Earnings Call: H1 2023

Mar 16, 2023

Good afternoon, ladies and gentlemen, and welcome to the PCI Pal results presentation. 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&A tab situated on the right-hand corner of your screen, or if anyone has dialed in, via pcipal@walbrookpr.com. We will endeavor to answer all questions today. However, failing that, the company will review all questions submitted today and publish responses where appropriate. These will be available via your Investor Meet Company dashboard. Finally, I would like to remind you that this presentation is being recorded. Without further ado, I would like to hand you over to Chief Executive, James Barham, and Chief Financial Officer, William Good. Thanks, Tom. Good afternoon, everyone. Welcome to this interims update for PCI Pal for FY23. It's a big year for us, this one, with some key financial milestones in them. For those of you that have followed our story for a while, you'll be aware of the growth trajectory that we've been on. But this year we're expected to hit month-to-month cash flow breakeven. So that's one of the milestones, and it's also a year where we're really gearing up to our first full year of profitability, in FY24. Both of those things have been very much part of the plan since the fundraise that we did and the strategy associated to that in May 2021. I'm certainly very pleased to report excellent progress along that path, and looking forward to talking to you about it today. We continue to execute very well on our strategic plans, and that's led to a strong first half financial performance. Financials aside, in the background we're very busy driving product development. That was a big part of the further investment that we've made since that fundraise in May, and later this calendar 2023, we're certainly looking forward to updating investors more on that, and I've got a bit more in this presentation as well. In a moment we will get into that detail. If you do have any questions, you can submit those through the chat, as Tom has said, and William and I will try and rattle through this, like we have done the last few times, so that we leave plenty of time to answer as many questions as we can in the live environment. I think now we'll get into the detail with a little bit of background for those of you that are new to the PCI Pal story. We're a fast-growing SaaS business at PCI Pal. We facilitate secure payments for organizations across business communications environments. What we mean by business communications environments are voice or phone, chat, social, email, basically all these channels that go into the omni-channel mix that makes up modern day call centers or contact centers today. The contact center is typically where we have the majority of our customers, and it's where majority of our customers use our services. By securing their payments, we help customers to also comply with various data standards. The main one, as our brand name attests, is PCI compliance or PCI DSS, which is the commercial set of guidelines that dictates how companies should be handling consumer credit and debit card data. Also, we find that that is often used as a good foundation towards other regulatory standards like GDPR, and other localized data protection standards, which we are seeing crop up more and more, whether that be state level in the U.S. or whether that be in other regional territories like Australia, for instance. One of the changes in our story is that as well as securing data for payments, we are also starting to bring new digital payment methods to contact center environments. Not only are we dealing with securing and facilitating payments for credit and debit cards, and the data associated to that, but also more recently, and in the first half, we announced our first open banking facility and feature, which we launched in, it was around September time. Excuse me, phone is ringing. We have got some other methods coming through on that payment route as well. So buy now, pay later, e-wallets, these sorts of solutions. I am going to talk a bit more about that product roadmap as we get further into the presentation. Certainly our value proposition here at PCI Pal is evolving, incorporating both security and compliance with payment value, layered on top. So a bit more on that roadmap later. All of this we do from our cloud-only product set as well. As I said, we are a SaaS business. We have got three core products, as you can see in the bottom left there. They are Agent Assist, which handles live agent interactions within call centers with customers. This is where you typically or traditionally would have picked up a phone to speak to an agent in a call center. Digital, which again is a live agent interaction with a consumer, but that is being handled over, say, web chat, for instance, or that is an agent engaging with you through a social media interaction that you might be having. Then IVR as well, which is the industry term for automated telephony. So when you are asked to press one or press two for different options, or perhaps it is a speech recognition system that does not involve an agent. We have speech recognition and keypad entry for most versions of our services. Many of the deployments that we have across these three products leverage tight integrations with many of the world's leading business communications vendors. Many of those companies we are proud to say are our partners. You see on the top right there, we are very much a partner-first business. The vast majority of our business comes through resellers. We are typically averaging about 80% plus. It is more than that in this first half, which we are very happy with. We live and breathe channel at this business. We are completely committed to a partner-based business, and we have been since very early on. It is a key part of our strategy, and we have got the