Operator: Ladies and gentlemen, welcome to the Temenos Q4 2025 Results Conference Call and Live Webcast. I am Moradi, Chorus Call operator. [Operator Instructions] The conference has been recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Adam Snyder, Director of Corporate Affairs. Please go ahead, sir.
Adam Snyder: Thank you very much. Thanks for joining us for our Q4 and full year '25 results call. Before I hand over to Takis, I'd just like to flag that we're hosting our Capital Markets Day tomorrow in London and virtually. You can still register on our website to attend if you've not done so already. I will be taking questions as usual at the end of this call related to the fourth quarter and fiscal year 2025 as well as our outlook for 2026. I'd ask if you could please kindly keep your questions related to strategy for the CMD tomorrow, where we'll also be talking much more extensively about our approach to AI. With that, I'll hand over to Takis.
Panagiotis Spiliopoulos: Thank you, Adam. Good afternoon, good evening. I will talk you through our key performance and operational highlights for the quarter before updating you on our operational and financial performance. As Adam mentioned, we will go into more depth on our strategic execution and road map tomorrow at our Capital Markets Day, also covering AI, where we feel very well positioned with a strong moat for Temenos giving us a structural competitive advantage. Starting on Slide 6. We achieved all our 2025 guidance metrics and delivered product revenue, constant currency growth of 11% in the first year of our strategic plan, which is above the market growth of 7%. The sales environment remained stable throughout the quarter and we saw strong demand across regions and client tiers, including several wins with Tier 1 banks globally. We also continue to see strong signings for premium maintenance and this drove very strong maintenance growth in the quarter and full year. We invested across the business in both sales and product, in line with our strategic road map, in particular, growing our sales quarter carrier headcount by 60% to over 140 by year-end. And we executed well on our AI strategy across product, process and people that we will be talking more about tomorrow. We announced our 2026 guidance, which is based on the stable sales environment, our strong pipeline and are confident in maintaining business momentum through our focus on execution. And given the strong first year of execution on our strategic road map, we have raised our 2028 targets, reflecting the confidence in our strategic positioning and our good levels of visibility. Moving to Slide 7. We signed a number of deals with Tier 1 clients in the quarter. This is a client segment we are particularly focused on, given their size and scale, the diversity of business lines and their global reach. We have invested in dedicated global strategic sales, focus on Tier 1 and 2 banks, and it was encouraging to see us expanding our footprint in the fourth quarter. I would highlight 2 deals in particular. We signed a Tier 1 U.S. bank for composable core banking across multiple international markets and the Japanese Tier 1 bank expanding their Temenos platform for core banking and payments to 3 new countries. These successes demonstrate the strength and scalability of our platform and the value and trust our clients place in Temenos and our deep domain expertise. Turning to Slide 8. It is important for us to demonstrate the value we bring to our customers. A highlight this quarter is VPBank in Vietnam, serving over 30 million customers. They completed one of the largest and most complex core banking upgrades in the region moving to a hybrid architecture with Temenos Core and AWS for scalability. VPBank has been a Temenos core customer since 2006. Our platform scalability, functionality and local knowledge are key differentiators. The core banking platform now handles double the daily volume with 0 incidents, business processing speeds are 30% faster and payment transaction volumes are up 40%. This shows the value of our platform and trust our customers place in us and our extensive domain expertise. On Slide 9, our product and technology road map continues to be validated as market-leading by industry analysts. We were particularly pleased to be named a leader by IDC MarketScape for North American retail digital banking solutions. Given our focus on delivering our U.S. road map, which is a key part of our U.S. growth ambition. We also won best core banking system of the 2025 Banking Tech Awards, and we were recognized for customer experience in Asset and Wealth management. Moving to Slide 10. We executed well against our strategic road map, which translated into tangible results across the business and a strong financial performance in 2025. We reorganized our product and tech function into agile teams and hire senior talent, which strengthened our ability to deliver our road map. We launched multiple new products on our platform in the year, including a number of AI solutions. Our sales organization grew significantly with individual quota carrier headcount increasing around 60% to over 140 individuals across all regions. We invested in sales operations and enablement, which resulted in strong pipeline growth and strong signings, especially with new logos. Looking at the U.S. specifically, we also made good progress on our U.S. expansion strategy, increasing sales headcount to over 20 individuals and opening our U.S. innovation hub hiring 70 developers to roll out our U.S. product road map. Our U.S. pipeline has grown nicely, and