Temenos AG

Ladies and gentlemen, welcome to the Temonos Q4 2024 Results Conference Call and Live Webcast. I would like to remind you that all participants will be listening only more than any conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing Start at 1 on your telephone. For operator assistance, please press Start at 0. The conference must not be recorded for publication or broadcast. At this time, it is my pleasure to hand over to Jean-Pierre Brulac, CEO. Please go ahead.

Thank you, operator. Good evening, good afternoon. Thank you for joining us for our Q4 2024 results call. So, I would like to talk through our key performance and operational highlight of the quarter before ending over to Takis. So, starting with the highlight, as a management team, we have put a lot of focus on consistent execution in the last few months. And so I was pleased that we ended the year with a strong Q4. If we look at two of our KPIs, ARR and free cash flow, we deliver strong ARR, growth of 12% year-on-year, and free cash flow growth of 25% in the quarter. We have also a strong SaaS SEV of $24.8 million, our strongest SaaS SEV quarter ever. The sales environment was stable through the quarter, and we have positive pipeline development. And we also made good progress on our strategy execution, which I will talk more about in a few minutes. We announced the sale of multifund earlier this month, and this is in line with the strategy we announced in November to be more focused in our product portfolio and R&D investment to support our growth levers. And we have issued guidance for 2025 and also updated our 2020 high targets to account for the sales of multifun. Let me start with customer success. Customer success is my number one priority, which is why we created the one global customer experience team, putting the customer really at the center of everything we do. We have made some excellent new hires, including the new Chief Delivery Officer, to strengthen our customer lifecycle. This builds on our success in 2024, where we had a total of 347 go-lives across all products, reflecting our scale and industry position. And Aldermore is a great example of our customer-centric approach. They signed a deal with Temenos for business and corporate enterprise services, all delivered as SaaS. As part of this, they will migrate multiple systems onto a single SaaS solution from Temenos. And all their more goals is to modernize the existing saving operation, to scale rapidly and increase agility. They clearly see the value of working with Temenos in order to achieve these critical objectives. I also like to share one of other great win in Europe. TEC Bank is a major bank in Romania with over 2 million customers. They chose to work with us to migrate from the legacy systems to our core banking, including our solution for payments and analytics with the goals of faster time to market, and increasing efficiency. We are delivering this project with two of our key partners in line with our partner first strategy. I was delighted that both Aldermore and CEC Bank and many other clients chose to work with Temenos in 2024. It demonstrates what I have said before, that we are highly relevant to our customers and critical to their success. We presented our new strategic plan in November, so I am sure that many of you have seen this slide already, but I wanted to remind you our three growth levers. Number one, we will expand our leadership in best of suite for tier 3 to tier 5 banks, in particular in the US and Western Europe, and this lever will be the largest contributor to our growth. Second, We will enhance our modular core solution, especially for Tier 1 and Tier 2 banks in retail and corporate. These banks are running legacy cores at very high cost and with a lot of operational risk. And they need modular and open solution to progressively modernize. Lastly, we will accelerate adjacent point solution like our digital banking capabilities for the U.S. market, payments, and compliance. We have a structured investment plan building on our strong foundation to outperform the market. So, in terms of execution, we have defined the key business enablers to deliver this strategic plan, which are focus, product, technology, and go-to-market investments, in particular in key geographies like the US, UK, and Western Europe, and investing in the customer lifecycle, which I've already talked about, and investing in our operating model. Alongside of all of this, we continue to prioritize our corporate culture to increase empowerment, accountability, and foster collaboration across the business. I would like to give an update on the progress we have made on our strategic plan and roadmap. The sale of multi-fonds was a key step to focus on our product portfolio and research and development investment in line with our strategy. We have continued to attract senior talent. I already mentioned our new chief delivery officer and Barb Morgan, our new CPTO, where you met at CMD just hire a new chief product officer with a very strong background coming from major US banks and financial technology providers. It's a first step to elevate our product and technology organization to the next level in terms of processes and skill sets. Lastly, we are updating our disclosure to reflect industry-based practice and evolving customer demand. Importantly, including new disclosure of cloud AR. This is highly relevant and strategic, given the direction the industry is moving in, as I highlighted in Capital Market Day. Many banks in the US and Western Europe in particular are developing their own in-house cloud skills to encompass proper cloud governance, taking into account security and regulation obligations. So as you can see, we are very busy, and we are absolutely focused on execution and delivering our strategic plan. And we will continue to update you on our progress. With that, I would like now to hand over to Takis to get through the financial highlight of the quarter.

