Activeops (LSE:AOM) — Investor Presentation

0:01 Good afternoon, and welcome to the ACTIVEOPS PLC investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time by the Q and A tab situated in the right hand corner of your screen. Just simply type in your questions and press send. The company may not be in a position to answer every question it receives in the meeting itself. However, the company will review all questions submitted today and publish responses where it is appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to Richard Jeffrey, CEO. Good afternoon to you, sir.

0:31 Good afternoon, and welcome, and, hello to everyone who's first time they've met ACTIVEOPS. In the room with me today, I have, my finance director, Ken Smith, and also, happily, my new finance director, Emma Sourheis. Emma was previously with ACTIVEOPS before taking a short short stint as a of FD and and another company, but she's coming back in to to pick up the mantle and, has the benefit of all the all the prior knowledge of having taken us through the IPO. So, welcome, Emma. In terms of the presentation, what I want to do is take you through a bit of a overview of the company for those of you who may not have come across us before, and then give you the main highlights of the of the results of the half year. Ken will then pick up some more detail on that before I come back with the outlook and, in particular, sort of strategy and how we're going to market around our products and our marketing, before essentially finishing off with a q and a session there.

1:23 Please do put questions on the poll, and we look forward to answering them towards the end of the presentation. So in terms of ACTIVEOPS then, we're a SaaS enterprise software company. Our revenues are are very sticky because we're we we charge annually in advance, which also drives a lot of benefits in terms of our cash flow. We serve financial services organizations with large numbers of people in their administrative sort of functions, and the problem we solve is essentially one of optimization of capacity. They have a lot of work, we have a lot of people, but they're all doing different things at different times, and that's a complex problem to solve. And ACTIVEOPS software enables them, first of all, to get a grip over that, but much more importantly, they it's a it supports the decision intelligence. It enables organizations, if you like, at the strategic right down to the operational level to make better choices, and better choices means higher productivity, but it means a range of outcomes, some of which are illustrated on the screen here.

2:19 You know, it's not just about creating that capacity, it's the control over that work to then bring about the change in in organizations you you'd like to achieve. So on the screen, you've got improvements in service level, you've got reductions in overtime, you've got improvement in service experience, so net promoter store, and and so on through. So so a lot of things that come about because essentially organizations are both fitter and more in control over their work and resources. And that immediately starts, I think, to signal why at the moment we're seeing a real relevance to the, if you like, the priorities of organizations, which, to be honest, the mood music in the industry is all about improving you like sweating the assets. It's doing more with what they have. It's getting better return on those investments in technology. It's accelerating their change programs, all of which are impacted if operations are not in control. So So a very, very powerful, particular message, which I'll I'll return to.

3:13 To give you some idea of the customer base, there's some brands on the screen there. We're very geographically spread across Australia, South Africa, North America, Europe, and India, and that gives us both sort of resilience around currency, and we'll talk to that in a moment, but also just the type of companies. What's also notable alongside those logos there is the list on the left because ACTIVEOPS is essentially independent to and agnostic to the type of work. It's a way of combining lots of different activities to give this combination of work and time in a common currency. So the list of type of business processes you have on the left there signals essentially that we're very agnostic to the work. We're just as relevant to a a loan or mortgage or insurance company or indeed sectors we're not yet in, like central government and and anywhere where you have lots of people doing largely administrative tasks where productivity is a really, really key factor.

4:06 Traditionally, ACTIVEOPS is sold very strongly through the land and expand model, so we will land, we will evidence the fact that what they might use currently for managing that capacity isn't necessarily as good as it could be, and on the back of that, we then experience that strong expansion, and that's been a recurrent theme of our business all the way through, and it comes through very much in our net revenue retention, our NRR, both last year, this year, and ongoing. Just as a for example, and it's notable, this particular year is a customer of ours in South Africa called Nedbank. Nedbank's been a long standing customer and we've grown, sort of established our reputation, but just in the last year, for example, that user base has grown from 300 to 2,000 with a significant increase in our annual revenue, you know, revenue from that customer, but the point is they've done that because ACTIVEOPS is absolutely in the sweet spot of driving both their performance improvement targets, but also their well-being amongst staff. It's a huge issue in South Africa, retaining qualified, skilled staff able to support the business proposition, and when things are getting tough and there's a lot of pressure on the business, obviously maintaining the right working environment for your staff is critical to not suffering a lot of skills attrition, and ACTIVEOPS absolutely drives that. So that's just a really nice example of the type of way in which this business grows, and we've got many, many other examples we can talk to.

