Thank you very much, and good morning to everybody. Here in the room is myself, CEO, Christian Kromann; Group CFO, Michael Rosenvold; Head of Investor Relations, Anders Hjort; and former CEO and now Senior Executive Advisor, Klaus Holse.

So we've been looking forward to speak to you all and take you through our Q3 2021 Financial Review. On Page 2, you see the usual disclaimer, that's always good to make sure that it's clear what that one says.

So but I'm sure most of you had already been through that. Today, we have the agenda, where I will start by taking you through the key highlights of the quarter.

Then Michael will take you through details of the financial review and our 2021 outlook. And then we will open up for Q&A after that.

So before we start to look at Page 4, and take you through the numbers, the overall feeling that I'm arriving at is that it's two steps forward and a half step back. And what I mean by that and we will talk you through that is that we have a very good momentum with our existing customers, the appetite in buying into our overall strategy.

We also start to see Europe really moving at a good pace in terms of generating new customers. The obvious half step back, is that we haven't signed a new customer in Q3, which is, even though Q3 is normally a little bit slow, still unusual.

But let us take you through what it ended up at and also give you a bit more detail. So Q3 at a glance, on Page 4, we ended up with an order intake of € 27.8 million, it's €6.1 million up.

So in all and in all whole nine yards, it's a good growth of around 28% of order intake that the parallel revenue growth is 7.1%. And that gives us an EBIT of 24.2% or an EBIT margin of 22.6%.

The 12 month rolling software update and support growth is 2%. And then on professional services, it's pretty much flat.

There is an underlying growth in the business, I would say, but the actual Q3 results is a little bit affected by certain bookings that will come at a later stage. Free cash flow continues the trend we've seen lately at a very good growth rate on €24 million.

So if we then look on Page 5 on the nine month overall results. Overall solid performance that has taken us three quarters of the year with an order intake of [70.6%], which is also is a very good growth number on the whole nine month horizon, good growth.

8.5% on revenue, sorry, €78 million is also a good growth margin of around 23.2%. So also that is going up.

And we are quite pleased that the order book is also continuing the upward trend as a whole. As I alluded to, relatively good pace on professional services with a 5.5% growth for the nine months and also here, a good healthy free cash flow of €79.8 million.

If we then go to Page 6, which is what we've talked about quite a bit, is that that's really the numbers that we are spending quite a lot of time on when we track our internal performance, the growth in annual recurring revenue, which is just short of 10%. So it once again demonstrate our ability to grow our business with our customers and on a recurring basis, which in the end in the transformation we are going through as a company, is an absolutely key performance indicator.

Revenue signed on contract €432 million. Also that number is growing at a relatively good pace.

As I said no new customers, which means that the picture on Page 7 which is the customers we've signed so far has not changed. So I'm not going to spend a lot more time on that.

We also, as we've done previously, on Page 8, we take Q3 announcement as an opportunity to give you a sneak preview into our overall strategy transformation, where are we with that. As most of you will remember, we run a five year cycle.

We are now two-year into that five-year cycle. As we always do, we go back and revisit the assumptions we did when we did it two years ago.

And we're doing a relatively deep dive on an annual basis presented to the Board in September, and then start to implement and then the whole cycle starts again. We continue to have three strategic imperatives.

Customer Experience Leadership, which I would say, also validated by some of the very significant deals we've done in Q3, has really now reached a level of maturity where all of the time and money we invested into understanding our customers much better, is now translating in to real strategic deals, and a real ARR uptick, so quite pleased with the performance on that side. Everything as a Service, I would say we are becoming more precise.

And what I mean by that is, it's now clear that the overall world has a high demand for cloud enablement, probably a higher demand than we thought when we planned. But we're obviously very pleased with the pace that this is going with.

And what it also has now translated into is a large part of our existing customer base has experienced and expressed an interest in moving on their cloud journey together with SimCorp. And, yeah, that's moving forward.

The other thing that has happened probably at an even higher pace, is the interest from our customers to ultimately move further up the value chain with SimCorp over and above the technical services that are associated with the Software as a Service transformation. We're going to give you a few examples of what we mean by that in one of the later pages.

And then the whole ecosystem we are building around us as a company, both from a technology point of view but also the overall culture, is certainly also taking a big leap forward. And I would say we are starting to slowly think much more about ourselves, also validated by our customers as the platform of choice in the investment management industry.

The entire thing stands on the pillar of cloud and technology transformation of all of our technology. If we then look at Page 9, that's a kind of a brush up on what - why is the underlying market reacting the way they are.

And I would say it comes in three pillars, and they comes relatively high pace of each of them. The first one is, obviously an efficiency push that we all experience, we need to do basically more with less.

