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Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to Temenos' Q4 2017 Results Call. [Operator Instructions] I must advise you that this conference is being recorded today, 13th of February 2018. I would now like to hand the conference over to your first speaker today, David Arnott. Please go ahead, sir.
Thank you very much. Good afternoon, everybody, and thank you for taking the time to join today's call. I hope you've all been able to access the results presentation, which we put up on our website, and we'll be using that as the basis for this call. I'm going to start with some comments on our fourth quarter 2017 performance and then, in usual format, will hand over to Max to update you on the financials. And then I'll wrap up with some concluding remarks.So let me start now on Slide 7 of the presentation. The fourth quarter has been another outstanding performance for Temenos, as the growth in our business accelerates and our end market continues to expand. We've seen that banks are very much alive to both the opportunity and the threat they face with open banking. And when layered on top of the digital and regulatory pressures that we've been talking about for the last few quarters, banks have really no option now but to invest in upgrading their IT platform. And this became clearer even again in the fourth quarter.And what we see is that more and more banks are understanding the benefit of buying best-in-breed packaged software to drive their digitalization and open banking strategies. I think the quote from McKinsey on the bottom of this slide sums it up very nicely. Banks simply can't afford to avoid the issue any longer.These trends and our strong execution drove total software licensing growth of 29% in the fourth quarter and total revenue growth of 22%. We often talk, as you know, about the leverage we have in our business model, and this again was reflected in our EBIT growth of 17% in the fourth quarter.Aside from the numbers, my key takeaway from the quarter is that Tier 1 -- is the Tier 1 banks that we've signed. We've signed multiple Tier 1 deals, and I'll talk to some of these in a second on a later slide. But the message is clear, our accretive wins with the world's largest banks demonstrate that we're the vendor of choice in this space. And the more we win the deals and take market share, the more we'll continue to pull further ahead of the competition.Turning now to Slide 8. I want to put the performance of Q4 into context. We've now grown our total software licensing at a CAGR of over 20% for each of the last 4 years. Total revenue at 12% and EBIT at 19%. This demonstrates not only the sustained growth in our end market, but more importantly, the ability of Temenos to consistently execute on the opportunity across all aspects of the business. This means not simply outselling the competition, but importantly, we're ensuring our implementations are well-managed and our clients go live on time and on budget. It is the client references that are absolutely critical for driving new sales for such mission-critical applications. We're going to talk about these trends in more detail tomorrow at our Capital Markets Day, for those of you able to attend.Moving to Slide 9 now. I'll give you an overview of our sales execution for the quarter. The performance in both the fourth quarter and, in fact, the full year 2017 has been broad-based, and we delivered strong double-digit growth across all geographies for the full year. As I mentioned earlier, the most notable point in this quarter is the contribution from Tier 1 and Tier 2 banks. Software licensing sales to Tier 1 and Tier 2 banks contributed 71% of the mix in the fourth quarter, driven by a number of new Tier 1 signings and 59% of the mix for the full year, as we continue with our track record of winning all the largest deals in our markets.We continued to see robust growth across both our installed base and with new clients, with 19 new customer wins overall in the fourth quarter. For the full year, competitive and new deals contributed 41% of software licensing, which is in line with previous years and the trend we expect to see going forward as well.And lastly, we've been consistently investing in sales and marketing over the last couple of years, and we're going to continue to do so; in fact, at an accelerating rate to going forward as we see a significant market opportunity ahead of us.On Slide 10 now. I'd like to focus for a couple of minutes on a few of the deals that we signed in the fourth quarter. And what's striking here is the range of banks, the deal structures, the underlying strategy, the new objectives across these deals, and they all reached, for different reasons, the same conclusion: that they could best achieve their objectives by partnering with Temenos.Openbank is a digital bank of Santander, which selected T24 for their core banking system and got very significant growth plans and needed a solution that could enable them to operate as a bank at the forefront of digitalization and to cope with significant scaling of the business given their public growth plans.KBC has been a longstanding client of Temenos, in particular in Ireland. They've built a good relationship, and they've continued with the progressive renovation now of their international operations and are working with Temenos to roll out our software across multiple other geographies. We're delighted that KBC are going to be joining us at our Capital Markets Day tomorrow to give you some