Operator: Good day, and thank you for standing by. Welcome to the Worldline Q3 2026 Revenue Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star one, one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one, one again. Please be advised that today's conference call is being recorded. I would now like to hand the conference over to your speaker today, Pierre-Antoine Vacheron, CEO of the group. Please go ahead.
Pierre-Antoine Vacheron: Thanks a lot. Good evening, everyone, and thank you for joining us. I am very happy to be here tonight with Srikanth Seshadri for this Q3 2026 Revenue that comes close to one year after our CMD, 6 November last year. Let's move directly to slide 4. Now that the balance sheet is repaired and the pruning program fully executed, we have been focused during this quarter purely on operational execution, executing on what we had committed with discipline. There are four highlights I would like you to take from our performance this quarter. First, our discipline execution is translating now into better customer satisfaction, I will come back to that, and improved operating results. Second, our North Star 2030 is on track, and we are delivering against the commitment we made one year ago across simplification, convergence, integration, and growth. Third, commercial momentum is building across the group.
Pierre-Antoine Vacheron: Although, depending on the markets, it will take more or less time for booking to translate into revenue. Fourth, we are confirming our full year guidance on the three items: the external revenue, the adjusted EBITDA, and the free cash flow. These are important milestones. Step by step, we are restoring the potential of this company and getting increasing confidence in our 2030 trajectory. On a fully pruned basis, Q3 revenue reached EUR 946 million, representing organic growth of 2.5%. Merchant Services delivered solid growth at 4.3%, and NNR is flat for the first time since Q2 2024. We are delivering an improving momentum across the three businesses. Customer satisfaction is improving on all businesses, and churn continues to decline at SMB.
Pierre-Antoine Vacheron: In enterprise, Mobility & e-Transactional Services continues to perform strongly, supported by our vertical expertise and geographic expansion. In Global Commerce, which is back to growth in Q3, Global Collect is demonstrating strong growth, double digits, following its repositioning and a successful platform modernization. Financial Services is recovering more gradually as expected at -3.3% this quarter, supported by non-recurring items. We obviously continue to absorb the impact of legacy contract terminations. The good news there is that underlying processing activity remains resilient and commercial momentum is strengthening with a significant increase in bookings year to date, boosted by the signing of the major contract with ABN AMRO ICS announced in July. One year ago, North Star was a plan. Today, it is an operating transformation under execution. Let me illustrate the progress we have achieved during the quarter.
Pierre-Antoine Vacheron: On Simplify, we continue to reduce complexity across the organization and our processes. In the quarter, we closed 3 entities and returned 1 additional license. This is creating a simpler organization with clearer accountability and faster execution. On Converge, platform migrations are progressing according to plan. We have decommissioned 3 acceptance platforms in Germany. If you remember, we started from 26 in 2025. We were at 23 in November. Remains today 20, with a target of 12 at the end of the plan. As part of this, we are coming to the end of the Ogone SMB portfolio to GoPay and moved approximately one-third of our Italian merchants to the target acquiring platform without disruption. On Integrate, we are bringing our capabilities and operations together more effectively across the group.
Pierre-Antoine Vacheron: We made significant progress in our infrastructure integrated strategy, transitioning step by step from our 44 fragmented landscape to deliberate domains, sovereign cloud, public cloud, and proprietary data centers. This will take time as planned, but we have demonstrated over the period that we were in control to make it happen without hiccup. On Grow, we have made step change in optimizing authorization rate across the value chain with tangible results, including increased share of wallet with some strategic clients. I will come back to the other illustrations in the following slides. Bottom line, regarding North Star, we are already ahead of plan on workforce reduction in Europe, where we expect headcount to be down by around 4% over the year, close to 500 positions. We are also beginning to see the financial benefits of North Star that we will comment in detail at Q4.
Pierre-Antoine Vacheron: The next stage is to accelerate the convergence. The conversion also of this operational improvement into sustainable net revenue growth, profitability, and cash generation. This is why North Star is a 4-year journey. We are changing platforms, processes, skills, and ways of working that were built over many years and that we acquired through several M&A. We are increasingly confident in the path while remaining fully aware of the execution still ahead of us. As I said in introduction, customer satisfaction is one of the clearest indicators that our operating model is improving. Our annual NPS has increased to 40 year to date, 10 points above 2025, with improvement across most of our markets, particularly in enterprise and Global Collect. This matters for 3 reasons.
