Interim Results

28 June 2016

Blue Prism Group plc

("Blue Prism" or the "Group")

Interim results for the six months ended 30 April 2016

Blue Prism, a leader in Robotic Process Automation ("RPA"), is pleased to announce its results for the six months to 30 April 2016, the first interim results as a listed Group following its IPO on 18 March 2016.

FINANCIAL HIGHLIGHTS

· Total contracted revenue* increased 124% to £14.8m (H1 2015: £6.6m)

· Group revenue growth of 21% to £4.0m (H1 2015: £3.3m)

· Recurring licence revenues now at 83% of total group revenues (H1 2015: 51%)

· Exit run rate (recognised, recurring license revenues) of £662k at 30 April 2016 (£252k at 30 April 2015)

· Adjusted operating loss of £1.4m funded organically (H1 2015 adjusted operating profit: £72k)**

· Cash at the period end of £11.2m including £8.8m from IPO proceeds (H1 2015: £1.1m)

· Deferred income at the period end of £5.9m (H1 2015: £1.8m)

* total of all billings and future contracted revenue

** H1 2016 adjusted to exclude IPO costs and share based payments; H1 2015 adjusted to exclude share based payments, H1 2015 also includes a perpetual contract payment of £0.8m

OPERATIONAL HIGHLIGHTS

· Strong new business wins in H1 2016 with 64 licence contracts signed in the period (40 licence contracts signed in the whole of FY 2015), underpinning future revenues

· Won 33 new customers, total customer base now 90 (FY 2015: 57 customers)

· 28 upsells from existing customers demonstrating their increasing RPA adoption

· Channel partner ecosystem gaining traction in line with strategy: 90% of new customers were acquired through or with channel partners

· Continued investment in US with sales team increasing to 12

· Blue Prism version 5.0 successfully launched

· Completed successful IPO on AIM on 18 March 2016

Alastair Bathgate, CEO, commented:

"I am delighted to report our maiden half year results. The Group has delivered an excellent performance in the six months under review with strong growth in the number of new deals signed and the value of business generated. This reflects both the success of our strategic move towards a partner led sales model and accelerating market growth fuelled by an increasing awareness of the many cost benefits and operational improvements RPA provides.

In order to take full advantage of this growing market opportunity we have taken the decision to bring forward planned 2017 investment in sales and marketing into the second half of this financial year. Looking forward, the Group is focused on securing Blue Prism's place as the leading RPA technology provider while maintaining and enhancing the quality of delivery our customers have come to expect. This forward investment is made on the back of strong trading performance in the first half and a solid cash position and we maintain our strategy of achieving cash generation and positive EBITDA in the mid-term.

Since becoming a public company in March, our corporate profile has increased considerably and we have seen a growing and positive recognition of Blue Prism and our RPA software which is further strengthening our encouraging pipeline. During the second half of 2016 the Group will be focused on converting this pipeline along with securing a number of major renewals and we look forward with confidence."

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About Blue Prism

Blue Prism is a UK-based software company and a leader in the emerging global technology category of Robotic Process Automation. The Group supplies software robots that automate clerical back office processes and operate in similar fashion to humans, by autonomously logging on and orchestrating various systems. Blue Prism's Software Robots are differentiated in the market as they have been designed to be deployed at scale in enterprise-sized organisations where security, resilience, robustness, flexibility, scalability and compliance can be critical.

Blue Prism's Software Robots provide a Virtual Workforce that is operated by the business function while being supported by the IT function. As such, software robots can address the "long tail" of automation that is currently not able to be addressed by the IT function due to limited economic granularity and resources.

The Group spent several years "industrialising" the software with a number of its blue-chip customers, including Barclays Bank, Co-operative Banking Group, Telefónica O2, RWE npower and Shop Direct. This enabled Blue Prism to meet the product and methodology standards needed to deploy this new robotic workforce in a transformational way, much like BPO did to business back offices 20 years ago. For this reason, Blue Prism's customers see the robots as a third sourcing option to complement onshore and offshore human resources.

