Ladies and gentlemen, welcome to the Temenos Q2 2021 Results Conference Call and live webcast. I'm Sasha, the conference call operator. I would like to remind you that all participants will be in listen-only mode, and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for a question at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it is my pleasure to hand over to Max Chuard, CEO. Please go ahead, sir. Thank you. Good afternoon, and thank you all for joining today's call. I hope you've been able to access our results presentation on our website. As usual, I will start with some comments on our Q2 performance, and then I will hand over to Takis for an overview of the financials before giving some concluding remarks. Starting on slide seven, we had strong momentum in the second quarter as more banks embark on digital transformation journeys in response to the pandemic and the ongoing structural pressures on traditional banking models. We also benefit from significant numbers of new entrants to the market. Our success with new entrants and challenger banks has driven significant growth in SaaS ACV, which were up 409% in Q2. Combined with strong license growth, this has delivered excellent growth in total bookings of 1% and 4%. Our total bookings this quarter are higher than they were, in Q1, in Q2 2019, demonstrating the strength of recovery and underpinning our future outlook. We introduced total booking as a new KPI this year to reflect the increasing contribution from SaaS and to enable you to track the overall growth in our business. Our EBIT grew 16% this quarter, and our EBIT margin expanded by 300 basis points, driving strong operating and free cash flow generation. With the strong momentum in our business, we have raised our SaaS ACV guidance for the year to between 50%-60%, up from between 40%-50%. We have reconfirmed the other guidance items, which Takis will run through later on. Moving to slide 8. We had significant SaaS ACV growth this quarter, up 409%, with ACV of $17.4 million, our highest-ever ACV quarter. The U.S. was the strongest contributor by region, and we expect this to continue going forward. We signed a number of new SaaS logos this quarter, as well as benefiting from volume growth within some existing clients who have rapidly scaled their business. On slide nine, you can see that our SaaS growth is largely incremental to the business. Large banks are buying licenses from us to progressively renovate the bank based on packaged business capabilities, and those will be run either on-premise or in the cloud directly themselves, or with a hybrid model that combines the two. Mid to lower-tier banks are also largely on-premise, renovating the entire bank, and we do see increasing use of cloud and SaaS in this segment. Finally, challenger banks and fintechs are almost entirely SaaS for their operations, and this is where we see the incremental demand. We can achieve rapid SaaS ACV growth with successful clients as they scale the business massively. Turning to slide 10, we had an excellent total booking growth of 104% this quarter. Total bookings hit $165 million, which is higher than what we had in Q2 2019. As you know, 2019 was our best year so far. This reflects the strong sales momentum we see in the business. Demand this quarter was broad-based across most geographies and products. Total booking is a key metric for us as it drives growth in our backlog and increases our long-term visibility. It underpins our guidance for the year, shows we are building backlog for 2022, and gives us confidence in our 2025 targets. Our growth in total bookings was driven by significant growth in SaaS as well as strong growth in licenses. As with Q1, we also saw an increase in average tenure this quarter compared to last year. On slide 11, we saw continued momentum in the second quarter, building on Q1 with the sales environment improving across most geographies. All regions delivered double-digit growth in the quarter, with the U.S. in particular having another very strong performance. The U.S. was again the largest contributor to total software licensing. In Europe, we are seeing a recovery that is following the trajectory of the U.S. with a short time lag. Our European deal pipeline is building up very nicely, and we expect strong sales growth in the second half of the year. Activity with Tier 1 and Tier 2 banks is also increasing across all regions. In fact, we are strengthening our sales organization to address this. We had 16 new clients win in the quarter, and our services teams and partners delivered 15 implementation go lives. On slide 12, I'm very proud that we again topped the sales league tables for the year. With IBS, we were ranked number one seller for core banking for 16 years in a row, which is an amazing achievement. We were also the number one seller for digital banking and channels, retail payments, and risk management. This year, IBS introduced a new category for sales to neo-banks and challenger banks, which is a very fast-growing segment targeted by a number of neo- vendors. We have invested heavily in our SaaS and cloud capabilities over the past few years to ensure we are highly competitive in this segment. Being ranked number one in this new category is a strong statement of our capabilities, our competitive positioning, and the investments we've made so far. With Forrester, we were the top global power seller for the 15th year. In fact, this year we were the only vendor to be ranked as a global power seller with a 20% increase in new