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Edited Transcript of SIM.CO earnings conference call or presentation 5-Feb-20 10:00am GMT

Q4 2019 Simcorp A/S Earnings Call

Copenhagen O Feb 10, 2020 (Thomson StreetEvents) -- Edited Transcript of Simcorp A/S earnings conference call or presentation Wednesday, February 5, 2020 at 10:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Klaus Holse

SimCorp A/S - CEO & Member of Executive Management Board

* Michael Rosenvold

SimCorp A/S - CFO & Member of Executive Management Board

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Conference Call Participants

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* André Thormann

ABG Sundal Collier Holding ASA, Research Division - Analyst

* Claus Almer Nielsen

Nordea Markets, Research Division - Senior Analyst of Capital Goods and IT

* Daniel Djurberg

Handelsbanken Capital Markets AB, Research Division - Research Analyst

* Hannes Leitner

UBS Investment Bank, Research Division - Equity Research Analyst of Software

* Magnus Thorstholm Jensen

SEB, Research Division - Senior Equities Analyst

* Poul Ernst Jessen

Danske Bank Markets Equity Research - Senior Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by, and welcome to today's Annual Report 2019. (Operator Instructions) I must advise you that this conference is being recorded today. And I would now like to hand the conference over to your host today, Klaus Holse. Please go ahead, sir.

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Klaus Holse, SimCorp A/S - CEO & Member of Executive Management Board [2]

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Thank you very much, and thank you to all of you for joining this call where we're going to talk about both fourth quarter results and also the full year results for SimCorp in 2019.

If you flip to Slide #2, it has the disclaimer that we always give, and most of you have seen this one before. And if you haven't, then I'd just encourage you to read through that as everything we say from herein on is governed by that disclaimer.

On Slide #3, you see the agenda for today. So first of all, we're going to walk you through Q4 and 2019 key highlights. I'll do that. Then we'll skip to a more detailed view on this that Michael Rosenvold, our CFO, is going to do. And then Michael will also give you the outlook for 2020. And then at the end of this, we expect there to be a Q&A that will be led by the conference call.

Flipping to Slide #4 that talks about our fourth quarter at a glance. The fourth quarter was largely in line with our expectations for the quarter. It was a quarter that in reported revenue was about flat, 1% down; in organic revenue, it was 5.1% down, but largely in line with what we guided and also in -- okay.

And so largely in line with guidance. On order intake, we signed 5 new SimCorp Dimension clients. We signed a new SimCorp Gain client as well in the fourth quarter. That gave us a total order intake of close to EUR 35 million, which is down by EUR 26 million over last year.

In EBIT, we came out at EUR 34 million, which is a decrease of almost 17% from the year before. And then the growth in professional services came out at 19% in reported currency, but in organic terms, we came out at a 14% growth.

The software updates and support growth was 12%, a little bit down rolling 4 quarters over the third quarter. And just for the fourth quarter, 6.8%.

Free cash flow, EUR 4.9 million, down from EUR 16 million in Q4 last year. And of course, that's the lower operation profit that comes from the quarter that is a little slower than it was in the fourth quarter last year. So overall, a quarter that was a little slower than our fourth quarter in the previous year, which, if I can remind you, was a particularly strong quarter in that year. So a tough comparison in many ways.

If we then flip to Slide #5, that gives us kind of the overview of the full year, so the fourth quarter and the 3 preceding quarters in one go. There you see an organic growth of 15.5%. And all in all, almost a 19% growth when you look at the reported revenue. That's a number we are quite happy about.

On the EBIT side, we came in with a reported EBIT of 28.1%. And in total, almost EUR 128 million in EBIT.

Order intake was EUR 98 million, and that comes from selling to existing customers, but also signing 16 new customers for SimCorp in the year, 12 of those for Dimension, and we'll walk through those in a minute, and then 3 new SimCorp Coric clients and 1 new Gain client, with a good spread across the world, both the U.S. and so on, and we'll get back to that in a later slide.

In professional services, we grew 14.6% if we look in the reported currency. If we look at organic growth, which kind of takes out gain and benefits we get from the currency, it's 11%.

Order book stood at EUR 9 million less than what it was the previous year and that was at EUR 36.4 million as we enter this year. And the reason for the drop is, as we've talked about in all of the previous quarterly calls, that we revenue recognized a big deal we did in Asia at the fourth quarter of 2018, and we did not have any deals in this year that kind of have revenue recognition extraordinarily in 2020.

Free cash flow is about EUR 10 million down over last year and sits at EUR 71 million for the year.

So overall, I think that we, as a management team, would say that the 2019 as a full year was a good year for SimCorp, a record-breaking year, both in terms of revenue and EBIT.

If we then move to talk about the new clients that are on Slide #6. Then on Slide 6, you have the preceding 3 quarters, and I think we've walked through all of those in previous calls, so I won't spend much time on that just as a reminder.

If we then move to the next slide that shows the new clients that we actually signed in the fourth quarter, then you will see a total of 6 clients were signed in the quarter as we said previously: one for Gain, an undisclosed investment manager; and then 5 for SimCorp Dimension; Athora in Belgium, which is a back office, one undisclosed in the U.S. and one in Canada and then a U.K. or Swiss asset manager, depending on what you look at it, and the GAM, which was in a previous life, an existing customer that opted out of the system and was out for a couple of years, it is now back as a full front-to-back client. That we're quite happy with, mostly focused on front office. Also, Coric and Gain, so a full platform that we're now going to be implementing in 2020.

Those you pretty much knew about as we exited the fourth quarter because that was the trading update we gave when we signed the GAM agreement, and then the last undisclosed manager happened on the 31st, so a New Year's present to all of us, I guess. And that is also undisclosed and even the country is undisclosed on this one. We'll get back to that as we get closer, but also a full front-to-back in that sense.

So overall, a good year, 16 new customers, 12 Dimension customers in a year. And as you can see, 4 in North America, a few in the U.K., and then the rest spread out well across Asia and Europe. So overall, a very balanced portfolio of new clients in the preceding year.

If we then flip to the next slide, you see kind of the global market share didn't change much. In -- as such, it sits at 15% at the end of 2019. The headline here says 199 SimCorp Dimension clients. I can happily say that it should say 200 because there was a small client that signed in January. We didn't make a separate slide on that, but it actually sits at 200 now. And what you see, as I said, that we have a good spread of the new clients. You saw -- see those with the pluses, except in Southern Europe, and we gained market share in each of the markets we're in. You need a few more clients before we can up this to 16%, but we're working on.

If we then flip to the next slide, then you see all of the products that is in our portfolio today with SimCorp Dimension, SimCorp Coric, SimCorp Gain and then SimCorp Sofia that we acquired in Italy.

And as you see, it's more than 300 clients in total, 200 on Dimension and then 30 on Gain and Coric that are not SimCorp Dimension customers and then 43 in Italy on SimCorp Sofia. So overall, a total of 300 clients across the 4 brands.

