GFT Technologies SE

XETRA:GFT

Earnings Call Transcript 2019-Q1

[Operator]

Ladies and gentlemen, thank you for standing by. I'm Sherry, your Chorus Call operator. Welcome and thank you for joining today's Conference Call First Quarter 2019 Results of GFT Technologies SE.[Operator Instructions] I would now like to turn the conference over to Dr. Jochen Ruetz, CFO of GFT. Please go ahead.

[Jochen Ruetz]

Good morning, ladies and gentlemen. Yes. Welcome to our Q1 call. As always, Thursday is a busy day. I know you guys have numbers all over the place, so let's get started fast.You have the presentation. It is downloadable from our website. Let me have one statement on the first slide, which is, as you may have seen, we've adapted our Q1 reporting. And as many other companies, we now only produce a quarterly statement, no longer this more bigger report. We will do the same in Q3. And we have adapted the presentation accordingly. You'll find the backup of the financials. However, most of the slides should look familiar to you because we did not change a lot.So let's jump to Slide #2, which is the highlights of the first quarter 2019. So in a nutshell.What we have seen in the first 3 months is a further expansion of client and sector diversification. 19% revenue growth without our top 2 clients is what we have achieved. This was including V-NEO.Revenue share of insurance business now amounts for 11% in the first quarter. Overall revenue is slightly below prior year quarter, minus 1%.Adjusted EBITDA is up 11% by the strong positive impact from IFRS 16, which I will mention quite often today.Earnings burdened, as expected, by underutilization and some restructuring.And last but not least, we confirm our outlook for the year 2019.So let's go to Slide #3. So here, we have the numbers in a table.Revenues stood at EUR 105.7 million, which is 1% down compared to the year before. V-NEO contributed nearly EUR 6 million, so organic development is minus 7%. We'll go into details of where this comes from.EBITDA adjusted is up 11% mainly driven by IFRS 16 effects of EUR 3.6 million. If you take them out, EBITDA adjusted is down 25%.EBITDA, similar, the gap between adjusted EBITDA and normal EBITDA is the earn-out we have to book for our V-NEO acquisition. But then in EBIT, we already see that the gap to previous year first quarter is a bit bigger, 44%. Here, most of the IFRS 16 effects are cleaned.And last but not least, EBT at EUR 3.2 million is close to what we have expected, and it was burdened by restructuring charges, we named them, at EUR 1.4 million. In the year before, first quarter, restructuring was more like daily business EUR 200,000. So EUR 1.4 million is a big chunk of restructuring.And we have currency effects in the end, EUR 700,000 minus. The year before, it was EUR 500,000. So a bit more negative currency effects.All right, I'll have some more explanations on underutilization and higher expense costs later when we come to the second slide. So let's move forward from here.Slide #4 usually focuses on the quarter at hand, which, in the first quarter, is kind of the same as the slide before. That's why I will not go into any analysis on this, Slide #4, today.Let's move forward, Slide #5, revenues by segment. We do see that the Americas & UK segment is up 4%, and the reasons are transparent. We have an M&A effect of plus 12%, which is V-NEO acquisition. We acquired V-NEO in Q3 last year, so it was not inside our Q1 2018 numbers. It is in for the first time. Therefore, we have 12% M&A effect. And organic, we have minus 9%. And we will jump to the next slide in a minute where we go one step deeper where does the organic come from. We ended the quarter at nearly EUR 50 million revenues in Americas & UK. I cannot really mention here that we had strong developments in Mexico and Brazil, as we will see on the country slide.Continental Europe is down 6%. Here, no FX, no M&A, only organic development, again dominated by the top 2 clients.And therefore, let's jump to Slide #6 and go into those in more detailed analysis. Where does it really come from? So we now again, as have done in the past quarters, differentiate between the top 2 clients, which is Deutsche Bank and Barclays, and other clients. Let me mention that the Barclays revenues in the first quarter of 2019 was roughly