named deals, and with three times as many deals as the next vendor in the ranking. That's quite impressive. I'm very pleased with this confirmation of our market leadership and the efforts of all our product, sales, and marketing teams who fully deserve the credit for this success. Moving now to slide 13. I'd like to give a quick update on the two strategic partnerships announced earlier this year. In our partnership with Salesforce, as you know, we are combining Salesforce CRM capabilities with transactional capabilities from Temenos Infinity. The product integration is nearly complete, and sales activity have already commenced with strong level of interest. The second partnership was a strategic agreement with DXC to offer the bank's clients a digital transformation path for core banking. We have a number of workshops and early-stage sales processes underway and are looking to potentially expand the relationship to offer other products into the U.S. market. Turning to slide 14. Our U.S. business continues to perform very well and was the largest contributor to our total software licensing, with strong growth in both license and SaaS. We've had a number of new U.S. logos signed in the quarter, and looking forward, it is the largest contributor to our global ACV pipeline this year. We have continued investing in our sales team in the U.S., which is translating into pipeline growth, and we expect our strategic partnerships, as I mentioned with Salesforce and DXC, to also contribute to future growth. Finally, sales activity with large U.S. clients is also increasing. Finally, turning to slide 15. We are seeing increased activity with Tier 1 and Tier 2 banks in the market, and therefore we are proactively responding to this and have announced two expanded roles in our Executive Committee to strengthen our global sales leadership. First, Philip Barnett is taking the role of President of Global Accounts in addition to his strategic partner responsibilities. He's building a dedicated sales team focusing on strategic and complex Tier 1 and Tier 2 accounts to capture the increased demand we see in this market. I think this is very exciting. Jean-Paul Mergeai is being promoted to President International Sales with responsibility for sales across Europe, Middle East, and Africa, as well as Asia Pac. Jean-Paul took over responsibility for Asia earlier this year and has already had great success, and we are very confident he will replicate this in Europe. Jacqueline will continue as President of the America, with responsibility for sales both across North and South America. On that, I will now hand over to Takis to talk through the numbers for the quarter. Yes. Thank you, Max Chuard, and hello, everyone from my side as well. On slide 17, I'll start with an overview of the quarterly financial performance. All figures are in constant currency unless otherwise stated. SaaS revenue was up 24% in Q2 2021, driven by strong ACV growth in prior quarters, but offset by the impact of HCL. Total software licensing grew a strong 16% and maintenance grew 3%, in line with guidance and in line with Q1 2021, giving total revenue growth of 8%. EBIT grew 16%, and the EBIT margin expanded by 300 basis points to 36.2%, driven by the operational leverage in our business model. We had another very strong cash quarter with operating cash flow of $ 112 million, up 19%, and free cash flow of $ 87 million, up 24%. DSO ended the quarter at 106 days, down one day year-on-year, and also down one day sequentially. Our net debt is now just above $1 billion, and our leverage is at 2.3 times, having paid out the 2020 dividend and executed $194 million of the $200 million share buyback program. With our strongest cash quarter ahead in Q4 2021, we expect our leverage to be around 2.1 times by year-end, therefore unchanged year- on- year. Moving to slide 18, SaaS revenue grew a strong 24% despite the HCL headwind. We have had several strong quarters of ACV growth, and with most of the HCL headwinds behind us, I expect a sequential improvement in SaaS revenue of $2 million-$3 million in Q3 2021, and an even stronger sequential improvement in Q4 2021, as the ACV growth is reflected in the P&L. Total software licensing grew 16% on the back of strong sales momentum and an improving environment in most regions. Maintenance continues to recover as expected, growing 3% in the quarter. We expect maintenance to grow at a similar rate in Q3 2021 and then accelerate in Q4 2021 to give full year maintenance growth of around 4%, driven by the license growth in the first half of the year. After 2021, we expect our maintenance growth to accelerate in 2022 and beyond as license growth is rebounding. Service revenue was slightly up in the quarter, and I expect service revenue to accelerate in the second half to also yield around 4% growth for the full year. Looking at the cost base, our operating costs were up 3% year-on-year. Our fixed cost base continued to grow with hiring in R&D and sales in particular, and we had some limited increase in travel costs. On slide 19, we have provided the Q2 2021 impact of the Kony non-banking clients moving off from the Temenos P&L to HCL. HCL paid us an annual license fee in Q2 2020, and this repeated again in Q2 2021, so there was no impact from the HCL license fee on our year-on-year growth rates. The headwind comes from lost revenue across license and SaaS as well as services and a bit of maintenance as non-banking clients move from Temenos to HCL, which also impacts EBIT. In Q2 2021, this