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Edited Transcript of PRSM.L earnings conference call or presentation 23-Jan-20 2:00pm GMT

Full Year 2019 Blue Prism Group PLC Earnings Call

St Helens Jan 28, 2020 (Thomson StreetEvents) -- Edited Transcript of Blue Prism Group PLC earnings conference call or presentation Thursday, January 23, 2020 at 2:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Conrad Jason Kingdon

Blue Prism Group plc - Executive Chairman

* Ijoma Maluza

Blue Prism Group plc - CFO & Director

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Conference Call Participants

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* John Peter King

BofA Merrill Lynch, Research Division - Research Analyst

* Julian Alexander Serafini

Jefferies LLC, Research Division - Equity Analyst

* Steven John Robertson

Canaccord Genuity Corp., Research Division - Analyst of Technology

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Presentation

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Operator [1]

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Hello, and welcome to the Blue Prism call to discuss the Full Year Results 2019. (Operator Instructions)

I would now like to hand the call over to Jason Kingdon, Executive Chairman; and Ijoma Maluza, CFO. Please go ahead, gentlemen.

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Conrad Jason Kingdon, Blue Prism Group plc - Executive Chairman [2]

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Thank you very much. Welcome, everybody. Pleased to introduce myself to my first Blue Prism results announcement and I'm particularly with such a great set of results that we're going to talk through. So if we go to the first slide, please. What I thought we'd do is very briefly pause at this slide, which I think is a really good kind of statement in terms of the progress of the business. So we'll -- I'll highlight a few things on here, then we'll go straight into the detail from Ijoma, and then we'll talk a little bit about some of the strategy of the business, some of the progress that we've made over the years, some of the details from customers and directions that we're going in.

But first of all, looking at this slide, so for -- I think the fourth year running we're the highest growing software company on the U.K. public market certainly against our peer group. I think you've got to go down to -- you've got to add the top 9 behind us to get even to our rate. So the 83% increase is a really strong testament in terms of what it is that we've done. Once again, this emphasis on license revenue and us understanding, when we talk about license, that is literally that. We sell the right to use our software. And so again, the fact that we've got those sorts of levels in terms of the business, kinds of give you an indication in terms of the strength of what Blue Prism is about.

71% growth in MRR, again, very, very solid number. Another indication behind that is 73% increase in terms of our overall customers. So in terms of revenue itself and kind of our other measures up there, I'll let Ijoma talk to more fully, and then, as I say, I think it would be good to talk about the business in the context of what's happened over the last few years. And in terms of the way that this market is starting to develop. So on that, I'm going to hand over to Ijoma, and then once we've gone through the details, I will come back with these kind of wider questions.

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Ijoma Maluza, Blue Prism Group plc - CFO & Director [3]

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All right. Thank you, Jason. Good morning, good afternoon, and good evening, depending on where you are. I'm delighted to be here to share with you another strong financial performance, built on continued growth in new customers, upsells and a high level of renewals. The numbers for the year ending 31st of October 2019, are based on IFRS 15 accounting standard, whilst the numbers for 2018 and 2017 are based on IAS 18.

As Jason mentioned, we finished the year with just over GBP 100 million of revenues, which is a remarkable achievement, having IPOed with less than GBP 10 million of revenues 3 years ago, a compounded annual growth rate of 120%. For 2019, we've seen strong growth across all 3 of our main regions. Growth was particularly strong in the second half of the year across each of those 3 main regions. Americas region has grown the fastest with revenues up 92% and now accounts for 40% of group revenues. Within Americas region, we include the United States, Canada and Latin America, and we saw particularly strong growth in the U.S. and Canada.

EMEA continued to perform strongly despite its relative maturity compared to the Americas. Revenues grew 77% to GBP 47.5 million and accounts for 47% of group revenues. This was driven by strong performance in the U.K., the DACH region, the Nordics and Spain, in particular. AsiaPac, which includes Japan, also grew by 77% to GBP 12.6 million. Australia was a key driver of revenue growth in the region followed by Japan, Singapore and New Zealand. We continue to believe that APAC or AsiaPac region represents a significant opportunity for the group. And we started to see very encouraging progress, particularly in Japan. The majority of our revenues, as you know, are derived from long-term recurring license fees and support -- licenses fees and support revenues, which provides strong visibility for the future.

Looking at the operating cost base following a period of significant investment across the group, but in particular, in sales and marketing, we expect a material moderation in the investment growth in the cost base as we move into 2020. The increase in 2020 will be as a result of the full year impact of investments that we've made in 2019 rather than significant new investments.

