Earnings Call: H2 2020

Jan 14, 2021

Welcome everybody to the Blue Prism Full Year Results. If we can have the first slide, please, Slide 3, with the outline of the results. And just before we kind of get into the meat of the presentation, I think it's kind of, should we talk about the elephant in the room now or later? It's been a very negative reaction today to us publishing our kind of formal full year result. I think there's 2 kind of aspects that people have reacted to. 1 is the initiation of a new guidance regime. And secondly, in terms of some of the edges revenue restatement. So just to talk to both of them, I think, again, that the vast majority of people that are in touch with them, understand what it is we're about, what the company is about, both of these things kind of look a little bit shrill, but on the mild side. Firstly, as you all recall, as part of the going into the pandemic reaction to it, like a lot of organizations, we withdrew our guidance, we didn't know what the market was likely to look like. We didn't really know what the impact of this thing is going to be, so that was, I guess, early last year, just as this thing was starting. We went through the year with no guidance. We presented our results at the end of the year. And I say it's I'll talk to the results directly in a minute. But over that period, we kind of see the spreading in terms of the way that people are talking about the stock itself, we also said in terms of the note at the end of last year that we've got to look at a potential U. S. IPO as well. And one of the things that we're looking at as part of that U. S. IPO is this material valuation discrepancy between stocks like ours trading in the U. K. And the kinds of valuation multiples that being in the U. S. So combining those two things together, us wanting to put out a guidance to market give it some kind of a tether in terms of what it is that we're doing. We signaled and we hoped the language that we put around that signal is very, very clear in terms of it's a conservative, really a peer structured guidance methodology, so slightly different from the way that we've done it before in terms of the way we've introduced it. We think that the way that our U. S. Peer groups do this tends to be highly conservative we thought that was an appropriate thing given the circumstances around COVID. Hence, it's slightly different than we've done it before. It's something that we think is very structural in terms of what it indicates, but it is a slightly different. So that kind of addresses on the first point. The second point on the restatement, and now again, if everybody nose and there's been following them up in prison. Grant Ford has taken over as our auditors. And as part of that, there is a technical evaluation of the way that license revenue is recognized. And the technical group previously with BDO and then now the new technical group at term, Grant Thornton, make a judgment in terms of the way that the license is allocated against derma revenue recognition. And the technical group at derma, Grant Thornton, making a judgment in terms of the right to use the product, the right for an upgrade and the right to a standard form of customer support and it's in their judgment that then has to be it informs the way that revenue is recognized. And so then we end up getting this summer at smaller discrepancy. Now obviously, we can pick up these at the end of the call. I don't want to make this day about kind of the market reaction to what has actually been a fabulous summer a year for us last year. So straight into that and I will try and go as quickly as we can. Firstly, headline growth is about 40% plus 5 years in a row now that we've done this, we're now looking at over €300,000,000 in terms of license obligations to Blue Prism, you will all recall that all of our licenses are recurring revenue. We maintain this really kind of world beating figure of 98% revenue retention, basically, you take that as a multiple against that GBP 300,000,000 in terms of the way that you can project the way that this business is likely to perform going forward. If you also see across that headline strip, got 140% growth in terms of our Blue Prism Cloud product. So these are digital workers serviced and managed within hosted environment, again, it's been a very successful product. It's been a very, very successful integration becomes increasingly the core of the way that we offer our product suite. The other thing that I would draw everyone's attention to is the 97% growth in registered users. So we doubled the user base in terms of people who are actually using this product. And again, in such a suppressed year, such a very strange year, I think, again, just kind of wonderful to see those numbers coming through. Headline also, we'd say with 2,000 plus now of customers, which is a right about that 30% mark of the year of Forbes Global 2000. Again, underlining how much of a global business Sunbat Blue Prism has become? An area that I think is really, really close to my heart is the R and D spend. Now we increased that by 124 percent over the year and jumping down that chart, I would bookend that immediately with the fact that we only spent £3,000,000 in terms of overall cash burn in the second half. And so we've put material resources into R and D and yet we still manage that in the context of a very measured set of investments. And a number that I'm very proud of is the fact that we list here that we had 8 major product launches over the period. And in fact, it was 9 when you include the core platform as well, we did a version of 6.8. So I think that from a technology perspective, something I'll talk to a little bit further, but it's we've invigorated the product set. It's all part and parcel of us going beyond RPA and towards these intelligent digital workers multiple skills in terms of the way that they address our customers' requirements and customer tasks. I'd also say that another thing that's worth highlighting is that we continue to build these long term customer relationships where these large organizations are increasingly bringing Blue Prism as their strategic automation capability and their centralized strategy in terms of the way that intelligent automation takes place. A final thing that is worth mentioning on Slide 3 is that the launch of Blue Prism Ventures and this is us some creatively using the brand, the product is light, it has a is light, it's got great loyalty, the 98% revenue retention demonstrates and there are ways that can also be put into action. And so we've created this vehicle, Blue Prism Ventures and we're looking at ways that we can take brand out to territories that otherwise we wouldn't be present within and the different ways that we can actually take the product out to market. And the first delivery of that, we had Blue Prism in South Korea launched. If we move on