Pci-Pal (LSE:PCIP) — Review of Interim Results and Prospects

0:04 Good morning, ladies and gentlemen, and welcome to the PCIPAL Interim Results Presentation and Update on Prospects. To start with, if we could cover a couple of housekeeping items. Before we begin, we would like to submit the following poll, which you will see on your screens. Throughout this presentation, investors will be in listen only mode. However, questions are encouraged and can be submitted at any time via the Q and A tab situated on the right hand corner of your screen or if anyone has dialed in via pcipalwarlbrookpr dot com.

0:39 The company may not be in a position to answer every question today. However, the company will receive all question will review, I'm sorry, all questions submitted and publish responses where appropriate. These will be available on your Investor Meet company dashboard. Talking about questions, a number of the advanced submitted questions we will be covering in the presentation itself. So do listen out. We won't cover those post in the Q and A session, but you will obviously pick up on questions submitted if you recognize them during the course of the presentation. Finally, I would like to remind you that this presentation is being recorded. I would now like to hand you over to Chief Executive, James Barham and Chief Financial Officer, William Good.

1:26 Thanks, Tom. Good morning, everyone, again. I think I'll start by saying it's actually really nice to round out our Investor Roadshow week for these interims with the opportunity to speak to you all this morning. I know that's many existing private investors that we have and also existing followers that we have on Investor Me Company, and I know that's growing. So that's great to see. But especially after what's been another excellent period of progress here at PCIPAL. I think it's worth saying that we're really enjoying life at this growing business right now as well, which I think is really important in a small, fast growing SaaS company like ours, especially working across numerous time zones and the team committing long days.

2:15 It's good to be able to do that with a smile on our faces as we've made this further positive step forward towards what are really our real long term ambitions. Worth me saying, as usual, a big welcome to those that are new to our story. And I'll give more background flavor as we go through. But given this is an interims update, we'll be focusing on those results. So please do check out our previous presentations on investment company if you want a bit more background, or you can go to our our new website. The knowledge center is really good, so you can check out our our journey so far. So as Tom says, I'm CEO of the group and William with me today is CFO. And I'm going to kick off with a brief background now and then I'll hand to William for the financials.

3:04 It's the usual disclaimer. Okay. So at PCIPOW, we provide organizations anywhere in the world with cloud based secure payment data protection solutions, and these are used within any business communications environment. And by that, what do I mean? I mean conversational channels such as voice, phone, chat, social media, email, and any other digital engagement channel. So, essentially, if the payment is anything but on a traditional website or in a shop, in store type payment, then we cover it. And actually where many of our customers sit is where you'll find most of these channels, that's the contact centre or you may know that as the call center. Now there's quite a lot on this slide as it develops, but I'm trying to wrap in quite a lot in our about us. So bear with me as I I skip through this before we get to the the interims update. This is more for those that are slightly newer to the story. But but what we do not only secures a company's most sensitive customer data, which is their payment data, which derisks their business from the risks of data loss, but it also makes them compliant with some, fairly rigorous security standards that they need to comply with when they're handling this customer payment data.

4:23 And the main standard here is known as PCI compliance. And PCI compliance is a requirement for any company worldwide handling customer payment data. It's essentially a set of rules that govern how companies must handle and protect this sensitive data and it's contractually required from all the major payment processors who are processing all the payments globally across their networks. This is the likes of Visa, Mastercard, Amex, JCV and others too. So, essentially, if you're a company and you want to handle payments from consumers, you must comply with this standard. PCI compliance is very broad, it's really complicated and it doesn't really stand still either. So it's updated regularly so that it can keep itself ahead of the cyber criminals out there that would seek to breach companies.

5:21 Now, at PCIPAL, we're the highest level of compliance for a service provider against these PCI standards, which means we can provide solutions to any size company anywhere in the world. And on top of this, and this third bullet point here is actually really important to us and for what we're all about, we make the process of securing this data easy and cost effective and we do it in such a way that doesn't compromise the way these organisations wish to engage with their own customers. So this is the compliance without compromise statement that we have in the bullet there. And this is a USP of ours and we have a real focus on customer experience as a whole in the environments to which we integrate and making sure that that's upheld. Now, a bit more on a recent thought leadership event we've run on this recently, bit later in the presentation.

6:15 Now, helping us to be able to achieve this is the fact that we're a cloud business. We're a true SaaS business with a subscription based sales model. We serve all of our products from our fully virtualised true cloud environment within Amazon Web Services or AWS as it's known, where we've got six regional instances globally today across North America, EMEA, Europe primarily, and ANZ Australia, New Zealand. And it's this cloud only focus that means there's no hardware requirement for our services either, and we've focused much of our product development efforts so far on being easy to integrate for particularly our channel sales partners, which is actually where the majority of our business comes from. So this is particularly resellers who are selling our services to their own customers.

7:09 And we call this a channel first sales model as such.

7:16 Now we've got three core products today, as you can see there on the slide. Agent Assist, which is secure payments for live agents and customers when they're in a live call speaking to each other. Digital, which we actually launched in in January, bit of an update on that later, and that enables secure payments through any number of digital channels like the ones I've mentioned, web chat, chatbots, SMS, etcetera.