The Group is increasingly focused on establishing its global Channel Partner ecosystem which currently includes Accenture, Deloitte, Cap Gemini, IBM, id. Management, NEOOPS and Thoughtonomy.

Blue Prism has 58 employees based out of offices in Newton-le-Willows and London (UK) and Miami, Chicago, New York and San Francisco (US).

INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 APRIL 2016

OVERVIEW

Total contracted revenue, being the total of billings and future contracted revenue for the six months ending 30 April 2016 ("H1 2016"), increased 124% to £14.8m (for the six months ending 30 April 2015 ("H1 2015"): £6.6m) and exceeds the total business generated in the full financial year to 31 October 2015 ("FY 2015") of £11.5m). Revenues for H1 2016 grew 21% to £4.0m (for the six months ending 30 April 2015 ("H1 2015"): £3.3m), driven by strong growth in recurring licence revenues which now accounts for 83% of total revenues (H1 2015: 51%). Exit run rate, which illustrates the momentum of recognised recurring licences, increased to £662k per month at 30 April 2016 (30 April 2015: £252k per month; 31 October 2015: £390k). Reflecting expensed sales commissions on total contract values associated to the new business wins as well as investment in the Group's sales teams in the period as planned, adjusted losses from operations increased to £1.4m. This compares to an adjusted operating profit in H1 2015 of £72k, which benefited from a perpetual licence contract of £0.8m.

We are pleased to report a successful debut of Blue Prism to trading on AIM, and are glad to welcome our new shareholders into the Group. The IPO and status as a publicly-listed company has reinforced our market-leading position and enhanced our credibility with large customers and channel partners. The IPO also offered the opportunity to continue our policy of enabling employee equity ownership which has helped us to retain and attract the high calibre employees required to develop the Group for its next stage of growth.

MARKET REVIEW

Blue Prism is a leader in the emerging global technology category of Robotic Process Automation, supplying a Virtual Workforce powered by Software Robots that are trained to automate routine back-office clerical tasks.

As businesses have become more aware of this new technology category, we are seeing an increasing adoption of RPA by large enterprises with significant back-office operations. Customers are becoming ever more ambitious in their demands for RPA, increasingly thinking in terms of building a Virtual Workforce to complement their existing human workforce. Whilst we remain in an educational phase of market development, with organisations displaying varied levels of awareness, large enterprises and consultancies are recognising the impact and scale this technology can deliver. Successful use of RPA is driven not least by the operational performance, productivity, security, resilience, auditability and scalability that Blue Prism's software is able to deliver.

This market progress has led to an increased number of RPA vendors. We are focusing our market education on the differentiation of our software, particularly against products with a scripting-tool heritage that are fast to deploy but cannot offer the scalable, enterprise-grade solutions demanded by large organisations. We continue to see new and existing customers and partners valuing the strength of our enterprise-grade software for major RPA deployments, often within regulated industries. These deployments require transformational scalability, security, data integrity, resilience, and governance, all of which we have taken many years to build into our product. We were pleased to receive further validation of this at the annual Alconics Awards where we were named the Best Enterprise Application of Artificial Intelligence.

To further this differentiation, in May 2016 we launched version 5.0 of the Blue Prism software platform which includes the ability to allocate and dynamically reallocate work to robot teams across multiple data centres, geographies and the cloud, improved process MI and self-configured dashboards, globalisation and localisation, new encryption functionality to improve data security, and a renewed user interface and technology platform to support new technologies and future versions of Blue Prism.

OPERATIONAL REVIEW

The Group has experienced significant customer momentum in the period, primarily through our channel partner ecosystem, which contributed 90% of new licence deals. Our channel partners provide a scalable sales and delivery capacity as well as domain expertise (such as geography or industry specific expertise) and existing customer relationships, often with direct connections to senior management that can shorten sales cycles and increase initial licence commitments.

