Earnings Call: H1 2021

Jun 17, 2021

Good morning. Good afternoon, everybody. Welcome to Blue Prism's Half Year Results for 2021. Next slide, please. Next slide, please. I'd like to start talking through some highlights In terms of the first half, I think the first number we look at is the accelerated growth in bookings Between H1 'twenty one and H1 'twenty. So we had a 35% growth in overall bookings number The $97,800,000 contracted in the first half. I think One of the things that's interesting to point out in that number is that the first half twenty twenty Included the Q1, which was pre COVID, and the Q2, which included COVID. Obviously, H1-twenty one Is completely a COVID period, and so we're still working through in terms of the way these comparisons take place And the way that various numbers are projected based on really where the market is, The recovery that's taking place and some of the other kind of actions, I would say, that we're encountering them through COVID. The other number that I would point out within that $98,000,000 is a 65% growth in Blue Prism Cloud. And I think that increasingly Blue Prism Cloud is really seen as the thoroughbred model for the way that This style of automation is done with a cloud base, and it's something that I think is going to become increasingly prominent in terms of Overall, Blue Prism's projection. The 98,000,000 is also worth Talking about in the context that that is a bookings number, a total contract value. And As many of you know, that is what we target at Blue Prism. It is TCV, total contracted value, and these are multi year contracts That we have with our clients. And the reason that we do this is that we regard Blue Prism As a piece of infrastructure, and therefore, for our customers, they want to see Stability, they want to have commercial relationships that extend into the future as they build their own automation capabilities and practices around the core product. Now it does mean that we're targeted in a slightly different way And sometimes, some people measure the market, but there are several aspects, I think, are worth just highlighting against that. That $98,000,000 replenishes into that $311,000,000 that we've got on the left in terms of the backlog or the remaining Performance and obligations. This is backlog. There's future contracted value with Blue Prism. And if you take the $311,000,000 and you take the $120,000,000 that we have in the bank, that gives Blue Prism Over 2.5 years of operations, if we were to sell nothing Ever again. If we were to stop selling today, that would still give us a runway on the existing cost base For approaching them at 2.5 I seem to have lost the So that gives a 2.5 years of visibility in terms of operations of the business, So the $311,000,000 plus the $120,000,000 that we have in the bank in terms of cash, So it gives us this 2 and a half years visibility in terms of even if we were to sell nothing from this day forward. It's a great visibility. It's a great underlying chassis around which the business is built. And I think that The other number that I would jump to underneath that is the 98% gross revenue retention, And that is the rate at which people renew contracts, the kind of continuity that we would expect against That underlying total contract value. And then I would reference the other 98% that you On the chart in terms of the second bullet, in terms of 98% being recurring revenue, 2% is basically services from Blue Prism. The remainder is the obligations To service the license. So again, I think that it gives very, very strong Around which the business is built. In terms of cash, we're on track in terms of the cash breakeven. And I think that there are 2 questions that we commonly get asked. Firstly, Why are we spending as much as we are? And the second question is, why aren't we spending more? And both Questions, I think, have a real merit in terms of the fact that we are operating the company to cash breakeven Basically, it means there is capacity in the organization for growth. There are things that we're doing in terms of the way we're structuring our go to market in various ways that we're looking to accelerate Against what we think is still incredible opportunity around the automation market. And equally, We think that by constraining to a cash breakeven, we are putting that within a disciplined context, Really, it's for the business to utilize that capacity and make use of it in a very effective way. Some other points that I've just Kind of raised in terms of the highlights, in terms of our commitment to innovation, and we'll talk a little bit about that later on. Some other pointers in terms of objective views on Blue Prism. Gartner has moved Blue Prism from 4th to 3rd place terms of the overall RPA market share for last year, IDC placed Blue Prism 2nd for 2020 in terms of growth. So this means that we are taking market share from the majority of our competitors and closing the gap on the market leader. We also achieved awards for innovation, customer choice and technology for the within the pandemic. And I'd Like to congratulate the teams on the basis of that performance. Can I have the next slide, please? In terms of some of the outline background in terms of activities that are taking place, I think one of the things I'd like to just kind of remind people, over a 3 year period, Blue Prism went from 80 people to over 1,000 people. So there's a lot of things That need to be put in place. So very much an organization under construction, still finding The models for its operations, all kinds of activities in terms of actually just building the company itself. And I'd highlight all of these areas in terms of activities that are taking place. 