to Slide 4, another thing that I would like to highlight is that we've increased the Board. We brought in some very substantial experience in terms of what it is we're doing, I'm actually delighted to say Rachel Mooney, Mauricio CEO Carly and Murray Road have joined us, Non Executive Directors Murray Road. Some of you will recall as the CEO of at TIBCO, Maurizio, exec roles are both in Google, VM aware, not Executive Director at Temenos now and also Rachel Mooney, who is at Snow Software, is also a Google alumni. I'll kind of break down what it is that we're going to talk to today. Firstly, I want to emphasize the fact that we continue to build the technology, drive a differentiated proposition for Blue Prism and really take ourselves to an area of deep enterprise grade intelligent automation with much of it delivered out of the box end to end process automation, we're also expanding the delivery capabilities in terms of the way that people can access some of the product. And a third area that I want to highlight today is also this kind of rich ecosystem in terms of the way that we're being referenced by both our partner base and the set of customers that are adopting us as their core technology. We go on to Slide 6, we get an overview of this. And Slide 7, one of the things that I think is really useful to understand is that this digital worker, we're attempting to get this notion of digital work as close to human worker as we possibly can. And one of the core features of that is the flexibility, the versatility, the fact that it interoperates with multiple other products, makes use of those products, uses those tools in the course of the December, a daily job and that it scales that you add these digital workers one to the next or many to the many in terms of the way they operate the team across your kind of enterprise task set, which means it's a highly agile technology. It means it's highly versatile in terms of the way that you deploy it. And it gives you a very flexible pattern in terms of the way that you onboard this technology within your organization. And for Blue Prism, there's probably these kind of 4 main dimensions that I'd say are really the things that we're trying to emphasize. Number one that I mentioned is a scalability aspect and that it's the ability to use many thousands of digital workers. We kind of see these things being used as populations and having policies set across them in terms of the way they dynamically work against their tasks. Second one that I'd say is absolutely key for us is a security component associated with it. One of the themes that we introduced is that it's a democratized technology, it's distributed to many, many users, and so how do you maintain enterprise level security? How do you make certain that it's client, how do you make certain that it's an IT estate that's under control, that is an estate under the control of IT, I should say, in terms of the way that security is being maintained. 2 other areas that I think is also worth emphasizing is the smartness. And so, again, this idea that digital work has solved problems in situ, that services are out or down, the digital worker will know how to work around it, come back to that task when that piece of the infrastructure is operating, it would know how to restart against individual task and all that kind of creativity that happens down at this operational layer in order to drive these process automations. And the last one that we'd emphasize is successful. It's how does it drive outcomes? How do you demonstrate the value of these digital workers in terms of what it is they're doing for the organization. This is something else that we think is very key in terms of what this technology is about. If you move on to Slide 7, you get a picture of the digital worker applying all of these different technologies against the task that it may be carrying out. And what we're trying to get over in this diagram is the way that we're making technologies interoperable and that a digital worker will make use of maybe multiple AI capabilities and skills as part of what it is that it does as well as core infrastructure within your own organization or third party organizations, but the central defining theme is that the digital worker becomes the focal point around which your intelligent automation takes place? It's the digital worker that is mastering these technologies, applying them in the context of achieving their tasks and creating these outputs. If you look on Slide 8, we give a presentation of the products that we released. And I say this to me is something that we can be very proud of. And all of these things are included within the core Blue Prism license. Again, I think it's something that is driving real value for our end customers. And so just to kind of give you a flavor of these, decipher, intelligent document processing is the way that unstructured documents can be interpreted by the digital worker turn into a structured number outputs and managed within the process flow. Interact is a capability where we further democratized the way that people can use this technology. So now we reduced it even just to a typing interface that anybody with no programming skills whatsoever can now put together an automation flow. Service Assist is a very specific capability aimed at the call center market, where it's gathering the digital workers gather information ahead of a client interaction and basically gathering data from across the organization in order to populate it for the human number operator, we've got the SAP Accelerators. Again, this is something very, very interesting in terms of what this technology is capable of doing, what this is, is that digital workers come fully SAP enabled out of the factory. It means that they already speak SAP, they already talk technology. And as many people will know on this call, as a high premium skill being able to program SAP. Now we're saying that the digital workers can do that. And what that means is that a business user using a Blue Prism digital worker can now effectively code into the SAP environment and certainly automate across that environment, all out of the box in terms of the standard shipment of a Blue Prism Digital Worker. Another one that we launched is the Automation Lifecycle Suite, and this is all to do with process capturing, the management of automations, the requirements, all the ways that that sun up and sunset against an automation takes place across your large enterprise transformational projects that we are encouraging our customers to go for and increasingly we're seeing. The other 2 that get called out here are the Blue Prism Amazon Web Services and Blue Prism Azure. And what we mean by this again is that the digital work has come fully informed with specific product sets that exists within those environments in order to allow our customers to fast track the way