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Ladies and gentlemen, welcome to the Temenos Q3 2019 Results Conference Call and Live Webcast. I am Sandra, the Chorus Call operator. [Operator Instructions] And the conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Max Chuard, CEO. Please go ahead.
Thank you. Good afternoon and thank you for joining today's call. I hope you've been able to access our results presentation on our website or through the webcast. I will start with some comments on our Q3 performance, and then I will hand over to Takis for an overview of the financials before giving some concluding remarks.So starting on Slide 7. We continued our momentum from the first half to deliver total software licensing growth of 15% in the quarter, and we've now delivered total software licensing growth of 20% year-to-date. In particular, we've seen strong momentum in our SaaS business with revenues up 93% and ACV up 164% in Q3 on the back of the number of new signings across regions.Overall, total revenue grew 12% in Q3 and 17% year-to-date. EBIT was up 16% in the quarter and 20% year-to-date. And EPS is up 18% in the quarter and 19% year-to-date as we continue to deliver strong margin expansion through the operational leverage in our business model.We closed the acquisition of Kony at the end of Q3, which we are integrating with Temenos Infinity to enhance our digital front office product as well as bring significant SaaS and cloud expertise, and increasing significantly our presence in the U.S. market.We have updated our 2019 guidance following the acquisition of Kony, which Takis will take you through shortly. I'm pleased with the continued momentum in the business and the growth we delivered so far in 2019.On Slide 8, I'd like to give you some insights on our sales performance in the quarter. Our end market continues to be driven by the significant digital, regulatory and cost pressures. In particular, the competitive environment for banks is evolving rapidly. With numerous neo-bank, challenging banks and new entrants offering a range of financial products through digital channels with customers expecting an Amazon-like experience. These new players are setting the benchmark for traditional banks and are struggling to compete with the legacy IT systems.We saw good sales momentum in Europe, Asia and the Americas in Q3. The U.S., in particular, had good momentum across a number of different product lines.Key wins in the quarter include a Tier 1 U.S. bank for fund administration, a Tier 1 Australian bank for Infinity and a number of signings with existing Tier 1 European clients as we continue to increase our penetration of our existing client base.In terms of products, Temenos T24 Transact continues to perform very well, and we expect continuous double-digit growth in this product going forward, based on the level of our pipeline development. We've also seen a significant acceleration in demand for Temenos Infinity, particularly on the back of the acquisition of Avoka and Kony, which significantly enhance the product functionality.We had a weak sales execution in the Middle East and Africa in the quarter. This should be put in perspective, though as a region delivered very strong growth in 2018 and so was against a strong competitor.Our Middle East and Africa sales force has grown significantly in the recent quarters. However, I think we need to strengthen our sales management in the regions to ensure better execution. We've put appropriate measures in place and expect to have it resolved by early 2020.On Slide 9, we had very strong performance in SaaS in Q3. Banks are becoming increasingly sophisticated around the understanding and use of the cloud, and we are very well positioned to capitalize on these with our cloud-native and cloud-agnostic products.Key SaaS signings in the quarter included a high-profile challenger bank entering into the Australian market, a U.K. challenger bank focusing on the SME space and a number of wins across different countries in Europe for both neo-banks as well as new entrants.The acquisition of Kony is also increasing our SaaS and cloud expertise, and we've already started to develop pipeline and seen some early customer successes in the first weeks of Q4.In term of SaaS metrics, ACV grew 164% year-on-year, SaaS revenues is up 93% and TCV increased by 183%. It is important to note that so far the growth in SaaS is incremental to our business.Moving to Slide 10. We had 21 implementation go-lives in Q3 2019, including multiple go-lives in Europe with ongoing Tier 1 and Tier 2 continuous renovation projects.We also had 7 neo-banks going live in the cloud in both Asia and Europe. Our implementations are very well supported by the global network of trained third-party consultants. There are now over 6,000 experienced third-party and Temenos consultants available to support our clients in the implementation projects. On Slide 11, I'd like to give you a quick overview of the Kony acquisition and