integrated as part of Thermo's Infinity. We bought Avoca for $45,000,000 and we expect it to grow 40% in 2019 to reach €50,000,000 of Robinson. We expect it to be non IFRS EPS neutral in 2019, accretive in 2020 and to reach group margin in 3 years. Turning to Slide 22. We've seen significant incremental demand for cloud adoption, which we expect to continue to accelerate going forward, driven by a highly differentiated cloud native and cloud agnostic product sector. Our total contract value increased over 6x in 2018 to reach $59,000,000 by the end of the year, and we expect such earnings to grow early in 2019. The growth in SaaS is driven by a combination of new banks, larger institutions looking to renovate for digital front office and banks looking to launch services across multiple countries. We expect this growth to continue accelerating 2019 and in the medium term. Moving to Slide 23. We are starting 2019 with very high product revenue visibility. We have strong visibility on around 85% of our product revenue, and this slide shows how we did this. You'll see in the appendix a definition, a more detailed definition of our remunerability. Our revenue of maintenance and SaaS are paid annually in advance and locked in for the year. Our software licensing includes subscription under I-five fifteen, so there is an element of legacy recurring as well. It also includes relicensing as a number of clients contracts come up for renewal each year, and we know the expected contribution from this. We also know the level of committed spend from Tier 1 and Tier 2 banks undergoing progressive renovation. Lastly, we have very good visibility on sales to our existing customers as we have affected the historical behavior in the context of our pipeline today. This level of semiconductor business was in a very strong position at the start of Slide 19. Turning to Slide 24. We had a very strong pipeline growth in 2018. This was broad based across all tier segments and geographies. We are expecting double digit growth across all geographies in 2019 with demand driven by our leadership position in core banking with several successful transactions as well as with market share in digital front office with Telnos Infinity. So obviously, this gives us also a pioneer of confidence in the outlook of the business. On Slide 25, we've given our 2019 non IFRS guidance. Please note that the guidance is based on IFRS 15, and we've provided the 2018 full year based numbers on the IFRS 15 for reference. The guidance is in constant currencies, and you can find the FX rate under restated 2018 year end in the appendix. We are guiding for full year total software licensing growth of 17.5% to 22.5% and total revenue growth of 16% to 19%. Our EBIT guidance is in the range of $210,000,000 to 3 $15,000,000 which implies a full year margin of around 31.7%. We continue to expand our EBIT margin, which is expected to increase by 130 basis points organically, excluding the impact of avocado. Finally, we expect conversion of over 1% of our EBITDA into operating cash and a 2019 tax rate of between 15% to 16%. With the strength of our pipeline and our very high revenue visibility, we are confident that our guidance for 20 19 is very achievable. On Slide 26, we are also reconfirming our medium term targets. We expect total software licensing to grow at the target of at least 15% and total loans to grow at the target of between 10% to 15%. We expect EBIT margin improvement target of between 1 to 1.50 basis points per annum and EPS growth of at least 15% on the target basis. For DSOs, we are targeting 5 to 10 days reduction per annum to reach 1 days in the medium term, and we expect our normalized tax rate to be around 17% to 18%. Lastly, we expect to continue to convert over 1% of our EBITDA into operating cash flow. We've been able to deliver growth at or above this level over the last 3 years, and we are confident we'll continue to do so going forward. On Slide 28, I'd like to highlight we are holding our annual Chemours Committee Form in the age on the second to the 4th April. This is an amazing opportunity to meet our clients and partners, Fintech that works with us and, of course, the executive team. If you like more information or attend, please to get in touch with us as it will be a fantastic event. So in conclusion, 2018 has been an outstanding year for Thermoz. Our clients are under significant digital and regulatory pressure, which, combined with the move to open banking, is driving demand for our products. We see SaaS and cloud adoption driving incremental demand, and we expect to capture this with the launch of our 2 new cloud native and cloud agnostic products. In 2018, we saw the ongoing investment we made in sales and marketing came off with very strong sales execution across geographies. We had a strong start in 2019 with the acquisition of Aboca, the announcement of our deal with Blumberg and the launch of our new products. We continue to benefit from multiple structural drivers and the strength of our pipeline and revenue visibility means we are confident in delivering another strong year of growth. We have a very clear strategy that has driven our growth over the years. And as CEO, I will continue executing this winning strategy to deliver exceptional shareholder