BLUE PRISM GROUP PLC
‘BLUE PRISM’ OR ‘THE GROUP’
UNAUDITED PRELIMINARY RESULTS FOR THE YEAR ENDED 31 OCTOBER 2020

JASON KINGDON, CHAIRMAN & CEO, COMMENTED: 

"We are building a global software company and have made a great deal of progress in the year. The business demonstrated resilience and strength throughout the extraordinary events of 2020, with strong retention and an acceleration in new business in the second half. We delivered revenue growth of 46% in the year, and Blue Prism Cloud, our SaaS product, was a standout contributor, with an increase of 147% in bookings in its first year as an integrated part of the Group, underpinning its strategic value as our enterprise customers look to cloud based deployments. We move into FY21 with a strong pipeline, underpinning our belief that intelligent automation is key to driving recovery across enterprises of all sizes. Our unique market focus on complex, enterprise-grade intelligent automation and access to cutting edge technologies via our Digital Exchange and partner network, generates significant ROI for our customers which is the foundation for us to benefit from long-term, value accretive relationships."

* Adjusted EBITDA loss is EBITDA loss adjusted to exclude contingent share-based payments and exceptional expenses

**Cash includes cash on deposit classified as short-term investments.

***See financial information below for details of the FY19 restatement

OPERATIONAL HIGHLIGHTS

§ Revenues increased by 46% to £141.4m (FY19: £96.8m restated), monthly recurring revenue (MRR) of £12.8m (FY19: £10.6m) (£1.1m from Blue Prism Cloud (FY19: £0.7m)

§ Strong improvement in cash generation, particularly in the second half, driven by business performance and aided by some benefit from pandemic-related savings

§ Enterprise-grade product providing significant customer ROI, and increasingly seen as a strategic tool, drives long-term customer relationships

-    98% gross revenue retention

-    Closing customers of 2,031 (FY19: 1,677 customers)

-    39% of opening customer base upsold for more licences during the year

§ Significant long-term commitments made - remaining performance obligation, which represents future revenues under contract but not yet recognised as revenue, was £312m

§ Increasing direct investment in product and R&D

-    Additional resource accelerated development - 8 product updates launched including Blue Prism Accelerators for SAP ERP, Interact, Service Assist and Decipher

-    Blue Prism continues to be ranked a strong market leader by industry analysts, including Gartner, Everest and Forrester

§ Continued broadening of technology partner ecosystem

-    250,000 registered users, an increase of 97% on the prior year

-    Online marketplace 'Blue Prism Digital Exchange' leverages 100 technology partnerships, now has 46,000 users, a 318% increase from 2019, and 1,800 assets

§ 147% increase in Blue Prism Cloud bookings, the market leader with 20% share of the RPA SaaS market (based on IDC market sizing)

§ The Board is pleased to announce the addition of two additional Non-Executive Directors, Maurizio Carli and Murray Rode, both of whom bring extensive international and US software experience.

CONTACT DETAILS

For further information please contact:

Blue Prism Group plc

Tom Hull, Head of Investor Relations                                                                                  +44 (0)77 3670 7407

Investec Bank plc                                                                                                   +44 (0)20 7597 5970

Carlton Nelson

Ben Griffiths

BofA Securities                                                                                                      +44 (0)20 7628 1000

James Robertson

Oliver Elias

Brunswick                                                                                                               +44 (0)20 7404 5959

Caroline Daniel

Rosie Oddy

FINANCIAL CALENDAR

Blue Prism World                                                                                                                 May 2021

Half year results                                                                                                                  18 June 2021

ANALYST PRESENTATION

Jason Kingdon (Chairman and CEO) and Ijoma Maluza (CFO) will host a webinar on these results at 3pm GMT/10am ET/7am PT today. A link to the webinar and to register can be found below. A question and answer session will be hosted during the webinar and to participate attendees will need to dial in.

Phone number UK: +44 (0)330 336 9125

Phone number USA: +1 929-477-0402

Confirmation code: 5712982

Phone lines will open at 2.45pm GMT

To view slides and join the audio webcast please use the following link:

https://webcasting.brrmedia.co.uk/broadcast/5ff3047ac627bb518d531317

RESULTS FOR THE YEAR ENDED 31 OCTOBER 2020

STRATEGY AND OPERATIONS

Group revenue increased 46% and the monthly recurring revenue (MRR) generated at the end of October was £12.8m (FY19: £10.6m). During the year the Group noted a direct impact from the COVID-19 pandemic, with customers responding to the uncertain macro environment by delaying purchasing decisions or reducing deal sizes. The Group saw some recovery in the second half of the year, with sales activity improving and deal sizes starting to recover, but overall deal sizes remained lower than the prior year.