The Group closed 64 licence deals in H1 2016 (whole of FY 2015: 40 licence deals). Of these deals, 33 were new customers (of which 30 were indirect and 3 were direct customers) taking our total customer base to 90 predominantly blue-chip customers across the UK, US, Europe and South Africa (FY 2015: 57 customers). The remaining licence deals comprised 28 upsells and 3 renewals, demonstrating that our customers are increasing their adoption of the product through the roll out of more robots on increasingly strategic and transformational projects.

Our channel partner ecosystem also saw continued development during the period in terms of a larger number of partners completing deals across a wider range of industries and geographies. Of the 30 new indirect customers signed in the period, 12 were acquired through or with three global alliance partners including Accenture and Deloitte with the remaining 18 acquired through or with our value added resellers ("VARs") including Thoughtonomy, Neoops, Digital Workforce, RPAi, ID Management and Virtual Operations.

We have continued to focus our attention on our indirect route to market with emphasis on the quality of partner delivery through our accreditation and training programme. Individual and partner accreditation on a global level ensures consistency, quality and worldwide uniformity of our delivery standards and software proposition. This was further enhanced by our inaugural Partner World events in London and New York.

Professional Services continued its migration from direct delivery and customer enablement to partner delivery enablement and accreditation. Professional Services plays a key role in ensuring the delivery quality and helping to fulfil the growing demand for delivery expertise among channel partners and customers.

The US is a strategic focus for the Group as the world's leading technology economy and we have increased our investment, notably in the sales headcount which has doubled to 12 employees. Although the RPA market in the US is at a more nascent stage than Europe, particularly in the channel partner ecosystem, there is evidence of larger upfront commitments to license adoption amongst customers. Financially, the US has shown robust growth with revenues increasing to £766k in H1 2016 (H1 2015: £202k). The Group won 5 new customers (4 indirect and 1 direct) and 10 upsells in the first half of the year.

To keep ahead of the growing demands of both customers and partners, and to avoid under-serving current market dynamics, we have taken the decision to bring forward investments previously scheduled for 2017 into the second half of 2016. Approximately 80% of this forward investment will be in sales and marketing. These investments are undertaken against the background of the Group's strong trading performance for the first half of 2016 combined with our solid cash position.

EMPLOYEES

In addition to its existing offices in Newton-le-Willows, London, Miami and Chicago, the Group increased its presence in the US with employees operating from new satellite locations in New York and San Francisco.

In accordance with our strategy outlined at the time of our IPO, we grew our global sales team from 16 to 25 and our total headcount from 43 to 58, providing a platform for further growth. We are pleased to report that our policy of involving all staff in the equity of the business, one of the important reasons for seeking an IPO, is helping to attract and retain high calibre employees in these fast moving market conditions.

We are delighted to welcome Charmaine Eggberry and Ken Lever as Non-Executive Directors to the PLC Board, both of whom have a wealth of UK public company experience and will, along with the rest of the Board, provide the necessary governance and guidance for a growing public company such as Blue Prism.

EXECUTING OUR STRATEGY

At the time of our IPO, we communicated that it was our intention to continue to focus on accelerating our organic growth opportunities and building global distribution capabilities. We identified a number of key areas of strategic focus:

Building a scalable sales and delivery channel

The Group has made good progress with its channel partner model and is pleased that indirect sales are showing early signs of success. We have successfully recruited partners and have seen a wider mix of deals across our partner ecosystem. Sales enablement is making good progress with 87 people across 18 partners already qualified through the online sales enablement programme.

We are now focussed on channel partner delivery enablement which is the key to customer satisfaction, upselling and brand reputation as we build the Blue Prism community across the globe.

Increasing business with the Group's customers

The Group's initial investment in account management resources is beginning to show signs of success with 28 existing customer upsells in the period coupled with evidence that new customers signed through or with alliance partners are beginning to take larger average initial licences deals.

Executing on the Group's US market strategy

The Group has made good progress in the US having secured important direct and indirect reference sites. We have invested in building out our sales team and have seen this already reflected in the strong revenue progress during H1 2016.