EUR 200,000, EUR 300,000. So when we say top 2, we mean Deutsche Bank. But we're going to continue using the top 2 term. So top 2 clients in overall is down 27%. That's in the GFT Group. When we then look in Americas & UK, it was somewhat stronger, minus 37%; but also in Continental Europe we saw a decline of 15%. U.K. was the strongest effect followed by Germany. So Continental European decline is fully coming from Germany, and they are caught as somewhat by surprise that Deutsche was stopping so many projects at the beginning and during the first quarter. That was not what we had expected. We thought it would start somewhat slower, we mean the decline, inside Deutsche for '19 would start slower, especially in Germany. In U.K., U.S., we were not so much surprised. But this hit us in Germany with -- following some underutilization and, to come, restructuring.But now let's look at the good news. That's the other clients. The other clients are up 19% for the first quarter. Roughly 9 percentage points come from other clients that GFT has gained, and 10% comes from V-NEO because V-NEO is included in these numbers. And when we look at the 2 business segments, we see that in Americas & UK, other clients are up 53%. And of course, V-NEO is only in this number as well. And so it's nearly 50-50. Half of that growth comes from V-NEO and the other half is organic growth inside GFT. So we have seen a continuous trend towards new projects with exponential technologies that are driving our growth in Americas & UK.When we look at Continental Europe, here we do see a decline of 1% in the other clients, which is not where we want to be at the end of the year. It was a slower start than we had hoped for. One of our big clients, the second biggest client of GFT, is called Banco Sabadell. They were reducing budgets in Q1, which pushed it into the negative territory besides growth in some of the other clients. But Sabadell pushed it below 0, and -- but we see them come back during the year. So overall, Sabadell is fine. It's more like they have cut budgets, especially on the U.K. TSB organization, and, therefore, we were not able to show growth, Continental Europe, other clients, in the first quarter. Another effect is that those trends in exponential technologies that we experienced in the U.K. and the U.S., especially cloudification, is slower in Europe because here the ECB is not giving the standards for banks to implement and effectively use the public cloud. And therefore, those effects are delayed for Europe. That's why the U.K./U.S. is growing faster. And on the insurance side, we do see a pickup, but that's not yet reflected in the first quarter on the European side.The good news, client concentration in first quarter, top 2 clients, 33% versus 44% a year ago. So we have heavily reduced our dependency on top 2, but we do see the break marks in the negative growth in the first quarter.Let's go on and look at the earnings numbers on Slide #7. We show EBITDA adjusted, EBITDA and EBT. Again all numbers, especially EBITDA adjusted and EBITDA, are influenced by IFRS 16. It was roughly EUR 3.6 million up.Therefore, let me mention the main effects and then give you a bit more detail than you can see on the slide. But let me start first with the segments, Americas & UK, adjusted, minus 21%; Continental Europe, up 33%, and both cases supported by IFRS 16 where the majority comes into Continental Europe because this is where most of our people sit.So overall, GFT Group, as already stated, EBITDA adjusted, up 11% driven by IFRS 16.So what is the negative side? If you take out the EUR 3.6 million, we do see that we're down on the adjusted EBITDA of 25%. It was the revenue share of the 2 clients was decreasing, so we have missing margins from that business. And for the business we are winning with the other clients, we have higher sales expenses. And then, therefore, the margins overall on those clients is roughly 4% to 5% lower than what we lose on the Deutsche Bank side. This is currently what is burdening the most and will continue to burden throughout 2019 our margin side.Then we do have mainly in Europe -- not only in Continental Europe but this was in the U.K. but mainly in Europe, the restructuring expenses because of the decline of the Deutsche Bank account and some underutilization, which