Company Announcements

14 November 2024

ActiveOps Plc

("ActiveOps", "the Company", "the Group")

Interim Results for the six months ended 30 September 2024

ActiveOps plc (AIM: AOM), a leading provider of Decision Intelligence for service operations, is pleased to announce its unaudited results for the six months ended 30 September 2024.

Financial Highlights:

ActiveOps Executive Chair, Richard Jeffery, commented:

The first half of FY25 has seen ActiveOps deliver good revenue and profit growth, trading in line with expectations for the full year. Importantly, we continue to make positive progress across the business, enhancing our product set and strengthening our sales team as planned. Looking ahead, we are confident the investment into our sales team, and the growing AI capabilities of our platform, provide us with a fantastic springboard for growth in FY26 and beyond."

Footnote to Financial highlights

The above non-GAAP measures are unaudited

For more information, please contact: 

ActiveOps is a Software as a Service business, dedicated to helping organisations create more value from their service operations. ActiveOps' Decision Intelligence software solutions are specifically designed to support leaders with the vast number of decisions they make daily in the running their operations. Our customers make better decisions and consume less time and effort making them. The outcomes are significantly improved turnaround times and double-digit improvements in productivity with backlogs of work materially reduced. Customers also leverage the capacity created to invest in transformation and development, and more efficiently utilise resources.

The Company's AI-powered SaaS solutions are underpinned by 15+ years of operational data and its AOM methodology which is proven to enhance cross departmental decision-making.

The Company has approximately 190 employees, serving a global base of enterprise customers from offices in the UK, Ireland, USA, Canada, Australia, India, and South Africa. The Group's customers are predominantly in the banking, insurance, healthcare administration and business process outsourcing (BPO) sectors, including Nationwide, TD Bank, Elevance and Xchanging.

Executive CHair Statement

The first half of FY25 has seen ActiveOps deliver good revenue and profit growth, trading in line with expectations for the full year. Importantly, we continue to make positive progress across the business, enhancing our product set and strengthening our sales team as planned, providing us with the skills and capacity to accelerate our growth rate in future years.

The increasing ability of our products to blend Artificial Intelligence ("AI") and Machine Learning ("ML") technologies with human intelligence, and information drawn from other enterprise applications, is helping our customers to make better decisions, faster and easier than ever. This is driving expansion opportunities across our customer base, as reflected in the strong ARR growth rates at constant currency in Canada and Africa this period, of 37% and 43% respectively. This provides a clear indication of the growth that is available when we are well established with our customers.

Our international land & expand sales strategy continues to deliver results, including three new logo wins in the half, two with significant expansion potential and several major contract expansions, including multiple upsells of the recently launched ControliQ Series 3.

Following our investments in product and marketing, the focus is now on expanding our sales teams to drive additional growth. With more customers than ever before at our conferences in October, we are confident that our products' position in the market has never been clearer and more relevant.

Delivering against our Financial KPIs

Our highly cash generative SaaS business model is a major strength of the business, providing robust visibility of earnings, and the funds to invest in resources to support further growth.

Overall Group revenues grew by 10%, (11% on a constant currency basis, "CC"), to £14.32m (H1 FY24: £13.06m), including 11% growth in SaaS revenue to £12.96m (H1 FY24: £11.72m). ARR increased 10% (12% on a CC basis) to £26.15m (H1 FY24: £23.73m), and NRR increased to 108% (H1 FY24: 104%).

Supported by this solid revenue performance, the Group delivered adjusted EBITDA growth to £1.04m (H1 FY24: £0.79m) and significantly increased PBT by 370% to £0.47m (H1 FY24: £0.10m). This strong profit performance provides us with firepower to accelerate investment in Canada, alongside our ongoing sales team investment, where we see further expansion opportunity. 

ActiveOps remains well capitalised, with cash and cash investments at the period end of £13.44m (H1 FY24: £9.90m), providing the capacity to reinvest into the business and support organic growth.

Growth of our customer base: land & expand

Our target market is global and large. The Decision Intelligence market was estimated to be worth more than $12bn in 2023, growing to greater than $36bn in 2030[1]. Today we focus on a well-defined set of industries and geographies, but with large-scale service operations present in all industry sectors, the potential is huge. The surge in interest in AI, increased regulation, challenging economic climate and continued uncertainty relating to hybrid working are all market forces which are driving interest in our capabilities.

While enterprise sales cycles remain elongated in some regions, with elections and other macro factors continuing to slow down decision making processes, we secured three new customers in the period, all in North America: a large US healthcare insurance provider, and a Canadian bank, both with significant expansion potential, and a small US bank.

