Temenos AG (TEMN) Earnings Call Transcript & Summary

Good morning, everyone. Thank you very much for joining us for those in the room and those of you on the webcast as well. My name is Adam Snyder, Head of Investor Relations for Temenos. I'd like to briefly take you through the agenda for the day. We've got a slightly shortened agenda, and we're going to run straight through. I promise there is refreshments at the end. We're going to be covering a range of the usual topics, industry trends, strategy and vision, our product and technology, approach to artificial intelligence and finally, our financial growth plans. We will be taking Q&A at the end, so I'd ask you to hold your questions until that session. And for those of you on the webcast, you can submit questions at any time through the webcast platform. There's the WiFi code for anyone in the room. If you need it, hopefully, you've got that. I'll leave that up there just for a second so you can use your phones. And before we start off with the formal agenda for the day, I'm first going to hand over to Thibault de Tersant, our Non-Executive Chairman of the Board who'd like to make some introductory remarks. Over to you, Thibault.

Good morning. I am the surprise on the agenda. So a few days ago, we received these allegations. And there was a public letter, which got my attention because it said that -- we actually received them on Valentine Day. So I looked for some love in the report, and I couldn't find it. So I think they missed a little bit the date for releasing it. More seriously, I'm, of course, the Chairman of Temenos, and I also have been the Chair of the Audit Committee for many years at Temenos and I can assure you that we have never stopped strengthening the control environment of this company, never. And also that this company is running a very strong business. So what I would like to do with you today and I will be short, I promise, is to give you some balance to the allegations that are done and also assure you that the Board is going to do an oversee and will be helped by top consultants, third-party independent consultants in order to review these allegations. And when this is done and the thorough examination has been done, we will come back with, of course, a more detailed answer. But I think it's important to put a balance in all of this, and this is what I'm trying to do now. So there is an allegation on client satisfaction and how implementations are done. I think that we have close to 3,000 customers. And if we look back, 2023, there were 391 go-lives, which I think tells a lot about the quality of the product. There is another good indicator by the way, of customer satisfaction, which is the churn. And the churn is close to 3%, between 3% and 4% in 2023 in dollar terms. There is also the net promoter score that we have released and I think that 54 is a very good score --- done out of 900 customers, 54 is a very good score. The ones that are ready to recommend. And also the last indicator, which I think matters, our litigations. When you have truly unhappy customers, you get threatened litigations or litigations. We have only 1 litigation open at the present. There's also an allegation on Mbanq. Mbanq, I think we said that this market, Banking-as-a-Service, is going to be a growing and interesting market. So that's the rationale for doing an investment in convertible bonds into Mbanq. In total, we invested $59.9 million in Mbanq. And Mbanq is also using Temenos and the revenue that we booked since the investment over this period is roughly 22% of the investment, which was made, just to be clear. Mbanq is not a reseller, they are running their BaaS business. So it's very hard to say that it's a round-tripping of revenue, I think. And I should push the button if I want to see my next chart. There is also an allegation on pulling forward contract and also on discounting that I am sure you have seen in the report. Well, pulling forward -- what is happening? It's quite normal. I mean, these negotiations with banks take a long time. So banks generally want to anticipate the renewal of a license agreement. That's just normal. They cannot end up being caught and having the only option to renew because it's too late to discuss. So it's a normal process. It's also a process that is useful when you want to upsell in a customer. It's normal life of the business. I think that is what truly matters is to see that what is happening with these customers because the allegation is really that when we do that, we pull forward and we give large discounts, we're going to kill the business. In reality, looking at the figures, the net retention rate for existing customers is 112%. So there is clearly an upsell rather than a steep discount. And the value we generate from customers is also very visible when you look at the growth in ARR, but this [ Takis ], I am sure, will develop further. Now there is another allegation about backdating transaction. Well, what I can tell you is that again, there are very strong controls to avoid it. And the process of our contract signing is a process that is today handled as a standard for DocuSign. So in DocuSign, you have in the system, the date at which the contract was signed. It's not a very complex thing to verify. Also, the only reason why someone would backdate an agreement would be to recognize in advance some revenue in the former quarter versus the following quarter, that would be the reason. But in IFRS, the software has to be delivered for the revenue to be recognized. And this is absolutely recorded, the date at which the software is delivered in the system. So it's not a salesperson somewhere who can change that. However, of course, this will be also part of the thorough examination that we will do and will be part of the answers that we will provide. There is also an allegation on Infinity. That Infinity would be a complete failure. I think that Andreas, Prema will give you more color on Infinity. But what I can say is that it's a strategic part of our portfolio, Infinity. We call it digital now. I mean it's how banks interact with customers. It's extremely important. And it is a portfolio we continue to sign good transactions on Infinity. We did so also in fourth quarter. And we do many go-lives of Infinity each year, including in 2023. So I don't know where this accusation is coming from but Infinity is actually a good product that is being sold, [ and ] decapitalization. So there is an allegation that we are playing games here in order to improve probably our EBIT through this activity. In reality, when you look at the net capitalization, it was reduced in 2023 compared to former years. And so in terms of year-to-year expense, there was actually $5-more million to take in the P&L in 2023. Because I think there was an allegation that we were actually changing the length of time, et cetera. Well, in reality, the net result is that in 2023, year-to-year, we took more expenses. And finally, partners. Partners are a very important element in the Temenos strategy because they do most of the implementations for our customers, most of them. But our sales are direct. We are selling directly the software and banks, they want to deal with Temenos. And that's very normal for a very important software infrastructure, software application for them. So we looked at what partners represent in our revenue and the licenses sold to our partners were around 4% in 2023. And this figure if you look backward, doesn't vary much. So it's very minor what we do in terms of sales to partners and the allegation here is probably that we are forcing them to buy licenses. And of course, it is not the case. And anyway, it's a very small amount. So this is really what I wanted to say to put some balance in the report that you probably have seen and all these allegations. And like I said at the beginning, we'll come back to you once the thorough examination helped by independent third parties in accounting legal in Switzerland and a law firm in the U.S. will be done. With that, I think I will not abuse your patience, and I think it's important now to see that we have a very good market, a growing market. Nothing is better than a growing market and how we are going to develop -- continue to develop our strategy in this market and which products we are going to continue to put on this market and what it means also in terms of our midterm plan. With that, Kanika will give you a presentation on the market plans.

Thank you, Thibault. So I will cover the banking industry trends, which is really about our market opportunity. And I will also talk about our proprietary Temenos Value Benchmark program and how we leverage it to inform our product and sales strategy. So as you know, the banking industry has been remarkably resilient since the COVID-19 pandemic and its aftermath. And even in 2023, with the shocks triggered by the banking collapses on both sides of the Atlantic, the market recovered -- the industry recovered and is tracking the market. However, banks face and continue to face significant performance, competitive and ever-increasing regulatory challenges today. In an analysis that we do every year, we find that 58% of 3,000 banks globally are earning returns below their cost of equity. This is across the world. It varies a little bit by region, North America being a little bit better, Europe being a little bit worse. And then we come to attracting and retaining customers and how it continues to be a challenge in the face of very strong competition from fintechs, from platform players, from technology giants, from challenger banks. This, however, has been a little muted in 2023. Banks have strengthened, incumbent banks have seen a strengthening of their position versus the fintechs because of the drastic drop in fintech funding and investor scrutiny, which has led to a short-term effect, but we expect them to rebound in the future. Embedded finance continues to its inexorable rise across the industry. Banking-as-a-Service, embedded finance is a trend that we've been tracking for a number of years. We published our first report in May '21. We see it everywhere. We see Apple Wallet, for instance, in late 2023, launching its real-time balances and spend analysis functionality on its wallet, which is a game changer for the payments and PFM space. And this was an initiative in the U.K., the first one that Apple has ever launched outside the U.S. Banks are also following a clear open ecosystem strategy. Larger banks want to orchestrate their own ecosystems and smaller banks want to participate in ecosystems in order to expand and grow. The reality is that banks -- incumbent banks, the vast majority still continue to run on complex, fragmented, legacy-based architectures that pre-date the digital era that are expensive to run and very difficult to change. These systems inhibit banks from competing effectively today. And it is this business need that is driving the structural demand for core banking modernization for the adoption to cloud and SaaS. So it is no surprise that technology spend is predicted to rise across all tiers and regions in 2024, up to 5% retail and 6% in corporate. And this expense is divided across nondiscretionary regulatory, revenue initiatives and operational efficiency endeavors. What are banks spending on? In retail, it's embedded finance and BaaS, not surprising. It's also digital account opening, onboarding and origination. So digital, the front end. This is very much true of all geographies. Then you've got BNPL, which is more strong in Europe. We've got a new trend on customer product bundles, which is more in Latin America. When you come to corporate, corporate digital channels is the top priority across all regions. We all know about manual processes in corporate onboarding, siloed digital channels, clunky processes that corporate banks face. So this is a very, very important trend this year. A new trend this year is trade and supply chain finance, again, across the world. And then digital channels aimed at small businesses. So this is an area which is a top priority for banks, and they are facing tough competition from the disruptive players. Players like challenger banks focused on SMEs like [indiscernible] and revenues in the U.K. and platforms like Shopify, QuickBooks, Amazon. When they come to wealth, the top trend is data analytics and insights and AI. This is true for wealth managers across the globe. Generative AI is seeing the earliest use cases in wealth. So DBS Bank is an example in Singapore, where they're using generative AI for the relationship managers to create curated investment portfolios and personalize the offering for their clients. In technology, across all 3 segments, artificial intelligence is the top investment priority followed by a migration to public cloud and open finance capabilities, which is all about open AIs -- APIs and digital signatures. In a survey that we commission every year with the Economist Impact Unit, 51% of the respondents said that there will no longer be any data centers in 5 years because everything would have moved to the cloud. That's quite a significant statement. But what we are seeing is banks increasing comfort with the cloud in terms of resilience, security, in the scope for innovation, transformation, ecosystem orchestration. There are obvious benefits. And we are seeing this in terms of mission-critical workloads and the appetite for them to move to the cloud, starting with digital channels. In core banking, definitely, it's the overseas subsidiaries and the noncore business lines first, not so much domestic, but that is also coming. And the appetite for public cloud obviously paves the way for Software-as-a-Service. In mid- to small banks, it makes a lot of sense because they are able to use this as a path to public cloud. SaaS is a path to public cloud, especially in markets where there's a shortage of cloud skills. And it's obviously easier to move to SaaS when you have less customization or a simpler business. Even in larger banks, we are seeing a much more openness to SaaS in recent months. And this is getting more -- they're getting more and more confident about SaaS as core banking vendors mature in their SaaS offering and are able to provide the necessary trust and security. When it comes to nonincumbents, the challengers, SaaS makes imminent sense because it is all about quick time to value, it's about elasticity, it's about pay as you grow. So what we are seeing is that across the board, the appetite for SaaS is definitely building up. Now when we come to a regional view, I would say that North America is high demand, and it's a market where managed services are mature. In Europe, there is uncertainty because of DORA and regulations. And in the emerging markets of Asia, Middle East and Asia Pacific and Latin America, it varies from country to country. There are countries which are really encouraging cloud and where the regulator is mature, and then there are countries where it is yet to come. Now let's come to our addressable market. We see robust growth in our addressable market this year. It's growing at a healthy 10%, which is just a little lower than the 11% we showed last year. And this is split in terms of product, almost equally between core and digital, between on-premise SaaS vendor run and public cloud bank run and by incumbents and nonincumbents. When we look at the first one, we see that digital and core is roughly equal. And this is borne out by our Temenos value benchmark data as well, where the application spend is split halfway between front office and back office. And it tilts a little bit in favor of core by 2027. When we look at the second graph, that 30%, which is the cloud and SaaS split, the public cloud bank run is growing at 32% and contributes to our subscription revenues. And the SaaS vendor run is growing at 28% and contributes to our SaaS revenues. When we look at the incumbents, we've done a downward adjustment for the reasons I stated earlier, the fintech funding constraints, et cetera. And so the mix and the growth rates have slightly reduced from last year. The last point I want to make is that incumbents are poised to spend 3.5x the nonincumbents in terms of SaaS spend. And this is, again, because of the mix, but also while incumbents do consume more SaaS, as I said earlier, it is also true that there are many markets where SaaS and public cloud are not mature, but they are a healthy round for nonincumbents. And we must say that we continue to have a very vibrant business with nonincumbents because we focus on the larger and the more specialized ones. I'll now come to the Temenos Value Benchmark. With 150 banks and 70,000 data points, we are now able to fully leverage this in how we decide on product investments and also in sales execution. We get some powerful insights from this benchmark. One example is the drivers of banking performance. Now this is something that we share with all the participants in our program. And what we are able to do is we are able to say how do better performing banks differ from their peers. And they differ in terms of these 15 metrics that you see that positively correlate with either cost/income ratio or return on equity. And for each bank, we are able to show where they are against precise values in our database on the average and the best-in-class. We do this globally, we do this for tailored peer groups. And what it allows us to do is that we are able to track it year-on-year. So we've done this for 5 years and every year, we run this analysis. And most of these 15 metrics have stayed stable, but I want to talk about 2 of them, digital sales and products digitally originated and transacted that have improved over the years. And that is exactly what we see in the market where digitization is taking off. And it helps us to understand the areas of business value to banks. If you look at customer experience in terms of customer growth, cross-sell rates and churn, we find it from the benchmark that there are certain critical capabilities that enable these metrics, which again positively correlate with these metrics, things like graphical product builder, omni-channel experience, 360-degree view of the customer. And what it helps us do is it informs our product decisions. So later on, Prema is going to talk about how some of our XAI models are going to focus on these critical capabilities. Now a very quick look at how we can use the TVB, the Temenos Value Benchmark in helping clients build robust business cases. So what we're able to do is we're able to build ROI models with paybacks and NPV through the metrics that we have in the benchmark. So we compare the bank's values with our best-in-class and average to come up with the potential for improvement. And very often, banks are unable to do this in this way because they lack the external data, the precise data. Now in this example, the bank used just 3 of these metrics in their own internal business case, and we were able to add all these other metrics in a very sort of data-driven way, and we were able to make the case much more robust, much more complete. Finally, from the 200 best practices and capabilities that we have in our database, we are able to analyze the bank's maturity and our own assessment of the relative maturity of those capabilities to help us to decide on product investments where we are less mature and to help us to focus our sales and go-to-market campaigns on areas where we are more mature. So let's take an example of AI-enabled conversational banking. That's an area where we know that banks are not that mature. It's important to them. So it's an area where we want to invest, and we want to move it from left to right so that it becomes a sales opportunity. So all in all, we follow a very structured data-driven approach to product and R&D investment. And on that note, I'll hand over to Andreas.

