ActiveOps Plc (AOM) Earnings Call Transcript & Summary

Good afternoon, and welcome to the ActiveOps plc Investor presentation. [Operator Instructions] Before we begin, I'd like to say the following poll. I'd now like to hand you to Richard Jeffery, CEO. Good afternoon, sir.

Good afternoon, and welcome and hello to everyone who's first time in ActiveOps. In the room with me today, I have my Finance Director, Ken Smith and also happily my new Finance Director, Emma Salthouse. Emma was previously with ActiveOps before taking this role, she was been into the -- of FP in another company, which is coming back in to pick up the mantle and has the benefit of 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 an 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 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 on how we're going to market around our products and our marketing, before essentially finishing off with a Q&A session there. 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, we're a SaaS enterprise software company. Our revenues are very sticky because we are -- we tried annually in advance, which also drives a lot of benefits in terms of our cash flow. We serve the financial services organizations with large number of people in their administrative sort of functions. And the problem is always potentially 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, get a group over that, but much more importantly, it supports the decision intelligence. It enables organizations, if you look at the strategic write-down to the operational level to make it choices and better choices means higher productivity. But it means a range of outcomes, some of which are illustrated on the screen here. It's not just about creating that capacity. It's the control over that work to then bring about the change in organizations 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 score and this go on through. So a lot of things that come about because essentially, organizations are both fitter and more in control over their working resources. And that immediately starts, I think, to signal why at the moment, we're seeing a real relevance like, feel like the priorities of organizations, which, to be honest, the mood music in the industry is all about improving, if you like, sweating the assets is 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 a very, very powerful particular message, which I'll return to. To give you some idea of the customer base, there are some brands on 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 I'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 work. We're just as relevant to a loan or a mortgage or insurance company or indeed sectors we're not yet in, like central government and anywhere where you have lots of people doing largely administrative tasks where productivity is a really key factor. 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 experienced that strong expansion, and that's been a recurring theme of our business all the way through, and it comes through very much in our net revenue retention, or NRR, both last year, this year and ongoing. Just as for example, and it's notable. This particular year is a customer of ours in South Africa called Nedbank. Nedbank has 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 from that customer. But the point is they've done that because ActiveOps is absolutely in a sweet spot and driving both their performance improvement targets but also their well-being among 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 any many, many other examples we can talk to. So that's what we do and how we're doing. Well, in summary, the half year then is this -- on this graph here. And to be honest, we -- I would say it's a robust performance really. We've grown steadily but within the actual currency, our base currency is clearly GBP. What is actually slightly disguised is, because of an adverse year-on-year currency movement in terms of pound is appreciated, a lot of those revenues we've had from South Africa, Australia, Canada and the U.S., had effectively become less valuable. So although at the reported revenue level, 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 slightly less than it was last year. But in fact, the underlying growth rate of the business is very, very strong. I think the other notable thing when we IPO-ed, we said we've seen that phase of investing for growth. We've never had to borrow money. We never have any debt for the purposes of growth of our business model, brings in cash ahead of spend. But what we have done therefore is manage our bottom line to effectively maximize growth. What we said at the IPO was, we were going to essentially turn that to a positive EBITDA and profit positive -- profit before tax. And what you're seeing here is that coming through. We achieved that overall last year EBITDA, but this half year now we've actually moved that to a profit before tax level. And that just speaks to the fact that essentially, we've added another GBP 1 million a bit to the ARR, and we do not increase our operational costs, that just dropped through to the bottom line. So fundamentally, it's a very robust business model. It consists there of that past 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 overall business gross margin is affected by that blend of SaaS versus services. Services is very profitable, but it's not as profitable as the SaaS model is there. SaaS is sort of headline numbers, but other sort of notable things, I think, in terms of progress the business has made this year. We've been really pushing to particularly like strategic pillars for the business in the last couple of years. Firstly, product. The capabilities of cloud-based technology is transformative in terms of when 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 a variety of forms is hugely powerful. What's critical, however, is our technology's ability to exploit that. And since 2019, we've completely re-platformed our core ControliQ product. What that means is, 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 to design and execute new functionality. 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 targets are out there, it's the ability to make that valuable to our customer base, which is the opportunity for us. And that's something I'll come back to, but it's really coming through the space. Our ability to present useful uses of the power of the AI, leveraging both our data and our methodology through our software is coming on in bits. I mean, it's phenomenal. We just come off a conference, which we've -- our own conferences, which brought that through. On the other hand, clearly, you need to take it to market. And the second very 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 for those of you who are familiar or not familiar with the implications that has 2 big effects. Firstly, our customers frequently have, if you like, bulk discount arrangements 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, is just the sheer mechanics of becoming qualified to sell to large organizations. 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 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 our Decision Intelligence label does 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 and 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 2 things in our customer base. And this pie chart here just gives you some distribution of our, if you like, the expansion of our -- in the different regions. We now go to our CaseworkiQ product, which expands the sort of addressable type of work significantly in place -- 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 has always been strong in North America. We're now getting some really good use of that in EMEIA. And then the actual expansion of our core product ControliQ is really now starting to get traction with our American Healthcare customers in North America. And that is a huge customer base, which we are very excited about the land and expand potential in the course of next year. And one of the reasons why we're trading confidence in our ARR growth continue for next year. So an awful lot in there to be genuinely quite excited about. I'll come back to the Decision Intelligence story and why that and how we're exploiting that going forward. But before we go there, perhaps I hand over to Ken for a change of voice and a bit about the finances.