they make use of that resource. If you move on to Slide 9, this is something else that we want to emphasize and that is the expansion of the delivery format. Now, I've got a notice up there saying that 98% recurring license revenue. And this is a thing that again, back to some of the comments I was making at the opening of this presentation, all Blue Prism revenue is recurring. It really has to be understood. Every single piece of it is recurring, on premise, customer cloud or a SaaS base, which means actually it's a higher grade revenue than you see from a traditional purest task based organization because everything we do is a recurring rental fee, but the real point of this chart here is to emphasize the myriad ways you can now access this product. And part of the philosophy of that is that we're not only are we saying that is the product at core highly promiscuous in terms of the other technologies that it will use and that will wield in terms of what it does within its activities, but it's also highly accessible. And so we're trying to take away all barriers in terms of the way that organizations can access digital workers, can scale them, interoperate them, share components across them. We go on to Slide 10. It wouldn't be one of our presentations without drawing out some of the customer brands. Again, just phenomenal brands that are associated with the company. I think this is something that the whole company, just so impressed in terms of the organizations that we're working with. It is kind of a short handful of them here, some of these are familiar names and some of them are very new even during the lockdown period, I think that in terms of calling out specific components on the side here, the 70 plus industries maintained, we're still being used in these myriad different areas. The 98% retention we talked about 90% to the growth in terms of customer usage and the kind of average figures associated with individual customer commitments to us. We go on to Slide 11 and here just to give a little flavor of the kinds of use cases that are taking place and what we thought we'd do with this is kind of give you a picture of the aspiration at one end of the scale. You take someone like Telefonica, they're now $1,000,000,000 plus in terms of the targets, in terms of savings, reinvestments that they will make based on the efficiencies that they deliver through Blue Prism. And at our top tier, that's we're seeing 1,000,000,000 and multiple billions as being the target around which Blue Prism is being applied against. And then when you look at what makes up those programs, how do you get to a SEK 1,000,000,000, then you see these other examples that we've pulled out here. Things like DTE Energy, they're doing identity theft detection, looking at customer use profiles and the way that customer credentials are being maintained, Veeva, they've got individual transaction number processes across the product set in terms of insurance management, renewals and just the bulk work of the transactions against existing customer base and then someone like National Grid, where it's things like where are the meters located? How do you speed up the time in terms of the servicing associated with an individual or organization, the running of the business, how do you further inform the activities that take place? When you take all of these different strands, that's how you start to get towards these kind of €1,000,000,000 targets and €2,000,000,000 that we see across the transformational customer group. If you can move on to Slide 12. And here, again, we just wanted to emphasize the level of interoperation that's taking place the technology, how flexible, how dynamic we're making it in terms of the ability for organizations to be able to consume both our technology and other technologies, and we see this as absolutely central to our mission and something that maybe differentiates us from way that kind of Microsoft will look at the world, we see it as that there's over $100,000,000,000 on this slide at a quick estimate in terms of R and D effort, how do you make that as liquid as possible in terms of the way that an organization can consume that technology? And how do you make it accessible in terms of the way that you apply it to frontline business tasks? And that's what we see is so differentiated in terms of what Prism is doing and the way we're bringing them and focusing these technologies throughout a customer's context in order to solve business problems. We structured this now across our digital exchange in terms of these kind of 3 d areas, discover, design, deliver, different stages in the supply chain, if you will, in terms of the way that you put automations together and it's something that's being very, very successful with the customers, it's something that people are really tuning into just the clarity of this vision, just the way that these technologies are both our technology and these third party technologies are applied against an organization's business challenges. And as I say, we've got these growing number of assets, we have 1800 assets in the Digital Exchange already, 46,000 users for that. If you move on to Slide 13, just a quick restatement. I think last year was very, very strange year in many ways, lots of things that still haven't kind of ended yet obviously in terms of this pandemic and whatever the implications are to all of us operating within it, but I think for Blue Prism itself, it's a strong year, excellent achievement in terms of the way that we've filled out and are filling out the technology, it's been highly appreciated by the customer base. We've extended the way that people access the technology, again, in this highly flexible needs in terms of people be able to deliver it. And thirdly, I'd say we've also extended that growing ecosystem that sits around Blue Prism and seize the summer in the context of what it is that they did. So on that, I shall hand over to Guillermo to go through the financials. Thank you, Jason, and good day to everyone. I'm not sure if I'm hoping people can hear me. Otherwise, I'll get some messages saying that You can. I'm delighted to be here to share with you a strong set of results achieved in a challenging economic environment. We have continued to retain and upsell into existing customers as well as winning new accounts, all of which have contributed to this performance. We finished the year with $141,400,000 of revenues, showing a 46% based on the restated reported revenues. Blue Prism Cloud represents $11,500,000 or 8% of group revenue. FX did not have a material impact on year on year growth. The vast majority of our revenues come from, as Jason mentioned, long term recurring licenses and support and maintenance revenue, Which provides strong visibility for the future. This is the case for both of our on premise license sales as well as the SaaS businesses. Our