Thank you, Jean-Pierre. On slide 14, I'll start with an overview of the quarterly financials. All figures are non-IFRS and in constant currency unless otherwise stated. We delivered strong ARR growth of 12% in June 4, which was helped by a very strong South ACV of 24.8 million, as well as healthy growth in subscriptions. ARR continues to increase as a percentage of our product revenue, now equal to 88%, and equal to 77% of our total revenue in 2024. Our transition to subscription from term license is now largely complete, and we expect the contribution from term license to be very limited going forward. I would also like to flag the strong growth in maintenance in Q4 of 12%, which again benefited from strong sales in premium maintenance, as well as the value uplift on subscription signings and renewal. Free cash flow grew 25% under our old definition or 24% on our new definition, which includes the impact of IFRS 16 leases and interest costs. We will be using this new definition going forward. In total, we generated 121 million of free cash flow under our new definition. CSOs were 152 days at quarter end, up 11 days due to the strong growth in subscription revenue in Q4. For 2025, we expect ESOs to marginally increase over the coming year and then to start declining from 2026 onwards as we will benefit from the cumulative cash flow from subscription deals sold from 2022 onwards. Lastly, we ended the year with net debt of 595 million and leveraged at 1.3 times, well within our target range of 1 to 1.5. And we have announced a dividend of 133 C for 2024, up 8% on last year to be voted on at the AGM. Moving to slide 15, I would like to flag the new cloud ARR disclosure we are introducing, which Jean-Pierre mentioned earlier. This includes ARR from both SAS contracts as well as subscription contracts where the client is using cloud infrastructure to run the software. This is an important metric as it reflects client demand. We see growing appetite for use of hybrid and public cloud. We spend on public cloud expected to grow at around 16% Cogger over the next few years. Therefore, Cloud ARR will give an insight into the demand for cloud infrastructure across our client base. We expect Cloud ARR to grow at a percentage of total ARR in 2025, and to continue increasing in the mix over the following years. Looking at our services revenue, this continued to decline in line with our partner-first strategy, but there was a strong improvement in the services profitability in the quarter. I would expect service revenues to grow low single digits in 2025. Looking at our cost base, operating costs were up 1% in the quarter, as we benefited from the efficiency program we started in H2 2014. This masks the underlying acceleration in investment in R&D and sales and marketing. We have not seen the full P&L impact of our investment program in 2024, and these investments will become more visible as the cost base continues to grow in 2025. Lastly, we delivered strong growth in our EBIT margin, up three percentage points for the full year to reach 34%. On slide 16, we have like-for-like revenues and costs adjusting for the impact of M&A and ethics. The figures are all organic and therefore in line with our constant currency growth rate. As I mentioned, services margin continues to improve with costs down 11% in the quarter and 7% for the full year. Product-related costs, including services, were up 4% in the quarter as we have started to ramp investment in R&D and sales and marketing. and this will continue under our investment plans for 2025. As a reminder, we have flagged at the CMD we expected to invest an incremental 30 to 40 million in total in 2025. I would also like to flag that our net capitalized development costs declined significantly in 2024 to 10 million, down from 18 million in 2023. Looking at ethics, there was roughly a 2.5 million headwind on EBIT largely due to euro weakness against the dollar, impacting revenue and some impact from hedging. On slide 17, net profit was up 44% in the quarter versus EBIT growth of 18%, with the outperformance mostly due to a one-off tax benefit of 15 million. EPS was similarly up 47% in the quarter. The underlying tax rate was 20.7%, within the guidance range of 20% to 22%. For 2025, we expect a similar tax benefit. So our expected tax rate for 2025 is 15% to 17%. And the normalized underlying tax rate excluding the one of benefit is 19% to 21%. Moving to slide 18, we have the changes to group liquidity in 2024. We generated 391 million of operating cash. paid $97 million of dividends and bought back $227 million worth of treasury shares. We also used our debt facilities to repay a $150 million Swissie bond in April 2024. We ended the quarter with $114 million of financial balance sheets and net borrowings of $727 million. Our leverage stood at 1.3 times, well within our target range of 1 to 1.5 times, and without M&A, share buyback will continue to be leveraged further in 2025. In conclusion, we have ample flexibility and optionality to do further buybacks. Moving to slide 19, I'm sure you all saw the sale of multi-funds we announced earlier this month for an EV of around 400 million, including an earn-out. we expect the deal to close in Q2 2025. This aligns with our strategy to simplify our product portfolio and focus R&D investments. In 2024, Multifunds contributed around 40 million to total software licensing and 50 million of EBIT, keeping in mind it has a solid maintenance revenue base as well as some service revenues. We have adjusted our 2025 guidance, 2028 target, and 2024 performer figures to exclude the contribution from multifund. Moving now to slide 20, I would like to briefly discuss the change in our revenue disclosure. As I mentioned earlier, we have introduced new disclosure on Cloud ARR to give greater transparency on the progress we are making on Cloud. We are also changing our revenue line items to reflect changes demand, and industry best practice. We are replacing total software licensing at niche parts with a single line called subscription and SaaS, which brings our guidance metrics and disclosure in line with global software failures. We expect term license to continue trending down to around 20 to 30 million per annum as a steady state, so the majority of the revenue in this line item will be from subscription and SaaS contracts. In slide 21, we have our guidance for 2025, which is non-IFRS and in constant currency, except GPS and free cash flow, which are reported. Both the 2025 guidance and the 2024 formal numbers exclude any contribution from multifunds, and free cash flow is, of course, under our new definition, including IFRS 16 leases and interest costs. We are guiding for ARR growth of at least 12%, and subscription and sales growth of 5%. We expect EBIT growth of at least 5% and EPS growth of 7% to 9%. And we expect free cash flow growth of at least 12%. And lastly, on slide 22, we have our 2028 targets, which we have updated for the sale of multifunds. It is important to note that the implied covers have not changed from the targets we announced at the CMD in November. We now expect ARR to be more than $1.2 billion, implying a cover of 13%, EBIT to reach around $450 million, implying a cover of 10%, and free cash flow now to reach about $400 million at a cover of 16%. With that operator, please can we open the call for questions.