So yes, good afternoon. And yes, I've been in the business for a number of months now, and Emma will be taking over this one. And I've enjoyed being here, especially when it's produced numbers like these. As Richard said, the business is funded primarily on a software-as-a-service model as to take customers by times typically annually in advance. So that revenue is very predictable. It also presents itself as based on cash flow. The renewal cycle is typically strongly in second half buyers, 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 -- obviously growing and very positively. We've now grown probably for the last 11 months, and we should continue that trend really from now on, is the reason why we can't be consistently profitable every month from there on. So the headlines ARR, NRR, they are the sort of key drivers for this sort of business and a recurring revenue of 15%, strong growth, especially to 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 are strongly profitable across the half and it's moved from 0.3% profit last year to an 800,000-tonne profit this year. And as I say, that's -- every month was possible in the first half. And yes, I think the charts here, just sort of the effect of that land and expand model of which I 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, sort of great opportunities to extend across the customer base. So here in detail, if you look at the P&L performance. So I think we feel very strong -- very strong set numbers, and it's even stronger if we look at the constant currency effects of that. Each of the regions grew in terms of currency terms. So again, that's, in fact, what Richard said about it and it's kind of 10% or more up against nearly all the currencies that we are involved with. So that has quite a fine effect on the business. So SaaS revenue growth, 13% at constant currency. That's both trading implementation, typically smaller in the first half and not in the second half. So it was relatively flat in the period we're talking about. It tends to result from implementations and getting customers live and the spent that to start building up in the second half. The margin has grown by 3 percentage points. Again, that's a function of the mix of the 2 revenue sources. That is extremely profitable. T&Is still nicely profitable. It just depends on the proportion there. So I think in the second half, we see the gross margin return to more typical levels. But that's not same, they're not really good, because we're being excited even to be making 50% to 60% on the T&I 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 the loss this time last year. Again, that should be sustainable during the second half and beyond. So there's no reason why we can't be seeing that very nicely. The OpEx side of the things theoretically insured a growth of 5% actually it gets marked by the previous year currency gain, which reduced the effective OpEx in that year. So in real terms, we show a slight reduction in our OpEx, which is due to the 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 GBP 0.5 million, which is slightly up on the same period for the first half of last year. That is a kind of probably at a normalized rate. Now I would expect that GBP 0.5 million or so capitalization level to continue for the foreseeable future. And obviously, that gets amortized. There is a balance sheet in the appendices, if anybody wants to jump to those, they tend to partly the movement since March and September and as a result of the renewal process with our customers. That obviously had a big impact on things like cash, as I've mentioned, deferred income, debtors, et cetera. So there was a good sales, really representative renewal cycles. The waterfall, which is always useful. I think for the most leaders. This takes the OpEx from last year, GBP 0.3 million, as I mentioned, and tracked across to this year is GBP 0.8 million. The big pictures there, obviously, the SaaS growth, which is the main contributor to our EBITDA, but also quite a saving in sales and marketing. Previously, we had built up the North American Sales & Marketing operation and downsized that in the other part of last year. So that reduced the cost base there. But having said that, the results still lack -- it improved despite that reduction. So we ensure that, that management 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 GBP 900,000. So it did flatter last year's result quite significantly. And you've also got the movement in capitalization in R&D spend, GBP 0.2 million. So that's how we tracked last year's EBITDA to this year. Now I'll hand over to Emma, who will tell you briefly, I haven't been in the company for all of a week. What she's rediscovering about the business and where it's going to go next?