more cover -- more color on their plans.Banco Itaú, the largest bank in Latin America, selected Temenos WealthSuite for their international private banking operations, really speaking to the strength of our software and operating across countries and the ability to implement and deliver in the public cloud.And lastly, we signed a U.S. Tier 1 bank in the fourth quarter, who unfortunately we're not allowed to name, but it's a very, very prestigious brand, for their global cash management platform. This was a critical decision for the institution and a significant step forward for Temenos as we continue to focus on expanding into the key U.S. market.On Slide 11 now. A little bit of flavor on our implementation performance for 2017. This is crucial for the business. As I've said earlier, our client references are absolutely key in giving us competitive advantage when pitching for new business. In 2017, we had 104 clients going live on our software for the first time, which is equal to 1 every 3.5 days. If you include all implementations, including clients taking modules in upgrading their software, the number moves to a client going live every 1.5 days. And this demonstrates the cadence we've got in our implementation, the strength of our services business, the methodologies and the robustness of the partner program. We work very closely with our partners and are putting a lot of focus on increasing the training available and the support we provide to grow the broader Temenos talent pool. All our key projects are progressing well, and partners are involved in a majority of the implementations we work on. I'm confident that our implementation track record in 2017 is going to support our sales effort into 2018.On Slide 12 now. I would like to look at our competitive positioning. We've retained our position as the only vendor to top both of the Forrester pyramids, the new-name business and the extended business, by which we mean sales to existing customers as well as continuing to rank first in the IBS League Table. These league tables measure performance based on the number of deals signed. And whilst we've signed significantly more deals than the closest competitors, what the league tables don't capture is our wallet share. Given the number of large deals [ we've side ] we've signed with Tier 1 and Tier 2 banks, we know that on a deal value basis, we're even further ahead of our competition. And again, coupled with the references, these are 2 absolutely vital data points as banks make their evaluation decisions. And we'll talk about this further tomorrow at our Capital Markets Day.On Slide 13 now, I'd like to look forward a little bit into 2018 and what we expect for the year ahead. Whilst digital and regulatory pressures continue to be the underlying drivers of banks' spend on IT, the new dynamic of open banking is clearly creating new demand for Temenos products as banks plan and execute new IT strategies to mitigate the risks and plan for the opportunity that this change creates. And it's clear that IT spend for banks is not discretionary. It's winning the competition for CapEx inside banks at the most senior levels, as they've got IT renovation at the heart of their strategic plans for the future. For Temenos, our installed base is going to continue to be a key driver underpinning our growth as we felt the clients would understand and have benefited from this whole Temenos value proposition. As the league tables show, we're the market leader in our vertical, and our Tier 1 and Tier 2 references have created significant barrier to entry for the competition, enabling us to continue to pull ahead. Very important point, we've had a strong start to the first quarter of 2018, with the highest ever revenue visibility we've had at the start of the year, driven by our pipeline growth and committed spend from existing clients. So with that, I'm going to hand you up to Max to update you on the financials.
Thank you, David. Hi, everyone. Starting with Slide 15, I'd like to run you through our performance in 2017 versus guidance for that year. To remind you, we increased our guidance twice in 2017. I'm very pleased to report that we've achieved the top end of our revised 2017 guidance. We grew total software licensing at 22% versus a revised guidance range of 20% to 22.5%. And total revenues grew by 15%, exceeding the revised guidance range of 13% to 14.5% growth.Finally, we exceeded the top end of our EBIT guidance, achieving an EBIT of $223.5 million for the full year as we continued to drive revenue growth and expense margin simultaneously. This is an excellent set of results, in particular given the strong growth we saw in '15 and in '16 as well.On Slide 16 now. I would like to highlight some of the most important numbers for the quarter and the full year. I will focus on the constant currency growth rates. The key figure is our total software licensing, which has grown 25% in the quarter and 22% for the full year 2017, reflecting our consistently strong execution and leadership position in our market. The Q4 performance reflects as well the acceleration we've seen during the year. The contribution of Tier 1 and Tier 2 clients to our growth in 2017 has been particularly impressive with the strength of our references, enabling us to win all the large deals in the year.Total revenue grew 18% in the quarter and 15% for the full year, driven by the strong license growth as well as sustained growth in maintenance at 10% for 2017. We grew our EBIT by 15% in the quarter and 17% for the full year, reaching