For sales, the main growth driver was growth in the sales force, and -- which grew from around 250 people in the team to just under 450 by the end of FY '19. The main driver of growth in marketing was events, such as Blue Prism World as well as investments in areas such as digital marketing. Following these investments, we believe we have a strong sales force achieving tenure as we move into 2020, which, combined with investments in lead generation and customer success, should drive growth going forward. Over the past 24 months, we've trebled our investment in research and development.

This investment has gone into pure research with the establishment of our research team towards the end of 2018, as well as investing in the core engineering and development teams we've also invested in the Digital Exchange and Technology Alliance partnerships (sic) [Program], TAP, to drive our unique product differentiation. Going forward, we expect to continue to grow our R&D spending to maintain and enhance for our differentiation. We also see strong opportunity in leveraging the investments that we've made in professional services to accelerate the success that our customers derive from our connected RPA. In 2019, we launched the Success Accelerator, which together with our Robotic Operating Model, are aimed at driving success and deeper relationships between Blue Prism and its customers.

Finally, G&A, this comprises all the normal general and administration costs, such as finance, legal, HR, IT and facilities. As the company has grown the number of employees and customers, we've invested in people, processes and systems to build a strong back-office infrastructure, which supports our growth. We believe that we've built a strong enough base, capable of supporting a much larger business.

Moving on to the operating cash flow. The operating cash flow for 2019 was GBP 63.8 million, including capitalized spend. And this reflects peak investment for the business ahead of further expected growth. As shown on the previous slide, we have invested across the business with particular emphasis in customer acquisition, retention and upselling.

For 2020, as outlined previously, the growth in cost base should moderate after the full year impact of the 2019 investment. Significantly lower levels of hiring should reduce both the growth in headcount cost base as well as lower the people-related costs, such as recruitment and so on. For cash generation, we expect the impact of increasing billing to start coming through as the year progresses. Overall, we expect net cash outflow for the year, but at significantly lower level compared to 2019, and broadly neutral in the second half of 2020.

Moving to the slide on new customer additions. We are growing our revenues from 3 key drivers: winning new customers, upselling into those customers, and retaining existing customers. A combination of these 3 drivers is reflected in the customer cohort analysis. I'll cover new customer additions on this slide, followed by upsells and renewals before concluding with a cohort analysis chart. We have continued to deliver strong customer growth in the year, with customer base growing by 73%, as Jason mentioned. Excluding Thoughtonomy, we added a net number of over 50 customers per month on average and acquired 76 direct customers with the acquisition of Thoughtonomy.

The new customers added in the year contributed around 28% of the increase in the annual recurring revenues in the year. We have also continued to increase penetration of large enterprise accounts with the Forbes Global 2000 companies as a proxy of those accounts. But clearly, there are other very large companies which are not included in the Forbes Global 2000. Around 478 of the Forbes Global 2000 companies are now our customers, and we added about 37 customers in the past 6 months within that cohort. New logos not only provide a material contribution to our in year revenues but more importantly, they provide a strong basis for future growth as our strategy is to deepen these customer relationships once they've been established. As we said before, customers usually start small with an average number of digital workers of 4 to 5.

However, subsequent upsells are typically significantly larger than the initial deals, which brings me to the next slide. Upsells continue to represent the largest opportunity for the business. The number of upsell deals increased by 56% year-on-year, and the number of customers upselling grew by 73% from 310 in 2018 to 536 in 2019. We effectively upsold into 50% of the customers that we had at the beginning of 2019. Upsells are important for 2 main reasons: First, they are typically larger than the initial deals, as I said before, so contribute more revenue per deal. On average, upsell deals are 2 to 3x larger than new logo deals in total contract value.

As a result, in 2019, upsells made up over 70% of the annual recurring revenue growth in the year; second, upsells strengthen our long-term relationship with customers, significantly increasing the likelihood of renewals, and therefore, the lifetime value of the customer. Our renewal metrics are covered on the next slide. Our gross and net retention rates continue to be excellent between full year 2018 and full year 2019, we added GBP 3.7 million in monthly recurring revenue in Blue Prism, excluding Thoughtonomy.

During the same period, we lost only GBP 40,000 of monthly recurring revenue. As a percent of the opening MRR for the year, this represents less than 1% churn of MRR. Strong renewal metrics are the key driver of the high gross and net retention rates. In 2018, as I said, we lost 40 customers, but these were typically a very small 1-year contracts, contributing a small amount of MRR. The 99% gross dollar-pound retention rates provides a strong platform from which to grow the business through new logos and upsells. The net retention percent of 143% in 2018 demonstrates this.

Looking forward, as we've highlighted before, we expect a relatively high churn for small customers, particularly those with very low digital workers -- digital work accounts, and on 1-year deals. However, we expect this to be offset by upsells into this cohort of customers. Summarizing this on our cohort analysis, this brings together the impact of new logos, renewals and upsells. This chart shows the total revenue growth, inclusive of losses for the group of customers that joined Blue Prism in each respective half year. The chart shows that we have consistently grown each cohort. The growth has ranged from 1.2x in the -- therefore, customer -- the customer cohort in the first half of 2019 to 6.3x for the H2 2016 cohort. And this is driven by high retention rates and upsells.