We now begin the question and answer session. Anyone wish to ask a question may press Start at 1 on their telephone. If you wish to remove yourself from the question queue, you may press star and two. In the interest of time, please limit yourself to one or two questions. The first question is from Toby Oakley, JP Morgan. Please go ahead.

Yeah, hey, good evening. Maybe just on the subscription and SAS guide 5 to 7 in 2025, how should we think about the implied growth rates embedded within the different components here across SAS and the term plus subscription revenues? And then just secondly, just on the SAS piece, obviously Q4 was 4%. I know the SAS ACV of almost 25 in Q4 should help drive some of the reacceleration in 2025 on SAS. But outside of that, could you give us a sense for how the SAS pipeline is evolving and how we should expect the FAS ACB to evolve through 2025. Thank you.

Hi, Tobi. Yes, I was expecting this question. So there is a reason why we haven't given any more outside for what we have outlined. our disclosure in terms of being aligned with the global software player. No one else discloses SaaS specifically. It also reflects the reality of the buying decisions from clients, which ultimately dictate the delivery and consumption model. And we see an increasing combination of on-premise, hybrid, public cloud and SaaS. So clearly we will focus on you know, ensuring that our world-class software services and support, you know, the model clients have chosen. On SaaS ACV, it is strong. It was strong, and we had guided a bit for, you know, a stronger performance. Several reasons here, you know, clearly we had seen a negative impact. know also on the on the south acv business in in the first two quarters of the year with the push outs due to hindenburg happening so clearly you know we had we had this you know in terms of catch-up coming in well into four and we also have to you know acknowledge that there was a sizable contribution from the multifunds business in Q4 on SaaS ACV, which, you know, also contributed to this very good number in Q4. And finally, on the SaaS ACV pipeline, we have seen, you know, In the last few years, as we had commented already back in 2023, clearly a negative impact from the funding challenges of fintechs. But clearly we have seen now, as for the rest of the business, a quite good improvement in the underlying pipeline development. know we would expect them over the over the next quarters to see a good performance of our south acv business um but at this point we can't give them any further disclosure let me add toby jump here that in a way when we say customer demand is mostly for very large bank in the us uk and where i'm in the countries as

