Temenos AG

Ladies and gentlemen, welcome to the Temenos Q1 2024 Results Conference Call and Live Webcast. I am Sandra, the course call operator. I would like to remind you that all participants have been listened only mode and the conference has been recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcasting. At this time, it's my pleasure to hand over to Adam Sneed, Head of Investor Relations. Please go ahead, sir.

Thank you very much, everyone, for joining us today. Before we go through the results materials, I would first like to hand over to our non-executive chairman of the board, Thibaut Duterson, to make some opening remarks regarding this evening's announcements. Over to you, Thibaut.

Thank you, Adam, and thank you all for joining our results call today. I would like to say just a few brief words regarding this evening's announcement. On behalf of the Temenos board, I am delighted to announce that Jean-Pierre Brulard will join Temenos from the 1st of May as our new CEO. Jean-Pierre is a highly experienced executive and a proven leader of large, global, and high-growth organizations, with a world-class track record in leading global sales organizations. He spent the last 14 years at VMware where he was executive vice president worldwide sales and a member of the executive committee. And he successfully oversaw the migration of VMware business model to subscription and SaaS while delivering strong ARR and revenue growth. Jean-Pierre brings to Temenos excellent strategic planning expertise and a strong understanding of the SAS transformation requirements of our clients, having worked with some of the world's largest banks in his previous role. His combination of strategic insight and energy and enthusiasm for working collaboratively with his colleagues to deliver for all his stakeholders across clients, partners, and shareholders will be key to driving Temenos in its next stage of growth. I look forward to him starting formally next week and to you all meeting Jean-Pierre in the near future. I would also like to take this opportunity to warmly thank Andreas for taking the CEO role during the extended search period. His commitment His passion and determination have been absolutely critical in building Temenos into a global leader in banking software. With independent report published last week and the appointment of our new CEO, my fellow board members and I are looking forward to focusing again on the business and supporting our executive team in delivering on Temenos' strong growth potential. I will be on, staying on the call and available to take questions at the end. And with that, I would now like to hand over the call to Andreas to talk you through the quarterly results. Andreas.

Thank you, Thibault. Good afternoon and welcome to our Q1 24 results call. I'd like first to talk through our performance and some of the highlights from the quarter before handing over to Takis to run through the financials and the outlook. Q1 was clearly a tough sales quarter for Temenos. We saw temporary lengthening of the sales cycle due to the short seller allegations. Some of our clients and prospects spent time considering the allegations, which added complexity to the sales cycle. And some waited for the publication of the Temenos independent report before resuming engagements. The sales organization clearly had more work to do in order to move sales campaign forward. However, despite these challenges, there are some really important positives in the quarter. We have been working relentlessly to transition to a recurring revenue business model, as you are aware, establishing ARR as our key performance indicator across the business, SaaS and on-premise. And in particular, as I explained during our Q4 and capital markets day, ARR is now fully operationalized and sales targets for 2024 are based on ARR. And this transition has helped reduce the volatility in our business as shown by the Q1 results. Despite total software licensing declining, our ARR still grew 12% in Q1. Our sales force is highly focused on recurring revenue deals. We are seeing the benefit of value uplift on renewals. We have the positive impact of CPI linkages in our recurring contracts, and we had a particularly strong maintenance growth of 10% this quarter, which drove ARR, as well as profits and cash flows, of course. On top of this, our sales revenue continued to grow double digits, driven by the ACV signings last year, Our total revenue still grew and we had a strong profitability and cash flow quarter. All in all, I believe that the investment we made with the shift to a recurring revenue model is starting to show through our numbers. Perhaps most importantly for me, our pipeline continued to grow in Q1. Now that the independent examination report has been published, we are seeing positive responses from clients. with some delayed deals already signing and others moving forward again in the sales process. From a regional perspective, APAC and Europe still grew year on year, with the Americas flat and Middle East and Africa declining, especially also given the stroke comparative, which was expected. Subscription revenue continued to grow as a percentage of the license mix, and we had a healthy nine new client wins in the quarter. Now, on a personal note, this will be my last quarterly results call after 25 years with Temenos. It's been an absolute honor to work and lead this business. I would like to thank all of my colleagues, all our clients, our partners, and shareholders who have supported us over this time. I wish our new CEO every success for the future, and I'm confident Temenos will go from strength to strength. With that, I'd like to hand over to Tagis.

