Good afternoon, ladies and gentlemen, thank you for standing by. Welcome to today's Temenos Q2 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. At which time, if you wish to ask a question, you will need to press star and one on your telephone and wait for your name to be announced. I must also advise you that this conference is being recorded today, Wednesday the 18th of July, 2018. I would now like to hand the conference over to your speaker today, David Arnott. Please go ahead, sir.
Thank you, operator. Good morning, good afternoon, everybody. Thank you for taking the time to join today's call. I hope you've all had a chance to get hold of our results presentation, which you can find on our website if you haven't so far. We'll be using this presentation to walk you through some of our messages for today's call. I'm going to start with some comments on our second quarter performance, I'll hand you over to Max for an overview of the financials, I'll wrap up with some concluding remarks. Assuming now you've all found the presentation, I'm starting on slide seven, where the key messages are that we've had a very strong quarter with 23% growth in total software licensing and 17% growth in total revenue.
For those of you who joined us at our annual client event in May in Dublin, what we call the Temenos Community Forum, you may know that we had three times the number of prospects attending that event than in the previous year. The pressures banks are under as they move to digital, increased regulation, and open banking is driving this significant increase in demand and activity in the end market. We've been once again able to capitalize on this momentum as a leader in our market by taking market share and delivering another strong quarter. This momentum also underpins our confidence in the outlook for the second half of 2018, as we've got very good revenue visibility from committed spend. We talked about some of the league tables that we topped at the time of the Q1 results, including both the Forrester Wave and the IBS survey.
Since then, Gartner have in May published their latest Magic Quadrant for retail core banking, Temenos was recognized for the ninth time in a row as a leader in the leader segment of that quadrant, which is fantastic, it's clear the validation of our position as the leader in this market. Moving now to slide eight. I'll give you a review of our sales performance in the second quarter. A very strong performance in the quarter was driven by broad-based demand across all tiers and segments and across all our geographies. We continue to do well in winning new business, with 41% of licensing coming from competitive deals and 13 new name customer wins in the quarter. Focusing on the regional performance for a second, Europe lacked a very strong comparison, with a large number of signings across all tiers of banks.
The strong performance in Asia, it's worth highlighting, was largely down to the significant progress we've been making in Australia. I'm also pleased with the good traction we're building in the U.S. We signed two notable deals. The first was Northern Trust, and the second was another neobank in the digital space, a digital disruptor. As a reminder, we signed our first digital neobank in the U.S. last year. The fact that digital startup banks are selecting Temenos as their technology partner is testimony to the strength of our existing product out of the box, as well as our innovation roadmap, and these banks are typically at the cutting edge of innovation in financial services. On slide nine now, I'd like to run you through the highlights of a couple of the key deals that we signed in the quarter.
The first is that we announced a deal with Coventry Building Society, who bought T24 core banking, as well as our payments hub, our channel solutions, and our financial crime mitigation suite of products. They're using Temenos to power their digital transformation with a focus on speed to market for new products and services and maintaining their sector-leading cost efficiency. Coventry is the second-largest building society in the U.K. and one of the top 10 mortgage providers with a great brand name. It's an important win for us, as the U.K. is one of our key growth markets in Europe and growing in quite a significant way. The other deals I'd like to highlight is Northern Trust, which is a leading provider of asset management and banking services.
They're an existing customer of ours, already using our funds platform for their European operations, and they've signed a deal to extend the relationship further to support their growth and the integration of a recent acquisition they made. It's a strategically important client, as the decision-making process was driven at the most senior levels of the organization out of the U.S. It demonstrates the progress we're making in building our brand in the U.S. Moving to slide 10 now. We had 24 implementation go-lives in the second quarter, giving a total of 49 implementation go-lives in the first half. I was particularly pleased to see that Julius Baer went live with WealthSuite across their Asian business after successfully going live in Luxembourg last year, as they're one of our key strategic clients in the wealth space.
We're very focused on our partner relationships, as we have a strategy of working closely with partners to deliver successful implementations. Last year, we launched the Temenos Learning Community, which is leading our efforts to industrialize the partner training program Ready for Growth. This has been very successful and now there's over 4,000 Temenos partner consultants, which is an increase of over 50% over the last 12 months. Moving to slide 11 now. Just like to spend a minute on the Temenos Community Forum, our annual client event. We held it in Dublin this year, and we had the Irish Prime Minister join us for our keynote speech, along with presentations from several of our leading clients, including Santander's Openbank, UBS and KBC.