IPR scalers are developing as well a significant footprint. I met a lot of customers, even a very important one here in London, which has deployed overseas software. And what they told me the following, they say, we like your software, we think that we can derive a lot of value from that, but You know, with the regulation, with Dora, and with all the investments we have done in our skill set in cloud operations, we started to encompass non-critical applications, like, I don't know, Salesforce or Workday, and now we are applying the same governance and the same regulation for mission-critical applications like yours. So our duty in terms of architecture is to build modular applications, either, I mean, run by us in the SaaS model, and it's mostly successful in tier three banks and some point sales as well, or in a way to provide the best software for our customers. And I'm glad as well we have delivered that in a multi-cloud environment. As today, we have customers not only on Azure, but as well on AWS, on Google Cloud and IBM Cloud as well. So it's giving, I mean, much more possibilities as well to please our customers. And let me add as well that we have almost completed the term license evolution, as pointed out by Takis. So there is no obvious reason to aggregate term license and subscription. And after three years of subscription license, as many, I mean, companies and software are doing as well to regroup, in a way, SaaS and subscription together to give a more recurring and predictable revenue trend as well. So it's the reason why we have done that. And not a surprise, we just announced as well this concept in Capital Market Day when we have different growth rates about cloud and SaaS as well. That's great. Thank you.

Good evening.

Two questions for me. When you think about the 2025 guidance, what are the greatest areas of uncertainty? That is, if you were to miss or beat guidance, what would be the most likely driver of each? And the second question is, what do you intend to do with the $400 million of proceeds from the multifund sale?

Hi, Josh. Okay, let's go step by step. I think on, you know, subscription and SaaS, which we have guided, you know, 5% to, you know, 7%. If you look at what we communicated at the Capital Markets Day, where we said we expect the market, which is product growth, to be around 7%. Maintenance, we expect around 7%, so if you take the midpoint, we're, let's say, close to market growth, what we are expecting. This is in line with our stable sales and environment commentary, and clearly we want to be a bit prudent at the start of the year. I think that's one thing. So if the market is developing better, more favorable than our current assessment, you can... we're probably ending then on the upper end and vice versa. On the ARR growth, we had a good performance in 2024, despite the headwinds we were facing at the start of the year. I think on ARR, and given this is an important metric, we have been focusing a lot. Clearly, I would say you know, the mix, you know, towards subscription, you know, is continuing. There is, as you've seen, there is little left in term, which will further decline. I think that's helping. The premium maintenance business is also helping maintenance and ARR, and clearly, you know, ACV performance should also help ARR. So this is why we're actually quite comfortable with this one, but there is obviously a direct link to the underlying product investment and product growth. We said back in November that this will be a year of investment. If you take the guidance, this is about flat margin. There is still a substantial investment program ahead of us. As we have seen also in Q4, clearly the efficiency gains, they're kicking very quickly, so that was a benefit. So let's see, if we are able to deliver all our investment plans, we will be in the guidance range. Clearly always, as in the past, we had clearly some prudence in our EBIT guidance, EPS is as a consequence of that. And then finally, free cash flow, we have consistently delivered over the last quarters. It clearly has been a good performance. Now, I think on free cash flow growth, it's nothing special there. We are prudent in our guidance. And clearly, if the inflows come in better and we manage managed to do to deliver the rest of the guidance and then the copy clearly. The one thing which we need to consider is clearly we have, you know, it's not an adjusted number. So the impact of, you know, the restructuring done last year and also being done this year, this is obviously a headwind to free cash flow because, you know, there is cash out impact on this one. So I would say this or the moving parts. In a nutshell, we start with a prudent guidance. It's only mid-February.

Let me add, before maybe Takis is taking the second part of your question, Josh, that this year is a year of investment. I'm glad that we have completed our hiring on US salespeople, initial hiring, that we have committed to do to cover our a sweet spot which is the tier 3 original bank so it is done they were all of them were in sales kickoff and they are onboarding as we talk and uh but you know really in the cell cycle duration i'm not expecting to be materially visible until the end of the year and mostly in 26 27. so uh and we will do as well i mean uh the second step of uh of our product and technology as well investment, self-funded by a couple of product simplification and rationalization. So again, I'm not expecting that there will be meaningful visible this year, even if we have this 5% to 7% growth rate. But let me reiterate my confidence that we will achieve the plan by 2028. And as you have seen, we have not modified the CAGR without multi-fund in the landscape as well. So maybe I will hand over to you, Takis, again for the use of proceeds for capital allocation.

Yeah, just let me take part of the question. Given our strong free cash flow profile, both, you know, in 24, but also given our forecast for 2025, clearly there is enough capacity for both share buybacks, but also do selective, you know, BOLT on M&A, which is always difficult to time. And let's be clear, we don't have anything, you know, transformational or anything, you know, looking at, and this clearly is something we also not intend to do. Let's be very clear here. I mean, ultimately, it's the board deciding on use of proceeds. And clearly, if we continue to deliver like that, we will fall outside our target range. So I will put a high probability that there will be a sizable share buyback happening this year.

