Good day, and thank you for standing by. Welcome to the SimCorp Q3 Report 2021 conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to our speaker today, CEO, Christian Kromann. Please go ahead, sir. Thank you very much, and good morning to everybody. Here in the room, it's myself, CEO Christian Kromann, Group CFO Michael Rosenvold, Head of Investor Relations Anders Hjort, and former CEO and now Senior Executive Advisor Klaus Holse. We've been looking forward to speak to you all and take you through our Q3 2021 financial review. On page two, you see the usual disclaimer. That's always good to make sure that it's clear what that one says, but I'm sure most of you had already been through that. Today, we have the agenda, where I will start by taking you through the key highlights of the quarter. Michael will take you through details of the financial review and our 2021 outlook. We will open up for Q&A after that. Before we start to look at page four and take you through the numbers, the overall feeling that I am arriving at is that it's two steps forward and a half step back. What I mean by that, and we will talk you through that, is that we have a very good momentum with our existing customers, their appetite in buying into our overall strategy. We also start to see Europe really moving at a good pace in terms of generating new customers. The obvious half step back is that we haven't signed a new customer in Q3, which is, even though Q3 is normally a little bit slow, still unusual. Let us take you through what it ended up at and also give you a bit more detail through it. Q3 at a glance on page four, we end up with an order intake of EUR 27.8 million. It's EUR 6.1 million up. In order, in all, whole nine yards, it's a good growth of around 28% of order intake. The parallel revenue growth is 7.1%, and that gives us an EBIT of 24.2% or an EBIT margin of 22.6%. The 12-month rolling software updates and support growth is 2%. On professional services, it's pretty much flat. There is an underlying growth in the business, I would say, but the actual Q3 result is a little bit affected by certain bookings that will come at a later stage. Free cash flow continues the trend we've seen lately at a very good growth rate on EUR 24 million. If we then look on page five on the nine-month overall result, overall solid performance that has taken us three quarters of the year with a order intake of 70.6%, which is also a very good growth number on the whole nine-month horizon. Good growth, 8.5% on revenue. EUR 78 million is also a good growth, a margin of around 23.2%. Also that is going up, and we are quite pleased that the order book is also continuing the upward trends as a whole. As I alluded to, relatively good pace on professional services with a 5.5% growth for the nine months and also here a good, healthy free cash flow of EUR 79.8 million. If we then go to page six, which is what we've talked about quite a bit, that's really the numbers that we are spending quite a lot of time on when we track our internal performance. The growth in annual recurring revenue, which is just short of 10%, so it once again demonstrates our ability to grow our business with our customers, and on a recurring basis. Which in the end, in the transformation we are going through as a company is an absolutely key performance indicator. Revenue signed on contract EUR 432 million. That number is growing at a relatively good pace. As I said, no new customers, which means that the picture on page seven, which is the customers we've signed, so far, has not changed. I'm not gonna spend a lot more time on that. We also, as we've done previously on page eight, we take a Q3 announcement as an opportunity to give you a sneak preview into our overall strategy transformation. Where are we with that? As most of you will remember, we run a five-year cycle. We are now two years into that five-year cycle. As we always do, we go back, we revisit the assumptions we did when we did it two years ago, and we're doing a relatively deep dive on an annual basis, present it to the board in September, and then start to implement, and then the whole cycle starts again. We continue to have three strategic imperatives, customer experience leadership, which I would say also validated by some of the very significant deals we've done in Q3, has really now reached a level of maturity where all of the time and money we invested into understanding our customers much better is now translating into real strategic deals and a real ARR optic. So quite pleased with the performance on that side. Everything as a service. I would say we are becoming more precise. What I mean by that is it's now clear that the overall world has a high demand for cloud enablement, probably a higher demand than we thought when we planned. We're obviously very pleased with the pace that this is going with. What it also has now translated into is a large part of our existing customer base has experienced and expressed an interest in moving on their cloud journey together with SimCorp. That's moving forward. The other thing that has happened probably at an even higher pace is the interest from our customers to ultimately move further up the value chain with SimCorp over and above the technical services that are associated with the software to service transformation. We're gonna give you a few examples of what we mean by that in one of the later pages. Then the whole ecosystem we are building around us as a company, both from a technology point of view, but also in the overall culture, is certainly also taking a big leap forward. I would say we are starting to slowly think much more about ourselves, also validated by our customers as the platform of choice in the investment management industry. The entire thing stands on the pillar of a cloud and technology transformation of all of our technology. If we then look at page nine, that's a kind of a brush up on what, you know, why is the underlying market reacting the way they are. I would say it comes in three pillars, and it comes relatively high pace of each of them. The first one is obviously an efficiency push that we all experience. We need to do basically