If we then flip to the next slide, and we kind of look at how did we then do across the world, then I would say North America, even though we signed 4 new deals in the year, it was below our expectations as we only grew the total revenue by 4%. There's still upside in that market, and we expect to see more as we get into 2020.

U.K., Northern Europe and Middle East performed very well in 2019, increasing revenue by 15% and that's good performance across Northern Europe and Middle East, but also that we saw the return of the U.K. with that market finally coming in with new customers. So very clear that the merger we made of these 3 market units has given us strength. It has allowed us to take some of the experience we have had in Northern Europe and Middle East and apply that in the U.K. and thus get new clients in that area.

Southern Europe, below expectations, declining revenue of 11%. You saw that there was not any new clients coming in there. The good news is that the client we signed in January, even though small, it's in Italy. So we're getting traction again in Southern Europe.

Central Europe, 2 new clients, revenue growth by 12%, quite happy about that, given it's a very mature market for us and good growth.

APAC performed, again, strongly in '19 and more than doubling the revenue over '18. We need to remember that in '19, we did recognize a deal that was signed in '18. But yes, '18 was a good year for Asia Pacific and '19 was even better.

So that's kind of how we look at the 4 geographic market units.

If we flip to the next slide, then we'll give you kind of a view of the products that are not the SimCorp Dimension products.

So SimCorp Coric had a very good year in 2019. We got revenue from new sales that was recognized in the regional business unit and there was 6 new SimCorp Coric clients signed in 2019. So that's quite healthy. We now have, as you've seen, 66 customers in total, some of these also being SimCorp Dimension clients.

SimCorp Sofia, the Italian acquisition we made, continues to perform very well. Solid performance with a growth of 7%. That growth mostly comes from us doing more and more services to the existing customers that is in the market, and we're quite happy with that. We did not sign any new clients for SimCorp Sofia in 2019. That was not our expectation either. There were 4 smaller clients that were merged with existing SimCorp clients. We see some of those mergers in the insurance business in Italy, where there's consolidation going on.

So the customers are still on SimCorp Dimension, but now part of a bigger setup in services.

SimCorp Gain is the new person in the family you could say. We acquired them in August, August 1, and we rebranded the product to be called SimCorp Gain.

In total, we had EUR 5.5 million in revenue in our ownership period, and we got 1 new client in that period as well. We also sold SimCorp Gain to a number of our existing customers in that period.

The total number of SimCorp Gain clients is now at 56.

So that kind of gives you an overview of the performance in the business units. And then the next couple of slides, I'll skip out of what we did in the fourth quarter and the full year and just give you a short reminder on the strategy we announced in the third quarter.

So if you now move to the next slide, you will see the winning aspiration we have as a company, we clearly want to be the #1 in our space, and then we'll kind of want to expand the playing field. I think that, in some senses, you could claim today that we are #1 in the playing field of the very biggest asset managers in the world for full front-to-back solutions. There's no others that have as many clients in that space as we have today. So we think in many ways, we are #1 in the space we've defined. It's a fairly small space, given that it's only 1,350 customers in that space. But still, that is the space we're in, and we're happy about that.

We're continuing to expand the playing field. You saw that with the Gain acquisition, where we also expanded into data management. And you'll continue to see us getting into new fields like we did with Alternative and so on. So that's going to happen as we go.

If we flip to the next slide, then it kind of mentions the 4 strategic imperatives that are there that will allow us to do this. And the foundation of this is the shift to cloud, the big investment we're making this year as well into cloud technology. And then on top of this, we are building this new customer experience leadership team. That's launched, it's running in 2020. And that's going to give us more insight to what our customers do. It's going to enable us to better manage our customers to be successful at adopting the full system.

We're moving towards a world where everything is a service. So we're delivering more and more as a service. You also saw in 2019 that a significant part of the new customers coming in is SimCorp-as-a-service deals and not just software that we're delivering. So we're on the road to make that happen.

And lastly, we've opened up the system for more partners in the ecosystem. Today, there's about 25 partners that partners with us. And I think in 2020, you're going to see more partners coming into the ecosystem and gradually, that's going to be a large ecosystem as we grow.

Lastly, if you flip to the last slide I have, which is the updated must-win battles. So these are the 5 things that we are focused on in the short term of 2020. We still focus very much on making front office a success also in North America, where we still need to have a front office only win. We're working very hard on that. But that is still on the list.

Alternative Investments, we've done quite well. We now have more than 40 customers on the platform, which we're quite happy about. The standard platform is now sold with every new implementation and is also part of the sales we do to existing customers. We keep investing in this. Building out the Standard Platform is now not about selling it and getting it to customers, it's now building out the coverage of the Standard Platform that's really there.

The cloud lift is the really big investment that comes over the next 6 releases, 4 of those happening in 2020, that's the majority of the lift we're going to do of the platform. And then lastly, SimCorp Gain and DataCare is the last must-win battle. So that's kind of what concludes the high level of 2019 and then a little bit of the future look.

And with that, I'll give it to Michael to take you through a bit more details on the financials.

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Michael Rosenvold, SimCorp A/S - CFO & Member of Executive Management Board [3]

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Thank you, Klaus. I'm now on Slide 16, where it's a little reminder of the key -- or the KPIs for Q4 2019. And I'll say there are 2 key observations here. The first one is that, as Klaus also mentioned, it is a very tough comparison base because Q4 2018 was really, really strong. And then the other observation is that in '19, we managed to have a more evenly distribution of orders throughout the year. And by having a more evenly distribution of orders, we also had a more evenly distribution of the revenue and EBIT.

So if we look at Q4 '19 isolated, it was a decline -- a slight decline in revenue and a negative revenue growth of 1%. And if we look at it organically, minus 5%.

If we look at the margin, it was a decline compared to the very strong Q4 '18, but still an organic margin of 28%. So that is also, I think, important to notice.

Then moving on to the full year on Slide 17. I think the key highlights here are revenue growth of 19%, pretty strong and also organic growth of 15.5%. So a very solid organic growth.

Looking at the margin, we had an organic margin of 28.6% and this is actually an improvement of 1.7 percentage point compared to 2018, so an almost 2% improvement or increase in the underlying organic EBIT margin.

Then move on to -- moving on to Slide 18, where we are comparing our achieved results with our guidance. And it's quite clear that we ended in the upper range of our guidance.

Starting with revenue. So we were having a guidance of between 12% and 17%, and we ended up at 16.9%. And of course, when we are ending up at the high end range of the guidance on revenue, that also leads to we are ending up at the high end on EBIT margin. So there, we ended up at 27.7% in local currency compared to the guidance between 25% and 28%.

Then looking at order intake. Again, very clear and more -- that's on Page 19, and more evenly spread over the year of the order intake. So in '18, we were very back-end loaded. In '19, we managed to realize more of the orders in the first 3 quarters also. And that, of course, also means that Q4 were significantly down compared to Q4 2018.

