Oct 14, 2021
Operator
Ladies and gentlemen, welcome to Temenos Q3 2021 Results Conference Call and Live Webcast. I am Swan [Ph], the Chorus Call operator.
I would like to remind you that all participants will be in listen-only mode and the conference is being recorded. The presentation will be followed by the Q&A session.
[Operator Instructions] At this time, it’s my pleasure to hand over to Max Chuard, CEO. Please go ahead sir.
Max Chuard
Thank you, operator. Good afternoon and thank you for joining us today.
I hope you’ve been able to access our results presentation on our website. I will start with a review of our Q3 performance, then I will hand over to Takis to go through the financials before giving some concluding remarks.
Starting on Slide 7, we saw strong momentum in our business this quarter. The environment continues to improve and more banks are pushing ahead towards IT transformation.
This is reflected in our license and SaaS, which both performed strongly in Q3. SaaS revenue accelerated to 30% growth in the quarter and license were up 20% with demand increasing across all customer tiers and products.
Total bookings grew at a healthy 19% in the quarter which is adding to a backlog and increasing our record revenue visibility. This is a key metric for tracking the growth in the business overall as it combines the acceleration in the SaaS, alongside the ongoing demand for traditional license business.
The growth in SaaS and maintenance is also driving our ARR, which was up 9% in the quarter. EBIT grew 7% driving a strong operating and free cash flow performance.
We are seeing rapid evolution of SaaS from clouds and we are doing – and we are going through a very exciting phase in our growth. Competition for Temenos is intense and we must ensure we can attract and retain the right keys and talent.
This quarter, we’ve made some investments to achieve this and Takis will talk more about this in the call. Moving to Slide 8.
We generated $10.7 million of SaaS ACV this quarter. In any one quarter this number is driven by a combination of some new bookings and volume growth in existing customers.
In Q3, the vast majority of growth came from new bookings. And in fact, this was more than double the amount from last year.
We saw very exciting names and I hope that those new names will also drive increased consumption in the future of course. The US was the largest contributor to ACV and Europe was the second largest and we expect a very strong year.
We saw SaaS ACV growing between 50% to 60% for the full year. Turning to Slide 9.
Total bookings this quarter grew 19% with strong demand across all tiers and products. We generated $153 million of total bookings and year-to-date our total bookings are up 64% versus 2020 and also up very importantly on 2019 as we continued to take market share.
The growth was across license and SaaS, as well as an increase in the average tenure compared to 2020. On Slide 10, the sales environment improved through the quarter in all regions.
We had 18 new clients, which was fairly evenly split across license and SaaS deals. The U.S.
is still our largest contributor to total software licensing. It has a good mix also of license and SaaS, this with some very exciting new names signed in the quarter.
Europe had a sequential improvement in sales and we expect the regions to accelerate further in the fourth quarter across both license and SaaS. We also had a good performance in Asia, with two Tier 1 banks extending their relationship with us.
And pipeline activity with Tier 1 and Tier 2 banks has clearly picked up across most regions, but in particular in the U.S. where we are actively engaged in multiple large deals opportunities.
This is very exciting time for us in the U.S. On Slide 11, I would like to pick a minute to discuss an interesting trend we’ve seen over the last few months.
We’ve announced several exciting partnerships and deals with operators in the BaaS market. We announced two partnerships with BaaS providers in the quarter to enter the BaaS market in the U.S.
and in Europe. Mbanq in the U.S.
offers services to Credit Unions and which is an estimated market of $3.6 billion, and Vodeno is targeting the European BaaS market, an estimated around $3 billion market annually. We also signed a key deal with deal with Green Dot in the U.S.
to power its direct digital bank and banking platform services. Interestingly, we competed against some of the largest US incumbent vendors and some several neo-vendors on this deal.
And the bank chose Temenos because of our hyper efficient, highly scalable and secure open cloud capabilities. And obviously, we’ve made significant investments over the last few years in that respect.
I believe the demand for BaaS will only increase going forward as finance institutions look to accelerate their digital transformation and FinTechs and ecommerce platform look to embed banking services into their ecosystems. This is, as I said, a very exciting and an accelerating trend that is expanding our addressable markets.
It is great that our technology is at the forefront of this and Temenos is extremely well positioned to capture this opportunity because of our market leadership, because of our credibility and the strength of our solution. Moving to Slide 12, we are making good progress with the both – strategic partnerships that we’ve announced at the start of the year.
