The Blue Prism Story

Macs don’t support a .Net framework

https://dotnet.microsoft.com/download

Given that Windows has a huge dominance in market share in desktops and laptops I can’t imagine where you get the idea that everything is on Mac.

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Bear,

I will take a guess. I think the stock price has gone done because spending has gone way up as they have increased employee count from 100 something to 1000 something in like 2-3 years. Additionally they got the money (140m pounds) from public markets to fund this growth. In addition there y/y revenue numbers were declining. I believe that is why the stock was cut in half.

Contracted customers numbers
2017 477
2018 992
2019 1677

Does not seem like a slow sales cycle to me…but I really do not know. Just going off numbers.

https://investors.blueprism.com/sites/blueprism-ir/files/Ann…

According to company page 8, TAM is 10.2B for 2022.

Management sees a real opportunity in upsetting current customer base. Think WIX. The measure each new cohort and each cohort spends more money with them over time.

Anyway just started studying company few days ago, but I like what I have been reading.

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Notes on their competition:

There is a short article about the RPA industry segment mentioning the biggest players in the field: https://www.grandviewresearch.com/press-release/global-robot…

UiPath is clearly the most successful of the pack with $400M revenues they moved from #5 in the market in 2017 to #1 since 2019.
AutomationAnywhere ceeded some market share to UiPath but remain strong with estimated revenue of $250M
BluePrism comes in 3rd with a revenue of $100M. It has been growing better than AutomationAnywhere but nowhere near the numbers that UiPath is posting.
NICE comes in 4th and I honestly can’t make heads or tails of their business. They’ve been founded in 1984 and their expertise seems to be in fraud detection. However, the products they seem to be pushing the most on their website are very non-descript generic RPA catch-all things, which I wouldn’t trust.

Others:
It’s important to note that a lot of big tech companies are already doing things that would be considered RPA on their own - Eg. Google has automated vetting of Youtube videos, GE has automated maintenance software on their medical devices etc. It’s unclear to me whether these instances are considered to be part of the RPA market or not.

Bottom line:
BluePrism seems to be the only company you can use to directly invest in RPA. I’m not sure whether this is good or bad - it’s an opportunity, but looking at their finances it seems to me they should still be in the hands of venture capitalists like UiPath.

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We’ve benefited greatly from companies like Crowdstrike and Alteryx where there’s not a lot of friction in buying their products – which makes for a short sales cycle. Definitely plenty to be interested in here with Prism, but their revenue has grown off a very small base. That makes me think the slow down could be severe, with the possibly low TAM and this idea that there could be a longer sales cycle. I’m curious if any PRSM buyers here agree that this is a concern, or can explain why it isn’t. Thanks in advance.

Bear,

I agree that the small revenue base might be a concern. A minor point is that the revenue is reported in British pounds so when converted to USD the numbers are about 25% higher. But yeah if growth slows when the base is only $150M then maybe the company can’t get escape velocity. I think one needs to look at the big picture though.

The company claims that the pandemic affected them. So if you can believe that then part of the deceleration can be viewed as temporary.

CEO was replaced. I think there was a good reason behind that and new leadership may help this company get back on track.

The RPA space is growing fast. If this growth (of the overall market) accelerates then there is opportunity for growth in the companies in the space. I believe this is true.

Regarding sales friction, I don’t know if it’s true. But I would look to the expand as being highly successful (see slides 11-14 in the most recent investor presentation). If you look at the spending on Blue Prism of the customer cohorts you can see that expand is working just fine. Is the land difficult? That needs to be explored, but the expand is definitely in tact. When a company gets tremendous ROI on a project then they will look for other uses cases to implement. One thing that leads me to think that land is not that difficult is that the professional services revenue is only 2%. It is possible that the sales process contains friction (maybe or maybe not) but implementing can’t be that difficult or else the professional services revenue would be a higher percentage of revenue.

I think the Thoughtonomy acquisition is adding revenue growth benefit and I think it will likely produce synergies.

So Blue Prism stumbled several years ago as they grew much slower than UiPath. CEO was replaced 3 months ago. I believe that the chance of this company getting back on track is very high. We are getting a very good price to make a bet on this.

So back to your question of why the stock price dropped. There are several possible explanations. But given the price, are you looking a gift horse in the mouth? Or is it not a horse but a donkey? Or perhaps it’s something between (a mule)? My small 3% allocation bet is that it’s a horse.

Chris

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So back to your question of why the stock price dropped. There are several possible explanations. But given the price, are you looking a gift horse in the mouth? Or is it not a horse but a donkey? Or perhaps it’s something between (a mule)? My small 3% allocation bet is that it’s a horse.

And remember that you are only paying for a mule for if it’s a horse, you’re getting a great deal.