7:39 And and and that area is is growing slowly. And then, excuse me, IVR as well. So the IVR is your traditional automated phone system, no agent involved. So the customer will be asked to press 1, press 2, select options, then enter their card details. Now we also have speech enabled versions of the IVR and agent assisted offering as well. So finally on this background slide before I move on, we have a selection of some of our partners on this slide. We do have a growing partner ecosystem, which is now starting to really benefit the business as we're starting to see the new customer numbers increasing nicely again these interims. But I'll talk a bit more about our channel partners later in that update specifically.

8:31 Okay. So in terms of the update, well, as I've said, we are really pleased with this next step forward in our progress. And for me personally, I'm extremely happy with how we've been able to execute against our near term objectives in this first half of the year. You might think that sounds a bit short term, but I think it's been so critical for us, even as an earlier stage company, to map out that short term path given everything that's been going on in the world across the last twelve months. And frankly, I think it's allowed us to continue the momentum we've built in the second half of our previous financial year, and I think we've got those short term plans just about right. On to the next bulletin. In terms of key metrics, we've seen customer numbers jump up again in the period.

9:22 This is mainly a result of what I've just said, which is executing against those near term objectives. It's particularly onboarding and further enabling our partners and resellers, which is where we'll really get future scale and quantity going through our platform. And naturally, these continued increases in customers also contribute to our key growth metric of TACV, so total annual contract value, which William will talk about more in a moment, but this which for a SaaS business like us is critical to our revenue visibility, our growth trajectory, and it's really what's growing the significant revenue growth that we've seen in the last couple of periods that we've reported on.

10:09 Moving on to the next bullet, in terms of the pandemic, we've reported since pretty early on that we felt we were well positioned as a business to react and handle what was coming and I think not just the last six months but the last twelve months has shown that. It's, you know, it's not all by nature of our model either. I think as a team we've reacted really well to adapt the business in some of the areas where we needed to, such as marketing, not being able to attend events. So we've been upping our digital game. We've been working even closer with our partners. But I think certainly, we have benefited from the robustness of certainly several of the pillars of our strategy today. Whether that's entirely purposeful or not is up for debate, but we have benefited from those strategic points and they are our cloud technology, which allows us to work with our customers entirely remotely.

11:03 So having not been able to attend customer sites, well, that's never been an issue for us. We miss it as we like to meet people, but we don't need to. So we've been able to continue delivery, continue customers going live and then also our channel model as well. So we partner with financially stable, fast moving technology companies most of the time. Many of them are much larger than us too, financially stable, as I say. And that's allowed us to continue our sales momentum because those organisations, the majority of our partners, have been pretty opportunistic in the period. So we've been aligning ourselves very closely to them. And just on that broader industry point a little, so the industry itself has pushed on.

11:48 We now know that data released in the last couple of months, contact centre markets in both The UK and The US have grown. I've got more data on that in the interims that you've hopefully read. So whilst we're mindful of the impacts of the pandemic, we're confident that we're well positioned and have been really quite proactive to support this in creating new opportunity for ourselves during that time. And as such as the final bullet point says, we've got full confidence in achieving the market forecast for the full current year. So all in all, it's been a great first half, but we're now into the thick of our second half. We're building up planning for next year as well. And for me, the achievements in the first half are just another required expected step forward for us as we push on to more of these longer term ambitions that we have for this business.

12:42 Okay. So that's my intro over with. I'll hand over to William, who's going to talk you through the financials in a bit more detail. William, over to you. Thank you, James. Firstly, welcome, everyone. Thank you for attending. As a CFO, it's been a fun six months. Financial highlights and the plans we set out. We're delivering as expected. We delivered you know, we set ourselves some, you know, some large targets to hit, but we are achieving those. And from a CFO point of view, my metrics, which I measure both internally and the public ones, everything's a green light at the minute, which is which is very, very pleasing. So for financial highlights, I'll talk a little bit more about everything later on. But, you know, the revenues increased 56% year on year to 3,200,000.

13:34 86% of that is pure recurring revenue from our licenses. The gross margin continues to improve, and I'll talk a little bit more about that as as we sell more and more onto our Amazon platform. The losses are in line with our expectations as set out by our brokers. Our trading businesses in EMEA and US, the adjusted EBITDA is continuing to move towards that magic line of profitability and cash breakeven, which we've set ourselves out on the targets. And then, in so in terms of new sales, we're, you know, we're achieving strongly. The new ACV, target has grown by 44% year on year to 1,700,000. And if you take the 2019 number, within that number, there was one large US contractor, a whale contract, as we told it internally, of £440,000.

14:27 If you, you know, if you took that out, we've grown even stronger, and James will talk more about our channel partners and our channel delivery later on. As a result of that, our key metric, which is TACV, total contract annual value, increased 59% to 8,300,000. This metric is very important to us as it, you know, as it shows the growth we've got not only within the business, but the future growth coming over the next twelve months. As a result of all these strong results, and strong metrics, cash has held up extremely well. We are a loss making business as part of the plan as we continue to head towards profitability. So cash is a point of focus for us all the time. So cash has held up well. Net cash has held up well, and I'll talk more detail about that. Where does our cash come from? Well, actually, it comes from our business model. Our business model does advanced billing as a SaaS business, as you would expect.