5:29 So if that's what we do, how are we doing? Well, in summary, the half year then is this on this graph here, and to be honest, I would say it's a robust performance, really. We've grown steadily, but within the actual currency, our base currency is is clearly GBP. What this actually slightly disguises is because of an adverse year on year currency movement in terms of pound as appreciated, a lot of those revenues we've had from South Africa, Australia, Canada, and The US have effectively become less valuable. So although at the reported revenue level, our our our SaaS revenue has grown by 8% there, it's actually 13% on the basis of a constant currency. So in other words, the same revenue this year is actually worth slightly less than it was last year, but in fact, the underlying growth rate of the business is very, very strong.

6:18 I think the other notable thing, when we IPO ed, we said we were still in that phase of investing for growth. We've never had to borrow money, we've never had any debt for the purposes of growth. Our our business model brings in cash ahead of of of spend, but what we have done, therefore, is manage our our bottom line to effectively maximize growth. What we said at the IPO was we were gonna essentially turn that to a positive EBITDA and a profit positive before tax. And what you're seeing here is that coming through. We we achieved that overall last year at EBITDA, but this half year now, we've actually moved that to profit before tax level. And that just speaks to the fact that essentially we've added another, you know, million and a bit to the ARR, and we've not increased our operational costs. That just drops through to the bottom line. So fundamentally, there's a very robust and sound business model. It consists there of that SaaS recurrent model and a bit of the training and implementation in purple on top there. It's worth noting that has some effect on our gross margin because obviously the the overall business gross margin is affected by that blend of of SaaS versus services. Services is very profitable, but it's not as profitable as the as the SaaS model is there.

7:31 So that's the sort of sort of headline numbers, but other sort of notable things, I think, in terms of progress the business has made this year is we've been really pushing two particular, if you like, strategic pillars for the business the last couple of years. Firstly, product. The capabilities of cloud based technology is transformative in terms of whether you talk about Azure or Amazon Web Services or any of those things. The ability to assemble large data and present it back to customers in variety of forms is is hugely, powerful. What's critical, however, is our technology's ability to exploit that. And since 2019, we've completely replatformed our core Control IQ product. What that means is, as we as we're coming into this year, we've got a truly state of the art code base in which it's much, much quicker, easier, and to to to design and execute new functionality.

8:24 Now that's really important because in the context of current capabilities in the market, when you start talking about things like artificial intelligence, machine learning, clearly, those toolkits are out there. It's the ability to make that valuable to our customer base, which which is which is the opportunity for us. And that's something I'll come back to, but it's really coming through in spades. Our ability to present useful uses of the power of AI, leveraging both our data and our methodology through our software is is is coming on in leaps and bounds. Mean, it's it's phenomenal. We've just come off a conference which we've or our own conferences which brought that through. On the other hand, clearly, you need to take it to market, and the second really big strategic pillar we've been working on is our marketing, and that's been about a combination of having the right sort of friends. So we're particularly pleased with the development around the Microsoft relationship, and in fact, we're now selling through the Microsoft marketplace, as an endorsement of that. And and for those of you who are familiar or not not familiar with the implications, that has two big big effects. Firstly, our customers frequently have, if you like, bulk discount arrangements from with Microsoft, and our software is qualifying for those purposes, which again increases the value to our customers of taking our software because they need to qualify for those discounts. And secondly, it's just the sheer mechanics of becoming qualified to sell to large organizations.