And I just want to step up the financial with my observation, having this redraws the business. I think this is working day 7 for me. And so the cash on the balance sheet position remain strong for the group. The cash generation in H1 is always typically impacted by the renewal cycle. And 2/3 of that will take place in H2. 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 into a cash-generative position for H2. For me, the high levels of the impairment, revenue really showcased the exciting and ROI so 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 provide a strong foundation for business and the opportunity to support Richard and large business and building on these robust metrics is an exciting one to the future.

Thanks, Emma. So just turn our mind a bit more then to the detail of the forward look in particular the strategy and the business strategy and the opportunity we see. I've touched on this already. But in particular, I think the market context of pressure on the operating models that 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, 2011, the last financial sort of trough period. And I think we're beginning to see the evidence of that in the current time. Potently 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, 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 aggressive greater forward-looking processes so that you're effectively no way going to be. And that critical need for Decision Intelligence is just coming through in space. And we are just really well placed. We have a unique problem we sold 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 way that we do, globally. Secondly, we have the longest data set, going back to 2005. Thirdly, we actually do have an absolutely state-of-the-art technology platform. And as such is brilliantly positioned to lever some of the power of AI. And our machine learning teams are generating these for the solvers on our platform now, which does genuinely creates some mind-blowing capabilities, which the team leaders and I'll talk more about that a bit later. It's just fantastic because it just takes away so much the drudgery and go so much more focused on what people can do with the data. If I'm trying to 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 through the, frankly, operational on the right, where on the one hand is do we open another processing center in Bangalore? But it could be in a different person and a different place. Shall I move the sales to do X versus Y today? And those are the kind of practical 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. How do they know what the right answer is, and 2 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 1-man band, but when you're at a 10,000 person back office, the sheer variety that, that creates across the amount of resources you have to carry is a huge impediment to optimize performance. So ActiveOps is then our kind of solution present 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, 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. 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 -- our 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 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 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. That kind of embedded cost is really, really large, and the outcomes are so uncertain and ActiveOps' Decision Intelligence suite is really starting to make some noise around solving that problem. So we're quite excited about the offer. Then on behind that, and again, please do look at our website. We're now sort of really and cranking it up in terms of our go-to-market from a marketing perspective. I'm just back from our global sort of conferences. We have them in London, Melbourne and Nashville. And every one, 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 inbound, not just in terms of quantity, but more in terms of the inbounds that know what they need from us or I think that kind of, if you like, knowledgeable entry point to the funnel, ActiveOps is not a company where we want thousands and thousands of inquiries of small numbers of resource. We want the big projects with the big clients. And I think the quality of our inbound is really the opportunity for the shift we're seeing in the last 3 months. So I think that speaks a lot to the marketing. Let's just touch specifically on the product. With this new technology base, what we've also been able to do is to stream our product into a series so that each series has different if you like, functionality. And behind that functionality, then it comes a different value proposition. So we're releasing Series 3, 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 of that. But more importantly, the plan it produces is better than probably Richard, Ken and Emma would have actually done. And that means the managers when they come to use the software and now talking about the outcomes they're going to achieve with the data, not debating whether Richard's got an bad habit of sandbagging his plan. And that kind of functionality really, really does have an effect when you use systemic in. Service indicator is 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 the capability. It will also alert you to the fact that if you don't use tally on mortgage processing next week, it's likely our capability will start to drop, again, taking that uncertainty out of the management process. The virtual coach is probably the single most exciting aspect of that because that really is starting to say, here's a copilot sense, 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 a market that's so exciting. On the one hand, you've got a market context looking for more ways to do more or less. And our solution there is expanding and across a greater sense of work types, CaseworkiQ, WorkiQ, and ControliQ, and the actual capacity to consume our product, our software itself is absolutely built for enterprise, whether it's integration with other enterprise software, you probably heard of Pega or Workday or Salesforce, but also as an output is 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 you just you make yourself part of that infrastructure at that time, embedded decisions we were looking to and makes you even more sticky. And ActiveOps has always been in 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 can probably tell from my manner, the excitement I feel about the opportunities. H1, H2 rather is absolutely trading in line with broad expectations in the way of these things. We've got a number of expansion deals beyond what we've talked about already, which are either have already landed in this half or well down the pipe before Christmas. And we just got a healthy pipeline of new opportunities, building behind the type of story I've been spending 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, I'm very keen to have any questions, either now or we can back to people afterwards. But in the meantime, I'll then welcome to address any questions.