Exploiting the Group's market leadership to take advantage of RPA market adoption

The Group has continued to maintain its premium product and thought leadership with the launch of version 5.0. This was further validated by the annual Alconics Awards where we were named the Best Enterprise Application of Artificial Intelligence.

SUMMARY AND OUTLOOK

We are very pleased with Blue Prism's performance for the six months to 30 April 2016 with strong growth in the number of new deals signed, upsells and the growing contribution from the US business. This reflects both the success of our strategic move toward a partner led sales model and accelerating market growth fuelled by an increasing awareness of the many business improvements and efficiencies RPA provides.

Looking forward, the Group will continue to focus on its indirect route to market strategy, with an emphasis on quality of delivery, as well as in securing Blue Prism's place as the leading global RPA technology provider. As the RPA market shows signs of heading into rapid growth mode for Blue Prism, we have taken the decision to bring forward our investment in sales and marketing to enable us to take full advantage of this and position ourselves for further growth.

Since becoming a public company in March, our corporate profile has increased considerably and we have seen a growing and positive recognition of Blue Prism that has translated into a strengthening pipeline. Whilst there remain a number of execution challenges ahead, including two large contract renewals in H2 2016, our performance in the first half of the financial year strongly underpins our expectations for the Group's full year performance.

FINANCIAL REVIEW

BILLINGS AND FUTURE CONTRACTED REVENUE

The Group saw billings, which are defined as invoices raised in the period, and future contracted revenues, which are defined as the future value of the contract which has not yet been invoiced to the customer, grow significantly in the period.

Billings increased to £6.5m against the comparative period (H1 2015: £2.8m). This increase has largely been driven by new business achieved in the period which accounted for over 80% of billings and were further improved by a large contract win with a major bank with 3-year advanced payment terms

Future contracted revenue increased to £8.3m (H1 2015: £3.8m) providing the Group with good revenue visibility.

Total contracted revenue, being the total of billings and future contracted revenue in the period, increased 124% to £14.8m (H1 2015: £6.6m) and exceeds the total business generated in the full financial year to 31 October 2015 (FY 2015: £11.5m).

REVENUE

Recurring licence revenue accounted for 83% of total revenues in H1 2016 (H1 2015: 51%).

H1 2016 exit run rate, which illustrates the momentum of our recognised recurring licences revenue, grew to £662k per month at 30 April 2016 compared to £390k per month at 31 October 2015 and £252k per month at 30 April 2015.

Revenue from UK operations accounted for 81% of total revenues. Adjusting for an £800k perpetual licence in H1 2015, UK revenues increased 41% to £3.3m (H1 2015: £3.1m before adjustment). Revenue from US operations accounted for the remaining 19% of total revenues and increased over 350% to £0.8m (H1 2015: £0.2m).

LOSS FROM OPERATIONS

Losses from operations were £2.6m, (H1 2015 profit: £58k) and included the following costs:

· share based payments charges of £60k

· exceptional IPO costs of £1.2m

Adjusting for these costs, losses from operations increased to £1.4m in the period compared to an adjusted operating profit in H1 2015 of £72k, which benefited from a perpetual licence described in the Billings and Future Contracted Revenue section above.

The Group has continued to invest to drive faster recurring revenue growth contributing to current operating losses. In addition, the Group's policy of expensing sales commissions for the total contract value immediately upon payment of the first invoice has further impacted operating losses as a result of higher total contracted revenue. This is expected to have a less significant impact on the Group's operating profits as the Group's recurring revenues increase.

CASH

Cash at the period end was £11.2m (H1 2015: £1.1m). Net cash increased as a result of the £8.8m (net of expenses) raised at the IPO and further benefited from advanced payment terms described in the Billings and Future Contracted Revenue section above. Strong trading in the period enabled the Group to fund losses from operations organically. The Group has an inherently cash generative business model which has enabled us to bring forward investments from a strong cash position and we continue to focus on being cash-generative in the medium term.

Additionally, the Group has a £2.0m Revolving Credit Facility which is currently unutilised.