integration. Temenos acquired Kony at the end of Q3 for an enterprise value of $559 million and an earn-out of $21 million. Kony is a leading vendor of digital banking software in the U.S., as you know, one of our key strategic markets.This acquisition significantly accelerates Temenos Infinity, our award-winning digital front office product, by combining Infinity with Kony's digital banking and multi-experienced development platform to create the most advanced digital banking product in the market.Kony has a global team of 1,500 people with strong digital and cloud expertise, which are key for banks in this -- investing in this area. Kony is also transformational for our presence in the U.S. as we are gaining additional scale, digital banking expertise and clients in that market specifically.Thomas Hogan, who was the Chairman and CEO of Kony, has joined Temenos as our President for North America and will be responsible for driving our U.S. strategy and growth across all our products going forward in the U.S. The integration of Kony and Temenos is progressing well both from a product and people perspective. We have a very detailed integration of roadmap in place, including combine the product over the next 18 months and cross-training of the sales teams. We've already started developing pipeline and are seeing some early success with clients.So on Slide 12, I'd like to give a quick overview of Kony. Kony was founded a decade ago and established itself as a global leader in digital banking and low-code development platforms. It has a very strong mobile development application capabilities in particular, which has been recognized by third-party industry and analysts including IDC and Forrester, who both rank Kony as a leader in each markets.Kony has a global client base of over 100 banks, with U.S Banks and credit unions making up around half of the client base. The majority of the U.S. client base are large financial institutions with assets of $10 billion and above.Kony is headquartered in Austin, Texas, and has around 230 employees in the U.S. with broad sales coverage in the market and a strong understanding of the digital requirement of U.S. financial institutions.Globally, Kony has 1,500 employees with a strong culture and understanding of digital and cloud solutions. It has a very similar R&D model to Temenos with large center of around 1,100 employees focused on digital development in Hyderabad, in India. And this will become the Temenos' R&D hub for digital -- for Temenos as a large group.The Kony business model is also highly compelling, with certain revenues contributing over 60% of its total revenue under a very high retention rate among its client base.You can find a summary of the transaction metrics in the appendix of this presentation.So with that, I will now hand over to Takis to take you through the financials for the quarter.
Thank you, Max. I will walk you through on Slide 14, the financial highlights of the quarter.We had good momentum in Europe, Asia and the Americas, driving total software licensing growth of 15% in Q3 with SaaS revenue growth particularly strong. We have now delivered total software licensing growth of 20% year-to-date, well above our sustainable annual progress of at least 15%.Our maintenance revenues grew 12% in the quarter and 12% year-to-date and total revenue grew 12% in the quarter and 17% year-to-date.EBIT grew 18% (sic) [ 16% ] in the quarter, and we delivered strong margin expansion of 127 basis points, reaching an EBIT margin of 34.5% in Q3. This drove EPS growth of 18% in Q3.We generated USD $50 million of operating cash in Q3 and have now generated US dollar $382 million of operating cash over the last 12 months.DSOs ended the quarter at 123 days, 9 of which are due to the acquisition of Kony, meaning the underlying DSOs were flat year-on-year at 114 days. Our leverage at quarter end was 3.1x net debt to EBITDA. And we collect, as you know, a significant portion of our cash in Q4, linked to our recurring maintenance revenue stream, which is billed and collected annually in advance and which will bring down our leverage to below 2.5x by the end of the year.Lastly, our services business continues to perform very well with our service margins reaching 12.2% in Q3, up 121 basis points as we continue to focus on project governance and are billing more of our services on a time and material basis.Moving to Slide 15. I will highlight some key figures for the quarter. As a reminder, with the adoption of IFRS 15 at the start of 2018, we are showing year-to-date rather than last 12-month comparisons as we did not restate our 2017 actuals under IFRS 15. Our total software licensing grew 15% in the quarter and 20% year-to-date at constant currency, reflecting the underlying momentum in the business and in our end markets. Our license growth continues to drive our maintenance, which grew 12% in constant currency and total revenue grew 12% in the quarter and 20% year-to-date also in constant currency.Our business