Please also bear in mind that in '18, we had this large new order in Asia. So that was also impacting the order intake in Q4 '18.

And then finally, 2 more observations. CDD order intake in Q4 was significantly lower than last year. Last year, we made a very large deal in Q4. And this year, we have not taken in as much CDD as we had in 2018. And then finally, additional licenses were EUR 3 million lower than the year before.

If we look at the client-driven development, then both in Q4, but also for the full year, we have sold significantly less CDD to clients as we want to also focus very much on what we have already sold and deliver that and also using resources on the client list. And that means, of course, that order intake from CDD is lower than the year before.

Then 1 client converted from perpetual licenses to subscription licenses in Q4 compared to 3 in Q4 2018. And if we look at it for the full year, it was 3 in '19 and 4 in '18. But I would say the 3 in '19 was bigger, they were bigger than the ones in '18. So the impact was bigger.

Moving on to Slide #20. What Klaus also said, if we look at it compared to last year, we have a decline due to the revenue recognition of the large order gained in Q4 '18. But just comparing this quarter to Q3, we actually had a slight increase of EUR 1.4 million.

If we look at CDD, that accounted for EUR 17 million of the order book when we started the year. And now -- sorry, it's EUR 17 million now, and it was EUR 17.7 million when we started the year. So EUR 0.7 million down compared to last year.

Then moving on to the revenue distribution. One highlight is that -- on Page 21, one highlight is that the organic revenue growth from the software updates and support were up by 10%, which is a quite nice increase in our recurring revenue from software updates and support. If we look at it for the Q4 quarter, that was less, that was 7%. So that is probably also what you should expect for what we're going into 2020 with the run rate, something similar to that level.

Total licenses were down in Q4 for the reason explained early on, but for the full year, total license revenue was actually up by 23% compared to last year.

And then finally, professional services. For the full year up 11% organically and 14% in Q4, and that was primarily driven by implementation of new clients. So with the success we had in winning new clients and also winning them earlier in the year, we had quite a lot to do in our professional service division implementing these new clients.

Moving on to Slide 22, where we do the split of add-on licenses where we do the split between, you can say, regular additional license sales, renewals, which is primarily renewals related to Coric and SimCorp Italiana and then conversions where we do see some clients want to convert from a perpetual license agreement to a subscription license agreement. And as we said earlier, the -- we had fewer conversions, but they were bigger. And thereby, they had a higher impact than in prior years.

The good thing was that all conversions actually had upselling as well. So we -- you could say we got fresh money as well. So it was not a dollar-for-dollar conversion, but it was actually that we were upselling to these clients in connection with the conversions. And you can then say, finally, that for additional regular license sales, that was lower than the year before. So in '18, it was EUR 38 million, in '19, it was EUR 29 million, the main reason being that some of the larger ALF deals, they slipped into the future, and we expect to regain some of it in the first half of 2020.

Then moving on to Slide #23, where we have the cost development, where you can see operating cost is increasing with 11% organically in Q4 and 13% for the full year. You could say, the 13% or 12.7% increase for the full year should be compared with an organic revenue growth of 15.5%.

It is primarily related to more people and subcontractors to fulfill the revenue. We also had an annual salary increase of around 3% and then we made some investments in IT systems, both lifting our internal servers to the cloud and also in a new ERP system or HR and ERP system.

And then finally due to the, what we believe, relatively good result in '19, we also have increased performance-related bonuses.

Admin cost is -- was increasing most. And the main reason being that we included a onetime transaction cost of EUR 1.1 million related to the acquisition of AIM Software. We also had extra costs to IT systems of EUR 2 million. And then we also had some performance-related bonuses recorded as in the administrative cost.

The cash flow was a little down compared to the year before. The main reason being that we had a very strong improvement in changes of working capital in '18. We also had an improvement in working capital this year, but it was less than the year before. And that was the main reason for the lower cash flow. And then, of course, when you look at the cash conversion and the reason why the cash conversion is lower than 100%, the main reason being that we have the negative impact from changes in contract assets due to IFRS 15 of EUR 64 million or EUR 63.5 million.

So that meant that we ended at a cash conversion of 73% compared to the guidance we gave when we entered the year of between 60% and 80%. So you can say that since it was 73%, is in line with the guidance we gave.

Then moving on to Slide 25. We are introducing a new term -- contract -- total contract value and that is -- the total contract value is the value of all subscription-based licenses, excluding any ASP offering. And remember that now we have 29% of our SimCorp Dimension, almost 30% of our SimCorp Dimension clients on a subscription, and the remaining 70% on perpetual. So for those 29%, the total contract value is EUR 300 million and the payable amount in 2020 is EUR 65 million of this total contract value.

If we look at the license base, so that includes everything -- all licenses we have on Dimension but on Dimension only, that went up with 7% from EUR 808 million to EUR 864 million.

And finally, when you look at revenue signed in the beginning of the year, we had an increase of 16%. So it is now EUR 278.8 million.

Then going to Slide #27, which is our full year guidance. And here, our full year guidance is that we expect revenue to grow between 5% and 10%, and EBIT margin to be between 24% and 27%, both measured in local currency.

The main reason for -- or you could say, an explanation to the EBIT margin guidance is that we will increase our investments into research and development from 18% in both '17 and '18 to now 20% in 2020 due to the extra investment in our cloud lift.

We would also continue our investment into internal IT systems that will continue into 2020. And then finally, we will have a negative impact from the integration of SimCorp Gain of 1 percentage point in 2020.

If you look at the revenue guidance of 5% to 10%, it's quite important to see it over a period of time. We will have a high base to jump from with 15.5% revenue growth in '19. And if you look at it over a 3-year period or a 5-year period and you take the midpoint of our guidance, then our growth over a 3-year compounded average growth rate is 12.5% and at a 5-year compounded average growth rate is 11.5%.

And also, if you look at the organic growth over the same period of time, it's 10%. So I think that's very much in line with what we said also earlier that there will be fluctuations from year-to-year. And if you have a year with high growth, then that can have an impact on the next year.

Then finally, on the last slide before the Q&A, we would want to make a little marketing of our Capital Markets Day, which will take place in September, on September 18. And the location will be in Nice in France, and we will do it in conjunction with our -- with our event for our customers. So we will -- you will be able to benefit from some of the saving in relation to our user conference.

And that end our presentation, and hand over for Q&A.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And your first question comes from the line of Magnus Jensen of SEB.

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Magnus Thorstholm Jensen, SEB, Research Division - Senior Equities Analyst [2]

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This is Magnus here. I have 2 questions for you. First of all, on the additional license sales. So excluding conversions and renewals, that decreased quite a lot in Q4 and then you gave an explanation for that being flowed, some of it into next year. But still, the first 3 quarters of the year weren't that impressive either. I think it was sort of flattish in terms of additional license fees to existing clients. Are you good enough currently at getting more out of existing clients? And I know it's a pretty important driver for you to reach your long-term guidance of plus 10% growth. That was the first question.