As I've already mentioned, we had three times the number of prospects attending than in the previous year. As well as using this event to sell, we use it to announce our new product innovations, some of which I've added and shown you on this slide that I extracted from the presentations we gave at the time. To highlight just a few of these that I think are worthy of note, we've further extended the Temenos Front Office Suite as a standalone digital front office solution that can integrate with any core banking system or any legacy system. We announced enhancements to our data analytics and robo-advisory products as we see banks trying to capitalize on the data advantage and automate parts of their retail and mass affluent channels. We also announced enhancements to our payment hub in the areas of compliance and STP.
Our payment hub is available as a standalone solution in the cloud and enables banks to be ready for the demands of instant payments. We see more and more banks identifying payments as a key pain point, and we expect this to be an increasingly important entry point into banks going forward. Going to slide 12. Just like to spend a minute on the outlook for the market and for Temenos, standing back up, if you like, from the second quarter itself, more into the medium term. Market growth is being driven by the increased pressure on banks from the move to digital, increased regulation, and the rise of new competition taking advantage of open banking to break up the value chain. Banks are struggling to adapt with legacy technology and are looking for packaged off-the-shelf solutions to transform their IT platforms and increase efficiency.
We've seen a significant increase in signing for cloud and software as a service, and whilst this is from a low base, we do expect strong growth in this area in 2019. We're seeing clear signs of momentum building in the U.S. as more banks consider how to address their platform issues. Signings such as Northern Trust and the digital neo banks at either end of the size spectrum today show the range of clients looking for new solutions to support their growth, drive efficiency or to launch new banking platforms. We continue to demonstrate our leadership position with our growth rate well ahead of the market and with data points from the likes of Gartner, IBS, and Forrester providing further validation of this.
Lastly, our revenue visibility continues to increase with committed spend from tier 1 and tier 2 progressive renovation, and the growth in our pipeline giving us confidence beyond 2018 and out into the medium term. With that, I'd like to hand you over now to Max for an update on the financials.
Thank you, David. Starting with slide 14, I would like to give you the financial highlights from Q2. We had a very strong second quarter with total software licensing up 23%. The growth was broad-based across all tiers of clients and across all of our geographies. This performance demonstrates our position as a leading global vendor of banking software. Our strong license growth over the last few quarters has driven acceleration maintenance, which grew 12% in the quarter. We grew total revenues by 17% and EBIT by 20%, with our EBIT margin continuing to expand to 30.5% on an NPM basis. We also delivered strong EPS growth of 23% in the quarter. We had a particularly strong cash quarter, with operating cash up 52% and DSO down another 10 days to 114 days.
By working closely with partners, we've been able to consistently improve our services margin, which reached 10% in Q2. As already mentioned by David, last year we launched a strategic initiative called Temenos Learning Community to industrialize our partner training program. This is a key success factor in our partner program and should continue to help our services business. On slide 15, I will highlight some of the most important numbers for the quarter. Our total software licensing grew 23% reported in the quarter, 28% over the last 12 months. Total revenue grew 17% in the quarter and 19% over the last 12 months. These numbers are evidence of our leadership position, which has been recognized by the industry analysts as we continue to grow significantly faster than the market. We've seen a significant uptake in our cloud and SaaS-based solutions since the beginning of the year.
Given the timeline between bookings and revenues of these products, I expect this strong growth to be visible in our 2019 earnings. The strong growth in working revenues has continued to drive our margin expansion. EBIT was up 20% in the quarter and 21% in the LTM. Now our LTM EBIT margin has reached 30.5%. Lastly, we continue to improve our services margin, which is now at 11% on an LTM basis. On slide 16, we show like-for-like revenues and costs, adjusting for the impact of Feminist and FX. As a reminder, we closed the acquisition of Rubik in Australia in Q2 of last year. Taking into account both currency movements and our hedging program, there was minimal net impact from FX at the EBIT level this quarter. We benefited from the stronger euro on revenues.
However, our costs also increased due to the number of currencies strengthening against the US dollar. Our leadership position in a growing market means that we continue to deliver strong organic growth, with total software licensing revenue up 16% like-for-like this quarter and maintenance up 10%. Total like-for-like cost increased 8% in the quarter as we continued to invest in sales and marketing and products to drive our future growth. On slide 17, we had another quarter of strong growth in both net profit and EPS. Our net profit grew 20% in the quarter and 21% in the last 12 months. You can see we've been able to improve our financing cost over the last 12 months by refinancing at better rates.