an EBIT margin of 30.3% for 2017, an expansion of 98 basis points. Finally, the services margin expanded by 57 basis points to 9.7% as we continued to improve the profitability of the services line by working closely with partners and focusing on the governance of our projects.On Slide 17, we show like-for-like revenues and costs, i.e., removing the impact of M&A and FX. As a reminder, we closed the acquisition of Rubik in Australia in Q2 and so have had 2 full quarters of contribution in Q3 and Q4. We continued to benefit from the weakening of the dollar against major currencies. However, FX gave us a small tailwind of $1.5 million on the EBIT in the quarter.Total revenue up 14% like-for-like in the quarter and 12% like-for-like for the full year. This includes total software licensing growth of 17% in Q4, and we expect our license growth to continue accelerating in 2018.Total like-for-like cost increased 10% in the quarter and 13% in the full year as we continue our strategy of investing in sales and marketing and product to drive our future growth.On Slide 18, we've had strong growth in the net profit and achieved an EPS of $2.45 per share for the full year, growing 18% on last year through our efficient management of below the line. Our tax rate remained below our normalized target of 17% to 18%, as we continue to benefit from some utilization of tax assets.Moving to Slide 19. Our cash conversion for the full year was at 114%, well above our target of 100% of IFRS EBITDA. We generated operating cash of $300 million for the full year, an increase of 16% year-on-year. DSOs ended the quarter at 119 days, a decrease of 8 days year-on-year.Going forward, we expect DSOs to continue to decline at around 5 to 10 days per year, and we're expecting DSOs to reach 100 days in the medium term.On Slide 20, we highlight the key changes to the group liquidity over 2017. In the course of 2017, we generated $300 million of operating cash, paid out $40 million of dividend and bought back a total of $190 million of shares. This was a combination of finishing off the buyback launched in Q4 2016 and completing the buyback launched in Q4 2017. We also used $50 million for the acquisition of Rubik. We announced a dividend of CHF 0.65 per share for 2017, an increase of 18% of last year. The dividend will be paid in May after our AGM and subject, obviously, to shareholder approval. We ended the year with a net debt of $272 million, equal to a leverage of 1x EBITDA. Our leverage was at around 1.5x post the acquisition of Rubik in May, and we have since decreased our leverage to 1x through our strong and predictable cash flow generation. [ It means that we are starting ] 2018 in a very healthy financial position with a strong balance sheet.Turning to Slide 21. I'd like to spend a couple of minutes on the impact of IFRS 15. We adapted IFRS 15 on the 1st of January 2018, and we'll transition using the modified retrospective methodology. This means that we'll not be restating our 2017 financial, but instead we will provide our 2018 financial under both the old standards and the new IFRS 15 standards. Our full year 2018 guidance will only be under the old standards, which make it easier to compare to prior years. From 2019 onwards, we will provide financial results and guidance only under the new IFRS 15 standards. The most significant change is for our subscription contract. Instead of the revenue being recognized prorated over the life of the contract, the revenue will be split between an upfront license payment and an ongoing maintenance payment. This will have a net impact of USD 5 million being reallocated out of our total software licensing into maintenance. We are not expecting IFRS 15 to have any material impact on total revenues or EBIT. We have provided a detailed presentation and explanatory video on IFRS 15 on our Investor Relations website, and I would encourage you to look at these for further information.Moving to Slide 23. We are starting 2018 with our highest ever product revenue visibility. We have strong visibility on around 85% of our product revenues for 2018, by which we mean our maintenance, SaaS and subscription, and software licensing. This slide shows a breakdown on how we look at our visibility. Our recurring revenues of maintenance and SaaS and subscription are paid annually in advance, and therefore locked in for the year. For software licensing, we know how much relicensing we will have in the year, as well as the level of committed spend from Tier 1 and Tier 2 banks undergoing progressive renovation. Lastly, we have a very good visibility on sales to our existing customers as we've assessed the historical behavior in the context of our pipeline today. This very high level of revenue visibility means that we are starting 2018 in a very strong position.Turning to Slide 24. We have seen a strong acceleration in the business over the course of 2017. This is evident in the acceleration in our pipeline over the last 4 years, driven by growth in volumes of deals we are tracking across client tiers, segments and geographies. We expect the acceleration we've seen in 2017 to continue in '18 and this give us confidence in our ability to continue delivering strong growth in both 2018 and the medium term.On Slide 25, we've given our 2018 non-IFRS guidance. Please note that the guidance is based on the previous accounting standard, IAS 18. The guidance is in constant currencies, and you can find the FX rates and restated 2017 P&L in the appendix. We are guiding for full year total software