more with less. Our customers is in the same situation. They are also positively impacted by a relatively large money inflow in the entire business. At the same time, our customers need to expand their reach in terms of geography or products or the whole nine yards in terms of what they do, but they need to do it more and more effective. That has led to a relatively brutal approach, at least from our chair, on differentiating between what are absolutely key things that our customers need to do inside their buildings in terms of differentiating themselves as compared to areas that do not really make any differentiation in the underlying business. Once we come to the examples, I think it will be quite obvious why that's a sweet spot for SimCorp to tap into. Finally, and I think somewhat fueled by COVID, I think is also mitigating risks, whether that's security side or scalability or access to talent, doesn't really matter. It's the whole nine yards. I would say all of these things is certainly pointing us in the direction that the strategy we put ourselves into two years ago is even more relevant now than it was at that point. To put it into a bit of perspective, on page 10, we try to illustrate a bit what it is we mean when we talk about these things. This is really a lot about lingo. There's a lot of wording going around these things when you read papers from the industry. We wanna try and break it down to something that we can all understand. A traditional customer relationship when we go back in time is an on-premise relationship. What we mean by that is that we are producing the software, we're handing the software license over to the customer that are installing them on their premises. We would typically help them in implementing, but they would then run the application, run the upgrade, and do all of these things themselves. We still have a predominant part of our customer base in that category. When we take the first step to a software as a service offering, and I would say we're probably literally turned the corner now where we consider ourselves a software as a service company. That's quite essential for the way we think, the way we operate, the talent we onboard, but it also have certain impacts on the financials that I'm sure we will talk a lot about over the coming quarters as well. The first level of that is that we take over the responsibility of running the application, including the kind of the technical infrastructure, the cloud capabilities for running that. We call that software as a service. It's kind of very mature. If you look at the next page, you will see we have 50 customers already in that category. I can honestly say when we come out and our customers realize that we are already mature in this space, that's a real enabler of that conversation because the last thing you wanna do as a new CTO is you wanna try something new with a vendor. We're absolutely in that space, and it's firmly accelerating. If we then go to page number twelve, I jump over the map, but the whole kind of the whole messaging of the overall map is the mature element of our offering in this space. You can see we have 300 staff working on this every day, and that's growing massively. We are building capabilities for this around the world, but we also certainly have a growing customer base on that. Let's talk a little bit about the new elements of our offerings to make sure we all understand what we're talking about. If you look at page 12, you will then see that we're introducing the concept of business operation. That's where the rubber hits the road. That's really where I say our market has become more brutal in separating what they need to do as a company as compared to what is not differentiating them in their competitive landscape. Very good example of that, which is now also mature from our side, is DataCare. We talked a little bit about it a couple of times, but it's really now becoming an integrated part of our strategy, and most customers are now having a real look at that. It's ultimately quality data on subscription. That's what it is. You're not installing our software, you're asking us to take all the data sources, quality assure them, whether static data, market data, or corporate actions, doesn't really matter. It's the whole nine yards. We're delivering that data. You can feed it into SimCorp Dimension if you're a user of SimCorp Dimension. If you're not, you feed it into whatever system of choice. What it also represents is another, SimCorp Dimension independent revenue source that we are also seeing, quite exciting in that. We call it, tech-enabled services, and what we mean by that's quite essential, is that everything we do in this space, we're using our own technology for high automation rates, and ultimately to make sure that whatever we do, we have relatively, little exposure to, what I would say warm hands, so real, kind of FTE-driven work. We are obviously doing that because our claim to fame is our underlying technology. To be completely brutally honest, it's only, it's also only interesting for us if we can actually use our technology to create the scale that allows us to earn money on the back of it. This is really moving, and it's moving fast. A couple of days ago, or was it yesterday, we announced to the whole world our next iteration of these services, which is our Investment Accounting as a Service. That's actually the first full-scale service enablement of SimCorp Dimension that we have been launching. Let me take you a little bit through that, what does that actually mean, and why are we doing it, and that's what we do on page thirteen. The client demand is quite clear. The buy-side trend to focus is on core activities. I already explained that, and there's a very clear demand on this from us. It's a focus on high level of quality, digitalization, and cost reduction. We actually already have close to 25 trillion of assets running on our accounting solution every day. We are highly proven in this space, and it's really something that we're very proud of. We've done it in many jurisdictions, and it's a key area that we work on. This whole thing is powered by Dimension. We