Good morning, and welcome to the ActiveOps PLC Final Results Investor Presentation. Throughout this recorded presentation, investors will be in listen-only mode. Questions are encouraged, and they can be submitted at any time using the Q&A tab situated on the right-hand corner of your screen. Just simply type in your questions and press send. Before we begin, I would like to submit the following poll.
I would now like to hand you over to Executive Chair, Richard Jeffery. Good morning to you.
Good morning, and thank you. Good morning. Welcome to everyone on this webinar. I look forward to taking you through what has been, by any stretch, a really strong year. Emma and I, hopefully, between us, can describe some of that, and perhaps there'll be some questions at the end. Let's get started. Firstly, for those of you who don't know ActiveOps, a very brief overview of the company. We're a SaaS software company. We provide decision intelligence software for enterprises, particularly banks, insurance companies, and organizations who have large numbers of people doing, let's call it, administrative tasks, processing paperwork in its myriad and variety of forms. We're very global. We operate around the world with three regions, EMEA, North America, and APAC. Essentially, we're primarily a SaaS company, which brings all sorts of virtuous things we can talk about around recurrent revenue.
Associated with it, we do the services for installation, and that varies from project to project and profile to profile. We have three products, which you see on screen there. We have a desktop analytics product, which essentially sits on people's desktops, seeing and the applications they use. Then we have our ControliQ product, which helps people manage work and time. It's the core system that is used globally for balancing work and resources across teams. Then in this increasingly complicated world with more and more automation, we have CaseworkiQ, which provides a similar sort of control system, if you will, over the complexity of exception handling and complaints handling, and the things that don't lend themselves to easy counting, of which I will talk more.
What's ActiveOps about? We are all about enabling organizations to deliver more successfully, ultimately managing within the constraints they have, their investments in resources, technologies, and systems, and play their particular piano really, really well. We help them with the information it takes to make the allocation of work and resources. Historically, that's not necessarily been done terribly well. It tends to be very localized. ActiveOps brings a level of system and structure to how that's done with all sorts of virtues that arises from that. Your managers operate, if you like, to a common rhythm. Your metrics are more consistent, so you can have conversations about this. In this increasing world of agents, robots, and other forms of automation coming through, it's not just about how you do it's the precision with which you do it.
ActiveOps is, I think we can justifiably claim, world leaders in this particular space, in this complex world of operations where processes and systems are so myriad and diverse, at the same time, we have to be able to optimize the whole thing. On the screen there, you can see some of the featured ways in which we present it. The ActiveOps products essentially is now moving from, if you like, that balancing of human capital against work in an increasingly agent AI world to there's a new game in town, which, of course, it's not the use of AI per se, which is the challenge. It's the blending. It's the balance between the allocation and use of AI amongst human activities. Of course, whilst every organization is rushing towards AI, it's a transformation journey. It's not an end state. You can't wish it that way. You have to manage it.
For ActiveOps, it's a very exciting time right now because what organizations I think are really beginning to appreciate, and I'll talk more about this, is that the control they have over those human processes and systems doesn't really cut it in terms of actually being able to give the precision of control that they need to be able to really exploit AI. We are presenting ourselves very much in that kind of three-step journey you see on the right there, which is the ability to make the right choices. There's so much to go at. Where do you go first? I'll talk a bit about that. It's about actually then executing, actually, if you like, delivering the processes to plan.
A transformation that goes to plan would be unusual in most of our client bases. You're actually releasing that full potential of what you think you can achieve. Then, of course, securing it. Many programs at the end of the day when changes occur, history reinvents itself and some of those benefits get sort of lost. ActiveOps is all about helping you secure and sustain that release of potential. It's a very exciting time for us at the moment. In the results in a moment, Emma will talk you through some of the figures. We've got a couple of case studies here of examples which have been well-publicized, and there's much more details on the web about this.
One of our big customers in Canada is a fund administrator, they're a really good example of they introduced ActiveOps to help them run their operations better, delivered all the productivity gain that we would normally expect because so much time does get lost. What particularly has been transformational for them is that as part of their automation journey, they are able to use the ActiveOps data to direct what processes were changed and ultimately cash that check. That whole choose, release, protect cycle is in that case study, Catherine Thacker and the management team there would tell anybody who wants to hear about it that it has been such a fantastic success in their professional experience of actually delivering on what they thought they could do.