The Group delivered £122m of business from new customers and upselling existing customers, driving revenue growth in FY20 and future periods. The total value of new software sold (which measures the total contract value from new customers, upsells and renewals generated over the period) was £180m (2019: £181m). Sixty percent of total business was generated in the second half of the year as customer activity and deal sizes increased. Remaining performance obligations (RPO), which represents future revenues under contract but not yet recognised as revenue, were £312m at the end of the period indicating the strong level of commitments made by customers despite the challenging environment.

In response to uncertainty driven by the COVID-19 pandemic the Group raised £100m (before expenses) to reinforce the balance sheet in the event of prolonged market disruptions. This funding allowed the Group to maintain investments made during 2018 and 2019 while continuing to prioritise spending into product and R&D, positioning the Group favourably as normal market conditions return.

The adjusted EBITDA loss for the period of £(40.3)m improved by 47% compared to FY19. This improvement was as a result of strong revenue growth combined with financial discipline across the business and reduced spending on areas like travel & expenses during the pandemic, offset partly by an increase of 124% in product and R&D spend.

The reported operating loss was £(81.6)m (FY19: £(91.8)m restated).

CUSTOMERS

The Group closed the financial year ended 31 October 2020 with a significantly increased customer base of 2,031 customers, an increase of 21% on the previous year. The customer base represents a significant opportunity for the Group, with the largest customers increasingly providing a blueprint for other customers to scale and the Group's continued track record in upselling underpinning this opportunity further.

Notable new logos included the U.S Department of Veteran Affairs, Bristol Myers-Squibb, the Federal Aviation Administration, Huawei, Fremantle Media, Nomura and Thames Valley Police. New customers typically start small, with deal sizes for new customers in 2020 similar to those in 2019 (average 3-5 digital workers). The Group aims to unlock further value from new customers by upselling further licences; this has the benefit of both increasing value per customer and retention levels.

In 2020 Blue Prism upsold into 647 customers (FY19: 536 customers). While upsell numbers remained high, the average value of an upsell deal fell as customers responded to uncertainty arising from the COVID-19 pandemic by either delaying or reducing the level of incremental spend. As a result, the net retention rate for the year was lower at 113% (2019: 143%).

During the period the Group delivered healthy levels of upselling across its largest customers, with 38 of its top 50 customers by revenue upselling. The Group's top 50 customers accounted for 36% of enterprise MRR, with an average spend of $1.3m a year. The Group views the top 50 customers as a blueprint for the remaining and new customer base.

Despite the pandemic driving significant uncertainty for the customer base, overall customer retention remained very strong. The gross retention rate for the year was 98%, with very low levels of revenue churn. The majority of losses were very small in size - 103, or 88% of the losses related to customers with deployments of 5 or less digital workers.

The high levels of revenue retention and increasing levels of customer commitments demonstrated provide the Group confidence in the margin potential.

PEOPLE

Since its IPO in 2016 the Group has invested in new talent across all functions to respond to the significant market opportunity. As previously indicated, 2020 was a year of consolidation, with total headcount largely unchanged from the prior year.

While headcount was flat on 2019, resources were pivoted toward product and R&D, in line with the Group's goal to increase product innovation and continue its focus on complex, enterprise-grade intelligent automation, where it is a market leader.

Sales & Marketing productivity was directly impacted by the COVID-19 pandemic, with short-term changes to customer behaviour reducing average deal sizes. This lengthened the payback period for some of the 2019 investments, which we had expected to reach productivity during the period.

The Group remains confident that the investments made will reach productivity and is reassured by the returns seen from the 2018 cohort of sales hires in 2019, where they helped to drive a strong net retention rate and 60% growth in MRR.

The Group continued to make key recruits to build a leadership team to support the potential of the organisation. These included a new Chief Marketing Officer, Chip Coyle, and the appointment of John King as Head of Strategy and Corporate Finance. The Group plans to continue strengthening leadership as the business grows and evolves.

During the year Charmaine Carmichael stepped down from her role as Non-Executive director, as a result of taking up a full-time executive role, which required her to step down from external appointments. Following Charmaine's resignation Rachel Mooney was appointed as a Non-Executive director, bringing extensive software experience from organisations such as Google and Snow Software.