Thank you very much.

The next question is from Charlie Brennan with Jefferies. Please go ahead.

Hi, great. Good evening. Thanks, guys. Just two questions for me, actually. Firstly, just a high-level question on the market backdrop. It feels like banks are in rude health at the moment, certainly healthier now than they've been for some time. Have you detected any change in the nature of your conversations with banks and Is it in any way optimistic to think that you might start to get a bit of a macro tailwind as that feeds through to discretionary spending? And then secondly, just a small financial question. Just on multifunds, it looks like it's 50 million of EBIT and about 20 million of free cash flow. What's the delta between EBIT and free cash flow there? It looks surprisingly wide. It would obviously help with our modelling to understand what's in In the middle there, thank you.

Let me take the first question as well about the banking industry. I spend a lot of time meeting CEOs and CIOs of banks all over the world, and basically they are facing this dilemma. The most performing banks are the ones that are investing the most in technology. in terms of return on equity, CIR, NPS, etc. But at the same time, they are stocked by legacy bespoke core banking systems, which are very difficult to move, and it's a dilemma that they are facing today. So there is no, according to, of course, we are still using a couple of independent analysts, and as well, the conversations that we could have with all the bankers, there is no slowdown in the technology investment. And there are a lot of projects surrounding the core is a reason why we continue to invest on modular architecture and application on point solution. And many banks as well are replacing the core banking. So I'm glad with what, in a way, you observe in Q4. that we have concluded a couple of SaaS solutions with the UK banks. We have changed as well our leader in the UK and I. And basically, the pipeline I've seen both in the UK and US in terms of modernization is encouraging us as well in terms of investment. And we have not seen in our pipeline any slowdown and any signal of slowing down. So with that, Regarding the specific question about multifund, I mean, Takis, if you can take it.

Yeah, Charlie, there is no magic in the number. Your calculation is not entirely wrong. There is one element, and we have shown this also in the appendix, DSOs will be quite a bit lower without multifund. So multifund, especially last year, very low cash conversion if you want also a bit to cash conversion given a number of larger deals signed also with tier one institution with payment terms you know not very favorable i.e high networking capital um basically in the in the business and this explains you know how you get from the epic to um to the cash and it's also something we would have seen you know over the next years if you look at the 2025-2028 updated targets you see you know a bit down 50 million per cash only down 20 million it's the nature of the business and it has been like that in the past and just sorry it's a bit technical but does that mean that you keep the working capital and you now get the cash flow benefit of that

Or has that working capital been sold with multifunds?

Okay, so you seem to be an M&A specialist. So when we close, there will be, because of the working capital shifts, and let's assume we're going to close on time in Q2, there will be, depending on what we will see by then, whether it's end of April or end of May, there will be a netting of basically the balance sheet position with, this is why we said EEV, yeah. So if we get the benefit of cash flows coming in in, you know, June 1 plus April, May, this will be obviously, you know, netted as part of the transaction with the working capital transfer.

Perfect, thank you. Next question from Frederic Boulan with Bank of America. Please go ahead. Boulan, your line is open.

Yes, sorry. Two questions from my side. One on the U.S. side, if you can provide us an update on where you see the, you mentioned on the sales effort, but Anything you want to share in terms of product position and traction that you've seen at this stage? And then secondly, just to clarify on the commentary around maintenance, I think you mentioned 7%. So if you can mention what kind of growth you expect this year, just for us in terms of modeling on the subs and SaaS side, just to confirm, you're not going to provide any split going forward there. Thank you.

Good evening, Frederic. I will take the first one. In a way, as I mentioned earlier, we have completed the initial targeted recruitment in the US. I'm very glad as well about attracting a good talent, which is not obvious for a non-US company in sales as well. We have a very good answer for the market of talent. No, they are all in board. As I mentioned in CMD, they are fully focused on a list of accounts, which are mostly Tier 3 original banks, where we would like to implement our Level 1, which is Level A, which is the best-of-speed software. We are contemplating as well our investment to respond to the specific product needs in the U.S., So it's part of the investment that Takis talked about. And I'm glad as well that we will announce, and I will be in the U.S. in two weeks now, our new innovation hub in Florida. And as well, we have hired a lot of new executives in the U.S. I mentioned the chief product officer that came from a major U.S. bank, a U.S. technology provider. We are as well recruiting a new UI design architect as well and many other executives that will reinforce as well our team to take into account the specific needs of the U.S. So I'm very encouraged by our progress and I will spend with Takis and the team as well a couple of weeks in the U.S. early March. So on the second part of the question, Takis, if you can take it, please.