Pierre-Antoine Vacheron: First, it is evidence that the work we have undertaken on service quality, platform stability, and customer engagement is being recognized by our clients. Second, improved customer satisfaction is supporting the reduction in churn that we are seeing across the group. Third, better customer relationship creates opportunities to increase our wallet share and expand the services that we provided. Obviously, we still have variability across countries and businesses, and we are not satisfied with every customer outcome. But the group level direction is clear and encouraging. Global Collect is another important illustration of the turnaround and the growth initiative. The business grew by more than 10% in Q3, offsetting the impact of anticipated churn and de-risking in the acquiring portfolio, which is the second component of the Global Commerce division. This performance follows the repositioning of the business and a significant program of platform modernization.
Pierre-Antoine Vacheron: The platform migration is now in its final phase, with the new portal fully deployed, the Connect API migration virtually complete. We are using this modernized platform to improve authorization rates and customer experience, including through the deployment of GenAI, with measurable operational improvements already in place. The focus for Global Collect is now on sustaining the growth trajectory while improving the business economic contribution over time, meaning NNR contribution over ER. We are notably extending Global Collect geographic reach into Latin America through a strategic partnership with a leading local acquirer. Global Collect is a concrete illustration of what North Star 2030 is designed to achieve: modernizing and simplifying the platform, strengthening the customer proposition, and creating the conditions for sustainable, profitable growth. Mobility and self-service is another good example of a business where Worldline has a clear right to win.
Pierre-Antoine Vacheron: Revenue grew by around 10% year-over-year in Q3, with bookings up 15% year to date. We have successfully launched in the UK and Ireland, and we are seeing strong traction in Italy. Regarding EV charging operators, we now serve three of the top 10 European operators. Our strength comes from combining a broad payment proposition with deep vertical expertise across transportation, parking, vending, EV charging, and fuel retail. These are environments in which payments have to be deeply integrated into physical infrastructure, operate at scale, and deliver very high availability. This fits perfectly Worldline technical and technological capabilities and European footprints. Mobility and self-service illustrates how we intend to grow, focusing on areas where Worldline has genuine differentiation, combining payments with deep vertical expertise, and scaling those capabilities across Europe. Finally, I would like to comment on Tap on Mobile.
Pierre-Antoine Vacheron: Innovation remains fundamental to our North Star 2030 ambition. Tap on Mobile is a good example on how innovation investments made over the past few years are now translating into growth. The solution is now live across 24 countries, with merchant sales value reaching EUR 1 billion since the beginning of the year, doubling versus 2025 nine months. We are scaling it across new use cases, customer segments, geographies, and partner ecosystems. We are deploying it directly for SMBs and enterprise customers, embedding it into partner propositions, and extending now to unattended environments. The miniPOS Cube is a good illustration of this approach. Building on our proprietary Tap on Mobile technology, we have extended the same software-led capability to address the needs of micro merchants with a simple standalone and cost-effective entering point into digital payments.
Pierre-Antoine Vacheron: Already live in Germany, the miniPOS Cube is now available in Switzerland and in Belgium. We believe at Worldline that payments will increasingly be software-led, embedded, and distributed through partner ecosystems. Worldline is well positioned to capture this trend, combining proprietary technology, acquiring capabilities, and European reach. Our focus is to invest behind innovations where Worldline has a clear right to win and a credible path to economic value. With that, let me hand over to Srikanth, who will take you through the Q3 revenue performance and our outlook in more detail. Srikanth, over to you.
Srikanth Seshadri: Thank you, Pierre-Antoine, and good evening, everyone. I will focus on three things today: the revenue performance across the various business lines, how that translates into net revenue, and our outlook. Moving on. On the table below is the published group revenue, which is at EUR 967 million, up 2% organically. For the rest of my remarks, I will use the table above, the fully pruned perimeter. This is also the basis of our full year outlook and guidance. On that basis, revenue was EUR 946 million compared with EUR 922 million a year ago, a growth of 2.5% organic. All organic comparisons are at constant scope and exchange rate. Merchant Services generated EUR 759 million, up 4%, while Financial Services generated EUR 186 million, down 3.3%.