1st of all, in terms of the go to market, considerable efforts to put into the martech, the sales tech, Actual technology in terms of the way that we drive and direct our own sales activity. We're using our own product Around this, and it is something that we vastly upgraded over the last 12 months. In terms of demand gen models, it's something that we're looking at against the way that this market is developing. Again, it's something that I think that there's still a ways to go in terms of how sophisticated this can become. Another area that I would say has been a considerable amount of work is the vertical alignment of the sales teams. And again, when you step back From this summer product category, start thinking about the implications of it, the obvious requirements and disciplines around a vertical alignment Become really quite clear. And how an organization talks the language of specific verticals It's something that we think is going to become much, much more a feature of the way this market develops over the coming years. We developed a brand new revenue group, new structures in terms of the way that we can actually monetize some of the product, Both in terms of partnerships and other ways that the technology can be used. And I think that that's something else that at appropriate points in time We'll showcase in terms of how creative this can be, and some of the other avenues that it gives to Blue Prism in terms of the way that it develops. I'll then talk about the product group. And we mentioned this a number of times, we've Materially increased the commitment to R and D, the product releases that we've had, 9 product components over the last 6 months, 10 if you include version 7. And behind the scenes on this, there's been a restructuring of the group, realignment in terms of the way that the organization is structured internally, In terms of the way that the product is built and the various ways that we can scale a product development. There's still a work in progress, still more things to go. And one of the areas that we're particularly interested in is the similar to the sales theme terms of the vertical alignment of the product against specific areas. And the one that we kind of put the example here is the Service Assist, which is the call center agent product that we have. In terms of people, Back to my point, in terms of we've gone from 80 people to over 1,000 people in this 3 year Period. There's a lot of structure that has been required in terms of the way that we've been building out The organization itself, this is a talks to the level setting, career structures, the salary benchmarking. One of the things that we participated in was the Great Place TO Work survey, which we achieved the certificate for. So Again, thank you very much to all the Blue Prism colleagues in terms of who voted for that. But the real purpose of that is to provide data in terms of the way that the organization manages communicate amongst the teams, The way that team development actually operates and the way that you start to put the structures in place across this considerably larger organization. We've built new internal communication mechanisms, our Blue Prism TV and created this sort of A virtual water cooler, which I think has been very, very important during COVID And the fact that everyone has been working in these sort of remote environments. The other thing that I would mention here is Pat Finn joining us In the U. S, there's a new GM President for Americas. There's a lot of work to do in the U. S. Ideally, A number of the senior execs would have spent most of the time, most of this last year in the U. S. That's not been possible. And so it is still Things have been a little delayed. But it's fabulous news having Pat join, and there's work underway in terms of the way that Certain of our structures in the U. S. Are being built, extended, and invested in. Something else that we would follow around that Is a new global head of HR to be based out of the U. S, and we would hope is something that we're in a position to announce in the coming months, summer 2. The 4th area of real sort of development work has been the customers, And this has been something where Blue Prism is very, very partner centric, for all kind of great reasons, But really getting the customer center stage to what it is that we do. And so we've Created customer advisory boards, all of the main territories. We've introduced a customer success model in terms of The way that organizations interact with us, we've sharply increased our NPS scores in terms of 1st year users, And we've extended the way that our community programs in terms of the way that customers interact with us and customers interact Amongst their own communities, in terms of the way they use the product, we've seen a sharp increase in terms of customer The way that organizations have taken that on, and we've aligned that around Our licensing strategy, too. So there's been a lot of activity around customers, and we'll kind of showcase some of the A response to that later on. Final area that I would mention is the methodologies that we're looking at around the product. Is something else that we've been investing in. And you see the product releases, the license models and all the kind of technology releases. There's also methodologies that have been created here. And in particular, one of the things that our customers are getting very interested in is this notion of 0 based design, Basically, where you automate a process first and you only triage to a human as and when necessary or as part of a design criteria in terms of Some quality of service that you're attempting to offer to your customers. Can we have the next slide, please? One of the big events of our calendar is the Blue Prism World. It's a full A virtual event this year, numbers up 24% year on year. Think all of the feedback has been incredibly positive in terms of the way that this event takes place. It is a material component Within our annual pipeline generation, and I think that all the indications are that this When COVID ends, I think that it's absolutely something that will persist. These kinds of virtual forums are very, very valuable. And we absolutely see that there's a place for them in terms of the way that you can bring Diverse communities together from across the globe, all talking about dedicated issues. We had a number of Major announcements during Blue Prism World, Starlink coming Blue Prism's first Value added distributor in the Middle East. We also had announcements with Amazon Connect And our own version 7. So at this point, I'd like to Show a small montage of customers talking at Blue Prism World, which I think gives you a flavor in terms of the purpose of the meeting And the way that customers are used to help reference what Blue Prism does. Please, can we share the video? We are very happy with what we're achieving with Blue Prism, not only from a tool point of view, About the consulting, the services that come with Blue Prism. I trust Blue Prism as an RPA software because of how robust it is. We also Existing adoption of Blue Prism in the marketplace, the idea of knowledge sharing is very attractive. Then having a platform which is cloud first, having a stable cloud environment With what? Truist towards Blue