In summary, I would say we've delivered excellent revenue growth across all 3 main regions. We've continued to strengthen existing customer relationships, as demonstrated by a high retention rate of 143%. And finally, investments made during 2019 will drive growth and cash generation in 2020 and beyond. I'll now hand over -- hand back to Jason.

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Conrad Jason Kingdon, Blue Prism Group plc - Executive Chairman [4]

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Thanks, Ijoma. Okay. So after that, kind of, quick fly through in terms of the details of results, now I want to talk a little bit wider about things that we've been involved with and things that are taking place. So I start with just a brief reminder of what it is that we do and what we're about. Our vision is a Digital Worker. And we don't see that as a piece of marketing. That's something that we're attempting to create as a piece of software. And it's a piece of software that we're trying to get as close to a human worker as we possibly can and even to exceed a human worker in certain aspects.

And so from a technical perspective, we're trying to get that same flexibility that you have with the human worker, the same ability, the interoperability in terms of the way that a person can interact with any piece of technology. And part of that -- it's not just any piece of technology that currently exists. I think this is one of the kind of mind-blowing aspects of this, is any technology that has yet to be created. So even technology that's not published yet, we are saying that this is a technology that can be trained to use it just in the same way that you would use -- you would get a human worker to learn a new skill and take on a new capability. So that's the mission of the company and that's what it is that we're driving towards. Then if you look a little bit in terms of well, we've heard about this Robotic Process Automation, it's RPA sector, it's come alive, it's started to take place over the last few years.

And there's a whole group of people in there that say that they do it. Well, Blue Prism is very different. And we've maintained this for a while. We've said that we're aimed at a slightly different place than maybe our principal competitors and maybe a different place than some of the other technology that sort of kicks around the area. So it's worth just itemizing some of that. First of all, we're enterprise-grade. And so we're not about introducing a productivity tool, a simple means to allow someone to be slightly more effective at their job. What we're saying is that this is the basis of a digital workforce. We think it's the new modern digital workforce that's turning out. We think it is the same kind of impact that robotics had in manufacturing towards the end of the 20th century.

We all know our mental image in terms of, if you look at manufacturing now, what you expect to see the way that those assembly lines are populated by robots, either side and whatever is being manufactured, it gets constructed. And what we're saying is, this is the same revolution, but now within the service industry. There's now technology that's capable of impacting and intersecting that work in exactly the same way that that revolution took place in manufacturing. And for those of you who have studied this and looked at it, there's something like a 50x productivity increase estimated over manufacturing tools the year -- end of the year, 20th century. And we think that the world is now on that kind of journey around a service work.

And Blue Prism is squarely aimed at this enterprise scale of this technology. So there's something else that's different about Blue Prism compared to other products in this space. Each Blue Prism robot is a full stack piece of software. Now sometimes, we see these -- you see this phrase kicking around, like bots and scripts. And we're kind of a little bit offended at those kind of labels because it diminishes the depth of the technology that actually underpins this. It's not simple technology. It's not straightforward to build these things. And if you actually look at what Blue Prism means by a robot, as I say, it's an end-to-end piece of software. It's a comprehensive unit of technology. And for those of you, again, kind of familiar with this space, there's aspects of the kind of multi-agent processing model that actually sits within this. And so it's a sophisticated piece of technology that's enabling things that we're doing.

I think a third area that is really useful to understand about Blue Prism, again, versus some of the other kinds of flavors of this technology, and we talk about enterprise collaboration. And what that means is that ours is a platform. It's a shared platform across the whole organization. And when you train a robot with a new skill, a new capability, a new task that it can complete, you publish that to a central resource within Blue Prism.

And it means that for our global organizations, your team in Singapore, they train a robot to do some account opening work and some administrative work that gets published to the platform it means that the team in London the next day, as soon as that thing is published, all of the aspects of that new skill and that capability become available to them. And so you get this collaborative effect across your organization, the way that everybody is working on building these automation assets. And obviously, once you've got a situation like that, you've got a compounding in terms of the way that these things are being built.

Two other areas that I think are also worth kind of highlighting is differences about Blue Prism is this kind of self-organizing aspect of the technology. And the fact that the technology is a full stack piece of software, is attempting to solve operational issues. And so the self-organizing basically means that a robot swarm to task, they're driven from a central to-do list across the organization, they see the timings associated with those, the requirements in terms of fulfilling those tasks. If they see that tasks are behind schedule, more and more robots are swarmed to that specific need in order to bring it back on track. And so you get this self-organizing characteristic over the way that work takes place.