Our customers is in the same situation, they are also positively impacted by relatively large money inflow in the entire business. So at the same time, they, our customers need to expand their reach in terms of geography or products or the whole nine yards in terms of what they do, but they need to do it more and more effective.

And that has led to a relatively brutal approach, at least from our chair on differentiating between what are absolutely key things that our customers need to do inside their buildings in terms of differentiating themselves as compared to areas that do not really make any differentiation in the underlying business. And once we come to the examples, I think it will be quite obvious why that's a sweet spot for SimCorp to tap into.

Then finally, and I think somewhat fueled by COVID, I think is also mitigating risks whether that's security side or scalability or access to talent, doesn't really matter. It's the whole nine yards.

I would say, all of these things is certainly pointing us in the direction that the strategy we put ourselves into two years ago, is even more relevant now than it was at that point. To put it into a bit of perspective, on Page 10, we try to illustrate a bit what it is we mean when we talk about these things.

And this is a really a lot about lingo. There's a lot of wording going around these things when you read papers from the industry, but we want to try and break it down to something that we can all understand.

So a traditional customer relationship when we go back in time is an on-premise relationship. What we mean by that is that we are producing the software, we're handing the software license over to the customer, then installing them on their premises.

We would typically help them in implementing but they would then run the application, run the upgrade and do all of these things themselves. We still have a predominant part of our customer base in that category.

When we then take the first step to a Software as a Service offering, and I would say, we're probably literally turned the corner now where we consider ourselves a Software as a Service company. That's quite essential for the way we think, the way we operate, the talent we onboard, but it also have certain impacts on the financials that I'm sure we will talk a lot about over the coming quarters as well.

The first level of that is that we take over the responsibility of running the application, including where the tech - kind of the technical infrastructure, the cloud capabilities, for running that. We call that Software as a Service.

It's kind of very mature. If you look at the next Page, you will see we have 50 customers already in that category.

And I can honestly say, when we come out and our customers realize that we're already mature in this space, that's a real enabler of that conversation. Because the last thing you want to do as a new CTO is you want to try something new with a vendor.

We're absolutely in that space and it's firmly accelerating. If we then go to Page #12, I jump over the map but the whole - kind of the whole messaging of the overall map is the mature element of our offering in this space.

You can see we have 300 staff working on this every day and that's growing massively. We're building capabilities for this around the world but we also certainly have a growing customer base on that.

But let's talk a little bit about the new elements of our offerings to make sure we all understand what we're talking about. So if you look at Page 12, you will then see that we are introducing the concept of business operation.

And that's where the rubber hits the road. And that's really where I say our market has become more brutal in separating what they need to do as a company as compared to what, as not differentiating them, in their competitive landscape.

Very good example of that, which is now also mature from our side, is Datacare. We talked a little bit about it a couple of times, but it's really now becoming an integrated part of our strategy.

And most customers are now having a real look at that. And it's ultimately qualitative data on subscription.

That's what it is. You're not installing our software, you're asking us to take all the data sources, quality assure them with the static data, market data or corporate actions, it doesn't really matter.

It's the whole nine yards, we're delivering that data. You can feed it into SimCorp dimension.

If you are user of SimCorp Dimension, if you're not you feed it in to whatever system of choice. So what it also represents is another SimCorp Dimension independent revenue source, that we are also seeing quite exciting in that.

We call it tech-enabled services. And what we mean by that, that's quite essential, is that everything we do in this space, we're using our own technology for higher automation rates, and ultimately, to make sure that whatever we do, we have relatively little exposure to what I would say, warm hands, so real kind of FTE-driven work.

And we're obviously doing that, because our claim to fame is our underlying technology. And to be completely brutally honest, it's also only interesting for us if we can actually use our technology to grade the scale that allows us to earn money on the back of it.

This is really moving and it's moving fast. And a couple of days ago or was it yesterday, we announced to the whole world, our next iteration of the services, which is our Investment Accounting as a Service.

And that's actually the first full scale service enablement of SimCorp Dimension that we have been launching. So let me take you a little bit through that.

What does that actually mean and why we're doing? And then that's what we do on Page 13.

So the current demand is quite clear. The buy-side trend to focus is on core activities, I've already explained that.

And there's a very clear demand on this from us. It's a focus on high level of quality, digitalization and cost reduction.

And we actually already have close to €25 trillion of assets running on our accounting solution, every day. So we are highly proven in this space and it's really something that we're very proud of.

We've done it in many jurisdictions, and it's a key area that we work on. This whole thing is powered by Dimension and we really can use our capabilities from a technology point of view to automate this, a very high target.