contracts weighted by value are typically on a 3 year on 3 year term paid annually, which provides predictability. This is what drives an RPO or remaining performance obligation to go CHF312,000,000 as at the end of FY 2020, Providing us with the base for robust growth outlook for the future. On a regional basis, EMEA accounts for 47% of total revenues. Americas stands at 40%. APAC, which includes Japan, account for 13%. We have seen strong growth across all three regions. We continue to see a significant opportunity In all markets and have established strong businesses with the scale to deliver against these opportunities. By industry, The distribution of our customer base reflects the enterprise nature of our products and focus on scalability, security and governance. As I'll touch on later, we're pleased with our strong growth retention rate. The impact you noted in H1 Our new business has steadily improved since that point, and we continue to observe some gradual improvement so far in FY 2021. So in summary, overall, we're building a global, well diversified and high quality revenue base. Moving on to the next slide. As Jason mentioned at the start and you will have seen in the prelim announcement Following the appointment of our new auditors, we have reviewed the revenue recognition Under IFRS 15 and revised a number of distinct performance obligations. This has led to a reversing of the point in time revenue that we accounted in FY 2019. The impact of this has been a €4,200,000 reduction in revenue for FY 2019 With the corresponding increase in deferred revenue. For the current year, the impact of revenue not recognized in FY 2019 has been offset by the impact of reducing upfront revenue admission on deals signed in FY 2020. So that overall, the net impact of this change in FY 2020 is not material. If we had accounted for revenues in the same way As FY 2019, revenues for FY 2020 would have been £2,000,000 higher than we're reporting, one for 1.4. Clearly, this accounting change does not have an impact on the underlying business performance such as bookings, Our customer wins, up sales and cash generation. This slide shows that the overall invoice amount calculated by adding revenue and movement in deferred revenue in the year, there's no change and provide a good gauge overall progress in FY 2020. To be clear, the total amount of contracted billings It's higher than the balances recognized on the balance sheet as at the 31 October 2020. This is because, as I've said, We typically contract on 3 year terms, invoicing 1 year in advance. Consequently, customer commitments that have been contracted but not billed Will not be on the balance sheet, but I'll reflect it in the RPO number I mentioned in the previous slide. Moving on to the next slide. Our operating cost base, excluding share based payments and depreciation and amortization, Has remained broadly flat year on year, while driving significant while we've driven significant growth in revenue. There have been several drivers of the cost base. The first, financial discipline in all areas of the business. As we mentioned at the end of 2019, following a period of significant growth in investment across the group In both 2018 2019, 2020 was a year when we were looking to effectively generate incremental revenue growth Through higher productivity of the capacity that we had created in the business. The second driver has been the impact of the pandemic, Which has led to a reduction in certain costs. It has had an impact on marketing costs with events going virtual, in particular, Blue Prism World. We have also seen lower travel and entertainment expenses, which is typically a sizable proportion of our cost base. Against this, there was a full year impact of FY 2019 costs, including The impact of our Blue Prism Cloud acquisition. Moving on to the next slide. More importantly, As a reflection of our strategic vision and confidence in the opportunity, we have continued to significantly increase our investment in research and development. R and D expenses, including capitalized amounts, stood at 14% of sales for FY 2020. We see our focus on enterprise grade RPA as differentiating, and this spend enhances it. We now have around 170 people in our product development team. Moreover, the R and D spend, as disclosed, does not capture two areas where we significantly developed our product capabilities. The first is building a leading SaaS platform with the acquisition of Autonomy, which after having been fully integrated into our platform, we renamed Blue Prism Cloud. This board is set to leading SaaS platform, But also products such as the Hub, Interact, AADA, which can be used in on premise as well as hybrid scenarios To bring products to bring these products to our broader customer base. The second is the digital exchange, The DX, where we have enabled our customers to have access to technologies developed by our partner ecosystem directly within their Blue Business environment. Looking forward, we will continue to increase investment into R and D. Moving to the next slide. The overall cash movement for the second half of the year, as Jason mentioned, was GBP 3,000,000. The strong cash flow dynamics, a feature of our business model. Adjusted operating cash flow significantly improved In FY 2020 against FY 2019 and in particular in the second half of the year. On a year on year basis, There were several drivers behind the improvement in cash burn. 1st, there was a narrowing of losses With adjusted EBITDA significantly improving year on year. 2nd, we experienced positive working capital dynamics driven by increasing deferred revenue base. As I said, we took the invoice annually in advance, Driving a growing deferred revenue balance. Working capital also benefited from strong cash collection and in particular, a reduction in trade receivables In the second half of the year, despite the growth in revenue and deferred revenue. And lastly, we had a strong management of capitalized spend, We've declined year on year despite spending more in product development as we typically expense A large proportion of development spend. We closed the year with cash and cash equivalents of £138,000,000 Reflecting in part a capital raise of around £97,000,000 in April of 2020. We aim to exit the year with a cash breakeven run rate. Moving to the next slide. Despite the plan to reach cash flow breakeven position, We will remain biased towards investing in our business given our opportunity for growth, but also our conviction in long term margin. I wanted to spend a few minutes talking about why we have such confidence in our unit economics. In summary, We have market leading revenue growth retention rate supported by our focus on enterprise RPA, The commitment of our customers to make automation a strategic priority and consequently high return on investment that customers generate Using our