BALANCE SHEET

Increased billings described above has increased deferred income at the period end to £5.9m (H1 2015: £ 1.8m).

There are no intangibles on the balance sheet and research and development costs have been fully expensed as incurred as none of these met the criteria for capitalisation.

Consolidated statement of comprehensive income for the six month period ended 30 April 2016

Consolidated statement of financial position

Consolidated statement of changes in equity

The consolidated statement of cash flows

1. Corporate information

The consolidated financial information represents the results of Blue Prism Group plc ("Holding Company") Blue Prism Limited ("the Company") and its subsidiary Blue Prism Software Inc. together referred to as "the Group".

Blue Prism Group plc and Blue Prism Limited are incorporated and domiciled in the UK. Blue Prism Software Inc. is incorporated in the US.

2. Accounting policies

The principal accounting policies applied in the preparation of these interim financial statements are summarised below. They have all been applied consistently throughout the current and preceding period.

Basis of preparation

The financial information presented in these interim financial statements have been prepared in accordance with the recognition and measurement requirements of International Financial Reporting Standards issued by the International Accounting Standards Board, as adopted by the EU. The principal accounting policies adopted in the preparation of the financial information in this preliminary announcement are unchanged from those used in the Historical Financial Information included within the company's prospectus and are consistent with those that the company expects to apply in its financial statements for the year ended 30 October 2016.

The financial information for the periods ended 30 April 2016 and 30 April 2015 presented in these interim financial statements do not constitute the statutory accounts for those periods, and are unaudited. The company's Annual Report and Accounts for the year ended 30 October 2015 have been audited and filed with the Registrar of Companies. The Independent Auditors' Report on the company's Annual Report and Accounts for the year ended 30 October 2015 was unqualified and did not draw attention to any matters by way of emphasis and did not contain statements under s498(2) or (3) of the Companies House 2006.

Basis of accounting

The financial statements of the Company have been prepared on a going concern basis and in accordance with International Financial Reporting Standards ('IFRS') and their interpretations which have been issued by the International Accounting Standards Board ('IASB'), as adopted by the European Union. They have also been prepared with those parts of the 2006 Act Companies applicable to companies reporting under IFRS.

The Group has not adopted any Standards or Interpretations in advance of the required implementations dates. It is not expected that adoption of Standards or Interpretations which have been issued by the IASB but are not yet effective will have a material impact on the interim financial statements.

Basis of consolidation

The interim financial statements incorporate the results of Blue Prism Group plc and its subsidiary undertakings as at 30 April 2016. The results of its subsidiary undertaking are included from the date of acquisition.

Operating segments

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision maker has been identified as the Board of Directors.

The Board considers that the Group's project activity constitutes one operating and one reporting segment, as defined under IFRS 8. Management reviews the performance of the Group by reference to total results against budget.

The total profit measures are operating profit and profit for the year, both disclosed on the face of the consolidated income statement. No differences exist between the basis of preparation of the performance measures used by management and the figures in the Group financial information.

Revenue recognition

The Group recognises revenue depending on the substance and legal form of the contracts with its customers. Revenue is recognised once a legally binding contract between the Group and its customers has been established and the delivery of the service has commenced. Service delivery is triggered by the providing of a 'software key' to the customer. Revenues are accrued or deferred based on the length of time through the contract, and this policy is consistently applied across all customers and contracts.

Provided the amount of revenue can be measured reliably and it is probable that the Group will receive consideration, revenue from the provision of services is recognised from the commencement and over the period in which the services are rendered, as adjusted for the stage of completion of individual contracts.

Licence fee revenue is recognised on an accruals basis; when invoiced in advance, the income is deferred in the statement of financial position and recognised in the income statement over the length of the licence.

Maintenance revenues are recognised over the period of the contract, the fee for which is included within the licence fee agreed.

Professional services revenues are recognised when the service has been delivered. If billed in advance, the income related to consultancy days not yet delivered at the end of the period is deferred and recognised in the income statement when the service takes place.