Good morning to everybody. Welcome to Temenos Capital Markets Day 2024. Kanika, thank you for introducing the market and also what we do in terms of the Value Benchmark. I have to say that the value -- we started the Value Benchmark probably 6 -- 5 years ago, I thought it was 6. And it has really transformed the way we sell. We've progressed from being a vendor of software to being a thought leader. When we first presented this Capital Markets Day '19 or whenever, '20. I had 1 investor come to me and say, you know something, when this reaches 100 banks, you will become the thought leader of the banking industry. Well, we've reached 150. And the thought leadership we output is very important. It's very important for our clients and it's also very important for us internally because it forms the basis not only of the R&D focus and priorities, but also of the value-based selling that we've migrated the business towards. So it is about selling value. It's not about selling software features. And it's close to my heart, and this is why I'm going to start with this and demonstrate some examples of how we create value for our clients. You'll see over on the left, the Northern faster onboarding, getting a little bit of static behind me, I don't know. There's faster onboarding, 52% faster onboarding achieved by the banks that are actually using our digital or Infinity, you like to be topical than legacy or other solutions. That's quite a significant -- it's not statistically important. It's a significant advantage we provide to our clients. You can see 68% higher cross-sell rate for banks that are using both our digital and our core solutions. And on -- here on the right, 33% more IT spend on growth and innovation for our core participants. Higher NPS scores from using our digital and core solutions and 24% faster time to market. So this is the essence of what we do. And this is the essence of what we've been doing for 30 years. And this is why Temenos is successful today because the value you bring to your clients is what propels you to the next deal, to the next bank, to the next client. Yes? So that as an introduction and we are growing the value benchmark, of course, every year. Banks appreciated, they like it. They want to be part of it, and they open their businesses to us. It's the single largest global survey of banks, database, scientific survey of banks. And we can do it because we are a globally organized company and because we look at banking across different verticals, different segments, different sizes. So I'll spend a little bit of time on giving you a snapshot of how busy we were in 2023. These are, if you like, case studies of what our clients have achieved in -- during the year. From the top left, you have a BNPL embedded finance provided that has been a client for quite a few years, is processing tens of millions of loans on our platform. And their strategy evolved and required securitization of the loan book to release cash for their balance sheet. Well, they didn't have to go very far on the platform they were using. They could securitize the portfolio within something like a week, they moved 5 million loans securitized without having to move them off the platform, without having to do a complex handover arrangements, the securitization partner receives information on the performance of the loans in a very seamless way. That's quite a unique achievement. The top middle, that's [indiscernible] Africa is actually [indiscernible] our digital solution in corporate payments across 20 countries. And you can see the time to process a corporate payment, which in the past was spreadsheets and all sorts of approvals, manual from 48 hours down to 6 minutes. This is what Infinity can do. And very little platforms can actually achieve that, yes. Over on the right, a very different business case. That's a thrift bank in the Philippines, one of the largest in the Philippines. So that demonstrates the scale that we can bring. Over on the lower left, a bank in the Americas that -- a digital bank an upstart, if you like, growing something like 25 million accounts in something like more than a year, 14 months. And the middle case study at the bottom, a universal plan in Benelux that is actually big in correspondent payments and processing 25 million payments on the platform. And another example of a digital bank achieving success in the UAE with our platform. In terms of new client relationships, expanded relationships, we talked about a global Tier 1 bank that has selected us for their global wealth business. This bank was a client before. We had another global Tier 1 bank that has been using us in their corporate international banking business for many, many years and during 2023, extended our contract to move the business on the cloud native release of the platform. They will run it themselves on cloud. It's not a SaaS example. So a leading Swiss private bank has committed with us, again, used to be a client, but has committed for a global rollout now of their wealth business. The bottom left is a case study that we've referred to before. You know which one it is. We announced it at the beginning of the year in March. And the middle one, again, in the Americas regions at the left and Koppel, bank Koppel top -- bottom middle and the one bottom right, we actually also announced it's the largest B2B cross-border payments provider, nonbank payments provider in the world. And they've committed to go on to our SaaS platform for cross-border international payments. So quite a successful year, a very successful year, I would say. And again, I'll come back to the why this is happening. It is because banks that are using our software are happy to recommend us to other banks. Banking is a -- the bankers talk to bankers and success -- selection of software and selection of strategic providers comes also through introduction by banks. And our NPS score is an indicator of the propensity of our clients to recommend us to other banks. A large client base. I've used this slide before. approximately 3,000 clients in more than 150 countries, a truly global business. This is banking. It's not capital markets which is in 5 cities in the world. More than 700 SaaS clients across the platform and both challenger and more traditional and also a large spread between the smallest to the largest. I'll talk a little bit about the value proposition for our SaaS business. We've been working on SaaS for quite a few years now. And when you look at -- there is some material in the appendix to my slides. When you look at the share of SaaS in our revenues compared to SaaS in the addressable market, we are pioneers in SaaS. And I've said this quite a few times, we create SaaS for banking. I would almost venture to say we create SaaS for banking. Banks have traditionally been very, very conservative. It's compliance, it's regulation, it's data residency. It's business continuity, it's security. These are serious considerations for a bank to reflect on and to get comfortable before they would put the master customer data on somebody else's data center, whether it is public cloud, private cloud, Temenos SaaS, running on public cloud, Microsoft Azure, AWS, IBM, it doesn't matter. So -- and the SaaS for banks is also different in many ways to SaaS for the rest of the industry. Also technically, you need to make sure you've got segregation of the data and so on and so forth. So a lot has to go there, and it is -- looking at this, we've been sharpening our value prop for quite some time now. And we are now able to confirm automated updates of the SaaS instances for our clients. That's probably takes away the largest cost item in the P&L for running enterprise core systems and digital systems for banks. It's a big thing. Probably 60% or 70% of the cost of running, let's say, core banking software over a 10-year period comes from the need to upgrade. I'm taking that away. Yes. On top of it, we are turning, if you like, a perceived challenge for strength, business continuity, security. When you are working with partners like Microsoft on Azure or AWS, you are able to provide proposition, which is much better invested than, let's say, most banks of the world can afford. Microsoft is spending more on security than any other bank in the world. So you are leveraging that, yes. And that's -- over time, it's a big thing. Over time, it's a big thing. And we will overcome the challenge of compliance, imposing limitations. And then you have things like AI capabilities. AI capabilities are better run from a SaaS instance because of compute capacity because of the way you are going to run the models, it lends itself much more to that, and Hani can probably explain it later on today. And carbon footprint, we've measured the reduction that a bank would typically have, out of migrating to Microsoft Azure, and it's up to 95% reduction in carbon emissions. This is for our clients. That's quite important for the Board of these institutions. And then from our side, we've been working on the solution so we've launched enterprise services, which are end-to-end. So they're across the platform. So they span core banking and digital and financial crime and analytics. And we are able to deploy them in 24 hours, pre-packaged with something like 120 products, if I'm not mistaken. And model banking processes, 700 APIs coming out of the box, this accelerates the time to value for banks deploying on SaaS. Back in 2020, Kanika and Mark Gunning at the time who was running our solutions group for quite a few years, 25 years, we run a critical piece of research with the top banks of the world, which told us if you guys can get your cost of running core banking down to 10% of what it is today, you will force our hand and you will -- we will have to change core banking software because big banks typically are quite reluctant to move with complex modernizations. And that's the strategy we are following, to decimate the cost of running core banking software. And we've been consistently bringing it down year-on-year, making simpler the adoption, faster the adoption. And that's what it's all about to unlock the market. Competitively, we've made, I'd say, very significant progress in 2023. And that's a snapshot of the IBS leadership table. We continue to be very [indiscernible] the significant majority of the opportunities that we compete with and that allows us to have a sales cost, if you like, which is sustainable, but it also allows us to grow sustainably. Some of the competitors on the left, the traditional competitors, they have service-based model. So if you were to look at the product revenues, the license revenues in the same kind of comparison, the difference would even be more accentuated. Some of them have something like 20% of our product revenues. And over on the right, we have the top new vendors. Now why are we competitive? We are competitive because we provide a fully packaged upgradable proposition whether it is in SaaS or it is in on-premise. We provide open software. We bundle on the platform much more business logic and functionality than our competitors can achieve and we leverage all banking segments, which means that our R&D spend is leveraged quite nicely in a very large addressable market. We also win because we've got 30 years of credibility and experience of running mission-critical systems for banks. When we compete with the new vendors on the right, people tell us we want to work with you because you know how to get things done. We've got credibility in migrating data from 1 system to another successfully. 391 go-lives in 2023, that's quite a scale, yes? And banks want the experience and the credibility that this gives us. They also appreciate our ability to scale the platform. It might sound easy to have 10 million or 20 million or 30 million customers or a 100 million customers on the platform. But let me tell you, this is one of the most challenging items that the bank has to deal with. The scalability of that product. So I'd say a position that myself and the rest of the management team are very comfortable with, it can continue to support our growth for the years to come. And of course, the accolades are there, whether it's the league table of sales, but also the industry analysts. And some of them, some Gartner is about retail banking. Forrester is both about digital, i.e., our Infinity platform and core. IDC, the same. There is one which is the IDC Marketscape for North America, where positions as a leader in digital banking for North America. So quite a lot there. Across the solution, there's accolades also for Islamic banking, which is a key growth area in emerging markets and one that we are very busy in Middle East, Africa and also in Asia Pacific. Finally, on the operations sales, if you like, from a revenue model, we've done 4 key things in 2023. I've talked about them during the investor calls during the year, but I wanted to summarize them. The first one is that we've aligned the sales model, the sales organization to the ARR model. So our sales organization is now ARR incentivized. And when you run an ARR incentivized organization, the quotas and the commission plan for sales -- in order -- the way they are structured, in order for sales to earn commission and deliver on their quotas, they need to increase ARR, okay? This means 3 things fundamentally. Firstly, cross-selling. You have to go to your client. The model brings you closer to the client. You have to go to your client and cross-sell whatever you have. So for a core customer, you cross-sell Infinity or you cross-sell payments or financial crime or for a retail customer, you sell wealth or for a retail, you go and sell corporate, yes? The second way is for clients to be successfully renewing their agreements. And when they do, there is a strong value uplift. If you think about it, there is no ARR increment if a customer renews an agreement and we discount [ at 0 ]. In fact, there is negative if you think about it, if you have an ARR model. Under an ILF model, it's a different discussion. But under an ARR model, the discounting results in 0 commissions to sales and that's a beautiful thing. And the third way, of course, is to sell new logos. And this is why yesterday on the call, I spent most of my time talking about the ARR bridge that we had on Slide 15 of the presentation, where we are showing a strong value uplift strong NRR, if you like, I wouldn't call it best-in-class, but I'm sure you guys as tracking this, the software industry would judge for yourselves whether 112% is best-in-class NRR. That's for you to figure it out. The second thing we've done is we've enhanced the value-based selling. The insights that Kanika and her team give us, the ability to -- when we are working with our prospects to go in and say, here is value benchmark, share with us what you do, we'll help you structure your business case. We'll help you also target what improvement -- business improvements you'd be making out of adopting the platform. That work is invaluable. And that work at their say we are unique in the industry to do it. The third thing, we strengthened the sales organization and that we have also announced before in Q3, I talked to you about what we've done in North America. And finally, we've done a major adoption of AI in our systems that support our sales process to improve predictability of the business, sales productivity and so on and so forth and value capture, of course. And anybody who is interested on that, I can talk about it a lot. Now moving on to our key strategic initiatives. The same 4 initiatives. We believe they are working. I'm not going to cover 4 of them here. I'm going to cover 2. There's material in the presentation for all 4 and I'm going to -- what I wanted to say about SaaS is that -- [ Bouquieaux ] is also going to give you a lot of information. I've already explained the value proposition and the enterprise services and where we're going. And Kanika gave you a market update. I will spend -- in terms of larger banks, you'll see that our mix in larger banks has, if you like, corrected, what it was pre-pandemic. And it's in the range of where we want it to be between 40% and 50% of the business. We've got a number of targeted initiatives to increase penetration. For example, in corporate banking, we do a lot. But -- and of course, we can answer any questions you may have. I'll talk a little bit about North America, where we have now a complete strategy. For quite a few years, we were niche, there were segments of the markets where we said we didn't want to play. Now we are quite broad-based. We've strengthened the product clearly, given the customer base we have and the references. It's only this morning, we announced Commerzbank has actually gone live with our Infinity product to do a complex loan originations for their business. We've got the top tier banks like regions, I guess. We've got the non-incumbent segment that we've been leading with our embedded finance attempts and new banking efforts. We have credit unions and smaller banks, and we've got target programs for that. And of course, continuing what we have been doing in international subsidiaries in the United States. On partners. The partner program, as Thibault said, partners are important in the software business. They're important for selling together with partners. When we are in front of a prospect, we need to demonstrate the capability in the country, in the region for the bank to leverage expertise, competence, implementation methodologies, implementation process locally from the partner of their choice. We've been asking a select group of partners to develop country models localization for us, which allows us to be more -- to provide a more complete solution to the end customer. Of course, we have a resellers and distributors program, which is quite new, and it's very, very small today. But which can grow over the years, an important part for software companies. We've got quite an extensive delivery channel. And of course, lastly, Temenos Exchange, which has -- is our ecosystem marketplace, if you like. We do not sell that software, but these are fintechs and other software providers that they see on it Temenos Exchange and they connect their products with the platform. And together, we present a more complete solution. We continue to rank very highly in ESG. In 2023, actually, the second box, top second box from the left, we've been ranked top in the software industry globally in our ESG rankings. And we've also received the highest rating in the MSCI AAA rating index, just to name a couple of these. We feel very proud. We are doing this the right way, and we are committing -- we are doing this in a business way also. And we commit to continue to be following sustainability. Finally, I'll talk a little bit about culture. We've been building the Temenos culture for 30 years, and we believe that culture is a vital component of business success. And it is a culture that has propelled Temenos to what it is today. It's also a culture that has allowed Temenos to deal with challenges before. We've been through events like Lehman Brothers, we've been through events like dot-com collapse, 2001. We've been through events like Euro crisis 2013. And it is the Temenos culture of collaborating, caring for our clients, caring for our business, committing to our clients and delivering to our clients and challenging each other in a better way. And when the market challenges us like it does, I guess, also today, we rise to that challenge. And it is culture, which is going to help Temenos manage its way forward. So to conclude, 4 or 5 things. It's the continued investment in the platform that puts us in a strong competitive position, both against traditional and new vendors. It is the global client base, which is diverse and which we've been building over 30 years. It is the recent expansion in the SaaS client base that gives us a critical mass to continue leading the market. With the transition from term to subscription substantially complete, we are in a position to now leverage the strong customer base to generate increasing recurring revenues and cash flows in the years to come. We did 3 things -- I talked about 3 things yesterday. We changed the model in '23. We delivered increasing cash flows in '23 as well as other KPIs, and we are confident looking forward to another successful year in '24. Therefore, we are in a position to reconfirm the strategic priorities and programs that we have talked about today, and I guess also consistent with last year. And with that, I'd like to thank you for your patience. And I hope it's not been too tiring. Prema?