The way we go about it is that we ring fence the business unit, we moved our absolutely best people. So Jochen Muller that was the former Chief Commercial Officer in the company, and also the MD of EMEA and APAC has moved in this role, and is kind of taking all of his seniority and his many, many years of SimCorp knowledge to really accelerate this [indiscernible].

It's ultimately a key example of where technology expertise and a service is now an integrated part of our DNA. And it's, I would say, a natural evolution of our Software as a Service strategy, but probably at a higher pace than what we anticipated two years ago, so truly excited and really, really good feedback from the overall customer base.

Page 14 is just to remind ourselves about what it is we're doing. It's technology, technology, technology, and then some people as compared to a traditional outsourcing service where it's a little bit of technology and a lot of people.

And I would assume that is quite obvious why we are going on the right side. But that also requires a high level of discipline, in terms of only going for the areas where our technology is supporting it.

And it also requires quite a lot of discipline when it comes to standardization, so quite exciting. A lot of other things are also going on.

It's fair to say that ESG is something that is very high on the agenda of our customers. It's also high on the agenda of SimCorp from an internal point of view.

But in this particular thing, I want to highlight that we have now launched our ESG capabilities. We are also launching a service on the data side where data management is a big part of ESG, shortly on the top of Datacare or actually embedded into Datacare, but also as SFDI is driving quite a lot of business.

So we continue on top of our service transformation to build small, more nimble solutions that allow our customers to advance their strategy at the right pace. So I would say, ESG is certainly creating a lot of conversations these days, and we are quite proud of our solution as it has a substantial amount of transparency with an essence is what you need when you're running an ESG portfolio.

So that was a little bit about what's going on inside SimCorp at the moment, a little bit about what's going on in terms of our market and then finally a bit about our strategy. But why don't we hand it over to you, Michael, to take us a little bit more through the details of the financial?

Yes, thank you, Christian. And I will start on Page 17, where we have the normal waterfall diagram.

And seen from my perspective, Q3 was, I will say, a rather soft quarter where we were still impacted by the lack of ability to physically meet new clients. And you could almost compare it with a really good football team with skilled players where they might - didn't have the best game but they still managed to make it roll.

So that's how I will count characterize the Q3. So, that meant that we made a revenue growth of 7% on reporter currency and for the first time this year, we actually had tailwind from FX, from currencies.

So, the organic growth was 6%. And on the margin, we made a 22.6% margin which was on level with the same period last year.

If we combine the three quarters on Page 18, then we will have a reported growth of 8.5% and for the first nine months because the first six months we had the headwind from FX, there was a combined tapering of almost one percentage point on from currency. So thereby the organic growth was 9.4%, so close to close to 10%.

And the margin for the first nine months was 23% which was 2% at this point better than the nine months last year. Order intake, as Christian also said, €6 million up compared to Q3 in 2020.

That is a 28% growth in order intake and which to some degree or primarily was impacted by the two significant transformational deals we made which also included conversions from perpetual to subscription based licenses. I will come a little bit back to you know what a transformational deal is and then and why we see a transformation deal like this as something good for the company.

Order intake revenues was €3.2 million, so about the same level as the year before, actually a little bit lower, while we had the more order intake from conversions than the year before with €12 million compared to €4.5 million the year before. And as Christian also said, we didn't sign any SimCorp Dimensions deals in Q3.

So, that is not included in the order intake. If we go to Slide #20, you can see the order book and the development of the order book.

So, an increase of €8 million compared to the last quarter and an increase of €17 million if we compare to one year ago. Datacare and other subscription services, the new kid on the block accounted for €28 million of the order book compared to €8 million, one year ago, so a quite large increase in Datacare and other subscription services.

The CDD part of the order book was about unchanged of at €10.5 million. Then going to the different revenue streams.

And quite clear, very little impact from new license sales, initial license sales, while additional license sales were increasing quite a lot. And I will come back to the composition of the additional license sales in the next slide.

Software updates and support, going up by 3% in local currency in this quarter. Professional services, as Christian also said, a little decline which was primarily due to timing on revenue recognition, as some work require acceptance and that acceptance is expected in the next quarter, so in Q4.

Hosting and other fees, which is you can say driven by our hosted SaaS solution, as Christian also mentioned, that we're going up by 12% in the quarter and 28% in nine months, so, good momentum in the SaaS business. Then going to Slide 22, where we have the split of additional license sales on, you can say what we call, a regular license sales renewals and conversions.