The second one is a well-established customer of ours. We've talked about it before in these meetings at our conference in Nedbank. Again, it's the same sort of context of the support for transformation. Prinsley here was an operations leader, but the data he had in his system to actually focus on the areas of change that he could make the greatest impact through the use of robots, automation, and other levers he had was for him, absolutely foundational to the progress they've made. Much more information on our website. I'd direct anybody to some of the super video clips and talking to leaders there to get a flavor at different levels of what ActiveOps does. I just wanted to kick off a little bit of context.
Let's talk about the year. Essentially, by any stretch, it's been the best year for ActiveOps ever. The growth, the fundamental growth of the business has been outstanding. New customers, we sustained nine new logos in last year, which is again, is just a symptom. An enterprise customer level, that's a lot of work and a lot of sales activity. More importantly, that underlying growth. Yes, we've made an acquisition, which has added to it, but I want to make a clear distinction between these sort of mergers and acquisitions growth, but from the organic growth. The fact that we're growing at the rate we are from the core business we have is fantastic. That NRR statistic, so the amount of revenue we get from our existing customers year on year going up to 119%, and that's a massive growth driver. We'll talk later about our target addressable, but again, that just expands in front of us.
There's so much more with the power of the product to do it and to do more with our software as our customers appreciate the value of it. We're really using our functionality to extend the use of ActiveOps across extending our TAM. Then as has been a real important part of the year's success, that acquisition of Enlighten in July last year or beginning of August, obviously we're well down the tracks now, and effectively it's fully assimilated into the business. Behind that, and Emma will have us talk about this, the success, let's say, of incorporating into the portfolio, but also achieving the savings, I think is another notable achievement. Along the bottom there, you can see how it's distributed across our different regions. The key point is it's consistent across the regions.
Canada, South Africa, all stand out, fundamentally, this is a symptom of a problem we provide a solution to, a problem that's a global one for our type of customers, which speaks to the growth and consistency. All in all, a year that I think we've got a lot to be pleased with, but also is incredibly foundational for the momentum we're already enjoying in the current year.
Enough from me. Emma, change of voice. Over to you.
Perfect. Thank you very much, Richard. This year I'm very proud to report another set of strong results for ActiveOps. On this slide, we've got a number of just the key highlights from a finance point of view. In terms of organic growth on SaaS, we delivered a 23% uplift on SaaS revenues on an organic basis. We've closed the year with GBP 41.5 million of ARR, of which GBP 4.9 million of that has been derived from the acquisition of Enlighten. We've seen an improvement on the adjusted EBITDA margin. Last year we reported an EBITDA margin of 8%. This year that's increased up to 10%. That does exclude exceptional items for the acquisition of Enlighten, which were GBP 3 million. From a cash point of view, we ended the year with GBP 23.8 million of cash, which gave us a healthy cash conversion of 295%.
Just going into the P&L performance in a little bit more detail. The total full year revenue recognized was GBP 45 million. The split between SaaS revenue and training and implementation services is an 85% weighting towards SaaS and a 15% weighting towards training and implementation. In terms of the definition of training and implementation, that is very much us going on site and implementing the licenses to customers. In terms of the gross margin, we've maintained a stable gross margin of 84%. That rate has been reported, and we've delivered that for a number of years now. From an operating cost point of view, you'll see on here that there is a significant increase. The main driver behind that is now the inclusion of the Enlighten OpEx. Around GBP 6 million of additional OpEx was recognized in the year directly related to nine months of trading for Enlighten.
In terms of adjusted EBITDA, we reported GBP 4.3 million versus GBP 2.5 million in the previous year. In terms of capitalization, so we do capitalize R&D, so we capitalize GBP 2.2 million in the year. That was an increase to the prior year where we capitalized GBP 1 million. The main drivers behind that is we actually ran two significant developments during the year. The first one was the next in the series called Series 5, and also the WorkiQ convergence as well. In terms of the SaaS model, so one of the key metrics around SaaS that we report is our NRR, so our net revenue retention rate. We have historically reported a rate anywhere between 108%-110%. This year we had an exceptional year. We reported a net revenue retention of 119%. It is worth just flagging that does not include the Enlighten net revenue retention. We've excluded that. This is purely an organic NRR rate.