Prism? The facilities that Blue Prism offer in terms of the information security, In terms of the security with our credentials and that everything's encrypted and the full auditability that we've got across the estate, we can see all that, And it satisfies not only our internal auditors, but our external auditors, which is very important to us as a regulated company. With Blue Prism, You are able to have first processes running in 1st very few weeks. And that means you have First people that are just happy about the new technology and about them having some kind of benefit in the very first weeks of your journey. Blue Prism have really helped us in terms of the journey. The initial engagement from day 1 right away through to this point has been absolutely faultless from our perspective, And we're looking forward to that, Ginni, continuing with Blue Prism really. So firstly, thank you very much for all the customers that participated in that. And thank you to the teams as well in terms of Getting that kind of response from the customer base. There are a number of themes there that were picked Tap on, which are absolutely core credentials for Blue Prism. So part of Blue Prism World, we launched version 7. We're in 6 different languages in terms of the way the release took place, but it was all of these Core qualities reinforce that we've just seen customers reference. I think the one area that I would pick out as being very, very specific for Version 7 Is the cloud first emphasis, and so it is taking all of those Key brand characteristics around security, scalability, management, visibility, usability That Blue Prism has, and scaling those, operating those at another level in terms of the way that we use some cloud native capability as a requirement within the platform. Can I have the next slide, please? Something else that we also talked to as part of the product release Was the different formats of these products and the availability to Blue Prism in terms of different format models. So not only we've got our own releases, and as I say, we talked about those before. One that I would like to mention in terms of Blue Prism product, the product called CAPTCHA, which is the way that a large Business process can be recorded, and then a robot generates A process description document that then becomes a foundation for the automation. So it's a way of speeding up The documentation, the management of a target process, and the way that it then follows into The Blue Prism methodology in terms of the way that process and description document becomes a process automation in its own right. Over 900 of our customers have taken that product, and it really has been a runaway success. 2 other products that I'd also mentioned in terms of this flexibility of product reach. It's not only our own number of product set, it's the way that other product sets can be accelerated. So Amazon Connect, which Their call center room, a product, something that's teamed up with Prism to give faster access, give Agent management information, just in time management information in terms of their product set. And another product is AbiYum timeline, which has become available through the Blue Prism Digital Exchange. And The next slide, please. This is a thoroughbred process mining technology, and it gives customers all that accessibility, the different product sets, These different R and D streams all being available within the context of a single product model, which is the Blue Prism digital worker. Have the next slide, please? Something that's also just quickly after the Prism is that our pinnacle Winners. And these are organizations that we think are really shining a path in terms of the way that the technology can be used. Bell Canada was using services in terms of the agents that they were accelerating. Old Mutual, I think is really developing a very, very creative relationship with the technology, Talking about personal contact managers, digital workers, effectively concierging the way organizations Those operate and are very, very ambitious in terms of Where the theme of that development is going. And the other one that is very interesting and worth just Talking through a little bit, is the Hong Kong number, stock exchange. And we have a process example here in terms of one of the areas that they had automated. And every year, the 2,500 listed companies have to do an annual filing. And within that filing, there are identity checks against the directors of the companies, Reconciliations in terms of the firms that they're involved with, there's reconciliations between the documentation that they do Within their company reports and ensuring that the right names match the right places, The documentation is in order and there's no reconciliations, errors between these. And What they're using the Bupress and Digital Worker to do is use OCR to read the Unstructured documents using natural language processing to strip out various aspects of text, using entity recognition in terms of picking out the names and the company Linkages within these documents using machine vision to do facial recognition against passport Photographs in order to look at identity checks and doing that across the myriad documents that exist for all of those 2,500 listed companies. This is a process that probably never changed in the history of the Hong Kong Stock Exchange. It's now automated to this level of sophistication, and it's something that really is going to stand out in terms of the way that you say a sophisticated Business process can now be fully automated. I think the other thing that I'd point out about this process is that this was put together by business users. So I think this is the kind of automation that any software engineering group will be very proud to have produced, This was actually produced by business users. And again, this democratization component of what it is that we're doing here really comes through in terms of this example. In terms of the overall market itself, I think it continues to be incredibly optimistic in terms of where it goes. Gartner's 85% of all enterprises using RPA by next year. McKinsey's with their 50% of all work activities are automatable today, and 60% of all jobs, That 30% of those can be automated. The Wall Street Research as well in terms of saying that almost 70% Over organizations that automation is a key driver. Next slide, please. This is a figure that Morgan Stanley derived terms of an overall market size, dollars 1,300,000,000,000 and I think this is absolutely substantial In terms of where it says the impact of these technologies are likely to be. And as we've kind of seen, it's an amalgam in terms of the way that automation, AI being applied in terms of automated fulfillment. And so I think that at the high level, as most of us would probably easily agree, the opportunities for this summer market still seem absolutely Unlimited, really, in terms of the way that organizations can go about it. Next slide, please. So one of the questions that we're looking at is really how does that market start to play out? Where does it go next? We've got to the point where we've got this very, very horizontal Technology, it can be applied in these very versatile settings. 