The Group has today announced the addition of two additional Non-Executive directors, Maurizio Carli and Murray Rode, effective 1 February 2021. These appointments strengthen the Board's breadth and depth of global software industry experience and expertise, notably in the critically important US market. The two appointees also bring invaluable skills in operations, product development - including cloud computing - and in scaling technology businesses, which will be central to supporting strategy.

Maurizio Carli is an international executive with an exceptional track record of driving sales growth in enterprise IT companies. Most recently Maurizio held a number of go-to-market leadership roles at VMWare, an $11bn+ revenue cloud computing and virtualization software and services company, progressing from direct responsibility for EMEA, then the US and finally leading worldwide sales and services. Prior to VMWare Maurizio held leadership roles at Google, Business Objects and IBM. Maurizio is currently Chairman of Board International, a decision-making software company, and is a Non-Executive Director at Temenos.

Murray Rode brings extensive experience in enterprise software at the executive and Board level, with particular knowledge in SaaS, analytics and data science, and data management infrastructure. He held senior Executive roles at Tibco, a $1bn+ revenue big data and software integration business, including CEO, CFO and COO. During his time at Tibco Murray led the company through a major financial and operating transformation, revamping the core strategy and go to market approach, significantly increasing profitability and executing a series of acquisitions. Murray currently serves as Senior Advisor for Bow Capital Management in Menlo Park, CA.

PRODUCT

Blue Prism is differentiated by its focus on enterprise-grade end-to-end intelligent automation. Four core areas enable this focus:

·    Scalable:

o  The Blue Prism digital workforce is centrally managed from an enterprise platform, maximizing versatility and scalability. Digital workers can be retrained and redeployed across the organization depending on business needs and how they evolve

o  This is very different from the wider market approach - which commonly takes desktop automation tools and adds on components in an attempt to allow scaling

·    Secure

o  As a result of the centralised architecture the digital workforce maintains total compliance and governance transparency

o  Digital workers have their own security credentials, providing clear audit trails of all actions and training history

·    Smart

o  The Blue Prism Digital Exchange (DX) allows direct access to cognitive capabilities, providing access to the world's best AI from the likes of Google, Amazon and Microsoft This allows the digital workers to multitask, learning and operating new technologies seamlessly

o  Digital workers are available to business users with intuitive, easy -to -train formats, that require no coding

·    Successful

o  The Blue Prism platform allows object-based reusability - meaning that every part of an automation can be reused. This simplifies building additional processes, allowing increasing complexity and improving time to value

o  Digital workers can closely match or exceed the output of human workers, with fewer errors and faster throughput

o  This provides customers a faster path to realizing business value and ROI at low total cost of ownership (TCO)

During the year the Group has prioritised the preservation and expansion of these differentiators with additional resource directed to the product function. In FY20 spending in R&D increased to £20.1m (FY19: £12.5m) of which £17.7m (FY19: £7.9m) was expensed through the P&L and £2.4m (FY19: £4.6m) capitalised.

These investments have driven an acceleration in product innovation and R&D. In the last twelve months, the Group has launched versions 6.7, 6.8, 6.9 and 6.10 of the product, incorporating new functionality including Latin American Spanish and improvements to user experience. In addition to these updates specific functionality has also been launched including:

-     Decipher IDP: (intelligent document processing): an easy-to-use intelligent document processing solution that uses OCR (optical character recognition) and ML (machine learning) technology to identify and extract data from business documents, such as invoices. It learns from human-in the-loop interaction and applies the knowledge going forward

-     Blue Prism Interact: an easy to use collaboration tool that allows humans to interact with digital workers, replicating many of the benefits of attended or desktop automation, while preserving the product's unique security and scalability features.

-     Blue Prism Service Assist: skills for the digital workforce to use in call centre situations

-     Blue Prism Accelerators for SAP ERP ERP: hundreds of pre-built automation components and thousands of actions designed to accelerate enterprise resource planning (ERP) software deployments and migrations with no code.

Further product development has been integrated in the form of Blue Prism Cloud, the Group's SaaS offering which provides immediate access to digital workers hosted on Microsoft Azure, as well as access to Azure Cognitive Services. These capabilities were acquired as part of the Thoughtonomy acquisition in July 2019, and have been successfully integrated throughout 2020. Blue Prism Cloud bookings increased by 147% in 2020 and accounted for 18.5% of bookings during the year. This offering capitalises on trends toward enterprise cloud migrations and SaaS based deployments and positions the Group favourably in this area.