Srikanth Seshadri: External revenue in Merchant Services caps off a sequential growth year-on-year after Q1 at 1.6%, Q2 at 2%, and Q3 at 4%, and captures the recovery in activity across the portfolio. At NNR level, though, Merchant Services was flat organically. However, this reverses a negative trend, as Pierre-Antoine mentioned, for the first time over the last eight quarters. The next two slides explain the commercial and mix effects between this performance in Merchant Services. Moving on to the next one. Delving deeper on Merchant Services, SMB grew at a low single digit rate. Momentum continued across Southern Europe with Greece and Italy performing, Northern Europe with the Nordics, and Central and Eastern Europe. In Western Europe, though, it is a little bit more split. Germany grew, Switzerland stabilized, Benelux lags. For Benelux, the turnaround plan is fully activated.
Srikanth Seshadri: Our focus remains on developing value-added services as well, deepening the services we provide to existing customers in this important part of improving our NNR growth. Enterprise accelerated to a high single digit growth, geographical expansion, as Pierre-Antoine elaborated earlier on mobility and self-service and as well as in retail, which is growing. The retail pipeline and order entry is also expanding. Alongside that progress, the quarter benefited from churn materializing later than expected. We continue to expect that churn to normalize in the Q4, consistent with what we believed at H1. Moving on to Global Commerce, which covers acquiring only portfolio on one side and the full service of Global Collect of acceptance and acquiring on the other side, returned to a low single digit growth. Global Collect within that grew more than 10%, offsetting anticipated churn in the acquiring portfolio.
Srikanth Seshadri: Travel delivered double-digit growth through market share gains, and we will discuss some of the labels on the right. Digital returned to growth through increased wallet share. The wins and upsells on this slide include Emirates, Wizz Air, Blizzard Entertainment in Global Commerce, and SBB in Enterprise. These examples show the breadth of our commercial activity across the customer base. Now moving on to the next slide regarding mix impact within our NNR. We explained why external revenue growth is not yet translating into net revenue growth. First, again, as we said, net revenue is stable after Q2 2024, and the take rate on external revenue is also stable. When we say take rate, it is external revenue divided by merchant sales value. The unfavorable business mix as anticipated during the Capital Markets Day that some of you will remember, actually has three components. One, which is the customer segment.
Srikanth Seshadri: We did anticipate the FS being lower. That is materializing with the commercial rebound being slower than we elaborated last quarter. Second is on verticals. Growth is higher in the fast moving consumer goods, which is in fact a volume game, while the travel and digital is scheme fee intensive, and we have seen that as part of our Global Collect portfolio. Finally, on the geo. The markets with indirect sales channels with partners and banks such as Nordics and Italy respectively, have been growing, and these have an impact on the NNR dilution more globally. They are not so different from the questions we answered in the last quarter, and NNR is an area for us to watch for us to reverse the mix. In SMB, value-added services is one of the areas we will work on to rebound on the NNR. Now moving on to Financial Services.
Srikanth Seshadri: The revenue was EUR 186 million, lower 3.3% organically. Excluding non-recurring items, revenue was down 5.1%. The legacy contract terminations we have been mentioning through the year continue to weigh on our revenue, while recurring processing activity remains resilient across most markets, issuing, acquiring account and instant payment, as we elaborate on the slide. Digital services grew through fraud detection and trusted authentication. We continue to position ourselves on digital euro and on FIDO, our password-less authentication, and digital identity is also supporting the opportunity pipeline. Financial Services bookings increased 91% year to date. We need to continue to sign those large deals that Pierre-Antoine mentioned earlier, while harvesting on the install base for the value-added services. Wins and upsells include BSI, Transactis, Crédit Agricole Payment Services, the labels you see on the right. Now, as regards SIX.
Srikanth Seshadri: We have recently agreed to extend and augment our ATM services partnership, including fraud management capabilities. As part of SIX's multi-vendor strategy, certain scopes will be diversified across other suppliers, hence certain scopes that we had could not be renewed. This development does not anywhere have a material impact on our revenue outlook until 2029. We continue to work closely with SIX across a range of critical payment services and remain committed to supporting the Swiss payments ecosystem through our leading technology, our operational resilience, and innovation capabilities. Now moving on to my final slide, is on the outlook. Very simply put, we are confirming our outlook in line with the guidance we presented to you in the last call, on revenue, on adjusted EBITDA, and on free cash. Reported net leverage that we confirmed was achieved at H1, we will sustain for full year.
Srikanth Seshadri: With that, I hand you back to Pierre-Antoine to conclude.