Thank you, Andreas, and also welcome from my side. Starting with slide 12, I'll give an overview of the quarter. All figures are non-IFRS and in constant currency unless otherwise stated. As Andreas highlighted, we had good growth in ARR this quarter, up 12% to reach $7.23 million by quarter end. The sequential decline of 1% versus Q423 is mainly linked to the weak SAS ACV and subscription signings, combined with the timing of some downsell and churn in the quarter. I therefore remain comfortable with our guidance of around 15% ARR growth for the full year. The continued growth in ARR this quarter was supported by 20 million of subscription signings, and 5 million of SaaS ACV, although these were both relatively weak compared to our original forecast due to the temporary lengthening of the sales cycles, as Andreas mentioned. Overall, total software licensing was down 8%. However, maintenance growth of 10% was a clear highlight, driven by value uplift on renewals, CPI escalators in our contracts, and continued good momentum from premium maintenance. Total revenue grew 2% in the quarter, with a transition to recurring revenue, mitigating the volatility of the license revenues. EBIT was up 7%, and our EBIT margin expanded 190 basis points in the quarter. Our cash flow remained solid, and with good cash collection, our free cash flow was up 26%. Our DSOs reduced to 136 days in Q124, down five days from Q423, following the usual seasonal pattern as we collect cash for deals signed late in Q4 and also helped by a reduction in services DSOs. We expect DSOs in 2024 to trend down as we have reached the peak of the subscription transition impact. We also continue to deal levers with the quarter, ending at 1.4 times leverage, down from 1.6 times at the end of 2023, which is below our target range of 1.5 to 2 times, and which gives us tactical and strategic flexibility. Moving to slide 13, I think the highlights for the quarter really were the strong growth in sales revenue, up 19% on the back of ACV signed last year, and the strong maintenance growth, as well as the resilience of our total revenue growth in the face of temporary sales challenges. Operating costs were down 1% in the quarter, driven by lower G&A costs, lower services costs, as well as lower variable costs, such as commissions and travel more directly linked to lower signings. We continued our focused investments in cloud and in key hirings across R&D and also sales and marketing. As an example, sales and marketing costs were up 7% in the quarter. Lastly, we delivered 73 million of EBIT in the quarter. Next on slide 14, we have like-for-like revenues and costs adjusting for the impact of M&A and FX. The figures are all organic and therefore in line with our constant currency growth rates. Looking in particular at our cost base, our services costs were down 3% as forecast. Product-related costs in the quarter were flat as we continued our focused investments in cloud and in key hirings across both R&D and sales and marketing. Looking at ethics, the stronger Pound sterling was a slight headwind on cost, but more than offset by a weaker Indian rupee. Overall, there was a 1 million positive impact from FX on EBIT. On slide 15, net profit was up 7% in the quarter, slightly lower than EBIT growth, with higher tax charges offsetting lower financing costs and the impact from FX. EPS for the quarter was up 6%. On slide 16, our LTM cash conversion was at 118% above our target of converting at least 100% of IFRS EBITDA into operating cash, and we continue to expect our cash conversion to be at least at 100% going forward. Moving to slide 17, we have the key changes to the group liquidity in the quarter. We generated operating cash of 72 million and also drew down on our RCF with a bond due for refinancing earlier in April. We ended the quarter with 302 million of cash on balance sheet and net borrowings of 568 million. Our leverage is at 1.4 and I expect this to continue declining assuming no M&A. On slide 18, we have confirmed our 2024 guidance, which is non-IFRS and in constant currency. We are guiding for ARR growth of about 15% as we continue to benefit from growth in subscription, SaaS revenues, and the growth acceleration in maintenance. We expect total software licensing to grow 7% to 10% and EBIT to grow 7% to 9%, reflecting the investments we plan to make this year. We are guiding for EPS to grow 6% to 8%, with our tax rate expected to be between 20% and 22%. Lastly, we expect our free cash flow to grow at least 16%. We have put the EBIT and free cash flow breaches into the appendix for your reference. On slide 19, we have confirmed our midterm targets, which are to reach ARR of at least 1.3 billion, EBIT of at least 570 million, and free cash flow of at least 700 million in the next three to five years. And so in conclusion on slide 21, despite the sales challenges in this quarter, resilience of our business model was clearly demonstrated with strong ARR growth and reduced quarterly volatility with the shift to our recurring revenue model, both at the revenue and profit level. I was pleased that the pipeline continued to grow, and we expect the publication of the independent examiner report on the allegations to restore normal deal closure rates. We expect the sales environment to remain stable through the year and have confirmed our 2024 guidance. Finally, on a personal note, I'd like to thank Andreas for this significant contribution to the success of Temenos. and for supporting the leadership team. I have appreciated your guidance, insights, and ideas over the years. With that, operator, I'd like to open the call to questions.