Chris

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I haven’t bought Blue Prism, but I do own APPN. I recall APPN purchased a RPA company in January 2020, and I looked back at some APPN stuff on RPA.

APPN has a pretty good description about RPA here https://www.appian.com/platform/robotic-process-automation-r…. I think this confirms that many companies are in this market, but a few like Blue Prism (public) and UiPath (private) are the big pure plays.

In their initial press release, APPN also mentions that they can help companies manage their RPA processes from major RPA vendors like Blue Prism and UiPath. https://www.appian.com/news/news-item/appian-acquires-roboti…. So, APPN clearly acknowledges them as one of two big leaders in the field. It also shows that some “competitors” like APPN also believe the market is big enough to be a complementary player to some of the leaders in the field.

Mike

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If PRSM is not the clear market leader, they would never get the same valuation as UiPath. It’s still early days in the overall market but if UiPath does become the clear market leader they would be the gorilla and get the gorilla-like valuation and PRSM would be more like a chimp

As a similar but not exact analog you can see this in something like OKTA (p/s 35) vs PING (p/s 9)

Either way I’m looking at the company and thank you for brining it. Very interesting

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Just to highlight the stock volume on the US OTC exchange for BPRMF.

Scanning back over the past year, prior to Ethan/Chris bringing it to the board and starting the discussion/analysis here on Mon, 7/13, the volume would typically be between 1000 and 10,000 shares/day with spikes toward 20K maybe once/week on average, and now and again up to maybe 40K on a random day.

That all changed on July 10th (last Fri), when volume went up by an order of magnitude to 143,000 shares (Ethan? :wink:), and has been above that since, to today, where it’s already at 250,000 not even 2 hours into the trading day. Here’s a table of the volume for the last 10 trading days for BPRMF.


    Date           Volume
Jul 16, 2020      251,250
Jul 15, 2020      126,389
Jul 14, 2020      124,440
Jul 13, 2020      183,334
Jul 10, 2020      143,490
Jul 09, 2020       31,363
Jul 08, 2020       24,588
Jul 07, 2020        4,580
Jul 06, 2020        5,548
Jul 02, 2020        2,603

That’s a 100-fold increase! I assume this spike might also draw attention to this stock from some momentum traders that look for that kind of thing.

The share price has bounced around during those 10 days, basically between $14 and $16, but not consistently up or down, for instance, up yesterday, down today (so far). Will be curious to see if volume stays high and if so, for how long. If this volume spike was caused by this board’s members buying in to BPRMF, I would have thought the price would have mostly spiked up during this time, but not the case, so I’m not sure what to make of that. Maybe someone with more experience analyzing smaller companies and how they react to large trading volume increases may be able to shed some light on this. Maybe because the number of shares traded here are a small portion of the shares trading on the London exchange (PRSM)?

Anyway, I thought it interesting, hopefully others do, too, if not just a warning that if you thought other stocks we hold can be volatile, Blue Prism may show us what real volatility can be. If you’ve bought in here, hopefully you have a strong stomach and risk tolerance, I could see this one moving 10% or more up or down every day.

Disclosure: I have a 1-2% BPRMF position currently.

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While the volume in the US has grown, the price leadership is on the LSE. Yesterday’s upticks happened in London first and were followed here. The decline today started in London and was followed here.

The company sold stock in May under duress of Covid19 at about $14/sh. That seems to put a floor under the stock price.

Mike

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BD,
Nice post with lots of details. In my research, I came across the following article which links to a great many articles.

https://www.fool.com/investing/2019/12/03/this-robotics-stoc…

I did some online research. Here is a summary:

  1. BP was the founder of RPA in 2001 and coined the acronym RPA.
  2. 2 competitors (UI Path and Automation Anywhere) were valued at $7B in 2019 vs only $1.4B for BP. UI is growing fast. Automation says they are the biggest and CRM did their Series B funding round in 10/19 where they were valued at $7B. UI had $360M rev. in 2019. Automation may be similar.
  3. BP P/S in 9/18 was 40. So, it is not correct to say the company has not been discovered. The company was a 10 bagger at 1 point. Also, analysts have known about RPA. So, why did they not invest and maintain a high P/S? Since late 2018 stk has dropped, MF says valuation concerns. rev continued to grow though now P/S has dropped to 10.
  4. Per MF overall mkt was $1.5B in 2018 projected to $2.9B in 2021.
  5. In 10/19 UI laid off 100s of workers and CFO resigned. But this was considered company and not RPA specific issue. In the same month Automation did their Series B funding. Salesforce led the funding round. Shows the interest among the key players. Also, Appian (1/20), MSoft (5/20), IBM (7/20) have made acquisitions in the RPA field in 2020. Clearly, we can say UI had a hiccup and RPA is being considered a positive new field.
  6. BP is growing their customers. SAAS acquisition in 6/19 and getting some rev in latest Q. Last Q was impacted by covid but this half should be better as Europe recovered by May and has done well.
  7. I found one -ve comment by a MF analyst in 11/19 (it is one of the lined articles in the above link)- He says "Blue Prism superb product, but not fully understood by wider market and has become tarred with the same brush as its more hyped rivals. technology growing pains and benefits not yet filtered to senior executives at companies whose support is needed before it’s scaled. Intelligent automation will become more important. When that happens, Blue Prism could be a big beneficiary.
  8. This comment had me worried. Meaning the product is not selling like hotcakes. But BP has been growing fast. Plus all the positive acquisitions in this space see #5 above. Also, according to Gartner, hyper-automation, or the automation of tasks once performed by people, is the No. 1 trend in today’s AI world. Enough said.