market's leading partner ecosystem in what we do as well. Just some examples, as you can see there, and I will talk a bit more about our partners and how we segment them a little bit later on. I will not spend too much time on this, but just some awards where we are regularly recognized within the industries that we work within, whether that be communications or whether that be in the payment space. We also were listed as one of the 100 fastest growing companies in the U.K. last year, and I found out just last week, we have also been listed again this year for the 2022 awards. That is great to see and just good evidence of our progress at PCI Pal. On to the update in a little more detail. Just high level metrics overview. As I said, strong first half from us. Because of the nature of our revenue model, we have got good visibility for our full year numbers. I think personally, we are getting the right balance between further investment into this business and our drive towards cash flow breakeven and profitability. Certainly the board expects that the first months of that cash flow breakeven are going to be coming our way in H2, and H1 has set us up nicely for that. On H1, revenue up 33% to just under GBP 7.3 million. That is where we wanted it to be. That is actually the same pretty much as the full year we did in FY 2021. Just again, highlighting the progress that we have made. Also 33% increase in exit ARR run rate as well, nearly at GBP 12 million at the end of December. Not only do we sign business, but we are getting it live and getting it fed into the sticky recurring revenues that we have got. The revenue is very much underpinned by the core quality of the business. We have got strong customer retention at 95%. The churn that we experienced, the 5% churn was across just eight customers, and actually one of those made up about 30%-40% of that, and that was a customer that we could not really do much about that had been acquired and did not require our services anymore. I am very happy that we are keeping in line really with the trends that we set in the last financial year for high customer retention. That feeds into NRR, which is very much in line or slightly ahead of our own internal targets at 106%. The comparison against last year at 120% was a very strong period for us. We noted that in our interims last year and also our full year, that we made a number of large upsells last year. This year we have not had the opportunity to do that, nor did we expect we would be able to. We are where we want to be at 106% at this point in time. Driving revenue, we have our TACV metric in the middle there across the top. That is the total value of all the contracts that we have today, the total annual recurring value of those contracts. It is a good indicator of future recurring revenues. That is up 30% year-on-year to GBP 14.7. That does actually incorporate about GBP 300,000 of revenue that decreased as a result of a migration we went through for some of the customers that remained on our legacy first generation platform that have all been moved over to our AWS public cloud now. We did actually retain the margin for those customers, so actually it's much healthier business that we've got. That first generation platform had only sort of average 50% margins, whereas they're obviously much higher on our public cloud platform. Yes, we lost the revenue, but we retained the margin. So actually, if you want to compare like for like, it's that TACV number is just north of GBP 15 million. Probably the only metric that was slightly behind where we wanted it to be was the ACV sales in the period, which were marginally behind where we expected to be at GBP 1.5 million. Last year we did GBP 1.76, I believe. But as I said, that period did include a number of large upsells. Actually, we've signed more new logo business in the first half of the year than we did last year. In fact, I believe we've had the strongest new logo period for us in this first half of the year. So that's very encouraging. We are making a step up in ACV this year, and we do anticipate to do that year on year by the end of the full year. We have strong outlook into H2 pipelines as well. So while slightly behind, confident of making that back in the second half, given where the maturity of the pipeline is. Gross margins increased further to 87%. This is partly to do with the transition off of our generation one platform that we've not sold on since about 2018. Everything's been on cloud, but it's just taken us time to move things across and focus that project against some of the more priority things that we've had to focus our time on. So 87% gross margins. I suspect we're probably only a couple of percentages away from the ceiling on gross margin, but certainly it may still track further towards 90% in periods to come. That along with the revenue growth is driving profitability or our route to profitability at the bottom line. So the EBITDA loss of just GBP 0.6 million, I say that really reflects the maturity of where we've come from. In FY 2022, we added 50% to our headcounts. We went up to just around 100 people from a standing start of sort of mid-60s. So we've brought on a lot of costs in doing that. It just goes to show the maturity of the business and how the revenue has grown, the margins have grown, that we've actually achieved the same level of loss in the period. So that's very encouraging for us and is reflective of where we're getting to from a profitability standpoint. Just looking ahead, strong lead generation going on through the business right now. Feel very happy with the way the pipelines look. We've got good momentum in customer deals going through, and we've got a strong pipeline in H2. A bit more on that later, in terms of where that pipeline is coming from. We've pushed very hard in the last 18 months, and those of you that know us well will