9:47 Being able to contract through the marketplace is one of those things that definitely reduces the friction of doing enterprise sales deals. So I think there's an awful lot of of goodness coming through there. The second element of this particular area is the positioning we go to market, and you'll see in our marketing materials and on our website a phrase around decision intelligence. We've always been about helping customers and helping individual leaders make better choices, And what that decision intelligence label does is is very well articulate what we do. The exciting piece, though, is what we can now do using AI to mean those that decision intelligence is just getting bigger, more powerful, and more scalable than it's ever been before, and I'll come back to that in a while. The key thing in terms of the actual results though is the expansion of our product set on the back of those two things in our customer base, and this pie chart here just gives you some distribution of our, if you like, expansion of our in in the different regions.

10:44 We now got our CaseworkIQ product, which expands the sort of addressable type of work significantly in place in our in many, if not most of our major customers, and we're seeing use of that across all regions. In the case of the background data analytics, both it's always been strong in North America. We're now getting some really good use of that in EMEA. And then the actual expansion of of of core our core product Control IQ is really now starting to get traction with our American health care customers in North America. And that is a huge customer base, which we're quite excited about, the land and expand potential in the course of next year, and one of the reasons why we're trailing confidence in our ARR growth continuing for this and for for next year. So an awful lot in there to be genuinely quite excited about. I'll come back to the decision decision intelligence story and and why that how we're exploiting that going forward, but before we go there, perhaps I'm hand over to Ken for a change of voice and and a bit about the the finances.

11:47 So, yes, good afternoon. And, yes, I've been with the business a number of months now. Emma will be taking over towards the end of this month, and I've enjoyed being here, especially when it's produced numbers like these. As as Richard says, the business is founded primarily on a software as a service model as to say, buy in advance, typically annually in advance. So that revenue is very predictable. It also presents itself as very strong cash flow. The renewal cycle is typically strongly second half bias, so our cash flow tends to get stronger and stronger as the year progresses. But, yes, in terms of the actual results here, it's moving, you know, obviously growing and growing profitably.

12:33 We've now grown profitably for the last eleven months, and we should continue that trend really from now on. There's no reason why we can't be consistently profitable every month from now on. So the high headlines, ARR, NRR, they're the key drivers for this sort of business. Highly recurring revenue, as Richard said, strong growth, especially when you do constant currency. That's double digit growth is where we want to be, if not stronger. And that's if we can keep overheads relatively stable, means that the bottom line will get stronger and stronger. So EBITDA strongly profitable across the half, and it's moved from a point three profit last year to an £800,000 profit this year. And as I say, that's every month was profitable in the first half.

13:23 And, yeah, I think on the the charts here, just show the effect of that land and expand model that which you described, these customers, each of them growing from last year to the current year and will continue to be on some of the new product areas, show great opportunities to extend across the customer base.

13:43 So here's the detail. We look at the the P and L performance. So, you know, I think we feel very strongly. It's a very strong set of numbers, and it's even stronger if we look at the constant currency effects of that. Each of the regions grew in constant currency terms. So, again, that's reflecting what Richard said about the pound and pound, which kind of 10% or more up against nearly all the currencies that we are involved with. So that had quite a profound effect on on the business. So SaaS revenue growth, 30% at constant currency. That's great. Training implementation, typically smaller in the first half and large in the second half, so it's relatively flat in the period we're talking about. It tends to result from implementations and, you know, getting customers live, and there's plenty of that stuff building up in the second half.

14:36 The margin has grown by three percentage points. Again, that's a function of the mix of the two revenue sources. SAS is extremely profitable. TNI is still nicely profitable. It just depends on the proportion there. So I think in the second half, we'll see the gross margin return to more typical levels, but that's not to say they're not really good because we're very excited even to be making 50 to 60% on the on the GNI side of the business. In terms of profit before tax, yes, a positive territory for us, which is great news, and that was up from a loss this time last year. Again, that should be sustainable through the second half and beyond, so there's no reason why we can't be seeing that growing nicely.

15:22 The OpEx side of things theoretically ensures a growth of 5% actually is marked by the previous year currency gain, which reduced the effective OpEx in that year. So in in real terms, we've shown a slight reduction in our OpEx, which is due to great cost control across the business. Like all software businesses, we are required to capitalize our development costs. So, again, we've done that in this half year to the tune of around about £500,000, which is slightly up on the same periods for the the first half of last year. That is a kind of probably a a normalized rate now. I would expect that 500,000 or so capitalization level to continue for the foreseeable future, and, obviously, that gets amortized.