70 plus industries already using blupism product. Also, down there, I would note the $1,500,000 ARR that we get from our top Tier customers. But our question is, really, where is this technology going next? How does it start to segment Against that overall market size that you take any of these commentators in terms of what it is they're looking at. Next slide, please. And this is something that's going to be very prominent in terms of our thinking, and that is the segmentations, The sector relevances, you see the percentages of revenue from us in terms of the performance in the various sectors. And it's how this informs the way that we actually start to drive our own go to market strategy. How is it that we actually talk to these business users About themes and directions that this technology really makes a difference in their context. Have the next slide, please. And as I mentioned before, the martech and some of the sales tech that we're putting in place It's really starting to talk to this. If you look at some of the sector marketing that we're starting to introduce now, not only is it we're referencing Individual customers. But if you look at this one here for financial services, we're talking about AML, we're talking about KYC, we're talking about very specific Questions Within a dedicated sector. Next slide, please. And a part of that, and I was saying that This is something we're really structuring. So the structure around the go to market in terms of the why, the who, the what, how, all those various questions Asked, automated, structured underneath in terms of the way that individual customer contacts are taking place. I've got Two examples here of buyer journeys. They're real life examples. You see that it takes from February Around about now in terms of the way that these models are landing, but one of the things that we're doing with our own technology and the way that we're thinking about our own use of technology Is the way that these individual touch points are effective, how do you analyze them, which pieces of material, Collateral, what value it generates and the way that it supports the overall buying journey. This is very specific to personas, Very specific to business outcomes. And so on that, I would just like to kind of I finished on the kind of the three themes that R and D investment of a product drive is still very much in terms of what it is we're doing, Solution selling and customer intimacy, all the ways that we're attempting to place the product in of an organization in terms of a very specific value proposition. And I would say that the Final area that is absolute our focus is optimizing the way that our go to market operates, driven by the technology and driven by our own segmentation analysis in terms of the way our product is actually being used. So on that, I'll hand over to Ajema. Thank you, Jason. And good day to everyone. I'm delighted to be here to share with you The set of results, as Jason says, achieved in an improving but still challenging economic environment. There are sort of 3 key messages that I'd like to get across. The first one is the strengthened resilience of our Underlying business with high levels of renewals and good upsells into the existing customer base. The second is the improving profitability and cash generation following a period of significant investments in the cost base in FY 2018 And FY 2019, which is done to create the capacity for further growth. And thirdly, is We have seen some improvement in sales momentum, but still the environment continues to be mixed, particularly With respect to large deals. And that is why we guided to the lower end of the revenue range that we guided at the beginning of the year. Our confidence for the future is based on a combination of 3 things. 1 is a large addressable market. The second is significant ramp up in investments in product development. And finally, the investments and changes that we are making in lead generation and core to markets as outlined by Jason Niepah in his first part of the So next slide please. So just a conscious of time, what I'll do is I'll spend a bit of time on this Slide, there are number of slides that I was going to I'll cover very, very quickly. But most of the financial information You would have seen posted this morning and some of it we also referred to when we put out the trading updates at the beginning of In there. So on this slide, what I want you to do is just To go through some of the key numbers showing the size of the business and the progress that we've made on revenues, Profitability and cash flow. We continue to see substantial remaining performance obligations with our view on about the half year Equal to around 2 times the annual recurring revenues. This demonstrates the high quality of customer commitments And predictability that we have from our customer base. The GBP 311,000,000 has been adversely affected by FX movements would have been $322,000,000 based on FX at the end of last year. In terms of bookings which we define as total contract value or TCV and includes both new contracts and renewal contracts We saw this increase by 35% year on year to €98,000,000 Revenue for the half was €80,400,000 on a reported basis And represented a 24% growth on constant currency. As you know, We restated FY 2019 and the first and the H1 FY 2020 revenues under the new IFRS 15. So that all recurring revenues are recognized ratably with no proportion of revenues recognized upfront. The annual recurring revenue performance also reflects the FX headwinds as well as mixed demand environment The significant one bump in investment, these have continued to narrow, primarily driven by revenue growth and continued control of the cost base. For the first half, EBITDA losses of £8,000,000 compared