We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touch-tone telephone. You will hear a tone to confirm that you have entered a queue. If you wish to remove yourself from the question queue, you may press star and two. Questioners on the phone are requested to use only handsets and eventually turn off the volume of the webcast. Anyone with a question may press star and one at this time. Our first question comes from Frederic Boulan from Bank of America. Please go ahead.

Hi. Good evening. You mentioned the sign-ins were impacted by temporary delays on the short-seller allegations. So I know the results of the review is, but can you maybe share with us how discussions are shaping up? How should we think about the discussion trajectory in the coming quarters? And more broadly, I seem to expect a pretty stable demand environment, but we are seeing the backdrop of fairly poor demand on the IT spending on the banking side. So it would be great to have a little bit your assumptions from a demand side on the spending and then, in particular, how we should think about subscription growth going forward. Thank you.

Okay, let me take this one, Fred. I think on the IT spending environment, we have not seen any changes in terms of the first four months, as we have mentioned also in the February call. And it's actually the same as last year where we ended. There is still a strong propensity from clients to do and to go forward IT renovation projects, so that hasn't really changed at all. Cloud is still top of mind, i.e. how quickly and how can we help clients shifting core banking workloads to the cloud. and this is either going to be one of the two deployment models as we have mentioned in the past. Either they buy a subscription and run it themselves or they take up our SaaS offering. I think this is something we also expect to remain. And it's something we see across all tiers. If you want IT investment budget for core renovations, for core modernization, as we have seen over the last couple of months, definitely have developed positively. This despite there is still some macro uncertainty out there. In terms of macro backdrop or macro assumption um i think we're in line with consensus either calling for a soft landing or uh no landing at all yeah i think this is this is what we what we can say um the the impact from you know the the allegations clearly was as andreas mentioned you know some uh some clients for their own basically internal compliance reasons. They needed to wait for the report to be published. We talk here about regulated entities which run our software, so this definitely added to the complexity. Clearly, now for the last seven or eight days, those discussions have resumed. We even signed some deals which were basically suspended on the back of this. We would expect this to eventually that we can catch up on what we missed out in Q1. This is also the reason, given the visibility we have, that we have to reconfirm the 2024 guidance across all items. Did I get everything? Did I miss anyone?

Yeah, I think you did. I don't know if you can be a bit more specific on the subscription side, which was a

fairly big um slowdown sequentially so um but i think you answered in terms of catching up in in q2 and beyond so yeah i think there it's a better uh you know comparison to do uh with you know the previous year clearly there is always a substantial you know slow down, or if you want, decline from any Q4 to Q1. Q4 always accounting for, you know, 40, 45% of the full year, and Q1 being our by far smallest quarter. If you look at the delta versus consensus, which is probably more in the 10 to 15 million range, I think this is something we are comfortable to to catch up in the remainder of the year. And clearly we saw the strongest impact on subscription as by now we have very few term license deals remaining in the pipeline. So I think on Q2 you would already expect a much more pronounced seasonality than you would see in a normal Q1 versus Q2. so that on an H1 basis, we're still confident.

Perfect. Thank you.

The next question comes from Charles Brennan from Jefferies. Please, go ahead.