Pierre-Antoine Vacheron: Thank you, Srikanth. Thanks a lot. In closing, to fully provide further evidence that Worldline is on track with its North Star trajectory, customer satisfaction has increased materially, churn trends are improving overall, and commercial momentum is strengthening with year-to-date bookings up in Financial Services, Global Commerce, and Enterprise. We therefore enter Q4 with confidence, but not complacency. We expect the Q4 trajectory to remain consistent with the expectations we set at H1, and North Star, the four-year journey. Building the Worldline we want will require sustained execution, but our ambition remains clear. Establish Worldline as the European champion in payments, trusted by its customers, differentiated by its technology and expertise, disciplined in its allocation of capital, and capable of delivering sustainable growth and cash generation. We know the work that remains ahead of us.
Pierre-Antoine Vacheron: The progress achieved this year strengthened our confidence in North Star and in Worldline's future. Thank you, and we are now ready to take your questions. Thanks a lot.
Operator: Thank you. We will now begin the question and answer session. If you wish to ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. We will take our first question, and the question comes from Frederic Boulan from Bank of America. Please go ahead. Your line is open.
Frederic Boulan: Hi. Thank you very much. Maybe one question firstly, Pierre-Antoine, if you can help us understand a bit the underlying growth trends in MS. We are back to flat NNR. If maybe we can break it out between SMB, Enterprise, and Global Commerce. What is growing? What is still declining? Any color on trajectory per business line would be very helpful. Srikanth, maybe a question around the, I know it is not a quarter for costs and cash flow, but any comments on where we are tracking? It looks like you are happy with the progress of North Star. You flagged the impact of geographic mix on NNR. What about margins? I would assume Benelux probably higher margin than Italy. Maybe a quick follow-up, if you can clarify your comment on churn in Enterprise to normalize in Q4. Can you be a bit more specific what that means? Thank you.
Pierre-Antoine Vacheron: Okay. We will try to cover all your questions. On Merchant Services, I will comment at the level of ER, and I will let Srikanth come back to the translation into NNR. As you said, we have an improved behavior across the board. The only area where we are still struggling is the Benelux SMB. Switzerland is stabilized in Q3, which is an important element in our trajectory. Obviously, as you remember, Benelux and that starts to be the answer to your question on margin. Benelux and Switzerland were very high in terms of margin. So we need them to come back to sustainable growth. Germany is behaving well, mid-single digit with a mix which obviously has any, I would say, consumer market in Germany.
Pierre-Antoine Vacheron: There is a very, very strong traction of FMCG, so the low-cost discounters in Germany to the detriment of specialty retail. This has an impact, obviously, on the mix, on the margins. But the SMB business is behaving well and is behaving, I would say, better in Q3 than in Q2. At the same time, on the various channels that we have, the Deutsche Post DHL or the third-party market. Central Eastern Europe is continuing to demonstrate good growth, high single digit. Italy has been accelerating in Q3, so we are back to very high growth. Greece is continuing to behave well. In the Nordics also, we have a good behavior, even if we know that we will lose one of our ISVs which has been acquired by one of our competitors. So they will finally migrate to this competitor. In a nutshell, this is how it works.
Pierre-Antoine Vacheron: If I take the Enterprise segment, we have higher growth in Mobility and Self-Service than in Retail. At the same time, because of the context, but also because of our very strong positioning in Mobility and Self-Service, as I described. In Global Commerce, we are globally back to growth. As you remember, we have in fact two pods in Global Commerce. One, which is acquiring only in Digital and Travel. So there, we have delivered some de-risking of the portfolio. That explains why it has been negative during the recent quarters. Global Collect, which is now really getting the benefits of the re-platforming. We are a little bit optimistic.
Srikanth Seshadri: Yep. Hello, Fred. First, I will start with the enterprise churn. In terms of enterprise churn, again, Enterprise has the two domains, as Pierre-Antoine mentioned. It is Retail and Mobility Self-Service. Today, we did a deep dive on Mobility Self-Service. But on Retail, there has been known churns. Not very different from what we are talking about in FS. These were planned, but the customers have taken longer time to leave us, and that is what we are calling as delayed churn. So we know that is going to happen. It is a question of timing. What we are expecting in Q3 is now deferred to Q4 and partly to 2027, and that normalizes a bit the Q4. It is a similar point in the Nordics. So that is what we talk about as churn. In terms of the margin, as we said during H1, the NNR has been dragging.