And if we start with the regular additional license sales, then we had an increase of €2 million compared to Q3 2020, so and more sale of additional regular license sales than one year ago. While we also saw the two conversions impacting additional license sales positive by almost €10 million, which was much more than the year before.

And with the deals we have made in Q3, we also have some revenue recognition which will be revenue recognized in the future of which €7.8 million will be recognized in Q4. Renewals, we have a small increase in renewals in revenue recognition of €0.4 million.

If we go to Slide #23, then a similar picture but also a little different, additional regular license sales was $2.7 million lower than in nine months 2020. Revenue from renewals were €4 million higher and conversions were €7 million higher than the year before.

Then I would like to go to Slide #24 where we are trying to give an example of what does it mean when we are talking about large transformational deals. And this is for financial reasons, a illustrative example.

But of course it is based on some of the discussions we had with several clients. So we believe that you can say the levels we're talking about here is not unrealistic, but of course, it is an illustrative example.

So, if we had, in the good old days a very, very large client, had made perpetual licenses for over a period of time of up to €15 million and thereby paying maintenance fee of €3 million per annum. And we are then saying now we need - now the client wants something else.

They want to have a different kind of arrangement where they are engaging more with us. What could that then look like?

And here in this example because of the change, they are going from a perpetual agreement to a subscription agreement. And at the same time, they are buying extra stuff, they're buying Datacare, and they are also buying other services, like extended support, eLearning, third party products and so on.

And that means in reality from a P&L point of view, that due to the conversion, we will have some upfront license recognition. But I think what is more important is from a cash flow perspective, we are actually in this example, going from €3 million in annual inflow to €5.5 million annual inflow.

We will have less in maintenance, but then we will have the subscription path will actually be higher than then the old maintenance because of the extensive scope. We will also have basically on top of it, we will have other services on top of it, so, going from €3 million in cash flow to €5.5 million in cash flows.

Then what very often also happens is that we will also do the hosting as part of the strategic view. So, if we go to the next slide, which is on Slide #25, then we have added the hosting element on top of the Datacare and the other services and the [indiscernible].

And then you suddenly go from €3 million to €10.5 million in inflow. Of course, some of these additional both services and the hosting part will also embed some costs.

So it's not like a net cash flow we're talking about here, but also the net cash flow will, of course, be higher than the €3 million we have in the past. So, here we are trying to see, so illustrate why are these conversions, why these transformational deals quite important and interesting for us.

Then going back to Q3 on Slide #26, where we are looking into the cost development. I think we have, overall we have had a cost increase in the quarter and also in the nine months of 6% where we have saved some money on admin costs.

We have had not that much sales and marketing costs due to lower inflow of the new deals. And then we have had the most increase in cost of sales for two reasons.

First of all, because there has been a real increase in cost of sales, but also because we have made a reclassification between R&D cost and cost of sales, which is having an impact on both numbers. So that's one of the reasons why we have a pretty large increase in cost of sales.

Then on Slide 27, as we also - Christian also said, solid cash flow performance 35% up in Q3 and 13% up for the first nine months. So a cash flow development, we are pretty satisfied about.

And for the FX part, due to the latest development especially with strengthening of the US dollars, we expect very little impact from currency fluctuations now of around 0.9 - 0.1% while we in the last guidance expected 0.5. But so very little very little impact from currency fluctuations.

And then the last sentence I will say is that in our new guidance or in our guidance here, we expect conversions and renewals to have a more positive impact on both revenue and EBIT margin than we anticipated in earlier guidance, which is also of course, due to what we have done up until now, but also what we see for the rest of the year. By this, I will hand over to questions.

Yes, thanks for having me on. Maybe you can, so a couple of questions.

The first one is around those two large conversion deals. Usually, I mean, you describe the impact of that but I think that was just a standard conversation.

In the past, you always talked about those specific deals, what would be the annual cash flow uplift on that? So maybe you can be specific on those two deals as a whole.

Then the second question is, given this upgrade of expectations in terms of conversion, and with the unchanged guidance, it means actually, that you somewhat have delayed or canceled some of the pipeline deals. So maybe you can talk about the pipeline for rest of the year, and then like starting to think about next year.

And then the last one is just in terms of R&D and going forward. So it seems like you have changed it.

Is there anything we should know in other 20%, your guidance to, this being said? And has the cloud lift been completed and R&D should trade slightly downwards going forward?

Thanks.

So thanks, hi, Hannes. I think I will take the two first questions and then Christian will take the last one.

So the first question regarding the impact of the convergence. What we're writing in the report, which is very similar to what we've been giving in the past, is that it will have a net positive impact on cash flow, the two conversions.

We have not said how much it is, but it will have a net positive impact. So we have said what is the negative impact on maintenance, and then we're saying it will still have a positive impact on the future.