And then you've also got within the robot itself if there are kind of operational changes, differences in the digital landscape that is engaged with, it will make adjustments to the way that it's working and what it does in order to solve those problem. So it's very dynamic, very fluid, and it's very robust in terms of what it is that the core technology is attempting to do. I think another area that we would also kind of highlight about kind of the category itself is, first of all, this idea of democratizing technology. And what we mean by that isn't the interoperability, isn't the fact that these things work with anything else. That's kind of one level of democracy.

Actually, the democratization that we're talking about here is that this is a technology that's aimed at business users. And so -- as you say, "Well, what's -- so what? It's aimed at business users." The so what is that what we're doing is we are increasing the capacity for organizations to be able to build automations. What we're saying is that a general business user can intuitively interact with these digital workers and put them to use. And so we've vastly increased the number of people that can actually interact with this kind of sophisticated technology. It has a whole new catchment that are being brought into the way that these technologies can be built, the kinds of initiatives that an organization can drive and the scale in terms of the way that an organization can take on tasks.

I think that the other thing that's worth emphasizing around this -- the aspect of inter-operation is the way that -- so not only are you bringing-in this new catchment of new users, not only are you collaborating across your organization but you're also introducing a technology that at its very core inter-operates with other capabilities. And so you've got this massively widened landscape, hinterland of products and digital assets that you can put to use.

And a final part that I would say around the features of this is that not only is this a product that makes use of AI in terms of what it is that it does and how it actually operates, we also think that it's the absolute natural on-ramps for deep AI across the enterprise. And so as we march into -- as we kind of get further into the consumption of AI, the development of AI, the relevance of AI to business, we think that Blue Prism's version of RPA is the natural way that you start to bring this into your organization.

Taking everything I've just said, you kind of say, "Wow, this stuff really must have changed the way organizations operate." And this is something that's been borne out by academic study. So London School of Economics cite this technology as the highest ROI of any technology that they've ever studied.

And again, I mean, I think it's just -- it's an amazing accolade in terms of what it is that we're talking to. And it kind of brings alive some of the claims that I've just been going through, associated with what it is that we do. And so if you take that and you say, well, okay, let's say this is correct, let's imagine that we are on the cusp, that the digital worker has now just turned up to work, what's the outcome of that? What does that look like?

Well, at one level, we think that the future is going to push towards an organization that looks something like 1/3 people, 1/3 core IT and 1/3 digital workers. We see digital workers as being very, very different from core IT. Digital workers operate and interoperate with the core infrastructure, they orchestrate that infrastructure. And they provide fulfillment across that infrastructure. Very different from what core IT does and distinct from what people will do in the future as well. We think people will be involved with the design of work, the design of services, the kind of ideas in terms of how they scale the business, what kind of services that they're trying to bring alive to their clients.

And so if we take this and we say, okay, all right, well, if these are the characteristics, what does that look like when it kind of hits the real world. And this takes on to something that's happened over the last 4 years. So this -- I think it's an amazing kind of diagram. And it basically says, this is a product category that didn't even exist 5 years ago. Okay. So 5 years ago, this category didn't exist. I just trotted through some of the characteristics associated with the technology and what it is that it does. And I think you would kind of say, wow, these are really big claims you guys are making. If anything, that you're saying there is true, it will be very interesting to see what kind of impact that's had on the real world. Well, here it is. And the last 4 years, we've gone from an organization that did something like GBP 6 million in revenue 4 years ago to over GBP 100 million in revenue that we're reporting this year.

More than that, as I mentioned on the previous slide, we sell licenses, these robot wages. I mean, these are rentals of our product against individuals using this technology. And this is what we've seen over the last 4 years. So we've got over 20% of the Forbes Global 2000 already have taken on this technology. As you can see, it's kind of the who's who in terms of the brands that we're dealing with. Over that 4-year period, we're selling product in 130 countries, 130 countries in terms of where this technology is being consumed in over 70 commercial sectors.

And when you look at the brands on this chart, we try to line them up roughly in terms of, I say, very roughly, in terms of the geographies and territories in terms of where they are. But if you look at these brands, and if you talk to any enterprise sales organization, I mean, you'd just give teeth to have relationships with these organizations. They don't buy technology lightly. They have procurement organizations which are trained in every form of procurement kung fu that you could imagine.

They don't take on new technologies on a whim. These guys, they study, they pick and they absolutely are disciplined in terms of the way that new technologies get into their organization. And for a technology that didn't even exist, a sector that wasn't even named 5 years ago for this kind of outcome, this is where you kind of say, wow, some of those claims that he's talking about on a previous slide, this is where you start to see it come to life.

