PCI PAL : 2021 Annual Report

ANNUAL REPORT & ACCOUNTS

FOR THE YEAR ENDED 30 JUNE 2021

Substantial increase in revenues and continued strong new business momentum

PCI-PAL PLC (AIM: PCIP), the global provider of secure payment solutions, is pleased to announce full year results for the year ended 30 June 2021 (the "Period").

STRATEGIC REPORT
Highlights............................................................................................	1
Chairman's Statement.........................................................................	3
Chief Executive's Statement................................................................	6
Chief Financial Officer's Review........................................................	15
Principal Risks, Uncertainties and Risk Mitigation............................	20
Corporate Social Responsibilities......................................................	27
GOVERNANCE
The Board of Directors......................................................................	30
Corporate Governance......................................................................	33
Compliance Statement......................................................................	34
Environmental Social and Governance Report..................................	41
Audit Committee Report...................................................................	44
Remuneration Committee Report.....................................................	45
Directors and Advisors......................................................................	47
Director's Report...............................................................................	48
FINANCIAL STATEMENTS
Independent Auditor's Report to the Members of PCI-PAL PLC.......	52
Consolidated Statement of Comprehensive Income.........................	57
Consolidated Statement of Financial Position..................................	58
Consolidated Statement of Changes in Equity..................................	59
Consolidated Statement of Cash Flows.............................................	60
Notes to the Consolidated Financial Statements..............................	61
Company Statement of Financial Position........................................	80
Company Statement of Changes in Equity........................................	81
Company Statement of Cash Flows...................................................	82
Notes to the Company Financial Statements....................................	83

Commenting on results and prospects, James Barham, Chief Executive said:

"We have taken another sizeable step forward in FY21. Our advanced cloud capabilities have allowed us to continue to grow our customer reach through our expanding partner eco-system, serving customers not only in our primary geographic focus areas, but across the world.

"With our key sales metric of TACV having grown by a further 41% year-on-year, I have been particularly pleased to see a real cohesion in the business this year, as despite a near doubling in new contracts won, we have maintained a strong deployment performance of customers going live in the year.

"I am delighted by the continued growth being shown by the business as we deliver against our strategy. We have therefore continued to make positive, progressive changes internally as we further refine our operations to best support our pace of growth. As well as the further geographic expansion planned in FY22, we are hugely excited by the additional foundational strength we are putting in place across Customer Success, Engineering, and Product Management.

"I am looking forward with confidence as we look to deliver another strong year of performance from the Group in FY22 as we further cement our relationships with our current and future partners, and drive customer go-lives of our class-leading cloud solutions with organisations across the world."

www.pcipal.com

STRATEGIC REPORT

HIGHLIGHTS

FOR THE YEAR ENDED 30 JUNE 2021

Revenue		Gross Margin		Loss before Tax £m		Adjusted EBITDA Loss £m1		New ACV £m
+67%		+9%		+4%		+27%		+19%
£7.36m		75.5%		£4.19m		£2.70m		£3.11m
2020: £4.40m		2020: 69.2%		2020: £4.35m		2020: £3.68m		2020: £2.62m
TACV £m2		Partner Sales %		Recurring Revenues % of		Cash Balances £m		Deferred Income £m
+41%		of contracts sold		total revenue in period		+75%		+79%
	N/C%		+5%
£9.51m		78.0%		88.0%		£7.52m		£8.09m
2020: £6.75m		2020: 78.0%		2020: 84.1%		2020: £4.30m		2020: £4.53m

• Operating Loss plus depreciation/amortisation plus or minus exchange losses recognised in the profit and loss

• TACV is the total annual recurring revenue of all signed contracts, whether invoiced and included in deferred income or still to be deployed and/or not yet invoiced