With Salesforce, we’ve completed the integration of our product for retail. We are working now on the business and the Wealth version of integrated products and we’ve seen already some strong interest in the U.S.
and globally across all those three business lines. Then secondly on the partnership with DXC, which continues to prove us well.
We are engaging with a number of DXC’s customers on core banking replacement as we see supporting the acceleration of our Tier 1 and Tier 2 pipelines in the U.S. as I mentioned before.
Turning to Slide 13, I would like to spend a minute on our competitive positioning. Temenos is uniquely placed to meet the demands of our clients across all tiers and business models.
We have a unique value proposition as banking is all we do 100% focus. We have deep domain expertise unmatched in our markets and all our R&D and innovation is customer-centric using our domain expertise to meet the demands of our customers today and in the future.
We combined our leading functionality with extensive localization capabilities for our clients in 150 countries. We shared a game changing technology.
Our platforms are cloud-native, cloud-agnostic and that gives our clients efficiency, scalability and freedom to choose how and where they want to run our software. Our technology is APIs first with AI embedded across the platform.
And our package products with a single code base mirrors all our clients everyone on the same platform and that can all benefit from our innovation in R&D which is the highest in the industry. We can scale through our extensive ecosystem of technology and implementation partners.
Now, on Slide 14, I’ll continue a little bit on our unique value proposition which give us a win combination of game changing technology and reach high localized package functionality. What is important is that our investments are not diluted across overlapping products.
We have one core banking platform and one digital banking platform and code base. So when we invest a dollar in innovation, all our clients can take advantage of this.
These are trends our competitors cannot match. With a focus on technology toolkit and highly customer solution for each individual clients, their models is not scalable.
When clients choose Temenos, our clients know they are working with the market leader and they know we can provide the business benefits they are looking for when selecting a vendor. And let me give you some examples of those business benefit we provide to our customers like Pepper.
Pepper had its fastest product launch ever using our Temenos platform. In the U.S., the challenger bank environment estimate that it is able to operate at a 25% cost of incumbent bank using our technology.
And now Green Dot, as I said before selecting Temenos because of our hyper efficient highly scalable and highly secure open cloud capabilities. So, this business benefits are only possible because of our unique approach, package, upgradable software, one single code using deep domain expertise and obviously our passion and relentless focus on innovation.
Having said that, I will now hand over to Takis to go through the numbers for the quarter.
Takis Spiliopoulos
Yes. Thank you, Max, and hello everyone from my side, as well.
Starting on Slide 16, I will start with an overview of the quarterly financial performance. All figures are in constant currency unless otherwise stated.
Our SaaS revenue accelerated to 30% growth in the quarter with now several quarters of strong ACV growth starting to be reflected in the P&L. We also had strong license growth with increased activity across all tiers and these together drove total software licensing growth of 23%.
Maintenance grew3% as expected giving total revenue growth of 9%. EBIT grew 7% and we achieved an EBIT margin of 37.2%, down one percentage points.
You should bear in mind that the Q3 2020 cost base had the full runrate benefit of cost savings from our 2020 restructuring program. Our cash generation remains strong with operating cash flow up 7% to $68 million and free cash flow up 19% to $40 million.
DSOs ended the quarter at 111 days and we expect DSOs to be around 105 days by year end. Our net debt moved below $1 billion and our leverage stood at 2.2 times, sequentially down from 2.3 times.
We now expect our leverage to be at around two times by year end. Moving to Slide 17, our strong ACV growth over the last few quarters drove an acceleration of SaaS revenue growth to 30%.
I expect SaaS revenue to increase by about $3 million in Q4. I was particularly pleased with the good license growth of 20% this quarter driving total software licensing growth of 23%.
Maintenance continues to recover as expected growing 3% in the quarter. We expect maintenance growth to accelerate into Q4 to give full year maintenance growth of around 4% driven by the stronger license growth in the first half of the year.
After 2021, we expect our maintenance growth to accelerate in 2022 and beyond that licenses continue to grow. Service revenues were down 5% in a seasonally slow quarter.
I expect growth to considerably accelerate in Q4 with service revenues growing around 3% for the full year. Looking at the cost base, our operating costs were up 10% year-on-year.