model continues to drive operating leverage in the business, with our EBIT growing 16% in the quarter and 20% year-to-date. And our EBIT margin expanding 127 basis points in constant currency to reach 34.5% in the quarter. Moving to Slide 16. We show like-for-like revenues and costs, adjusting for the impact of M&A and FX. Our last acquisition before Kony was Avoka in December 2018, which is expected to contribute USD 50 million of revenue for the full year 2019. Kony closed at the end of Q3 and so far has a minimal impact on the quarter.In terms of FX, the weaker euro continue to be a headwind on revenues while our cost base benefited from a number of currencies weakening against the US dollar. Taking into account currency movements and hedging, FX has a minimal impact on EBIT in the quarter.Total software licensing delivered 8% like-for-like growth this quarter and maintenance grew 11%, with total like-for-like revenue growth of 17 -- of 7%. Total like-for-like cost increased only 1% in quarter, in particular, due to lower variable costs linked to the weak sales execution in the EMEA region. Like-for-like cost has increased 6% year-to-date, versus was 11% like-for-like revenue growth.On Slide 17, we look at below the line items. Net profit grew 20% in both Q3 and year-to-date. Our tax rate was Q3 -- our tax rate for Q3 was 12.1%, which was lower as we continue to benefit from deferred tax assets. We now expect our fiscal year 2019 tax rate to be between 14% and 15%, down from 15% to 16% previously. Our medium tax -- medium-term tax rate remains at 18% to 20%, which is a normalized run rate for the business.Finally, EPS grew 18% in the quarter to reach USD 0.90 and grew 19% year-to-date.On Slide 18, we look at DSOs. DSO ended the quarter at 123 days, 9 days are due to the acquisition of Kony, meaning the underlying DSOs ended the quarter flat at 114 days. We expect our DSOs to continue declining driven by our strong cash collection, more business with Tier 1 and Tier 2 banks and an increasing amount of services we bill as time and material. We plan to continue decreasing DSOs to reach our long-term target of less than 90 days.Turning to Slide 19. Our Q3 LTM cash conversion was 107%. This continues to be significantly above our target of converting 100% of IFRS EBITDA into operating cash.Moving to Slide 20. We show the key changes to group liquidity. We generated USD 50 million of operating cash in the quarter. The biggest movements in the quarter were driven by the acquisition of Kony, which we paid for mostly with debt. We ended the quarter with USD 77 million in cash on balance sheet. Our total borrowings at the end of the quarter were USD 1.2 billion and our net debt was USD 1.1 billion with our leverage at 3.1x. Given that Q3 is strongest -- is our strongest cash quarter, our leverage will be below 2.5x by year-end.Now on Slide 21, we have given a revised 2019 guidance, taking into account the impact of Kony. The guidance is on a non-IFRS basis and in constant currencies. You can find FX rates in the appendix.We are now guiding for full year total software licensing growth of 19.5% to 22.5% versus 17.5% to 22.5% previously. The change includes roughly 200 basis points of headwinds from FX, roughly 200 basis points of additional total software licenses from Kony and the remaining delta is due to the sales execution issues in EMEA, which we highlighted. For total revenue, we are guiding for growth of 18% to 20%, up from 16% to 19%. This change also included roughly 200 basis points headwind from FX, 200 basis points of additional licenses from Kony. The remaining delta is due to the sales execution in EMEA as well as the lower services revenues in Q3 due to the strength of our partner program.Finally, our EBIT guidance remains in the range of USD 310 million to USD 315 million, which implies a full year margin of around 31.9%. We expect Kony to reach group margin within 3 years, and we expect it to be EPS neutral in 2020 and accretive from 2021. Our organic EBIT margin expansion is expected to be 150 basis points, excluding the impact of Avoka and Kony.Finally, we expect conversion of over 100% of EBITDA into operating cash and as mentioned, a 2019 tax rate of 14% to 15%, revised down from 15% to 16% previously.On Slide 22, we reconfirm our sustainable annual growth targets. We expect to deliver compound growth at these rates sustainably in the long term beyond the usual 3- to 5-year period we would consider for medium-term targets. We have introduced a new lower DSO target of 90 days and an EBIT margin of 36% plus in the long term. We also expect our tax rate to move up to towards 20%.Our other targets remain unchanged as well, with total licenses expected to grow organically at 15% plus per annum, total revenue at 10% to 15% per annum and EPS at 15% plus per annum. We have also retained 2 3- to 5-year targets of expanding the EBIT margin at 100 to 150 basis points per annum and a tax rate of 18% to 20%.With that, I will hand back to Max.