was mainly in Germany, where it hit us very hard very fast. To put some numbers to it versus the first quarter of last year, the missing margin effect, if you take out V-NEO, right, we lost EUR 7 million in revenues, which means we missed roughly EUR 700,000 of EBITDA margin. On the other side, we have on top higher sales cost for the compensating business because we lost more than EUR 7 million with Deutsche, we lost nearly EUR 15 million. And there we have higher sales cost effects and -- which cost us another EUR 600,000. Restructuring was EUR 1.2 million, and the underutilization EUR 800,000. And this in the end together explains the gap to the first quarter of '18. Then you can add IFRS 16, then you can add V-NEO. But it is 2 effects that will continue, which is if you have less revenues than in the quarter before, you have a missing margin. This will stop throughout the year because we will come to an overall top line growth. Second, replacing top 2 revenues with other revenues cost at the moment roughly 4% to 5% EBITDA margin because we have significantly higher sales cost for the new business compared to the being lost top 2 businesses.Okay. Let's move forward. Slide #8, revenue by country. Here we do show all countries. And for the first time in many years, we see Spain in first place. They now have overtaken our U.K. business revenue-wise because the U.K. was again suffering from Deutsche Bank and Barclays because the year before, Barclays was still a relevant customer; this year, no longer. And therefore, Spain is now our first with a small increase in revenues of 1%. And the U.K. and U.S., both down because of the top 2 clients. We do see, and let's take a look at Continental Europe, other countries. Italy, up 8%, a normal organic development. Germany hit by top 2. Outside top 2, we were growing by 25% in Germany. But Deutsche Bank reductions killed us to minus 16% versus last year's first quarter. And then we have Switzerland. Switzerland is down 34%. You'll remember we discussed Switzerland a lot last year. Q1 was still the strongest quarter in Switzerland in '18. We still had Avaloq projects from the quarters before coming from '17, and they then strongly ramped down throughout the year. Therefore, the comparison will be flatter in the coming quarters. In Q1, we have a steep decline in Switzerland. The good news is in the South American markets. We do see that in Brazil, we're up 31%; and in Mexico, we're even up 89%. Looks like we're doubling the revenues from Mexico in 2019, nearly doubling.Canada is mainly V-NEO, and, therefore, the increase should not be overinterpreted. And other markets are diverse, other countries, mainly in Europe.Let's move on, Slide #9, to our major clients, 30 biggest clients. And now for the first time, because V-NEO is now a relevant player inside our portfolio, we do have more insurance companies. And on top, we have an insurance company that made the list from the GFT client base.But let's start on the top capital markets suffering from Deutsche Bank. Besides that, we have a good performance in HSBC, Citi, the not disclosed Blackstone client. Oop, there, I just said it, which is like KKR, one of our asset managers we have under contract. And a decline mainly in UBS.When we come to retail banking, again Deutsche is reduced. Sabadell in the first quarter also reduced by 7%. This will pick up throughout the year, will get better throughout the year. We have very strong growth in the client Santander of 140%. More business in Spain, more business in Mexico, more business in Brazil. And then another client we're heavily increasing is the Crédit Agricole in Italy. So it's the Italian subsidiary of Crédit Agricole where we are doubling the revenues in the first quarter.Now we have 6 insurance companies which make it to our top 30 list. La Macif is the French insurance, and Industrielle Alliance is a Canadian client. They are both V-NEO clients. The other 4 are existing GFT clients. So Unipol in Italy made it to the list for the first time. They grew by 50% versus last year. The GKV from Germany was already on the list in the later quarters last year. MAPFRE, the biggest Spanish insurance company, was growing by 25% in the first quarter. And SulAmérica from Brazil, where we doubled the revenues, also made it to this