to £33,000,000 for a similar period in the first half of FY 2020. We are expecting losses to be higher in the second half driven by investments in products Expected normalizing of travel and entertainment expense environment, some back field recruitment in our go to market And second half weighting of marketing program costs more than offsetting our continued ramp in revenue. In terms of cash, cash performance has significantly improved. We expect a strong Performance relative to FY 2020, primarily driven by narrowing EBITDA losses and continue to expect The exit of the year on an underlying cash breakeven basis with monthly recurring revenue higher than a monthly recurring cost. We have over 2,000 customers. Our disclosure on customer accounts will focus on worst and net retention rates, Which provide a better indicator of how on how the business is retaining and growing our customers, A key focus for our business. As new customers are added, as new customers added continue That come through, you see that influencing the net retention rates. For reference, our customers, our customer accounts Continued growth during the half as compared to the end of FY 2020. And we only lost 5 customers During the period with more than 5 digital workers and only 1 with more than 10. We believe our current customer base Represent the significant growth opportunity for the business. I think I would like to make sort of a couple of points. The first is the gross retention Shows how effective we have been at returning customers on a dollar retention rate basis. We have managed to consistently keep retention rate at these levels and we think that this is a good indicator for long term margin potential for our business. Secondly, in H1 FY 2021, around 22% of customers that we had at the beginning of the year Upsold during the first half of the year. And more specifically, looking at our 50 customers, Over 50% upsold during H1. It was notable to see that These groups of customers are continuing to upsell, demonstrating that even our largest customers have significant upside. And finally, we have over 1,000 employees globally with 60% in gorgia market related functions, 30% are growing in product related functions and around 10% in corporate functions. By geography, Just over half in the EMEA region, around 30% in Americas region and around 15% in APAC and Japan. So next slide please. On this slide, I mean, I'll just make one point here and then move on to the next slide. So as you can see, revenue grew across all regions. In absolute pound terms, this was led by the Americas, Which contributed 42% of the growth compared to 41% for EMEA and 17% from APAC in Japan. America's constant currency revenue growth was 30% and now accounts for around 39% of group revenues. We believe that given the relative sizes of the automation markets, Americas and Asia Pac and Japan are Underrepresented in our revenue base and we see this is providing a significant opportunity for our business. Moving to the next slide, please. I wanted to make a couple of points Around the breakdown of our TCV work to show the resilience that I mentioned at the start. First of all, we have maintained High levels of retention rates despite the increasing number of contracts coming up for renewal as you can see More than doubling the level of renewals from the first half of last year and the first half of this year. Secondly, This is as Jason mentioned, this is the last half that we're comparing against the period. Last year, we had half of Okay. In pre COVID time. So, we see As we move forward into the second half of the year, the comparator is getting easier. And the final point It was around product sales productivity. So the TCV performance in the first half Was delivered with marginally fewer sales reps during the half compared to the prior period. This indicates Stabilization and improvement of our sales productivity. A couple of other sort of highlights Around the cloud business and support and maintenance attach rates. So from a cloud perspective, Jason mentioned, We saw 65% worth in bookings. And now as a percentage of new bookings in the half, Our cloud represented around 22% of total bookings versus 10% in the first half of last year. And secondly, We saw strong growth in support and maintenance attachments with contract values doubling between The first half of last year and the first half of this year. There remains a long way to go for us to continue to increase attachment rates, But it's a very positive development in the first half following some of the actions that we took at the beginning of the year. Next slide please. This slide I was going to talk to you in gross margins, but I think we can kind of skip this in the interest of So on this slide as you can see, overall OpEx Our full year 23% year on year. And then reduction coming in sales and marketing, which is driven by Three things. 1 is lower headcount. The second was the impact of travel and entertainment as a result of COVID-nineteen restrictions. And the third was around phasing of program spend, particularly in marketing and we see some of that sort of coming will be coming back as we move into the second half. We continue to see to significantly increase the level of spend in product related functions. These include pure R and D as well as product support both for their on premise customers as well as the client platform. General and admin costs also declined year on year and driven by lower facilities costs. Outside of product development, We currently are not planning material increase in headcount other than the factors that I've kind of talked about And we believe that we have the capacity for growth without a significant increase in headcount. Therefore as such we believe Just showing a bit more sort of detail on Research and developments costs and you can see how we've grown the kind of expenses in R and D, both as a percentage of revenues, But also as relative to the overall cost base of the company over the period since 2018. Next slide, please. In terms of cash flow, again, I'll kind of I touched on this on previous slides. We continue to see significant improvement in cash generation, primarily driven by Reducing losses over the two periods. Next slide please. In terms of net retention rates and gross retention rates, again, continued strong performance from a gross retention perspective. And when you look at net retention, last year, as we talked about at the end of last year, we So net retention rate declined 