Thank you, Takis. So to conclude on Slide 24, banks are under intense pressure from digital regulations, cost and open banking, and they view investment in the IT platform as essential to the businesses. We continue to invest in sales and marketing to support the 6 drivers of growth and to grow our market share across all of these.We had good sales momentum in Europe, Asia and the Americas this quarter with the U.S., in particular, performing well.We also have strong momentum in SaaS with multiple signings in Q3. And finally, the acquisition of Kony will enhance Temenos Infinity, strengthen our SaaS and cloud capabilities and significantly expand our presence in the U.S.With that, operator, I'd like to open the call for Q&A.
[Operator Instructions] The first question comes from Michael Foeth from Vontobel.
[Technical Difficulty]
Excuse me to interrupt Mr. Foeth, but your line is very disturbed. I have to disconnect you. Please reconnect again.The next question comes from Stacy Pollard from JPMorgan.
Just the weaker license and the issues in Middle East and Africa, what does the pipeline look like there? And maybe -- you say you can recover in 2020, so it sounds like the issues might be ongoing in Q4. Could you perhaps give us a little more clarity on that? I know you mentioned sales management, maybe just a little bit more detail there. Have you lost any deals from the pipeline there? And then broader spectrum, are you -- how does the pipeline look in other regions?
Stacy. Listen, regarding the execution issue that I mentioned in the Middle East and Africa, this is a region that the last couple of years have seen tremendous growth. And I think what we've seen in Q3 is the investment we've put in that region and the capabilities to deliver and close on the transaction have not been as efficient as expected. So for us, the planning is very simple. We need to strengthen the management team -- the sales management team to be able to cope with the growth that we've seen in the region. Now we started the process, so it's something that we knew we needed to do. So the process is ongoing. However, I will expect that to go through and to able to perform 100% as we've had in the past, will take probably until early 2020. Now having said that, the pipeline continues to be very strong in that region. We've not lost any deal. And as I said, it is a region that has performed very strong in the past. And somehow that success and the growth came to a point where we couldn't end the execution, and that's what we've seen. But pipeline is strong, there is no deals that have been lost and in fact, there are some of those deals that we expect to close, obviously, in Q4 already. Now globally, I will say across the regions, if you remove these sales execution, we continue to see a strong pipeline. I mentioned in -- during my part that Transact, which is the core of the business, the largest part continues to be growing sustainably and very strongly at more than double digit. And also, Infinity, which is this newer product on the digital front is experiencing extreme growth. And we are very, very positive on our ability to capture that market. And in addition to that, we see the cloud part being very, very positive. And I see -- what is very interesting on the cloud is our technology give us such an advantage compared to the more traditional vendors. That our leadership position when we compete for cloud deals is very much enhanced compared to them. So -- also seeing a very strong pipeline development for SaaS type of deals.
Maybe just one quick follow up. Can you give a comment around services and the weakness in the quarter there and how do you see that going forward? And then in terms of upcoming implementations, I guess, you continue to leverage third-party SIs more and more?
Yes. That's clearly the strategy on the -- that's why on the services side, we look at it as a margin business and not as a top line as such. So for us, really, is how can we continue to improve our margin in services? Obviously, we continue to improve the services we offer to our customer and the ability to deliver a very strong competition. But it's true that today, if you look at our partner network and how we've been able to grow and train our partner, this is working extremely well and since more and hence more of the deals are delivered by our partners. And Temenos plays a role of governance and support to the bank, to the customer, to ensure that there is a smooth transformation of the bank.
The next question comes from James Goodman from Barclays.