In 2018 the Group launched its Digital Exchange (DX) platform to provide object-based access to technologies from its technology partnerships and pre-made automations. The DX allows customers to upskill their digital workforce by incorporating the latest in technology from the technology partner network, including AI, machine learning and other cognitive tools from partners including Amazon, IBM, Microsoft and Google.

The DX has continued to grow in terms of active users and assets available. As of 31 October 2020, 46,000 users are registered with the platform and have access to over 1,800 assets. This is in part driven by the rapid development of the technology partner network which has increased to 100 in the year, a 100% increase on the prior year.

MARKETPLACE

The RPA market continued to grow throughout 2020, albeit at a lower than expected rate as customers delayed or reduced spend in response to the uncertain environment driven by the COVID-19 pandemic. Gartner estimate that in 2020, the RPA market grew 12%.  Blue Prism continued to build market share as our track record of delivering enterprise-grade automation continued to resonate. The role of RPA in driving enterprise productivity, and the potential for increasingly strategic deployments, remains undiminished and the Board believe may in some ways be accelerated by the pandemic going forward as businesses look to improve organisational resilience and respond to changing consumer demands.

During 2020 the returns to customers and scale of the market opportunity has attracted the attention of some major software vendors. Microsoft acquired RPA vendor Softomotive in May 2020 and has subsequently launched their Power Automate tool. These entries into the market are a recognition of the scale and validity of the RPA market opportunity, and while there is always the potential for increased competitive tension, the Group notes that most new entrants, including Microsoft, are focused on the desktop automation space. The Board remains confident in the capabilities of the Group's product set, and enterprise-grade intelligent automation solutions, validated by its continued cross-selling and partnership activities with the likes of Microsoft on larger, strategic deals.

STRATEGY

The Group's strategy has been designed to enhance its position as the go-to provider of enterprise grade, intelligent automation:

·    Empower customers to extend the boundaries of process automation

o  The Blue Prism platform is a holistic solution for customers to automate business processes that are not adequately handled with existing systems. To drive the greatest possible adoption, it aims to:

§ Allow business users, not just IT, to implement an automation tool by providing no code software

§ Enabled by the Digital Exchange (DX):

·    Build extensive capabilities for handling commonly deployed IT systems

·    Work with a technology partner network, including Google, AWS and Microsoft, to provide a range of skills for digital workers to complete a diverse array of tasks (for example OCR, NLP, sentiment analysis, machine learning)

·    Lower the barrier to adoption and increase the stickiness of products

o  Investments across product, sales and marketing and in the ecosystem of systems integrators and partners ensure that:

§ The product is accessible to potential or new customers with learning and trial editions via multiple routes, including public cloud

§ Customers have access to trained resources when planning, deploying and extending automation projects

§ The product is capable of scale via building on initial successful projects and can quickly scale up across a customer's organization

§ The product responds to the evolving needs of customers and can integrate legacy technology with the newest, cloud-based applications

§ The Group can solve the most complex, mission-critical and sensitive areas of customers' operations, fulfilling regulatory requirements

§ All processes are centrally controlled and are made of editable, reusable objects which speed up process building and lower total cost of ownership with scale

·    Drive growth with compelling user economics

o  Based on strong and consistent gross retention rates and track record of upselling, the Group continues to invest in growth. To optimize this, the Group:

§ Takes a holistic approach to maximise investments, looking at the long-term value of new account and upsell opportunities

§ Employ both direct and indirect sales strategies, depending on relationships and presence in a given market

§ Work with partners to map out the most compelling upselling opportunities within major accounts

§ Explore partnership and joint venture opportunities where market characteristics warrant it

CORPORATE STRATEGY

As announced in November 2020 at the full year trading update, the Board has begun exploring a potential secondary listing in the United States. No decisions regarding the terms or timing of a potential secondary listing have been made, and there is no certainty that a US listing will take place.

OUTLOOK

The Board is instigating a guidance format from 2021 which reflects the significant structural opportunity in our end market, coupled with the heightened uncertainty stemming from the actions taken by governments around the world to combat the pandemic and aligns more closely with the approach of global software peers.

Based on the Annual Recurring Revenue of £154m for the year to 31 October 2020 and prevailing foreign exchange rates, the Board currently expects that revenue for 2020/21 will be in the range £170m to £180m, with an adjusted EBITDA loss of the order of £25m. The Group continues to plan to reach cash break-even by the end of the financial year ended 31 October 2021. The FY20/21 pipeline is stronger than at the same point in 2020. To date the business has performed in line with expectations.