software, we have a track record of successfully upselling into existing customers. Therefore, combined with the maturation of our sales force, the high levels of retention rate should be a key driver of our long term margin potential. Moving to the next slide. Customer commitments Continued to expand despite the impact of COVID-nineteen. During the year, we added 2,400,000 GBP of monthly recurring revenue, MR or MRR, less EUR 200,000 of MRI churn from lost customers and net growth of 21%. Of the total MRR added, 17% came from our Blue Prism Cloud offering, showing how important this deployment model As we count the overall growth. Overall, MRR from Blueprints and Cloud was €1,100,000 with €11,700,000 from the license subscription business, where customers deploy the products and their infrastructure. Gross revenue retention remains Market leading at 98%. This is because where we do lose customers, they tend to be small with a modest impact on overall revenues. Of the 117 customers that we lost in the year, almost 90% had 5 or fewer digital workers. This shows that where customers have made strategic investments in Blue Prism RPA as opposed to your trial, they tend to be sticky Through realization of significant return on investment. Moving on to the next slide. Customer commitment, both in terms of new customers, new customer additions and outflows continued to grow during the year. We added 499 new customers in FY 2020 across our three regions. New customers typically start small as they assess processes to be automated and assess their readiness for prioritizing our automation. Based on our cohort analysis, a large proportion of new customers typically have fill within 12 to 18 months or at renewal And upsells tend to be significantly larger than the initial purchase. So we look at our new customers as a pipeline for future upsells. Up sales accounted for 75% of the bookings signed during the year. This is the key driver of the net retention rate, Which was 113% for the year. Overall, the operational performance of the business During 2020 underscores our conviction that the market opportunity is large and demand from both new and existing customers continues to grow. Our customers are buying more and increasing their commitment with us. Moving on to the next slide. In summary, There are a number of factors that give us the confidence in the long term margin potential of our business for the reasons covered in the previous slide and notice here. I'll move on to guidance now. Turning to outlook. We are providing a specific guidance for the first time and reinstating guidance for the first time since Q1 2020. There are 3 points that I would like to make. First, we have talked about being a global software company, And we think this is the right time to introduce the practice followed by this year. The guidance should be seen within that context. 2nd, this guidance assumes that today's FX rates remain constant through to the end of October. If that were to happen, we'll experience around a 3% headwind to full year revenue, primarily due to hours, so that's a 40% dollar exposure on a revenue basis. The third point is that this year has started well. The pipeline is stronger and generally we'll continue to see performance in line with our expectations that we had at the time of our November trading update. However, as Jason mentioned, we still don't know the impact of the pandemic second wave on economic outlook. We hope that we start seeing macro improvements from the second quarter. If that happens, then we'll be in a very good position relative to the guidance we've given. And therefore, starting the year with a range in revenue of between £170,000,000 £180,000,000 and a adjusted EBITDA loss Of around £25,000,000 I'll now hand back to Jason to conclude. Thank you very much, Jomo. Given the timings, let's move straight on to Q and A. Thank you, sir. Our first question today will come from Julien Cerfini from Jefferies. Please go ahead. Your line is now open. Hi, good afternoon. Thanks for taking my question. So two questions from me. I think one is on the sales and marketing. I mean, we've seen from the metrics disclosed that the sales and marketing headcount has actually been declining throughout FY 2020. So should we be reading anything into that? I What is driving that? Should we be reading anything into that? And then are there any changes we should read into that in relation to Blue Prism's go to market strategy, which think it's been more partner driven historically. Yes, I can take that. No, I mean, it's the bit change has been really kind of business as usual. I I'll see that number tick up a bit in FY 2021. So there's nothing to really read into that or a Okay. And then I guess second question and just on the cash breakeven. And then I think, Gentlemen, you had said you're biased to investing going forward in the future. I mean, should we be reading into that thinking that you would continue to operate at a breakeven level in Out years beyond FY 2021, is that the thought process basically just keep reinvesting the business going forward? And then secondarily, I mean to hit cash breakeven in FY 2021, Are you having to do anything that may be impacting the growth of the business potentially? On the first one, I mean, the thing is what we'll do is, as we've kind of said before, We look at what the opportunity is in the market and whether it makes sense for us to as we invest against that opportunity. From what we see at the moment, the fact that we're still in the very early stages of this market, I would say, yes, question, we would see we will continue to actively invest. So any sort of incremental cash generation that we generate over As we move forward, I would say we would look to invest that back into the business. Your second question in terms of getting to a cash flow breakeven, I mean, I think the guidance that we're giving As Jason said, it's conservative given the what we are seeing given the MAPFEL condition. On that basis, we don't really need to do anything to the cost base in order for us to actually reach that. The way that We think about it. I mean, if you look at our exit MRR for the year, you look at the sort of business that we've managed to deliver historically, That should get us to a position where we get to a partial breakeven by as we exit FY 2021. Got it. Thanks guys. We'll now move to our next question over the phone, which comes from Alex Kurtz from KeyBanc. Please go ahead. Your line is now open. Yes. Thanks for taking a couple of questions and congratulations on a good finish to the year in a tough environment. So A lot of software growth management teams look at Rule 40 as a mechanism to balance growth with margins, is that something that you have considered or is Actually breakeven, kind of a more of an important goal as far as how you think about the modeling of 2021 beyond? I