PCI-PAL H1 FY26: ARR up 21% while EBITDA drops 79% – how to read this mix
PCI-PAL’s half-year numbers for the six months to 31 December 2025 (H1 FY26) serve up classic SaaS growing pains: growth metrics are flying, but near-term profits have been squeezed by heavier investment. As a reminder, ARR (annual recurring revenue) is the value of the contracted subscription base; CARR (contracted ARR) includes signed deals not yet live; GRR/NRR track retention; and EBITDA is a proxy for operating cash profit before non-cash items.
The big picture: record new business and strong retention pushed ARR to a new high, yet revenue recognition and spend on marketing, engineering and partner enablement dragged adjusted EBITDA to £0.20 million.
Key numbers at a glance
| Metric | H1 FY26 | H1 FY25 | Change |
|---|---|---|---|
| Annual Recurring Revenue (ARR) | £20.33m | £16.75m | +21% (25% CC) |
| Contracted ARR (CARR) | £23.99m | £20.30m | +18% (21% CC) |
| Revenue | £11.31m | £10.57m | +7% (14% normalised) |
| Adjusted EBITDA | £0.20m | £0.95m | -79% |
| Gross margin | 87% | 90% | -3 ppts |
| Gross Revenue Retention (GRR) | 95% | 95% | Flat |
| Net Revenue Retention (NRR) | 105% | 102% | +3 ppts |
| Net cash | £2.61m | £4.00m | -£1.39m |
Normalised revenue growth adjusts for a prior-year deferral that inflated H1 FY25; on this basis, top line was up 14%.
Growth engine: partners, enterprise wins and record ARR build
ARR rose by £3.6 million over the past 12 months to £20.3 million, a record real-terms increase. CARR reached £24.0 million, giving a clear line of sight to future ARR as signed contracts go live. Retention remains top quartile: GRR at 95% means very low gross churn; NRR at 105% shows upsell is outpacing any losses.
The partner-led model is doing the heavy lifting. In H1, 83% of contracts were secured via partners and those partners contributed 71% of total new ACV. PCI-PAL’s integrations across CCaaS/UCaaS heavyweights – Genesys, NICE, Zoom, RingCentral, Talkdesk, Five9, 8×8 and Amazon Connect, plus systems integrators like Presidio and TTEC – continue to expand. Management also called out more enterprise opportunities, particularly in North America, with notable wins in US insurance and healthcare, and a manufacturing client.
Why EBITDA fell: timing, mix and deliberate investment
Adjusted EBITDA slid to £0.20 million from £0.95 million as PCI-PAL leaned into growth. Administrative expenses rose to £10.7 million (H1 FY25: £9.8 million), reflecting higher spend on the global AWS platform, engineering, marketing and partner enablement. Gross margin dipped to 87% (from 90%) due to revenue mix and the timing of licence deployments that delay revenue recognition. Management expects gross margin to improve in H2 as licence revenue “catches up”.
On adjusted measures, the Group swung to a £0.65 million loss before tax (H1 FY25: £0.20 million profit). In plain terms: they are choosing to invest now to sustain organic ARR growth of 18-20% per annum through FY27 and beyond. The trade-off is thinner near-term profitability.
Cash, balance sheet and liquidity
Closing cash was £2.61 million, down from £3.92 million at year-end and £4.00 million a year ago. Operating cash outflow was £0.49 million, with a further £0.90 million invested in capitalised development. After lease payments, total cash outflow for the half was £1.5 million.
The Group has an undrawn £3.0 million HSBC facility, which provides flexibility. It’s also worth noting the balance sheet shows negative equity of £1.98 million, a common feature in subscription businesses carrying large deferred income balances (current deferred income £12.44 million). Still, investors should monitor cash burn closely alongside the pace of deployments converting CARR to revenue.
Geography and concentration: EMEA up, US softer this half
By region, EMEA revenue grew to £7.16 million (H1 FY25: £6.20 million), while North America eased to £3.89 million (H1 FY25: £4.14 million). By customer location, the UK increased to £7.28 million, and the USA decreased to £3.40 million. Management highlights strengthening US enterprise momentum and strong pipeline, so this looks timing-related rather than a shift in strategy, but it’s one to track.
Customer concentration is unchanged: the largest customer represented 17% of Group revenue, the same as last year. Helpful stability, but concentration risk remains present.
Platform reliability and product roadmap, including AI
Operationally, the AWS-hosted platform achieved 100% global uptime in H1 – a strong credential for partners and enterprise buyers. Deployment automation is being pushed hard to reduce TTR (time to revenue), with a self-serve model for smaller customers targeted within 18 months. That could accelerate future revenue recognition and expand the serviceable market.
On product, PCI-PAL rolled out enhanced analytics and an AI-powered fraud risk scoring feature with Telesign, now being enabled across partners with early standalone sales underway. The company also progressed conversational AI integrations and plans support for Model Context Protocol (MCP) to make its secure payment tools easier for AI agents to discover and invoke. Early traction included the company’s largest conversational-AI-related secure payment contract via a partner in Q1.
Outlook: momentum continues into H2
Management says H2 has started well, with new enterprise wins, an extension with one of the Group’s largest customers, and a major new strategic partner signed on 23 February 2026. The plan is to sign another step-up in new business, reduce TTR further, and keep expanding the partner ecosystem to support FY27 growth and profitability goals. The Board is confident in meeting full-year expectations.
My take: strong growth KPIs, near-term profit trade-off
- Positives: ARR and CARR growth are robust; retention is excellent; the partner network is delivering larger deals; and the platform’s 100% uptime underpins credibility.
- Negatives: EBITDA compression, a lower gross margin this half, and a reduced cash balance to £2.61 million. North American revenue softened in H1, albeit against a growing enterprise pipeline.
- Why it matters: In subscription software, ARR and retention are the best leading indicators. PCI-PAL’s record ARR build and higher NRR suggest durable demand. If deployments keep accelerating and gross margin normalises in H2, headline revenue and EBITDA should follow.
What to watch next
- Conversion of CARR to ARR and revenue – evidence that TTR is falling.
- Gross margin rebound in H2 as licence revenues “catch up”.
- Cash trajectory and any use of the £3.0 million facility.
- North American enterprise deal flow turning into recognised revenue.
- Uptake and monetisation of the AI-driven fraud risk scoring product.
- Retention holding at 95%+ GRR and 105%+ NRR.
- Further partner signings and deeper integrations that lift average contract value.
Bottom line for investors
PCI-PAL is clearly in investment mode, prioritising scale, partner reach and deployment speed. The result is enviable ARR growth and visibility, countered by thinner profits and a tighter cash position. If you buy the thesis that this is a land-and-expand market – and PCI-PAL’s KPIs support that – then H2 delivery on deployments, margin and cash discipline becomes the key catalyst set.