we expect to close more deals in 2026. Turning to the next slide. We will be talking about our approach to AI, our competitive positioning and our AI strategy extensively tomorrow at our CMD. To summarize, we have a clearly defined AI strategy across product, process and people. This is focused on lowering total cost of ownership for our customers, speeding up delivery and empowering our people to leverage AI and enable greater productivity. As an example, we are also rolling out Anthropic tools across our entire software development life cycle. The adoption threshold for AI in the banking sector is very high due to high product complexity and significant risk aversion. This, combined with our deep customer trust and domain knowledge, creates a strong competitive moat for Temenos and gives us the right to win in the AI era. I will now run through our Q4 and 2025 financial highlights. Focusing on constant currency and non-IFRS financials, which are pro forma, excluding any contribution from Multifonds. On Slide 13, we delivered strong ARR growth of 12% with ARR now representing over 90% of product revenue. The growth in ARR was driven by growth in all our recurring revenue lines, both subscription and SaaS as well as maintenance. Our ARR growth gives excellent visibility on recurring revenue and future cash flows, supporting our long-term growth targets. Our product revenue, which is subscription and SaaS and maintenance grew 11%, well above the market growth rate of 7% in the first year of our strategic plan. On the next slide, we exceeded our 2025 subscription and SaaS revenue growth target with 9% growth year-on-year. We also delivered strong total revenue growth of 9% in the quarter and 10% for the full year. Growth was broad-based, reflecting robust demand across geographies and client tiers for our platform and products. On the next slide, non-IFRS EBIT grew 21% for the year and non-IFRS EPS grew 25%. While we made significant investments in our business product, [ GTM ] and operations, this was largely self-funded through our cost efficiency program. We have good operational leverage in our business. And saw the strong revenue growth, in particular, premium maintenance drove our profitability. Let me highlight a few items on Slide 16. We delivered strong ARR growth of 12% year-on-year in Q4 '25 with ARR now at $860 million. Cloud ARR was 39% of total ARR, excluding any contribution from Multifonds or the BNPL client, which terminated a contract in 2025. We expect cloud ARR to increase in the mix going forward as more clients move workloads to cloud environments. Maintenance revenue grew 15% in Q4 '25 and 12% for the full year, driven by premium maintenance signings. On profitability, EBIT margin improved by 3 percentage points to 34.7% for the year, reflecting strong operating leverage and savings from cost efficiency. These results demonstrate the strength of our business model and our ability to simultaneously drive growth while investing in the future. Turning to nonoperating items on Slide 17. Net profit was up 9% in Q4 '25 and 21% for the year. EPS grew 14% in Q4 and 25% for the full year, benefiting from both profit growth and the lower share count. We had an increase across net finance charges, tax and FX losses in Q4, offset by our strong operating performance. The tax rate for the year was 17%, in line with our guidance. On Slide 18, free cash flow grew 15% year-on-year, ahead of our guidance, reaching $256 million. This was supported by strong ARR growth, disciplined capital allocation and our continued focus on operating efficiency. On Slide 19, we have our changes in group liquidity in the quarter. We generated $179 million of operating cash in the quarter and bought back $30 million worth of shares in the buyback launched in December. We also repaid a bond which matured in November 2025. We ended the year with leverage at 1.3x comfortably within our target range of 1.0 to 1.5x. Turning to Slide 20, a few comments on our debt leverage and capital allocation. We launched our second share buyback program in 2025 for a total of CHF 100 million in December 2025. This will run until December 2026 at the latest. Reported net debt stood at $605 million at year-end. Finally, the Board is proposing a dividend of CHF 1.40 for 2025, which will be voted on at the AGM in May. Our approach remains disciplined and balanced, returning capital to shareholders while maintaining flexibility for future investment. Next, we have our 2026 guidance, which is non-IFRS and in constant currencies, except EPS and free cash flow, which are reported. For 2026, we are guiding to circa 12% ARR growth, about 9% growth in subscription and SaaS, about 9% EBIT growth, about 7% EPS growth and about 16% free cash flow growth. This guidance reflects the strong foundation we built in 2025, our execution focus and confidence in our competitive positioning and also our pipeline visibility. The guidance includes the headwind from the termination of a BNPL client in 2025 which we have given on the slide. There will be no further headwind from this beyond the current year 2026. And lastly, we have raised our 2028 targets based on our strong first year of execution, confidence in our strategic positioning and good visibility. The new targets are for ARR above $1.23 billion, EBIT of about $480 million and free cash flow around $410 million. I am very pleased with our first year's execution, and I'm very confident about our strategic positioning and momentum. I look forward to sharing more at our Capital Markets Day tomorrow. Operator, please can be open for questions.