Srikanth Seshadri: Now we have turned flat, but it is still lower in terms of the trend. The good thing is both of them are showing positive trends, the ER and NNR so far. But the NNR drag has an impact on our profitability, and therefore, we have been having to work on the cost control during H1, and we will continue to do so for the full year in order to protect the EBITDA. That is a little bit the NNR to EBITDA conversion, more of the same as what we said at H1. You also had a question on, by segment, how does the NNR intensity work? Obviously, we have the three products, right? One is the hardware, second one is really the acceptance, and third one is acquiring. When we do terminals and acceptance, there is no impact between external revenue and net revenue.
Srikanth Seshadri: On acquiring, it is the impact of external to net net. If you break it down by segment, SMB has the least intensity because we are talking about local customers, and they are working with some local schemes, as well as international card schemes. On the other hand, the highest impact of scheme intensity is on Global Commerce due to the cross-border nature of that business. Then in between, we have enterprise. So that is a little bit the NNR intensity or scheme fee intensity that drives NNR low. On cash, we have confirmed the outlook. We are progressing well on North Star. We are progressing well on the various aspects that we mentioned during H1. We will give you more color for the next quarter.
Frederic Boulan: Thank you very much.
Srikanth Seshadri: You are welcome.
Operator: We will take our next question. Your next question comes from the line of Hannes Leitner from Jefferies. Please go ahead. Your line is open.
Hannes Leitner: Yes. Thanks, and congrats to the good results. Maybe you can talk a little bit, given you have now closed all the acquisitions, if there is any extra payment expected or below the cash flow movement for next year. You called out, for example, ANZ, you will still do some services, et cetera. Just thinking about some potential one-off costs in that regard. Maybe then on Benelux, you can talk about the reasons why this is lagging and struggling. The miniPOS Cube looks encouraging, so how much of that could address some of those lagging factors? Thank you.
Srikanth Seshadri: Maybe I will take the one.
Hannes Leitner: Yeah
Srikanth Seshadri: On M&A. Hello, Hannes. Hope you are well. On the M&A, yes, we have closed all the deals. In fact, the India and Australia were closed a couple of days after our H1 call. In terms of what is to come, I think there is only one main thing, which is on the divestment that we made on the MeTS. It is a complex carve-out, so there is still cost to come for which we got paid, and we will be incurring those costs in the next couple of years. On the other side, the completion accounts of MeTS is yet to be done, and we also presented at H1, there is a deferred compensation of EUR 50 million that we need to get. Both of them are around the same number. So EUR 50 million of deferred payments to be received from MeTS in the future. For the carve-out cost, we have gotten paid.
Srikanth Seshadri: We need to execute that over the next years. That is the only real thing that is at play. Everything else is more or less closed. Regarding ANZ, we also did mention that we will do a small technical services for BillDesk as part of our Indian divestment. There is no additional cost incurred. It is really a revenue cost. It is a normal project kind of work that we will do.
Pierre-Antoine Vacheron: On Benelux, maybe two comments. First, you are right, the miniPOS is a great product. We launched a different version, but the concept is the same in Germany a year ago. One year, we sold 10,000 of this solution. That is addressing, in this case, the micro merchants, so it is really the entry device, which is good, and we are coupling it in the Benelux together with the Launchpad solution. That will help us on the low end of the market. More generally speaking on Benelux, there is a part that we should be able to fix quickly, all this being linked to the NPS. The NPS in the Benelux remains negative and remains in the negative territory, and that gives you most of the explanations of why we are struggling.
Pierre-Antoine Vacheron: Part of it can be addressed with additional, I would say, focus on customer service, which has been a bit, I would say, under pressure because of the ODD remediation that we are doing in the region. All this is creating an adverse type of climate, and we are putting in place more means to overcome this challenge in terms of relationship with the merchants. The other topic is linked to technology. Since we are in Belgium, still under legacy, acquiring a back office and platform with a limited digital experience. Here we will fix more structurally this market with this shift to the next technology. In a nutshell, what does it mean? That means that we want to be stabilized in the Benelux in the course of H1.
Pierre-Antoine Vacheron: To be back to growth, we need to have made significant steps in the digital journey on the local market.
Hannes Leitner: Great. Thank you.
Operator: We will take our next question. The question comes from Emmanuel Matot from Oddo BHF. Please go ahead. Your line is open.
Emmanuel Matot: Hello, Pierre-Antoine. Hello, Srikanth. I have two questions. First, do you expect the cost savings from the North Star plan to become a significant driver of profits from next year onwards? Because if I am right, there is no significant positive contribution expected at the EBITDA level of 2026 from this plan. My second question, I was wondering whether the first rollout had taken place for the Launchpad digital onboarding platform and whether the early signs are promising. Thank you very much.