value. Operator, please, we can move on to Q and A. Thank you, sir. Ladies and gentlemen, we will begin the question and answer And our first question comes from the line of Josh Levin from Citigroup. Thank you. Good evening. First, David, I want to wish you the best of luck. I can't think of anyone who deserves a book more than you, given how hard you've worked building Temnos. And congratulations to you, Max, as well. Well deserved. My first question, your medium term guidance is well below your 2018 results and your 2019 guidance. What's holding you back from raising your medium term guidance? Thanks, Josh, for a very good question. Ethan, the guidance the medium term guidance that we are giving is what we believe we can deliver sustainably. And clearly, we've seen that the last few years, we've been going faster than that. And I think you are raising a fair point on the fact that now we see the cloud adoption being faster than we expected. I think at this at some stage, we are going to see that going through our 1,000,000 ton target. I think it's too early to do that today, and I think we'll provide more information during our next CapEx and a massive day. But thanks for the question. Okay. One more, if I may. You've spoken before about this being the part of the cycle where you need to invest in sales and marketing. Your sales and marketing costs, I think it looks like they increased around 23% in 2018. Should we expect a similar trend in 2019? Just clearly, we've been investing in sales and marketing. We've been investing in specialization within our sales and marketing, and we'll continue to do that. And clearly, as you said, we grew sales in March around 25% in 'eighteen. 2018. And 3 years ago is to continue to invest in 2019 to capture this amazing opportunity which is in front of us. And our next question comes from the line of Paul Katz from Jefferies. Just two questions on my end. Regarding the front office deal in the U. S, I think you mentioned that you were integrating it into the 3rd party banking core banking system. Is that a system that was internally developed? Or is that from a competitor? And secondly, when it comes to the U. S. Deals that you're currently implementing, how or to what extent are you relying on your own services team to implement those versus third parties? Yes. The strategic deal that we won on the back end side, as let's call it, one of our competitors that we see in the U. S. And so very pleased that Fedex selected us on the front end. And see that part of having this turn of infinity, which is certainly independent from the back end. And secondly, in the U. S, we've been so far delivering our projects mainly ourselves, but clearly, in time, we've been bringing up the same governance and the same partner structure that we've got internationally. So you'll see now that we are getting more scale in the U. S. And we've got much more activity. We are going to start deploying the stream model as we do internationally with partners as well. And just maybe one quick follow-up on your mid term guidance. When I look at the 100 to 150 basis points and then I look at the margin trajectory of Evoca, is it fair to say that maybe over the next 2 to 3 years, you should see your margins expand at a rate that is significantly higher than what you have in your midterm guidance? I think expanding our margins between 1 and 150 basis points is a very acceptable assumption and I think this is what we are trying to do. Clearly, we want to continue to invest and we'll be investing already in sales. We'll continue to invest in the product as well. And at the same time, as you know, we've got an income stream of recurring revenue, which is highly profitable and that will continue to drive margin expansion. But for time being, let's continue to drive at this 1 to 150 basis points improvement. And your next question comes from the line of Charlie Brannen from Credit Suisse. I've got 2 quick ones, if I can. First, if you could just touch on a subscription versus license debate. It's one that we see across the sector. But the way in which you describe subscription sounds like it's all incremental business for you. I'm just wondering at the margin whether there's any cannibalization of traditional licenses moving to subscription. And is that something that's holding back your revenue growth? And then secondly, on a completely separate matter, one of your partners Cognizant, I'm talking very optimistically about the size of the SandLink deal for them. Was just wondering if you can give us any color from your point of view on that deal. Let me if I start with the first one, we don't see a cannibalization. We see that this is opening a new market, things that probably will not have gone the traditional way. So I think we don't see cannibalization and we continue to see our traditional license going fast at double digit than running the platform. And on the cognizant one, we've clearly seen what they've disclosed, and we were very obviously pleased with this announcement. As I said, we started well this year. We are very confident in 2019. And I will be pleased to update you during our Q1 results. And you've touched on a good start to the year. A couple of investors have been commenting to me on the tough comps that you seem