Operator: [Operator Instructions] The first question comes from the line of Boulan Fred from Bank of America.
Frederic Boulan: If I can ask a question around the whole kind of demand/competitive environment. Are you seeing any kind of new behavior from some customers trying to leverage, some of the new tools you actually described yourself to meet their needs around core banking software? Or it's still very much kind of business as usual in terms of competition with incumbents and some of the new vendors?
Panagiotis Spiliopoulos: Fred, let me take this one. So on the demand environment first, as we said, it was pretty stable throughout the year and also in Q4. And also if I look at the first 2 months in Q1, there has been no change so far. And this is pretty consistent across all regions and across the Tiers. So really, so far, no change. In terms of -- I'll take the external competition first, still see the same trends as last year, less of, I would say, the so-called new vendors given some of the problems they're facing in terms of funding so still pretty much the same competitors both in the U.S. and outside the U.S. If there is -- the one thing we could call out is emerging markets, clearly showing a consistent positive trend with a slight improvement every quarter. Now when talking to our bank customers. Clearly, we haven't seen any trends in that direction you're mentioning. If at anything, the discussions are how you Temenos can help us with basically two things. One is with AI to have faster installation, faster deployment and easier upgrades. Because if we can help clients do that, they would substantially save on implementation time frames. But in terms of anything regarding the core banking space, we don't see any trends in that direction. Always keep in mind, there is two elements or two dimensions, which we need to be aware of. The customer risk erosion, which is very high with banks is a mission-critical systems. There is zero tolerance for hallucinations. You need to have as a bank always deterministic decision making and not probabilistic, which if you get it wrong, there is a very high cost to errors. And on the other side, we are seeing as a trusted domain expert. We're facing very highly complex workflows, which are very difficult to replicate. So from that perspective, we're going to talk more about tomorrow. So far, not seen an impact.
Operator: The next question comes from the line of Charlie Brennan from Jefferies.
Charles Brennan: Two, if I could. Firstly, on the guidance, I'm pleasantly surprised by how confident you are for 2026. If I add back the BNPL contract, it looks like you're targeting an acceleration in ARR growth in '26. We're not seeing many software companies more broadly taking these market conditions as an opportunity to point to accelerating growth. Can you just give us some visibility into pipeline coverage maybe versus last year or level of confidence from the known renewal of 10-year licensing deals from prior years versus new logo requirements that just shape your confidence in 2026. And then separately, just on the maintenance, obviously, very, very strong growth. Can you just remind us what customers actually get for the premium maintenance option? And is this a onetime uplift to your maintenance revenues? Or is it more of a sustainable source of growth going forward.