know we've done that. We've always pretty much stretched our targets year on year. We do that, we challenge ourselves. That requires a lot of effort from our people. Despite a number of headwinds that this business has had to face, we have retained employee retention at 93%, and that is something I am very proud of. We have got an excellent culture here at PCI Pal, and as William Good reminds me, people are our largest cost. So we have got to look after them and make sure that is benefiting us. A bit more on strategy. Just those new to the story, three key strategic pillars, broadly speaking. There is quite a lot more detail to our strategy, but from a high level, they are cloud, global, and channel. To lead the market in cloud solutions in our space. We were the first to market with a true public cloud offering on a global basis, and by far, we have got the most mature cloud platform today. To leverage that cloud platform to be able to access the global contact center market. It is a fairly specialist space that we operate in, but it is a large one on a global basis, and most of the dynamics in contact centers are the same no matter where you go in the world. To be able to access that global market through the technology that we have got, but also leveraging a partner ecosystem and a channel model to support us in that ambition to sell globally and access that market. That is very much those three pillars of what we have really focused our strategy on. So real focus on technology and global presence. Just updating on that position. The global cloud and our global presence is key to us now. We are 110, 115 people within this organization, but we very much have a global feel to us. We think very hard about how we do that, and it is important to us to take more of a holistic global view in this business, given that we have got so many large, truly global partners that we work with. We launched Australia and Canada, so we have got feet on the ground effectively in those two countries just over 12 months ago now. More updates to come on that. As a business, we are very well set up to manage the global engagements that we have got with partners. The vast majority of our people work remotely, and they had done pre-COVID as well, but remote first is the way that we do things today. We leverage WeWork pretty much extensively apart from Ipswich, where we have started our own today. WeWork has not quite made it here yet. But we have WeWork everywhere else, and that allows us to be pretty cost-effective but also have that global feel and that global access. I am an avid WeWork user myself whenever I am traveling. In terms of the cloud platform itself, as I said, we were the first to launch in cloud. We were pioneers in cloud-to-cloud third-party integrations. I have always said it was the focus of our early product efforts. As a result of that, we have patented the ways by which we have found to work with third-party clouds. In FY22, we talked about an important patent that was granted for us in the U.S. And in the first half of this year, we have seen a raft of new patent grants coming through for that same method. The reason for that is these things take four or five years to come through. We've seen grants in H1 in the U.K., E.U., Australia, and just last week in New Zealand as well, where we do have a couple of customers. Cloud innovation and our focus on that has been important for our partner model as well. We're working with the majority of the Gartner Magic Quadrant for CCaaS. Abbreviation-wise, that's Contact Center as a Service, so it's the cloud communications platforms that they use. That's helped us with that partner aspiration, but also it helps us access the breadth of the contact center market. In particular, it allows us to deal with any size contact center in a cost-effective way. The vast majority of the contact center market globally is small to mid-size. In the United States, 90% plus of contact centers are less than 250 seats. That's the majority part of the contact center market, and that's where traditionally we were very strong, but we're now starting to move up into the enterprise space as well. We've got a very strong enterprise customer base. All of this is hosted within Amazon Web Services, which is the strongest hosting platform in the world, though we're agnostic to any third parties that we plug into. In short, we've got the most mature cloud offering in our space. We've got patents that protect the way we do things in this, and we're well set up to support our globally hungry partners across that as well. On those partners, good segue. Another strategic initiative was this focus on channel, and we do live and breathe it. We have a very strong partner ecosystem. There's some of our partners listed there, many of them with very tight integrations. We split our partners into three groups, so integrated partners, solution providers, and referral partners. We're very pleased in the period that we saw 87% of our contracts coming through our reseller partners. Actually another trend that we're seeing, and it was an expected trend, is that the value, so the ACV value coming through our partners is increasing. That's gone up to 65%. What I can tell you is that three-quarters of the contracts and three-quarters of the value that comes through partners is coming through our integrated partners now. Those of you that have listened to me in the past will know that that was a position we wanted to get to, because the integrated partners are much better operationally for us, and they're better in terms of releasing product as well, because you have a centralized integration and can work through them much freer. Highlights from the partner business for the half year. Record number of contracts being run through the channel, record levels of pipeline that we're seeing today. We've got a very strong pipeline