Yeah, thanks very much for taking my question. Just a couple from me. Sorry, I missed the phasing in your last response. you're obviously assuming you're going to catch up the missed 15 million in the remainder of the year. Do we assume that all comes in Q2 or do you think it comes evenly phased through the rest of the three quarters? And then just on costs, we don't often see software companies able to linearly reduce costs to match a fall in license expectations in the quarter. Can you just talk about how you were able to be so nimble on the cost line? And is that just a temporary timing issue and costs will rebuild later in the year? Or are there some structural savings in Q1 that we can extrapolate to the rest of the year? Thank you.

Hi, Charlie. Yes. I think it's probably too early and despite the positive evidence we have seen over the last few days to already confirm that we're going to sign up the delta or the miss all in Q2. Clearly, that's our ambition, but we would expect this to happen maybe over rather two quarters, because you don't know whether there is going to be just days or weeks of delays. But clearly, for the full year, that should be definitely the case. For me to give you now a number on Q2, let's say a substantial part of the MACE will be recovered in Q2 and maybe some in Q3. I think that's the best view today. On cost, yes, they were down 1% year on year, but that was driven if you look at you know, the year ago Delta G&A costs, clearly there is a structural element in there. Quite clearly we have reduced internal, you know, software costs, you know, optimized our own cloud usage across, you know, many applications. There is also some you know, lower services costs, which, you know, as we have explained over the last few quarters, is also calling structural. So we have put the services business on new footing and maintained profitability. And then the remaining delta is maybe for two reasons, clearly lower variable costs in terms of commissions. and bonus accruals because we didn't hit the Q1 number. That should clearly revert back if we deliver the numbers on the variable side. Clearly, there was some travel and marketing, which I believe is also more timing related. And ultimately, the last element, which is investments. We haven't changed our investment plans for the full year. So again, some phasing and timing related to this. So I wouldn't, you know, other than let's say the GM day and service element, the rest is more timing. So we wouldn't expect a change in terms of the full year cost base. We'd still see then, you know, maybe up 40, 45 million versus last year.

And then just lastly, I think we can probably all understand some temporary impacts on the sales cycles. we don't often see companies impacted to this magnitude by external events, whether it's short selling reports or bid talks or any other external influence. Why do you think you've been impacted sort of more than we normally see in these sort of situations?

Yeah. So number one, we, Again, we serve, you know, regulated entities which, you know, have to fulfill a lot of, you know, compliance and regulatory, you know, restrictions and, you know, things like that obviously immediately raise, you know, a lot of, you know, alerts and then people have to react. So this is more from, you know, an internal stakeholder perspective when the CIO has told us, hey, we need to see this report for our board, for our risk committee. So it's a lot of internal elements which play to this. Number two, As you know, we sell the relatively larger ticket items, so to miss 10 or 15 million, these are not hundreds of small ticket item deals. It's a few larger ones which get impacted. immediately you have a substantial impact. And there were one or two larger deals scheduled to sign in Q1, which got delayed and which we are confident that they will come pretty soon. And lastly, it's a small quarter, so any deal slipped or missed has a more pronounced impact also on the back of a very strong Q1, which shows then in terms of the negative growth rate. Now, if you put 10 or 15 million into perspective to a full-year license number of, let's say, 250 million, It's 5%, 5%, 6%, which is not that much and definitely not something you can't recover.

Taki, if I could add perhaps a little bit of perspective here. Our clients are buying software from us that are mission critical. They run the bank's operations on our software, highly strategic, Their business continuity plans are based on terminals. And for a bank to say, I'm going to make a 15 or 20-year decision, do I make this on March 31st or do I make it April 15 when I will have the independent report, if you like, out and all concerns validated, It becomes, for boards of banks, which are regulated entities themselves, as Tagis said, it becomes a pretty simple decision. They say, okay, two weeks. We are still gonna make the decision. We'll still invest. We'll still go ahead. But it's a check in the box that compliance and risk departments and boards, frankly, were expecting. But in the scheme of things, if you are committing to strategic software for 15 or 20 years, this is how you would be thinking about the decision.

Perfect, thanks for the details.

The next question comes from Toby Oak from JPMorgan. Please, go ahead.

Yes, hi, and thanks for taking the questions. Perhaps just on the delays on the on-premise side, you mentioned the 10 to 15 million delta there on the signings that you expect to catch up. Could you quantify or just give us a sense for the magnitude of the amount that's already been signed in Q2 and then what actually gives you the confidence that you will be able to close these deals out? Then if we move on to the delays on the SaaS side, so generated 5 million of SAS ACV in the quarter. Could you help us again with the magnitude of the delayed ACV on this side and how much you've closed out so far and kind of confidence levels around your ability to recoup that over the next few quarters? Thank you.