16:11 There is a balance sheet in the appendices if anybody wants to jump to those. They tend to show quite clearly the movement since March and September, and as a result of the renewal process with our customers, that obviously has a a big effect on things like cash, as I've mentioned, deferred income, debtors, etcetera. And so those movements really represent those renewal cycles.

16:40 Now the the waterfall, which is always useful, I think, for most readers, this takes the OpEx from last year, point 3,000,000 as I mentioned, and tracks it across to this year's point eight. The the big features there, obviously, the SaaS growth, which is the the main contributor to our EBITDA, but also quite a a saving in sales and marketing. Previously, we had built up the North American sales marketing operation and downsize that in the other part of last year. So that reduced the cost base there, having said that, the results still flat, you know, improved despite that reduction. So we're not sure that that that management decision is a good one. And the other principle, as you can see, the effect of the foreign exchange gain in the previous year, which is nearly £900,000.

17:33 So it it did flatter last year's result quite significantly. And you've also got the the movement in capitalization and r and d spend at the point two. So that's how we track from last year's EBITDA to this year's. Now I'll hand over to Emma, who will tell you briefly, having been in the company for all of a week, what she's rediscovering about the business and where it's gonna go next. Perfect. Thanks. And I just wanted to finish up the financials with my observations having just rejoined the business. I think this is

18:05 working day seven for me. So the the cash and the balance sheet position remains strong for the group. And the cash generation in h one is always typically impacted by the renewal cycle. And two thirds of our renewals take place in h two. So what we have already started to see now is the cash build, which will continue to build between now and the end of the year, which will push us into a cash generative position for h two. For me, the high levels of recurring revenue really showcase the exciting ROI stories for our customers, which you can really see come through in the NRR metrics. Finally, the transition to a sustainable profit before tax is really great progress for the group, all of which provides a strong foundation for the business. The opportunity to support Richard and the wider business in building on these robust metrics is an exciting one for the future.

18:56 Thanks, Emma. So let's turn our minds a bit more then to the detail of of the of the of the forward look, in particular, strategy business strategy and the opportunity we see. I've touched on this already, but in particular, I think the the the the market context of pressure on the operating models of so many of our customers generates in itself lots of activity. Previously, and I think I've spoken about this on the last investor brief, our fastest growing period historically for ACTIVEOPS was 2008 to 2011, the last financial sort of stress period, and I think we're beginning to see the evidence of that in the current times. Essentially, organizations just need to do more with less. But in particular, what we see is this opportunity to capitalize on the need for better decision intelligence. People want to be more confident.

19:44 They need to be more precise. There's a scope for contingency. They're looking to essentially improve their supply chain. All these things which require better data, but also greater forward looking processes so that you effectively know where you're going to be. And that critical need for decision intelligence is just coming through in space, and we're just really well placed. We have a unique problem we we solve around the optimization of resources. There's no other organization in the world who has such a developed solution for how to manage operations in the in the way that we do globally. Secondly, we have the longest dataset going back to 2005. Thirdly, we actually do have an absolutely state of the art technology platform, and as such, it's brilliantly positioned to leverage some of the power of AI. And our machine learning teams are generating these sort of solvers on our platform now, which does genuinely create some mind blowing capabilities, which for team leaders, and I'll talk more about that a bit later, is just fantastic because it just takes away so much of the drudgery and grows so much more focus on what people can do with the data.

20:48 If I try and just sort of illustrate that a little bit, on the screen there, on the sort of yellow and the green, you've got the typical decisions that our customers are resolving from the sort of truly strategic on the left there to the frankly operational on the right where it's as, you know, it's on the one hand, it's do we open up another processing center in Bangalore, but it could be in a different person and different place, shall I move Sid to do x versus y today? And those are the kind of practical lateral, you know, operational tactics and decisions which are going on in every one of our clients all the time. And the reality for most of those organizations is they're either making they have very imperfect data or there's a selection of, if you like, dashboard information, which gives them some of the information they need, but the outcome they make with that the decision they make is still a variable.