really can use our capabilities from a technology point of view to automate this a very high part. The way we go about it is that we ring-fence the business unit. We move some of our absolutely best people. Jochen Müller, former Chief Commercial Officer in the company and also the MD of EMEA and APAC, has moved in this role and is kind of taking all of his seniority and his many, many years of SimCorp knowledge to really accelerate this growth model. It's ultimately a key example of where technology expertise and a service is now an integrated part of our DNA. It's, I would say, a natural evolution of our software-as-a-service strategy, but probably at a higher pace than what we anticipated two years ago. Truly exciting and really, really good feedback from the overall customer base. Page 14 is just to remind ourselves about what it is we are doing. It's technology, and then some people, as compared to a traditional outsourcing service where it's a little bit of technology and a lot of people. I would assume that is quite obvious why we are going on the right side. That also requires a high level of discipline in terms of only going for the areas where our technology is supporting it, and it also requires quite a lot of discipline when it comes to standardization. Quite exciting. A lot of other things also going on. It's fair to say that ESG is something that is very high on the agenda of our customers. It's also high on the agenda of SimCorp from an internal point of view. In this particular thing, I want to highlight that we have now launched our ESG capabilities. We are also launching a service on the data side, where data management is a big part of ESG, shortly on top of DataCare or actually embedded into DataCare. SFDR is driving quite a lot of business. We continue on top of our service transformation to build small, more nimble solutions that allow our customers to advance their strategy at the right pace. I would say, you know, ESG is certainly creating a lot of conversations these days, and we are quite proud of our solution as it has a substantial amount of transparency, which in essence is what you need when you're running an ESG portfolio. That was a little bit about what's going on inside SimCorp at the moment, a little bit about what's going on in terms of our market, and then finally a bit about our strategy. Why don't we hand it over to you, Michael, to take us a little bit more through the details of the financial. Yes. Thank you, Christian. I will start on page 17, where we have the normal waterfall diagram. Seen from my perspective, Q3 was, I will say, a rather soft quarter where we were still impacted by the lack of ability to physically meet new clients. You could almost compare it with a really good football team with skilled players, where they might didn't have the best game, but they still managed to make a draw. That's how I would characterize the Q3. That meant that we made a revenue growth of 7% in reported currency. For the first time this year, we actually had tailwind from FX, from currencies, so the organic growth was 6%. On the margin, we made a 22.6% margin, which was on level with the same period last year. If we combine the three quarters on page 18, then we had a reported growth of 8.5%. For the first nine months, because the first six months, we had the headwind from FX, there was a combined headwind of almost one percentage point from currencies. Thereby, the organic growth was 9.4%, so close to 10%. The margin for the first nine months was 23%, which was two percentage point better than the nine months last year. Order intake, as Christian also said, EUR 6 million up compared to Q3 in 2020. That is a 28% growth in order intake, which to some degree or primarily was impacted by the two significant transformational deals we made, which also included conversions from perpetual to subscription-based licenses. I will come a little bit back to, you know, what a transformational deal is and then why we see a transformational deal like this as something good for the company. Order intake from renewals was EUR 3.2 million, so about the same level as the year before, actually a little bit lower, while we had more order intake from conversions than the year before, with EUR 12 million compared to EUR 4.5 million the year before. As Christian also said, we didn't sign any new SimCorp Dimension deals in Q3, so that is not included in the order intake. If we go to slide number 20, you can see the order book and the development of the order book. An increase of EUR 8 million compared to the last quarter and an increase of EUR 17 million if we compare to one year ago. DataCare and other subscription services, the new kid on the block, accounted for EUR 28 million of the order book compared to EUR 8 million one year ago. A quite large increase in DataCare and other subscription services. The CVC part of the order book was about unchanged at EUR 10.5 million. Going to the different revenue streams, quite clear, very little impact from new license sales, initial license sales, while additional license sales were increasing quite a lot. I will come back to the composition of the additional license sales in the next slide. Software update and support going up by 3% in local currency in this quarter. Professional services, as Christian also said, a little decline, which was primarily due to timing on revenue recognition, as some work require acceptance and that acceptance is expected in the next quarter, so in Q4. Hosting and other fees, which is, you can say, driven by our hosted SaaS or SaaS solution as Christian also mentioned, that was going up by 12% in the quarter and 28% in the nine months. Good momentum in the SaaS business. Going to slide 22, where we have the split of additional license sales on, you can say, what we call, regular license sales, renewals, and conversions. If we start with the regular additional license sales, then we had an increase of EUR 2 million compared to Q3 2020. More sales of additional regular license sales than one year ago, while we also saw the two conversions impacting additional licenses positive by almost EUR 10 million, which was much more than