Financial Highlights

• Revenue increased by 67% to £7.36 million (2020: £4.40 million)
• Gross margin increased to 76% (2020: 69%) reflecting the continuing transition of our service delivery mix to the higher margin, cloud based Amazon Web Services ("AWS") platform
• Significant increase in new sales bookings leading to signed recurring Annual Contract Value ("ACV") increasing by 19% to £3.11 million (2020: £2.62 million)
• Total contracted recurring ACV ("TACV1") increased 41% to £9.51 million at 30 June 2021 (2020: £6.75 million)
• Deferred income increased 79% to £8.09 million
  (2020: £4.53 million)
• Loss before Tax in line with expectations at £4.19 million (2020: £4.35 million) following continued investment in our growth plans and a £0.55 million foreign exchange loss in the period (2020: Foreign exchange gain of £0.02 million)
• Raised £5.18 million net of expenses to fund further expansion into Canada, Australia and mainland Europe in April 2021 to grow the Group's addressable market by 40%
• Cash balances at year end of £7.52 million (2020: £4.30 million) and the Group is debt free having repaid its debt facility prior to the period end (2020: drawn down debt of £1.27 million)

• TACV is the total annual recurring revenue of all signed contracts, whether invoiced and included in deferred revenue or still to be deployed and/or not yet invoiced

Operating and Other Highlights

• North American momentum continues to build, with revenue up 279% and new ACV sales up 29%. North America now accounts for 26% of the Group revenue (2020: 10%)
• Recurring revenue model proven with record full year on year revenue growth, recurring revenues now stand at 88% of all revenue (2020: 84%)
• Signed 195 new sales contracts in the year (2020: 109)
• A further 121 new contracts live with our services in the period
• Time to go live of new contracts signed in the last 18 months from the date of signature to deployment ("TTGL") was consistent with the prior year at around 5 months average across all sales channels
• 78% of new sales contracts for the Group generated from channel partners (2020: 78%)
• Formed the PCI Pal Advisory Committee ("PAC") which included the committee's first member, payments and cyber-security specialist, Neira Jones.
• Completed planned hiring of new Chief Technology Officer ("CTO") with cloud and payments technology leader, Mufti Monim, joining the business in April 2021.

PCI-Pal PLC | 1

Annual Financial Report 2021

STRATEGIC REPORT

HIGHLIGHTS CONTINUED

Current trading

• Strong start to new financial year with new ACV in line with management expectations.
• Sales highlights since year end:
• • Two sizeable contracts won through resellers in the US:
  • • the first providing our Agent Assist services to a well-knownNASDAQ-listed hosting provider covering contact centres in US and UK;
    • the second through a new reseller, at whom we displaced one of our main competitors as their PCI solution of choice, to win our first deal with a major LATAM-focused energy provider leveraging our services through our recently announced improved product offering with Genesys.
    • Continuing to build on our government sector strength in the UK, with a further large council based in Wales.
• Signed a new reseller partnership with a multi-national German headquartered technology provider and BPO which has included the partnership's first new customer.
• Added two new members to the PCI Pal Advisory Committee, both US-based, experienced product and engineering executive, Jayesh Patel who was formerly Chief Product Office at Vonage Inc, and Emilia D'Anzica, a customer success executive and consultant.

Board Change

• PCI Pal today announces that after 24 years with PCI Pal and its former businesses, Geoff Forsyth, Chief Information Security Officer (CISO) and current executive director, has

informed the Board of his intention to step down from the Board at the Company's upcoming AGM. He will continue in his role as CISO for the Company, serving on the Company's management team, as he works towards retirement which is expected to be in the next 24 months.

Commenting on results and prospects, James Barham, Chief Executive said:

"We have taken another sizeable step forward in FY21. Our advanced cloud capabilities have allowed us to continue to grow our customer reach through our expanding partner eco-system, serving customers not only in our primary geographic focus areas, but across the world.

"With our key sales metric of TACV having grown by a further 41% year-on-year, I have been particularly pleased to see a real cohesion in the business this year, as despite a near doubling in new contracts won, we have maintained a strong deployment performance of customers going live in the year.