Hi, Fred. On maintenance, we had clearly another strong performance, both in Q4 and also for the full year at 12%. It was definitely helped by the easier base in 2023. So the base now becomes a tougher comparison. If you look at the drivers for maintenance growth, ultimately it's growth of our subscription business with the value uplift we continue to see versus term license. And also with the CPI locked in and also premium maintenance, which is something we have started to put salespeople on. This is clearly delivering what we expected. Now, the basis is now a bit higher. This is why we say it should be around 7% growth for maintenance in 2025, maybe a bit higher in Q1. And then you have a bit lower growth than in Q4. This is where we should arrive. It's correct we're not going to guide for the individual components of subscription and such.

Thank you. The next question is from Chandrasi Ramanvishtipal. Please go ahead.

Yeah, hi. Good evening, Jean-Pierre and Takes. Thanks for taking the question. I have a couple. Firstly, I mean, You mentioned a lot of interesting hires that you have made. I'm just trying to get a sense of incremental investment, how much of it is already locked in, just to get a better sense of the seasonality of these incremental costs. And my second question is, in terms of geographies, obviously Q4 was very good, but I couldn't see any significant change in terms of any geography contributing. the strength, so you have any, would you like to call out any geography that moved the needle significantly?

Thanks. Hi, Chandra. Okay, on the costs, we have seen some slight, you know, pickup, as I mentioned, on sales and marketing in R&D costs in Q4, but this is obviously not yet visible for the full year. So I would expect that especially Q1 and Q2, maybe also Q3, but especially Q1 and Q2, we'll see, you know, mid-high single-digit cost increases given the easier comps. for both sales and marketing and R&D. Some people have been hired in December, so it's visible in the exit rate. This is why we say overall you should see a cost increase mid to high single digits in 2021. Don't forget, we still have services costs, you know, declining, let's say, cost of, you know, 7, 8% in Q1 and similar in Q2. And the race, you know, as Jean-Pierre mentioned, you know, we had front-loaded, you know, U.S. sales hiring, but, you know, will Moroni continue to hire salespeople, you know, across the world? It's not just... UK, Ireland, and clearly also Barb. You'll have seen some of the announcements. He's bringing in senior talent in the product organization in Q1, and this will also continue. And this is what we have reflected in our model. Yes, hiring is always, usually takes longer, but we are committed to our investment plans, and this is what we have

To give you some color about investment in product and technology as well. So, of course, we will go a little bit more details. And once Bob and I, we will announce our new model for product and technology. But it's basically share between products. Of course, I mentioned our US product portfolio. but let me mention as well investment around digital and around corporate banking. And we continue to innovate, to innovate on modular architecture and modular solution, to innovate in SaaS and cloud architecture. And lastly, and you will see that in our flagship event in May in Madrid, in GNI as well. So it's in a way a very focused investment that we will announce at the occasion of TCF in Madrid on the 20th and 21st of May. Regarding the second part of your question, we have a significant traction coming from AsiaPac for the first time in the year, which was in a way, I mean, mostly driven by a couple of larger deals. And I'm glad as well to have seen a very large bank converting on-prem to SaaS, which is basically a very good move. And as well, as I mentioned earlier, I'm feeling encouraged by a couple of SaaS transactions that we have concluded in the UK.

Great, thank you.

Sandra, just to add on the Regent's question, APAC saw a good performance. I think on the other regions, they developed as expected. There was no specific, actually, to be said. As you saw from our performance, I think there was, yeah, there were a few surprises. We delivered a good performance across the regions in line with the budgets, also on product. nothing specific to highlight transact our core product being the main driver you know also of the performance as we had mentioned good contributions from multiple as well yeah just let me add as well that yeah we have completed our sales management team and we just are here as i mentioned earlier a new leader and ukai

As well, I'm glad that we have hired a new leader in APAC that have immediate impact as well in Q4. And if you remember as well that we have an issue in Middle East in Q3, so we will have our new leader in Middle East starting in March. So we have completed as well all the leadership under Will Moroney.

Thank you very much.

The next question is from Sven Mert with Barclays. Please go ahead.

Good evening. Can I just check how you will report Q1 and Q2? Is multifunds moving into discontinued operations so you will provide us with the P&L and cash flow on a continued basis? And then secondly, how big is the multifunds turnout? of the 400 million and when would you get it?