the year before. With the deals we have made in Q3, we also have some revenue recognition, which will be revenue recognized in the future, of which EUR 7.8 million will be recognized in Q4. Renewals, we had a small increase in renewals in revenue recognition, but of EUR 0.4 million. If we go to slide number 23, a similar picture, but a little also a little different. Additional regular license sales was EUR 2.7 million lower than in nine months 2020. Revenue from renewals were EUR 4 million higher and conversions were EUR 7 million higher than the year before. I would like to go to slide number 24, where we are trying to give an example of what does it mean when we are talking about large transformational deals. This is for natural reasons an illustrative example, but of course, it is based on some of the discussions we have with several clients. We believe that you can say the levels we are talking about here is not unrealistic, but of course, it is an illustrative example. If we had in the good old days a very large client had made perpetual licenses for over a period of time of up to EUR 15 million, and thereby paying maintenance fee of EUR 3 million per annum. We are then saying now the client wants something else. They want to have a different kind of arrangement where they are engaging more with us. What could that then look like? Here in this example, because of the change, they are going from a perpetual agreement to a subscription agreement. At the same time, they are buying extra stuff, they are buying DataCare, and they are also buying other services like extended support, e-learning, third-party products, and so on. That means, in reality, from a P&L point of view, that due to the conversion, we will have some upfront license recognition. But I think what is more important is from a cash flow perspective, we are actually, in this example, going from EUR 3 million in annual inflow to EUR 5.5 million annual inflow. We'll have less in maintenance, but then we will have the subscription part will actually be higher than the old maintenance because of the extended scope. We will also have DataCare on top of it, or we will have other services on top of it. Going from EUR 3 million in cash flow to EUR 5.5 million in cash flow. What very often also happens is that we will also do the hosting as part of these strategic deals. If we go to the next slide, which is on slide number 25, then we have added the hosting element on top of the DataCare and the other services and the extended scope. You suddenly go from EUR 3 million to EUR 10.5 million in inflow. Of course, some of these additional both services and the hosting part will also embed some costs. It's not like a net cash flow we are talking about here. Also the net cash flow will of course be higher than EUR 3 million we had in the past. Here we are trying to see, like, to illustrate why are these conversions, why are these transformational deals quite important and interesting for us. Going back to Q3 on slide number 26, where we are looking into the cost development. I think we have overall, we have had a cost increase in the quarter and also in the nine months of 6%, where we have saved some money on admin costs. We have had not that much sales and marketing costs due to lower inflow of the new deals. We have had the most increase in cost of sales for two reasons. First of all, because there has been a real increase in cost of sales, but also because we have made a reclassification between R&D costs and cost of sales, which is having an impact on both numbers. So that's one of the reason why we have a pretty large increase in cost of sales. On slide 27, as we also, Christian also said, a solid cash flow performance, 35% up in Q3 and 13% up for the first nine months. A cash flow development we are pretty satisfied about. Finally, my last slide before we go to the Q&A, the full year guidance. We maintain our expectations both for revenue growth and EBIT margin. That means that we have to deliver as good Q4 as we did last year. That also means that, as always, we are very dependent on a strong Q4. It is as risky as it used to be, and we really need to materialize our pipeline into orders. Of course, we also have the pipeline to do it, we need to convert that into signed deals. For the FX part, due to the latest development, especially with strengthening of the U.S. dollars, we expect a very little impact from currency fluctuations now of around 0.1%, while we in the last guidance expected 0.5%. Very little impact from currency fluctuations. The last sentence I will say is that in our new guidance or in our guidance here, we expect conversions and renewals to have a more positive impact on both revenue and EBIT margin than we anticipated in earlier guidance, which is also, of course, due to what we have done up until now, but also what we see for the rest of the year. By this, I will hand over to questions. Thank you. As a reminder to ask a question, you will need to press star one on your telephone. To withdraw your question, press the pound hash key. Your first question today comes from the line of Hannes Leitner from UBS. Please go ahead, your line is open. Yes, thanks for letting me on. I have a couple of questions. The first one is around those two large conversion deals. Usually, I mean, you described the impact of that, but I think that was just a standard conversation. In the past, you always talked about those specific deals. What would be the annual cash flow uplift on that? Maybe you can be specific on those two deals as a whole. Then the second question is, given this upgrade of expectations in terms of conversion, and with the unchanged guidance, it means actually that you somewhat have Delayed or canceled some of the pipeline deals. Maybe you can talk about the pipeline for rest of the year, and then, you know, like starting to think about next year. The last thing is just in terms of R&D and going forward. It seems like you have changed. Is there anything we should know? Is the other 20% you're guiding to, are they still set? Has the cloud lift been now completed and R&D should trade slightly down, downwards going forward? Thanks. Thanks, Hannes. I