Okay, Toby. So first of all, on the On the on-premise of the subscription, we have signed some proportion of that. Less than 50% of what we have missed, which has been signed in the first three weeks of April. So again, confident that we can catch up with this over the next weeks and months, clearly. And that's what we have seen. In terms of, and that gives you some confidence, clearly none of the deals which were supposed to sign in Q1 got cancelled. So yes, they have been suspended. Discussions have resumed. As I said, some have signed. But as Andreas has explained, we need to go through this phase in the next few weeks and months. On ACV, clearly, that was disappointing and had a stronger-than-expected impact. We were going for a much higher number, clearly, in terms of the ACV number. And I think this will also come back over the next quarters, but this is clearly going to have a considerable negative impact on SaaS revenues for the year. So while we have confirmed the full year guidance for total software licenses, the mix we see now is a bit different than before. So more subscription and less SaaS revenues. ACV being the largest impact, we were going for a much bigger number. And I think this will have an impact on the full year number. And clearly, as has also been evident in our ARR number, we had clearly there was timing of downsell and the tuition was was earlier than expected, also having a negative impact this quarter. And ultimately, we have now better visibility in terms of overages, which we see with some customers slowing a bit down. So clearly, that has also a negative impact in terms of our sales revenue growth. So in a nutshell, if you put this all together, the weaker ACV, earlier downsell and earlier churn, we now see SARS growing about 10% this year. We were at 20% before. And the delta basically faster or higher growth in terms of subscription.

Understood. Thank you. And maybe just one follow-up on sort of how we should then think about the SaaS kind of revenue growth sort of evolution beyond 2024, if it's sort of trending at the 10% level this year, what then drives the implied sort of acceleration beyond that?

Yeah, I think you will see, or this is what we expect is obviously, you know, a better ACV performance towards the end of the year, which then you should drive, you know, ACV should drive sales revenue growth you know, acceleration next year and beyond, yeah. So I think it's probably a bit too early to look at, you know, 2025, depending on how quickly we can deliver this ACV growth we expect, but we would expect an acceleration of sales revenue growth in 2025 and beyond. So it's really up-facing, affecting 2024 and less the outer years.

Understood. Thank you.

The next question comes from Laurent Dor from Cap-le-Chevreux. Please, go ahead.

Yes, thank you. Good evening, gentlemen. A couple from me as well. The first one is on the support or growth of 10%. You gave us the main drivers and I was wondering into the next quarter which are the ones that will continue to support the growth. What shall we expect on this? My second question is back to your previous comment on the SaaS growing only 10% versus 20%. Am I right to understand that it's not coming from the issue you had with the allegation? Or do you have in your 10% growth for the year somewhat of an impact from that? And my last question is another way to ask the previous question on the cost base. in the first quarter, if you had had 10 or 15 million more licenses, what would you have had in terms of cross-border? I'm trying to get what is the impact on the provisioning of bonuses and variable comps. Thank you.

Okay, Laurent, let me take maintenance first. So maintenance clearly is something we're very happy about, and it's clearly – it was a clean quarter in terms of, you know, evolution. As we said, you know, clearly subscription deals we signed in the past year, but also – also this year give us very high quality in terms of uplift, so that's in there. Clearly also the uplift we generate on renewals, CPI, which we have been very adamant in maintaining, and ultimately, as we also said, the premium maintenance element. For this year, and also given the visibility we have now on these elements, we would see maintenance growth growing rather 7%, 8% this year from 5% to 6% before. I think that's the right number. In terms of Q2 specifically, we don't guide on individual quarters. I think a similar growth rate as in Q1 or let's say plus minus flat absolute number Q2 versus Q1 is probably not a bad estimate. On your second question, yes, indirectly the allegations had an impact in terms of a lot of ACV deals delayed. And as we know, ACV deals have usually an even longer sales cycle than straightforward subscription deals. So ACV being pushed out clearly has a negative impact also on Q2. But the main negative impact other than ACV for the full year is clearly The overages, which we see now less, and clearly also the timing of downsell and attrition, which is maybe also testimony to the still quite tough funding environment for some of the fintechs out there. This has an impact, so not related to the allegations. And then finally on cost, so if we had delivered as planned or let's say as per consensus, I think variable costs would probably have been higher, but let's say four or five million. To make it easier, if we look at it on a sequential basis, we would see, given that we expect a strong recovery of the subscription business, we would see costs sequentially going up maybe around 10 million or so. So from 157 plus 10 million, and that's, as we said, across variable costs and clearly in some of the investments, which simply have been faced a bit differently.