list. So you see insurance is picking up, and it now stands for 11% of our business, and it gets going side by side. Part of the growth comes from the V-NEO business and part comes from existing GFT sales organizations going more to insurance companies now paying off in 2019. On the industry side, we only have 2 clients who make it to the top 30 list. It's the European Commission that is a declining client at the moment and Google. Google for the first time made it to this list. And for some clients, we contract through Google to the end clients. And therefore, Google is the formal client we have to show here. And it shows that cloud business is truly picking up, and even Google is on our list now. So it's now a top big client at the moment. Amazon pipeline picking up just as strongly as Google pipeline but somewhat behind the curve because our improved partner status is only valid since a couple of months. And therefore, now we're truly picking our pipeline in Italy and that Amazon business and Google business will both benefit our other clients' growth in 2019.Moving forward, Slide #10, on the profit and loss statement. We gave a lot of text on the right side. Let me point out 2 or 3.I think important is always the combination of personnel expenses and cost of purchased services. For us, usually, it is the same, right? We hire people who do projects or we buy freelancers who do projects. That's why we add those 2 and then compare it to revenue. And that ratio, it's the fourth bullet point I'm now referring to, stood at 80% in the first quarter, 3% up, which is negative compared to a year ago where we stood at 77%. So here, you do see that our underutilization was at work in the first quarter versus the previous year. Overall, 2018 was 78%. We hope to get there over time, again, throughout the year 2019. But in the P&L, this reflects - when I'm saying underutilization, that's where you see it.More complex other operating expenses looks like heavily improved. But of course, this is an IFRS 16 effect. We no longer have rents or lease. Now we do have depreciation. And that's why the depreciation line is corresponding in the other way and is heavily increasing to minus EUR 6.4 million. So that is IFRS 16 as commented on the right.Last but not least, income tax rates stood at 15% in the first quarter, which is pretty much where we think it will be throughout the year.Moving forward, cash flow analysis, Slide #11. We started the year with a net cash position of minus EUR 60 million, minus EUR 59.67 million. That's on the very left of the graph. And we ended the first quarter at minus EUR 52 million. So we have a pickup of EUR 8 million in our net cash position mainly, of course, as usual, driven by operating cash flow that was at EUR 11.7 million. That includes a component of IFRS 16, again, because the depreciation is included there. So therefore, if you compare to Q1 last year, we're bit below. But in both quarters, it was very strong. So we are satisfied with the Q1 operating cash flow performance. Financing activities is just paying back loans. And investments were not heavy at EUR 1.1 million.Let's move on to the P&L. Of course, the P&L also looks quite different because of IFRS 16 now. First of all, the balance sheet total increased by EUR 45 million, which then is mainly happening in the noncurrent assets side on the assets side of the P&L, which increased by nearly EUR 60 million. Corresponding on the right side with the equity and liabilities in the noncurrent liabilities, where we have to show IFRS 16 liabilities worth, again, EUR 56 million, and some are shown under current liabilities. So this IFRS 16 is heavily impacting the balance sheet that otherwise would not have been worth mentioning.Let's move forward to Slide #13, employees by country. You do see that we have an increase, of course, compared to a year ago. The increase is mainly because of the V-NEO acquisition. And we have staff expansion in Mexico, where we have the strong growth, and in Brazil where we do see the growth. And we have a decrease in Spain and Poland, the 2 nearshore countries who are suffering from the reduction in the top 2; and Poland from Deutsche but mainly from Barclays; and Spain mainly from Deutsche Bank. Corporate functions stood at 115 people. Utilization, of course, is also