Hello, everyone. It's my absolute pleasure to be presenting the product and technology update, along with a few other operational updates. First and foremost, a little bit on our journey. I think some of you will be familiar with this slide. We have presented it regularly to talk about our journey, our evolution in products, technology and platform. When no one in the industry -- in our industry was doing packaging, we were the first ones to do packaged software, upgradable software, allowing -- giving clients a confirmed path to taking the latest and greatest of the investments that we put on our platform and products. When the industry didn't hear about or didn't think about 24/7 banking, we were the first ones to provide that support. We were open because we were always supporting multiple stacks, even on print. When Microsoft introduced the very first version of cloud, we were the first vendors to put our software on cloud with live clients. The period between being cloud-ready and becoming cloud-first and then fully cloud-native gave us the opportunity to truly re-factor our architecture and future-proof our architecture for cloud and SaaS. And that's why we were in that period, able to also consolidate and acquire and serve a number of large banks because they were understanding our technology, our architecture choices we were making. And when we started making available a lot of deployment options which is both public, private and hybrid cloud, we were able to regain our leadership position. We also moved our cloud -- all of our products on to cloud-native architectures and then introduce the composable architecture, composable banking. This year, we have launched the Enterprise Services, which will -- which I will go through a little more in detail. And I'm very proud to be announcing the AI embedded platform. I'll briefly introduce, and Hani will also take you through a lot more in detail. This slide, again, is something that some of you may have seen before. But there is no better slide, better way to represent everything that we offer to our clients and partner ecosystem than this one. It shows the different types of services that we have launched on the Temenos banking platform. Let me draw your attention to the top left and top right. We see 2 sets of services there. So when we became SaaS-first, we were very clear on the types of services we wanted to launch in the market. One set of services on the left, you see are the [ more point ] solutions, specific banking capabilities, banking solutions, package for a specific market. Therefore, they are point solutions. Banks choose to take those, and they can also compose the rest of it in their ecosystem as they need. But more and more banks are now looking for what you see on the right-hand side, which is the Enterprise Services, which is why we invested and we are launching that in a big way this year across multiple segments. So these are the more preconfigured banking solutions, bringing together the core digital, financial crime, data, analytics and what Hani will present to you with AI as well. So all of the end-to-end journeys put together in an easy to consume and easy to derive the value out. That's the Enterprise Services. No matter what these services are, they are comprised of the same things, which is the Temenos banking capabilities. We have always, always maintained a single code base, single configuration base. We do not branch code for customers, we do not branch code for technology choices we make. We do not branch code for deployment choices we make. It's the single platform, single product, single business set of business logic and data models that we continue to invest, enhance every single customer if -- even if they have been on the oldest release, when they upgrade, they take the same software that we maintain for all of our customers, and that is the Temenos banking capabilities. Underpinning the Temenos banking capabilities are 2 sets of foundational elements, one that takes care of all of the common banking capabilities, the multi multi multi, as we call in the banking industry, everything goes into that banking foundation. Which is why we are able to host in a single instance, hundreds of legal entities for a bank, or a bank may choose -- like a private build bank may choose to have multiple instances or multiple hubs hosted on a single platform. There is also the technology foundation. I spoke about how the period when we became cloud-ready to cloud-first and cloud-native, that was the period when we discovered the perfect recipe to future-proof our solution for cloud and SaaS. This is to bring the full abstraction that was needed from the technology layer for the business logic and data. Therefore, as we started adding on multiple cloud platforms, cloud services, the services that the cloud vendors were actually updating on a regular basis, we were able to consume that without having to invasively rewrite our business logic. That is the secret as to why we are able to add more of the cloud services and certify our software in a cloud-native way and yet continue to invest and grow our business capabilities. We offer 2 sets of deployment choices. We run the software ourselves on our SaaS. We use AWS and Microsoft for that. We also allow banks to run it themselves on the private cloud. So the banks who take the cloud options themselves, host it themselves, they take exactly the same pipeline, same blueprints, same way of deploying the software as we do on our SaaS. So the investment that we do on our SaaS is actually benefiting and making sure all of the cheaper, faster, smarter way of doing things, deploying solutions on cloud is benefiting those cloud customers as well. Very important point here to notice, some of the large banks do prefer to have a deployment choice of having hybrid cloud options. Not all banks would be very comfortable putting everything on the public cloud as they go through the progress of modernization journey. These things may eventually happen, where they move everything onto the public cloud. But till the point they get to that, they need some of the workloads to be mixed between on-prem or private cloud or public cloud and a mix of whatever they choose to do, and we provide that choice. And this is something neo vendors do not do, which is, again, 1 of the reasons why we are able to still penetrate further and further into the large client base. Temenos banking capability. So I draw your attention to the Temenos banking capabilities in the middle that make up our solutions and the services. This is the breadth and depth of our functionality. It covers pretty much everything that you will see in a buy-in banking domain landscape, and that's how we map our solutions. This is also across multiple segments; retail, corporate, wealth and business or commercial. I'll draw your attention to the top 2 rows, the Channels and the Customer Engagement, which is where all of our digital capabilities are. Even before we acquired the digital companies that we did in 2019, we were always, always digital-first. I would like to address 2 points here. One, the questions about the R&D investment on digital. We don't do any feature building on our platform without the end-to-end journey complete, which means if we build something on core, we always complete the capabilities on digital. If we build something on digital, there will be something that we will integrate and verify and release on the core or the full end-to-end journey. That's the R&D part of it. The second part of it is the implementations and go-lives. There was a question to Andreas and Takis yesterday on the results presentation on the number of Infinity go-lives and the digital go-lives. So let me give you that information now. Out of the 391 go-lives that we had last year, I'm giving you the minimum number, 160 go-lives were digital go-lives as well. Yes. This is a very important number because it constitutes upgrades of the digital solutions from older releases. This includes new feature rollouts, big feature rollouts. We are not talking about just a button change or screen change. That's not what I'm counting at all here. These are new segments, retail, digital app, may probably have a commercial rollout or a corporate app or customer who had a corporate app would have extended to launch a commercial brand. There could be new digital brands across as well. This is what we count as incremental or significant go-lives on Infinity. And that's the number I wanted to share. There are some challenges, obviously, that digital or neo banks would face because of funding and other issues because obviously, there are pressures. They can't continue to invest as much on both digital and core and keep the existing complex legacy landscape also funded and up-to-date. So those digital banks and large banks may see the pressure, but most banks that have gone through the pandemic and brought a lot more of the self-assisted and digital capabilities, they continue to invest and deliver and the go-lives, the number of go-lives, hopefully, will give you some color as to how far ahead are we in terms of digital go-lives as well. Right. So another question I wanted to address was also the R&D priorities. When you have the breadth and depth of functionality and you are a market leader in various segments, it becomes a little bit of a difficult decision as to how you choose to invest in the right areas in your products and platform, yes? We use the value benchmark thoroughly and extensively. And this is a scientific approach. Because after a point, it's about how much value can you start giving to your customers and where you should be differentiating your solution, where you should be leading the market, where the investment on the innovation should be higher than the business as usual or the regulatory catch-up or whatever it is. And we use the value benchmark for this. So the performance drivers are the pillars. The indicators -- Kanika showed a lot more metrics. I'm just highlighting a few performance driver. So whatever investments we do, whatever features we want to build out of our backlog, we make sure we measure the value output from that to 1 of these metrics. Is it going to help us differentiate and improve the percentage of false positive or the digital sales for our customers or introduce another channel in digital for banks to be able to offer their products and sell the products digitally. This is how the product investments are being made. I just wanted to give a little bit of color to that. The strategic priorities, a little bit. There are 4 initiatives that we have mentioned, the Enterprise Services. Temenos LEAP is a modernization program for banks who, for whatever reasons, may have remained on older releases, older technologies. And how do we modernize and bring them to the latest and greatest and make them ready to go cloud-native or to be on SaaS itself in the future? Lean Core, our impressive large bank, Tier 1 and Tier 2 base continue to help us modernize our capabilities to improve the tooling, to improve these services packages or honestly, to perhaps make further investments in slimming down or making our platform greener, faster, cheaper. It could be any number of those things. I'll touch upon a few things that we are doing there. Last but absolutely not the least, AI has been the center of a lot of our innovation investments that we have been doing. We have been differentiating our capabilities using AI, explainable AI the last 4 to 5 years. With the evolution in the AI industry, with the generative AI capabilities, it's -- it's even more important for us to make sure it is more responsible, more explainable when we embed these capabilities onto our solution. So I'll touch upon briefly that as well. Enterprise Services. Andreas has explained this beautifully already. It's about the standardized SaaS services which are preconfigured with the products, with the APIs, with the user journeys, with the business processes, with the documentation, with the country packages, the regulatory packages, data extracts, everything put together, what we have done brilliantly before, but to do it differently on SaaS, which is to make sure customers are able to do a lot of this