So we think that this is a message that's starting to get over. We're seeing these early adopters, these very agile organizations and very thoughtful organizations starting to adopt this technology at scale. One of the things that we saw last year, in our view, is that we saw a lot more discerning audience starting to arrive. People are understanding the difference between this and maybe what an accelerator is on a desktop. People understand that maybe this is something that is absolutely critical to the business, something that's going to be strategic in terms of what it is that they do in the future.

And we started to see customers raising their expectations in terms of the kinds of impact that they want from this technology. So we started to see our first $1 billion-plus impact that people are putting down, saying, well, we want to use this technology now. And there's kind of $1 billion worth of impact that we think it can have on our business in terms of the agility, in terms of things that we can take on, core automation, imagination around services and the way it is that we manage our own customers.

In terms of a few other things that are kind of worth talking through in terms of last year. We've also -- as Ijoma said, we're putting more emphasis in terms of our own R&D spend. I think that just on the previous chart, you get a sense of the enthusiasm in terms of the way that this product category has really been embraced by the world. Everybody understands what it is that it does. Everybody understands that in terms of the kind of the outsized paybacks that you get from this technology.

And it's not finished. We know that and our audience know that. And there are things in terms of where we want to take this and things that we want to add. And if you take that human worker analogy and you kind of stretch it and you kind of say, where does it go? There's all kinds of skills and capabilities that we want to add to these robots, the depth in terms of what it is that they can do and the way that you manage these new digital workforces in your organization. So a couple of things worth highlighting in terms of what we did last year.

First of all, we acquired Thoughtonomy and a headline reason for that was that we got the world leader in terms of cloud-based RPA. And for those of you that have been following this for a while, you know that RPA, and particularly kind of Blue Prism RPA, really started to get traction when people compared us to business process outsourcing. And the kind of slogan was, is why outsource to some sort of rural location across the planet when you can outsource to a robot in the cloud.

And there are organizations that took that very seriously. Terry Walby set up Thoughtonomy. He can absolutely see in terms of the way that the direction this technology was taking the world. He put together the world's most comprehensive cloud-based version of RPA, principally based on Blue Prism. And so we saw that as a very, very natural extension of what it is that we wanted to do. We saw as an extension in terms of the way that we could take our product out to market. And it was also something that our enterprise clients were also very keen on in terms of provisioning the robots, faster access to them, faster deployment times. So that was headline reason number one. But there are other reasons that we thought Thoughtonomy was a wonderful acquisition. And that was around the core technology itself. And there's 3 kind of main components that we would highlight.

Hub, which is an enhanced management information. So one of the things that when people start using robots at scale, they want to know details about what the robots are doing, the throughput of work that they're completing, some of the dynamic interactions that are taking place across their own infrastructure. And just watching the traffic flow, if you will, in terms of the completion of processes. And Thoughtonomy put a particularly good one of this together in terms of the way that the robots could be managed and watched and there's readings in terms of productivity. And so again, it was an excellent component that we're now adopting across the whole product set.

The second is a product that we call Interact. And Interact is something where I think there are a lot of people that said kind of making this distinction that Blue Prism is kind of back-office and we do lights out automation, maybe some of the core automations within an organization. But there was another world that kind of dealt with a desktop. And the reality is far from that. We've always thought of ourselves as a Digital Worker and a Digital Worker had to interoperate with humans. And what the guys at Thoughtonomy have done, is basically they'd enhanced that, they'd enhanced the way that that product can interoperate with individuals on their desktop, but retain the service side security that around the collaborative platform that I was outlining earlier on.

So again, we think this is a great addition to what it is that we do, and it's something that all our customers are going to enjoy across, whichever flavor or product they're using. A third component is IADA. And this is an intelligent -- uses machine learning, machine optimization for overall robot control. Enhances some of the dynamic nature in terms of the way that multiple robots can be used, the prioritization, the dynamic rescheduling of them, the dynamic reaction against activity that's taking place within an organization.

And maybe a way of kind of imagining this is that if you imagine your kind of core IT systems are a bit like the infrastructure in a city, like the roads, the traffic lights, the buildings, and the robots are kind of the cars or the delivery vehicles that are driving around on that infrastructure. And sometimes you get blockages in a digital world. The network goes out, a system fails, some system becomes unavailable or too congested. And what you want is the robots to dynamically adjust to that.

And so in this case, in our kind of city analogy, it's like there's -- a road's been blocked off and say, okay, right, fine, we drive around and we get to the same location, but through a different route. And all of that delegation being pushed down into the infrastructure as part of the overall control. So again, we see that as something as a natural enhancement in terms of where Blue Prism is.