created a 4% headwind on SaaS revenue, 9% on total software licensing, and 4% on total revenue. There was also a 10% impact on EBIT. The large majority of the HCL impact is now behind us, and the rest will gradually phase out in H2 2021 and become negligible in 2022. The strong ACV performance in the recent quarters will become more visible in the SaaS growth acceleration in Q3 2021 and Q4 2021. We have now visibility on most of our forecast 2021 SaaS revenue, given the sake of three months time lag between SaaS deal signing and SaaS revenue starts. Now in slide 20, we show like for like revenues and costs, adjusting for the impact of M&A and FX. The Q2 2021 figures are all organic and therefore in line with our constant currency growth rates. In terms of FX, the trends from Q1 2021 continued with a stronger EUR having a positive impact on revenues, but more than offset by cost increases in all major currencies, in particular, the GBP and the AUD. Taking into account all currency movements and hedging, FX had a negative impact of about EUR 2.5 million on EBIT in the quarter. Turning to slide 21, net profit grew 11%, with higher taxes driving most of the difference versus EBIT and EPS grew 11%. Our tax rate was 17.5% for the quarter, and we continue to guide for the 2021 tax rate at 16%-18%. Moving to slide 22. Our DSOs reached 106 days at the end of the quarter, down one day sequentially, and also down one day versus one year ago. We had strong cash collection in H1 2021, which was reflected in the operating and free cash flow growth, and we expect this trend to continue going forward. We are confident in getting DSOs to below 105 days by year-end. Beyond 2021, we expect DSOs to continue on their downward trend towards 85 days by 2025, driven by continued improvement in licenses and services cash collection, and an increasing contribution from SaaS in the P&L, which typically has lower DSOs more in line with maintenance. On slide 23, our Q2 2021 LTM cash conversion was 107%, well above our target of converting at least 100% of IFRS EBITDA into operating cash. We expect our cash conversion to be at least 100% for 2021, driven by strong growth in recurring revenue, which we have continued to deliver for the last few quarters. Now in slide 24, we show the key changes to the group liquidity since Q1 2021. In Q2 2021, we generated $112 million of operating cash flow, and the other main movements were the share buyback of $105 million, a net positive inflow from borrowings, and $71 million dividend payment. Our cash on balance sheet at the end of the quarter was $88 million, with our net leverage reaching 2.3 times. We expect our net leverage to be around 2.1 times at year-end 2021 after the share buyback and with strong free cash flow generation. This is unchanged with the end of 2020. Turning to slide 25. We had an acceleration in ARR versus Q1 2021, with ARR growing 8%. HCL was still a considerable headwind in this quarter, but most of this is behind us now, and underlying attrition on ARR remains in line with historic rates. ARR growth will continue to move upwards in Q3 2021 on the back of higher SaaS growth before considerably accelerating in Q4 2021 as both SaaS growth and maintenance growth reach normalized levels. We had very strong growth in deferred revenue, which was up 17% after already growing 28% in Q1 2021. This is driven by a combination of strong cash collection on maintenance and the growing contribution from SaaS. Free cash flow was therefore up 24% year-on-year to reach $87 million, and our net cash debt was $5.4 million, flat on Q1 2021, and still expected to be at or below 2020 levels for the full year, assuming no further M&A. Moving to slide 26. I have kept this slide in here to remind you of the new KPIs we introduced in February: total bookings and ARR. Most of you will be familiar with this by now, so I will not spend time going through them. If you have any questions, please let us know. We've also put slides in the appendix with tables showing SaaS ACV, ARR, total bookings, and free cash flow by quarter. On slide 27, we have revised our 2021 non-IFRS guidance, specifically increasing our expected SaaS ACV growth to 50%-60%, up from previously 40%-50%. Keep in mind there is a one-quarter delay between ACV and SaaS revenue growth, so most of this will impact the 2022 P&L. With a dollar of SaaS ACV equivalent to around $2.5 of license, if this had been licenses, we would be raising total software licensing guidance by 2.3% for the full year 2021. This is why reporting our new KPIs of ACV, total bookings, and ARR are so important. They provide visibility on the future growth trajectory of our business given the acceleration in SaaS and its increasing contribution to the P&L line. We have reconfirmed all the guidance items for 2021. The guidance is on a non-IFRS basis and in constant currencies. You can find the FX rate assumptions in the appendix. For ARR, we guide for 10%-15% growth driven by committed SaaS revenue from the ACV we have booked and a re-acceleration in our maintenance growth during the year. We expect to grow total software licensing by 14%-18% as licenses continue to grow, as already seen in the first two quarters, and driven by the sustained growth in SaaS. Total revenue growth is forecast at 8%-10%, with the impact of slower growth in maintenance and services on the back of lower license growth last year. We expect both of these to accelerate throughout the year and in 2022 and beyond. We are guiding for EBIT growth of 12%-14% to