As you can see from the chart in the middle, the column on the very far right, you'll see a breakdown. The total annual recurring revenue increased by 46%, of which you can see the orange box at the top represents Enlighten, the other two boxes represent what has come from existing customers and what the growth has come from the new logos that we've acquired during the year. As you can see, 19% of that came from existing customers. Just on this next slide, this is the ARR walk across. To give just a little bit more flavor around where the growth came from. If you look at the 19% of growth that came from the existing, the first box on here, that has come from a mixture of a number of things.
Firstly, annual price increase. We've also got the upsell to the multiple series that we have. We'll also have cross-sell, we will have your more traditional, just standard seat expansion. In the pink box, what we've got here is the growth in ARR that we've got from new logos during the year. We reported nine new customer wins during the year, which is consistent with the year before, and was quite a significant step up from the year before that where we had three. We've delivered a consistent result there. Finally, in the blue box, you'll see the uplift that we've had from the Enlighten acquisition.
In terms of to give you a real-life case study from a finance point of view around one of our North America Tier 1 banking customers. What you can see here is how the ARR, the blue bars on this chart, how that has changed over the last 10 years. What you can see is a real pivotal change in the last five. In FY 2022, we actually introduced WorkiQ, and we cross-sold WorkiQ within this existing customer, and you can see quite a significant expansion. The following year, we actually did an expansion to a new country in which this customer operated within. We saw an expansion of ControliQ. Over the next two years, we also cross-sold CaseworkiQ.
Really what this story here is showing you is our ability within an existing customer to cross-sell and upsell within the existing customer base. We've got some statistics across the bottom. Very much I've talked about what this means to us financially, what this customer means to us. What we've got across the bottom is what do the customers gain from using our software. Within this particular customer, they've seen an increase in productivity of around 18%. They've identified annual savings in one particular area that we've looked at of around GBP 2 million per year. They see a reduction in the case backlogs, and they also see a reduction in the cost to serve. We've also included another case study this year. This is one of our U.K. Tier 1 banks.
With this particular customer, we reported two years ago that they gave us notice of a partial termination. What we wanted to do this year was sort of show you how this customer has evolved since that announcement. As you can see, over the last four years, we had a large expansion across multiple areas and geographies within this particular customer. Last, in FY 2025, they gave us a partial termination. That didn't work out, and what we have seen is we're able to reverse that termination, and actually the real success in this account is actually they are now back to being a growth customer with us. Over the last two years, their NRR rate exceeds 110%. Richard has already sort of touched on how the integration has been going with Enlighten.
Where we are at the end of the financial year, we already taken out GBP 3 million of annualized cost. That cost has come out at different parts during that financial year. When you do look at our OpEx cost at the end of FY 2026, it will be overinflated, depending on at which point we execute. Most of that cost saving actually happened towards the back end of the financial year. We've already identified and actually executed a further GBP 1 million of savings that will be coming out in this financial year. We now operate as an overall group, and what I mean by that is Enlighten is very much integrated in the operations of ActiveOps. There is no distinction between the two. We've completed a formal review of the software platform, and the outcome is that ControliQ was the strongest fit.
There are a number of features that we had within the Enlighten software that we're in the process of building within ControliQ. The plan very much is to migrate the Enlighten customer base across our ControliQ software. I will give a bit of an update just on the deal financials. We did announce as part of the trading update that one of the customers of Enlighten has terminated. When we scoped the deal and when we shut the deal initially, there was always a particular risk around this customer. The deal was structured that if that customer did terminate, the earn-out would reduce such that we actually wouldn't pay for that canceled contract. We have seen a reduction in the deferred consideration that we currently have in the accounts by GBP 3.5 million.
In terms of the post synergy EPS accretion, we're very much on track with where we thought we would be at the time of the acquisition. Just to touch upon the updated numbers of the TAM that we report. When we did the Capital Markets Day at the back end of the last calendar year, we very much talked around our ambitions to be GBP 100 million ARR business in the medium term. What gives us comfort and reassurance around how achievable that number is the TAM. If you look at the existing customers that we have today, and you look at the growth potential within the existing, we believe that there is GBP 150 million of incremental ARR from where we are today within that existing customer portfolio. That has increased from GBP 130 million last year, directly driven by the inclusion of the Enlighten customer base.