The second question is, you said you lost 3 Dimension clients, could you elaborate on why you have lost these 3 clients?

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Klaus Holse, SimCorp A/S - CEO & Member of Executive Management Board [3]

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Yes. So if we take sales to existing customers, first off, I would say that as you said, the result of last year was not the growth we'd hoped. And if you take out the conversions, then clearly not. The question is, are we then good enough at selling to existing customers? We think we get quite a lot from existing customers, both in terms of licenses, but also in terms of some of the services that we are stepping up and selling to existing customers. We have a very good engagement with them.

But if you then look at the strategy that I presented, you also see that one of the strategic imperatives is a customer engagement team. So with Christian and his team, we're now building quite a strong customer engagement team that we launched this year. And we wouldn't do that if we didn't see that there was more opportunity with existing customers.

So yes, there's more opportunity there. Yes, we're going to pursue that, and we'll see how much of that we see in 2020 as we go through the next few quarters.

Then on lost clients, there was -- on SimCorp Dimension, there was 3 clients that came out of the system last year. Two of those are still SimCorp Dimension users. So they're either part of an outsourcing to somebody that uses SimCorp Dimension for that or they're part of a acquisition where the acquirer uses SimCorp Dimension. Only one customer left the family to do something completely different.

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Operator [4]

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And your next question comes from the line of Daniel Djurberg of Handelsbanken.

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Daniel Djurberg, Handelsbanken Capital Markets AB, Research Division - Research Analyst [5]

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I would like to ask you also on the order book, excluding the client-driven development, it was down, I think, 23% in the quarter.

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Klaus Holse, SimCorp A/S - CEO & Member of Executive Management Board [6]

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Say that again, Daniel. You want to ask about the order book guidance?

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Daniel Djurberg, Handelsbanken Capital Markets AB, Research Division - Research Analyst [7]

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Not -- no, no, sorry, order book, excluding the client-driven development, it was down like 23%. Should we be concerned about this? Or is it only that the Asian order came in so strongly in Q4 '18, if we look at the order book? And also, if you can say something about seasonality, what did you expect in 2020? Will 2019 be at the more new normal? Or will it be more similar to the historical levels we've been more -- more strength in the fourth quarter, especially?

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Michael Rosenvold, SimCorp A/S - CFO & Member of Executive Management Board [8]

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I'm a little bit in doubt if your comment or question is related to order book or order intake. But if you look at the...

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Daniel Djurberg, Handelsbanken Capital Markets AB, Research Division - Research Analyst [9]

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No, no. Order book, order book.

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Michael Rosenvold, SimCorp A/S - CFO & Member of Executive Management Board [10]

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But the order book, I think that's quite clear. The reason for the decline in the order book is due to -- we revenue recognized the big deal in Asia we did in Q4 2018. So when we took this revenue recognition, that explains the entire, you can say, drop in the order book. And then when you look at the order book...

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Daniel Djurberg, Handelsbanken Capital Markets AB, Research Division - Research Analyst [11]

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Perfect.

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Klaus Holse, SimCorp A/S - CEO & Member of Executive Management Board [12]

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The seasonality for 2020, we would love that to be more like the one in '19. So that's what we're aiming for. We'll see if we can make that happen. Q4 becomes a little less exciting for all of us if we can do that.

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Daniel Djurberg, Handelsbanken Capital Markets AB, Research Division - Research Analyst [13]

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Perfect. And may I ask you on the professional service margin? If you can give us the trend you see there? And also, what do you expect to see in pricing versus salary inflation and so on in 2020?

This is the last question for me.

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Klaus Holse, SimCorp A/S - CEO & Member of Executive Management Board [14]

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I think in general, we see the profitability as planned.

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Operator [15]

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And your next question comes from the line of Poul Jessen of Danske Bank.

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Poul Ernst Jessen, Danske Bank Markets Equity Research - Senior Analyst [16]

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I have a few questions as well. I'll start by the R&D line, which will go up in 2020. Are you willing to do any comments on how we should look at it in '21? Is the increase temporary and then it should come down in absolute numbers in '21? Or will you keep the high level beyond this year after you have finished the cloud solution? That's the first one.

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Klaus Holse, SimCorp A/S - CEO & Member of Executive Management Board [17]

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We'll try to answer that one. So the R&D line goes up in 2020. And the way we're doing it is partly that we've recruited quite a few people in 2019, you see that in some of the cost figures. They continue into 2020 and gives us some of the growth. On top of that, we are hiring full teams in Ukraine, that's going to help us do the cloud lift. So those are, you can say, temporary in that sense that they will help us get through this project, and then it'll kind of normalize from there. So I think at least the way we think about it conceptually is that, in absolute numbers, will R&D come down? Probably not. But it'll, in percentage of R&D, come down again.

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Michael Rosenvold, SimCorp A/S - CFO & Member of Executive Management Board [18]

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In percentage of revenue.

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Klaus Holse, SimCorp A/S - CEO & Member of Executive Management Board [19]

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In percentage of revenue, yes, yes.

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Poul Ernst Jessen, Danske Bank Markets Equity Research - Senior Analyst [20]

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Okay. Then on professional service which continues to perform quite well with another 19% growth. Given the margins you have overall, does the professional service continue to be running at very high margins? Or do we have to see the current profitability as going forward as well?

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Klaus Holse, SimCorp A/S - CEO & Member of Executive Management Board [21]

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I think when you look at professional services, it's a good business. We're doing a good job. And if you compare to licenses, then, of course, the professional services is margin dilutive, but it is still generating a good profit. So if you have EUR 1 million [each] of revenue from licenses, then, of course, very, very high margin. If you have EUR 1 million each in professional services, that's naturally a much lower margin in comparison. But it's still a good contribution to the EBIT, and thereby, the value creation in this company.

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Poul Ernst Jessen, Danske Bank Markets Equity Research - Senior Analyst [22]

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I agree on that. But I believe that if you do implicit calculation of the margins then -- and keep license flat, then you must have had higher margins in the professional service in '19 versus previous years. Is that a wrong assumption?

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Klaus Holse, SimCorp A/S - CEO & Member of Executive Management Board [23]

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I think we had good professional service year this year, yes.

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Poul Ernst Jessen, Danske Bank Markets Equity Research - Senior Analyst [24]

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Yes. But is that sustainable or is it temporary?

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Michael Rosenvold, SimCorp A/S - CFO & Member of Executive Management Board [25]

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So we'll see what the customers are willing to pay. But there's no -- we don't see any particular pressure on professional services that we haven't seen in past years.