The strong profit are driving our EPS growth with, as I said, EPS up 23% in the quarter and 21% in the last 12 months to reach $2.72 per share. On slide 18, our cash conversion was at 116%, well above our target of 1% of IFRS EBITDA. DSO decreased another 10 days year-on-year to end the quarter at 114 days, and we expect DSOs to continue declining at around 5-10 days per year to reach 100 days in the medium term. On slide 19, we highlight the key changes from the group and liquidity in the quarter. We generated $67 million of operating cash in the quarter, an increase of 52%, which is partly due to the timing of outflows linked to variable compensation elements that took place a little later than last year. I expect this to normalize by the end of Q3 2018.
Out of the total $250 million of buyback that we announced, we bought $161 million of shares in the quarter at an average price of CHF 147 and paid out $46 million in dividends. We ended the quarter with $88 million of cash on the balance sheet and a net debt of $470 million, equals to a leverage of 1.4 times. Finally, on slide 20, we have reconfirmed our guidance for 2018. Our guidance is based on IAS 18 and is in constant currencies. We've provided the FX rates in the appendix. We are guiding for full-year total software licensing growth of 13.5%-18.5% and total revenue growth of 10%-13%. Our EBIT guidance is in the range of $255 million-$260 million, which implies a full-year margin of circa 31%, which represents one basis point expansion in constant currencies to last year.
We expect a 2018 tax rate of 15%-16%, and finally, we expect conversion of over 100% of FBE in total operating cash. We've had a strong start to Q3, and our revenue visibility continues to increase. As such, I am confident we will be above the midpoint of the guidance for 2018. With that, I will hand back to David.
Thank you, Max. In conclusion, the second quarter was a very strong quarter across all of our key KPIs. The move towards becoming digital and regulation continued to be a key focus for banks, with open banking and payments, in particular, driving strong demand. IT spend is increasingly clearly non-discretionary for banks, something they have to do, something they see as critical to their competitive positioning, client retention, and efficiency long term in a market that's become increasingly crowded. This is translating into continued growth for our end market, and we continue to take market share, pulling further ahead of the competition. We've had a strong start to the third quarter, and committed spend from Tier 1 and Tier 2 banks gives us confidence in our full-year 2018 guidance.
Structural drivers are very much in place. Our strong pipeline gives us confidence beyond that out into the medium term. Again, I look forward to updating you after our third quarter results in October. With that, operator, we'd like to open up the call for Q&A, please.
Thank you. Ladies and gentlemen, we will now begin the question and answer session. As a reminder, if you wish to ask a question, please press star and one on your telephone and wait for your name to be announced. Please stand by while we compile the Q&A queue. This will only take a few moments. If you wish to cancel your request, please press the hash key. Your first question comes from the line of Takis Spiliopoulos from Bank Vontobel. Please ask your question. Your line is open.
Thanks. Hi, David. I'm Max. Thanks for taking my question. Two question, I guess one for each of you. You mentioned a couple of times that payment is becoming a key focus now for banks. How do you tackle this opportunity? How do you win, basically, against the pure plays? Maybe some background on this one would be appreciated. Then one on sales and marketing costs, which grew 15% year-on-year under IAS 18 or 11% on IFRS 15. That's quite a bit slower than in the previous quarters. Is that an intentional deceleration, or is it just timing? Maybe I make more color on this one. Thanks.
Okay. Thanks, Takis. Let me take the payments one. Max will take the sales and marketing one. Payments, especially tier 1 payments, is really a technology game. The big challenges for payments are on volume. The volumes of payments are exploding as we move to a world of micropayments, but it costs the same amount to process a small payment as it does a big payment. The two big issues are how to handle a huge expansion in terms of the payments volumes out into the medium term as the way we spend changes, and how to be profitable and process that large volumes of transactions with the fixed cost being relatively high. The functionality, as you'd imagine, is relatively straightforward. It's all about scalability, architecture, ability to support modern platforms.
We're quite unique that we started with a blank sheet of paper in our partnership with ABN. Obviously, we've been doing payments since the beginning of Temenos, but we carved out a specific initiative around scalable high volume tier 1 payments, really because of the architecture complexity a few years ago, back in 2013. What we have now is truly tier 1 scalable in terms of the benchmarks we've been going through. It's nice that it also fits as a module within an overall core banking product. Those whose biggest pain today is payments know they can replace the rest of their systems as people like KBC and ABN have been doing with more modules from the same vendors. That's a big differentiator. The second big differentiator, I would say, is the technology, because none of the pure-play payments vendors out in the market today have modern technology.