Panagiotis Spiliopoulos: Charlie, on guidance, so first, if you look at the performance in 2025, where we absorbed already some of the headwind from this BNPL client downsell. We have mentioned throughout the year, on one hand, the stable sales environment. But on the other hand, we've also been investing a lot in additional quota carriers, which we have hired throughout the year. And clearly, that has helped the pipeline evolution. That's one thing, and you would also expect this not to be yet visible in signings in '25, but this should happen in 2026, given the usual 12 to 18 months lead time. That's one thing. So clearly, we feel pretty good about the pipeline given the investments we have done, specifically also in the U.S., clearly, we started with a relatively low number of salespeople, and we're now at 20-plus and they have substantially built a good pipeline, which we are now about to execute to sign deals throughout 2026. The next one to highlight our confidence is we've done a lot of investments also in how we qualify the pipeline, how we track it. And as part of that, you've also seen now a number of quarters delivered as planned or as predicted. So we have not only better visibility and also the quality of the pipeline is much better understood. And the third element I would put, and we always made it clear that there is also a number of large deals included in our guidance, our approach, taking a weighted approach in terms of the risk proved the correct one. And clearly also for 2026, we have quite a number of larger deals included in the pipeline. So overall, it's a mix of, let's say, internal process improvement and a good market environment, which is giving us that confidence. And yes, you're right, we would expect, excluding this impact to have 15% on ARR growth. Now the renewal pool -- let's put it like this. We have talked about the special situation of what we see and what we have in terms of situation on 2027, where we get basically the 2 things coming together, the 10-year renewals from 2017 and the first time renewals from 2022. And clearly, that's helping in terms of our confidence. However, and I think this is an important element. We do not, today, I think there is a specific revenue benefit included in 2026 guidance. The majority of the revenue we would still expect to happen in 2027 from the respective pool. Clearly provides some sort of safety net. And what we can say is the combined renewal pool for 2027 is definitely something attractive. But this is the same case also for '28 and the years beyond, yes. And this is quite sizable, but let's leave it there. Finally, on the maintenance part, what do clients get? I mean the premium maintenance, these are basically -- this is referring to two main areas. The one is you get enhanced support offerings designed for banks using Transact or other Temenos platforms who want a higher service level than the standard maintenance packages, faster response times and so on. So that's one thing. And the other one is extended support which is basically for customers who are staying on older versions for a bit longer and are not yet ready to upgrade, but we want to continue maintenance for this. Now clearly, we put a lot of effort into selling this to our existing customers. We have seen some good -- very good traction in the last 2 years. We would expect eventually this to slow down, given we have not an unlimited pool. So let's say, 7%, 8% is probably the appropriate growth for 2026. And then we expect this over the next 2 years to tail down to maybe 6%. I think this is a fair assumption, putting the potential of this pool together.
Operator: The next question comes from the line of Sven Merkt from Barclays.
Sven Merkt: It would be great if you could comment a bit further on the U.S. progress. In the release, it reads a lot like coming from improved sales capacity and better execution. And is there anything else you would call out, especially maybe from a competitive perspective? And how much of this progress is already reflected in the guidance?
Panagiotis Spiliopoulos: Sven, yes, let me comment on the U.S. situation. Clearly, we have seen a nice buildup in our pipeline in the U.S. And clearly, as we mentioned, the majority of signed deals, we expect to see the impact in 2026. So this is unchanged. And hopefully, we'll have good news to report. Now there is an element of U.S. growth, obviously embedded in 2026 guidance and in our entire midterm plan to 2028. So this is -- we've taken clearly a prudent approach to how much we reflect. In terms of competition, we are clearly getting now into more RFPs and our win rate is improving. And I think we have -- we're really tackling a huge market with a real need and a long runway for banks to modernize. And I think we also have a much better value proposition in terms of our strategic road map versus where we were a year ago, both on the product side. We have the Orlando innovation Hub. So we're developing U.S. product for U.S. customers that can come in, co-innovate. So this is really helping also from a perception point of view. I think we're very well on track for the U.S. market in terms of specific products. So that's -- we've already been launching some and more will happen throughout the year. But clearly, we have been able already to start selling this. We can also see -- and maybe there is some anecdotal evidence. We can also see competitors becoming more aware of Temenos, maybe as a difference to 1 or 2 years ago. You'll hear more on this from Will and Barb tomorrow at our CMD. They're going to share updates on multiple fronts of our U.S. strategy, product pipeline, go-to-market initiatives.
Operator: The next question comes from the line of Toby Ogg from JPMorgan.