As expected, the cost base in H2 is catching up with the continued hiring across the business and we would expect our 2021 cost base to arrive as we implied by the midpoint of our guidance. While travel costs are lower than forecasted at the start of the year, those savings are offset by competition for talent in some areas of the business.
Next on Slide 18, we have like-for-like revnues and costs adjusting for the impact of M&A and FX. The Q3 figures are all organic and therefore in line on constant currency growth rates.
In terms of FX, the Euro weakened against the dollar and the sterling and the Swiss has strengthened against the dollar creating a EBIT headwind of around $2 million. We have also factored in this $2 million headwind on EBIT guidance for the full year.
Turning to Slide 19, net profit grew 1% in the quarter, largely due to the higher tax rates. EPS grew 3%.
Our tax rate was 17.2% for the quarter and we continued to guide for our 2021 tax rate at 16% to 18%. Now moving to slide 20, our DSOs reached 111 days at the end of quarter/year-on-year as Q3 is normally a back-end loaded quarter due to summer holidays, this usually results in a seasonal sequential uptick in DSOs as also seen last year.
We still expect DSOs to reduce to around 105 days at year end. Beyond 2021, we expect DSOs to continuing their downward trend towards 85 days by 2025 driven by continued improvement in licenses and services cash collection and an increase in contribution from SaaS in the P&L, which typically has DSOs more in line with maintenance.
On Slide 21, our Q3 2021 LTM cash conversion was 113%, well above our target of converting at least 100% of IRS EBITDA into operating cash. We expect our cash conversion to be at least 100% for 2021, driven by strong growth in recurring revenue, which we have continued to deliver for at least a few quarters now.
Next on Slide 22, we show the key changes for the Group liquidity since Q2 2021. We generated $68 million of operating cash.
Other movements to highlight include the completion of our share buyback, which ended in August and the net outflow borrowings of $28 million. Our cash on balance sheet at the end of the quarter was $85 million with our net leverage reaching 2.2 times, down from 2.3 times at the end of Q2.
We expect our net leverage to be around two times at year end 2021, a slight improvement from its previous commentary. Moving to Slide 23.
Our ARR continues to accelerate on the back of strong SaaS growth and on the recovery of our maintenance revenue with ARR reaching 9% growth in this quarter. ARR growth will continue to accelerate in the fourth quarter as both SaaS growth and maintenance growth reach more normal levels.
Our deferred revenue continues to grow nicely at 13% with strong advance collections and growth in SaaS being the key drivers. Free cash flow was up 19% year-on-year to reach $40 million and our net CapEx was $5.8 million, down $1.4 million versus Q3 2020 and still expected to be at 2020 levels for the full year assuming no further M&A.
On Slide 24, I have kept this slide in here to remind you of the new KPIs introduced in February, total bookings and ARR. I won’t go over it again now.
But you can find tables in the appendix with SaaS, ACV, ARR, total bookings and free cash flow by quarter to help you track these numbers. Now on Slide 25, we have confirmed our non-IFRS guidance for 2021.
The guidance is in constant currencies and you can find the FX rate assumptions in the appendix. For ACV, we are guiding for 50% to 60% growth as we have seen strong growth in both new names and volume growth with a number of clients throughout 2021.
For ARR, we guide for 10% to 15% growth driven by committed SaaS revenue from the ACV we have both and the reacceleration in our maintenance growth in Q4. We expect total software licensing growth of 14% to 18% with continued license growth as seen in the first three quarters and driven by the accelerating growth in SaaS.
Total revenue growth is forecasted at 8% to 10% with the impact of slower growth in maintenance and services on the back of lower license growth last year. We expect both of these to accelerate in Q4 and in 2022 and beyond.
We are guiding for EBIT growth of 12% to 14% to $360 million to $367 million including the $2 million FX headwind on EBIT for the full year. This implies an EBIT margin expansion of 130 basis points from 35.8% to 37.1%.
Under our definition of non-IFRS, which we changed in January 2021 to bring us in line with our peers, we are now excluding IFRS 2 charges. There is a significant amount of volatility in these costs including the share price and if and when individuals exercise their options.
Our estimated IFRS 2 cost for the full year have increased from around $20 million to an estimated $50 million while the normal IFRS 2 runrate cost is still estimated at around $20 million to $25 million, the incremental portion is driven by two one-off elements. Firstly, the introduction of a new one-off LTIP program extended across an increased number of employees to align a broader segment of the middle and upper management with the overall company performance.