Then there's a second area I wanted to highlight. And this is the Digital Exchange or the DX as sometimes it's called. And this isn't Thoughtonomy. This is something that we've been -- are working on as a product core at Blue Prism. And we go back to this idea of a Digital Worker. And the idea that, well, we want this digital worker basically to have all the skills it could possibly have, have access to all the skills that are available out there. And to the extent, once you start looking at this -- the ability to interoperate with other capabilities you kind of naturally get to this idea of an exchange, a digital exchange of assets capabilities know-how that can be dynamically used by robots. And so this is something we put together.

We started to get hundreds of assets associated with this exchange. We're interoperating with our TAP technology partners. Again, I think something that's very, very interesting about the RPA revolution and what Blue Prism is attempting to do in it, and that is its interoperability with other organizations. And if you take the kind of the AI mission that a lot of us are working against, there's no possible way that Blue Prism on its own, is going to kind of deal with the overall demand in terms of really getting artificial intelligence fulfilled to its top level. You take our R&D effort and it's -- it's whatever it is that we could afford to do. But if you take this idea of interoperability, you start to link together all of these different R&D elements. All these different kind of capabilities from different organizations, bringing -- being brought together by the robot itself.

And so all the natural language processing, machine learning, optical character recognition, image recognition and sentiment analysis, all of these kinds of capabilities being pushed through this exchange. And so if you look at the exchange, you've kind of got these digital assets that are being made available within the exchange itself. They become either things that are self-serve, put there by our partners, put there by people in their own organization. They build a solution. It becomes part of the overall exchange and then can be used by others down the way. And it becomes a resource that these robots can basically access these new capabilities in terms of dealing with third party systems, new kinds of capabilities.

And if you kind of see the implication of that, we see our technology application number of partners. And you get this kind of effect. And I call this slide kind of digital singularity. And so for those of you that have been sort of keen on the kind of AI world, this is a notion of the singularity where you get machines actually operating at the same kind of intelligence as human beings. So we're certainly not at that, but this idea that all of this technology now becomes available in a very dynamic way to our end clients. This is something that's never existed before. It's not been possible before, and that's something that's unlocked by this notion of interoperability and something that actually is designed to interoperate with all of these other technologies.

And to give you a flavor of the power of this, my quick estimate in terms of what this slide represents in terms of R&D effort, there's probably about $60 billion worth of R&D effort that we're looking at on that chart there. So that's $60 billion worth of R&D effort that now becomes available, becomes prismed, if you will, towards our end clients. We're saying you can access these capabilities as they become available, as a great new technology becomes available in one of these partners, the robots can make access and make use of it.

And we have clients that are using some of the machine learning capabilities, language analysis technologies from Google, they're interoperating with technologies from IBM. And they're using technologies from Microsoft as well. All of those becoming available to Blue Prism end clients. And this is something that we think is still very early days. We still think that people are still understanding just how powerful this is. It's something that we're working with our top-tier clients to understand in terms of the way that they can start to really make use of this and accelerate their own supply of technology into their organizations. And we think that it's something that is going to be increasingly impactful over the coming years.

So just to finish off. I think that to me, what I would remind people of is -- back to this journey, 4 years ago, GBP 6 million. Here, we are now we're looking at a GBP 100 million plus in terms of commitments.

We're talking about long-term commitments to our product as well. And so again, how -- people want to look at ARRs and MRRs you can, but ultimately, this is an enterprise product that actually people buy on a long-term basis. Over that 4-year period, you've seen over 20% of the Global 2000 say they want to take this technology seriously. And some of the analysis that Ijoma gave you earlier on, some of them are taking it very, very seriously indeed. So I think that you take all of this together, you look at the momentum in terms of the direction that this is going in, you look at the kind of business cases that people are trying to drive with this product category.

And we believe that we're at the very beginning of this. We think that the journey is only just getting underway. We don't think it's necessarily a technology that's fully understood yet. We don't think that there's necessarily people out there that are explaining it to the depth that they could be. But we are starting to see signs. We are certainly seeing signs in our early adopter advanced customers who are really starting to see how you use this technology, how you use it at scale and how it is that you start to disrupt the way that you do business within your own context. So on that, I'd like to finish up and open for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions)

We will take our first question from Julian Serafini from Jefferies.

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Julian Alexander Serafini, Jefferies LLC, Research Division - Equity Analyst [2]

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So the first question I'd like to ask is on the investments going forward, so I think, Ijoma, you had talked about reaching breakeven on a cash basis, right, in the second half of this fiscal year. But I'm curious about longer-term in fiscal '21 and beyond. I mean, should we be expecting more leverage in the business going forward? Or should we be expecting that you just keep reinvesting in the business, given that you have this huge market opportunity in front of you? I mean, what's the right way for us to think about that going forward?