If you then look at the TAM across the top 250 targets accounts, that actually increases our TAM to GBP 1.4 billion. That is looking at just purely the target 250 accounts within the sectors in which we currently already operate in, so the financial services, healthcare, and BPO sectors. In terms of the cash and capital allocation, here we have a chart that shows you the movement from a cash point of view in the year. As I already mentioned, we've had a really healthy cash conversion of 295% in the year. We also paid out GBP 6.4 million for the initial consideration of Enlighten. We are due to pay part of the earn-out, the first stage of the contingent consideration in August.
That will be GBP 5.4 million, and then we are due to pay the remaining balance, which will be around GBP 700,000 in August next year, all of which we will be funding within our cash current reserves. We did also flag as part of the trading update that we have sold our trademark WorkiQ to Microsoft for $10 million. That completed at the very start of April. That cash inflow is not represented in these numbers and will be part of this year's cash position. In terms of where we are from a capital allocation, this is in order of priority. Our first priority is to use the capital that we have as a business on organic growth. That is investing in our current sales and marketing strategies, looking at the partner channel and continuing to invest in the product.
Secondly, the second priority is M&A. Very much looking at businesses that would be EPS accretive to us as an organization. Finally would be return to shareholders, and looking at different options around share buybacks or a change to dividend policy. But that is sort of the order of preference as it stands at the moment. What are the key takeaways from my point of view? We are expecting ARR to grow in line with the current market forecast that we have out there. We have an incredibly strong balance sheet, and we have got no debt. As a business, we will continue to be strongly cash generative, and our vision to be GBP 100 million ARR and a 25% EBITDA margin business still very much remains in our sights, and in our ambitions and expectations for the group.
That is all from me. Back to you, Richard.
Thank you very much for that. I really want to pick up the story, because obviously it is about where we go from here as much as where we are, and picking up a picture that we used before. We now have this kind of what we call the HAT framework, which is effectively the way in which we support our customers to manage that human automation and increasingly token-based pricing. Because just to give some color on this, many people on this call may well have had the same experience of a slightly sticker shock in the last couple of months as firstly, the Anthropic and now Microsoft as well, have moved away from that kind of flat fee to a variable consumption-based charging model. And suddenly that is a huge new issue that has to be managed.
Suddenly, if you like, the management of this type of input resource is an acute problem. How do I manage that? ActiveOps is positioned to apply effectively the standard we already have to help our customers manage what, and potentially lots of new customers will manage a really burning issue is very exciting. What that means in practice is configuring our product, firstly, to operate on an enterprise platform basis so that we can actually provide support for all sorts of work across the organization. Interesting example last year that came out was using our WorkiQ program to help have visibility over sales agency within a large organization.
They have a lot of relationship directors in this particular organization, they used our information system to be able to work out just how much time was being consumed, if you like, in the non-value-adding activities and what we would call diverted activities, not customer facing. Just by having visible data across the whole data set, the number of people, had a hugely positive effect on firstly identifying where time should be spent and then focusing attention to the right places to have it. Of course, that came through not in productivity, but in sales effectiveness. It's a really nice example of use of ActiveOps in a broadening way. I think that speaks to that expansion in the TAM that Emma's mentioned already. We're looking at how we change our pricing model, reflecting the variability of human and AI.
Increasingly, I think we'll be moving to more of a platform-based fee, but with elements of variability associated with size. We've mentioned about Series 5 coming out. Series 5 is aimed very much at that transformation agenda. It's helping customers to firstly plan, manage, and then execute the combination of things they're needing to move and change all the time. That is the challenge for our organizations that we serve. They are such complicated, multi-threaded organizations with simultaneous change happening, and the kind of data and the process we provide does give them such improved level of granularity and visibility over how to make those changes work rather than if you like travel and hope.
There's a lot of really good market drivers for us, which is stimulating the interest in the need for better control at an operational level, which when we're market leading in, gives some traffic towards us. We spoke a lot last year, and I'm giving some feedback here on we've been growing our sales team. Part of the investment that we're seeing in the last year is in this. This slide just gives you some scale on that, 12 new senior sales hired and just reflecting the broad growth in the business, how that's distributed across the world.