EUR 362 million-EUR 369 million, implying an EBIT margin expansion of 130 basis points from 34.9%-37.2%. We have maintained our target of converting over 100% of EBITDA into operating cash and expect DSOs to be below 105 days by year-end 2021. We expect a tax rate of 16%-18% for 2021 and our net leverage to be around 2.1 times by the end of the year. On slide 28, I'd like to reconfirm all of our 2025 targets, which we presented at our capital markets day in February. These targets are organic growth rates per annum. We expect total software licensing to grow 15%-20%. SaaS will clearly grow significantly faster at around 30%+, and licenses are expected to grow at 10%+ per annum. This will drive total revenue growth of 10%-15% per annum. We expect to expand the EBIT margin to around 41% by 2025, driven by strong growth in license and maintenance, improving our SaaS gross margin and leveraging R&D and G&A while still growing R&D on an absolute basis by 7%- 8% per annum. We expect total bookings to grow 17%- 22% per annum with ARR to grow at least 15%. ARR, in particular, will drive free cash flow growth of at least 15% to reach more than $600 million by 2025. Next, on slide 29, this is a slide we showed during the last couple of quarters, but I wanted to give you a quick run-through of our non-IFRS EBIT and margin expansion in 2021. Our average growth will be driven in particular by our growth in recurring revenue as well as licenses, while we continue to invest in R&D and sales and marketing, and with greater variable cost accrual compared to 2020. As such, we expect to deliver an EBIT margin expansion of around 130 basis points in 2021. Lastly, on slide 30, we have so far completed $194 million of the $ 200 million share buyback we launched in February. With that, I hand back to Max. Thank you, Takis. Turning to Slide 32. We are operating in a very large market, EUR 63 billion, with well over 70% of the spend still being done in-house. We've got a huge opportunity in front of us for sustainable growth in the long term. COVID-19 has accelerated the structural pressures on banks with traditional business models and legacy technology stacks. Demand for our products and technology continues to accelerate, in particular for SaaS, and this is driven by our pipeline growth. The acceleration in SaaS is largely incremental, as we discussed, and our growth in total booking is increasing our backlog and long-term visibility. On Slide 33, our strong SaaS performance is built on years of investment in our SaaS and cloud capabilities. We were the first vendor to run a bank in the cloud a decade ago, and since then, we've invested in our product and architecture to ensure we have the market leading SaaS and cloud platform. We use a single code base, and the same product is delivered on-premise or in the cloud. This means our clients are not forced to choose between different products with different capabilities. They simply choose Temenos and then decide how they want to implement and run the software. It also means we can leverage a single product and sales and marketing organization to drive our growth profitably going forward. We are very well positioned for the future growth in demand for SaaS and cloud, and we'll continue to invest heavily in R&D to ensure we stay well ahead of the competition. Finally, on Slide 34, to conclude, we had strong momentum in the second quarter with substantial growth in SaaS ACV, which will drive our SaaS revenue over the coming quarters. We had excellent growth in total bookings up on Q2 2019 as the sales environment continues to improve. We maintain our market leadership across products and regions. Our revenue growth continued to drive our EBIT. The operational leverage in our business model is driving margin expansion. We remain very focused on cash with strong operating and free cash flow generation in the quarter. Finally, we raised our 2021 SaaS ACV guidance to reflect the momentum in our SaaS business. I'm confident we will have a very strong second half of the year. With that, operator, I'd like to open the call for Q&A. We now begin the question and answer session. Anyone who wish to ask a question may press star and one on their touchtone telephone. You'll hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Questioners on the phone are requested to use only handsets. Anyone who has a question may press star and one at this time. The first question comes from the line of Sven Merkt from Barclays. Please go ahead. Evening. Thank you very much for taking my questions, and congratulations on a good quarter. Clearly, if we adjust for the different accounting treatments between SaaS and on-premise, you're already tracking ahead of the 2019 level. On the other hand, Q4 remains an important quarter. Could you therefore maybe comment on the visibility you currently have for Q4 and how pipeline coverage and pipeline conversion have developed versus your initial expectations so far this year? Secondly, SaaS ACV was clearly very strong, and I'm just wondering to what extent this was driven by license substitution, so customers that decided in the end to go for a SaaS solution rather than for the on-premise solution. Thank you very much. Thanks for the question. Let me take the first one. Listen, yes, we are very pleased with the quarter, pleased with the first half. Clearly, as you know, the second half of the year is where a lot of activity still has to happen. What I can tell you is we've seen quarter after quarter the improvement in the