It's all been built in the days of batch systems. The architecture is very much based in the days of branch banking. It's really not scalable for the modern needs going forward. Predominantly architecture, but the fact we're a big software company who can meet more of their needs from one vendor relationship is important too.
Takis, on the second question, clearly, as we've said many times, we invest on sales and marketing spend. On the 15% or 11% depending on which accounting time you look, it's just a reflection of time underlying the investment. The growth is around 25%. I think this is what you will see for the year.
Okay, thanks.
Thank you. Your next question comes from the line of Josh Levin from Citi. Please ask your question. Your line is open.
Thank you. Good evening. If you look at software licensing, it grew 24% during the quarter, and I think it was 37% in the first quarter. You say the third quarter is off to a strong start. Your guidance for the full year total software licensing growth is 13.5%-18.5%. Doesn't that guidance look a bit conservative, or am I missing something?
Well, listen, obviously, we gave a yearly guidance, which we did at the start of the year. We are, as we said, very confident on delivering on that guidance. As I said, I expect to be above the midpoint of that guidance. We are in Q2. We're starting strongly Q3, which is great because we are confident to be able to deliver on that guidance.
Okay. My next question is about the competitive landscape. Are you seeing any of your competitors materially improve their product offering?
In a word, no, not really. There's nobody who's come from left field. I think whoever's going to win is already playing. Quite difficult with the momentum that a player like Temenos and even some of the international other vendors with maybe a slightly more services-led business model. With the momentum we've all got and the fact the market is moving so fast, I think it would be difficult to start from scratch. That leaves the competition really of the existing players, and I wouldn't say any of them have made any great strides in terms of focus on banking, focus on rationalizing their products.
The market is big enough for all this, but I would say certainly in the first half of 2018, nothing to note, certainly not on the positive, let's put it like that, from any of our competitors in terms of changes of strategy or execution. In fact, our win rate, as you can see, given our rate of growth being higher than the overall market, is predominantly coming at this stage still from market share gains.
Thank you.
Thank you. Your next question comes from the line of Gerardus Vos from Barclays. Please ask your question. Your line is open.
Hi, thanks for taking my question. Just a few if I may. First of all, on the kind of revenues, I think it was the first quarter in eight quarters that you didn't beat consensus. I noticed that you also indicated in the presentation that you made a strong start to Q3. Have some deals perhaps slipped from Q2 into Q3? Secondly, on the SaaS revenues, I think if I exclude the M&A, they went backwards. I think there were some
some kind of products you've discontinued from businesses you've acquired. Could you perhaps share with us how much revenue impact that will be for the full year? Thank you.
Hi, guys. Listen, I'm not going to comment on this consensus. I think our collection is that we've been doing better than the consensus. I think it's a great quarter on the license and overall, I'm pleased that the full KPIs in Q2 are looking outstanding. Clearly, based on our analysis, and when we gather the different data points, we are clearly beating on the license. Putting that aside, we had a very strong Q2, and as I said, we are starting Q3 very strongly as well. We are not in the business of looking at it on a quarterly basis. We look at it on a 12-months basis. Hence, we feel very confident for 2018. On the SaaS question, it's true that some of the legacy assets that we inherited through some of the M&A, we've sunsetted, which had a material impact on the year.
I think as we said, the plan on SaaS is it's performing extremely well. Now, there's a timing to that, because we start really booking the revenues when the customer goes live, and it can take between six to 12 months. I think we'll see really the benefit and the growth in 2019. Already as we said in the capital market day, this is something that is expected. As what we've said in the past, we do expect our SaaS to be growing at around 35% in the medium term. I think by 2019, we are going to be closer to that direction.
Okay. Thank you.
Thank you. Your next question comes from the line of Chandramouli Sriraman from MainFirst. Please ask your question. Your line is open.
Yeah. Thanks. Good evening, guys, and congrats on another good quarter. Just a couple from my side. First one, I noticed a big jump in contribution to licensing from Middle East and Africa. I was just wondering if you have any thoughts on the region as such. Maybe the second one is on your investments in terms of sales and marketing. David, you mentioned a couple of times the heightened interest in Temenos in the TCF conference. Do you see any urgency to accelerate investments at this moment, or you think you have enough on the plate to deliver to a high quality? Thanks.