Just quickly -- just elaborating perhaps a little bit further just on the Middle East and Africa topic. I just wondered if you were able to be any more specific around sort of the countries or subregions there and whether it's a small number of deals. I don’t know if you were clear on that, or whether it's a sort of -- a broader sales execution there? Whether you'd really encompass any sort of macro commentary into Middle East at all or is it -- whether that's still strong and it’s purely execution? And then the other question is just on the sequential change in the OpEx, I think, Takis, you mentioned that there's been some lowering of the compensations for the provisions. Just looking for a little bit more details there, whether that's the key driver, whether there's anything else sequentially there with the OpEx down 10% or so?
James. So, listen, on the Middle East, it's clearly execution and I wanted to bring transparency and to be able to explain really what happened and -- but ultimately, if you look at it, it's a few deals. So, we are not talking of anything major here. It's just probably more towards the Africa region, where we've seen probably most of – a need to strengthen the situation, but it's really very specific risk. We've not seen any macro events. And as I said, if anything, it's really the growth that we've seen in that region, which has put pressure to the team on the delivery side. And so, it's now -- we've started a process to strengthen, to bring more sales management and not just people on the street delivering the [Foreign Language]. That's the action that is ongoing set by the -- by early 2020. The -- we should be back on track with the pipeline developing very nicely.
James. You're correct. A large -- the largest part of that was from lower variable accruals, definitely driving this lower cost. Also, as you may remember, we always have said, we have a tight grip on this, especially on G&A. And this, we have maintained. So there are also some savings there as we have now fully integrated Avoka, but the largest part was from the variable.
The next question comes from Hannes Leitner from UBS.
I got a couple of questions concerning the updated guidance around acquisitions. So you mentioned 200 basis points tailwind from the Kony acquisition. Could you identify because there's $17 million calculated 200 basis points. You mentioned that some of it was already booked in Q3, so how should we think about the trajectory going forward as you guide for roughly $115 million run rate next year? That's the first question.
Hi Hannes. I'll take that one. As we said, there is very limited contribution from Kony in Q3. For Q4, we would say, the 200 basis points, that's around $8 million to $9 million of total software licensing and maybe around $20 million of total revenue, so the delta is obviously services. Now keep in mind that Kony has a fiscal year-end in March. So there is the usual seasonality, i.e., the calendar Q1 quarter is the strong one. So we still feel very confident with $115 million of revenues we have guided for 2020 for Kony.
But isn't that a subscription business? Or we would have expected that there is less seasonality in the booking of subscription?
Well, it is. But we don't have -- we don't give the splitting of what is SaaS. So that's definitely included in those $8 million. And there is some still new deals to be won, and it's, as we have mentioned, that the Kony acquisition, called there is very strong growth in this business.
Okay. And then the last one is on, so if there was really minimal contribution by Kony that would mean that the implied difference on the organic growth and constant currency would be coming from Avoka. I have year-to-date contribution of only $30 million so far. You guided to a $50 million of business at the time of the acquisition of Avoka, so that would mean also for a very strong finish and that would result in a similar question around SaaS and software license split.
Okay. On Avoka, I don't think we have given you the quarterly split and contribution from -- for Avoka. Definitely, with Avoka having, let's say, the normal fiscal year-end, their strongest quarter is Q4. So this is incorporated, but we haven't changed the $50 million we see for the full year.
And then, if I may, the last quick follow-up on the accounting. You had a deferred income also year-to-date of roughly $40 million versus $25 million. So could you help us to understand how much Kony added in Q3 to that?
Okay. We'll have to come back on that. Most of the items we saw in terms of balance sheet changes, obviously, we had limited impact on the P&L. But obviously on the balance sheet, there are most of the changes we have seen from a quarterly and yearly change, that was all or mostly driven by Kony.
The question comes from Adam Wood from Morgan Stanley.
Can I just maybe start off on the cost base increase? If we look through last few quarters, the rate of cost-base growth has been decelerating, kind of generally. And I'm just wondering philosophically how you think about that against top line growth? We now put a 35% give-or-take margin for Q3. Unless businesses in software slow, it's generally difficult for companies to push margins dramatically higher. Could you just talk a little bit about how comfortable you feel driving the top line growth that you want with the slowing cost base that we see in the business? Secondly, could you maybe just help us -- you've highlighted the very strong SaaS performance overall. Could you just help us with what that would be organically, specifically SaaS in the quarter? And then just again to the environment, generally, a lot of the IT services companies have talked about a weaker environment for financial services spend, I guess we all understand that you are exposed to like different markets to the IT services companies purely and the strategic deals that you have might not be impacted. But with more of the business coming from add-on deals into the base, could you just talk a little bit about what you see as the risks from IT services companies flagging weaker financial services spend overall?