coverage for what we need to do in the second half of the year. We continue to be strong in the CCaaS space, both working with existing partners, but also we're still adding partners. This year is much more along the tone of the back half of last year. We're not going crazy trying to sign new partners at the moment. We are very focused on those relationships that we have already got and enablement and strengthening those. But we did bring on one new global CCaaS vendor who is growing at quite a pace and has good coverage across North America, Europe, and APAC as well. Signed our first customer with that partner as well. The integration is there and working. Then just finally, some of you will know that we are strong in the U.K. government space. We have got 50 plus local authorities that use our services and a number of central government agencies as well. I am pleased to say that in the first half, we kind of built the momentum, got the momentum going again in that space with a number of local authorities being added in the period. All in all, very happy with the execution against these sort of two or three key strategic initiatives that we have got. I am going to hand over to William now to jump into some of the numbers, William. I will hand over to you now for control of the slides. Thank you, James. Good afternoon, everyone. It is again, a continued story of growth, financially delivering on our plans, which we have laid out since 2018. Again, 30% growth in revenue, allowing some of that to feed into the growth in the business, but also allowing some of it to drop through to the bottom line in a controlled way to bring our EBITDA down, heading towards that profitability and cash break even in FY 2024 that we have been talking about for a number of years. On the financial highlights side, I like to lay out a sort of consistent picture. These are, I kind of use them every time we talk to you, so you can see the trends. When you see in the top left hand corner, the revenue, we did GBP 7.26 million this time, which is 33% up on half on half last year. As you can see, was almost the same as we did in the whole of FY 2021. You can see the growth performance of the business, and the board is fully expecting to hit its full year targets as laid out in our presentations. Gross margin continues to increase. In 2018, we were on our Gen one revenue share model. As we have sold more and delivered more on our AWS platform, that has increased to 87%. As James said, that is going to probably head towards 90% and then plateau. The numbers I look at more carefully is the bottom box there, the adjusted EBITDA. The adjustments I take out are exceptionals and share option costs, for instance. You can see the performance on that. As we have grown the business, we have gone from 25 people roughly at 2018 to the current 110. At the same time growing revenue, but decreasing the EBITDA. We are now down at GBP 57,000 loss for the period, which is very similar to what we did last year in spite of increasing, adding 25% more in the headcount and having a 46% increase in the cost of those people. But more on that later. Looking at other metrics we measure, James has talked about the new ACV. We are slightly behind where we wanted to be, but not critically so. We did GBP 1.47 million in the first half, against GBP 1.76 million in the comparative period in FY 2022. In FY 2022, however, we did sell GBP 650,000 worth of upsell contracts. Most of that was to three large clients that we renewed in the period. As James said, on a like-to-like basis, we are Sorry. On a like-to-like basis, we are ahead on new logo. We are aiming to obviously deliver a strong H2, as James said, and we believe we will be reporting a like-for-like increase against FY 2022. The only other graph I will talk about is the one at the bottom, cash balance. We finished the period of GBP 1.89 million. We had no facilities in place, so that is a pure cash balance. As you can see, it has grown to GBP 3.4 million at February 2023. If you have been following us recently, we did have a bit of an SVB problem, which I will talk about in a little while because I can see there are questions coming up. Mid-March, we were already at GBP 3.6 million, so we are turning the corner on cash. However, our cash flow is lumpy as we renew contracts. So why has it jumped so much? Well, in December, we had a renewal with our largest U.S. customer, and that was done on a three-year multi prepaid contract. We did a similar one when they first signed up to us, and they wanted to do it again. That was $1.75 million, which was billed in December and collected in January. Since the period end, we have also billed a year renewal for one of our largest U.K. customers, which is GBP 1 million, and that was billed and collected in 30 days. So the cash is strong, and I will talk a little bit more about that later when I talk about SVB. TACV. TACV, I will not talk much because James has covered it. What I will bring to your attention is the little box at the top, little orange box with the GBP 2.8 million in it. We are still expecting our TACV to finish the year at about GBP 17.5 million. How does TACV grow? Well, it grows by us selling new ACV contracts. It gives you a gauge of how much we are expecting to sell, and that is a net figure because as contracts churn, and we do expect some contracts to churn in the second half, that will come immediately out of the TACV. But we are well on target for delivering those targets, to get to the 17.5. That 17.5 should underpin the management expectations for FY 2024. A bit more on TACV. We are clearly strong in two regions. EMEA was our original market, that's grown, and you can see the orange bars on there is North America, which has grown from our launch in FY 2018, through to the current, and is growing strongly as you can see. On the right-hand side, I break down the