themselves in a low-touch self-guided manner. Right from the day we deploy the software to the day when they are able to leverage the value out of the service to be done in a low touch and also a frictionless manner. Another point that Andreas mentioned was around the continuous updates or the automated continuous updates. Banks take months or sometimes even years in this industry to go through complex upgrade programs. For many, many years, we have invested in getting our upgrade tooling right. But on SaaS, we needed high levels of automation, which is what we have achieved. So when we upgrade these enterprise services, it's a matter of weeks, the software, the service [ enter service ] is upgraded, it is tested and delivered to the customers with the test cases, which they can use if they wanted to qualify their service and take it into production in a low-touch manner again. Security is, by design, embedded into the service. We also have invested heavily on the automated monitoring and automated operations as well. With the increase in the SaaS client base, it gives us a unique perspective, again, data-driven and, to some degree, the predictive AI-driven as well. We are able to understand where the bottlenecks on infrastructures are, where the specifications have to be improved, where the NFRs will have to be improved. And that's what goes into the continuous loop within the -- getting the service much better, faster. Elastic scaling and embedded user journeys are part of a default characteristic, rather, I would say, of these services. What do our customers get from the Enterprise Services? What is different? Prospects, when they buy the Enterprise Services, can try before they buy the service itself. Okay. This has been around sandboxes. People do it. No, that's not what we mean by that. What we mean by truly try before you buy is you get access to the Enterprise Service as you would get in a developer or test environment. And whatever test or configuration that you as a prospect do, we will be in a position to package and move it into a proper dev and live environment within 24 hours of deployment. So we suck the configurations and packages that banks are trying, playing with, and we are able to deliver that in the real environment for banks to start implementing readily. The focus is also on value delivery. We spoke a lot about value benchmark we do, how we sell value. How we use the value insights to make the R&D decisions, but it's also about value delivery. The 391 go-lives for us is also above the value that we deliver to our customers. Every single one of them improve a number of value metrics for our banks, and that's what we track. So when it comes to Enterprise Services, it's also about how quickly can we deliver the first value and demonstrate the power of this enterprise service to our customers. Obviously, within the 90-day implementation plan, we don't want banks to be complex -- doing complex integrations of 50 different systems and complex migration strategies and all of that, but they can make a start, they can start doing all of those activities. But we also focus in making sure the first value delivery is demonstrated within the 90 days. Obviously, with all of this combined, it comes -- brings the operational cost down, the cost of running the service down for us, and it importantly offers choice and flexibility. Not all of these capabilities have to be taken by all of our customers. But more and more, we are seeing more banks want to take the end-to-end capabilities, less so on the smaller or granular ones. Temenos LEAP. As I mentioned, it is a modernization program for older customers who are on older technologies, but we leverage the capabilities that we have on our platform. These customers tend to have a lot of customization. That's one of the big, big pain points. But this is where AI comes in. This is where the smart features, smart capabilities of how do we minimize the customization and how do we map the business processes that banks may have already implemented with very little documentation. How do we use AI in order to extract all of it, turn it into the latest business process that we have got on our platform and project the deltas that they can manually review and either decide to extend still or to just get rid of those and then to be able to modernize and come on to the latest and the newer technologies. So there will be some of the functional modules or older capabilities that they may have, which again, using AI and some of the smarter product mapping and migration features, we intend to bring those products and the older technologies like web services on to the newer products and the APIs, restful APIs, which is what you would need to be cloud-native. What does that give to our customers? It's faster time-to-value. Again, it's the productized solutions to the newer product capabilities with the updated regulatory features. That's very important. Again, the digital capabilities, the more modern digital customer engagement capabilities and AI capabilities are on offer as well as part of it. This is going to expand the bank's markets onto the bank's business onto the newer markets that they have never been able to penetrate. That's the easy access to the newer markets and newer segments. Obviously, with total cost of ownership at the lowest possible. A little bit more on AI, but Hani is going to deep dive into all of this -- deep dive into all of this. The AI journey. For a very long time, we have had our emphasis on data analytics. When we say data, it's about data quality, it's about data traceability. It's about data, okay, sovereignty and residency as well, metadata management. We have had such data capabilities for a very long time. So we did predictive prescriptive analytics. We also acquired the explainable AI platform, which allowed us to build 25 to 30 explainable AI models covering predictive -- predictions, optimization, classification, segmentation, et cetera. But with generative AI, with the ability to generate new content, we are able to take the next step on our AI journey, which is what the embedded AI platform is all about. Now it's very easy to get carried away when it comes to AI. AI is always often spoken about in text to image, image to text and all sorts of interactive, cool intelligent stuff. That's all well and good. We do infuse AI onto our front office, back office use cases for both the bank users and the customers themselves. But the biggest use case is also emerging on the internal use cases. Internal means how do we use generative AI and the predictive AI stuff in order to differentiate and improve operational efficiency for banks and the implementation? So complex integrations that banks do across the systems. How do we use AI to generate test cases that covers the full landscape? How do we use AI to minimize the quality issues that crop up during data migration activities? Data migration activities are some of the most complex activities. People throw -- people are thrown at it, money gets thrown at it, and it's usually trial and error kind of capabilities area. This is where we believe some of the strong use cases for AI is emerging. So when I spoke about LEAP, 1 of the areas where we invest heavily is also to differentiate our solution with AI capabilities for migration and testing. Documentation. Anything generative AI can generate documents as well. So just imagine the power of generative AI that can produce documentation of some of the complex integrations or business process that sit in a bank, and we are able to come in not only providing the AI-generated documentation for what we implement, but also to provide that capability and extend it for banks to use in their own landscape. And then last but not the least, for the internal bank -- our own operations rather, Temenos operations, we have already launched the conversational assistant-based chatbot for support portal and operations, but we are extending it further with the generative AI capabilities. We are also using AI heavily in the learning community. Obviously, it's a perfect use case for AI. Again, a little bit on how do we decide, how do we go about deciding where AI can differentiate the solutions that we have. We, again, go back to our value metrics and the value benchmark that we do. All of our solutions are mapped to some of the insight and the performance drivers and the metrics and by infusing AI in some of these solutions. For example, when a customer goes through an onboarding journey, by embedding generative AI, you can in a very simple known technical, easy-to-understand format, you explain the product terms and conditions. Just imagine a mortgage documentation, a customer going through a mortgage documentation to read through the 50 pages of whatever that is, to understand what am I signing up to. Just make it in a simple, bullet-based readable format or answer questions that a customer is asking about what am I signing up to in that document. Just imagine the power of that capability, AI capability. That's how we decide where to embed AI in our solutions. Lean core, another massive initiative, which is an ongoing activity. It has now become business as usual for us because we work with a number of large Tier 1s and Tier 2s, they continue to take us through in the modernization journey. So it's also about, for us, the componentization, the microservices architectures and everything that we have already done. I've just given a few capabilities that we have been working with a number of our clients right now. On the retail side, we have party as an enterprise capability. A bank that is implementing core, but as a completely standalone enterprise capability, they are bringing together all of their customer data sources and bringing it in a digital-ready application outside of the core to be plugged into our own digital channels or any third-party digital channels that they have in an ecosystem. That's what enterprise capabilities are meant to do. And that's what progressive modernization is all about to be able to take any standalone capability without having to take the whole platform or to upgrade the whole platform itself and then to be able to modernize as well. Corporate. We have been heavily investing on corporate as well, as you know. Some of the capabilities that we make standalone and to be consumed in this fashion is also listed there. The example that Andreas gave on the digital corporate solution that went live last year in Africa, that's the digital capabilities, a standalone corporate capability. They don't have the core from us actually. It's only digital Infinity standalone, and they were able to integrate to multiple cores. And that's the metric that you saw from 48 hours of doing manual processes to doing it in 6 minutes, all self-service, complete digital end-to-end journey just on an app. That's the power of standalone independent capabilities. Last but not the least, I would like to touch upon the Temenos Exchange ecosystem. We are extremely proud of this ecosystem, not just because of the quantity. It's because of the quality that we are able to bring. They complement our solutions, they complete our solutions. If you look at the list, we have expanded some of these domains further and further because there are lots of niche vendors. When we go through different geographies, newer markets, there will be established players in those regional local markets. We make it a habit to go through those partners as well, do our due diligence. Importantly, we do the integration with these partners. So when we qualify our software, when those partners qualify their solution as well, they qualify with the integrations. And they continue to upgrade and update using the sandboxes that we provide and the wider community as well. So we are always testing them on security, on performance and also on the compliance as well. And the readiness to onboard them onto our own SaaS platform. So we are extremely proud of this community, and this continues to grow. Finally, it's the winning combination. We have the leading functionality. We have the leading technology, and that's why we win consistently all of these segments and all of the markets. With that, I hand over to Hani to talk about AI.