Pierre-Antoine Vacheron: On North Star, you are right. What we communicated last year for 2026 was, if I remember, plus 10 on EBITDA and minus 40 in terms of RI and CapEx. We will be probably a bit better on that for 2026. The bar is higher in the plan for 2027. As we sit today, there is no reason to challenge that. We were speaking about EUR 80 million in 2027. Considering the progress that we are making, there is no challenge on that. Regarding Launchpad, it is a journey, because devil is in the detail when you are speaking about digital experience, because we do not do something cosmetic. We really do something which touches the deep dimension of the merchant account, the KYC, the document justifications, the order of payment terminals and so on and so forth.
Pierre-Antoine Vacheron: We have a succession of versions which have been launched on the market on the target instance, not on the legacy instance. It is really starting Q1 and Q2 2027 that I anticipate to see the results. But I am confident about what we are building and that it will be able then to expand very quickly on the other geographies.
Emmanuel Matot: Thank you very much.
Srikanth Seshadri: Maybe just a point of precision also, and hello, Emmanuel. When we said 10 and 40 for 2026, and EUR 80 million for 2027, there is also an associated cost against that of 50. That is why during the CMD, we said after 2027 it becomes a break-even and then a self-financing plan. That is still what is in the making and we need to work towards that framework, yeah.
Emmanuel Matot: Okay, very clear. Thank you.
Srikanth Seshadri: You are welcome.
Operator: Thank you. We will take our next question. Your next question comes from the line of Hervé Drouet from CIC-IB. Please go ahead. Your line is open.
Hervé Drouet: Yes. Good evening. Thank you for taking my question. The first one is, I am trying to get what prevents you to launch now in other country, you do miniPOS and your Launchpad. Is it because of reason of client relationship? Is it because of technology on the back office? Or is there another reason, maybe some cannibalization of existing revenue that for the moment prevents you to do so? That is my first question. My second question is, I did not get what was the non-recurring items in financial services that change a bit the organic trend. If you just can specify what is these non-recurring items. Thank you.
Pierre-Antoine Vacheron: Okay. miniPOS Cube, there is no reason not to launch elsewhere. It is just a marketing effort, marketing campaign to organize the onboarding, and the provisioning, on the various instances that we have. We have launched Belgium and Switzerland. Then obviously we will expand in the other markets. There is no reason we are targeting, in this case, micro merchants, which is a market where there were some risk of disruption from the newcomers that you know. We are very happy to have this solution with the right digital journey which goes together with that. On the Launchpad, it is more complex, because as I said, the Launchpad is not just a front, it is really an orchestration layer with a front, so that is impacting the various, I would say, back end of the company.
Pierre-Antoine Vacheron: It slowed down by the fact that we still have a long way before having one unified stack on the back end. That is the reason why it is step by step. The plan on the Launchpad is to launch it, if I remember correctly, in 4 geographies in the course of 2027, but also to expand into new segments as compared to the pure SMB. It is a slow takeoff, which is normal because it is really foundations that we are putting in place. Then I expect to be able to accelerate in 2027 and in 2028. Regarding FS one-off or non-recurring, there are 2 dimensions here. One is a real one-off, which is linked to a settlement as part of the renewal of a contract with a significant partner. That is one-off, and that is only one-off in Q3.
Pierre-Antoine Vacheron: As mentioned by Srikanth, we have some TSA, so transition agreements with some of the disposals that we have done that is generating revenue starting this Q3, and that will last for a few quarters. It is not something that we consider as recurring.
Hervé Drouet: Thank you.
Operator: Once again, if you wish to ask a question, please press star 1 1 on your telephone. We will take our next question, and the question comes from Mahir Bidani from UBS. Please go ahead. Your line is open.
Mahir Bidani: Hi, Pierre-Antoine, Srikanth. Thank you for taking my questions. Just a couple from me, if I may. First one on the growth outlook. What gets us to the lower end of the flattish total revenue growth for the year versus the marginally positive? If you could just tell us what gets us to the higher end of that. Then on the medium-term outlook, when we think about the free cash flow guidance, is there anything that perhaps since we last spoken, has incrementally increased the risk of it not meeting, perhaps the EUR 300 million in the medium term, whether that is higher bond yields and higher refinancing costs that you may incur? Or perhaps, the increased mix shift towards lower take rate revenues that perhaps doesn't get us to the acceleration of 4% over time. Yes. Thank you.