TACV also in between what's live, so our ARR, against what's in deployment, so contracts that are signed and going through and then we'll recognize revenue, and what's on hold. I'm pleased to say our ARR has hit that magic number of 12. So I'm getting a monthly revenue release of GBP 1 million. That should be compared to what we did in FY 2018. We did GBP 2 million in the whole of FY 2018, so there's strong growth coming through this business. On the on hold, we've improved the on hold position from the end of June, where it was GBP 1.2 million. It's now GBP 0.88 million. The metric we follow, the on holds run between 4% and 6% of TACV. So what we do, we work hard with our customers to make sure that they have the resourcing or our partners to do that. We manage the on holds over time, put them into deployment, and then make them live, and that drives our ARR forward. Revenue growth. We talked quite a lot about revenue. The only thing I'm going to bring to your attention here is, the orange boxes on top of the charcoal boxes, they relate to our non-recurring revenue. Historically, primarily that's professional services, that we bill up front on contract and release typically over four years under IFRS 15. But included in this half is a one-off contract that we took on for a major U.K. client, where they asked us to actually use our telephony connections to connect one of their contact centers to their main systems. That contract has generated about GBP 350,000 worth of revenue in the first half. It's going to generate slightly less in the second half, and then is likely to expire at the end of this financial year. So we treat that as non-recurring, but I thought I'd just flag it up to you, because it obviously changes the metrics a bit. Looking at the income statement. We've talked about the revenues and the gross margins and the cost of sales. The thing I'd like to bring to your attention here is the staff costs. You can see they've gone from GBP 4 million to GBP 5.8 million, a 46% increase. Why is that? Well, we took on 50% more staff in the whole of FY 2022, and that's the impact coming through on the full year. In the actual period from December 2021 to December 2022, we took on 32 new employees. Now, these employees we've taken on are at the more expensive end of our spectrum, in the sales and marketing and senior engineering side. So that's why the staff costs have gone up slightly more than the headcount numbers. As James Barham said, those are starting to plateau out. We are taking and filling in more, but that's slowing down, which is allowing our growth to drop through to the bottom line, and that's why we're pleased with our EBITDA position. Talking of EBITDA, you can see that we achieved a loss of GBP 600,000 last year, and we've done a very similar number this year in spite of taking on all those additional costs. The adjustments, by the way, we take out exchange movements. Those exchange gains and losses purely driven by the revaluation of intercompany loans. The exceptional costs there, though, are relating to our patent case, which James will give more on later. That patent case, we spent GBP 433,000 in the period on legal fees. To date, we've spent GBP 1.23 million defending the claim since September 2021. Money I prefer not to be spending on legal fees, but we are robust in our defense. Taking those out, our adjusted EBITDA is flat. Moving on, just on to cash flow. On a like-for-like basis, we spent GBP 2.99 million worth of cash out of our reserves in the first half. If you strip out the patent case cost, that's GBP 2.6 million. That's very much in line with our expectations, and the renewal cycle of the business. If you remember, we bill quite a lot of our contracts annually in advance. The cash does go up and down, it's quite lumpy. On a trend, it's moving definitely towards cash break even, as we've already said. Just turning to the balance sheet. Trade debtors, I'll just point you to that. We run with GBP 2.5 million to GBP 3 million worth of trade debtors at any one time based on renewals and new contracts coming through. It spiked up in the end of H1 due to the renewal in America of that $1.75 million contract with America, which was collected in January. So it's now down to normal levels. As at the end of December, some 14% of our debtors were over 60 days, and most of those were in the 60- to 90-day category. The reason is we tend to give 60 days credit to our American and U.K. customers, but they tend to pay on 70 days. So we have a little fall over into that. Otherwise, we don't really have a bad debt problem. In fact, we don't have a bad debt problem. Deferred revenue is the other area I'll just point to. You can see it's grown from 8.7 to 11.5. That just reflects the underlying strength of the business as we continue to win new business, continue to build in advance on the contracts we win, and then once they go live, we start releasing it out of the business. So I'm quite pleased with that growth because it funds the underlying side of the business. I will now hand over to James for some more. Thanks, William. Thank you, William. Some operating highlights before we look to wrap up so we've got time for questions at the end. Just working through the bullet points there. We reference in the interims a number of enterprise size U.S. customer wins. The reason this is important is we've long stated the size of the U.S. market, and that we want to be able to get into it in some depth, and getting access to some of these large enterprise organizations within the U.S. The U.S. has more enterprise contact centers than any other country in the world. Really pleased to see a couple of good wins there of an enterprise size for us. One of those with a very well-known U.S. clothing retailer, probably one of the brands you'd associate the most with the U.S. We sold that at the back end of Q1, and