15:22 And during the period, we, you know, we raised our deferred income, which is the other side of the the advanced billing, by £2,300,000.

15:33 Moving on. Just looking at the revenues for the business. The the the recognized revenue is is growing strongly. The bars you're seeing now are all half on half performance, not annual. So half on half, we're up 35% year on year. We're on 56%. The charcoal bottles you see there, that is our recurring revenue, our pure license recurring revenue that is being released to the p and l having deployed the contracts. The little orange bar at the top, that relates to our professional services release, and that's governed by I IFRS 15. And that continues to grow as we sell more and more contracts. Professional services is an important part of our business. So for instance, during the first six months, we do yeah. We signed £800,000 worth of professional services contracts in addition to our our ACV metric.

16:28 And those are generally 99% invoiced on on signature, which then form an important part of our cash flow. Gross margin, that's grown to 73%. Now why is that growing so strongly? Well, we have two two platforms. Our first generation platform was the original part of the business, and we stopped selling that in in f y eighteen as we launched our new Amazon platform. All new sales go onto the Amazon platform. And why is the margin improving? Well, actually, we own the Amazon platform, and so we have very minimal cost of sales. Whereas the first generation platform, which is in E in EMEA, is a revenue share model. So we only get approximately 55% margins from that. So as we sell more and more onto the Amazon platform, I'm expecting the margins to continue to improve.

17:21 And, eventually, we will subsume the first generation platform into the into the Amazon platform, and we have plans for that, which over the next couple of years to do so. At which point, we might lose some revenue, but we're expecting the margin to be at least maintained, and it will help us save some underlying compliance costs underneath.

17:42 Moving on, TACV. Sorry. Sorry. TACV. This is the important metric. So some of you who have followed us from over previous presentations will remember that I set a target for the for the financial year that we'll get to June 22 June 2021 with circa £9,800,000 worth of TACV in the bank. What is TACV? Well, it's the sum total of all the contracts, recurring revenue contracts, we have in the business, regardless whether it's deployed, and so recognizing revenue, or going through our deployment metric. And I'll talk a little bit more about that split in the next slide. Why why is 9,800,000 important to us? Well, it's gonna be the it it will show that when I get to June 2021, we will have enough contracts within our our business to cover our underlying cost base.

18:41 As a result, we then get the confidence that, you know, we will turn breakeven and cash positive in FY twenty two. Moving on a little bit more about group TACV. The original part of the business is was formed in EMEA. It's been around since 2012. We clearly split the business in in September 16 and focused on our PCI compliance business. And the graph you see on the left hand side there, the charcoal colors is the TACV element for the EMEA region, which is the strongest parts, the more mature part of the business. And that's had a successful successful year, growing its revenue year on year by 45%, in line with our expectations. In fact, they've had a very strong year, slightly ahead of expectations.

19:35 Within, you know, the orange bar is the North American region, which we only launched in FY 'eighteen after the first fundraising. That's had another strong year, and we are continuing to sign new contracts, new ACV, which is building our our revenue visibility in that region. And you can see those the the orange column has gone up by a 118% to 2,400,000. In future, over the next few years, I'm expecting that orange bar to overtake the charcoal bar. Why is that? Well, the North American region is six times larger than The UK region in contact centers. In terms of EMEA in terms of EMEA, it's it's probably double the size of EMEA.

20:21 If you look on the left on the right hand side, I provide a split of of the of the TACV into what's deployed, and so recognizing revenue under IFRS 15, and then what's in deployment. And you see we've made strong progress in the in the six month period, delivering over £1,800,000 worth of revenue recognized revenue, annual contract revenue to the business. As of the end of December, we still have 2,000,000 £2,000,000 worth of contracts going through our deployment. And James will talk a bit more about our TTGL metric and and how we're improving that. Because I can only start recognizing revenue once there is once we have gone live and deployed the contracts with our customers. You'll also see there's a small element of on hold at the bottom.

21:08 We've made improvements on the on hold. It's halved, but I must admit that half yeah. That some hundred, hundred and twenty thousand pounds of that improvement has come from us agreeing to walk away from contracts with customers. Some of it's being driven by the pandemic, others being driven by the lack of resources or changes at the customers' customer side. Of the £270,000 we had on hold at the end of December, that's broadly split into two categories. We have, contracts which have been signed with some, you know, smaller customers, and, they have to get themselves organized vis a vis getting resources to allow the deployment to come through. That sometimes takes one, two, three months at their end. And so those contracts sit on hold waiting for us to deploy.

21:56 The other element is where our channel partner has successfully sold a new bigger project into a co into a contact center. Those contact centers then you know, that customer that that partner then needs to deploy its main technology first, and then we normally come in as a second phase to that. Clearly, from our point of view, we would like the on hold to be nil, but it's a reality of of our business that there will always be an element on hold. But we do watch it, monitor it monthly, and report on it accordingly.