Our company is going through a rapid evolution with significant changes around SaaS and cloud across the organization, while the competition for talent in our sector has intensified. Our Board and executives made the decision to give this one-off grant to a large number of senior and middle management below executive level to ensure we can attract and retain the necessary skills and talent to drive the growth of our business going forward.
The second element driving the increase of IFRS 2 cost is the alignment of outstanding years of existing LTIP programs with the new KPIs introduced in 2021 as voted on at the May 2021 AGM. Lastly, in terms of guidance, we had maintained our target of converting over 100% of EBITDA into operating cash and expect DSOs to reduce to around 105 days by year end.
We expect a tax rate of 16% to 18% for 2021 and our net leverage to be around two times by the end of the year. On Slide 26, I’d like to reconfirm also our 2025 targets which are presented – which we presented at our Capital Markets Day in February.
These targets are organic growth rates per annum. We expect total software licensing to grow 15% to 20% and SaaS will clearly grow significantly fast track around 30% plus with license is expected to grow at 10% plus per annum.
This will drive total revenue growth of 10% to 15% per annum. We expect to expand the EBIT margin to around 41% by 2025, driven by strong growth in license and maintenance improving our SaaS gross margin and leveraging R&D and G&A, while still growing R&D on absolute basis by 7% to 8% per annum.
We expect total bookings to grow at 17% to 22% per annum with ARR to grow at least 15%. ARR in particular will drive free cash flow of at least 15% to reach more than $600 million by 2025.
And then finally on Slide 27, this is a slide we showed during the last couple of quarters. But I wanted to give a quick run through of our non-IFRS EBIT and margin expansion in 2021.
Our EBIT growth will be driven in particular by the growth in recurring revenues as well as licenses, while we continue to invest in R&D and sales and marketing and with greater valuable cost of growth compared to 2020. As such, we expect to deliver an EBIT margin expansion of around 130 basis points in 2021.
With that, I hand back to you Max.
Max Chuard
Thank you, Takis. And so, on Slide 29, in conclusion, we continued our strong momentum in the third quarter.
License and SaaS both performed strongly with SaaS revenue accelerating to 30% and license is up 20%. Our total bookings continues to grow strongly driving backlog and visibility as does our ARR.
Our EBIT growth is driving our strong operating and free cash flow generation. And finally we are going through a very exciting phase of growth as I am confident to deliver our 2021 guidance, as well as the mid-term ones.
I look forward to betting you on our Q4 results in February. So with that, operator, I’d like to open the call for Q&A.
Operator
[Operator Instructions] The first question comes from Laurent Daure from Kepler Cheuvreux. Please go ahead.
Laurent Daure
Good evening, Max and Takis. I have three questions on my side.
The first one is on the Green Dots deal. It seems quite an attractive deal.
Could you elaborate a bit further with more details on this deal? The one – I suppose the ACV will be impacted by this in Q4 and any granularity on the size this deal could reach maybe one or three years from now?
The second question, Takis, more for you. You reconfirmed all your guidance.
I was thinking about the licensing was 14 to 18. Why have you kept to the low end of your guidance and changed, because it seems to imply more or less flattish license in the fourth quarter.
And final question is on the stock option, you just described at the CMB on the long run you are expecting the charge to be 3% - I think 3% to 3.5% of revenues with more fight for talent. Is there a risk that this number maybe adjusted for not only 2021 but for the coming years?
Thank you.
Max Chuard
Hi Laurent. Thanks for the question.
I’ll take the first one. Yes, listen, Green Dots is a very exciting deal.
It is a Temenos banking cloud. So it is an ACV deal.
It is a large deal we signed in for Q3. So, it will really start impacting as shown in the P&L more towards 2022.
But it’s an exciting deal. What we are seeing in the markets we embedded finance and the ability to expand our market into different ecosystems they are basing for Temenos to be the technology to power this, I think that’s very exciting.
And the path of traction and the speed at which we saw – we are seeing this happening is very, very exciting and I think we are extremely well positioned. We do want to be the de facto player on technology provider to those BaaS providers.
You’ve seen we’ve announced Mbanq in the U.S. and Vodeno we are selected, we are chose by Green Dots, that has around 53 million customers.
It’s a very, very exciting company. So, very pleased with the deal and as I said, it’s also a deal that we are able again to show our value proposition to show as a business benefit we can bring to them.