that's live already across more than 2,500 agents, leveraging an integration with one of our CCaaS partners, which is fantastic. That was a competitive process, that one. The other one is a more regional energy provider across the U.S. and Canada. Whilst being a fairly large deal for us, it was also interesting because it leverages our speech recognition capabilities across Agent Assist and IVR. Because we're deploying it into Canada, it does also have a French requirement too. We're delivering that right now, and that'll be going live in the coming month. That's good progress to see over in the U.S. Linked to that onto the second bullet point on there, pipelines, as I've said earlier, are looking good for us, particularly in the United States, particularly through partners as well. We're really seeing that start to pick up in the U.S. We've always said that we felt the U.S. market for us has probably got a two to two and a half year lag on where we're at in the U.K. We perhaps haven't got that quite right. Maybe it is three years, but it definitely feels like it's starting to pick up nicely for us, and we've got a good outlook into the second half. We've talked a bit about renewals as we've gone through this. William mentioned our largest customer in the U.S. and that we renewed that at the back end of Q2. We don't talk about renewals a great deal because most of our customers auto renew, given the nature of our SaaS sort of subscription type services. Certainly, some of the very largest do require conversations at renewal. Most of the work we do to ensure that customers do renew is in between during the contract term. It's those customer satisfaction scores, making sure our delivery is strong, our relationship management is good, and that we work well with our partners. To that point on that fourth bullet point there, we talked about NRR but CSAT. We get accused of using too many abbreviations sometimes, so I'll try and define them. Customer satisfaction scores, so we've kind of moved, we've not moved away from NPS, Net Promoter Scores, but as the highlight stat, we're generally using CSAT now. We're tracking at 87%, and that's improving. We made a few operational changes in terms of the structure of the business at the beginning of the year, and that seems to be having a positive impact. Wouldn't be surprised to see that get to 90% plus. Operationally, the business is very healthy at the core. In terms of the two new regions that we set up, Australia and Canada, we have now been live there for more than 12 months in both of those, 12 to 14 months in each. Pipelines building nicely. I would say, I have been asked to comment by some institutional investors over the last few days, I would say that Australia is moving quickest for us, but that was as expected. We did not bake in the same sort of target level in Canada as we did in Australia. That was not that we did not anticipate that, but we have a very good feel about what is happening in Australia right now. We have good coverage with our partners down there. We have patents there as well. Yes, very excited about that region. We do anticipate Canada being able to get to the numbers that we have set for them in this second half of the year. All in all, some really exciting highlights, given some of the headwinds that we have had to manage in this business. Just on that final bullet point there, I did want to give an update on the patent case, the detail is in the interims. We have been involved in this patent case for 18 months now. If you are new to the story and you would like some background information on this, please do go back and read our full year update on this, though the interims update is fairly extensive, and if you want to hear from us, we have talked about it on other updates as well. The update on the position is really unchanged from what I have given previously, that we very much strongly refute the claims that have been made against us. We believe those claims are unfounded, and given that PCI-PAL has been the fastest growing company in this space for a number of years, it has always been and continues to be our belief that this action was taken by a competitor to disrupt the momentum that we have in this business. The position today, as we said in the interims, it is very much a two-way street. Firstly, we have their claim of infringement, and we are confident that we do not infringe, and we have legal opinions to support this. Secondly, we have made counter-claims against the validity of those patents. Our counter-claims include various elements of prior art and a number of other claims which we believe mean that these patents are invalid. The bottom line, I suppose, is that we have got high confidence as do our advisors. We have our own patents for what we do, as I have shown you on the earlier slides. Even whilst we do not think it is needed, we have taken the prudent approach, as we noted in the interims, that in any kind of worst-case scenario, no matter how unlikely we believe it is, it is a prudent approach that we have got adjustments that we can make to our products if we need to. Whilst we have kept the door open for discussions throughout, and we will continue to do so, we are very much prepared for court in the U.K. when the time comes in June. That is the update on the patent case. I'm going to switch to product now and back to some of the good stuff, if you like, before we get to questions. Last time out on product, we talked you through our plans to evolve our product set. It was one of the main reasons behind our fundraise in May 2021, and it's long been a vision of ours. It wasn't new in 2021 when we started on this journey all the way back in 2016. We had an idea of where we'd like to go to in the very long term, once we'd really established a foothold. What we're doing is effectively moving our value proposition from solely