Srikanth Seshadri: Okay. Thanks for both those questions. I will take the first one, which was on revenue growth. So obviously the FS, there is the one-off, especially related to the claim. I think that is really the one-off that won't repeat. Then in terms of MS, we did talk about the delayed churn in enterprise and the Nordics that will impact us in Q4, and partially in 2027, but it will impact us in Q4. Then, as we have said, we are cautious on the volume outlook. We were cautious in Q3. We did have the same level of MSV continuing at 4% plus, and our external revenue grew at 4% plus, showing the take rate stabilization, by the way. But I think we are still cautious around that on both the consumer spending as well as on the energy prices. They are both volatile.
Srikanth Seshadri: We have seen the volume contracting a little bit in October. So we just wait and see to see how that aspect plays out. So those are probably the three key areas that we need to watch and especially on the Merchant Services, if any of the churn timing works in our favor or if the volume rebounds, then we could go back into the higher end. But we want to be cautious around where we are reviewing Q4 outlook. Now, in terms of, then your question is really on the 2030, EUR 300 million to EUR 350 million cash conversion. If I got you right?
Mahir Bidani: Yeah.
Srikanth Seshadri: Okay. So on the EUR 300 million to EUR 350 million, what we did say during the Capital Market Day is we take EUR 120 million of interest cost, which was nothing but the EUR 50 million that we had as a run rate the year before. And we said we will refinance 1 billion at 7% each. That 70 plus 50 gave us the 120. We had to be extremely macro at that time. We still are macro now. So what we are looking at is, as we said, we are cash covered for 2027. We need to look at the refinancing options for 2028. We will look at the quantum, the timing, and be opportunistic on the windows in order to optimize. And we will see how the spreads turn out by the time we are ready to launch. I am sorry.
Srikanth Seshadri: I think there was also what else could impact the 2030. I think the interest cost was an assumption, and the second one was on the take rate and on the mix. We did mention that we were slightly cautious on projecting the lower contribution margin all the way down to 2030, keeping a sense of cushion on the contribution margin. The growth is linear with the CAGR being at 4% and the exit at 5%. Maybe a percentage drop here or there. We need to see what the impact is. We revised, in fact, post our divestments, the EUR 1 billion that we said in the CMD was brought down to EUR 900 million. Since we were divesting our cash-draining companies, we retained our EUR 300 to EUR 350 of cash. That is still quite secure in our view.
Mahir Bidani: Thank you very much.
Srikanth Seshadri: You are welcome.
Operator: Thank you. We will take our final question. Your final question comes from Craig McDowell from JP Morgan. Please go ahead. Your line is open.
Craig McDowell: Hi. Good evening. Thanks for taking my question. My first one, I just want to clarify the comments Srikanth made on the October volumes. I might have missed out, but I thought you said contraction in volumes in October. Just to confirm that, first of all.
Srikanth Seshadri: Yeah, there is a slight drop indeed, Craig. Nothing to be majorly worried about, but it is showing certain volume drops for us. Yeah.
Craig McDowell: Okay, got it. Then just a broader question, I would be appreciative of a refresher, I guess, on inflation impacting your business, specifically in your pricing. Is your pricing broadly designed to be flat in terms of take rates on inflated volumes, or is there any kind of inflation impact on your pricing that we need to be aware of? Then my final question was, I am sorry to raise it, but any update on the regulatory audits or investigations would be helpful as well. Thank you.
Srikanth Seshadri: I will take probably the question around pricing and leave the regulatory question to Pierre. On the inflation part, we have two kinds of pricing in our industry. We have the IC++ as well as the blended. The IC++ shows what the interchange fee, what the scheme fee, and what the acquiring fee. Then we have blended, which kind of blends the three. We do look at, especially when there are scheme fee revisions that we go and, of course with the IC++ it is passed through, and for blended we have to make sure that it is getting repriced. That is really and we have a split by the various businesses, of how the pricing works.
Srikanth Seshadri: Acquiring is a percentage of MSV, and as long as the take rates are stable, then the inflation in the MSV, the merchant sales value, us taking a percentage of it, our revenues are already getting the inflation built in. That is how the pricing works. Whereas on the acceptance, it is really a fixed price with taps. We did have an issue this year, because of the Ogone to GoPay, that Pierre mentioned, which is 98% migrated. Then at H1, we did have a bit of churn on the SMB merchants that impacted our revenue this year. Acquiring inflation is built in, I would say. That is where I will leave it. For the regulatory part, Pierre.