licensing growth of 13.5% to 18.5% and total revenues growth of 10% to 13%. Our EBIT guidance is in the range of $255 million to $260 million, which implies a full year margin of around 31%. This equals to 100 basis point expansion on 2017 in constant currencies. We expect our tax rate in 2018 between 15% to 16%. And finally, we expect conversion of over 100% of EBITDA into operating cash.I'm very pleased with the way the year started and expect to continue to see license acceleration in Q1 2018. Although we do not guide on a quarterly basis, as an indication, I expect our Q1 2018 to grow above our full year guidance range given the strong start we've had to the year.Moving to Slide 26. I would note that our guidance for 2018 does not include contributions from new large transformational deals due to the difficulty in timing those deals as in previous years. We've benefited well from the deals like these every year since 2015, which lead -- led us to upgrade our guidance each year to reflect the contribution as well as the strong market conditions. Whilst we have an active pipeline of these large transformational deals, we continue to exclude them from our guidance due to the difficulty in timing the sales process.Finally, on Slide 27, we show our updated medium-term targets, which we've revised given the strong growth in 2017, and we will discuss those in more details tomorrow during the Capital Markets Day. We expect total software licensing to grow at a CAGR of at least 15% and total revenue to grow at a CAGR of between 10% to 15%. We continue to expect EBIT margin improvement of between 100 to 150 basis points per year and EPS to grow at least by 15% on a CAGR basis. For DSOs, we continue to target 5 to 10 days' reduction per year to reach 100 days in the medium term, and we expect our nominal tax rate to be at 17% to 18%.And finally, we continue to expect to convert over 100% of our EBITDA into operating cash flow.So with that, I'd like to hand it back to David for the conclusion.
Thanks, Max. Slide 29, just before we wrap up, I've mentioned this a couple of times, but I'll plug it one more time. Just to remind you, we're hosting our Capital Markets Day in London tomorrow at the stock exchange, and I look forward to seeing a lot of you there. If you're not going to be able to attend in person, it'd be great if you could take the time to join the live webcast, which is accessible via our website. It's going to be a great event, interesting agenda, and we're really pleased, as I've said, to have KBC talking about their progressive renovation with Temenos, their journey so far with us in the geographies in there and their plans going forward. So good session. Great if you could make it. On Slide 30, to wrap up. We had an outstanding performance in 2017 on the back of a very strong 2016. And importantly, as we went through 2017, the year got stronger and stronger. And as Max and I have both said, we've had a great start to 2018.Digital and regulatory pressures are clearly front of mind for our customers, and this continues to drive strategic decision-making and market growth, and therefore growth for Temenos. In this context, we're executing very well across all segments, tiers and geographies, and we've had a very strong growth, in particular in the Tier 1 and Tier 2 space.We're going to continue to invest across the business, most importantly, of course, in sales and product, to ensure that we're well-positioned to capture the market opportunity and ensure that our leadership position continues and accelerates in 2018. And given the strength of our pipeline and the level of visibility that we have today, I'm very excited about our prospects for the coming year and look forward to updating you as we go through the next 4 quarters.So with that, operator, I'd like to open up the call for a Q&A, please.
[Operator Instructions] And your first question comes from the line of Josh Levin from Citi.
I have 2 questions. First, as you talk to bank executives in the U.S., does the lower corporate tax rate, the recent change in the tax code, is that impacting their decision on whether or not to spend on major IT projects?
Josh, okay, it sounds like you've got 2, but I'll take that one for now and then you can jump in with the second. Listen, the structural issue in U.S. banking is so fundamental to their almost existential business over the medium term. The tax rate, I suppose, technically makes things easier for them to a certain extent, but it doesn't change the fundamental premise that the competition has changed and brought in all sorts of new entrants. The community banks and credit union model is really struggling against these nimble technical -- technology-based companies coming in. The bigger banks are struggling with the digital disruptors coming in. And everyone, of course, is passing on their more modern costs and their more agile platforms to take market share, drive down pricing. Amidst this long-term specter of being marginalized by payments vendors, startups, fintechs, neobanks and not being able to compete long term because they're simply too clunky, cost base is too high, too long to take products to market, not quick enough to make decisions for customers, is the #1 strategic priority, closely followed by the regulatory environment, which I think is the one difference in the U.S. So this is -- the tax rate is a discussion clearly, but it definitely doesn't drive the fundamental premise for our U.S. business. And as I've said, our U.S. pipeline continues to grow strongly.