[Operator Instructions]

So if I can pick up a few of them here. So I'll jump specifically to, because it's the one I saw the first thing I'm trying to think about is the -- 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 coexisted precisely because the work, particularly with ERP or indeed a so-called BPM, business process management software package. They sort of solve a different problem, and they really cover all the work. So if you talk about a large enterprise resource platform possibly say, a Workday or something, they track time very well. But they don't -- and they might attribute time to activities in terms of ongoing on our training course, but they're not measuring volumes of actual activity. So you don't actually have a true productivity measure. ActiveOps combines that input from the ERP and the process level, which might be coming from Pega, or 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 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 co-exist with. I think Ken, if you want to pick up that soon around the...

Yes, sure. It's a good question from Ben. Are you at the inflection point, where we see the operational gearing in the business delivering substantial free cash flow or as further investment needed in the cost base. That's a really good question. We could actually kind of debate what the business is really about from a financial point of view. I think last year, we came through the breakeven point of EBITDA level where we started bursting into profitable and growing business. And so the whole business is about double digit or better revenue growth and single-digit or lower Op 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 to -- go past that breakeven point. So no, I think we don't need. There's always investment regard in marketing, sales, R&D, but they can be kept at a relatively modest level and alluded the revenue to deliver the cash flows that we want them to do. So a really good point. And yes, I mean, the answer is very much.