Thanks, Chandra, for taking the time out on a second quarter, really appreciate it. You're right to spot that Middle East and Africa have grown faster. They're performing very well, actually. I would say the market itself is in good shape, we've been particularly strong in terms of taking market share in Middle East, and increasingly in Africa from two groups of people. First of all, a lot of the local players are starting to drop by the wayside in terms of their ability to invest at the level that's needed, especially in the bigger banks. Secondly, we've been taking market share from the larger global players, specifically Infosys and Oracle in the last 12, 18 months, and that's starting to show through our numbers.
On the sales and marketing piece, if you remember four or five years ago, we felt that the constraints to market were, A, the market's willingness to, or need to change software systems. We were holding back investment and focusing between revenue and margin until we had visibility that the market was moving to the extent it is today. We, in parallel, prepared ourselves for a level of growth by removing constraints around delivery. All the model banks, country platforms, partner programs, online learning community tooling, that type of stuff is well in place. I would say today, the biggest constraint we have for Temenos over the medium term, is our ability to be out present in the market. It's a good two years now that we've been focusing significantly on sales and marketing investment, both in absolute terms, but also as we specialize.
We've got product specializations in areas like wealth, private banking, retail, capital markets, and also in terms of the tiers. As tier 1 banks look for more technology, it's more of a technology sell. Whereas for smaller banks, it might be more of a bank-in-a-box, how-quickly-can-I-deploy sell. There's a complexity as we grow, as capture all the different segments of markets, and we've already been growing significantly our sales and marketing investment. I highlighted the key areas as being sales investment and pre-sales campaign support. They're the two big buckets of activity, and we've found a model which does allow us to onboard those people quite fast and find them in the market by going laterally to adjacent segments, setting up a sales academy, and finding the right model to incentivize people to come away from our peers and our competitors to join Temenos.
It's something we track. It's something that for me, is one of the biggest opportunities for Temenos over the medium term, and I drive personally, and I would say we're doing quite well in terms of ramping up our sales investment, which you can see that coming through the numbers.
Great. Maybe a quick follow-up. You've had a fantastic run over the last few years, as we look forward from here in terms of your opportunity, do you see
Signing more large deals are the key focus for you as such, or is it penetrating deeper into your existing large customers? Do you see a lot more opportunity there?
Hopefully I don't have to pick one. Both are exciting in their own right. We've done the hard work of gaining the trust of a significant and cumulative number of Tier 1 and Tier 2, and of course, smaller organizations and specialized organizations, and gaining their trust to embark on what is going to be a very significant opportunity for us going forward. I know a couple of your models out there try to quantify the opportunity of progressive renovations are changing out the addressable part of the subsystems that exist in those markets. The average of all your numbers is obviously a significant opportunity. That alone gives us a good base level of growth.
Provided we don't upset these banks, provided we deliver on the business cases, take them live on time, deliver a revenue business case or the cost-cut business case, whatever they bought the software for, and we can create sponsors in our customers and references for other customers, that's a good level of growth that is already, I wouldn't say locked in, but we're proving every day the success our software brings to banks. Clearly, though, if you take the view that software's going to be dominated by the best one or two software companies, it's also very important that as the big deals come to market, that Temenos wins the lion's share of those and don't have to share that leadership position with two or three others. Then it starts to impact lots of things that we shouldn't go into in this call now.
If you remain the leader, if you look after your installed base, if you provide success, if you make heroes of the people that choose your software, if you win the lion's share of the big business, each one of them in its own right is a significant contributor to the $49 billion of addressable spend. I'd say it's both. Ultimately, it's the same constraining factors for both. It's the sales organization for existing customers, the sales organization for new business. Ultimately, it's demonstrating that the product can go live quickly in our existing customers that underpins their comfort to buy more software and underpins the comfort of new banks to join the club. It's the same fundamental drivers, really, for both. Slightly different go-to-market challenges, but broadly the same.
Thanks. Very helpful.
Thank you. Your next question comes from the line of Adam Ward from Morgan Stanley. Please ask your question. Your line is open.
Hi, good evening, and thanks for taking the question. Just two from me, please. Just first of all on the building societies in the U.K., you've obviously signed Coventry. I wonder if you could just give us a little outline on what the landscape's there. I think one in particular has done an implementation with SAP that seemed to be challenging. Have they done any major moves towards package software? Or is that a fruitful field for you and potentially have it? Maybe just secondly on the services margin, obviously good improvement there. Is that realistically where you'd like it to be and there's more limited upside from here? Or do you think there's still more work to do on that side of things? Thank you.