Okay. On a separate note, it looks like your 2018 EBIT margin guidance implies a 70 to 80 basis point increase versus 2017, but your medium-term guidance is for 100 to 150 basis points of improvement each year. So how do we reconcile those 2?
Yes. I think you need to look at it on a constant-currencies basis, and we've -- that was my point when I talked about in the guidance. Clearly, on a constant-currency basis, we're improving by almost [ 5 ] basis points. Now the 100 to 160 basis points is a guidance that we -- target that we gave. And if you look at the last 4 years, we achieved around 130 basis points improvement per year. Clearly, in '17, we've been growing much -- we've been growing faster than the -- our medium-term plan some and [ since ] this is reflected on the margin. But I think you need to look at it on a constant-currency basis, but I'm very pleased myself with the improvement that we see on the margins, the level of growth that we're achieving, which we continue to invest a lot in the business to capture the opportunity. So very pleased with the improvement on our margin.
Your next question is from Chandra Sriraman from MainFirst.
Congrats on another very good quarter and a good start to 2018. Just a couple of questions from my side. So you have quite a few of these progressive renovation deals ongoing now. Can you give us a sense of how successful have you been in terms of extending the scope of these implementations? I think that is quite critical in terms of getting greater confidence on the duration of many of these implementations, so that would be very helpful. And also, I noticed that the overall revenue or licensing contributions from the Americas jumped up in Q4. Was it broad-based or just the one deal that you mentioned?
Chandra, good questions. Okay. Clearly, they're both for me. So progressive renovation, there's no real pattern. Some banks start and do something as a tactical initiative, do nothing for 3 or 4 years, and when they come to make a more strategic decision, they dig around and they find that they've had good Temenos experiences elsewhere. But it's never sort of been a stated plan from the beginning. Others rush to do a lot all in one go because they have a greater sense of urgency, and I'll put people like Bank of Ireland and Nordea into that camp. Others start with a more measured view of geography, disclose a specific problem or line of business like wealth management typically, might be going through growth pains in emerging markets or assets have maybe declined and they need a lower cost base in the European context. And they approach that, as we've said many times, in a digestible format, where they test the relationship with Temenos before they really jump in. The only -- and they move at different speeds and in different ways, frankly. The only common theme that is emerging over the last few years is that those initial relationships are difficult to get going. It's a big leap of faith for a bank to trust a third-party vendor for something so mission-critical. But if you are transparent upfront, if the software does what it says, if you go live on time and on budget, the value proposition is there. It does make sense. They do deliver the business case. And therefore the vast majority, if not all -- I can't actually think of one off the top of my head -- of our progressive renovation journeys has stopped post the initial relationship. So -- but they -- they're all working very well.
And Chandra, maybe just to add on, I'm going to discuss EBITDA tomorrow during the Capital Markets Day. So I'm not going to say too much tonight. But if you look at the last 3 years, the amount of spend that we've been able to increase within our existing large customer and to spend the wallet within them through progressive renovation has increased by 30% per year. So clearly, we've been able to improve and to grow within our existing customer base going -- undergoing a progressive renovation. So I think tomorrow we'll discuss quite a bit on that. KBC as well, we'll discuss about their own expense for the progressive renovation. I think this is very exciting because it give us a level of visibility that we did not enjoy in the past.