22:30 Moving forward, looking at the income statement, I've talked about recurring revenue. I've talked about, you know, gross profit improvements and everything like that. The areas I'd like to highlight here is two areas. Staff costs, you can see they've they've the staff costs have gone up by 11% to £2,900,000. That's driven by the impact of additional headcount as we continue to grow. We've gone from 55 employees to 65 employees over the year, and that's all part of our maturing business. Yes. We will still take on new headcount over the next coming coming few years as we continue to grow, as we continue to mature. But the important thing to remember is that that head rate of headcount growth will not be as large as the recurring revenue and the and the resulting gross profit growth. So, you know, we are expecting operational gearing improvements.

23:27 The other area to look at is other expenses. Other expenses are 1,175,000, which is 558% up on the pro on the equivalent period in December 19. Why is that? Well, 80% of those costs can be put down to three three broad areas. The first area and the most expensive area is the the Amazon platform. The cost of, you know, paying for AWS and the associated software that goes with it, that was a £375,000 bill in the first half, up from 275,000 in the in the, you know, comparative period. That's that growth is due to the yeah. Due to our growth we've got coming through the business as we put more customers on the on the platform, then we have to increase the effective horsepower and the processing power we have at Amazon.

24:18 So that's 33% of the cost. The next biggest expenditure is actually exchange movements. It's you can see underneath there, I've I've highlighted the exchange movements. You know, the, you know, the hit the hit we had in the business in both periods as the US dollar mainly strengthens. So we took a a a translation cost through the p and l of £366,000, which is just over 30% of those other expenses. Why is that? Well, the US dollar has gone from $1.25 to $1.36 at the period end. Yes. It's it's gone up a little bit more, another 2% since then, and so we're monitoring carefully. If you yeah. The last bit of major expenditure in the other expense line is our marketing cost. And as James said, we continue to market. We continue to work with our partners. We've gone we've moved from the conference face to face meeting, marketing, to working more with our partners on a digital platform.

25:16 That's working very well. And James will talk a bit more about some of the some of the some of the good things we've done with, you know, our digital marketing and our conferences. So those three items account for 85% of that cost. If you stripped out the adverse exchange movements and the costs relating to share options, the adjusted operating loss improved to 1,700,000 from 2,100,000. That's an 18% improvement and was in line with our expectations. Just moving on. Balance sheet. So a few few points to pull out here. The fixed assets continue to grow. Why is that? Well, that's mainly our development capitalization. Because we're investing heavily on our Amazon platform and we have a detailed road map, I have to capitalize the cost of, primarily salaries of our staff going into that. We spent £400,000 in the six month period. Prior year comparison was 500,000.

26:17 And we will continue to do so as we continue to grow and add features to our platform. However, the rate of capitalization will will drop off over the next couple of years as we, you know, hit the the IS 38 rules. Trade debtors, I just wanted to talk about that briefly. £2,000,000 worth of trade debtors, half of it relates to invoices for new contracts. So we're collecting those through. The other half is on renewals and everything like that. Collections have been slightly harder over the pandemic as expected, especially in The United States, who some of our customers have taken the unilateral decision to try and pay us on ninety days, which has caused some detailed conversations.

27:04 But overall, bad debts have been, you know, nil going to the p and l, and and we are collecting our debts, albeit slightly slower. Has it improved? It has improved slightly since the since the period end, but I am expecting to be, you know, challenging for the coming six months.

27:22 The final bit I'd like to point out is the bank borrowing. The bank borrowing is at 2,100,000. We did draw down the final part of our bank facilities of 1,250,000, leaving me with a 2,100,000 balance at the at the year end at the half year end. And I'm repaying that at a £100,000 per month. So over the next twenty one months, I'm expecting that to disappear accordingly. Finally, cash and cash flows. Being a loss making business, heading towards profitability and cash breakeven, we monitor this very carefully. What I've given here is six months slices of our, operational, expenditure in cash going through. So you can see the operating loss at the top of the business. That's the statutory operating loss.

28:08 Where we focus on, though, is the cash operating loss, having removed the likes of the depreciation, amortization and exchange movements, etcetera. And you can see that that's a positive trend. It's come down from 1,850,000 down to 1,300,000, and we're expecting it to continue in that in that with that momentum. But if you then move to the cash used in operating expenses for the six months, out of the £1,200,000 operating loss, we've only lost cash of £500,000. How come? Well, that's part of our core business model, and it's the main movement in in deferred income, which is our advanced billing. As we sign contracts, we want to you know, we build the

28:49 professional services upfront. And and quite often, we also build the first year's licenses. Those licenses then sit in deferred income and get released once the bit once the contracts go live, but it's an important bow wave of cash for us. However, that's not the that's not the whole story for us because, clearly, we're spending serious money on our development and our, paying interest and things like that. So where the board focus is on the cash used in, the business before financing, which in analyst speak is, free cash outflow.

29:21 And as you can see in the six month period, it's improved from 1,500,000 in the prior year to circa to £900,000 in this this financial year. And, actually and and so the the the operating loss of two point one has actually turned into a cash outflow of point of point nine. The other tip that I give you is that, yeah, as at the end of February twenty twenty one, cash has improved.