ActiveOps as a sales to enterprise is long lead timed, but in terms of the sort of symptoms of success When we measure our sales cycle, certainly in multiple months of years and so on, we've had sales and this new cadre of professional sales who've had some conspicuous success in accelerating some deals through, deals that we already had but have moved more quickly. In one case, a project that came in that scaled remarkably quickly that we probably wouldn't have got before. I think that cadre is really making an impact. Really the real difference is now in the pipeline, in seeing that pipeline both in size and volume build around the block. It's a journey.
I'm reporting on results of revenue we earned last year on deals that actually it worked the year before that and probably sold the year before that. It's very important to understand that dynamic. ActiveOps is a massive flywheel in terms of that recurrent revenue and the new projects coming onto that flywheel, the lead time to get them into revenue is lagged. This investment will pay off, and it is already paying off, but it really will come through in the next two to three years. What we're now doing and where the focus is for the current year is building out and addressing that TAM in our customer base. What at the note there it says we're investing in our customer success function.
That again is raising the caliber, more executive level speakers to represent us and be contributing to our clients' transformation journeys. We want that NRR, we want that growth, we want to expand to regions where we know we can add value, but you've got to be at the right table to have the right conversation. As a company, we're really investing in that customer success function. That's a great example where, to Emma's point earlier on, our use of capital, we've just been very deliberate about where we do spend. There's an element of our business as it grows, obviously, that scales proportionately, but also making those deliberate investments in areas where we know there'll be a payoff. That investment in customer success improves the outcomes of projects, but it also builds that relationship to farming and growing the NRR over years to come.
The other thing I spoke about at the Capital Markets Day, and it's well underway now, is our moving more towards working through partners. Again, this is a payoff that will happen, and this is the thing that will not only support us towards GBP 100 million, but frankly, is the thing that will accelerate way beyond that. Obviously what we want to be able to do is distribute with other parties and not rely on our own sales capacity. We appointed a group head of partners earlier in this year, and I think where we are today is exactly where I want to be. We've got some really strong developing relationships with some Tier 1 and Tier 2 consultancies who are specialists in this field who can take us to markets we've just never been to. It's a co-sell function. It's not a wholesale-resale arrangement.
We're with them at the table, that takes an education process to join, there's lots of really good progress there. That represents newer projects in the pipeline, it represents new entries into areas that we probably wouldn't have done before. I think another exciting area for me is also in software-related partners. We have a number of customers of ours who also sell their software, business process outsourcers, where they're, alongside delivering with people and set technology product to customers, they sell the platform technologies that they use themselves to other people who self-administer. We've got two particular examples developing where they've already wrapped ActiveOps around that production system, and now their software arm is taking ActiveOps to go to market in conjunction as part of the bundle.
I think those sorts of things are really interesting because that's organizations set up to sell software, and that makes a lot of things sort of aligned with our business model very well. I think where we're getting to with our plan for the 2027 is let's keep going and do what we currently do very well indeed. We're really making sure we're at the heart of automation. We're really trying to think about the problems our enterprise customers have in terms of not only using and exploiting AI, but controlling the beast, this business about metering it. Just because you meter something, they'll get the bill, but it's too late. We're helping our customers manage the problem. How do they allocate AI resources?
How do they make Is it actually worth having Claude do something, or is it still worth doing that project, that work activity in Manila? Providing the instrumentation to have that kind of choice, whether it's what we're going to do today and do we have the token budget, through to what is the right place to do that work, even at that operational, tactical, and strategic level, is a really, really burning issue for so many organizations right now. We're scaling our demand engine, which is the marketing support, because if we have got that kind of external-driven demand of a problem that needs solving, our marketing function actually changes quite significantly because we've got to manage and support and attract that attention. It's a very different sort of opportunity.
Clearly building on the scalable foundations of the business, because I don't want ActiveOps' reputation to depend on the single heroic activities of a particularly good implementation team. This is a global company that's operating very successfully internationally, and we've restructured internally to create a kind of delivery function now, which I think is both efficient, interacts with partners very well, so we build their capability and ultimately capable of delivering some very, very large projects indeed. We've had a sound first quarter. Momentum continues to build. I think there's been another sale in the course of the time since we went to print on this, which is a U.K. but globally operating insurance broker, and just the sort of momentum of the business is continuing.