Okay, Adam, thanks for that. I'll be crystal on the Building Society U.K. market. It's quite small, so obviously I won't be commenting on specific prospects. It is a market that can potentially give growth opportunities to Temenos, and there's a number of organizations there that we would be targeting, as you'd expect. It's quite standard. Once we've rolled out something with the Coventry, there's not much of a functionality overlap for the rest of that market. It's quite homogeneous.
Adam, on the services margin, I'm clearly very pleased of the improvement and what we've been able to achieve the last few years. To be at 11% on LTM basis is great. I think ultimately, if you look at where all the software services and software companies, what they've been able to achieve, I think there's still a bit of room for improvement, and probably in the medium term, we could potentially get to the 15%. I have to say, I'm very pleased already with the levels that we achieved. As you know, services is a small percentage of the overall business, which represents slightly less than 20% of the revenues. So the improvement we can get from increasing the margin is quite small ultimately at the bottom line.
Perfect. That's very clear. Thank you very much.
Thank you. Your next question comes from the line of Mohammed Moawalla from Goldman Sachs. Please ask your question. Your line is open.
Great. Thank you very much. Two questions from me as well. First on the U.S., David, can you give us an update on where we are in terms of the go-lives, also in terms of the strategy or go-to-market? You highlighted a lot of these digitals from neobanks, what has been the gating factor in terms of achieving perhaps more progress or announcements? When do we start to see evidence of some more references? Is this still a medium-term thing, or should we think of the back half of the year potentially to see some of this incremental progress? Secondly, just coming back to the balance sheet. You obviously have done a fair amount of the buyback that you specified a few months ago.
How do you think about M&A through the rest of the year, but also weigh that up against further kind of returning capital back to shareholders via buybacks?
Okay, Mo. Thanks for those. I'll take the U.S. one. We're making good progress, and we're very happy with where we are clearly. Ally has been live with payment for a good year and a half now. That's clearly a reference in the payment space. Commerce Bank are hitting all of their milestones and have met all their Q2 milestones, and they're well on track to their Q3 milestones, which give us the bulk of the new localization delivered. After that, it's really about the bank's readiness and clean data and things like that. We're making very good progress on Commerce. We signed a Tier 1 bank in Q4 last year. That is also progressing well. I can't say much more about that other than that it's progressing well.
We also signed, if you remember last October, a neobank out of New York that we said would be live in Q2. They're ready to go live. They're totally done. They're just waiting for their final approval of the banking license and some branding issues, which I shouldn't talk about on their behalf before we see a formal launch, but our job is effectively done. We signed another new neobank, which is really quite disruptive. It's staffed by people from Facebook and Amazon and LendingClub, and they're going to be making a lot of noise. I think these new banks are interesting inasmuch as they allow us to prove we can deploy software quickly. They're going to be disruptive, and it's always nice to be attached to a disruptive name.
From a revenue opportunity, clearly the market is really for us about the top 120-odd banks or the CHF 10 billion, where we're looking to extract efficiencies, savings, allow them to be agile and compete against some of these new players. I would say for that, it's really about Commerce and this Tier 1 that we bank, we won. There's no competitor that's won a U.S. deal in the meantime. We've won them all, and we're just crunching our way through them. We'll have references in the second half of this year and going into 2019.
Well, Mohammed, on the balance sheet, as you've seen, only in Q2 we paid $46 million of dividends. We did $161 million of buybacks, still the leverage is still below 1.5 times EBITDA. Clearly we want to continue the buybacks that we announced and to complete the $350 million that we announced. At the same time, we still have a strong balance sheet, which allow us to look at M&A opportunities. Now clearly on the M&A side, timing is always difficult to predict. We are looking at ways to complement the organic base. Rest assured that the balance sheet is very strong for us if needed to be able to do more acquisitions.
Great. Thank you.
Thank you. Your next question comes from the line of Michael Briest from UBS. Please ask your question. Your line is open.