Okay. So Good afternoon, everyone. The requirements of artificial intelligence in the banking sector is really unique. We are dealing with a unique sector which is heavy regulated. Therefore, the artificial intelligence models that are produced by AI should be easily understood, analyzed and maybe sometimes augmented by the business users or the regulators. Also, as artificial intelligence touches many decision-making processes within the banking sectors, the output of the AI models needs also to be easily understood, easily analyzed by the business stakeholders within the bank as well as the banking and customers. This is very important for the wide deployment for artificial intelligence in banking. This causes big problems for other opaque box models or traditional artificial intelligence, where basically, the implication of decision-making within banking sector is becoming a very important thing. And we can see this in -- coming into media, coming by various regulators who emphasizes the need for explainability and trust in the banking decision and any kind of decision-making processes, specifically within the banking sector. Regulators are stepping into this kind of market. In the past, there was wait-and-see approach by different kind of regulators. This is completely changing. And now there are different kind of regulations, different kind of important mechanisms coming into the AI sectors in general. The other important thing which is extremely important for the banking sector is that we don't want the data, which -- data will always be biased, data will be always be patchy and so on. You don't want only to rely on data-driven knowledge. Data-driven knowledge means that whatever you see in the data will be reflected in your model. And we have seen different kind of situations where big corporates ended up developing financial products which basically were biased against a certain sector of the demography. So it's very important when AI is going to be deployed that it is unbiased, safe and fair when it's going to be used. Huge problems which are caused by the opaque box models is that the outputs of the given model cannot be easy traced. So this is what's called data addressability. If you take a decision, you cannot just basically trace it back to the different kind of input. And this is causing huge problems for different kind of regulations, as you are going to see. At the end of the day, banks include a lot of human stakeholders, and it includes human users. Humans always understand what the -- trust always what they can understand. Therefore, explainability and interpretability and trust is a very important concept for banking in general. There are huge regulatory pressures. So for example, the European banking agency mentioned that there is a need to provide trust in artificial intelligence via explainability and interpretability, fairness and avoidance in bias and most importantly, traceability and [indiscernible]. Here in the U.K., the House of Lords have got the AI Select Committee and they mentioned that if AI is going to be used as a trusted partner in our society for decision-making, it has to be completely explainable. They even went and mentioned that if deep learning is existing for some decision-making processes, it should not be used until proper AI or artificial intelligence interpretability is put in action. In Temenos, we always want to align with a different kind of vision, which can be seen by different kind of leading regulatory bodies, which is responsible artificial intelligence. Responsible artificial intelligence is built on 2 pillars. The first 1 is the [ XAI ] model that is generated is not going to be an opaque box. It is a model that can be easily understood, analyzed and sometimes augmented with human knowledge if needed. The output of the models, which basically touches the lives of millions of people all over the world should also be completely understandable, completely transparent. This is a very important factor if artificial intelligence is going to be used with complete trust for the whole banking sector. The EU did move forward with EU AI Act, which is coming in action in 2025, which basically is the EU wants to go for a safe, transparent, traceable, nondiscrimination and environment-friendly AI. They even go and impose hefty fines for the non -- of AI applications, which is not following that kind of framework. Temenos, we were always at the forefront of explainable artificial intelligence in the banking industry. And when we speak about explainable artificial intelligence, we generate models which are totally transparent, easily interpreted by human beings within the banks, and they are the only models which enable us to fuse 2 sources of knowledge, data-driven knowledge and human knowledge at the same time. The output of these kind of models are fully transparent, fully understandable to the human stakeholders, they are the banking stakeholders or the end users. And we will do this without sacrificing the accuracy of the model. So our models are highly accurate at the same time, which has been always a problem which people have been tackling in this kind of area. We solved this, and we have got our unique AI models in this area. So in 2019, we introduced our explainable AI platform for the banking industry, which enables our customers to procure Temenos explainable models for banking automation efficiency and meaningful customer engagement. Customers can create and run self-developed AI models with explainability feature on the Temenos [ XAI ] platform. And they can -- we can also add and develop models on demand for new and evolving use case. As Prema has mentioned, we provide different kind of explainable AI models, which serve different areas of the banking sector, from retail and SME scoring, retail and SME customer management, transaction management, smart money management, financial crime, wealth and mortgage advise. But now we are, as Prema has mentioned, we are moving towards embedding XAI rather than just basically selling standalone models of embedding XAI in the Temenos platform. We are also moving and we are going to expand more in the area of generative AI to basically fulfill our responsible AI mission. So in this case, we are going to go into the area of generative AI, and we are going to apply it in different kind of areas like automating and hyperpersonalizing manual processes, improving responses to specific customer user need, summarizing complex information into coherent narrative and simplifying the process of creating content in a particular time. Our approach to Gen AI has been articulated by Prema. We are -- we have already different kind of different levels. We started with internal operations and we have got different examples for customer support operations, presales operations and as well as Temenos learning community. And we are moving to enabling banks and to deploy and implement Temenos software faster and better. Examples of this would be applying generative AI for testing, migration and documentation. And then the most appealing one from my personal point of view, which is infusing AI in our Temenos banking platform. This will enable us to have unique generative AI applications and functionality for the front and the back office. We started doing this already and we launched our generative AI solution for the transaction classification, and this has resulted in fast and accurate automatic classification of transaction events, which are very important for different applications like next best product, cash flow prediction, customer budget advice, peer grouping and sentiment analysis. So let's now move and see a demo of explainable AI embedded in the Temenos banking platform. So what we can see here is the front end of Tony. Tony owns a plumbing company as an SME [ sold ] trader. What you can see to the left is what appears in non-XAI app, balances of Tony, money in, money out. On the surface, things look good. But on the right, you can see the explainable AI part, which predicts that Tony is going to have negative cash flow for the next month. It explains why this is happening with positive drivers, but the most important one and worrying one are the negative drivers which explained that the company current ratio, which means the company liquidity ratio is going to extremely lows, company profits are low and the net disposable income is basically dwindling. This, of course, will cause -- now, Tony understands where things are coming from. He needs to begin finding what is the next action to do. But the bank actually, through the use of explainable AI has anticipated this. And if there is a notification up there, which shows that the bank is actually going to propose a new product for Tony. And in this case, it will be -- it would be an action that helps him in order to mitigate this kind of issue of going beyond this kind of financial difficulty and trying to find what would be the next best product for his own action. Of course, what we can see on the top is that we have seen here this kind of notification, which should allow us to go to the next best product, and the next best product here will be a business loan, which Tony has been scanned based on his relationship with the company for this kind of next best product as a business loan and now everything is taken care of. So basically, he just needs to go ahead, apply for the loan. Of course, he has been preapproved of what we know about him, but of course, this is pending the final risk and compliance step of credit checking. So in this case, he will start the process, he will choose $10,000. He might actually want to increase this to $13,000 to cover any kind of financial problems. He would choose to come to his current account. He would go ahead and apply to the loan automatically. And then he has been only given $5,000. Of course, he will begin wondering why this is happening. And again, this is the risk and compliance part. The [indiscernible] will enable the bank to tell him what the bank is allowed to tell him according to the bank and the regulation in a given country. There are good things about them that the company has been stable for the last 12 months and the company has a good cash and equivalent, but the worrying sign is the health score, which is the credit and the financial well-being is low, as our comp and total asset to liability ratios are going too low and the company has not been there for long. So basically he can accept this. He can go for the next way and apply for the loan to resolve his current short-term issue. So let's take a look at what was happening from the banking side, what the banking -- what the banks were seeing from their kind of side in order to manage this kind of process. What we can see here is the banker screen. It shows everything about Tony. It shows us the net disposable income that Tony was able to see. Everything is explainable in terms of why this is negative cash flow based on what. We have got also the attrition score showing that Tony has been a loan customer. He has been a profitable customer in terms of its customer lifetime value. His financial well-being is in the age of 48. And what we have got here is that his next best product was business loan. So in this case, we knew -- the bank knew ahead of time that we can give a loan to Tony, maybe not to the maximum amount. But based on this is somebody who is a good financial -- a decent financial well-being, loyal, attrition. And basically, it is better for the bank now to begin stepping and supporting everything, and all the reasons behind this decision has been articulated with the power of explainable AI. Also at the portfolio level, all of this kind of information go to the portfolio level. So [indiscernible] basically just deal with Tony as an individual customer. We have got all the customer base coming back to analytics. And within analytics, for example, here in attrition, you would be able to know which customers are around the edge of attrition and why, what are the top churn drivers, what are the top retention drivers. You can begin segregating your customers and finding in a certain age group, what is the attrition, what is the most risky sector here, it is between 45 and 54. And you have got here also a description of your customers by lifetime value. In this case, you will be able to articulate a proper customer retention scheme, as Prema has mentioned, in order to maximize your retention scheme and so on. The same for next best product, rather than basically sending everybody everything. You know for each product, what are the top drivers that people would go for and you are able to know for each product and you will be able to segregate it and see for each, for example, age group, what is the best appearing products for all of them. That just reflects and see if XAI was not there. In this case, Tony will basically unexpectedly fall into financial difficulty. He will begin to call the bank. He will begin losing a lot of money and time in order to search for what is really good for him. And there might be a problem of him going delinquent. He might actually leave the bank, and so on. From the bank side, the bank was able to articulate this beforehand. The right product was offered to the right customer at the right time. This was enabling us to maximize the customer satisfaction to the highest level. There is a high personalization for the customer needs, and we are able also to minimize the effort on the banking stuff in order to man and help Tony and give him the right advice. Everything was happening at the right time without the customer -- with the customer being informed about everything about the step. If none explainable AI was going to be used, the bank staff -- Tony was not going to have the same kind of trust in the banking decision. This actually enables us to hit on the 5 Temenos value benchmarks that has been mentioned by Prema and Kanika, customer centricity, and through the use of advanced analytics, we are able to increase growth and innovation within the bank, operation efficiency and very importantly, effective risk and compliance. So with this, I conclude. And now, I just move to Takis. Thanks.