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Klaus Holse, SimCorp A/S - CEO & Member of Executive Management Board [26]

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And I think, Poul, you are asking us to give more details on our outlook between the different lines, which we normally don't do.

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Poul Ernst Jessen, Danske Bank Markets Equity Research - Senior Analyst [27]

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Of course, yes. When you give yourself an input into the ASP hosting line where you say that it will add 0.5% points to the revenue this year, that's about EUR 2 million or EUR 3 million in growth. I would have assumed that you should do more growth on the ASP line?

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Michael Rosenvold, SimCorp A/S - CFO & Member of Executive Management Board [28]

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Yes. It could happen, but that's at least what we have put into our expectations right now. That's the signed contract we know that's going to happen.

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Poul Ernst Jessen, Danske Bank Markets Equity Research - Senior Analyst [29]

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Okay. So if there are additional contracts, then it's on top of that?

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Klaus Holse, SimCorp A/S - CEO & Member of Executive Management Board [30]

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Yes, but they seem to be come by later. So if we sign a contract in Q2 then before we actually start the hosting agreement, you will be in '21. [It's in there].

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Operator [31]

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Your next question comes from the line of Andre Thormann of ABG.

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André Thormann, ABG Sundal Collier Holding ASA, Research Division - Analyst [32]

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Then just starting off with North America. You mentioned that it was below your expectations. Can you elaborate a bit on that, why it was that?

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Klaus Holse, SimCorp A/S - CEO & Member of Executive Management Board [33]

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So I think that with 4% growth, that is lower than we would want it to be. North America, ideally should be growing faster than the group overall because we do think that should be the market that gains share over time. With 5 new clients coming in, in '19, in that sense, not too bad. We would have liked to see a few more clients come in. And ideally, it would also have been a little bit bigger clients that we've seen come in. So that's the explanation of this. So more work needs to be done to get more clients in 2020. So that's the nature.

There's not a particular where we've lost a deal to a competitor. There's nothing were something super unusual in this one, the pattern we see of asset owners over asset managers continues. The 4 deals we've signed are 3 asset managers, 1 asset owner. So we see that trend continuing. It's just we need to get more deals over the line in 2020.

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André Thormann, ABG Sundal Collier Holding ASA, Research Division - Analyst [34]

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Okay. But -- so...

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Klaus Holse, SimCorp A/S - CEO & Member of Executive Management Board [35]

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As to the question -- the next question is, is this the right team we have in the U.S.? And the answer is yes. We strongly believe we have the right team.

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André Thormann, ABG Sundal Collier Holding ASA, Research Division - Analyst [36]

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Okay. But just to be sure, it's not because there were less tender rounds, and it's not because you didn't lose more than -- you lose -- you lost more than expected? Or...

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Klaus Holse, SimCorp A/S - CEO & Member of Executive Management Board [37]

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No. It's more less decision than we'd hoped for. So more deals moving to no decision or extending into 2020. That's the pattern we've seen.

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André Thormann, ABG Sundal Collier Holding ASA, Research Division - Analyst [38]

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All right. Okay. Then just to be sure on ALF, it was already mentioned, but what was the main reason for the decline compared to last year?

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Klaus Holse, SimCorp A/S - CEO & Member of Executive Management Board [39]

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So our analysis is that we had a number of deals in Q4 that we expected to sign in Q4 that was then moving into 2020. As Michael said, our expectation is those will get signed in the first half of this year.

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Michael Rosenvold, SimCorp A/S - CFO & Member of Executive Management Board [40]

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And then on the other hand, I think there were a few of the new license sales, where we were quite successful in getting them in, in 2019. So you can say, I think, all in all, a little more revenue from the new license sales and less revenue from additional license sales we saw in Q4. So those 2 offset each other.

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Klaus Holse, SimCorp A/S - CEO & Member of Executive Management Board [41]

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Specifically, a lot of our existing license sales have been in Northern Europe. They were very busy doing new customers last year. And with a total of 15% growth, we're still quite happy with that market unit.

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André Thormann, ABG Sundal Collier Holding ASA, Research Division - Analyst [42]

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But just to be sure, was everything just pushed? Or was there also -- was the reason also that you lost more than expected in Q4 on ALF? Or not lost, but didn't sign?

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Michael Rosenvold, SimCorp A/S - CFO & Member of Executive Management Board [43]

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They were pushed, but they could also be pushed longer than we hoped for, but it was not like we lost them, but they were pushed. So it was not like we lost them to something else.

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Klaus Holse, SimCorp A/S - CEO & Member of Executive Management Board [44]

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Boldness in decision-making. More, I would say, the number of steps in -- I think in the past, we've talked a lot about new customers going through more and more covenants. We're starting to see that with existing customers as well.

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André Thormann, ABG Sundal Collier Holding ASA, Research Division - Analyst [45]

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Okay, okay. And then just to be sure on Sofia clients, just looking into last

(technical difficulty)

it looked like you had 4 clients which were also Dimension clients on Sofia. How many Sofia clients currently have Dimension as well?

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Klaus Holse, SimCorp A/S - CEO & Member of Executive Management Board [46]

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That's the same. No changing.

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André Thormann, ABG Sundal Collier Holding ASA, Research Division - Analyst [47]

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It's still -- okay. So the 4 you lost and those are not related to Dimension at all on Sofia?

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Klaus Holse, SimCorp A/S - CEO & Member of Executive Management Board [48]

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Those are mergers of existing Sofia customers.

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André Thormann, ABG Sundal Collier Holding ASA, Research Division - Analyst [49]

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Okay, okay. And then just my last question on R&D. Because you mentioned that you will set it up from 18% to 20% in 2020. I just need to be sure on the longer-term communication on the R&D level? Because I understood that the normalized level was around 20% of revenue, but is that normalized level? Or should that be lower going forward, in general? What's your reflections on that?

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Klaus Holse, SimCorp A/S - CEO & Member of Executive Management Board [50]

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I think it is -- you have to round it around. So it doesn't mean 20% -- and we have also said that both in '18 and in '19, it was 18-point something and we still thought that was around 20%. So it -- I think you should -- that's the kind of the levels.

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Michael Rosenvold, SimCorp A/S - CFO & Member of Executive Management Board [51]

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I just had one comment to what we said regarding Poul's question regarding ASP and interim. The 0.5% is only the pass-through part of the hosting. So when we do hosting, we have 2 revenue streams. We have the pass-through from the hosting provider and then we have our services. And it is only the pass-through part we're mentioning there with the 0.5%, just to make it clear.

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Operator [52]

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Your next question comes from the line of Claus Almer of Nordea.

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Claus Almer Nielsen, Nordea Markets, Research Division - Senior Analyst of Capital Goods and IT [53]

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Yes, also a few questions from my side. Coming back to the professional service division. Looking at your number of employees or capacity, how much did that grow organically in Q4 compared to Q3?