think I will take the two first questions and then Christian will take the last one. The first question regarding the impact of the conversions. What we're writing in the report, which is very similar to what we have written in the past, is that it will have a net positive impact on cash flow, the two conversions. We have not said how much it is, but it will have a net positive impact. We have said what the negative impact on maintenance is, and then we're saying it will still have a positive impact on the future. The future spend will be higher than what we lose on maintenance. The other questions that was regarding conversions and the outlook, and you are right. As we stick to our guidance and the guidance is maintained, when you have a larger impact from conversion, that also means that you will have this impact from non-converted deals. That is primarily within new license sales outside EMEA. That means in North America and in APAC, where we do see some postponements. I'll hand over to Christian for the R&D part. Yeah. Maybe I can add quickly to what Michael just said. I think there's kind of two effects to monitor from our point of view. The one is that at least the last very transformative deals, it's quite often that to get the customer over the line in the end requires face to face. That has been tricky, especially in APAC and in North America. That's opening up a bit at the moment, which is nice. We hope it will keep that way. The other effect is that in order to make a decision of a transformative nature, you need to have a strategy work prior to that going on at the customer. That we can see has also slowed down, because they have been, frankly, more occupied with making sure people got back and work and all of that stuff. We need both to work in the right direction. I would say just the last couple of weeks, we've seen a bit kind of movement in the positive direction. But it's like an old diesel train that kind of needs to get moving. It will certainly take some quarters before we are back at full pace. That obviously assumes that somewhat that the world keeps being open, which I'm pretty confident that it will. From an R&D point of view, I would say probably things look a little bit different. What I mean by that is that we've taken a close look at our cloud project and has kind of broken it down into two buckets. One is what derives direct customer value, and what is more an internal thing we need to do to make sure our offering scales to the maximum. We have chosen to up prioritize the areas that have direct customer value generation. Spread the other thing a little bit over longer time. The reason for that is that it's ultimately the customer doesn't really see it. It's more a scalability thing that is going on our side. One additional positive comment is that we are now going live with the first Microsoft Azure-based customers. A lot of the investment we put into natively put SimCorp on Azure is now starting to also pay off. On top of that, some of the service offering we are putting out there in the market, we're also putting a lot of investments into getting them off the grid, and that falls into a couple of different components. One is to make sure the product is as standardized as possible to ultimately make scalability and therefore earn money on the back of that. Then finally also requires a basic set of knowledge that we're putting into. I would say this traditional R&D percentage will make less and less meaning over time because in the end we are driving ARR, and that is kind of investments across product, but certainly also service and the skills acquired to do it. We're not guiding about next year, but there's certainly a lot of things we wanna do. Now we need to make sure through the budget process that is somewhat linked to the revenue expectations as well. We will come back on that when we meet again in three months' time. Understood. Thank you. Thank you. Your next question comes from the line of Claus Almer from Nordea. Please go ahead. Your line is open. Thank you. Yeah, I have also some questions. I will take them one by one. The first goes to the order intake. Just to be sure about what we saw in Q3, have you seen lost, canceled projects in the pipeline or is it more about undecided projects? And also has there been any shift from Q3 to Q4 in the order intake. That'll be the first one. We haven't seen any cancellations of existing customers, but I assume you're referring more to new customers. Yes. In the pipeline. I would say in Europe, it's kind of the normal situation where we kind of win our fair share of what's going on. That will continue into Q4. We have a pipeline that kind of supports the outlook that we gave and also on new customers. In terms of North America and APAC, it's much more about continuous delay, and some of them are delayed into Q4, but I think most of them, if not all, a substantial part of them are delayed even further than that. Okay. Coming back to a old topic, employees. It is still slightly flattish. It is up, but not by much. You still have a lot of vacant positions on your website. Maybe you can update on how it goes with adding enough resources and not least enough resources to support the whole cloud journey. Good question. I think it comes in a couple of different parts, right? We are doing quite a lot to make sure that the talent we already have are staying with us. That's somewhat obviously something is compensation driven, but I would say most of the things we do are not compensation driven. Obviously we are seeing the same pressure as the rest of the world. Was it 6% inflation they're expecting now in North America or whatever it is, so obviously there's something going on there. We've also invested quite a lot into infrastructure from a location point of view through 2021. We upgraded our office in Warsaw. We have established an office in Manila. We also established an office in India. I would say we are preparing ourselves for a world where we have employees close to our customers, but we certainly also now see a real step up in terms of having employees that are part of a global delivery model. That also means that