Hi, everyone. Just me left between you and refreshments. Let me start with a bit of water, my 30 minutes is almost gone. Okay. As you have seen, we have a very clear strategy on how to drive sustainable growth across our business, both in '24 and in the midterm. We have reiterated yesterday and again today our midterm targets for ARR to reach more than EUR 1.3 billion, the EBIT of more than EUR 570 million and free cash flow of more than EUR 700 million. And as we had -- as we had said last year, midterm was 4 to 6 years, down year, down 1 year. So that's basically meaning we talk about 3 to 5 years when we discuss midterm. So in the next 15, 20 minutes, I'm going to take you through the main drivers. We have seen already in the past that ARR has delivered very consistent growth quite nicely. It's 6 years cover of 13%. And we think with the transition to subscription now substantially complete and the growth in SaaS we're seeing, this is actually a very good basis for further growth as we are projecting. Now with both SaaS and subscription benefiting from the rising demand for cloud, we are forecasting continued growth in both of these revenue lines, which will drive ARR to more than EUR 1.3 billion. Free cash flow is set to benefit from the growth drivers, as we have said, but also profitability and the rising demand for SaaS. This is a very important one. As you know, if we grow SaaS, if we grow our SaaS ACV, this will drive deferred revenues and therefore, cash to deliver the EUR 700 million in the midterm. Now, profitability. Same chart, we had clearly a good track record in the past. '22, we had the issues we discussed back to the growth track. Now the recurring revenue base we're projecting clearly will give us also visibility on providing the EBIT growth we need. What are the drivers? They're unchanged. SaaS margins will continue to expand, and I' m going to talk in a few minutes about this. But at the same time, we have a lot of operating leverage embedded in our business model, which should help us get there. And as we had said already last year, there will be plenty of room for the necessary investments to be done along the way to deliver and support our business. Now ARR -- and this is the history, as you can see. As you can see, SaaS has been becoming a larger proportion of our ARR, subscription as well. Clearly, as we grow our subscription revenue base, this will make an increasingly large contribution to the ARR mix and is projected to reach around 25% in the midterm. The effect is obviously more pronounced for SaaS, which should contribute around 55%. And this is what we have embedded in medium term, and this is what we call our base assumption or a base scenario. So quite strong ACV growth embedded in there and ultimately then SaaS revenue in SaaS ARR. Now free cash flow should grow faster than ARR. Troughing 2022. And clearly, we -- sorry for that. So we already saw strong growth in 2023. We had said '22 would have been the trough, and this was clearly the case. And I think we'll substantially accelerate because '23 year and beyond, there will be no more headwinds from the term license shift to subscription. And at the same time, if you have SaaS growing and accelerating, this will give us deferred revenues, which will then, again, drive free cash flow. Now we have stress tested our assumptions. And as you know, it's hard for software companies to exactly predict the precise point in time when customers will ultimately move to SaaS, yes. So we have built and we have put together an alternative scenario, which has somewhat or quite a bit lower SaaS ACV CAGR growth of 20%, which is then basically replaced by -- so the lower growth is compensated by the higher subscription growth. So this would mean, okay, a lower and even lower number of what we expect would shift to SaaS and rather remain with subscription. So now what does it mean for our plan, we would still deliver the EBIT target in the same year as in the base model, makes sense. Yes, subscription is still more profitable than SaaS. So that's pretty straightforward. Now we have done a lot of testing. And if you look then at ARR and free cash flow, which obviously are the ones being driven by strong SaaS growth, there is a slight negative impact or rather a slight delay. So on ARR, we will get to the $1.3 billion target, let's say, 3 to 6 months later, so a few quarters, and free cash flow also a few quarters later. However, it would still be in line with our midterm targets of 3 to 5 years. So if you want, this is kind of a derisked view with a lower SaaS ACV growth than in the base model. Let us briefly look at the drivers. These are the same slides we have provided last year. But I think it's important to see. And this is also what Andreas mentioned that we have done quite some progress in the last years. For Tier 1 and Tier 2, we are now at 43%. This is returning to 2019 levels. And clearly, if we look also at the next one, very good track record also for North America, now 33%. And we're getting very close to -- and in some individual quarters, as you know, it can be very volatile and some individual quarters will -- we have already during 2023 sometimes hit our targets, which we want to reach in the midterm. This is our guidance, I'm not going to repeat that. We issued that yesterday. And also midterm targets, no change to that. This is one which should be familiar to you. It shows basically again the buildup for the ARR, and this is for the base model. So with a higher growth embedded in there. I think you'll see SaaS and subscription still being the main driver. So no surprise there. Now if we will go for the alternative model, yes, we would still get there. You would have a bit of a different mix between SaaS and subscription. On EBIT, the same 3 drivers and the same 3 elements which we've shown last year. I think SaaS gross margin, and I'll get to that, we have seen an increase of 300 basis points on a reported basis. Now if you take into account all efficiency measures and everything we are putting in place for the future for the large volume of SaaS we've seen already, then you will get to an even higher what we call exit rate and what we had at the end of 2023. Operating leverage, we still have a very good infrastructure. We're going to get some positive impact from services becoming more profitable again. And finally, this will provide us with more than enough room to do the necessary investment. Now SaaS gross margin, this is what I was just referring to. So we did 300 basis points, despite all the investments we did in the last few years. We still maintained a very good expansion rate. This is what I mentioned. The exit rate being 66% if we account for all the things we have been putting in place, follow the model in terms of support and also becoming more and more automated in what we want to do. We continue to invest a lot in software, on automation. And I think that's important with the rising number of SaaS clients. We will increase the level of automation, but also in terms of the optimization, which we do across our hubs. And ultimately, as you can imagine, there is efficiencies on the hyperscaler side. So the more volume you buy from the big hyperscalers, the better discounts you get. I think this gives us confidence that we get to 75% to 80% in the midterm. And if you look at 66 over the next 3 to 5 years, getting there. So that's 10, 15 percentage points. It's not a very different rate of what we have done in the past. And especially if you look at this, which is locked in, I think this is a reasonable assumption given the SaaS growth we are projecting. Key cost lines, not much to say here. We'll keep investing in R&D. A bit of leverage, but this is important, same for sales and marketing. Clearly, services, we have done a big step in 2022 and have seen the benefits in 2023, so profitable. We still follow our partner model. And then ultimately, we still got something on G&A. So overall, I think there is a number of percentage point is -- maybe 6 percentage point is -- 6 percentage points where you see in terms of margin expansion potential into the midterm. Now on free cash flow, this is '23 to '24. We've shown this year, and we've shown this yesterday already. The important one is already this year. Last year, it was a bit different. But you see what we get from subscription is already offsetting the negative impact from the few remaining term license deals we still had and still going to have this year, yes. So this is important because now here in the third year, we collect already the third year of cash from the deal signed in '22, the second year of cash from the deals signed in '23 and first year of cash of the deals which we're going to sign this year. Deferred strong growth close to free cash. We explained tax yesterday on the call. We had quite a bit of tax outlays last year, going to be quite a bit less this year. If we look at the long term or midterm rather, same profitability and deferred revenue. This is not just SaaS. It's maintenance as well. We have been growing maintenance, and we have been accelerating maintenance, as we have seen from 3% to 7% in last year in the quarter. I think we're going to see good growth continuing. There is the uplift from the renewals. There is the CPI linkages which are embedded in their premium maintenance services. This is what's helping with this as well. Okay. Now this is a new slide. What we have tried to do here and it's along the lines what Andreas and the team have discussed. If you look at the ARR bridge, clearly, there are new deal signings. That's an easy one. And then there is the upsell, cross-sell part, which you see in the ARR. So either existing SaaS clients, purchasing new SaaS product or buying more volume, that's in there. Now we have talked about last year that we see a lot of interest from Tier 3, Tier 4, Tier 5 banks to move to SaaS at the point of renewal, yes. We saw not that much last year. But clearly, if you look at now the pipeline and the discussions, clearly, that's going to become a more relevant topic here. So we're going to see and expect to see some of those clients to convert to SaaS and therefore, drive incremental SaaS ACV growth. Now how does that look like? And we have, as you can imagine, if you go back 2015, there was just a term license model, so 10-year standard contract. So basically, this tells you -- it was actually always a standard 10-year contract, but we saw a big acceleration in licenses in 2015. So obviously, this means there is going to be a lot more volume, which comes up for relicensing than we had 5 or 10 years ago. Now how much -- and this is the important question, yes, how much of that is really required in terms of moving to SaaS so that we can hit our targets in the base model, yes. This -- the SaaS ACV growth and ultimately, the SaaS revenue growth acceleration. Now SaaS contracts typically achieve 2 to 3x value uplift compared to on-premise license deals. And we have given here a sensitivity analysis, which basically shows okay. If we have this type of incremental SaaS ACV growth, so going back to this, if we basically have this one growing at 15%, how much of those customers and just Tier 3, Tier 4, Tier 5 coming up for renewal, need to basically convert so we get to deliver our base model. And here, you see at 15%, it's less than half. And if we grow faster, it's even less. And if we get a higher value uplift, it's even less. And if we even had some Tier 1 customers, it's even less. So this is why we have our confidence level in such a way that this is really something we believe we can deliver, and it doesn't require all or a majority of them to convert. It's really depending on smaller -- a relative small portion moving to SaaS. Okay. So this is a bit more on the how we flow the different revenue lines through the balance sheet and the P&L. So this is for SaaS ACV, a 5-year SaaS deal. You can see basically signed in Q1 on 1 year and how it flows through over the period, how it generates the different elements. More interesting is this one because that's the delta to a subscription deal. And the main difference if you look here is actually you see here, this is driving more deferred revenues than a subscription deal. And this is why SaaS is more attractive ultimately for us. Now free cash flow is going to be the same. And this is something I think we -- I wanted to highlight. Now we have discussed that Q4 ACV was maybe below some of the expectations, and therefore, the full year. Now what does it mean? It means, one, we're going to see still volatility in the quarterly ACV numbers. But it also means that you don't -- even if you have flat ACV -- and I'm going to show the examples. So this is in year 1, you got $10 million ACV a quarter, so $40 million. In year 2, you also got $10 million of ACV every quarter. So basically, okay, $40 million ACV. $40 million ACV means no growth. No, that's wrong. Because as you see, even a flat ACV drives deferred revenue growth and ultimately derives free cash flow growth. Now this is the -- if you want, the conservative example. So same ACV, still you're going to deliver free cash flow growth. Now this is the similar example. So you start with $10 million ACV in Q1 and do $2 million more in every quarter, yes. So ACV grows as we hope and aim to deliver. You see here what the difference it makes in terms of deferred revenue instead of 68 on a $40 million ACV, you almost double it and cash flow, 60% higher. So this is why it's so important what the team, what Andreas and then Prema and Tony said. SaaS ACV, while we cannot predict the exact timing and when customers will convert other than we know when the point of renewal comes. If we can convert to ACV, given them the higher uplift, this is going to help us drive to our free cash flow target. And as we appreciate, this is a big delta. If you look at midterm consensus numbers, they're far below the $700 million ambition or the $700 million target we have, but the big delta is really SaaS ACV growth. If we deliver that, we're going to get there. So capital allocation, I think nothing unchanged. We have made bolt-on acquisitions historically, and this has been value creative for us, still a preferred use of cash. We don't pay a lot on our debt. The leverage has come further down, and we are in the 1.5 to 2x leverage ratio. So starting with a strong balance sheet. If we don't do M&A, you can expect this to go down even further. So we have ample ammunition if required for M&A. Now M&A, again, not changing much. We want to do M&A to increase our scale. Strategic priorities is accelerate the R&D road map, which Prema has presented in key markets and segments. We still -- we don't plan to go into new segments like capital markets. So this is what we still plan to do. No change there. Conclusion is, as a management team, we're very focused to deliver that. Clearly, SaaS is one of the main drivers of -- SaaS and subscription are the main drivers for this. And this is clearly also depending even more on SaaS. However, we have shown even in the alternative model, the derisked SaaS model, if you want, with lower growth, we would still get to all those targets in the midterm. Thank you.