Thank you. On the first one, no, it does not, given the size of the business and the accounting requirements, multifunds is not discontinued operations. So it will be, as you look at the balance sheet, it's what we call assets held for sale. You know, the opposite side, liabilities held for sale. So it will be reported as part of the operating business. However, because of our guidance, we will clearly, you know, exclude the impact of multifunds. But it will be, you know, visible. It's not part of our guidance. Definitely 421. And then Q2, we'll see whether it's, you know, a few weeks, one, two months. But it's not going to be... know a discontinued operation yeah um so yeah that's uh that's what it is um what was the other question on the other hand so the earn out um clearly we have agreed with with montague not disclose all the details of the transaction it's um something which um given, you know, management, multifunks, the existing multifunks management is also investing in the business. So it's basically aligned with, you know, the incentive plan for the management. So, you know, we're in the same boat. It's a multi-year earn out. The very vast majority, you know, more of 80% is upfront. we're going to get this up closing yeah and then the remaining part is split over the next two years okay thank you the next question is from laurent please go ahead yes good evening gentlemen uh i also have two questions uh the first one is

we could have a little bit more disclosure on Multifond to help us to deconsolidate it. Particularly, I was a bit surprised on the very high profitability. Could you share with us the total revenues this company is doing and maybe a little bit of granularity on the split of revenue by region? And my second question is more an update on UOP, which has been relatively weak for years. Do you consider now you have the right team, and do you start to see the very early signs of potential inflection in this region? Thank you.

Hi, Laurent. I think we have provided already the details which we are comfortable with. It's, again, part of the confidentiality with the buyer. We said, you know, think about there was a sizable maintenance space in the business. MultiFonds was a highly profitable business. There was also some services. I think this is as much as we can say.

And Laurent, Jean-Pierre, so in your second question as well, So we have made a couple of changes in our European operation. Last year, we have two teams in a way, a geographic team and a strategic account coverage about the top 10 accounts that we have in Europe. So in a way, we came back to a more linear organization based on geography and across four different sub-regions. I already mentioned that we changed our leadership in UKI. uh we have done the same in france and benelux as well a new a new leadership and the rest is organized around a southern europe and germany and eastern europe which was traditionally working well because it's a market of first equipment that's more market of buys that built as well i met a lot of customers in europe so In a way, they're all waiting for us just to release our modular architecture. It's a different market than in the US or in emerging countries. As I said before, I'm encouraging the first SaaS success that we have in the UK. We will double-click on the wealth where we have a very good traction across a couple of countries, but we would like to extend to Countries like the UK, for instance, which we are worth three spots in Europe. And lastly, as well, we are fortunate to have a top ten tier one and tier two banks in Europe that, in a way, are ready to develop all their investment with us as well. So if I summarize in Europe, three priorities, UKI, wealth, and strategic account.

Great. Thank you, Jean-Pierre.

The next question is from Michael with Fontobel. Please go ahead.

Hi, good evening, gentlemen. Just two more questions on multifund. Sorry to get back on that. I was just puzzled by the high profitability of the business and you're selling it for an EV of 400 million. Can you share any comments on you know, the valuation and your motivation to sell the business for what seems at least a low price. Maybe tying into that, you're taking out only 50 million of the 28 EBIT target as well. So that implies that you wouldn't expect any growth in that business. So maybe that explains the the low valuation. Anything you can share in addition, please.

Yeah.

Let me start with the strategic reasons first. As we mentioned in CFD as well, we would like to focus on really what's matter for us, which is our core business. And it's fair to recognize that multifound was ring-fenced within the organization in terms of go-to-market, in terms of products. and uh we will never i mean god i mean the uh in a way uh the the interlock that this business will deserve with the maintenance and they are mostly in uh very uh few limited tier one banks and the personnel within the account as well are far different so in a way we have made the strategic assessment of multi-fund and we have considering different options as well to keep in the landscape of Temenos. And we have pros and cons. And at the end as well, we have taken the strategic decision to put Temenos on the market. And we are satisfied with the transaction we have done with Montague. And I will hand over to Taki to give you the reason why we are glad with the result of the transaction.