environment, which this is extremely positive across the region. Clearly, we said the U.S. is ahead, but we see now Europe as well coming back with a time lag of potentially six to nine months. I expect the second half of the year to be also very strong now in Europe. I would say what is also very exciting is, I think I've been mentioning this now for a few quarters, is the fact that we see some large Tier 1 and Tier 2 banks coming back to the market. As we discussed with structured and we... For the organization to ensure we can take the full potential of that. What we've seen since the start of the year is clearly an environment which is much more predictable. The ability to forecast accurately clearly is almost back to the 2019 levels. That's why, as we said, we feel confident for the balance of the year. Hi, Sven. Let me take the ACV question. I can here confirm that we have seen also in Q2, same as in Q1, no cannibalization, i.e., no license deal shifting to a SaaS deal. With the visibility we have in our forecast and our pipeline, this is also not something we see coming. That's maybe the first part of the answer. The other one, the way to look at the ACV number is really, it's not just incremental, meaning we win a lot of new clients, it's also what we call basically surfing the wave. i.e., if you have clients which are successful with their business models on the cloud, these challenger banks and fintechs. Just to give you one example, PayPal, as we have mentioned a couple of times. They are successful, clearly you ride this wave and they come back buying more and more. The ACV number is driven by both new names and new logos we bring, but also incremental additional business with existing clients. This is why you see the strong performance, and clearly there is no cannibalization or any business shifting from license to that. That's great. That's very helpful. Thank you. The next question is from the line of Chandra Sriraman from Stifel. Please go ahead. Yeah. Good evening, Max. Good evening, Takis. Just a couple of questions from my side. Thanks for giving us some sense of the HCL impact on the SaaS revenues. Could you give us a sense of what is the impact in Q2? I would assume there was some impact this Q2. A number would be nice, but at least a direction in terms of what the figure was, that would be very helpful. The second question is, you've been quite positive on Tier 1, Tier 2 deals, at least in terms of activity, but there was a significant drop in the contribution in licensing from Tier 1, Tier 2. Would you be able to comment on that? Thanks. Hi, Chandra. Listen, it's Max. Let me take the second one. I'll leave Takis with the HCL one. I wouldn't track the quarterly to take a view of the trend. Clearly my comment about the activity in Tier 1, Tier 2 clearly means what I see in the market, what is reflected in the pipeline. Clearly there is a time lag between this and those deals closing. What is so positive is that there is really increased activity across the lines, across the regions on those larger, more strategic deals. Now, it doesn't mean that you see this immediately, but definitely, it will, at some stage, flow through the P&L as we close them. My remark is much more about, if you want, the opportunity that I see in front of us. As well, when you look at the pie chart that you refer to, you need to take into account that we do have a SaaS business, which is growing very strongly, and this will be reflected. Those are, as we know, on the low end of the tiers. Hi, Chandra. For the HCL impact on Q3, first of all, Q2 was clearly the one quarter with the strongest impact. It was even higher, as you see, versus Q1. Now for Q3, clearly beyond the peak. I would say on total software licensing, the impact will be maybe 2%, 3%, 4% lower than in Q2, and then substantially lower in Q4 again, so really minimal in Q4 to get to the full-year number. On profit, clearly there is a bit more impact from services in Q3 versus the previous quarter, so the profit impact will be lower. Maybe on profit, let's say 3%, 4% impact from HCL. Q4, clearly it's a very low single-digit impact, and then you arrive at the full-year number. On ARR, we have not basically given guidance on that. It was in the previous quarter and also in the future quarters, it's about 1%-2%. Full-year impact is also then at 2% on ARR. Next year, as we said, it's negligible, so I guess we're not going to be providing this anymore. Maybe we'll only provide Q3 and then it becomes really negligible and not meaningful to report anymore. Great. Sorry, just a clarification. Was there an impact on pure licenses as such? As you remember, HCL impacts across all lines. We had the Kony non-banking business. It wasn't just pure SaaS, there was also, if you want to call it, annual licenses and annual maintenance. Yes, there was clearly in Q2, there was an impact as we mentioned of 11% just on the license line. In Q3, this will be also substantially lower, maybe 6%, 7%. Perfect. Thank you very much. Next question is from the line of Josh Levin from Autonomous Research. Please go ahead. Thank you. Good evening. I have two questions. One, I guess there's a lot of uncertainty around the Delta variant. How much does your ability to sell these days depend on your ability to travel? Then number two, you announced some new management changes today. Has there been a departure of any key executives? Was somebody else previously president of international sales or chief marketing officer? Thank you. Hi. Listen, let me take