Thanks, Takis. I'm going to dive straight into Q&A. So if Thibault, Prema, Andreas and Takis could come in, take their seats. [Operator Instructions] Charles, do you want do first?

Yes. It's Charles Brennan here from Jefferies. I'll go with two questions. One, just on overall process and then one on the business, if I can. If I start with the one on the business, there's a lot of focus on SaaS, both from a technology point of view, but also in a contributor to the targets. But it was an area of relative underperformance in Q4. I know you said it was volatile, but Q3 also wasn't a standout quarter. I think, on the call, you suggested that you were confident in SaaS revenues in 2024. Can you give us some sense of confidence on the ACV for '24? And then just in terms of process, Thibault, can you give us a little bit more granularity on who's actually running the process? Is the process being run by the Board with help from third parties? Or is it being run by third parties with input into the Board? I guess another way of asking the question is, who is ultimately writing the conclusion report? Is it the Board or is it third party...

Okay. So we start with the last question. It's a Board responsibility to oversee this examination. And so that's very clear. The third parties, which are in the process of being appointed, will be independent, will be top firms in accounting and 2 law firms, one for Switzerland, one for the U.S. They are going to -- I mean, drive to their conclusions, right? So the Board is not going to filter any. The Board will take the report. And will -- based on this report, will report to you.

Can I take the business side of the ACV SaaS and then I'll hand over to Takis to answer the financial question? We've done a number of initiatives to accelerate the ACV in -- and consequently SaaS revenues in cash flows for 2024 specifically. One, we've already talked about, which is enterprise services, which it -- I anticipate that it's a significant bullet in our armory, if you like, because we are approaching the market in a very different way than we have been until now. So that's number one. Number two, we are trying to introduce the market to SaaS irrespective of whether they ultimately wish to run their production environments on to SaaS. So when we go to market for selling on-premise subscription, if you like, there's a lot that the bank can actually do during the project on public SaaS and on our SaaS environments and services. They can do their initial system built, they can do their knowledge and transfer, they can do their integration, they can do their testing and then move into their own preproduction environments, on-prem if they so wish or they can continue to use SaaS for their production. So there's a lot of initiatives that we've introduced with the sales organization, which are intended to open up the market faster.

So we have seen in the past occasions where we had 1 or 2 quarters, which were, let's say, below the -- if you want, the average of the previous quarters or indicating some type of negative trend. And obviously, that has 3 months down the road some negative impact on SaaS revenues. However, the SaaS revenues are not just built from ACV and basically what you have from attrition also. I mean, don't forget, we still have overages, so -- which is a sizable part of the revenues. So we get paid or recharge the customer for overusage on their commitments. And this is done at a premium. So usually, after a few months or quarters when they have to pay much more, they come back and sign for a new commitment on ACV, but you get the revenue. So the customer doesn't get in a position where he can use the platform for free. So overages is an important point. Then you have CPI linkages as well in there. This is not visible in the ACV. This is in the original contract. But obviously, that builds over time as well. And the third lever without giving here details, obviously -- and we demonstrated the overall ARR churn at 3%. Clearly with the type of portfolio we have built and the platform approach, you would expect also that your churn would trend down. So needing, again, less ACV to get to the same revenue number. But coming back so yes, we feel confident to deliver the -- at least 20% growth for SaaS revenues this year.

Great. Thanks. Josh?

Josh Levin, Autonomous Research. Two questions. In one of your slides, you showed that your addressable market is growing at 10% per year. Your guide for this year for revenue growth is 7% to 10%. And does that imply you think you're going to lose share this year? Or does the math -- that's not the way the math works? And then the second question, Thibault, you addressed many of the concerns raised by the short report. I'm not sure I didn't hear you address the R&D issue about whether Temenos is investing 20% of its revenues in R&D. So maybe you could comment a bit on that one.

So on the market growth, I think, at least from what I remember, the market also includes not just total software licensing...

Maintenance...

Correct. So you would actually -- if you add the maintenance, which is in our case as big as our total software licenses, you would get a comparable number, which is probably more 6%, 7% or something to which you will compare our 7% to 9% growth, yes. So no, we -- our revenue guidance on those metrics doesn't imply we plan to lose market share.

And what we call R&D is R&D. I don't know how to answer it differently. The -- what is done specifically for customers like customization is not part of it, right?

Great. Fred? Sorry [indiscernible] microphone already. I'll come back to you.

It's Laurent Daure from Kepler Cheuvreux. I have a question on the 2024 outlook and the comments that you made last night on investment needed that lead the margin to be more or less stable plus. If you could elaborate a little bit on this and maybe the headcount addition you're planning. My second question is on the ARR. The growth is mostly coming from your existing customer with your new customer basically offsetting the churn. Are you comfortable with that? Or do you expect to do a special effort on grabbing new customers? And my very final one is for you, Thibault. When you read the report, what makes you less comfortable with? Is there one point on which you say, okay, we really need to investigate this? Or are you feeling comfortable on everything?

So okay. Maybe -- we'll start with the ARR. I think -- well, we look at this in the opposite way. And if you remember the pie charts, we always put into the slide deck in the appendix. It shows that we usually get, whatever, 60 2/3 of the business from our installed base. So you would expect to have a similar picture on the recurring part. And actually, for us, it's something which derisks the outlook because you are actually much less dependent on new logos. And if there was -- as we have seen as an example, in 2022, ARR grew quite nicely despite the challenges in the marketplace. So do we have the ambition to also grow new logos? Yes, of course, and we'll continue to that. But for us, it's almost like a safety net that we see this high net retention for -- with our existing customers. On guidance for 2024, it's a bit unfair, Laurent, because if you take not 8.5% as the midpoint, total software licenses, but take 9%, you already get a 60 basis points as -- 60 basis points EBIT margin improvement. So we're still confident that we'll increase the EBIT margin as well this year. Last year, we ended up a bit higher than originally expected as we have explained some of the investments late in the year or we couldn't do on time. We're not stopped to -- we're not stopping to invest. So nothing exceptional needed or planned on the cost side.

So when I read this interesting report, based on my knowledge as a Chair of the Audit Committee, I didn't see anything that I thought would be concerning. Again, the thorough examination will be done. So I'm not saying we are washing our hands of it. We owe you that and we owe it our customers and our employees as well. But I really didn't see anything that for me was concerning except that, of course, when I remember the title, I feel extremely surprised by the strength of it.

Fred, would you like to go next?

Fred at Bank of America. So I've got two questions on the guidance and maybe one more on the process. So firstly, to come back on the phasing of your midterm ambition. I think to reach your mid-term EBIT guidance, you need about 15%, 16% growth per annum. So '24, we are significantly below. Can you share a little bit with us the moving parts here? Is it because of the phasing of term license, et cetera, but what kind of drives this shape to be quite back-end loaded? And then second, to come back on the previous question on SaaS, I think CMD last year, you had this growth ambition, which was about 30% growth in the SaaS business. We've been closer to 20% in Q4 and you're saying for next year more than 20%. So is it a change in trend? I mean what's driving the kind of more prudent message on SaaS? Or it's more a question of phasing? And then maybe lastly on digital. I think there were some interesting numbers shared today. If you can just come back on the number of go-lives you've seen this year on digital side, if you can share any color on how that was last year, that's trending, et cetera, that would be very useful.