Our performance in Canada, APAC and Africa has been particularly strong. In Australia three further major banks have upgraded to transition to ControliQ Series 3, meaning our four largest Australian customers have either now moved to ControliQ Series 3 or are contracted to do so later this year. APAC ARR has increased 10% in the period on a constant currency basis.

In Canada we continue to see good traction following the work we did last year to create a French-Canadian version of our core offering, and the opening of our office in Toronto. Canada has seen 37% ARR CC growth in the period, with a major customer win coupled with healthy expansions across our existing base in the country, driving NRR of 123% on a constant currency basis.

ARR CC growth in Africa is up 43%, driven by a significant expansion within three significant customers driven by the upsell to Series 3.

Following the close of the period, we have been notified by an EMEIA customer of the intention to reduce the use of the ControliQ platform in a single area of their organisation. Although they remain a customer, and we will continue to work with them to demonstrate the value derived from our software, this will have a gross impact on exit ARR of approximately 5%. Such an event is highly unusual, and we are focused on ensuring all customers remain fully aware of the considerable return on investment they derive from our software.

Investing in our sales team

The applicability of our offerings across our target sectors is clear, and our expansion performance within existing customers continues to underpin our overall growth. We are now investing in our sales teams to specifically target an increase in the rate of new customer wins. This process has begun and is progressing well, with five new team members joining us towards the end of the half in the UK, South Africa and North America, and further investment is planned in Canada in the second half of the year. Revenue growth is expected from this investment from H2 FY26.  

Powering our customers' success with innovation

Service Operations leaders make thousands of decisions every day. Our Decision Intelligence products, designed purely for the operations environment, help these leaders and their teams make the right decision, quicker. This increases efficiency and capacity, alleviating pinch points and improving employee welfare. Through our 15 years' experience in the service operations industry, and close customer relationships, we are well placed to ensure we build the products which Service Operations teams need most and can derive the most value from. Product development and enhancement remains a key cornerstone of our growth strategy, and our product teams have been busy in the first half of the year.

ControliQ

Following its launch in September 2023, ControliQ Series 3 is now live, with multiple customers using the platform following successful upsells, and with additional customers trialling its features. Our customers are now able to take advantage of the latest in AI tools for the back-office, increasing automation and releasing capacity, all with zero technical effort. These technologies have the potential to transform back-offices, and I am proud that our people and platforms are at the heart of making that happen.

On average, we have seen an ARR increase of 24% from those customers moving onto Series 3, with the tiered licencing and pricing model we have introduced helping customers make the most of the parts of our software platform they want, while facilitating upselling opportunities.

We now look ahead to the release of ControliQ Series 4, which is on track to launch in early 2025 and will provide a further four AI-powered features. We were delighted to secure our first customer engagement for Series 4 post period end with a global healthcare company. With further advanced AI and ML capabilities embedded within our software, our customers will be better equipped than ever before to execute their roles efficiently and effectively.

New features include:

CaseworkiQ

CaseworkiQ continues to perform well since its launch in June 2022. There are now 17 customers using the platform with a healthy level of interest in the product, as more organisations look to technology to help their teams undertake some of the most complex and regulated processes.

The data captured by CaseworkiQ enables customers to see the effort deployed in every step and stage of a process. This insight is used to direct process improvement and automation activity, predict the impact of this and manage out the benefits.

In a major enhancement, a Process Analytics feature, due to be released in H1 2025, will automatically produce process maps showing the flow of work through a process and the volumes and effort associated with each path through a process, which will further embed the products benefits into the end user ecosystem.

Board Changes

Further to the announcement made on 25 July 2024, following many years of outstanding services to the Company, Sean Finnan did not stand for re-election as Chair at the Company's AGM on 26 September and I transitioned to the role of Executive Chair. Hilary Wright, independent Non-Executive Director and Chair of the Remuneration Committee, assumed the role of Senior Independent Director, while Mike McLaren remains as an Independent Non-Executive Director and Chair of the Audit Committee.

To ensure an appropriate balance of independent directors and increase the Company's depth of US expertise, Bruce Lee was appointed to the Board from 1 September 2024. Bruce brings strong technical leadership expertise from his career as a corporate CIO and deep familiarity with ActiveOps' target customers in US financial services and healthcare. His previous roles included senior leadership positions at the New York Stock Exchange, BNP Paribas, HSBC, Fannie Mae and Centene Healthcare. Bruce is chair of the Nominations Committee and, reflecting this expertise and experience, is also chairing a new Board committee responsible for the Group proposition and technologies.