Again some very established U.S. incumbent vendors and also the traditional neo vendor.
So very pleased with these deals.
Takis Spiliopoulos
Hi, Laurent. Let me take the other two questions.
License growth clearly we are pleased that we have shown 20% again in Q3. We had Q1 and Q2 also good.
Keep in mind the comparison base gets tougher in Q4. So that’s maybe one reason why we feel confident with the guidance as it stands now.
And second is, we still have the largest – traditionally the largest quarter ahead of us. As we mentioned in the past, we expect closure rates to be back at the pre-COVID levels by the end of the year.
So, at this point in time, I think we feel confident with our guidance as it is outset. On your IFRS 2 cost, clearly we need to highlight that is a one-off, okay?
Now, we have been investing across the organization in our talent pool and in terms of salary increases. So this is all reflected in our cost base.
From today’s point of view, I think it’s too early to come out with an IFRS 2 number for the next year. We’ll inform in February.
Maybe it’s going to be slightly higher a couple of basis points. We don’t know at this point in time, but clearly it would be not driven by this one-off or only partially.
So, I think, yes, even if we end up at 3% to 4% next year, but I think we will need to see what we said in February. I mean, one of the reasons as we have mentioned is exactly what has happened this year.
Share price recovered for us. Then it came back again.
You really don’t know what has happened and so we’ve constantly grown even when we were estimating for ourselves the cost. But the runrate I think that’s the important one.
The $20 million to $25 million still stands. So, another $5 million, $6 million for Q4.
Laurent Daure
Okay. Thank you very much.
Operator
The next question comes from James Goodman from Barclays. Please go ahead.
James Goodman
Hi, good evening. Thank you.
You talked about being engaged I think in multiple large deal opportunities in the U.S. I mean, we saw obviously, a particularly big cloud vendor in the U.S.
recently I guess, the complex domestic operation. When I think about the customers that you target with your SaaS offering typically is sort of well outside of that kind of Tier 1 category.
So I just wondering if you could help us there with, I guess, the evolution of the competitive situation with the native cloud vendors as we think about larger tiered clients. The second question, just I think there was, in Q2, some discussion of a modest amount of slippage out of that quarter.
And I was curious as to whether you closed those deals this quarter if not is that’s still anticipated for the year and did you experience any further slippage on the license side? Thank you.
Max Chuard
Hi, James. Let me take the first one.
Yes, we do see a large amount of exciting opportunities in the U.S. Some of those are doing with – from our partnership with DXC.
Some are just through - on all operations that we have there. And also, as I mentioned, we’ve got a particular focus on global accounts and big banks and we’ve got a team that is looking specifically after those accounts.
Those are, I will say, Tier 1 to Tier 2 institutions. It’s mainly I will say at the back end that those want to innovate.
Is it through micro services or line of business, but it is significant type of activities. Now, to your question about the competitive landscape, I tried to explain during my presentation how differentiate ourselves and why we announced.
We clearly don’t win all the deals, because there are some deals that are, if our model doesn’t fit for those deals. So, we – our goal is to provide a highly scalable model, which we can repeat.
We invest massively and we can show, today clear business benefits to our banks, to our customers and I tried to give some of that. We are not in a business of building a tailored platform for a single bank.
That’s not our business and that would never be our business. So, the case is where a bank will want to invest in something very specific for them, that they’d be able to tailor it made to evolve in the very specific requirements.
That’s not Temenos. Temenos is about heavy investing in innovation, lead innovation, bring value and that’s why also you see Temenos is earning at high margins.
We are able to sell the value to the customer that sees the benefit of what we bring to them. When – is able to operate at 25% of the cost of incumbent vendors that see the benefit of what we can bring to them.
And that’s our model. So, we will not win all the deals, because some of the deals will not be for us.
Takis Spiliopoulos
Hi, James. Let me take the second one.
The one example given at the time of Q2 results was just to show the impacts one deal can have on growth rates. So I can’t really comment on this specific deal other than not much on what happened with the legal team.
So it’s expected to close now shortly. So, let’s say October or November.
But clearly, as you see from a Tier 1 total software license share, we had some very good other deals closed in Q3. So yes, so, still the one ahead and clearly part of our full year forecast.
James Goodman
Thank you. That’s quite helpful.