to have in Q1. Is there anything you want to say about the seasonality of this year to help us with that modeling? Listen, as you know, we look at the business on a daily basis. We gave you a guidance that we believe we can deliver because of the high level of visibility in the business as well as the very high level of pipeline in inflow. And so on that basis, there's nothing for me to flag that we are confident that we are going to have a very successful 2019. Great. Thank you. Thank you. And the next question comes from the line of Hans Oleksma from UBS. Two questions also. The first one is regarding Julius Baer. Julius Baer announced at their conference call that they will not proceed with they will stick with the in house solution in Switzerland. May you comment on that? And the second one is, in terms of the TCF increase, how much of that is a broker? And then I'll speak for that. Ethan, on Judith, obviously, I cannot comment on that, but I would not even though I would love that I cannot. On the total contract value, there is no contribution on that from Avocado. So it's without any contribution of Avocado. And that's why I think we are so excited about the traction we see in the South and South, and we continue to expect this to continue to grow in the future. Okay. And then just a quick follow-up on regards to the investment in equity and the cash flow. Can you specify what those EUR 60,000,000 are for? We did mention that we've done an investment in UDP, which is on this cloud specialized distributed database. And that's the only investment we made in 2018. Year. And the next question comes from the line of Jacob Kruse from Autonomous. I just wanted to ask if you see any additional opportunities or challenges in the U. S. With or following the Fiserv as our state of the E and O announced a couple of weeks ago? We've seen a lot of momentum in the U. S. In the last few years. 2018 was by far our best year in the U. S. We are gaining much more credibility in the U. S. The Avoca transaction as well is bringing momentum in the U. S. With the U. S. Company. We've got almost 500 people there. I think that for us is the main point. Now when you grow such a major transaction than the one that you mentioned, clearly, it can bring some disruption. And what will be difficult to say, what I can say is Telenor is in great position right now to continue to execute extremely well in the U. S. As indeed the last 2 to 3 years momentum, and I think we are going to continue to see that in 2019 and onwards. And the next question comes from the line of Chandra Sviraman from MainFirst. Thank you. Please ask your question. Yes. Thanks for taking my question. Good evening, Max. Good evening, David. Congrats on your new roles. Just a couple of questions from my side. So I remember you just showing us a slide where large deals led to your beat in the last 3 years. Obviously, you said again, it's been very strong without any large deals. So can you give us a sense of how strong your backlog is with regards to the progress of remuneration deals to give us a sense of how independent your top line performance is with respect to the large deals that you would sign in the future? That would be very helpful. And secondly, if you can give I know it's difficult, but if you can give any sense of how much you have already included in your 2018 guidance from the plume of the balance required also? John, thanks for the question. On the large deals, I think the main point here is that we've delivered an outstanding twenty 18 without any contribution from last year. I think the point I tried to summarize is the demand was really broad based, the momentum broad based. And that growth that we've seen in 2018 is what we see as sustainable in the future and does not require any contribution of those megabits. So clearly, no, everyone like those big deals, but the point is, how do you build a business which can sustainably grow at those levels without the contribution of those one offs. Now clearly, we continue to have discussion of very strategic deals, but both are very unpredictable and timing is very difficult to predict. And that's why we don't comment on them and that's why we don't add them as part of our guidance because we cannot predict and cannot guide on a sustainable and predictable basis. That's why we will move them. Now Bloomberg, this is very, very exciting, and we expect to start to go to market in early Q2. As I said, this opens up particularly new market for us, really the capital market, which we've not been there so far. We do it as well in a very interesting way with Bloomberg who clearly lead the way there. We'll be able to leverage the distribution channel. And as you might know, we've got around 2,000 salespeople. And so we are going to train some of them on our product. I expect to see starting from Q4, we're going to see contribution from Newstrike, and we'll update as it goes. It's a new initiative. I think it's a very exciting initiative for the medium term. So with that, I think that's all the last questions. Thank you very much for attending the call and see you soon on the roll out. Thank you very much. Thank you, ladies and gentlemen. This does conclude the conference for today. Thank you all for participating. You may now disconnect.