Current Trading and Outlook

The second half has begun well, with the signing of two new engagements, with a multinational BPO and a well-known global healthcare company, which is also the first customer to contract for ControliQ Series 4. Both engagements have significant expansion potential given the size of the organisations. Whilst the reduction within one customer will impact exit ARR at the year end, we see a range of expansion opportunities elsewhere and the business continues to trade in line with full year expectations.

Looking ahead, we are confident the investment into our sales team, and the growing AI capabilities of our platform, provide us with a fantastic springboard for growth in FY26 and beyond.

Richard Jeffery

Executive Chair

Chief Financial Officer's Report

Financial Review

I am pleased to report a strong first half for the Group, with 11% revenue growth on a constant currency basis, delivering total revenue of £14.32m (H1 FY24 £13.06m). The Group delivered a sustainable profit before tax and maintained a strong cash and cash investments position.

Revenue

ARR is a key performance metric for the Group. ActiveOps' ARR at 30 September 2024 totalled £26.15m (30 September 2023: £23.73m), representing year-on-year growth of 10%. The successful launch of ControliQ Series 3 in September 2023 has bolstered the ARR growth in the first half of the year with upsell to multiple customers, compounded by new customer wins. This strong upsell performance is anticipated to continue in the second half of the year, during which a high proportion of renewals take place. On a constant currency basis, the ARR growth exceeded 12%.

Total revenue for the Group at £14.32m (H1 FY24: £13.06m) is 10% ahead of the same period last year, with recurring software and subscription revenues increasing by 11% to £12.96m (H1 FY24: £11.72m) on a reported basis. Training and Implementation ('T&I') revenue at £1.36m (H1 FY24: £1.34m) was in-line with the prior year.

Margins and operating profit

Gross profit margins have remained in line with prior year at 84% (H1 FY24: 84%). Software and Subscription margins marginally increased to 88% (H1 FY24: 87%), due to prudent cost management.

Operating expenses (excluding share-based payments, depreciation and amortisation) increased by 7% to £10.92m (H1 FY24: £10.17m). This is primarily due to the investment in our global sales operation.

Adjusted EBITDA increased to £1.04m (H1 FY24: £0.79m), reflecting revenue growth and good cost control.

Foreign Exchange

The Group has 52% (H1 FY24: 62%) of revenues invoiced in currencies other than GBP, with the Group's cost base predominantly located in the same base jurisdictions as revenues, providing a natural hedge to currency exchange risk.

Product and Technology Expenditure

Total expenditure on product management, research and development in the first half increased to £1.78m (H1 FY24: £1.66m). Capitalised labour of £0.47m (H1 FY24 £0.54m) related to the development of new product features.

Depreciation & Amortisation

Depreciation & amortisation of £0.63m (H1 FY24: £0.52m) principally comprised intangible amortisation following the acquisition of the OpenConnect entity in 2019 and the Australian entities in 2017.

Taxation

The Group operates a transfer pricing policy to ensure that profits are correctly recorded in each of the jurisdictions in which it operates. ActiveOps has brought forward tax losses in the UK and Irish legal entities, and the corporation tax charge in the accounts is foreign corporation tax.

Statutory Results

The Group reported a profit before tax for the period of £0.47m (H1 FY24: £0.10m).

Earnings per Share

Basic Earnings per Share for continuing operations was a profit of 0.52p (H1 FY42: loss of 0.14p).

Dividend

The Board has determined that no dividend will be paid in the period. The Group is primarily seeking to achieve capital growth for shareholders. It is the Board's intention during the current phase of the Group's development to retain distributable profits from the business to the extent they are generated.

Cash flow

As is typical for the business, cash flow from operations in the first half of the year was negative £4.32m (H1 FY24: (£5.35m)). The negative cashflow position in H1 is attributable to the phasing of renewals over the year, and the timing of invoices raised. A significant level of renewals take place in the second half of the year and the timing of payments of annual in advance bills significantly impacts the cash position at 30 September 2024.

Balance Sheet

The Group has maintained a strong balance sheet position with cash and cash investments of £13.44m (H1 FY24: £9.90m) and net assets of £9.29m (FY24: £8.80m).

Management Statement

This Interim Management Report (IMR) has been prepared solely to provide additional information to shareholders to assess the Group's strategies and the potential for those strategies to succeed. The IMR should not be relied on by any other party or for any other purpose.

The IMR contains certain forward-looking statements. These statements are made by the Directors in good faith based on the information available to them up to the time of their approval of this report, but such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information.