143%, 113%. However, as we move through the first half of the year, we've seen that starting To rebound about with growth in net retention rates from 110% in the first half of last year 215% in the first half of this year. Next slide, please. Again, the core voice slide continues to show that we continue to upsell across our installed base. In general, we see significant upsides to practically all of our customers, even the largest as I've explained on the previous slide. And we continue to believe that we have the most scalable products in the industry And the investments in R and D that we're putting through is to really enhance that differentiation as business grows. Next slide please. So just to finish off with outlook. I mean, we talked about this in the trading updates in May. We are now we're guiding to The lower end of the $170,000,000 to $180,000,000 We've started the second half well. So we had a good start GBP 25,000,000 loss for the year. For EBITDA, we continue to expect a GBP 25,000,000 loss for the year, Although it is possible that we can do slightly better than that as the year goes on. With that, I'll hand back to Jason. Thanks, Jim. Can I have the next slide, please? Just in conclusion, I think that As we keep emphasizing, the blueprint of model in terms of digital worker is really is a clear platform for intelligent automation. Think we're getting deeper and deeper in terms of the way that an organization thinks about this technology as a requirement In terms of enabling its overall infrastructure, we'll follow that through in terms of the way that we continue to build our R and D And the overall number of product set. And I think the final area to emphasize Is long term customer relationships based on consuming digital workers, higher scales And across a much wider variety of end to end process automations. So on that, I'll hand you back to the Blue Prism operator, And we're going to Q and A. Thank you, Jason. Hello, I'm Johnny, and I'll be guiding us through this Q and A session. I'm going to start by taking you through a few directions. Please ensure your mic is unmuted and your camera is on once you are on screen to be able to ask your question. If you are having any technical difficulties, please reach out via email to investor. Relations blueprism.com and we will be able to support you. Also at this time if you could please ensure your name on Zoom and your organization are listed correctly, First up, we have Sean Sapar. Hi, guys. Thanks very much for taking the questions. I've got 2, if I may. Just more towards Ajoma, I guess, just looking at the development of cloud, With license bookings for cloud kind of representing 22% of total bookings, But your total bookings being kind of flat year on sorry, sequentially. Does that now mean that effectively your on premise business is in decline? And I Supposedly, is that evidence of a greater transition of not just bookings, but also the recurring revenue base towards plan? And I guess as a follow on for that We usually associate the gross margins for emerging Lower than an existing on prem business. You're kind of thinking about any kind of gross margin headwinds that may occur from cloud increasing as a Portion of bookings and then I have one kind of wider follow-up for Jason as well. Thanks. All right. Okay. So just very quickly then, I think to your first question around cloud and on premise business, I mean, I think the way we look at those is we look at those as kind of one business and we're providing customers with a choice to choose Whether they want to they want us to host the product on our cloud platform, they may well host the products on their own cloud platform On premise. So we the way we think about the business is it's growing the license revenues across That's the 3 modes of how a customer wants to consume the products. On your second point around gross margins, Yes, you're right. So in terms of the hosting costs associated with the cloud business, There's probably around, I would say 15% to 16% of costs of hosting costs That we have in our Muslim business versus our own premise business. However, on the flip side of that Is the price points, the digital worker that we have in the car business is significantly significantly higher than The on premise business. Thank you. Sean, let's go back for your follow-up question. Yes. Just to follow-up to Jason. I think in your comments in the trading statement and also in the results, you mentioned the slide of kind of what next. It was just interesting to hear Kind of when you talk about kind of review of go to market, just how wide ranging is that going to be? Kind of what's on the table when You're reviewing go to market and then just how you might communicate that with us in the market kind of going forward? Thanks, Owen. Yes, I mean, basically, it's the way that we see this very Versatile general purpose of technology maturing. And if you take this notion of a digital worker, how much And all of these are very active lines of inquiry in terms of the way that you basically have a robot Come out of the factory with a certain level of knowledge to do a dedicated job. We see customers Wanting to think in that way, we're seeing a center of excellence, these COEs and automation groups really wanting To drive the way that automations operate within their own organization at a much greater scale. And part of that Is the ability to better talk to their colleagues and work with their colleagues around specific functions. So it's Something we're looking at in terms of the way that we're aligning the sales teams and the sales teams, the ability to better talk to dedicated Verticals and something that we're also looking at with respect to partners as well in terms of dedicated technologies, that Product extension models that I was showing. So that kind of idea in terms of where a digital worker arrives already pre packed With some capability maybe even anti money laundering or some Specialist regulatory capability. These are all the kinds of things that we're seeing that customers have been very interested in And ways that they accelerate their use of digital workers. Thank you, Jason. Our next question is from Julian Serafini. Great. Thank you. So I have two questions for myself. The first on the guidance then. So I guess obviously you're saying that you're looking to be at the lower end That's right versus when I think back, I don't know, was it 5, 6 months ago, you seemed quite optimistic, I think, about where the