missed the beginning of the question, sorry. Yes. Rule of 40, basically growth plus Software growth plus free cash flow margin, it's a mechanism that a lot of software teams use to manage their investment levels. And was just wondering, it sounds like you're very focused on cash flow breakeven over the next couple of years and Was wondering if that's something you would consider as helping inform your investment levels, because I think the prior questions were around growth versus investment. So I just was wondering if you had considered rule of 40 before and how you look at your OpEx? Alex, this is John. I mean, rule of 40, we sort of We do think about it, but I mean, I think that's not the kind of the biggest kind of driver for our investment decisions around the business. I mean, I think the way we think about investment thesis around the business is looking at what's the likely one of the likely sort of long term margins for the business and whether it makes sense for us to invest against That opportunity, and as I said in the script, our view is we are still in the very early stages of kind of the market work. And it's important for us to continue to invest to create value for the Q1 of the business. And I mean, the one little nuance on that Just on the 2021 guidance. Sorry, were you going to say something? Yes. Sorry, I was going to say, one of the nuance that I would add to it is that we all kind of appreciate the scale of opportunity that we're looking at. There has to be give some of the comments that I was making at the beginning of this presentation in terms of year, the discount that we're trading versus our U. S. Counterparts, even for organizations that aren't even dealing with exciting high growth opportunities or patented underpinned technology. And so against that, we have to be mindful in terms of like what strategy that we can afford to we can manage. And whether that's picking targets within it, targets that we can place investment against, that differentiate what it is that we do and that distinguishes Blue Prism from the rest of the pack. So the equation has to take all of those things into account. Okay. And then I appreciate that. But then just on the 2021 guidance, Would you frame this as a starting point on how you think the year can play out? Or just given the lift in incremental software growth that you need that this is pretty a fairly reasonable range, especially at the midpoint. Yes. I mean, I think it's a lot. I mean, it's a reasonable range. As I said, I mean, the way that I would think that you guys would probably more related to say you ended the year on an annual recurring revenue of, £155,000,000 and if you look at the range of what we've delivered in year in the last sort of 3 years plus a small amount of services revenue, that quickly gets you to sort of middle of that range Without making any sort of aggressive assumptions in terms of business recovery and so on. So I think on that basis, you sort of You get to the middle of the range that we've given. Thank you. We'll now move on to our next question over the phone, which comes from Arvind Ramnani from So I had a couple of questions on kind of your format for your guidance. You've been providing a range, Which is pretty helpful. Can you kind of talk about kind of the top end of the range? Under what scenario do Do you think you may kind of meet or even exceed the top end of the scenario? And are there any concerns that will lead you to come to the lower end of the range. Hi, Avin. Yes, sure. I think it's kind of similar sort of question to And similar sort of answer to what I gave to Alex, which is the kind of the top end of the way, if you look at if you start From the annual recurring revenue and you look at historically how much we've generated In year revenue to add to the year end revenue. At the top end of what we've managed to achieve in the last kind of 3 years, You get to the €180,000,000 or a bit more. If you get to the lower end of what we manage to achieve, you get to the €170,000,000 And clearly, that's not taking into account potential Improvement in the demand environment. So If we see a level sort of acceleration in terms of the demand environment, then that would certainly I could see that leading to us outperforming that range. And if that doesn't happen, then clearly, we'll fall within that range. The only other sort of risk is then around FX. We The dollar denominated revenues make up a significant proportion of our overall revenues. And as you know, over the last sort of couple of months, we have seen the sterling strengthen against the dollar and it depends where that goes. We don't really know at this stage, but Depending on where that goes up, that would also have an impact on where we end up and where the year. Great, great. And when I kind of look at the sales highlights, I mean, certainly appreciate the kind of The dollar retention, but in terms of like number of customers, in FY 2020, the number of customer losses basically went from like 40 to 117, but the number of additions obviously Also went down from $670,000,000 to about $500,000,000 And I understand the whole sort of COVID impact, but could you make the case that there's going to be some You know pent up demand from kind of project delays of clients who kind of pushed out decision making, Could you benefit from some push outs or delays that you had in calendar 2020 Benefiting you guys in the next 6 to 12 months? Yes, I mean, absolutely. I mean, the point that we're making about the pipeline and the pipeline being Continuing to be very strong and certainly stronger than he was at this time sort of last year. A lot of the opportunities that sort of where delays out of FY 2020 are sort still in the pipeline, the sales one of the key things that we've kind of talked about before is the lengthening of the sales cycle. So we are seeing We're not seeing customers or potential customers sort of really falling out of the pipeline. It's more around those opportunities being Taking more time to be discussed internally for customers to make a decision. So that certainly Has contributed to that. And then also, we have had a pretty good impact from one of the initiatives that we learned, which is a coated initiative and customers really sort of looking at making the kind of processes kind of more robust and so on. And that's created incremental demand as a consequence of what's happened in FY 2020. So all of that, that's a pretty strong tailwind. We have closed Quite a lot of business from that tailwind and we start we continue to see opportunities in the pipeline that have been created as a result of that. Great, great. And then just an additional couple of questions. From a geographic perspective or from an industry perspective, are there any kind of call outs you can help us either are you seeing strength or weakness In particular geos or particular