both. First on the Delta variant, which is obviously very sad what is happening on that part. I would say from a business point of view, the banks have adapted to the situation now for quite a few quarters, and hence we don't see an impact on our ability to transact, to close deals or to operate. Quite a lot of banks are still operating remotely. The few that have started to go back to the office, I think now have the ability to very quickly go back to remote if this would be the case. We don't foresee, if you want, an impact from that side. Regarding the management change. As I said, I mentioned two main ones, both on the sales side. We did not have before, someone running international sales as it is today. We had someone running Europe and that person for personal reasons, is going to depart and leave the company. Internally, we've got great and very seasoned executive in Europe. This is really our core market. I'm very confident about the ability to deliver on the strong expectation we've got in H2 for Europe. That's if you want for the international sales as well you've seen, we've announced also a new chief people officer, who has been with us now for more than five years. Jayde, she's really fantastic. She's taking over Monica, who is leaving for personal reasons. Finally, we've got a new CMO that is joining the ExCo. Martin, I'm sure he's going to be great. He's fully in line with open banking, and this is lots of initiative on what we want to do more on that side. Very excited to have Martin on board. Lots of new people joining the company, which is great. It shows how exciting it is. Very pleased with those changes. Thank you. The next question comes from the line of Laurent Daure from the Kepler Cheuvreux. Please go ahead. Takis. I have two questions. I'd like to come back on the ACV number for the quarter. I was wondering if there was a kind of a larger than usual deal. When I look at your new guidance, basically you expect the second half to be a bit softer than the exceptional performance you had in the first half in terms of bookings. My second question is on North America. All the wins that you had in the first part of the year, do you see the environment changing in terms of competition, between a new entrant and the U.S. incumbent, or you're still fighting with the same names? Thank you. Hi, Laurent. Let me take the second one. I'll leave Takis with the ACV one. On North America, as I've been saying now for a few quarters, clearly, we are more and more established in the U.S. We are more and more, I would say, credible. The sum of our, I would say, high-profile wins like PayPal, what we've been able to achieve in less than nine months to be going from zero to EUR 20 million of loans being processed, I think that's quite fantastic. What we are doing with Varo as well in the U.S., are fantastic case studies. In fact, Varo, they're telling very openly that they are able to deliver a service at 25% of the cost of an incumbent bank. We've been able to show really some strong traction in the U.S., which clearly give much more credibility in our ability. We are more and more invited to join the sales processes, and clearly our technology makes a difference. At the same time, as you know, we've been investing on the sales side. We've been with the leadership of Jacqueline, we've been building a stronger, larger sales organization. Finally, the market is clearly there. Banks are spending both, I would say, on the neo-banks, on fintech, but as well on more established banks that want to go through the digital transformation. Temenos is more and more appealing to those banks. I think that's why you see the momentum which is building and which continues to build, where we've got a pipeline which continues to be very exciting. I think we are better positioned than ever to capture this opportunity. Hi, Laurent. Let me go back again to the ACV details. Clearly, if you look at the, let's say, new business, new incremental business in H1, there was already a very strong growth. Then on top we had additional business with existing clients buying more volumes. Now, the way we forecast, and this is also true for the second half is the new business or new logos acquisition has the same, if you want, seasonality as the license business. You would see Q4 being the strongest one, where most of the deals get decided. This is the way we forecast. If you add $29.5 million of the first half, plus whatever the number is in our guidance, that will basically imply a slowdown. However, if you just look at the incremental business, excluding the volume with existing customers, which is very difficult to predict because you don't really know when those customers hit the next threshold, and they have to come back and buy more volumes. Usually this is not what we are able to correctly forecast. If you want, the guidance implies largely new incremental business. You could see on top maybe some of the existing ones also coming. Thank you. Just a clarification. In terms of the ACV, the split between the new logos and additional businesses with existing clients, can you share that with us? Yeah, I know where you're going to. It took many years for the traditional license business to become predictable and then also to have some kind of time series, giving additional information. Now we have now four quarters in a row with double-digit ACV growth. Let us get to, let's say, a business which we can even better predict than we do it today. Then maybe we'll start sharing some additional color