we now have more strings to play on in terms of how we acquire talent than we had just 12 months ago. It certainly also is needed because as you rightly say, Claus, that it's a different ballgame. I think we're doing all the right things. On top of that, we have also continued to invest in partnerships with companies that can generate some of that capacity in a more flexible way. That has turned out to be a good choice. In reality, when we look at our entire capacity, it's a bit higher than what you see from a pure FTE point of view. We will certainly continue down that road as well, but as I also have said, we now established our own footprint in some of the areas of the world where there is a bit more easier access to some of this talent. No doubt it is a challenge for us and for everyone else. Yes. Yeah, for sure. The decline in professional service or revenue for professional service versus Q1 and Q2, is this also impacted by lack of resources or lack of you know hours to be invoiced? Yeah, just a follow-up. It's not. I can tell you very clearly, it's not resource driven. It's primarily timing and activity driven, but it's not because we can't get the resources. Okay. Just as the final question, coming back to the slide you showed about the cash flow impact when you have these conversion projects. As you also said, this was more from a revenue or incoming cash flow point of view, and it looks really good, obviously. What if you were going to do the same, you know, example on a more EBIT line, so the cash flow- Yeah. Net cash after cost, how would these EUR 3 billion-EUR 10.5 billion look, on? Yeah. It's of course a very relevant and good question. I would say it depends also very much on the maturity of the different parts of what we are upselling. You can say some of it will be having a low margin in the beginning, and then the more scale you get, then you get to a certain margin. Some will have very little margin. So for instance, the hosting, the pure hosting part, that's a commodity you don't make a large margin on because it is a commodity. I'll say many of the adjacent services and also services related to the hosting, we do expect to make a good margin based on both our own intelligence, but also what we see other companies are able to do in this field. Of course, the first few clients, you don't have the scalability, then you'll make a lower margin. When you start getting scale, you make a higher margin. Let's just say for the next three years, will you then be able to reach enough scale to really matter, or is it more for the long term? It depends. I think some of the services we will already from the beginning make a decent margin. On some of the other services, it will take some time before we get the right scale. I think it is a combination. Okay, thanks. That was all for me. Thanks. Thank you. Your next question comes from the line of Daniel Djurberg from Handelsbanken. Please go ahead. Your line is open. Thank you, operator, and thank you for taking my question, all questions. I will also take them one by one. I would like to start to understand a little bit more of the delays processes in North America and APAC. I guess that you took some in U.S., nine front office deals, I think, in 2020. I guess most of those were already planned for ahead of the COVID-19 and so forth. If you look at the delays you see in, for example, U.S. now, is the delays decided upon in the board level? Is it the management group, the C- level? How fast can we expect this process to restart? Will the restart include a full procurement process from the beginning, or is it more that they can start where they stopped, so to say? It's a bit of a mixed bag, but let me see if I can give you a few data points. There's kind of one part of our offer portfolio, actually one plus one. The client reporting Coric is clearly speaking to the urgency of increasing the digitalization of client communication. That's actually going quite nicely. There's also an indication that is of an investment size and magnitude that makes it feasible to take these decisions at a lower level, without involving board and anything like that. We have a positive expectations that we're gonna land more customers on that also in Q4. When it then comes to these things, replacing 35 systems and, you know, replanning the whole thing and all that's either delayed because they're concerned about the money they need to put into it, or it's withdrawn, which we've seen a few cases where because they simply are doubtful that their staff is capable of lifting the task. I would say if I look at what has been going on, and I kind of extrapolate another couple of months, then we will go into next year with roughly the same size of qualified pipeline, I would say. Okay than we had a year ago. If I look at the conversion rates on the pipeline we entered into 2021 with, our expectation, that's obviously where we are coming out with a lower result. It's all about are we starting to see data points indicating that conversion rate and decision speed is going up? That's why I say, well, in the last month, yes, some signs, but it would be wrong for us to just go out and say we expect North America in particular, but certainly also APAC to be back kind of at pre-COVID pace. It's kind of both. It's a little bit of concern whether their staffing is capable of lifting the task. It's relatively few that are making a financial argument for not doing it because, as I said, inflow is high and money is okay. It's kind of that, do we really have what it takes to make that transformational choice? Most people are making the decision to defer at the moment outside of Europe. In Europe, they are pushing along. Thank you. Great answer. May I ask you also a little bit on your move to the global delivery model, technology first, et cetera? You talked about the Investment Accounting as a Service investment you've done. Can this also help you to broaden the market below the tier ones that you focused on so far, so to say? Also perhaps help out to make it easier for tier ones to do acquisition decisions on investing in your systems? Yeah. I think there's kind of two questions in that