So the future sales will be higher than what we lose on maintenance. Then, the other questions that was regarding conversions and the outlook.

And you are right, in our - as we stick to our guidance and the guidance is maintained, then when you have a larger impact on conversion, that also means that you will have this impact from non-converted deals and that is primarily within new license sales outside EMEA. So that means in North America and in APAC where we do see some postponements.

And then I'll hand over to Christian for the R&D part.

Yeah, maybe I can add quickly to what Michael just said. So I think there's kind of two effects to monitor, from our point of view.

And one is that at least the [last were] the transformer deals, it's quite often there to get the customer over the line in the end that requires face-to-face. And that has been tricky, especially in APAC and North America.

That's opening up a bit, at the moment, which is nice. And we hope it will keep that way.

But the other effect is that in order to make a decision of a transformative nature, you need to have a strategy work prior to that going on at the customer. And that we can see has also slowed down because they have been, frankly, more occupied with making sure people got back in work and all of that stuff.

And so we need both to work in the right direction. I would say, just the last couple of weeks, we've seen a bit kind of movement in the positive direction.

But it's like an older diesel train that kind of needs to get moving. So it will certainly take some quarters before we are back at full pace.

And that obviously assumes that somewhat that the world keeps being open, which I'm pretty confident that it will. From an R&D point of view, I would say probably things look a little bit different.

And what I mean by that is that we're taking a close look at our Cloud project, and has kind of broken it down into two buckets. One is what drives direct customer value.

And what is more an internal thing we need to do to make sure our offering scales to the maximum. And we have chosen to up prioritize the areas that have direct customer value generation and then spread the other thing a little bit over a longer time.

And the reason for that is that it's ultimately the customer doesn't really see it, it's more a scalability thing that is going on our side. One additional positive comment is that we're now going Live with the first Microsoft Azure based customers.

So a lot of the investment we put into natively puts SimCorp on Azure, is now starting to also pay off. And on top of that, some of the service offering we are putting out there in the market, we're also putting a lot of investments into getting them off the grid.

And that falls into a couple of different components. One is to make sure the product is as standardized as possible, so ultimately make scalability and therefore earn money on the back of that.

And then finally, also requires a basic set of knowledge that we were putting into. So I would say this traditional R&D percentage will make less and less meaning over time, because in the end, we are driving ARR, and that is kind of investments across product, but certainly also service and the skills acquired to do it.

So we're not guiding about the next year. But there's certainly a lot of things we want to do.

Now we need to make sure through the budget process that is somewhat linked to the revenue expectations as well. But we will come back on that when we meet again in three months' time.

Understood, thank you.

Thank you. Yeah, I have also some questions.

I will take them one by one. The first goes to the order intake.

Just to be sure about what we saw in Q3. Have you seen lost, canceled projects in the pipeline, or it's more about undecided projects?

And also, has been any shift from Q3 to Q4, in the order intake? That'll be the first one.

So we haven't seen any cancellations of existing customers, but I assume you're referring more to new customers. And so I'd -

In the pipeline.

I would say the - in Europe, it's kind of the normal situation where we kind of win our fair share of what's going on. And that will continue into Q4 and we have some - we have a pipeline that kind of supports the outlook that we've given also on new customers.

In terms of North America and APAC, it's much more about continuous delay. And some of them are delayed into Q4, but I think most of them, if not a substantial part of them are delayed even further than that.

Okay. And then compared to an old topic, employees, and is still slightly flat-ish, is up not by much.

And you still have a lot of vacant positions on your website. So maybe you can update on how does it go with adding enough resources and not least enough resources to support the whole cloud journey?

Good question. So I think it comes in a couple of different parts, right?

So we are doing quite a lot to make sure that the talent we already have, are staying with us. That's somewhat, obviously something is compensation driven.

But I would say most of the things we do are not compensation driven but obviously we are seeing the same pressure as the rest of the world and was it - was a 6% inflation they're expecting now North America, whatever it is. So obviously there's something going on there.

We've also invested quite a lot into infrastructure from a location point of view through '21. We upgraded our office in Warsaw.

We have established an office in Manila. We have also established an office in India.

And I would say we are preparing ourselves for a world where we have remained to have employees close to our customers. But we certainly also now see a real step-up in terms of having employees that are part of a global delivery model.

And that also means that we now have more strings to play on in terms of how we acquire talent than we had just 12 months ago, but it certainly also is needed but because as you rightly say, Claus that, it's a different ballgame. But we - I think we're doing all the right things.