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Ijoma Maluza, Blue Prism Group plc - CFO & Director [3]

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Yes. I mean, I think sort of the starting point is that our view is we should -- we've invested significant amounts over the last 2 years and when you look at across the business from our sales function to marketing to some of the sort of back-office functions, we've got the capability to deliver a much higher sort of revenue base than what we're currently delivering as people become more tenured within the business.

In terms of investments in FY'21 and so on, we haven't guided to specific numbers. What we do is every year, the Board looks at where the market is and how much investments we should make, depending on what we see on a 2- to 3-year term, and we make decisions on that basis. But I think the sort of the important thing from my perspective is that we want to be looking at sort of the unit economics of the business. It's -- we can see a path to both cash and profitability within the next sort of 2 to 3 years.

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Julian Alexander Serafini, Jefferies LLC, Research Division - Equity Analyst [4]

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Okay, that makes sense. And then if I may, just one follow-up, too. On the sales and marketing investments that you just mentioned, right, I mean, it'd be helpful to get a sense right now like what portion of your deals are from your direct sales force versus your partner channels? It'd be interesting to kind of get a sense of how that's evolving. Because I believe at one point in time, you were much more channel-driven, right? So it'd be -- or partner-driven I should say, so it'd be helpful to get a sense of how that may have changed recently.

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Ijoma Maluza, Blue Prism Group plc - CFO & Director [5]

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I mean, the -- over the last sort of 6 months, there hasn't been sort of significant changes in terms of where our business is being generated from. So the majority of our business continues to be derived from the sort of reseller and partner sort of model. There's a small proportion of our revenues that comes from direct sales to end customers. I think what we've done is we've invested in our ability to have conversations side by side with our partners as we go into those customers, rather than completely just relying on our own partners in the sort of -- in the sales cycle.

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Conrad Jason Kingdon, Blue Prism Group plc - Executive Chairman [6]

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Yes. And actually, I'll just add to that as well. I mean, it's important that we're not disintermediated from our customers -- the advanced customers absolute source of ideas in terms of direction and things that we should be doing. So I think that part of what we've been doing is, is to improve the kind of intimacy in terms of our contact with our customers. But absolutely, we are a partner-centric business, both in terms of other technologies and in terms of services, and there's no movement away from that.

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Operator [7]

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(Operator Instructions) We will now take our next question from John King, Bank of America.

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John Peter King, BofA Merrill Lynch, Research Division - Research Analyst [8]

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Yes, so just thanks for the data on the cohorts. I was wondering if you could just take -- just perhaps give us some more color around how the recent cohorts are looking at the same stage of their evolution compared to some of those older cohorts who have obviously been very, very successful in terms of the amount of times you managed to upsell. Are they performing at the same level? Is there any deterioration, or improvement even, in how that upselling is trending at the same point in the evolution of the customer? That's the first question.

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Ijoma Maluza, Blue Prism Group plc - CFO & Director [9]

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So I'll go first. I mean, the -- we haven't seen any sort of material changes in terms of the behavior of the customers. I mean, I think what I would say is different is there's probably a wider dispersion in terms of types of customers that we have as a function of just having a lot more customers than we did, say, 2, 3 years ago, but also the change in some of the sort of contract -- contracting terms that we introduced in Q4 2018, where we have 1 digital, 1-year sort of cohorts or customers within certain cohorts. So that sort of introduces a wider sort of dispersion in terms of the customers. But in terms of the sort of the top 10%, the top 20% of customers within each of the cohorts, I haven't seen any sort of change in behaviors when it comes to upselling.

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John Peter King, BofA Merrill Lynch, Research Division - Research Analyst [10]

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Okay. And then just if we think about capital allocation and investment plans, obviously, you've talked about profitability. But obviously, the market opportunity still seems pretty big. You're growing very nicely. And obviously, a year ago, the conclusion more or less was, well, we should go for it, we should hire more salespeople to address that demand. Is there an argument that says, perhaps a different share price, but that you might consider doing that again, doubling down since it seems like that has paid off? Or do you see that the market, I guess, at least maybe the competitive landscape as well, means that that feels unlikely at this stage? And I've got one final follow-up, if I can, after that.

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Conrad Jason Kingdon, Blue Prism Group plc - Executive Chairman [11]

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Okay. Well, I mean, I'll jump in on that one. And I think that ultimately, that's a decision for all of us as stakeholders in the business. There's absolutely no doubt in our mind in terms of the scale of this market, the opportunity is there. We've been saying that for quite some time.

We think all the evidence is coming back and I mean what more evidence would you need? I think that the point that Ijoma just made, we did take on significant investment early last year and the end of the previous year over this 4-year period. We've also gone from 60 people to over 1,000 people. And so that's a decent amount of investment in its own context. And so bedding that down, getting it to work, aligning it, putting the structures in place allow us to operate on a global scale now in terms of the way that we want to. There is some work to do with that.

