The Directors believe that the Group has the following key strengths.
Leading management process automation software
The Group’s Workware+ platform has been developed over 25 years specifically for the complex needs of large enterprises with complex and often global back-offices. Workware+ was designed from the outset to cope with the significant variety of work types and service levels which exist within the enterprise back-office. Many competitor products were originally conceived to manage a specific niche of operations workload (such as telephone calls) or address different business needs (such as fraud prevention) and then subsequently applied to the back-office. The Directors believe that the specific design and broad applicability of Workware+ and its highly scalable architecture create a significant competitive advantage.
Deep domain expertise and proven operations management methodology
The management team at ActiveOps has been a leading authority in back-office operations management for over 25 years. This deep domain expertise and experience is captured in the Group’s AOM method, which in turn is embedded within the Workware+ software platform. The Directors believe that the proposition of MPA software which applies best practice operations management methods whilst enabling better data-led decisions is a significant advantage for the Group when competing with rival technology firms who are reliant on their customers to define the operations metrics and management processes used in each deployment. The Directors believe that the Group’s sector authority allows it to continually evolve the solutions in ways which are compelling to its user base.
Immediate quantifiable productivity gains and a broad range of long-term business benefits including acceleration of digital transformation
The Group’s products have a proven track record of delivering a quantifiable ROI for customers by identifying and making best use of capacity that would otherwise be poorly utilised. Further productivity gains are achieved by providing managers with insights which enable them to better motivate/manage staff performance and from reducing the time taken by leaders to execute key management processes. In the 78 deployments of ControliQ undertaken by ActiveOps in the three years to 31 December 2020, the average productivity gain recorded by customers was 15 per cent. Customers then have the choice of how best to utilise this additional capacity. Typically customers look to resolve a range of business issues, for example: to improve delivery of service level targets, reduce backlogs of work, absorb additional work volumes, invest in projects, reduce overtime and reduce costs.
Once embedded at the heart of a customer’s back-office operations, the Group’s solutions help deliver a broad range of additional long term improvements including: better compliance with regulation, risk reduction and greater employee engagement. The Group’s solutions also provide greater visibility and control over all aspects of the modern ‘blended’ workforce; humans (both in offices and working remotely); software robots (RPA); and BPO vendors. This visibility and control is a significant enabler for organisations operating with a dispersed workforce either as a chosen operating model or as a result of the Covid-19 pandemic. Customers with enterprise wide deployments are able to confidently make what were previously risky decisions about sharing resources and work across divisions of the enterprise. This capability was especially valued by the Group’s customers during the initial Covid-19 lock-down period when resource availability was reduced and work volumes fluctuated in unprecedented ways.
Differentiated proposition and market message
The Group built AOM and Workware+ with reference to well established academic models of motivation and human performance. The Group’s solutions promote the use of performance data in an open manner which treats employees with respect, focuses on outcomes not just inputs and motivates staff to achieve individual, team and organisational targets. These design principles are differentiated from competitors whose technology solutions are more focused on employee monitoring and measurement than on employee motivation and performance. This positioning is strongly aligned with modern views on effective human performance management as voiced by academic and analyst communities.
Diversified and long term blue-chip customer base and low churn rate
The Group serves large enterprise customers, predominantly in the banking, insurance and BPO sectors. It has built an installed base of approximately 80 customers (and over 100,000 individual users) across EMEA, North America, APAC, and India. The Group has low levels of customer concentration, with the largest customer representing 9 per cent. of SaaS revenue for FY20. Typically, the Group’s solutions become deeply embedded in its customers’ operating model, leading to low customer churn. During each of FY17 to FY20 customer churn was 2 per cent. or less. In the nine months to 31 December 2020, customer churn continues to be low (approximately 1 per cent.). The Group benefits from numerous long-standing customer relationships with 18 of the current 78 customers having used the Group’s solutions for more than 10 years.
Strong track record of new customer acquisition
The Group has invested in recent years in building its direct global sales team and has a strong track record of new customer wins. The Group added 13 new customers in the calendar year to 31 December 2020, including AIG, Standard Life, Morneau Shepell and Molina Healthcare, taking total enterprise customers to 78. The Directors have identified their primary target customers within the Group’s focus sectors (both potential and existing customers) and estimate these opportunities alone represent approximately £750 million of potential ARR.
Proven ability to grow revenue from existing customers
The Group has had demonstrable success in driving organic revenue growth from existing customers. Ten of the top 20 ARR producing customers during FY20 were also customers in FY16. Over this period, the ARR from this same group of customers doubled. In addition, in the nine months to 31 December 2020, the run rate ARR from this cohort has increased by a further 10 per cent. The Directors believe that clear, quantifiable ROI, ease of implementation and the Group’s ability to deliver visibility and control across large, but diverse operations, has been key to this growth. Recent new logo wins have large addressable employee bases, and as a result the Directors believe there is up to a £70 million ARR opportunity within the Group’s primary expansion targets.
Robust financial model with high levels of recurring revenue and cash generation
The Group has a robust commercial model with high levels of recurring revenue which provides good forward visibility of revenues and strong cash generation. In FY20, 79 per cent. of the Group’s revenues were recurring SaaS revenues, predominantly billed annually in advance. Recurring SaaS revenues represent an increasing proportion of the Group’s total revenues: 75 per cent. in FY19 and 70 per cent. in FY18. SaaS revenues are supplemented by T&I revenues (19 per cent. of Group revenues in FY20), typically recognised over the implementation period of between three and twelve weeks. The Group enjoys high gross margins, typical of a SaaS software business, and, having invested in recent years in its technology and sales infrastructure, has inherent operational leverage within its business model. In FY20, gross margin on SaaS revenues was 82 per cent. and 43.2 per cent. on T&I revenues.
The Group has a strong history of consistent cash generation. It typically receives cash upfront for its SaaS revenues and net cash flow inflows from operations (before tax) was £1.2 million in FY20. Following the disposal of the non-core products and customers of OpenConnect, the Group had a cash balance of £7 million as at 31 December 2020 with no debt.
Proven management team
The Group’s management team have extensive expertise alongside a proven ability to grow the Group’s business across customer verticals, new geographies and through successfully executed M&A. The average senior management tenure is seven years and incorporates a blend of long-standing operations management expertise, enterprise software sales experience, critical technical/specialist skills and corporate development experience. The senior management team remains firmly committed to the future growth of the business.