industries? I mean from a geography perspective, it's all kind of relative. The U. S. Has done pretty well Relative to the other regions. We've seen strong demand in time as well, albeit from a small starting position. So I would say those kind of 2 regions on a relative basis, we've seen stronger probably demand environment than sort of EMEA and APAC. And from an industry perspective, Yes. I was going to say Healthcare from an industry perspective has been pretty strong. Great. That's helpful. Last question for me. From a competitive perspective, are you seeing any kind of changes in the competitive environment Either from a pricing perspective or any of that like any changes from now versus when I look back 6 months ago? I mean, there's always competition. So a lot of most of the particularly on kind of new logos, new customers, let's say these competition customers Looking to see, particularly if they don't really understand the technology. They read Gartner about various kind of vendors in the market. And so they always look To see what's out there, so they can be competitive. I think because quite a large proportion of our business is coming from up sales. That's why I've kind of been saying that where the deals haven't happened is not because we've lost the deals due to competition, but It's basically kind of the sales cycle has lengthened. From a pricing perspective, if I look at just broadly what's our average prices across What we're doing, those actually average prices have stayed pretty stable, maybe even ticked up a little bit. So we haven't I haven't seen a generalized pressure on pricing, there may be specific sort of situations, but not a general situation. No. And in fact, I think one of the points that I was making was that the additional technology that we've released is all part of our same core license and I think that to say it's gone down very well. The other question you asked in terms of some of the customer numbers. I think it's been pointed out on another occasion that last year, the year before, we introduced these 1 year one robot trials and so there's that kind of activity that this in those numbers and it's not really anything material to what it is that we do. Great. Thank you very much and good luck for 2021. Thanks, Avel. We'll now move to our next question over the phone, which comes from Sean Please go ahead. Your line is open. Hi, good afternoon, guys. Can you hear me okay? Yes. Yes, we can hear you. Yes, perfect. Sorry. Yes, I just wanted to ask A little bit of a big picture question, I guess, that you've kind of highlighted in the statement that kind of Gartner's estimate for growth in the RPA market this year has only been 12%. And you're based on the midpoint of that guidance for next year, though that is a big improvement, it's still substantially below the 50%, 60%, 70% growth that we usually associate with the RPA market and you're still commenting on significant market opportunity and the capabilities of automation are growing and the importance of automation, I would have thought would have grown post COVID. So I guess, My question is, what is the barrier here in which clients aren't engaging With deployment and why is that causing kind of a marked deceleration in the kind of spending on the RPA Market. Yeah. I mean, I think that, you know, you always tend to kind of think of these markets is sort of linear, you know, or they just accelerate away, it's some kind of exponential. The reality of a market expansion I think is slightly different. It's more like breathing. And so you get a larger commitment to technology. I think that it's a technology that kind of reinforce itself by word-of-mouth in an amazingly efficient way that these top tier very, very difficult organizations to sell to. Again, I made that point many times. Just do not take it for granted that you're servicing the 30% of the global 2,000. Organization's take on the technology, then they've got to see, is it the capability? Are we looking at it the right way? Is it the technology that is displaced the way that we would do offshoring or outsourcing? How do we drive it to our organization? How do we marshal ourselves in terms of what it is that we should do? Is an automation assistant sitting in a kind of desktop environment the right way to think of this technology or is it a larger kind of automation and robotics for manufacturing as a model that should be looked at? What kind of levels of returns should we be achieving? What levels of investment in terms of staff, education? What kind of change management programs to be put in place, what are we really asking this technology to do? It does all the various contexts that take place. And I think that we see these extraordinary numbers in terms of the paybacks. Again, a point I just keep repeating. MIT and London School of Economics, best returns that they've ever studied. So organizations now have to figure out how they use the technology, where that goes, what's the right characteristics. And to an extent, I think that we feel that we're in one of those places where there are certain requirements coming back to us as the providers of this technology that the technology needs to do, things that it needs to keep pace with, things that has to make even easier in terms of the way that organizations consume it, things that must be more complete within what a digital worker ought to be, the way that we make it accessible for organizations to access across their set of requirements. So there's things that we have to do I think that they have to do in terms of familiarizing themselves with this new and highly flexible world they're moving into. And I think there's a lot of catch up that has to take place associated with that. Okay, great. And I guess sorry, it's a bit of a follow-up question. You've kind of noted the kind of reduction in deal value is It has been an impact kind of through the year. Now, Jamie, you mentioned that kind of pricing has remained static. So I was just wondering What are the other impacts there? Is it that the frequency of kind of deployments going into production, has that reduced? Or has it been a kind of scaling issue through the course of the year that customers are just not engaging in very large bot deployments? It just be interesting to hear you kind of pull apart that impact on deal value. Yeah. I mean, I think that the characteristic that we're to say is that there's a hell of a lot of caution out there in terms of where the overall market is going. And that's really what informs all of these things here, and it doesn't matter what business you're in, you've got to look at what shape the overall economy is likely to be operating at. And there's a question earlier in terms of how are we seeing different geographic splits and different sector splits and certain sectors are completely wiped out. They're prohibited from functioning