Okay, Adam. Let me take the last one. And I will leave that the first 2 for -- to Takis. On the environment, clearly, we monitor the environment on the macros on a continuous basis. So far, we have not seen an impact of the macro element. So, so far, the discussion we've got with our customer is that what we do is really, highly strategic, mission-critical. We ultimately support to improve the profitability and the performance of those banks. And so we've not seen any change in conversion, in pipeline, except, as I mentioned very specifically for the Middle East, but that it's really not related to macro. But obviously, we are very conscious and we track the pipeline, the conversion rates. We tried to assess if there is any change. But so far, we have not seen any impact from any worsening environment from our customers. But we'll continue monitor that and make sure that we are tracking very closely.
On the cost side, yes, correct, we have been, like-for-like, up 1% on revenues of plus 7%. There is still quite some investment we've planned for Q4. So we think a double-digit cost increase for the full year is probably what we're going to end up with. Obviously, there is quite a bit of discretionary spending. We're not saving on R&D. We're not saving on sales and marketing, so that was largely G&A where we reaped some of the benefits from the integration of Avoka. On the SaaS organic growth, we used to give guidance and this is still valid to say we expect the SaaS revenue to grow 30% to 35%. So you can assume that the organic growth in Q3 was also in that ballpark.
The next question comes from Chandra Sriraman from MainFirst.
Just a couple of questions from my side. So I noticed that maintenance growth has dramatically slowed, but still strong in double digits. But just wondering, if there is anything to it or is just more timing related? And my second question is DSOs of the underlying businesses have also increased after declining for a very long time. Is there anything to read into this or is just, again, one-off?
Okay. So on the DSOs, first, we are at 114 days. And if you look at the cash flow statement, obviously, with licenses not growing as strongly as in the previous quarter, there was also some headwind on the cash side. So this is just basically momentary view, I would not read anything into that. We expect this to revert, basically in Q4. Now on maintenance revenue, with 12% on constant-currency basis, again here, I wouldn't read too much into one particular quarter. We see that growing 12%, 13%, 14% is slightly slower than total software licenses. So no change in terms of guidance for the maintenance revenue line.
Perfect. And maybe a quick one on the SaaS business. I thought it's supposed to dip a bit in this quarter due to some setting of some of your products in Australia. Has that happened? Or is it pushed to next quarter, just for modeling purposes?
No, that has really happened. As we had indicated, what surprised us on the positive was, as Max mentioned, the strong underlying business in SaaS. So that was basically more than offsetting what we expected to lose in terms of revenues from that.
The next question comes from Charles Brennan from Crédit Suisse.
Can we just get back to the Middle East? I'm not entirely sure what the reason for the weakness is. I think the way that you described was a successful team struggling to manage growth that they've delivered. But if I look at the numbers, it looks like software licensing was down about 30% in the period, that makes it feel a little bit more significant than that. Have you lost some salespeople or there have been changes of management that have driven that underperformance? And inevitably, I think investors are going to be focused on the recovery of that software licensing in Q4. I'm not quick enough to calculate what's implied in your Q4 guidance, but can you just help us with your expectations for software licensing growth in Q4?
Charles, listen, regarding it -- to give more color on the Middle East and Africa, as I said, this is reason that the last couple of years, I've seen very, very strong growth. And it's true that when you look at it just specifically on 2019, the performance is not where I would like it to be. Now if we look it over the period of 2 years, this is still bringing significant growth to the company. What has happened is the fact that we've been able to grow that business so much, we've invested a lot, and the sales force has grown around 30% in that territory and probably, as I mentioned, we have not sufficient sales management to be able to qualify, to be able to close the deals that the people were working on. So it's really about sales execution in that region. There's nothing more than that. We are already working on that and, as I said, by early 2020, this will be resolved. But don't look at the performance within the first 9 months. It's clearly, if you look at it over 2 to 3 years, you will see how that's part of the reward that's contributed to the growth. On the guidance question, I'll leave Takis to respond to this one.