29:45 It's actually 4,600,000, and our our net cash is 2,600,000. So it's gone up by £500,000. Why is that? Well, actually, around the Christmas in this this quarter period,

29:58 there are strong renewals from existing customers as well as as well as we've been successful in selling new contracts. Would I expect cash to continue to outflow? Yes, I am. The summer months are slightly worse for renewals. And as a result, I am expecting cash to, you know, to outflow out of the business because we are still loss making. But we still have sufficient cash head headroom, and in fact, we're slightly ahead of where we where we're expecting to be at this time of year. So I think I'll hand over to James now.

30:33 Thanks, William. So we're having plenty of questions coming through, will just say. So I'm going to canter through these slides because we'd like to get to as many of those as we possibly can. So on to our technology, the PCIPOWER cloud platform that we talk about. This is a key competitive differentiator for us. We were the first to launch a true cloud globally available

30:56 solution in our space. And it's one of the key reasons that we've been successful with partners, particularly those that are integrated partners of ours or those that have significant cloud product presence themselves. So this is the likes of Vonage, 8x8, Talkdesk, Genesys. But it's also a key reason for our capability to service the majority of the small to mid size end of the contact center market, which I'll talk about a tiny bit more in a moment, but it is by far and away the vast majority of the addressable markets, the less than two fifty seats end of the market.

31:35 We launched our TrueCloud platform in well, it was kind of back in the 2017, in October, we weren't actually selling it until around February 2018, so we're about three years into that now. We launched on AWS, as I mentioned earlier, which we specifically chose for its its geographic extensive coverage, features, resilience and particularly security as well, which was really well aligned with what we were trying to achieve in that platform. It's also highly cost efficient,

32:03 William said, so our margins are increasing the more that we sell on that platform compared to our first generation platform, which was more of your traditional privately hosted environment. But as I say, we've actually not been selling on that platform since early twenty eighteen as well, so nearly three years. So that will continue to be diluted as we sell more and more on the AWS platform. Now we've got customers live across all six instances of our AWS environment. We have the ability to scale and expand that platform very quickly, including doing that geographically too. We set up both our Canadian and Australian and Sydney instances in under two weeks. So we can be really reactive, although we haven't expanded any further for the last eighteen months or so because we're very well set up to deal with the focus geographies that we have today.

32:57 Now, in terms of the digital product that I mentioned earlier that we launched about a year ago, a bit of an update for investors that were aware of that. So that's selling really well, really pleased with how that's gone, really smooth, straightforward deployments on that front. We've got a number of customers live. We have more and more going through the go live process.

33:18 It's primarily being sold as a bolt on to agent assist, which is quite natural really because more and more agents now within contact centers are very much handling the omni channel of conversations. So they're dealing with voice at the same time as dealing with digital channels like web chat. They're very much omni channel capable, so they can flip between the two capabilities using our agent assist and digital technology. And then as William did touch on just now, that first generation platform and privately hosted environment, we've got around GBP 1,700,000 in annual recurring revenue going through that platform at the moment. We have stated, and I did actually state this in the full year report, that we were going to start a project to start transitioning customers off of that platform onto our AWS environment. We've been way too focused on the sort of early stage growth and foundation of the business to do that. We feel that we have the bandwidth and capability to do that now. So I've set a target internally of achieving that by

34:17 October next year, so 2022, and William's covered off that there might be some margin gains for us to make there, but we're also aware we may need to offer some incentives, which don't need to all be financial incentives, but it's good to get that project underway.

34:36 The second pillar of our current strategy with cloud is our channel go to market model. It's another differentiator for us. I've seen some of the questions coming in saying why are you different from your competitors? Well, as I'm telling you, cloud, channel are two big parts of that of why we differentiate. We set out an objective to become a channel first business in 2017, and we achieved that within two years of stating that objective to our investors. We split our partners into four groups, and that kind of dictates how we work with them, how we manage those relationships.

35:14 Primarily, that's the first top two that you can see on the slide there, integrated partners and solution providers. So integrated partners have highly repeatable integrations, particularly on the telephony side, and this is where we're often doing cloud to cloud integrations with some of the CCaaS and high growth UCaaS vendors that I've mentioned so far. But solution providers are very important to us too. So these are organizations that are selling standalone versions of PCIPAL, so there's no integration necessarily or there's just a light integration. And this might be payment providers, it might be systems integrators like Capita, Pay360 who we work with, Civica in The UK or payment providers like Worldpay. And then we also have a much smaller section, which is referral partners who, by the name, introduce business to us and often give us access to their customer base, which is very important for us in terms of achieving scale through our brand messaging.

36:09 And then technology partners, which recognizes that there are a small group of very, very large, often quite traditional vendors like Cisco, Avaya, with whom we actually have these accredited integrations. So we class them as technology partner as such. Now in terms of how much of our business comes through channels, as said, it's channel first, 75% in the first half. I'm quite happy with the range of high 60s through to about 85%. That's generally where we've always been telling investors we expect that we would sit in terms of the amount of contracts coming through channel partners. So quite happy that it's 75% for the period, and I would anticipate being similar to that as we go forward as well. But we have seen a big tick up in the amount of customers that we've signed in general. And actually channel contributed 70 new customers in the first half.