reflecting our non-IPO utilization numbers. And therefore, 89% is below what we had a year ago.Why are we restructuring while FTE numbers are growing? That was a question I already got. Therefore, I thought I'd answer it proactively.Our challenge at the moment, I mean, with the DB projects that are being ended is that some people come back to our bench, to our offices, and have been with the client for many, many years. And we now see their skill set, they are business analysts, project management officers, doesn't really fit the demand of the market. The market is looking for tech experts who know the new technologies, who can work in a cloud environment, are data analytics experts, et cetera, et cetera. Therefore, the people coming back do not all fit the new demands, and not everybody can be retrained. And that is why we have to restructure roughly 60 people throughout the year, half is -- 20 done, 40 to come out of 5,000, let's mention that, right, it's a small number, because they do not fit the requirements anymore. At the same time, we are heavily searching for tech experts sometimes in the same market. In Germany, we are looking for people who are experts in both technologies. The same is true in Spain. But we have to lose some who don't fit the skill set currently in demand. So this is the mismatch we have to get over. And then, of course, it's part of our top 2 reduction.Next slide, #14, the outlook for 2019. My message is that the outlook is confirmed. And even though they'll say it, but, of course, I do, despite our erratic top 2 clients, we see upside on the revenue number. So the EUR 420 million we have guided, we do see upside on that number coming from the business we do from V-NEO, where we do see upside with a client we just won, hopefully more to be mentioned, and with the exponential business at hand. It doesn't change our business with the top 2 at the moment here. We do believe we will stick to the minus 30%. But we do see growth in all other clients of over 20%. We will come back to that on the next slide.The insurance business will be more than 10%. While it was already 11% in the first quarter, we need to wait how exactly it works out for the year. But 10, 11 percentage points is what it looks like.And the earnings are burdened by the short-term restructuring. Overall, we roughly will do EUR 2.9 million of restructuring this year. Last year, it was EUR 1 million. So there's still a bit to come in Q2, and then less but still something in the second half year.And underutilization is also something which will not vanish in the second quarter because the restructuring measures, especially in markets like Germany, they just take time. Until then, people are underutilized.And then we have the effect of permanent sales expense increase compared to prior years.However, overall, I think it looks promising when we look forward into 2019, especially on the revenue side. That's the good news.IFRS 16 details since we have a slide for that in the backup, Slide #19, so you can see the detailed numbers there again.So let me go into one last slide with details that fits the performance revenue-wise coming from top 2 and other clients.Let's focus on the group top 2 clients. Minus 31% is what we expect. At the same time, other clients, up 23%. Of course, V-NEO is part of that. They will contribute roughly 6% to the 23%. But the organic growth that we see from the old GFT business will be 17% for the year. But this is what we see and aim at.So let me end. As guided, 2019 is another of our transition years. We have strong reduction in the top 2, and we have strong growth in the other clients. The growth drivers are, as we have presented a quarter ago, the exponential technologies. We name cloud, data analytics. We do see strong growth in the Guidewire area. So that's the standard product we're implementing in smaller insurance companies. And we do see continued digitalization in banks throughout the world.Overall, first top line growth since 2016 is what we believe 2019 will show. Profitability lacks behind. It will improve later. We need other clients' growth to bring back the margins out of the additional sales cost. Thus, client distribution has significantly improved, and it will continue to be that way. That was Q1 2019. I'm happy to take your questions.