being about securing data and compliance to actually enabling payments with security and compliance, basically becoming the table stakes and the foundations for the payment value that we add on the top. In this, we're talking about on top so that our salespeople, so that our marketing teams, our messaging out to customers is more than just security and compliance. It will start being about value. It will include talking to customers about increasing revenue, talking to them about how they can better control and reduce the costs of payment processing, how they can better control fraud. Effectively what we're doing is making e-commerce payment capabilities, because there's so many great digital payment options for consumers today on websites. We're making those available within business communications environments across that omni-channel mix within contact centers. The way that we're doing this, and this is critical to it, is that we're doing it leveraging the existing technology stack that we've built to date, and we're leveraging our existing go-to market model as well. That core technology platform that we've invested so much time and effort in, we'll be leveraging that for all these new products and services. We'll be using our partner network and our partner ecosystem and the existing integrations that we've got with those partners to allow us to push these new products out into that ecosystem as well. That'll also allow us to access the global market opportunity too. Ultimately, we're looking at growing our addressable market, and historically we've done that more by geographic expansion. By this product evolution, we're doing this also through the evolution of the product set. There'll be more of that to come in the second half and later in 2023. In H1 we did launch the first of these, which was an open banking product launch, which was the first. We launched that with a very well-known market leader in the open banking aggregation space called TrueLayer, a London-headquartered business, but with a global footprint. Across H2 and later this calendar year as well and really for the next 2 and a half years, our roadmap spans out. You're going to get to see numerous new features, including all these additional payment capabilities, whether that be buy now, pay later, e-wallets. We've got a new user interface coming out soon. We're doing quite a lot around data analytics and AI and the intelligence to better understand payment flows. There's a huge amount of work going on in the background here at PCI Pal right now, and that's how we're using the proceeds from that fundraise that we made in May 2021. But it's really exciting times here, and we're looking forward to talking to you more about these things that will add more value to this business as we continue on this growth trajectory. So just to wrap up before questions. Outlook really is kind of more of the same, but we're expecting a strong H2. Revenue momentum certainly continued. We've got very strong revenue visibility to the end of the financial year. We've got work to do in our sales pipelines. Everyone's always got work to do in their sales pipelines, so we've got deals to get over the line. But we have very healthy pipelines and good level of deals at a mature stage, so looking forward to moving those along. And also we've got some of the new products and features will be coming to the fore as well. That pretty much covers William and I's update. So why don't we move to some questions now, Tom. Yeah. Great. Okay, fine. Great. Well, look, thank you, James. Thank you, William. If we could turn to the questions, we had a number of questions submitted ahead of the presentation, but please do continue to submit your questions using the Q&A tab situated on the right-hand corner of your screen. What we might do, William, if we can turn to you then, that will give James a chance to look through the questions that have been submitted through the course of the presentation. We have two questions actually related to the breakeven. So well, thank you. And there's one which is anonymous, but very pleased to see the company continuing to deliver. Please could you comment on whether you expect to reach breakeven at net income level in H1 FY 2024, or will it be likely be H2 FY 2024? Yeah, good question. The trajectory is obviously full year profit at adjusted pre-tax level. I'm expecting to be a small profit in the first half and a bigger profit in the second half, plus or minus a couple of hundred thousand, it'll be just above breakeven, I believe, from my current forecasts. Right. Okay. We've got a couple of questions around the SVB situation. If I can just group a couple together, and if you could add a little color there. First one is, any lessons learned? The second is, do you have facilities in the U.K.? If you did, are they still available? The third question is, how are you placed in the U.S. in terms of the circumstances around your account? Okay, good question. SVB was a bit of a shock to the system. For those who have followed us, we've been with SVB in the U.S. since we opened up there in 2017. They've worked with us very well. However, we had our relationship management out of London, and when London became a registered bank, we were looking to open up facilities with them. Some people who follow us will notice that we've already put charges in place with SVB at Companies House, so it's public information. We do not have a facility in place at the minute. That's in discussion now. Clearly, with HSBC taking over the U.K. arm, we are being told that they want to continue with the facility. However, I will only know that next week once I've met with them. In hindsight, three weeks ago, our money was split between two banks. We just happened to time it very badly. We are now going back to running two banks, and we'll be balancing our cash flow with a majority be