Operator
The next question comes from Chandra Sriraman from Stifel. Please go ahead.
Chandra Sriraman
Yes. Good evening, Max.
Good evening, Takis. Maybe a couple of questions from my side.
So, when I look at Europe, it still seems to be very Q4 loaded like 2020. Can you give some color on what’s driving this?
You have been quite positive in terms of the demand bouncing back in Europe for a while now? What are the key hurdles you see here for things not to have improved already?
And maybe a very quick question in terms of the sales and marketing cost. You have mentioned that you are seeing some increased competition there.
How should we see this evolving as licenses continue to progress as you expect? Thanks.
Max Chuard
Hi, Chandra. Let me take the first one.
So, listen, in Europe we saw a sequential improvement compared to Q2 to Q3. Clearly, the largest quarter is Q4.
Europe is pretty much close for most of the Q3. The summer is long in Europe and specifically after COVID times, people are taking time off and that’s what is the case clearly.
But I think, as well what probably you don’t fully appreciate this that we do also see quite some traction in our SaaS business in Europe. And when you look at our performance in Europe, from a bookings point of view, where you take into account is shown in the total contract value from our SaaS piece.
Then the picture is totally different and then you would see Europe in Q3 being strongly on last year. So I think this is a little bit probably what is not that what you cannot see and is the fact that we see more and more traction in our SaaS business coming from Europe.
Clearly, U.S. continues to lead the way.
But second is Europe and we see increased activity from our SaaS business in Europe and when you look at the total contract value of both the license and the SaaS then Europe has clearly strongly rebounded in Q3 in that respect.
Takis Spiliopoulos
Maybe on, Chandra, the sales and marketing cost. I think as we explained at the start of the year at the CMD, sales and marketing will grow faster than the revenue this year but also the future years.
And clearly this is something we not only started this year, but if you remember, we are already making selective investments in both R&D and sales and marketing on the back end of 2020. So, this is, I think something which is going to increase.
Now, as we mentioned, this loyalty program clearly had also some sales people benefiting from this. So this is just one element we do regular salary benchmarking reviews.
But this is something which are we predicted in our forecast. So, I would say, no change expected from what we said at the start of the year.
Chandra Sriraman
Great. Thank you.
Operator
The next question comes from Knut Woller from Baader Bank. Please go ahead.
Knut Woller
Yes. Thank you.
Also a couple of questions from my side. First on the SaaS ACV it was basically down year-over-year admittedly against the back of tough comps.
Still it was I think the weakest SaaS ACV now that you delivered in the last five quarters. So, I am trying to get a better feeling for the momentum that you are seeing on the SaaS side which I don’t see reflected in the SaaS ACV and I would appreciate here some more color.
And then secondly, on the cash flow, it looks like the cash flow in Q3 has been particularly driven by trade payables, while receivables were absent and if you are particularly looking at receivables they have been up sequentially. Can you give some ideas what drove the receivables up in the third quarter?
Thank you.
Max Chuard
Hi, Knut. Let me take the first one.
Listen, our ACV – SaaS ACV business is very, very strong. And there is lot of activity, very strong pipeline.
Now, when you look at the ACV for this quarter, the element I try to highlight is, within every quarter, you will have an amount of consumption and this is difficult to predict when a certain customer will report increased consumption. And clearly, this year - this quarter, sorry, we had minimum from that.
So if you look at – and that’s right for me ultimately this is a very positive KPI. When you look at the incremental the ACV this quarter, almost all of this is new business activity, which we generate in the future increased consumption.
So, yes, it is below a year ago. That’s for sure.
But this is just new business activity, new logos that’s what you know hopefully be successful customer that will increase consumption and so on. So, for me I am very pleased with the delivery of what we signed on the ACV side in Q3.
It’s lots of new logos, very exciting new logos, exciting names that hopefully will generate much more consumption in the future.
Takis Spiliopoulos
Hi, Knut, let me take the cash flow question. So, yes, we had an outflow of around $26 million on the receivables.
But clearly, we had, as I mentioned, a very back end loaded quarter. So, quite a number of deals signed very late and basically the cash was coming in Q4.
This is also visible with the DSO number moving sequentially. On the payables, I think, if you go back into the quarters, and clearly we had some positive impact there of payments we have done to suppliers are basically prepayments and therefore this was a positive impact.