37:03 That compares to just 82 in the full prior year. So you can see the momentum, hopefully, that we're starting to build and the scale opportunity that we've got by working with these channel partners. Now we do talk about channel first or partner first, and the reason we say that is because we

37:20 do sell direct to. We don't hide from that. We want to sell direct to, but we don't want it to be the majority of what we're doing. And we do maintain the ability to sell, so our sales teams can deal with it, marketing. And actually, a year ago, in our last fundraise, I did talk about a new account based marketing strategy, which was particularly to target more sort of strategic direct business. So that is there. We've touched on that bullet there. We've certainly seen a proportionate increase in the value of deals coming through channel though. So that's moved from 42% of the ACV that we've signed to 64%. Why is that? Well, we're building up more and more traction with these partners. Many of the partners that you've seen in the presentation today we've actually been working with for less than two years And most of these partners are quite big organisations, so it does take time for us to get moving with them. So that's one reason.

38:16 The other is that last year we had a one off very large deal with a high ACV value, so that skewed the numbers a bit to a degree. And being a small business, that can happen. We're not going to complain about some of the impacts that a one off large deal is going have to us. We just need the underlying trends to keep improving the way that they are. There's some sales highlights in here, which I will touch on now rather than later because I'm conscious of the time to get to questions. But great reseller contract that we've won there with a major U. S. IT services provider to the government sector. This is FED and SLED, federal, state law enforcement education space. It's very similar to a degree to the sorts of business we do through Civica and through Capita Pay360 that we've been very successful with over here in The UK. So we're obviously hopeful of building a strength in the public sector space and government in The US as well.

39:10 And that resale partnership has produced its first customer too. So my US team are really proud that they'd signed their first state and that's due to go live pretty soon, I believe. The other point I'll make on this slide before I move on is that many of our channel partners, certainly the global ones, are US headquartered. So we are regularly seeing now our efforts in The U. S, our investment in North America paying off for the group. And a good example of that is relationship that we grew that was we held regionally with a large U. S. BPO, so an outsourcer with tens of thousands of agents who we've worked within The UK. We worked with a UK subsidiary. Well, during the period, we were able to expand that relationship, and and our relationship is now owned out of their headquarters in The US. And since we expanded that to a new global reseller agreement where we are the preferred PCI solution for their outsourcing business worldwide, we've sold a number of new US customers and a new Spanish customer as well under that new global framework that we've got.

40:22 Now I'm not going to spend too much time on this, but the North American opportunity is the biggest opportunity in front of us under the current plan. Today, it's the main reason that we've raised money in the last few years when we have. You know, there is a serious scale opportunity here in The US. These trends that we see in The US as well related to this data you can see on the screen, that 93% of all contact centers in The US are less than two fifty seats. That's the small to mid sized end of the market. That's the scale opportunity. And if we can't deal with that, we're not doing our job. So we've always set out to be able to target that volume end of the market. Now I think we've proven in the last few years, we can also deal with that much smaller enterprise end as well with the enterprise contracts that we've won, but it's critical that we're able to address that end of the market too.

41:17 Now in terms of the updates for the regions, there's a lot of information on these next two slides, so it's all crammed into the interim, so you can double check back there as well. Another step change in North America, no doubt. We've increased the key growth metric of TACV by 100%. Really pleased with that result. That's a great indicator of the future revenue that we're likely to see coming from that business unit. Revenue is now picking up as well, contributing more than 25% to the group revenue total. The numbers are still small, but it's only our third full financial year in The U. S. I will just comment on ACV. So ACV signed in the period was up just 8%. I say just because it was against a very strong comparator last year and that's because last year, we had one of the largest deals we'd ever signed in the company's history signed in that first half.

42:11 If you take that out and consider the trends, then we're looking at three to four times the amount of ACV booked. So looking at big deals will come, but as I've said in the interims, the timing of those is difficult to predict. More importantly though, we've signed 35 new customers in the period, which is actually only a couple short of what we signed in the full prior year. So the trends are looking very good and I'm very happy with how those plans are playing out. That said, just because we didn't sign a 5,000 seat contact center, we have signed some pretty big ones. So the largest in the period in The US was more than 1,500 seats, really well known fashion retailer in North America. And the other great thing about that one was we sold it and it was live within two months. So considering our TTGO metric that I'll talk about in a moment, that's a real success story, that one. So great to see and great to get to revenue recognition.

43:07 And pipelines in North America looking strong going into the second half as well so that we can continue that momentum. So on to EMEA, which is primarily our UK based business, certainly everyone that is selling into EMEA for us is based in The UK as well. Really strong period for the UK team, really pleased with that. ACV nearly doubled what it was at the prior year, customer numbers up more than 50%. No doubt, our UK EMEA business is benefiting from the global relationships that we're driving out of North America. We're seeing great sales coming through from some of those large North American global partners and most of those businesses have a real concentration of effort on The UK and Europe right now. So they are benefiting from that, but also they benefit from being the more mature business in that we have more mature regional partners too. So the likes of Capita, the likes of Civica who are working well for us.