Yes. Charlie, if you look at the, let's take, like-for-like, total software license growth, which was 14% year-to-date and if you basically look at our -- the implied Q4 guidance, that's clearly in the double-digit space. If we deliver the midpoint, you probably will get towards the range we usually guide for the year. So clearly double-digit, we expect the clear improvement of the like-for-like total software license growth for Q4.
And just a quick follow-up on clarification. Did you say that Transact grew double-digits during the periods than you had very strong growth from Infinity Cloud? Given that Transact's the biggest chunk of the revenues, that implies considerable weakness elsewhere. Have I got that right or have I misinterpreted the comment on Transact?
No, you got it right, in fact and it's something that in 2018, one of -- in fact 2017, 2018, one of our -- probably our second largest business line, which is the fund accounting, had a very, very strong performance. And we knew that we were facing with a comparative on the fund side. So this was not if you want a surprise to us. We knew that we were lapping on the fund side a very high comparative. I wanted to mention Transact, because clearly for me, this is [not] the largest contribution to growth. I wanted to make sure that you understand that this continues to be growing significantly and, as you know, at double digit, as I said. Then we've got this new product line of Infinity, which is very exciting, which is now strengthened with the acquisition of Avoka and Kony that we've done. And finally, U.S. Multifonds, which I just mentioned. And then if you look at our drivers of growth, you have 2 more products which is wealth and payment. And those are smaller -- very small contributor to the group, so I would not spend too much time. So yes, the one that we knew though was facing a large comparative was on the fund side
The next question comes from John King from Bank of America.
Just one question, actually. Just in relation, obviously, there has been a long time since, I guess Temenos has adjusted -- tweaked down the guidance based on an execution issue. It's been some time anyway, I think. And I'm just wondering why you would say that? Has there been anything changed to the kind of visibility of the business? I mean, I know, last quarter, you were talking about not relying on large deals, but do you feel as confident as you might have done 12 months ago, let's say if we look into the next 12 months, the deals are there, the deals are closing pretty predictably and this is a very isolated issue. And it maybe just gives, I know, if you've already addressed a little bit Max, but maybe you can look at it through that prism?
Yes. No, listen, it's really taking a -- it's going to more conservative view on what we can deliver in Q4 in the Middle East and Africa, that's really about it. And reflecting of what happened in Q3, which was disappointing in the specific region. And taking a more prudent view of what that team will deliver in Q4, now it's very tactical, it's very -- we actually understand where has been the need for improvement is. There's nothing more than that. Now across-the-board, as I said, the Transact business continues to be growing strongly. The Infinity is clearly the one where we see the fastest growth. The -- from a territory point of view, we see the U.S. clearly being very strong and with now the enhanced scale with Kony, we see a very small opportunity. And I would say Digital is really top of mind in, particularly in the U.S. Customers, banks today are in the need to offer a personalized customer experiences. And specifically, in the U.S., if you are to -- if you look the largest banks, they've built very competitive offerings themselves. The largest bank, the top 5 banks. And you'll get the full market that need to be able to offer similar type of experiences to the customers. And they cannot be themselves and they go for packages and this is why we see, specifically in the U.S., a clear window of opportunity for the next 2 to 3 years. And that's why Kony is sort of strategic -- to that opportunity. So that's -- so overall, as I said, the conversion and the execution remains strong, except in that very specific situation.
And then finally, you've done the Kony deal. Does that signal that, maybe your conviction is actually, I mean, I know not maybe for all of the applications, but we may see a more concerted shift towards us and cloud in the market. I mean is that something that you are starting to say that could play out more meaningfully than perhaps it has done maybe, and I guess, with that change of view is to what you could deliver in terms of on-premise licensing growth? I guess are you going to see a faster shift towards SaaS essentially?