Okay, great. Very good. Thank you.

The next question comes from Mohed Moabala from Goldman Sachs. Please go ahead.

Great, thank you. Good evening. I have two questions. The first one was really for Thibault. Now that the new CEO is in place, I wonder if you can talk through the agenda and the key priorities that you feel that the new appointee will have. And then secondly, I appreciate that it's been a long wait and he is starting quite soon. But you're also navigating kind of the, you know, post the kind of independent third party review and trying to kind of get the business back on track. And given his kind of background with more of a kind of go to market, do you foresee any kind of immediate changes in terms of the organization? And what gives you the confidence that with sort of so many different things going on, there won't be any kind of disruption in terms of the kind of execution of the business? Thank you.

Yeah, thank you, Mo. I think when we were doing this search for a CEO, we were actually looking for someone with a lot of strength in go-to-market. And so this is one of our key areas of focus. We believe that you know, the coverage that we have because of the strength of the solutions and products of Staminos is something that is critical in order to accelerate growth. So that is truly one of the important agenda items. It goes with, you know, since coverage, marketing, partners, and geographic coverage. So all of these areas will be important, but he's going to be, of course, a full CEO, so we'll have to truly support and lead in all the areas of the business, right? But, you know, in terms of priorities, you know, this is really what I would highlight.

Got it. Excellent. And what gives you the confidence?

In terms of management team, you know, frankly, this is not my place to do that. You know, it's going to be Jean-Pierre Brulard's task. You know, there is a strong management team at Temenos, people working well together in order to deliver the value to customers, you know. But, of course, you know, he will have to... step in, you know, make his own judgment and get back to you.

Got it. Thank you.

The next question comes from Christian Bader from Zurich Continental Bank. Please go ahead.

Yes, good evening. gentlemen thanks for taking my questions the first one is related to your costs in your reported result you have recognized a recurring charge of 5.3 million dollars I was wondering what is it for and how much more restructuring do we have to model for the rest of the year please

Yes, hi. I'll take this one. Yes, so 5.3 million, which we had in terms of restructuring. There is an element of improvement in terms of our footprint for leases and rents and this type of thing. So office footprint optimization, that's one element in there. And clearly, we're always optimizing in certain areas what we can do in terms of the mixed externals versus internals. The considerable part in there is clearly we have a considerable element in there in terms of the costs for this third-party examination, which was or is quite costly. And if you look at the restructuring cost guidance, which we have increased from $12 million to $22 million, this is largely driven by the costs related to this third-party examination. And this is not just for you know, the lawyers and forensic, you know, investigators. There's also additional audit costs, you know, and, you know, costs related to that. Okay. The restructuring costs, you know, gave you in February the 12 million, you know, for the underlying business where we always have, you know, some areas to optimize, you know, in terms of also the regional footprint, as I mentioned, that has been unchanged.

Okay, that's very clear. Just for me to understand, I mean, when I look back over the last couple of years, you always have restructuring charges. So I'm kind of wondering, why do you strip those out? I mean, those seem to be part of the business. So why is it non-recurring?

Well, you don't know. It's 12 million. And I think there is... for a business of our size at 1 billion revenues to have 1%, or sorry, you have 0.1% in terms of revenues, in terms of cost to optimize, I think that's fair, or if you want 3% to 4% of EBIT. I think there is always something to do in a large global organization and you know it's not like is it recurring I mean it's a budget we define at the start of the year you know because we know there could be something coming but there are sometimes unforeseen elements you know something like the pandemic back in 2020 or when we face the issues in 2022 with a services organization which you can't forecast. So now these allegations, yeah. So it's a budget, you know, we have in there. So it's not predictable from our perspective. It's one of, and this is why we put it in there.