Okay. On EBIT growth first. So last year, we ended up with 12%, so not far away from what we need on a compounded basis. We started again, this year, also given circumstances, with a prudent approach. And clearly, a lot of the investments, especially in SaaS or rather front-end loaded, yes, we still did 300 basis points last year. Probably, if we deliver the 20% plus SaaS revenue growth, we'll again have probably the same margin expansion. So on the EBIT side, let's see where we end up. But the CAGR we feel quite comfortable because we have taken a lot of the initiatives or put them in place, especially on the SaaS side, yes. So there is good visibility on SaaS gross margin. SaaS revenues. To answer this, we had said back in October '22 when we had the profit warning, we had said SaaS revenues will grow 25% in '23. I think we delivered exactly on the spot, which tells you, yes, while the ACV number will probably lead you to something different, it's again overages and so on. Have we changed our view on terms of SaaS ACV growth? No. But given the last 2 quarters, and we -- again, we expect ACV to be higher in the upcoming quarters. This is where we said, okay, does the model also work if we don't grow SaaS by 30%, yes, but quite a bit less, yes. And this was today to prove that it's working as well, yes. Maybe you get a bit later there in terms of free cash. But our base scenario still remains unchanged. No mistakes there.

Can I just refer back to Kanika's point in the market for SaaS just to put a little bit of perspective what is going on in the market, which is driving what Takis is deciding to do with the numbers? You've got 2 or 3 different drivers. The first one is, clearly, the funding situation for fintechs and the NEOs, if you like, in the market. And for sure, that has put a dampening effect on the demand for SaaS because if you recall how we started our SaaS business was by targeting entirely to that. So that's one driver that has taken place in 2023. The second one is that you have in Europe, in particular, DORA, the legislation around the provision of outsourcing services -- material outsources, if you like, which is making bigger banks and smaller banks reflect on what they would need to do and how the framework would develop to consume SaaS services. And that is also working on the dampening side. Now on the other side, you have the availability of public cloud infrastructure in emerging markets growing quite fast. You have the ability of regulators -- sorry, the position of regulators in emerging markets changing more favorably towards SaaS, and these 2 are positive. And finally, the traditional banks globally, on an average, they are more willing to consume their core banking SaaS. Kanika said that in the midterm, traditional banks will outspend the fintechs, the NEOs by a factor of, if I recall correctly, 3.5x. So the trajectory of adoption by traditional banks is much faster than the equivalent for fintechs. And then finally, just to cap it off. In the U.S., the market has shifted to SaaS, it's moving to SaaS and that's expected to continue.

So I'll take the question on Infinity go-lives. The number that I quoted was last year's numbers. So out of the 391, 160 had Infinity or digital go-lives. And this covers anything from onboarding or origination to digital servicing capabilities. It includes new apps or new channels or new segments or a bank that may have already a digital brand that they copy and create a new brand. So I'm only counting all the significant value deliveries on digital. For this year, that covers also the Tier 1s through the credit union end of the market. For this year, we are expecting -- projecting 180, that is 1-8-0 to 2-1-5, 215. The number is a range because digital projects are always agile projects. They are shorter life cycle projects, and they get planned quite late and also executed fast as well. So it's something slightly evolving. So right now, our projection is based on our experience and what we know our clients are planning to do this year. So that's what we are looking for this year. Same segment, same sort of range.

Thanks, Prema. Antonin?

Antonin Baudry from HSBC. Two quick questions about the process. The first one is in allegation, you have a lot of client interviews. I appreciate the client satisfaction that you highlighted. But would possible at some point to have more contact with your clients, more client testimony, more use cases that support your product in your Capital Markets Day, for example, beyond the audit -- beyond the results of the audit to have -- these clients testimony from your side? The second point is, do you expect after the results of the audit to change some -- the way you have to present your account on R&D, for example, if we can have the line R&D in the P&L, how we can change that in the future?

Well, on the testimonies, I don't think it's my role to answer. But I think it -- yes, it is actually a good suggestion to have more customer testimonies in what we release. And I don't think it would be a big problem to do it, by the way, based on their overall satisfaction. Well, the reports have not been done yet. So it's difficult for me to say that we are going to take their conclusion and make changes. From what I know, I don't see a need to change what we report in terms of R&D, but there will be a thorough examination and you will be aware. And if there is something to change, we will do it.

Toby?

Toby Ogg from JPMorgan. Two questions for me. Firstly, just on the on-prem licensing business. So the TSL guidance and the SaaS guidance within that implies that the on-prem licensing business isn't really showing any growth after having declined in 2023. So how much of that is prudent for 2024? And how much of that is other factors? And what are those factors? And what have you built into the guidance for those elements? And then just secondly, just on the maintenance growth. Clearly, the rate of growth through 2023 has been increasing each quarter and ended Q4 with 7%. You've talked about 5% to 6% maintenance growth for 2024 as the right level. What are the reasons why that would slow versus the accelerating momentum we've seen in 2023 and slow versus that 7% exit rate?

Okay. So on the maintenance first, I mean, if you look at H1, clearly, there was an easier or there will be an easier base for maintenance revenue. I think that's one of the reasons that you should look at it on a full year basis and the comparison base simply becomes a bit higher. There is nothing will change in terms of the momentum or the elements for either Q1 or Q2 or any of the quarters, yes. And as we try to convey we -- again, let's be prudent also on maintenance. Now it's a narrow range because we have the visibility, you would not expect the attrition or anything to change. Now on total software licensing, again, my favorite word being prudent here. So if you take SaaS growing 20% plus and term licenses, as we said, which still includes this small part of custom development, which is, again, going to trend down again, you would see, let's say, if you take term licenses being down 50% plus, your subscription would grow correspondingly, yes. There is -- maybe it's more about the phasing. Clearly, the few term deals we have still in the pipeline, [indiscernible] be first half then second half. Yes. So that's as much as we see it today.

Justin?

Justin Forsythe from UBS. I appreciate it. So a couple of questions here. First, I wanted to hit one of the questions around platform compatibility, which is I think one of the issues raised in the report. Around -- I think one of them was relating to the rollout of Kony in the U.S. in T24. Just wanted to make sure I heard something said correctly during the presentation was that there are no issues there. I think that was what was either discretely said or implied. And then there were some comments around localization or the lack thereof in places like Australia. Would you say that that's not true, and you're pretty much in line with all the banking regulations and everything in response to that point? And talk us a quick question around SaaS gross margin. So if I go back to last year, I think we had the exit rate at 64% for 2022. It seems like the full year margin for '23 came in at 60%. And it looks like the medium-term guide came down from greater than 80% to -- 75% to 80%. So what happened there? And what is the justification for the downward adjustment in assumptions?

Okay. I'll take the gross margin first. So last year, we said exit rate, 64%. That's correct. If you read the footnote, it basically says if you account for everything implemented all actions and measures taken. And this is not going to -- this is not happening over one year, yes. So same here, this doesn't -- this exit rate of 66%, doesn't mean we're going to have 66 in 1 year because some of the things we are implementing automation and so on, this is not a 1-year thing. It's basically over, let's say, more like 2 years. Now 75% to 80% versus 80%, I think we have seen what Andreas said, there are some trends in the SaaS world. We are a bit, let's say, onshore. This is why we've given the alternative scenario in terms of how quickly, how fast this adoption will happen. Still, the ambition is still to get to 80%. But we -- I mean, to deliver the model, the EBIT, the free cash, we don't need to get to 80%. So this is why we provided a bit more space. Just being a bit more prudent.

Got it. And real just a real quick follow-up there. So you're saying that was relating to the subscription, transition and potential downside in that. In terms of the mix of TSO that might drive that in your downside scenario? Are you saying that, that was the mix between on-prem cloud and public cloud that will be driving the delta?

So no. So we don't call it a downside scenario. It's an alternative scenario from the base. So the only change we have -- we have done there or -- we have provided if SaaS growth slower, yes, and subscription correspondingly faster this would be then the impact. So EBIT, no impact, the same year and some delay on ARR and free cash flow. That was the message. Nothing on -- I mean, by -- in the midterm, we won't have much term left anyway. So no impact from that.

So the first question, if I may answer. So the -- there are known issues on the Australian market coverage or anything of that sort. We continue to invest and deliver and keep ourselves up to date on the regulatory changes, including the payment regulations and everything, which is modernizing in Australia quite heavily. On the first question -- first part of your question, there were some red projects that we inherited as part of Kony acquisition. That's what we had to get through painfully one by one, but most of it is already behind us. In fact, some of those customers, we have actually sold many of our existing capabilities or the newer capabilities like onboarding because Kony used to do only servicing, that sort of thing. So we continue to take care of that customer base as well.

Adam Wood from Morgan Stanley. I guess these are probably all for Takis. But just first of all, I guess, one of the challenges for us is when we look at the revenue growth of the company versus the ARR growth of the company, there's a reasonably big delta and the challenge is to work out what we think is the best indicator of what your midterm growth capacity is. Could you help us with as we look forward to that midterm plan, the phasing of how that gap narrows between revenues and ARR and how big would you expect the gap to be as you deliver on those midterm targets? That was the first one. Secondly, you gave guidance of, I think, 2 to 3x uplift on the SaaS revenues. Is that versus a support revenue from a license? Or is that some other metric? Could you explain how we get that level of uplift? And then finally, a point of clarification, you gave in your little sensitivity chart. The growth of the SaaS business and then how many of those Tier 3 to Tier 5s would need to convert? Were you assuming like an underlying growth of the SaaS business ex that conversion? And so obviously, the faster the underlying business does, the less people need to convert. Is that the right way to understand that, please?

Okay. I take the last one first, yes, it's correct. So basically -- you see on the horizontal axis, basically, the 15%, 20%, 25% assumption that there will be the underlying business. And then if 20%, 30%, 40% will then convert, we will get to the 30% plus ACV business. So that's correct. The value uplift is measured on total contract value. So basically on a subscription is easy, but on a term was basically term license plus the committed maintenance, and now it's basically 5x the ACV, So it's on a 5-year basis. On the ARR versus revenue. Now because ARR is not a straightforward P&L metric, you probably will always have the delta. Now if we if we deliver this model and you will have 55% plus being SaaS and fully recurring and basically dropping through, I would say, the gap to revenue growth will shrink quite substantially to low single digit. That's what's in the model.

Great. I think no more questions from the floor. I'm just going to take a couple from the webcast very quickly and then we'll wrap up because we're quite far over time. Takis firstly, a question on DSOs. Is it possible to reduce our DSOs going forward?

Yes, DSOs -- okay, if people go back, we had a very good downtrend on DSOs for years. At the end of '21 or beginning of '22, we decided to move to subscription. Obviously, you book the entire license portion upfront, but you only get the yearly portion in terms of cash. So obviously, your receivables move up. We had shown the plan. And clearly, the original plan we have done now better was for the peak to be in '24 and then trend down. The peak was in '23 and will trend down now So in the midterm, we're going to go back to, again, depending how fast we can move to SaaS. The faster we can move to SaaS, the quicker it will come down.

And one more for you, Takis, about the bond maturing in April. Do you intend to access the capital markets to refinance that?

Okay. So if I look at how our bonds traded on Thursday and Friday, probably, this is not the preferred option, would be too expensive to refinance the bond, the April bond through issuing a new bond. But most likely, unless something changes over the next 4 or 5 weeks to the positive we would refinance through our credit facility.

Okay. And Thibault, one for you. Will the independent third-party report be published for the investor community?

Well the conclusion of the report.

Great, I think that's it for the moment. Thanks for listening. Thank you, everyone, for joining us today. There are finally refreshments outside as well. And yes, look forward to meeting quite a few over the next few days as well.