44:12 So it's going very well in EMEA, the good uplift in revenue. It would have been a bit stronger before that several pretty large customers went live following the period end, which you would have seen in our trading statement, the outlook statement that we had in there. In terms of highlight deals, we did sign a very well known pan European airline. I think in any other year, we'd have made a lot more noise about that, but, you know, that's a tough industry that year. But the reason I'm highlighting it here is because we've taken real confidence from seeing organisations that we don't touch many of the sectors that have struggled, but seeing these organisations invest in our services because they're thinking, right, I've got through this, I've survived the pandemic, what's the next big risk? And data breach is certainly something that organizations are looking at as a concern. So we're really pleased to be supporting that airline, who's now live actually, as they go through their and commence their bounce back, which we all hope they are able to do.

45:19 And then operationally, this is actually almost one of the strongest slides in the deck. I mean, those of you that have followed us for longer than just today will know that since I took over as CEO, we've had a real focus on this TTGO metric, so time to go live metric. It's so critical because it's the time from when we sign a deal to when we go live and we're continuing to improve that. We've improved it by another 16%, so we know that when we sign a deal, we know roughly it's going to take us about three and a half months to get to revenue recognition. But the other point is that we've been able to scale our operation here too, so bringing on 67 new customers to go live in the period. So we're ramping up the amount of customers coming into the business, but we can deal with it operationally as well. And then on top of that as well, we're delivering some of the larger projects quickly too and we've seen a substantial increase in the amount of ARR, so annual recurring revenue as a result of these go lives. And that's moved year on year from just over £400,000 in ARR live in the period to this first half, 1,800,000.

46:26 So that's a big step forward for us and we've covered I could talk about this slide a lot longer, but I'm conscious of time but we've come a long, long way here and I'm really proud of what we've achieved. It's been a real team effort across the whole business. And then finally, in terms of the outlook, we've maintained market guidance throughout the pandemic somewhat cautiously at times, but we have done that because we knew that we could deliver and we felt that our pipelines would be robust enough to do that. We are confident achieving forecasts for the year. We've gone into H2 in a good place, still signing partners, signing new customers at good levels and customers going live too. And that actually includes the largest deal that we signed last year. Has gone live in the last it went live at the end of January. So pleased to be able to report that that's now getting to revenue recognition.

47:19 And I will skip now to questions because I'm conscious there's thirteen minutes left. Let's make a move over to the question. Super. Okay. Well, thank you, James. Thank you, William. As James says, if we can now turn to the questions. There were a number that was submitted ahead of the event. And in fact, I trust that you will have recognized some of those answers within the slides themselves. So we won't repeat those. But do continue to submit your questions using the Q and A tab on the right hand corner of your screen. I'd like to remind you that a recording of this presentation, along with a copy of the slides and the published Q and A, can be accessed via your Investor Meet company dashboard after the event.

48:05 James, if I could just turn to you because there are a number of questions which all follow the same theme, which is about what investors may look forward to from this point onwards. And of course, you've covered a number of your moving parts in the presentation. But encapsulated in this question, probably you can touch on a few of those together. These are excellent results. What's next? Yeah. Okay. So and, yeah, I hope you can tell that, yes, we have a bit of a short term view over the last six to twelve months because of because of the pandemic. But as we said in the in the interims, we've been working very hard to make sure that we don't get too distracted by that, make sure we are looking much further ahead. We're an ambitious management team running this small company, and we want to continue the growth.

48:53 We need to deliver shareholder value as well. We're completely aware of that. And as I stated in the interims, a lot of this is about TACV growth for me. You know, we're a SaaS company. We're signing higher quantities of customers. We've got some great metrics related to that TACV growth, which is the key indicator for future revenue growth that we're going to achieve. So we've got to keep that going. So it's keeping that momentum not just into next year or the year after, It's across the next next five years. And then what goes hand in hand with that is a real focus on retention too. So our retention is very high at the moment anyway, but that's partly because we're a fairly new business, but or a young business in terms of what we do today. But it'll be critical for us to keep retention high. You know, really, we want positive net retention long term, minimize churn, these sorts of things. But there's a load of opportunities for us, I think, particularly geographically as well. We're very focused on The UK today and North America.

49:54 We're starting to do a bit more business into Mainland Europe. As we told investors through our full year report, and I've sort of reminded in the interims this time, we are working on a revised five year plan or refreshed version of our five year plan this year. So I'm going be drip feeding information out to investors as I'm able to. And you may have seen that we set up the PCI Power Advisory Committee in September, so feel free to have a look at the members of that committee. We have one today, and we expect to add more in the future. But clearly, they're working closely with myself and the Board to help advise us as we steer our path to more growth and more success in the future. Just looking at TACV, there is a question here which might be interesting to address following your statement there. But do you think TACV would have been materially higher had COVID not occurred?

50:49 I recognize that being cloud based has protected you to a large extent. Yes. That's a pretty quick answer, that one. So we did report at the end of the last full financial year that what we experienced with TACB was not really losing deals, losing opportunities or certainly net net, what we gained made up for what we lost in our pipelines. It was more to do with timing. So, you know, at this time last year, most companies everywhere in The UK turned off procurement because nobody knew what was happening. So at the time we reported that, that's the same. So, yeah, definitely, if we talk TACB is an accumulating metric. So if we had a delay in it across a two, three month period, then, yeah, absolutely, it could have been a bit higher than what it is what it is today. But in terms of actual ACV that's coming through and the momentum that we're now seeing, I think it had corrected itself by around June last year.