But clearly, over the full year, we always expect more quarterly specific variations to normalize. So, other than the receivable we see with the DSO increase with the traditionally back-end loaded quarter, nothing specific to mention here.
Knut Woller
Excellent. Thank you.
Operator
The next question comes from Stacy Pollard from JPMorgan. Please go ahead.
Stacy Pollard
Hi, thanks. Just a couple of catch-up questions.
First off, what happened in services again? Can you maybe speak about that a bit more and what we should expect in services going forward?
How much is being taken by third-parties now? And does that shifts continue?
And second question just, a kind of a follow-up around the ARR and the 9% looks a little bit below the 10% to 15% target for the full year. Is that catch-up mainly coming from the higher signings in Q4?
Is that the way we should think about it?
Takis Spiliopoulos
Hi, Stacy. Let me – so let me take those.
Maybe first on the ARR. Clearly, ARR which is driven by maintenance and SaaS growth.
We will see an acceleration – a pretty considerable acceleration in both maintenance and SaaS growth in Q4, which were basically going to drive the ARR growth into the 10% to 15% range as we have guided. So, I think nothing specific to read into that.
And given the visibility we have, this is something – yes, we are pretty happy to forecast. So, yes, ARR growth will materially accelerate in Q4 as well maintenance and SaaS.
On the services, I think there are two elements to consider. One is, what we have seen in terms of the revenue impact.
Clearly, we had a particularly high number of partner implementation in Q3, which is something it’s always difficult to time. From the current point of view, we would see Q4, let’s say with the normal share of partner implementations material growth acceleration in service revenues in Q4 to arrive around the 3% mark for the full year.
And then the other element is clearly having some impact on profitability. It was more that we have been making some selective investments into our partner model, especially around governance, customer success, which is also, I mean, is still small – having a small impact on the margin, but this clearly should help us drive license growth in 2022 and beyond.
And also become more efficient in terms of the implementation timeframe for future projects.
Stacy Pollard
Okay. Thanks.
Operator
The next question comes from Michael Foeth from Vontobel. Please go ahead.
Michael Foeth
Yes. Good evening, gentlemen.
Two questions also from me. The first one is regarding the additional Board members that you announced, two additions which look very good.
The question is, whether they are going to replace other Board members? Or that whether you are expanding the Board and as you are expanding, why does Temenos still needs to expand the Board?
Second question is regarding your view on your overall pipeline. How is that developing?
How would you qualify your pipeline of business now versus a quarter ago and a year ago? Thank you.
Max Chuard
Hi, Michael. So the – yes, we are bringing two Board members which have I will say, quite probably a different profile which will very nicely complement, I will say the, our current Board.
It is about expanding it. It is about as I said, bringing new type of ideas, new interest into the Board.
And I think it’s going to be very, very interesting to have them as part of the Board. We are also obviously, nicely moving into a more diversified – with now three female at the Board.
So around 30% will be represented by female at the Board which I think is great. So it is about expanding the Board with new ones very interesting background, so.
On the question about the pipeline, listen, clearly the – I would say, the U.S. is where we see the - probably the most active, because of – I will say some very large deals as you know are progressing well and I think which are very, very attractive.
And so the U.S. is clearly – we are making now significant inroads in the U.S.
And as you’ve seen now it’s now quite supported that the U.S. is the largest contributor to – in terms of licensing.
And we see both, I would say, from license and SaaS. Yes, I will say the rest of the regions are clearly coming back from the COVID crisis and we see both, I will say, Asia, starting as well.
I mentioned we had two very interesting Tier 1 deals that expanded the footprint with Temenos this quarter. But there is more activity happening across Asia or so in Australia which has been a very important market for us in the past and then during COVID it slowed down and now we see increased activity again.
So, clearly, Asia, as well is coming back. I mentioned Europe obviously, Europe, where that I think the regions which has been the most impacted and that has been slow - the slowest to come back compared to – for instance the U.S.
But there as well, we are starting to see some increased activity. There is a need of digitalization across the globe and we see both tracks on the license side, but as well on DSC.
So, clearly a picture which is clearly improving compared to last year, because that is improving compared to a month ago. So we see continuous improvement in the environment which is I will say, giving us ultimately the confidence for the medium term.
Michael Foeth
Excellent. Thank you very much.
Operator
The next question comes from Gianmarco Conti from Deutsche Bank. Please go ahead.
Gianmarco Conti
Hi there. Yes.