Toby Ogg: A couple from me. Just on -- just firstly, on the BNPL headwind, which you've mentioned in 2026 is 5 points of headwind on the subscription and SaaS, and 4 points on the EBIT and EPS. Is there any reason to think that revenue growth and EBIT growth wouldn't mechanically accelerate in 2027, given there is no further headwind from the BNPL headwind after FY '26? And then just secondly, just on the FY '28 upgrades, it looks like low single-digit upgrade on ARR, 7% on EBIT and low single digit on free cash flow. What was the main driver of the EBIT upgrade? And also, why is the upgrade a bit bigger than the free cash flow upgrade?
Panagiotis Spiliopoulos: Yes. Toby, on BNPL, I think let's get through 2026 where we are confident about before we already talk on 2027. Clearly, yes, there should be no more headwind. Now we're still taking a prudent approach to both 2026 and also our midterm targets. And we're 1 year down into our journey, and we feel confident. And I think you can do the math what this means for '27 and '28. On the upgrade for 2028, we have delivered a good 2025 with a good exit in Q4. And clearly, the upside on -- given also the accounting, the upside was higher on EBIT than it was on ARR and free cash flow. Now the maintenance or the premium maintenance growth, clearly, that will slowly tail down. But we thought this is something we feel confident that we can still deliver. We're not going to lose this. So this is why the EBIT upgrade. The ARR upgrade, I think, is a function of the visibility we see on our pipeline. And ultimately, we wanted and we said we would maintain EBIT to free cash flow conversion, as we said 1.5 years ago around 85% plus. So this is to maintain this year basically the free cash flow of $410 million, yes. So we've always been talking about ARR growth with drive free cash flow growth. So the upgrade on ARR is about 2% and on free cash flow also 2%, but it's really the EBIT to free cash flow conversion, where we say 85% is the right number unchanged from what we said last time.
Operator: Next question comes from the line of Justin Forsythe from UBS.
Justin Forsythe: Just a couple of questions here for me as well. So on Regions Bank, that was one of your big podium wins or a key reference client, if you will, in the U.S.? It was, I think, your second large Tier 1, 2 bank in the U.S. that you signed in 2023. It seems like they're talking about publicly a pilot in the latter part of 2026 and beginning customer conversion in 2027, which is, by my math, about what, a 4- or 5-year full rollout. So I wanted to ask if that was what your expectation was going into the project or if there have been any delays or anything that went faster? And if that would also mean a direct uplift to revenues as a result? And I just wanted to get a little bit more detail on the BNPL impact that you're mentioning. And maybe just correct me if I've got this wrong, but I think it was first mentioned back in 1Q of '24, and then we talked about maybe accelerated impact in '25. So just curious if maybe you could talk a little bit about the phasing of that. And why we're continuing to see the impact here in FY '26?
Panagiotis Spiliopoulos: Justin, clearly, we can't really comment on behalf of clients, also at Regions Bank. We're clearly feel quite happy with the progress the project is taking. If the bank is talking positively in that respect, we appreciate this, but this is as much as we can say. But all large projects have a long evolution in stages, and we feel very happy with our relationship with Regions Bank. On the BNPL customer, this is correct. We initially talked about in April on the Q1 '24 results. There was the first phase of, if you want, downsell. Last year, we mentioned this that there is an impact this year, which was reflected in our original guidance, which was prudent. We ultimately overdeliver despite this headwind. And so clearly, we see that as a good success. And the reason why we bring this up now is really because ultimately, it's about transparency and because it's impacting '26. We thought it's important to understand the underlying growth. I think, it's the last year that was important, we say, okay, we want to show the impact and also show the underlying growth. There is nothing more to that.
Justin Forsythe: Got it. And maybe just because the first question was one that you wouldn't answer. Just a broader question on the core versus the other services business. I think I recall in the past that you're saying revenues roughly with the old TSL line were roughly 2/3 core versus maybe 1/5-ish Infinity, which is now the, I think, what you call it digital banking and then other solutions, wealth payments, et cetera. Maybe you could just talk a little bit about if that mix has stayed similar and/or how you expect it to evolve over time, i.e., is there a certain composition of the backlog that's skewed to say, core versus digital banking or otherwise?