of that. Also keep in mind, we have now 70 clients in our cloud. This is compared to 10 or 15 or 20 times more, which we have in our traditional business. Okay. Fair enough. Thank you. The next question is from Stacy Pollard from JP Morgan. Please go ahead. Hi. Thanks very much. Just a couple from me. You seem to be running ahead of the curve on EBIT margins. Does this mean that you're being a little bit conservative for the full year, or that maybe you won't have the same kind of level of heavy Q4 weighting on margins? Is there some seasonality that we need to be aware of? Secondly, just a quick update on M&A. How's the pipeline looking there, sort of your current thoughts and valuation levels? Hi, Stacy. Let me take both. Yeah, on the EBIT margin, clearly, I think there are a couple of elements to keep in mind. First of all, last year, if you remember Q1 and Q2, we were hit with the impact from COVID, and the cost base was basically still the 2019 or early 2020 cost base, which we only after that started to take out costs. What we have seen now in Q1 and Q2 is clearly a strong revenue growth, hitting on a year-on-year comparison, a relatively low cost base. This has clearly boosted the EBIT margin quite dramatically. Now, we have been investing now in this year and already started last year. Some of those investments will now follow through as originally communicated in February. I would expect clearly to see the year-on-year margin trajectory probably not having the kind of jumps we have seen in Q1 and Q2. There is, I would say, no magic behind that. In the second half, if you compare H2 2021 to H2 2020, clearly H2 2021 will then have a higher cost base again. I think the margin expansion will be as guided for the full year. So far, yeah, it's basically very good top-line growth hitting a cost base, which is maybe a bit slower ramping up because of the hiring process. There was still some COVID impact in the first half. If you look at the exit run rate in June on the cost base, I think we're tracking well for our full-year EBIT margin. On the M&A, unfortunately, nothing has changed. There is still a very elevated, if you want, valuation level. If you've seen some of the recent transactions, some fintechs bought. They don't even have SaaS multiple by now. That's clearly something very mind-boggling still. We're looking at smaller bolt-on acquisitions, more on the technology side. We clearly don't see right now any larger opportunity coming on stream for us. M&A strategy is unchanged, clearly searching the market. Yeah, we probably would need to see some more reasonable valuation levels. Thank you. Next question is from Knut Woller from Baader Bank. Please go ahead. Yeah. Hi, thanks for taking my questions. It's actually two. The first one on sales and marketing, which was down sequentially, which took me a bit by surprise given that license revenues have been up here in the second quarter. Normally it used always to be that sales and marketing was up sequentially in normal seasonality. Can you give some color here on what drove this development and what we should expect in the quarters to come? Just briefly on the cash flow, which was strong but benefited from non-cash and non-operating items and also the trade payables. Can you provide here some more color? In Q2, it seems to have been just reversed compared to last year, while it looked, I think, on the longer time horizon, on the 12-month perspective, as you showed it, a bit more equalized. Some more color on these two line items would be helpful. Thank you. Okay. Hi, Knut. Thanks for the question. On sales and marketing, again, I would not read too much into that. It has also to do with some of the variable versus fixed cost evolution. Clearly, we had some lower variable costs in Q2 versus Q1. Overall, I wouldn't see any change to what we have communicated in February, i.e. sales and marketing will be clearly going forward, increasing. If you look at this, and maybe this is what you meant, the year-on-year drop. If you look at the IFRS number, clearly, that was mainly the, if you remember, the earn-out of the Kony reversal, which was booked there on the sales and marketing. This basically explains the largest part of the drop from EUR 50 million to basically EUR 25 million. The year-on-year on IFRS has a special item in there. If you look at the free cash flow, yes, I would say some of the, if you want, strong cash flow growth was timing related, payables being one of that. I would see even if some of that will reverse in Q3, I would say maybe 5- 8 percentage points are due to timing. This can happen in any particular quarter. We would still expect very solid development of free cash flow both in Q3 and also the full year. This is just timing, nothing specific else in there. Okay. Thank you very much. The next question is from Gautam Pillai from Goldman Sachs. Please go ahead. Good. Thanks for taking my questions. Firstly, excluding the HCL impact, can you comment on the underlying churn in the SaaS business and also how the maintenance churn is tracking? Secondly, there was an announcement by Cognizant terminating a core banking contract with a Finnish bank, in which I believe Temenos was a software partner. Is there any financial liability for you in this? Also, is there any impact for the other contracts you have signed with Cognizant in the region? Finally, a quick clarification on share-based compensation seems to be tracking slightly ahead at the half year versus your full-year guidance. Anything we should