21:34 How do they know what the right answer is? And two different people presented with the same information will make a different decision. And that's the reality of how it is, and of course that's fine if you're a one man band, but when you're a 10,000 person back office, the sheer variety that that creates across the amount of resources you have to carry is huge impediment to optimize performance. So ACTIVEOPS is then our kind of solution presents this opportunity to take as an input all the myriad of things people do. I mentioned the processes earlier, but imagine the complexity and the variety of things people are doing in the back office of, I don't know, HSBC or NatWest or National Australia Bank today, the sheer variety of things people need to do and the number of people doing them. Our solution aggregates that information, creates that single view of work and time in a language we can all understand, which, guess what, enables us to make better decisions.

22:28 If we now add in AI into that, so it's looking across all those decisions we may have made, and now it's going to proactively present the right answer to the particular situation we're in, such that every one of those decisions is made as good as it can possibly be, the impact is transformational. So again, if you revisit the type of decisions that we are people, the decisions and the choices aren't any different, but with the benefit of ACTIVEOPS, the fact that every one of those answers is going to be, a, the right answer, and secondly, consistent across thousands of people, the gearing impact of that is simply amazing. So in terms of ACTIVEOPS' go to market then, what we're now able to do is very clearly articulate the value to our customers of having our having our technology. It's genuinely about enabling them to simplify the way they run their operations, And there's so much cost embedded in these large organizations because essentially there's uncertainty, whether it's a compliance and control, whether it's having senior levels and spans and layers because you have to have people close to the decision who know what they're doing. You know, that kind of embedded cost is is is is really, really large, and the outcome is so uncertain, and ACTIVEOPS' decision intelligence suite is really starting to make some noise around solving that problem.

23:47 So so we're quite, you know, excited about the offer. Then on behind that, and again, please do look at our website, we're now sort of really cranking it up in terms of our go to market from a marketing perspective. I'm just back from our our global sort of talk, conferences. We had them in London, Melbourne, and Nashville, and and everyone, it was fantastic to see both customers who've been with us for many years and a lot of new prospects really getting excited behind the power that we were able to demonstrate around the new software, and I think that in itself, and we're seeing it in our marketing inbounds, not just in terms of quantity, but more in terms of the inbounds that know what they need from us already. I think that kind of, if you like, knowledgeable entry point to the funnel. You know, ACTIVEOPS is not a company where we want thousands and thousands of inquiries of of of small numbers of of small numbers of of resource. We want the big projects with the big clients, and and I think the quality of our of our inbound is is really the the opportunity, the the shift we're seeing in the last three months.

24:47 So I think that's that speaks a lot to the to the marketing. Let's just touch specifically on the the the product. With this new technology base, what we've also been able to do is to stream our product into series so that each series has different, if you like, functionality, and behind that functionality then comes a different value proposition. So we're releasing series three, which has the first generation of the AI planning back built into it. So for example, automated planning, which we know not only reduces the mechanics of Emma, Ken, and Richard producing a plan, so it eliminates all that, but more importantly, the plan it produces is better than probably Richard, Ken, or Emma would have actually done. And that means the managers, when they come to use the software, are now talking about the outcomes they're going to achieve with the data, not debating whether Richard's got a bad habit of sandbagging his plan.

25:41 And that kind of functionality really, really does have an effect when used systemically. Service indicators, another one there, and then downstream for '24, we've got a number of really quite innovative capabilities. Skills tracking is a nightmare when you're talking about thousands of staff. Skills effectively need to be nurtured, they erode if you don't use them, our technology will not only monitor and determine what people's skills are against that matrix of capability, it'll also alert you to the fact that if you don't use Sally on mortgage processing next week, it's likely her capability will start to drop, again, taking that uncertainty out of the management process.