All considered I took a 3% position today. Company reports in late Nov. Would have to see how much Covid has impacted them. They withdrew their guidance and said last half had a 15-20% drop in billings which would indicate a slow down in future rev. But Europe did recover faster.

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https://seekingalpha.com/news/3589431-ibm-acquires-rpa-compa…

Okay, I’ve been watching and I don’t think anyone has brought up this news, nor this competitor?

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Notes from their H12020 conference call (they report every 6 months):

Numbers are in british pounds:
Revenue 68.5M - up 70% YoY
Income (41.4M) - 20% worse YoY
Operating Cash Flow (31.2M) - 68% worse YoY

Yikes, they are expending 160% of their revenue and leaking a lot of cash, but they have pledged to fix that in 2021:
The Board is comfortable reaffirming its commitment to reach cash break even during 2021.

Let’s see where they’re losing money:


£m                         1H20  1H19
General & Administrative   13    12
Professional services      14    8
Sales & Marketing          56    45
Research & Development     8     4
Depreciation & amort.      3     -
Share based payments       7     3
Operating expenses         101   72

The first thing that jumps at me is that their R&D budget seems really small. Not sure how a tech company is supposed to develop their product with just a couple million pounds per year. For comparison, OKTA has got twice the number of employees but spends 5 times as much on R&D. Or another look - while PRSM S&M budget is 7 times its R&D budget, OKTA S&M budget is 2 times its R&D budget. It’s probably even worse in that I think what PRSM calls “Professional services” is simply included in OKTA’s S&M for the most part.

Cash and cash equivalents at the period end were £90.8m (30 April 2019: £129.4m). The Group holds a further £50.0m on deposit maturing within the next 12 months making its net cash and short-term investments position £140.8m.
The Group raised gross proceeds of £100m (before expenses) via an equity issue, in new funding in April 2020 to provide significant balance sheet headroom in the event of prolonged disruptions relating to the COVID-19 pandemic, and to enable it respond to opportunities that may arise.

This means they have enough cash for about 1,5 years of operation with the current performance, but hopefully their performance is going to get better.

So their marketing costs have risen by 32% YoY, how did their customer base grow in the same period:


                                1H20   1H19   YoY growth
Closing customers at period end 1,864  1,337  39%
New customer wins               255    349    -26%
Upsells during the period       635    496    28%

This is pretty bad given the size of their S&M.

They seem to be aware these results are not great and are talking about Covid-19 disruption throughout the document. They’ve even retracted their guidance because of it:

In response to the immediate impact of COVID-19 on growth rates, the unprecedented nature of the disruptions and the unknown timescales the Board withdrew guidance from the market in April 2020.

So maybe their performance has been hindered by the situation that’s out of their hands, though the impact of Covid-19 on their particular type of business is not as clear to me - they are a software provider and those have not felt the Covid-19 impact as hard as other industries.

Some positive things:
Recurring Revenue represents 98% of their revenue
635 upsells on a customer base of 1864 is pretty good. Looks like customers like their product.
Operating cash outflow reduced from 2H19

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Here are my thoughts (thanks to GauchoChris and Ethan for the initial research):

Regarding R&D, I once read an article that low R&D can indicate a moat. Not sure if this is true and if this could be an issue if too high or too low.

ZM (pre-Covid Numbers):
S&M: 54% of revenue
R&D: 11% of revenue

PRSM:
S&M: 81% of revenue
R&D: 12% of revenue

I read some glassdoor reviews that marketing of Blue Prism “sucks”. Overall their glassdoor ratings are not the best.

e.g. Cons
Marketing is horrible. Better product than the competitors but you would never know it. British company with US presence, which feels like a startup. Management doesn’t know how to move the needle.
Advice to Management
Spend some budget on marketing. This is your time to shine. You should own the RPA market. What’s stopping you? Be bold.

This is weird because obviously they are spending 81% on S&M.