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Klaus Holse, SimCorp A/S - CEO & Member of Executive Management Board [54]

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Oh, I don't have that number right off. I'll have -- we'll have to go and look at the Annual Report.

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Michael Rosenvold, SimCorp A/S - CFO & Member of Executive Management Board [55]

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Yes, I can find it somewhere.

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Klaus Holse, SimCorp A/S - CEO & Member of Executive Management Board [56]

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If you go on to the next question, we'll find that in the meantime.

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Claus Almer Nielsen, Nordea Markets, Research Division - Senior Analyst of Capital Goods and IT [57]

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Well, actually, my next question is kind of related to this. But then, let's also postpone that. You said...

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Klaus Holse, SimCorp A/S - CEO & Member of Executive Management Board [58]

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But Claus, so I don't think we give a specific number on that as such. And the professional services is a blend in 3 things. One is the consultants that are in the market unit, the growth we had in Poland, which we're now getting close to 100 people in there, and then in subcontractors. And there was -- given the high levels, there was a bit more subcontractors in there than normal. Michael is going to look up the number and then we'll either do it here or we'll get back to you on that one.

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Claus Almer Nielsen, Nordea Markets, Research Division - Senior Analyst of Capital Goods and IT [59]

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Sure. Okay. But then just a follow-up. It was a quite, quite impressive growth you had in the quarter. So more looking into 2020, I mean, I guess, you have not grown your number of consultants that much in Q-over-Q. So are you now running as high as possible utilization rate on your staff? And how should you think about 2020? And then what's also, you have in the past talked about you're finalizing some projects, you are now calculating the right use of hours in Q4. So there's some adjustment also being made in Q4.

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Klaus Holse, SimCorp A/S - CEO & Member of Executive Management Board [60]

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So I think that on -- I would say, given the high-growth in professional services, then the utilization rate for us, if you look across 2019 was very high and in some pockets, higher than we would want to. So some of our people are working more hours than we would like to, if they have to have the right balance in life. So that's kind of where it is.

Whether that normalizes in 2020, we'll see as we go. But ideally, we would like it to normalize and get a more balanced view on this.

Part of the way we do this is moving more work to our centralized division in Poland, where we can better balance that and have a little less travel for some of the people in the market. But in general, I would say, we had high utilization. And we're going to go -- we're going into 2020 with high utilization.

And then the follow-up question is, will then that require to hire more professional services people in 2020? And the answer is yes.

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Claus Almer Nielsen, Nordea Markets, Research Division - Senior Analyst of Capital Goods and IT [61]

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Yes. That's how it is when you grow.

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Klaus Holse, SimCorp A/S - CEO & Member of Executive Management Board [62]

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Yes.

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Michael Rosenvold, SimCorp A/S - CFO & Member of Executive Management Board [63]

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And Claus, if you look at [the judgment at least in] the public information which we gave you, so our professional services staff are growing more than the rest of the business. So if you look at -- I think we have it on Page 16, average number of employees, then professional services is now 42% of the workforce where it was 41% when we -- last year. So it means we are growing more in that field than we are doing on average. And then if we take a little historic look here, in '17, we grew 30% in professional services. There, we were very busy. There we were really up to our neck.

Last year, it was a more modest -- sorry, in '18, it was a more modest growth. And I would also say, this year it has been a more modest growth. So it's not like we are -- we are not in a '17 situation and even in '17, we did quite well because we had the flexibility with the subcontractors.

So I would say between 10% and 15% growth in professional services, that's actually a quite healthy growth. That's something you can control. If it's getting much more than that, then you need to use some other mechanism in terms of subcontractors and so on.

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Claus Almer Nielsen, Nordea Markets, Research Division - Senior Analyst of Capital Goods and IT [64]

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Okay. Then moving into 2020, I guess, this discussion we've had in the past, you had some very good wins in the past, some very large clients. The installations of these projects must be in the end of their phase. And yes, you won one last in Singapore in '18, but are you -- not maybe under pressure, but when do you really need to sign one of these larger, more complicated projects to keep the momentum in professional service division?

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Klaus Holse, SimCorp A/S - CEO & Member of Executive Management Board [65]

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So as you know, we do professional services in a couple of big buckets. So one is the new installations and another one is implementation of new stuff to existing customers and then there's the operational services, Claus. And we continue to see a good spread across those. And I would say, in the past years, we've had to spend quite a bit of time on doing new implementations. And I think that as we move forward, there's going to be opportunity to also do more with our existing customers. So it's going to kind of balance out on those. And the demand for more operational services is clearly there as well. So I don't think we are particularly pressured. But if we don't sign any new deals in 2020, yes, that's going to be a problem.

But with 12 deals signed in 2019, we're going to be busy for a little while.

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Claus Almer Nielsen, Nordea Markets, Research Division - Senior Analyst of Capital Goods and IT [66]

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Okay. Great. Then my second question, maybe it's not second, but nevertheless, order intake, you mentioned, Klaus, that you didn't lose any clients in North America, as I understood. But signing only 4 deals for the full year, I guess there must have been more contracts out in 2019. So maybe you could share some color to what happened with projects being in a tender process?

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Klaus Holse, SimCorp A/S - CEO & Member of Executive Management Board [67]

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So I think that was what I tried to say before as well, the projects that were in the tender process, most of them, at least the ones we were in, did not make a decision. They actually moved out and made no decision in '19. Some of them are still alive and they say they'll make a decision in '20. Whether that happens or not, we'll see. And that's kind of where it is. We -- if we look at our major competitors, like Charles River, BlackRock and so on, there was no change in their win rate from what we've recorded in North America, did not change either. So that's the numbers we have. That's what we see. There might be something we don't have visibility to. But I actually think we have pretty good transparency on what's going on in the U.S. market and Canadian market right now.

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Claus Almer Nielsen, Nordea Markets, Research Division - Senior Analyst of Capital Goods and IT [68]

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And what was your win rate in the tenders you participated?

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Klaus Holse, SimCorp A/S - CEO & Member of Executive Management Board [69]

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So it goes a long, long way, where of all the tenders that comes out, then on average, worldwide, I won't give the U.S. number because that means we're starting to break out our business to the point where we don't want. But in general, across the world, of all of the tenders we see coming up, about half goes to no decision and about half of the ones that kind of continues, that we win.

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Claus Almer Nielsen, Nordea Markets, Research Division - Senior Analyst of Capital Goods and IT [70]

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That half that you win what I would suggest -- yes. Okay. Those being postponed, I know that always happens. But is there any new reasons why projects are being postponed?

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Klaus Holse, SimCorp A/S - CEO & Member of Executive Management Board [71]

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No. We've not seen a change.

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Operator [72]

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Your next question comes from the line of Hannes Leitner of UBS.