26:19 The virtual coach is probably the single most exciting aspect of that because that really is starting to say, here's your, in a copilot sense, here's you can ask an English question in the sense of what should I worry about? And the virtual coach comes back with all the things that it would consider that you probably need to pay attention to and probably the solutions for what those are. Again, it really is transformational in terms of the use of the software. So all in all, when I look at our sort of opportunity, we've got that sort of financial robustness that gives us the platform to do what we want, but I think it's the market that's so exciting. On the one hand, you've got a market context looking for more ways to do more with less, and our solution set is expanding across a greater sense of work types, CaseworkIQ, WorkIQ, and Control IQ, and the actual capacity to consume our product, know, our software itself is absolutely

27:15 built for enterprise, whether it's integration with other enterprise software you've probably heard of, like Pega or Workday or Salesforce, but also as an output, it's feeding data into, if you like, quite complicated data mixes so that if you like that kind of aggregating effect of having ACTIVEOPS data on productivity and capacity alongside service data around Salesforce really does give senior executives some unique perspectives, which of course is what it's all about, because as soon as you make yourself part of that infrastructure, that kind of embedded decision suite they're looking to, it makes you even more sticky, and and ACTIVEOPS has always been you know, that kind of core system that gives us great stickiness. So just to end with, I'll give a little bit of an overview around the outlook, and really, other than, you know, you can probably tell from my side manner, the excitement I feel about the opportunities, H one h two, rather, is is absolutely trading in line with with board expectations in the in the in the way of these things.

28:13 We've got a number of expansion deals beyond what we've talked about already, which are which are either have already landed in this this

28:18 half or or or well down the pipe before Christmas, and we've just got a healthy pipeline of new opportunities building behind the type of story I've been spinning here. So I think overall, we're very confident in our ARR growth in this year, and I think from a board perspective in the way that you can with these things, the analysts have their view on our projections, but we're comfortable that we're on track to deliver those expectations. So that's quite a run through. Obviously, very keen to have any questions either now or we can back to people afterwards, But in the meantime, I'll then welcome to welcome to address any questions. Perfect. Richard, Ken, Emma, thank you very much for your presentation. Ladies and gentlemen, please do continue to submit your questions just by using the q and a tab, which is situated on the top right hand corner of your screen. Just want the company to take a few moments to review those questions that have been submitted today. I'd like to remind you that recording of this presentation along with a copy of the slides and the published q and a can be accessed via your investor dashboard.

29:17 As you can see, we received a number of questions throughout today's presentation. If I could just ask you to read out those questions and give responses where it is appropriate to do so, I'll pick up from you at the end. Thank you. So if I can pick up the a few of them here. So so I'll I'll jump specifically to, because it's the one I saw a bit quick, first thing I have time to think about, is the could could you talk a little bit about the competition? Specifically, could a large ERP software vendor incorporate your solution in their existing product suite? We've worked we've coexisted precisely because the work, particularly with ERP or indeed a so called BPM, a business process management software package, they they they sort of solve a different problem, and they rarely cover all the work. So if you talk about a large enterprise resource platform, possibly, say, a workday or or something, they track time very well, but they don't and they might attribute time to activities in terms of ongoing on a training course, but they're not measuring volumes of actual activity, so you don't actually have a true productivity

30:18 measure. ACTIVEOPS combines that input from the ERP and the process level, which might be coming from a a PEGA or a or a or, you know, any any one of a dozen sort of processing engines, and we synthesize all that work data and the time data to present that single view, and that is absolutely our our our USP, and that is no question across all our client base. They will all have ERP systems, probably plural, in a variety of forms which we we coexist coexist with. I think,

30:52 Ken, if you wanna pick up that top one around the Yeah. Sure. It's a good question from Ben. Are you at the inflection point where we see the operational gearing of the business delivering substantial free cash flow, or is further investment needed in the cost base? That's a really good question because, actually, it it kind of depicts what the business is really about from a financial point of view. I think last year, we came through the breakeven point at EBITDA level where we started bursting into profitable and growing business. And so, yeah, the the whole business is about double digit or better revenue growth and single digit or lower up cost growth. And both of those are absolutely possible, and you don't need to be a genius mathematician to work out that the bottom line will grow rapidly and exponentially once we get past the once we've got past that breakeven point. So and no.