I almost wanted to take a position last week, but then I looked at some google trend numbers:
https://drive.google.com/file/d/14NJ6-nTTz4UNy5u_pb_tM31k5GB…

This doesn’t look like a winner to me. Yes it is cheap. Perhaps for a reason?

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Company reports in late Nov. Would have to see how much Covid has impacted them. They withdrew their guidance and said last half had a 15-20% drop in billings which would indicate a slow down in future rev. But Europe did recover faster.

I work in finance for a FTSE 100, my product is IOT. You’re right that (in the UK at least) we have eased out of lockdown in recent weeks, and usage has up-ticked since then (across various industries). However we are still well behind run rate, and the impact will likely take rest of the financial year 2021 to recover. There is a lot of uncertainty in the market, which doesn’t help new business or incremental growth. We are currently mitigating the impact by offering discounts & promotional pricing to re-stimulate this growth.

I’ve seen a lot of great points about this company in this thread, and I am intrigued to invest in the RPA space since that is, as mentioned, where the future is going. I am just wondering why now invest in a company that has been experiencing Covid headwinds on the assumption they may recover quicker than expected (and little visibility of that), instead of investing in a company with continued tailwinds (eg. ZM/FSLY). And I certainly wouldn’t be inclined to build in a quicker than expected recovery from Covid into my investing criteria here, at least without more information.

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ZM (pre-Covid Numbers):
S&M: 54% of revenue
R&D: 11% of revenue

Take a look at almost any other company and I think you will find R&D is a far higher percentage of revenue. I mean the companies we look at here.

I suspect Zoom’s low spend on R&D is due to the CEO being Chinese and having most of their R&D done there. It might work for Zoom, but no other company on the planet is going to have their R&D done in China where it can be pilfered in a heartbeat.

I’ve always seen Zoom’s R&D as a big question mark, but they may be the exception to the rule.

A.J.

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Man it’s hard to invest in tech without firm grasp of tech in rapidly changing world…

Gavin Baker, a popular guest on Invest Like the Best Tweeted this…

https://twitter.com/gavinsbaker/status/1284481478022356994?s…

“Who needs RPA/Low Code/No Code after this?”

Off what appears to be AI writing code at high speed.

I know Blue Prism incorporating AI but no clue how any of this actually works.

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“I suspect Zoom’s low spend on R&D is due to the CEO being Chinese and having most of their R&D done there. It might work for Zoom, but no other company on the planet is going to have their R&D done in China where it can be pilfered in a heartbeat.

I’ve always seen Zoom’s R&D as a big question mark…”.

This was short-seller-fueled propaganda. Check your source. Here are a lot of articles for reference.
http://letmegooglethat.com/?q=zoom+ceo+not+chinese

Zoom is an American company, founded and headquartered in California, incorporated in Delaware, and publicly traded on NASDAQ. The CEO migrated from China in 1997 and has been an American citizen since 2007. Zoom was launched in 2013. Like a lot of companies, including their peers, they have some operations in China. This is disclosed.

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Take a look at almost any other company and I think you will find R&D is a far higher percentage of revenue.

Here is the article mentioning signs of competitive advantages, e.g. high margins, low R&D to Sales Ratio, Consistent Profits etc.
https://www.begintoinvest.com/9-signs-competitive-advantage-…

I checked a few companies (AYX DDOG TWLO NTNX ESTC ZS CRWD MDB OKTA ZM COUPA TTD DOCU SMAR WORK SQ ROKU ENPH LVGO) for R&D to Sales Ratio

Average R&D Ratio is 27%.

Below 20%: AYX (18%), ZM (10%), TTD (18%), DOCU (19%), SQ (14%), ENPH (6%)

Above 35%: NTNX (40%), ESTC (37%), WORK (72%)

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Hi BroadwayDan,

I read through many of the links to your post and yes it’s easy to be overwhelmed with the tech updates.

I did find this quote from your source settling, “ This is a strategy that OpenAI and other researchers have been pursuing for quite some time, by starting off with a ‘simple’ problem like trying to predict the next word in a sentence. We have now steadily built up to where they are today, where a model like GPT-3 can complete several paragraphs or more. Though an incredible result, even GPT-3 at some point may lose direction and wander aimlessly. Despite its massive size (over 175B parameters), it still may struggle with keeping a long term destination in mind or holding logical, consistent context over many paragraphs.”.

So, does that mean disruption for several industries including RPA?

I think the above quote may be a better starting point for this discussion if it weren’t OT from the beginning?

:upside_down_face:

While I will take a small position in Blue Prism after reading this thread, I am also likely to increase a tiny position I had in NICE, which has appreciated nicely (couldn’t resist) since I bought a few shares in late March (though what SaaS company hasn’t ?).

After all, NICE actually makes a profit and if RPA really has legs my guess is there will be room for several players.