guidance was heading. Can you help us just reconcile, I guess, what has Exactly in the last 5, 6 months really to for you guys to move down, I guess, in the guidance that way. I mean, I know there's FX, but clearly there's more play than that. And then number 2 then on the go to market as well then. I mean historically we think of Blue Prism as having gone to market more through system integrators, Right. Is that still the case today or is that changing? Can you expand on that a little bit in terms of what's your primary means going to be to go to market going forward here? Yeah, okay. Maybe I can take the first and Jason you take the second one. So Julian, in terms of the guidance, when we put out the guidance at the beginning of the year, I mean, it was kind of Based on two things. One was how we finished Q4 last year. We had a Pretty strong kind of finish to the year. And secondly, it was based on the pipeline that we had at the time. I think one of the phrases that I used was we've seen some green shoots and We're sort of optimistic in terms of the deals that we're working on as we move through Q1. Q1 is generally Relatively small kind of quarter for us just because of the number of trading days in Q1. But still we felt at the time that the year had started well and you can see some large deals in the pipeline That's how we're looking to close as Q2 sort of went on and into Q3. What has happened is that We have seen continued sort of decline in the average deal sizes Relative to the level of deal sizes that we did in the second half of FY twenty twenty and certainly Relative to the deal sizes that we had in FY 2019, we have closed Similar number of deals in terms of discounting the volume of deals, but significantly less Value per deal as we move through the half. And that's really what's had the biggest impact is that customers haven't sort of are not Really back at the kind of the large deals that we're doing in previous periods. We've done 1 or 2, but not to the extent that we were seeing in the pipeline as we look into this year. Thank you. Next up is Steve Robertson. Steve, if you could turn your camera on and unmute yourself, That would be helpful. Thank you. Thank you very much. I'm afraid my camera isn't working, which is probably for the best, I think, All the viewers, but thanks for taking the question. It was really surrounding the RPOs. Can you roughly age the EUR 311,000,000 RPO balance at April 2021? And I mean sort of What's the remainder of this financial year? What would be turning into revenue in FY 2022? I know you do that at year end, and it's a little bit Fair of me to ask you to do it at the half year end, but just a rough sort of hedging on RPO. And also, what was the change between April 2021 And April 2020, if possible. All right. And Just before we answer that, I'll just go back to Julian's question beforehand and then I'll hand over to you, Germa, and you're going to answer the new one. The other question was on the go to market and the traditionally People had seen that we've worked with the GSIs and that, that was kind of almost exclusively the way that we went to market. That was certainly a massive feature of Early days of Blue Prism. It is something that we've evolved. It's something that we've adjusted Part and parcel of the product's destiny is for us to have proximity to customers. And we also think that In terms of the way that ourselves and the whole partner base work with the customer set, It has to move to this new direction in terms of whether there's co selling and there's joint activity around those individual accounts. One of the features of the product set is really how interoperable it is with all of these other different technologies, that's both technology suppliers And other services that are applied around the product. So it really is about moving into these slightly more sophisticated models in terms of the way that we're all jointly serving an account. A final point I'll just make is that The one of the core aspects of this technology is a democratizing technology. It is about business users using the technology. And so the way that traditional services are used, it's kind of a different model in terms of the way this technology Operates. And so again, the way that the GSIs operate in this context is really different from traditional enterprise software. So on that, I'll hand over to Ajamu to answer the obligations question. All right. So just very quickly. So we actually do have a note in the statements, note number 8, but Essentially, the breakdown is €50,000,000 within 1 year, €84,200,000 1 to 2 years, dollars 79,400,000 more than 2 years. And then on the balance sheet, there's $96,900,000 in deferred revenue. That makes sense. 7,000,000 in deferred revenue that makes it 311,000,000 that we disclosed. And in terms of FY 2020 first half was 285,500,000. That's brilliant. Thank you. Do we have any more questions from anyone, please? I see we have a question from Victor Cheng. Victor? Good afternoon. Thanks for taking my questions. I think 2 of my way. On the first one, I just want to clarify, I think it's been asked a bit before. But about the many changes in go to market and products that you have discussed earlier in the presentation, how much of that Is the result of the review that you have talked about in the release and how much more changes should we expect going forward? And then secondly, we can see obviously from your largest customers that they continue to scale their RPA deployments substantially More than the broader customer base. So my question is how much of a runway do you think there is left for these large customers to upsell? And then thinking about the rest of the customer base. Do you see any upside on improving the upsell rate as you continue to enhance your products Or is the current 20% run rate still your near term expectations? Thank you. Thanks, Victor. And To an extent, almost yes. The evolution of the go to market will continue. And Parts of those buyer journeys is really the point I was trying to get at in terms of the way that we are using Insights into the product, the way that automation works, the way that organizations take on automations as a way of helping to inform The customer base at large, in terms of how do they get these really big ROIs and the really good kind of dramatic types of paybacks that we're seeing from some customers. Previous presentations, I've put up notices in terms of people that are targeting 1,000,000,000 dollars plus in