Just to finish the progressive renovation point very quickly, clearly, the second part of your question, we're addressing a very small percentage of the potential spend in these banks. As Tier 3, Tier 4, universal bank, we might be addressing a larger part upfront because they're small enough to do more core replacement in one go. By the time you get to a Tier 1 or Tier 2 bank, really, you're looking at, maybe you've replaced 4% of their spend. It will be a line of business or a geography, even a big ambitious one will be a very small subset of where we could be going. So there's no real constraint, and that's why the 2 KPIs that we track are getting a foot in the door of new Tier 1 and Tier 2 banks and not letting a competitor win any of those deals, which we're not. And as you say, making sure that we put our best foot forward, deliver on time, make heroes of the people involved in the project so that they sponsor us for further initiatives. If we get those 2 things right, we'll continue to dominate the industry, and so far we are. Very quickly on your second point, U.S. licensing is broad-based. It's not contribution from the new Tier 1 deal that we signed. It's a mixture of milestones on existing projects. And there's no one number driving that particularly.
Great. Maybe a quick one on services margins. I mean, Q4 was a bit light. How should we see 2018? Still tracking double digits?
Yes. Listen, I'm very pleased with the progress we've done on the services side to reach almost 10%. I think now, for us, the focus is really delivering successfully to our customers, to those large Tier 1 transformation. Clearly, we continue to expand the margin and probably through the medium term getting towards 15% as a target. But I think at 10% now, and expanding smoothly towards 15% in the medium term, I'm pleased with this position.
Your next question is from Gerardus Vos from Barclays.
Three questions, quickly. Just on the investments, I think, on the call you mentioned quite a few times that you're accelerating kind of investments. Could you give us a bit of insight where you make those investments? And if this at all is changing your kind of partner program on the server side? And secondly on the U.S. kind of pipeline, which gives a bit of visibility, how does that pipe is shaping up? And particularly, are there any kind of large deals coming to that final negotiation stage? And then finally, just catching up on the service margin from the kind of prior question. There was a sharp drop, at around 500 basis points down, in kind of Q4. Were there any kind of overruns in the quarter on large implementations?
I'll try and keep to that [ big question ] -- so in terms of investment, it's following our core thesis, that we ruthlessly leverage G&A services as a margin business and the key is to get it under 20% -- or around 20% of revenue so it's not a drag on group margins. And it's really a quality control model, ensuring that we do enough services on our projects to protect the implementation quality. And therefore, we've not, in our investments, changed that strategy. We're very clear that we're a product company, and therefore we're not either taking services away from partners nor giving more services to partners. In fact, the one change you will see to services, like any big software company, I think we don't do enough education services. The big software companies do, and it's very profitable. It ensures that people out there are better trained. So you'll see more education revenue, more training revenue coming through over the next few years. But in the fourth quarter, we have basically a lot of salespeople, presales people and continued product investment to follow, especially the Tier 1, Tier 2 product dynamics. U.S. pipeline, clearly, I'm not going to comment specifically on individual deals. But I would caution that we've been very clear to say U.S. is a medium-term opportunity. It's a big market. We're not going to get there overnight. It's not -- we don't want to overhype this as some sort of 2018 - '19 hockey stick. We're excited about it because it's basic, it's homogeneous. Their local competitors don't really have a compelling offering. They have multiple cores, all of which are old. None of them are really, in the view of the majority of banks, really future-proofed for the digital age. So it absolutely is perfect for Temenos. The key for us in 2017 was getting Ally live. We did that. We're hitting our milestones, as we've said, on Commerzbank, which is a big traditional well-regarded bank, where we're implementing the deposit suite, the asset side of the balance sheet. And provided we continue to hit those milestones, and we also signed a couple of startup banks, as you saw, which will be a very quick implementation to a digital bank. So references are absolutely key. Branding is absolutely key, with a lot of U.S.-centric research, which focuses on Temenos as a company, and the pipeline is developing healthily. I won't say anything more than that.
And Gerardus, on the services margin, listen, on Q4, really nothing to read into that. It was -- if you look at the last year, the seasonality of the margin in 2016, you could see that it was really -- back end of it was Q4, which we feel was much more normalized in the year. So pleased with the progress and confident that 2018 will continue to see expansion progressing in our services margin business.
Your next question is from Takis Spiliopoulos from Vontobel.
Two easy ones, I guess. On the sales cycle, with the amount you have seen coming from the installed base, have you seen overall the sales cycle shrinking a bit? Or, in general, seeing the necessity of those banks, has there been any shortening? Will be question number one. And question number two, with the acceleration you have seen in license growth, especially from Tier 1 and Tier 2 banks, can you please update us on the partner model? Do they have enough implementation people to cover all those projects?