Pierre-Antoine Vacheron: On the regulatory, there is no significant change as compared to what we shared in July. We are continuously mobilized on this topic with a clear strategy, the resources, to address the findings of the regulators, especially the NBB. The discussion with them is evolving. We are coming to the end of the process on the AML parts. We received a recent letter, which is no surprise. The areas that they have identified are consistent with the plans that we have. They expect the program to be coming to an end, like us, by the end of 2027. We continue to be motivated on that, to maintain a very close and transparent dialogue with the regulator throughout the process. Obviously, that is something that we want to have behind us, in 2028.
Craig McDowell: Super. Thanks, both.
Operator: Thank you. We do have a further question. Please stand by. Your question comes from the line of Lars Duse from Deutsche Bank. Please go ahead. Your line is open.
Lars Dueser: Yeah, hello. Good evening. Thank you for taking the questions. On the flat MS NNR in Q3, can you quantify the one-off impact there? Also, what is the expectation for Q4 based on what you said earlier, Srikanth Seshadri, on volumes, but also the late churn in the Nordics?
Srikanth Seshadri: Yeah. I do not think we really talked about one-off on MS NNR. We talked about the one-off on FS. On the NNR with MS, it is really more the mix that we talked about. The customer segment mix, the FMCG versus travel and travel and so on. The last one was on the geography, where we are, if you are partner-led or through a banking partner, then especially with the banking partner in Italy, it is between ER and NNR, that impacts the NNR mix. So those are the three areas that impact the NNR. So that is the one on MS. Then in terms of volume, what is the second question? Sorry. Was it on volume?
Lars Dueser: Second question was, yeah, just how to think about NNR and MS in Q4, if you.
Srikanth Seshadri: Yeah
Lars Dueser: You know. Yeah.
Srikanth Seshadri: I mean, we are probably the only company still guiding on ER because we are still rebuilding our systems to forecast NNR. We will progressively get there. But in terms of these mix, as long as they continue, and we see that to continue, Pierre talked about Benelux being a key aspect where, we are direct sales in Benelux and direct sales in Switzerland, and these are key markets for us to turn around and stabilize in SMB for our NNR to improve. Value-added services is going to help improve NNR. That is really the reversing the mix that we are talking about. I would expect NNR to still drag in Q4. But we do not guide by quarter, of course, and we do not guide on NNR today. Sorry to not have given you a precise answer.
Pierre-Antoine Vacheron: Basically, there is no reason for a significant shift.
Srikanth Seshadri: Yeah.
Pierre-Antoine Vacheron: Because that.
Srikanth Seshadri: It takes a bit of time.
Pierre-Antoine Vacheron: that will be linked to a rebalancing of our mix of business.
Lars Dueser: Got it. Then if I may, just on cash flows, did you pay out the Italian put?
Srikanth Seshadri: Not yet.
Lars Dueser: Not yet. Okay. What's the latest?
Srikanth Seshadri: Not yet.
Lars Dueser: expectation there in terms of cash outs and timing? Is that something you can say already?
Srikanth Seshadri: We originally planned that for H2. We will need to see as to when that finally gets closed.
Lars Dueser: Got it. Last but not least, on MeTS and the related cash costs you were talking about, which you incur, I think, next year. Is that in the ballpark of EUR 50 million, which you also said is the deferred compensation you get? So it is a wash, or what sort of ballpark are we talking here?
Srikanth Seshadri: It is a bit more phased in terms of the cash out. It is not all in one go next year. I think it is over the next 2.5 years.
Lars Dueser: Okay. And magnitude-wise, is it around 50?
Srikanth Seshadri: It is a wash. On the global number, it is a wash.
Lars Dueser: Okay. Thank you so much.
Srikanth Seshadri: You are welcome.
Operator: Thank you. This concludes today's question and answer session. I will now hand back for closing remarks.
Pierre-Antoine Vacheron: Thanks a lot. I will not add too much to what we said. I think we are obviously proud of what we achieved in Q3, which shows that the plan initiated one year ago is working, and that the customer satisfaction is improving. The platform convergence is really on track and somehow ahead of the plan. We are able, with that, to confirm the guidance for Q4 on all dimensions, and we continue to work because we still have a long way to go. Thanks a lot, and have a great evening.
Srikanth Seshadri: Thank you very much.
Operator: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.