The global context for the world is not making decision-making in our customers any easier, but there's nothing like having a burning problem to make people focus. To some extent, I think that the control and the relevance of our stuff to helping people manage something that they know they need to get on with in terms of safe use of AI, meeting constraints, meeting the expectations of their shareholders, and keeping the lights on. At the end of the day, if you run an ATM network. You can't afford for it to go down. They always have that sort of paradox of sort of six impossible constraints, all of which had to be done simultaneously.
Overall, we're trading in line with expectations. I think there's one point Emma alluded to, and it's worth noting. Our exit, if you like, overhead cost had all the overhead of Enlighten in, and other things as well in train. I think the half year will be a much better guide to, if you like, the underlying operational gearing that's flowing through the business right now. Emma told you We've already saved GBP 3 million and coming onto the GBP 4 million of the Enlighten cost. By context, that's on the original cost base when we took it on of GBP 8 million. That's the scale of difference and the absorption and ultimately the gearing that will flow through to the business.
A lot to be excited about. The fundamentals of the business, and for those of you who've seen me before talk about ActiveOps, on the screen now are the things that we absolutely are cornerstones of our success. We sell to blue-chip customers with a large problem or an ongoing chronic issue around productivity management, which they always need help with. The market's expanding. The fundamentals of a business model are really simple. Recurrent software revenue on an annual advance basis and with a high gross margin. The nice thing is with the headroom and the cash we have on hand, we are making these selective investments to really accelerate, and as the Enlighten opportunity demonstrated this year, we have the opportunity and we can take the opportunity.
The business is strong and resilient enough to take on something like Enlighten and effectively not miss a beat. This isn't easy. It's not a time to be complacent. I think it's just absolutely a great place to be right now. As well as, frankly, being a U.K. tech company listed on the London Stock Market, I think it's been the right place for us, and as ActiveOps, as an organization, I think we're going from strength to strength.
That's it. Happily take any questions, if there are any on the chats. Over to you.
That's great, guys. Thank you very much indeed for your presentation. Ladies and gentlemen, please do continue to submit your questions using the Q&A tab situated on the top right corner of your screen. While the company take a few moments to view those questions submitted today, I would like to remind you that a recording of this presentation, along with a copy of the slides and the published Q&A, can be accessed via Investor Dashboard.
Richard, Emma, if I may now hand back to you to take us through the Q&A, and I'll pick up from you at the end. Thank you.
Thank you. The question on screen is from James. How do you see a platform and variable fee impacting margins and ARR? We're doing a lot of work right now. We have a firm called Simon-Kucher Associates, which is a specialist SaaS software pricing advisory, and we've used them very successfully in the past to help us with this. ActiveOps, I don't think will ever be a kind of innovator in the pricing model, there are other bigger fish than us will be wrestling with this move. I think there's no question, the fundamentals of being in control are going to be there. They've almost got more instruments than the orchestra to manage with AI. And so are the need for tools to help with that at ActiveOps. You then go into pricing, as you say, about how do you charge for that if there's lower numbers.
Ultimately, I can only see that it's a value-driven argument. The value of having ActiveOps, if we sustain that, if you like, that 25% or so efficiency gain by simply optimizing your resources, that's an ongoing value. As long as we can maintain that linkage and the effect for the risk of not having us in that context, I think our price point is very strong. It's not a direct answer to the variability of volumes. What it will do, I think, ultimately is make our gross margins probably more stable. Not that it hasn't been stable because it's a lot of big numbers. I think the fundamental economics of the business don't go away. You can charge link to value, and the cost of production is very low.
Ultimately, it's a business decision between Emma and I about how much resources we carry to grow and sustain.
Thank you, Richard. I'll just give it a couple of seconds. If there are no further questions, Richard, if I may just ask you for some closing comments to wrap up, if that's okay.
Thank you very much. I think everyone's probably heard it, but it's been a cracking year for ActiveOps. In many ways, and the message internally as much as externally is that the best is yet to come. Let's be grateful for where we are relative to a lot of companies and make the most of the opportunity as we certainly have the opportunity. Thank you very much.
Fantastic, Richard. Emma, thank you once again for updating investors today. Could I please ask investors not to close this session, as you'll now be automatically redirected to provide your feedback which will help the company better understand your views and expectations. On behalf of the management team, we would like to thank you for attending today's presentation and good afternoon to you.