Panagiotis Spiliopoulos: Okay. So I think what you're referring and we're going to show this tomorrow. So if we look at product revenue, which includes SaaS and subscription and maintenance, and there's almost no term license left. If you look at this, then it's more than 80% is our core banking product. Digital is about 10% and the remaining 10% is spread across basically payments and wealth. And we would expect, given the growth trajectory and we're going to launch some very exciting tools this year on the digital side with AI. But you would expect this to maybe stay stable. But given the strong traction we see on core around the world and especially also in the U.S. maybe core would probably increase even to, let's say, 85% or something.
Operator: The next question comes from the line of Christian Bader from Zürcher Kantonalbank.
Christian Bader: In Autumn 2024, you laid out your road map including, let's say, over investments of between $110 million and $150 million. I was wondering if that number is still or let's say, this range is still valid. And how much of the investments did you spend in 2025? And how much is embedded in terms of investments in your guidance for 2026?
Panagiotis Spiliopoulos: Christian, so as you're going to see tomorrow, and I don't want to spoil the party. Our investment algorithm, and we're going to give more detail for '26 to '28 is still going to be somewhere in the same ballpark. It was a broader range, but we have invested quite a bit in 2025. So if you -- you're going to see it's the same $110 million to, let's say, $130 million, $140 million number we plan for the next 3 years. What have we invested in 2025? We ended up -- as you can see from our cost base, pretty much where we had said we would end up. So around $30 million to $35 million we have invested. Clearly, there was a lot of self-funding or basically offset by efficiencies. For 2026, we have earmarked basically a very similar investment pool somewhere between, let's say, $28 million and $35 million and again offset by some efficiency gains, but that's about it. There is a bit of a mix shift. We were earlier with the go-to-market investment in 2025 and product came only in the second half. Clearly, the focus for 2026, it's mainly going into product because we see a lot of opportunity to invest when competitors are struggling. And when we have the market demand and really want to extend out competitive advantage. The investment is to be done now, including AI, but we saw this as an opportunity to accelerate some of the investments. But the overall pool remains broadly unchanged for the next 3 years.
Operator: [Operator Instructions] The next question comes from the line of Laurent Daure from Kepler Cheuvreux.
Laurent Daure: I just have two questions. The first is, if you go back to your digital and wealth operation, which are close to 20% of the sales. Referring the first comment you made, you told us that clients' decision-making was not really changing. I was wondering in this particular business as Wealth and Digital, given maybe the risk of AI disruption in the long run, do you see some clients delaying process, delaying contracts? Or is it the same pattern for your three businesses? And my second question is at the end of '25 on the maintenance, would it be possible to have a rough split between the customers that have taken a premium version and the ones that are still on the old version?
Panagiotis Spiliopoulos: Okay. The first one on specifically Digital and Wealth. As you have seen from our numbers, we have so far not seen any delayed decision-making regarding any topics in the banks. And this is also what we see reflected in our pipeline. The discussions so far with the banks are not about, okay, we're going to write our own code to replace your wealth system or your digital system. Clearly, there is the potential for banks also experimenting at the edges around the core. But they clearly want to do this, and we do a lot. Barb is going to talk to more about this, about core innovation. A lot of the also AI-specific use cases with co-developing with banks. I think it's -- banks wanting to develop everything in-house and then maintain everything in-house and constantly upgrade and carry the burden of all the regulatory and compliance pressure. I think this is not something we see today, whether it will come in 10 years or so. But clearly, we don't have indications for that. In terms of the mix question for premium maintenance, whether we can't give that kind of disclosure, there has been, let's say, a good take-up over the last 2 years. We would expect this eventually, you'll get to a very good percentage of clients who want to take that and have taken that. So this is why we would expect the growth to trend a bit down. As always, at the start of the year, we are prudent in terms of our financial guidance and this applies to our revenue lines.
Operator: Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to the company for any closing remarks.
Adam Snyder: Thanks very much. Thanks, everyone, for joining the call and webcast, and we look forward to seeing many of you at the Capital Markets Day tomorrow and continuing the dialogue. Thank you.
Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call. Thank you for participating in the conference. You may now disconnect your lines. Goodbye.