The next question comes from Chandra Siraman from Stiefel. Please go ahead.

Yeah, hi. Thanks for taking my question. Just a couple. So I see that you mentioned that your expectation of SaaS growth is now 10%. That's about a 20% drop in terms of 20 million drop in TSL, whereas the range of your TSL growth is still in the low teens. So what gives you the confidence that you can still compensate for this drop in SaaS revenues? And just if you can provide any kind of detail or color in terms of any sub-segments which are particularly weak, that would be super helpful. Thanks.

Hi, Chandra. Yes, as you've correctly figured out, this is about a 20 million drop in terms of SaaS revenues. And what I mentioned before is about half of that is coming just from the ACV impact. If you sign 5 million versus a much higher number, which we had budgeted for, that's already half the drop explained. And then the rest is really the timing of some of the downsell which came earlier than expected, which then also falls through and ultimately also some of the visibility on overages where we see where we had benefited last year and it looks like some of those clients either will do less or or later in terms of overages, you know, this year. Now, what gives us the visibility or the confidence? I think the 20 million given, you know, we started also with a prudent guidance in February. Clearly, we have a very good pipeline and given the evolution, we can still see that we can find those, you know, 20 million less SaaS revenues, we'll find them in terms of subscription deals. And this is why we maintain the guidance. So it's offsetting, you know, SaaS with subscription for this year.

Thanks, Takis. Maybe a quick follow-up. Services margins, they seem to have now, they're in the green. Is this sustainable or is this a one-off quarter?

No, I think the services margin is, as we mentioned last year, or in February already, we would see the services margin decrease. continue to evolve positively this year. We said we plan to go eventually to high single-digit, low double-digit. Again, this will not happen this year, but clearly we will make a sizable step forward. this year already from 2% to a couple of percentage points upwards. There were no one-offs in Q1. Now, are we always going to have the same margin every single quarter? Probably not. It depends on the individual projects finishing and going live. But clearly, it will remain profitable in every quarter this year and also with resuming service revenue growth, that should also help. Maybe to be clear on the previous one, why are we so confident on the TSL number? Ultimately, both subscription and SaaS, and as we have seen, maintenance, they drive ARR. So for us and for the Salesforce, being tuned on ARR, And, you know, clearly they have the ambition to deliver on this KPI. And, you know, if we have these delays on the ACV side, you know, we're going to try to make it up with subscription. And clearly maintenance is clearly a highlight, as we have shown, which in terms of profitability helps a lot on the EBIT line.

Thank you.

The last question for today's call comes from Michael Furth from Fontobel. Please go ahead.

Good evening. Thank you. Just two for me. Can you repeat what the costs for the examination, the independent report were and if they've all been provisioned for in the first quarter or if there's more to come? I'm not sure if you said it. And then a question probably for Thibaut is, whether the CEO signing was at all impacted by the independent report and given that he's now starting in a week already, is there a period during which Andreas will stay on board for the transition?

Okay, let me take the first one and then Thibaut the second. So, Michael, we don't have yet the full visibility. As you know, they just finished, you know, one week ago. We haven't received all the, you know, all the invoices yet. We have provisioned one part, what we have received basically in terms of for Q1, but there will be a considerable amount coming also in Q2. We don't know the exact number, but we have increased restructuring from 12 to 22 million. So being on the conservative side, something mid to high single digit is probably a fair estimate.

And so the CEO signing actually was not by Hindenburg. Of course, any candidate was interested in the findings by the examiners, independent third parties doing the examination. But at the same time, I have been for many years on the Temenos board and the chair of the audit committee for many years. And so I was able to communicate confidence that the results of the examination would be positive and was believed by the candidate. So in the transition, Andreas will do a transition during the month of May and then and then he has a 12-month notice so we'll be able also to to give advice to the new ceo as needed during this period of time okay excellent thank you very much gentlemen over to you for closing remarks well thank you for participating to this call and and we look forward of course to meeting with you shortly have a good day end of the day thank you very much ladies and gentlemen the conference is now over thank you for choosing chorus call and thank you for participating in the conference you may now discuss