Yes, hi, Michael. Indeed, we're very happy with the outcome. EV is a good number, and let me respond to the question from two different angles. So, number one, why is the 2028 target now only 50 million less? As we mentioned a couple of times, multifunds had a very strong 2024 year. on the back of a relatively weak 23, also held by, you know, a strong finish to the year. So clearly we would not expect, you know, this performance, you know, to continue if we look at the business plan we had. So clearly there is an outsized impact, you know, in YouTube 4. That's reason number one. Reason number two, which you don't see, but contrary to you know, the rest of the products. Multifunds has really only started in the second half of 24. It's transitioned to SaaS. We mentioned, you know, they had a good ACV quarter. Now you know what this means if you transition to SaaS, you know, there will be a multi-year, you know, headwind to your model. And, you know, that was also something clearly we, you know, we didn't want to carry forward. So, you know, it's not, it's not visible, but clearly it's visible in the investment plan that this south transition is only starting. And then finally, you know, we mentioned that we want to be focused in our R&D investments. Clearly, the multi-funds business for the transition to south is also requiring quite some investments. For us, you know, this was, It explains why we think there are better owners than this one. And then finally, unfortunately, this is not the way buyers look at. They look at, and we gave him the footnote, the adjusted cash EBITDA multiple. Now, there is limited amortization within the business. So, you know, the EBITDA is maybe slightly higher than the EBIT. But the way private equity looked at this was, you know, clearly you need to, you know, subtract a number or a plethora of items, you know, standalone costs, day-to-day adjustments, you know, for the billing. You know, we book, you know how we book subscriptions. There were, you know, sales commission, a number of, you know, adjustments, which basically then get you to an adjusted, you know, cash EBITDA, which is materially lower than, you know, the basically reported EBIT. And this, you know, the 20 to 24 times cash, just the cash EBITDA multiple, depending on the year, I think this is a good outcome and was really in line with, similar transactions. So there's a bit long response, but this is how we think about this and why we're happy with the EVO 400 million.

Okay, thank you. That's very helpful. Thank you.

Next question is from Knut Voller with Baader Bank. Please go ahead.

Yeah, thank you. Just two quick questions. The first one, Looking at deferred revenues, they have been down 5% year over year in Q4 and showed the lowest sequential uptick with a plus of 45 million quarter over quarter in many years. Can you just give us some more color here what drove this development? And then secondly, can you also please provide some more color on the one-off tax benefit that you cited in 2024 and that you expect to persist in 2025? Thank you.

Hi, Knut. Let me take those two questions. Maybe first on the tax rate. As you've seen, the underlying tax rate was 20.7%, so in line with our guidance range for 2024. And we're actually structurally going the right way. So the underlying one for 2025, we see at 19% to 21%. So clearly, we're moving in the right direction. We had in 2024 success on a few, call it uncertain tax positions and tax filings from prior years, which we benefited from. I think this is what it is. And I think the same if we look at, you know, what we have done now, we're definitely going to see, you know, we've been conservative in the past and clearly those you know, those uncertain tax positions are moving, you know, in our favor. And, you know, also tax authorities, you know, are usually very late with, you know, confirming, you know, some of the filings. So these are, you know, what we will call one of the benefits in the amounts we have stated. On deferred revenues, yeah, we grew, I'm not sure about the absolute number, but the growth was just 1%. That's correct. I think if you look at deferred revenues, the balance sheet is clearly without multi-funds. So you don't really see a like-for-like view on deferred revenues. We had a health increase in our deferred revenues, including funds. which is masked by the, you know, assets held for sale accounting position. So that's clearly one reason. Secondly, there was quite a substantial negative FX impact on our balance sheet at the end of the year. And, you know, deferred revenues is a balance sheet position, so clearly recurring revenues are constant currency, but it's not really comparable to the balance sheet movement. And finally, You know, I think 2023, we had 14%, you know, deferred revenue growth and recurring revenue growth was lower. Clearly, there is some timing difference. However, I think what's more important, I think we'll see deferred revenues growing in the next few quarters, also due to the comparatives. And, you know, the momentum we have in maintenance and in ACV growth, you know, should support an acceleration in deferred revenue growth. But I think we're guiding on enough metrics and, yeah, I think that should be okay for now.

Thank you very much, Takis.

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Jean-Pierre Bouroulard, CEO, for any closing remarks.

Thank you. Thank you for your time, your question and your support. It's a long journey, but let me reiterate my full confidence for our midterm plan by 2028. I look forward to seeing you in our earning calls in April and as well to welcoming you in our flagship event, Temenos Community Forum, in may 20th 22nd and we have pleasure to announce that we will restart the investment breakout during this event as well thank you a lot have a nice evening bye ladies and gentlemen the conference is now over thank you for your participation you may now disconnect your lines