A non-renewal and slower wins outweigh ActiveOps’s 110% retention

ActiveOps, the AIM-listed maker of decision intelligence software for service operations, told the market on 12 October that its first half had gone to plan. Revenue for the six months to 30 September rose 21% to £25.3m, organic SaaS revenue grew 19% to £18.2m and the company ended the period with £19.6m of cash and no debt. In the same trading update, it said a major customer, which it did not name, had told it that it does not intend to renew its contract when it falls due in March 2027.

The contract is worth £3.8m of annual recurring revenue (ARR), about 9% of the group’s £42.2m. It has no effect on the current financial year, which ends in March 2027. The board has nonetheless removed the revenue in full from its expectations for the year to March 2028, and now expects revenue and adjusted EBITDA (earnings before interest, tax, depreciation and amortization) for that year to be “significantly below market expectations”. The company put market expectations, as at 9 October, at £50.0m–£56.4m of revenue and £6.7m–£9.0m of adjusted EBITDA. The contract alone is equal to roughly 7–8% of that revenue range.

The board attributed the lower outlook to “both the potential customer loss and lower new business activity” in the first half, and the company said new customer wins and implementations had been lower than a year earlier.

Organic net revenue retention (NRR) was 110%: in ARR terms, existing ActiveOps customers were paying 10% more than a year before, after losses. Yet the forecast for the year to March 2028 moved on two things a retention rate does not show – how much revenue sits with a single customer, and how many new customers are arriving. In ActiveOps’s update, those two set the outlook for the next financial year.

A 110% retention rate hides concentration

NRR is a blended number, and a base expanding at 110% can still contain one account large enough to cancel out most of a year’s growth. Excluding the Enlighten acquisition, ActiveOps’s ARR grew 14% to £37.2m, an increase of roughly £4.6m. The contract due to end is worth £3.8m, or more than four-fifths of that year’s organic ARR growth.

The company said notification had “only just been received” and that details were yet to be formally agreed. The contract runs until March 2027, and the revenue gap falls in a financial year that does not end until March 2028, 17 months after the announcement. The board still took the revenue out of its forecast on the day it disclosed the notice.

The new-logo engine slowed

Group growth of 21% includes acquired revenue and a one-off £1.5m termination receipt; without the receipt it was 14%, and organic revenue grew 8%, or 5% at constant currency. Training and implementation revenue held level with the prior year at £3.5m only because it includes that receipt. Without it, the line was about £2.0m, and the company said the lower underlying performance reflected fewer customer implementations and new wins.

ActiveOps credited its revenue growth to “expansion sales in the existing account portfolio” and go-lives with several new customers, with strong growth in Canada, Africa and Asia-Pacific. With new wins lower than a year earlier, fewer new accounts are arriving to reduce the weight of any one existing customer in the forecast.

Enlighten weighs on group retention

Including Enlighten, group ARR grew 4% to £42.2m and group NRR was 101%; excluding it, ARR grew 14% and NRR was 110%. The gap of nine percentage points between the two retention figures comes from including Enlighten’s customers; the company did not give a separate retention figure for them. The £1.5m termination receipt in the half relates to what the company called the “previously announced loss of an Enlighten customer”.

Jeffery’s answer is AI productivity

Some cost action will follow the non-renewal, the company said, but it intends to continue with planned investments in growth initiatives, citing “the size of the opportunity ahead” and the strength of its balance sheet. Executive chair Richard Jeffery called the non-renewal “a setback to our near term revenue growth” and set out the case for growth: “The need for organisations to measure productivity gains from AI is a compelling driver for our software and one which we are uniquely able to meet, given our deeply embedded position within the heart of the operations of our customers.”

The announcement describes ActiveOps’s customers as predominantly in banking, insurance, healthcare administration and business process outsourcing. Jeffery presents the need to measure AI productivity gains as a driver of demand for ActiveOps software, in a half when the company reported fewer new customer wins than a year earlier. Results for the half are due on 24 November.

Organic NRR was 110%, and ActiveOps still guided the year to March 2028 significantly below market expectations almost six months before that year begins. One contract worth 9% of group ARR and a slower flow of new customers were enough to move the forecast.