and by those sectors not functioning, there's a certain knock on impact in terms of the draw and the demand they make on other sectors. So I think you have to look at with that context in mind and just the natural kind of caution that takes place. But I think what we to demonstrate what we're showing is there's no lack of enthusiasm for this whole direction of intelligent automation and where this technology is driving to. Yes. And I mean, just to add to that, I mean, if you look at the way the year kind of happen, the first half, it was certainly a much bigger impact. And then we did see The large deals returning in the second half of the year, which helps sort of recover the average deal value somewhat I mean, the second half. Okay, perfect. That's very useful. Thank you both. We'll now move on to our next question, which comes from Peter McNally from Penn Jorgen. Please go ahead. Your line is now open. Thanks for taking my question. I think most have been answered, but I'll ask one on Blue Prism Cloud, doing very well. Is this a hosted version of RPA or is this a true cloud version? I wonder if you could comment about that. Does it matter to your customers? When you could just talk about that in a minute? It's both. We offer both those formats. So, cloud is hosted. So you provision the robot in the cloud, you dial it up, you can dial it straight down into your organization, have it operating. Or if you've got your own cloud provider and you want to take the Blue Prism footprint within that provider, you can also do it that way. And so one of the themes that I was trying to get over is that your name and format is available to you from Blue Prism. That's great. Just one other quick one. I mean, I think we all read Gartner reports as well. One of the things that was asked or was mentioned that About your support for upgrades could use some improvement. Do you agree with that? Are you putting any investments to that? Yes, we totally agree with that. And and in fact, again, part of this big activity that's taking place around the R and D, that's something that we think that just like interoperation, we want to banish that as an issue. Great. Thanks very much. Our next question now comes from Victor Cheng from Bank of America. Please go ahead. Your line is now open. Good afternoon, everyone. Thanks for taking the question. I think most of mine has answered as well, but I think 2, if I may. So just thinking holistically the growth drivers of the RPA market as a whole and then maybe more specifically for BrUPREZIM, is there any areas, be it By region or by sector that you think is underpenetrated at the moment? Also on the growth is or is it more about building out new features like the cipher that you have and thus expanding the use case and addressable market? And I guess in that case then, do you think is more of that coming from R and D Or from potentially acquisitions. Yes. I mean, in terms of sectors that are under penetrated, I think it's a very, very easy answer, all of them. And we think we're at the very, very beginning of this. And part of the drive that we're on in terms of our individual customer journeys, the way that we're getting organizations to think of this technology and the flexibility, the dynamism of it, what it actually offers to an organization, the ability to be able to change the business chemistry with which they run their own organizations. So we've got customers that are fully automated the mortgage application activity, we've got customers that are fully automated, they're underwriting capabilities to the point where they now think of themselves as SaaS based offerings in their own right, it's a core competence they could monetize in a very different way. And so we still think that the world is kind of catching up with these ideas. And on that slide I showed earlier in terms of names of organizations that have been with us for a while and new organizations. Five new ones, we had the U. S. Department of Veteran affairs, Bristol Myers Squibb, we have Huawei, Namura and the Federal Aviation Authority. And as somebody pointed out to me, Just those 5 alone are operating $250,000,000,000 in OpEx in 2019. The ability to be able to use automation at genuine scale, the genuine number core aspect of the business, we're only at the very, very start of that. Fair enough. And then that's very clear. And then on the R and D or acquisition side to acquire new features potentially, Do you think that's a growth driver for RPA to expand the use case and thus the addressable market? Yeah, Absolutely. I mean, look, one of the things that we set out as a mission is that this digital worker should be as close to a human worker as it possibly can be. And this is what I say, the previous question about upgrades, not only do we want to banish that as anything associated with us, but we think that's something that can be banish the history as well. It should be a feature of the kind of technology world that we're completely fluent across this. And new features, new capabilities around the digital worker, make it even closer, making it more interoperable, making it more agile in terms of the way that it operates in teams, it swarms to tasks, interoperate with human beings, pass his tasks around an organization, all of those things are a part and parcel of the way that this market will mature, the reason why we're so optimistic about it and so enthusiastic about it is that we think that the model is right and we think that actually, Yammer, to large part, there's a lot of these technical questions of actually Yammer, not only in scope, but they're on the point of being fully mastered. And that's one of the reasons why we were capable of delivering the level of R and D output that we did last year. Thank you. That's very clear. And then I think just one last one from me. You mentioned just now in the slide 12 the wealth of asset that is available in Digital Exchange. So I'm just thinking, is there any point in time in the future that you're able to monetize it similar to, I guess, what Apple App Store is doing? Absolutely. And we kind of think that if you extrapolate what it is we're saying is coming into view that you get to a world that starts to look a little bit like that in the enterprise context. Lots of other things are associated with it, but yes, we see it as same as you. Got it. Thank you. Mr. Kingdon, there are no further questions queued at this time, sir. I would like turn the conference back over to yourself for any additional or closing remarks. No, thank you very much. Thank you very for everybody joining today and apologies if we had some technical issues in terms of the overall delivery. I hope everyone managed to hear us present loud and clear. And as always, available outside of this form, if some people have questions or things I'd like to follow-up with. Yes. Thank you very much, everyone.