one. There's will you- Yeah. Will we make it easier for our normal addressable market to make decision? The answer is clearly yes. That's why I say we are now coming to an inflection point where we talk about standardization for quite a while as a facilitator for our customers to make the decision. Now it's a requirement for us to sell our service. It's kind of taking a turn up in importance, and also why we are investing in. That's certainly a key. Will we end up broadening our addressable market? Yes, eventually. We've also been quite firm that that's not a priority for now because. Yeah ... we believe there's a huge opportunity in our existing market, and there's also a task of prevention of making sure that our customers understand that they can take this journey with us and they don't need anybody else. Great. May I have a last question? It would be more to Michael perhaps on the view on the salary inflation for perhaps next year compared to what we saw this year, and also on the impact on annual maintenance revenue. I think it was a negative EUR 1.8 million as was mentioned. How large part of this will impact Q4 all else equal would be my last questions. Taking the last part of your question first, very little Q4 impact from the conversion. You know, a long deal or many short deals and there will be very little impact in Q4 on the maintenance part. In terms of inflation and salary increases, yeah, we certainly expect that the salary increase next year will be higher than this year and the year before. I think we have been quite specific about our salary increases for the last couple of years, which has been about a little more than 2% on an annual basis. We certainly believe that salary increase next year will be higher. For the maintenance, the ongoing maintenance, in most of our contracts, we have a price indexation clause. You can say some of the salary increase will be able to, in that way, to pass on to the clients in terms of the subscription part of the maintenance part. Okay, perfect. Thank you, and good luck in Q4. Thank you. Thank you. Thank you. Your next question comes from the line of Gautam Pillai from Goldman Sachs. Please go ahead. Your line is open. Great. Thanks so much for taking my questions. A couple of questions to Christian. Firstly, on just following up on the comments you made about the headwinds in closing deals. Just to kind of ask about the business model, the active business model, in a post-COVID environment. What we have observed in a lot of global software companies is that a lot of companies have adapted and kind of moved to a virtual selling model and are very successful in kind of doing that. What is preventing SimCorp from kind of doing that? Is it more of an industry-wide problem, as in do you see your competitors also kind of facing similar kind of, let's say, longer sales cycles and lower pipeline conversion issues? That's my first question. Secondly, on just competition, can you just update or give us an update on the competitive landscape? Obviously, the usual names like BlackRock and SS&C are out there. But are you seeing any kind of new cloud-native vendors coming to the space? I mean, we had Clearwater Analytics IPO recently. Are you seeing those come into the market and coming into your space more and more? I have a couple of follow-ups to my question, but I'll ask them later. Very good questions. There's certainly nothing preventing SimCorp from moving our sales methodology to a more digital one, and we're doing that at a relatively high pace, investing into both technology but also kind of mindset and standardizations of our demos and all of these good things. Our ultimate goal is that in not too distant future, it should be feasible to actually you know go on our web page, you know put in a purpose and then have access to some relatively simplistic demos. We're doing that at full steam, and that is already having a positive impact on all these things. We also have to be honest to ourselves that the bigger deals we do has such a transformational element that it can be career limiting on both sides. I would almost say if you kind of don't have that underlying trust, and it's nothing a contract can deal with. We quite often know when we won the deal, and it's typically that kind of moment of truth where you kind of share the same values and have the same ambitions for going that way. We can do many things, but at the least we haven't yet found a way of anything that beats sitting around a table and creating that relation. We're doing everything we can to make everything else digital. Yeah, that's certainly a very good question. The question about competitors. We currently see them in a couple of different groups. There's no doubt that BlackRock is still out there. We believe we have an angle on them. We certainly also know that they believe they have an angle on us, but it somewhat still seem to be a game about whether you wanna be associated with BlackRock or not, and that seems to be relatively stable in this development. I would say Charles River, we see less. Maybe that's something we need to figure out. Generally we somehow also through our strong relationship with State Street, we believe that it becomes more and more difficult for them to find an alignment about that kind of two-string strategy. Certainly our partnership is certainly taking, you know, a very positive turn and momentum at the moment where they decided to put SimCorp Dimension into Alpha for insurance customers in Europe. I would say there is certainly a couple of new companies. Some of them are coming from a cloud-native technology point of view, like, recently we saw Enfusion IPO and other companies are taking kind of a service first with less technology enabled, where Clearwater is a good example of those. In the end, we are always intrigued by people that are changing the underlying business model. We are certainly happy they are now publicly traded because finally we have some proper comparison. We obviously noticed they have good growth, but they also are yet to demonstrate that they can actually make money on the back of that growth. We believe Clearwater is, you know, has an