be mindful in terms of the weighting of share-based compensation for the year? Thank you. Hi, Gautam. Happy to take that one. Maybe first on the Cognizant announcement. Clearly, you would understand that we can't comment on individual clients or individual partners. What we can say is if there is anyone with a relation to Temenos, it would clearly not have any material impact. I think we don't see that as any event for that. Now, on the churn, the maintenance churn is still tracking as we have guided in the past, so around 3%. If you look at the SaaS churn, maybe it's slightly higher, overall, let's say 3%-4%, which basically gives you an ARR churn around the same levels. I think what is important to note on the SaaS is that the churn on Transact clearly is lower. This is more in line with the on-prem license, while Infinity, which clearly has also shorter sales cycles and a shorter lifespan, is a bit higher. On average, we're on SaaS maybe slightly above the 3% which we have on the maintenance side. Finally, on the share-based compensation. Clearly, we track this very closely, what is happening with the share price and when people exercise their shares. We take assumption at the start of the year. Now, clearly there has been a good recovery in the share price. Maybe some people exercised a bit ahead of expectations. Just because we're now EUR 13 million for the half year, it doesn't mean that it automatically, it's just like a doubling of that number. What we would need to add here on the share-based compensation, it's usually three plans which are running in parallel. As you know, the share-based compensations are always for three-year plans. There is a number of assumptions which we have to take. Not much to add that, but one reason why we decided at the start of the year to exclude this from our target is exactly that. It's very unpredictable, what is happening to the share price and when people exercise how much. This is why we have taken it out, or one of the reasons. Got it. Thanks so much, Takis. The last question for today conference is from Michael Foeth from Vontobel. Please go ahead. Yes, thank you. Good evening, gentlemen. Two questions from my side. The first one is the acceleration in SaaS ACV, and the increase in guidance. Could you maybe explain what impact that could have on your EBIT margin expansion roadmap beyond 2021, if there is any meaningful impact from the faster ACV development? The second question would be regarding your partnership with DXC. Now that we're a few months in, could you maybe elaborate a little bit on what sort of potential you're seeing going forward from that partnership? I think we're sort of not fully appreciating that potential yet. Thank you. Hi, Michael. Let me start with DXC, and this is clearly one of the very exciting partnerships that we signed earlier this year. We've started engaging now with a lot of the customers that are using VIP from DXC. I would say more in the U.S. than internationally, even though we've done also some internationally. We've started running some processes and remember, the customer base from DXC are mainly large banks. We do have some processes that are at early stage, but which looks very interesting. I think the relationship is clearly very strong. In addition to that, we are assessing potentially also to extend, because the partnership is today for Transact, and it could be able to extend it to different products. We could enlarge as well this partnership. As to say, the engagement is very strong. The type of banks are really the core to what we do. Those are really large banks, mid to large banks that are running on mainframe type of application, and that do need to go through a transformation. Those are perfect prospects for us. Hence, it's progressing well, and it's partly as well, why we are also structuring this team that will focus globally on global accounts is to how to better capture, how to better maximize the opportunity with those type of large banks. Very good so far. Those large banks take some time to go through the full sales process. It's very encouraging at this stage. Hi, Michael. Let me take the SaaS margin impact. As we have guided of at least, let's say, 30% SaaS growth in terms of cover until 2025. This is implied in our 2025 guidance. Every additional million on the top line of SaaS revenue will clearly help not just improving the gross margin by simply running more volume through our cost base, but also clearly help improving the EBIT margin. On the exact timing of the margin progression, we have given some color back in February. If you look at the SaaS gross margin to address maybe this point, it's clearly progressing very well. We intentionally don't give this on a quarterly basis because you would see then where we track and then probably consider our 2025 targets not ambitious enough. There is still some volatility in the margin evolution of SaaS because sometimes people, sometimes clients come on board faster, others ramp up much faster with volumes. If somebody goes live with very few clients, the gross margin is much higher than if he ramps up much faster. There are a lot of variables in there. Clearly, as a general rule of thumb, every acceleration in SaaS growth in 2022 and beyond is clearly beneficial to the margin. Thank you. Very helpful and well done. Thanks. Thank you everyone for joining the results presentation. I'm sure we'll speak soon and thank you again for joining this call today. Bye. 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