Good evening, Max and Takis. Thanks for taking my questions.
I have about three or four. And so the first one is just a quick one around what the one-off, is it’s truly a one-off not just recurring cost or might come back next year?
The second question is, with regards to the lower SaaS ACV, I know you have explained this previously, but my question is, is there a risk there to continue to grow ACV SaaS? It was always into basically increase new winnings and given that the bank environment is quite conservative with regards to cloud, it will be tricky to have this basically grow sustainably from only fintechs and challenger banks especially as consumption is unpredictable.
I am just trying to understand what’s the strategy and how you guys think of guiding for SaaS ACV? The third question is, roughly, I know you’ve given some metrics around the exchange rates.
But could you perhaps can – in percentage terms, what is the FX impact you expect both on CSR and revenues for the full year? And the fourth question is just around DXC.
I was wondering if you could give any update there and more granular detail, for example which has – to any RFPs or if there is just so previous concepts at this time or is there have been any significant developments? Thank you.
Max Chuard
Hi, let me take the second question and the last one. So, on the SaaS ACV, listen, we clearly don’t see a slowdown and we don’t expect a slowdown of our SaaS ACV.
What we expect is a continuous strong – very strong growth of our ACV business. And again, as I said before, Q3, the full ACV has been done just on new logos.
And remember, last year, same that was the year where we had seen no – we had seen some of this moving into ACV. So, I think that’s – it for me, the quarter has been a very strong quarter on the ACV side, because it’s all incremental and there is so much activity happening.
Look at what’s happening on the BaaS side. And the market is bubbling and this is not going to stop and we are extremely well positioned for – to capture it.
Now on the DXC side, DXC, yes, we are involved in some ISP processes. Some are more advance than others.
But as I said, there is also some very interesting activity going on. As I said some of the large pipeline deal activity, some of them are with DXC and some are advanced, some are less advanced.
But it is going well. It is progressing well.
And clearly those are lastly – so it takes time and as we had mentioned when we signed the partnerships at the start of the year, this would be a 2022 story and not having really an impact on 2021. But listen, it is progressing well.
So, it follows the flow. So we are confident that with DXC being the owner ultimately of the ISP knowing the customer actually what we are extremely well positioned to win those deals.
Takis Spiliopoulos
And let me take the other two questions. The first on the one-off for the LTIP.
This was clearly also communicated that way also internally. We have clearly the regular – as I mentioned, the regular salary increases.
People have a viable component in their total compensation. So this is always reflecting the changes in environment.
I think these people which we have now awarded with this loyalty share program, this is also maybe the team or the key people to drive this current transformation over the next three, four years, because you need continuity, you need stability, and I guess, also some of the future leaders. So, clearly, it’s also something we will not be able to afford every year let’s be clear here.
So, now it’s definitely a one-off. On the FX, we always pose the FX rates.
Currently, we basically take last quarter and the spot rate going forward. On the top-line, as most of our revenues are dollar denominated and a bit of euro, yes, you have some impact there, but not much.
So clearly, this is why we give you usually the currency mix, we were short to British Pound, short to Swiss, also short a lot of all the currencies, the Romanian, and the Indian rupee being the most important one. So, this is the way we currently see.
So, this year, yes, we had an overall negative impact on our cost base that we will end up. We are reporting transparently and this is why we also have adjusted the guidance to reflect this.
So if we stay where we are, I think that’s probably going to be a lot maybe a bit of additional headwind. But I think this is in the ballpark as we have guided.
Gianmarco Conti
Okay. That’s fair enough.
Thank you. And just a follow-up on the DXC, just to clarify.
There have been no invites to RFPs, right. It’s still just discussions, some in more advanced, some in less advanced, but no specific RFPs, invites to RFPS?
Max Chuard
No, no, what I say is, some of them are more advanced, which means that there have been an RFP process. And that we – as I said, we are extremely well positioned because of the relationship from DXC and because of what Temenos can bring also to the table.
So I think this partnership really is strengthening our value proposition, strengthening our ability to win the deal.
Gianmarco Conti
Okay. Thank you.
Max Chuard
Thank you, operator. That was the last question.
Thank you very much for attending the call and that we will speak very soon. Thank you.
Takis Spiliopoulos
Thank you.
Operator
Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call and thank you for participating in the conference.
You may now disconnect your lines. Good bye.