The guidance provided above is forward-looking in nature. Actual results may differ materially. See the cautionary note regarding forward-looking statements below, under "Disclaimer".

TRADING

REVENUES

Recognised revenues for the period increased by 46% to £141.4m (FY19: £96.8m restated) with recurring, subscription-based, licence revenue accounting for 98% (FY19: 96%).

Other revenues accounted for 2% of total revenues, with professional services and training revenues increasing to £3.0m (FY19: £2.6m) and sponsorship and other revenue decreasing to £0.1m (FY19: £1.8m) as a result of the Blue Prism World events being hosted virtually in response to the COVID-19 pandemic.

MRR, which is the exit run rate of monthly recurring revenue at the last month of the reporting period, was £12.8m (FY19: £10.6m). Growth in MRR was directly impacted by the COVID-19 pandemic as customers became more cautious with spending decisions, resulting in extended sales cycles and smaller average deal sizes. Recognised revenues by geography were as follows:

Blue Prism Cloud accounted for £11.5m of revenues in the period, compared to £1m in 2019 following its acquisition in July 2019. Blue Prism Cloud bookings increased by 147% and now contribute around 18.5% of the new bookings achieved by the Group.

LOSS FROM OPERATIONS

Excluding contingent share based payments and exceptional deferred consideration costs, the Group recorded an operating loss for the year of £(50.2)m (FY19: £(78.4)m restated). The reduction in the loss was as a result of strong revenue growth while costs grew modestly due to lower travel and expenses and events costs, in part as a result of restrictions due to the COVID-19 pandemic, as well as lower recruitment costs and general cost management. Offsetting some of these cost reductions were investments in the product and R&D. Operating expenses were in the following categories

CASH FLOW

Net cash at the period end was £137.6m (FY19: £74.1m). The increase in cash and cash equivalents relates to the net proceeds from the £100m fundraising in April 2020 less operating cash outflow.

Operating cashflow for the year was £(33.0)m (FY19: £(57.5)m). The improvement in operating cashflow was primarily driven by improving adjusted EBITDA loss £(40.3)m (FY19: £(76.1)m restated). The strong cash performance also reflects positive working capital, driven by strong cash collection and increasing deferred revenue, and lower capitalised spend.

OTHER COMPREHENSIVE INCOME

During the period the translation of the overseas subsidiaries from their local currency into the Group's reporting currency resulted in other comprehensive loss of £(2.6)m (FY19: gain of £1.8m).

STATEMENT OF FINANCIAL POSITION

Deferred revenue was higher than the prior year at £95.7m (FY19: £77.4m restated) in line with the growth of the business.

Trade and other receivables increased to £44.4m (FY19: £43.6m restated). This was driven by the growth in the business across the year offset by robust cash collection in the second half of the year (reflected in the closing cash position).

In addition, costs to obtain contract assets of £30.5m (FY19: £28.2m) have been recognised in line with the capitalisation of commission under IFRS 15. During the period software development costs of £2.4m (FY19: £4.6m) have been capitalised relating to product developments which will give rise to future economic benefits. The product upgrades represented a number of functional upgrades as well as some significant product innovations. These costs are being amortised over 18 months.

PRINCIPAL RISKS & UNCERTAINTIES

In day to day operations the Group faces risks and uncertainties. The Board aim to mitigate and manage these risks by regularly reviewing and assessing these risks and identifying suitable strategies to minimise the risks. The risks and mitigation strategies will be described in more detail in the Annual Report and Accounts and a list of the key risks is presented below:

-      Growth strategies and management

-      Macroeconomic and political conditions

-      Software reliability and performance

-      Security breaches

-      Market and technological changes

-      Talent management

-      Pandemic management

-      Intellectual property

GLOSSARY OF METRICS REFERENCED

Exit monthly recurring revenue (MRR): The amount of recurring software licence revenue recognised in the Group's profit and loss account in the last month of the reporting period, adjusted to reflect the full impact of work won during the month

Net revenue retention: Measures the net growth in MRR from customers at the beginning of the reporting period

Gross revenue retention: MRR at the beginning of the period less MRR losses from lost customers divided by MRR at the beginning of the year, annualised

Jason Kingdon, Chairman & CEO

Ijoma Maluza, CFO