51:42 Okay. And just looking at those contracts, there are two questions which hang together quite nicely. What's the average length of your contracts? And what is your average ACV contract size? So I'll let William have a go at average length if you've got that number to hand, William. But the average ACV size has gone down slightly, but that's expected. It's around 20,000 pounds across both North America and EMEA. I think it was about twenty three and twenty four at the full year. But that's gonna happen because we're doing more business, you know, more contracts, more more value through through some of our integrated partners as well. And as I said, the majority of the market is that small end. So we don't really want that average to become hugely higher than that. We're quite happy for it to be pretty low. That's that's what we wanna see. William, in terms of average contract length, I suspect it's somewhere like two and a half years.

52:37 That's that's correct. It's between two and two and a half years as as we speak. It's not a contract length is not something we focus at particularly. Being a SaaS business, we, you know, we we rely we're we know we're sticky. We have a minimum term of twelve months in any contract. And all our contracts or the vast majority of our contracts have auto renewals at the end of it for twelve month period. So, you know, we've we we don't focus on signing extra long term contracts because we know our customers, once they, you know, install our services, are sticky. And you can prove that on the first generation platform, a lot of the original contracts are still there and still rolling forward. Okay. Super. Thank you. We've had a few questions on the addressable market size.

53:25 And I appreciate this is probably a slightly difficult one to answer. But what is the addressable market? Are there many contact centers who don't have a solution? Is that something you can Yeah. Yeah. It's not a it's not a straightforward one, I'm afraid. But We've we've obviously done work on this, and I've joked with investors before that we've, you know, we've thrown some numbers out there and we get mixed reactions to them. Some thinking it's too large, some thinking it's too small. Well, the maths that we can do is we can when we're considering our TAMs that we can look at the amount of contact centers and seats that there are in the regions where we're focused on calculating that TAM. So for us, that would be primarily UK and US today. We know how many agent seats there are in The UK from market research. We know how many there are in The US as well. And we also have a good idea of how many of those take payments from similar research. So it's around three quarters ish, so about 65% to 70%, 75% of contact centers in The UK and The US handle payments. So that's actually our addressable market.

54:26 In terms of today, in terms of figuring out value for that addressable market, then we would apply some or we can apply at the moment some fairly crude maths to that that would roll out IRR sort of average license cost that we would expect to achieve if we were selling to that to all of that addressable market to give us a valuation. What I will say is that we are going through a process this year to obtain better data and not just in those two regions. So we are hoping to be able to update investors a bit more once we've gone through that process. But actually, the mixture of contact center and payment data that's out there is not the best. So you're not going to find it on Google. It's something that we're having to invest in. Thanks, James. I'm conscious of time. So there are two questions here we're just going to finish off with, and they're for you, William, I think. So the first one is to do with foreign exchange, which I know you touched on very briefly.

55:19 But what impact to the bottom line does the strengthening pound to the dollar and euro have? Yes. I obviously highlight that we have a translation foreign exchange coming through the p and l as the US dollar has gone from 1.25 to 1.36. That's just the nature of translating the balance sheet into the p and l. From a from a natural hedging point of view, we are naturally hedged. We we sell in in dollars, but we also have a significant cost base in dollars. The US business actually, as I've reported, loses slightly slight amount of money. So as the dollar strengthens, it actually slightly improves. As we move into profitability, it goes the other way. But the the natural hedging of that is the strength of the business. So I don't have any hedging contracts in place to cover that.

56:10 We maintain most of our currencies in sterling. So, again, we don't have that that translation problem coming through the business. So we yeah. It's a natural hedge we have at the minute, but it's something that we are aware of and we'll focus as the business, especially in North America, grows. And then as we go into Europe and sell more in euros, then we will be doing the same. Understood. Great. Super. Thank you. And last question. What is the annual level of sales at which you think PCI Power will breakeven at an adjusted EBITDA level? And in which financial year do you anticipate the group showing an adjusted positive EBITDA for the year as a whole? Good question. I, you know, obviously, won't answer that directly, but I can point the listeners to FinCap, who are brokers. And if you log on to FinCap, you can, subject to signing on with them, download their forecasts and market predictions.

57:08 And I can say that they are expecting us to turn EBITDA breakeven in next financial year. That's f y twenty two, so the the year to June 2022. And on that's based on revenues of circa £10,500,000. That's our recognized revenue. And one thing I'll just say is, obviously, our TACV, as I pointed out, will be circa £10,000,000 going into that year. That's our recurring revenue base. So you can see we have a high revenue visibility of achieving that number. Great. Super. All right. Well, a very comprehensive review. Thank you both very much. Thank you for updating investors. Could ask investors not to close this session as you'll now be automatically redirected for the opportunity to provide your feedback.

57:54 If you access this meeting from our website, the feedback page will appear. If you access from a link sent to you by email, you'll be asked to log in to submit your feedback. If anyone has any further questions or would like additional information on PCIPAL, please do get in touch via pcipallwarbrookpr dot com. We will review all of the questions submitted, and we will complete the Q and A for you, which you'll be notified of in due course. Many thanks for attending, and we look forward to updating you again soon. Thank you, everybody. Yes. Thanks, everyone.