Takis, good questions. Thank you. I'll take the first one. Sales cycle, in a nutshell, have -- they've never made a change. If I were to pick 2 slight trends, I would say they're becoming crisper and they're more senior-level dialogues. So these are strategic plan-driven through a sales process. The more the landscape clears up to a smaller number of vendors, the less you need to do workshops and evaluating with multiple vendors. And therefore there's a Temenos-controlled element, that we're getting better references. There is an urgency in the customer base as the digital -- the open banking challenges come on top of the -- restoring your P&L challenges. But I wouldn't say it's -- I wouldn't say a major change. It's still a massive decision, and it's still typically around the 12-month mark to make a decision like this.
Takis, listen, as we said last in 2017, every 3.5 days, a new bank went live on our software. So clearly, we are scale up to deliver on projects. Clearly, we are working very closely with the partners. In fact, we are taking that really on a regional basis. We're more and more with our strategic partners, we build together which type of skills in which regions we need. So we have taken this into the regional model, and it's very efficient, and we're making good progress. So I'm confident that we can deliver on that growth. And clearly, the partners are very excited about taking on those projects for us.
Your next question is from Michael Briest from UBS.
Thank you very much for the slide, I guess it's 23, on visibility. Just looking at 2017, I sort of calculate that maintenance and SaaS subscription get you to nearly 60% of product revenues, so it's probably similar in 2018. Just looking at the relicensing and progressive renovation components, not so much 2018, but in 2019, you'll be lapping a decade ago when we had the financial crisis and licenses were down nearly 20%. So should we assume that the relicensing element takes a hit there? And then also, on the progressive renovations, it was 2015 you announced Nordea, and I know you don't want to talk to individual customers, but is that block, if you like, going to continue to be growing into 2019 and '20 and beyond? Or do you need to backfill that? And then just on the pipeline chart below that, can you give some sort of quantum on the level of increase in the pipeline that you've generated in the year? It's not really visible from the blocks that we have there.
Michael, thanks for the questions. Listen, if we take the -- on the progressive renovations first, which probably is the one [ you just want to ] address, I think, like I said before, we've seen these growing on average by 30% and, really, we continue this to expect to be growing in the medium term. So I think we are confident, and you'll see tomorrow when we talk about the medium term. We are pleased with our level of visibility for '18, obviously, but as well in the medium term. And as you know, we are growing our existing customer base faster than in the past. We are seeing the [indiscernible] resource that would be reflected in that visibility. And...
And just on the relicensing point, no, there's no -- it's not absolutely linear that you sign exactly what you signed 10 years ago. Some banks come to you 1 or 2 years ahead, some of them leave it even a year late. And you give them a stay of execution [indiscernible] on the budget. So the trend for progressive -- for relicensing is very, very steady, and you won't see it, you won't see a dip in 2019 [indiscernible].
And the part about the pipeline was really to show that it's not always obvious when you look at the financial statements. And we saw that it was quite material to show how we see an acceleration of that pipeline. And the purpose was not to quantify or to give amounts, but for you to see that there is clear [ maxination ], and this is what has been reflected towards the end of the year. And we are saying we continue to expect this to continue in Q1 and onwards.
And I think, to add a bit of flavor to that, the point was the consistency. We spend a lot of time at the start of the year, and obviously every quarter, going through all the geographies with all the regional teams. We look at the segments, the wealth, the retail, et cetera, and we validate that bottom up and apply our historical conversion ratios. And the point I made in my [ strip ] was that there is a consistency, there is a broad base driven by different dynamics in different geographies at different speeds, clearly, but there's a momentum that we thought was worth highlighting. On your big deal milestones, if your concern is that we're kind of running out of steam because the big deals have hit their big milestones and they have nothing left, let's deal with that head-on, absolutely not. As I said, we are 3% to 4% through the progressive renovation journey of big banks, and that would obviously be everything. But even the bits they plan to do, even the business plans that come to the board, we're dealing with only a few of the milestones. So there's a lot left of milestones underpinning the Tier 1 business that we've been signing. And as we add Tier 1 banks, like we did 3 new ones just in the fourth quarter, they themselves have a chunk of different milestones spanning 2, 3, 4 years out. So no, we're not running out of milestones, for sure.