Training revenues are recognised when Blue Prism is notified that the online training course has been completed.

Share capital

Ordinary shares

Ordinary shares are classified as equity.

Preference share capital

Preference share capital is classified as equity if it is non-redeemable, or redeemable only at the Company's option, and any dividends are discretionary.

Preference share capital is classified as a liability if it is redeemable on a specific date or at the option of the shareholders, or if dividend payments are not discretionary.

Share Options

Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date. Details regarding the determination of the fair value of equity-settled share-based transactions are set out in Note 9 to the interim financial results. 

3. Segmental analysis

The Group has one operating segment being the licensing of Robotic Process Automation (RPA) software used to automate routine, rules-based, back office processes. This has been determined by the chief operating decision maker, the Board of Directors.

The Group operates in two main geographic areas: UK and USA. The Board of Directors only monitors revenue on this basis. Business performance is otherwise monitored by reference to total results against budget.

Revenue for each of the geographical areas is as follows:

The Group currently has two key sources of revenue:

1. Licencing - for the provision of software licences, where the agreement is established by way of a legally binding contract between the Group and its customers. Maintenance and support services are included in the Licence fee.

2. Professional services and training - where the customer requires consultancy or training on a project by project basis.

Revenue for each of the sources is summarised as follows:

Assets and liabilities and sources of revenue are not analysed by geography as the business performance measure utilised by the chief operating decision maker, the Board of Directors, is the total business result.

4. Exceptional Expenses

Exceptional expenses were costs relating to the Initial Public offering and listing on AIM of £1,185k on 18th March 2016.

5. Trade and other receivables

6. Trade and other payables

7. Basic and diluted loss per share 

Where the Group has incurred a loss in a year the diluted earnings per share is the same as basic earnings per share as the loss does not get diluted.

Basic and diluted loss per share is calculated by dividing the loss after tax attributable to the equity holders of the Group by the weighted average number of shares in issue during the year.  

8. Share capital

Allotted and fully paid up:

Ordinary shares are classified as Equity.

Note: £0.01 Deferred shares were also issued in exchange for the preference shares and B preference shares as follows:

The deferred shares carry no voting rights, no rights to income and the right to a return of a maximum of £0.001 on a winding up of the Company. 

9. Share Options

The Company introduced a Share Option Plan (SOP) in August 2008, whereby the Board of Directors is entitled to grant options to staff, which are convertible into ordinary shares. Options have been granted with a fixed exercise price of £1.00 and £1.25. The contractual life of an option is 10 years. All staff are eligible for awards under the current SOP. There are no reload features. The company has made annual grants each year since 21 September 2008. Options granted under the SOP vest over a three-year period, one third of the options per annum from the date of grant. Exercise of an option is subject to continued employment and SOP members may not transfer or sell their shares except as permitted or required to do under articles subject to the Articles of Association of the Company. Options were valued using the Black-Scholes option-pricing model. There are no performance conditions.

All the above options were exercised immediately prior to the IPO as follows:

In February 2016 the Company established an Employee Share Plan and a Non-Employee Share Plan (together the "Share Plans"). The Employee Share Plan is administered by the remuneration committee of the Board and the Non-Employee Share Plan is administered by the Board. Awards under the Share Plans take the form of options to acquire Ordinary Shares with an exercise price equal to the market value of an Ordinary Share on the date of grant. All employees of the Group may be granted awards under the Employee Share Plan. Non-Executive directors and consultants of the Group may be granted awards under the Non-Employee Share Plan. All options under the Share Plans are ten year options. The Employee Share Plan options for staff vest over a three year period, one third each year. Directors options under the Employee Share Plan vest at the end of the three year period. Options awarded under the Non-Employee Share Plan vest over three years, one third each year.

Under this Share Plans, 4,861,859 share options were issued to directors, staff and non-employees at the IPO price of £0.78. Under the Black-Scholes option-pricing model the cost of these options was £500,244 in the first year, of which £60,303 has been charged in the P&L for the six months to 30 April 2016.