interesting offering, but we believe we have better tech. That's also why we decided to service enable that and go hard after Clearwater. Got it. Thanks for sharing. Just a couple of financial questions. Firstly, on gross margins. Gross margins have kind of come down quite a bit in Q3 and have been kind of trending down. Is this driven by kind of more hosting businesses which you are undertaking? My question Is it driven by your private cloud? If you kind of, once you have the Azure business up and running and if you move more people to the public cloud, is it more of a SaaS model where it should not have an impact on gross margin? Yeah. I will say, there is still some. I think first of all, the hosting cost is going into that line, and that also means that, as you grow hosting more than you grow the rest of the business, then that will increase that cost line because that is almost a one-to-one, as very little margin is on the hosting part. That is one element. Another element was the internal move we made where we took a department which used to be part of the R&D cost, where we thought it's probably more a kind of an operating operation. Therefore, that is now part of the cost of sale. That happened in Q2, so that means that both Q2 and Q3 have that move of course. In reality we're also spending more cost on the SaaS part than we did in the past. Just kind of a philosophical question. If SimCorp moves to 100% SaaS model, all your customers move to SaaS in, let's say, 10 years' time, would you expect the gross margin of the business to be higher or lower than today? It's good. When we are fully scalable, it should be about the same. Got it. Now I feel that you're moving more and more to an ARR metric, which I think is a fair point. Can you comment on the churn on that ARR which you're seeing currently? How much we're losing? As in, yes, at renewal or obviously ARR is a combination of subscriptions and maintenance and everything in there. What is the typical churn which you see? How many, you know, kind of customers. Either customers moving off or customers downsizing the contracts and so on. No. We see, I think there are two elements in that one. There's one where, you know, do we lose clients? In the past we have lost between two and four clients per annum, and primarily the smaller ones, and we announce that once a year in connection with the annual report. I would say we haven't seen any uptick in that part. It's not like you could expect seeing any uptick in cancellations. In terms of when we do the renewals, it's still early days, but the renewals we have made up until now, there has not been, they have not been smaller than what they used to be. It's actually more the opposite, that we have been able to upsell a little bit. Of course, it's a relevant question because when you have the subscription model, then the customer of course also have the opportunity to decrease scope. Up until now, it has been same level or above. I would say most of the conversation understand that it's a pivotal point they make once they start to give some of their either technical operations or business operations to us. I would expect as a basic statement or kind of an overall statement that it becomes even more sticky through that. Cool. I mean, would you consider giving us something like a net renewal rate, kind of a metric, in future which would kind of enable to see how much of an upsell or cross-sell it's coming to? Yeah, let's consider that. Yeah. We will take it as input. Yeah. Last question from me. You commented about salary inflation. Can you comment on attrition? Like, are you seeing above normal attrition or are you within your normal kind of range right now? I would say a little increase. Yeah. It's not substantial, but a little increase. I would say compared to the rest of the industry. You have to remember that normally because we disclose this on an annual basis, it's very public information. Normally we have been below 7%. We are normally at a relatively low level and we've seen a slight uptick, but it's not significant. Great. Thank you so much. All the best for keep- Thank you. Thank you. Thank you. Thank you. We will now take our final question, and that question goes to the line of Magnus Jensen from SEB. Please go ahead. Your line is open. Thank you. Before taking that question, I'll do it rather quick. Two questions on the guidance. First on your margin guidance. Is it fair to assume there's a high correlation between your top line and your margin? If you end up in the top end of your guidance range on revenue, you will also end in the top of your margin range and vice versa? Yes. That was good. Thank you. Second question. To end in the high end of your range, I mean, you need to calculate around 14% growth in Q4 on top of a pretty strong Q4 last year because of State Street. Is that even realistic? What kind of scenarios should play out for you to end up in the upper range? It seems very optimistic. You're absolutely right. To end in the upper range, we need to do slightly better. We need to do better than last year in order to end in the middle of a range. It's a little better than last year, but not significantly better than last year. You're absolutely right. It will require that we do slightly better than or better than last year to get to the upper end of the range. Of course, why we keep our guidance is because we look into our pipeline and see, you know, what do we have in the pipeline? What is possible based on the likelihood of signing deals and that's the basis for the guidance. But you're right. We are once again very back-end loaded and in order to deliver we need to deliver as good as we did last year. Just then add on to that. To meet the top end of your guidance is a prerequisite that you get some momentum in APAC and North America. Yeah, or make some very large deals in EMEA. Okay. That's all for me. Thank you very much, guys. Thank you. Thank you. I will now hand the call back. Thank you. Great. Thank you very much. Well, very good questions, and thank you so much for participating, yeah, see you roughly three months from now. Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.