31:47 I think we don't need always there's always investment required in in marketing, sales, r and d, but they can be kept at a relatively modest level and allow the the revenue to deliver the cash flows that we want them to do. So, you know, really good point. And, yes, I mean, the answer is very much Yeah. We've never, you know, we've never borrowed money to grow, and I think that's and it it's true. We can we can we can generate. I mean, of the advantages of being on the public markets has historically been access to capital for, for example, acquisitions, and that was part of our plan. The current state of the market means probably that's less attractive right now to raise money in that way, but the great thing is the core business is so cash generative. We can pretty much do what we want. You know, should the should the strategic value being there, we'll we we we can execute against that.

32:36 Picking up a couple of questions. When approaching a new client, who are the decision makers within the organization you're selling to? Again, great question. Historically, it's been the P and L owner of the resources, so it might be a COO, it might be EVPOPS operations, somebody who carries accountability for the cost of delivering the service to customers, and that remains true today, but interestingly, we're also seeing a migration towards technology. There's a greater need or a question being asked of CTOs about how to make organizations more agile, reduce operational risk, and generally contribute to the ability of the organization to leverage its capacity. And to that extent, we're starting to have really interesting conversations and become visible to the system integrators and the organisations that are facilitating that kind of digital transformation programme, so there's a movement there.

33:30 And actually the third change is probably more around the HR. I've mentioned a few times the kind of well-being aspect, and you're all aware of with hybrid working, it has introduced a whole load of new variables for people to effectively juggle, to put it politely, in their own organizations, and part of that is introducing visibility over are people working longer hours, are people working the right amount of hours? You've seen plenty in the press about productivity debates about work at home. Our software provides the data to support decision making, you know, for either of the answer to the questions, whether it's hybrid working, at office, or whatever. For goodness sake, let's at least have some data to support a rational discussion about that, not just based on sort of prejudice or point of view, and I think our software is is absolutely

34:14 striking a note to HR audiences, let's say, to answer and support senior execs in those discussions as well. When you refer to land and expand, can you describe the nature of the expansion? Is it across different functions, geographies, enterprise wide? In a sense, it could be all of those things. Typically, our solution itself is very generic. It doesn't necessarily constrain to a particular type of work, whether it's mortgage processing, underwriting, anything involving transactions and people. So what that means is our customers will typically will find a willing audience to try our stuff, and that very quickly turns the fact that what they might previously had is somewhat sort of less effective than ACTIVEOPS, and then that goes in a different direction.

34:59 Sometimes it goes straight to the top because it absolutely resonates with, say, a transformation program, so you become an instrument of strategic change. In other cases, it's more federal, so in other words, it's worked here, you get sold, and you have to sell to other bits of the business. So it does vary quite a lot, but the point you're making is, I mean, the history of ACTIVEOPS has been driven by global expansion by our primary customers. Scanning the list here. Are you offering an alternative to existing outsourced solutions? Do you work for both a x and a in this case, it says HSBC and a Cognizant, for example, that might be executing? Active Ops is solution, like Workday, like PRINCE2, like in ServiceNow, so it comes down to how well people consume it. So the answer is absolutely.

35:49 We would work as a solution to whatever customer. I mean, like we would say to any of our customers, every company has its constraints. The challenge is how well you succeed within your constraints, and ACTIVEOPS is a big lever to use to improve and help you optimize within your constraints. So no, there's no particular constraints on that. In fact, quite the reverse. What we are seeing in the outsourced market is a problem where, particularly in the BPOs market, it's very hard to evidence your credentials as a provider that you're good at this stuff. So if you think back to the Indian explosion in the coding area, they developed you know, there's a lot of talk of CMM level, in particular, CMM level five, which is a demonstration, a third party endorsement of the development capabilities of what was then Coding Shots.

36:35 We're seeing a similar sort of opportunity with ACTIVEOPS because our benchmarks, which are global and gives comfort to anybody who's interested and knows what they're looking at, that a certain organization, team, department, or function is controlled within the, you know, at how well controlled they are. So there's a big opportunity for us to to and we are doing this. A lot of our big banking customers use ACTIVEOPS as a way of putting a management framework around parts of their supply chain or their their outsource provider. So there's a lot lot in there. I think there's a nice finance question in there for you. Well, this one from George, a 300 basis points improvement in gross margin is impressive. How is this achieved? As I mentioned, I think there's the two primary sources of revenue, the SaaS elements and the TMI element.