[Operator]

[Operator Instructions] The first question comes from the line of Andreas Wolf, Warburg Research.

[Andreas Wolf, Research Analyst]

It's Andreas Wolf, Warburg Research. A couple of questions from my side. So the first one would be on retail banking in general. If you look at your clients outside the top 2, how's their investment behavior in this area? I'm just trying to figure out if in general, the retail banking is growing at attractive rates. And then maybe you could provide some insight in how V-NEO is already doing within Europe, if you could carry out the first steps to roll out the business here. And then with regard to your 19% growth outside the top 2 clients, is it right to assume that this is basically volume driven/with those companies that you have been able to sign contracts with in the past? So the land has "already happened," and now the expand phase is being entered? And then on AWS versus Google, could AWS become probably just an important partner as Google is already today? And how big could this business be in general going forward?

[Jochen Ruetz]

All right. Yes. I'm not going to delve in those questions. That's interesting. On retail plan, I will just -- it helps me to go back to our top 30 list. Maybe if you want to do it as well. Why not? When we look at the client group, we do have 2 -- we have a problem, which is Deutsche Bank and Monte dei Paschi. And of course, those 2 show the biggest decline at the moment. So in Monte dei Paschi, we had minus 25% in the first quarter. Monte dei Paschi is anyway only spending what it takes to keep the lights on, and Deutsche is trying to get into the same area. But we did have some Sabadell reductions in the first quarter. It was, I think, a coincidence, and it will work out. Therefore, when I look at the portfolio, you see in retail banking it is mainly growth. It is growth because of continuous programs in Santander where I said we are growing by 140% versus first quarter last year. It is because we're now in the middle of a major program that was started and we won it. So this can [ help ] you have a big new win in an existing or a new client. But most of the clients you see here have adequate growth of plus 20% to plus 30%. So the retail banking is an attractive area. We do like all those midsized players who are, of course, huge banks in their countries. They are all having the need of spending in digitalization, and this is not changing. And on top, Continental Europe is not even going cloud yet.You asked for V-NEO in Europe. Currently, all V-NEO numbers are still driven by the Canadian mother. And the people come from Canada, but we now started hiring people in Europe for V-NEO mainly in France where La Macif, the client you saw on the list, the biggest client in our insurance business and probably to be for the coming 3, 4 years, maybe ramping up to EUR 5 million, EUR 6 million, EUR 7 million, EUR 8 million a year because they are doing a big Guidewire implementation. If we will hire people in France, we will build a Guidewire hub in Poland for nearshore into, first of all, France but also into interest we have generated in our clients in Italy and Spain, So Guidewire is a very strong product that we like to go with. We would need some of the V-NEO sales guys 4x. At the moment, we just can't clone them, which is a pity. I mean the cost of delivery people just as well. So currently, the demand on the Guidewire business is very strong. We can't fulfill it all right now. Therefore, this is a strong growth trend. But yes, Europe will come. Currently, Q1, still all numbers are Canadian numbers from V-NEO, people coming from Québec. Growth volume driven by what's -- well, in the end, is it new clients or is it existing clients? It's a mixture. As I said, in retail, when I look at the list, there are a lot of clients in there that have plus 20%, plus 30%. That is existing clients doing more. At the same time, Google was not on the list a year ago, right? It was at 0 in Q1 2018. It was now EUR 1.2 million. So this has been exploding. In those exponential technologies, business can move fast. There, it is not about all those very long RFPs and vendor checks that the clients are doing. This can go quite fast because they are not buying GFT, they're buying Google or AWS, Amazon Web Services, or maybe even Microsoft Azure. So it is mix. It's more mix today, the growth that we have from new clients and existing clients than in the past year.And last but not least, AWS, Amazon Web Services where is it going? Yes. We do see that AWS, of course, is getting Google in the market and they are the ones that are more professional. They are used to work with enterprises. When we talk to the Google guys, they still have to learn a lot about working with enterprise customers, not private customers. Enterprise customers have questions, right? They want to change contracts. And therefore, Amazon there is far more professional. And our pipeline is currently building faster on Amazon than on Google.What will be the size in the end? We don't really know. That's very hard to predict. We -- we said we will double cloud revenues from EUR 10 million to EUR 20 million in 2019. We feel very comfortable with that prediction. But is it going to be Google or Amazon? Well, the clients in the end make the decision. We have now 1 project where the client kicked out 1 of the 2 and took the other one. I won't say which one because it could just go the other way. But they started with one of the main players and said, ah, it's not what we want, they are not professional. And they went for the other one. So they can even be replaced. And we did not change. We were doing it when they lost it and when the other one won it. We can do both technologies and have enough experts in both to continue growing. I hope that helps.

[Operator]

Next question comes from the line of Robin Brass, Hauck & Aufhäuser.

[Robin Brass, Equity Analyst]

I have a question also on the, let's say, visibility on revenue growth generally. I mean usually, it means with Deutsche, the visibility was quite low in the past. So is there anything changing here? Or why are you still, let's say, confident that maybe the full year guidance, especially also top line, might be even slightly better than expected? Second question is the restructuring towards, let's say, more new technology drivers, especially the cloud come shooting in those tough -- on higher demand by virtually all companies in Germany. So how do you expect to hire more people in this highly coveted segment? And are you still seeing also maybe then price pressure on your personnel costs?