On top of that, we have also continued to invest in partnerships with companies that can generate some of that capacity in a more flexible way. And that has turned out to be a good choice.

So in reality, when we look at our entire capacity, it's a bit higher than what you see from a pure FTE point of view. And we will certainly continue down that road as well.

But as I also have said, we now established our own footprint in some other areas of the world where there is a bit more easy access to some of this talent.

But no doubt, it is a challenge for us and for everyone else.

Yes.

Yeah, for sure. And the decline in professional service or revenue for professional service versus Q1 and Q2, is this also impacted by lack of resources or lack of hours to be invoiced?

Yeah, just a follow up.

Yeah, it's not - so I can say very clearly, it's not resource driven. It's primarily timing, and activity driven.

But it's not because we can't get the resource.

Okay. Then just as the final question, coming back to the slide you showed about the cash flow impact where you have these conversion projects.

And then you - as you also said, this was more from a revenue or incoming cash flow point of view. And it looks really, really good, obviously.

But what if you were going to do the same example on a more EBIT line, so the cash flow, net cash after cost, how would these €3 million to €10.5 million looks?

It is, of course, a very relevant and good question. I would say it depends also very much on the maturity of the different parts of what we are observing.

You can say some of it will be having a low margin in the beginning, and then the more scale you get, then you get to a certain margin. Some will have very little margin, so for instance, the hosting - the pure hosting part, that technology, you don't make a large margin on because it is a commodity.

And then I will say many of the adjacent services and also services related to the hosting, we do expect to make a good margin based on both our own intelligence but also what we see other people are able to or other companies are able to do in this field. But of course, the first few clients you do then you don't have the scalability, then you'll make a low margin, then when you start getting scale, then you make a higher margin.

And so let's just say, for the next three years, will you then be able to reach enough scale to really matter, or it is more for the long term?

It depends, I think some of the some of the services we will already - from the beginning may get these margin. On some of the other services, it will take some time before we get the right scale.

So I think it is a combination.

Okay, thanks. That was all from me.

Thanks.

Thank you, operator, and thank you for taking my questions. I will also take them one-by-one.

And I would like to start to understand a little bit more of the delayed processes in North American and APAC. I guess you took some in US, nine front-office deals, I think in 2020, and I guess most of those were already planned for ahead of the COVID-19, and so forth.

But if you look at the delays, you're seeing in, for example, in US now, is the delays decided upon in the Board level, is it the management Group C level? And how fast can we expect this process to restart?

And will the restart include a full procurement process from the beginning? Or is it more that they can start where they stopped, so to say?

It's a bit of a bit of a mixed bag. So let me see if I can give you a few data points.

So there's, kind of one part of our offer part we're actually one plus one. But the client reporting Coric is clearly speaking to the urgency of increasing the digitalization of client communication.

So that's actually going quite nicely. There's also an indication that it is of an investment size and magnitude that makes it feasible to take these decisions at a lower level without involving Board and anything like that.

So we are kind of we have a positive expectations that we're going to land more customers on that also in Q4. And when it then comes to these things, replacing 35 systems and re-planning the whole thing and all that, that's - it's either delayed because they are concerned about the money they need to put into it or it's withdrawn, which we've seen a few cases where because they simply are doubtful that their staff is capable of lifting the task.

And so I would say, if I look at what has been going on, and I kind of extrapolate another couple of months, and then we will go into next year with roughly the same size of qualified pipeline, I would say.

Okay.

Than we had a year ago but then if I look at the conversion rates on the pipeline we entered into 2021 with, our expectation, that's obviously where we're coming out with a with a lower result. So it's all about, are we starting to see data point indicating that that conversion rate and decision speed is going up.

And that's why I was say, well the last month, yes, some signs but it will be wrong for us to just go out and say we expect North America, in particular, but certainly also APAC to be back on a pre-COVID pace. But it's kind of both.

It's a little bit of concern whether the staffing is capable of lifting the task. It's relatively few that are making your financial argument for not doing it because as I said, inflow is high and money is okay.

But it's kind of that, do we really have what it takes to make that transformational choice. And most people are making the decision to withdraw at the moment, outside of Europe.

In Europe, they are pushing along.

Thank you, great answer. May I ask you also a little bit on your move to the global delivery model, technology first, etc., you talked about the investment level, Accounting as a Service investment done.

Can this also help you to broaden the market below the Tier 1's that you focused on so far, so to say and also perhaps help out to make it easier for Tier 1's to do exit or decisions on them on investing in your systems?

Yeah, so I think there's kind of two questions in that one. Those, will we make it easier for our normal addressable market to make decision?