We've never borrowed money to grow, and I think that's -- and it's true we can generate. I mean, one of the advantages of being on in public markets has historically been access to capital, 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, should the strategic value being there, we can execute against that. Picking up a couple of questions. When approach your new clients who are the decision-makers within the organization you're selling to? Again, great question. And historically, it's been the P&L owner of the resources. So it might be a CRO. It might be a EVP Ops operations, somebody who carries accountability for the cost of delivering the service to customers, and that would be that remains true today. But interestingly, we're also seeing a migration towards technology. There's a greater need or a question being asked to CTOs about how to make organizations more agile, reduced 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 organizations that are facilitating that kind of digital transformation program. So there's a movement there. 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 has introduced a whole load of new variables for people to effectively juggle to put it lightly, in their organizations. And part of that is introducing visibility over are people working longer hours or people working at the right amount of hours, you've seen plenty in the press about productivity debate by work at home. Our software provides the data to support decision-making. For either the answer to the questions, whether it's hybrid working at office or whatever, we're going to say, 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 absolutely striking a note to HR audiences, let's say, to answer in 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 this sense, it could be all of those things. Typically, I mean 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 less effective than ActiveOps. And then that goes in a different direction. 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 work 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 -- and in this case, as HSBC and a Cognizant, for example, that might be executing? ActiveOps is a solution like Workday, like PRINCE2, like in ServiceNow. So it comes down how well people consume it. So the answer is absolutely. 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 outsource market is a problem where, particularly in the BPO market, very hard to evidence your credentials as a provider that you're good at this stuff. So if you think about the Indian explosion in the coding area, they developed -- there's a lot of talk of CMM level, in particular, CMM Level 5, which is a demonstration of a third-party endorsement of the development capabilities of what was in coding shops. 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 -- and how well controlled they are. So there's a big opportunity for us 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 outsource provider. So there's a lot in there. I think there's a nice finance question in that point.

Well, just 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 2 primary sources of revenue, SaaS elements and the T&I element. SaaS, that has a very low cost of sale. So it's very much a function of the mix of those 2 revenue sources. So in this half year, the SaaS element 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 continue to grow. So the margin will over time improve further. But in this case, it's primarily a function of the mix of revenues.

There's a second part of that question, which is the support for the implementation of the T&I activity. George, thank you for that. The short answer is no. Our efficiency of delivering is also improving. So a combination, again, is the technology and the structure we put into our implementation means that our bandwidth to delivery is actually increasing for the same level of resourcing. And then the second part is our capacity to educate our customers to self-install is also improving. So if you take those 2 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 clearly not constrained by our capacity.

It's one for you as well, which is do you see your clients taking in new territories as part of the land and expanding strategy?

Well, historically. So do our customers take us in? Yes, absolutely, because particularly when they're looking to expand SaaS 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 things. So there's no reason -- that's absolutely part of the reason people use us to expand or pull us into that. There's a question here about verticals. Could you please talk about end-to-end verticals? Clearly, you have great strength in financials, but which other sectors expect you the most [ trusted ] because significant additional potential for you? Historically, ActiveOps has done a lot in government. It sort of goes to wax and wane. We had a particular -- a lot of work in our revenue in New Zealand and particularly in the U.K. in [ Jobs-Plus ] back long. The current market for public sector productivity means the kind of transparency and discipline that our product provides will make a very, very relevant solution. That would also apply just as much to the IRS and parts of the U.S. government administration as well. And we -- we're becoming closer to that in a variety of ways. In particular in the U.S., 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, where your references are also in place, we very much don't feel constrained by that. And as such, we're not chasing markets. We'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 probably, if you like, leverage our toolkit and our assurance to provide. So I think that's about it. I'll take one more here. Actually, you mentioned longer contract cycles. Is that affecting the land expand part of the land or expand 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, IT second and just contracting the process is not getting any easier. I touched on Microsoft and how that helps already. But in truth, the expand phase is still challenged at times even when you have an MSA, a sort of service contract in place. But no, I mean, in the round, to be honest, the market pressure for results and the short-term return, the very quick return to get bank of ops is a far more of a positive impact than the past of -- the sort of general lengthening and complexity of service cycles. So 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 route there, but we will pick up other questions, I think, if we can.

Perfect. Thank you very much. And I think as you say, we address those questions that came from investors, and of course, the company will review all questions submitted today and will publish those responses that on the Investor Meet Company platform. But just before redirect to investors to provide you with their feedback is particularly important to the company. Richard, could I just ask you for a few closing comments?

Well, thank you, everyone 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, and 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. Noted that the management team can better understand your views and expectations. Spend a few moments to complete potentially will 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.