"I am delighted by the continued growth being shown by the business as we deliver against our strategy. We have therefore continued to make positive, progressive changes internally as we further refine our operations to best support our pace of growth. As well as the further geographic expansion planned in FY22, we are hugely excited by the additional foundational strength we are putting in place across Customer Success, Engineering, and Product Management.

"I am looking forward with confidence as we look to deliver another strong year of performance from the Group in FY22 as we further cement our relationships with our current and future partners, and drive customer go-lives of our class-leading cloud solutions with organisations across the world."

"As part of our mission to deliver the highest level of security and compliance to our customers we are pleased to extend our partnership with PCI Pal. 8×8 is helping to transform the way the world communicates, and we've worked hard to become the leading choice for businesses looking for powerful, seamless services to meet all of their communications, collaboration and customer experience needs." 8×8 Inc

2 | PCI-Pal PLC

Annual Financial Report 2021

STRATEGIC REPORT

CHAIRMAN'S STATEMENT

FOR THE YEAR ENDED 30 JUNE 2021

I am very pleased to report on another year of significant progress for the business. In a year overshadowed by the impacts of the COVID-19 pandemic, the PCI Pal team has nonetheless forged ahead to achieve impressive top line growth. As a result, our leading forward indicator of growth, TACV, grew by 41% to £9.5 million in the year and deferred revenue grew 79% to £8.1 million, helping to grow our forward recognized revenue visibility. Recognised revenue also grew strongly by 67% to £7.4 million and gross margins continued to improve to 75%. These financial metrics are all hallmarks of a strong and growing cloud company and SaaS business model.

Not only did the Group not need to furlough or layoff any staff as a result of the COVID-19 pandemic, we continued to hire in order to support that strong growth. At the same time, the team have continued to build the Group's infrastructure through investment in process, systems, and importantly, our incredibly talented people. We are grateful for the support of our people in these challenging personal times, as well as other key stakeholders, including our new and existing shareholders in supporting of the equity funding in April 2021, and our channel partners with whom we continue to drive our growth.

People

The COVID-19 pandemic is lasting longer than most of us expected, but our people have proved to be incredibly resilient and have adapted well to the new circumstances, and I personally thank them for that. The Company has put a great deal of effort in to supporting our people; not just by accommodating work-from-home requirements and providing collaborative technologies, but by being understanding, respectful, flexible, and most importantly listening to people's needs and concerns. From this enhanced culture, communication and teamwork, new opportunities for individuals and the business are emerging. We have also taken advantage of the opportunity to invest in new or deeper skills, most notably in engineering, customer success, and senior management with the recruitment of a new CTO to lead our technology and product plans for the next phase of our strategic growth plan.

Overall, the PCI Pal team has grown from 58 to 71 employees over the course of the year, and we plan additional expansion in FY22. As the world tentatively emerges from lockdown and uncertainty is reduced, the market for talent has become more competitive, willingness to move jobs has increased, and the supply of technical Cloud-experienced people has tightened. The Board remains as committed as ever to supporting our people in terms of professional development, flexible hybrid work environments and competitive compensation and benefit packages. I am therefore confident of our ability to not only retain our people, but also attract new talent necessary to support our ambitious growth goals.

Board Change

Geoff Forsyth, CISO and current executive director, has notified the Board of his intention to step down from the Board with effect from the Company's upcoming AGM. Geoff will continue his important management role as CISO for the Company, leading our Information Security and Compliance team, until his intended retirement in the next two years. Geoff is one of the founders of the PCI Pal business and has played a critical role in building the security, technology, and compliance foundations of this fast-growing business. On behalf of the Board and everyone at PCI Pal, I would like to thank Geoff for his significant contribution, and we look forward to his continued valuable input as he works towards retirement.

PCI-Pal PLC | 3

Annual Financial Report 2021