Thanks. Good afternoon and congratulations on another good quarter. A couple from me, Max first then one for you, David. In terms of the guidance, I notice your currency assumption now is, putting it in our thinking, sort of $1.16 for the year. I think in the first half it's probably $1.19 or $1.20. It's quite a bleak forecast for the euro for the second half. Can you sort of talk about the assumptions behind that? Maybe are you sort of suffering from Brazilian reals and Turkish liras and things like that flying around, which have been quite weak? Then just on the SaaS subscription business, Gerardus was asking for the second half of the year, should we assume the Q2 run rate is more indicative before you ramp up SaaS in 2019? It might help us understand the guidance.
David, just in terms of Australia, I noticed there was a deal with Volt one. Is that the one you're referencing or is it another deal that hasn't been announced yet? Just on Middle East Africa, you were asked earlier, it's a pretty big contribution seemingly. Are there no large banks that you can call out as having driven that strong performance this quarter? Thanks.
Hi, Michael. Listen to that. Recently, the 1.16 is for the balance of year. In terms for the full year, we'll be talking 1.18. In fact, we are back quite closely to where we were at the start of the year when we gave the guidance. That's for us, the main one is really the Euro, which drives most of the impact on the currency side. I think we are quite good with that. On the SaaS now, to come back to the question that was asked on what to expect for the balance of year, I think SaaS will be probably between 10%-15% growth for the full year. You'd see a continuation on probably of where we are today in Q2. Obviously, starting Q3, we don't have a contribution from Rubik anymore because it will be more than 12 months.
I expect the underlying to be growing faster.
Okay, Michael, let me take the Australian one. I need you to repeat the last one because I didn't quite capture it. We did sign Volt. That's not the reason we're excited about Australia. We've signed deals beyond Volt that I'm not at liberty to talk about at the moment. That's why it's more than just Volt. Can you just repeat the last bit? I didn't capture that.
Yes. It's just, Middle East Africa does look like it had a very strong quarter year-on-year. Are there no sort of single banks you can name or big deals you can reference that contributed? Was it just generally lots of little deals coming in?
Just across the board, really. If I were to single out one sub-region that's performing extremely well within that, I would say Africa. Africa's coming back. It's been quiet for a while. It goes through a cycle. A lot of them at the end who migrated to third-party systems 10, 15 years ago when there was a large replacement cycle, have amortized it now they're coming to market. Lion's share are coming to Temenos. Some of them big names, nobody probably I'm allowed to mention so. We're also upselling to our existing customers who've been there a long time. Across the board. If there's one thing I can give you is that Africa's growing really well.
All right. Thank you.
Thank you. Your next question comes from the line of Laurent Daure from Kepler. Please ask your question. Your line is open.
Yes. Thank you. Good evening, gentlemen. I also have two questions. First one is regarding the strong run of your stock price. Can we have kind of an indication of the stock option charge you're expecting for the full year and your assumption in your guidance? My second question is back to the question that was asked about the sales and marketing cost. It's been quite erratic from one quarter to the other. Does it have to do with provisioning of bonuses of the salespeople, or is it more the timing of recruitment? More generally, how is the market of recruiting sales at the moment? Do you see inflation? Any comment, any color on that would be very useful. Thank you.
Okay. Let me take the second one, while Max gets to answer Chris for the first one. There's a lot of variable costs clearly flowing through quarterly sales and marketing. You accrue for bonuses, you accrue for sales commissions, and then they pay at different times. The licensing, which is where the majority of the variable pay goes, is quite lumpy, it's quite seasonal. Often, the payments are attached to things you don't see because the revenue recognition may not be perfectly aligned. If you cut through the variability of that, I would say we're very steadily increasing our underlying sales and marketing headcount in dollar terms by about 25%. That's very steady. Every quarter we're bringing on a bunch of new people. There's a lump in September when our sales academy intake comes through. That's the only non-linear amount, I'd say. Very slow and steady.
25% increase over the year. I'm targeting to get that up a bit over the medium term. That's more of a capital markets strategy point. We're executing on the strategy that we laid out in February, which was to invest disproportionately high in sales and marketing, and we've been able to start finding the right people. The rest is just variable timing.
The stock option charge, it will be slightly higher than last year, but this is fully taken into account in the guidance. It's part of the guidance we give at the cost and at the profit level. Slightly up on last year, obviously. Thank you.
Thank you. Your next question comes from the line of Sorry, there are no further questions.
Okay. Thank you very much, everybody, for giving up your time to spend with us this morning, this afternoon. Look forward to speaking to you after the third quarter, if not before. Thank you very much.
Thank you.
That does conclude your conference for today. Thank you for participating. You may all disconnect.