So for the moment, we're quite content. And then I think that we start to look at the stakeholders overall in terms of saying, "Okay, look, once we've got what we feel like it looks like real consensus in terms of we're all on the same page. We all know the scale of opportunities available here and we should really be chasing it down" then I think that's something that we revisit once we're in that kind of territory.

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John Peter King, BofA Merrill Lynch, Research Division - Research Analyst [12]

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That's clear. And probably as a final follow-up for you, Jason, again. So obviously, we've seen a little bit of change in the management layer obviously, with Alastair changing his role. Again, at this point in time, would you envisage further investment in the kind of senior management layer? Or what -- I guess, yes, could you speak to that?

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Conrad Jason Kingdon, Blue Prism Group plc - Executive Chairman [13]

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Yes. I mean, I think the quick answer is, yes. And I mean, it's all the natural functions of an organization, going through the gears and going through the gears at a pretty rapid pace as well. And -- so I mean, I think that you'd expect that -- you guys would be expecting us to be doing that and being ahead of it. And there are different demands associated with them in different stages of the business.

So there are a few areas that we want to mature and bring on. There's things that we want to invest in. One of the things that we're talking about internally here is that an organization like this hasn't really existed before, not certainly with the level of outward collaboration and cooperation that we have with other organizations, the level of innovation that we're seeing across our own technology that's kind of emerging from many different places. And to the extent that we're still figuring that out in terms of saying, "wow, how do we make best use of this? How do we make it best use in terms of the way that we make it accessible to our customers and to our partners?"

And so yes, those are things that will get added to and yes, over time, there will be a -- things added, things changed and adjustments made.

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Operator [14]

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(Operator Instructions) We will now take our next question from Steven Robertson from Canaccord.

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Steven John Robertson, Canaccord Genuity Corp., Research Division - Analyst of Technology [15]

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I have 2 really. The first one is the impact of IFRS 15 in the year just gone was, I think, plus 20 at the operating loss level. Now as these contract assets that you've capitalized unwind in the current year, then that obviously will go into the P&L. But as you make more sales, you'll have more contract assets to put back into the balance sheet. I'm just wondering, in the sort of net figure, if I was to multiply the plus 20 from last year in -- by the increase in expected sales this year, would that give me the sort of delta of the IFRS 15 impact in the current year? Or is it more complicated than that? And the second question is on capitalization ...

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Ijoma Maluza, Blue Prism Group plc - CFO & Director [16]

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Yes. So I mean, I think it's slightly more complicated than that because there are sort of -- there are broadly sort of 3 things that have an impact on IFRS 15 on that plus 21 is revenues. So the -- so the performance obligations that we have, one of them we recognize revenues upfront. It's a small proportion of the 3 performance obligations that we recognize a small amount of revenues upfront.

And then the second, which is really kind of the big impact is around commissions that we pay our salespeople. So historically, we've been conservative in the way that we've treated those in the P&L by expensing commissions upfront. But as a result of IFRS 16, we spread that -- those commissions in line with the length of the contractual term of the underlying deal. And then the final one is because one of the performance obligations is upgrades of the products that customers have the right to. So we capitalize, say, an amount of R&D. And that gets amortized as well across over time, 18 months is -- up to 18 months is the period of time that we -- sort of we depreciate the capitalized R&D as a result of the upgrade performance condition. I think the easiest way, Steven, is for perhaps you sort of get in touch with us and we sort of take that offline and we could guide you through the sort of the modeling of it, rather than going into detail here.

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Steven John Robertson, Canaccord Genuity Corp., Research Division - Analyst of Technology [17]

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Sure. I appreciate that. I think you've already answered my second question on capitalization of R&D. I noticed you capitalized a bit more last year than you did the year before. I just wondered what specific project it was if I could ask that question as well?

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Ijoma Maluza, Blue Prism Group plc - CFO & Director [18]

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So the -- I mean, there are various projects. I mean, we have -- as I was saying in my part of the presentation, we're investing across the whole R&D. So clearly, we don't capitalize research, but the development part of R&D around -- for our development, things like Decipher, which was on Jason's presentation, those things are things that we're sort of -- we're capitalizing.

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Operator [19]

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That concludes today's question-and-answer session. I would now like to hand back the conference back to you, the host.

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Conrad Jason Kingdon, Blue Prism Group plc - Executive Chairman [20]

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All right. Thank you very much, everybody. Thanks for the questions. And if there are any things that people want to follow-up with afterwards, by all means, get in touch and we've got to deal with them as specific questions. Otherwise, thank you very much, and look forward to seeing you on the next one. Thanks.

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Operator [21]

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This concludes today's conference call. Thank you for your participation. You may now disconnect.