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Hannes Leitner, UBS Investment Bank, Research Division - Equity Research Analyst of Software [73]

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I have also a couple of questions. The first one on professional services. I missed the split of recurring professional services of the -- in the 2019 report, so maybe you can help me there? And then also on the back of that, you mentioned more hiring of subcontractors, is this an indication that you expect those go-lives and then some ramp down in professional services? So looking there at the growth rate at 2020 and 2021. And maybe there, you can also add when you expect the go-lives to happen of those deal wins in 2019?

And then in regarding the client-driven developments, are we seeing them materializing this year or is it rather more a 2021 event?

And then in regards to the must-win battles, could you give us any, like, indicative progress report on them?

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Michael Rosenvold, SimCorp A/S - CFO & Member of Executive Management Board [74]

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Okay. So I'll start with the professional services. What I said earlier on, I think, where we had most growth was in new implementations, but that was also what Klaus said. Then we had less on existing clients, the new installations, and for, you would say, the recurring part, that has been about the same proportion as you have seen in the past, of between 25% and 30%. So that grew with the rest of the group.

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Klaus Holse, SimCorp A/S - CEO & Member of Executive Management Board [75]

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And then on go-lives, that's a long map. We've got projects that are in implementation that's been in implementation for the last 2 years because they are very big. And we've got projects that get implemented in 4 months that are very small. So trying to map that out and give you that full landscape of go-lives and so on would be quite detailed. So we don't do that. But as they go live, as they come, there isn't any particular pattern for the next year that's going to be different than the pattern we've seen in the past.

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Hannes Leitner, UBS Investment Bank, Research Division - Equity Research Analyst of Software [76]

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Okay. And then maybe 2 follow-ups. In your annual report, you state that 85% -- roughly 85% of your revenues in '19 came from existing customer. So that would actually almost add to the whole total 2018 number. So maybe you can give us there some rationale about the proportion we should look at this? Is this something which was stable over the past years, leading then to kind of the growth expectations? And then I have one little one, I think.

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Michael Rosenvold, SimCorp A/S - CFO & Member of Executive Management Board [77]

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I think the 85% has been quite stable for a number of years now. So that -- the new -- the 12 new clients, they are contributing about 15% and then the remaining part is from existing clients, so that's 85%. And that has been a quite stable number now for a number of years.

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Hannes Leitner, UBS Investment Bank, Research Division - Equity Research Analyst of Software [78]

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Okay. And so 2 questions left on the renewals...

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Michael Rosenvold, SimCorp A/S - CFO & Member of Executive Management Board [79]

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Remember, Hannes, just -- so that number might sound low. But if you think about it, then a new client signed in the third quarter of 2019, the implementation part of that, that gets recognized in '19 is quite little. And when that client then moves into 2020, it's an existing client.

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Hannes Leitner, UBS Investment Bank, Research Division - Equity Research Analyst of Software [80]

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That's completely my understanding. The only thing is when I look at this 85%, that come to, let's say, 386 and then it seems like the existing clients, they're almost only slightly growing. So that was rather more my concern, not so much about the small number or contribution by new clients.

In regards to the renewals, could you give us any indication if there are any big renewals coming up this year? I saw that there was quite an -- a slight increase in it or actually a drop in regular licenses, but I think you answered it in the slipping to 2021.

Then the last question is on margins. As to my feeling, you expect to grow professional services and ASP hosting, which is rather more a lower-margin business. So having now the impact, excluding the impact from the higher R&D costs, how should we think of the margin? You -- where do you take out the cost of the other side -- on the other side?

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Klaus Holse, SimCorp A/S - CEO & Member of Executive Management Board [81]

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So if you look -- so you asked, is there any big renewals coming up this year? No, that's not our expectation. We really started on the subscription program in '16. So the first renewals you're going to see in '21 and then there's going to be a little less in '22, and then '23 is quite a lot coming into that. So that's kind of the pattern that you should look at there.

And on the margin side, if you look, the shift in 2020 kind of comes from, as Michael said, about 2% of that comes out of our cloud lift, the investments we do in R&D and so on. And then there's about 1% from ERP systems and other investments we're doing in this. So that's kind of where the difference is to what a normal year in a sense.

And then AIM integration of about 1%. So you can say there's somewhere between 3% and 4% that kind of goes out of the margin compared to what should be a normal year.

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Operator [82]

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And you do have a follow-up question from Poul Jessen of Danske Bank.

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Poul Ernst Jessen, Danske Bank Markets Equity Research - Senior Analyst [83]

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I have a few ones. First, on your comment on North America and APAC on Slide 10, the growth rate. I was just wondering, has there been any reallocation of clients in '18? Because the numbers you report, Annual Report 2018 had totally different revenue numbers for '18.

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Michael Rosenvold, SimCorp A/S - CFO & Member of Executive Management Board [84]

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Is this the currency?

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Poul Ernst Jessen, Danske Bank Markets Equity Research - Senior Analyst [85]

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No. It's a change in revenue in the U.S. of -- just a second. It's lowered from 95 to 81, and Asia from 20, then it's getting high to 32.

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Michael Rosenvold, SimCorp A/S - CFO & Member of Executive Management Board [86]

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I think, Poul, just so you know, I think in '18, we were reporting in local currency. And this year, we are reporting in euro. So can that be the reason why we have different numbers?

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Poul Ernst Jessen, Danske Bank Markets Equity Research - Senior Analyst [87]

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No. It's changed from 95 -- okay. So it could be U.S. dollars. Okay.

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Michael Rosenvold, SimCorp A/S - CFO & Member of Executive Management Board [88]

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Yes, yes, yes. I think in '18, we wanted to do everything in euro this year, but in -- and especially because if you're in APAC and then as we're growing a lot in Singapore, of all places we think it doesn't make sense to continue using Australian dollars. So that's why we are now reporting everything in euro.

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Poul Ernst Jessen, Danske Bank Markets Equity Research - Senior Analyst [89]

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Okay. That was a simple answer.

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Klaus Holse, SimCorp A/S - CEO & Member of Executive Management Board [90]

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Great comparison between oranges and apples.

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Poul Ernst Jessen, Danske Bank Markets Equity Research - Senior Analyst [91]

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Yes. Now Gain -- I just thought cross-selling of Gain into your Dimension customer base, is that much too early to get a comment? Or are you satisfied with the performance of cross-selling?

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Klaus Holse, SimCorp A/S - CEO & Member of Executive Management Board [92]

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Yes, that we're quite happy with. We did that, as I also said in here, we sold to a few of our existing clients already. And both kind of the Gain product as such, but also what we call DataCare, which is our managed service where we provide the outcome to the client was also sold in '19. So we're quite happy with that side of the acquisition. There's still a lot of work to do in the integration and so on. But we are quite happy with the reception that we've seen both from existing SimCorp clients and from certain new clients.

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Poul Ernst Jessen, Danske Bank Markets Equity Research - Senior Analyst [93]

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Okay. Then a technical one on the installed base of EUR 865 million, which you report. The way you include software-as-a-service or subscription and perpetual in that value. Perpetual mix is quite simple, but the software-as-a-service part to include the contracts by the announced value that you have on the contract or how is that put in? Because you have different length of those contracts.