[Jochen Ruetz]

Let's start with the visibility or why do we say revenue up. It's not because of Deutsche. We do believe Deutsche will come where we have guided, right? And so the revenue upside that we do see, of course, is in all other clients. But it's the only way to predict the revenue upside at the moment. Deutsche is erratic, hard to predict. We believe it will come as we have guided and as we have shown on that slide.New experts. Yes, of course. If you want to hire 100 Google cloud experts, you will just fail, right? You have to train them, read them and have experts that you can expand into going cloud, and that's what we are doing. It is not easy to hire those experts. Of course, we need some of the stars of the strong guys you can send to the client fast, I mean, especially close to the client. In our case, that's currently mainly U.K., U.S. And we have found those, but then in the end it's all about ramping up things behind onshore but especially nearshore who have Google and Amazon knowledge. And that's what we're doing by training. We're training them, and we're certifying them. Want to be among 300 -- more than 300 experts certified at the end of the year. I think the biggest player will have roughly 1,000 certified at the end of the year. So it is a relevant number, especially when you're an expert in an industry like banking where we are. And therefore, yes, you're right, they're hard to get. Everybody looks for them. We're not trying to hire them in Germany at the moment. We would rather nearshore them from Poland and Spain and train and ramp up the keys there.Cost-wise, well, margins are also better. Therefore, we don't see the higher cost of people who have training in those technologies because at the same time, the prices, they are chargeable. For those projects, they reflect that. The margins are higher than our average margins. Therefore, there, the price pressure is not our problem. It's more legacy business, maintenance business where clients are putting pressure on everybody to reduce those recurring costs. So that's harder to manage than the new technologies.

[Operator]

Next question comes from the line of Berenice Lacroix, Kepler Cheuvreux.

[Berenice Lacroix, Equity Research Analyst]

I just had one actually. So it relates on your backlog sheet with Google. So the presentation indicates that 7% of your sales that you had from the industry sector, which mentions Google as a client. I'm sorry because I missed your explanations, Jochen, on Google. Now I understand that it is your strategic partner for cloud services, but what Google pays you for as a customer? I mean could you remind us your relationship with Google as a client?

[Jochen Ruetz]

Yes. Yes, it's a mixed bag. We have to show Google on the industry because it definitely doesn't fit any banking cluster that we have. But we do deliver through Google to some banking clients or other clients. So -- and the clients buy Google, and we deliver to Google. We are the subcontractors who are doing the implementation of the cloud. Therefore, it is not Google directly who needs the services. Some, yes. For some things, Google are using us, so we are working with Google. But that's the smallest size. The bigger part of it is we deliver through Google mainly into some banks. But as it is Google who is the formal client, we show it on the industry at the moment, knowing it serves our other clusters. So it's a bit mixed story. And therefore, the industry number is a bit overexaggerated at the moment. Therefore, I wouldn't call this the Industry 4.0 number that we are aiming at with our Industry 4.0 ambition to grow that industry client, especially in Germany. This is still growing but slowly. Google is another effect which helps the number, but it is going mainly to banks or other clients. Sorry for that. I mean it's not that crystal clear, right, how to do it but as Google is not a bank, we're not showing it as a bank, right? Therefore, it is a bit blurring the picture at the moment.

[Operator]

Next question is from [ Oliver Nubla ], [ Big T ].

[Unknown Analyst]

A very technical one. So what are the skill sets you're looking exactly for? Are these people who have a lot of experience [indiscernible] for experience as VMware with the new trend of visa and [ NS6 ]? And will this not also be a little bit of a bottleneck once the European banks start moving on the cloud? Those are my questions.

[Jochen Ruetz]