The answer is clearly yes. And that's why I say, we are now coming to an inflection point where we talk about standardization for quite a while, as a facilitator for our customers to make the decision.

Now, it's a requirement for us to sell our service. Now, it's kind of taking a turn up in importance, and also why we're investing in it.

So that's certainly a key. Will we end up broadening our addressable market?

Yes, eventually. We've also been quite firm, that that's not a priority for now.

Because we believe there's a huge opportunity in our existing market. And there's also a task of prevention, of making sure that our customers understand that they can take this journey with us and they don't need anybody else.

Great. And my last question, and it would be more to Michael, perhaps on the view on the salary inflation for perhaps next year compared to what you saw this year and also on the impact on annual maintenance revenue.

I think it was a negative €1.1 million was mentioned. How a large part of this will impact Q4, all else equal?

Would be my last question.

So saving the last part of your question, first, very little Q4 impact from the conversion, that's a long deal and many, [whole] year deals and there will be very little impact in Q4 on the maintenance part. In terms of inflation and salary increases, yeah, we certainly expect that the salary increase next year will be higher than that this year and the year before.

I think we have been quite specific about our salary increases for the last couple of years, which has been about a little more than 2% on an annual basis and we certainly believe that salary increase next year will be higher. For the maintenance, the ongoing maintenance in both of our contracts, we have a price indexation clause.

So you can say some of the salary increase will be able to, in that way to pass on to the clients in terms of the subscription part and the maintenance part.

Okay, perfect. Thank you.

And good luck in Q4.

Thank you.

Thank you.

Good, thanks so much for taking my question. A couple of questions to Christian.

Firstly, on the - just following up on the comments you made that there has been some closing deals. And just to kind of ask about the business model and adaptability of the business model in a post-COVID environment.

What we have observed in a lot of global software companies, is that a lot of companies have adapted and kind of moved to a virtual selling model, and are very successful in doing that. What is preventing SimCorp from kind of doing that?

And is it more of an industry-wide problem, and do you see your competitors, also kind of facing similar kind of, let's say, longer trade cycles and lower pipeline conversion issues? That's my first question.

Secondly, on just competition, can you just update - give us an update on the on the competitive landscape? Obviously, the usual names like Blackrock and Charles Schwab are there.

But are you seeing any kind of new cloud native vendors coming to the States? I mean, we had Clearwater Analytics IPO recently, are seeing that those coming to the market and coming into your space?

One more. And I have a couple of thought for Michael, that I'll [indiscernible]?

Very good questions. So there's certainly nothing preventing SimCorp from moving our sales methodology to a more digital one.

And we're doing that at a relatively high pace, investing into both technology, but also kind of mindset and standardizations of our demos, and all of these good things. And our ultimate goal is that in not too distant future, it should be feasible to actually go on our web page, put in a purpose, and then have access to some relatively simplistic demos.

So we're doing that at full steam and that is already having a positive impact in all of these things. But we also have to be honest to ourselves that the bigger deals we do has such a transformational element that it can be career limiting on both sides.

I would almost say if you kind of don't have that underlying trust, there's nothing a contract can deal with. And we quite often know when we want the deal.

And it's typically that kind of moment of truth where you kind of share the same values and have the same ambitions for going that way. And we can do many things but at least we haven't yet found a way of anything that beats sitting around a table and creating that relation, but we're doing everything we can to make everything else digital.

And, yeah, that's certainly a very good question. The question about competitors.

So we currently see them in a couple of different groups. There's no doubt that Blackrock is still out there.

We believe we have an angle on them. We certainly also know that they believe they have an angle on us, but it's somewhat still seem to be a game about whether you want to be associated with Blackrock or not.

And that seems to be relatively stable in this development. I would say Charles River, we see less and maybe that's something we need to figure out.

But generally, we somehow also through our strong relationship with State Street, we believe that it becomes more and more difficult for them to find an alignment about that kind of two stringed strategy. And certainly our partnership is taking, a very positive turn and momentum at the moment where they decided to put SimCorp dimension into Alpha for insurance customers in Europe.

And then I would say, there is certainly a couple of new companies. Some of them are coming from a cloud native technology point of view.

Like recently, we saw Infusion IPO. And other companies are taking kind of a service first, with less technology enabled work.

Clearwater is a good example of those. In the end, we are always intrigued by people that are changing the underlying business model.

We are certainly happy they are now publicly traded because finally we have some proper comparison. And we obviously noticed they have good growth but they are also are yet to demonstrate that they can actually make money on the back of that growth.

But we believe Clearwater has an interesting offering. But we believe we have better tech and that's also why we decided to service enable that and go hard after Clearwater.

Got it. Thanks, Christian.