terms of overall impact on their business. We think there's still a long way to go. If you talk to even the Sophisticated COEs and automation groups, one of the areas that they say that they're constrained by is the visibility with the C suite, How much that organization themselves is taking the technology to a fully Strategic capability and the ways that they interoperate with their IT groups in terms of Being licensed to provide a much wider function within the organization. So There's a component of change management. There's some design aspects associated with this. One of the things that we don't see is people being constrained It sounds like what it is that they do with the product. That seems to be very rich and something The sophisticated customers are really building out backlogs and driving ambition in terms of the way that they have, As I mentioned in the release, almost this programmable infrastructure. So the top tier customers we see continuing to drive forward, Brand new model is starting to emerge in terms of the way that the technology is adopted, the way that it's introduced to colleagues across the organization, the way that Business cases are managed. We think that Blue Prism actually demonstrates some of the largest ROIs of the whole sector. And we think this is very, very related to the way that we bring the technology to market, the architecture of the product and our kind of model In terms of democratization. At the kind of the longer tail part of your question, That's something we're looking at. There's various pieces of work going on in terms of the way that we talk to these groups. And how organizations introduce themselves to automation and start to get on to the automation journey, I don't think it's finished business. I think it's still something that some organizations need support. I need introducing to some of the methodologies in terms of the way that they adopt the technology And actually think about the technology. And so, yeah, we absolutely see that as very rich ground in terms of the way that organizations are really taking on. And part of the showcasing of the paybacks that other organizations are getting, some of the benchmarking they're getting around functions, We think this is all areas that will start to enrich and inform everybody that's thinking about automation in terms of what it is they should be achieving, What should their cost base be across different functions? What should their cost base be around various service fulfillments their own number of clients. This, we think, is things that are really starting to emerge right now. Okay. Thank you. We have time for our last question. Daniel Cohen, over to you. Hi, that's Dan Cowen here from HSBC. Just 2 for me, please. 1 is on headcount. I'm sorry I missed you said earlier, Ajayo, on the on headcount and the hiring intentions for this year. And the second one is on the 25,000,000 EBITDA loss and the guidance there, it sounded like that's starting to look a little bit conservative. Given the visibility that you've got on revenues and costs, what are the variables in the mix here? And I appreciate that. You're probably not going to answer this, but what's the range of the outcomes that we might see In the rest of the year for that 25,000,000. Yes, okay. So in terms of kind of headcount points, what I said was I suppose the kind of 2 parts of the business. 1 is Products and R and D, which is one area that we have been significantly investing in and recruiting A lot of people into that part of the business. The second part of the business is I'd say the quarter market Functions or sales and sort of marketing and some of the points that Jason was making around some of the changes that we've done, There is kind of a timing effect where some of the world's that's out, we've moved around and shifted By the point that we are reporting now, we have been filled some of the results. So there will be I said amount of increase in headcount within that, but not a material number, but it will be slightly higher than where It is at the moment where we are putting material sort of increase in headcount is then around sort of products And R and D sort of functions. On your second part of your question on EBITDA, I think there's sort of I'd say there are 4 areas that really kind of drive. So from a revenue perspective, The kind of the outcomes in terms of where we would end up is, as you say, is very narrow, kind of the range And we're guiding to the lower end of 170,000,000 as we kind of talked about. So from a cost perspective, there's sort of 4 areas. One is we've taken an assumption around travel and entertainment and how quickly are we going to see lockdown Measures across the world sort of opening up. So we've got a lot of people in the U. S, we've got a lot of people in APAC and across Europe, Who typically in the normal scenario in the normal sort of environment we expect them to travel for customer and so on reasons. So the extent in which that comes back that will have an impact on the cost base. The second area is this kind of Links back to the headcount points, which is how quickly can we execute against plans that we have in place around hiring for For our perspective, the market is tightening up. There's a lot of kind of competition for talent. So how quickly we sort of execute against that We'll have an impact on the cost base. The sort of the third impact which It doesn't have a sort of a huge kind of range in terms of outcomes, but it is something that will raise the cost base in the second half Is the phasing of our marketing budget. So they asked that they said things that we wanted to have been the first half, which We didn't quite do just because of the environment and we're now expecting to this is the Marketing spend or program spend to be materially higher in the second half of the year than it was in the first half of the year. And then the final area is FX. So from a translational sort of some inter Company working capital, which affects EBITDA and that's kind of a variable as well. So I think the GBP 25,000,000 that we're guiding to It's realistic. If some of those things don't turn out in the way that we expect them to turn out then You may well end up looking as a conservative sort of as explained from the information that we have at the moment. I think it's a reasonable guidance for us to be given. Thank you. Thank you, everyone. That concludes our question and answer session. If you do have any further questions, please do reach out