And just on currency, Max. I think you're implying about $1.18, $1.19 for the year. Clearly no one can call currencies by any means, but conceptually, if we are a $1.23, $1.24 for the year, would that be something that actually hurts your margin? So we shouldn't be surprised if that does come about, you get better revenue growth but lower margin.
Listen, obviously, as you said -- as you think about the rates and the volatility that we've seen in the market, I took a blended rate at the end of the year, which I thought was maybe the best way to look at it. Listen, I don't think that it will have a material impact on the margin. We are hedged. So at the EBIT level, there will be minimal impact on movement on the currencies. Clearly, as you know, we are longer -- are long the dollar, and we are long the euros, but on short most of the -- or the major currencies. But other than that, we do take hedge in places to protect our EBIT guidance -- or our EPS dollar amount, if you want.
And your last question is coming from the line of Steven Goulden from Deutsche Bank.
Just wanted to ask about the open banking opportunity, which you talked about in the deck. If you could sort of expand on that and maybe within that, whether you see PSD 2 as a contributor this year and whether you think that could move the needle. And also, you pointed to the IBS figures in terms of number of deals won, and you said that, obviously, in terms of value, you were doing better than by volume. Maybe if you could just give us a bit of color there and some recent comment on the competitive landscape, that would be great.
Sure. Okay, Steve, let me take those. So the open banking point, we're going to spend a lot of time on this tomorrow on the Capital Markets Day, but just in a nutshell today. So what we're seeing is the banks -- as banks adopt strategies to deal with the openness of banking, [ let's put the ] [indiscernible] the legislation like PSD 2, which forces them to provide their customer data effectively to anybody [ who's through an API ] an open API layer fundamentally changes the landscape from a proprietary model of the grudgingly selling your own products to truly being a platform player as a bank. And if you can be a platform player and offer other people's products by taking [ a vantin there ] from banking, that's good. On the other hand, other people will also put a platform in play with their own distribution channels, like Amazon and so forth, and the fintechs and the neobanks, and they will take advantage of this forced open banking, which is a global phenomenon, similar legislation coming through in the U.S., as you know. So again, it's an acceleration of this trend towards banks no longer having a cozy position where they can [ pass ] products as they like, and there will no new entrances. It forces -- as we've said, it's one of the 4 forces that change banking fundamentally: the regulator [indiscernible] [ as a ] bringing pressure to bear to banks to be more competitive, to open up the competitive market, at the same time, if the customer behavior is changing and the technology is out there to allow new entrants to come in and take advantage of it. So it's the convergence of those 3 trends, which is absolutely the sweet spot for us, clearly. And we'll talk about that in more detail tomorrow.Okay. So I can read my own notes here. So IBS League Table. What I was trying to say there was, the IBS League Table tracks the number of deals signed, but it's literally a number. So a Tier 1 bank like a Santander counts the same as a Tier 5 bank. And whilst we've won the majority of the -- or the -- by far the largest number of deals in the market, what that doesn't take into account is the fact that we've been winning all the larger deals in the market. So if you were to overlay the value of deals signed, our leadership position would be even stronger. In terms of the competition, again we'll talk about this tomorrow, but we don't see any particular competitor coming through. We see some private equity roll-ups, with a very different approach to life. We see some people who have more of a services development shop model, which, in our view, has never been the winning model in application software. We see local players who increasingly are unable to invest at the right level in their product set to compete against giants like Temenos when they're spending $150 million, $200 million on R&D. No, we don't see any of the new startups really gaining enough traction in terms of building up the functionality and the references to catch us. So we feel -- and the U.S. spend, as we talked about, we'll talk about again tomorrow. So no major change in the competitive landscape. The more we win the big deals and also the majority of the bread-and-butter deals, the easier it is to compete. And the challenge, frankly, now is to turn that clear beachfront [ hash ] position into pricing advantage, to lock down the market and make sure that the true value that we bring to customers comes out through the commercials. And I think that's the next big challenge for Temenos over the next few years.
There are no further questions. Please continue.
That's all, operator. Thank you very much, everybody, for taking the time to join the call tonight. Look forward to seeing some of you tomorrow at the Capital Markets Day. Otherwise, look forward to updating you at the end of our first quarter. Thank you very much.
Ladies and gentlemen, this does conclude your conference for today. Thank you very much for participating. You may now all disconnect. Enjoy your evening.