And just a couple of financial questions, firstly on gross margins, gross margin. Gross margins have come down quite a bit in Q3 and have been kind of trending down.

Is this driven by kind of more of hosting businesses you are undertaking?

Yes.

So my question is, is it driven by your private cloud? And if you, kind of, once you have the - your business up and running as you move more people to the public cloud, is it more of a SaaS model where it should not have an impact on gross margin?

Yeah, I will say, there is still some - I think, first of all the hosting cost is going into that line. And that also means that on - as you grow, grow hosting more than you grow the rest of the business, then that will increase that cost line because that is almost a one-to-one, as very little margin is on the hosting part.

So that is one element. Another element was the internal move we made where we took a department which used to be part of the R&D cost, where we thought it's probably more a kind of an operating operation.

And therefore, that is now part of the cost of sales. That happened in Q2.

So that means that both Q2 and Q3, they have that move up of cost. And so but in reality, we're also spending more cost on the SaaS part than we did in the past.

So if you - just kind of a philosophy question, if SimCorp moves to a 100% SaaS model, 100 or all your customers moves to SaaS, in let's say, 10-years' time, would you expect the gross margin of the business to be higher or lower than today?

It should be, when we're fully scalable, it should be about the same.

Got it. And now I feel like you're moving more and more to an ARR metric, which I think is a fair point.

But can you comment on the churn on that ARR, which you're seeing currently?

So on how much we're losing?

And then yeah at any, well or obviously ARR is a combination of subscriptions and maintenance and everything in there. So what is the typical churn which you see?

How many kind of customers, either customers moving out or customers downsizing the contracts and so on?

No. No, we see, I think there are two elements in that one.

There's one where, do we lose clients? And in the past, we have lost between two and four clients per annum and primarily the smaller ones.

And we announced that once a year in connection with the annual report. I will say we haven't seen any uptick in that part.

So it's not like you should expect seeing any uptick in cancellations. And in terms of when we do the renewals, it's still early days, but the renewals we've made up until now there has not been - they have not been smaller than what they used to be.

It's actually more of the opposite, that we have been able to upsell a little bit. But of course, it's a relevant question.

Because when you have the subscription model, then the customer of course also has the opportunity to decrease scope but up until now, it has been same level or above.

But I would say, most of the conversation, understand that it's a pivotal point they make once they start to give some of their either technical operations or business operations to us. So I would say I would expect as a basic statement or kind of an overall statement, that it becomes even more sticky through that.

Got it. And would you consider giving us something like a next renewal rate kind of a metric in future?

Just kind of enable to see how much of an upsell or cross-sell is coming through?

Yeah, let's consider that. Yeah, we will take it as input.

And last question for me, you commented about inflation. Can you comment on attrition, like are you seeing above normal attrition or are you within your normal kind of range right now?

I would say a little increase. It's not substantial, but a little increase.

But I would say compared to the rest of the industry, it's -

But then there also you have to remember that normally because we disclose this on an annual basis, so it's very popping information. Normally we have been below 7%.

So we are normally at a relatively low level, and we've seen a slight uptick, but it's not significant.

Okay. Thank you, so much.

All the best for Q4.

Thank you.

Thank you.

Thank you for taking my question, I'll do it rather quick. Two questions on the guidance.

First, on your margin guidance, is it fair to assume that sort of there is a high correlation between your top line and your margin? So if you're in the top end of your guidance range on revenue, you will also end in the top of your margin range and vice versa?

Yes.

That was good, thank you. And then the question, to end in the high end of your range, I mean, you need to do calculate around 14% growth to Q4 on top of a pretty strong Q4 last year because of State Street.

Is that even realistic to - well I mean, what kind of scenario should play out for you end up in the upper range? It seems very optimistic.

But you're absolutely right. To enter the upper range we need to do slightly better.

We need to do better than last year in order to end in the middle upper range. It's a little better than last year, but not significantly better than last year, so you're absolutely right.

It is - it will require that we do slightly better than or better than last year to get to the upper end of the range. And of course why we keep our guidance is because we look into our pipeline and see what do we have in the pipeline, what is possible based on the likelihood of signing deals and that's the basis for the guidance.

But you're right, we are, once again, very back-end loaded and in order to deliver, we need to deliver as good as we did last year.

Just an add-on to that, so to meet the top end of the guidance, it's a prerequisite that you get some momentum in APAC and North America?

Yeah, make some very large deals in EMEA.

Okay, that's all for me. Thank you very much, guys.

Thank you.

Thank you.

Great. Thank you very much.

Well, very good questions and thank you so much for participating. And yeah, see you roughly three months from now.