37:22 SaaS has a very low cost of sale, so it's very much a function of the mix of those two revenue sources. So in this half year, the SaaS element was was unusually high, and that will probably return to more normalized levels in the second half. I think over time, over the coming years, the proportion of SaaS to overall revenue will will continue to grow. So the margin will, over time, improve further. But in this case, it's primarily a function of the the mix of revenues. There's a second part of that question, which is the support for the implementation of the t and I activity. Hi, George. Thank you for that. The the the short answer is no. Our efficiency of delivering is also improving. So a combination, again, of the technology and the structure we put into it in our implementations means that our our our bandwidth to to deliver is is actually increasing for the same level of resourcing.

38:19 And then the second part is our capacity to educate our customers to self install is also improving. So if you take those two things in conjunction with a reasonable quality assurance process, which is pretty robust, means that I think our capacity to scale in that way is is certainly not constrained by our our capacity. One for you as well, which is do you see your clients taking you into new territories as part of the land and expand strategy? Well, historically. So so do our customers take us in? Yes. Absolutely. Because particularly when they're looking to expand themselves safely, operational risk is such a big deal. So the value of having ACTIVEOPS is a way of, if you like, protecting and securing both that expansion to different geographies has historically been a big big thing, so there's no reason you know, that's absolutely part of the reason people use us to to expand or pull us into that. There's a question here about verticals.

39:09 Could you please talk about end to end verticals? Clearly, you have great strength in financials, but which other sectors excite you the most or have significant additional potential for you? Historically, ACTIVEOPS has done a lot in government. It sort of goes waxed and wanes. We had a particular lot of work in our revenue in New Zealand, and particularly in The UK and in Jobcentre Plus back along. The current market for public sector productivity means the kind of transparency and discipline that our product provides would make that a very, very relevant solution. That would also apply just as much to the IRS and parts of the US government administration as well, and we're becoming closer to that in a variety of ways.

39:54 In particular, in The US, in our American healthcare, a lot of the customer base there is government related, and that starts to create the opportunities for that sort of discussion. So I think government is an open opportunity. We are not short of target addressable market, and for that reason, you know, wearing your references in a certain place, we very much don't feel constrained by that, and as such, we're not chasing markets, we're not, you know, if you're not necessarily active in. However, I think our strategy there would be around partners, so I think if we can our thinking here is to build the need for and the awareness of the type of decision intelligence software that we create across markets, and that will create a demand which potentially third parties in the first instance can can probably, if you like, leverage our toolkit and our assurance to to provide.

40:47 So I think that's about it. I'll take one more here. Actually, you mentioned longer contract cycles. Is that affecting the landexpand part or the land or expand part or both? In truth, a bit of both. I mean, it's so much easier to sell to existing customers because the inevitable entry phase is so painful for large enterprises, whether it's data security, you know, IT second, and just contracting. The process is not getting any easier. I've touched on Microsoft and how that helps already, but in truth, the expand phase is still a challenge at times even when you have an MSA, a sort of service contract in place. But no, I mean, the round, to be honest, the market pressure for results and the short term return, the very quick return you get from ACTIVEOPS is a far more of a positive impact than than perhaps the the sort of general lengthening and complexity of service cycles.

41:42 So there's there's, you know, that's that's a balance there, but we are selling to large complex organizations, which is always a very political game. I think we'll probably take a wrap there, but we will pick up other questions, I think, if we can. Perfect. Thank you very much. And I think, as you say, you've addressed those questions you can from investors. And, of course, the company will review all the questions submitted today, and we'll publish those responses out on the Investor Meet company platform. But just before redirecting investors to provide you with their feedback, which is important to the company, Richard, could I just ask you for a few closing comments? Well, thank you everyone for taking the time to listen to us. We are feeling very excited about the opportunity for the company, and, I hope that's been a useful session. Perfect. Richard, Ken, Emma, thank you once again for updating investors today. Could I please ask investors not to close the session as you now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations?

42:37 This will only take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of ACTIVEOPS PLC, we'd like to thank you for attending today's presentation, and good afternoon to you all. Thank you. Thanks very much.