kept in the U.K., split between NatWest and HSBC, and we'll be keeping a working capital facility, for instance, covering the payroll and everything in the U.S. The U.S. situation is still flux. It's still under control of the Fed, the FDIC, and there is not a buyer in place yet. I know they have made announcements that they are looking for a buyer, but we need to be prepared that if they can't find a buyer, then we might have to move to a different source, and that we'll deal with at the time. One potential silver lining on this whole debacle is obviously we now have a relationship with HSBC. They have taken on our relationship director and the team at SVB, and that's important to us because SVB do talk our language. They understand SaaS businesses. They understand recurring revenue. If we can take that and underpin it with a global bank, I'll be very happy. I think that covers the questions. Great. Okay. Super. A couple of questions in and around admin expenses, which were touched on in the course of the presentation, but if we could just add a little bit more detail. Question one is in respect of North America and Canada, does the 38% increase in adjusted admin expenses for North America solely reflect the growth of the Canadian office, or has headcount also been added in the U.S. since H1 2021? Good question. If you go back to June 2021, just after we had done a fundraise for our global expansion, we had 16 heads in the United States. The vast majority of those are sales heads. We have a few professional services, people managing our installations and working with the teams over there. By December 2021, that had grown to 21 people, all in the United States because we had strengthened our U.S. selling as we laid out in the fundraise. Then by December 2024, it has grown to 24 people. The answer is, it is a mixture of both. The 24 people include Canada, but we had strengthened the sales and marketing side of the United States, and that is the driver for the increase in admin expenses. Yeah. I do not mind. I will throw in as well. Yeah, we are seeing, yes, Canada is a part of that. But as we are able to grow pipelines further in the U.S., then we will increase the size of our sales team to adapt to that, and we will time that carefully. But also in growing those pipelines, you need the additional marketing effort that goes into that as well, working collaboratively with our partners. Yeah, it is a bit of a mixture. Also as you get more customers coming through, then you need more support to be going with it. Okay. Super. Look, just maybe we just reflect on that in the EMEA as well. The adjusted admin expenses for EMEA have increased by around 37%. What functions have seen increased headcount, and is all of the R&D product development cost, et cetera, borne by the EMEA division in the regional analysis? I will let James answer the sort of growth side. From a financial point of view, let's deal with the R&D side. Yes, all our R&D is undertaken in the U.K. The U.K. owns the platform and then sublicenses out around to the rest of the group in return for a royalty. That is why there has been growth in our engineering, our product, but also in sales and customer success. But I can let James outline a bit more about that as to why we have done it. Yeah. The majority of the headcount uplift has come into product and engineering. That is us effectively making use of the proceeds that we made from the fundraise in May 2021. We have significantly expanded the engineering team. We have firmly established a proper product team, including product marketing as well. We have also invested further into customer success, and a number of those heads are in the U.K., including the manager that runs that team. In terms of central functions that we have, William's team in the finance and admin side of the business, that is all run out of the U.K. Also we hired in-house counsel as well at the beginning of this financial year. Again, that is another individual that whilst they have got international experience, they are based in the U.K. as well. But the majority of it headcount-wise is related to the engineering and product investment that we said we were going to be making at the back end of FY22, which is now coming through this year. Great. Okay, super. All right. Well, look, we do have a couple of questions in relation to market size and a couple of very specific questions which I think are better addressed offline. But James, would you just like to give the 30-second summary of where we find ourselves now, and then I think we will probably move to close. Yeah, sure. Okay. We've got ourselves into a very good position. Our go-to-market is working very well for us. Our partners we're working very closely with. We're generating more pipeline than we ever have before, and that's key. We're keeping customers to the same high levels that we have done for the last few years. So it's winning that new business. It's keeping interesting, becoming more interesting through product development and retaining customers and having a good culture along the way while we do that. I think we're ticking all of those boxes. Particularly thank you to those that have followed us for a long time, and we look forward to updating you next time. Yeah, super great. Okay. Thank you, James. Thank you, William Good. Could I ask investors not to close this session as you'll be automatically redirected for the opportunity to provide your feedback. If anyone has any further questions or would like additional information on PCI Pal, please get in contact via pcipal@walbrookpr.com. In respect of the Q&A, we will review a few of those questions and submit responses that will be on your Investor Meet Company dashboard. Thank you for attending today's presentation. Look forward to updating you again soon. Thanks, everyone. Bye-bye. Thank you very much. Thank you. Bye-bye.