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Michael Rosenvold, SimCorp A/S - CFO & Member of Executive Management Board [94]

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Only the license part. So that's 50%.

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Poul Ernst Jessen, Danske Bank Markets Equity Research - Senior Analyst [95]

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Yes, but if you have a EUR 10 million contract for 10 years and you have a EUR 10 million contract for 5 years, are they taken in by EUR 10 million both in the installed base?

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Michael Rosenvold, SimCorp A/S - CFO & Member of Executive Management Board [96]

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Yes.

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Poul Ernst Jessen, Danske Bank Markets Equity Research - Senior Analyst [97]

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Okay. And then a more historical question. In the past, it's been -- or you've been telling us many times that one of the strengths about your solution were that if the client didn't pay for the maintenance, then he couldn't use the service. My question is, is that always the case because one of the contracts you just signed in December apparently was still used by the client who canceled the contract back in early '18, and he was still using it throughout both '18 and '19?

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Michael Rosenvold, SimCorp A/S - CFO & Member of Executive Management Board [98]

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There are a few exceptions. So if it is not possible by -- for local law to have such a clause in the contract, then of course, we can't go against the law. And in Switzerland, that was the case where the law actually stipulates that when you abort something, then you can still use it. Of course, you have no support at all. So that was the case there. But in all other instances, then it is stipulated in our contract that you can't do it, except for the cases where it's not really allowed by law.

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Poul Ernst Jessen, Danske Bank Markets Equity Research - Senior Analyst [99]

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It's only in Switzerland then?

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Klaus Holse, SimCorp A/S - CEO & Member of Executive Management Board [100]

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It's still in our contract, but -- and even with it, you'll get that. But there are countries where that's difficult. Switzerland, there's probably something in Germany, where that can be difficult. Germany has different laws around software than most countries. You can buy and sell used software in Germany, which is not usual in most other countries.

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Poul Ernst Jessen, Danske Bank Markets Equity Research - Senior Analyst [101]

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Okay. And then a final one. I didn't hear it, but did you say that recurring revenue in the professional service was 25% of total?

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Michael Rosenvold, SimCorp A/S - CFO & Member of Executive Management Board [102]

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Of total services.

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Poul Ernst Jessen, Danske Bank Markets Equity Research - Senior Analyst [103]

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Okay. Perfect.

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Michael Rosenvold, SimCorp A/S - CFO & Member of Executive Management Board [104]

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Between 25% and 30%, depending on how you define it. So it's in that range. So that has been -- that was also the case last year, but it had grown -- but we had grown with the peers in total.

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Poul Ernst Jessen, Danske Bank Markets Equity Research - Senior Analyst [105]

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And that includes parts from Gain as well? Or is that not recurring?

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Michael Rosenvold, SimCorp A/S - CFO & Member of Executive Management Board [106]

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That's a small number. I think it's all immaterial in the total feature. So...

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Operator [107]

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And you've got one last follow-up question from Claus Almer of Nordea.

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Claus Almer Nielsen, Nordea Markets, Research Division - Senior Analyst of Capital Goods and IT [108]

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Yes, also a few extra questions from my side. 2020 client conversions, what have you included in your guidance?

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Klaus Holse, SimCorp A/S - CEO & Member of Executive Management Board [109]

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The same level as previous years.

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Claus Almer Nielsen, Nordea Markets, Research Division - Senior Analyst of Capital Goods and IT [110]

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Years or year? So same as 2019? Or...

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Klaus Holse, SimCorp A/S - CEO & Member of Executive Management Board [111]

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You can take -- just take an average of the previous years.

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Claus Almer Nielsen, Nordea Markets, Research Division - Senior Analyst of Capital Goods and IT [112]

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Okay. And just the same question regarding CDDs.

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Klaus Holse, SimCorp A/S - CEO & Member of Executive Management Board [113]

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So CDD is kind of -- that's the same as well, yes.

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Claus Almer Nielsen, Nordea Markets, Research Division - Senior Analyst of Capital Goods and IT [114]

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So it's for the last years or year because there's a huge difference between your '18 and '19?

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Klaus Holse, SimCorp A/S - CEO & Member of Executive Management Board [115]

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So the revenue -- so this, in order inflow, you're probably going to see a small uptick and in revenue, you're going to see a continuation.

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Claus Almer Nielsen, Nordea Markets, Research Division - Senior Analyst of Capital Goods and IT [116]

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So uptick versus 2019?

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Klaus Holse, SimCorp A/S - CEO & Member of Executive Management Board [117]

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An uptick in order inflow. And in revenue, you're going to see the continuation.

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Claus Almer Nielsen, Nordea Markets, Research Division - Senior Analyst of Capital Goods and IT [118]

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Klaus, 2019 order intake. So 2020 will be slightly better CDD order intake than in '19, is that what you mean?

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Klaus Holse, SimCorp A/S - CEO & Member of Executive Management Board [119]

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Yes. And that's what we expect, who knows, but we don't expect it to be '18 level. So it will be lower than '18 level, yes.

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Michael Rosenvold, SimCorp A/S - CFO & Member of Executive Management Board [120]

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Maybe.

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Klaus Holse, SimCorp A/S - CEO & Member of Executive Management Board [121]

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It's what we have in our expectations, yes. Very good.

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Operator [122]

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There are no further questions.

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Klaus Holse, SimCorp A/S - CEO & Member of Executive Management Board [123]

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We've got one that comes in from the platform.

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Michael Rosenvold, SimCorp A/S - CFO & Member of Executive Management Board [124]

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Yes, and that's from Oliver, down in Pictet. You had 2 questions. I think the first one has been answered regarding the uplift in R&D, whether or not that's kind of recurring or nonrecurring. And the second one is, what kind of business do you expect from your partnership with BNY Mellon?

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Klaus Holse, SimCorp A/S - CEO & Member of Executive Management Board [125]

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So the partnership we did with BNY Mellon is one where we make it easier for our customers and for BNY's customers to reconcile between the custody they do and the platform that we have. We don't have any big expectations on we're going to sign a lot of new clients because of it, but our expectation is it's going to get easier to sign new clients that have BNY as a custodian. Many customers we sign are big customers, they're complex customers and they often have worked with more than one custodian. This is helpful, but it's not going to be a driver in signing more business.

That seems to be the final question. There are no more coming in on the web, and it seems like there's no more coming in on conference call.

I just want to remind you that we want to see you back in Nice in the not-too-distant future. We promise that we've ordered sun and a nice location. And we hope to see you all there. And before then, we'll meet at the Q1 report in May.

Thank you very much.

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Operator [126]

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Thank you. Ladies and gentlemen, that does conclude your conference for today. Thank you for participating, and you may all disconnect.