I'll start first. Yes, we will -- absolutely, yes. Yes, you gave the right technologies. And please add experience in implementing a Google platform and Amazon platform for a big player. And there are different levels of doing that just lifting and shifting, which is simple to do, or working inside the technologies the cloud vendors offer to expand the applications. Or maybe, and that's the third level, to do the new applications, including the cloud technology. So it gets more and more complex. And we are looking for people who have standardized knowledge, and we can then, via training and then training on the job and projects, bring it to Google Projects. It's not easy to find somebody in the market. It's -- you will not find somebody from university ready to work in a Google program. Therefore, we have to train the people. It's very simple. It is a greenfield approach. Everybody has to take it. There are some players you can hire, but that's about it. So yes, that's not easy. But the way forward, of course, is interesting, as you say, correctly. Currently, the cloud -- the public cloud, let's call it like this because the 3 big players are public cloud vendors, they're the most efficient way to go into the cloud, and the Americans and the British are using it. The European banks mainly can't do it yet because the European Central Bank has not given the right guidance of what they may use and may not, or rather how they could use the public cloud. That's why European players can't move yet. It's different in the insurance business. They can, and they're already doing it. So in insurance, there are cloud projects. In banking, not. And you're absolutely right, once the ECB is done thinking and the European players can move there, the demand will go even further up. We see it rather as an upside than a downside, right, because we will have knowledge from cloud implementation in the U.K. and U.S., in our nearshore centers in Poland and Spain, which we can then easily reuse for European banks going to the public cloud. And we don't mind if the ECB has a bit more time, right? So don't take it too fast, guys. Maybe 2020 would be fine. We have then enough decent projects we can show to clients where we have lifted and shifted or even enhanced applications from local data centers into the public cloud. That's why for us it is an upside over time. And this is a demand that will come because the ECB will not be able to just stop this forever. It is the end game, right, of optimizing data and hosting costs. The end game is go public cloud and nothing else. And that's why the banks are waiting for that.

[Unknown Analyst]

In the insurance sector you mentioned only Guidewire. Are there any other software vendors you do install -- that you do implementations? Or is it just Guidewire?

[Jochen Ruetz]

It is -- currently, the main driver is Guidewire, which is -- oh now, I don't know the English word. That's the [Foreign Language]. What's English term for that? I'm looking at my team. So you don't insure life or health but assets...

[Unknown Executive]

Property.

[Jochen Ruetz]

Property. Oh, okay. I'm not alone, as you can hear. And on the other side, there's a life insurance product from Oracle which we're also offering, which has good traction in the market. It has a very cryptic name, but I forgot it. It's Oracle something. And here, these are the 2 products we're going to market with at the moment. On top, of course, classics. Some of the insurance companies have self-build code and self-build crop insurance systems. We help them with those as well, but the growth driver is currently Guidewire. That's the main driver we see. Maybe there are more questions?

[Operator]

[Operator Instructions] We have a follow-up question from Andreas Wolf with Warburg Research.

[Andreas Wolf, Research Analyst]

Just a quick one on your Swiss standard software business. So since the business with Avaloq is in decline, are there opportunities to grow the business, let's say, with Temenos? Or is it a partner which would not be on your agenda?

[Jochen Ruetz]

Oh, they would be. But currently, we don't see Temenos or Avaloq implementations in our pipeline in Switzerland. And that's the problem. It is about the Swiss market, right? Our Swiss country revenue is linked to the Swiss banking industry, and their demand for new applications currently is limited. And we are not that close to Temenos, we are close to Avaloq. And there, there are no new projects. So it is more maintenance, minor enhancements. And this was burdening our 2018, especially second half year, and it's continuing to burden. While it is kind of the same self-cleaning that we do have in the GFT Group, we have to get independent from the top 2. And in Switzerland, we need to get independent from a lot of Avaloq projects and go broader into banks, and this is what's currently happening. So we're now stabilizing the Swiss business with less Avaloq but growing business with other clients in the market. And if they would be in Temenos implementation, we will not say no if we would have the right skill sets to do it. But we don't see one in our pipelines at the moment.

[Operator]

That was the last question.

[Jochen Ruetz]

All right. Well, is it 45 minutes? That's good for the first quarter. Thank you very much. Hope to see you on the road somewhere in time because the coming months, we will be quite busy. Maybe we meet here or there. Q2 numbers coming up early August. Latest then we'll hear again. Thank you very much and bye-bye.

[Operator]

Ladies and gentlemen, the conference is now concluded, and you may disconnect your telephone. Thank you for joining and have a pleasant day. Goodbye.