SaaS is exciting as an opportunity and the ability that -- the cost benefit of the infrastructure, if that provides to -- to banks, we are quoting that cloud can bring the infrastructure cost up to 10x, because really use the environment for on-demand, really with what you need and when you are a cloud-native vendor like Temenos, you can really optimize and get the benefit from that. So this clearly is a feeling to bank that probably be -- probably we're not able and we're not willing to take more traditional on-premise solutions. At the same time, there is a perception that to do on the cloud through more, let's say, flexible environment, faster ways to implement, there is also a view that the timing and the risk aversion for some banks is seen lower on the cloud. And finally, the level of resilience, performance and the security level as well has been significantly enhanced over the years. So all of those attributes are making lots of progress, and we see more and more banks. And even in some territories, for instance, in Q3, we signed a SaaS deal in the country in Europe where we've not been able to penetrate for the last 25 years. And through our Cloud and SaaS, we were able to bring this off. So to summarize, I continue to believe that SaaS will remain incremental, that there is still -- and there is clearly an increased demand for those type of solutions and deployment. And that the market for traditional on-premise is still there because you still have many banks that are not yet ready to move to the SaaS. And so far, I will say, at this stage, I continue to see the SaaS has been complement increment to the business.
The next question comes from Alex Tout from Deutsche Bank.
Am I right in thinking that the organic cut to revenue in FY '19 is about $10 million? And if so, are you assuming any net catch up in license sales in the fourth quarter? I think the shortfall versus consensus, this quarter was about $7.5 million and you're only guiding down by $10 million for the year of a midpoint. So you are assuming some catch-up, some resolution of those issues in the fourth quarter? And then secondly, could you just update us on Commerzbank in the U.S.? Is the go-live still on track for the end of this year? And also perhaps, if you could update on the other major rollouts that are in progress, notably Nordea?
Alex. Okay. On the guidance, yes, this is about correct. The underlying, let's say, reduction or revision related to Temenos or the EMEA situation is about $10 million. So that's about correct. What was the -- the other question?
Yes. So is it $10 million of write down?
Yes. Okay.
You've missed by about $7 million in the quarter, so are you expecting any net catch-up in licenses in the fourth quarter?
No. As Max pointed out, and I think the consensus we put on our website is about -- around a $6 million miss. So that's definitely, as Max explained, not something we expect to catch up. We remain prudent in our assessment what the Middle East and Africa region can deliver by the end of the year. So overall, I think, the $10 million you alluded to, it's about the right number.
And on the large deals, on the progress of implementation, I have to say that if you look at Commerz, if you look at Nordea, if you look at Openbank, those are progressing extremely well. It's exciting times because for all of our projects we are getting in the next, let's say, 6 to 12 months, a lot of those will go -- will start to go-live and I think [going around] I’m hopefully that we'll be able to make some very interesting announcement and to have them also to communicate more and more. So all those projects are on track, progressing very well. In fact, we are doing more SaaS with them. And remember, our strategy with largest banks, it is one of increasing our wallet share with those and that's really our continuous goal if -- how can we continuously renovate the banks. And that is applying as well to those funds. And so I’m very pleased with relationship and the progress we are making on the go-live base.
The last question comes from Paul Kratz from Jefferies.
Just kind of looking at your numbers and stripping out is the, I guess the declines in the Middle East and Africa, it suggests, and when take out your acquisitions you've done this year that your growth in all the other regions is basically in the single digit. I mean could you maybe explain or maybe clarify as to why you've seen such a slowdown in those regions ex-acquisition?
Paul. Okay. So the one thing I can say is the calculation is not quite right. So we have very strong double-digit growth in most of the regions. Yes, Middle East and Africa, we highlighted, but clearly, especially the Americas and also Asia Pacific are very strongly in the double-digit range. And if you do the math in Europe, it's still growing quite nicely. But as you would expect from the largest region, the growth is a bit lower than what we have for the Americas and Asia Pacific. So the culprit both on Q3, but also year-to-date is definitely on Middle East and Africa.
We lost connection with the questioner. Ladies and gentlemen, that was the last question. I would like now to turn the conference back over to Max Chuard, for any closing remarks. Thank you.
Thank you very much for attending the call, and looking forward to talking to you and seeing you very shortly. Thank you.
Thank you.
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